U.S. SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-KSB

                 ANNUAL REPORT UNDER SECTION 13 OR 15(D) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 2002

                         COMMISSION FILE NUMBER 0-29649

                     FLEXIBLE SOLUTIONS INTERNATIONAL, INC.
                 (Name of Small Business Issuer in its charter)

                NEVADA                                     91-1922863
(State or other jurisdiction of                (IRS Employer Identification No.)
incorporation or organization)

                               2614 QUEENSWOOD DR.
                                 VICTORIA, B.C.
                                 V8N 1X5, CANADA
                    (Address of principal executive offices)

                                  250-477-9969
                           (Issuers telephone number)

 Securities registered pursuant to Section 12 (b) of the Act:      None

 Securities registered pursuant to Section 12 (g) of the Act:      Common Stock

           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( )

           Check if disclosure  of delinquent  filers in response to Item 405 of
Regulation  S-B is not  contained  in  this  form,  and no  disclosure  will  be
contained,  to the  best of  registrant's  knowledge,  in  definitive  proxy  or
information  statements  incorporated by reference in Part III of this Form 10 -
KSB or any amendment to this Form 10 - KSB (X )

      Issuer's revenues for its most recent fiscal year $1,112,192

      The   aggregate   market  value  of  the  voting   common  stock  held  by
non-affiliates of the Company as of March 2, 2003 was approximately  $26,083,000
based on the  closing  price for  shares of the  Company's  common  stock on the
American Stock Exchange for that date.










<PAGE>
           On March 17, 2003,  approximately  11,621,919 shares of the Company's
common stock were outstanding.


                      DOCUMENTS INCORPORATED BY REFERENCE:

      No documents are incorporated by reference.

      Transitional Small Business Disclosure Format (check one):
       Yes ( ) No (X)
















































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ITEM  1.  BUSINESS

Flexible Solutions  International,  Inc. was incorporated in the State of Nevada
in May 1998. It acquired all of the  outstanding  shares of Flexible  Solutions,
Ltd., a British  Columbia  corporation,  in June 1998 in exchange for  7,000,000
shares of common  stock,  which  represented  all of the issued and  outstanding
shares  of  Flexible   Solutions   International   at  the  conclusion  of  such
acquisition.  Flexible  Solutions  International  had no other  business and was
incorporated in order to acquire Flexible  Solutions,  Ltd. Flexible  Solutions,
Ltd.  was  organized  in 1991 to develop  and market a  swimming  pool  chemical
product designed to reduce heat loss.

We completed the development of our HEAT$AVR  product and introduced it into the
commercial marketplace in 1998, achieving sales of $84,252 that year. Since that
time we have been expanding our distribution network and working to complete the
development of our WATER$AVR product.

In  2002  we  established   WATER$AVR  Global   Solutions,   Inc.,  an  Illinois
corporation,  as a wholly  owned  subsidiary  to  concentrate  on  marketing  of
WATER$AVR.

Flexible develops,  manufactures and markets specialty chemicals which slow down
the evaporation of water. Our initial product,  Heat$avr, is marketed for use in
swimming  pools and spas where its use,  by slowing  the  evaporation  of water,
allows the water to retain a higher  temperature for a longer period of time and
thereby reduces the energy  required to maintain the desired  temperature of the
water in the  pool.  Our  newest  product,  Water$avr,  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.

OUR HEAT$AVR PRODUCT

The primary product of Flexible is HEAT$AVR which represents  substantially  all
of our sales.  HEAT$AVR is a chemical product for use in swimming pools and spas
that forms a thin,  invisible  layer on the surface of water  which  reduces the
amount of water evaporation and heat loss from the pool. The product is marketed
as a cost effective and convenient way to save on the cost of energy required to
heat pools and spas.  Approximately  70% of the energy lost from a swimming pool
occurs through evaporation.

HEAT$AVR is a mixture of chemicals  which are lighter  than water.  The solution
floats to the  surface  when  introduced  into a pool or spa to form a very thin
layer on the surface of the water which slows down evaporation of water from the
surface of the pool.  The  product is not  visible  on the pool  surface  and it
cannot be seen, felt or tasted by swimmers. After a swimmer stops disturbing the
pool water, the product reforms to a complete layer on the pool surface.

We  market  HEAT$AVR  to the  residential  market  primarily  in the form of our
"Tropical  Fish"  dispenser.  Each  Tropical  Fish  dispenser  is made of molded
plastic  in the form of a ten inch long  colorful  Tropical  Fish that is filled
with enough HEAT$AVR solution to cover the surface of a






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400 square foot swimming pool for about one month. The Tropical Fish is deployed
by snipping the fin and tossing the fish into the pool where it submerges to the
bottom of the pool.  Water pressure  causes the HEAT$AVR liquid inside to escape
into the water where it rises to the surface and forms an invisible layer on the
surface of the water.  The empty  dispenser can remain on the bottom of the pool
for  decoration  and use as a pool toy or be removed.  The Tropical Fish product
has a suggested retail price of $9.95 in the United States.

BENEFITS OF HEAT$AVR USE IN OUTDOOR POOLS

In outdoor  swimming pools HEAT$AVR  provides  savings on pool heating costs and
provides convenience of use when compared to pool blankets.

Pool personnel  often find it  inconvenient  to use  conventional  pool blankets
correctly and  consistently.  Pool blankets are plastic  covers which are cut to
the size and shape of the surface of the pool or spa.  They float on the surface
and perform the same purpose as HEAT$AVR of reducing  energy cost by  inhibiting
evaporation.  Of course the blanket must be removed and stored prior to swimmers
entering the pool and provide no energy  savings when not in the pool.  HEAT$AVR
eliminates  the  necessity of  installing,  removing and storing the blanket and
works 24 hours a day.  We  believe  that the ease of use  provided  by  HEAT$AVR
results in more consistent usage.

BENEFITS OF HEAT$AVR USE IN INDOOR POOLS

Use of HEAT$AVR in indoor pools results in even greater energy  savings.  Indoor
pool  locations  use energy not only to heat the pool water but to air condition
the pool  environment.  By slowing the transfer of heat and water vapor from the
pool to the atmosphere of the pool enclosure  atmosphere less energy is required
to maintain a pool at the desired  temperature,  there is a reduced  load on the
air--conditioning system because less is heat transferred from the pool water to
the surrounding air and less water vapor will have to be removed from the air to
maintain the required comfort level. Air--conditioned indoor pools are very high
users of  energy  because  swimmers  and  loungers  have  differing  temperature
expectations  which require both water heat,  generally by gas, and electric air
cooling to keep both groups happy in the same room.

MARKET FOR HEAT$AVR

We  market  our  HEAT$AVR  product  to both the  residential  market  made up of
individual  homeowners with pools and spas and the commercial  market consisting
of  operators  of  commercial  swimming  pools such as those  located in hotels,
motels, schools, and municipal and private recreational facilities.

Pool and Spa Marketing Magazine has published the following estimates concerning
the swimming pool market and their 2002 reference and directory:

2000 U.S in--ground pool sales-- 170,700

2000 U.S. above--ground pool sales-- 345,000








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Existing pools in U.S.-- 4,210,000

Existing above--ground pools in U.S.-- 3,219,000

2000 sales for new pools in U.S.-- $3,950,000,000

1999 residential pool sales in Europe-- 95,740 pools

We have  received  reports  from some of our  commercial  customers  documenting
energy savings of $2,400 to $6,000 per year. We also make and sell  programmable
dispenser for automatically dispensing HEAT$AVR into a pool. The dispenser has a
reservoir  holding a one week  supply of  HEAT$AVR.  The unit is  programmed  to
inject the appropriate  amount of the product into the pool at the rate of 1 oz.
per 400 square feet of pool surface per day.

MARKETING AND SALES

The HEAT$AVR and Tropical Fish products are sold in Canada and the United States
by  Flexible's  exclusive  distributor,  Sun Solar Energy  Technologies,  and in
Australia  by  Hydro--Flexible  Solutions  PTY.  Flexible  also  sells  HEAT$AVR
directly into the United States to both wholesale and retail  accounts.  We have
about 155 active customers. However, in the nine months ended September 30, 2002
Sun Solar Energy Technologies represented 94.7% of our total sales.

OUR AGREEMENT WITH SUN SOLAR ENERGY TECHNOLOGIES

We have a written  agreement with Sun Solar Energy  Technologies,  our exclusive
distributor for our Tropical Fish product in the U.S. and Canada.  This customer
represented  95% of our total sales in 2002. In February 1998 we entered into an
exclusive  distributorship  with Sun Solar  Technologies  for our Tropical  Fish
product.  The  agreement  gives  Sun Solar  exclusive  right to  distribute  our
Tropical Fish product in the United States and Canada.  In order to maintain the
exclusivity  of such  distribution,  Sun Solar  must  order and pay for at least
720,000 units in the year ending  February 28, 2003.  Such  exclusive  agreement
terminates  on February  29,  2004.  We have agreed to give Sun Solar a right of
first  refusal  in the event we  propose  to sell our  Flexible  Solutions  Ltd.
subsidiary.  If such subsidiary is sold we must require the purchaser to fulfill
the  exclusive  distribution  contract with Sun Solar and Sun Solar can veto the
proposed  sale to an entity which it  reasonably  believes may have an intent to
discontinue  manufacture  of our  Tropical  Fish  product.  The  agreement  also
provides that Sun Solar will sell its veto for a reasonable  premium  arrived at
by mutually agreed upon by a mediator. The agreement also provides that Flexible
has a right  of first  refusal  if Sun  Solar  proposes  to sell  its  exclusive
distributorship.  If such  distributorship is sold Sun Solar's sales performance
minimums  are  required  to be  binding  on the new owner.  The  agreement  also
provides that if such exclusive  distribution  rights are sold by Sun Solar, the
buyer must  advance to Flexible  $1.00 US for each  Tropical  Fish which must be
bought in the year of sale to maintain the distribution  agreement  exclusivity,
which  payment will be credited to future orders of Tropical Fish at the rate of
$1.00  US per  fish as the  orders  are  made.  We have  also  agreed  to  offer
distribution  rights on new







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<PAGE>
swimming  pool products to Sun Solar in the US and Canada if it is up-to-date on
its sales performance  requirements.  Flexible is satisfied with the performance
of Sun  Solar  as  exclusive  distributor  of  Tropical  Fish and  believes  our
relationship with Sun Solar is satisfactory.  There can be no assurance that our
exclusive  distributorship  with Sun  Solar  will be  renewed  past its  current
expiration  on February 29, 2004.  We grant Sun Solar 45 days to pay for product
ordered after shipment.

We also have  nonexclusive  distributors  in Canada  and the  United  States for
HEAT$AVR not packaged in our Tropical Fish dispenser and exclusive  distributors
in Australia,  Korea and Great  Britain.  We support our  distributors  and seek
additional market opportunities by attending the major pool industry trade shows
in the United  States  yearly.  We advertise in trade  magazines and directly to
buyer  associations.  We maintain an Internet presence with a website containing
information about our products.  We also write and publish a newsletter to 5,000
customers and potential customers twice a year.

OUR WATER$AVR PRODUCT

We introduced our WATER$AVR product in June 2002. This product utilizes our core
technology to reduce water  evaporation.  It is marketed as a water conservation
product for use where water is standing or gently flowing and the need for water
conservation can justify the cost of purchase and deployment of the product.  We
believe that our WATER$AVR product may find a market for use in

       Reservoirs,  Potable water  storage,  Aqueducts and canals,  Agricultural
       irrigation,  Flood water  crops,  Lawn and turf care,  Potted and bedding
       plants, Stock watering ponds, Mining

WATER$AVR is sold in granulated  form.  It can be provided in shaker  containers
holding 3/4 pound or in 44 pound  weatherproof  bags.  We also offer a dispenser
for WATER$AVR to automate deployment of the product.  The product can be applied
in various ways from hand dispersal to fully automated scheduled metering.

