UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30th 2000
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from___________ to ________
Commission file number 000-29649
FLEXIBLE SOLUTIONS INTERNATIONAL INC.
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(Exact name of small business issuer as specified in its charter)
NEVADA NONE
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(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
2614 Queenswood Dr. Victoria BC Canada V8N 1X5
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(Address of principal executive offices)
( 250 )477-9969
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(Issuer's telephone number)
(Former name, former address and former fiscal year if changed since last
report)
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12,13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. Yes[ ] No[ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: Common stock $.001 par value
9,131,136 shares as of June 30th 2000.
<PAGE>
PART 1 - FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS.
Attached hereto and incorporated herein by reference.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following information contains certain forward looking statements that
anticipate future trends or events. These statements are based on certain
assumptions that may prove to be erroneous and are subject to certain risks
including but not limited to the risks of increased competition in the Company's
industry and other risks detailed in the Company's Securities and Exchange
Commission filings. Accordingly, actual results may differ, possibly materially,
from the predictions contained herein.
During the three months ended June 30th 2000, the Company experienced a net
after tax income of $175 046 as compared to income of $59 795 for the three
months ended June 30th 1999. The increase was due to a significant expansion of
operations which began in the first quarter of 2000 and continued through the
second quarter. During this period the Company hired additional personel,
expanded corporate headquarters and increased production. The overall result was
a net income of $175 045 for the second quarter of fiscal 2000 and a net income
for the first six months of fiscal 2000 of $202 081.
RESULTS OF OPERATIONS
Reference is made to Item 2, "Management's Discussion and Analysis" included in
the Company's registration statement on Form 10-SB for the year ended December
31st 1999, as amended, on file with the Securities and Exchange Commission. The
following analysis and discussion pertains to the Company's results of
operations for the three month and six month periods ended June 30th 2000,
compared to the results of operations for the three month and six month periods
ended June 30th 1999, and to changes in the Company's financial condition from
December 31st 1999 to June 30th 2000.
THREE MONTHS ENDED June 30th 2000 and 1999
For the second quarter of the current fiscal year ending June 30th 2000, sales
were $539 858 compared to $259 285 for the same quarter of the previous year.
The increase in sales were as a result of our distributors selling to more
retail outlets in more geographic areas and selling larger quantities to older
accounts.
Operating expenses were $91 521 for the second quarter, up from $39 547 for the
second quarter of last year. This is as a result of increased costs in all
categories of expenses due to the significant
<PAGE>
expansion in sales. The largest increases were in the areas of wages ($40 889),
sub-contracting fees ($12 215) and professional fees ($15 342).
The net income for the quarter was $175 045 which represents a substantial
increase over second quarter last year when the net income was $59 795. The
increase in income was a result of increased sales and lower cost of sales.
The earnings per share (fully diluted) was $0.02 for the three months ended June
30th 2000 compared to $0.01 for the three months ended June 30th 1999.
SIX MONTHS ENDED June 30th 2000
Sales in the first six months ended June 30th 2000 were $800 186 compared to
$309 570 for the six months ended June 30th 1999. As was the case for the three
months ended June 30th 2000 the increase in sales were a result of increased
numbers of customers and increased sales per customer.
Operating expenses for the Company were $158 496 for the six months ended June
30th 2000 up from $60 966 for the six months ended June 30th 1999. The increase
in operating expenses in virtually every category are a result of greatly
increased production and sales by the Company.
The net income for the six months ended June 30th 2000 was $202 081 compared to
a net income of $42 283 for the six months ended June 30th 1999. The increase in
income was due to the increase in sales and the reduction in cost of sales as a
percentage of total sales for the six month period ended June 30th 2000.
The earnings per share (fully diluted) was $0.02 for the six month period ended
June 30th 2000 compared to $0.00 for the six month period ended June 30th 1999.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Historically, the Company has financed it's cash flow requirements through
retained earnings from sales. Cash provided by net earnings which occurred
during the six months ended June 30th was $202 081. This resulted in a total
cash and cash equivalent position of $530 545 at the end of the period.
