SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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FLEXIBLE SOLUTIONS INTERNATIONAL, INC.
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(Name of small business issuer in its charter)
Nevada 2800 1922863
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(State of Incorporation) (Primary Standard Industrial (IRS Employer I.D.
Classification Number) Number)
2614 Queenswood Drive
Victoria, BC, V8N 1X5, Canada
(250) 477-9969
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(Address and telephone number of principal executive offices)
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2614 Queenswood Drive
Victoria, BC, V8N 1X5, Canada
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(Address of principal place of business)
Daniel B. O'Brien, President
Flexible Solutions International, Inc.
2614 Queenswood Drive
Victoria, BC, V8N 1X5, Canada
(250) 477-9969
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(Name, address and telephone number of agent for service)
Copies to:
Joel Bernstein, Esq., P.A.
11900 Biscayne Blvd. #604
Miami, FL 33181
(305) 892-1122
Fax:(305) 892-0822
Approximate date of proposed commencement of sale to the
public: From time to time after the Registration Statement
becomes effective.
CALCULATION OF REGISTRATION FEE
============================================================================================
Title of each Proposed Proposed Amount of
class of securities Amount maximum offering maximum aggregate Registration
to be registered to be registered price per unit(1) offering price Fee
---------------- ---------------- ----------------- ----------------- ------------
common stock 1,828,600 shares $3.08 $5,632,088 $518.15
(1) Estimated solely for purposes of calculating the registration fee based
upon the average of the bid and asked price in the over the counter
market on September 13, 2002
Registrant hereby amends the registration statement on such date or dates as may
be necessary to delay its effective date until the registrant shall file a
further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Acts of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
2
PROSPECTUS
FLEXIBLE SOLUTIONS INTERNATIONAL, INC.
1,828,600 Shares of Common Stock
These shares of common stock are being offered by the selling shareholders named
in this prospectus.
The selling shareholders may sell the shares covered by this prospectus on the
over the counter market in ordinary brokerage transactions, in negotiated
transactions or otherwise, at prevailing market prices at the time of sale or at
negotiated prices, and may engage a broker or a dealer to sell the shares. For
additional information, you should refer to the Plan of Distribution section of
this prospectus. The selling shareholders may be deemed to be underwriters
within the meaning of the Securities Act in connection with their sale of our
shares. We will not receive any proceeds from the sale of the shares, but will
bear the costs relating to the registration of the shares.
Our common stock is traded on the over-the-counter market and is quoted on the
OTC Electronic Bulletin Board under the symbol FXSO.
Investing in the common stock involves a high degree of risk. You should
consider carefully the risk factors beginning on Page 4.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES or determined if this
prospectus is truthful or complete. any representation to the contrary is a
criminal offense.
The date of this prospectus is ___________, 2002
3
PROSPECTUS SUMMARY
Our company
Flexible Technologies International, Inc. develops, manufactures and markets
specialty chemicals which slow down the evaporation of water. Our initial
product, Heat$avr, is marketed for use in swimming pools and spas where its use,
by slowing the evaporation of water, allows the water to retain a higher
temperature for a longer period of time and thereby reduces the energy required
to maintain the desired temperature of the water in the pool. Our newest
product, Water$avr, is marketed for water conservation where its use slows down
water loss due to evaporation. This product is designed for use in agriculture,
golf course and turf, reservoirs, and irrigation. We also make and sell
dispensers which automate the deployment of our chemical products.
We are a Nevada corporation which was incorporated in May 1998. Our wholly-owned
subsidiary, Flexible Solutions, Ltd., which we acquired in 1998, began
operations in 1991. Our executive office is located at 2614 Queenswood Drive,
Victoria, British Columbia V8N 1X5. Our telephone number is (250) 477-9969 and
our facsimile number is (250) 477-9912.
RISK FACTORS
Except for historical information, the information in this prospectus and in our
SEC reports contains forward-looking statements about our expected future
business and performance. Our actual operating results and financial performance
may prove to be very different from what we might have predicted as of the date
of this prospectus. The risks described below deserve your special
consideration.
DEPENDENCE UPON THE SERVICES DAN O'BRIEN, OUR CHIEF EXECUTIVE OFFICER.
We are dependent upon the services of Dan O'Brien, who serves as our president
and chief executive officer. Our business would be adversely affected if the
executive services of Mr. O'Brien ceased to be available us because none of our
other employees could take over the management activities of Mr. O'Brien.
Therefore we would have to recruit one or more new executives but there can be
no assurance that we would be able to engage a replacement executive with the
required skills on satisfactory terms. Mr. O'Brien does not have an employment
contract with Flexible. We have a key man life insurance policy in the amount of
CDN $400,000 (currently approximately USD$250,000) on Mr. O'Brien.
WE HAVE ONE CUSTOMER THAT ACCOUNTS FOR A SUBSTANTIAL AMOUNT OF OUR SALES.
Our exclusive U.S. and Canadian distributor of our HEAT$AVR product packaged in
our Tropical Fish dispenser accounts for 97.2% of our sales revenues for the six
months ended June 30, 2002. Although we have an agreement with such firm which
is described below, the agreement does not require the distributor to purchase
any minimum amount of our products, nor does it prevent it from handling
competing products. If our distributor reduced its purchase or ceased to
purchase our products we would suffer substantial reduction in our sales and
would have to make alternative arrangements to distribute our
4
Tropical Fish product in the U.S. and Canada. There can be no assurance that we
would be able to find replace the services of this distributor on satisfactory
terms.
THERE CAN BE NO ASSURANCE OF COMMERCIAL SUCCESS OF OUR WATER$AVR PRODUCT.
We introduced our WATER$AVR product in June 2002. We have delivered quantities
for testing by potential customers but only one customer has ordered the product
for commercial use. This product can achieve success only if it is ordered in
substantial quantities by commercial customers who have determined that the
benefits of the product exceed the costs of purchase and deployment of the
product. We cannot assure that we will receive sufficient orders of this product
to achieve profits.
USE OF PROCEEDS
The shares being sold with this prospectus are being sold by selling security
holders. Flexible will not receive the proceeds of any sales.
MARKET FOR SECURITIES
Our common stock is traded on the over-the-counter market and is quoted on the
NASD Electronic Bulletin Board under the symbol FXSO.
The following is the range of high and low closing bid prices for Flexible
common stock for the periods indicated:
CLOSING BID
2000 High Low
---- -----------------
January 3 - March 31 .255 .05
April 3 - June 30 .20 .10
July 3 - September 29 .80 .15
October 2 - December 29 .71875 .50
2001
January 2 - March 30 2.75 .6875
April 2 - June 29 2.30 1.50
July 2 - September 28 1.75 .67
October 1 - December 31 1.45 .73
2002
January 2 - March 28 3.57 1.30
April 1 - June 28 4.10 2.50
5
The above represents inter-dealer quotations which do not include retail
mark-ups, markdowns, or commissions, and do not necessarily represent actual
transactions. We had 75 record holders of our common stock on August 28, 2002.
