UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549


                             -----------------------


                                  FORM 10-QSB/A
                                (AMENDMENT NO. 2)

(Mark one)

|X|      Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
         Exchange Act of 1934

         FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2004.

|_|      Transition Report Under Section 13 or 15(d) of the Securities Exchange
         Act of 1934

         For the transition period from                 to               .
                                        ---------------    --------------

                        Commission File Number 000-29649


                             -----------------------


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

         NEVADA                                           91-1922863
(State of Incorporation)                       (IRS Employer Identification No.)


          615 DISCOVERY STREET
   VICTORIA, BRITISH COLUMBIA, CANADA                      V8T 5G4
(Address of Principal Executive Offices)                  (Zip Code)

                                 (250) 477-9969
                (Issuer's Telephone Number, Including Area Code)


                             -----------------------


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

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

                      APPLICABLE ONLY TO CORPORATE ISSUERS

         State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date: The Company had 11,831,916
shares of Common Stock, par value $0.001 per share, outstanding as of October
29, 2004.

         Transitional Small Business Disclosure Format (check one): Yes |_| No
|X|
<PAGE>
                                  FORM 10-QSB/A

                                      Index

PART I.  FINANCIAL INFORMATION

Item 1.  Financial Statements.

         (a)  Unaudited Consolidated Balance Sheets at September 30,
              2004.                                                            1

         (b)  Unaudited Consolidated Statements of Operations for the
              Nine Months Ended September 30, 2004 and 2003.                   2

         (c)  Unaudited Consolidated Statements of Operations for the
              Three Months Ended September 30, 2004 and 2003.                  3

         (d)  Unaudited Consolidated Statements of Cash Flows for the
              Nine Months Ended September 30, 2004 and 2003.                   4

         (e)  Notes to Unaudited Consolidated Financial Statements for
              the Period Ended September 30, 2004.                             5

Item 2.  Management's Discussion and Analysis or Plan of Operation.           14

Item 3.  Controls and Procedures.                                             19

PART II. OTHER INFORMATION

Item 1.  Legal Proceedings.                                                   19

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds.         20

Item 3.  Defaults Upon Senior Securities.                                     20

Item 4.  Submission of Matters to a Vote of Security Holders.                 20

Item 5.  Other Information.                                                   20

Item 6.  Exhibits.                                                            20

SIGNATURES                                                                    21











                                        i
<PAGE>
                                EXPLANATORY NOTE
                                ----------------

         Flexible Solutions International, Inc. ("we," "us," and "our") is
filing this Quarterly Report on Form 10-QSB/A to amend and restate in its
entirety its Quarterly Report on Form 10-QSB for the fiscal quarter ended
September 30, 2004, which was previously filed with the Securities and Exchange
Commission on November 12, 2004.

         In October 2005, while completing a registration statement for
securities issued in the second quarter of 2005, we determined that certain
disclosures made in connection with our stock-based compensation expense
required adjustment. As such, on October 5, 2005, upon the recommendation of our
management, our board of directors and its audit committee, and our independent
accountants, we determined to restate our consolidated financial statements for
each of the periods ended since September 30, 2002, including each of the years
ended December 31, 2002 through 2004, and for both of the quarters in the six
months ended June 30, 2005 (the "Restated Periods").

         In accordance with this determination to restate the Restated Periods,
we revised the disclosures for stock-based compensation expense as required
under Emerging Issues Task Force ("EITF") No. 96-18, Accounting for Equity
Instruments That are Issued to Other Than Employees for Acquiring, or in
Conjunction with Selling Goods or Services; EITF No. 00-18, Accounting
Recognition for Certain Transactions involving Equity Instruments Granted to
Other Than Employees; and EITF No. 01-9, Accounting for Consideration Given by a
Vendor to a Customer. In particular, we adjusted the stock-based compensation
expense in our financial statements and notes thereto recorded in connection
with our grant of an option to purchase 2,000,000 shares of our common stock in
September 2002 pursuant to the terms of a product distribution agreement.
Additional information on this restatement and its effects on our financial
condition and results of operations can be found in our Notes to Unaudited
Consolidated Financial Statements contained herein.

         This Form 10-QSB/A does not reflect events occurring after the filing
of our Form 10-QSB on November 12, 2004 or modify any of the disclosures
contained therein, or in the accompanying financial statements and notes
thereto, in any way other than by the amendments identified above and as set
forth herein. Notwithstanding the above, and for the convenience of the reader,
this entire report has been amended as a result of, and to reflect, the
restatement, as well as to revise the disclosure of our management's discussion
and analysis, unregistered sales of equity securities, and legal proceedings, as
well as to generally reflect the current disclosure requirements of Form 10-QSB.

         This Form 10-QSB/A should be read in conjunction with our periodic
filings made with the Securities and Exchange Commission subsequent to the date
of their original filings, including any amendments to those filings. In
addition, in accordance with Rule 12b-15 under the Securities Exchange Act of
1934, as amended, and certain other rules, this Form 10-QSB/A includes updated
certifications from our Chief Executive Officer and Chief Financial Officer.

         We are presently unaware of any evidence that the restatements
described above are due to any material noncompliance by us, as a result of
misconduct, with any financial reporting requirement under the federal
securities laws. Our audit committee of the board of directors is working with
our management and our accountants to assure that we are taking the appropriate
approach to resolving the issues related to the restatements, as well as any
further issues that may be identified during the course of its review. The
filing of this Form 10-QSB/A shall not be deemed an admission that the original
filing, when made, included any untrue statement of a material fact or omitted
to state a material fact necessary to make a statement not misleading.


                                       ii
<PAGE>
              CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

         This Quarterly Report on Form 10-QSB/A for the quarter ended September
30, 2004 ("Quarterly Report"), including the Notes to Unaudited Consolidated
Financial Statements, contains forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995. Forward-looking statements
include, without limitation, those statements relating to development of new
products, our financial condition, our ability to increase distribution of our
products, integration of businesses we acquire, and disposition of any of our
current business. Forward-looking statements can be identified by the use of
forward-looking terminology, such as "may," "will," "should," "expect,"
"anticipate," "estimate," "continue," "plans," "intends," or other similar
terminology. These forward-looking statements are not guarantees of future
performance and involve risks, uncertainties and assumptions that are difficult
to predict. Therefore, actual outcomes and results may differ materially from
what is anticipated or forecasted in these forward-looking statements due to
numerous factors, including, but not limited to, our ability to generate or
obtain sufficient working capital to continue our operations, changes in demand
for our products, the timing of customer orders and deliveries, and the impact
of competitive products and pricing. In addition, such statements could be
affected by general industry and market conditions and growth rates, and general
domestic and international economic conditions.

         Although we believe that the expectations reflected in these
forward-looking statements are reasonable and achievable, such statements
involve risks and uncertainties and no assurance can be given that the actual
results will be consistent with these forward-looking statements. Except as
otherwise required by Federal securities laws, we undertake no obligation to
publicly update or revise any forward-looking statements, whether as a result of
new information, future events, changed circumstances or any other reason, after
the date of this Quarterly Report.
























                                       iii
<PAGE>
PART I   FINANCIAL INFORMATION

Item 1.  Financial Statements.

