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, 2009





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:  001-31540







FLEXIBLE
SOLUTIONS INTERNATIONAL INC.


(Exact
Name of Issuer as Specified in Its Charter)






Nevada
                    
                    91-1922863(State
      or other jurisdiction of incorporationor
      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
            14,062,567
            April 30,
      2009









FORM
10-Q




Index




PART
      I.
                                  FINANCIAL
      INFORMATIONItem
      1.
                                  Financial Statements.
                                  1(a)
                                  Unaudited Consolidated Balance Sheets at March 31, 2009
      and December 31, 2008.
                                  1(b)
                                  Unaudited Consolidated Statements of Operations for the Three
      Months Ended
                                    March 31, 2009 and 2008.
                                  2(c)
                                  Unaudited Consolidated Statements of Cash Flows for the
      Three Months Ended
                                    March 31, 2009 and 2008.
                                  3(d)
                                  Notes to Unaudited
      Consolidated Financial Statements for the Period
      Ended
                                    March 31, 2009.
                                  4Item 2.
                                  Management’s Discussion and
      Analysis or Plan of Operation.
                                  17Item
      4 and 4T.
                                  Controls and Procedures.
                                  20PART II.
                                  OTHER INFORMATION
                                  21Item 6.
                                  Exhibits.
                                  21SIGNATURES
                                  
                                  22






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-K for the year ended
December 31, 2008.









ii




PART
      I
            FINANCIAL
INFORMATION




Item
      1.
            Financial
Statements.




FLEXIBLE SOLUTIONS INTERNATIONAL, INC.


CONSOLIDATED
BALANCE SHEETS


At
March 31, 2009


(U.S.
Dollars)




March
      31,
                      2009
                      (Unaudited)
                    
                    
                    December
      31,
                      2008AssetsCurrentCash
      and cash equivalents
                    
                    $
                    1,508,257
                    
                    
                    $
                    1,894,045Accounts
      receivable
                    
                    
                    2,110,670
                    
                    
                    
                    1,642,001Inventory
                    
                    
                    3,291,627
                    
                    
                    
                    3,591,112Prepaid
      expenses
                    
                    
                    62,837
                    
                    
                    
                    109,4946,973,391
                    
                    
                    
                    7
      ,236,617Property,
      equipment and leaseholds
                    
                    
                    5,987,901
                    
                    
                    
                    5,882,223Patents
                    
                    
                    194,420
                    
                    
                    
                    204,203Long
      term deposits
                    
                    
                    27,107
                    
                    
                    
                    32,713$
                    13,182,819
                    
                    
                    $
                    13,355,756LiabilitiesCurrentAccounts
      payable and accrued liabilities
                    
                    $
                    731,011
                    
                    
                    $
                    771,180Long
      TermLoans
                    
                    
                    1,485,744
                    
                    
                    
                    1,546,836$
                    2,216,755
                    
                    
                    $
                    2,318,016Stockholders’
      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 outstanding14,062,567
      (2008: 14,062,567) common shares
                    
                    
                    14,063
                    
                    
                    
                    14,063Capital
      in excess of par value
                    
                    
                    16,325,899
                    
                    
                    
                    16,259,614Other
      comprehensive income
                    
                    
                    (249,520
                    )
                    
                    
                    (244,788
                    )Deficit
                    
                    
                    (5,124,378
                    )
                    
                    
                    (4,991,149
                    )Total
      Stockholders’ Equity
                    
                    
                    10,966,064
                    
                    
                    
                    11,037,740Total
      Liabilities and Stockholders’ Equity
                    
                    $
                    13,182,819
                    
                    
                    $
                    13,355,756
  Commitments,
Contingencies and Subsequent Events (Notes 14, 15 &
16)




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


FLEXIBLE SOLUTIONS INTERNATIONAL, INC.


CONSOLIDATED
STATEMENTS OF OPERATIONS


For
the Three Months Ended March 31, 2009 and 2008


(U.S.
Dollars -- Unaudited)




Three
      Months Ended March 31,2009
                          
                          
                          2008Sales
                          
                          $
                          2,659,548
                          
                          
                          $
                          3,498,473Cost
      of sales
                          
                          
                          2,012,546
                          
                          
                          
                          2,327,172Gross
      profit
                          
                          
                          647,002
                          
                          
                          
                          1,171,301Operating
      expensesWages
                          
                          
                          306,590
                          
                          
                          
                          283,727Administrative
      salaries and benefits
                          
                          
                          88,431
                          
                          
                          