Such shares are owned by approximately 350 beneficial owners.
Our common stock also trades on the Frankfurt Germany stock market under the
symbol FXT.
THE PENNY STOCK RULES
The Securities and Exchange Commission has adopted regulations which generally
define a penny stock to be any equity security that has a market price less than
$5.00 per share, subject to certain exceptions. Our shares currently fall within
the definition of a penny stock and therefore are subject to rules that impose
additional sales practice requirements on broker-dealers who sell such
securities to persons other than established customers and accredited investors
(generally those with assets in excess of $1,000,000 or annual income exceeding
$200,000, or $300,000 together with their spouse). For transactions covered by
these rules, the broker-dealer must make a special suitability determination for
the purchase of such securities and have received the purchaser's written
consent to the transaction prior to the purchase. Additionally, for any
transaction involving a penny stock, unless exempt, the rules require the
delivery, prior to the transaction, of a risk disclosure document mandated by
the Commission relating to the penny stock market. The broker-dealer also must
disclose the commissions payable to both the broker-dealer and the registered
representative, current quotations for the securities and, if the broker-dealer
is the sole market-maker, the broker-dealer must disclose this fact and the
broker-dealer's presumed control over the market. Finally, monthly statements
must be sent disclosing recent price information for the penny stock held in the
account and information on the limited market in penny stocks. The penny stock
rules may restrict the ability of broker-dealers to sell our shares and may
affect the ability of our shareholders to sell our shares in the secondary
market.
DIVIDEND POLICY
Flexible has not paid any dividends on its common stock, and it is not
anticipated that any dividends will be paid in the foreseeable future. The Board
of Directors intends to follow a policy of retaining earnings, if any, to
finance the growth of the company. The declaration and payment of dividends in
the future will be determined by the Board of Directors in light of conditions
then existing, including the company's earnings, financial condition, capital
requirements and other factors.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATION
Our operating activities are related primarily to manufacturing and marketing
our swimming pool chemical product called "HEAT$AVER", including the consumer
version packed in our "Tropical Fish" dispenser. In June 2002 we introduced a
fresh water evaporation control chemical product called "WATER$AVER".
6
Results of Operations
Six months ended June 30, 2002 and 2001
Sales in the six months ended June 30th 2002 were $1,041,865 compared to
$1,159,472 for the six months ended June 30th 2000. This decrease in sales was a
result of decreased sales to our residential pool product distributor and likely
attributable to poor weather in primary markets. Such sales were solely of our
HEAT$AVR product.
Operating expenses were $387,566 for the six months ended June 30th 2002 up from
$188,689 for the six months ended June 30th 2001. As well as the costs of
expensing options, the increase in operating expenses are a result of increased
salaries, wages, rent, stock promotion, transfer agent fees, research and
development and expansion of sales and marketing for commercial pool products
and water conservation products. In addition there were one time expenses
associated with listing our shares on the Frankfurt stock exchange in Germany.
The net income for the six months ended June 30th 2002 was $43,281 compared to a
net income of $246,889 for the six months ended June 30th 2001. The decrease in
income was due to the decrease in total sales for the six month period ended
June 30th 2001 and increase in expenses related to new product research,
development and marketing. Expensing of stock options significantly reduced
earnings.
Our earnings per share (fully diluted) was $0.00 for the six month period ended
June 30th 2002 compared to $0.03 for the six month period ended June 30th 2001.
Year Ended December 31, 2001 and 2000
Fiscal 2001 revenue rose 30% to $1,334,273 because of more effective marketing
with the preponderance of sales continuing to be in Canada to our Montreal-based
distributor. The distributor reports that 75% of his sales are in the USA. Gross
profit margins were stable at 50.3%. Product mix shifted little during the year
with a continued emphasis on "Tropical Fish".
Operating expenses for the fiscal year ended December 31, 2001 totaled $905,421
and we experienced a net loss of $233,955 against revenues of $1,334,273. The
major expenses during this period were wages of $313,918, administrative
salaries of $46,639, professional fees of $23,338, office expenses of $48,398,
subcontracting fees of $16,630, stock promotion and transfer agent fees of
$241,573, shipping of $13,563, travel of $23,125, and rent, telephone and
depreciation of $53,505.
Operating expenses for the fiscal year ended December 31, 2000 totaled $380,741
and we experienced a net profit of $138,971 against revenues of $1,029,649. The
major expenses during this period were $126,590 in wages, commissions and
professional fees; administration salaries of $37,234 and $12,641 in office
expenses and telephone; $10,454 in travel expenses; and, $13,489 in
depreciation.
Cash operating expenses for fiscal 2001 totaled $406,934 versus $289,860 for
last year; the primary factor in the increase was increased corporate activity.
However, fiscal 2001 financial statements also include "non-cash compensation"
of $397,576 resulting from the required adoption of a new accounting standard
(FASB 123) regarding stock options
7
granted to consultants resulting in $82,326 in expenses; stock options granted
at below fair market value to employees resulting in $173,750 in expenses; and
common stock issued to an employee and a consultant which were categorized as
"non-cash services" resulting in $140,000 in expenses.
Net income (Loss) for fiscal 2001/2000 was ($233,955) and $138,971,
respectively. Earnings per share for fiscal 2001/2000 was ($0.03) and $0.02,
respectively.
Liquidity and Capital Resources
We sold 1,828,600 shares of common stock to investors in 2002 for net proceeds
of $5,750,000. We believe we have sufficient capital to support our business and
operations for at least the next 12 months. We anticipate utilizing
approximately $2 million in the next twelve months to attempt to increase the
sales of our products by adding sales and marketing professionals, increase
advertising and promotion expenses, improve our products, develop additional
uses for our core technology and make additional patent applications. There can
be no assurance that such expenditures will result in significant increase in
sales of our products.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Some of the statements contained in this prospectus discuss future expectations,
contain projections of future operations or state other "forward-looking"
information. These statements are subject to known and unknown risks,
uncertainties and other factors that could cause the actual results to differ
materially from those contemplated by the statements. The forward-looking
information is based on various factors and is derived using numerous
assumptions. Important factors that may cause actual results to differ from
projections include, for example:
o the success or failure of management's efforts to implement our
business strategy;
o the uncertainty of demand for our products;
o introduction of competitive products which may be superior to ours; and
o our ability to attract and retain quality employees.