CURRENT STATUS OF OUR WATER$AVR PRODUCT

We anticipate our initial  market for WATER$AVR  will be in India and China.  We
have provided  quantities  of the product for testing in these  countries and if
successful anticipate that substantial orders may be received.  The product will
also be marketed in both  developed  and lesser  developed  countries to address
water conservation concerns. We are seeking to establish strategic relationships
with  companies  in  the  water  processing  industry  who  have  marketing  and
manufacturing  operations in countries with water conservation concerns. We have
a full time employee  dedicated to  establishing  sales channels  throughout the
world for WATER$AVR.













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<PAGE>
In  September,  2002 we granted  Ondeo Nalco  Company,  a subsidiary of Suez, of
Naperville, Illinois exclusive and non-exclusive distribution rights as follows:

      Exclusive Market                         Countries
      ----------------                         ---------
      Market                                  Canada and USA
      Municipal                               All, except India, Pakistan,
      Mineral and Mining                      Bangladesh, Sri Lanka, Nepal,
                                              Bhutan, Mauritania, Malaysia and
                                              Singapore.

      Non-Exclusive Market                    Countries
      --------------------                    ---------
      All except agriculture                  All, except India, Pakistan,
      and large retail                        Bangladesh, Sri Lanka, Nepal,
                                              Bhutan, Mauritania, Malaysia and
                                              Singapore.

We have also granted Ondeo Nalco an option to purchase  1,000,000  shares of our
common  stock at $4.25 per share and they will  receive  additional  options  to
purchase  1,000,000  shares at $5.50 per share by meeting certain sales targets.
The  distributor is not required to purchase any quantity of WATER$AVR and there
can be no assurance that we will achieve  substantial sales of WATER$AVR to this
distributor.  The exclusive  markets convert to non-exclusive if the distributor
does not meet certain thresholds of sales.

COMPETITION

We are not aware of any chemical evaporation reduction products on the market or
under development which compete with our HEAT$AVR product. HEAT$AVR does compete
against plastic pool blanket  products.  We compete against pool blankets on the
basis of convenience of use of HEAT$AVR  versus the  inconvenience  of deploying
and storing pool  blankets.  Pool owners and  operators  may also decide that no
evaporation  control  product  is needed  for their  pools.  We are aware of one
chemical product  manufactured by Aegis Chemical  Industries Ltd. of India which
competes with our WATER$AVR product.  We believe WATER$AVR is a superior product
for the following reasons:

o      Easier  Application.  WATER$AVER  may be  deployed  directly to the water
       surface by hand.  The Aegis  product  requires  premixing to dilute it to
       usable strength.

o      Cost.  In order to achieve  comparable  water savings  levels,  the Aegis
       product would cost more than the WATER$AVER product.

Specialty   chemicals  are  a  highly   competitive   industry  with  many  huge
multi-national firms with large research and development operations. There are a
number of firms which develop and market chemical  products for the pool and spa
industry. Therefore, we can expect competition to arise at any time.

Water  conservation is an important  priority  throughout the world and numerous
researchers in industry and academia are seeking to develop  solutions which may
compete with or be superior





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<PAGE>
to our products.  Climate  changes which relieve water shortage  conditions or a
technological breakthrough in water desalination could reduce the need for water
conservation products.

MANUFACTURING

Our HEAT$AVR products and dispensers are made from chemicals,  plastic and other
materials and parts which are readily available from multiple suppliers. We have
never  experienced  any shortage in the  availability of raw materials and parts
for our products and we do not have any long term supply  contracts for any such
items.  We  manufacture  our products in an 11,000 square foot plant in Calgary,
Alberta, Canada.

We have agreed to purchase all our  requirements for WATER$AVER from Ondeo Nalco
Company under a five year agreement  effective  April 2002, but are not required
to purchase any minimum quantity of such product.

GOVERNMENTAL REGULATIONS

Chemical  products  for use in  swimming  pools  are  covered  by a  variety  of
governmental  regulations  in the  countries  where we sell our  products.  Such
regulations  cover such matters as packaging,  labeling and product  safety.  We
believe our products are in  compliance  with such  regulations.  Our  WATER$AVR
product will be subject to additional regulation in some countries  particularly
for  agricultural  and drinking  water uses.  We will address  these issues on a
country--by--country  basis. We do not anticipate that governmental  regulations
will be an impediment to marketing  WATER$AVR  because the major  ingredient has
been used in  agriculture  for many  years.  We will  require  approval  to sell
WATER$AVR in the United States for agricultural or drinking water users. We have
not yet applied for any such approvals in the U.S.

PROPRIETARY RIGHTS

Our  success and ability to compete is  dependent  in part upon our  proprietary
technology.  We rely on a combination of patent, copyright and trade secret laws
and nondisclosure agreements to protect our proprietary technology. We currently
hold two U.S.  patent and are seeking to extend these  patents to certain  other
countries.  We also have  seven  patent  applications  pending.  There can be no
assurance  that our  pending  patent  applications  will be  granted on that any
issued patent will be upheld as valid or prevent the  development of competitive
products  which may be  equivalent  or  superior  to our  products.  We have not
received any claims alleging infringement of the intellectual property rights of
others,  but there can be no assurance that we may not be subject to such claims
in the future.

EMPLOYEES

As of December  31, 2002,  we employed 15 persons  including  one officer,  five
sales and customer support and four in  manufacturing.  None of our employees is
represented by a labor union and we have experienced no work stoppages to date.








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ITEM 2.  DESCRIPTION OF PROPERTY

Our   President   provides  use  of  space  in  his  residence  to  conduct  his
administrative  duties and we do not  reimburse  him for such use. We rent 1,400
sq. ft. of sales and research space in Victoria BC for $1050 a month and 500 sq.
ft. of office space in Chicago IL for $500 a month.  We lease an 11,000 sq. foot
building in Calgary,  Alberta,  Canada for $3,150 per month until September 2003
for  manufacture of our products.  We also maintain a warehouse  facility in St.
Laurent, Quebec, Canada which is provided by our distributor at no cost.

ITEM 3.  LEGAL PROCEEDINGS

On January 15, 2002 we filed a lawsuit in the Supreme Court of British  Columbia
against John Wells and Equity Trust,  S.A.  seeking  return of 100,000 shares of
our  common  stock and  repayment  of a $25,000  loan  which  were  provided  to
defendants for investment banking services to be provided to Flexible consisting
of providing a $5 million loan and a $25 million stock  offering.  Such services
were not  performed  and we filed suit for the return of such shares  after they
were not returned voluntarily and the note was not paid.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

There were no matters  submitted to the vote of our  shareholders in the quarter
ended December 31, 2002.

                                     PART II

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

MARKET FOR SECURITIES

Our common stock began trading on the American  Stock  Exchange under the symbol
FSI  on  November   19,   2002.   Prior  to  that,   our  stock  traded  on  the
over-the-counter market and was quoted on the NASD Electronic Bulletin Board.

The  following  is the range of high and low  closing  sales or bid  prices  for
Flexible common stock for the periods indicated:




                                  SALES OR BID PRICES

                2001                             High                      Low
                ----                             ----                      ---
              January 2-March 30                $2.75                  $ .6875
              April 2- June 29                   2.30                     1.50











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              July 2 - September 28              1.75                      .67
              October  1 - December  31          1.45                      .73

                2002
                ----
              January 2 - March 28               3.57                     1.30
              April 1 - June 28                  4.10                     2.50
              July 1 - September 30              3.85                     1.95
              October 1 - December 31            3.85                     2.77

Prices  since  November  19,2002  represent  high and low prices on the American
Stock  Exchange.  Prices  prior to  November  19,  2002  represent  inter-dealer
quotations which do not include retail mark-ups,  markdowns, or commissions, and
do not necessarily  represent actual  transactions.  We had 75 record holders of
our common stock on December 31,  2002.  Such shares are owned by  approximately
350 beneficial owners.

Our common  stock also trades on the  Frankfurt  Germany  stock market under the
symbol FXT.

DIVIDEND POLICY

Flexible  has  not  paid  any  dividends  on  its  common  stock,  and it is not
anticipated that any dividends will be paid in the foreseeable future. The Board
of  Directors  intends  to follow a policy of  retaining  earnings,  if any,  to
finance the growth of the company.  The  declaration and payment of dividends in
the future will be  determined  by the Board of Directors in light of conditions
then existing,  including the company's earnings,  financial condition,  capital
requirements and other factors.

Sales of unregistered shares in 2002

In January 2002 we issued 30,000 shares of our common stock to Patrick Grant, an
employee,  for  services  for the period from  January 1, 2002 to June 30, 2002.
Such shares were issued pursuant to an exemption from registration under Section
4(2) of the  Securities  Act of 1933.  Such shares  were  issued  pursuant to an
investment letter under which the shareholder  acknowledged that the shares were
restricted securities and would not be sold without registration or an exemption
from   registration.   The  certificate  for  such  shares  contained  a  legend
restricting  transfer without such registration or exemption and a stop transfer
order was lodged against the shares with our transfer agent.

In April 2002 we sold 400,000 shares of our common stock in a private  placement
to managed  accounts of Sprott Asset  Management,  Inc. for $2.50 per share.  We
paid a commission of $50,000 in connection with such placement. Such shares were
issued  pursuant to an exemption  from  registration  under  Section 4(2) of the
Securities Act of 1933. Such shares were issued pursuant to an investment letter
under  which  the  shareholder  acknowledged  that the  shares  were  restricted
securities  and would not be sold  without  registration  or an  exemption  from
registration.  The  certificate for such shares  contained a legend  restricting
transfer  without such  registration  or exemption and a stop transfer order was
lodged against the shares with our transfer agent.






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<PAGE>
In July 2002 we sold 1,000,000 shares of our common stock in a private placement
to managed  accounts of Sprott  Asset  Management,  Inc.  and 428,600  shares to
Pictet Global Sector Fund for $3.50 per share.  Such shares were issued pursuant
to an exemption  from  registration  under Section 4(2) of the Securities Act of
1933. Such shares were issued  pursuant to an investment  letter under which the
shareholder  acknowledged  that the shares were restricted  securities and would
not  be  sold  without  registration  or an  exemption  from  registration.  The
certificate for such shares contained a legend restricting transfer without such
registration  or  exemption  and a stop  transfer  order was lodged  against the
shares with our transfer agent.

ITEM 6. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

Our operating  activities are related  primarily to manufacturing  and marketing
our swimming pool chemical  product  called  "HEAT$AVR",  including the consumer
version packed in our "Tropical  Fish"  dispenser.  In June 2002 we introduced a
fresh water  evaporation  control chemical product called  "WATER$AVR" which has
not achieved substantial sales to date.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The SEC has recently  issued  Financial  Reporting  Release No. 60,  "Cautionary
Advice  Regarding  Disclosure  About Critical  Accounting  Policies" ("FRR 60"),
suggesting  companies  provide  additional  disclosure  and  commentary on those
accounting  policies  considered most critical.  A critical accounting policy is
one that is both very important to the portrayal of our financial  condition and
results,  and  requires  management's  most  difficult,  subjective  or  complex
judgments.  Typically,  the circumstances  that make these judgments  difficult,
subjective  and/or complex have to do with the need to make estimates  about the
effect of matters  that are  inherently  uncertain.  We believe  the  accounting
policies below represent our critical accounting policies as contemplated by FRR
60. See Note 3 of the Notes to Consolidated  Financial Statements for a detailed
discussion on the application of these and other accounting policies.

Allowances  for Product  Returns.  We still grant  certain of our  customers the
right to return  product  which they are unable to sell.  Upon sale, we evaluate
the need to record a  provision  for  product  returns  based on our  historical
experience, economic trends and changes in customer demand.

