---

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, 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 September 30, 2009
|                                                  |                                                                                         
|OR                                               
|                                                  |                                                                                         
|o                                                 | 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 incorporation |  | (I.R.S. Employer
 Identification No.)
|or organization)                               |  |                                      

|                                                     |  |           
|---------------------------------------------------- |  | ----------
|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 o

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 o |  | Accelerated
 filer o        
|                                               |                            |  |                             
|                                               | Non-accelerated
 filer o   |  | 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).

|     |     
|---- | ----
|Yeso | No x

|               |  |                        |  |                 
|-------------- |  | ---------------------- |  | ----------------
|Class of Stock |  | No. Shares Outstanding |  | Date            
|               |  |                        |  |                 
|              
|Common         |  | 13,962,567             |  | November 6, 2009

---

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FORM 10-Q

Index

|           |                                                             |                                                                                                           | 
|---------- | ----------------------------------------------------------- | --------------------------------------------------------------------------------------------------------- | 
|PART I.    | FINANCIAL INFORMATION                                       |                                                                                                          
|           |                                                             |                                                                                                           | 
|Item 1.    | Financial
 Statements.                                      |                                                                                                          
|           |                                                             |                                                                                                           | 
|           | (a)                                                         | Unaudited
 Consolidated Balance Sheets at September 30, 2009 and December 31, 2008.                       | 
|           |                                                             |                                                                                                           | 
|           | (b)                                                         | Unaudited
 Consolidated Statements of Operations for the Three Months Ended September
 30, 2009 and 2008. | 
|           |                                                             |                                                                                                           | 
|           | (c)                                                         | Unaudited
 Consolidated Statements of Operations for the Nine Months Ended September 30,
 2009 and 2008.  | 
|           |                                                             |                                                                                                           | 
|           | (d)                                                         | Unaudited
 Consolidated Statements of Cash Flows for the Nine Months Ended September 30,
 2009 and 2008.  | 
|           |                                                             |                                                                                                           | 
|           | (e)                                                         | Notes to
 Unaudited Consolidated Financial Statements for the Period Ended September
 30, 2009.           | 
|           |                                                             |                                                                                                           | 
|Item 2.    | Managements
 Discussion and Analysis or Plan of Operation. |                                                                                                          
|           |                                                             |                                                                                                           | 
|Item 4T.   | Controls
 and Procedures.                                   |                                                                                                          
|           |                                                             |                                                                                                           | 
|PART II.   | OTHER INFORMATION                                           |                                                                                                          
|           |                                                             |                                                                                                           | 
|Item 6.    | Exhibits.                                                   |                                                                                                          
|           |                                                             |                                                                                                           | 
|SIGNATURES |                                                            

i

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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

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|        |                      
|------- | ---------------------
|PART I  | FINANCIAL INFORMATION
|        |                      
|Item 1. | Financial Statements.

FLEXIBLE SOLUTIONS
INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
At September 30, 2009
(U.S. Dollars)

|                                                                                                                    |  |                                  |            |                    |   |            |  
|------------------------------------------------------------------------------------------------------------------- |  | -------------------------------- | ---------- | ------------------ | - | ---------- | -
|                                                                                                                    |  | September 30,
 2009
 (Unaudited) |            | December 31,
 2008 |  
|                                                                                                                    |  |                                  |            |                    |  
|Assets                                                                                                              |  |                                  |            |                    |   |            |  
|                                                                                                                   
|Current                                                                                                             |  |                                  |            |                    |   |            |  
|Cash and cash equivalents                                                                                           |  | $                                | 1,909,899  |                    | $ | 1,894,045  |  
|Accounts receivable                                                                                                 |  |                                  | 1,680,252  |                    |   | 1,642,001  |  
|Inventory                                                                                                           |  |                                  | 2,523,355  |                    |   | 3,591,112  |  
|Prepaid expenses                                                                                                    |  |                                  | 135,766    |                    |   | 109,494    |  
|                                                                                                                    |  |                                  |            |                    |   |            |  
|                                                                                                                    |  |                                  | 6,249,272  |                    |   | 7 ,236,617 |  
|                                                                                                                    |  |                                  |            |                    |   |            |  
|Property, plant and equipment                                                                                       |  |                                  | 7,150,023  |                    |   | 5,882,223  |  
|Patents                                                                                                             |  |                                  | 223,239    |                    |   | 204,203    |  
|Long term deposits                                                                                                  |  |                                  | 18,802     |                    |   | 32,713     |  
|                                                                                                                    |  |                                  |            |                    |   |            |  
|                                                                                                                    |  | $                                | 13,641,336 |                    | $ | 13,355,756 |  
|                                                                                                                    |  |                                  |            |                    |   |            |  
|Liabilities                                                                                                         |  |                                  |            |                    |   |            |  
|                                                                                                                   
|Current                                                                                                             |  |                                  |            |                    |   |            |  
|Accounts payable and accrued liabilities                                                                            |  | $                                | 525,008    |                    | $ | 771,180    |  
|Current portion of long term loan                                                                                   |  |                                  | 116,050    |                    |   |           |  
|                                                                                                                    |  |                                  |            |                    |   |            |  
|                                                                                                                    |  |                                  | 641,058    |                    |   |            |  
|Long Term                                                                                                           |  |                                  |            |                    |   |            |  
|Loans                                                                                                               |  |                                  | 1,859,456  |                    |   | 1,546,836  |  
|                                                                                                                    |  |                                  |            |                    |   |            |  
|                                                                                                                    |  | $                                | 2,500,514  |                    | $ | 2,318,016  |  
|Stockholders Equity                                                                                                |  |                                  |            |                    |   |            |  
|                                                                                                                   
|Capital stock                                                                                                       |  |                                  |            |                    |   |            |  
|Authorized                                                                                                          |  |                                  |            |                    |   |            |  
|50,000,000 Common shares with a par value
 of $0.001 each 1,000,000 Preferred shares with a par value of $0.01 each |  |                                  |            |                    |   |            |  
|Issued and
 outstanding                                                                                             |  |                                  |            |                    |   |            |  
|13,962,567 (2008: 14,062,567) common shares                                                                         |  |                                  | 13,963     |                    |   | 14,063     |  
|Capital in excess of par value                                                                                      |  |                                  | 16,378,582 |                    |   | 16,259,614 |  
|Other comprehensive income                                                                                          |  |                                  | 249,180    |                    |   | (244,788   | )
|Deficit                                                                                                             |  |                                  | (5,500,903 | )                  |   | (4,991,149 | )
|                                                                                                                    |  |                                  |            |                    |   |            |  
|                                                                                                                    |  |                                  |            |                    |   |            |  
|Total Stockholders Equity                                                                                          |  |                                  | 11,140,822 |                    |   | 11,037,740 |  
|                                                                                                                    |  |                                  |            |                    |   |            |  
|                                                                                                                    |  |                                  |            |                    |   |            |  
|Total Liabilities and Stockholders Equity                                                                          |  | $                                | 13,641,336 |                    | $ | 13,355,756 |  
|                                                                                                                    |  |                                  |            |                    |   |            |  
|Commitments and Contingencies (Notes 13 and 14)                                                                     |  |                                  |            |                    |   |            |  