We do not promise to update forward-looking information to reflect actual
results or changes in assumptions or other factors that could affect those
statements.
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OUR BUSINESS
Flexible develops, manufactures and markets specialty chemicals which slow down
the evaporation of water. Our initial product, Heat$avr, is marketed for use in
swimming pools and spas where its use, by slowing the evaporation of water,
allows the water to retain a higher temperature for a longer period of time and
thereby reduces the energy required to maintain the desired temperature of the
water in the pool. Our newest product, Water$avr, is marketed for water
conservation in irrigation canals, aquaculture, and reservoirs where its use
slows down water loss due to evaporation. We also make and sell dispensers which
automate the deployment of our chemical products.
Our HEAT$AVR product
The primary product of Flexible is HEAT$AVR which represents substantially all
of our sales. HEAT$AVR is a chemical product for use in swimming pools and spas
that forms a thin, invisible layer on the surface of water which reduces the
amount of water evaporation and heat loss from the pool. The product is marketed
as a cost effective and convenient way to save on the cost of energy required to
heat pools and spas. Approximately 70% of the energy lost from a swimming pool
occurs through evaporation.
HEAT$AVR is a mixture of chemicals which are lighter than water. The solution
floats to the surface when introduced into a pool or spa to form a very thin
layer on the surface of the water which slows down evaporation of water from the
surface of the pool. The product is not visible on the pool surface and it
cannot be seen, felt or tasted by swimmers. After a swimmer stops disturbing the
pool water, the product reforms to a complete layer on the pool surface.
We market HEAT$AVR to the residential market primarily in the form of our
"Tropical Fish" dispenser. Each Tropical Fish dispenser is made of molded
plastic in the form of a ten inch long colorful Tropical Fish that is filled
with enough HEAT$AVR solution to cover the surface of a 400 square foot swimming
pool for about one month. The Tropical Fish is deployed by snipping the fin and
tossing the fish into the pool where it submerges to the bottom of the pool.
Water pressure causes the HEAT$AVR liquid inside to escape into the water where
it rises to the surface and forms an invisible layer on the surface of the
water. The empty dispenser can remain on the bottom of the pool for decoration
and use as a pool toy or be removed. The Tropical Fish product has a suggested
retail price of $9.95 in the United States.
Benefits of HEAT$AVR use in outdoor pools
In outdoor swimming pools HEAT$AVR provides savings on pool heating costs and
provides convenience of use when compared to pool blankets.
Pool personnel often find it inconvenient to use conventional pool blankets
correctly and consistently. Pool blankets are plastic covers which are cut to
the size and shape of the surface of the pool or spa. They float on the surface
and perform the same purpose as HEAT$AVR of reducing energy cost by inhibiting
evaporation. Of course the blanket must be removed and stored prior to swimmers
entering the pool and provide no energy savings when not in the pool. HEAT$AVR
eliminates the necessity of installing, removing and storing the blanket and
works 24 hours a day. We believe that the ease of use provided by HEAT$AVR
results in more consistent usage.
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Benefits of HEAT$AVR use in indoor pools
Use of HEAT$AVR in indoor pools results in even greater energy savings. Indoor
pool locations use energy not only to heat the pool water but to air condition
the pool environment. By slowing the transfer of heat and water vapor from the
pool to the atmosphere of the pool enclosure atmosphere less energy is required
to maintain a pool at the desired temperature, there is a reduced load on the
air-conditioning system because less is heat transferred from the pool water to
the surrounding air and less water vapor will have to be removed from the air to
maintain the required comfort level. Air-conditioned indoor pools are very high
users of energy because swimmers and loungers have differing temperature
expectations which require both water heat, generally by gas, and electric air
cooling to keep both groups happy in the same room.
Market for HEAT$AVR
We market our HEAT$AVR product to both the residential market made up of
individual homeowners with pools and spas and the commercial market consisting
of operators of commercial swimming pools such as those located in hotels,
motels, schools, and municipal and private recreational facilities.
The residential market
We estimate that there are approximately 8 million residential in ground
swimming pools in the United States and Canada, with approximately 250,000 new
pools added annually.
The commercial market
We estimate that there are approximately 106,000 municipal swimming pools and
280,000 hotel swimming pools in our target markets of Australia, Canada, Europe,
and the United States. We have received reports from some of our commercial
customers documenting energy savings of $2,400 to $6,000 per year. We also make
and sell programmable dispenser for automatically displacing HEAT$AVR into a
pool. The dispenser has a reservoir holding a one week supply of HEAT$AVR. The
unit is programmed to inject the appropriate amount of the product into the pool
at the rate of 1 oz. per 400 square feet of pool surface per day.
Marketing and Sales
The HEAT$AVR and Tropical Fish products are sold in Canada and the United States
by Flexible's exclusive distributor, Sun Solar Energy Technologies, and in
Australia by Hydro-Flexible Solutions PTY. Flexible also sells HEAT$AVR directly
into the United States to both wholesale and retail accounts. We have about 155
active customers. However, in the six months ended June 30, 2002 Sun Solar
Energy Technologies represented 97.2% of our total sales.
We have a written agreement with Sun Solar Energy Technologies, our exclusive
distributor for our Tropical Fish product in the U.S. and Canada. This customer
represented 97.2% of our total sales for the six months ended June 30, 2002. In
February 1998 we entered into an exclusive distributorship with Sun Solar
Technologies for our Tropical Fish product. The agreement gives Sun Solar
exclusive right to
10
distribute our Tropical Fish product in the United States and Canada. In order
to maintain the exclusivity of such distribution, Sun Solar must order and pay
for at least 720,000 units in the year ending February 28, 2003. Such exclusive
agreement terminates on February 29, 2004. We have agreed to give Sun Solar a
right of first refusal in the event we propose to sell our Flexible Solutions
Ltd. subsidiary. If such subsidiary is sold we must require the purchaser to
fulfill the exclusive distribution contract with Sun Solar and Sun Solar can
veto the proposed sale to an entity which it reasonably believes may have an
intent to discontinue manufacture of our Tropical Fish product. The agreement
also provides that Sun Solar will sell its veto for a reasonable premium arrived
at by mutually agreed upon by a mediator. The agreement also provides that
Flexible has a right of first refusal if Sun Solar proposes to sell its
exclusive distributorship. If such distributorship is sold Sun Solar's sales
performance minimums are required to be binding on the new owner. The agreement
also provides that if such exclusive distribution rights are sold by Sun Solar,
the buyer must advance to Flexible $1.00 US for each Tropical Fish which must be
bought in the year of sale to maintain the distribution agreement exclusivity,
which payment will be credited to future orders of Tropical Fish at the rate of
$1.00 US per fish as the orders are made. We have also agreed to offer
distribution rights on new swimming pool products to Sun Solar in the US and
Canada if it is up-to-date on its sales performance requirements. Flexible is
satisfied with the performance of Sun Solar as exclusive distributor of Tropical
Fish and believes our relationship with Sun Solar is satisfactory. There can be
no assurance that our exclusive distributorship with Sun Solar will be renewed
past its current expiration on February 29, 2004.
