EDGAR 10-K Filing

Company CIK: 1069394
Filing Year: 2025
Filename: 1069394_10-K_2025_0001641172-25-001675.json

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ITEM 1. BUSINESS
Item 1. Description of Business
We were incorporated as Flexible Solutions Ltd., a British Columbia corporation on January 26, 1991. On May 12, 1998, we merged Flexible Solutions Ltd. into Flexible Solutions International, Inc., a Nevada corporation. In connection with this merger, we issued 7,000,000 shares of common stock to the former shareholders of Flexible Solutions Ltd. in exchange for all of the outstanding shares of Flexible Solutions Ltd.
In June 2004 we purchased 52 U.S. and 139 International Patents (“IP”), as well as a 56,780 sq. ft. manufacturing plant near Chicago, Illinois from the bankruptcy estate of Donlar Corporation (“Donlar”) for $6.15 million. The IP we acquired from Donlar relates to water-soluble chemicals (“TPAs”) which prevent corrosion and scaling in water pipes used in the petroleum, chemical, utility and mining industries. TPAs are also used to enhance fertilizers and improve crop yields and as additives for household laundry detergents, consumer care products and pesticides. These assets are held in our wholly owned subsidiary, NanoChem Solutions Inc. (“NanoChem”), which has become our largest revenue generator.
In October 2018, we purchased 65% of ENP Investments, LLC, a manufacturing and distribution company active in the areas of golf, turf and ornamental agriculture products.
In January 2019, we purchased 50% of a Florida based limited liability company engaged in international sales of fertilizer additives. This purchase is accounted for as an equity accounted investment.
In 2019, we changed our corporate domicile from Nevada to Alberta, Canada.
In January 2020, ENP Realty, LLC became a wholly owned subsidiary of ENP Investments, LLC and was renamed to ENP Mendota, LLC. ENP Mendota owns a building that the Company occupies.
In June 2022, ENP Peru Investments, LLC became a wholly owned subsidiary with NanoChem owning 91.67% and ENP Investments, LLC owning 8.33% of ENP Peru. In 2023, NanoChem purchased the remaining 8.33% of shares to become sole owner. ENP Peru was previously accounted for under the equity method however, from 2022 it is consolidated into the financial statements from the date control was obtained. ENP Peru owns a building the Company occupies.
In June 2023, 317 Mendota LLC (“317 Mendota”) was created to purchase real estate and the Company has 80% ownership with an unrelated party (NCI) owning the remaining 20%. The Company occupies part of the building currently owned by 317 Mendota and intends to rent out the remaining portion of the building. For financial reporting purposes, the assets, liabilities and earnings of 317 Mendota are consolidated into these financial statements. The NCI’s ownership interest in 317 Mendota is recorded in non-controlling interests in these consolidated financial statements.
We operate through a number of wholly-owned subsidiaries which are further discussed in Note 1 to the consolidated financial statements included as part of this report. Unless otherwise indicated, all references to our business include the operations of these subsidiaries.
Our website is www.flexiblesolutions.com
Our Products
Thermal Polyaspartates (“TPAs”)
We manufacture TPAs in our Peru, Illinois plant using a thermal polymerizing process. The multiple variants produced are optimized for individual market verticals and sold for end use or through distribution.
TPAs for Oilfields. TPAs are used to reduce scale and corrosion in various “topside” water systems. They are used in place of traditional phosphonate and other products when biodegradability is required by environmental regulations. We have the ability to custom manufacture TPAs depending on the specific water conditions associated with any oil well. TPAs are also used in fracking fluids to reduce the toxicity while maintaining equal function.
TPAs for the Agricultural Industry. TPAs have the ability to reduce fertilizer crystallization before, during and after application and can also delay crystal formation between fertilizer and minerals present in the soil. Once crystallized, fertilizer and soil minerals are not able to provide plant nourishment. As a result, in select conditions the use of TPAs either blended with fertilizer or applied directly to crops can increase yields significantly. TPAs are designated for crop nutrient management programs and should not be confused with crop protection and pesticides or other agricultural chemical applications. Depending on the application, TPA products are marketed under a variety of brands including EX-10TM, AmisorbTM, LYNXTM, MAGNETTM, AmGroTM and VOLTTM. Markets of significance include corn, wheat, soybeans, rice, potatoes, sugar beets, cotton, tomatoes, almonds and other high value per acre crops.
TPAs for Irrigation. The crystallization prevention ability of TPAs can also be useful in select irrigation conditions. By reducing calcium carbonate scale propagation, TPAs can prevent early plugging of drip irrigation ports, reduce maintenance costs and lengthen the life of equipment. TPAs compete with acid type scale removers, but have the advantage of a positive yield effect on the plant, as well as an easier deployment formulation with liquid fertilizers when used as part of a “fertigation” program. Our TPAs for drip irrigation scale prevention are marketed and sold through the same channels as TPAs used by the agricultural industry.
TPAs in Cleaning Products. TPA can replace polyacrylates in cleaning products which is valuable because TPA is biodegradable while polyacrylates are not. In a cleaning product formulation, TPA prevents the re-deposition of dirt onto the surfaces to be cleaned allowing dirt to be rinsed away.
Nitrogen Conservation Products for Agriculture. We manufacture and sell two conservation products and mixtures used for slowing nitrogen loss from fields. One significant loss route for nitrogen fertilizer is enzymatic degradation by bacteria naturally present in soil. Our product, SUN 27TM inhibits the bacterial action and keeps the nitrogen fertilizer available for plant growth. The second significant nitrogen loss mechanism is de-nitrification. This is also caused by bacterial activity in soil resulting in oxygen being stripped from the fertilizer leaving nitrogen gas. The gas can’t be used by the plants and escapes into the atmosphere. Our N Savr 30TM product uses the most effective active ingredients available to combat this cause of fertilizer loss. We sell SUN 27TM and N Savr 30TM through distributors in North and South America under our trade names and under private labels.
Food and Nutritional Materials
We have installed custom equipment used to produce food and nutritional materials. All the ingredients we produce are custom products for specific clients and are confidential. We anticipate that this market vertical will grow over time.
HEATSAVR®
Our studies indicate that approximately 70% of the energy lost from a swimming pool occurs through water evaporation. HEATSAVR® is a chemical product for use in swimming pools and spas that forms a thin, transparent layer on the water’s surface. The transparent layer slows the evaporation of water, allowing the water to retain a higher temperature for a longer period of time and thereby reducing the energy required to maintain the desired temperature of the water. We have received reports from our commercial customers documenting energy savings of between $2,400 and $6,000 per year when using HEATSAVR®.
In outdoor pools, the HEATSAVR® also provides convenience compared to pool blankets. It is often inconvenient to use conventional pool blankets since a pool blanket must be removed and stored before the pool can be used. Pool blankets do not provide any energy savings when not on the pool. Conversely, HEATSAVR® eliminates the need to install, remove and store the blanket and works 24 hours a day. In addition, the use of HEATSAVR® in an indoor pool results in even greater energy savings since indoor pool locations use energy not only to heat the pool water, but also to air condition the pool environment. By slowing the transfer of heat and water vapor from the pool to the atmosphere of the pool enclosure, less energy is required to maintain a pool at the desired temperature and there is a reduced load on the air-conditioning system. We also manufacture and sell products which automatically dispense HEATSAVR® into commercial size swimming pools or spas at the rate of one ounce per 400 sq. ft. of water surface per day.
WATERSAVR®
This product utilizes a patented variation of our HEATSAVR technology to reduce water evaporation in reservoirs, potable water storage tanks, livestock watering ponds, aqueducts, canals and irrigation ditches. WATERSAVR may also be used for lawn and turf care and potted and bedding plants.
WATERSAVR® is sold in granulated form and can be applied by hand, by fully automated scheduled metering, or by an automatic dispenser.
Tests have indicated that WATERSAVR®:
● Reduces daily water evaporation as much as 54%;
● Reduces monthly water evaporation as much as 37%;
● Is odorless;
● Has no effect on invertebrates or vertebrates;
● Has no anticipated effect on any current drinking water treatment processes; and
● Is biodegradable.
We have one part-time employee involved in the sales and marketing of WATERSAVR®.
Principal Customers
The table below presents our revenue resulting from purchases by our major customers for the periods presented.
Year Ended December 31,
Company A $ 8,050,462 $ 6,811,083
Company B $ 8,235,394 $ 10,260,870
Company C $ 4,493,455 $ 3,410,845
Customers with balances greater than 10% of our receivable balances as of each of the fiscal year ends presented are shown in the following table:
Year Ended December 31,
Company A $ 5,377,088 $ 4,225,028
Company B $ 1,866,645 $ 2,073,813
Company D $ 1,189,157 $ 670,920 *
*Less than 10% in that period
Competition
TPAs: Our TPA products have direct competition with Lanxess AG (spun out of Bayer AG) (“Lanxess”), a German manufacturer of TPAs, which uses a patented process different from ours. We have cross-licensed each other’s processes and either company can use either process for the term of the patents involved. We believe that Lanxess has approximately the same production capacity and product costs as we do. We believe that we can compete effectively with Lanxess by offering excellent customer service in oilfield sales, superior distributor support in the agricultural marketplace and flexibility due to our relative size. In addition, we intend to continue to seek market niches that are not the primary targets of Lanxess. There are other competitors based in Asia.
Our TPA products face indirect competition from other chemicals in every market in which we are active. For purposes of oilfield scale prevention, phosphonates, phosphates and molibdonates provide the same effect. For crop enhancement, increased fertilizer levels can serve as a substitute for TPAs. In irrigation scale control, acid washes are our prime competitor. Notwithstanding the above, we believe our competitive advantages include:
● Biodegradability compared to competing oil field chemicals;
● Cost-effectiveness for crop enhancement compared to increased fertilizer use; and
● Environmental considerations, ease of formulation and increased crop yield opportunities in irrigation scale markets.
HEATSAVR®: Although we are aware of two other companies that manufacture products that compete with HEATSAVR®, we believe our products are more effective and safer. We maintain fair pricing equal to or lower than our competitors and protect our intellectual property carefully. Our products are expected to maintain market share in the competitive pool market. HEATSAVR® also competes with plastic pool blanket products. However, we believe that HEATSAVR® is more effective and convenient than pool blankets.
WATERSAVR®: WATERSAVR® competes with solid and floating covers. We believe our WATERSAVR® product is superior for the following reasons: it is less expensive, requires little capital expenditure to deploy and can be started and stopped as water scarcity escalates or declines. As water conservation is an important priority throughout the world, numerous researchers are working to develop solutions that may compete with, or be superior to, WATERSAVR.
Manufacturing
Our 56,780 sq. ft. facility in Peru, Illinois manufactures our TPA products. Raw materials for TPA production are sourced from various manufacturers throughout the world and we believe they are available in sufficient quantities for any increase in sales. Raw materials are, however, derived from crude oil and are subject to price fluctuations related to world oil prices.
Our HEATSAVR® products and dispensers are made from chemicals, plastics and other materials and parts that are readily available from multiple suppliers. We have never experienced any shortage in the availability of raw materials and parts for these products and we do not have any long term supply contracts for any of these items. We have these products made by outside parties without long term contracts.
Our WATERSAVR® products are manufactured by a third party. We are not required to purchase any minimum quantity of this product.
In January 2020, ENP Investments, LLC acquired a 100% interest in ENP Realty, LLC and the 14,000 sq. ft. manufacturing facility in Mendota, Illinois owned by this entity.
Government Regulations
TPAs: In the industrial oil field and agricultural markets, we have received government approval for all TPAs currently sold.
Nitrogen Conservation Products: We have obtained all government approvals for the markets in which we sell these products.
HEATSAVR®: Chemical products for use in swimming pools are covered by a variety of governmental regulations in all countries where we sell these products. These regulations cover packaging, labeling, and product safety. We believe our products are in compliance with these regulations.
WATERSAVR®: Our WATERSAVR® product is subject to regulation in most countries, particularly for agricultural and drinking water uses. We do not anticipate that governmental regulations will be an impediment to marketing WATERSAVR® because the components in WATERSAVR® have historically been used in agriculture for many years for other purposes. Nevertheless, we may require county or state approval on a case by case basis to sell WATERSAVR® in the United States for agricultural and drinking water uses. We have received National Sanitation Foundation approval for the use of WATERSAVR® in drinking water in the United States.
Proprietary Rights
Our success is dependent, in part, upon our proprietary technology. We rely on a combination of patent, copyright, trademarks, trade secrets and nondisclosure agreements to protect our proprietary technology. We hold several US patents with various expiry dates. We have applied for additional patents in new areas of invention and may extend these patents, if granted to other jurisdictions. There can be no assurance that our patent applications will be granted or that any issued patent will be upheld as valid or prevent the development of competitive products, which may be equivalent to or superior to our products. We have not received any claims alleging infringement of the intellectual property rights of others, but there can be no assurance that we may not be subject to such claims in the future.
Research and Development
We spent $329,952 during the year ended December 31, 2024 and $158,246 during year ended December 31, 2023 on research and development.
Employees
As of December 31, 2024, we had 45 employees, including one officer, 17 sales and customer support personnel, and 27 manufacturing personnel. None of our employees are represented by a labor union and we have not experienced any work stoppages to date.