                     FLEXIBLE SOLUTIONS INTERNATIONAL, INC.
                           CONSOLIDATED BALANCE SHEETS
                              AT SEPTEMBER 30, 2004
                                 (U.S. DOLLARS)

<TABLE>
<CAPTION>
                                                                      SEPTEMBER 30,
                                                                          2004                DECEMBER 31,
                                                                       AS RESTATED                2003
                                                                        (NOTE 7)               AS RESTATED
                                                                       (UNAUDITED)              (NOTE 7)
                                                                    ------------------      ------------------
<S>                                                                 <C>                     <C>
ASSETS
CURRENT
  Cash and cash equivalents                                         $         774,324       $         237,080
  Short-term investments                                                      938,360               5,033,837
  Accounts receivable                                                         591,524                 294,238
  Income tax receivable                                                        85,123                  86,243
  Loan receivable                                                              17,849                  17,585
  Inventory                                                                 1,009,891                 212,938
  Prepaid expenses                                                            134,279                  36,101
                                                                    ------------------      ------------------
                                                                            3,551,350               5,918,022

PROPERTY AND EQUIPMENT                                                      5,207,929                 167,589
INVESTMENT                                                                    303,500                 303,500
                                                                    ------------------      ------------------
                                                                    $       9,062,779       $       6,389,111
                                                                    ------------------      ------------------

LIABILITIES
CURRENT
  Due to shareholders                                               $              --       $           7,700
  Short-term loan                                                           3,150,000                      --
  Accounts payable and accrued liabilities                                    159,817                 157,643
                                                                    ------------------      ------------------
                                                                            3,309,817                 165,343

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
  11,831,916 (2003: 11,794,916) common shares                                  11,832                  11,794
CAPITAL IN EXCESS OF PAR VALUE                                              7,347,232               7,082,813
OTHER COMPREHENSIVE INCOME (LOSS)                                                  --                   3,023
DEFICIT                                                                    (1,606,102)               (873,862)
                                                                    ------------------      ------------------

TOTAL STOCKHOLDER'S EQUITY                                                  5,752,962               6,223,768
                                                                    ------------------      ------------------

TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY                          $       9,062,779       $       6,389,111
                                                                    ------------------      ------------------
</TABLE>

          - See Notes to Unaudited Consolidated Financial Statements -

                                        1
<PAGE>
                     FLEXIBLE SOLUTIONS INTERNATIONAL, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
              FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003
                           (U.S. DOLLARS -- UNAUDITED)

<TABLE>
<CAPTION>
                                                                         NINE MONTHS ENDED SEPTEMBER 30,
                                                                    ------------------------------------------
                                                                          2004                     2003
                                                                       AS RESTATED             AS RESTATED
                                                                        (NOTE 7)                 (NOTE 7)
                                                                    ------------------       -----------------
<S>                                                                 <C>                      <C>
SALES                                                               $       2,411,925        $      1,982,571
COST OF SALES                                                                 829,314               1,130,293
                                                                    ------------------       -----------------

GROSS PROFIT                                                                1,582,611                 852,278
                                                                    ------------------       -----------------

OPERATING EXPENSES
  Wages                                                                       606,942                 408,658
  Administrative salaries and benefits                                         94,973                  60,258
  Advertising and promotion                                                    73,258                  60,915
  Investor relations and transfer agent fee                                   173,164                 120,273
  Office and miscellaneous                                                    154,053                  59,334
  Insurance                                                                    33,475                      --
  Interest expense                                                             29,364                      --
  Rent                                                                        114,711                  49,153
  Consulting                                                                  294,109                 176,303
  Professional fees                                                           212,146                 173,143
  Travel                                                                       79,831                 120,030
  Telecommunications                                                           28,464                  36,574
  Shipping                                                                     21,950                  14,687
  Research                                                                     21,000                  61,298
  Bad debt expense (recovery)                                                    (797)                    822
  Currency exchange                                                             5,666                  20,788
  Utilities                                                                    46,469                  13,938
  Depreciation                                                                359,536                  24,768
                                                                    ------------------       -----------------
                                                                            2,348,314               1,400,942
                                                                    ------------------       -----------------

INCOME (LOSS) BEFORE INTEREST INCOME AND INCOME TAX                          (765,704)               (548,664)
INTEREST INCOME                                                                33,463                 155,195
                                                                    ------------------       -----------------

INCOME (LOSS) BEFORE INCOME TAX                                              (732,240)               (393,469)
INCOME TAX (RECOVERY)                                                              --                    (363)
                                                                    ------------------       -----------------

NET INCOME (LOSS)                                                            (732,240)               (393,106)
DEFICIT, BEGINNING                                                           (873,862)               (396,974)
                                                                    ------------------       -----------------
DEFICIT, ENDING                                                     $      (1,606,102)       $       (790,080)

NET INCOME (LOSS) PER SHARE                                         $           (0.06)       $          (0.03)
                                                                    ------------------       -----------------

WEIGHTED AVERAGE NUMBER OF SHARES                                          11,826,345              11,715,619
                                                                    ------------------       -----------------
</TABLE>

          - See Notes to Unaudited Consolidated Financial Statements -

                                        2
<PAGE>
                     FLEXIBLE SOLUTIONS INTERNATIONAL, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
             FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003
                           (U.S. DOLLARS -- UNAUDITED)

<TABLE>
<CAPTION>
                                                                        THREE MONTHS ENDED SEPTEMBER 30,
                                                                    ------------------------------------------
                                                                          2004                    2003
                                                                       AS RESTATED             AS RESTATED
                                                                        (NOTE 7)                (NOTE 7)
                                                                    ------------------      ------------------
<S>                                                                 <C>                     <C>
SALES                                                               $       1,376,054       $          40,009
COST OF SALES                                                                 418,307                  34,944
                                                                    ------------------      ------------------

GROSS PROFIT                                                                  957,747                   5,065
                                                                    ------------------      ------------------

OPERATING EXPENSES
  Wages                                                                       349,226                  74,786
  Administrative salaries and benefits                                         37,429                  20,783
  Advertising and promotion                                                    16,466                  31,757
  Investor relations and transfer agent fee                                    50,539                  51,606
  Office and miscellaneous                                                     62,099                  24,559
  Insurance                                                                    28,507                      --
  Interest expense                                                             29,364                      --
  Rent                                                                         62,495                  11,601
  Consulting                                                                  105,293                  39,572
  Professional fees                                                           104,432                  45,270
  Travel                                                                       30,317                  41,611
  Telecommunications                                                           13,750                  11,976
  Shipping                                                                     11,153                   6,409
  Research                                                                      5,158                  41,594
  Bad debt expense (recovery)                                                      --                     822
  Currency exchange                                                             2,343                 (42,172)
  Utilities                                                                    32,271                   3,711
  Depreciation                                                                173,989                   8,841
                                                                    ------------------      ------------------
                                                                            1,114,831                 372,726

INCOME (LOSS) BEFORE INTEREST INCOME AND INCOME TAX                          (157,084)               (367,661)
INTEREST INCOME                                                                 2,994                  50,950
                                                                    ------------------      ------------------

INCOME (LOSS) BEFORE INCOME TAX                                              (154,090)               (316,711)
INCOME TAX (RECOVERY)                                                              --                 (26,457)
                                                                    ------------------      ------------------