We also have nonexclusive distributors in Canada and the United States and
exclusive distributors in Australia, Korea and Great Britain. We support our
distributors and seek additional market opportunities by attending the major
pool industry trade shows in the United States yearly. We advertise in trade
magazines and directly to buyer associations. We maintain an Internet presence
with a website containing information about our products. We also write and
publish a newsletter to 5,000 customers and potential customers twice a year.
Our WATER$AVR product
We introduced our WATER$AVR product in June 2002. This product utilizes our core
technology to reduce water evaporation. It is marketed as a water conservation
product for use where water is standing or gently flowing and the need for water
conservation can justify the cost of purchase and deployment of the product. We
believe that our WATER$AVR product may find a market for use in :
Reservoirs Potable water storage Aqueducts and canals Agricultural
irrigation Flood water crops Lawn and turf care Potted and bedding plants
Stock watering ponds Mining
WATER$AVR is sold in granulated form. It can be provided in shaker containers
holding 3/4 pound or in 44 pound weatherproof bags. We also offer a dispenser
for WATER$AVR to automate deployment of
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the product. The product can be applied in various ways from hand dispersal to
fully automated scheduled metering.
Current status of our WATER$AVR product
We anticipate our initial for WATER$AVR will be in India and China. We have
provided quantities of the product for testing in these countries and if
successful anticipate that substantial orders may be received. The product will
also be marketed in both developed and lesser developed countries to address
water conservation concerns. We are seeking to establish strategic relationships
with companies in the water processing industry who have marketing and
manufacturing operations in countries with water conservation concerns. We have
a full time employee dedicated to establishing sales channels throughout the
world for WATER$AVR.
In September, 2002 we granted Ondeo Nalco Company, a subsidiary of Suez, of
Naperville, Illinois sole distribution rights in the global mining marketplace
and some parts of the municipal marketplace by achieving sales of at least
$5,000,000 annually for the next 5 years. We have also granted Ondeo Nalco an
option to purchase 10% of our common stock at above-market exercise price and
they will receive additional option rights by meeting certain sales targets. The
distributor is not required to purchase any quantity of WATER$AVR and there can
be no assurance that we will achieve substantial sales of WATER$AVR to this
distributor.
Competition
We are not aware of any chemical evaporation reduction products on the market or
under development which compete with our HEAT$AVR product. HEAT$AVR does compete
against plastic pool blanket products on the basis of convenience and cost. Pool
owners and operators may also decide that no evaporation control product is
needed for their pools. We are aware of one chemical product which competes with
our WATER$AVR product. We believe WATER$AVR is both cheaper and easier to apply.
Specialty chemicals are a highly competitive industry with many huge
multi-national firms with large research and development operations. There are a
number of firms which develop and market chemical products for the pool and spa
industry. Therefore, we can expect competition to arise at any time.
Water conservation is an important priority throughout the world and numerous
researchers in industry and academia are seeking to develop solutions which may
compete with or be superior to our products. Climate changes which relieve water
shortage conditions or a technological breakthrough in water desalination could
reduce the need for water conservation products.
Manufacturing
Our HEAT$AVR and WATER$AVR products and dispensers are made from chemicals,
plastic and other materials and parts which are readily available from multiple
suppliers. We have never experienced any shortage in the availability of raw
materials and parts for our products and we do not have any long term supply
contracts for any such items. We manufacture our products in an 11,000 square
foot plant in Calgary, Alberta, Canada.
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Governmental Regulations
Chemical products for use in swimming pools are covered by a variety of
governmental regulations in the countries where we sell our products. Such
regulations cover such matters as packaging, labeling and product safety. We
believe our products are in compliance with such regulations. Our WATER$AVR
product will be subject to additional regulation in some countries particularly
for agricultural and drinking water uses. We will address these issues on a
country-by-country basis. We do not anticipate that governmental regulations
will be an impediment to marketing WATER$AVR because the major ingredient has
been used in agriculture for many years. We will require approval to sell
WATER$AVR in the United States for agricultural or drinking water users. We have
not yet applied for any such approvals in the U.S.
Proprietary Rights
Our success and ability to compete is dependent in part upon our proprietary
technology. We rely on a combination of patent, copyright and trade secret laws
and nondisclosure agreements to protect our proprietary technology. We currently
hold two U.S. patent and are seeking to extend these patents to certain other
countries. We also have seven patent applications pending. There can be no
assurance that our pending patent applications will be granted on that any
issued patent will be upheld as valid or prevent the development of competitive
products which may be equivalent or superior to our products. We have not
received any claims alleging infringement of the intellectual property rights of
others, but there can be no assurance that we may not be subject to such claims
in the future.
Employees
As of August 1, 2002, we employed 10 persons including one officer, five sales
and customer support and four in manufacturing. None of our employees is
represented by a labor union and we have experienced no work stoppages to date.
Facilities
Our president provides use of space in his residence to conduct his
administrative duties and we do not reimburse him for such use. We rent 1400 sq.
ft. of sales and research space in Victoria BC for $1050 a month and 500 sq. ft.
of office space in Chicago IL for $500 a month. We lease an 11,000 sq. foot
building in Calgary, Alberta, Canada for $3,150 per month until September 2003
for manufacture of our products. We also maintain a warehouse facility in St.
Laurent, Quebec, Canada which is provided by our distributor at no cost.
MANAGEMENT
Our directors and executive officers are:
Name Age Office
---- --- ------
Daniel B. O'Brien 46 President, Director
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John H. Bientjes 49 Director
Dr. Robert O'Brien 81 Director
Daniel B. O'Brien has been president and a director of Flexible since August
1998. He has been involved in the swimming pool industry since 1990 when he
founded our subsidiary, Flexible Solutions Ltd. which was purchased by Flexible
Solutions International, Inc. in August 1998. From 1990 to 1998 Mr. O'Brien was
also a teacher at Brentwood College where he was in charge of outdoor education.
John H. Bientjes has been a member of our Board of Directors since February
2000. Mr. Bientjes has been the manager of the Commercial Aquatic Supplies
Division of D.B. Perks & Associates, Ltd., located in Vancouver, British
Columbia, a company that markets supplies and equipment to commercial swimming
pools which are primarily owned by municipalities. Mr. Bientjes was graduated in
1976 from Simon Fraser University in Vancouver, British Columbia with a Bachelor
of Arts Degree in Economics and Commerce.