                          91,225Advertising
      and promotion
                          
                          
                          22,072
                          
                          
                          
                          39,800Investor
      relations and transfer agent fee
                          
                          
                          38,256
                          
                          
                          
                          45,840Office
      and miscellaneous
                          
                          
                          56,698
                          
                          
                          
                          72,698Insurance
                          
                          
                          52,903
                          
                          
                          
                          49,486Interest
      expense
                          
                          
                          11,385
                          
                          
                          
                          14,141Rent
                          
                          
                          59,619
                          
                          
                          
                          67,842Consulting
                          
                          
                          27,475
                          
                          
                          
                          50,191Professional
      fees
                          
                          
                          42,488
                          
                          
                          
                          21,738Travel
                          
                          
                          31,212
                          
                          
                          
                          27,614Telecommunications
                          
                          
                          6,783
                          
                          
                          
                          9,201Shipping
                          
                          
                          10,385
                          
                          
                          
                          12,301Research
                          
                          
                          2,894
                          
                          
                          
                          19,961Commissions
                          
                          
                          23,705
                          
                          
                          
                          29,126Bad
      debt expense (recovery)
                          
                          
                          (590
                          )
                          
                          
                          120Loss
      of sale on equipment
                          
                          
                          -
                          
                          
                          
                          29,026Currency
      exchange
                          
                          
                          (13,518
                          )
                          
                          
                          (6,760
                          )Utilities
                          
                          
                          13,443
                          
                          
                          
                          4,342Total
      operating expenses
                          
                          
                          780,231
                          
                          
                          
                          861,619Operating
      Income (loss)
                          
                          
                          (133,229
                          )
                          
                          
                          309,682Interest
      income
                          
                          
                          -
                          
                          
                          
                          490Income
      (loss) before income tax
                          
                          
                          (133,229
                          )
                          
                          
                          310,172Net
      income (loss)
                          
                          
                          (133,229
                          )
                          
                          
                          310,172Net
      income (loss) per share (basic and diluted)
                          
                          $
                          (0.01
                          )
                          
                          $
                          0.02Weighted
      average number of  common shares
                          
                          
                          14,062,567
                          
                          
                          
                          14,057,567







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


FLEXIBLE SOLUTIONS INTERNATIONAL, INC.


CONSOLIDATED
STATEMENTS OF CASH FLOWS


For
the Three Months Ended March 31, 2009 and 2008


(U.S.
Dollars -- Unaudited)




Three
      Months Ended March 31,2009
                          
                          
                          2008Operating
      activitiesNet
      income (loss)
                          
                          $
                          (133,229
                          )
                          
                          $
                          310,173Stock
      compensation expense
                          
                          
                          66,292
                          
                          
                          
                          82,699Depreciation
                          
                          
                          100,083
                          
                          
                          
                          111,626Assigned
      interest expense
                          
                          
                          -
                          
                          
                          
                          12,846Changes
      in non-cash working capital items:(Increase)
      Decrease in accounts receivable
                          
                          
                          (468,668
                          )
                          
                          
                          (1,619,488
                          )(Increase)
      Decrease in inventory
                          
                          
                          299,484
                          
                          
                          
                          519,800(Increase)
      Decrease in prepaid expenses
                          
                          
                          46,621
                          
                          
                          
                          (1,197
                          )Increase
      (Decrease) in accounts payable
                          
                          
                          (40,167
                          )
                          
                          
                          412,124Increase
      (Decrease) in deferred revenue
                          
                          
                          -
                          
                          
                          
                          (338
                          )Cash
      provided by (used in) operating activities
                          
                          
                          (129,584
                          )
                          
                          
                          (171,755
                          )Investing
      activitiesLong
      term deposits
                          
                          
                          5,606
                          
                          
                          
                          487Development
      of patents
                          
                          
                          9,783
                          
                          
                          
                          6,764Acquisition
      of property and equipment
                          
                          
                          (205,760
                          )
                          
                          
                          (224,012
                          )Cash
      provided by (used in) investing activities
                          
                          
                          (190,371
                          )
                          
                          
                          (216,761
                          )Financing
      activitiesLoan
                          
                          
                          (61,092
                          )
                          
                          
                          -Proceeds
      from issuance of common stock
                          
                          
                          -
                          
                          
                          
                          -Cash
      provided by financing activities
                          
                          
                          (61,092
                          )
                          
                          
                          -Effect
      of exchange rate changes on cash
                          
                          
                          (4,741
                          )
                          