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ITEM 1A. RISK FACTORS
Item 1A. Risk Factors
This Form 10-K contains forward-looking information based on our current expectations. Because our actual results may differ materially from any forward-looking statements made by us, this section includes a discussion of important factors that could affect our future operations and result in a decline in the market price of our common stock.
We have in the past incurred significant operating losses and may not sustain profitability in the future.
We have in the past experienced operating losses and negative cash flow from operations. If our revenues decline, our results of operations and liquidity may be materially and adversely affected. If we experience slower than anticipated revenue growth or if our operating expenses exceed our expectations, we may not be profitable. We may not remain profitable in future periods.
Fluctuations in our operating results may cause our stock price to decline.
Given the nature of the markets in which we operate, we cannot reliably predict future revenues and profitability. Changes in competitive, market and economic conditions may cause us to adjust our operations. A high proportion of our costs are fixed, due in part to our sales, research and development and manufacturing costs. Thus, small declines in revenue could disproportionately affect our operating results. Factors that may affect our operating results and the market price of our common stock include:
● Demand for and market acceptance of our products;
● Competitive pressures resulting in lower selling prices;
● Adverse changes in the level of economic activity in regions in which we do business;
● Adverse changes in the oil and gas industry on which we are particularly dependent;
● Changes in the portions of our revenue represented by various products and customers;
● Delays or problems in the introduction of new products;
● The announcement or introduction of new products, services or technological innovations by our competitors;
● Variations in our product mix;
● The timing and amount of our expenditures in anticipation of future sales;
● Increased costs of raw materials or supplies;
● Changes in the volume or timing of product orders; and
● Uncertainty in the tariff rates being charged.
Our operations are subject to seasonal fluctuation.
Our TPA business is the least seasonal, however there is a small increase in the spring related to inventory building for the crop season in the United States and a small slowdown in December as oilfield customers run down stock in advance of year end, but otherwise, there is little seasonal variation. We believe we are able to adequately respond to these seasonal fluctuations by reducing or increasing production as needed. The foregoing is equally true of our nitrogen conservation products. The use of our swimming pool products increases in summer months in most markets and results in our sales from January to June being greater than in July through December. Markets for our WATERSAVR® product are also seasonal, depending on the wet versus dry seasons in particular countries. We attempt to sell into a variety of countries with different seasons on both sides of the equator in order to minimize seasonality.
Interruptions in our ability to purchase raw materials and components may adversely affect our profitability.
We purchase certain raw materials and components from third parties pursuant to purchase orders placed from time to time. Because we do not have guaranteed long-term supply arrangements with our suppliers, any material interruption in our ability to purchase necessary raw materials or components could have a material adverse effect on our business, financial condition and results of operations.
Our WATERSAVR® product has not proven to be a revenue producing product and we may never recoup the cost associated with its development.
The marketing efforts of our WATERSAVR® product may result in continued losses. We introduced our WATERSAVR® product in June 2002 and, to date, we have delivered quantities for testing by potential customers, but only a few customers have ordered the product for commercial use. This product can achieve success only if it is ordered in substantial quantities by commercial customers who have determined that the water saving benefits of the product exceed the costs of purchase and deployment of the product. We can offer no assurance that we will receive sufficient orders of this product to achieve profits or cover the expenses incurred to manufacture and market this product. We have received National Sanitation Foundation approval for the use of WATERSAVR® in drinking water in the United States. Nevertheless, we may require county or state approval on a case by case basis. We expect to spend $50,000 on the marketing and production of our WATERSAVR® product in fiscal 2025.
If we do not introduce new products in a timely manner, our products could become obsolete and our operating results would suffer.
Without the timely introduction of new products and enhancements, our products could become obsolete over time, in which case our revenue and operating results would suffer. The success of our new product offerings will depend upon several factors, including our ability to:
● Accurately anticipate customer needs;
● Innovate and develop new products and applications;
● Successfully commercialize new products in a timely manner;
● Price our products competitively and manufacture and deliver our products in sufficient volumes and on time; and
● Differentiate our products from our competitors’ products.
In developing any new product, we may be required to make a substantial investment before we can determine the commercial viability of the new product. If we fail to accurately foresee our customers’ needs and future activities, we may invest heavily in research and development of products that do not lead to significant revenues.
We are dependent upon certain customers.
Among our current customers, we have identified three that are sizable enough that the loss of any one would be significant. Any loss of one or more of these customers could result in a substantial reduction in our revenues. See “Principal Customers” in Item 1 of this report for further details.
Economic, political and other risks associated with international sales and operations could adversely affect our sales.
Revenues from shipments made outside of the United States accounted for approximately 24% of our revenues in the year ended December 31, 2024, 21% in the year ended December 31, 2023 and 20% in the year ended December 31, 2022. Since we sell our products worldwide, our business is subject to risks associated with doing business internationally. We anticipate that revenues from international operations will continue to represent a sizable portion of our total revenue. Accordingly, our future results could be harmed by a variety of factors, including:
● Changes in foreign currency exchange rates;
● Changes in a country’s or region’s political or economic conditions, particularly in developing or emerging markets;
● Longer payment cycles of foreign customers and difficulty of collecting receivables in foreign jurisdictions;
● Trade protection measures and import or export licensing requirements;
● Differing tax laws and changes in those laws;
● Difficulty in staffing and managing widespread operations;
● Differing laws regarding protection of intellectual property; and
● Differing regulatory requirements and changes in those requirements.
We are subject to credit risk and may be subject to substantial write-offs if one or more of our significant customers default on their payment obligations to us.
We currently allow our major customers between 30 and 90 days to pay for each sale. This practice, while customary, presents an accounts receivable write-off risk if one or more of our significant customers defaulted on their payment obligations to us. Any such write-off, if substantial, would have a material adverse effect on our business and results of operations. See above principal customer information.
Our products can be hazardous if not handled, stored and used properly; litigation related to the handling, storage and safety of our products would have a material adverse effect on our business and results of operations.
Some of our products are flammable and must be stored properly to avoid fire risk. Additionally, some of our products may cause irritation to a person’s eyes if they are exposed to the concentrated product. Although we label our products to warn of such risks, our sales could be reduced if our products were considered dangerous to use or if they are implicated in causing personal injury or property damage. We are not currently aware of any circumstances in which our products have caused harm or property damage to consumers. Nevertheless, litigation regarding the handling, storage and safety of our products would have a material adverse effect on our business and results of operations.
Our failure to comply with environmental regulations may create significant environmental liabilities and force us to modify our manufacturing processes.
We are subject to various federal, state and local environmental laws, ordinances and regulations relating to the use, storage, handling and disposal of chemicals. Under such laws, we may become liable for the costs of removal or remediation of these substances that have been used by our consumers or in our operations. Such laws may impose liability without regard to whether we knew of, or caused, the release of such substances. Any failure by us to comply with present or future regulations could subject us to substantial fines, suspension of production, alteration of manufacturing processes or cessation of operations, any of which could have a material adverse effect on our business, financial condition and results of operations.
Our failure to protect our intellectual property could impair our competitive position.
While we own certain patents and trademarks, some aspects of our business cannot be protected by patents or trademarks. Accordingly, in these areas there are few legal barriers that prevent potential competitors from copying certain of our products, processes and technologies or from otherwise entering into operations in direct competition with us.
Our products may infringe on the intellectual property rights of others, and resulting claims against us could be costly and prevent us from making or selling certain products.
Third parties may seek to claim that our products and operations infringe on their patents or other intellectual property rights. We may incur significant expense in any legal proceedings to protect our proprietary rights or to defend infringement claims by third parties. In addition, claims of third parties against us could result in awards of substantial damages or court orders that could effectively prevent us from making, using or selling our products in the United States or internationally.
A product liability claim for damages could materially and adversely affect our financial condition and results of operations.
Our business exposes us to potential product liability risks. There are many factors beyond our control that could lead to liability claims, including the failure of our products to work properly and the chance that consumers will use our products incorrectly or for purposes for which they were not intended. There can be no assurance that the amount of product liability insurance that we carry will be sufficient to protect us from product liability claims. A product liability claim in excess of the amount of insurance we carry could have a material adverse effect on our business, financial condition and results of operations.
Our ongoing success is dependent upon the continued availability of certain key employees.
Our business would be adversely affected if the services of Daniel B. O’Brien ceased to be available to us since we currently do not have any other employee with an equivalent level of expertise in and knowledge of our industry. If Mr. O’Brien no longer served as our President and Chief Executive Officer, we would have to recruit one or more new executives, with no real assurance that we would be able to engage a replacement executive with the required skills on satisfactory terms. The market for skilled employees is highly competitive, especially for employees in the fields in which we operate. While our compensation programs are intended to attract and retain qualified employees, there can be no assurance that we will be able to retain the services of all our key employees or a sufficient number to execute our plans, nor can there be any assurances that we will be able to continue to attract new employees as required.

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ITEM 1B. UNRESOLVED STAFF COMMENTS
Item 1B. Unresolved Staff Comments.
Not applicable.

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ITEM 2. PROPERTIES
Item 2. Properties.
We own a 61,200 sq. ft. facility and a 56,780 sq. ft. facility in Peru, Illinois along with a 14,000 sq. ft facility in Mendota, Illinois which is used to manufacture our TPA line of products. In 2017, we purchased a 3,000 sq ft building on 1 acre of land in Taber, Alberta. In 2023, the Company purchased an 80% share in 317 Mendota, a real estate company that was set up to purchase a manufacturing building in Mendota, IL. ENP Investments now occupies part of this space.

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ITEM 3. LEGAL PROCEEDINGS
Item 3. Legal Proceedings.
None.

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ITEM 4. MINE SAFETY DISCLOSURE
Item 4. Mine Safety Disclosures.
Not applicable.
PART II

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ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchase of Equity Securities.
Our common stock is traded on the NYSE American under the symbol “FSI”.
As of March 30, 2025, we had approximately 3,400 shareholders.
The Company declared a special dividend of $0.10 per share on April 23, 2024, paid on May 16, 2024 to shareholders of record on April 30, 2024.
The Company declared a special dividend of $0.05 per share on April 14, 2023, paid on May 16, 2023 to shareholders of record on April 28, 2023.
None of our officers or directors, nor any of our principal shareholders purchased, on our behalf, any shares of our common stock from third parties either in a private transaction or as a result of purchases in the open market during the years ended December 31, 2024 and 2023.
As of March 30, 2025, we had 12,647,532 outstanding shares of common stock. The following table lists additional shares of our common stock, including shares issuable upon the exercise of options which have not yet vested, which may be issued as of March 30, 2025:
Number Note
Of Shares Reference
Shares issuable upon exercise of options granted to our officers, directors, employees, consultants, and third parties 1,708,000 A
A. Options are exercisable at prices ranging from $2.00 to $4.05 per share. See Item 11 of this report for more information concerning these options.

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ITEM 6. SELECTED FINANCIAL DATA
Item 6. [Reserved]
Not applicable.

