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

                                   FORM 10-KSB

[X]   ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE
      SECURITIES ACT OF 1934
      For the fiscal year ended:  DECEMBER 31, 2001
                                  -----------------

[ ]   TRANSITION REPORT UNDER SECTION 13 OR 15(d)
      OF THE SECURITIES ACT OF 1934
      For the transition period from ________ to ________

                         Commission file number: 0-29649

                      Flexible Solutions International Inc.
                 (Name of small business issuer in its charter)




                   Nevada, USA                                N/A
-------------------------------------------      ---------------------------
(State or other Jurisdiction of Incorporation  (IRS Employer Identification No.)
       or Organization)

        2614 Queenswood Drive, Victoria, British Columbia, Canada V8N 1X5
        -----------------------------------------------------------------
                    (Address of principal executive offices)

                     Issuer's Telephone Number: 250-477-9969
                                                ------------

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

           Securities to be registered pursuant to Section 12(g) of the Act:
           ----------------------------------------------------------------
                         Common Stock $0.001 par value.
                         -----------------------------
                                (Title of Class)

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. [X] Yes [ ] 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  issuer'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]

The issuer's revenues for its most recent fiscal year. $1,353,186.

State the aggregate market value of the voting and non-voting common equity held
by non-affiliates  computed by reference to the price at which the common equity
was sold,  or the average bid and asked  price of such  common  equity,  as of a
specified date within the past 60 days: March 28, 2002 = $26,083,000.

Common  Stock,  $0.001  par  value,  of issuer  outstanding  at March 31,  2002:
9,485,819 shares

                                  Page 1 of 49
                          Index to Exhibits on Page 33


<PAGE>
                      Flexible Solutions International Inc.
                                   Form 10-KSB

                                TABLE OF CONTENTS


                                     PART I
                                                             Page

Item 1.  Description of Business...............................   3

Item 2.  Description of Property...............................  17

Item 3.  Legal Proceedings.....................................  17

Item 4.  Submission of Matters to a Vote of Securities Holders.  17

                                     PART II

Item 5.  Market for Common Equity and
         Related Stockholder Matters...........................  18

Item 6.  Management's Discussion and Analysis or
         Plan of Operation.....................................  19

Item 7.  Financial Statements..................................  24

Item 8.  Changes in and Disagreements with Accountants
         on Accounting and Financial Disclosure................  24

                                    PART III

Item 9.  Directors, Executive Officers, Promoters and
         Control Persons; Compliance With Section 16(a) of the
         Exchange Act..........................................  25

Item 10.  Executive Compensation...............................  28

Item 11.  Security Ownership of Certain Beneficial Owners
          and Management.......................................  31

Item 12.  Certain Relationships and Related Transactions.......  32

Item 13.  Exhibits and Reports on Form 8-K.....................  33


                                        2
<PAGE>
                                     PART I

ITEM 1.  DESCRIPTION OF BUSINESS
--------------------------------

Introduction
------------
Flexible Solutions International Inc. and its subsidiaries  hereinafter also are
referred to as the "Company" and/or the "Registrant". The Company is involved in
the sale of  specialty  chemicals  which  slow  down the  evaporation  of water.
Applications include swimming pools where their use allows the water to retain a
higher temperature for a longer period of time, irrigation canals,  aquaculture,
and reservoirs.

The Company currently manufactures three products: "HEAT$AVR"; the "Tropical
Fish"; and "WATER$AVR".

The Company has one wholly-owned subsidiary:
 Flexible Solutions Ltd.;
 incorporated in January 1991 in British Columbia; and
 acquired in June 1998.

The Company's executive office:
 2614 Queenswood Drive, Victoria, British Columbia  V8N 1X5
 Contact person: Daniel B. O'Brien,
                 President/Treasurer/Secretary and Director
 Telephone: (250) 477-9969
 Facsimile: (250) 477-9912
 E-Mail:  flexsol@vanisle.net
          -------------------
 Website: www.flexiblesolutions.com
          -------------------------

The Company's authorized capital includes 50,000,000 shares of common stock with
$0.001 par value and 1,000,000 shares of preferred stock with $0.01 par value.

As of the close of the  Company's  latest  fiscal year,  12/31/2001,  there were
9,272,819   shares  of  common  stock   outstanding  and  no  preferred   shares
outstanding.

The  Company's  common stock trades on the NASD OTC  Electronic  Bulletin  Board
under the symbol "FXSO" and on the Frankfurt Stock Exchange in Germany under the
symbol "FXT".

The  information  in this  Annual  Report is  current as of  12/31/2001,  unless
otherwise indicated.

                                       3
<PAGE>
Historical Corporate Development
--------------------------------

The Company was incorporated in the state of Nevada on 5/12/1998.

The  Company  acquired  Flexible  Solutions  Ltd.   ("Flexible   Solutions")  on
6/25/1998.  The Company issued  7,000,000 shares of its common stock in exchange
for all of the issued/outstanding  stock of Flexible Solutions;  the acquisition
was  accounted  for as a "reverse  takeover".  The two primary  shareholders  of
Flexible  Solutions were  officer/directors  of the Company  and/or  significant
shareholders of the Company: Daniel O'Brien and Robert O'Brien. Accordingly, the
transactions  between the Company and Flexible  Solutions cannot be deemed to be
an arm's length transaction.

Flexible  Solutions was incorporated on 1/25/1991 in British Columbia.  From its
inception  through  the  Fiscal  1998 ended  January  31st,  Flexible  Solutions
incurred net income (losses):
1992:  $1,326
1993:  $1,883
1994:  $3,265
1995:  $3,440
1996: ($2,454)
1997:  $1,679
1998:  $3,154

Following  acquisition,  net income  (loss) for the  Company  increased:  1999 -
$102,848;  2000 -  $138,971;  and  2001 -  ($233,955);  the 2001  loss  reflects
accounting rules for non-cash compensation,  operating income showed an increase
during 2001.

During Fall 1998 the Company completed private placements:
1,050,000 shares at $0.01 per share = gross proceeds of $10,500;
  500,000 shares at $0.05 per share = gross proceeds of $25,000;
  581,316 shares at $0.25 per share = gross proceeds of $145,329.

The   proceeds   of  these   offerings   were   used  for   professional   fees,
research/development   of  the  "Tropical   Fish"   product,   the  purchase  of
machinery/dies  to begin large scale  production of the "Tropical Fish" product,
and general corporate purposes. The investors, in addition to Daniel O'Brien and
Dr.  Robert  O'Brien,  in  all  instances,  were  friends,  family  or  business
associates of Daniel O'Brien and/or Dr. Robert O'Brien.

Since  incorporation in 1998, the Company has utilized the home of its President
in Victoria,  British  Columbia,  as its  "executive  offices".  Since 1999, the
Company utilized a 1,000 sq.ft., rented, factory facility, in Victoria,  British
Columbia.  Since April 2000, the Company has maintained a 2,000 sq.ft.,  rented,
administrative  facility in Victoria,  British  Columbia.  In October 2001,  the
Company  moved all  production  operations to a 11,000  sq.ft.  rented  Calgary,
Alberta facility.

                                       4
<PAGE>
Business
--------

Introduction
------------
The Company  manufacturers and markets chemicals and chemical dispensers through
its wholly-owned subsidiary,  Flexible Solutions Ltd. The chemicals are designed
to act as energy saving "liquid blankets" which reduce the evaporation of water.

The Company currently  manufactures  three products:  "HEAT$AVR";  the "Tropical
Fish"; and "WATER$AVR".


The HEAT$AVR Product and the Tropical Fish Product
--------------------------------------------------

Product Description:
The primary  product of the  Company is  HEAT$AVR.  This  product is a non-toxic
chemical that forms an invisible  skin on the surface of water thereby  reducing
the amount of  evaporation  and creating an energy  saving  device.  The Company
estimates  that  evaporative  losses account for between 70% and 95% of pool/spa
energy use.

HEAT$AVR is a mixture of  ingredients  which are lighter than water so that they
automatically  float to the  surface.  They are  attracted to each other so that
they try always to form a very thin layer over the whole pool surface.  They are
individually  so small that they are 500 times smaller than the spaces in a high
quality filter. After a swimmer stops disturbing the water they rush to reform a
complete  layer.  Management  estimates  that the use of HEAT$AVR  could achieve
savings in energy costs of up to 40%, and that most pool managers  and/or owners
will realize energy bill reductions between 17% and 30%.

Management  believes that customers  associated with outdoor  swimming pools use
HEAT$AVR  primarily  for two  reasons:  cost savings on energy being the primary
one; and pool personnel  often find it  inconvenient  to use  conventional  pool
blankets  correctly  and  consistently,  and that the  ease of use  provided  by
HEAT$AVR results in more consistent usage.

Management believes that users of air-conditioned  indoor swimming pools use the
HEAT$AVR product because it also results in savings.  The savings occurs because
less energy is required to maintain a pool at the desired  temperature  and also
because there is a reduced load on the air-conditioning system because less heat
and much less water vapor will have to be removed  from the air to maintain  the
required  comfort.  Air-conditioned  indoor  pools are very high users of energy
because the swimmers and loungers have environmental  expectations which require
both gas water heat and  electric  air cooling to keep both groups  happy in the
same room.  HEAT$AVR  works by slowing the transfer of heat and water vapor from
the pool to the pool room atmosphere.

                                       5
<PAGE>
The company also sells a  timer-controlled  injection  pump which  automatically
adds the chemical to the pool as needed.  Each of these systems is  programmable
to fit both the size of the pool and the hours of operation. The reservoir which
holds the HEAT$AVR must be checked and filled once a week instead of daily.  The
system is self-contained  and needs to be connected into the main return line of
the pool and then plugged into a 110V AC socket.

There are some disadvantages to using HEAT$AVR and these include the following:
a.  The product biodegrades and must be replaced twice per week
    unless the timer controlled injection pump or the Tropical
    Fish dispenser is utilized;
b.  The product reduces evaporative heat loss only and has no
    effect on convective and conductive losses;
c.  The product is flammable when not mixed with water; and,
d.  The product is poisonous, although not fatal, if ingested
    straight from the bottle or the dispenser.

The British Health Department,  the Health Department of Queensland (Australia),
and the Health Department of New South Wales (Australia) have concluded that the
product, used as directed, has no adverse effects on humans or animals.

The product is  manufactured by the Company from  readily-available  components,
and is usually dispensed by the consumer utilizing the Company's "Tropical Fish"
dispenser. This Company-designed  dispenser is shaped like a fish about 10" long
and requires  minimal  effort on the part of the  consumer.  One  Tropical  Fish
covers an area of 400 square feet and is effective for about one month.