                          
                          (69,659
                          )Inflow
      (outflow) of cash
                          
                          
                          (385,788
                          )
                          
                          
                          (458,175
                          )Cash
      and cash equivalents, beginning
                          
                          
                          1,894,045
                          
                          
                          
                          3,355,854Cash
      and cash equivalents, ending
                          
                          $
                          1,508,257
                          
                          
                          $
                          2,897,678Supplemental
      disclosure of cash flow information:Interest
      paid
                          
                          $
                          11,385
                          
                          
                          $
                          14,141




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


FLEXIBLE SOLUTIONS INTERNATIONAL, INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


For
the Period Ended March 31, 2009


(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, 2008 Annual Report on Form 10-K.  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, 2009, and the consolidated results of operations
and the consolidated statements of cash flows for the three months ended March
31, 2009 and 2008.  The results of operations for the three months
ended March 31, 2009 are not necessarily indicative of the results to be
expected for the entire fiscal year.




These
consolidated financial statements include the accounts of 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 Company was incorporated May 12, 1998 in
Nevada and had no operations until June 30, 1998.




The
Company and its subsidiaries develop, manufactures and markets 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 thermal
polyaspartate biopolymers (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.




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):




4




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.  Inventory 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.  The adoption of this
standard did not have a material impact on the Company’s financial position,
results of operations or cash flows for 2008 or 2009.




5


(c)           Allowance for Doubtful
Accounts




The
Company provides an allowance for doubtful accounts when management estimates
collectibility is 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 and annual rates:




Computer
      hardware
                
                30%
      Declining balanceAutomobile
                
                30%
      Declining balanceTrade
      show booth
                
                30%
      Declining balanceFurniture
      and fixtures
                
                20%
      Declining balanceManufacturing
      equipment
                
                20%
      Declining balanceOffice
      equipment
                
                20%
      Declining balanceBuilding
      and improvements
                
                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 Company’s 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 period.  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 period and in comprehensive income if they remain unrealized at the end of
the period.




(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 periods ended
March 31, 2009 and 2008, 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 $1,171,499 (55%) as at March 31, 2009 (2008 - $961,931 or
60%).





(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.





8


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.





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





(p) Recent
Accounting Pronouncements





Business
Combinations





In
December 2007, the Financial Accounting Standards Board (“FASB”) issued
Statement of Financial Accounting Standards (“FAS”) No. 141 (Revised 2007),
“Business Combinations” (“FAS 141(R)”). FAS 141(R) establishes principles and
requirements for how an acquirer in a business combination recognizes and
measures in its financial statements the identifiable assets acquired,
liabilities assumed, and any noncontrolling interests in the acquiree, as well
as the goodwill acquired. Significant changes from current practice resulting
from FAS 141(R) include the expansion of the definitions of a “business” and a
“business combination.” For all business combinations (whether partial, full or
step acquisitions), the acquirer will record 100% of all assets and liabilities
of the acquired business, including goodwill, generally at their fair values;
contingent consideration will be recognized at its fair value on the acquisition
date and, for certain arrangements, changes in fair value will be recognized in
earnings until settlement; and acquisition-related transaction and restructuring
costs will be expensed rather than treated as part of the cost of the
acquisition. FAS 141(R) also establishes disclosure requirements to enable users
to evaluate the nature and financial effects of the business combination. FAS
141(R) applies prospectively to business combinations for which the acquisition
date is on or after the beginning of the first annual reporting period beginning
on or after December 15, 2008. Earlier adoption is not permitted. The Company is
currently evaluating the potential impact of this statement.





Noncontrolling Interests in
Consolidated Financial Statements





In
December 2007, the FASB issued FAS No. 160, “Noncontrolling Interests in
Consolidated Financial Statements — An amendment of ARB No. 51” (“FAS 160”). FAS
160 amends Accounting Research Bulletin 51, “Consolidated Financial Statements,”
to establish accounting and reporting standards for the noncontrolling interest
in a subsidiary and for the deconsolidation of a subsidiary. It clarifies that a
noncontrolling interest in a subsidiary, which is sometimes referred to as
minority interest, is a third-party ownership interest in the consolidated
entity that should be reported as a component of equity in the consolidated
financial statements. Among other requirements, FAS 160 requires the
consolidated statement of income to be reported at amounts that include the
amounts attributable to both the parent and the noncontrolling interest. FAS 160
also requires disclosure on the face of the consolidated statement of income of
the amounts of consolidated net income attributable to the parent and to the
noncontrolling interest. FAS 160 is effective for fiscal years, and interim
periods within those fiscal years, beginning on or after December 15, 2008.
Earlier adoption is not permitted. The Company is currently evaluating the
potential impact of this statement.