 See Notes to Unaudited Consolidated
Financial Statements 

1

---



FLEXIBLE SOLUTIONS INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months Ended September 30, 2009 and 2008
(U.S. Dollars  Unaudited)

|                                                |  |                                  |            |      |   |            |  
|----------------------------------------------- |  | -------------------------------- | ---------- | ---- | - | ---------- | -
|                                                |  | Three Months Ended September 30, |           
|                                                |  |                                  |           
|                                                |  | 2009                             |            | 2008 |  
|                                                |  |                                  |            |      |  
|                                               
|Sales                                           |  | $                                | 2,448,994  |      | $ | 2,097,351  |  
|Cost of sales                                   |  |                                  | 1,476,046  |      |   | 1,111,547  |  
|                                                |  |                                  |            |      |   |            |  
|                                                |  |                                  |            |      |   |            |  
|Gross profit                                    |  |                                  | 972,948    |      |   | 985,804    |  
|                                                |  |                                  |            |      |   |            |  
|                                                |  |                                  |            |      |   |            |  
|Operating expenses                              |  |                                  |            |      |   |            |  
|Wages                                           |  |                                  | 343,656    |      |   | 330,657    |  
|Administrative salaries and benefits            |  |                                  | 107,627    |      |   | 99,162     |  
|Advertising and promotion                       |  |                                  | 6,576      |      |   | 13,612     |  
|Investor relations and transfer agent fee       |  |                                  | 29,874     |      |   | 24,238     |  
|Office and miscellaneous                        |  |                                  | 159,854    |      |   | 138,957    |  
|Insurance                                       |  |                                  | 49,026     |      |   | 59,675     |  
|Interest expense                                |  |                                  | 19,741     |      |   | 1,445      |  
|Rent                                            |  |                                  | 65,859     |      |   | 66,517     |  
|Consulting                                      |  |                                  | 42,565     |      |   | 53,645     |  
|Professional fees                               |  |                                  | 58,152     |      |   | 28,000     |  
|Travel                                          |  |                                  | 34,807     |      |   | 23,179     |  
|Telecommunications                              |  |                                  | 9,319      |      |   | 7,929      |  
|Shipping                                        |  |                                  | 11,672     |      |   | 6,412      |  
|Research                                        |  |                                  | 8,300      |      |   | 7,219      |  
|Commissions                                     |  |                                  | 8,510      |      |   | 20,899     |  
|Currency exchange                               |  |                                  | 91,147     |      |   | (40,072    | )
|Utilities                                       |  |                                  | 16,762     |      |   | 279        |  
|                                                |  |                                  |            |      |   |            |  
|                                                |  |                                  | 1,063,447  |      |   | 841,753    |  
|                                                |  |                                  |            |      |   |            |  
|                                                |  |                                  |            |      |   |            |  
|Income (loss) before other items and income tax |  |                                  | (90,499    | )    |   | 144,051    |  
|Interest income                                 |  |                                  |           |      |   | 378        |  
|                                                |  |                                  |            |      |   |            |  
|                                                |  |                                  |            |      |   |            |  
|Income (loss) before income tax                 |  |                                  | (90,499    | )    |   | 144,429    |  
|Income tax                                      |  |                                  | 71,183     |      |   |           |  
|                                                |  |                                  |            |      |   |            |  
|Net income (loss)                               |  |                                  | (161,682   | )    |   | 144,429    |  
|                                                |  |                                  |            |      |   |            |  
|Net income (loss) per share (basic and diluted) |  | $                                | (0.01      | )    | $ | 0.01       |  
|                                                |  |                                  |            |      |   |            |  
|                                                |  |                                  |            |      |   |            |  
|Weighted average number of common shares        |  |                                  | 13,962,567 |      |   | 14,057,567 |  
|                                                |  |                                  |            |      |   |            |  

 See Notes to Unaudited Consolidated
Financial Statements 

2

---



FLEXIBLE SOLUTIONS INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Nine Months Ended September30, 2009 and 2008
(U.S. Dollars  Unaudited)

|                                                |  |                                 |            |      |   |            |  
|----------------------------------------------- |  | ------------------------------- | ---------- | ---- | - | ---------- | -
|                                                |  | Nine
 Months Ended September30, |           
|                                                |  |                                 |           
|                                                |  | 2009                            |            | 2008 |  
|                                                |  |                                 |            |      |  
|                                                |  |                                 |            |      |   |            |  
|Sales                                           |  | $                               | 7,381,301  |      | $ | 8,518,441  |  
|Cost of sales                                   |  |                                 | 5,058,024  |      |   | 5,087,051  |  
|                                                |  |                                 |            |      |   |            |  
|                                                |  |                                 |            |      |   |            |  
|Gross profit                                    |  |                                 | 2,323,277  |      |   | 3,431,390  |  
|                                                |  |                                 |            |      |   |            |  
|                                                |  |                                 |            |      |   |            |  
|Operating expenses                              |  |                                 |            |      |   |            |  
|Wages                                           |  |                                 | 1,023,809  |      |   | 936,412    |  
|Administrative salaries and benefits            |  |                                 | 290,038    |      |   | 271,272    |  
|Advertising and promotion                       |  |                                 | 49,835     |      |   | 82,193     |  
|Investor relations and transfer agent fee       |  |                                 | 39,393     |      |   | 112,269    |  
|Office and miscellaneous                        |  |                                 | 332,066    |      |   | 330,232    |  
|Insurance                                       |  |                                 | 124,769    |      |   | 162,210    |  
|Interest expense                                |  |                                 | 47,431     |      |   | 3,407      |  
|Rent                                            |  |                                 | 187,211    |      |   | 201,627    |  
|Consulting                                      |  |                                 | 120,676    |      |   | 141,498    |  
|Professional fees                               |  |                                 | 171,919    |      |   | 94,407     |  
|Travel                                          |  |                                 | 97,438     |      |   | 91,197     |  
|Telecommunications                              |  |                                 | 23,749     |      |   | 26,858     |  
|Shipping                                        |  |                                 | 33,125     |      |   | 29,626     |  
|Research                                        |  |                                 | 21,025     |      |   | 75,001     |  
|Commissions                                     |  |                                 | 57,867     |      |   | 102,470    |  
|Bad debt expense (recovery)                     |  |                                 | (695       | )    |   | 482        |  
|Currency exchange                               |  |                                 | 98,342     |      |   | (63,496    | )
|Loss on sale of equipment                       |  |                                 |           |      |   | 29,048     |  
|Utilities                                       |  |                                 | 43,850     |      |   | 4,856      |  
|                                                |  |                                 |            |      |   |            |  
|                                                |  |                                 | 2,761,848  |      |   | 2,631,569  |  
|                                                |  |                                 |            |      |   |            |  
|                                                |  |                                 |            |      |   |            |  
|Income (loss) before other items and income tax |  |                                 | (438,571   | )    |   | 799,821    |  
|Interest income                                 |  |                                 |           |      |   | 2,405      |  
|                                                |  |                                 |            |      |   |            |  
|                                                |  |                                 |            |      |   |            |  
|Income (loss) before income tax                 |  |                                 | (438,571   | )    |   | 802,226    |  
|Income tax (recovery)                           |  |                                 | 71,183     |      |   |           |  
|                                                |  |                                 |            |      |   |            |  
|                                                |  |                                 |            |      |   |            |  
|Net income (loss)                               |  |                                 | (509,754   | )    |   | 802,226    |  
|                                                |  |                                 |            |      |   |            |  
|Net income (loss) per share (basic and diluted) |  | $                               | (0.04      | )    | $ | 0.06       |  
|                                                |  |                                 |            |      |   |            |  
|                                                |  |                                 |            |      |   |            |  
|Weighted average number of common shares        |  |                                 | 14,028,313 |      |   | 14,057,567 |  
|                                                |  |                                 |            |      |   |            |  

