10-K: Flexible Solutions International Reports Increased Working Capital in Annual 10-K Filing
Sentiment:
Annual Results
Flexible Solutions International's annual report reveals increased working capital and discusses various aspects of their business, including product lines, financial performance, and risk factors.
Worse than expectedRevenue decreased slightly from 2023 to 2024.
Summary
- Flexible Solutions International, Inc. filed its annual report on Form 10-K for the fiscal year ended December 31, 2024.
- The company operates through several wholly-owned subsidiaries, focusing on specialty chemicals that slow water evaporation and biodegradable polymers.
- Key products include HEATSAVR for swimming pools, WATERSAVR for water conservation, and TPAs for various industrial and agricultural applications.
- The company's revenue was $38,234,860 in 2024, slightly down from $38,324,806 in 2023.
- Working capital increased to $22,714,190 in 2024 from $20,172,833 in 2023.
- The company declared a special dividend of $0.10 per share in 2024.
- The report details various risk factors, including dependence on key customers, economic conditions, and raw material price fluctuations.
- The company has implemented new procedures to improve its financial statement close and review process.
- 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.
- The company has federal and state income tax net operating loss carryforwards of $623,028 available for US tax purposes.
Sentiment
Score: 6
Explanation: The document presents a mixed sentiment. While there are positives such as increased working capital and a special dividend, there are also negatives such as decreased revenue and a material weakness in internal control. The overall tone is cautiously optimistic.
Positives
- The company's working capital increased year over year.
- The company declared a special dividend, returning value to shareholders.
- The company is actively engaged in research and development.
- The company has a diversified customer base with international sales.
- The company has implemented new procedures to improve its financial statement close and review process.
- 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.
- The company has federal and state income tax net operating loss carryforwards of $623,028 available for US tax purposes.
Negatives
- Revenue slightly decreased from 2023 to 2024.
- The company is dependent on certain key customers.
- The company acknowledges a material weakness in its internal control over financial reporting.
- The company has recognized liabilities for uncertain tax positions of $2,754,007.
Risks
- The company's future operating results are significantly affected by the sale price of crude oil.
- The company's future operating results are significantly affected by activity in the oil and gas industry.
- The company's future operating results are significantly affected by drought conditions.
- The company is subject to credit risk if significant customers default on payment obligations.
- The company's products can be hazardous if not handled, stored, and used properly.
- The company's failure to comply with environmental regulations may create significant environmental liabilities.
- The company's failure to protect its intellectual property could impair its competitive position.
- The company's ongoing success is dependent upon the continued availability of certain key employees.
Future Outlook
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.
Management Comments
- Mr. OBrien requested his salary be dropped by $100,000/year during 2019 and the Compensation committee agreed.
- In the fall of 2023, Daniel OBrien, 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. OBriens request.
Industry Context
The company competes with Lanxess AG in the TPA market and faces indirect competition from other chemicals in various markets. The company believes it can compete effectively by offering excellent customer service, superior distributor support, and flexibility.
Comparison to Industry Standards
- The company competes 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 others 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.
Related Party Transactions
- 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 ).
- 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 ).
Stakeholder Impact
- Shareholders will receive a special dividend of $0.10 per share.
- Employees are affected by the company's compensation policies and stock option plans.
- Customers are impacted by the company's product offerings and pricing strategies.
- Suppliers are affected by the company's sourcing and purchasing decisions.
- Creditors are impacted by the company's debt levels and financial performance.
Next Steps
- The company expects to spend $50,000 on the marketing and production of our WATERSAVR product in fiscal 2025.
- Starting in 2025, the Company will sell a further 3.98 % per year upon receipt of that years $ 800,000 payment.
- In 2025, we have implemented new procedures to improve our financial statement close and review process.