Fair Value
Measurements





In
February 2008, the FASB issued FASB Staff Position No. FAS 157-2, “Effective
Date of FASB Statement No. 157” (“FSP 157-2”), to partially defer FASB Statement
No. 157, “Fair Value Measurements” (“FAS 157”). FSP 157-2 defers the effective
date of FAS 157 for nonfinancial assets and nonfinancial liabilities, except
those that are recognized or disclosed at fair value in the financial statements
on a recurring basis (at least annually), to fiscal years, and interim periods
within those fiscal years, beginning after November 15, 2008. The Company is
currently evaluating the impact of adopting the provisions of FAS 157 as it
relates to non-financial assets and liabilities.





9


Disclosures about Derivative
Instruments and Hedging Activities





In March
2008, the FASB issued FAS No. 161, “Disclosures about Derivative Instruments and
Hedging Activities” (“FAS 161”). FAS 161 amends and expands the disclosure
requirements of FAS 133, “Accounting for Derivative Instruments and Hedging
Activities” and requires qualitative disclosures about objectives and strategies
for using derivatives, quantitative disclosures about fair value amounts of
gains and losses on derivative instruments, and disclosures about
credit-risk-related contingent features in derivative agreements. This statement
is effective for financial statements issued for fiscal periods beginning after
November 15, 2008. Earlier adoption is not permitted. The Company does not
believe the adoption of FAS 161 will have a material impact on its consolidated
financial statements.





Determination of Useful Life
of Intangible Assets





In April
2008, the FASB issued FASB Staff Position (“FSP”) FAS 142-3, “Determination of
Useful Life of Intangible Assets” (“FSP FAS 142-3”). FSP FAS 142-3 amends the
factors that should be considered in developing the renewal or extension
assumptions used to determine the useful life of a recognized intangible asset
under FAS 142, “Goodwill and Other Intangible Assets.” FSP FAS 142-3 also
requires expanded disclosure related to the determination of intangible asset
useful lives. FSP FAS 142-3 is effective for fiscal years beginning after
December 15, 2008. Earlier adoption is not permitted. The Company is currently
evaluating the potential impact the adoption of FAS FSP 142-3 will have on its
consolidated financial statements.





3.
            Accounts
      Receivable




2009
                        
                        
                        2008Accounts
      receivable
                        
                        $
                        2,119,457
                        
                        
                        $
                        1,672,772Allowances
      for doubtful accounts
                        
                        
                        (8,787
                        )
                        
                        
                        (30,771
                        )$
                        2,110,670
                        
                        
                        $
                        1,642,001







4.
            Inventories




2009
                      
                      
                      2008Completed
      goods
                      
                      $
                      2,100,671
                      
                      
                      $
                      2,394,723Works
      in progress
                      
                      
                      54,272
                      
                      
                      
                      56,036Raw
      materials
                      
                      
                      1,136,684
                      
                      
                      
                      1,140,353$
                      3,291,627
                      
                      
                      $
                      3,591,112




10




5.
            Property,
      Plant & equipment





2009
                        
                        
                        Accumulated
                        
                        
                        2009Cost
                        
                        
                        Depreciation
                        
                        
                        NetBuildings
                        
                        $
                        3,987,998
                        
                        
                        $
                        1,236,415
                        
                        
                        $
                        2,751,583Building
      Improvements
                        
                        
                        645,606
                        
                        
                        
                        —
                        
                        
                        
                        645,606Computer
      hardware
                        
                        
                        74,391
                        
                        
                        
                        49,846
                        
                        
                        
                        24,545Furniture
      and fixtures
                        
                        
                        21,947
                        
                        
                        
                        12,045
                        
                        
                        
                        9,902Office
      equipment
                        
                        
                        18,308
                        
                        
                        
                        13,318
                        
                        
                        
                        4,990Manufacturing
      equipment
                        
                        
                        3,431,305
                        
                        
                        
                        1,434,660
                        
                        
                        
                        1,996,645Trailer
                        
                        
                        22,130
                        
                        
                        
                        6,099
                        
                        
                        
                        16,031Leasehold
      improvements
                        
                        
                        22,730
                        
                        
                        
                        20,671
                        
                        
                        
                        2,059Technology
                        
                        
                        108,305
                        
                        
                        