Allowances for Doubtful Accounts Receivable. We evaluate our accounts receivable
to determine if they will  ultimately be  collected.  This  evaluation  includes
significant judgments and estimates,  including an analysis of receivables aging
and a review of large accounts.  If, for example, the financial condition of our
customers  deteriorates  resulting in an impairment of their ability to pay or a
pattern of late payment develops, allowances may be required.

Provisions  for  Inventory  Obsolescence.  We may need to record a provision for
estimated obsolescence and shrinkage of inventory.  Our estimates would consider
the cost of  inventory,  the  estimated  market  value,  the  shelf  life of the
inventory  and  our  historical  experience.  If  there  are  changes  to  these
estimates, provisions for inventory obsolescence may be necessary.






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<PAGE>
RESULTS OF OPERATIONS

Year ended December 31, 2002 and 2001
-------------------------------------

Sales  for the  year  ended  December  31,  2002  were  $1,112,192  compared  to
$1,334,273  for the 2001  period,  a decrease of  $222,081  or 16.6%.  Our sales
decline was primarily the result of poor weather  conditions in the Eastern U.S.
and Canada which  reduced the outdoor  swimming  season and therefore the demand
for our tropical fish product. There were no price changes in this period.

Our overall gross profit margin on product sales decreased  slightly to 47.7% in
2002 from 50.3% in 2001.  This  decrease was primarily due to higher fixed costs
related to additional production facilities and equipment which we have added in
the 2002 period.

Operating expenses for fiscal 2002 were $3,701,899, up from $806,020 in 2001. We
issued over 2 million stock options to employees and consultants  which resulted
in a  non-cash  expense  recognition  of  $2,736,608  in  2002.  In 2002 we also
increased sales and marketing costs in connection with our WATER$AVR product and
this was  reflected in  increased  wages,  office,  rent,  telephone  and travel
expenses.  We incurred higher professional fees in the 2002 period primarily due
to increased legal and accounting expenses. Depreciation expense was $24,683 for
the 2002 period  compared to $18,910 for the 2001  reflecting  depreciation  for
additional  property  and  equipment  added in 2002.  Our  expenses  to increase
investor  awareness of our company was significantly  less than in 2001 and this
resulted in a decrease in stock  promotion and transfer  agent's fee in 2002. We
also had an expense of $19,180 in 2002 for currency  exchange.  There was income
of $2,368 from such item in 2001.

Our income tax provision for 2002  reflected a benefit of $21,456 due to the net
loss while we had income tax expense of $100,264 in 2001. We had interest income
of $67,228 in 2002 reflecting earnings on the proceeds of stock sales during the
year.  There was a net loss of $3,082,445  in the 2002 period  compared to a net
loss of $233,955 in 2001.

Year Ended December 31, 2001 and 2000
-------------------------------------

Fiscal 2001 revenue rose 30% to $1,334,273  because of more effective  marketing
with the preponderance of sales continuing to be in Canada to our Montreal-based
distributor. The distributor reports that 75% of his sales are in the USA. Gross
profit margins were stable at 50.3%.  Product mix shifted little during the year
with a continued  emphasis on "Tropical  Fish".  There were no price  changes in
this period.

Operating  expenses for 2001 were  $806,020 up from $289,860 in the 2000 period.
Wages  increased to $313,918 in 2001 from $87,907 in 2000. In 2001 this included
$173,750  related to granting of stock options  rather than cash  expense.  Cash
expense  also  increased  due to  increased  production  levels  and to  further
introduction  of WATER$AVR.  In the 2001 period we increased sales and marketing
costs in  connection  with our  WATER$AVR  product  and  this was  reflected  in
increased wages, office, rent, telephone and travel expenses.  We incurred lower
professional




                                       12
<PAGE>
fees in the 2001 period  primarily due decreased legal and accounting  expenses.
Depreciation  expense was  $18,910  for the 2001 period  compared to $13,489 for
2000 reflecting  additional  depreciation for additional  property and equipment
added in 2001. We also undertook a program to increase investor awareness of our
company and this program resulted in an increase in stock promotion and transfer
agent's fee in 2001. We also had income of $2,368 in 2001 for currency exchange.
There was $19,344 of such income in 2000.

There was a net loss of $233,955  in 2001  compared to net income of $138,971 in
2000.

Liquidity and Capital Resources
-------------------------------

We sold  1,828,600  shares of common stock to investors in 2002 for net proceeds
of $5,750,000. We believe we have sufficient capital to support our business and
operations   for  at  least  the  next  12  months.   We  anticipate   utilizing
approximately  $2 million in the next twelve  months to attempt to increase  the
sales of our  products by adding  sales and  marketing  professionals,  increase
advertising and promotion  expenses,  improve our products,  develop  additional
uses for our core technology and make additional patent applications.  There can
be no assurance that such  expenditures  will result in significant  increase in
sales of our products. Approximately $1,900,000 of such expenditures are related
to our recently introduced WATER$AVR product. There can be no assurance that any
of the expenditures will result in additional sales revenues.

SEASONALITY

Our  operations  are  subject  to  seasonal  fluctuations.  Use of our  products
increase in summer  months in most  markets and result in our sales from January
to June being greater than in July through November. Additionally, cooler summer
weather  patterns lead to lower sales volume,  particularly of our Tropical Fish
product which is geared to residential  pools,  due to shorter  swimming  season
while hotter weather  results in increased sales volume due to a longer swimming
season.  We  believe  we are  able  to  adequately  respond  to  these  seasonal
fluctuations by reducing or increasing production as needed.

RISK FACTORS

We have identified the following as the most material risks of our business.

Our business  would be  adversely  affected if we lost the services Dan O'Brien,
our chief executive officer.

We are dependent  upon the services of Dan O'Brien,  who serves as our president
and chief  executive  officer.  Our business would be adversely  affected if the
executive  services of Mr. O'Brien ceased to be available us because none of our
other  employees  could  take over the  management  activities  of Mr.  O'Brien.
Therefore we would have to recruit one or more new  executives  but there can be
no assurance  that we would be able to engage a replacement  executive  with the
required skills on satisfactory  terms.  Mr. O'Brien does not have an employment
contract with Flexible. We have a key man life insurance policy in the amount of
CDN $400,000 (currently approximately USD$250,000) on Mr. O'Brien.





                                       13
<PAGE>
Our revenues would be  substantially  reduced if we lost the major customer that
accounts for a substantial amount of our sales.

Our exclusive U.S. and Canadian  distributor of our HEAT$AVR product packaged in
our Tropical Fish  dispenser  account for 94% of our sales  revenues in 2001 and
95% of our sales revenues in 2002.  Although we have an agreement with such firm
which is described  above,  this agreement  does not require the  distributor to
purchase  any  minimum  amount  of our  products,  nor does it  prevent  it from
handling competing  products.  If our distributor reduced its purchase or ceased
to purchase our products we would suffer substantial  reduction in our sales and
would have to make  alternative  arrangements  to  distribute  our Tropical Fish
product in the U.S. and Canada.  There can be no assurance that we would be able
to replace the services of this distributor on satisfactory terms.

We are subject to concentrated credit risk from our major customer.

We allow our major  customer 45 days to pay for each shipment of product we make
to them. This represents risk that we would be subject to substantial  write-off
of  our  accounts  receivable  if  this  customer  defaulted  on  their  payment
obligations to us.

The recent introduction of our Water$avr product may result in losses.

We introduced our WATER$AVR  product in June 2002. We have delivered  quantities
for testing by potential customers but only one customer has ordered the product
for  commercial  use. This product can achieve  success only if it is ordered in
substantial  quantities by commercial  customers  who have  determined  that the
water saving benefits of the product exceed the costs of purchase and deployment
of the product.  We cannot assure that we will receive sufficient orders of this
product  to  achieve  profits  or cover  the  additional  expenses  incurred  to
manufacture and market this product.  We expect to spend $1,900,000 on WATER$AVR
in 2003.

Our products can be hazardous if not handled, stored and used properly.

HEAT$AVR  is  flammable  and  must  be  stored  properly  to  avoid  fire  risk.
Additionally,  it may injure eyes which are exposed to the concentrated product.
Although we label the products to warn of such risks, our sales could be reduced
if our products  were to be viewed as being  dangerous  to use or actually  been
implicated in causing personal injury or property damage, which is not currently
the case.

















                                       14
<PAGE>
                                    PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(A) OF THE EXCHANGE ACT.

DIRECTORS AND EXECUTIVE OFFICERS

    The  following  table  sets  forth  our  directors  and  officers  and their
respective ages and positions:


Name                               Age                       Position

Daniel B. O'Brien                   46                       President, Director
John H. Bientjes                    49                       Director
Dr. Robert N. O'Brien               81                       Director
Dale Friend                         47                       Director

Daniel B.  O'Brien has been  president  and a director of Flexible  since August
1998.  He has been  involved in the swimming  pool  industry  since 1990 when he
founded our subsidiary,  Flexible Solutions Ltd. which was purchased by Flexible
Solutions International,  Inc. in August 1998. From 1990 to 1998 Mr. O'Brien was
also a teacher at Brentwood College where he was in charge of outdoor education.

John H.  Bientjes  has been a member of our Board of  Directors  since  February
2000.  Mr.  Bientjes  has been the manager of the  Commercial  Aquatic  Supplies
Division  of D.B.  Perks &  Associates,  Ltd.,  located  in  Vancouver,  British
Columbia,  a company that markets supplies and equipment to commercial  swimming
pools which are primarily owned by municipalities. Mr. Bientjes was graduated in
1976 from Simon Fraser University in Vancouver, British Columbia with a Bachelor
of Arts Degree in Economics and Commerce.

Dr.  Robert N.  O'Brien has been a member of the  Company's  Board of  Directors
since May 1998.  Dr.  O'Brien was a Professor of Chemistry at the  University of
Victoria  from 1968  until 1986 at which  time he was given the  designation  of
Professor  Emeritus.  He  held  various  academic  positions  since  1957 at the
University  of  Alberta,  the  University  of  California  at  Berkley,  and the
University of Victoria.  While  teaching,  Dr. O'Brien acted as a consultant and
served on the British Columbia  Research Council from 1968 to 1990. In 1987, Dr.
O'Brien  founded  the  Vancouver   Island   Advanced   Technology  and  Research
Association.  Dr. O'Brien  received his Bachelor of Applied  Science in Chemical
Engineering  from the  University  of British  Columbia in 1951;  his Masters of
Applied  Science in  Metallurgical  Engineering  from the  University of British
Columbia in 1952;  his Ph.D. in Metallurgy  from the University of Manchester in
1955;  and, was a Post Doctoral  Fellow in Pure  Chemistry at the  University of
Ottawa from 1955 through 1957.

Dale Friend was elected a director in  December,  2002.  She was a Senior  Trust
Analyst for  Alderwoods  Group,  formerly  The Loewen  Group from August 2002 to
February  2003.  She was Advanced  Accountant  for such firm from 1999 to August
2002.  She was  with  Telus,  formerly  BC  Tel,  from  1979 to 1998 in  various
accounting, auditing and financial planning positions.






                                       15
<PAGE>
Daniel B. O'Brien and Dr. Robert N. O'Brien are father and son.

    Directors are elected annually and hold office until the next annual meeting
of our stockholders  and until their  successors are elected and qualified.  The
Board has not established any committees.  All executive  officers are chosen by
the board of directors and serve at the board's discretion.

    We  reimburse  directors  for any expenses  incurred in  attending  board of
directors meetings.

Section 16(a) Beneficial Ownership Reporting Compliance

         Based solely upon a review of the copies of Forms 3 and 4 and 5 thereto
furnished  to the  Company,  or written  representations  that no annual  Form 5
reports were required,  the Company believes that all filing  requirements under
Section 16(a) of the Securities  Exchange Act of 1934, as amended (the "Exchange
Act") applicable to its directors,  officers and any persons holding ten percent
(10%) or more of the  Company's  Common  Stock  were  made with  respect  to the
Company's fiscal year ended December 31, 2002.







































                                       16
<PAGE>
    ITEM 10.  EXECUTIVE COMPENSATION.