NET INCOME (LOSS)                                                            (154,090)               (290,254)
DEFICIT, BEGINNING                                                         (1,452,012)               (499,826)
                                                                    ------------------      ------------------
DEFICIT, ENDING                                                     $      (1,606,102)      $        (790,080)

NET INCOME (LOSS) PER SHARE                                         $           (0.01)      $           (0.02)
                                                                    ------------------      ------------------

WEIGHTED AVERAGE NUMBER OF SHARES                                          11,831,916              11,791,612
                                                                    ------------------      ------------------
</TABLE>

          - See Notes to Unaudited Consolidated Financial Statements -

                                        3
<PAGE>
                     FLEXIBLE SOLUTIONS INTERNATIONAL, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
              FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003
                           (U.S. DOLLARS -- UNAUDITED)

<TABLE>
<CAPTION>
                                                                         NINE MONTHS ENDED SEPTEMBER 30,
                                                                    ------------------------------------------
                                                                                                  2003
                                                                                               AS RESTATED
                                                                          2004                  (NOTE 7)
                                                                    ------------------      ------------------
<S>                                                                 <C>                     <C>
OPERATING ACTIVITIES
  Net income (loss)                                                 $        (732,241)      $        (393,106)
  Stock compensation expense                                                  206,957                 123,078
  Depreciation                                                                359,536                  24,768
Changes in non-cash working capital items:
  Accounts receivable                                                        (297,286)               (170,996)
  Inventory                                                                  (796,953)                (23,462)
  Prepaid expenses                                                            (98,177)                 34,685
  Accounts payable                                                              2,174                  12,796
  Income tax receivable                                                         1,120                  60,014
  Decrease in due to shareholders                                              (7,700)                     --
  Unrealized foreign exchange gain/loss                                            --                      --
                                                                    ------------------      ------------------

CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES                            (1,362,571)               (332,223)
                                                                    ------------------      ------------------

INVESTING ACTIVITIES
  Acquisition of property and equipment                                    (5,399,876)                (49,477)
  Short-term investments                                                    4,095,477                (143,683)
  Loan receivable                                                                (264)               (277,625)
  Acquisition of investments                                                       --                  (1,827)
                                                                    ------------------      ------------------

CASH USED IN INVESTING ACTIVITIES                                          (1,304,663)               (472,612)
                                                                    ------------------      ------------------

FINANCING ACTIVITIES
  Subscriptions received                                                           --                   3,000
  Short-term loan                                                           3,150,000                      --
  Proceeds from issuance of common stock                                       57,500                 401,058
                                                                    ------------------      ------------------

CASH PROVIDED BY FINANCING ACTIVITIES                                       3,207,500                 404,058
                                                                    ------------------      ------------------

Effect of exchange rate changes on cash                                        (3,022)                (14,576)
                                                                    ------------------      ------------------

INFLOW (OUTFLOW) OF CASH                                                      537,244                (415,353)
Cash and cash equivalents, beginning                                          237,080                 556,789
                                                                    ------------------      ------------------

CASH AND CASH EQUIVALENTS, ENDING                                   $         774,324       $         141,436
                                                                    ------------------      ------------------

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
  Income taxes paid                                                 $              --       $          58,000
  Interest received                                                            33,464                 155,196
                                                                    ------------------      ------------------
</TABLE>

          - See Notes to Unaudited Consolidated Financial Statements -

                                        4
<PAGE>
                     FLEXIBLE SOLUTIONS INTERNATIONAL, INC.
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                     FOR THE PERIOD ENDED SEPTEMBER 30, 2004
                                 (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, 2003 Annual Report on Form 10-KSB. This quarterly report should be
read in conjunction with such annual report.

         In the opinion of the Company's management, these consolidated
financial statements reflect all adjustments necessary to present fairly the
Company's consolidated financial position at September 30, 2004, and the
consolidated results of operations and the consolidated statements of cash flows
for the nine months ended September 30, 2004 and 2003. The results of operations
for the three months ended September 30, 2004 are not necessarily indicative of
the results to be expected for the entire fiscal year.

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

         On June 30, 1998, the Company completed the acquisition of all of the
shares of Flexible Ltd. The acquisition was effected through the issuance of
7,000,000 shares of common stock by the Company, with the former shareholders of
Flexible Ltd. receiving all of the shares then issued and outstanding of the
Company. The transaction has been accounted for as a reverse-takeover. Flexible
Ltd. is accounted for as the acquiring party and the surviving entity. As
Flexible Ltd. is the accounting survivor, the consolidated financial statements
presented for all periods are those of Flexible Ltd. The shares issued by the
Company pursuant to the acquisition have been accounted for as if those shares
had been issued upon the organization of Flexible Ltd.

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

         Pursuant to a purchase agreement dated May 26, 2004, the Company
acquired the assets of Donlar Corporation on June 9, 2004 and created a new
company, NanoChem Solutions Inc. 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 satisfy $3,150,000 of the purchase
price. This note is due June 2, 2005 and all of the former Donlar assets were
pledged as security.

                                        5
<PAGE>
         The following table summarizes the estimated fair value of the assets
acquired at the date of acquisition (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
------------------------------------------------------------- ------------------

         The acquisition costs assigned to property and equipment are all direct
costs incurred by the Company to purchase the assets. These costs include due
diligence fees paid to outside parties investigating and identifying the assets,
legal costs directly attributable to the purchase of the assets, plus applicable
transfer taxes. These costs have been assigned to the individual assets based on
their proportional fair values and will be amortized based on the rates
associated with the related assets.

2.       SIGNIFICANT ACCOUNTING POLICIES.

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

         (a)      Cash and Cash Equivalents.

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

         (b)      Inventory and Cost of Sales.

                  Inventory is valued at the lower of cost and net realizable
         value. Cost is determined on a first-in, first-out basis. Cost of sales
         includes all expenditures incurred in bringing the goods to the point
         of sale. Inventorial costs and costs of sales include direct costs of
         the raw material, inbound freight charges, warehousing costs, handling
         costs (receiving and purchasing) and utilities and overhead expenses
         related to the Company's manufacturing and processing facilities.

          (c)     Property, Equipment and Leaseholds.

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

     --------------------------------- -- ----------------------------------
     Computer hardware                    30% Declining balance
     Furniture and fixtures               20% Declining balance
     Manufacturing equipment              20% Declining balance
     Office equipment                     20% Declining balance
     Trailer                              30% Declining balance
     Building                             10% Declining balance
     Leasehold improvements               Straight-line over lease term
     --------------------------------- -- ----------------------------------

                  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.

                                        6
<PAGE>
         (d)      Foreign Currency.

                  The functional currency of the Company is the Canadian Dollar.
         The translation of the Canadian Dollar to the reporting currency of the
         U.S. Dollar is performed for current assets and current liabilities
         using exchange rates in effect at the balance sheet date. Non-monetary
         assets and liabilities are translated using rates prevailing at the
         time of the acquisition of the assets or assumption of the liabilities.
         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 income and 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 income if
         realized during the year and in comprehensive income if they remain
         unrealized at the end of the year.

         (e)      Revenue Recognition.

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

                  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.

         (f)      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.

         (g)      Stock-based Compensation.

                  The Company applies the fair value based method of accounting
         prescribed by the Statement of Financial Accounting Standards ("FAS")
         No. 123 in accounting for stock issued in exchange for services to
         consultants and non-employees.