                        —
                        
                        
                        
                        108,305Trade
      show booth
                        
                        
                        6,889
                        
                        
                        
                        5,589
                        
                        
                        
                        1,300Truck
                        
                        
                        9,426
                        
                        
                        
                        2,014
                        
                        
                        
                        7,412Land
                        
                        
                        419,523
                        
                        
                        
                        —
                        
                        
                        
                        419,523$
                        8,768,558
                        
                        
                        $
                        2,780,658
                        
                        
                        $
                        5,987,901








2008
                      
                      
                      Accumulated
                      
                      
                      2008Cost
                      
                      
                      Depreciation
                      
                      
                      NetBuildings
                      
                      $
                      4,017,334
                      
                      
                      $
                      1,187,408
                      
                      
                      $
                      2,829,926Building
      improvements
                      
                      
                      502,847
                      
                      
                      
                      —
                      
                      
                      
                      502,847Computer
      hardware
                      
                      
                      78,121
                      
                      
                      
                      50,962
                      
                      
                      
                      27,159Furniture
      and fixtures
                      
                      
                      19,884
                      
                      
                      
                      11,875
                      
                      
                      
                      8,009Office
      equipment
                      
                      
                      29,396
                      
                      
                      
                      21,262
                      
                      
                      
                      8,134Manufacturing
      equipment
                      
                      
                      3,335,089
                      
                      
                      
                      1,402,423
                      
                      
                      
                      1,932,666Trailer
                      
                      
                      23,040
                      
                      
                      
                      4,996
                      
                      
                      
                      18,044Leasehold
      improvements
                      
                      
                      23,665
                      
                      
                      
                      19,378
                      
                      
                      
                      4,287Technology
                      
                      
                      112,759
                      
                      
                      
                      —
                      
                      
                      
                      112,759Trade
      show booth
                      
                      
                      7,172
                      
                      
                      
                      5,709
                      
                      
                      
                      1,463Truck
                      
                      
                      9,814
                      
                      
                      
                      1,472
                      
                      
                      
                      8,342Land
                      
                      
                      428,587
                      
                      
                      
                      —
                      
                      
                      
                      428,587$
                      8,587,708
                      
                      
                      $
                      2,705,485
                      
                      
                      $
                      5,882,223





Amount of
depreciation expense for 2009: $100,083 (2008: $111,626)





The
following carrying amount of capital assets held by Flexible Solutions Ltd.
serves as collateral for the AFSC loan:





Land
                    
                    $
                    220,430Building
                    
                    
                    835,758Building
      improvements
                    
                    
                    645,606Manufacturing
      equipment
                    
                    
                    1,295,487Trailer
                    
                    
                    16,032Truck
                    
                    
                    7,412Trade
      show booth
                    
                    
                    1,300Technology
                    
                    
                    108,305




11




6.
            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.





Of the
patents costs listed below, $62,877 are not subject to amortization as of yet,
as the patents are still in the process of being approved.





2009
                    Cost
                  
                  
                  Accumulated
                    Amortization
                  
                  
                  2009
                    NetPatents
                  
                  $
                  210,293
                  
                  
                  $
                  15,873
                  
                  
                  $
                  194,420





2008
                    Cost
                  
                  
                  Accumulated
                    Amortization
                  
                  
                  2008
                    NetPatents
                  
                  $
                  218,209
                  
                  
                  $
                  14,009
                  
                  
                  $
                  204,203





Decrease
in 2009 cost was solely due to currency conversion.  2009 cost in
Canadian dollars - $264,519 (2008 - $264, 244 in Canadian dollars).





Amount of
depreciation for 2009 - $1,864 (2008 - $396)





Estimated
depreciation expense over the next five years is as follows:





2009
                        
                        $
                        9,9502010
                        
                        
                        9,9502011
                        
                        
                        9,9502012
                        
                        
                        9,9502013
                        
                        
                        9,950







7.
            Long
      Term Deposits




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




2009
                    
                    
                    2008Long
      term deposits
                    
                    $
                    27,107
                    
                    
                    $
                    32,713







8.
            Long
      Term Debt




Flexible Solutions Ltd. has received a
non-interest bearing loan from the Department of Agriculture and Agri-Food
Canada (AAFC).  Eligible for up to $1,000,000 Canadian funds, the
Company has drawn $383,047 CDN ($303,679US) as of March 31, 2009 and has pledged
no securities.