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Results of Operations
We have three product lines.
The first is a chemical (“EWCP”) used in swimming pools and spas. The product forms a thin, transparent layer on the water’s surface. The transparent layer slows the evaporation of water, allowing the water to retain a higher temperature for a longer period of time thereby reducing the energy required to maintain the desired temperature of the water. A modified version of EWCP can also be used in reservoirs, potable water storage tanks, livestock watering pods, canals, and irrigation ditches for the purpose of reducing evaporation.
The second product, biodegradable polymers (“TPAs”), is used by the petroleum, chemical, utility and mining industries to prevent corrosion and scaling in water piping. TPAs can also be used to increase biodegradability in detergents and in the agriculture industry to increase crop yields by enhancing fertilizer uptake.
The third product line is nitrogen conservation products used for the agriculture industry. These products decrease the loss of nitrogen fertilizer after initial application and allows less fertilizer to be used. These products are made and sold by the Company’s TPA division.
The Company also manufactures food grade products that are made and sold by the TPA division.
Material changes in the line items in our Statement of Income and Comprehensive Income for the year ended December 31, 2024 as compared to the same period last year, are discussed below:
Item
Increase (I) or Decrease (D)
Reason
Sales
EWCP products
I
Increased customer orders.
TPA products
D
Decreased customer orders.
Gross profit
I
Raw material costs declined to catch up with customer price reductions already in place.
Insurance
I
Prior year increase in assets and in sales resulted in higher insurance costs.
Office and Miscellaneous
I
Increase in property tax associated with more properties along with various other one time costs.
Consulting
I
Increased reliance on consultants instead of full time employees.
Professional fees
I
Increase in accounting fees related to tax filings and increase in audit fees related to growth of the Company.
Research
I
New product development.
Utilities
I
Addition of real estate not yet rented out.
Investor relations
D
Reduced shares traded and filings required in 2023 did not reoccur in 2024.
Currency exchange
I
Currency exchange increased as a result of movements in the US / Canadian dollar exchange rate and its effects on US dollar cash balances and US dollar payables held by the Company’s Canadian subsidiaries.
Lease expense
D
Termination of lease in Naperville, IL reduced costs.
Loss on lease termination
I
One time cost incurred terminating lease in Naperville, IL.
Interest income
I
Increased interest rates combined with increase in term deposits.
Gain on investment
D
Sale of 30.1% of Florida based LLC reduced our Company’s portion of the profits.
Loss on sale of investment
I
One time loss on the sale of 30.1 % of Florida based LLC.
Interest expense
I
Increased debt resulted in increased interest expense.
Income tax expense
I
One time adjustments to income tax accruals in 2023 did not occur again in 2024.
The factors that will most significantly affect future operating results will be:
● The sale price of crude oil which is used in the manufacture of aspartic acid we import from China. Aspartic acid is a key ingredient in our TPA product. If tariffs increase and if relief is not available, some customers may experience price increases;
● Activity in the oil and gas industry, as we sell our TPA product to oil and gas companies; and
● Drought conditions, since we also sell our TPA product to farmers.
Other than the foregoing we do not know of any trends, events or uncertainties that have had, or are reasonably expected to have, a material impact on our revenues or expenses.
Capital Resources and Liquidity
Our sources and (uses) of cash for the years ended December 31, 2024 and 2023 are shown below:
Cash provided by operating activities $ 5,568,346 $ 6,116,171
Sale of investment 2,000,000 -
Purchase of investments - (470,000 )
Redemption of investments - 200,000
Distributions received from equity investments 510,710 201,034
Non-Controlling Interest of 317 Mendota LLC - 200,000
Proceeds from sale of asset - 5,411
Purchases of property and equipment (4,964,736 ) (4,990,675 )
Advances (repayment) of line of credit 241,680 (1,008,112 )
Repayment of long term debt (1,517,500 ) (725,823 )
Proceeds of long term debt 2,162,412 2,686,682
Dividends paid (1,255,053 ) (626,777 )
Distributions to non-controlling interest (794,722 ) (719,439 )
Shares issued upon exercise of stock options 184,850 13,600
Effects of foreign exchange rate changes on cash 188,160 10,653
We have sufficient cash resources to meets our future commitments and cash flow requirements for the coming year. As of December 31, 2024, our working capital was $22,714,190 (2023 - $20,172,833) and we have no substantial commitments or capital requirements that require significant outlays of cash over the coming fiscal year.
Other than as disclosed above, we do not know of any trends, demands, commitments, events or uncertainties that will result in, or that are reasonable likely to result in, our liquidity increasing or decreasing in any material way.
Other than as disclosed above, we do not know of any significant changes in our expected sources and uses of cash.
We do not have any commitments or arrangements from any person to provide us with any equity capital.
Critical Accounting Policies and Estimates
Allowances for Doubtful Accounts Receivable. We evaluate our accounts receivable to determine if they will ultimately be collected. This evaluation includes significant judgments and estimates, including an analysis of receivables aging and a review of large accounts. If, for example, the financial condition of a customer deteriorates resulting in an impairment of its ability to pay or a pattern of late payment develops, an allowance may be required.
Provisions for Inventory Obsolescence. We may need to record a provision for estimated obsolescence and shrinkage of inventory. Our estimates consider the cost of inventory, the estimated market value, the shelf life of the inventory and our historical experience. If there are changes to these estimates, provisions for inventory obsolescence may be necessary.
Valuation of Goodwill and Intangible Assets. We review goodwill and intangible assets to determine if there are qualitative factors which exist which may indicate that the carrying value exceeds the fair value. Our estimates are based upon an assessment of market conditions and expected future cash flows to be generated by the reporting units and related assets. If factors exist which indicate that the carrying value exceeds the fair value, an impairment charge against the goodwill and intangible assets could be required.
Useful Lives of Property, Equipment and Leaseholds and Intangible Assets. We amortize and depreciate our property, equipment and leaseholds and intangible assets based on their estimated useful lives. We estimate the expected useful lives based on the expected term over which the asset is expected to continue to generate economic benefit for our company. If there are differences between the expected useful lives and the actual useful lives of the asset, impairment of property, equipment and leaseholds or intangible assets could be necessary.
Revenue Recognition. We follow a five-step model for revenue recognition. The five steps are: (1) identification of the contract(s) with the customer, (2) identification of the performance obligation(s) in the contract(s), (3) determination of the transaction price, (4) allocation of the transaction price to the performance obligation, and (5) recognition of revenue when (or as) the performance obligation is satisfied. We fulfill our performance obligations when control of product transfers to the customer, which is generally at the time the product is shipped since risk of loss is transferred to the purchaser upon delivery to the carrier. For shipments which are free on board (F.O.B). shipping point, we have elected to account for shipping and handling activities as a fulfillment cost rather than as an additional promised service and performance obligation.
Stock Based Compensation The fair value of share-based payments are subject to the limitations of the Black-Scholes option pricing model that incorporates market data and involves uncertainty in estimates used by management in the assumptions. Since the Black-Scholes option pricing model relies on highly subjective assumptions, any changes to these inputs can significantly impact the estimated value.
Income Taxes Tax interpretations, regulations and legislation in the various jurisdictions in which the Company operates are subject to change and interpretation. As such, income taxes are subject to measurement uncertainty. Assessing the recoverability of deferred tax assets requires the Company to make estimates related to the expectations of future taxable income and the application of existing tax laws. To the extent that future taxable income differs significantly from estimates, the ability of the Company to realize deferred tax assets could be impacted.
Privately Held Equity Investments The recoverability of privately held equity investments requires management to make certain assumptions and estimates. Changes in these assumptions and estimates could result in materially different results.
See Note 2 to the consolidated financial statements included as part of this report for a description of our significant accounting policies.
Recent Accounting Pronouncements
We have evaluated recent accounting pronouncements issued since January 1, 2024 and determined that the adoption of these recent accounting pronouncements will not have a material effect on our consolidated financial statements.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Not applicable.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Item 8. Financial Statements and Supplementary Data.
FLEXIBLE SOLUTIONS INTERNATIONAL, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
Report of Independent Registered Public Accounting Firm, Assure CPA, LLC (PCAOB ID NO: 444)
Report of Independent Registered Public Accounting Firm, Smythe LLP (PCAOB ID NO: 995)
Consolidated Balance Sheets as of December 31, 2024 and 2023
Consolidated Statements of Income and Comprehensive Income for the Years Ended December 31, 2024 and 2023
Consolidated Statements of Cash Flows for the Years Ended December 31, 2024 and 2023
Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2024 and 2023
Notes to Consolidated Financial Statements
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholders and the board of directors of Flexible Solutions International Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheet of Flexible Solutions International Inc. (“the Company”) as of December 31, 2024 and the related consolidated statements of income and comprehensive income, stockholders’ equity and cash flows for the year then ended, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audit provides a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Uncertain Tax Positions
As described in Note 12 to the consolidated financial statements, the Company has an income taxes payable balance associated with uncertain tax positions, including interest and penalties, of approximately $3.0 million as of December 31, 2024. The Company recognizes uncertain tax positions that it believes has a greater than 50% likelihood of being sustained upon challenge by a tax authority. The evaluation of this liability requires significant judgment and involves complex tax regulations, interpretations, and estimates. Given the complexity and subjectivity of these considerations, auditing the uncertain tax position required a high degree of auditor judgment.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. Our audit procedures related to the Company’s uncertain tax position included, among others:
● Evaluating management’s assessment of the technical merits of the tax position, including reviewing relevant tax laws.
● Assessing the adequacy of the Company’s disclosures regarding the uncertain tax position and its impact on the financial statements.
● Evaluating the reasonableness of management’s conclusions, including the probability of recognition and measurement of the liability.
● Testing the completeness and accuracy of the underlying data used in management’s assessment.
/s/Assure CPA, LLC
We have served as the Company’s auditor since 2024.
Spokane, Washington
PCAOB ID: 444
March 31, 2025
Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of Flexible Solutions International, Inc.
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated financial statements of Flexible Solutions International, Inc. and its subsidiaries (the “Company”) which comprise the consolidated balance sheet as of December 31, 2023, and the related consolidated statement of income and comprehensive income, cash flows and stockholders’ equity for the year then ended, and the related notes (collectively referred to as the “consolidated financial statements”).
In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2023, and the consolidated results of its operations and its consolidated cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audit provides a reasonable basis for our opinion.
SMYTHE LLP | smythecpa.com
VANCOUVER
1700-475 Howe St
Vancouver, BC V6C 2B3
T: 604 687 1231
F: 604 688 4675
LANGLEY
600-19933 88 Ave
Langley, BC V2Y 4K5
T: 604 282 3600
F: 604 357 1376
NANAIMO
201-1825 Bowen Rd
Nanaimo, BC V9S 1H1
T: 250 755 2111
F: 250 984 0886
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of this critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Valuation of inventory
At December 31, 2023, the Company’s inventory balance was $11,134,889. As discussed in Note 2 to the consolidated financial statements, the Company records inventory at the lower of cost on a first-in, first-out or weighted average basis and net realizable value. To determine inventory valuation, management conducts regular reviews of overhead costs and the calculation to allocate these expenditures to inventory cost.
We identified the assessment of valuation of inventory as a critical audit matter. Auditing management’s inventory valuation involved significant judgment because the estimates are based on several factors. In particular, in estimating inventory cost inputs, management developed assumptions such as the allocation of overhead expenditures to inventory cost.
The primary procedures we performed to address this critical audit matter included:
● Obtained an understanding and reviewed the appropriateness of the Company’s costing of inventory, including the allocation of overhead costs to inventory.
● Performed substantive procedures over the inputs of costing of inventory, including overhead allocation by agreeing inputs to third party source documentation.
● Tested management’s allocation of overhead costs between inventory products by assessing the appropriateness of the allocation method and recalculated the formula used to determine computational accuracy.
● Tested the reliability of reports used by management in inventory costing by agreeing the report inputs to underlying records.
● Performed observations of inventory held at year-end for any signs of obsolescence and held discussions with management and operational personnel to identify any slow-moving inventory.
Chartered Professional Accountants
Vancouver, Canada
April 1, 2024
We served as the Company’s auditor from 2019 to 2024.
SMYTHE LLP | smythecpa.com
VANCOUVER
1700-475 Howe St
Vancouver, BC V6C 2B3
T: 604 687 1231
F: 604 688 4675
LANGLEY
600-19933 88 Ave
Langley, BC V2Y 4K5
T: 604 282 3600
F: 604 357 1376
NANAIMO
201-1825 Bowen Rd
Nanaimo, BC V9S 1H1
T: 250 755 2111
F: 250 984 0886
FLEXIBLE SOLUTIONS INTERNATIONAL, INC.
Consolidated Balance Sheets
As at December 31
(U.S. Dollars)
December 31, 2024 December 31, 2023
Assets
Current
Cash $ 7,631,055 $ 5,017,583
Term deposits (Note 2) 2,400,916 2,690,241
Accounts receivable, net (Note 4) 11,696,098 9,843,056
Inventories (Note 5) 10,890,195 11,134,889
Prepaid expenses and deposits 1,957,593 1,540,923
Total current assets 34,575,857 30,226,692
Property, equipment and leaseholds, net (Note 6) 17,146,184 13,171,787
Right of use assets (Note 3) - 115,293
Intangible assets (Note 7) 2,120,000 2,280,000
Long term deposits (Note 8) 167,882 824,254
Investments (Note 9) 3,424,381 6,033,960
Goodwill (Note 7) 2,534,275 2,534,275
Deferred tax asset (Note 12) - 284,794
Total Assets $ 59,968,579 $ 55,471,055
Liabilities
Current
Accounts payable $ 2,049,425 $ 1,984,592
Accrued liabilities 403,157 284,131
Deferred revenue 78,655 148,292
Income taxes payable 5,137,290 4,485,213
Short term line of credit (Note 10) 2,052,159 1,810,479
Current portion of lease liability (Note 3) - 59,520
Current portion of long term debt (Note 11) 2,140,981 1,281,632
Total current liabilities 11,861,667 10,053,859
Lease liability (Note 3) - 55,773
Net deferred income tax liability (Note 12) 122,019 260,047
Long term debt (Note 11) 6,618,867 6,833,304
Total Liabilities 18,602,553 17,202,983
Commitments and Contingencies (Notes 9 and 10) - -
Stockholders’ Equity
Capital stock (Note 15)
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:
12,515,532 (December 31, 2023: 12,435,532) common shares 12,516 12,436
Common stock, value 12,516 12,436
Capital in excess of par value 18,789,915 17,932,015
Accumulated other comprehensive loss (606,986 ) (795,146 )
Accumulated earnings 19,836,527 18,053,051
Total stockholders’ equity - controlling interest 38,031,972 35,202,356
Non-controlling interests (Note 16) 3,334,054 3,065,716
Total Stockholders’ Equity 41,366,026 38,268,072
Total Liabilities and Stockholders’ Equity $ 59,968,579 $ 55,471,055
See Notes to Consolidated Financial Statements.
FLEXIBLE SOLUTIONS INTERNATIONAL, INC.
Consolidated Statements of Income and Comprehensive Income
For the Years Ended December 31
(U.S. Dollars)
Sales $ 38,234,860 $ 38,324,806
Cost of sales (Note 6 & 7) 24,994,961 27,881,721
Gross profit 13,239,899 10,443,085
Operating expenses
Wages 2,504,523 2,659,654
Administrative salaries and benefits 1,238,702 1,205,007
Insurance 958,109 861,501
Office and miscellaneous 805,307 512,896
Consulting 473,925 324,327
Research 329,952 158,246
Professional fees 324,462 238,466
Utilities 259,972 123,475
Travel 227,837 264,563
Advertising and promotion 218,269 194,308
Investor relations and transfer agent fee 199,863 222,650
Lease expense 72,891 97,806
Telecommunications 57,970 55,093
Shipping 29,408 24,060
Commissions 28,093 35,623
Currency exchange (4,790 ) (37,632 )
Total operating expenses 7,724,493 6,940,043
Operating income 5,515,406 3,503,042
Non-operating income (expense)
Gain on investments (Note 9) 245,631 505,065
Loss on sale of investment (Note 9) (353,076 ) -
Loss on lease termination (41,350 ) -
Interest expense (610,265 ) (498,666 )
Interest income 196,454 113,809
Total non-operating income (expenses) (562,606 ) 120,208
Income before income tax 4,952,800 3,623,250
Income taxes (Note 12)
Deferred income tax (expense) benefit (146,767 ) 250,917
Current income tax expense (704,444 ) (118,182 )
Net income for the year 4,101,589 3,755,985
Net income attributable to non-controlling interests (1,063,060 ) (980,121 )
Net income attributable to controlling interest $ 3,038,529 $ 2,775,864
Income per share (basic and diluted) (Note 13) $ 0.24 $ 0.22
Weighted average number of common shares (basic) 12,454,957 12,434,886
Weighted average number of common shares (diluted) 12,680,668 12,489,467
Other comprehensive income:
Net income $ 4,101,589 $ 3,755,985
Unrealized gain (loss) on foreign currency transactions 188,160 10,653
Total comprehensive income 4,289,749 3,766,638
Comprehensive income - non-controlling interest (1,063,060 ) (980,121 )
Comprehensive income attributable to controlling interest $ 3,226,689 $ 2,786,517
See Notes to Consolidated Financial Statements.
FLEXIBLE SOLUTIONS INTERNATIONAL, INC.
Consolidated Statements of Cash Flows
For Years Ended December 31
(U.S. Dollars)
Operating activities
Net income for the year $ 4,101,589 $ 3,755,985
Adjustments to reconcile net income to net cash:
Stock based compensation 673,130 395,080
Depreciation and amortization 1,957,476 1,686,319
Gain on investments (245,631 ) (505,065 )
Loss on sale of investment 353,076 -
Gain on sale of asset - (4,589 )
Deferred income tax expense (recovery) 146,767 (250,917 )
Changes in assets and liabilities:
Accounts receivable (1,853,042 ) (393,199 )
Inventories 244,694 3,284,541
Prepaid expenses and deposits (416,670 ) (1,230,626 )
Long term deposits (159,342 ) (815,714 )
Accounts payable 64,833 1,110,689
Accrued liabilities 119,026 (675,725
)
Income taxes payable 652,077 (1,137 )
Deferred revenue (69,637 ) (239,471 )
Cash provided by operating activities 5,568,346 6,116,171
Investing activities
Sale of investment 2,000,000 -
Distributions received from equity investments 510,710 201,034
Proceeds from sale of asset - 5,411
Purchase of property and equipment (4,964,736 ) (4,990,675 )
Purchase of investments - (470,000 )
Redemption of investments - 200,000
Non-controlling interest of 317 Mendota - 200,000
Cash used in investing activities (2,454,026 ) (4,854,230 )
Financing activities
Advance (repayment) of line of credit 241,680 (1,008,112 )
Repayment of long term debt (1,517,500 ) (725,823 )
Proceeds of long term debt 2,162,412 2,686,682
Dividends paid (1,255,053 ) (626,777 )
Distribution to non-controlling interest (794,722 ) (719,439 )
Shares issued upon exercise of stock options 184,850 13,600
Cash provided by (used in) financing activities (978,333 ) (379,869 )
Effect of foreign exchange rate changes on cash 188,160 10,653
Increase in cash and term deposits 2,324,147 892,725
Cash and term deposits, beginning of year 7,707,824 6,815,099
Cash and term deposits, end of year $ 10,031,971 $ 7,707,824
Cash and term deposits is comprised of:
Cash $ 7,631,055 $ 5,017,583
Term deposits 2,400,916 2,690,241
Cash and cash equivalents, ending $ 10,031,971 $ 7,707,824
Supplemental disclosure of cash flow information:
Income taxes paid $ 52,367 $ 119,319
Interest paid 610,625 498,666
See Notes to Consolidated Financial Statements.
FLEXIBLE SOLUTIONS INTERNATIONAL, INC.
Consolidated Statements of Stockholders’ Equity
For the Years Ended December 31, 2024 and 2023
(U.S. Dollars)
Shares Capital Stock Capital in
Excess of
Par Value
Accumulated
Earnings
Accumulated Other
Comprehensive
Income (Loss)
Total Non-
Controlling
Interests
Total
Stockholders’
Equity
Balance December 31, 2022 12,426,260 $ 12,426 $ 17,523,345 $ 15,903,964 $ (805,799 ) $ 32,633,936 $ 2,605,034 $ 35,238,970
Translation adjustment - - - - 10,653 10,653 - 10,653
Dividends paid - - - (626,777 ) - (626,777 ) - (626,777 )
Non-controlling interest of 317 Mendota LLC - - - - - - 200,000 200,000
Net income - - - 2,775,864 - 2,775,864 980,121 3,755,985
Shares issued upon exercise of stock options 9,272 13,590 - - 13,600 - 13,600
Distributions to noncontrolling interests - - - - - - (719,439 ) (719,439 )
Stock-based compensation - - 395,080 - - 395,080 - 395,080
Balance December 31, 2023 12,435,532 $ 12,436 $ 17,932,015 $ 18,053,051 $ (795,146 ) $ 35,202,356 $ 3,065,716 $ 38,268,072
Balance 12,435,532 $ 12,436 $ 17,932,015 $ 18,053,051 $ (795,146 ) $ 35,202,356 $ 3,065,716 $ 38,268,072
Translation adjustment - - - - 188,160 188,160 - 188,160
Dividends paid - - - (1,255,053 ) - (1,255,053 ) - (1,255,053 )
Net income - - - 3,038,529 - 3,038,529 1,063,060 4,101,589
Common shares issued upon exercise of stock options 80,000 184,770 - - 184,850 - 184,850
Distributions to noncontrolling interests - - - - - - (794,722 ) (794,722 )
Stock-based compensation - - 673,130 - - 673,130 - 673,130
Balance December 31, 2024 12,515,532 $ 12,516 $ 18,789,915 $ 19,836,527 $ (606,986 ) $ 38,031,972 $ 3,334,054 $ 41,366,026
Balance 12,515,532 $ 12,516 $ 18,789,915 $ 19,836,527 $ (606,986 ) $ 38,031,972 $ 3,334,054 $ 41,366,026
See Notes to Consolidated Financial Statements.
FLEXIBLE SOLUTIONS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2024 and 2023
(U.S. Dollars)
1. BASIS OF PRESENTATION
These consolidated financial statements (“consolidated financial statements”) include the accounts of Flexible Solutions International, Inc. (the “Company”), its wholly-owned subsidiaries Flexible Fermentation Ltd., NanoChem Solutions Inc. (“NanoChem”), Flexible Solutions Ltd., Flexible Biomass LP, FS Biomass Inc., NCS Deferred Corp., Natural Chem SEZC Ltd., InnFlex Holdings Inc., ENP Peru Investments LLC (“ENP Peru”), Pana Chem Solutions Inc., its 80% controlling interest in 317 Mendota LLC (“317 Mendota”), and its 65% controlling interest in ENP Investments, LLC (“ENP Investments”) and ENP Mendota, LLC (“ENP Mendota”). All inter-company balances and transactions have been eliminated upon consolidation. The Company was incorporated on May 12, 1998 in the State of Nevada and in 2019, the Company redomiciled into Alberta, Canada.
In 2022, NanoChem purchased an additional 50% in ENP Peru, increasing its share to 91.67%. ENP Investments owns the remaining 8.33%, of which the Company has a 65% interest. In 2023, NanoChem purchased the remaining 8.33% of shares to become sole owner. ENP Peru was previously accounted for under the equity method however, it is now consolidated into the financial statements from the date control was obtained.
In 2023, the Company purchased an 80% interest in 317 Mendota, a newly incorporated company established to purchase a large manufacturing building. ENP Investments will occupy part of this building, freeing up more space in the building owned by ENP Peru for NanoChem. The Company intends to rent the remainder of the space to suitable tenants. The remaining 20% non-controlling interest is held by unrelated parties.
The Company and its subsidiaries develop, manufacture and market specialty chemicals which slow the evaporation of water. One product, HEATSAVR®, is marketed for use in swimming pools and spas where its use, by slowing the evaporation of water, allows the water to retain a higher temperature for a longer period of time and thereby reduces the energy required to maintain the desired temperature of the water in the pool. Another product, WATERSAVR®, is marketed for water conservation in irrigation canals, aquaculture, and reservoirs where its use slows water loss due to evaporation. In addition to the water conservation products, the Company also manufactures and markets water-soluble chemicals utilizing thermal polyaspartate biopolymers (hereinafter referred to as “TPAs”), which are beta-proteins manufactured from the common biological amino acid, L-aspartic. TPAs can be formulated to prevent corrosion and scaling in water piping within the petroleum, chemical, utility and mining industries. TPAs are also used as proteins to enhance fertilizers in improving crop yields and can be used as additives for household laundry detergents, consumer care products and pesticides. The TPA division also manufactures two nitrogen conservation products for agriculture that slows nitrogen loss from fields and has installed custom equipment used to produce food and nutritional materials. All the ingredients we produce are custom products for specific clients and are confidential. We anticipate that this market vertical will grow over time.
2. SIGNIFICANT ACCOUNTING POLICIES
These consolidated financial statements have been prepared on a historical cost basis, except where otherwise noted, in accordance with accounting principles generally accepted in the United States applicable to a going concern and reflect the policies outlined below.
(a) Cash and Cash Equivalents.
The Company considers all highly liquid investments purchased with an original or remaining maturity of less than three months at the date of purchase to be cash equivalents. Cash and cash equivalents are maintained with several financial institutions. As of December 31, 2024 and 2023, the Company did not have any cash equivalents.
(b) Term Deposits.
The Company has four term deposits that are maintained by commercials banks. The first term deposit is for $303,954 and matures in February 2025. This deposit pays 3% interest and if withdrawn before maturity, a penalty may be applied. The second term deposit is for $742,834, matures in March 2025 and pays interest at a rate of 2.65%. If withdrawn before maturity, the greater of the loss of accrued interest or $150, plus 1% of the principal shall be levied. The third term deposit is for $1,038,721 and matures in March 2025. This deposit pays 2.5% and if withdrawn before maturity, the greater of the loss of accrued interest or $150, plus 1% of the principal shall be levied. The fourth term deposit is for $315,407, matures in February 2025 and pays interest at a rate of 3%. If withdrawn before maturity, a penalty may be applied.
(c) Inventories and Cost of Sales.
The Company has three major classes of inventory: completed goods, work in progress and raw materials and supplies. In all classes inventories are stated at the lower of cost or net realizable value. Cost is determined on a first-in, first-out basis or weighted average cost formula to inventories in different subsidiaries. Cost of sales includes all expenditures incurred in bringing the goods to the point of sale. Inventory costs and costs of sales include direct costs of the raw material, inbound freight charges, warehousing costs, handling costs (receiving and purchasing) and utilities and overhead expenses related to the Company’s manufacturing and processing facilities. Shipping and handling charges billed to customers are included in revenue (2024 - $473,843; 2023 - $522,033). Shipping and handling costs incurred are included in cost of goods sold (2024 - $895,463; 2023 - $944,811).
(d) Allowance for Doubtful Accounts.
The Company’s expected credit losses are determined through a review using historical credit loss experience; changes in asset specific characteristics, current conditions, and reasonable and supportable future forecasts, among other specific account data, and is performed at least quarterly. The Company develops and documents its methodology to determine its allowance for expected credit losses. Risk characteristics used by the Company may include customer mix, knowledge of customers and general economic conditions of the various local economics, among others. Specific account balances are written off when management determines the amounts to be uncollectible. Management has reviewed the balance reserved through the allowance for expected losses and believes it is reasonable.
(e) Property, Equipment, Leaseholds and Intangible Assets.
The following assets are recorded at cost and depreciated using the methods and annual rates shown below:
SCHEDULE OF METHOD OF DEPRECIATION
Manufacturing equipment
20% Declining balance
Office equipment
20% Declining balance
Building and improvements
10% Declining balance
Automobiles
Straight-line over 5 years
Technology
Straight-line over 10 years
The Company capitalizes expenditures for improvements that significantly extend the useful life of an asset. The Company recognizes a gain (loss) on a sale of property, equipment, leaseholds and intangible assets based upon the proceeds received on the sale less the net carrying value of the asset. The Company charges expenditures for maintenance and repairs to operations when incurred.
(f) Impairment of Long-Lived Assets.
Property, Equipment, Leasehold, and Definite-lived Intangible Assets:
The Company reviews the carrying amount of our property, equipment, leasehold, and definite-lived intangible assets for impairment when events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. We measure recoverability of these assets by comparing the carrying amounts to the future undiscounted cash flows that the assets or asset group are expected to generate. If the carrying value of the assets or asset group are not recoverable, impairment is measured and recognized as the amount by which the carrying value exceeds its fair value. Fair value is generally determined based on discounted future cash flows.
Goodwill and Indefinite-lived Intangible Assets:
Goodwill and indefinite-lived intangible assets are tested for impairment annually by the Company on December 31 or more frequently if events or changes in circumstances indicate that the carrying amount may not be recoverable. Goodwill is tested for impairment at the reporting unit level using a two-step process which includes a qualitative and quantitative assessment. Indefinite-lived intangible assets are tested for impairment by comparing their fair value to their carrying amount. If the carrying amount exceeds the fair value, an impairment loss is recognized in the period it is identified. The Company determines fair value using appropriate valuation methodologies, including discounted cash flow models and market-based approaches, which incorporate assumptions regarding future performance, growth rates, discount rates, and other relevant factors. Any impairment losses recognized are recorded as an expense in the consolidated statements of income.
(g) Foreign Currency.
The functional currency of the Company is the U.S. dollar. The functional currency of three of the Company’s subsidiaries is the Canadian dollar. The translation of the Canadian dollar to the reporting currency of the Company, 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 period. Translation adjustments arising on conversion of the Company’s financial statements from the subsidiary’s functional currency, Canadian dollars, into the reporting currency, U.S. dollars, are excluded from the determination of income (loss) and are disclosed as other comprehensive income in the consolidated statements of operations and comprehensive income.
Foreign exchange gains and losses relating to transactions not denominated in the applicable local currency are included in operating income (loss) if realized during the year and in comprehensive income (loss) if they remain unrealized at the end of the year.
(h) Revenue Recognition.
The Company generates revenue primarily from energy and water conservation products and biodegradable polymers, as further discussed in Note 17.
The Company follows a five-step model for revenue recognition. The five steps are: (1) identification of the contract(s) with the customer, (2) identification of the performance obligation(s) in the contract(s), (3) determination of the transaction price, (4) allocation of the transaction price to the performance obligation, and (5) recognition of revenue when (or as) the performance obligation is satisfied. The Company has fulfilled its performance obligations when control transfers to the customer, which is generally at the time the product is shipped since risk of loss is transferred to the purchaser upon delivery to the carrier. For shipments which are free-on-board shipping point, the Company has elected to account for shipping and handling activities as a fulfillment cost rather than as an additional promised service and performance obligation.
Since the Company’s inception, product returns have been insignificant; therefore, no provision has been established for estimated product returns.
Deferred revenues consist of products sold to distributors with payment terms greater than the Company’s customary business terms due to lack of credit history or operating in a new market in which the Company has no prior experience. The Company defers the recognition of revenue until the criteria for revenue recognition has been met and payments become due or cash is received from these distributors.
(i) Stock Issued in Exchange for Services.
The Company’s common stock issued in exchange for services is valued at fair value based upon trading prices of the Company’s common stock on the dates of the stock transactions. The corresponding expense of the services rendered is recognized over the period that the services are performed.
(j) Stock-based Compensation.
Stock-based compensation expense is recognized for equity awards granted to employees, directors and other eligible participants based on the fair value of the awards at the grant date. For stock options, fair value is estimated using an appropriate valuation model such as the Black-Scholes option pricing model. The fair value of stock options is recognized as an expense of the requisite service period, typically the vesting period, using the graded-vesting method. The Company estimates expensed forfeitures based on historical data and adjusts stock-based compensation expenses accordingly. Shares are issued from Treasury upon exercise of stock options.
(k) Other Comprehensive Income.
Other comprehensive income refers to revenues, expenses, gains and losses that under generally accepted accounting principles are included in comprehensive income, but are excluded from net income as these amounts are recorded directly as an adjustment to stockholders’ equity. The Company’s other comprehensive income is comprised only of unrealized foreign exchange gains and losses related to the translation of subsidiaries’ functional currency into the reporting currency.
(l) Income Per Share.
Basic earnings per share is computed by dividing income available to common stockholders by the weighted average number of common shares outstanding in the period. Diluted earnings per share are calculated giving effect to the potential dilution of the exercise of options and warrants. Common equivalent shares, composed of incremental common shares issuable upon the exercise of stock options and warrants are included in diluted net income per share to the extent that these shares are dilutive. Common equivalent shares that have an anti-dilutive effect on net income per share have been excluded from the calculation of diluted weighted average shares outstanding for the years ended December 31, 2024 and 2023.
(m) Use of Estimates.
The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates and would impact the results of operations and cash flows.
Estimates and underlying assumptions are reviewed at each period end. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected.
Significant areas requiring the use of management estimates include assumptions and estimates relating to the valuation of goodwill and intangible assets, valuation of assets acquired at fair value, asset impairment analysis, share-based payments, valuation allowances for deferred income tax assets, determination of useful lives of property, equipment and leaseholds and intangible assets, recoverability of accounts receivable, recoverability of investments, discount rates for right of use assets and the costing and recoverable value of inventory.
(n) Fair Value of Financial Instruments.
Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The standard describes a fair value hierarchy based on three levels of inputs described below, of which the first two are considered observable and the last unobservable, that may be used to measure fair value.
● Level 1 - Quoted prices in active markets for identical assets or liabilities.
● Level 2 - Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
● Level 3 - Unobservable inputs that are supported by little or no market activity which is significant to the fair value of the assets or liabilities.
The fair values of cash, term deposits, investments and the line of credit for all periods presented approximate their respective carrying amounts due to the short term nature of these financial instruments.
The fair value of the long term debt for all periods presented approximate their respective carrying amounts due to these financial instruments being at market rates.
(o) Contingencies.
Certain conditions may exist as of the date the consolidated financial statements are issued which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company’s management and its legal counsel assess such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company’s legal counsel evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.