Dr. Robert N. O'Brien has been a member of the Company's Board of Directors
since May 1998. Dr. O'Brien was a Professor of Chemistry at the University of
Victoria from 1968 until 1986 at which time he was given the designation of
Professor Emeritus. He held various academic positions since 1957 at the
University of Alberta, the University of California at Berkley, and the
University of Victoria. While teaching, Dr. O'Brien acted as a consultant and
served on the British Columbia Research Council from 1968 to 1990. In 1987, Dr.
O'Brien founded the Vancouver Island Advanced Technology and Research
Association. Dr. O'Brien received his Bachelor of Applied Science in Chemical
Engineering from the University of British Columbia in 1951; his Masters of
Applied Science in Metallurgical Engineering from the University of British
Columbia in 1952; his Ph.D. in Metallurgy from the University of Manchester in
1955; and, was a Post Doctoral Fellow in Pure Chemistry at the University of
Ottawa from 1955 through 1957.
Daniel B. O'Brien and Dr. Robert N. O'Brien are father and son.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the total compensation paid to our chief
executive officer for the last three completed fiscal years. No other officer
earned $100,000 or more per year in such period.
------------------- ------ ------------ --------------------- ----------------
Name and Position Year Total Income Other Annual Bonus Other Annual
Compensation
------------------- ------ ------------ --------------------- ----------------
Daniel B. O'Brien 2001 $19,332 -0- -0-
President
------------------- ------ ------------ --------------------- ----------------
2000 $19,250 -0- -0-
------------------- ------ ------------ --------------------- ----------------
1999 $20,250 -0- -0-
------------------- ------ ------------ --------------------- ----------------
We do not maintain any long term compensation plans, pension plans or similar
plans.
14
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
The following information sets forth the individual grants of stock options and
freestanding SARs to the officer named in the Summary Compensation Table in the
fiscal year ended December 31, 2001.
------------------- ------------------------ ----------------------- -------------- -----------------
Name Number of Securities % of Total Options/SARs Exercise Price Expiration Date
Underlying Options/ SARs Granted Employees in
Granted Fiscal Year.
------------------- ------------------------ ----------------------- -------------- -----------------
Daniel B. O'Brien 100,000 8.3% $1.40 December 21, 2006
------------------- ------------------------ ----------------------- -------------- -----------------
YEAR-END OPTIONS/SAR VALUES
The following table sets forth the value of the stock options held by the
officer named in the Summary Compensation Table as of December 31, 2001. No
options were exercised in 2001.
------------------- ------------------------------------ ----------------------------------------------
Name Number of Unexercised Securities Value of Unexercised In-The-Money Options/SARs
Underlying Options/SARs at Year-End At Year-End
------------------- ------------------------------------ ----------------------------------------------
Daniel B. O'Brien 200,000 $115,000
------------------- ------------------------------------ ----------------------------------------------
DIRECTOR COMPENSATION
We have agreed to issue Mr. Bientjes and Dr. Robert O'Brien options to purchase
5,000 shares of our common stock annually for serving as a director. We also pay
Dr. Robert O'Brien additional options for assisting in research and development
and patent prosecution.
INDEMNIFICATION
Our articles of incorporation provide that we will indemnify our directors to
the fullest extent permitted by the Nevada General Corporation Law. Nevada law
provides that the directors of a corporation may not be indemnified (i) for any
breach of their duty of loyalty to the corporation or its stockholders; (ii) for
acts or omissions not in good faith or that involve intentional misconduct,
fraud or a knowing violation of law; or (iii) for unlawful distributions to
shareholders. Flexible's by-laws provide that we shall indemnify our directors
and officers for any actions taken as officers or directors other than arising
out of negligence or willful misconduct.
Indemnification Against Public Policy
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers or person controlling the company,
Flexible has been informed that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is therefore unenforceable.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of August 28, 2002, the beneficial ownership
of our common stock by (i) the only persons who own of record or are known to
own, beneficially, more than 5% of our common stock; (ii) each of our directors
and executive officer; and (iii) all directors and officers as a group.
15
Name and Address of Number of Percent of Class
Shareholder Shares(1) ----------------
----------- ---------
Daniel B. O'Brien(2) 4,656,000 40.3%
John H. Bientjes(2) 70,000 *
Dr. Robert N. O'Brien(2) 1,750,000 16.2%
Sprott Asset Management, Inc.(3) 1,672,800 14.9%
All directors and officers as a 6,591,000 57.1%
group (3 persons)
(1) Includes shares which may be acquired upon exercise of stock options
as follows: Daniel B. O'Brien - 100,000 shares, John H. Bientjes -
5,000 shares and Dr. Robert N. O'Brien - 50,000 shares.
(2) Addresses for these shareholders is 2614 Queenswood Drive, Victoria,
BC, V8N 1X5, Canada.
(3) Address for this shareholder is Suite 3450, South Tower, Royal Bank
Plaza, Toronto, Ontario, M5J 2J2, Canada.
* Less than 2%
DESCRIPTION OF SECURITIES
Common stock
Flexible is authorized to issue 50,000,000 shares of common stock with $.001 par
value. The holders of the common stock are entitled to one vote per each share
held and have the sole right and power to vote on all matters on which a vote of
common stockholders is taken. Voting rights are non-cumulative. The holders of
shares of common stock are entitled to receive dividends when, as and if
declared by the Board of Directors, out of funds legally available therefore and
to share pro-rata in any distribution to stockholders. Upon liquidation,
dissolution, or winding up of the company, the holders of the common stock are
entitled to receive the net assets held by the company after distributions to
the creditors and payment of any preferences due to the holders of any preferred
stock which may be issued and outstanding. The holders of common stock do not
have any preemptive right to subscribe for or purchase any shares of any class
of stock. The shares of common stock offered hereby will not be subject to
further call or redemption and are fully paid and non-assessable.
Preferred Stock
The Board of Directors has the authority to cause us to issue without any
further vote or action by the shareholders, up to 1,000,000 shares of preferred
stock, par value $.01 per share, in one or more series, and to designate the
number of shares constituting any series, and to fix the rights, preferences,
privileges and restrictions thereof, including dividend rights, voting right,
rights and terms of redemption, redemption price or prices and liquidation
preferences of such series. The issuance of preferred stock may have the effect
of delaying, deferring or preventing a change in control of the company without
further action by the stockholders. The issuance of preferred stock with voting
and conversion rights may
16
adversely affect the voting power of the holders of common stock, including the
loss of voting control. No shares of preferred stock are currently outstanding.