12


If the
full amount is drawn, the repayment schedule is as follows:




Amount
      Due (in CDN funds)
                              Payment
      Due Date$200,000
                              January
      1, 2012$200,000
                              January
      1, 2013$200,000
                              January
      1, 2014$200,000
                              January
      1, 2015$200,000
                              January
      1,
2016




Flexible Solutions Ltd. has also
received a 5% simple interest loan from Agriculture Financial Services Corp.
(AFSC).  Eligible for up to $2,000,000 Canadian funds, the Company has
drawn $1,491,000 CDN ($1,182,065 US) as of March 31, 2009 and has until April 1,
2009 to draw the remainder.  The Company only has to make interest
payments until May 1, 2010 and then must pay down the principal in equal
payments until May 1, 2014.  The Company has pledged the assets of the
Taber, AB building, including equipment, inventory and accounts receivable, as
collateral as well as signed a promissory note guaranteeing the amount of the
loan by Flexible Solutions International Inc.




9.
            Mortgage




Pursuant to the acquisition of the
plant and property in Taber, Alberta, the Company agreed to assume a mortgage of
$651,298 ($645,167 CAD) to the vendor to satisfy the balance of the purchase
price.  The mortgage was paid in June 2008.




10.
            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.




13


The
following table summarizes the Company’s stock option activity for the years
ended December 31, 2007, 2008 and the period ended March 31, 2009:




Number
      of shares
                        
                        
                        Exercise
      price
                          per
      share
                        
                        
                        Weighted
      average exercise priceBalance,
      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
                        
                        
                        203,000
                        
                        
                        
                        $3.60
                        
                        
                        
                        $3.60Cancelled
      or expired
                        
                        
                        (204,740
                        )
                        
                        
                        $3.00
      - $4.60
                        
                        
                        
                        $3.74Balance,
      December 31, 2008
                        
                        
                        1,910,700
                        
                        
                        
                        $3.00
      – 4.55
                        
                        
                        
                        $3.38Granted
                        
                        
                        122,000
                        
                        
                        
                        $2.25
                        
                        
                        
                        $2.25Cancelled
      or expired
                        
                        
                        (8,000
                        )
                        
                        
                        $3.92
                        
                        
                        
                        $3.92Balance,
      March 31, 2009
                        
                        
                        2,024,700
                        
                        
                        
                        $2.25
      - $4.55
                        
                        
                        
                        $3.31




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




2009
                      
                      
                      2008Expected
      life – years
                      
                      
                      5.0
                      
                      
                      
                      5.0Interest
      rate
                      
                      
                      1.14
                      %
                      
                      
                      2.27
                      %Volatility
                      
                      
                      65
                      %
                      
                      
                      99
                      %Dividend
      yield
                      
                      
                      —
                      %
                      
                      
                      —
                      %Weighted
      average fair value of options granted
                      
                      $
                      1.00
                      
                      
                      $
                      1.15





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, 2009 the Company granted 61,000 options to
consultants that resulted in $15,346 in expenses this quarter.  During
the same period, 61,000 options were granted to employees, resulting in $15,347
in expenses this quarter.  No stock options were exercised during this
period.




11.
            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 exercisable at a price of $4.50 per share.




On June 8, 2005, the Company
announced that it had raised an additional $327,750 pursuant to a private
placement.  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.




14


In May
2007 the Company closed a $3,042,455 private placement with 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.  The Company also issued 21,970 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 three
years ended December 30, 2007 (no subsequent activity):




Number
      of shares
                        
                        
                        Exercise
      price
                          per
      share
                        
                        
                        Weighted
      average exercise priceBalance,
      December 31, 2004
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        —Granted
                        
                        
                        987,400
                        
                        
                        $
                        4.50
                        
                        
                        $
                        4.50Exercised
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        —Cancelled
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        —Balance,
      December 31, 2005
                        
                        
                        987,400
                        
                        
                        $
                        4.50
                        
                        
                        $
                        4.50Granted
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        —Exercised
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        —Cancelled
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        —Balance,
      December 31, 2006
                        
                        
                        987,400
                        
                        
                        $
                        4.50
                        
                        
                        $
                        4.50Granted
                        
                        
                        490,040
                        
                        
                        $
                        4.50
                        
                        
                        $
                        4.50Exercised
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        —Cancelled
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        —Balance,
      December 30, 2007
                        
                        
                        1,477,440
                        
                        
                        $
                        4.50
                        
                        
                        $
                        4.50




12.
            Capital
      Stock.




The
Company did not issue any shares of its common stock during the three months
ended March 31, 2009.




