**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**








**FORM
      10-QSB**





(Mark
                one)ý
            Quarterly
                Report Pursuant to Section 13 or 15(d) of the Securities Exchange
                Act of
                1934**For
                the quarterly period ended March 31, 2007.**o
            Transition
                Report Under Section 13 or 15(d) of the Securities Exchange Act of
                1934For
                the transition period from___________to___________.Commission
                File Number 000-29649







**FLEXIBLE
                SOLUTIONS INTERNATIONAL, INC.**(Name
                of Small Business Issuer as Specified in Its
                Charter)





**Nevada**
            
            **91-1922863**(State
                of Incorporation)
            
            (IRS
                Employer Identification No.)**615
                Discovery Street**
              **Victoria,
                British Columbia, CANADA**
            
            **V8T
                5G4**(Address
                of Principal Executive Offices)
            
            (Zip
                Code)**(250)
                477-9969**(Issuer’s
                Telephone Number, Including Area Code)





Check
      whether the issuer (1) filed all reports required to be filed by Section 13
      or
      15(d) of the Exchange Act during the past 12 months (or for such shorter period
      that the registrant was required to file such reports), and (2) has been subject
      to such filing requirements for the past 90 days. Yes **ý** No **o**




Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act). Yes **o** No **ý**




**APPLICABLE
      ONLY TO CORPORATE ISSUERS**




State
      the
      number of shares outstanding of each of the issuer’s classes of common equity,
      as of the latest practicable date: The Company had 14,055,967 shares of Common
      Stock, par value $0.001 per share, outstanding as of May 10, 2007.




Transitional
      Small Business Disclosure Format (check one): Yes **o** No **ý**









**FORM
      10-QSB**




Index




**PART
                I.**
            **FINANCIAL
                INFORMATION**Item
                1.
            Financial
                Statements.
            1(a)
            UnauditedConsolidated
                Balance Sheets at March 31, 2007
                and December 31, 2006.
            1(b)
            Unaudited
                Consolidated Statements of Operations for the Three Months EndedMarch
                31, 2007 and 2006.
            2(c)
            Unaudited
                Consolidated Statements of Cash Flows for the Three Months Ended
                March 31,
                2007 and 2006.
            3(d)
            Notes
                to Unaudited Consolidated Financial Statementsfor the Period EndedMarch
                31, 2007.
            4Item
                2.
            Management’s
                Discussion and Analysis or Plan of Operation.
            15Item
                3.
            Controls
                and Procedures.
            17**PART
                II.**
            **OTHER
                INFORMATION**Item
                1.
            Legal
                Proceedings.
            18Item
                2.
            UnregisteredSales of Equity Securities and Use of Proceeds.
            18Item
                3.
            Defaults
                Upon Senior Securities.
            18Item
                4.
            Submission
                of Matters to a Vote of Security Holders.
            18Item
                5.
            Other
                Information.
            18Item
                6.
            Exhibits.
            19**SIGNATURES**
            20




**i**




**CAUTIONARY
      NOTE REGARDING FORWARD-LOOKING STATEMENTS**




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




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




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




·
            Increased
                competitive pressures from existing competitors and new
                entrants;




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




·
            Deterioration
                in general or regional economic
                conditions;




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




·
            Loss
                of customers or sales weakness;




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




·
            The
                unavailability of funds for capital expenditures;
                and




·
            Operational
                inefficiencies in distribution or other
                systems.




For
      a
      detailed description of these and other factors that could cause actual results
      to differ materially from those expressed in any forward-looking statement,
      please see “Risk Factors” in our Annual Report on Form 10-KSB for the year ended
      December 31, 2006.