The Tropical Fish is utilized by opening the fin where indicated and placing the
fish into the pool  where it  submerges  to the  bottom of the pool and,  as the
pressure increases,  the HEAT$AVR liquid escapes,  rises, and forms an invisible
layer on the surface of the water.  The HEAT$AVR liquid acts like a conventional
solar blanket by forming an invisible layer on the surface of the swimming pool,
thus inhibiting water evaporation.  It dispenses a blue liquid,  which creates a
one-molecule thick layer on the surface of the pool.

                                       6
<PAGE>
Target Market:
The Company  currently is selling to clients  associated with hotels,  municipal
swimming pools,  and residential  swimming pools. The HEAT$AVR and Tropical Fish
products are sold in Canada and the United States by the Company's  distributor,
Sunsolar Energy Technologies,  and in Australia by Hydro-Flexible Solutions PTY.
The  Company  also  sells  HEAT$AVR  directly  into the  United  States  to both
wholesale and retail accounts.

The Company  estimates that there are over 100,000  municipal  swimming pools in
its initial target market,  which is Australia,  Canada,  Europe, and the United
States.  Based on the  assumption  that energy costs are a large  portion of the
total  operating  costs  for  municipal  pools and that the  operators  of these
facilities want to lower these costs, the Company anticipates that the operators
may turn to the use of chemicals,  such as HEAT$AVR,  as an  alternative  to the
higher cost pool blankets.  The Company realizes,  however, that the product may
not be used by proprietors of every pool in the target market referred to above.

With regard to hotel pools, the Company  estimates that there are  approximately
300,000 hotel pools located in its target market.  Company  management  believes
that each  hotel  which  utilizes  the  HEAT$SAVR  product  will be able to save
between  $2,400 and $6,000 per year on its heating costs  throughout the life of
the pool.  Again,  the  Company  realizes  that the  product  may not be used by
proprietors of every pool in this category.

Regarding  the  residential  pool  market,  management  believes  that there are
approximately eight million residences in Canada and the United States that have
swimming pools.  Management  believes that successful market penetration in this
area will require  developing sound business  relationships with retail swimming
pool stores by creating equitable pricing policies.  Management further believes
that the Company's HEAT$AVR product packaged in the Tropical Fish dispenser will
appeal to the residential  pool market based on the novelty of the Tropical Fish
dispenser,  coupled with the east of use and the low initial  cost.  The Company
realizes  that the product may not be used by  proprietors  of ever pool in this
category.

The Tropical  Fish product is retail priced at $9.95 in the United  States.  The
Company  currently  offers no rebates,  discounts or promotional  prices for the
Tropical Fish product.


                                       7
<PAGE>
The WATER$AVR Product
---------------------

The  Company  also  markets  its core  technology  in the  areas of fresh  water
conservation  and  aquaculture  through another  product called  WATER$AVR.  The
WATER$AVR product works in the same way as the HEAT$AVR product.

Production Description:
WATER$AVR  is a  granulated  product  which is  delivered  to the  customer in a
44-pound  weatherproof bag. There are various ways to apply this product ranging
from simple hand  dispersal to fully  automated  scheduled  metering using local
weather data to  determine  timing and dosage  quantities.  Examples of suitable
applications include the following:
a. Reservoirs;
b. Potable water storages;
c. Aqueducts and canals;
d. Agricultural irrigation canals and ditches;
e. Flood water crops; and
f. Stock watering ponds.

This product can be used in any  application  where water is either  standing or
running without rapids.

The Company  currently  makes  available  to customers  one piece of  mechanized
dispersal  equipment called the Model P-320e WATER$AVR  dispensing machine. It
is capable of servicing  reservoirs up to 30 acres in size and 100 miles or less
of irrigation  canals for six to eight days. It is fully  automated and provides
scheduled  powder  metering  using local  weather data to  determine  timing and
dosage quantities. Specifications are:
a. Hopper capacity: 320 lbs;
b. Shoreline swivel mounted on 12 cubic yard abutment or trailer
   mounted for mobile deployment;
c. Has windproof dispersal pattern skirting;
d. Full SCADA compliance ready (custom mounting tabs, bracketing
   and enclosures);
e. Full NEMA weather proofing of electronics;
f. Data collection storage and transmission with the customer's
   choice of variables to be monitored;
g. The data may be collected by laptop computer through RS232
   ports;
h. Land line, cellular, radio and satellite transmission of real
   time and stored data;
i. Armored protection of electronics and backup equipment by
   casting into abutment;
j. Hydro grid powered with a battery backup;
k. Battery powered with solar running and recharging capability;
l. Antipersonnel-protective fencing with sabotage-suppression
   razor wire available.

                                       8
<PAGE>
The Company also has available a basic dispersal  machine which is available for
lower-tech  situations  and the  Company  will  build  custom  models  to  suite
individual client's requirements.

US Patent Issued:
In October 2001, the United States Patent and Trademark Office formally issued a
patent for the Company's  evaporation control powder which is marketed under the
name WATER$AVR. Worldwide patents have been applied for and are pending.

Management believes that this is an important step forward for the Company.  The
Company will be much more open about our technology with  prospective  customers
and partners without risking duplication of our technology.

Marketing:
WATER$AVR is now ready for commercial production and sales. WATER$AVR is used on
open  water,  soil,  crops,  and  grass  to  reduce  the  loss of  water  due to
evaporation.  Management believes it is an inexpensive way to conserve water for
other uses.

The  Company  has  embarked on an expanded  marketing  effort for  WATER$AVR.  A
President  was hired for the  WATER$AVR  Division  in  August  2001.  Management
believes that  WATER$AVR,  with its unique  spreading  technology,  helps reduce
evaporation  and  increase  local water  supply by up to 40% at a cost as low as
$0.04 per cubic meter of water saved.  The Company's  vision is to strategically
leverage the WATER$AVR  technology with international  water companies,  who are
positioned  through their  existing  channels,  to  distribute  WATER$AVR in all
countries with water management concerns.

In January 2002,  the Company  received of a minimum  US$1,000,000  order for it
WATER$AVR evaporation control product from a multinational company in India. The
product will be used on water reservoirs and flood irrigated crops over the next
24 months. The order is still in the form of a letter of intent.  Shipments will
begin in Spring 2002 if the onsite testing in India is complete and successful.

In February  2002, the Company has received a Letter of Intent from the Ministry
of Water of the Peoples Republic of China and the National  Engineering Research
Center for Water Saving and  Irrigation  ("NERCWSI") at Yang Ling, to purchase a
minimum of US$4,750,000 worth of WATER$AVR evaporation reduction powder over the
next four  years.  This  letter of intent was  negotiated  following  successful
testing of WATER$AVR in Yang Ling, China in December 2001. As part of the Letter
of Intent, a larger scale test will be conducted in China.  Success again should
result in a firm contract and a date for the first shipment. NERCWSI has already
chosen the sites and planning has begun.

                                       9
<PAGE>
In March 2002,  The  Company  received a Letter of Intent  from Ondeo  Nalco,  a
subsidiary  of  SUEZ  (a  NYSE-traded   public   company),   to  provide  global
manufacturing  capacity for the Company's  WATER$AVR product. In partnering with
Ondeo Nalco on this  project,  the Company hopes it has found a partner that can
meet the quality  manufacturing  standards  required  for a National  Sanitation
Foundation  grade  product.  Additionally,  Ondeo  Nalco has access to  regional
capacities  in  various  areas of the  world,  and total  annual  capability  to
manufacture up to 400 million  pounds of WATER$AVR.  It is the intention of both
companies to move quickly from the Letter of Intent toward a full  manufacturing
contract.   Ondeo  Nalco  is  a  global  leader  in  finding  solutions  in  the
international  water market.  Because  WATER$AVR  provides a unique  solution to
managing  evaporation loss,  management  anticipates that both companies will be
able to leverage  their  strengths  in creating a  successful  partnership.  The
companies have also initiated licensing negotiations for WATER$AVR.

Ondeo Nalco, a subsidiary of Ondeo (the water division of SUEZ) is the worldwide
leader in water treatment and process  chemicals with 10,000  employees  working
with more than 60,000  customers in 120  countries  and annual  revenues of $2.8
billion.  Ondeo is the premier water-related  solutions provider with a presence
in 130  countries  supplying  115  million  people  with  water  and  wastewater
services, and has built more than 10,000 water treatment plants worldwide.

In North  America,  Patrick  Grant,  the new WATER$AVR  Division  President,  is
attempting to duplicate his  international  success.  The WATER$AVR  Division is
exploring  new methods of  commercializing  its products,  including  geographic
expansion, new distributors, and new retail outlets.

                                       10
<PAGE>
Competition
-----------
The Company is not aware of any other companies  developing or producing similar
swimming pool and/or reservoir chemicals.  This belief stems management's decade
of directly  involvement in the pool/spa  industry and research into advertising
and  literature  in the field.  Management  is not aware of any other  companies
offers or  advertises  a product  that  directly  competes  with  HEAT$AVR,  the
"Tropical Fish" product,  or the WATER$AVR product.  Rather,  competition arises
from various devices that cover the pool.

However, in general,  and with regard to its markets, it is anticipated that the
Company  will be competing  with a wide variety of national,  regional and local
companies,  many of which have established  public images and greater  financial
strength and personnel  resources than the Company.  Further,  it is likely that
the Company will also be competing with entities,  which have  established  good
will and market acceptance.


Government Regulation and Legal Uncertainties
---------------------------------------------
The  Company  anticipates  that it  will  be  subject  to  various  governmental
regulations  with regard to the  chemicals  used in HEAT$AVR,  WATER$AVR and the
Tropical Fish. In Australia, the Company's operations are subject to health acts
as enacted by the  Commonwealth  and/or  various  states  within  Australia.  In
Canada,  the Company's  operations are subject to health  regulations within the
various  provinces in Canada;  further,  in  French-speaking  provinces  such as
Quebec, the Company is required to comply with "French only" regulations such as
the actual wording on its products (no English  allowed).  In the United States,
the  Company's  operations  are subject to the  regulations  enacted by the U.S.
Department of Health and possibly the regulations  enacted by the  Environmental
Protection  Agency.  Further,  the Company  anticipates that all ingredients may
have to be approved by the Food and Drug  Administration  for direct,  undiluted
skin contact.

                                       11
<PAGE>
Risk Factors
------------

The Company is almost exclusively dependent on the efforts of its sole Executive
--------------------------------------------------------------------------------
Officer and has little depth of management:
------------------------------------------
The Company's success is dependent,  to a large degree,  upon the efforts of its
sole executive officer:  Daniel O'Brien. The loss or unavailability of him could
have an adverse effect on the Company. At the present time the Company maintains
CDN$400,000 key-man life insurance policies for Mr. O'Brien. Also, the continued
success and  viability of the Company is  dependent  upon its ability to attract
and  retain  qualified  personnel  in  all  areas  of its  business,  especially
management  positions.  In the event the Company is unable to attract and retain
qualified personnel, its business may be adversely affected. Currently, there is
an employment agreement in place with the Executive Officer.