If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, the estimated liability would be accrued in the Company’s consolidated financial statements. If the assessment indicates that a potential material loss contingency is not probable, but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material, would be disclosed.
Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed. Legal fees associated with loss contingencies are expensed as incurred. The Company is not aware of any contingencies at the date of these consolidated financial statements.
(p) Income Taxes.
Income taxes are computed by multiplying the Company’s taxable net income by the Company’s effective tax rates. Deferred income tax assets and liabilities are recognized for the future tax consequences attributable to differences between the consolidated financial statement carrying amounts of existing assets and liabilities and their respective tax bases, and operating loss carry-forwards, if any. Deferred income tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred income tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is provided to reduce the carrying amount of deferred income tax assets if it is considered more likely than not that some portion, or all, of the deferred income tax assets will not be realized.
It is the Company’s policy to provide for uncertain tax positions and the related interest and penalties based upon management’s assessment of whether a tax benefit is more likely than not to be sustained upon examination by tax authorities. At December 31, 2024, the Company believes it has appropriately accounted for any unrecognized tax benefits.
To the extent the Company prevails in matters for which a liability for an unrecognized benefit is established or is required to pay amounts in excess of the liability, the Company’s effective tax rate in a given financial statement period may be affected. Interest and penalties associated with the Company’s tax positions are recorded as interest expense in the consolidated statements of income and comprehensive income.
(q) Risk Management.
The Company’s credit risk is primarily attributable to its accounts receivable. The amounts presented in the accompanying consolidated balance sheets are net of allowances for doubtful accounts, estimated by the Company’s management based on prior experience and the current economic environment. The Company is exposed to credit-related losses in the event of non-payment by customers. Credit exposure is minimized by dealing with only credit worthy counterparties. Revenue for the Company’s three primary customers totaled $20,779,311 (54%) for the year ended December 31, 2024 (2023 - $20,482,798 or 53%). Accounts receivable for the Company’s three primary customers totaled $7,585,199 (65%) at December 31, 2024 (2023 - $6,561,164 or 67%).
The credit risk on cash is limited because the Company limits its exposure to credit loss by placing its cash with major financial institutions. The Company maintains cash balances at financial institutions which at times exceed federally insured amounts. The Company has not experienced any losses in such accounts.
The Company is exposed to foreign exchange risk to the extent that market value rate fluctuations materially differ for financial assets and liabilities denominated in foreign currencies.
In order to manage its exposure to foreign exchange risks, the Company closely monitors the fluctuations in the foreign currency exchange rates and the impact on the value of cash, accounts receivable, and accounts payable and accrued liabilities. The Company has not hedged its exposure to currency fluctuations.
The Company is exposed to interest rate risk to the extent that the fair value or future cash flows for financial liabilities will fluctuate as a result of changes in market interest rates. The Company is exposed to interest rate risk on its long-term debt subject to fixed long-term interest rates.
In order to manage its exposure to interest rate risk, the Company closely monitors fluctuations in market interest risks and will refinance its long-term debt where possible to obtain more favourable rates.
(r) Leases.
Leases are evaluated and classified as either operating or finance leases by the lessee and as either operating, sales-type or direct financing leases by the lessor. For leases with terms greater than 12 months, the Company records the related right-of-use (“ROU”) asset and lease obligation at the present value of lease payments over the term. Leases may include fixed rental escalation clauses, renewal options and / or termination options that are factored into the determination of lease payments when appropriate. The Company’s operating leases are included in ROU assets, lease liabilities-current portion and lease liability-long term portion in the accompanying consolidated balance sheets. ROU assets represent the Company’s right to use an underlying asset for the lease term, and lease liabilities represent the obligation to make lease payments arising from the lease. The Company’s leases do not usually provide a readily determinable implicit rate; therefore, an estimate of the Company’s incremental borrowing rate is used to discount the lease payments based on information available at the lease commencement date.
(s) Investments.
Investment, at cost
The Company accounts for investments in equity securities that do not have a readily determinable fair value using the cost method. These investments are initially recorded at cost and are not subsequently remeasured unless impaired. Dividends received from cost-method investments are recognized as income when declared, provided they do not represent a return of capital. The Company evaluates these investments for impairment at each reporting period based on qualitative factors, such as financial condition, operational performance, and general market conditions affecting the investee. If an investment is determined to be impaired and the impairment is considered other than temporary, the carrying amount is reduced to its estimated recoverable value, with the impairment loss recognized in earnings.
Investment, equity method
The Company accounts for investments in entities over which it has significant influence, but not control, using the equity method of accounting. Under the equity method, the investment is initially recorded at cost, and the carrying amount is subsequently adjusted for the Company’s share of the investee’s income, losses, and dividends received. When a portion of an equity-method investment is sold, the Company recognizes a gain or loss on the sale based on the difference between the carrying amount of the investment sold and the proceeds received. The Company adjusts the carrying amount of the remaining investment based on its proportionate share of the investee’s equity after the sale. The Company assesses its equity-method investments for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. If the carrying amount of an equity-method investment exceeds its recoverable amount, an impairment loss is recognized.
(t) Reclassification.
Certain prior year amounts have been reclassified to conform to the 2024 financial statements presentation. Reclassifications had no effect on net income, cash flows, or stockholders’ equity as previously reported.
(u) Goodwill and Intangible Assets.
Goodwill
Goodwill represents the excess of the purchase price over the fair value of identifiable net assets acquired in a business combination. Goodwill is assigned to reporting units at the date of acquisition and is not amortized but is subject to periodic impairment testing. The carrying amount of goodwill is adjusted only in the event of impairment or upon the disposal of a business.
Intangible Assets
Intangible assets acquired separately are recorded at cost, while those acquired in a business combination are recognized at fair value as of the acquisition date. Intangible assets are classified into the following categories:
● Definite-Lived Intangible Assets - These assets are amortized over their estimated useful lives on a straight-line basis or another systematic basis that better reflects the pattern of consumption of economic benefits. The estimated useful lives of these assets are reviewed periodically to determine whether adjustments are necessary.
● Indefinite-Lived Intangible Assets - Certain intangible assets are classified as indefinite-lived when there is no foreseeable limit to the period over which they are expected to contribute to cash flows. These assets are not amortized but are subject to periodic evaluation to confirm their classification remains appropriate.
(v) Recent Accounting Pronouncements.
In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-07 (Topic 280) Improvements to Reportable Segment Disclosures. The new guidance requires disclosure of significant segment expenses that are (1) regularly provided to or easily computed from information regularly provided to the chief operating decision maker and (2) included in the reported measure of segment profit or loss. The new standard also allows companies to disclose multiple measures of segment profit or loss if those measures are used to assess performance and allocate resources. We adopted this guidance which resulted in additional required disclosures included in our consolidated financial statements for the year ended December 31, 2024 and segment disclosure for the comparative year ended December 31, 2023 were modified retrospectively to include the new requirements.
In December 2023, the FASB issued ASU 2023-09 (Topic 740) Improvements to Income Tax Disclosures. The new guidance is intended to enhance annual income tax disclosures to address investor requests for more information about the tax risks and opportunities present in an entity’s operations. The amendments in this standard require disclosure of additional information in specified categories with respect to the reconciliation of the effective tax rate to the statutory rate (the rate reconciliation) for federal, state, and foreign income taxes. They also require greater detail about individual reconciling items in the rate reconciliation to the extent the impact of those items exceeds a specified threshold. In addition to new disclosures associated with the rate reconciliation, the amendments in this update require information pertaining to taxes paid (net of refunds received) to be disaggregated for federal, state, and foreign taxes and further disaggregated for specific jurisdictions to the extent the related amounts exceed a quantitative threshold. The amendments in this update are effective on January 1, 2025 for annual periods beginning after December 15, 2024, and early adoption is permitted. The Company does not expect the adoption to have a material impact on the consolidated financial statements and has not early adopted the standard.
In November 2024, the FASB issued ASU 2024-03, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, which requires disclosure about the types of costs and expenses included in certain expense captions presented on the income statement. The new disclosure requirements are effective for the Company’s annual periods beginning after December 15, 2026, and interim periods beginning after December 15, 2027, with early adoption permitted, and may be applied either prospectively or retrospectively. The Company is currently evaluating the ASU to determine its impact on our consolidated financial statements and disclosures.
Management does not believe that any other recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying financial statements.
3. LEASES
In January 2016, NanoChem Solutions Inc. leased a space in Naperville, IL for office and research and development. The lease was for an initial five years and renewable every five years for a further five years. In March 2024, the Company consolidated NanoChem operations into the Peru, IL locations and terminated the lease in Naperville, IL. The Company had to pay a penalty of $35,910 and forfeited the $5,440 security deposit to terminate the lease early and incurred a loss of $41,350 on early termination of the lease that is shown on the consolidated statement of income and comprehensive income as a part of non-operating income (loss). The table below summarizes the right-of-use asset and lease liability for the periods ended December 31, 2024 and 2023.
SUMMARY OF RIGHT-OF-USE ASSET AND LEASE LIABILITY
Right of Use Assets
Balance at December 31, 2022 $ 167,222
Amortization (51,929 )
Balance at December 31, 2023 $ 115,293
Amortization (13,694 )
Early termination of lease (101,599 )
Balance at December 31, 2024 $ -
Lease Liability
Balance at December 31, 2022 $ 167,222
Lease interest expense 6,151
Payments (58,080 )
Balance at December 31, 2023 $ 115,293
Lease interest expense 1,186
Payments (14,880 )
Early termination of lease (101,599 )
Balance at December 31, 2024 $ -
4. ACCOUNTS RECEIVABLE
SCHEDULE OF ACCOUNTS RECEIVABLE
Accounts receivable $ 11,983,200 $ 10,133,249
Allowances for doubtful accounts (287,102 ) (290,193 )
Total accounts receivable $ 11,696,098 $ 9,843,056
5. INVENTORIES
SCHEDULE OF INVENTORY
Completed goods $ 3,060,508 $ 2,682,158
Raw materials and supplies 7,829,687 8,452,731
Total inventory $ 10,890,195 $ 11,134,889
6. PROPERTY, EQUIPMENT AND LEASEHOLDS
SCHEDULE OF PROPERTY, EQUIPMENT AND LEASEHOLDS
Accumulated
Cost Depreciation Net
Buildings and improvements $ 12,795,750 $ 4,521,212 $ 8,274,538
Automobiles 196,255 168,807 27,448
Office equipment 124,526 117,011 7,515
Manufacturing equipment 15,318,758 6,922,667 8,396,091
Land 440,592 - 440,592
Leasehold improvements 10,000 10,000 -
Technology 94,945 94,945 -
$ 28,980,826 $ 11,834,642 $ 17,146,184
Accumulated
Cost Depreciation Net
Buildings and improvements $ 12,341,605 $ 3,896,887 $ 8,444,718
Automobiles 196,255 140,040 56,215
Office equipment 177,623 165,048 12,575
Manufacturing equipment 10,017,466 5,799,779 4,217,687
Land 440,592 - 440,592
Leasehold improvements 88,872 88,872 -
Technology 103,292 103,292 -
$ 23,365,705 $ 10,193,918 $ 13,171,787
Amount of depreciation expense for 2024 was: $1,797,476 (2023 - $1,526,319) and is included in cost of sales in the consolidated statements of income and comprehensive income.
In 2023, the Company sold the boat and $4,589 was recognized as a gain on sales of asset in the consolidated statements of income and comprehensive income.
7. GOODWILL AND INTANGIBLE ASSETS
Goodwill and intangibles assets, all of which relates to the acquisition of ENP Investments in 2018, at December 31, 2024 and 2023 consisted of the following:
SCHEDULE OF GOODWILL AND INDEFINITE LIVED INTANGIBLE ASSETS
December 31, 2024 December 31, 2023
Goodwill $ 2,534,275 $ 2,534,275
Intangibles Assets:
Indefinite lived - trade secrets and trademarks 770,000 770,000
Definite lived - customer lists 2,350,000 2,350,000
Accumulated amortization on definite-lived intangibles assets (1,000,000 ) (840,000 )
Net definite-lived intangible assets 1,350,000 1,510,000
Total intangible assets $ 2,120,000 $ 2,280,000
The amount of amortization for 2024 was $160,000 (2023 - $160,000) and was included in cost of sales in the consolidated statements of income and comprehensive income. Estimated amortization expense over the next five years is as follows:
SCHEDULE OF ESTIMATED FUTURE AMORTIZATION EXPENSE
$ 160,000
160,000
160,000
160,000
160,000
8. LONG TERM DEPOSITS
The Company has security deposits that are long term in nature which consist of damage deposits held by lessors and deposits held by various vendors for equipment purchases.
SCHEDULE OF LONG TERM DEPOSITS
Long term deposits $ 167,882 $ 824,254
9. INVESTMENTS
The Company’s investments at December 31, 2024 and 2023 consisted of the following:
SCHEDULE OF COMPANY’S INVESTMENTS
Investments, at cost:
Lygos Inc., simple agreement for future equity (“SAFE”) agreement $ 1,000,000 $ 1,000,000
Trio Opportunity Corp., 97,000 non-voting Class B shares 970,000 970,000
Investments, at cost: 970,000 970,000
Investment, equity method:
Florida-based LLC 1,454,381 4,063,960
Total $ 3,424,381 $ 6,033,960
In January 2019, the Company invested in a Florida based LLC that is engaged in international sales of fertilizer additives. According to the operating agreement, the Company had a 50% interest in the profit and loss of the Florida based LLC but does not have control. In August 2024, the Company sold a 30.1% interest in the Florida based LLC to a third party for consideration of $2,000,000. In addition, the Company entered a subsequent agreement for the sale of its remaining 19.9% interest over the next five years for an additional $4,000,000. Starting in 2025, the Company will sell a further 3.98% per year upon receipt of that years $800,000 payment. At December 31, 2024, the Company continues to account for this investment using the equity investment as it exercises significant influence.
A summary of the activity associated with the Company’s investment in the Florida based LLC during the years ended December 31, 2024 and 2023 is follows:
SCHEDULE OF EQUITY METHOD INVESTMENT
Balance, December 31, 2022 - 50% interest $ 3,758,895
Balance, December 31, 2022 - 50% interest $ 3,758,895
Company’s proportionate share of earnings 505,065
Distribution received (200,000 )
Sale of 30.1% of Florida based LLC
Balance, December 31, 2023 - 50% interest 4,063,960
Company’s proportionate share of earnings 244,857
Distribution received (510,710 )
Basis of 30.1% of interest sold (2,343,726 )
Balance, December 31, 2024 - 19.9% interest $ 1,454,381
Summarized profit and loss information related to the Florida based LLC is as follows:
SUMMARY OF PROFIT AND LOSS INFORMATION RELATED TO EQUITY ACCOUNTED INVESTMENT
Net sales $ 13,046,436 $ 16,043,468
Gross profit 3,640,973 4,668,177
Net income $ 455,241 $ 1,010,128
During the year ended December 31, 2024, the Company had sales of $8,235,394 (2023 - $10,260,870) to the Florida based LLC, of which $1,866,645 is included within Accounts Receivable as at December 31, 2024 (2023 - $2,073,813).
10. LINE OF CREDIT
(a) In June 2024, ENP Investments renewed the line of credit with Stock Yards Bank and Trust (“Stock Yards”). The revolving line of credit is for an aggregate amount of up to the lesser of (i) $4,500,000, or (ii) 50-80% of eligible domestic accounts receivable plus 50% of inventory, capped at $2,000,000. Interest on the unpaid principal balance of this loan will be calculated using the greater of prime or 4.0%. The interest rate at December 31, 2024 is 7.5% (2023 - 8.5%).
The revolving line of credit contains customary affirmative and negative covenants, including the following: compliance with laws, provisions of financial statements and periodic reports, payment of taxes, maintenance of inventory and insurance, maintenance of operating accounts at Stock Yards, Stock Yard’s access to collateral, formation or acquisition of subsidiaries, incurrence of indebtedness, dispositions of assets, granting liens, changes in business, ownership or business locations, engaging in mergers and acquisitions, making investments or distributions and affiliate transactions. NanoChem is a guarantor of 65% of all the principal and other loan costs not to exceed $2,925,000. The non-controlling interest is the guarantor of the remaining 35% of all the principal and other loan costs not to exceed $1,575,000.
To secure the repayment of any amounts borrowed under the revolving line of credit, the Company granted Stock Yards a security interest in substantially all of the assets of ENP Investments, exclusive of intellectual property assets.
The balance outstanding under this revolving line as of December 31, 2024 was $2,052,159 (2023 - $1,810,479).
(b) In August 2024, the Company renewed the line of credit with Stock Yards Bank and Trust (“Stock Yards”). The revolving line of credit is for an aggregate amount of up to the lesser of (i) $2,000,000, or (ii) 80% of eligible domestic accounts receivable and certain foreign accounts receivable plus 50% of inventory, capped at $1,000,000. Interest on the unpaid principal balance of this loan will be calculated using the greater of prime or 4.0%. The interest rate at December 31, 2024 is 8% (2023 - 8.5%).
The revolving line of credit contains customary affirmative and negative covenants, including the following: compliance with laws, provision of financial statements and periodic reports, payment of taxes, maintenance of inventory and insurance, maintenance of operating accounts at Stock Yards, Stock Yards access to collateral, formation or acquisition of subsidiaries, incurrence of indebtedness, dispositions of assets, granting liens, changes in business, ownership or business locations, engaging in mergers and acquisitions, making investments or distributions and affiliate transactions. The covenants also require that the Company maintain a minimum ratio of qualifying financial assets to the sum of qualifying financial obligations.
To secure repayment of any amounts borrowed under the revolving line of credit, the Company granted Stock Yards a security interest in substantially all of the assets of NanoChem, exclusive of intellectual property assets.
The balance outstanding under this revolving line as of December 31, 2024 were $nil (2023 - $nil).
11. LONG TERM DEBT
Debt, all of which is with StockYards Bank and Trust, at December 31, 2024 and 2023 consisted of the following:
SCHEDULE OF LONG TERM DEBT
December 31, 2024 December 31, 2023
ENP Mendota, 10-year mortgage, 4.35% to 5 year fixed index plus 4.50% interest, monthly payments through to January 2030, collateralized by real property and all rents on said property $ 387,577 $ 399,269
NanoChem, 3-year note payable, 4.90% interest, monthly principal and interest payments through June 2025, collateralized by real property 345,036 1,004,748
ENP Peru, 10-year mortgage, 4.35% interest, monthly principal and interest payments through January 2030, collateralized by real property (1st mortgage) 2,658,381 2,737,232
ENP Peru, 10-year mortgage, 5.4% interest, monthly principal payments plus interest through June 2032, collateralized by real property (2nd mortgage) 243,957 250,207
NanoChem, 3-year note payable, 6.5% interest, interest only payments through to July 2024, then monthly principal and interest payments through December 2025, collateralized by manufacturing equipment 1,355,285 1,475,188
317 Mendota, 5-year note payable, 6.79% interest, interest only payments through June 2024, then monthly principal and interest payments through June 2028 with lump sum payment of $2,024,710 due in June 2028, collateralized by real property 2,223,667 2,248,292
Nanochem, 5-year note payable, 7.0% interest, monthly principal payments plus interest through August 2029, collateralized by manufacturing equipment 1,545,945 -
Long-term debt 8,759,848 8,114,936
Less: current portion (2,140,981 ) (1,281,632 )
Long-term debt non current $ 6,618,867 $ 6,833,304
The following table summarizes the scheduled annual future principal payments as of December 31, 2024
SCHEDULE OF ANNUAL FUTURE PRINCIPAL PAYMENTS
Year Ended December 31, Principal Amount Due
$ 2,140,981
467,149
498,454
2,530,128
Thereafter 3,123,136
Total $ 8,759,848
12. INCOME TAXES
The provision for income tax expense (benefit) is comprised of the following:
SCHEDULE OF PROVISION FOR INCOME TAX EXPENSE (BENEFIT)
Current tax, federal $ 763,471 $ 753,683
Current tax, state 345,380 340,952
Current tax, foreign 217,552 151,236
Current tax expense 1,326,403 1,245,871
Income tax benefit (621,959 ) (1,127,689 )
Current tax, total expense 704,444 118,182
Deferred income tax, federal 101,053 (172,763 )
Deferred income tax, state 45,714 (78,154 )
Deferred income tax, foreign - -
Deferred income tax, total expense (benefit) 146,767 (250,917 )
Total $ 851,211 $ (132,735 )
The following table reconciles the income tax expense at the U.S. Federal statutory rate to income tax expense at the Company’s effective tax rates.
SCHEDULE OF RECONCILIATION OF INCOME TAXES
Income before income tax - United States $ 4,472,950 $ 3,249,901
Income before income tax - Canada 479,850 373,349
Income before income tax 4,952,800 3,623,250
US federal statutory tax rate 21.00 % 21.00 %
Expected income tax expense 1,040,088 760,883
State income tax expense, net of federal tax benefit 371,708 344,208
Non-deductible items 64,857 362,554
Change in estimates and other (194,142 ) (1,585,427 )
Foreign tax rate differential (35,952 ) (92,379 )
Change in valuation allowance (395,348 ) 77,426
Total income taxes expense (benefit) $ 851,211 $ (132,735 )
Included in current income tax expense for the year ended December 31, 2024 is a recovery of $621,959 (2023 - $1,127,689) for a revision of estimated current taxes payable for previous years.
Deferred taxes reflect the tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes. Deferred tax assets (liabilities) at December 31, 2024 and 2023 are comprised of the following:
SCHEDULE OF DEFERRED TAX ASSETS (LIABILITIES)
Canada
Non-capital loss carryforwards $ 1,059,468 $ 855,176
Share issuance costs 1,024 -
Property, equipment and leaseholds 27,995 30,916
Deferred tax assets gross 1,088,487 886,092
Valuation allowance (1,088,487 ) (886,092 )
Net deferred tax asset $ - $ -
United States
Net operating loss carryforwards $ 190,024 $ -
Property, equipment and leaseholds 502,646 36,093
Deferred tax asset 692,670 36,093
Valuation allowance (192,953 ) -
Net deferred tax asset $ 499,717 $ 36,093
Intangible assets $ (516,414 ) $ (11,346 )
Investments (105,322 ) -
Deferred tax liability (621,736 ) (11,346 )
Net deferred tax asset (liability) $ (122,019 ) $ 24,747
The Company has non-capital loss carryforwards of approximately $4,606,383 which may be carried forward to apply against future year income tax for Canadian income tax purposes, subject to the final determination by taxation authorities, expiring in the following years:
SCHEDULE OF NON OPERATING LOSS CARRYFORWARDS
Loss
$ 249,807
865,746
566,109
1,555,780
134,471
396,186
301,063
315,157
222,064
Total $ 4,606,383
As at December 31, 2024, the Company has federal and state income tax net operating loss carryforwards of $623,028 available for US tax purposes. The NOLs carry forward indefinitely, with utilization limited to offsetting up to 80% of taxable income in any given year.
Accounting for Uncertainty for Income Tax
The Company recognizes income tax liabilities from uncertain tax positions where there is uncertainty as to a tax position being sustainable using the more-likely-than-not threshold. During the years ended December 31, 2024 and 2023, the total liability for uncertain tax positions increased by $419,214 and $464,185 respectively, primarily due to increased liabilities based on existing tax positions. As of December 31, 2024 and 2023, the Company has recognized liabilities for uncertain tax positions of $2,754,007 and $2,334,793, respectively, which is included in income taxes payable on the consolidated balance sheets. All recorded uncertain tax positions impact the Company’s effective tax rate. The timing of any future settlements or payments related to uncertain tax positions is uncertain.
Additionally, the Company has accrued interest and penalties related to these unrecognized tax benefits and other items, which are recorded as a component of income tax expense (benefit). As of December 31, 2024 and 2023, the Company recorded an additional $333,086 and $193,551 in accrued interest and penalties. At December 31, 2024 and 2023, the Company had accrued interest and penalties related to unrecognized tax benefits of $1,237,637 and $904,549 respectively, which is included in income taxes payable on the consolidated balance sheets.
13. INCOME PER SHARE
The Company presents both basic and diluted income per share on the face of its consolidated statements of income and comprehensive income. Basic and diluted income per share are calculated as follows:
SCHEDULE OF BASIC AND DILUTED LOSS PER SHARE
Net income attributable to controlling interest $ 3,038,529 $ 2,775,864
Weighted average common shares outstanding:
Basic 12,454,957 12,434,886
Diluted 12,680,668 12,489,467
Net income per common share attributable to controlling interest:
Basic and diluted $ 0.24 $ 0.22
Certain stock options whose terms and conditions are described in Note 14, “Stock Options” could potentially dilute basic EPS in the future, but were not included in the computation of diluted EPS because to do so would have been anti-dilutive. Those anti-dilutive options are as follows.
SCHEDULE OF ANTI-DILUTIVE OPTIONS
Anti-dilutive options 745,000 740,000
There were no preferred shares issued and outstanding during the years ended December 31, 2024 and 2023.
14. STOCK OPTIONS
The Company has a stock option plan (“Plan”). The purpose of this Plan is to provide additional incentives to key employees, officers, directors and consultants of the Company and its subsidiaries in order to help attract and retain the best available personnel for positions of responsibility and otherwise promote the success of the Company’s business. It is intended that options issued under this Plan constitute non-qualified stock options. The general terms of awards under the option plan are that 100% of the options granted will vest the year following the grant unless a executive employee is granted a multi-year stock option grant where an equal amount vests over the next 5 years. The maximum term of options granted is 5 years and the exercise price for all options are issued for not less than fair market value at the date of the grant.
The following table summarizes the Company’s stock option activities for the years ended December 31, 2024 and 2023:
SCHEDULE OF STOCK OPTION ACTIVITIES
Number of shares Exercise price
per share Weighted average
exercise price
Balance, December 31, 2022 1,686,000 $ 1.70 - 4.13 $ 3.26
Cancelled or expired (564,000 ) $ 3.46 - 4.13 $ 3.55
Exercised (8,000 ) $ 1.70 $ 1.70
Balance, December 31, 2023 1,114,000 $ 1.75 - 3.61 $ 3.13
Granted 1,081,000 $ 2.00 - 4.05 $ 2.12
Cancelled or expired (275,000 ) $ 1.75 - 3.61 $ 2.54
Exercised (80,000 ) $ 1.75 - 2.44 $ 2.31
Balance, December 31, 2024 1,840,000 $ 2.00 - 4.05 $ 2.68
Exercisable, December 31, 2024 939,000 $ 2.00 - 3.61 $ 2.71
During the years ended December 31, 2024 and 2023, the Company recognized stock based compensation associated with stock options as follows:
SCHEDULE OF RECOGNIZED STOCK BASED COMPENSATION
Line item on the statement of income and comprehensive income:
Wages and administrative salaries $ 623,000 $ 331,609
Consulting 50,130 63,471
Stock based compensation $ 673,130 $ 395,080
During the year ended December 31, 2024, the Company granted 102,000 (2023 - nil) stock options to consultants and 979,000 (2023 - nil) stock options to employees. The fair value of options granted during 2024 was calculated using the following range of assumptions:
SCHEDULE OF STOCK OPTION FAIR VALUE ASSUMPTIONS
Expected life - years 3.0
Interest rate 1.76 - 4.11%
Volatility 66.01 - 71.59%
Fair value of options granted $1.46 - 2.02
As of December 31, 2024, the weighted-average remaining contractual life of outstanding and exercisable options is 3.4 years and 3.1 years, respectively. As of December 31, 2024, there was approximately $603,850 of compensation expense related to non-vested awards that is expected to be recognized over a weighted average period of 1.9 years.
The aggregate intrinsic value of options outstanding and exercisable at December 31, 2024 is $1,709,850 (2023 - $nil) and $843,790 (2023 - $nil), respectively. During the year ended December 31, 2024, the intrinsic value of stock options exercised was $88,730 (2023 - $11,520).
15. CAPITAL STOCK
During the year ended December 31, 2024, 47,000 shares were issued upon the exercise of employee stock options (2023 - 8,000) and 33,000 shares were issued upon the exercise of consultant stock options (2023 - nil).
During the year ended December 31, 2024, the Company announced a special dividend of $0.10 per share that was paid on May 16, 2024 to shareholders for a total of $1,255,053 (2023 - $0.05/share for a total of $626,777).
During the year ended December 31, 2023, the Company issued 1,272 shares to a consultant for services rendered, resulting in an expense of $4,070 on the consolidated statements of income and comprehensive income.
16. NON-CONTROLLING INTERESTS
(a) ENP Investments is a limited liability corporation (“LLC”) that manufactures and distributes golf, turf and ornamental agriculture products in Mendota, Illinois. The Company owns a 65% interest in ENP Investments through its wholly-owned subsidiary NanoChem. An unrelated party (“NCI”) owns the remaining 35% interest in ENP Investments. ENP Mendota is a wholly owned subsidiary of ENP Investments. ENP Mendota is a LLC that leases warehouse space. For financial reporting purposes, the assets, liabilities and earnings of both of the LLC’s are consolidated into these financial statements. The NCI’s ownership interest in ENP Investments is recorded in non-controlling interests in these consolidated financial statements. The non-controlling interest represents NCI’s interest in the earnings and equity of ENP Investments. ENP Investments is allocated to the TPA segment. See Note 17.
ENP Investments makes cash distributions to its equity owners based on formulas defined within its Ownership Interest Purchase Agreement dated October 1, 2018. Distributions are defined in the Ownership Interest Purchase Agreement as cash on hand to the extent it exceeds current and anticipated long-term and short-term needs, including, without limitation, needs for operating expenses, debt service, acquisitions, reserves, and mandatory distributions, if any.
From the effective date of acquisition onward, the minimum distributions requirements under the Ownership Interest Purchase Agreement were satisfied. The total distribution from the effective date of acquisition onward was $4,020,679.
SCHEDULE OF DISTRIBUTIONS
Balance, December 31, 2022 $ 2,605,034
Distribution (719,439 )
Non-controlling interest share of income 1,015,604
Balance, December 31, 2023 2,901,199
Distribution (794,722 )
Non-controlling interest share of income 1,164,037
Balance, December 31, 2024 $ 3,270,514
During the year ended December 31, 2024, the Company had sales of $8,050,462 (2023 - $6,811,083) to the NCI, of which $5,377,088 is included within Accounts Receivable as of December 31, 2024 (2023 - $4,225,028).
b) 317 Mendota is a LLC that owns real estate that the Company occupies part of while renting out the excess. The Company owns a 80% interest in 317 Mendota and an unrelated party (“317 NCI”) owns the remaining 20% interest in 317 Mendota. For financial reporting purposes, the assets, liabilities and earnings of 317 Mendota are consolidated into these financial statements. The 317 NCI’s ownership interest in 317 Mendota is recorded in non-controlling interests in these consolidated financial statements. The non-controlling interest represents 317 NCI’s interest in the earnings and equity of 317 Mendota. 317 Mendota is allocated to the TPA segment as that is the intended use of the building.
SCHEDULE OF NON CONTROLLING INTEREST RELATED TO ACQUISITION
Balance, December 31, 2022 $ -
Acquisition 200,000
Non-controlling interest share of loss (35,483 )
Balance, December 31, 2023 164,517
Non-controlling interest share of loss (100,977 )
Balance, December 31, 2024 $ 63,540
17. SEGMENTS AND SIGNIFICANT CONCENTRATIONS
The Company operates in two segments:
(a) Energy and water conservation products (as shown under the column heading “EWCP” below), which consists of a (i) liquid swimming pool blankets which save energy and water by inhibiting evaporation from the pool surface, and (ii) food-safe powdered form of the active ingredient within the liquid blankets and which are designed to be used in still or slow moving drinking water sources.
(b) Biodegradable polymers, also known as TPA’s (as shown under the column heading “BCPA” below), used by the petroleum, chemical, utility and mining industries to prevent corrosion and scaling in water piping. This product can also be used in detergents to increase biodegradability and in agriculture to increase crop yields by enhancing fertilizer uptake.
The third product line is nitrogen conservation products used for the agriculture industry. These products decrease the loss of nitrogen fertilizer after initial application and allows less fertilizer to be used. These products are made and sold by the Company’s TPA division.
The Company also manufactures food grade products that are made and sold by the TPA division.
The Company’s reportable segments are strategic business units that offer different, but synergistic products and services. They are managed separately because each business requires different technology and marketing strategies. The economic factors that impact the nature, amount, timing, and uncertainty of revenue and cash flows vary among the Company’s operating segments and the geographical regions in which they operate. This operating segment structure is used by the Chief Operating Decision Maker (“CODM”), who has been determined to be the Chief Executive Officer, to make key operating decisions and assess performance of the Company. The CODM evaluates segment operating performance, and makes resource allocation and performance evaluation decisions, based on gross profit and net operating income.
Year ended December 31, 2024:
SCHEDULE OF REPORTABLE SEGMENTS
EWCP BPCA Other (1) Consolidated
Sales $ 759,549 $ 37,475,311 $ - $ 38,234,860
Cost of sales 350,345 24,644,616 - 24,994,961
Gross profit 409,204 12,830,695 - 13,239,899
Wages and administrative salaries 90,043 3,653,182 - 3,743,225
Office & Miscellaneous 45,327 759,410 805,307
Other segment items (2) 57,056 2,699,196 419,709 3,175,961
Net operating income 216,778 5,718,907 (420,279 ) 5,515,406
Interest expense 609,956 - 610,265
Depreciation and amortization (included in COGS) 15,298 1,942,178 - 1,957,476
Capital expenditures - 4,964,736 - 4,964,736
Assets (3) 2,588,731 56,415,104 964,744 59,968,579
Year ended December 31, 2023:
EWCP BPCA Other (1) Consolidated
Sales $ 572,845 $ 37,751,961 $ - $ 38,324,806
Cost of sales 359,429 27,522,292 - 27,881,721
Gross profit 213,416 10,229,669 - 10,443,085
Wages and administrative salaries 92,302 3,772,359 - 3,864,661
Office & Miscellaneous 46,968 465,535 512,896
Other segment items (2) 79,809 2,109,582 376,581 2,565,972
Net operating income (5,663 ) 3,885,680 (376,975 ) 3,503,042
Interest expense 498,279 - 498,666
Depreciation (included in COGS) 17,411 1,668,908 - 1,686,319
Capital expenditures - 4,990,675 - 4,990,675
Assets (3) 3,889,596 50,627,932 953,527 55,471,055
(1) Other is not considered an operating segment and includes expenses and income not identifiable to an operating segment and is not included in operating segment results
(2) Other segment items for each reportable segment includes insurance, consulting, research, and professional fees.
(3) Segment assets include cash, term deposits, accounts receivable, inventory, prepaid expenses, property, equipment and leaseholds, right of use assets, security deposits, intangible assets, and goodwill.
Sales by territory are shown below:
SCHEDULE OF REVENUE GENERATED IN UNITED STATES AND CANADA
Canada $ 400,693 $ 755,844
United States and abroad 37,834,167 37,568,962
Total $ 38,234,860 $ 38,324,806
The Company’s long-lived assets (property, equipment, leaseholds, right of use assets, intangibles, and goodwill) are located in Canada and the United States as follows:
SCHEDULE OF LONG-LIVED ASSETS ARE LOCATED IN CANADA AND UNITED STATE
Canada $ 116,496 $ 142,577
United States 21,683,963 17,958,778
Total $ 21,800,459 $ 18,101,355
Three customers accounted for $20,779,311 (54%) of sales made in 2024 (2023 - $20,482,798 or 53%).
18. SUBSEQUENT EVENTS
In the three months ended March 31, 2025, the Company issued 67,000 shares to employees and 65,000 shares to consultants upon the exercise of stock options.