**ii**




**PART
              I**
            **FINANCIAL
                INFORMATION**




**Item
              1.**
            **Financial
                Statements.**




**FLEXIBLE
      SOLUTIONS INTERNATIONAL, INC.**


**CONSOLIDATED
      BALANCE SHEETS**


**At
      March 31, 2007**


**(U.S.
      Dollars)**




**March
                31,**
              **2007**
              **(Unaudited)**
            
            **December
                31,**
              **2006****Assets****Current**Cash
                and cash equivalents
            
            $
            780,647
            
            $
            450,759Accounts
                receivable
            
            
            1,649,740
            
            
            1,319,575Inventory
            
            
            1,750,999
            
            
            1,904,315Prepaid
                expenses
            
            
            120,528
            
            
            124,3604,301,914
            
            
            3,799,009**Property,
                equipment and leaseholds**
            
            
            3,976,644
            
            
            4,100,553**Patents**
            
            
            188,578
            
            
            169,758**Investment**
            
            
            369,000
            
            
            369,000**Long
                term deposits**
            
            
            47,531
            
            
            47,220$
            8,883,667
            
            $
            8,485,540**Liabilities****Current**Accounts
                payable and accrued liabilities
            
            $
            527,138
            
            $
            423,030Deferred
                revenue
            
            
            -
            
            
            20,559527,139
            
            
            443,589**Stockholders’
                Equity****Capital
                stock**Authorized50,000,000
                Common shares with a par value of $0.001 each1,000,000 Preferred shares with a par value of $0.01 eachIssued
                and outstanding13,179,227
                (2006: 13,058,427) common shares
            
            
            13,179
            
            
            13,058**Capital
                in excess of par value**
            
            
            12,691,858
            
            
            12,370,418**Other
                comprehensive income**
            
            
            148,234
            
            
            131,002**Deficit**
            
            
            (4,496,742
            )
            
            (4,472,527
            )**Total
                Stockholders’ Equity**
            
            
            8,356,529
            
            
            8,041,951**Total
                Liabilities and Stockholders’ Equity**
            
            $
            8,883,667
            
            $
            8,485,540**Commitments,
                Contingencies and Subsequent events (Notes 11, 12 &
                13)**




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


**FLEXIBLE
      SOLUTIONS INTERNATIONAL, INC.**


**CONSOLIDATED
      STATEMENTS OF OPERATIONS**


**For
      the Three Months Ended March 31, 2007 and 2006**


**(U.S.
      Dollars -- Unaudited)**




**Three
                Months Ended March 31,****2007**
            
            **2006****Sales**
            
            $
            2,289,901
            
            $
            2,508,445**Cost
                of sales**
            
            
            1,466,351
            
            
            1,486,681**Gross
                profit**
            
            
            823,550
            
            
            1,021,764**Operating
                expenses**Wages
            
            
            257,186
            
            
            276,400Administrative
                salaries and benefits
            
            
            131,797
            
            
            160,949Advertising
                and promotion
            
            
            31,878
            
            
            18,947Investor
                relations and transfer agent fee
            
            
            58,191
            
            
            32,298Office
                and miscellaneous
            
            
            37,928
            
            
            23,918Insurance
            
            
            54,829
            
            
            42,494Interest
                expense
            
            
            1,025
            
            
            1,044Rent
            
            
            54,293
            
            
            58,533Consulting
            
            
            64,997
            
            
            87,801Professional
                fees
            
            
            38,796
            
            
            92,935Travel
            
            
            33,743
            
            
            18,753Telecommunications
            
            
            9,616
            
            
            6,997Shipping
            
            
            8,093
            
            
            13,466Research
            
            
            32,694
            
            
            37,603Commissions
            
            
            36,703
            
            
            57,225Bad
                debt expense (recovery)
            
            
            1,076
            
            
            589Currency
                exchange
            
            
            (10,093
            )
            
            5,515Utilities
            
            
            5,607
            
            
            4,992848,359
            
            
            940,459**Income
                (loss) before other items and income tax**
            
            
            (24,809
            )
            
            81,305**Interest
                income**
            
            
            594
            
            
            945**Income
                (loss) before income tax**
            
            
            (24,215
            )
            
            82,250**Income
                tax (recovery)**
            
            
            -
            
            
            (127,079
            )**Net
                income (loss)**
            
            
            (24,215
            )
            
            209,329**Net
                income (loss) per share (basic and diluted)**
            
            $
            0.00
            
            $
            0.02**Weighted
                average number of common shares**
            
            
            13,240,377
            
            
            12,981,316


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


**FLEXIBLE
      SOLUTIONS INTERNATIONAL, INC.**


**CONSOLIDATED
      STATEMENTS OF CASH FLOWS**


**For
      the Three Months Ended March 31, 2007 and 2006**


**(U.S.
      Dollars -- Unaudited)**




**Three
                Months Ended March 31,****2007**
            
            **2006****Operating
                activities**Net
                income (loss)
            
            $
            (24,215
            )
            $
            209,329Stock
                compensation expense
            