 See Notes to Unaudited Consolidated
Financial Statements 

3

---



FLEXIBLE SOLUTIONS INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 2009 and 2008
(U.S. Dollars  Unaudited)

|                                                  |  |                                  |            |      |   |            |  
|------------------------------------------------- |  | -------------------------------- | ---------- | ---- | - | ---------- | -
|                                                  |  | Nine
 Months Ended September 30, |           
|                                                  |  |                                  |           
|                                                  |  | 2009                             |            | 2008 |  
|                                                  |  |                                  |            |      |  
|                                                  |  |                                  |            |      |   |            |  
|Operating activities                              |  |                                  |            |      |   |            |  
|Net income (loss)                                 |  | $                                | (509,754   | )    | $ | 802,226    |  
|Stock compensation expense                        |  |                                  | 198,875    |      |   | 248,097    |  
|Depreciation                                      |  |                                  | 301,595    |      |   | 341,433    |  
|Judgment from lawsuit                             |  |                                  | (80,000    | )    |   |            |  
|Changes in
 non-cash working capital items:       |  |                                  |            |      |   |            |  
|(Increase) Decrease in accounts receivable        |  |                                  | (38,251    | )    |   | (734,044   | )
|(Increase) Decrease in inventory                  |  |                                  | 1,067,756  |      |   | (1,391,756 | )
|(Increase) Decrease in prepaid expenses           |  |                                  | (26,307    | )    |   | 13,722     |  
|Increase (Decrease) in accounts payable           |  |                                  | (246,172   | )    |   | 76,131     |  
|Increase (Decrease) in deferred revenue           |  |                                  |           |      |   | (9,870     | )
|                                                  |  |                                  |            |      |   |            |  
|                                                  |  |                                  |            |      |   |            |  
|Cash provided by (used in) operating activities   |  |                                  | 667,742    |      |   | (654,061   | )
|                                                  |  |                                  |            |      |   |            |  
|                                                  |  |                                  |            |      |   |            |  
|Investing activities                              |  |                                  |            |      |   |            |  
|Long term deposits                                |  |                                  | 13,911     |      |   | 13,711     |  
|Development of patents                            |  |                                  | (19,036    | )    |   | 10,358     |  
|Acquisition of property and equipment             |  |                                  | (1,569,395 | )    |   | (2,223,788 | )
|                                                  |  |                                  |            |      |   |            |  
|                                                  |  |                                  |            |      |   |            |  
|Cash provided by (used in) investing activities   |  |                                  | (1,574,520 | )    |   | (2,199,719 | )
|                                                  |  |                                  |            |      |   |            |  
|                                                  |  |                                  |            |      |   |            |  
|Financing activities                              |  |                                  |            |      |   |            |  
|Loan                                              |  |                                  | 428,670    |      |   | 359,947    |  
|                                                  |  |                                  |            |      |   |            |  
|                                                  |  |                                  |            |      |   |            |  
|Cash provided by financing activities             |  |                                  | 428,670    |      |   |           |  
|                                                  |  |                                  |            |      |   |            |  
|                                                  |  |                                  |            |      |   |            |  
|Effect of
 exchange rate changes on cash          |  |                                  | 493,962    |      |   | (192,239   | )
|                                                  |  |                                  |            |      |   |            |  
|                                                  |  |                                  |            |      |   |            |  
|Inflow (outflow) of cash                          |  |                                  | 15,854     |      |   | (2,686,072 | )
|Cash and
 cash equivalents, beginning             |  |                                  | 1,894,045  |      |   | 3,355,854  |  
|                                                  |  |                                  |            |      |   |            |  
|                                                  |  |                                  |            |      |   |            |  
|Cash and cash equivalents, ending                 |  | $                                | 1,909,899  |      | $ | 669,782    |  
|                                                  |  |                                  |            |      |   |            |  
|                                                  |  |                                  |            |      |   |            |  
|Supplemental disclosure of cash flow information: |  |                                  |            |      |   |            |  
|Interest
 paid                                    |  | $                                | 47,431     |      | $ | 3,407      |  
|                                                  |  |                                  |            |      |   |            |  

 See Notes to Unaudited Consolidated
Financial Statements 

4

---



FLEXIBLE SOLUTIONS
INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Period Ended September 30, 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 the 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 September 30, 2009, and the consolidated
results of operations and the consolidated statements of cash flows for the
nine months ended September 30, 2009 and 2008. The results of operations for
the three and nine months ended September 30, 2009 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.) and NanoChem Solutions Inc. All inter-company
balances and transactions have been eliminated.

The
Company was incorporated May 12, 1998 in Nevada. The Company and its
subsidiaries develop, manufacture and market specialty chemicals which slow
down the evaporation of water. The Companys primary product, HEAT$AVR®, is
marketed for use in swimming pools and spas where its use, by slowing the evaporation
of water, allows the water to retain a higher temperature for a longer period
of time and thereby reduces the energy required to maintain the desired
temperature of the water in the pool. Another product, WATER$AVR®, is marketed
for water conservation in irrigation canals, aquaculture, and reservoirs where
its use slows down water loss due to evaporation. In addition to the water
conservation products, the Company also manufacturers and markets water-soluble
chemicals utilizing thermal polyaspartate biopolymers (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.

5

---



FLEXIBLE SOLUTIONS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
For the Period Ended September 30, 2009 
(U.S. Dollars)

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

There
was no goodwill or other intangible assets, except 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 included 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.

6

---



FLEXIBLE SOLUTIONS INTERNATIONAL, INC. 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
For the Period Ended September 30, 2009 
(U.S. Dollars)

| |     |                              
| | --- | -----------------------------
| | (b) | Inventories and Cost of Sales

The
Company has three major classes of inventory: finished goods, work in progress,
and raw materials and supplies. In all classes, inventory is valued at the
lower of cost or 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.

| |     |                                
| | --- | -------------------------------
| | (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 balance
|Automobile                 |  | 30%
 Declining balance
|Trade show
 booth          |  | 30%
 Declining balance
|Furniture
 and fixtures    |  | 20%
 Declining balance
|Manufacturing
 equipment   |  | 20%
 Declining balance
|Office
 equipment          |  | 20%
 Declining balance
|Building and
 improvements |  | 10%
 Declining balance

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.

7

---



FLEXIBLE SOLUTIONS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
For the Period Ended September 30, 2009 
(U.S. Dollars)

| |     |                                 
| | --- | --------------------------------
| | (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.

| |     |                  
| | --- | -----------------
| | (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 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 period and in comprehensive income if they remain unrealized at the end of
the period.