Key Dates
| Date | Description |
|---|---|
| 1991-01-26 | Flexible Solutions Ltd. was incorporated as a British Columbia corporation. |
| 1995 | Forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. |
| 1998-05-12 | Flexible Solutions Ltd. merged into Flexible Solutions International, Inc., a Nevada corporation. |
| 1998-06 | Daniel B. OBrien has served as our President, Chief Executive Officer and Principal Financial and Accounting Officer, as well as a director since June 1998. |
| 2000 | John H. Bientjes has been a director since 2000. |
| 2000-02-22 | Previously filed as an exhibit to our Registration Statement on Form 10-SB filed with the Commission on February 22, 2000. |
| 2002-06 | We introduced our WATERSAVR product in June 2002. |
| 2002 | 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. |
| 2003-01-22 | Previously filed as an exhibit to our Registration Statement on Form SB-2 filed with the Commission on January 22, 2003. |
| 2004-06 | 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. |
| 2007 | Mr. Seaman has been the CEO of Eartheasy.com Sustainable Living Ltd since 2007. |
| 2011 | Robert T. Helina has been a director since 2011. |
| 2012 | Thomas M. Fyles has been a director since 2012. |
| 2012 | During the year ended December 31, 2012, the Company determined that Daniel B. OBrien, the Companys President and Chief Executive Officer, was underpaid. |
| 2013 | His company has contributed over $1M towards clean water projects in Kenya since 2013. |
| 2014-08 | 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. |
| 2016-01 | In January 2016, NanoChem Solutions Inc. leased a space in Naperville, IL for office and research and development. |
| 2016-10 | Ben Seaman has been a director of the Company since October 2016. |
| 2016 | David Fynn has been a director since 2016. |
| 2017 | We purchased a 3,000 sq ft building on 1 acre of land in Taber, Alberta in 2017. |
| 2017 | Professor Emeritus (2017). |
| 2018-10 | 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. |
| 2018-10-01 | 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. |
| 2018 | Mr. Bientjes retired in 2018. |
| 2019-01 | In January 2019, we purchased 50% of a Florida based limited liability company engaged in international sales of fertilizer additives. |
| 2019 | In 2019, we changed our corporate domicile from Nevada to Alberta, Canada. |
| 2019 | Mr. OBrien requested his salary be dropped by $100,000/year during 2019 and the Compensation committee agreed. |
| 2020-01 | In January 2020, ENP Realty, LLC became a wholly owned subsidiary of ENP Investments, LLC and was renamed to ENP Mendota, LLC. |
| 2020-01 | 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. |
| 2022-06 | 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. |
| 2022 | In 2022, NanoChem purchased an additional 50 % in ENP Peru, increasing its share to 91.67 %. |
| 2022 | 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. |
| 2023 | In 2023, NanoChem purchased the remaining 8.33 % of shares to become sole owner. |
| 2023-06 | 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%. |
| 2023 | In 2023, the Company purchased an 80 % interest in 317 Mendota, a newly incorporated company established to purchase a large manufacturing building. |
| 2023 | In the fall of 2023, Daniel OBrien, CEO, relocated to Grand Cayman in order to help with international sales. |
| 2023-11 | In November 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2023-07 (Topic 280) Improvements to Reportable Segment Disclosures. |
| 2023-12 | In December 2023, the FASB issued ASU 2023-09 (Topic 740) Improvements to Income Tax Disclosures. |
| 2024-03 | In March 2024, the Company consolidated NanoChem operations into the Peru, IL locations and terminated the lease in Naperville, IL. |
| 2024-04-23 | 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. |
| 2024-06 | In June 2024, ENP Investments renewed the line of credit with Stock Yards Bank and Trust (Stock Yards). |
| 2024-08 | 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 . |
| 2024-08 | In August 2024, the Company renewed the line of credit with Stock Yards Bank and Trust (Stock Yards). |
| 2024-11 | In November 2024, the FASB issued ASU 2024-03, Income StatementReporting Comprehensive IncomeExpense 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. |
| 2024-12-31 | As of December 31, 2024, we had 45 employees, including one officer, 17 sales and customer support personnel, and 27 manufacturing personnel. |
| 2025 | In 2025, we have implemented new procedures to improve our financial statement close and review process. |
| 2025 | We have amended the plan in 2025 for issuance up to 2,500,000 shares of our common stock to pursuant to the Plan. |
| 2025-03-30 | As of March 30, 2025, the Company had 12,647,532 issued and outstanding shares of common stock. |
| 2025-03-31 | 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. |
Keywords
Flexible Solutions International, TPAs, HEATSAVR, WATERSAVR, working capital, dividends, specialty chemicals, biodegradable polymers, financial report, Form 10-K
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