            
            123,712
            
            
            204,118Depreciation
            
            
            127,733
            
            
            147,621227,230
            
            
            561,068Changes
                in non-cash working capital items:(Increase)
                Decrease in accounts receivable
            
            
            (330,165
            )
            
            (1,175,037
            )(Increase)
                Decrease in inventory
            
            
            153,316
            
            
            627,958(Increase)
                Decrease in prepaid expenses
            
            
            3,832
            
            
            45,200Increase
                (Decrease) in accounts payable
            
            
            104,108
            
            
            (41,628
            )Increase
                (Decrease) in deferred revenue
            
            
            (20,559
            )
            
            -Increase
                (Decrease) in income taxes
            
            
            -
            
            
            28,918**Cash
                provided by (used in) operating activities**
            
            
            137,762
            
            
            46,479**Investing
                activities**Long
                term deposits
            
            
            (311
            )
            
            -Investments
            
            
            -
            
            
            -Loan
                receivable
            
            
            -
            
            
            (93
            )Development
                of patents
            
            
            (18,820
            )
            
            6,344Acquisition
                of property and equipment
            
            
            (3,824
            )
            
            (4,603
            )**Cash
                provided by (used in) investing activities**
            
            
            (22,955
            )
            
            1,648**Financing
                activities**Proceeds
                from issuance of common stock
            
            
            197,850
            
            
            (52,154
            )**Cash
                provided by financing activities**
            
            
            197,850
            
            
            (52,154
            )Effect
                of exchange rate changes on cash
            
            
            17,231
            
            
            (3,931
            )**Inflow
                (outflow) of cash**
            
            
            329,888
            
            
            (7,958
            )Cash
                and cash equivalents, beginning
            
            
            450,759
            
            
            526,292**Cash
                and cash equivalents, ending**
            
            $
            780,647
            
            $
            518,334**Supplemental
                disclosure of cash flow information:**Interest
                paid
            
            $
            1,025
            
            $
            1,044  --
              See
              Notes to Unaudited Consolidated Financial Statements --
 **3**




**FLEXIBLE
      SOLUTIONS INTERNATIONAL, INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**For
      the Period Ended March 31, 2007**


**(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, 2005 Annual Report on Form 10-KSB. This
      quarterly report should be read in conjunction with such annual
      report.




In
      the
      opinion of the Company’s management, these consolidated financial statements
      reflect all adjustments necessary to present fairly the Company’s consolidated
      financial position at March 31, 2007, and the consolidated results of operations
      and the consolidated statements of cash flows for the three months ended March
      31, 2007 and 2006. The results of operations for the three months ended March
      31, 2007 are not necessarily indicative of the results to be expected for the
      entire fiscal year.




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




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




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




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




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




**4**


Pursuant
      to a purchase agreement dated May 26, 2004, the Company acquired the assets
      of
      Donlar Corporation (“Donlar”) on June 9,  2004
      and
      created a new company, NanoChem Solutions Inc. as the operating entity for
      such
      assets. The purchase price of the transaction was $6,150,000 with consideration
      being a combination of cash and debt. Under the purchase agreement and as part
      of the consideration, the Company issued a promissory note bearing interest
      at
      4% to Donlar’s largest creditor to satisfy $3,150,000 of the purchase price.
      This note was paid June 2, 2005 and upon payment, all former Donlar assets
      that
      were pledged as security were released from their mortgage. The remainder of
      the
      consideration given was cash.




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




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




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






**2.**
            **Significant
                Accounting Policies.**




These
      consolidated financial statements have been prepared in accordance with
      accounting principles generally accepted in the United States applicable to
      a
      going concern and reflect the policies outlined below.




(a)
            *Cash
                and Cash Equivalents*.




The
      Company considers all highly liquid investments purchased with an original
      or
      remaining maturity of less than three months at the date of purchase to be
      cash
      equivalents. Cash and cash equivalents are maintained with several financial
      institutions.