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
None.

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ITEM 9A. CONTROLS AND PROCEDURES
Item 9A. Controls and Procedures.
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our periodic reports to the SEC is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and regulations, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. Our disclosure controls and procedures are designed to provide a reasonable level of assurance of reaching our desired disclosure control objectives.
As of the end of the period covered by this Annual Report on Form 10-K for the year ended December 31, 2024 we carried out an evaluation, under the supervision and with the participation of management, including our principal executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined under Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended). Based upon that evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures are effective.
Management’s Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting and for the assessment of the effectiveness of internal control over financial reporting. As defined by the Securities and Exchange Commission, internal control over financial reporting is a process designed by, or under the supervision of our principal executive officer and principal financial officer and implemented by our Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of our financial statements in accordance with U.S. generally accepted accounting principles.
Our internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect our transactions and dispositions of our assets; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of our financial statements in accordance with U.S. generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In connection with the preparation of our annual financial statements, management has undertaken an assessment of the effectiveness of our internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission, or the 2013 COSO Framework. Management’s assessment included an evaluation of the design of our internal control over financial reporting and testing of the operational effectiveness of those controls.
During this assessment, management identified material weaknesses in our internal control over financial reporting (“ICFR”) related to a material adjustment identified during the audit process indicating that controls over the financial statement close and review process were not operating effectively to prevent or detect misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in ICFR, such that there is a reasonable possibility that a material misstatement of the Company’s financial statements will not be prevented or detected on a timely basis. Because of the material weaknesses described above, management has concluded that our ICFR was not effective as of December 31, 2024. In 2025, we have implemented new procedures to improve our financial statement close and review process.
There was no change in our internal control over financial reporting that occurred during the quarterly period ending December 31, 2024 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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ITEM 9B. OTHER INFORMATION
Item 9B. Other Information.
None of our directors or officers adopted or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement (as defined in Item 408(c) of Regulation S-K) during the quarterly period ending December 31, 2024.