                  FAS No. 123 encourages, but does not require, companies to
         record compensation cost for stock-based compensation plans to
         employees at fair value. The Company has chosen to account for
         stock-based compensation to employees and directors using Accounting
         Principles Board Opinion ("APB") No. 25, Accounting for Stock Issued to
         Employees. Accordingly, compensation cost for stock options for
         employees is measured as the excess, if any, of the quoted market price
         of the Company's stock at the date of the grant over the amount an
         employee is required to pay for the stock.

                  The Company adopts the disclosure provisions of SFAS No. 123
         for stock options granted to employees and directors. The Company
         discloses 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.

                                        7
<PAGE>
         (h)      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.

         (i)      Income (Loss) Per Share.

                  Income (loss) per share is calculated by dividing net income
         (loss) by the weighted average number of shares outstanding.

         (j)      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.

         (k)      Financial Instruments.

                  The fair market value of the Company's financial instruments
         comprising cash, short-term investment, accounts receivable, income tax
         recoverable, loan receivable, accounts payable and accrued liabilities
         and amounts due to shareholders were estimated to approximate their
         carrying values due to immediate or short-term maturity of these
         financial instruments.

                  The Company 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.

         (l)      Recent Accounting Pronouncements.

                           (i) In June 2001, the Financial Accounting Standards
                  Board ("FASB") issued FAS No. 142, Goodwill and Other
                  Intangible Assets. Under FAS No. 142, goodwill and intangible
                  assets with indefinite lives are no longer amortized but are
                  reviewed at least annually for impairment. The amortization
                  provisions of FAS No. 142 apply to goodwill and intangible
                  assets acquired after June 30, 2001. With respect to goodwill
                  and intangible assets acquired prior to July 1, 2001, the
                  Company adopted FAS No. 142 effective January 1, 2002.
                  Application of the non-amortization provisions of FAS No. 142
                  for goodwill did not have any impact on the Company's
                  financial reporting.

                           (ii) In October 2001, the FASB issued FAS No. 144,
                  Accounting for the Impairment or Disposal of Long-Lived
                  Assets. FAS No. 144 addresses significant issues relating to
                  the implementation of FAS No. 121, Accounting for the
                  Impairment of Long-Lived Assets and for Long-Lived Assets to
                  be Disposed Of, and develops a single accounting model, based
                  on the framework established in FAS No. 121 for long-lived
                  assets to be disposed of by sale, whether such assets are or
                  are not deemed to be a business. FAS No. 144 also modifies the
                  accounting and disclosure rules for discontinued operations.
                  The standard was adopted on January 1, 2002 and did not have
                  any impact on the Company's financial statements.

                                        8
<PAGE>
                           (iii) In November 2001, the FASB issued Emerging
                  Issues Task Force ("EITF") Issue No. 01-14, Income Statement
                  Characterization of Reimbursements Received for "Out of
                  Pocket" Expenses Incurred. This guidance requires companies to
                  recognize the recovery of reimbursable expenses such as travel
                  costs on service contracts as revenue. These costs are not to
                  be netted as a reduction of cost. This guidance was
                  implemented January 1, 2002. The Company does not expect this
                  guidance to have a material impact on its financial
                  statements.

3.       PROPERTY, EQUIPMENT AND LEASEHOLDS.

<TABLE>
<CAPTION>
        ------------------------------- ------------ ----------------- ------------- -------------
                                                       Accumulated       September     December
        Item                               Cost        Amortization      2004 Net      2003 Net
        ------------------------------- ------------ ----------------- ------------- -------------
<S>                                     <C>          <C>               <C>           <C>
        Computer hardware               $    36,371  $         11,692  $     24,680  $      9,267
        Furniture and equipment              14,278             3,197        11,080         3,293
        Office equipment                     27,339             9,231        18,108        15,195
        Manufacturing equipment           2,037,063           291,093     1,745,970       133,283
        Trailer                               1,763               577         1,186         1,518
        Building                          3,144,259           153,754     2,990,507            --
        Leasehold improvements               23,610             9,227        14,382         5,033
        Trade show display                    4,140               310         3,830            --
        Land                                398,186                --       398,186            --
        ------------------------------- ------------ ----------------- ------------- -------------
             Total                      $ 5,687,009  $        479,081  $  5,207,929  $    167,589
        ------------------------------- ------------ ----------------- ------------- -------------
</TABLE>

4.       STOCKHOLDERS' EQUITY.

         (a) During prior periods, the Company granted stock options to
consultants and has recognized consulting expense applying FAS No. 123 using the
Black-Scholes option-pricing model, which resulted in expense of $71,727 for the
three months ended September 30, 2004.

         (b) The following table summarizes the Company's stock option activity
for the period:

<TABLE>
<CAPTION>
         -------------------------------------------------------------------------------------------------------
                                                                                                    Weighted
                                                                                Exercise             Average
                                                           Number                Price              Exercise
                                                         of Shares              Per Share             Price
                                                       ---------------    -----------------------   -----------
<S>                                                    <C>                <C>                       <C>
         Balance, June 30, 2004                            1,758,740         $ 1.00 to $ 4.55          $ 2.79
         -------------------------------------------------------------------------------------------------------
            Granted During the Period                          5,000              $3.60                  3.60
            Exercised                                             --                --                    --
            Cancelled                                        500,000           $2.50 to $3.50          $ 3.10
         -------------------------------------------------------------------------------------------------------
         Balance, September 30, 2004                       1,263,740         $ 1.00 to $ 4.25          $ 2.67
         -------------------------------------------------------------------------------------------------------
</TABLE>

5.       ACQUISITION OF ASSETS OF DONLAR CORPORATION.

         Pursuant to a purchase agreement dated May 26, 2004, the Company
acquired the assets of Donlar Corporation on June 9, 2004.

         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

                                        9
<PAGE>
promissory note bearing interest at the prime rate to the vendor to satisfy
$3,150,000 of the purchase price.

         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
         Acquisitions costs assigned
           to property and equipment             $          254,874
         ----------------------------------- --- ----------------------
             Total assets acquired               $        6,404,874
         ----------------------------------- --- ----------------------

6.       CONTINGENCIES.

         (a) On November 13, 2003, Patrick Grant filed a lawsuit in the Circuit
Court of Cook County, Illinois against the Company, WaterSavr Global Solutions
Inc. ("WGS"), the wholly-owned subsidiary of the Company, and Daniel B. O'Brien
, the Company's Chief Executive Officer. The plaintiff claims damages for breach
of contract, tortuous interference with an agreement and various wrongful
discharge claims. The plaintiff seeks monetary damages in excess of $1,020,000
for the breach of contract and tortuous interference claims and unspecified
compensatory and punitive damages in the wrongful discharge claims. The Company
considers the case without merit and is planning to dispute the matter
vigorously. In addition, the Company intends to file counterclaims against the
plaintiff for failure to repay financial obligations owed to the Company of
almost $40,000, as well as unspecified damages arising out of the plaintiff's
disclosure of confidential information to a client during his employment at WGS.
No amounts have been recorded as receivable and no accrual has been made for any
loss in the Company's consolidated financial statements as the outcome of the
claim filed by Mr. Grant is not determinable.