EXECUTIVE COMPENSATION

                           SUMMARY COMPENSATION TABLE

         The  following   table  sets  forth  certain   information   about  the
compensation paid or accrued to the person who was the Company's chief executive
officer  during the fiscal year ended  December  31, 2002 (the "named  executive
officer").
<TABLE>
<CAPTION>
                                                  ANNUAL COMPENSATION              LONG TERM COMPENSATION AWARDS
                                                                                        AWARDS                    PAYOUTS

                                                                OTHER                       SECURITIES
                                                                ANNUAL        RESTRICTED    UNDERLYING      ALL      OTHER
                                                                COMPEN-       STOCK         OPTIONS/        LTIP     COMPEN-
                                         SALARY   BONUS         SATION        AWARD(S)      SARS            PAYOUTS  SATION
                            YEAR         ($)      ($)           ($)           ($)           (#)             ($)      ($)
                            ---------    -----    -------       --------      ---------     ----------      -------  ---------

<S>                            <C>      <C>       <C>           <C>           <C>           <C>             <C>      <C>
Daniel O'Brien                 2002     $40,000     --              --           --          50,000 shares    --          --
      --
President, Chief               2001     $18,500     --              --                      100,000 shares    --          --
Executive Officer              2000     $18,500                                             100,000 shares
</TABLE>

         The  following  table  provides  certain  information  about  the stock
options  granted to the  executive  officer  named in the  Summary  Compensation
Table. in the year ended December 31, 2002.

                       OPTIONS GRANTED IN 2002 FISCAL YEAR

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------
                               NUMBER OF
                               SECURITIES
                               UNDERLYING          PERCENT OF TOTAL
                            OPTIONS GRANTED    OPTIONS/SARS GRANTED TO     EXERCISE OR BASE PRICE
           NAME                   (#)          EMPLOYEES IN FISCAL YEAR          ($/SHARE)             EXPIRATION DATE
--------------------------- ------------------ -------------------------- ------------------------ -----------------------
<S>                           <C>                        <C>                       <C>               <C>
 Daniel B. O'Brien            50,000 shares              40.4%                     $4.25             December 31, 2007
--------------------------- ------------------ -------------------------- ------------------------ -----------------------
</TABLE>



         The following table sets forth certain  information about stock options
exercised in 2002 and the value of unexercised  stock option held as of December
31, 2002 by the executive officer named in the Summary Compensation Table.







                                       17
<PAGE>
<TABLE>
<CAPTION>
                            AGGREGATE OPTION EXERCISES IN 2002 AND YEAR-END OPTION VALUES

                                                            NUMBER OF UNEXERCISED          VALUE OF UNEXERCISED IN-THE
                        SHARES                              OPTIONS AT FY-END (#)          MONEY OPTIONS AT FY-END ($)
                        ACQUIRED ON     VALUE           ------------------------------  --------------------------------
NAME                    EXERCISE(#)     REALIZED($)     EXERCISABLE     UNEXERCISABLE   EXERCISABLE     UNEXERCISABLE
----------------------  --------------  --------------  --------------  --------------  --------------  ----------------
<S>                       <C>            <C>               <C>             <C>             <C>                 <C>
Daniel B. O'Brien         100,000        $330,000          100,000         50,000          $205,000            0
</TABLE>

DIRECTOR COMPENSATION

We have agreed to issue our  directors  who are not also employed by the Company
options to purchase  5,000 shares of our common stock  annually for serving as a
director.  However,  Dr. Robert N. O'Brien will not receive  director options in
any year in which he receives  options  for other  services.  We pay Dr.  Robert
O'Brien  additional options for assisting in research and development and patent
prosecution.  The amount of such options are determined annually by the Board of
Directors  with Dr.  O'Brien not voting on such  matter.  In 2002,  Dr.  O'Brien
received the following options for such services and he did not receive director
options:

Option Price               No. of Options        Expiration Date
------------               --------------        ---------------

$4.25                      25,000                December 31, 2007

Our other outside directors received the following options in 2002:

Name                    Option Price        No. of Options     Expiration Date
----                    ------------        --------------     ---------------

John H. Bientjes        $4.25               5,000              December 31, 2007
Dale Friend             $4.25               5,000              December 31, 2007





















                                       18
<PAGE>
ITEM 11.  SECURITY  OWNERSHIP OF CERTAIN  BENEFICIAL  OWNERS AND  MANAGEMENT AND
RELATED STOCKHOLDER MATTERS.

The following  table sets forth  certain  information  regarding the  beneficial
ownership  of Common Stock as of March 17, 2003 by (i) each  stockholder  who is
known by the Company to own beneficially more than five percent of the Company's
outstanding Common Stock, (ii) each director of the Company, (iii) the Company's
executive  officers  named in the Summary  Compensation  Table,  and (iv) by all
executive  officers and directors of the Company as a group.  The information as
to each person or entity has been furnished by such person or group.

                          Shares Beneficially Owned (1)
                             Common Stock Percentage

    Daniel O'Brien(2)(3)                           4,606,000            39.3%
    John H. Bientjes(2)(3)                            40,000            *
    Dr. Robert O'Brien(2)(3)                       1,800,000            15.4%
    Dale Friend(2)(3)                                    -0-            -


    Sprott Asset Management, Inc.(4)               1,672,800            14.4%
    PF Water(5)                                      678,600             5.8%
    Beat Aschmann(6)                                 700,000             6.0%
    All directors and   officers
    as a group (4 persons)                         6,446,000            54.7%

 *  Less than 2%

(1)  Applicable  percentage  of  ownership  at March  17,  2003,  is based  upon
11,621,919  shares  of  Common  Stock  outstanding.   Beneficial   ownership  is
determined  in  accordance  with  the  rules  of  the  Securities  and  Exchange
Commission and includes voting and investment power with respect to shares shown
as  beneficially  owned.  Shares of Common Stock  subject to options or warrants
currently  exercisable  or  exercisable  within 60 days of February 3, 2003, are
deemed  outstanding  for  computing the shares and  percentage  ownership of the
person  holding  such options or warrants,  but are not deemed  outstanding  for
computing the percentage ownership of any other person or entity.

(2) Address for this shareholder is 2614 Queenswood Drive, Victoria,BC, V8N 1X5,
Canada.

(3) Includes  shares  which may be acquired on the exercise of stock  options as
follows.

   Name                   No. of Options    Exercise Price    Expiration Date
   ----                   --------------    --------------    ---------------
   Daniel O'Brien             100,000            $1.40        December 21, 2006
   John H. Bientjes             5,000            $1.40        December 21, 2006
   Dr. Robert O'Brien          50,000            $1.40        December 21, 2006

Doesnot include the  following  shares  which may be acquired on the exercise of
    stock options which are not exercisable until December 31, 2003.






                                       19
<PAGE>
  Name                  No. of Options    Exercise Price     Expiration Date
  ----                  --------------    --------------     ---------------
  Daniel O'Brien           50,000             $4.25          December 31, 2007
  John H. Bientjes          5,000             $4.25          December 31, 2007
  Dr. Robert O'Brien       25,000             $4.25          December 31, 2007
  Dale Friend               5,000             $4.25          December 31, 2007

(4) Address for this shareholder is Suite 3450,  South Tower,  Royal Bank Plaza,
    Toronto, Ontario, M5J 2J2, Canada.

(5) Formerly known as Pictet Global Sector Fund. Address for this shareholder is
    Boulevard Georges Favon, Geneva, Switzerland CH-1204.

(6) Address of this shareholder is Laerchenhofweg #3,  Bonstetten,  Switzerland,
    CH-8906.











































                                       20
<PAGE>
EQUITY COMPENSATION PLAN INFORMATION

         The Company issues stock options to purchase common stock the officers,
directors, employees and consultants on an individual basis. The Company adopted
an Option  Granting  Plan  covering  options  to be issued  December  1, 2001 to
December 31, 2002.  The plan set  guidelines  for  selecting  optionees,  option
pricing and authorization of issuance. All issuances are required to be approved
by the Board of Directors.  The following table sets forth information about all
of our outstanding options as of December 31, 2002.

<TABLE>
<CAPTION>
      ----------------------- -- -------------------------------- -- ------------------------ ------------------------------
                                 NUMBER OF SECURITIES TO BE          WEIGHTED-AVERAGE         NUMBER OF SECURITIES
                                 ISSUED UPON EXERCISE OF             EXERCISE PRICE OF         REMAINING AVAILABLE
                                 OUTSTANDING OPTIONS,                OUTSTANDING OPTIONS,     FOR FUTURE ISSUANCE UNDER
                                 WARRANTS AND RIGHTS                 WARRANTS AND RIGHTS      EQUITY COMPENSATION PLANS
                                                                                              (EXCLUDING SECURITIES
                                                                                              REFLECTED IN COLUMN (A))
                                              A                                 B                          C
      ----------------------- -- -------------------------------- -- ------------------------ ------------------------------
      PLAN CATEGORY
      ----------------------- -- -------------------------------- -- ------------------------ ------------------------------
<S>                                           <C>                              <C>                         <C>
      EQUITY                                 -0-                                -                         -0-
      COMPENSATION
      PLANS APPROVED
      BY SECURITY
      HOLDERS
      ----------------------- -- -------------------------------- -- ------------------------ ------------------------------
      EQUITY
      COMPENSATION
      PLANS NOT                          3,671,800                           $3.68                        -0-
      APPROVED BY
      SECURITY HOLDERS(1)
      ----------------------- -- -------------------------------- -- ------------------------ ------------------------------
      TOTAL                              3,671,800                           $3.68                        -0-
      ----------------------- -- -------------------------------- -- ------------------------ ------------------------------
</TABLE>






















                                       21
<PAGE>
ITEM 12.   CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS.

Our director,  Dr. Robert  O'Brien,  developed our products and has assigned his
patent  rights to such  products to us. We have no  agreement  with Dr.  O'Brien
requiring him to conduct any research and  development  activities for us but we
anticipate  that any  future  inventions  which  may be of  interest  to us will
continue  to be  assigned  to us by  Dr.  O'Brien,  although  he  has  no  legal
obligation to do so. Dr.  O'Brien does not receive any salary or royalties  from
us for any  research and  development  activities.  The Board of Directors  does
consider such activities  undertaken by Dr. O'Brien when it grants stock options
to Dr.  O'Brien.  Dr. O'Brien is a member of the Board of Directors but does not
participate  in the  proceedings  of the Board  concerning  his own stock option
grants. See Item 10 above for further information.


ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.


NUMBER                 DESCRIPTION

3.1    Articles of Incorporation of the Registrant (Incorporated by reference to
       Exhibit 3.1 to our  Registration  Statement on Form 10-SB filed  February
       22, 2000).

3.2    Bylaws of the  Registrant  (Incorporated  by  reference to Exhibit 3.2 to
       Registrant's Registration Statement on Form SB-2 filed February 22, 2000

4.1    Option Granting Plan for Term December 1, 2001 to December 31, 2002

10.1   Distribution  Agreement  dated June 1, 1998 between  Flexible  Solutions,
       Ltd.   and   Heliocol   Canada  Ltd.   (now  known  as  Sunsolar   Energy
       Technologies).   Incorporated   by  reference  to  Exhibit  10.1  to  our
       Registration Statement on Form 10-SB filed on April 4, 2000.

10.2   Global Supply and License  Agreement  between  Registrant and Ondeo Nalco
       Company.  (Incorporated  by  reference  to Exhibit  10.2 to  Registrant's
       Registration Statement on Form SB-2 filed March 5, 2003.