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ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Item 10. Directors, Executive Officers and Corporate Governance.
Name
Age
Position
Daniel B. O’Brien
President, Chief Executive Officer, Principal Financial and Accounting Officer and a Director
John H. Bientjes
Director
Robert Helina
Director
Tom Fyles
Director
Ben Seaman
Director
David Fynn
Director
Daniel B. O’Brien has served as our President, Chief Executive Officer and Principal Financial and Accounting Officer, as well as a director since June 1998. He has been involved in the swimming pool industry since 1990, when he founded our subsidiary, Flexible Solutions Ltd. From 1990 to 1998 Mr. O’Brien was also a teacher at Brentwood College where he was in charge of outdoor education.
John H. Bientjes has been a director since 2000. From 1984 to 2018, Mr. Bientjes served as the manager of the Commercial Aquatic Supplies Division of D.B. Perks & Associates, Ltd., located in Vancouver, British Columbia, a company that markets supplies and equipment to commercial swimming pools which are primarily owned by municipalities. Mr. Bientjes retired in 2018. Mr. Bientjes graduated in 1976 from Simon Fraser University in Vancouver, British Columbia with a Bachelor of Arts Degree in Economics and Commerce.
Robert T. Helina has been a director since 2011. Mr. Helina has been involved in the financial services industry for over 35 years which has given him extensive knowledge in business, economics and finance. His specialty is in Corporate Finance and Capital Markets. Mr. Helina holds a Bachelor of Arts degree from Trinity Western University.
Thomas M. Fyles has been a director since 2012. Dr. Fyles holds chemistry degrees from the University of Victoria (B.Sc. 1974) and York University (Ph.D. 1977). Following postdoctoral work in France, he joined the Chemistry Department at the University of Victoria in 1979 where he progressed through the academic ranks to Professor (1992) , Chair (2001 - 2006; 2008), and, on his retirement, Professor Emeritus (2017). His research program spanned analytical, synthetic, and physical chemistry with an emphasis on sensors, membranes, and water treatment processes.
Ben Seaman has been a director of the Company since October 2016. Mr. Seaman has been the CEO of Eartheasy.com Sustainable Living Ltd since 2007, an international ecommerce and wholesale distribution business. His company has contributed over $1M towards clean water projects in Kenya since 2013, has been recognized internationally by the Stockholm Challenge Award, and the Outdoor Industry Inspiration Award in 2016. Prior to that, he worked in sales and investor relations at Flexible Solutions. Mr. Seaman graduated from the University of Victoria with a Bachelor of Science degree in 2004. He has significant experience in launching new products, marketing, distribution and e-commerce in both the US and Canada. He’s a strong believer in the triple bottom line approach to business, giving consideration to social and environmental issues in addition to financial performance.
David Fynn has been a director since 2016. Mr. David Fynn is a Canadian Chartered Professional Accountant and services individuals/companies in many sectors including mining and commodities in his private practice. Mr. Fynn worked as a senior manager with KPMG in Canada and Ernst & Young in the United Kingdom and Saudi Arabia. Since 1996 he has been the principal of D.A. Fynn & Associates Inc., an accounting firm.
Directors are elected annually and hold office until the next annual meeting of our stockholders and until their successors are elected and qualified. All executive offices are chosen by the board of directors and serve at the board’s discretion.
John Bientjes, Thomas Fyles, Ben Seaman and David Fynn are independent directors as that term is defined in section 803 of the listing standards of the NYSE American.
Our Audit Committee, consisting of John Bientjes, Ben Seaman and David Fynn all of whom have strong financial backgrounds, facilitates and maintains open communications with our board of directors, senior management and our independent auditors. Our Audit Committee also serves as an independent and objective party which monitors our financial reporting process and internal control system. In addition, our Audit Committee reviews and appraises the efforts of our independent auditors. Our Audit Committee meets periodically with management and our independent auditors. John Bientjes and David Fynn meet the SEC’s definition of an audit committee financial expert. Each member of the Audit Committee is “independent” as that term is defined in Section 803 of the listing standards of the NYSE American.
Our Compensation Committee, consisting of John Bientjes, Ben Seaman and David Fynn, establishes salary, incentive and other forms of compensation for our Chief Executive Officer and administers our Stock Option Plan. None of our officers participated in deliberations of the compensation committee concerning executive officer compensation. During the year ended December 31, 2024 none of our executive officers served as a member of the compensation committee or as a director of another entity, one of whose executive officers served on our compensation committee or as one of our directors.
We have adopted a Code of Ethics that applies to our Chief Executive Officer, our Chief Financial Officer and our Principal Accounting Officer, as well as our other senior management and financial staff. Interested persons may obtain a copy of our Code of Ethics from our website at www.flexiblesolutions.com.
We believe our directors benefit us for the following reasons:
Name
Reason
Daniel B. O’Brien
Long standing relationship with us.
John J. Bientjes
Long standing relationship with us.
Robert Helina
Corporate finance experience.
Dr. Thomas Fyles
Scientific expertise.
Ben Seaman
Younger generation businessman increases our awareness of internet sales and adds value to our audit and compensation committees
David Fynn
Experienced accountant adds value to our audit and compensation committees