         (b) 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
return of 100,000 shares of the Company's common stock and repayment of a
$25,000 loan, which were provided to defendants for investment banking services
consisting of securing a $5 million loan and a $25 million stock offering. Such
services were not performed and in the proceeding, the Company seeks return of
such shares after defendant's failure to both return the shares voluntarily and
repay the note. On May 7, 2003, the Company obtained an injunction freezing the
transfer of the shares. The proceeding is still in a discovery phase. On the
date of issuance, the share transaction was recorded as shares issued for
services at fair market value, a value of $0.80 per share. No amounts have been
recorded as receivable in the Company's consolidated financial statements as the
outcome of this claim is not determinable.

         (c) On May 28, 2004, Sun Solar Energy Technologies, Inc. ("Sun Solar"),
filed a lawsuit in the Federal Court of Canada, against the Company, Flexible
Solutions, Ltd., the Company's wholly-owned subsidiary ("Flexible Ltd."), and
Mr. O'Brien. Sun Solar is seeking: (a) a declaration that the trademark
"Tropical Fish" is available for use by Sun Solar; (b) injunctive relief against
further use of the "Tropical Fish" trademark by the Company; and (c) monetary
damages exceeding $7,000,000 for the alleged infringement by the Company,
Flexible Ltd. and Mr. O'Brien of the "Tropical Fish" trademark, as well as any
other "confusingly similar trademarks" or proprietary trade dresses. On August
9, 2004, the Company, Flexible Ltd. and Mr. O'Brien filed their defense and
filed a counterclaim against Sun Solar. The counterclaim seeks: (x) injunctive
relief against further use of the "Tropical Fish" trademark by Sun Solar; (y) a
declaration that the "Tropical Fish" trademark is owned by the Company, or, in
the alternative, is not distinctive and should be struck from the trademark
registry; and (z) monetary damages

                                       10
<PAGE>
exceeding $50,000. The parties have completed documentary discovery, and
examinations for discovery of all parties have been scheduled for July 2005. No
amounts have been recorded as receivable in the Company's consolidated financial
statements and no amounts have been accrued as potential losses as the outcome
of this claim is not determinable.

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

         In addition, Tatko filed its own suit on September 24, 2004 in the
Circuit Court of Cook County, Illinois seeking declaratory relief of its
entitlement to the Company's restricted common stock.

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

7.       RESTATEMENTS AS A RESULT OF CORRECTING STOCK COMPENSATION EXPENSE.

         In October 2005, while completing a registration statement for
securities issued in the second quarter of 2005, the Company determined that
certain disclosures made in connection with its stock-based compensation expense
required adjustment. In September 2002, the Company entered into a distribution
agreement with Ondeo Nalco Company ("Ondeo") whereby Ondeo agreed to serve as
the exclusive distributor of the Company's WATER$AVR(R) products for so long as
Ondeo maintained a certain threshold sales level as defined in the agreement. As
consideration for signing the agreement, Ondeo was granted an option to purchase
2,000,000 shares of the Company's common stock. Half of the option for one
million shares was exercisable immediately at an exercise price of $4.25 for
each common share. The remaining half of the option for 1,000,000 shares was
exercisable after certain threshold sales targets were achieved at a price of
$5.50 for each common share.

         In determining the stock-based compensation expense for the nine months
ended September 30, 2002, the Company expensed the entire fair value of the
stock option believing that the option fully vested upon the signing of the
agreement. In its October 2005 review, however, the Company determined that: (i)
first, as stated above, half of the option to purchase 1,000,000 shares of
common stock did not vest and was not exercisable until the threshold sales
target had been met, which would not be until five years after the signing of
the distribution agreement; and (ii) second, the Company did not consider
Emerging Issues Task Force ("EITF") No. 96-18, Accounting for Equity Instruments
That are Issued to Other Than Employees for Acquiring, or in Conjunction with
Selling Goods or Services; EITF No. 00-18, Accounting Recognition for Certain
Transactions involving Equity Instruments Granted to Other Than Employees; and
EITF No. 01-9, Accounting for Consideration Given by a Vendor to a Customer.

         To correctly account for the stock options granted to Ondeo, the
stock-based compensation expense, included in consulting expenses, should have
been measured at the date the performance obligation was complete and then
recognized on a rational and systematic manner in relation to the sales achieved
by Ondeo. Had the Company correctly accounted for these stock options,
stock-based compensation expense for the quarter would have been nil as no sales
had yet been achieved. Instead, the Company recorded a stock-based compensation
expense of $2,704,000 for the quarter.

                                       11
<PAGE>
         During the three months ended March 31, 2003, Ondeo achieved the first
threshold sales target, and, accordingly, the Company should have recorded a
corresponding stock-based compensation expense of $54,080. However, since the
entire stock-based compensation expense had been recorded in the September 30,
2002 interim financial statements and in the year ended December 31, 2002, the
Company did not record any additional stock-based compensation expense as a
result of the attained first threshold level.

         In the fourth quarter of the year ended December 31, 2003, it was
determined that Ondeo was not going to attain the minimum sales targets
stipulated in the exclusive distributorship agreement. Consequently the
exclusive distributorship agreement and corresponding stock options were
cancelled. The Company accounted for the cancellation of the stock options in
accordance with FAS No. 123 similar to a forfeiture of stock options and
reversed $2,480,200 of the stock compensation expense previously recorded in
2002. Had the Company accounted for the cancellation of the stock options
correctly, it would have reversed the stock-based compensation expense of
$54,080 that was recorded in the first quarter ended March 31, 2003.

         The following presents the effect on the Company's previously issued
financial statements for the nine months ended September 30, 2004 and 2003, and
the year ended December 31, 2003:

         Balance sheet as at September 30, 2004 -

<TABLE>
<CAPTION>
          ----------------------------------------- -------------------- --------------------- ----------------------
                                                        Previously             Increase
                                                         Reported             (Decrease)               Restated
                                                    -------------------- --------------------- ----------------------
<S>                                                 <C>                  <C>                   <C>
          Capital in excess of par value            $        7,571,032   $          (223,800)  $          7,347,232
          Accumulated deficiency                            (1,829,902)              223,800             (1,606,102)
          ----------------------------------------- -------------------- --------------------- ----------------------

         Statement of operations for the nine months ended September 30, 2004 -

          ----------------------------------------- -------------------- --------------------- ----------------------
                                                        Previously             Increase
                                                         Reported             (Decrease)               Restated
                                                    -------------------- --------------------- ----------------------
          Deficit, beginning                         $      (1,097,662)  $           223,800   $           (873,862)
          Deficit, ending                                   (1,829,902)              223,800             (1,606,102)
          ----------------------------------------- -------------------- --------------------- ----------------------

         Statement of operations for the three months ended September 30, 2004 -

          ----------------------------------------- -------------------- --------------------- ----------------------
                                                        Previously             Increase
                                                         Reported             (Decrease)               Restated
                                                    -------------------- --------------------- ----------------------
          Deficit, beginning                         $      (1,675,812)  $           223,800    $        (1,452,012)
          Deficit, ending                                   (1,829,902)              223,800             (1,606,102)
          ----------------------------------------- -------------------- --------------------- ----------------------
</TABLE>




                                       12
<PAGE>
         Statement of operations for the nine months ended September 30, 2003 -