The Company currently has one significant customer; the decrease of sales to
---------------------------------------------------------------------------
which could seriously hamper sales growth:
-----------------------------------------
During  Fiscal  2001/2000/1999,  the  Company had one major  customer,  Sunsolar
Energy Technologies,  is distributor for Tropical Fish, which comprised 92%, 86%
and 70% of total sales, respectively.

There can be no guarantee that the Company will  experience  significant  growth
--------------------------------------------------------------------------------
because  it has been in  operation  since 1991 and to date has  achieved  modest
--------------------------------------------------------------------------------
results:
-------
The Company has ten years of operating history with modest results upon which to
base an evaluation of its business and prospects.  Operating  results for future
periods are subject to numerous uncertainties.  These uncertainties include such
critical  factors as  historically  minimal profits and uncertainty as to actual
demand for its products. There can be no assurance that the Company will achieve
or  sustain  profitability  on an  annual  or  quarterly  basis.  The  Company's
prospects  must be considered in light of the risks  encountered by companies in
the  early  stage of  development,  particularly  companies  in new and  rapidly
evolving  markets.  Future  operating  results  will depend  upon many  factors,
including the demand for the Company's products,  the level of product and price
competition,  the Company's  success in attracting  and retaining  motivated and
qualified personnel,  and in particular,  the use of chemicals to retain heat in
swimming pools instead of the  historically  successful use of thermal  blankets
and the use of chemical to decrease evaporation from reservoirs.

                                       12
<PAGE>
There is no assurance  that the Company will be able to grow  internally  to the
--------------------------------------------------------------------------------
level that would be necessary to support a higher level of sales:
----------------------------------------------------------------
Should the Company be successful in the sales and marketing efforts of its water
additive products it will experience  significant growth in operations.  If this
occurs,  management  anticipates that additional  expansion in the areas of both
personnel and plant and equipment will be required in order to continue  product
development and product  marketing.  It is possible that the Company will not be
able to finance  this  potential  additional  expansion.  Any  expansion  of the
Company's  business would place further  demands on its sole Executive  Officer,
operational capacity and financial resources.  It is possible that the Company's
President will not be able to assume any additional  responsibility and that the
current  operational  capacity  of the Company  will not be able to  accommodate
additional business. The Company realizes that it will need to recruit qualified
personnel  in  all  areas  of  its  operations,   including  management,  sales,
marketing,  and  product  delivery  when and if growth  occurs.  There can be no
assurance  that the  Company  will be  effective  in  attracting  and  retaining
additional qualified personnel,  expanding its operational capacity or otherwise
managing  growth.  In  addition,  there can be no assurance  that the  Company's
current  systems,  procedures  or  controls  will be  adequate  to  support  any
expansion of it's operations. The failure to manage growth effectively could
result in the failure of the Company.

The Company  could  experience  delays in the  delivery  of its  products in the
--------------------------------------------------------------------------------
future and this delay could result in a loss of customers:
---------------------------------------------------------
Delays  and cost  overruns  could  affect  the  Company's  ability to respond to
technological changes, evolving industry standards,  competitive developments or
customer requirements thus causing a loss of customers.

The Company markets its products on an international level and, consequently, is
--------------------------------------------------------------------------------
exposed to all of the risks of doing business on a worldwide basis:
------------------------------------------------------------------
The Company markets and sells its products in the United States, Canada, and
Australia/Asia. As such, it is subject to the normal risks of doing business
abroad. These risks include, but are not limited to, unexpected changes in
regulatory requirements, export and import restrictions, tariffs and trade
barriers, difficulties in staffing and managing foreign operations, longer
payment cycles, problems in collecting accounts receivable, potential adverse
tax consequences, exchange rate fluctuations, increased risks of piracy,
discontinuity of the Company's infrastructures, limitations on fund transfers
and other legal and political risks. Such limitations and interruptions could
have a material adverse effect on the Company's business. The Company does not
currently hedge its foreign currency exposures.

                                       13
<PAGE>
The Company  does not pay a cash  dividend  to  shareholders;  shareholders  and
--------------------------------------------------------------------------------
future  shareholders  cannot be assured  that the Company will pay a dividend in
--------------------------------------------------------------------------------
the future:
----------
The Company does not presently  intend to pay cash dividends in the  foreseeable
future,  as any earnings are expected to be retained for use in  developing  and
expanding its  business.  Further,  the actual  amount of any  potential  future
dividends received from the Company will remain subject to the discretion of the
Company's Board of Directors.

The Company  has a limited  cash  position  and there is no  assurance  that the
--------------------------------------------------------------------------------
Company  will be able to meet  its  future  capital  requirements:
-----------------------------------------------------------------
The Company  currently has limited sources of operating cash flow to fund future
projects or corporate overhead. The Company has limited financial resources, and
there is no assurance that additional  funding will be available.  The Company's
ability to  continue  to operate  will be  dependent  upon its  ability to raise
significant additional funds in the future.

Dilution could occur to existing and future shareholders because the Company is
--------------------------------------------------------------------------------
authorized to issue up to 1,000,000 shares of preferred stock:
-------------------------------------------------------------
The Company is  authorized to issue up to 1,000,000  shares of preferred  stock,
$0.01 par value per share.  As of the date of this Annual  Report,  no shares of
preferred  stock have been issued.  The Company's  preferred stock may bear such
rights and preferences,  including dividend and liquidation preferences,  as the
board of Directors may fix and determine from time to time. Any such preferences
may operate to the  detriment  of the rights of the holders of the common  stock
and would cause dilution to these shareholders.

U.S. Investors May Not Be Able to Enforce Their Civil Liabilities  Against Us or
--------------------------------------------------------------------------------
Our Directors, Controlling Persons and Officers:
-----------------------------------------------
It may be difficult to bring and enforce suits against the Company. The
Company's sole Executive Officer and all of the directors are residents of
Canada, and all or a substantial portion of their assets are located outside of
the United States. In addition, a major portion of the Company's assets are
located in Canada. As a result, it may be difficult for U.S. holders of our
common shares to effect service of process on these persons within the United
States or to realize in the United States upon judgments rendered against them.
In addition, a shareholder should not assume that the courts of Canada (i) would
enforce judgments of U.S. courts obtained in actions against us or such persons
predicated upon the civil liability provisions of the U.S. federal securities
laws or other laws of the United States, or (ii) would enforce, in original
actions, liabilities against us or such persons predicated upon the U.S. federal
securities laws or other laws of the United States.

                                       14
<PAGE>
However, U.S. laws would generally be enforced by a Canadian court provided that
those laws are not contrary to Canadian  public  policy,  are not foreign  penal
laws or laws that deal with  taxation  or the  taking of  property  by a foreign
government  and provided that they are in compliance  with  applicable  Canadian
legislation regarding the limitation of actions.  Also, a judgment obtained in a
U.S.  court would  generally  be  recognized  by a Canadian  court  except,  for
example:
  a) where the U.S. court where the judgment was rendered had no
     jurisdiction according to applicable Canadian law;
  b) the judgment was subject to ordinary remedy (appeal, judicial review and
     any other judicial proceeding which renders the judgment not final,
     conclusive or enforceable under the laws of the applicable state) or not
     final, conclusive or enforceable under the laws of the applicable state;
  c) the judgment was obtained by fraud or in any manner contrary
     to natural justice or rendered in contravention of
     fundamental principles of procedure;
  d) a dispute between the same parties, based on the same subject matter has
     given rise to a judgment rendered in a Canadian court or has been decided
     in a third country and the judgment meets the necessary conditions for
     recognition in a Canadian court;
  e) the outcome of the judgment of the U.S. court was
     inconsistent with Canadian public policy;
  f) the judgment enforces obligations arising from foreign penal laws or laws
     that deal with taxation or the taking of property by a foreign government;
     or
  g) there has not been compliance with applicable Canadian law dealing with the
     limitation of actions.

The securities of the Company are in the "penny stock"  classification and there
--------------------------------------------------------------------------------
are risks including, but not limited to, lack of liquidity in the market for the
--------------------------------------------------------------------------------
Company's stock to the shareholders as a result of this classification:
----------------------------------------------------------------------
The Company's stock is subject to "penny stock" rules as defined in 1934
Securities and Exchange Act rule 3151-1. The SEC has adopted rules that regulate
broker-dealer practices in connection with transactions in penny stocks. The
Company's common stock is subject to these penny stock rules. Transaction costs
associated with purchases and sales of penny stocks are likely to be higher than
those for other securities. Penny stocks generally are equity securities with a
price of less than US$5.00 (other than securities registered on certain national
securities exchanges or quoted on the NASDAQ system, provided that current price
and volume information with respect to transactions in such securities is
provided by the exchange or system).

                                       15
<PAGE>
The penny stock rules require a broker-dealer, prior to a transaction in a penny
stock not  otherwise  exempt  from the  rules,  to deliver a  standardized  risk
disclosure document that provides  information about penny stocks and the nature
and  level of risks in the  penny  stock  market.  The  broker-dealer  also must
provide the customer with current bid and offer  quotations for the penny stock,
the  compensation of the  broker-dealer  and its salesperson in the transaction,
and monthly account statements showing the market value of each penny stock held
in the customer's account.  The bid and offer quotations,  and the broker-dealer
and salesperson compensation  information,  must be given to the customer orally
or in  writing  prior  to  effecting  the  transaction  and must be given to the
customer in writing before or with the customer's confirmation.

In  addition,  the penny stock rules  require that prior to a  transaction  in a
penny stock not otherwise exempt from such rules, the broker-dealer  must make a
special written  determination that the penny stock is a suitable investment for
the purchaser and receive the purchaser's  written agreement to the transaction.
These  disclosure  requirements  may have the  effect of  reducing  the level of
trading  activity in the  secondary  market for the common  shares in the United
States and shareholders may find it more difficult to sell their shares.


Significant Customers and/or Suppliers
--------------------------------------
During  Fiscal  2001/2000/1999,  the  Company had one major  customer,  Sunsolar
Energy  Technologies,  which  comprised  92%,  86%,  and  70%  of  total  sales,
respectively.

The Company has no significant suppliers.


Employees
---------
As of  3/31/2002,  the Company had 20  employees,  including  its one  Executive
Officer.  The Company employs eleven full-time  employees at the Calgary factory
facility.  None of the Company's employees are covered by collective  bargaining
agreements.












                                       16
<PAGE>
ITEM 2. DESCRIPTION OF PROPERTY
-------------------------------

The Company  utilizes  the  residence  of its  President  and  director,  Daniel
O'Brien, for offices. No monthly fee is paid to Mr. O'Brien for rent.

The Company also  maintains an  administrative  facility at 3378 Burns Avenue in
Victoria,  British  Columbia.  This facility  consists of 1,400 square feet. The
Company pays $1,000 per month on a month-by-month basis.

The Company  leases an 11,000  square foot  factory  facility at Bay 2, 701 30th
Street NE in  Calgary,  Alberta.  The lease  runs to August  2003 at $5,000  per
month.  The Company  believes that capacity at this facility will be adequate to
support anticipated demand for product at least through the term of the lease.