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ITEM 11. EXECUTIVE COMPENSATION
Item 11. Executive Compensation.
Summary Compensation Table
The following table shows in summary form the compensation earned by (i) our Chief Executive Officer and (ii) by each other executive officer who earned in excess of $100,000 during the two fiscal years ended December 31, 2024.
Name and Principal Position Fiscal Year Salary (1) Bonus (2) Restricted Stock Awards (3) Options Awards (4) All Other Annual Compensation (5) Total
Daniel B. O’Brien $ 600,000 - - $ 316,000 - $ 916,000
President, Chief Executive Financial and Accounting Officer $ 785,368 - - $ (660,000 ) - $ 125,368
(1) The dollar value of base salary (cash and non-cash) earned.
(2) The dollar value of bonus (cash and non-cash) earned.
(3) During the periods covered by the table, the value of the shares of restricted stock issued as compensation for services to the persons listed in the table.
(4) The value of all stock options granted during the periods covered by the table. The options granted to Daniel O’Brien in 2022 were cancelled in 2023.
(5) All other compensation received that we could not properly report in any other column of the table.
During the year ended December 31, 2012, the Company determined that Daniel B. O’Brien, the Company’s President and Chief Executive Officer, was underpaid. Accordingly, the Company increased Mr. O’Brien’s annual salary to twice that which was paid to the highest paid employee of the Company. Mr. O’Brien requested his salary be dropped by $100,000/year during 2019 and the Compensation committee agreed.
In the fall of 2023, Daniel O’Brien, CEO, relocated to Grand Cayman in order to help with international sales. He requested that his salary be reduced to a flat $600,000 per year with annual increases at the same rate as other employees receive. The compensation committee agreed and granted Mr. O’Brien’s request.
Non-Qualified Stock Option Plan
In August 2014 we adopted a Non-Qualified Stock Option Plan which authorizes the issuance of up to 1,500,000 shares of our common stock to persons that exercise options granted pursuant to the Plan. Our employees, directors and officers, and consultants or advisors are eligible to be granted options pursuant to the Non-Qualified Plan.
The Plan is administered by our Compensation Committee. The Committee is vested with the authority to determine the number of shares issuable upon the exercise of the options, the exercise price and expiration date of the options, and when, and upon what conditions options granted under the Plan will vest or otherwise be subject to forfeiture and cancellation.
During the fiscal year ended December 31, 2024 we issued nil options pursuant to the Non-Qualified Plan (2023 - nil).
As of December 31, 2024, options to purchase 233,000 shares of our common stock were outstanding under our Non-Qualified Stock Option Plan. The exercise price of these options varies between $2.44 and $3.61 per share and the options expire at various dates between on December 31, 2024 and December 31, 2026.
Stock Option Plans
In 2022 we adopted a Stock Incentive Plan which authorizes the issuance of up to 1,500,000 shares of our common stock to persons that exercise options granted pursuant to the Plan. We have amended the plan in 2025 for issuance up to 2,500,000 shares of our common stock to pursuant to the Plan. Our employees, directors and officers, and consultants or advisors are eligible to be granted options pursuant to the Stock Incentive Plan.
The Plan is administered by our Compensation Committee. The Committee is vested with the authority to determine the number of shares issuable upon the exercise of the options, the exercise price and expiration date of the options, and when, and upon what conditions options granted under the Plan will vest or otherwise be subject to forfeiture and cancellation.
During the fiscal year ended December 31, 2024 we issued 1,081,000 options pursuant to the Stock Incentive Plan (2023 - nil).
As of December 31, 2024, options to purchase 1,607,000 shares of our common stock were outstanding under our Stock Incentive Plan. The exercise price of these options varies between $2.00 and $4.05 and the options expire at various dates between December 31, 2027 and December 31, 2029.
Summary
The following table shows the weighted average exercise price of the outstanding options granted pursuant to both our Non-Qualified Stock Option Plan and Stock Incentive Plan as of December 31, 2024, our most recently completed fiscal year.
Plan Category Number of Securities
to be Issued Upon
Exercise of
Outstanding Options,
Warrants and Rights Weighted-Average
Exercise Price of
Outstanding Options,
Warrants and Rights Number of Securities
Remaining Available for
Future Issuance Under
Equity Compensation
Plans (Excluding
Securities Reflected
in Column (a))
(a) (b) (c)
Non-Qualified Stock Option Plan 233,000 $ 3.04 57,000
Stock Incentive Plan 1,607,000 $ 2.63 457,000
Both our Non-Qualified Stock Option Plan and Stock Incentive Plan have been approved by our shareholders.
No options were exercised by our executive officers during the fiscal year ended December 31, 2024.
Director Compensation
We reimburse directors for any expenses incurred in attending board meetings. We also compensate directors $6,000 annually for each year that they serve with an additional $4,000 paid to the head of the Audit Committee -
Our directors received the following compensation in 2024:
Name Paid in Cash Stock Awards (1) Option Awards (2)
John H. Bientjes $ 10,000 - -
Robert Helina $ 6,000
Tom Fyles $ 6,000 - -
Ben Seaman $ 6,000 - -
David Fynn $ 6,000 - -
(1) The fair value of stock issued for services computed in accordance with ASC 718 on the date of grant.
(2) The fair value of options granted computed in accordance with ASC 718 on the date of grant.
Daniel B. O’Brien was not compensated for serving as a director during 2024.
Insider Trading Arrangements and Policies
We are committed to promoting high standards of ethical business conduct and compliance with applicable laws, rules and regulations. As part of this commitment, we have adopted our Insider Trading Policy governing the purchase, sale, and/or other dispositions of our securities by our directors, officers, employees and others that we believe is reasonably designed to promote compliance with insider trading laws, rules and regulations. A copy of our Insider Trading Policy is filed as Exhibit 19 to this Annual Report on Form 10-K.