8

---



FLEXIBLE SOLUTIONS INTERNATIONAL, INC. 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
For the Period Ended September 30, 2009 
(U.S. Dollars)

| |     |                     
| | --- | --------------------
| | (h) | Revenue Recognition.

Revenue
from product sales is recognized at the time the product is shipped since title
and risk of loss are 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.

9

---



FLEXIBLE SOLUTIONS INTERNATIONAL, INC. 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
For the Period Ended September 30, 2009 
(U.S. Dollars)

| |     |                      
| | --- | ---------------------
| | (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 June 30, 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, accounts
receivable, accounts payable and accrued liabilities 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 total $1,172,819 (70%) as at September 30, 2009 (2008 -
$961,931 or 61%).

10

---



FLEXIBLE SOLUTIONS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
For the Period Ended September 30, 2009 
(U.S. Dollars)

|    |              
|--- | -------------
|(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.

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 FASB issued SFAS 141 (revised 2007), Business Combinations
(SFAS 141R). SFAS 141R significantly changes the accounting for business
combinations in a number of areas including the treatment of contingent
consideration, preacquisition contingencies, transaction costs, in-process
research and development, and restructuring costs. In addition, under SFAS
141R, changes in an acquired entitys deferred tax assets and uncertain tax
positions after the measurement period will impact income tax expense. SFAS
141R is effective for fiscal periods beginning after December 15, 2008. The
Company adopted SFAS 141R on July 1, 2009.

Non-Controlling Interests in Consolidated Financial Statements

In
December 2007, the FASB issued SFAS No. 160, Non-Controlling Interests in
Consolidated Financial Statements  an amendment of Accounting Research
Bulletin No. 51 (SFAS 160), which establishes accounting and reporting
standards for ownership interests in subsidiaries held by parties other than
the parent, the amount of consolidated net income attributable to the parent
and to the non-controlling interest, changes in a parents ownership interest
and the valuation of retained non-controlling equity investments when a
subsidiary is deconsolidated. The Statement also establishes reporting
requirements that provide sufficient disclosures that clearly identify and
distinguish between the interests of the parent and the

11

---



FLEXIBLE SOLUTIONS INTERNATIONAL, INC. 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
For the Period Ended September 30, 2009 
(U.S. Dollars)

interests of
the non-controlling owners. SFAS 160 is effective for fiscal periods beginning
after December 15, 2008. The Company adopted SFAS 160 in July 2009. Adoption of
this standard is not expected to have a material impact on the Companys
financial position, results of operations or cash flows.

Disclosures about Derivative Instruments and Hedging Activities

In
March 2008, the FASB issued SFAS No. 161, Disclosures
about Derivative Instruments and Hedging Activities (SFAS 161). SFAS
161 amends and expands the disclosure requirements of SFAS 133, Accounting for Derivative Instruments and Hedging
Activities. It 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. The Company adopted SFAS 161 in July 2009. Adoption of this
standard is not expected to have a material impact on the Companys financial
position, results of operations or cash flows.

The Hierarchy of Generally Accepted Accounting Principles

In
May 2008, the FASB issued SFAS No. 162, The Hierarchy of Generally Accepted
Accounting Principles (SFAS 162). This statement identifies the sources of
accounting principles and the framework for selecting the principles used in
the preparation of financial statements of nongovernmental entities that are
presented in accordance with GAAP. With the issuance of this statement, the
FASB concluded that the GAAP hierarchy should be directed toward the entity and
not its auditor, and reside in the accounting literature established by the
FASB as opposed to the American Institute of Certified Public Accountants
(AICPA) Statement on Auditing Standards No. 69, The Meaning of Present Fairly
in Conformity With Generally Accepted Accounting Principles. This statement is
effective 60 days following the SECs approval of the Public Company Accounting
Oversight Board amendments to AU Section 411, The Meaning of Present Fairly in
Conformity With Generally Accepted Accounting Principles. The Company has
evaluated the new statement and has determined that it will not have a
significant impact on the determination or reporting of the Companys financial
results.

Subsequent Events

In
May 2009, the FASB issued SFAS No. 165, Subsequent Events, which establishes
general standards for accounting for and disclosure of events that occur after
the balance sheet date but before the financial statements are issued or are
available to be issued. The pronouncement requires the disclosure of the date
through which an entity has evaluated subsequent events and the basis for that
date, whether that date represents the date the financial statements were
issued or were available to be issued. SFAS 165 is effective with interim and
annual financial periods ending after June 15, 2009. The Company adopted SFAS
160 in July 2009. Management has evaluated the impact of the adoption of SFAS
165 and it has had no impact the Companys results of operations, financial
position or cash flows.

12

---



FLEXIBLE SOLUTIONS INTERNATIONAL, INC. 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
For the Period Ended September 30, 2009 
(U.S. Dollars)

Accounting for Transfers of Financial Assets

In June
2009, the FASB issued SFAS No. 166, Accounting for Transfers of Financial
Assetsan amendment of FASB Statement (SFAS 166). SFAS No. 166 is intended
to establish standards of financial reporting for the transfer of assets and
transferred assets to improve the relevance, representational faithfulness, and
comparability. SFAS 166 was established to clarify derecognition of assets
under FASB Statement No. 140, Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities. SFAS No. 166 is effective
for financial statements issued for fiscal years and interim periods beginning
after November 15, 2009. The Company adopted SFAS 166 in July 1 2009. The
Company has determined that the adoption of SFAS No. 166 will have no impact on
its consolidated financial statements.

SFAS 167

In June 2009, the FASB issued SFAS No. 167, Amendments to FASB
Interpretation No. 46(R) (SFAS No. 167). SFAS No. 167 eliminates the
exception to consolidate a qualifying special-purpose entity, changes the
approach to determining the primary beneficiary of a variable interest entity
and requires companies to more frequently re-assess whether they must
consolidate variable interest entities. Under the new guidance, the primary
beneficiary of a variable interest entity is identified qualitatively as the enterprise
that has both (a) the power to direct the activities of a variable interest
entity that most significantly impact the entitys economic performance, and
(b) the obligation to absorb losses of the entity that could potentially be
significant to the variable interest entity or the right to receive benefits
from the entity that could potentially be significant to the variable interest
entity. SFAS No. 167 will become effective for the Companys fiscal 2011
year-end and interim reporting periods thereafter. The Company does not expect
SFAS No. 167 to have a material impact on its financial statements.

FASB Accounting Standards Codification

In July 2009, the FASB issued SFAS No. 168, FASB Accounting Standards
Codification (SFAS 168), as the single source of authoritative
nongovernmental U.S. generally accepted accounting principles (GAAP). The
Codification is effective for interim and annual periods ending after September
15, 2009. All existing accounting standards are superseded as described in SFAS
168. All other accounting literature not included in the Codification is
non-authoritative. Management is currently evaluating the impact of the
adoption of SFAS 168 but does not expect the adoption of SFAS 168 to impact the
Companys financial statements.