ITEM 3.  LEGAL PROCEEDINGS
--------------------------

In December  2001,  the Company  filed suit in British  Columbia  Supreme  Court
against  Equity Trust and John Wells.  The Company is claiming that Equity Trust
and John Wells did not provide  the  services  for which they were paid  100,000
shares of common stock and loaned  $25,000.  The Company is seeking  return (and
cancellation)  of the shares,  repayment of the loan,  costs and penalties  from
Equity Trust and John Wells. As of 3/31/2002,  the BC Supreme Court has enjoined
the  defendant  against  any  transaction  regarding  the shares  until trial is
complete. The Company has accounted for the loan as un-collectable;  the 100,000
shares are included in reported issued/outstanding common stock.

Other than discussed above, the Company knows of no material,  active or pending
legal  proceedings  against them; nor is the Company  involved as a plaintiff in
any material proceeding or pending litigation.

The Company knows of no active or pending  proceedings against anyone that might
materially adversely affect an interest of the Company.


ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
------------------------------------------------------------
--- No Disclosure Necessary ---


                                       17
<PAGE>
                                    PART II

ITEM 5.  MARKET FOR COMMON STOCK AND RELATED STOCKHOLDER MATTERS
----------------------------------------------------------------

Market Information
------------------
The Company's  common stock trades on the NASD OTC Electronic  Bulletin Board in
the United  States,  having the trading  symbol  "FXSO" and CUSIP  #33938T-10-4.
High/low/closing  prices and trading  volume,  on a quarterly  basis,  since the
stock began trading on 6/16/2000, are shown in Table No. 1. The closing price on
3/28/2002 was $2.75.

                                   Table No. 1
                       FXSO Common Stock Trading Activity
                       NASD OTC Electronic Bulletin Board
==============================================================================

Quarter
Ended              High        Low     Close               Volume
-----------------------------------------------------------------
12/31/2001        $1.55      $0.73     $1.40              226,900
 9/30/2001         2.60       0.67      1.10               49,100
 6/30/2001         2.40       1.75      2.40               93,000
 3/31/2001         3.01       0.69      2.50              577,900

12/31/2000        $0.81      $0.63     $0.69              522,100
 9/30/2000         0.94       0.25      0.65            1,259,500
 6/30/2000         0.27       0.27      0.27               58,000
==============================================================================

The  Company's  common  stock also  trades on the  Frankfurt  Stock  Exchange in
Germany with the trading symbol "FXT". The stock began trading on 2/25/2002. The
closing price on 3/28/2002 was EURO 3.55.


Holders
-------
The  Company's  common  stock  is  issued  in  registered  form.  The  following
information is taken from the records of Computershare  Inc. (located in Denver,
Colorado), the registrar and transfer agent for the common stock.

On  12/31/2001,  the  shareholders'  list for the Company's  common stock showed
twenty (20) registered shareholders and 9,272,819 shares outstanding.  6,567.919
shares  are held by  shareholders  registered  in Canada,  about 70%.  2,005,000
shares are held by shareholders registered in the USA, representing about 22%.

Based on this research and other  research  into the indirect  holdings of other
financial  institutions,  the  Company  believes  that it has in  excess  of 250
beneficial owners of its common stock.

                                       18
<PAGE>
Dividends
---------
The Company has not  declared any  dividends  since  incorporation  and does not
anticipate that it will do so in the foreseeable  future.  The present policy of
the Company is to retain future earnings for use in its operations and expansion
of its business.

There are no restrictions that limit the ability of the Company to pay dividends
on common equity or that are likely to do so in the future.

Securities Authorized For Issuance Under Equity Compensation Plans.
-------------------------------------------------------------------
Recent Sales of Unregistered Securities
---------------------------------------
--- No Disclosure Necessary ---


ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS
---------------------------------------------
         OR PLAN OF OPERATION
         --------------------

Selected Financial Data
-----------------------
The  selected  financial  data in Table No. 2 for Fiscal  2001,  Fiscal 2000 and
Fiscal 1999,  ended December 31st, was derived from the  consolidated  financial
statements  of  the  Company  which  were  audited  by  Smythe   Ratcliffe  PKF,
independent  Chartered  Accountants,  as  indicated  in  their  report  which is
included elsewhere in this Annual Report.

The selected  financial  data was  extracted  from the more  detailed  financial
statements and related notes  included  herein and should be read in conjunction
with such financial  statements  and with the  information  appearing  under the
heading,  "Management's  Discussion  and  Analysis of  Financial  Condition  and
Results of Operations".

The Company has not declared any dividends since incorporation and does not
anticipate that it will do so in the foreseeable future.

On 6/30/1998, the Company completed the acquisition of 100% of the shares of
Flexible Solutions. The acquisition was effected through the issuance of
7,000,000 shares of common stock by the Company to the former shareholders of
the now wholly-owned subsidiary. The transaction has been accounted for as a
reverse take-over. Flexible Solutions is accounted for as the acquiring party
and the surviving entity. Because Flexible Solutions is the accounting survivor,
the consolidated financial statements presented for all periods are those of
Flexible Solutions. The shares issued by the Company pursuant to the 1998
acquisition have been accounted for as if those shares had been issued upon the
organization of Flexible Solutions.

                                       19
<PAGE>
                                   Table No. 2
                             Selected Financial Data
                        ($ in 000, except per share data)
====================================================================
                      12/31/2001  12/31/2000  12/31/1999  12/31/1998
--------------------------------------------------------------------
Revenue                   $1,334      $1,030        $759         $84
Gross Profit                 671         520         345          25
Net Income (Loss)          ($234)       $139        $103        ($18)

Earnings (Loss) per Share ($0.03)      $0.02       $0.01      ($0.01)
Dividends per Share            0           0           0           0

Wtg. Avg. Shares       9,247,949   9,131,316   9.131,316   4,102,469
Period-End Shares O/S  9,272,819   9,131,316   9,131,316   9,131,316

Working Capital             $458        $333        $206        $139
Long-Term Debt                 0           0           0           3
Shareholders' Equity         531         386         256         146
Total Assets                 569         489         359         174
--------------------------------------------------------------------

(1) FY2001 Net Loss reflects accounting treatment of non-cash "transactions":
     a) FASB 123 treatment of stock options granted to consultants = $82,328;
     b) common stock issued as compensation to employees/consultants = $140,000;
     c) stock options granted at below fair market value = $173,750.
_________________________________________  ___________ ______________________
=============================================================================


Plan Of Operations
------------------

Source of Funds for Fiscal 2002
-------------------------------
Working capital at 12/31/2001: $457,861.

The Company's  primary source of funds since  incorporation has been through the
issuance of common stock and loans. The Company has increasingly generated sales
revenue and net income,  while modest,  has been  sufficient in recent  periods.
Anticipated gross profit for Fiscal 2002 is approximately $1 million.

The Company is in  negotiations  to complete a private  placement  in Germany of
100,000 shares of common stock at $2.50 per share; closure in anticipated during
Spring 2002.

Use of Funds for Fiscal 2002
----------------------------
During Fiscal 2002, the Company estimates that it will expend approximately $0.6
million on general/administrative expenses.

During  Fiscal 2002,  the Company  estimates  that it might  expend  $200,000 on
capital expenditures,  primarily for faster production equipment at the Calgary,
Alberta,  facility  to meet  increased  demand for  Tropical  Fish and  HEAT$AVR
product.

Anticipated Changes to Facilities/Employees
-------------------------------------------
The Company has no plans to acquire any new facilities. The current facilities
can accommodate anticipated growth until at least mid-2003. The Company will add
additional personnel in response to increased product demand and as needed to
support increased sales of new products.

                                       20
<PAGE>
Management's Discussion and Analysis of Financial Condition and
---------------------------------------------------------------
Results of Operations
---------------------

Overview
--------
The Company was incorporated in May 1998.

Flexible Solutions Ltd. was acquired in June 1998. The acquisi-tion was effected
through the issuance of 7,000,000 shares of common stock by the Company with the
former shareholders of the now wholly-owned subsidiary; the transaction has been
accounted for as a reverse take-over.

Several private placement stock offerings were completed in 1998:
1,050,000 shares at $0.01 per share = gross proceeds of $ 10,500;
  500,000 shares at $0.05 per share = gross proceeds of $ 25,000;
  581,316 shares at $0.25 per share = gross proceeds of $145,329.

Since completing  acquisition,  the Company's operating  activities have related
primarily to marketing  the products of Flexible  Solutions:  its swimming  pool
chemicals called "HEAT$AVR" and "Tropical Fish"; and its fresh water evaporation
control chemical called "WATER$AVR".

Revenue  primarily has been  generated by sales of Tropical Fish in the USA. the
Company has embarked on an expanded marketing program for HEAR$AVR and WATER$AVR
and has signed several large international orders. Gross profit margins from the
sale of  WATER$AVR  in large  orders is  expected  to be in the 50% while  gross
profit margins for HEAT$AVR are expected to exceed 60%.  However,  more complete
usage of the Calgary factory facility should and efficiencies  from higher total
sales are  expected  to lead to  substantially  higher  net income in the coming
years.

Cash Balances
-------------
The Company  maintains  its major cash  balances at one  financial  institution,
Toronto  Dominion  Bank,  located in Victoria,  British  Columbia,  Canada.  The
balances are insured up to CDNS40,200  or  CDN$60,000  per account by the Canada
Deposit  Insurance  Corporation.  At 12/31/2000  and  12/31/2001,  there were no
uninsured cash balances.

Foreign Currency Risk
---------------------
The Company's  facilities are located in Canada and it experiences  the majority
of its costs in Canadian  Dollars.  Virtually all sales are booked in US Dollars
regardless  of the  country  to which  goods  are sold.  For  Fiscal  2001,  the
Company's sales were 5% in the USA and 95% in Canada.  Therefore,  the Company's
financial condition is only modestly sensitive to currency exchange rates.

                                       21
<PAGE>
Inflation
---------
The Company's  operations  have not been affected  materially by inflation,  and
management does not expect inflation to have a material impact on its operations
in the future.
Seasonality
-----------
The  Company's  Tropical  Fish  product  (92% of  FY2001  sales) is  subject  to
extensive  seasonality  related to the North  American  spring and  summer.  The
HEAT$AVR  commercial  pool  product is less  seasonal as there is a  significant
indoor winter market.  WATER$AVR has not yet recorded it's first sales; however,
there are  markets  for the  product in some area of the world in every  season.
Because of the larger land mass and population in the Northern Hemisphere, it is
anticipated that the sales will be somewhat larger in March-September.

Quantitative/Qualitative Disclosure about Market Risks
------------------------------------------------------
The Company does not have any derivative financial instruments as of 12/31/2001.
The Company has not material interest rate risk.