10.3   Exclusive  Distribution  Agreement effective September 1, 2002 with Ondeo
       Nalco Company. (Incorporated by reference to Exhibit 10.3 to Registrant's
       Registration Statement on Form SB-2 filed March 5, 2003)

21     Subsidiaries.  (Incorporated  by reference to Exhibit 21 to  Registrant's
       Registration Statement on Form SB-2 filed January 22, 2003)

99.1   Written statement of chief executive officer.

99.2   Written statement of chief financial officer.










                                       22
<PAGE>
REPORTS ON FORM 8-K

There were no reports  filed on Form 8-K during the quarter  ended  December 31,
2002.


ITEM 14.  CONTROLS AND PROCEDURES.

The Company  maintains  disclosure  controls and procedures that are designed to
ensure that information  required to be disclosed in the Company's  Exchange Act
reports is recorded, processed,  summarized and reported within the time periods
specified in the SEC's rules and forms, and that such information is accumulated
and  communicated  to the Company's  management,  including its Chief  Executive
Officer and Chief Financial Officer,  as appropriate,  to allow timely decisions
regarding  required  disclosure  based closely on the  definition of "disclosure
controls and  procedures"  in Rule  13a-14(c).  In designing and  evaluating the
disclosure controls and procedures,  management recognized that any controls and
procedures,  no  matter  how  well  designed  and  operated,  can  provide  only
reasonable assurance of achieving the desired control objectives, and management
necessarily  was required to apply its judgment in evaluating  the  cost-benefit
relationship of possible controls and procedures.

Within 90 days prior to the date of this  report,  the  Company  carried  out an
evaluation,  under the supervision and with the  participation  of the Company's
management,  including the Company's Chief  Executive  Officer and the Company's
Chief Financial Officer, of the effectiveness of the design and operation of the
Company's  disclosure  controls  and  procedures.  Based on the  foregoing,  the
Company's Chief Executive Officer and Chief Financial Officer concluded that the
Company's disclosure controls and procedures were effective.

There have been no significant  changes in the Company's internal controls or in
other factors that could  significantly  affect the internal controls subsequent
to the date the Company completed its evaluation.

























                                       23
<PAGE>
                                   SIGNATURES

         In  accordance  with the  requirements  of  Section  13 or 15(d) of the
Securities  Exchange Act of 1934, the registrant caused this report to be signed
on its behalf by the  undersigned,  thereunto  duly  authorized,  in the City of
Victoria, British Columbia, on March 21, 2003.

                                          FLEXIBLE SOLUTIONS, INC.


                                          /s/ DANIEL B. O'BRIEN
                                          ----------------------------------
                                          Daniel O'Brien
                                          President

         In accordance  with the  requirements  of the Exchange Act, this report
has been signed by the following  persons on behalf of the registrant and in the
capacities and on the dates indicated:


         Signature              Title                            Date


/s/ DANIEL B. O'BRIEN        President and Director (principal   March 21, 2003
Daniel B. O'Brien            executive officer and principal
                             accounting officer)

/s/ JOHN H. BIENJES          Director                            March 21, 2003
John H. Bienjes

/s/ ROBERT N. O'BRIEN        Director                            March 21, 2003
Robert N. O'Brien

/s/ DALE FRIEND              Director                            March 21, 2003
Dale Friend























                                       24
<PAGE>
                    CERTIFICATION OF CHIEF EXECUTIVE OFFICER

I,  Daniel O'Brien, certify that:

           1. I have  reviewed  this  annual  report on Form  10-KSB of Flexible
           Solutions International, Inc.;

           2. Based on my  knowledge,  this  annual  report does not contain any
           untrue  statement of a material fact or omit to state a material fact
           necessary to make the statements made, in light of the  circumstances
           under which such statements were made, not misleading with respect to
           the period covered by this annual report;

           3.  Based  on my  knowledge,  the  financial  statements,  and  other
           financial  information included in this annual report, fairly present
           in  all  material  respects  the  financial  condition,   results  of
           operations  and cash  flows of the  registrant  as of,  and for,  the
           periods presented in this annual report;

           4. The registrant's  other certifying  officers and I are responsible
           for establishing and maintaining  disclosure  controls and procedures
           (as  defined  in  Exchange  Act  Rules  13a-14  and  15d-14)  for the
           registrant and have:

           a) designed such  disclosure  controls and  procedures to ensure that
           material  information  relating  to  the  registrant,  including  its
           consolidated subsidiaries, is made known to us by others within those
           entities,  particularly during the period in which this annual report
           is being prepared;

           b)  evaluated  the  effectiveness  of  the  registrant's   disclosure
           controls  and  procedures  as of a date  within 90 days  prior to the
           filing date of this annual report (the "Evaluation Date"); and

           c)  presented  in  this  annual  report  our  conclusions  about  the
           effectiveness of the disclosure  controls and procedures based on our
           evaluation as of the Evaluation Date;

           5. The registrant's  other certifying  officers and I have disclosed,
           based on our most recent evaluation, to the registrant's auditors and
           the audit  committee of  registrant's  board of directors (or persons
           performing the equivalent functions):

           a)  all  significant  deficiencies  in the  design  or  operation  of
           internal  controls  which  could  adversely  affect the  registrant's
           ability to record,  process,  summarize and report financial data and
           have identified for the registrant's auditors any material weaknesses
           in internal controls; and










                                       25
<PAGE>
           b) any fraud,  whether or not material,  that involves  management or
           other  employees  who  have a  significant  role in the  registrant's
           internal controls; and

           6. The registrant's other certifying officers and I have indicated in
           this annual report whether there were significant changes in internal
           controls or in other factors that could significantly affect internal
           controls  subsequent  to the  date  of our  most  recent  evaluation,
           including  any   corrective   actions  with  regard  to   significant
           deficiencies and material weaknesses.

Date:  March 12, 2003


/s/ DANIEL O'BRIEN
-------------------------
Daniel O'Brien
Chief Executive Officer


                    CERTIFICATION OF CHIEF FINANCIAL OFFICER


I,  Daniel O'Brien, certify that:

           1. I have  reviewed  this  annual  report on Form  10-KSB of Flexible
           Solutions International, Inc.;

           2. Based on my  knowledge,  this  annual  report does not contain any
           untrue  statement of a material fact or omit to state a material fact
           necessary to make the statements made, in light of the  circumstances
           under which such statements were made, not misleading with respect to
           the period covered by this annual report;

           3.  Based  on my  knowledge,  the  financial  statements,  and  other
           financial  information included in this annual report, fairly present
           in  all  material  respects  the  financial  condition,   results  of
           operations  and cash  flows of the  registrant  as of,  and for,  the
           periods presented in this annual report;

           4. The registrant's  other certifying  officers and I are responsible
           for establishing and maintaining  disclosure  controls and procedures
           (as  defined  in  Exchange  Act  Rules  13a-14  and  15d-14)  for the
           registrant and have:

           a) designed such  disclosure  controls and  procedures to ensure that
           material  information  relating  to  the  registrant,  including  its
           consolidated subsidiaries, is made known to us by others within those
           entities,  particularly during the period in which this annual report
           is being prepared;








                                       26
<PAGE>
           b)  evaluated  the  effectiveness  of  the  registrant's   disclosure
           controls  and  procedures  as of a date  within 90 days  prior to the
           filing date of this annual report (the "Evaluation Date"); and

           c)  presented  in  this  annual  report  our  conclusions  about  the
           effectiveness of the disclosure  controls and procedures based on our
           evaluation as of the Evaluation Date;

           5. The registrant's  other certifying  officers and I have disclosed,
           based on our most recent evaluation, to the registrant's auditors and
           the audit  committee of  registrant's  board of directors (or persons
           performing the equivalent functions):

           a)  all  significant  deficiencies  in the  design  or  operation  of
           internal  controls  which  could  adversely  affect the  registrant's
           ability to record,  process,  summarize and report financial data and
           have identified for the registrant's auditors any material weaknesses
           in internal controls; and

           b) any fraud,  whether or not material,  that involves  management or
           other  employees  who  have a  significant  role in the  registrant's
           internal controls; and

           6. The registrant's other certifying officers and I have indicated in
           this annual report whether there were significant changes in internal
           controls or in other factors that could significantly affect internal
           controls  subsequent  to the  date  of our  most  recent  evaluation,
           including  any   corrective   actions  with  regard  to   significant
           deficiencies and material weaknesses.

Date:  March 12, 2003


/s/ DANIEL O'BRIEN
-----------------------
Daniel O'Brien
Chief Financial Officer





















                                       27
<PAGE>
                                  EXHIBIT 99.1


                WRITTEN STATEMENT OF THE CHIEF EXECUTIVE OFFICER


                           PURSUANT TO 18 U.S.C. 1350


         Solely for the purposes of  complying  with 18 U.S.C.  1350,  I, Daniel
O'Brien,   the  undersigned  Chief  Executive  Officer  of  Flexible   Solutions
International,  Inc.(the "Company"), hereby certify, based on my knowledge, that
the Annual  Report on Form  10-KSB of the  Company  for the year ended  December
312002,  (the "Report") fully complies with the requirements of Section 13(a) of
the Securities Exchange Act of 1934 and that information contained in the Report
fairly presents,  in all material respects,  the financial condition and results
of operations of the Company.


/s/ DANIEL O'BRIEN
------------------------
Daniel O'Brien

March 12, 2003


































                                       28
<PAGE>
                                  EXHIBIT 99.2


                WRITTEN STATEMENT OF THE CHIEF FINANCIAL OFFICER


                           PURSUANT TO 18 U.S.C. 1350


Solely for the purposes of complying with 18 U.S.C. 1350, I, Daniel O'Brien, the
undersigned  Chief  Financial  Officer  of  Flexible  Solutions   International,
Inc.(the  "Company"),  hereby  certify,  based on my knowledge,  that the Annual
report on Form  10-KSB of the Company  for the year ended  December  312002,(the
"Report")  fully  complies  with  the  requirements  of  Section  13(a)  of  the
Securities  Exchange  Act of 1934 and that  information  contained in the Report
fairly presents,  in all material respects,  the financial condition and results
of operations of the Company.


/s/ DANIEL O'BRIEN
------------------
Daniel O'Brien

March 12, 2003


































                                       29
<PAGE>
                                                                     EXHIBIT 4.1
FLEXIBLE SOLUTIONS INTERNATIONAL INC.

OPTION GRANTING PLAN FOR THE TERM DECEMBER 1ST 2001 TO DEC 31ST 2002

From time to time it is in the best  interests  of the Company to grant  options
to:

    1. Directors and Officers
    2. Employees
    3. Certain consultants not involved in SEC proscribed activities.

The purpose of options in all cases is to:

    1. Align the interests of the optionees with those of the Company over time.
    2. Provide  potential  material  incentive  for effort above and beyond that
       normally required by a person in that position.
    3. Conserve  corporate capital by maintaining lower base salaries than might
       otherwise be reasonable.
    4. Ensuring, as much as possible, that consultants regard themselves as part
       of  the  ongoing  success  of  the  Company  and  therefore  engage  more
       thoroughly.

Method of setting Option Grants:

The Company's standard option agreement is to be used in every case. It is to be
modified only as needed for special cases. (Sample Attached)

1.       Directors  and  Officers  options  will  be set  annually.  The  number
         requested  by a director  or officer  will be  proposed to the Board of
         Directors by the individual.  The compensation committee will adjust as
         they see fit and place the  revised  numbers in front of the full board
         for approval.  No board member may vote on their personal option grant.
         The strike  price for options is the market  close or higher on the day
         of grant.
2.       Employees may be granted options in numbers and at times decided by the
         CEO. The Board of Directors must approve the grants. No options will be
         granted  with  strike  prices  below  the  market  close  on the day of
         granting unless there is a very exceptional reason.
3.       Consultants who meet the criteria enforced by the SEC regarding capital
         raising,  stock  sales,  promotion  and  market  making  can be granted
         options  at times  and in  numbers  decided  by the CEO.  The  board of
         directors must approve the grants. The strike price of the options must
         be the  market  close on the grant  date or  higher.  In rare,  unusual
         situations,  the Company  may award  options to parties who do not meet
         the  requirements set by the SEC. Options granted to these parties will
         not be  registered  ever and in the event  they are  exercised  will be
         issued as restricted  shares and subject to all the rules of restricted
         shares.