<TABLE>
<CAPTION>
          ----------------------------------------- -------------------- --------------------- ----------------------
                                                        Previously             Increase
                                                         Reported             (Decrease)              Restated
                                                    -------------------- --------------------- ----------------------
<S>                                                 <C>                  <C>                   <C>
          Expenses                                  $        1,346,862   $            54,080   $          1,400,942
          Income (loss) before other item and
          income tax                                          (494,584)              (54,080)              (548,664)
          Income (loss) before income tax                     (339,389)              (54,080)              (393,469)
          Net income (loss)                                   (339,026)              (54,080)              (393,106)
          Net income (loss) per share                            (0.03)                   --                  (0.03)
          Deficit, beginning                                (3,100,974)            2,704,000               (396,974)
          Deficit, ending                                   (3,440,000)            2,649,920               (790,080)
          ----------------------------------------- -------------------- --------------------- ----------------------

         Statement of cash flows for the nine months ended September 30, 2003 -

          ----------------------------------------- -------------------- --------------------- ----------------------
                                                        Previously             Increase
                                                         Reported             (Decrease)              Restated
                                                    -------------------- --------------------- ----------------------
         Net income (loss)                          $         (339,026)  $           (54,080)  $           (393,106)
         Stock option compensation                              68,998                54,080                123,078
          ----------------------------------------- -------------------- --------------------- ----------------------

         Statement of operations for the three months ended September 30, 2003 -

          ----------------------------------------- -------------------- --------------------- ----------------------
                                                        Previously             Increase
                                                         Reported             (Decrease)              Restated
                                                    -------------------- --------------------- ----------------------
          Deficit, beginning                         $      (3,149,746)  $         2,649,920               (499,826)
          Deficit, ending                                   (3,440,000)            2,649,920               (790,080)
          ----------------------------------------- -------------------- --------------------- ----------------------

         Balance sheet as at December 31, 2003 -

          ----------------------------------------- -------------------- --------------------- ----------------------
                                                        Previously             Increase
                                                         Reported             (Decrease)              Restated
                                                    -------------------- --------------------- ----------------------
          Capital in excess of par value            $        7,306,613   $          (223,800)  $          7,082,813
          Accumulated deficiency                            (1,097,662)              223,800               (873,862)
          ----------------------------------------- -------------------- --------------------- ----------------------
</TABLE>










                                       13
<PAGE>
Item 2.  Management's Discussion and Analysis or Plan of Operation.

         Flexible Solutions International, Inc. ("we," "us," and "our")
develops, manufactures and markets specialty chemicals which slow down the
evaporation of water. Our initial product, HEAT$AVR(R), is marketed for use in
swimming pools and spas where its use, by slowing the evaporation of water,
allows the water to retain a higher temperature for a longer period of time and
thereby reduces the energy required to maintain the desired temperature of the
water in the pool. Our newest product, WATER$AVR(R), is marketed for water
conservation in irrigation canals, aquaculture, and reservoirs where its use
slows down water loss due to evaporation. We also make and sell dispensers which
automate the deployment of our chemical products.

RESULTS OF OPERATIONS

         The following analysis and discussion pertains to our results of
operations for the three month and nine month periods ended September 30, 2004,
as compared to the results of operations for the three month and nine month
periods ended September 30, 2003, and to changes in our financial condition from
December 31, 2003 to September 30, 2004.

THREE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003

         Separate financial data for each of our operating segments is provided
below. We evaluate the performance of our operating segments based on the
following:

<TABLE>
<CAPTION>
----------------------------------- -------------------------------------------------- ------------- -------------
                                            Three Months Ended September 30,
                                    ---------------- ---------------- ----------------   % Change      % Change
Sales                                    2004             2003             2002         2004-2003      2003-2002
                                    ---------------- ---------------- ---------------- ------------- -------------
<S>                                 <C>              <C>              <C>              <C>           <C>
  Energy Segment                     $     141,045    $      40,009    $      55,257           253%          (28%)
  Polymer Segment                    $   1,235,009                *                *             *             *
                                    ---------------- ---------------- ---------------- ------------- -------------
    Consolidated                     $   1,376,054    $      40,009    $      55,257          3339%          (28%)
Gross Profit
  Energy Segment                     $     100,826    $       5,065    $      80,819          1891%          (94%)
  Polymer Segment                    $     856,921                *                *             *             *
                                    ---------------- ---------------- ---------------- ------------- -------------
    Consolidated                     $     957,747    $       5,065    $      80,819         18809%          (94%)
SG&A
  Energy Segment                     $     475,315    $     372,726    $     101,552            28%          267%
  Polymer Segment                    $     639,516                *                *             *             *
                                    ---------------- ---------------- ---------------- ------------- -------------
    Consolidated                     $   1,114,831    $     372,726    $     101,552           199%          267%
Interest Income
  Energy Segment                     $       2,994    $      50,950    $      15,221           (94%)         235%
  Polymer Segment                               --                *                *             *             *
                                    ---------------- ---------------- ---------------- ------------- -------------
    Consolidated                     $       2,994    $      50,950    $      15,221           (94%)         235%
Write-down of Investments
  Energy Segment                                --               --               --            --            --
  Polymer Segment                               --                *                *             *             *
                                    ---------------- ---------------- ---------------- ------------- -------------
    Consolidated                                --               --               --            --            --
----------------------------------- ---------------- ---------------- ---------------- ------------- -------------
Net Income (Loss)                    $    (154,090)   $    (290,254)   $    (167,363)          (47%)          73%
------------------------------------------------------------------------------------------------------------------
</TABLE>

* Polymer segment data is not available as indicated. Our polymer segment was
formed after the acquisition of certain assets of Donlar Corporation in June
2004.

                                       14
<PAGE>
         For the three months ended September 30, 2004, our Energy segment had a
net loss of $371,495, as compared to a net loss of $290,254 for the three months
ended September 30, 2003. Our NanoChem division, formed in June 2004 after our
acquisition of certain assets from Donlar, had a net gain of $217,405 for the
three months ended September 30, 2004. Although swimming pool product sales were
negatively impacted by the end of the swimming pool season in the Northeastern
parts of the United States and Canada, and the transition from outside to inside
distribution, increases in pool product sales outside of North America and a
full quarter of operations from our Polymer segment resulted in revenue of
$1,376,054 for the quarter ended September 30, 2004, as compared to $40,009 for
the quarter ended September 30, 2003. Our Polymer segment had increased sales,
cash flow, and revenue after only 110 days following our commencement of their
activities and is starting to replace the capital expended for it. Additionally,
opportunities to synergistically cross-sell the products of all divisions have
already generated leads to new business, and the swimming pool division has
discovered ways to help our NanoChem division increase utilization of our Peru,
Illinois factory while decreasing our costs as a whole. In addition, our
NanoChem sales are much less seasonal than those of our other divisions, which
should lead to less volatile sales figures in future. We will attempt to reduce
seasonality even further over time.