13

---



FLEXIBLE SOLUTIONS INTERNATIONAL, INC. 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
For the Period Ended September 30, 2009 
(U.S. Dollars)

Accounting for Convertible Debt Instruments

In May
2008, the FASB issued FSP No. APB 14-1, Accounting for Convertible Debt
Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash
Settlement) (FSP 14-1). FSP 14-1 applies to convertible debt instruments
that, by their stated terms, may be settled in cash (or other assets) upon
conversion, including partial cash settlement, unless the embedded conversion
option is required to be separately accounted for as a derivative under FASB
Statement No. 133. Convertible debt instruments within the scope of FSP 14-1
are not addressed by the existing APB 14. FSP 14-1 would require that the
liability and equity components of convertible debt instruments within the
scope of FSP 14-1 be separately accounted for in a manner that reflects the
entitys nonconvertible debt borrowing rate. This will require an allocation of
the convertible debt proceeds between the liability component and the embedded
conversion option (i.e., the equity component). The difference between the
principal amount of the debt and the amount of the proceeds allocated to the
liability component would be reported as a debt discount and subsequently
amortized to earnings over the instruments expected life using the effective
interest method. FSP APB 14-1 is effective July 1, 2009 and will be applied
retroactively to all periods presented. Adoption of this standard is not
expected to have a material impact on the Companys financial statements.

|   |                    
|-- | -------------------
|3. | ACCOUNTS RECEIVABLE

|                                  |  |      |           |      |   |           |  
|--------------------------------- |  | ---- | --------- | ---- | - | --------- | -
|                                  |  | 2009 |           | 2008 |  
|                                  |  |      |           |      |  
|                                  |  |      |           |      |   |           |  
|Accounts
 receivable              |  | $    | 1,690,798 |      | $ | 1,672,772 |  
|Allowances
 for doubtful accounts |  |      | (10,546   | )    |   | (30,771   | )
|                                  |  |      |           |      |   |           |  
|                                  |  | $    | 1,680,252 |      | $ | 1,642,001 |  
|                                  |  |      |           |      |   |           |  

|   |          
|-- | ---------
|4. | INVENTORY

|                  |  |      |           |      |   |           | 
|----------------- |  | ---- | --------- | ---- | - | --------- | 
|                  |  | 2009 |           | 2008 |  
|                  |  |      |           |      |  
|                  |  |      |           |      |   |           | 
|Completed
 goods  |  | $    | 1,663,161 |      | $ | 2,394,723 | 
|Work in
 progress |  |      | 45,104    |      |   | 56,036    | 
|Raw
 materials    |  |      | 815,090   |      |   | 1,140,353 | 
|                  |  |      |           |      |   |           | 
|                  |  | $    | 2,523,355 |      | $ | 3,591,112 | 

14

---



FLEXIBLE SOLUTIONS INTERNATIONAL, INC. 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
For the Period Ended September 30, 2009 
(U.S. Dollars)

|   |                            
|-- | ---------------------------
|5. | PROPERTY, PLANT & EQUIPMENT

|                         |  |                    |            |                           |   |           |  |   |           | 
|------------------------ |  | ------------------ | ---------- | ------------------------- | - | --------- |  | - | --------- | 
|                         |  | September 30, 2009 |           
|                         |  |                    |           
|                         |  | Cost               |            | Accumulated
 Depreciation |   | Net       | 
|                         |  |                    |            |                           |   |           | 
|                         |  |                    |            |                           |   |           |  |   |           | 
|Buildings                |  | $                  | 4,147,647  |                           | $ | 1,335,553 |  | $ | 2,812,094 | 
|Building
 Improvements   |  |                    | 964,352    |                           |   |          |  |   | 964,352   | 
|Computer
 hardware       |  |                    | 82,695     |                           |   | 60,034    |  |   | 22,661    | 
|Furniture
 and fixtures  |  |                    | 25,823     |                           |   | 14,963    |  |   | 10,860    | 
|Office
 equipment        |  |                    | 21,569     |                           |   | 16,308    |  |   | 5,261     | 
|Manufacturing
 equipment |  |                    | 4,284,988  |                           |   | 1,560,992 |  |   | 2,723,996 | 
|Trailer                  |  |                    | 26,072     |                           |   | 10,248    |  |   | 15,824    | 
|Technology               |  |                    | 127,595    |                           |   |          |  |   | 127,595   | 
|Trade show
 booth        |  |                    | 8,116      |                           |   | 6,833     |  |   | 1,283     | 
|Truck                    |  |                    | 11,105     |                           |   | 3,790     |  |   | 7,315     | 
|Land                     |  |                    | 458,782    |                           |   |          |  |   | 458,782   | 
|                         |  |                    |            |                           |   |           |  |   |           | 
|                         |  | $                  | 10,158,744 |                           | $ | 3,008,721 |  | $ | 7,150,023 | 
|                         |  |                    |            |                           |   |           |  |   |           | 
|                         |  |                    |            |                           |   |           |  |   |           | 
|                         |  | December 31, 2008  |           
|                         |  |                    |           
|                         |  | Cost               |            | Accumulated
 Depreciation |   | Net       | 
|                         |  |                    |            |                           |   |           | 
|                         |  |                    |            |                           |   |           |  |   |           | 
|Buildings                |  | $                  | 4,017,334  |                           | $ | 1,187,408 |  | $ | 2,829,926 | 
|Building
 improvements   |  |                    | 502,847    |                           |   |          |  |   | 502,847   | 
|Computer
 hardware       |  |                    | 78,121     |                           |   | 50,962    |  |   | 27,159    | 
|Furniture
 and fixtures  |  |                    | 19,884     |                           |   | 11,875    |  |   | 8,009     | 
|Office
 equipment        |  |                    | 29,396     |                           |   | 21,262    |  |   | 8,134     | 
|Manufacturing
 equipment |  |                    | 3,335,089  |                           |   | 1,402,423 |  |   | 1,932,666 | 
|Trailer                  |  |                    | 23,040     |                           |   | 4,996     |  |   | 18,044    | 
|Leasehold
 improvements  |  |                    | 23,665     |                           |   | 19,378    |  |   | 4,287     | 
|Technology               |  |                    | 112,759    |                           |   |          |  |   | 112,759   | 
|Trade show
 booth        |  |                    | 7,172      |                           |   | 5,709     |  |   | 1,463     | 
|Truck                    |  |                    | 9,814      |                           |   | 1,472     |  |   | 8,342     | 
|Land                     |  |                    | 428,587    |                           |   |          |  |   | 428,587   | 
|                         |  |                    |            |                           |   |           |  |   |           | 
|                         |  | $                  | 8,587,708  |                           | $ | 2,705,485 |  | $ | 5,882,223 | 
|                         |  |                    |            |                           |   |           |  |   |           | 

15

---



FLEXIBLE SOLUTIONS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Period Ended September 30, 2009
(U.S. Dollars)

Amount of
depreciation expense for the nine months ended September 30, 2009: $301,595
(2008: $341,433)

The
following carrying amount of capital assets held by Flexible Solutions Ltd.
serves as collateral for the AFSC loan (see Note 8):

|                         |  |   |           | 
|------------------------ |  | - | --------- | 
|Land                     |  | $ | 259,689   | 
|Building                 |  |   | 984,609   | 
|Building
 improvements   |  |   | 964,352   | 
|Manufacturing
 equipment |  |   | 2,091,022 | 
|Trailer                  |  |   | 15,824    | 
|Truck                    |  |   | 7,316     | 
|Trade show
 booth        |  |   | 1,283     | 
|Technology               |  |   | 127,595   | 
|                         |  |   |           | 

|   |        
|-- | -------
|6. | PATENTS

Patents are
amortized over their legal life of 17 years.