-------------------             --------------------          ----------------
J. H. Bientjes                  Robert  N.O'Brien             Dan O"Brien
Director                        Director                      Director and
                                                              Officer





                                       30
<PAGE>
         FLEXIBLE SOLUTIONS
         INTERNATIONAL INC.

         CONSOLIDATED FINANCIAL STATEMENTS
         DECEMBER 31, 2002 AND 2001
         (U.S. DOLLARS)







         INDEX                                                        PAGE

         REPORT OF INDEPENDENT CHARTERED ACCOUNTANTS TO
           THE BOARD OF DIRECTORS AND STOCKHOLDERS                     1

         FINANCIAL STATEMENTS

         Consolidated Balance Sheets                                   2

         Consolidated Statements of Operations                         3

         Consolidated Statements of Stockholders' Equity               4

         Consolidated Statements of Cash Flows                         5

         Notes to Consolidated Financial Statements                   6-16































<PAGE>
               REPORT OF INDEPENDENT CHARTERED ACCOUNTANTS


TO THE BOARD OF DIRECTORS AND STOCKHOLDERS
OF FLEXIBLE SOLUTIONS INTERNATIONAL INC.

We have  audited  the  accompanying  consolidated  balance  sheets  of  Flexible
Solutions  International  Inc.  as  of  December  31,  2002  and  2001  and  the
consolidated  statements of operations,  stockholders' equity and cash flows for
each of the years  ended  December  31,  2002,  2001 and 2000.  These  financial
statements   are  the   responsibility   of  the   Company's   management.   Our
responsibility  is to express an opinion on these financial  statements based on
our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the  United  States of  America.  Those  standards  require  that we plan and
perform an audit to obtain  reasonable  assurance  about  whether the  financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable basis for our opinion.

In our opinion,  these consolidated  financial statements present fairly, in all
material respects, the financial position of the Company as at December 31, 2002
and 2001 and the  results of its  operations  and its cash flows for each of the
years ended  December  31, 2002,  2001 and 2000 in  conformity  with  accounting
principles generally accepted in the United States of America.









"Pannell Kerr Forster"

Chartered Accountants

Vancouver, Canada
March 12, 2003














                                       1
<PAGE>
FLEXIBLE SOLUTIONS INTERNATIONAL INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31
(U.S. DOLLARS)
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
                                                                                   2002                2001
--------------------------------------------------------------------------------------------------------------------
ASSETS
CURRENT
<S>                                                                                    <C>                 <C>
  Cash                                                                                 $556,789            $190,457
  Short-term investment (note 14)                                                     5,062,495                   0
  Accounts receivable                                                                    55,222              46,374
  Income tax recoverable                                                                118,014                   0
  Loan receivable (note 4)                                                               10,082               9,516
  Note receivable (note 5)                                                                    0               9,225
  Inventory                                                                             203,830             181,698
  Prepaid expenses (note 6)                                                              87,321              59,291
--------------------------------------------------------------------------------------------------------------------

TOTAL CURRENT ASSETS                                                                  6,093,753             496,561
PROPERTY AND EQUIPMENT (note 7)                                                         128,566              72,753
INVESTMENT (note 8)                                                                      32,500                   0
--------------------------------------------------------------------------------------------------------------------

TOTAL ASSETS                                                                         $6,254,819            $569,314
--------------------------------------------------------------------------------------------------------------------

LIABILITIES
CURRENT
  Accounts payable                                                                      $53,146             $20,592
  Income tax payable                                                                          0              18,108
--------------------------------------------------------------------------------------------------------------------

TOTAL CURRENT LIABILITIES                                                                53,146              38,700
--------------------------------------------------------------------------------------------------------------------

STOCKHOLDERS' EQUITY
CAPITAL STOCK (note 13)
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
    11,570,916   and 9,272,816 Common shares                                             11,570               9,272
CAPITAL IN EXCESS OF PAR VALUE                                                        9,328,648             563,713
SHARE SUBSCRIPTION RECEIVABLE                                                          (16,217)                   0
OTHER COMPREHENSIVE LOSS                                                               (21,354)            (23,842)
ACCUMULATED DEFICIENCY                                                              (3,100,974)            (18,529)
--------------------------------------------------------------------------------------------------------------------

TOTAL STOCKHOLDERS' EQUITY                                                            6,201,673             530,614
--------------------------------------------------------------------------------------------------------------------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                           $6,254,819            $569,314
--------------------------------------------------------------------------------------------------------------------
</TABLE>

See notes to consolidated financial statements.

                                      2
<PAGE>
FLEXIBLE SOLUTIONS INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31
(U.S. DOLLARS)
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
                                                            2002                 2001                 2000
--------------------------------------------------------------------------------------------------------------------
<S>                                                            <C>                  <C>                  <C>
SALES                                                          $1,112,192           $1,334,273           $1,029,649
COST OF SALES, (exclusive
  of depreciation shown
  separately below)                                               581,422              662,807              509,933
--------------------------------------------------------------------------------------------------------------------
GROSS PROFIT                                                      530,770              671,466              519,716
--------------------------------------------------------------------------------------------------------------------
OPERATING EXPENSES
  Wages (note 12)                                                 414,885              246,955               87,907
  Consulting (note 12)                                          2,736,608               66,963                    0
  Office                                                          122,703               48,398                9,028
  Stock promotion and transfer agent fee                           96,954              241,573                  568
  Rent                                                             61,126               28,978               11,445
  Subcontracting                                                   53,837               16,630               33,312
  Professional fees                                                53,548               23,338               36,701
  Travel and entertainment                                         50,213               23,125               10,454
  Administrative salaries and benefits                             45,312               46,639               37,234
  Currency exchange                                                19,180              (2,368)             (19,344)
  Shipping                                                         10,771               13,563               12,189
  Telephone                                                         9,326                5,616                3,613
  Research                                                          2,523                    0                    0
  Bad debt expense                                                    230               26,570               51,282
  Commission                                                            0                1,130                1,982
  Depreciation                                                     24,683               18,910               13,489
--------------------------------------------------------------------------------------------------------------------
                                                                3,701,899              806,020              289,860
--------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) BEFORE OTHER ITEMS
  AND INCOME TAX                                              (3,171,129)            (134,554)              229,856
--------------------------------------------------------------------------------------------------------------------
OTHER ITEMS
  Gain on sale of property and equipment                                0                  863                    0
  Interest income                                                  67,228                    0                    0
--------------------------------------------------------------------------------------------------------------------
                                                                   67,228                  863                    0
--------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) BEFORE INCOME TAX                               (3,103,901)            (133,691)              229,856
INCOME TAX (RECOVERY)                                            (21,456)              100,264               90,885
--------------------------------------------------------------------------------------------------------------------

NET INCOME (LOSS)                                            $(3,082,445)           $(233,955)             $138,971
--------------------------------------------------------------------------------------------------------------------

NET INCOME (LOSS) PER SHARE                                      $ (0.29)             $ (0.03)               $ 0.02
--------------------------------------------------------------------------------------------------------------------
DILUTED INCOME PER SHARE                                              N/A                  N/A               $ 0.01
--------------------------------------------------------------------------------------------------------------------
WEIGHTED AVERAGE NUMBER OF SHARES                              10,555,754            9,247,949            9,131,316
  DILUTIVE EFFECTS OF OPTIONS                                         N/A                  N/A              220,527
--------------------------------------------------------------------------------------------------------------------
WEIGHTED AVERAGE NUMBER OF
  SHARES WITH DILUTION                                         10,555,754            9,247,949            9,351,843
--------------------------------------------------------------------------------------------------------------------
</TABLE>

See notes to consolidated financial statements.
                                       3
<PAGE>
FLEXIBLE SOLUTIONS INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000
(U.S. DOLLARS)
<TABLE>
<CAPTION>
---------------------------- ------------ ------------ -------------- --------------- -------------- --------------- ---------------
                                                        Capital in        Share        Accumulated    Other              Total
                                                        Excess of      Subscription      Earnings     Comprehensive   Stockholders'
                                 Shares    Par Value    Par Value       Receivable     (Deficiency)   Income (Loss)      Equity
---------------------------- ------------ ------------ -------------- --------------- -------------- --------------- ---------------
<S>                            <C>             <C>          <C>                   <C>       <C>              <C>           <C>
BALANCE, DECEMBER 31, 1999     9,131,316       $9,131       $163,653              $0        $76,455          $6,677        $255,916
TRANSLATION ADJUSTMENT                 0            0              0               0              0         (8,516)         (8,516)
NET INCOME                             0            0              0               0        138,971               0         138,971
---------------------------- ------------ ------------ -------------- --------------- -------------- --------------- ---------------
BALANCE, DECEMBER 31, 2000     9,131,316        9,131        163,653               0        215,426         (1,839)         386,371
SHARES ISSUED
  For cash                         9,500            9          4,116               0              0               0           4,125
  For services                   132,000          132        139,868               0              0               0         140,000
  Stock option compensation            0            0        256,076               0              0               0         256,076
  Translation adjustment               0            0              0               0              0        (22,003)        (22,003)
  Net loss                             0            0              0               0      (233,955)               0       (233,955)
---------------------------- ------------ ------------ -------------- --------------- -------------- --------------- ---------------

BALANCE, DECEMBER 31, 2001     9,272,816        9,272        563,713               0       (18,529)        (23,842)         530,614
SHARES ISSUED
FOR CASH
  Private placement            1,828,600        1,829      5,998,271               0              0               0       6,000,100
  Exercise of stock options      439,500          439        150,686               0              0               0         151,125
For services                      30,000           30         44,370               0              0               0          44,400
Share issue costs                      0            0      (250,000)               0              0               0       (250,000)
Share subscription                     0            0              0        (33,000)              0               0        (33,000)
Payment of subscription
  receivable                           0            0              0          16,783              0               0          16,783
Stock option compensation              0                   2,821,608               0              0               0       2,821,608
Translation adjustment                 0            0              0               0              0           2,488           2,488
Net loss                               0            0              0               0    (3,082,445)               0     (3,082,445)
---------------------------- ------------ ------------ -------------- --------------- -------------- --------------- ---------------

BALANCE, DECEMBER 31, 2002    11,570,916      $11,570     $9,328,648       $(16,217)   $(3,100,974)       $(21,354)      $6,201,673
---------------------------- ------------ ------------ -------------- --------------- -------------- --------------- ---------------
</TABLE>














See notes to consolidated financial statements.
                                       4
<PAGE>
FLEXIBLE SOLUTIONS INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31
(U.S. DOLLARS)
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------
                                                                  2002              2001              2000
------------------------------------------------------------------------------------------------------------------
OPERATING ACTIVITIES
<S>                                                              <C>                  <C>                <C>
  Net income (loss)                                              $(3,082,445)         $(233,955)         $138,971
  Adjustments to reconcile net income (loss)
    to net cash provided by (used in)
    operating activities
      Stock option compensation                                     2,821,608            256,076                0
      Non-cash services                                                44,400            141,510                0
      Depreciation                                                     24,683             18,910           13,489
      Gain on sale of property and equipment                                0              (863)                0
  Changes in Non-Cash Working Capital
    Accounts receivable                                               (8,848)             98,009         (31,544)
    Inventory                                                        (22,132)           (88,185)           43,047
    Prepaid expenses                                                 (28,030)           (53,140)          (5,631)
    Accounts payable                                                   32,554              8,170         (14,589)
    Accrued liabilities                                                     0                  0          (6,929)
    Income tax recoverable                                          (136,122)           (72,490)           21,312
   Unrealized foreign exchange gain/loss                                  627           (10,500)          (5,033)
------------------------------------------------------------------------------------------------------------------
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES                     (353,705)             63,542          153,093
------------------------------------------------------------------------------------------------------------------