         Operating expenses for our Energy segment were $475,315 for the quarter
ended September 30, 2004, an increase of 28% from $372,725 for the quarter ended
September 30, 2003. Operating expenses for our Polymer segment were $639,516 for
the quarter ended September 30, 2004, as compared to nil for the quarter ended
September 30, 2003. We continued expanding our sales and marketing efforts for
our WATER$AVR(R) product line with the objective of closing the first major
sales as soon as possible and with development of advanced production machinery
for swimming pool products. In our Energy segment, the largest real increases
from the quarter ended September 30, 2003 to the quarter ended September 30,
2004, were in the areas of wages (from $74,786 for the quarter ended September
30, 2003 to $106,280 for the quarter ended September 30, 2004), rent ($11,601
for the quarter ended September 30, 2003 to $36,760 for the quarter ended
September 30, 2004), office ($24,559 for the quarter ended September 30, 2003 to
$54,220 for the quarter ended September 30, 2004), and consulting ($39,572 for
the quarter ended September 30, 2003 to $89,372 for the quarter ended September
30, 2004). These increases are wholly accounted for by the operating costs of
our new NanoChem division and represent a permanent increase in operating costs
related to the new level of sales. The decreases in travel (from $41,611 for the
quarter ended September 30, 2003 to $18,126 for the quarter ended September 30,
2004) and advertising (from $31,757 for the quarter ended September 30, 2003 to
$16,411 for the quarter ended September 30, 2004) are the result of better cost
control in these areas, which we instituted over the past year. Professional
fees increased to $96,927 in the quarter ended September 30, 2004, as compared
to $45,270 in the quarter ended September 30, 2003. This was largely the result
of the one time costs of transferring patent assets in our acquisition of the
assets comprising our NanoChem division. In addition, a substantial amount of
the increase in consulting fees, from $39,572 in the quarter ended September 30,
2003 to $105,293 in the quarter ended September 30, 2004, is the result of
expensing of consultant options. We note that depreciation increased to $173,989
in the quarter ended September 30, 2004, as compared to $8,841 in the quarter
ended September 30, 2003, as a result of the depreciable NanoChem assets
acquired in June 2004.

         There is no comparable data for our Polymer segment as it was recently
added in June 2004.

         Our Energy segment's loss for the quarter ended September 30, 2004 was
$371,495, an increase from the loss of $290,254 for the quarter ended September
30, 2003. This increase in loss was a result of an increase in our professional
and consulting fees in connection with our acquisition of the Donlar assets. Our
Polymer segment's gain for the quarter ended September 30, 2004 was $217,405,
with no data to compare to from years previous.

                                       15
<PAGE>
         The loss per share was $0.01 for the quarter ended September 30, 2004,
as compared to a loss of $0.02 for the quarter ended September 30, 2003.

NINE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003

         Separate financial data for each of our operating segments is provided
below. We evaluate the performance of our operating segments based on the
following:

<TABLE>
<CAPTION>
----------------------------------- ------------------------------------------------- ------------- --------------
                                            Nine Months Ended September 30,
                                    ---------------- ---------------- ---------------   % Change      % Change
Sales                                    2004             2003             2002         2004-2003     2003-2002
                                    ---------------- ---------------- --------------- ------------- --------------
<S>                                 <C>              <C>              <C>             <C>           <C>
  Energy Segment                     $      900,789   $    1,982,571   $   1,089,164          (55%)           82%
  Polymer Segment                    $    1,511,136                *               *            *              *
                                    ---------------- ---------------- --------------- ------------- --------------
    Consolidated                     $    2,411,925   $    1,982,571   $   1,089,164           22%            82%
Gross Profit
  Energy Segment                     $      458,152   $      852,278   $     495,123          (46%)           72%
  Polymer Segment                    $    1,124,459                *               *            *              *
                                    ---------------- ---------------- --------------- ------------- --------------
    Consolidated                     $    1,582,611   $      852,278   $     495,123           86%            72%
SG&A
  Energy Segment                     $    1,470,207   $    1,400,942   $     677,707            5%           107%
  Polymer Segment                    $      878,107                *               *            *              *
                                    ---------------- ---------------- --------------- ------------- --------------
    Consolidated                     $    2,348,314   $    1,400,942   $     677,707           68%           107%
Interest Income
  Energy Segment                     $       33,463   $      155,195   $      15,221          (78%)          920%
  Polymer Segment                                --                *               *            *              *
                                    ---------------- ---------------- --------------- ------------- --------------
    Consolidated                     $       33,463   $      155,195   $      15,221          (78%)          920%
Write-down of Investments
  Energy Segment                                 --               --              --           --             --
  Polymer Segment                                --                *               *            *              *
                                    ---------------- ---------------- --------------- ------------- --------------
    Consolidated                                 --               --              --           --             --
----------------------------------- ---------------- ---------------- --------------- ------------- --------------
Net Income (Loss)                    $     (732,240)  $     (393,106)  $    (167,363)          86%           135%
------------------------------------------------------------------------------------------------------------------
</TABLE>

* Polymer segment data is not available as indicated. Our polymer segment was
formed after the acquisition of certain assets of Donlar Corporation in June
2004.

         Our Energy segment's sales for the nine months ended September 30, 2004
were $900,789, as compared to $1,982,571 for the nine months ended September 30,
2003. Our Polymer segment's sales for the nine months ended September 30, 2004
were $1,511,136, which accounts for sales in the period from June 10, 2004 to
September 30, 2004. The swimming pool division experienced a decrease in sales
as a result of taking over distribution from an outside group. The product
pipeline was filled prior to the distribution change and the focus of our sales
team was directed toward ensuring sales for the 2005 season and expanding sales
overseas. However, twenty days of revenue in the second quarter and the full
third quarter of fiscal 2004 from the Polymer segment, combined with comparable
sales in the Energy segment, resulted in sales of $2,411,925 for the nine months
ended September 30, 2004, an increase of 22% from the nine months ended
September 30, 2003.

         Our Energy segment's operating expenses were $1,470,207 for the nine
months ended September 30, 2004, a slight increase from $1,400,942 for the nine
months ended September 30, 2003. The increase

                                       16
<PAGE>
in operating expenses was a result of the increase in professional and
consulting fees in connection with our acquisition of the Donlar assets. The
loss for the nine months ended September 30, 2004 was $1,012,055, as compared to
a loss of $393,106 for the nine months ended September 30, 2003. Of the
increased loss, $117,806 was from expensing of consultant options. Other factors
contributing to the loss were:

         o    The brand building, marketing and extra staffing costs in
         ECO$AVR(TM) sales incurred throughout the year that were not reflected
         in sales because dealers that had been sold product by our discontinued
         distributor, Sun Solar, still had substantial "Tropical Fish" product.
         We believe that very little old product is on the shelves and that
         costs and revenue for ECO$AVR(TM) will be better balanced in 2005.

         o    Litigation costs became significant in 2004 compared to 2003 as a
         result of the need to protect our assets from suit. The costs are
         manageable, but we will make every effort to reduce these costs going
         forward without adversely affecting shareholder value.

         Our Polymer segment's operating expenses were $878,107 for the nine
months ended September 30, 2004, as compared to nil for the nine months ended
September 30, 2003. Our net income for the nine months ended September 30, 2004
was $246,352, with no data to compare to from years previous.

         The loss per share was $0.06 for the nine months ended September 30,
2004, as compared to a loss of $0.03 for the nine months ended September 30,
2003.

LIQUIDITY AND CAPITAL RESOURCES

         We had cash on hand of $774,324 as of September 30, 2004, as compared
to $141,435 as of September 30, 2003.

         As of September 30, 2004, we had working capital of $241,553, as
compared to working capital of $5,752,679 as of December 31, 2003. The decrease
was a result of the cash used to purchase the assets comprising our NanoChem
division and the costs associated with that acquisition, combined with the
continuing costs of market development for our WATER$AVR(R) product line.