(b)
            *Inventories
                and Cost of Sales*




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




In
      2004,
      the FASB issued SFAS No. 151, “Inventory Costs”, to clarify the accounting for
      abnormal amounts of idle facility expense, freight, handling costs and wasted
      material. This standard requires that such items be recognized as current-period
      charges. The standard also establishes the concept of “normal capacity” and
      requires the allocation of fixed production overhead to inventory based on
      the
      normal capacity of the production facilities. Any unallocated overhead must
      be
      recognized as an expense in the period incurred. This standard is effective
      for
      inventory costs incurred starting January 1, 2006. The adoption of this standard
      did not have a material impact on its financial position, results of operations
      or cash flows for 2006 or 2007.




**5**




(c)
            *Allowance
                for Doubtful Accounts*




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




(d)
            *Property,
                Equipment and Leaseholds*.




The
      following assets are recorded at cost and depreciated using the following
      methods using the following annual rates:




Computer
                hardware
            
            30%
                Declining balanceFurniture
                and fixtures
            
            20%
                Declining balanceManufacturing
                equipment
            
            20%
                Declining balanceOffice
                equipment
            
            20%
                Declining balanceBuilding
            
            10%
                Declining balanceLeasehold
                improvements
            
            Straight-line
                over lease term





Depreciation
      is recorded at half for the year the assets are first purchase. Property and
      equipment are written down to net realizable value when management determines
      there has been a change in circumstances which indicates its carrying amount
      may
      not be recoverable. No write-downs have been necessary to date.




(e)
            *Impairment
                of Long-Lived Assets*.




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




(f)
            *Investments.*




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




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





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




**6**




(g)
            *Foreign
                Currency*.




The
      functional currency of one of the subsidiaries is the Canadian Dollar. The
      translation of the Canadian Dollar to the reporting currency of the U.S. Dollar
      is performed for assets and liabilities using exchange rates in effect at the
      balance sheet date. Revenue and expense transactions are translated using
      average exchange rates prevailing during the year. Translation adjustments
      arising on conversion of the financial statements from the Company’s functional
      currency, Canadian Dollars, into the reporting currency, U.S. Dollars, are
      excluded from the determination of loss and are disclosed as other comprehensive
      income (loss) in stockholders’ equity.




Foreign
      exchange gains and losses relating to transactions not denominated in the
      applicable local currency are included in the operating loss if realized during
      the year and in comprehensive income if they remain unrealized at the end of
      the
      year.




(h)
            *Revenue
                Recognition*.




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




Provisions
      are made at the time the related revenue is recognized for estimated product
      returns. Since the Company’s inception, product returns have been insignificant;
      therefore no provision has been established for estimated product
      returns.




(i)
            *Stock
                Issued in Exchange for Services*.




The
      valuation of the Company’s common stock issued in exchange for services is
      valued at an estimated fair market value as determined by officers and directors
      of the Company based upon trading prices of the Company’s common stock on the
      dates of the stock transactions. The corresponding expense of the services
      rendered is recognized over the period that the services are
      performed.




(j)
            *Stock-based
                Compensation*.




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




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




**7**




(k)
            *Comprehensive
                Income*.




Other
      comprehensive income refers to revenues, expenses, gains and losses that under
      generally accepted accounting principles are included in comprehensive income,
      but are excluded from net income as these amounts are recorded directly as
      an
      adjustment to stockholders’ equity. The Company’s other comprehensive income is
      primarily comprised of unrealized foreign exchange gains and
      losses.




(l)
            *Income
                (Loss) Per Share*.




Income
      (loss) per share is calculated by dividing net income (loss) by the weighted
      average number of shares outstanding. Diluted loss per share is computed by
      giving effect to all potential dilutive options that were outstanding during
      the
      year. **** For
      the
      years ended December 31, 2006, 2005 and 2004, 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 $582,001 (35%) as at March 31, 2007 (2006 -
      $918,913 or 70%).