INVESTING ACTIVITIES
  Short-term investment                                           (5,062,495)                  0                0
  Acquisition of property and equipment                              (80,496)           (39,246)         (16,771)
  Note receivable                                                       9,225            (9,225)                0
  Loan receivable                                                       (566)            (9,516)                0
  Investment                                                         (32,500)                  0                0
------------------------------------------------------------------------------------------------------------------
CASH USED IN INVESTING ACTIVITIES                                 (5,166,832)           (57,987)         (16,771)
------------------------------------------------------------------------------------------------------------------

FINANCING ACTIVITIES
  Proceeds from issuance of common stock                            5,868,225              4,125                0
  Subscriptions received                                               16,783                  0                0
------------------------------------------------------------------------------------------------------------------
CASH PROVIDED BY FINANCING ACTIVITIES                               5,885,008              4,125                0
------------------------------------------------------------------------------------------------------------------

EFFECT OF EXCHANGE RATE CHANGES ON CASH                                 1,861           (11,503)          (3,483)
------------------------------------------------------------------------------------------------------------------

INFLOW (OUTFLOW) OF CASH                                              366,332            (1,823)          132,839
CASH, BEGINNING OF YEAR                                               190,457            192,280           59,441
------------------------------------------------------------------------------------------------------------------

CASH, END OF YEAR                                                    $556,789           $190,457         $192,280
------------------------------------------------------------------------------------------------------------------

SUPPLEMENTARY DISCLOSURE OF CASH
  FLOW INFORMATION
    Income taxes paid                                                $115,472            $85,126          $66,748
------------------------------------------------------------------------------------------------------------------
SUPPLEMENTARY DISCLOSURE OF NON-CASH
  TRANSACTIONS
    Issue of common stock for service                                 $44,400           $140,000               $0
    Sale of trailer - exchange for rent                                    $0             $1,510               $0
------------------------------------------------------------------------------------------------------------------
</TABLE>

See notes to consolidated financial statements.
                                       5
<PAGE>
FLEXIBLE SOLUTIONS INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000
(U.S. DOLLARS)
--------------------------------------------------------------------------------

1.       OPERATIONS AND BASIS OF PRESENTATION

         These  consolidated   financial  statements  include  the  accounts  of
         Flexible   Solutions   International   Inc.  ("the  Company")  and  its
         wholly-owned subsidiaries Flexible Solutions Ltd. and Water$aver Global
         Solutions  Inc.  All   intercompany   balances  and   transactions  are
         eliminated.  The parent  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 100% of the
         shares of Flexible  Solutions Ltd. The acquisition was effected through
         the  issuance of  7,000,000  shares of common stock by the Company with
         the former  shareholders of the subsidiary  receiving 100% of the total
         shares then issued and outstanding.  The transaction has been accounted
         for as a reverse take-over.

         Flexible Solutions Ltd. is accounted for as the acquiring party and the
         surviving  entity.  Because  Flexible  Solutions Ltd. is the accounting
         survivor,  the  consolidated  financial  statements  presented  for all
         periods  are those of  Flexible  Solutions  Ltd.  The shares  issued by
         Flexible Solutions  International Inc. pursuant to the 1998 acquisition
         have been  accounted  for as if those  shares had been  issued upon the
         organization of Flexible Solutions Ltd.

         On May 7, 2002, the Company  established  Water$aver  Global  Solutions
         Inc. through issuance of 100 shares of common stock to itself.

2.       COMPARATIVE FIGURES

         Certain of the comparative figures are reclassified to conform with the
         current year's presentation.

3.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         (a)      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.

                                       6
<PAGE>
FLEXIBLE SOLUTIONS INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000
(U.S. DOLLARS)
--------------------------------------------------------------------------------

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

         (b) Use of estimates

                  The  preparation  of  consolidated   financial  statements  in
                  conformity with accounting  principles  generally  accepted in
                  the  United  States of  America  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 future results of
                  operations and cash flows.

         (c)      Cash

                  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.

         (d)      Inventory

                  Inventory  is valued  at the lower of cost and net  realizable
                  value. Cost is determined on a first-in, first-out basis.

         (e) Property and equipment

                  Property and  equipment  are recorded at cost and  depreciated
                  using the following methods using the following annual rates:

                     Manufacturing equipment     - 20% Declining balance
                     Computer hardware           - 30% Declining balance
                     Furniture and fixtures      - 20% Declining balance
                     Office equipment            - 20% 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.

         (f)      Revenue recognition

                  Revenue  from  product  sales  is  recognized  at the time the
                  product  is  shipped   since  title  and  risk  of  losses  is
                  transferred to purchaser  upon delivery to carrier.  Shipments
                  are made F.O.B.  shipping  point.  Provisions  are made at the
                  time  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.

                                       7
<PAGE>
FLEXIBLE SOLUTIONS INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000
(U.S. DOLLARS)
--------------------------------------------------------------------------------

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

         (g)      Financial instruments

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

                  The  Company is exposed  to  interest  rate risk to the extent
                  that market  value rate  fluctuations  materially  differ from
                  financial  assets and  liabilities  subject to fixed long-term
                  rates.

         (h) Income (loss) per share calculation

                  Income  (loss) per share is  calculated by dividing net income
                  (loss) by the weighted  average number of shares  outstanding.
                  Common share  equivalents  consisting of stock options are not
                  considered  in the  computation  because their effect would be
                  anti-dilutive.

         (i) Stock issued in exchange for services

                  The  valuation  of the 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.

         (j) Stock based compensation

                  The   Company   applies   APB   Opinion  No.  25  and  related
                  interpretations  in accounting  for its employee  stock option
                  plans.  Compensation  expense is  recorded  when  options  are
                  granted to management at discounts to market.

         (k)      Comprehensive income

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




                                       8
<PAGE>
FLEXIBLE SOLUTIONS INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000
(U.S. DOLLARS)
--------------------------------------------------------------------------------

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

         (l) Recent accounting pronouncements

                  (i)      In June  2001,  the  Financial  Accounting  Standards
                           Board  (FASB)  issued  FAS 142,  Goodwill  and  Other
                           Intangible  Assets.   Under  FAS  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 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  has  adopted  FAS 142  effective  January 1,
                           2002. Application of the non-amortization  provisions
                           of FAS 142 for  goodwill  did not have any  impact on
                           its financial reporting.

                  (ii)     In  October  2001,  the  FASB  issued   Statement  of
                           Financial  Accounting  Standards FAS 144, "Accounting
                           for the Impairment or Disposal of Long-Lived Assets."
                           FAS 144 addresses  significant issues relating to the
                           implementation  of  FAS  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 121 for long-lived assets to be disposed of by
                           sale, whether such assets are or are not deemed to be
                           a business.  FAS 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 financial statements.

                           In  November  2001,  the FASB  issued  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 effect on the financial statements.









                                       9
<PAGE>
FLEXIBLE SOLUTIONS INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000
(U.S. DOLLARS)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
4.       LOAN RECEIVABLE

         -----------------------------------------------------------------------------------------------------------
                                                                                       2002             2001
         -----------------------------------------------------------------------------------------------------------
<S>      <C>                                                                              <C>                <C>
         5% loan receivable due on demand                                                 $10,082            $9,516
         -----------------------------------------------------------------------------------------------------------
</TABLE>

5.       NOTE RECEIVABLE

         The note  receivable  had no stated  terms of repayment or interest and
         was received in full during the year 2002.
<TABLE>
<CAPTION>
6.       PREPAID EXPENSES

         -----------------------------------------------------------------------------------------------------------
                                                                                      2002              2001
         -----------------------------------------------------------------------------------------------------------
<S>                                                                                        <C>              <C>
         Deposits for materials purchase                                                   $13,578          $41,436
         Security deposit and prepaids                                                      73,743           17,855
         -----------------------------------------------------------------------------------------------------------
                                                                                           $87,321          $59,291
         -----------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
7.       PROPERTY AND EQUIPMENT

         -----------------------------------------------------------------------------------------------------------
                                                                                       2002
                                                                                    Accumulated
                                                                     Cost          Depreciation          Net
         -----------------------------------------------------------------------------------------------------------
<S>                                                                     <C>                 <C>             <C>
         Manufacturing equipment                                        $159,885            $61,641         $98,244
         Computer hardware                                                 9,834              3,602           6,232
         Furniture and fixtures                                            5,542              2,031           3,511
         Office equipment                                                 14,690              1,731          12,959
         Leasehold improvements                                           10,160              2,540           7,620
         -----------------------------------------------------------------------------------------------------------

                                                                        $200,111            $71,545        $128,566
         -----------------------------------------------------------------------------------------------------------

         -----------------------------------------------------------------------------------------------------------
                                                                                       2001
                                                                                    Accumulated
                                                                     Cost           Depreciation          Net
         -----------------------------------------------------------------------------------------------------------

         Manufacturing equipment                                        $110,105             $43,303        $66,802
         Computer hardware                                                 5,190               1,927          3,263
         Furniture and fixtures                                            3,786               1,372          2,414
         Office equipment                                                    534                 260            274
         -----------------------------------------------------------------------------------------------------------

                                                                        $119,615             $46,862        $72,753
         -----------------------------------------------------------------------------------------------------------
</TABLE>

                                       10
<PAGE>
FLEXIBLE SOLUTIONS INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000
(U.S. DOLLARS)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
8.       INVESTMENT

         -----------------------------------------------------------------------------------------------------------
                                                                                      2002              2001
         -----------------------------------------------------------------------------------------------------------
<S>                                                                                        <C>                   <C>
         Ideal Business Solutions India
          P.Ltd - 2700 equity shares (10%)                                                 $32,500               $0
         -----------------------------------------------------------------------------------------------------------
</TABLE>

         The above investment is recorded at cost.
<TABLE>
<CAPTION>
9.       COMPREHENSIVE (LOSS) INCOME

         -------------------------------------------- ----------------------- ------------------- -------------------
                                                               2002                  2001                2000
         -------------------------------------------- ----------------------- ------------------- -------------------
<S>                                                             <C>                   <C>                   <C>
         Net income (loss)                                      $(3,082,445)          $(233,955)            $138,971
         Other comprehensive
           income (loss)                                               2,488            (22,003)             (8,516)
         -------------------------------------------- ----------------------- ------------------- -------------------

         Comprehensive income (loss)                            $(3,079,957)          $(255,958)            $130,455
         -------------------------------------------- ----------------------- ------------------- -------------------
</TABLE>

10.      INCOME TAX

         Total income tax expense differs from the amounts  computed by applying
         the combined  Canadian federal and provincial  statutory rate of 44.62%
         to income before  income taxes.  The income to which this is applied is
         as follows:
<TABLE>
<CAPTION>
         ----------------------------------------------- --------------------- ------------------- -------------------
                                                                 2002                 2001                2000
         ----------------------------------------------- --------------------- ------------------- -------------------
<S>                                                              <C>                   <C>                         <C>
         Income (loss) before income tax
           per entity
            Flexible Solutions International Inc.                $(2,866,021)          $(396,470)                  $0
            Flexible Solutions Ltd.                                  (56,264)              62,779             229,856
            Water$aver Global Solutions Inc.                        (181,616)                   0                   0
         ----------------------------------------------- --------------------- ------------------- -------------------

         Consolidated income (loss) before
           income tax                                             (3,103,901)           (133,691)             229,856
         Permanent difference
           Stock option benefit                                     2,821,608             256,076                   0
         Other
           Stock issued for services                                   44,400             140,000                   0
           Miscellaneous                                                    0                 394                   0
         ----------------------------------------------- --------------------- ------------------- -------------------

         Taxable income (loss) for
          tax purposes                                             $(237,893)            $262,779            $229,856
         ----------------------------------------------- --------------------- ------------------- -------------------
</TABLE>