13.
            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
ofbiodegradable polymers (“BCPA’s”) used by the petroleum, chemical,
utility and mining industries to prevent corrosion and scaling in water piping.
This product can also be used in detergents to increase biodegradability and in
agriculture to increase crop yields by enhancing fertilizer uptake.





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.




15


The
accounting policies of the segments are the same as those described in Note 2,
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.




Three
months ended March 31, 2009:




EWCP
                        
                        
                        BPCA
                        
                        
                        TotalRevenue
                        
                        $
                        211,267
                        
                        
                        $
                        2,448,281
                        
                        
                        $
                        2,659,548Interest
      revenue
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -Interest
      expense
                        
                        
                        10,173
                        
                        
                        
                        1,212
                        
                        
                        
                        11,385Depreciation
      andamortization
                        
                        
                        13,065
                        
                        
                        
                        87,018
                        
                        
                        
                        100,083Segment
      profit (loss)
                        
                        
                        (307,893
                        )
                        
                        
                        174,663
                        
                        
                        
                        (133,230
                        )Segment
      assets
                        
                        
                        3,351,638
                        
                        
                        
                        2,830,683
                        
                        
                        
                        6,182,321Expenditures
      forsegment
      assets
                        
                        
                        202,857
                        
                        
                        
                        2,903
                        
                        
                        
                        205,760


Three
months ended March 31, 2008:




EWCP
                          
                          
                          BPCA
                          
                          
                          TotalRevenue
                          
                          $
                          410,828
                          
                          
                          $
                          3,087,645
                          
                          
                          $
                          3,498,473Interest
      revenue
                          
                          
                          490
                          
                          
                          
                          -
                          
                          
                          
                          490Interest
      expense
                          
                          
                          13,039
                          
                          
                          
                          1,102
                          
                          
                          
                          14,141Depreciation
      andamortization
                          
                          
                          11,378
                          
                          
                          
                          100,248
                          
                          
                          
                          111,626Segment
      profit (loss)
                          
                          
                          (347,068
                          )
                          
                          
                          657,241
                          
                          
                          
                          310,173Segment
      assets
                          
                          
                          1,5050,591
                          
                          
                          
                          3,203,491
                          
                          
                          
                          4,709,082Expenditures
      forsegment
      assets
                          
                          
                          192,032
                          
                          
                          
                          (31,980
                          )
                          
                          
                          224,012


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




2009
                      
                      
                      2008Canada
                      
                      $
                      87,572
                      
                      
                      $
                      74,723United
      States and abroad
                      
                      
                      2,601,976
                      
                      
                      
                      3,423,750Total
                      
                      $
                      2,659,548
                      
                      
                      $
                      3,498,473




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




2009
                      
                      
                      2008Canada
                      
                      $
                      3,361,638
                      
                      
                      $
                      3,176,775United
      States
                      
                      
                      2,830,683
                      
                      
                      
                      2,909,651Total
                      
                      $
                      6,182,321
                      
                      
                      $
                      6,086,426




Three
customers accounted for $1,581,211 (59%) of sales made in the period (2008 -
$1,748,545 or 50%).




16


14.
            Commitments.




The
Company is committed to minimum rental payments for property and premises
aggregating approximately $85,806 over the term of three leases, the last
expiring on December 31, 2011.




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




2009
                  
                  $
                  65,8812010
                  
                  
                  9,9622011
                  
                  
                  9,9622011
                  
                  
                  -2012
                  
                  
                  -





15.
            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.




16.
            Subsequent
      Events.




On April
8, 2009 the Company received an additional $99,375US ($125,792CDN) loan from the
Department of Agriculture and Agri-Food Canada (AAFC).  Please see
Note 8.




17.
            Comparative
      Figures.




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




Item
      2.
            Management’s Discussion and Analysis of Results of Operation and
      Financial Condition.




Overview




The
Company develops, manufactures and markets specialty chemicals that slow the
evaporation of water.  The Company also manufactures and markets
biodegradable polymers which are used in the oil, gas and agriculture
industries.




Results
of Operations




The
Company has two product lines:




Energy
and Water Conservation products - The Company’s HEAT$AVR® product is used in
swimming pools and spas.  The product forms a thin, transparent layer on
the water’s surface.  The transparent layer slows the evaporation of water,
allowing the water to retain a higher temperature for a longer period of time
and thereby reducing the energy required to maintain the desired temperature of
the water.  WATER$AVR®, a modified version of HEAT$AVR®, can be used in
reservoirs, potable water storage tanks, livestock watering ponds, canals, and
irrigation ditches.