SELLING SHAREHOLDERS
In April 2002 we sold 400,000 shares of our common stock to investors for $2.50
per share and we sold 1,428,780 shares of our common stock to investors for
$3.50 per share in July 2002. We are registering these shares for sale in the
registration statement of which this prospectus is a part.
The following table sets forth certain information as of August 28, 2002,
regarding the ownership of our common stock by the selling shareholders and as
adjusted to give effect to the sale of the shares offered in this prospectus.
Name Shares Shares which Number of
owned may be offered shares to be
prior to this under this owned after
offering prospectus the offering
--------------------------------- -------- ---------- ------------
Sprott Asset Management, Inc. (1) 1,672,800 1,400,000 272,800
Pictet Global Sector Fund 428,600 428,600 -0-
----------
(1) Sprott Asset Management, Inc. is an investment manager that has sole or
shared dispositive and sole or shared voting power with respect to these shares,
which were purchased on behalf of investment accounts for which it is portfolio
manager.
The selling shareholders and their officers and directors have not held any
positions or office or had any other material relationship with Flexible or any
of its affiliates within the past three years except as purchaser of the shares
registered for sale.
PLAN OF DISTRIBUTION
The shares of common stock are being offered on behalf of the selling
shareholders, and we will not receive any proceeds from the offering. The shares
of common stock may be sold or distributed from time to time by the selling
shareholders, or by pledgees, donees or transferees of, or other successors in
interest to, the selling shareholders, directly to one or more purchasers
(including pledgees) or through brokers, dealers or underwriters who may act
solely as agent or may acquire such shares as principals, at market prices
prevailing at the time of sale, at prices related to such prevailing market
prices, at negotiated prices, or at fixed prices, which may be subject to
change. The sale of the shares of common stock may be effected through one or
more of the following methods: (i) ordinary brokers' transactions; (ii)
transactions involving cross or block trades or otherwise on the
over-the-counter; (iii) purchases by brokers, dealers or underwriters as
principal and resale by such purchasers for their own accounts pursuant to this
prospectus; (iv) "at the market" to or through market makers or into established
trading markets, including direct sales to purchasers or sales effected through
agents; and (v) any combination of the foregoing, or by any other legally
available means. The selling shareholders also may enter into option or other
17
transactions with broker-dealers that require the delivery by such
broker-dealers of the shares of common stock, which shares of common stock may
be resold thereafter pursuant to this prospectus. We cannot be certain that all
or any of the shares of common stock will be sold by the selling shareholders.
Brokers, dealers, underwriters or agents participating in the sale of the shares
of common stock as agents may receive compensation in the form of commissions,
discounts or concessions from the selling shareholders and/or purchasers of the
common stock for whom such broker-dealers may act as agent, or to whom they may
sell as principal, or both (which compensation to a particular broker-dealer may
be less than or in excess of customary commissions). The selling shareholders
and any broker-dealers or other persons who act in connection with the sale of
the common stock may be deemed to be "underwriters" within the meaning of the
Securities Act, and any commission they receive and proceeds of any sale of such
shares may be deemed to be underwriting discounts and commissions under the
Securities Act. Neither Flexible nor the selling shareholders can presently
estimate the amount of such compensation. Flexible does not know of any existing
arrangements between the selling shareholders and any other shareholders,
broker, dealer, underwriter or agent relating to the sale or distribution of the
shares of our common stock.
The selling shareholders and any other persons participating in the sale or
distribution of the common stock will be subject to applicable provisions of the
Exchange Act and the rules and regulations thereunder, which provisions may
limit the timing of purchases and sales of any of the common stock by the
selling shareholders or any other such persons. The foregoing may affect the
marketability of the common stock. We will pay substantially all of the expenses
incidental to the registration of the shares which may be offered by the selling
shareholders, but the selling shareholders will be responsible for any
commissions or discounts of underwriters, broker-dealers or agents.
LEGAL MATTERS
The validity of the securities offered hereby is being passed upon by Joel
Bernstein, Esq., P.A., Miami, Florida.
EXPERTS
The financial information statements appearing in this Prospectus and
Registration Statement have been audited by Pannell Kerr Forster, Chartered
Accountants, as set forth in their report thereon appearing elsewhere herein and
in the Registration Statement, and are included in reliance upon such report
given upon the authority of such firm as experts in accounting and auditing.
ADDITIONAL INFORMATION
Flexible is subject to the reporting requirements of Section 13 of the
Securities Exchange Act of 1934 and files periodic reports including financial
statements and other information with the Securities and Exchange Commission.
For further information with respect to Flexible and the securities hereby
offered, reference is made to the exhibits filed as part of this registration
statement, which may be inspected and copied at the public reference facilities
of the Commission
18
in Washington D.C., and copies of such material can be
obtained from the Public Reference Section of the Commission, 450 5th Street,
N.W., Washington, D.C. 20549, at prescribed rates and are available on the World
Wide Web at : http://www.sec.gov.
--------------------------------------------------------------------------------
19
FLEXIBLE SOLUTIONS INTERNATIONAL INC.
Consolidated Financial Statements
December 31, 2001
(U.S. Dollars)
INDEX Page
----- ----
Report of Independent Chartered Accountants to
the Board of Directors and Stockholders 1
Financial Statements
Consolidated Balance Sheets 2
Consolidated Statements of Operations 3
Consolidated Statements of Stockholders' Equity 4
Consolidated Statements of Cash Flows 5
Notes to Consolidated Financial Statements 6-14
REPORT OF INDEPENDENT CHARTERED ACCOUNTANTS
TO THE BOARD OF DIRECTORS AND STOCKHOLDERS
OF FLEXIBLE SOLUTIONS INTERNATIONAL INC.
We have audited the accompanying consolidated balance sheets of Flexible
Solutions International Inc. as of December 31, 2001 and 2000 and the related
consolidated statements of operations, stockholders' equity and cash flows for
each of the years ended December 31, 2001, 2000 and 1999. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform an audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, these consolidated financial statements present fairly, in all
material respects, the consolidated financial position of the Company as at
December 31, 2001 and 2000 and the consolidated results of its operations and
its cash flows for each of the years ended December 31, 2001, 2000 and 1999 in
conformity with accounting principles generally accepted in the United States of
America.
"SMYTHE RATCLIFF PKF"
Chartered Accountants
Vancouver, Canada
March 19, 2002
1
FLEXIBLE SOLUTIONS INTERNATIONAL INC.