United States versus Foreign  Assets/Sales
------------------------------------------
All the Company's long-lived assets are located in Canada.

The Company generates sales revenue worldwide:
               Canada    United States    Australia/Asia
           ---------------------------------------------
2001       $1,293,000          $60,000              $nil
2000         $992,000          $30,000            $8,000
1999         $744,000          $10,000            $5,000

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

Fiscal 2001 and Fiscal 2000, Ended December 31st
------------------------------------------------
Working Capital at 12/31/2001: $457,861.
Working Capital at 12/31/2000: $333,307.
Working Capital at 12/31/1999: $139,139.

Cash Used by Fiscal 2001 Operating  Activities totaled ($57,987),  including the
($233,955) net loss; the primary  adjusting items were $18,910 in  depreciation,
$256,076 in  non-cash,  stock-option  "compensation"  to  employees/consultants,
$141,510 in "non-cash  services"  (common  shares  issued as  compensation)  and
($107,636) in net non-cash  working capital items.  Cash Provided by Fiscal 2001
Financing  Activities was $4,125. Cash Used in Fiscal 2001 Investing  Activities
totaled $57,987. In addition: on 1/14/2001, the Company issued 100,000 shares of
common stock to Equity  Trust SA for services to be rendered in the  compilation
of an SB-2 filing  document;  on 7/1/2001,  the Company  issued 30,000 shares of
common stock (in lieu of cash) as compensation to Patrick Grant.

Cash provided by Fiscal 2000 Operating  Activities  totaled $158,126,  including
the  $138,971  net  income;   the  primary   adjusting  items  were  $13,489  in
depreciation and $5,666 in net non-cash working capital items.  Cash Provided by
Fiscal 2000

                                       22
<PAGE>
Financing  Activities was $nil.  Cash Used in Fiscal 2000  Investing  Activities
totaled $16,771.

Results of Operations
---------------------

Fiscal 2001, Fiscal 2000 and Fiscal 1999, Ended December 31st
-------------------------------------------------------------
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 the  Company's
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".

Fiscal 2000 revenue rose to  $1,029,649  because of broader  Canadian  sales and
increased sales  penetration into the U.S. market;  these indirect USA sales are
estimated at 60% of total product.  Sales of "Tropical Fish"  represented 86% of
the total with HEAT$AVR  representing the rest. The continued faster increase in
sales of the higher  margined  "Tropical  Fish" was the primary factor in higher
gross profit margins: 50.5% versus 45.5% last year.

Fiscal 1999 revenue rose to $759,218 because of increased sales penetration into
the U.S.  market.  Sales of "Tropical  Fish"  represented  70% of the total with
HEAT$AVR  representing  the rest. The continued  faster increase in sales of the
higher  margined  "Tropical  Fish" was the primary factor in higher gross profit
margins: 46% versus 30% last year; increased productivity flowing from increased
sales  also was a major  factor  (75  "Tropical  Fish"  units/employee/hour  per
employee  versus 37  units/employee/hour  last year).  Sales of "Tropical  Fish"
increased  from less that 50,000 units to in excess of 400,000  units.  HEAT$AVR
sales also grew, but only by a small amount. The tropical fish increase in sales
occurred  primarily  because Fiscal 1999 was the Company's  first full season of
sales for that product and the beginning of sales into the United States through
the Company's distributor.

Cash operating  expenses for Fiscal 2001 totaled  $406,934  versus  $289,860 for
last year; the primary factor in the increase was increased  corporate activity.
However,  Fiscal 2001 financial statements also include "non-cash  compensation"
of $397,576  resulting from: the required adoption of a new accounting  standard
(FASB 123) regarding stock options  granted to consultants  resulting in $82,326
in  "expenses";  stock  options  granted at below fair market value to employees
resulting in $173,750 in "expenses";  and common stock issued to an employee and
a consultant which were categorized as "non-cash services" resulting in $140,000
in expenses.

Operating  expenses for Fiscal 2000 totaled  $289,860 versus $175,213 for Fiscal
1999. The major expenses during this period were wages of $87,907,  professional
fees of $38,701,

                                       23
<PAGE>
administrative salaries/benefits of $37,234, and subcontracting fees of $33,312.
The primary  factor in the changes to these  expenses  was  increased  corporate
activity.


Operating  expenses for Fiscal 1999 totaled  $175,213  versus $43,323 for Fiscal
1998.  The  major  expenses  during  this  period  were  wages  of  $63,947  and
commissions of $20,957.  The primary factor in the changes to these expenses was
increased corporate activity and a full year of operations.

Net Income  (Loss) for  Fiscal  2001/2000/1999  was  ($233,955),  $138,971,  and
$102,848,  respectively.  Earnings  Per  Share  for  Fiscal  2001/2000/1999  was
($0.03), $0.02, and $0.01, respectively.


ITEM 7.  FINANCIAL STATEMENTS
-----------------------------

The  financial  statements  and notes  thereto  as  required  under  ITEM #7 are
attached hereto and found immediately  following the text of this Annual Report.
The audit report of Smythe Ratcliffe PFK, independent Chartered Accountants,  is
included herein immediately preceding the audited financial statements.

Audited Financial Statements: Fiscal 2001/Fiscal 2000/Fiscal 1999
-----------------------------------------------------------------

Auditors' Report, dated March 19, 2002

Consolidated Balance Sheets at 12/31/2001 and 12/31/2000

Consolidated Statement of Operations
 for the Years Ended 12/31/2001, 12/31/2000, and 12/31/1999

Consolidated Statements of Stockholders' Equity
 for the Years Ended 12/31/2001, 12/31/2000, and 12/31/1999

Consolidated Statements of Cash Flows
 for the Years Ended 12/31/2001, 12/31/2000, and 12/31/1999

Notes to Consolidated Financial Statements


ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
------------------------------------------------------
--- No Disclosure Necessary ---


                                       24
<PAGE>
                                    PART III

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

Table No. 3 lists as of  3/31/2002,  the names of the  Directors of the Company.
The Directors have served in their  respective  capacities  since their election
and/or appointment and will serve until the next Annual Shareholders' Meeting or
until a successor is duly  elected,  unless the office is vacated in  accordance
with the  Articles/By-Laws  of the Company.  All  Directors  are  residents  and
citizens of Canada.

                                   Table No. 3
                                    Directors
==============================================================================

                                                       Date First
                                                          Elected
Name                                    Age          or Appointed
------------------------------------------------------------------------------
Daniel B. O'Brien (1)                    45              May 1998
Dr. Robert N. O'Brien (1)                80         February 2000
John H. Bientjes (1)                     49         February 2000

(1)  Member of Audit Committee.
==============================================================================


Table No. 4 lists, as of 3/31/2002,  the names of the Executive  Officers of the
Company. The Executive Officer serves at the pleasure of the Board of Directors.
The Executive Officer is a resident/citizen of Canada.

                                   Table No. 4
                               Executive Officers
==============================================================================
                                                          Date of
                                                            Board
Name               Position                        Age   Approval
------------------------------------------------------------------

Daniel B. O'Brien  President/Treasurer/Secretary    45   May 1998
==============================================================================

                                       25
<PAGE>
Business Experience
-------------------

John H. Bientjes is a member of the Company's  Board of Directors.  Mr. Bientjes
was  graduated  in 1976 from  Simon  Fraser  University  in  Vancouver,  British
Columbia with a Bachelor of Arts Degree in Economics and Commerce.  For the past
fifteen  years  he 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  pools
which are primarily owned by municipalities.

Daniel  B.   O'Brien  is  President   and  a  Director  of  the   Company.   His
responsibilities   include   coordinating   strategy,   planning,   and  product
development.  He has been involved in the swimming pool industry since 1991 when
he founded  Flexible  Solutions  Ltd.,  purchased by the Company in August 1998.
Prior to his involvement with Flexible Solutions Ltd., Mr. O'Brien was a teacher
at Brentwood  College where he was in charge of Outdoor  Education.  Mr. O'Brien
devotes 100% of his time to the affairs of the Company.

Dr. Robert N. O'Brien is a member of the Company's  Board of Directors.  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. He has held various  academic  positions  since 1957 at the  University of
Alberta,  the  University  of  California  at  Berkley,  and the  University  of
Victoria.  Most  recently,  he 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. While teaching, Dr. O'Brien acted as a consultant and served
on the British  Columbia  Research  Council.  In 1987, Dr.  O'Brien  founded the
Vancouver Island Advanced Technology and Research Association.

                                       26
<PAGE>
Involvement in certain legal proceedings
----------------------------------------
There have been no events during the last five years that are material to an
evaluation of the ability or integrity of any director, person nominated to
become a director, executive officer, promoter or control person including:
a) any bankruptcy petition filed by or against any business of which such person
was a general partner or executive  officer either at the time of the bankruptcy
or within two years prior to that time;
b) any  conviction  in a  criminal  proceeding  or being  subject  to a  pending
criminal proceeding (excluding traffic violations and other minor offenses);
c) being subject to any order,  judgment, or decree, not subsequently  reversed,
suspended  or  vacated,  of any  court of  competent  jurisdiction,  permanently
enjoining,  barring, suspending or otherwise limiting his/her involvement in any
type of business, securities or banking activities;
d) being found by a court of competent  jurisdiction  (in a civil  action),  the
Commission  or the  Commodity  Futures  Trading  Commission  to have  violated a
federal or state  securities or  commodities  law, and the judgment has not been
reversed, suspended, or vacated.

Family Relationships
--------------------
Daniel O'Brien, President/Treasurer/Secretary/Director of the Company, is the
son of Dr. Robert O'Brien, a Director of the Company. Other than that, there are
no family relationships between any of the officers or directors of the Company.

Other Relationships/Arrangements
--------------------------------
There are no arrangements or understandings between any two or more Directors or
Executive Officers, pursuant to which he/she was selected as a Director or
Executive Officer. There are no material arrangements or understandings between
any two or more Directors or Executive Officers.

Compliance with Section 16(a) of the Exchange Act
-------------------------------------------------
--- No Disclosure Necessary ---

                                       27
<PAGE>
ITEM 10.  EXECUTIVE COMPENSATION
--------------------------------

The Company has no formal plan for  compensating its Directors for their service
in their  capacity as  Directors.  Directors are entitled to  reimbursement  for
reasonable travel and other  out-of-pocket  expenses incurred in connection with
attendance  at meetings of the Board of  Directors.  The Board of Directors  may
award special  remuneration to any Director  undertaking any special services on
behalf of the Company  other than  services  ordinarily  required of a Director.
During Fiscal 2001, no Director received and/or accrued any compensation for his
services  as  a  Director,  including  committee  participation  and/or  special
assignments; other than the granting of stock options.

During Fiscal 2001, no funds were set aside or accrued by the Company to provide
pension, retirement or similar benefits for Directors or Executive Officers.