(o)
            *Contingencies*




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





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





**8**


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





**3.**
            **Inventories**




2007
            
            2006Completed
                goods
            
            $
            894,028
            
            $
            970,780Works
                in progress
            
            
            234,130
            
            
            397,995Raw
                materials
            
            
            622,841
            
            
            535,540$
            1,750,999
            
            $
            1,904,315





**4.**
            **Property,
                Plant & equipment**




**2007**
            
            **Accumulated**
            
            **2007****Cost**
            
            **Depreciation**
            
            **Net**Buildings
            
            $
            3,144,259
            
            $
            785,239
            
            $
            2,359,020Computer
                hardware
            
            
            61,163
            
            
            36,431
            
            
            24,732Furniture
                and fixtures
            
            
            18,706
            
            
            9,172
            
            
            9,534Office
                equipment
            
            
            29,713
            
            
            18,173
            
            
            11,540Manufacturing
                equipment
            
            
            2,211,177
            
            
            1,053,637
            
            
            1,157,540Trailer
            
            
            2,009
            
            
            1,467
            
            
            542Leasehold
                improvements
            
            
            24,832
            
            
            12,179
            
            
            12,653Trade
                show booth
            
            
            7,526
            
            
            4,629
            
            
            2,897Land
            
            
            398,186
            
            
            —
            
            
            398,186$
            5,897,571
            
            $
            1,920,927
            
            $
            3,976,644





**2006**
            
            **Accumulated**
            
            **2006****Cost**
            
            **Depreciation**
            
            **Net**Buildings
            
            $
            3,144,259
            
            $
            724,752
            
            $
            2,419,507Computer
                hardware
            
            
            60,576
            
            
            34,200
            
            
            26,376Furniture
                and fixtures
            
            
            18,576
            
            
            8,608
            
            
            9,968Office
                equipment
            
            
            29,533
            
            
            17,488
            
            
            12,045Manufacturing
                equipment
            
            
            2,207,781
            
            
            990,959
            
            
            1,216,822Trailer
            
            
            1,991
            
            
            1,411
            
            
            580Leasehold
                improvements
            
            
            39,517
            
            
            25,551
            
            
            13,966Trade
                show booth
            
            
            7,456
            
            
            4,353
            
            
            3,103Land
            
            
            398,186
            
            
            —
            
            
            398,186$
            5,907,875
            
            $
            1,807,322
            
            $
            4,100,553





**5.**
            **Patents**




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





**9**


Of
      the
      patents costs listed below, $70,790 are not subject to amortization as of yet,
      as the patents are still in the process of being approved.





**2007**
              **Cost**
            ****
            **Accumulated**
              **Amortization**
            ****
            **2007**
              **Net**Patents
            
            $
            193,791
            
            $
            5,213
            
            
            188,578





**2006**
              **Cost**
            ****
            **Accumulated**
              **Amortization**
            ****
            **2006**
              **Net**Patents
            
            $
            172,938
            
            $
            3,180
            
            
            169,758





**6.**
            **Investments****.**





2007
            
            2006Tatko
                Inc.
            
            $
            271,000
            
            $
            271,000Air-Water
                Interface Delivery and Detection Inc.
            
            
            98,000
            
            
            98,000$
            369,000
            
            $
            369,000





On
      May
      31, 2003, the Company acquired an option to purchase a 20% interest in the
      outstanding shares of Tatko Inc. (“Tatko”) for consideration of the issuance of
      100,000 shares of the Company’s common stock. The option to purchase the shares
      of Tatko expires on May 31, 2008. The cost of the investment has been accounted
      for based on the fair market value of the Company’s common stock on May 31,
      2003. For further information on this option, see Contingencies (Note 18)
      below.




In
      2005,
      NanoDetect purchased 32.7 shares of equity in Air Water Interface Delivery
      and
      Detection Inc. (“AWD”) for a total cost of $98,000. This investment represents
      only 3.3% of the issued and outstanding shares of AWD and, accordingly, will
      be
      accounted for under the cost method.




**7.**
            **Long
                Term Deposits**




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




2007
            
            2006Long
                term deposits
            
            $
            47,531
            
            $
            47,220







**8.**
            **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.




**10**


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




The
      following table summarizes the Company’s stock option activity for the years
      ended December 31, 2006 and 2005:




**Number
                of shares**
            ****
            **Exercise
                price**
              **per
                share**
            ****
            **Weighted
                average exercise price**Balance,
                December 31, 2004
            