Patents
with a cost of $73,388 are not subject to amortization as of September 30, 2009
since the patents are still in the process of being approved.

|        |  |                    |         |                           |   |        |  |   |         | 
|------- |  | ------------------ | ------- | ------------------------- | - | ------ |  | - | ------- | 
|        |  | September 30, 2009 |        
|        |  |                    |        
|        |  | Cost               |         | Accumulated
 Amortization |   | Net    | 
|        |  |                    |         |                           |   |        | 
|        |  |                    |         |                           |   |        |  |   |         | 
|Patents |  | $                  | 247,644 |                           | $ | 24,405 |  | $ | 223,239 | 
|        |  |                    |         |                           |   |        |  |   |         | 
|        |  |                    |         |                           |   |        |  |   |         | 
|        |  | December 31, 2008  |        
|        |  |                    |        
|        |  | Cost               |         | Accumulated
 Amortization |   | Net    | 
|        |  |                    |         |                           |   |        |  |   |         | 
|Patents |  | $                  | 218,209 |                           | $ | 14,009 |  | $ | 204,203 | 
|        |  |                    |         |                           |   |        |  |   |         | 

Amount of
depreciation for nine months ended September 30, 2009 - $8,995 (2008 - $2,051)

16

---



FLEXIBLE SOLUTIONS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Period Ended September 30, 2009
(U.S. Dollars)

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

|     |  |   |        | 
|---- |  | - | ------ | 
|2009 |  | $ | 11,995 | 
|2010 |  |   | 11,995 | 
|2011 |  |   | 11,995 | 
|2012 |  |   | 11,995 | 
|2013 |  |   | 11,995 | 
|     |  |   |        | 

|   |                   
|-- | ------------------
|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   |  |   | 2008   | 
|                    |  |   |        |  |  
|                    |  |   |        |  |   |        | 
|Long term
 deposits |  | $ | 18,802 |  | $ | 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 CDN, the
Company has drawn $624,103 CDN ($582,912US) as of September 30, 2009. The loan
is unsecured.

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 ($1,392,594 US) as of September 30, 2009.
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.

17

---



FLEXIBLE SOLUTIONS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Period Ended September 30, 2009
(U.S. Dollars)

|   |              
|-- | -------------
|9. | STOCK OPTIONS

The Company
has 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 its business activities. It is intended that options issued under
this Plan constitute non-qualified stock options. The general terms of awards
under the option plan are that 100% of the options granted will vest the year
following the grant. The maximum term of options granted is 5 years.

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

The
following table summarizes the Companys stock option activity for the years
ended December 31, 2007, 2008 and the period ended September 30, 2009:

|                             |  |                  |           |                           |  |                                  |  |   |      | 
|---------------------------- |  | ---------------- | --------- | ------------------------- |  | -------------------------------- |  | - | ---- | 
|                             |  |                  |           |                           |  |                                  | 
|                             |  | Number of shares |           | Exercise price
 per share |  | Weighted average
 exercise price | 
|                             |  |                  |           |                           |  |                                  | 
|                             |  |                  |           |                           |  |                                  |  |   |      | 
|Balance,
 December 31, 2006  |  |                  | 2,126,740 |                           |  | $1.40 - $4.60                    |  | $ | 3.44 | 
|Granted                      |  |                  | 235,700   |                           |  | $1.50 - $3.60                    |  | $ | 2.35 | 
|Exercised                    |  |                  | (163,000  | )                         |  | $1.50 - $3.25                    |  | $ | 1.77 | 
|Cancelled or
 expired        |  |                  | (287,000  | )                         |  | $3.00 - $4.40                    |  | $ | 3.93 | 
|                             |  |                  |           |                           |  |                                  |  |   |      | 
|                             |  |                  |           |                           |  |                                  |  |   |      | 
|Balance,
 December 31, 2007  |  |                  | 1,912,440 |                           |  | $3.00 - $4.60                    |  | $ | 3.38 | 
|Granted                      |  |                  | 203,000   |                           |  | $3.60                            |  | $ | 3.60 | 
|Cancelled or
 expired        |  |                  | (204,740  | )                         |  | $3.00 - $4.60                    |  | $ | 3.74 | 
|                             |  |                  |           |                           |  |                                  |  |   |      | 
|Balance,
 December 31, 2008  |  |                  | 1,910,700 |                           |  | $3.00  4.55                     |  | $ | 3.38 | 
|Granted                      |  |                  | 122,000   |                           |  | $2.25                            |  | $ | 2.25 | 
|Cancelled or
 expired        |  |                  | (318,000  | )                         |  | $3.50  4.55                     |  | $ | 3.67 | 
|                             |  |                  |           |                           |  |                                  |  |   |      | 
|Balance,
 September 30, 2009 |  |                  | 1,714,700 |                           |  | $2.25 - $3.85                    |  | $ | 3.24 | 
|                             |  |                  |           |                           |  |                                  |  |   |      | 

18

---



FLEXIBLE SOLUTIONS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Period Ended September 30, 2009
(U.S. Dollars)

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

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

During the
nine months ended September 30, 2009 the Company granted 61,000 options to
consultants that resulted in $46,038 in expenses this quarter. During the same
period, 61,000 options were granted to employees, resulting in $46,038 in
expenses. Options granted in previous years resulted in additional expenses in
the amount of $35,674 for consultants and $71,122 for employees during the nine
months ended September 30, 2009. No stock options were exercised during this
period.

During the
nine months ended September 30, 2008 the Company granted 46,000 options to
consultants that resulted in $39,717 in expenses this period. During the same
period, 37,000 options were granted to employees, resulting in $31,947 in
expenses this period. An additional 120,000 options were granted to two key
employees with special vesting requirements. Once the vesting requirements have
been met, the Company will recognize the expense associated with these options.
Options granted in previous years resulted in additional expenses in the amount
of $61,275 for consultants and $115,158 for employees during the nine months
ended September 30, 2008. No stock options were exercised during the period.

|    |         
|--- | --------
|10. | WARRANTS

On
April 14, 2005, the Company announced that it had raised $3,375,000 pursuant to
a private placement. The investors in this offering purchased 900,000 shares of
the Companys common stock at a per-share price of $3.75, together with
warrants to purchase up to 900,000 additional shares of the Companys common
stock. The warrants expired on July 31, 2009 and were 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 warrants expired on July 31, 2009 and were exercisable at a price of
$4.50 per share.