The Company has no compensatory plan or arrangements,  including  payments to be
received from the Company,  with respect to any  Executive  Officer or Director,
where such plan or arrangement  would result in any compensation or remuneration
being paid resulting from the resignation,  retirement or any other  termination
of  such  Executive   Officer's   employment  with  the  Registrant  or  from  a
change-in-control  of the  Company  or a  change  in  such  Executive  Officer's
responsibilities  following a  change-in-control  and the amount,  including all
periodic  payments  or  installments,  where the value of such  compensation  or
remuneration exceeds $100,000 per Executive Officer.

The  Company  has  no  long-term   incentive  plan  (LTIP)  or  other  long-term
compensation program and no SARs have been granted in the last three years.

Daniel O'Brien  currently  receives a annual salary of CDN$30,000  (~US$18,800).
Compensation is set by the two independent Directors.

                                       28
<PAGE>
Table No. 5 details  compensation  paid/accrued for Fiscal  2001/2000/1999 ended
December 31st for the Executive Officers;  Daniel O'Brien was the only Executive
Officer during Fiscal 2001/2000/1999.

                                   Table No. 5
                           Summary Compensation Table
                               Executive Officers
==============================================================================

                                                      Long-Term
                                                      Compensation
                                             -----------------------
                        Annual Compensation        Awards
                       --------------------  ------------------
Name and                              Other          Restricted         All
Principal      Fiscal                Annual   Stock   Options/    LTIP  Other
Position         Year   Salary Bonus  Comp.   Award(s) SARS(#) Payouts  Comp.
---------------------- ------- ----- ------  -------- -------- -------  ----

Daniel O'Brien
President/       2001  $19,332   ---    ---       ---  100,000     ---     ---
Treasurer/       2000  $19,250   ---    ---       ---   50,000     ---     ---
Secretary        1999  $20,250   ---    ---       ---   50,000     ---     ---
====================== ======= ===== ======  ======== ========= =======  =====

Stock Options
-------------
The Board of Directors may allocate  non-transferable  stock options to purchase
common shares of the Company to Directors,  Executive Officers,  employees,  and
consultants  of the  Company  and its  subsidiaries.  The  Company has no formal
written stock option plan.

Table No. 6 details the 1,309,000  stock options granted in Fiscal 2001; no SARS
were granted.

                                   Table No. 6
               Stock Option Grants in Fiscal 2001 Ended 12/31/2001
==============================================================================

                         Percentage
                  Number         of  Exercise
                      of      Total     Price
                 Options    Options       Per      Grant Expiration
Name             Granted    Granted     Share       Date       Date
--------------   ------- ----------  -------- ---------- ----------
Daniel O'Brien   100,000       7.6%     $1.40 12/01/2001  12/6/2006
Robert O'Brien    50,000       3.8%     $1.40 12/01/2001  12/6/2006
John Bientjes      5,000       0.4%     $1.40 12/01/2001  12/6/2006

Employees/                             $1.00-  1/1/2001- 1/12/2002-
Consultants    1,154,000      88.2%     $3.50   7/6/2001   7/1/2006

(1)  900,000 of the stock options granted to employees vest over
     2002-2006.
==============================================================================


                                       29
<PAGE>
Table  No. 7  details:  stock  options  exercised  in  Fiscal  2001;  number  of
unexercised  stock  options  at fiscal  yearend;  and the  value of  unexercised
in-the-money  stock  options at fiscal  yearend.  No SARS have been  granted and
therefore none were exercised.

                                   Table No. 7
                Aggregated Stock Options Exercises in Fiscal 2001
                    Fiscal Yearend Unexercised Stock Options
                       Fiscal Yearend Stock Option Values
                          Executive Officers/Directors
==============================================================================

                                                           Value of
                                          Number of     Unexercised
                   Number               Unexercised    In-the-Money
                       of                   Options         Options
                   Shares                 at Fiscal       at Fiscal
                 Acquired  Aggregate        Yearend         Yearend
                       on      Value   Exercisable/    Exercisable/
Name             Exercise   Realized  Unexercisable   Unexercisable
-------------------------------------------------------------------
Daniel O'Brien        ---        ---        200,000        $115,000
Robert O'Brien        ---        ---         75,000          17,500
John Bientjes         ---        ---         10,000           7,000
==============================================================================

                                       30
<PAGE>
ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
---------------------------------------------------------
          AND MANAGEMENT
          --------------

The Company is a  publicly-owned  corporation,  the shares of which are owned by
United States,  Canadian, and European residents.  The Company is not controlled
directly or indirectly by another corporation or any foreign government.

Table  No. 8 lists,  as of  3/31/2002,  Directors  and  Executive  Officers  who
beneficially own the Company's voting securities and the amount of the Company's
voting  securities  owned by the Directors  and  Executive  Officers as a group.
Table   No.  8  also   includes   data  on  Beat   Aschmann,   the  only   other
persons/companies  where  the  Company  is aware  that a  shareholder  has 5% or
greater beneficial interest in the Company's  securities.  All  Officer/Director
addresses c/o Flexible  Solutions  International  Inc.; 2614  Queenswood  Drive,
Victoria, British Columbia, Canada V8N 1X5.

                                   Table No. 8
                Shareholdings of Directors and Executive Officers
                        Shareholdings of 5% Shareholders
=================================================================

 Title                                 Amount and Nature  Percent
    of                                     of Beneficial       of
 Class  Name/Address of Beneficial Owner       Ownership   Class#
-----------------------------------------------------------------
Common  Daniel O'Brien (1)                     4,720,000    49.8%
Common  Robert O'Brien (2)                     1,825,000    19.2%
Common  John Bientjes (3)                         90,000     0.9%

Common  Beat Aschmann (4)                        700,000     7.5%
        TOTAL                                  7,335,000    77.3%
-----------------------------------------------------------------

1.    100,000 represent currently exercisable stock options.
    4,620,000 shares are restricted pursuant to Rule 144.
    4,000,000 shares are held indirectly through Birnham Development
               Company, a trust controlled by Mr. O'Brien.

2.     75,000 represent currently exercisable stock options.
    1,750,000 are restricted pursuant to Rule 144.
    1,750,000 shares held indirectly through RNO Holdings,
              a company controlled by Mr. O'Brien.

3.     10,000 represent currently exercisable stock options.

4.  700,000 shares are restricted pursuant to Rule 144.
    Address: Laerchenhofweg #3 8906 Bonastetten, Switzerland

#   Based on 9,485,819 shares outstanding as of 3/31/2002 and stock options held
    by each beneficial holder exercisable within 60 days.
==============================================================================

                                       31
<PAGE>
ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
--------------------------------------------------------

Acquisition of Flexible Solutions
---------------------------------
The Company was  incorporated for the purpose of acquiring  Flexible  Solutions.
The value of Flexible Solutions and the determination of the number of shares to
be issued to its owners were not made independently or based on appraisals.  The
two primary  shareholders of Flexible  Solutions were  officer/directors  of the
Company  and/or  significant  shareholders  of the Company:  Daniel  O'Brien and
Robert O'Brien.  Accordingly,  the transactions between the Company and Flexible
Solutions cannot be deemed to be an arm's length transaction.

The  Company  issued  7,000,000  shares to the three  shareholders  of  Flexible
Solutions:  Daniel O'Brien = 4,550,000 shares;  Robert O'Brien = 1,750,000;  and
Beat Aschmann = 700,000 shares.

Use of Home of Daniel O'Brien
-----------------------------
The Company has utilized the home of Daniel  O'Brien  since  incorporation  as a
corporate office, without compensation to Mr. O'Brien.


Other than described above, there have been no transactions since 12/31/1998, or
proposed transactions,  which have materially affected or will materially affect
the Company in which any Director,  Executive  Officer,  or beneficial holder of
more  than 10% of the  outstanding  common  stock,  or any of  their  respective
relatives,  spouses, associates or affiliates has had or will have any direct or
material indirect interest.

                                       32
<PAGE>
ITEM 13.  EXHIBITS AND REPORTS ON FORM 8-K
------------------------------------------

a.  Index to Exhibits:
---------------------

Exhibit
-------
Number   Description
--------------------
 2.      Incorporated by reference to Form 10-SB and Form 10-Q's
 3.      Incorporated by reference to Form 10-SB and Form 10-Q's
 5.      Incorporated by reference to Form 10-SB and Form 10-Q's
 9.      Incorporated by reference to Form 10-SB and Form 10-Q's
10.      Incorporated by reference to Form 10-SB and Form 10-Q's
11.      Incorporated by reference to Form 10-SB and Form 10-Q's
13.      Incorporated by reference to Form 10-SB and Form 10-Q's
16.      Incorporated by reference to Form 10-SB and Form 10-Q's
18.      Incorporated by reference to Form 10-SB and Form 10-Q's
21.      Incorporated by reference to Form 10-SB and Form 10-Q's
23.      Incorporated by reference to Form 10-SB and Form 10-Q's
23.      Incorporated by reference to Form 10-SB and Form 10-Q's
24.      Incorporated by reference to Form 10-SB and Form 10-Q's
99.      Incorporated by reference to Form 10-SB and Form 10-Q's


b.  Reports on Form 8-K:
------------------------
--- No Disclosure Necessary ---


                                       33
<PAGE>
                                 SIGNATURE PAGE


Pursuant to the  requirements  of Section 12g of the Securities  Exchange Act of
1934, the Registrant  certifies that it meets all of the requirements for filing
on Form 10-KSB and has duly caused this Annual Report to be signed on its behalf
by the undersigned, thereunto duly authorized.

            Flexible Solutions International Inc. - SEC File #0-29649
            ---------------------------------------------------------
                                   Registrant




Dated: April 5, 2002    By /s/ Daniel O'Brien
--------------------      ------------------------------------------------------
                          Daniel O'Brien, President/Treasurer/Secretary/Director



















<PAGE>

         FLEXIBLE SOLUTIONS
           INTERNATIONAL INC.

         Consolidated Financial Statements
         December 31, 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                   6-14

<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, 2001 and 2000 and the related
consolidated  statements of operations,  stockholders' equity and cash flows for
each of the years  ended  December  31,  2001,  2000 and 1999.  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  consolidated  financial  position of the Company as at
December 31, 2001 and 2000 and the  consolidated  results of its  operations and
its cash flows for each of the years ended  December 31, 2001,  2000 and 1999 in
conformity with accounting principles generally accepted in the United States of
America.