            
            1,241,740
            
            $1.00
                - $4.60
            
            $2.87Granted
            
            
            30,000
            
            $3.58
                - $4.40
            
            $4.17Exercised
            
            
            (162,000
            )
            $1.40
            
            $1.40Cancelled
                or expired
            
            
            (49,000
            )
            $3.00
                - $4.25
            
            $3.52Balance,
                December 31, 2005
            
            
            1,060,740
            
            $1.40
                - $4.60
            
            $3.44Granted
            
            
            1,191,000
            
            $3.25
                - $3.60
            
            $3.25Exercised
            
            
            (46,000
            )
            $1.40
            
            $1.40Cancelled
                or expired
            
            
            (79,000
            )
            $1.40
                - $4.25
            
            $2.46Balance,
                December 31, 2006
            
            
            2,126,740
            
            $1.40
                - 4.55
            
            $3.44Granted
            
            
            150,000
            
            $1.50
                - 2.00
            
            $1.67Exercised
            
            
            (120,800
            )
            $1.50
                - 3.25
            
            $1.63Balance,
                March 31, 2007
            
            
            2,155,940
            
            $2.75
                - 4.55
            
            $3.42








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





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




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




2007
            
            2006Expected
                life - years
            
            
            5.0
            
            
            5.0Interest
                rate
            
            
            4.50
            %
            
            3.85
            %Volatility
            
            
            52
            %
            
            52.0
            %Dividend
                yield
            
            
            —
            %
            
            —
            %Weighted
                average fair value of options granted
            
            $
            1.49
            
            $
            1.69





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




**11**


During
      the three months ended March 31, 2006, the Company granted 405,000 options
      to
      purchase common stock to consultants and has applied FAS No. 123(R) using the
      Black-Scholes option-pricing model, which resulted in additional expenses of
      $78,163 this quarter. During the same period, the Company granted 675,000
      options to employees, resulting in an additional $125,955 in wages and
      administrative expenses.




**9.**
            **Warrants**




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




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




The
      following table summarizes the Company’s warrant option activity for the year
      ended December 31, 2005 (no prior or subsequent activity):




**Number
                of shares**
            ****
            **Exercise
                price**
              **per
                share**
            ****
            **Weighted
                average exercise price**Balance,
                December 31, 2004
            
            
            —
            
            
            —
            
            
            —Granted
            
            
            987,400
            
            
            $4.50
            
            
            $4.50Exercised
            
            
            —
            
            
            —
            
            
            —Cancelled
            
            
            —
            
            
            —
            
            
            —Balance,
                December 31, 2005
            
            
            987,400
            
            
            $4.50
            
            
            $4.50




**10.**
            **Capital
                Stock****.**




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




No
      stock
      was issued in the quarter ending March 31, 2006.




**11.**
            **Segmented,
                Significant Customer Information and Economic
                Dependency****.**




The
      Company operates in two segments:




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




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




**12**


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.




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




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




**EWCP**
            ****
            **BPCA**
            ****
            **Total**Revenue
            
            $
            687,482
            
            $
            1,602,419
            
            $
            2,289,901Interest
                revenue
            
            
            594
            
            
            -
            
            
            594Interest
                expense
            
            
            395
            
            
            630
            
            
            1,025Depreciation
                andamortization
            
            
            12,758
            
            
            114,975
            
            
            127,733Segment
                profit (loss)
            
            
            (188,350
            )
            
            164,135
            
            
            (24,215
            )Segment
                assets
            
            
            190,439
            
            
            3,786,205
            
            
            3,976,644Expenditures
                forsegment
                assets
            
            
            3,587
            
            
            237
            
            
            3,824




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




**2007**
            ****
            **2006**Canada
            
            $
            31,278
            
            $
            83,012United
                States and abroad
            
            
            2,258,623
            
            
            2,425,433Total
            
            $
            2,289,901
            
            $
            2,508,445




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




**2007**
            ****
            **2006**Canada
            
            $
            368,002
            
            $
            364,487United
                States
            
            
            3,797,220
            
            
            3,905,824Total
            
            $
            4,165,222
            
            $
            4,270,311





Three
      customers account for $840,310 (37%) of sales made in the period (2006 -
      $1,261,370 or 50%).





**12.**
            **Commitments****.**




The
      Company is committed to minimum rental payments for property and premises
      aggregating approximately $456,354 over the term of four leases, the last
      expiring on December 31, 2011.