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The following table shows the beneficial ownership of our common stock as of March 31, 2025 by (i) each stockholder who is known by us to own beneficially more than five percent of our outstanding common stock, (ii) each of our officers and directors, and (iii) by all of our executive officers and directors as a group.
Shares (1) Percentage Ownership
Daniel B. O’Brien 4,430,156 35.0 %
6001 54 Ave.
Taber, AB
Canada T1G 1X4
John Bientjes 0 %
46081 Greenwood Dr.
Chilliwack, BC
Canada V2R 4C9
Robert Helina 35,000 0.3 %
6001 54 Ave.
Taber, AB
Canada T1G 1X4
Dr. Thomas Fyles 20,000 0.2 %
Box 3065
Victoria, BC
Canada V8W 3V6
Ben Seaman 0 %
Unit 605 5 E. Cordova St.
Vancouver BC
Canada V6A 0A5
David Fynn 0 %
202-2526 Yale Court,
Abbotsford, BC
Canada V2S 8G9
All officers and directors
as a group (6 persons) 4,485,156 35.5 %
Other Principal Shareholders
Comprehensive Financial Planning, Inc. 1,258,521 10.0 %
(1) Includes shares which may be acquired on the exercise of the stock options, all of which were exercisable as of March 31, 2025, listed below.
Name No. of Options Exercise Price Expiration Date
Daniel B. O’Brien 160,000 $ 2.00 December 31, 2028
Robert Helina 5,000 $ 2.44 December 31, 2025
5,000 $ 3.61 December 31, 2026
5,000 $ 3.55 December 31, 2027
5,000 $ 3.55 December 31, 2027
5,000 $ 2.00 December 31, 2028
10,000 $ 2.00 July 1, 2029

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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Item 13. Certain Relationships and Related Transactions, Director Independence.
Not applicable.

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ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Item 14. Principal Accountant Fees and Services.
Assure CPA, LLC audited our consolidated financial statements for the year ended December 31, 2024. Smythe LLP examined our consolidated financial statements for the year ended December 31, 2023.
Audit Fees
Assure CPA, LLC was paid $5,475 in the fiscal year ended December 31, 2024 for professional services rendered in the audit of our financial statements. Smythe LLP was paid $152,354 in the fiscal year ended December 31, 2024 for professional services rendered in the audit of our 2023 annual financial statements and for the reviews of the 2024 condensed interim financial statements included in our quarterly reports on Form 10-Q during that fiscal year. Smythe LLP was paid $127,487 for professional services rendered in the audit of our annual financial statements and for the reviews of the condensed interim financial statements included in our quarterly reports on Form 10-Q during fiscal 2023.
Tax Fees
Smythe LLP has been retained to file our taxes for the fiscal years ended December 31, 2017 through to December 31, 2023. Smythe LLP was paid $25,662 in the fiscal year ended December 31, 2024 (2023 - $14,079) for professional services rendered in preparing our taxes.
All Other Fees
Assure CPA, LLC and Smythe LLP were not paid any other fees for professional services during the fiscal years ended December 31, 2024 and 2023.
Audit Committee Pre-Approval Policies
Rules adopted by the SEC in order to implement requirements of the Sarbanes-Oxley Act of 2002 require public company audit committees to pre-approve audit and non-audit services. Our Audit Committee has adopted a policy for the pre-approval of all audit, audit-related and tax services, and permissible non-audit services provided by our independent auditors. The policy provides for an annual review of an audit plan and budget for the upcoming annual financial statement audit, and entering into an engagement letter with the independent auditors covering the scope of the audit and the fees to be paid. Our Audit Committee may also from time-to-time review and approve in advance other specific audit, audit-related, tax or permissible non-audit services. In addition, our Audit Committee may from time-to-time give pre-approval for audit services, audit-related services, tax services or other non-audit services by setting forth such pre-approved services on a schedule containing a description of, budget for, and time period for such pre-approved services. The policy requires our Audit Committee to be informed of each service and the policies do not include any delegation of our Audit Committee’s responsibilities to management. Our Audit Committee may delegate pre-approval authority to one or more of its members. The member to whom such authority is delegated will report any pre-approval decisions to our Audit Committee at its next scheduled meeting.
During the year ended December 31, 2024 our Audit Committee approved all of the fees paid to Assure CPA, LLC and Smythe LLP. Our Audit Committee has determined that the rendering of all non-audit services by Assure CPA, LLC and Smythe LLP is compatible with maintaining its independence.

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ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
Item 15. Exhibits, Financial Statement Schedules.
Number
Description
3.1
Articles of Incorporation of the Registrant. (1)
3.2
Bylaws of the Registrant. (1)
Insider Trading Policy and Procedures
21.1
Subsidiaries. (2)
23.1
Consent of Independent Accountants.
31.1
Certification of Principal Executive Officer Pursuant to §302 of the Sarbanes-Oxley Act of 2002.
31.2
Certification of Principal Financial Officer Pursuant to §302 of the Sarbanes-Oxley Act of 2002.
32.1
Certification of Principal Executive and Financial Officer Pursuant to 18 U.S.C. §1350 and §906 of the Sarbanes-Oxley Act of 2002.
101.INS
Inline XBRL Instance Document
101.SCH
Inline XBRL Taxonomy Extension Schema Document
101.CAL
Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF
Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB
Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE
Inline XBRL Taxonomy Extension Presentation Linkbase Document
Cover Page Interactive Data File (embedded within the Inline XBRL document)
(1) Previously filed as an exhibit to our Registration Statement on Form 10-SB filed with the Commission on February 22, 2000, and incorporated herein by reference.
(2) Previously filed as an exhibit to our Registration Statement on Form SB-2 filed with the Commission on January 22, 2003, and incorporated herein by reference.