"SMYTHE RATCLIFF PKF"


Chartered Accountants

Vancouver, Canada
March 19, 2002

                                       1
<PAGE>
FLEXIBLE SOLUTIONS INTERNATIONAL INC.
Consolidated Balance Sheets
December 31
(U.S. Dollars)

-----------------------------------------------------------------------------
                                                       2001         2000
-----------------------------------------------------------------------------

Assets

Current

  Cash                                                  $190,457     $192,280
  Accounts receivable                                     46,374      144,383
  Loan receivable (note 4)                                 9,516            0
  Note receivable (note 5)                                 9,225            0
  Inventory                                              181,698       93,513
  Prepaid expenses                                        59,291        6,151
-----------------------------------------------------------------------------

Total Current Assets                                     496,561      436,327
Property and Equipment (note 6)                           72,753       53,064
-----------------------------------------------------------------------------
Total Assets                                            $569,314     $489,391
=============================================================================


Liabilities

Current
  Accounts payable                                       $20,592      $12,422
  Income tax payable                                      18,108       90,598
-----------------------------------------------------------------------------

Total Current Liabilities                                 38,700      103,020
-----------------------------------------------------------------------------

Stockholders' Equity

Capital Stock
Authorized
  50,000,000   Common shares with a par value of $0.001 each
   1,000,000   Preferred shares with a par value of $0.01 each
Issued and Outstanding
    9,272,816   and 9,131,316 Common shares                 9,272       9,131
Capital in Excess of Par Value                            563,713     163,653
Other Comprehensive Loss                                 (23,842)     (1,839)
Accumulated Earnings (Deficiency)                        (18,529)     215,426
-----------------------------------------------------------------------------

Total Stockholders' Equity                                530,614     386,371
-----------------------------------------------------------------------------

Total Liabilities and Stockholders' Equity               $569,314    $489,391
=============================================================================


See notes to consolidated financial statements.

                                       2
<PAGE>
<TABLE>
<CAPTION>

FLEXIBLE SOLUTIONS INTERNATIONAL INC.
Consolidated Statements of Operations
Years Ended December 31
(U.S. Dollars)

---------------------------------------------------------------------------------------
                                                    2001            2000          1999
---------------------------------------------------------------------------------------

<S>                                           <C>             <C>             <C>
Sales                                         $1,334,273      $1,029,649      $759,218
Cost of Sales (Exclusive of Depreciation)        662,807         509,933       413,849
---------------------------------------------------------------------------------------

Gross Profit                                     671,466         519,716       345,369
---------------------------------------------------------------------------------------

Operating Expenses

  Wages (note 10)                                313,918          87,907        63,467
  Stock promotion and transfer agent fee         241,573             568         8,048
  Office                                          48,398           9,028        11,456
  Administrative salaries and benefits            46,639          37,234         4,524
  Rent                                            28,978          11,445         4,442
  Bad debt expense                                26,570          51,282             0
  Professional fees                               23,338          36,701        16,465
  Travel                                          23,125          10,454         6,607
  Subcontracting                                  16,630          33,312        12,801
  Shipping                                        13,563          12,189         7,179
  Telephone                                        5,616           3,613         2,359
  Commission                                       1,130           1,982        20,957
  Currency exchange                              (2,368)        (19,344)         4,144
  Depreciation                                    18,910          13,489        12,764
---------------------------------------------------------------------------------------

                                                 806,020         289,860       175,213
---------------------------------------------------------------------------------------

Income (Loss) Before Other Items and
  Income Tax                                   (134,554)         229,856       170,156
Other Items
  Gain on sale of property and equipment             863               0             0
---------------------------------------------------------------------------------------

Income (Loss) Before Income Tax                (133,691)         229,856       170,156
Income Tax                                       100,264          90,885        67,308
---------------------------------------------------------------------------------------

Net (Loss) Income                             $(233,955)        $138,971      $102,848
=======================================================================================

Net (Loss) Income Per Share                     $ (0.03)          $ 0.02        $ 0.01
=======================================================================================

Weighted Average Number of Shares              9,247,949       9,131,316     9,131,316
=======================================================================================
</TABLE>


See notes to consolidated financial statements.

                                       3
<PAGE>
<TABLE>
<CAPTION>

FLEXIBLE SOLUTIONS INTERNATIONAL INC.
Consolidated Statements of Stockholders' Equity
Years Ended December 31, 2001, 2000 and 1999
(U.S. Dollars)

-----------------------------------------------------------------------------------------------------------------------------------
                                                                    Capital in       Accumulated        Other            Total
                                                                    Excess of         Earnings       Comprehensive   Stockholders'
                                         Shares     Par Value       Par Value       (Deficiency)     Income (Loss)       Equity
------------------------------------- ------------- --------------- ---------------- --------------- --------------- -------------
<S>                                   <C>              <C>            <C>              <C>                <C>            <C>
Balance, December 31, 1998             9,131,316        9,131          163,653          (26,393)           (376)          146,015
Translation Adjustment                         0            0                0                 0           7,053            7,053
Net Income                                     0            0                0           102,848               0          102,848
------------------------------------- ------------- --------------- ---------------- --------------- --------------- -------------

Balance, December 31, 1999             9,131,316        9,131          163,653            76,455           6,677          255,916
Translation Adjustment                         0            0                0                 0         (8,516)          (8,516)
Net Income                                     0            0                0           138,971               0          138,971
------------------------------------- ------------- --------------- ---------------- --------------- --------------- -------------

Balance, December 31, 2000             9,131,316        9,131          163,653           215,426         (1,839)          386,371
Shares Issued for
  Cash (October and December               9,500            9            4,116                 0               0            4,125
  Services (January, July
    and November)                        132,000          132          139,868                 0               0          140,000
  Stock option compensation                    0            0          256,076                 0               0          256,076
  Translation adjustment                       0            0                0                 0        (22,003)         (22,003)
  Net loss                                     0            0                0          (233,955)               0        (233,955)
------------------------------------- ------------- --------------- ---------------- --------------- --------------- -------------

Balance, December 31, 2001             9,272,816       $9,272         $563,713          $(18,529)       $(23,842)         $530,614
===================================== ============= =============== ================ =============== =============== =============
</TABLE>



See notes to consolidated financial statements.

                                       4
<PAGE>
<TABLE>
<CAPTION>

FLEXIBLE SOLUTIONS INTERNATIONAL INC.
Consolidated Statements of Cash Flows
Years Ended December 31
(U.S. Dollars)

------------------------------------------------------------------------------------------------------------------
                                                                      2001              2000              1999
------------------------------------------------------------------ -------------------- ---------------- ---------
<S>                                                                <C>                  <C>              <C>
Operating Activities
  Net (loss) income                                                $(233,955)           $138,971         $102,848
  Adjustments to reconcile net (loss) income
    to net cash, provided by (used in)
    operating activities
      Stock option compensation                                       256,076                  0                0
      Non-cash services                                               141,510                  0                0
      Depreciation                                                     18,910             13,489            2,764
      Gain on sale of property and equipment                            (863)                  0                0
  Changes in Non-Cash Working Capital
    Accounts receivable                                                98,009           (31,544)        (111,308)
    Inventory                                                        (88,185)             43,047        (131,225)
    Prepaid expenses                                                 (53,140)            (5,631)            (520)
    Accounts payable                                                    8,170           (14,589)            5,444
    Accrued liabilities                                                     0            (6,929)            3,559
    Income tax payable                                               (72,490)             21,312           69,286
------------------------------------------------------------------ -------------------- ---------------- ---------

Cash Provided by (Used in) Operating Activities                        74,042            158,126         (49,152)
------------------------------------------------------------------ -------------------- ---------------- ---------

Investing Activities
  Acquisition of property and equipment                              (39,246)           (16,771)         (52,409)
  Note receivable                                                     (9,225)                  0                0
  Loan receivable                                                     (9,516)                  0                0
------------------------------------------------------------------ -------------------- ---------------- ---------

Cash Used in Investing Activities                                    (57,987)           (16,771)         (52,409)
------------------------------------------------------------------ -------------------- ---------------- ---------

Financing Activities
  Repayment to shareholder                                                  0                  0          (3,261)
  Proceeds from issuance of common stock                                4,125                  0                0
------------------------------------------------------------------ -------------------- ---------------- ---------

Cash Provided by (Used in) Financing Activities                         4,125                  0          (3,261)
------------------------------------------------------------------ -------------------- ---------------- ---------

Effect of Exchange Rate Changes on Cash                              (22,003)            (8,516)            7,053
------------------------------------------------------------------ -------------------- ---------------- ---------

Inflow (Outflow) of Cash                                              (1,823)            132,839         (97,769)
Cash, Beginning of Year                                               192,280             59,441          157,210
------------------------------------------------------------------ -------------------- ---------------- ---------

Cash, End of Year                                                    $190,457           $192,280          $59,441
================================================================== ==================== ================ =========

Supplementary Disclosure of Cash
  Flow Information
    Income taxes paid                                                 $85,126            $66,748               $0
------------------------------------------------------------------ -------------------- ---------------- ---------

Supplementary Disclosure of Non-Cash
  Investing Activities
    Sale of trailer - exchange for rent                                $1,510                 $0               $0
------------------------------------------------------------------ -------------------- ---------------- ---------
</TABLE>

See notes to consolidated financial statements.

                                       5
<PAGE>
FLEXIBLE SOLUTIONS INTERNATIONAL INC.
Notes to Consolidated Financial Statements
Years Ended December 31, 2001, 2000 and 1999
(U.S. Dollars)
--------------------------------------------------------------------------------


1.       OPERATIONS AND BASIS OF PRESENTATION

         These  consolidated   financial  statements  include  the  accounts  of
         Flexible  Solutions  International Inc. and its wholly owned subsidiary
         Flexible Solutions Ltd. ("the Company").  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.

2.       COMPARATIVE FIGURES

         Certain of the comparative figures are reclassified to conform with the
         current years' 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  assets  and
                  liabilities  using  exchange  rates in effect  at the  balance
                  sheet date.  Revenue and expense  transactions  are translated
                  using  average  exchange  rates  prevailing  during  the year.
                  Translation adjustments arising on conversion of the financial
                  statements from the Company's  functional  currency,  Canadian
                  dollars,  into  the  reporting  currency,  U.S.  dollars,  are
                  excluded  from the  determination  of 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
                  the determination of income.


                                       6
<PAGE>
FLEXIBLE SOLUTIONS INTERNATIONAL INC.
Notes to Consolidated Financial Statements
Years Ended December 31, 2001, 2000 and 1999
(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)      Inventory

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

         (d)      Property and equipment

                  Property and  equipment  are recorded at cost and  depreciated
                  using the declining  balance method using the following annual
                  rates:

                            Manufacturing equipment            - 20%
                            Trailer                            - 30%
                            Computer hardware                  - 30%
                            Furniture and fixtures             - 20%
                            Office equipment                   - 20%

         (e)      Revenue recognition

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

         (f)      Financial instruments

                  The Company's financial  instruments consist of cash, accounts
                  receivable,  note  receivable,  loan  receivable  and accounts
                  payable.  It is  management's  opinion that the Company is not
                  exposed to  significant  interest,  currency  or credit  risks
                  arising from these  financial  instruments.  The fair value of
                  these financial instruments  approximate their carrying values
                  due to their short maturities.

         (g)      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.