As of June 30th 2000 the Company had working capital of $530 545 which
represented an increase of $325 795 as compared to the working capital of June
30th 1999. The increase was a result of retained earnings from the third and
fourth quarters of 1999 and the six month period ending June 30th 2000.
The Company has no external sources of liquidity in the form of credit lines
from banks.
Management believes that its available cash will be sufficient to fund the
Company's working capital requirements through December 31st 2000. Management
further believes that available cash will be sufficient to implement the
Company's expansion plans. No investment banking agreements are in place and
there is no guarantee that the Company will be able to raise capital in the
future should that become necessary.
IMPACT OF THE YEAR 2000 ISSUE
The year 2000 issue arises because many computerized systems use two digits
rather than four to identify a year. Date sensitive systems may recognize the
year 2000 as 1900 or some other date, resulting in errors when information using
year 2000 dates is processed. In addition, similar problems may arise in some
systems which use certain dates in 1999 to represent something other than a
date. Although the change in date has occurred, it is not possible to conclude
that all aspects of the year 2000 issue that may affect the company including
those related to customers, suppliers, or other third parties, have been fully
resolved.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS:
The Company does not have any derivative financial instruments as of June 30th
2000. However, the Company is exposed to interest rate risk.
The Company's interest income and expense are most sensitive to changes in the
general level of U.S. and Canadian interest rates. In this regard, changes in
U.S. and Canadian interest rates affect the interest paid on the Company's cash
equivalents as well as the interest paid on debt.
FOREIGN CURRENCY RISK
The Company operates primarily in Canada. Therefore, the Company's business and
financial condition is sensitive to currency exchange rates or any other
restriction imposed on its currency.
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Part II - OTHER INFORMATION
Item 1. Legal proceedings - None
Item 2. Changes in Securities - None
Item 3. Default upon Senior Securities - None
Item 4. Submission of Matters to a Vote of Securities Holders - None
Item 5. Other Information - None
Item 6.(a) Exhibit 27 - Financial Data Schedule
Item 6.(b) Reports on Form 8-K - None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
FLEXIBLE SOLUTIONS INTERNATIONAL INC.
(Registrant)
Dated: July 19 2000 /s/ Dan O'Brien, President and Director
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<PAGE>
FLEXIBLE SOLUTIONS INTERNATIONAL INC.
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEET
QUARTERS ENDED JUNE 30TH 2000 AND 1999
UNAUDITED
2000 1999
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<S> <C> <C>
Assets
Current
Cash $156,057 $116,854
Accounts receivable 301,837 82,924
Inventory 72,009 4,428
Prepaid expenses 642 544
Total Current Assets 530,545 204,750
Property and Equipment 50,276 18,647
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Total Assets $580,821 $223,397
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Liabilities & Stockholders' Equity
Current
Accounts payable $ 12,978 $ 2,731
Sales Taxes Payable 20,080 0
Accrued Liabilities 0 3,370
Income tax payable 104,115 0
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Total current liabilities 137,273 6,104
Stockholders' Equity
Capital Stock
Authorized
50,000,000 Common shares; par value - .001 each
1,000,000 Preferred shares; par value - .01 each
Issued
9,131,316 Common shares 9,131 9,131
Capital in excess of par value 163,653 163,653
Other comprehensive income (loss) (7,773) (2,263)
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Retained earnings (deficit) 278,537 46,775
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Total Stockholders Equity 443,548 217,293
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Total Liabilities and Stockholders' Equity $580,821 $223,397
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</TABLE>
See Notes to Financial Statements.
<PAGE>
FLEXIBLE SOLUTIONS INTERNATIONAL INC.
CONSOLIDATED STATEMENT OF OPERATIONS
QUARTERS ENDED JUNE 30TH 2000 AND 1999
UNAUDITED
2000 1999
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Sales $539,858 $259,285
Cost of Sales 183,116 130,145
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Gross Profit 107,921 3,907
Operating Expenses
Wages 40,889 12,875
Shipping 4,670 1,311
Office 2,909 599
Professional Fees 15,342 7,035
Misc. 3,513 479
Rent 3,740 2,176
Subcontracting Fees 12,215 2,020
Phone 1,522 829
Travel 2,798 1,132
Entertainment 196 0
Commissions 968 10,393
Service Charges 84 110
Depreciation 2,674 588
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Total Operating Expenses 91 521 39 547
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Gross Income 265 221 90 598
Income Tax 90 175 30 803
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Net Income (loss) 175 045 59 795
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Income per share 0.02 0.01
Weighted average number of shares
outstanding 9 131 316
See Notes to Financial Statements.