Consolidated Balance Sheets
December 31
(U.S. Dollars)
-----------------------------------------------------------------------------
2001 2000
-----------------------------------------------------------------------------
Assets
Current
Cash $190,457 $192,280
Accounts receivable 46,374 144,383
Loan receivable (note 4) 9,516 0
Note receivable (note 5) 9,225 0
Inventory 181,698 93,513
Prepaid expenses 59,291 6,151
-----------------------------------------------------------------------------
Total Current Assets 496,561 436,327
Property and Equipment (note 6) 72,753 53,064
-----------------------------------------------------------------------------
Total Assets $569,314 $489,391
=============================================================================
Liabilities
Current
Accounts payable $20,592 $12,422
Income tax payable 18,108 90,598
-----------------------------------------------------------------------------
Total Current Liabilities 38,700 103,020
-----------------------------------------------------------------------------
Stockholders' Equity
Capital Stock
Authorized
50,000,000 Common shares with a par value of $0.001 each
1,000,000 Preferred shares with a par value of $0.01 each
Issued and Outstanding
9,272,816 and 9,131,316 Common shares 9,272 9,131
Capital in Excess of Par Value 563,713 163,653
Other Comprehensive Loss (23,842) (1,839)
Accumulated Earnings (Deficiency) (18,529) 215,426
-----------------------------------------------------------------------------
Total Stockholders' Equity 530,614 386,371
-----------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity $569,314 $489,391
=============================================================================
See notes to consolidated financial statements.
2
FLEXIBLE SOLUTIONS INTERNATIONAL INC.
Consolidated Statements of Operations
Years Ended December 31
(U.S. Dollars)
---------------------------------------------------------------------------------------
2001 2000 1999
---------------------------------------------------------------------------------------
Sales $1,334,273 $1,029,649 $759,218
Cost of Sales (Exclusive of Depreciation) 662,807 509,933 413,849
---------------------------------------------------------------------------------------
Gross Profit 671,466 519,716 345,369
---------------------------------------------------------------------------------------
Operating Expenses
Wages (note 10) 313,918 87,907 63,467
Stock promotion and transfer agent fee 241,573 568 8,048
Office 48,398 9,028 11,456
Administrative salaries and benefits 46,639 37,234 4,524
Rent 28,978 11,445 4,442
Bad debt expense 26,570 51,282 0
Professional fees 23,338 36,701 16,465
Travel 23,125 10,454 6,607
Subcontracting 16,630 33,312 12,801
Shipping 13,563 12,189 7,179
Telephone 5,616 3,613 2,359
Commission 1,130 1,982 20,957
Currency exchange (2,368) (19,344) 4,144
Depreciation 18,910 13,489 12,764
---------------------------------------------------------------------------------------
806,020 289,860 175,213
---------------------------------------------------------------------------------------
Income (Loss) Before Other Items and
Income Tax (134,554) 229,856 170,156
Other Items
Gain on sale of property and equipment 863 0 0
---------------------------------------------------------------------------------------
Income (Loss) Before Income Tax (133,691) 229,856 170,156
Income Tax 100,264 90,885 67,308
---------------------------------------------------------------------------------------
Net (Loss) Income $(233,955) $138,971 $102,848
=======================================================================================
Net (Loss) Income Per Share $ (0.03) $ 0.02 $ 0.01
=======================================================================================
Weighted Average Number of Shares 9,247,949 9,131,316 9,131,316
=======================================================================================
See notes to consolidated financial statements.
3
FLEXIBLE SOLUTIONS INTERNATIONAL INC.
Consolidated Statements of Stockholders' Equity
Years Ended December 31, 2001, 2000 and 1999
(U.S. Dollars)
-----------------------------------------------------------------------------------------------------------------------------------
Capital in Accumulated Other Total
Excess of Earnings Comprehensive Stockholders'
Shares Par Value Par Value (Deficiency) Income (Loss) Equity
------------------------------------- ------------- --------------- ---------------- --------------- --------------- -------------
Balance, December 31, 1998 9,131,316 9,131 163,653 (26,393) (376) 146,015
Translation Adjustment 0 0 0 0 7,053 7,053
Net Income 0 0 0 102,848 0 102,848
------------------------------------- ------------- --------------- ---------------- --------------- --------------- -------------
Balance, December 31, 1999 9,131,316 9,131 163,653 76,455 6,677 255,916
Translation Adjustment 0 0 0 0 (8,516) (8,516)
Net Income 0 0 0 138,971 0 138,971
------------------------------------- ------------- --------------- ---------------- --------------- --------------- -------------
Balance, December 31, 2000 9,131,316 9,131 163,653 215,426 (1,839) 386,371
Shares Issued for
Cash (October and December 9,500 9 4,116 0 0 4,125
Services (January, July
and November) 132,000 132 139,868 0 0 140,000
Stock option compensation 0 0 256,076 0 0 256,076
Translation adjustment 0 0 0 0 (22,003) (22,003)
Net loss 0 0 0 (233,955) 0 (233,955)
------------------------------------- ------------- --------------- ---------------- --------------- --------------- -------------
Balance, December 31, 2001 9,272,816 $9,272 $563,713 $(18,529) $(23,842) $530,614
===================================== ============= =============== ================ =============== =============== =============
See notes to consolidated financial statements.
4
FLEXIBLE SOLUTIONS INTERNATIONAL INC.
Consolidated Statements of Cash Flows
Years Ended December 31
(U.S. Dollars)
------------------------------------------------------------------------------------------------------------------
2001 2000 1999
------------------------------------------------------------------ -------------------- ---------------- ---------
Operating Activities
Net (loss) income $(233,955) $138,971 $102,848
Adjustments to reconcile net (loss) income
to net cash, provided by (used in)
operating activities
Stock option compensation 256,076 0 0
Non-cash services 141,510 0 0
Depreciation 18,910 13,489 2,764
Gain on sale of property and equipment (863) 0 0
Changes in Non-Cash Working Capital
Accounts receivable 98,009 (31,544) (111,308)
Inventory (88,185) 43,047 (131,225)
Prepaid expenses (53,140) (5,631) (520)
Accounts payable 8,170 (14,589) 5,444
Accrued liabilities 0 (6,929) 3,559
Income tax payable (72,490) 21,312 69,286
------------------------------------------------------------------ -------------------- ---------------- ---------
Cash Provided by (Used in) Operating Activities 74,042 158,126 (49,152)
------------------------------------------------------------------ -------------------- ---------------- ---------
Investing Activities
Acquisition of property and equipment (39,246) (16,771) (52,409)
Note receivable (9,225) 0 0
Loan receivable (9,516) 0 0
------------------------------------------------------------------ -------------------- ---------------- ---------
Cash Used in Investing Activities (57,987) (16,771) (52,409)
------------------------------------------------------------------ -------------------- ---------------- ---------
Financing Activities
Repayment to shareholder 0 0 (3,261)
Proceeds from issuance of common stock 4,125 0 0
------------------------------------------------------------------ -------------------- ---------------- ---------
Cash Provided by (Used in) Financing Activities 4,125 0 (3,261)
------------------------------------------------------------------ -------------------- ---------------- ---------
Effect of Exchange Rate Changes on Cash (22,003) (8,516) 7,053
------------------------------------------------------------------ -------------------- ---------------- ---------
Inflow (Outflow) of Cash (1,823) 132,839 (97,769)
Cash, Beginning of Year 192,280 59,441 157,210
------------------------------------------------------------------ -------------------- ---------------- ---------
Cash, End of Year $190,457 $192,280 $59,441
================================================================== ==================== ================ =========
Supplementary Disclosure of Cash
Flow Information
Income taxes paid $85,126 $66,748 $0
------------------------------------------------------------------ -------------------- ---------------- ---------
Supplementary Disclosure of Non-Cash
Investing Activities
Sale of trailer - exchange for rent $1,510 $0 $0
------------------------------------------------------------------ -------------------- ---------------- ---------
See notes to consolidated financial statements.