**13**


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




2007
            
            $
            153,6282008
            
            
            160,4672009
            
            
            113,1332010
            
            
            14,5632011
            
            
            14,563





**13.**
            **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.




On
      July
      23, 2004, the Company filed a breach of contract suit in the Circuit Court
      of
      Cook County, Illinois against Tatko. The action arises out of a joint product
      development agreement entered into between the Company and Tatko in which the
      Company agreed to invest $10,000 toward the product development venture and
      granted to Tatko 100,000 shares of the Company’s restricted common stock. In
      return, Tatko granted the Company a five-year option to purchase 20% of Tatko’s
      outstanding capital stock. Tatko has since refused to collaborate on the
      agreement and the Company seeks declaratory relief stating that Tatko is not
      entitled to the 100,000 shares of the Company’s restricted common stock. The
      litigation is still pending at this time.




In
      addition, Tatko filed its own suit on September 24, 2004 in the Circuit Court
      of
      Cook County, Illinois seeking declaratory relief of its entitlement to the
      Company’s restricted common stock. On May 23, 2005, the Tatko suit was dismissed
      with prejudice by the Circuit Court.




No
      amounts have been recorded as receivable in the Company’s consolidated financial
      statements and no amount has been accrued as a loss as the outcome of the claim
      against Tatko is not determinable.




**14.**
            **Subsequent
                Events.**




The
      Company has issued 34,200 shares of common stock at $2.00 per share upon the
      exercise of stock options.





The
      Company has closed a $3 million private placement with select institutional
      investors. The terms are 936,140 units with each unit consisting of one share
      at
      $3.25 and one half warrant with a three year term and a strike price of $4.50
      per share. The proceeds will be used to build a biomass conversion facility
      that
      will use renewable agriculture crops to produce aspartic acid.




**15.**
            **Comparative
                Figures****.**




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


**14**





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




**Overview**




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




**Results
      of Operations**




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





**Quarter
      Ended March 31, 2007**




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




**15**


**Quarter
      Ended March 31, 2006**




**Item**
            
            **Increase
                (I) or**
              **Decrease
                (D)**
            
            **Reason**Sales
            
            I
            
            Sales
                growth in all divisions.Wages
            
            I
            
            In
                2005 the Company was not required to record the expense of stock
                options
                for employees. The expense, for financial report purposes for employee
                stock options, added $29,359 to wages in first quarter 2006.Administrative
                salaries and benefits
            
            I
            
            In
                2005 the Company was not required to record the expense of stock
                options
                for employees. The expense, for financial report purposes for employee
                stock options, added $92,498 to administrative salaries in first
                quarter
                2006.Insurance
            
            I
            
            The
                increase is comparable to what others are experiencing in the
                industry.Consulting
            
            I
            
            The
                granting of stock options to long term consultants resulted in a
                stock
                option expense of $61,152 in first quarter 2006 as compared to $18,200
                in
                the same period 2005.Professional
                fees
            
            I
            
            Litigation
                costs became significant in 2006 compared to 2005 as a result of
                the need
                to protect our assets from potential litigation or unwarranted
                claims.Commissions
            
            I
            
            As
                commissions are tied into sales, as the sales figures rise, commission
                is
                expected to as well.





**Capital
      Resources and Liquidity**




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





The
      Company has sufficient cash resources to meets its future commitments and cash
      flow requirements for the coming year. As of March 31, 2007 working capital
      was
      $3,774,775 (2006 - $3,355,420) and the Company has no substantial commitments
      that requires significant outlays of cash over the coming fiscal year. In
      addition, as stated in Subsequent Events, the Company completed a private
      placement of $3,000,000 to finance future expansion plans.




**16**


The
      Company is committed to minimum rental payments for property and premises
      aggregating approximately $456,354 over the term of four leases, the last
      expiring on December 31, 2011.




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




2007
            
            $
                153,6282008
            
            160,4672009
            
            113,1332010
            
            14,5632011
            
            14,563





The
      Company doesn’t anticipate any capital requirements for the twelve months ending
      December 31, 2007.





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





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







**Subsequent
      Events**




The
      Company has closed a $3 million private placement with select institutional
      investors. The terms are 936,140 units with each unit consisting of one share
      at
      $3.25 and one half warrant with a three year term and a strike price of $4.50
      per share. The proceeds will be used to build a biomass conversion facility
      that
      will use renewable agriculture crops to produce aspartic acid.