17


BCPA products -The second
product, TPA’s (i.e. thermal polyaspartate biopolymers), are biodegradable
polymers used by the petroleum, chemical, utility and mining industries to
prevent corrosion and scaling in water piping. This product can also be used in
detergents to increase biodegradability and in agriculture to increase crop
yields by enhancing fertilizer uptake.




Material
changes in the Company’s Statement of Operations for the periods presented are
discussed below:





Three Months Ended March 31,
2009





Item
                                      Increase
      (I) or
                                        Decrease (D)
                                      
                                      ReasonSalesEWCP
      products
                                      D
                                      
                                      The
      Company believes that the lower volume is the result of large customers
      keeping inventory levels down.BPCA
      products
                                      D
                                      
                                      Reduced
      selling prices, reduced demand in the detergent sector and lower oil
      extraction levels all contributed to lower revenue.Gross
      Profit
                                      D
                                      
                                      Reduced
      due to lower volume and lower pricing per unit sales that were not
      accompanied by lower cost raw materials until later in the
      quarter.Wages
                                      I
                                      
                                      Decreased
      use of consultants increased wages.Advertising
      and Promotion
                                      D
                                      
                                      The
      Company selected the highest impact trade shows and trade publications,
      reducing the total cost of reaching customers.Office
      and miscellaneous
                                      D
                                      
                                      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.Consulting
                                      D
                                      
                                      Increased
      wages decreased the need for consultants.Professional
      Fees
                                      I
                                      
                                      The
      Company has chosen to allocate the year end audit fee throughout the year
      instead of just recording it in fourth quarter.Research
                                      D
                                      
                                      Decreased
      as one line of inquiry was completed and new projects were
      identified.Commissions
                                      D
                                      
                                      Decreased
      sales for the quarter resulted in lower
  commissions.





18


Capital
Resources and Liquidity





The sources and uses of funds are
directly obtainable from the Consolidated Statement of Cash Flows included as
part of the financial statements filed with this report.





The Company has sufficient cash
resources to meets its future commitments and cash flow requirements for the
coming year.  As of March 31, 2009 working capital was $6,242,378
(2008 - $6,465,437) and the Company has no substantial commitments that require
significant outlays of cash over the coming fiscal year.





The
Company is committed to minimum rental payments for property and premises
aggregating approximately $85,806 over the term of three leases, the last
expiring on December 31, 2011.




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




2009
                  
                  $
                  65,8812010
                  
                  
                  9,9622011
                  
                  
                  9,9622011
                  
                  
                  -2012
                  
                  
                  -








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






































19




Item
      4T.
            CONTROLS AND
PROCEDURES





Evaluation
of Disclosure Controls and Procedures





Under the
direction and with the participation of our management, including our Principal
Executive and Financial Officer, we conducted an evaluation of the effectiveness
of the design and operation of our disclosure controls and procedures as of
March 31, 2009.  We maintain disclosure controls and procedures that
are designed to ensure that information required to be disclosed in our periodic
reports with the Securities and Exchange Commission is recorded, processed,
summarized and reported within the time periods specified in the SEC’s rules and
regulations, and that such information is accumulated and communicated to our
management, including our principal executive and financial officer, as
appropriate, to allow timely decisions regarding required
disclosure.  Our disclosure controls and procedures are designed to
provide a reasonable level of assurance of reaching desired disclosure control
objectives. Based on the evaluation, our Principal Executive and Financial
Officer concluded that these disclosure controls and procedures are effective as
of March 31, 2009.





Changes
in Internal Control over Financial Reporting





Our
management, with the participation of our Principal Executive and Financial
Officer, evaluated whether any change in our internal control over financial
reporting occurred during the three months ended March 31,
2009.  Based on that evaluation, it was  concluded that
there has been no change in our internal control over financial reporting during
the three months ended March 31, 2009 that materially affected, or is reasonably
likely to materially affect, our internal control over financial
reporting.















































20


PART II




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 and
      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.














































21


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.May
      14, 2009
                                    By:
                                    /s/ Daniel
      B. O’BrienName:
                                    Daniel
      B. O’BrienTitle:
                                    President
      and Chief Executive OfficerBy:
                                    /s/ Daniel
      B. O’BrienName:
                                    Daniel
      B. O’BrienTitle:
                                    Chief
      Financial and Accounting Officer
























22