                                       7
<PAGE>
FLEXIBLE SOLUTIONS INTERNATIONAL INC.
Notes to Consolidated Financial Statements
Years Ended December 31, 2001, 2000 and 1999
(U.S. Dollars)
--------------------------------------------------------------------------------


3.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

         (h)      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 within the same
                  general time period.

         (i)      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.

         (j)      Recent accounting pronouncements

                  (i)      In December  1999,  the SEC issued  Staff  Accounting
                           Bulletin ("SAB") 101,  "Revenue  Recognition",  which
                           outlines  the  basic  criteria  that  must  be met to
                           recognize   revenue   and   provides   guidance   for
                           presentation of revenue and for disclosure related to
                           revenue recognition  policies in financial statements
                           filed with the SEC. The Company believes the adoption
                           of SAB 101  does not have a  material  impact  on the
                           Company's   financial   position   and   results   of
                           operations.

                  (ii)     In March  2000  the  Financial  Accounting  Standards
                           Board ("FASB") issued "Interpretation #44, Accounting
                           for    Certain    Transactions     Involving    Stock
                           Compensation".     Among    other    issues,     this
                           interpretation clarifies:

                           (a)      The  definition  of employee for purposes of
                                    applying APB Opinion No. 25.

                           (b)      The criteria for determining  whether a plan
                                    qualifies as a noncompensatory plan.

                           (c)      The   accounting   consequence   of  various
                                    modifications  of the terms of a  previously
                                    fixed stock option award, and

                           (d)      The  accounting  for an  exchange  of  stock
                                    compensation    awards    in   a    business
                                    combination.

                           In relation to (c) the interpretation states, "if the
                           exercise  price  of a fixed  stock  option  award  is
                           reduced,  the  award  shall  be  accounted  for  as a
                           variable  from  the date of the  modification  to the
                           date the award is exercised, is forfeited, or expired
                           unexercised,  the  exercise  price of an option award
                           has  been   reduced   if  the   fair   value  of  the
                           consideration required to be remitted pursuant to the
                           award's  original  terms".  There is no impact on the
                           Company for fiscal 2001.


                                       8
<PAGE>
FLEXIBLE SOLUTIONS INTERNATIONAL INC.
Notes to Consolidated Financial Statements
Years Ended December 31, 2001, 2000 and 1999
(U.S. Dollars)
--------------------------------------------------------------------------------


3.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

                  (iii)    On September 2000, the EITF reached a final consensus
                           on EITF Issue  00-10,  "Accounting  for  Shipping and
                           Handling  Fees and Costs."  This  consensus  requires
                           that  all  amounts  billed  to a  customer  in a sale
                           transaction related to shipping and handling, if any,
                           represent   revenue  and  should  be   classified  as
                           revenue.  Adoption of this  consensus  did not change
                           the  Company's   existing   accounting   policies  or
                           disclosures.

4.       LOAN RECEIVABLE

         -----------------------------------------------------------
                                                             2001
         -----------------------------------------------------------

         5% loan receivable due October 17, 2002             $9,516
         -----------------------------------------------------------

5.       NOTE RECEIVABLE

         The note  receivable  is without  stated terms of repayment or interest
         and was received in full subsequent to year end.

6.       PROPERTY AND EQUIPMENT

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

         The trailer was sold on  September 1, 2001 in exchange for free rent of
         a  month  and  a  half  at  the  Victoria  location.  Depreciation  was
         calculated up to date of sale.

         -----------------------------------------------------------------------
                                                       2000
                                                    Accumulated        Net Book
                                     Cost           Depreciation         Value
         -----------------------------------------------------------------------

         Manufacturing equipment       $75,757          $26,602        $49,155
         Trailer                         1,510              770            740
         Computer hardware               1,039              530            509
         Furniture and fixtures          3,087              769          2,318
         Office equipment                  534              192            342
         -----------------------------------------------------------------------
                                       $81,927          $28,863        $53,064
         -----------------------------------------------------------------------


                                       9
<PAGE>
FLEXIBLE SOLUTIONS INTERNATIONAL INC.
Notes to Consolidated Financial Statements
Years Ended December 31, 2001, 2000 and 1999
(U.S. Dollars)
--------------------------------------------------------------------------------


7.       COMPREHENSIVE (LOSS) INCOME

         -----------------------------------------------------------------------
                                          2001            2000          1999
         -----------------------------------------------------------------------

         Net income (loss)               $(233,955)      $138,971      $102,848
         Other comprehensive
            income (loss)                  (22,003)        (8,516)        7,053
         -----------------------------------------------------------------------

         Comprehensive (loss) income     $(255,958)      $130,455      $109,901
         -----------------------------------------------------------------------

8.       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>

         -------------------------------------------------------------------------------
                                                     2001         2000           1999
         -------------------------------------------------------------------------------

        <S>                                      <C>            <C>           <C>
         Income (loss) before income tax
           per entity
            Flexible Solutions International Inc. $(396,470)          $0      $(10,766)
            Flexible Solutions Ltd.                  262,779     229,856        180,922
         -------------------------------------------------------------------------------

         Consolidated income (loss) before
           income tax                              (133,691)     229,856        170,156
         Permanent Difference:
           Stock option benefit                      256,076           0              0
         Other                                                                        0
           Stock issued for services                 140,000           0              0
           Miscellaneous                                 394           0              0
         -------------------------------------------------------------------------------

         Taxable income                             $262,779    $229,856       $170,156
         -------------------------------------------------------------------------------

</TABLE>

                                       10
<PAGE>
FLEXIBLE SOLUTIONS INTERNATIONAL INC.
Notes to Consolidated Financial Statements
Years Ended December 31, 2001, 2000 and 1999
(U.S. Dollars)
--------------------------------------------------------------------------------


8.       INCOME TAX (Continued)

         Application of the federal and provincial statutory rate results in the
         following:

         ------------------------------------------------------------------
                                            2001         2000       1999
         ------------------------------------------------------------------

         Expected tax expense at
           statutory rates                 $117,252     $104,860    $77,625
         Increase (decrease) resulting
           from manufacturing and
           processing deduction            (18,395)     (16,090)   (11,911)
         Other                                1,407        2,115      1,594
         ------------------------------------------------------------------

         Income tax expense                $100,264      $90,885    $67,308
         ------------------------------------------------------------------

         The  Company's  losses for U.S.  income tax purposes  are U.S.  $30,272
         which may be carried  forward to apply  against  future income for U.S.
         income tax purposes, expiring between 2018 and 2019. The future benefit
         of these loss  carry-forwards  has been  offset  with a full  valuation
         allowance. These losses expire as follows:

         --------------------------------------- --------------------
         Available to                                  Amount
         --------------------------------------- --------------------

         2018                                                $16,858
         2019                                                 13,414
         --------------------------------------- --------------------

                                                             $30,272
         --------------------------------------- --------------------

9.       NET (LOSS) INCOME PER SHARE

         -----------------------------------------------------------------------
                                              Net
                                       Income (Loss)       Shares      Per Share
                                         (Numerator)    (Denominator)    Amount
         -----------------------------------------------------------------------

         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

         1999
         Basic net income per share
         Net income                         $102,848       9,131,316     $ 0.01
         -----------------------------------------------------------------------

         There were no preferred  shares  issued and  outstanding  for the years
         ended December 31, 2001, 2000 and 1999.


                                       11
<PAGE>
FLEXIBLE SOLUTIONS INTERNATIONAL INC.
Notes to Consolidated Financial Statements
Years Ended December 31, 2001, 2000 and 1999
(U.S. Dollars)
--------------------------------------------------------------------------------


10.      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 NASDAQ) on the date of the grant.

         The following table  summarizes the Company's stock option activity for
         the year ended December 31, 2001:
<TABLE>
<CAPTION>

         ------------------------------------------------------------------------------------
                                                                                   Weighted
                                         Number of         Exercise Price           Average
                                           Shares             Per Share        Exercise Price
         ------------------------------------------------------------------------------------

        <S>                               <C>               <C>                     <C>
         Granted during year ended
           December 31, 2001                1,898,000        $ 0.25 - $ 3.50          $ 1.47
         Exercised                            (2,000)                 $ 1.00          $ 1.00
         ------------------------------------------------------------------------------------

         Balance, December 31, 2001         1,896,000        $ 0.25 - $ 3.50          $ 1.63
         ------------------------------------------------------------------------------------
</TABLE>

         The Company applies APB Opinion No. 25 and related  interpretations  in
         accounting for its stock options granted to employees, and accordingly,
         compensation  expense of $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 loss and per share amounts would have been as follows:

         -----------------------------------------------------------------------
                                            2001            2000           1999
         -----------------------------------------------------------------------

         Net loss, as reported             $(233,955)     $138,971      $102,848
         Net loss, pro-forma                (955,071)      138,971       102,848
         Net loss per share, as reported     $ (0.03)       $ 0.02        $ 0.01
         Net loss per share, pro-forma       $ (0.10)       $ 0.02        $ 0.01
         -----------------------------------------------------------------------

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

         ----------------------------------------------------- -------------
                                                                2001
         ----------------------------------------------------- -------------

         Expected life (years)                                 3.5
         Interest rate                                         4.00%
         Volatility                                            58.27%
         Dividend yield                                        0.00%
         ----------------------------------------------------- -------------


                                       12
<PAGE>
FLEXIBLE SOLUTIONS INTERNATIONAL INC.
Notes to Consolidated Financial Statements
Years Ended December 31, 2001, 2000 and 1999
(U.S. Dollars)
--------------------------------------------------------------------------------

10.      STOCK OPTIONS (Continued)

         During the year the Company granted stock options to consultants. These
         options have been recognized  applying SFAS 123 using the Black-Scholes
         option-pricing  model which  resulted in  additional  stock  promotion,
         advertising,  professional fees,  subcontracting and office expenses of
         $82,326 in the accounts.

11.      CONTINGENCIES

         The Company has been named 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.

12.      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.

         The Company's sales in the United States of America and abroad amounted
         to 5%, 3% and 28.8% for the years ended  December  31,  2001,  2000 and
         1999 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
         94%, 96% and 70% of total sales for the years ended  December 31, 2001,
         2000 and 1999 respectively. There were no significant concentrations of
         credit risk.

                                       13
<PAGE>
FLEXIBLE SOLUTIONS INTERNATIONAL INC.
Notes to Consolidated Financial Statements
Years Ended December 31, 2001, 2000 and 1999
(U.S. Dollars)
--------------------------------------------------------------------------------

13.      COMMITMENTS

         Property and premises leases

         The Company is  committed to minimum  rental  payments for property and
         premises  aggregating  approximately  $235,202 over the terms of leases
         expiring September 1, 2003.

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

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

         2001                                            $85,528
         2002                                             85,528
         2003                                             64,146
         ---------------------------------- ---------------------

14.      SUBSEQUENT EVENTS

         (a)      Subsequent to the year end, 47,000 common shares were issued.

         (b)      In January,  2002, U.S.  $29,000 was received upon exercise of
                  options for shares of stock.

                                       14