                                       11
<PAGE>
FLEXIBLE SOLUTIONS INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000
(U.S. DOLLARS)
--------------------------------------------------------------------------------

10.      INCOME TAX (Continued)

         Application of the federal and provincial statutory rate results in the
following:
<TABLE>
<CAPTION>
         ------------------------------------------------ ------------------- ------------------- ------------------
                                                                 2002                2001               2000
         ------------------------------------------------ ------------------- ------------------- ------------------
<S>                                                                <C>                  <C>                 <C>
         Expected tax expense (recovery)
           at statutory rates
           From Canadian operations                                $(21,456)            $100,264            $90,885
           From US operations                                       (84,691)              16,988             13,975
         Decrease resulting from
           manufacturing and
           processing deduction                                            0            (18,395)           (16,090)
         Other                                                             0               1,407              2,115
         ------------------------------------------------ ------------------- ------------------- ------------------

         Income tax expense (recovery)                            $(106,147)            $100,264            $90,885
         ------------------------------------------------ ------------------- ------------------- ------------------
</TABLE>

         Deferred income taxes reflect the tax effects of temporary  differences
         between the carrying  amounts of assets and  liabilities  for financial
         reporting  purposes and the amounts used for income tax  purposes.  The
         Company's deferred tax liability  calculated at 35% tax rate consist of
         the following:
<TABLE>
<CAPTION>
         -----------------------------------------------------------------------------------------------------------
                                                                                      2002              2001
         -----------------------------------------------------------------------------------------------------------
<S>                                                                                        <C>              <C>
         Non-capital loss carry-forwards                                                   $93,858          $10,595
         Book over tax value of fixed assets                                               (1,449)          (1,086)
         Valuation allowance                                                              (92,409)          (9,509)
         -----------------------------------------------------------------------------------------------------------

                                                                                                $0               $0
         -----------------------------------------------------------------------------------------------------------
</TABLE>

         The Company's  losses for U.S.  income tax purposes are $268,165  which
         may be carried  forward to apply against future income for U.S.  income
         tax purposes,  expiring  between 2018 and 2022.  The future  benefit of
         these  loss  carry-forwards  has  been  offset  with a  full  valuation
         allowance. These losses expire as follows:
<TABLE>
<CAPTION>
         ------------------------------------------------------------------------------------- --------------------
         Available to                                                                                Amount
         ------------------------------------------------------------------------------------- --------------------
<S>      <C>                                                                                               <C>
         2018                                                                                              $16,858
         2019                                                                                               13,414
         2022                                                                                              237,893
         ------------------------------------------------------------------------------------- --------------------

                                                                                                          $268,165
         ------------------------------------------------------------------------------------- --------------------
</TABLE>

                                       12
<PAGE>
FLEXIBLE SOLUTIONS INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000
(U.S. DOLLARS)



11.      NET INCOME (LOSS) PER SHARE
<TABLE>
<CAPTION>
         ------------------------------------------- ---------------------- --------------------- ------------------
                                                              Net
                                                         Income (Loss)             Shares             Per Share
                                                          (Numerator)           (Denominator)           Amount
         ------------------------------------------- ---------------------- --------------------- ------------------
<S>                                                           <C>                     <C>                  <C>
         2002
         Basic net loss per share
         Net loss                                             $(3,082,445)            10,555,754           $ (0.29)

         2001
         Basic net loss per share
         Net loss                                               $(233,955)             9,247,949           $ (0.03)

         2000
         Basic net income per share
         Net income                                               $138,971             9,131,316             $ 0.02
         ------------------------------------------- ---------------------- --------------------- ------------------
</TABLE>

         There were no preferred  shares  issued and  outstanding  for the years
         ended December 31, 2002, 2001 and 2000. The 2002  denominator  excludes
         3,671,800  shares that may be issued upon  exercise of options as to do
         so would have been anti dilutive for the 2002 per share loss.

12.      STOCK OPTIONS

         The Company may issue stock  options and stock bonuses for common stock
         of the Company to provide  incentives to  directors,  key employees and
         other  persons  who  contribute  to the  success  of the  Company.  The
         exercise  price of the Incentive  Options  (employees of the Company or
         its  subsidiaries)  is not less than the fair market value of the stock
         at the date of the grant and for non-employees the exercise price is no
         less than 80% of the fair  market  value  (defined  by the most  recent
         closing sale price reported by AMEX) on the date of the grant.

         The following table  summarizes the Company's stock option activity for
         the year ended December 31, 2002 and 2001:
<TABLE>
<CAPTION>
         -------------------------------------- -------------------- ---------------------------- ------------------
                                                                                                      Weighted
                                                     Number of             Exercise Price              Average
                                                      Shares                  Per Share            Exercise Price
         -------------------------------------- -------------------- ---------------------------- ------------------
<S>                                                         <C>                   <C>                       <C>
         Balance, December 31, 2000                         589,000               $ 0.25 - $0.70            $ 0. 31
         Granted during year ended
           December 31, 2001                              1,309,000               $ 0.25 - $3.50            $ 1. 47
         Exercised                                          (9,500)               $ 0.25 - $1.00            $ 0. 32
         -------------------------------------- -------------------- ---------------------------- ------------------

         Balance, December 31, 2001                       1,888,500              $ 0.25 - $ 3.50            $ 1. 63
         Granted during year ended
           December 31, 2002                              2,222,800              $ 1.50 - $ 5.50             $ 4.78
         Exercised                                        (439,500)              $ 0.25 - $ 1.50           $ (0.34)

         Balance, December 31, 2002                       3,671,800              $ 0.25 - $ 5.50             $ 3.79
         -------------------------------------- -------------------- ---------------------------- ------------------
</TABLE>

                                       13
<PAGE>
FLEXIBLE SOLUTIONS INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000
(U.S. DOLLARS)
--------------------------------------------------------------------------------

12.      STOCK OPTIONS (Continued)

         The Company applies APB Opinion No. 25 and related  interpretations  in
         accounting for its stock options granted to employees, and accordingly,
         compensation  expense of $85,000  (2001 - $173,750)  was  recognized as
         wages expense.  Had compensation expense been determined as provided in
         SFAS 123 using  Black-Scholes  option - pricing  model,  the  pro-forma
         effect on the  Company's  net income (loss) and per share amounts would
         have been as follows:
<TABLE>
<CAPTION>
         ------------------------------------------- ---------------------- --------------------- -------------------
                                                             2002                   2001                 2000
         ------------------------------------------- ---------------------- --------------------- -------------------
<S>                                                           <C>                     <C>                   <C>
         Net income (loss), as reported                       $(3,082,445)            $(233,955)            $138,971
         Net income (loss), pro-forma                          (3,704,296)             (955,071)             138,971
         Net income (loss) per share,
          as reported                                             $ (0.29)              $ (0.03)              $ 0.02
         Net income (loss) per share,
          pro-forma                                                $(0.35)              $ (0.10)              $ 0.02
         ------------------------------------------- ---------------------- --------------------- -------------------
</TABLE>

         The fair value of each option grant is  calculated  using the following
weighted average assumptions:
<TABLE>
<CAPTION>
         -------------------------------------------------------------------------- --------------- -----------------
                                                                                    2002            2001
         -------------------------------------------------------------------------- --------------- -----------------
<S>                                                                                 <C>             <C>
         Expected life (years)                                                      5               3.5
         Interest rate                                                              3.00%           4.00%
         Volatility                                                                 72.3%           58.27%
         Dividend yield                                                             0.00%           0.00%
         -------------------------------------------------------------------------- --------------- -----------------
</TABLE>

         During the year, the Company  granted  2,097,000  (2001 - 51,000) stock
         options to consultants and have been recognized applying SFAS 123 using
         the  Black-Scholes  option  pricing model which  resulted in additional
         consulting  expense of  $2,736,608  (2001 - $66,963).  Of the 2,097,000
         options,  75,000 were  granted on December  31, 2002 and have a vesting
         period of one year,  consequently  consulting  expense related to these
         options will be recognized during the year ended December 31, 2003.






                                       14
<PAGE>
FLEXIBLE SOLUTIONS INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000
(U.S. DOLLARS)
--------------------------------------------------------------------------------

13.      CAPITAL STOCK

         (a) During the year, the Company:

                  (i)      completed  two  private  placements  whereby  400,000
                           shares  of  common  stock  were  issued at a price of
                           $2.50 per share and an additional 1,428,600 shares of
                           common  stock  were  issued  at a price of $3.50  per
                           share to independent third parties;

                  (ii)     issued  439,500  shares  of  common  stock at  prices
                           ranging  from $0.25 to $1.50 per share upon  exercise
                           of stock options;

                  (iii)    issued  30,000  shares of common  stock at a price of
                           $1.48 per share to a officer in lieu of six months of
                           salary.

         (b)      The Company is the plaintiff in a lawsuit demanding the return
                  of  the  share   certificate   for  100,000  shares  of  stock
                  originally  given to the  defendant  as payment in advance for
                  services.  The  services  for which the advance was given were
                  never  performed  or given  to the  Company,  and the  Company
                  therefore received no consideration or value for such advance.
                  Return  of  the  share  certificate  for  100,000  shares  was
                  demanded  within  ten (10) days,  namely by August  22,  2001,
                  however, to date remains unreturned.

                  On date of issue,  January 4, 2001, the share  transaction was
                  recorded as shares issued for services at fair market value, a
                  value of $0.80 per share.

14.      SHORT-TERM INVESTMENT

         Short-term  investment  consists of a  certificate  of deposit  bearing
         interest at 4.11% and maturing  September  11,  2005.  The Company will
         incur a penalty if principal is withdrawn  before  maturity  date.  The
         amount of penalty  equals one half of the  remaining  days in the terms
         daily compounded interest on the total amount withdrawn. If the accrued
         interest is less than the calculated penalty at time of withdrawal, the
         difference  between  the  penalty  and  the  accrued  interest  will be
         deducted from the principal.

15.      SEGMENTED AND SIGNIFICANT CUSTOMER INFORMATION

         The Company operates in a single segment, involving the development and
         marketing of two lines of energy and water conservation products.

         The first line  consists of a liquid  swimming pool blanket which saves
         energy  and water by storing  evaporation  from the pool  surface.  The
         second  line  consists  of a food  safe  powdered  form  of the  active
         ingredient  within the liquid  blanket  and is  designed  to be used in
         still or slow moving drinking water sources.

                                       15
<PAGE>
FLEXIBLE SOLUTIONS INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000
(U.S. DOLLARS)
--------------------------------------------------------------------------------

15. SEGMENTED AND SIGNIFICANT CUSTOMER INFORMATION (Continued)

         The Company's sales in the United States of America and abroad amounted
         to 4%, 5% and 3% for the years ended  December 31, 2002,  2001 and 2000
         respectively. The remainder were earned in Canada.

         All the Company's long-lived assets are located in Canada.

         The Company had one major customer,  Sunsolar Energy Technologies which
         comprised  95%, 94% and 96% of total sales for the years ended December
         31,  2002,  2001 and 2000  respectively.  The  Company  is  exposed  to
         concentrated  credit risk with  respect to its trade  receivables  from
         this customer. It seeks to keep this risk to a minimum by granting only
         45 days credit terms to this customer.

16.      RELATED PARTY TRANSACTION

         A  director   provides  use  of  space  of  his  residence  to  conduct
         administrative duties without reimbursement from the Company.

17.      COMMITMENTS

         Property and premises leases

         The Company is  committed to minimum  rental  payments for property and
         premises  aggregating  approximately  $113,800 over the terms of leases
         expiring September 29, 2003 and November 1, 2005.

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

         -----------------------------------------------------------------------
         2003                                                            $78,600
         2004                                                             19,200
         2005                                                             16,000
         -----------------------------------------------------------------------
















                                       16