In May 2007
the Company closed a $3,042,455 private placement with institutional investors.
The Company sold 936,140 units at a price of $3.25 per unit. Each unit
consisted of one share of common stock and one-half warrant with a three year
term and an exercise price of

19

---



FLEXIBLE SOLUTIONS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Period Ended September 30, 2009
(U.S. Dollars)

$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 activity for the three years
ended December 30, 2009:

| |                             |  |                  |           |                          |   |                                 |  |   |      | 
| | --------------------------- |  | ---------------- | --------- | ------------------------ | - | ------------------------------- |  | - | ---- | 
| |                             |  | Number of
shares |           | Exercise price
per share |   | Weighted
average exercise
price | 
| |                             |  |                  |           |                          |   |                                 | 
| | Balance,
December 31, 2006  |  |                  | 987,400   |                          | $ | 4.50                            |  | $ | 4.50 | 
| | Granted                     |  |                  | 490,040   |                          | $ | 4.50                            |  | $ | 4.50 | 
| | Exercised                   |  |                  |          |                          |   |                                |  |   |     | 
| | Cancelled                   |  |                  |          |                          |   |                                |  |   |     | 
| |                             |  |                  |           |                          |   |                                 |  |   |      | 
| | Balance,
December 31, 2007  |  |                  | 1,477,440 |                          | $ | 4.50                            |  | $ | 4.50 | 
| | Granted                     |  |                  |          |                          |   |                                |  |   |     | 
| | Exercised                   |  |                  |          |                          |   |                                |  |   |     | 
| | Cancelled                   |  |                  |          |                          |   |                                |  |   |     | 
| | Balance,
December 31, 2008  |  |                  | 1,477,440 |                          | $ | 4.50                            |  | $ | 4.50 | 
| |                             |  |                  |           |                          |   |                                 |  |   |      | 
| | Granted                     |  |                  |          |                          |   |                                |  |   |     | 
| | Exercised                   |  |                  |          |                          |   |                                |  |   |     | 
| | Cancelled/Expired           |  |                  | 987,400   |                          | $ | 4.50                            |  | $ | 4.50 | 
| | Balance,
September 30, 2009 |  |                  | 490,040   |                          | $ | 4.50                            |  | $ | 4.50 | 
| |                             |  |                  |           |                          |   |                                 |  |   |      | 

|    |               
|--- | --------------
|11. | CAPITAL
STOCK.

The Company
did not issue any shares of its common stock during the nine months ended
September 30, 2009. The Company cancelled 100,000 shares during the nine months
ended September 30, 2009. See Note 14.

|    |                                                                     
|--- | --------------------------------------------------------------------
|12. | 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 (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.

20

---



FLEXIBLE SOLUTIONS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Period Ended September 30, 2009
(U.S. Dollars)

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.

Nine months
ended September 30, 2009:

|                                |  |      |            |      |   |           |  |   |           |  
|------------------------------- |  | ---- | ---------- | ---- | - | --------- |  | - | --------- | -
|                                |  | EWCP |            | BPCA |   | Total     | 
|                                |  |      |            |      |   |           | 
|                                |  |      |            |      |   |           | 
|Revenue                         |  | $    | 686,811    |      | $ | 6,694,490 |  | $ | 7,381,301 |  
|Interest
revenue                |  |      |           |      |   |          |  |   |          |  
|Interest
expense                |  |      | 43,695     |      |   | 3,736     |  |   | 47,431    |  
|Depreciation
and amortization   |  |      | 39,712     |      |   | 261,883   |  |   | 301,595   |  
|Segment
profit (loss)           |  |      | (1,130,656 | )    |   | 620,902   |  |   | (509,754  | )
|Segment
assets                  |  |      | 4,701,236  |      |   | 2,672,026 |  |   | 7,373,262 |  
|Expenditures
for segment assets |  |      | 1,564,173  |      |   | 24,258    |  |   | 1,588,431 |  
|                                |  |      |            |      |   |           |  |   |           |  

Nine
months ended September 30, 2008:

|                                |  |      |            |      |   |           |  |   |           | 
|------------------------------- |  | ---- | ---------- | ---- | - | --------- |  | - | --------- | 
|                                |  | EWCP |            | BPCA |   | Total     | 
|                                |  |      |            |      |   |           | 
|Revenue                         |  | $    | 980,431    |      | $ | 7,538,010 |  | $ | 8,518,441 | 
|Interest
revenue                |  |      | 1,696      |      |   | 709       |  |   | 2,405     | 
|Interest
expense                |  |      | 550        |      |   | 2,857     |  |   | 3,407     | 
|Depreciation
and amortization   |  |      | 40,176     |      |   | 301,257   |  |   | 341,433   | 
|Segment
profit (loss)           |  |      | (1,027,410 | )    |   | 1,829,636 |  |   | 802,226   | 
|Segment
assets                  |  |      | 3,255,934  |      |   | 3,007,054 |  |   | 6,262,988 | 
|Expenditures
for segment assets |  |      | 2,187,236  |      |   | 36,552    |  |   | 2,223,788 | 
|                                |  |      |            |      |   |           |  |   |           | 

21

---



FLEXIBLE SOLUTIONS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Period Ended September 30, 2009
(U.S. Dollars)

Sales by
territory:

|                          |  |      |           |      |   |           | 
|------------------------- |  | ---- | --------- | ---- | - | --------- | 
|                          |  | 2009 |           | 2008 |  
|                          |  |      |           |      |  
|                          |  |      |           |      |   |           | 
|Canada                    |  | $    | 276,488   |      | $ | 226,632   | 
|United
 States and abroad |  |      | 7,104,813 |      |   | 8,291,809 | 
|                          |  |      |           |      |   |           | 
|Total                     |  | $    | 7,381,301 |      | $ | 8,518,441 | 
|                          |  |      |           |      |   |           | 

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

|               |  |      |           |      |   |           | 
|-------------- |  | ---- | --------- | ---- | - | --------- | 
|               |  | 2009 |           | 2008 |  
|               |  |      |           |      |  
|               |  |      |           |      |   |           | 
|Canada         |  | $    | 4,701,236 |      | $ | 3,176,775 | 
|United
 States |  |      | 2,672,026 |      |   | 2,909,651 | 
|               |  |      |           |      |   |           | 
|Total          |  | $    | 7,373,262 |      | $ | 6,086,426 | 
|               |  |      |           |      |   |           | 

Three
customers accounted for $4,559,009 (62%) of sales made in the nine months ended
September 30, 2009 (2008 - $4,083,436 or 48%).


13.     COMMITMENTS.

The Company
is committed to minimum rental payments for property and premises aggregating
approximately $394,987 over the term of three leases, the last expiring on July
31, 2014.

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

|     |  |  |        | 
|---- |  |  | ------ | 
|2010 |  |  | 85,776 | 
|2011 |  |  | 85,776 | 
|2012 |  |  | 70,839 | 
|2013 |  |  | 73,713 | 
|2014 |  |  | 44,380 | 

14.     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 its common stock and the repayment of a $25,000 loan which were
provided to the defendants for investment banking services. The services were
not performed and in the proceedings the Company sought the return of the
shares and the repayment of the loan. On the date of issuance, the transaction
was recorded as shares issued for services at a fair market value of $0.80 per
share. On April 30, 2009 the Supreme Court of British Columbia ruled in favor
of the Company

22

---



FLEXIBLE SOLUTIONS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Period Ended September 30, 2009
(U.S. Dollars)

and ordered Equity Trust S.A. to return the 100,000 shares and repay
the loan with interest ($30,514US). The Company has reversed the expense
recorded for the shares in the nine months ended September 30, 2009.