**Item
              3.**
            **Controls
                and Procedures.**




*Disclosure
      Controls and Procedures*




We
      maintain disclosure controls and procedures that are designed to ensure that
      information required to be disclosed in our periodic reports to the Securities
      and Exchange Commission (“SEC”) 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 officer and principal 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 our desired disclosure control objectives.




As
      of the
      end of the period covered by this Quarterly Report, we carried out an
      evaluation, under the supervision and with the participation of management,
      including our principal executive officer and principal financial officer,
      of
      the effectiveness of the design and operation of our disclosure controls and
      procedures (as defined under Rules 13a-15(e) and 15d-15(e) under the Securities
      Exchange Act of 1934, as amended). Based upon that evaluation, our principal
      executive officer and principal financial officer concluded that our disclosure
      controls and procedures are effective in timely alerting them to material
      information relating to us (including our consolidated subsidiaries) that is
      required to be included in our periodic reports.




**17**





**PART
      II**  **OTHER
      INFORMATION**




**Item
              1.**
            **Legal
                Proceedings.**




On
      May 1,
      2003, we 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 our 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 we seek the return of such shares after defendants’ failure to
      both return the shares voluntarily and repay the note. On May 7, 2003, we
      obtained an injunction freezing the transfer of the shares. On May 24, 2004,
      there was a hearing on defendants’ 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 our consolidated financial statements as the outcome of this claim is not
      determinable.




On
      July
      23, 2004, we filed a breach of contract suit in the Circuit Court of Cook
      County, Illinois against Tatko. The action arises out of a joint product
      development agreement entered into between the us and Tatko in which we agreed
      to invest $10,000 toward the product development venture and granted to Tatko
      100,000 shares of our restricted common stock. In return, Tatko granted us
      a
      five-year option to purchase 20% of Tatko’s outstanding capital stock. Tatko has
      since refused to collaborate on the agreement and we seek declaratory relief
      stating that Tatko is not entitled to the 100,000 shares of our restricted
      common stock. The litigation is still pending at this time.




In
      addition, Tatko filed its own suit on September 24, 2004 in the Circuit Court
      of
      Cook County, Illinois seeking declaratory relief of its entitlement to our
      restricted common stock. On May 23, 2005, the Tatko suit was dismissed with
      prejudice by the Circuit Court. No amounts have been recorded as receivable
      in
      our consolidated financial statements and no amount has been accrued as a loss
      as the outcome of the claim against Tatko is not determinable.




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




In
      May 2007 the Company completed the sale of 936,140 Units, at a price of
      $3.25 per Unit, to a group of private investors.  Each Unit consisted of
      one share of the Company's common stock and one-half of a warrant.  Each
      whole warrant permits the holder to purchase one share of the Company's common
      stock at a price of $4.50 at any time prior to May 3, 2010.




**Item
              3.**
            **Defaults
                Upon Senior Securities.**




None.




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




None.




**Item
              5.**
            **Other
                Information.**




None.




**18**





**Item
              6.**
            **Exhibits.**




**Number**
            **Description**3.1
            Amended
                and Restated Certificate of Incorporation of the registrant.
                (1)3.2
            Bylaws
                of the registrant. (1)31.1
            Certification
                of Principal Executive Officer Pursuant to §302 of the Sarbanes-Oxley Act
                of 2002.*31.2
            Certification
                of Principal Financial Officer Pursuant to §302 of the Sarbanes-Oxley Act
                of 2002.*32.1
            Certification
                of Principal Executive Officer Pursuant to 18 U.S.C. §1350 and §906 of the
                Sarbanes-Oxley Act of 2002.*32.2
            Certification
                of Principal Financial Officer Pursuant to 18 U.S.C. §1350 and §906 of the
                Sarbanes-Oxley Act of 2002.*


**______________**


* Filed
      with this report.




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




**19**


**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.




Dated:
      May 15, 2007




**Flexible
                Solutions International, Inc.**By:
            /s/ Daniel
              B.
              O’BrienDaniel
              B. O’BrienTitle:
              President and Chief Executive Officer


By:
            /s/ Daniel
              B.
              O’BrienDaniel
              B. O’BrienTitle:
              Chief
              Financial and Accounting Officer







20