<PAGE>
FLEXIBLE SOLUTIONS INTERNATIONAL INC
CONSOLIDATED STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30TH 2000 AND 1999
UNAUDITED
2000 1999
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Sales $800,186 $309,570
Cost of Sales 335,433 175,518
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Gross Profit 464,753 134,052
Operating Expenses
Wages 67,546 17,418
Shipping 7,509 2,371
Office 3,779 690
Professional Fees 33,724 7,471
Misc. 5,427 2,315
Rent 6,120 1,262
Subcontracting Fees 20,063 2,020
Phone 2,401 1,302
Travel 5,004 2,387
Entertainment 320 0
Commissions 1,231 20,779
Service Charges 166 159
Depreciation 5,208 1,095
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Total Operating Expenses 158,496 60,966
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Gross Income 306,197 73,086
Income Tax 104,115 26,311
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Net Income (loss) 202,082 46,775
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Income per share 0.02 0.01
Weighted average number of shares
outstanding 9 131 316
See Notes to Financial Statements.
<PAGE>
FLEXIBLE SOLUTIONS INTERNATIONAL INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
QUARTERS ENDED JUNE 30TH 2000 AND 1999
UNAUDITED
2000 1999
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Cash Flows from Operating Activities
Net Income (loss) 175,045 59,795
Adjustments 0 0
Depreciation 2,674 588
Changes in non cash working capital
Accounts receivable (73,277) (70,181)
Inventory 60,549 (1,082)
Prepaid expenses (642) (234)
Accounts payable (43,828) 8,438
Accrued liabilities 0 0
Income tax payable 30,167 0
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Net cash flows provided by (used in) operating activities 150,688 (2,676)
Cash flows used in investing activities
Acquisition of equipment (2 207) 0
Cash flows from financing activities
Issuance of Capital Stock 0 0
Share issue costs 0 0
Advance from (repayment to) shareholder 0 0
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Net cash flows provided by (used in) financing activities 0 0
Effect of exchange rate changes on cash 4 167 2 362
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Inflow (outflow) of cash 152 648 314
Cash - beginning of quarter 3 409 116 540
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Cash - end of quarter 156 057 116 854
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See Notes to Financial Statements.
<PAGE>
FLEXIBLE SOLUTIONS INTERNATIONAL INC.
Notes to Financial Statements:
Foreign Currency - Flexible Solutions functions using the Canadian
dollar. Translation to US dollars for reporting is done at the
average exchange rates during the year. Losses and gains
arising from currency translation are disclosed as other
comprehensive income (loss) in shareholders equity.
Estimates- The preparation of consolidated financial statements
requires management to make estimates that affect the reported
assets and liabilities at the date of the statements. Actual
results could differsubstantially.
Inventory- Inventory is valued at the lower of cost or net realizable
value. Cost is determined on a first in-first out basis.
Property and Equipment - Property and equipment are recorded at cost
and depreciated using the declining balance with the following
annual rates:
Manufacturing equipment 20%
Trailer 30%
Computer hardware 30%
Furniture and Fixtures 20%
Office equipment 20%
Revenue Recognition - Revenue is recognized when product is shipped.
Returns have been insignificant since the Company's inception,
therefore no allowance has been established for product
returns.
Financialinstruments - The Company's instruments consist of cash,
accounts receivable, accounts payable and accrued liabilities.
Management opines that there are no significant currency or
credit risks from these instruments.
Income (loss) per share calculation - Calculated by dividing net
income by the weighted average number of shares outstanding.
Accounts Receivable - No provision has been made for uncollectible
accounts. Management believes all receivables are collectible.