On July 23,
2004, the Company filed a lawsuit in the Circuit Court of Cook County, Illinois
against Tatko Biotech Inc. (Tatko). The action arose from a Joint Product
Development Agreement with 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
refused to collaborate on the agreement and the Company filed the lawsuit to
have the court declare that Tatko was not entitled to the 100,000 shares of the
Companys common stock. On January 4, 2008, the lawsuit was dismissed pursuant
to an agreement by Tatko to treat the Joint Product Development Agreement as
void. As a result of the dismissal of the lawsuit and the agreement of the
parties, the 100,000 shares of restricted stock will be returned or cancelled.

15.     SUBSEQUENT EVENTS.

None.

16.     COMPARATIVE FIGURES.

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

23

---



|        |                                                           
|------- | ----------------------------------------------------------
|Item 2. | Managements Discussion and Analysis or Plan of Operation.

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.

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:

Nine Months Ended September 30, 2009

|                                           |  |                               |  |                                                                                                                                  
|------------------------------------------ |  | ----------------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------
|Item                                       |  | Increase (I) or
 Decrease (D) |  | Reason                                                                                                                           
|                                           |  |                               |  |                                                                                                                                  
|Sales                                      |  |                               |  |                                                                                                                                  
|BCPA products                              |  | D                             |  | Reduced demand in the detergent sector and lower oil extraction levels.                                                          
|                                           |  |                               |  |                                                                                                                                  
|Gross Profit                               |  | D                             |  | Lower sales.                                                                                                                     
|                                           |  |                               |  |                                                                                                                                  
|Wages                                      |  | I                             |  | Increased number of employees and annual wage increases.                                                                         
|                                           |  |                               |  |                                                                                                                                  
|Investor relations and transfer agent fees |  | D                             |  | One time reversal of $80,000 as shares were cancelled by the Supreme
 Court of British Columbia as per Note 14 to the Financials.
|                                           |  |                               |  |                                                                                                                                  
|Insurance                                  |  | D                             |  | Credit allocated from overpayment in four previous quarters.                                                                     

24

---



|                                  |  |                               |  |                                                                                                                                                                                   
|--------------------------------- |  | ----------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Interest
 expense                 |  | I                             |  | Interest payments on the Agriculture Financial Services Corp loan did
 not start until the fall of 2008.                                                                          
|                                  |  |                               |  |                                                                                                                                                                                   
|Professional
 fees                |  | I                             |  | The year end audit fee has been allocated to each fiscal quarter
 rather than expensing the audit expenses in the fourth quarter.                                                 
|                                  |  |                               |  |                                                                                                                                                                                   
|Research                          |  | D                             |  | Decreased as one project was completed and no new projects were
 identified.                                                                                                      
|                                  |  |                               |  |                                                                                                                                                                                   
|Commissions                       |  | D                             |  | Decreased sales.                                                                                                                                                                  
|                                  |  |                               |  |                                                                                                                                                                                   
|Loss on sale
 of equipment        |  | D                             |  | One time sale which occurred in the prior period. No equipment was
 sold during the current nine- month period.                                                                   
|                                  |  |                               |  |                                                                                                                                                                                   
|Utilities                         |  | I                             |  | Increased research and development energy use at the Companys
 facility in Alberta.                                                                                              
|                                  |  |                               |  |                                                                                                                                                                                   
|Quarter
 Ended September 30, 2009
|                                  |  |                               |  |                                                                                                                                                                                   
|Item                              |  | Increase (I) or
 Decrease (D) |  | Reason                                                                                                                                                                            
|                                  |  |                               |  |                                                                                                                                                                                   
|Sales                             |  |                               |  |                                                                                                                                                                                   
|BWCP products                     |  | I                             |  | Return to traditional levels of ordinary sales along with some
 customers increasing their inventory levels.                                                                      
|                                  |  |                               |  |                                                                                                                                                                                   
|Wages                             |  | I                             |  | Increase of employees and annual wage increases.                                                                                                                                  
|                                  |  |                               |  |                                                                                                                                                                                   
|Admin
 salaries and benefits      |  | I                             |  | Increase of employees and annual wage increases.                                                                                                                                  
|                                  |  |                               |  |                                                                                                                                                                                   
|Office and
 misc                  |  | I                             |  | Various costs associated with the start up of the new facility have
 been allocated to this account. Once the facility is operational, these costs
 will be allocated to overhead.
|                                  |  |                               |  |                                                                                                                                                                                   
|Interest
 expense                 |  | I                             |  | Interest payments on the Agriculture Financial Services Corp loan did
 not start until the fall of 2008.                                                                          
|                                  |  |                               |  |                                                                                                                                                                                   
|Professional
 fees                |  | I                             |  | The year-end audit fee has been allocated to each fiscal quarter
 rather than expensing the audit fee in the fourth quarter.                                                      
|                                  |  |                               |  |                                                                                                                                                                                   
|Commissions                       |  | D                             |  | Decreased
 sales.                                                                                                                                                                 
|                                  |  |                               |  |                                                                                                                                                                                   
|Utilities                         |  | I                             |  | Increased research and development energy use at the Taber facility.                                                                                                              

25

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Capital Resources and Liquidity

The
Companys 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 September 30, 2009 working capital was
$5,724,264 (2008 - $5,481,845) 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 $394,987 over the term of three leases, the last expiring on July
31, 2014.

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

|     |  |  |        | 
|---- |  |  | ------ | 
|2010 |  |  | 85,776 | 
|2011 |  |  | 85,776 | 
|2012 |  |  | 70,839 | 
|2013 |  |  | 73,713 | 
|2014 |  |  | 44,380 | 

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.

|         |                        
|-------- | -----------------------
|Item 4T. | CONTROLS AND PROCEDURES

Our Principal Executive and Financial Officer has evaluated the
effectiveness of our disclosure controls and procedures (as defined in Rule
13a-15(e) of the Securities Exchange Act of 1934) as of the end of the period
covered by this report, and in his opinion our disclosure controls and
procedures are effective at the reasonable assurance level to ensure that
information is adequately disclosed.

There were no changes in our internal controls over financial reporting
that occurred during the fiscal quarter ended September 30, 2009 that have
materially affected, or are reasonably likely to materially affect, our
internal control over financial reporting as discussed above.

26

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|        |                  
|------- | -----------------
|PART II | OTHER INFORMATION

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     |  | 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 Companys Registration Statement on Form 10-SB (SEC File.
 No. 000-29649) filed February 22, 2000.

27

---



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.

|                   |                                        |                                         | 
|------------------ | -------------------------------------- | --------------------------------------- | 
|November 12,
 2009 | FLEXIBLE SOLUTIONS INTERNATIONAL, INC.
|                   |                                        |                                        
|                   |                                        |                                        
|                   | By:                                    | /s/ Daniel
 B. OBrien                 
|                   |                                        |                                        
|                   | Name:                                  | Daniel B.
 OBrien                     
|                   | Title:                                 | President,
 Chief Executive Officer and
|                   |                                        | Chief
 Financial and Accounting Officer

28

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