         We have no external sources of liquidity in the form of credit lines
from banks.

         We believe that our available cash will be sufficient to fund our
working capital requirements through December 31, 2004. We further believe that
available cash will be sufficient to implement our expansion plans. We have no
investment banking agreements in place and there is no guarantee that we will be
able to raise capital in the future should that become necessary.

RESTATEMENT OF FINANCIAL STATEMENTS

         The accompanying financial statements have been restated to revise
certain stock-based compensation expense. In October 2005, while completing a
registration statement for securities issued in the second quarter of 2005, we
determined that certain disclosures made in connection with our stock-based
compensation expense required adjustment. In September 2002, we entered into a
distribution agreement with Ondeo Nalco Company ("Ondeo") whereby Ondeo agreed
to serve as the exclusive distributor of our WATER$AVR(R) products for so long
as Ondeo maintained a certain threshold sales level as defined in the agreement.
As consideration for signing the agreement, Ondeo was granted an option to
purchase 2,000,000 shares of our common stock. Half of the option for one
million shares was exercisable immediately at an exercise price of $4.25 for
each common share. The remaining half of the

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<PAGE>
option for 1,000,000 shares was exercisable after certain threshold sales
targets were achieved at a price of $5.50 for each common share.

         In determining the stock-based compensation expense for the nine months
ended September 30, 2002, we expensed the entire fair value of the stock option
believing that the option fully vested upon the signing of the agreement. In our
October 2005 review, however, we determined that: (i) first, as stated above,
half of the option to purchase 1,000,000 shares of common stock did not vest and
was not exercisable until the threshold sales target had been met, which would
not be until five years after the signing of the distribution agreement; and
(ii) second, we did not consider Emerging Issues Task Force ("EITF") No. 96-18,
Accounting for Equity Instruments That are Issued to Other Than Employees for
Acquiring, or in Conjunction with Selling Goods or Services; EITF No. 00-18,
Accounting Recognition for Certain Transactions involving Equity Instruments
Granted to Other Than Employees; and EITF No. 01-9, Accounting for Consideration
Given by a Vendor to a Customer.

         During the three months ended March 31, 2003, Ondeo achieved the first
threshold sales target, and accordingly, we should have recorded a corresponding
stock-based compensation expense of $54,080. However, since the entire
stock-based compensation expense had been recorded in the September 30, 2002
interim financial statements and in the year ended December 31, 2002, we did not
record any additional stock-based compensation expense as a result of the
attained first threshold level.

         In the fourth quarter of the year ended December 31, 2003, we
determined that Ondeo was not going to attain the minimum sales targets
stipulated in the agreement. Consequently, the agreement and corresponding stock
option was cancelled. We accounted for the cancellation of the stock option in
accordance with Statement of Financial Accounting Standard No. 123 similar to a
forfeiture of stock options and reversed $2,480,200 of the stock compensation
expense previously recorded in fiscal 2002. Had we accounted for the
cancellation of the stock option correctly, we would have reversed the amended
stock-based compensation expense of $54,080 that was recorded in the first
quarter ended March 31, 2003.

         In light of the above, the net effect of the adjustments to the
financial statements is as follows:

         1. Approximately $2,704,000 in stock compensation expense recorded in
September 2002 has been reversed;

         2. Approximately $54,080 in stock-based compensation expense has been
recorded in the quarter ended March 31, 2003, as Ondeo met the first sales
threshold under the agreement;

         3. Approximately $54,080 in stock-based compensation expense has been
reversed in the year ended December 31, 2003, as Ondeo failed to meet subsequent
sales thresholds under the agreement, resulting in the cancellation of the stock
option;

         4. As stated above, we recorded a stock-based compensation expense of
$2,704,000 in December 2002. As a result of canceling the stock option, we
previously recorded a recovery of $2,480,000 of stock compensation expense at
December 31, 2003. This $2,480,000 recovery has been reversed, in conjunction
with the reversal of $2,704,000 in stock compensation expense originally
recorded; and

         5. For the periods ended March 31, 2004 to June 30, 2005, the net
effect of these adjustments is to decrease capital in excess of par value by
approximately $223,800 and increase retained earnings by approximately $223,800.

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<PAGE>
         We are presently unaware of any evidence that the restatements
described above are due to any material noncompliance by us, as a result of
misconduct, with any financial reporting requirement under the federal
securities laws. Our audit committee of the board of directors is working with
our management and our accountants to assure that we are taking the appropriate
approach to resolving the issues related to the restatements, as well as any
further issues that may be identified during the course of its review.

Item 3.  Controls and Procedures.

         Disclosure Controls and Procedures

         We maintain disclosure controls and procedures that are designed to
ensure that information required to be disclosed in our periodic reports to the
Securities and Exchange Commission ("SEC") is recorded, processed, summarized
and reported within the time periods specified in the SEC's rules and
regulations, and that such information is accumulated and communicated to our
management, including our principal executive officer and principal financial
officer, as appropriate, to allow timely decisions regarding required
disclosure. Our disclosure controls and procedures are designed to provide a
reasonable level of assurance of reaching our desired disclosure control
objectives.

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

         The prior accounting treatment of our stock-based compensation expense
was done in consultation and in accordance with the advice of our independent
accountants. Accordingly, management does not believe that this restatement of
our Quarterly Report indicates or results from a material weakness with respect
to our disclosure controls and procedures or our internal controls over
financial reporting.

         Changes in Internal Control Over Financial Reporting

         There was no change in our internal control over financial reporting
that occurred during the period covered by this report that has materially
affected, or is reasonably likely to materially affect, our internal control
over financial reporting.

PART II  OTHER INFORMATION

Item 1.  Legal Proceedings.

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

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<PAGE>
suit on September 24, 2004 in the Circuit Court of Cook County, Illinois seeking
declaratory relief of its entitlement to our restricted common stock. No amounts
have been recorded as receivable in our consolidated financial statements and no
amount has been accrued as a loss as the outcome of the claim against Tatko is
not determinable.

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

         None.

Item 3.  Defaults Upon Senior Securities.

         None.

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

         None.

Item 5.  Other Information.

         None.

Item 6.  Exhibits.

         The following exhibits are attached hereto and filed herewith:

NUMBER                      DESCRIPTION
------                      -----------
31.1          Certification of Principal Executive Officer Pursuant to ss.302 of
              the Sarbanes-Oxley Act of 2002.
31.2          Certification of Principal Financial Officer Pursuant to ss.302 of
              the Sarbanes-Oxley Act of 2002.
32.1          Certification of Principal Executive Officer Pursuant to 18 U.S.C.
              ss.1350 and ss.906 of the Sarbanes-Oxley Act of 2002.
32.2          Certification of Principal Financial Officer Pursuant to 18 U.S.C.
              ss.1350 and ss.906 of the Sarbanes-Oxley Act of 2002.























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                                   SIGNATURES

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

Dated:  December 5, 2005.

                                    FLEXIBLE SOLUTIONS INTERNATIONAL, INC.


                                    By:/s/ DANIEL B. O'BRIEN
                                       -----------------------------------------

                                    Name:  Daniel B. O'Brien
                                    Title: President and Chief Executive Officer












































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