5
FLEXIBLE SOLUTIONS INTERNATIONAL INC.
Notes to Consolidated Financial Statements
Years Ended December 31, 2001, 2000 and 1999
(U.S. Dollars)
--------------------------------------------------------------------------------
1. OPERATIONS AND BASIS OF PRESENTATION
These consolidated financial statements include the accounts of
Flexible Solutions International Inc. and its wholly owned subsidiary
Flexible Solutions Ltd. ("the Company"). All intercompany balances and
transactions are eliminated. The parent company was incorporated May
12, 1998 in the State of Nevada and had no operations until June 30,
1998 as described below.
On June 30, 1998 the Company completed the acquisition of 100% of the
shares of Flexible Solutions Ltd. The acquisition was effected through
the issuance of 7,000,000 shares of common stock by the Company with
the former shareholders of the subsidiary receiving 100% of the total
shares then issued and outstanding. The transaction has been accounted
for as a reverse take-over.
Flexible Solutions Ltd. is accounted for as the acquiring party and the
surviving entity. Because Flexible Solutions Ltd. is the accounting
survivor, the consolidated financial statements presented for all
periods are those of Flexible Solutions Ltd. The shares issued by
Flexible Solutions International Inc. pursuant to the 1998 acquisition
have been accounted for as if those shares had been issued upon the
organization of Flexible Solutions Ltd.
2. COMPARATIVE FIGURES
Certain of the comparative figures are reclassified to conform with the
current years' presentation.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Foreign currency
The functional currency of the Company is the Canadian dollar.
The translation of the Canadian dollar to the reporting
currency of the U.S. dollar is performed for assets and
liabilities using exchange rates in effect at the balance
sheet date. Revenue and expense transactions are translated
using average exchange rates prevailing during the year.
Translation adjustments arising on conversion of the financial
statements from the Company's functional currency, Canadian
dollars, into the reporting currency, U.S. dollars, are
excluded from the determination of income and disclosed as
other comprehensive income (loss) in stockholders' equity.
Foreign exchange gains and losses relating to transactions not
denominated in the applicable local currency are included in
the determination of income.
6
FLEXIBLE SOLUTIONS INTERNATIONAL INC.
Notes to Consolidated Financial Statements
Years Ended December 31, 2001, 2000 and 1999
(U.S. Dollars)
--------------------------------------------------------------------------------
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
(b) Use of estimates
The preparation of consolidated financial statements in
conformity with accounting principles generally accepted in
the United States of America requires management to make
estimates and assumptions that affect the reported amounts of
assets and liabilities at the date of the consolidated
financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could
differ from those estimates and would impact future results of
operations and cash flows.
(c) Inventory
Inventory is valued at the lower of cost and net realizable
value. Cost is determined on a first-in, first-out basis.
(d) Property and equipment
Property and equipment are recorded at cost and depreciated
using the declining balance method using the following annual
rates:
Manufacturing equipment - 20%
Trailer - 30%
Computer hardware - 30%
Furniture and fixtures - 20%
Office equipment - 20%
(e) Revenue recognition
Revenue from product sales is recognized at the time the
product is shipped. Provisions are made at the time the
related revenue is recognized for estimated product returns.
Since the Company's inception, product returns have been
insignificant; therefore no provision has been established for
estimated product returns.
(f) Financial instruments
The Company's financial instruments consist of cash, accounts
receivable, note receivable, loan receivable and accounts
payable. It is management's opinion that the Company is not
exposed to significant interest, currency or credit risks
arising from these financial instruments. The fair value of
these financial instruments approximate their carrying values
due to their short maturities.
(g) Income (loss) per share calculation
Income (loss) per share is calculated by dividing net income
(loss) by the weighted average number of shares outstanding.
Common share equivalents consisting of stock options are not
considered in the computation because their effect would be
anti-dilutive.
7
FLEXIBLE SOLUTIONS INTERNATIONAL INC.
Notes to Consolidated Financial Statements
Years Ended December 31, 2001, 2000 and 1999
(U.S. Dollars)
--------------------------------------------------------------------------------
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
(h) Stock issued in exchange for services
The valuation of the common stock issued in exchange for
services is valued at an estimated fair market value as
determined by officers and directors of the Company based upon
trading prices of the Company's common stock within the same
general time period.
(i) Stock based compensation
The Company applies APB Opinion No. 25 and related
interpretations in accounting for its employee stock option
plans. Compensation expense is recorded when options are
granted to management at discounts to market.
(j) Recent accounting pronouncements
(i) In December 1999, the SEC issued Staff Accounting
Bulletin ("SAB") 101, "Revenue Recognition", which
outlines the basic criteria that must be met to
recognize revenue and provides guidance for
presentation of revenue and for disclosure related to
revenue recognition policies in financial statements
filed with the SEC. The Company believes the adoption
of SAB 101 does not have a material impact on the
Company's financial position and results of
operations.
(ii) In March 2000 the Financial Accounting Standards
Board ("FASB") issued "Interpretation #44, Accounting
for Certain Transactions Involving Stock
Compensation". Among other issues, this
interpretation clarifies:
(a) The definition of employee for purposes of
applying APB Opinion No. 25.
(b) The criteria for determining whether a plan
qualifies as a noncompensatory plan.
(c) The accounting consequence of various
modifications of the terms of a previously
fixed stock option award, and
(d) The accounting for an exchange of stock
compensation awards in a business
combination.
In relation to (c) the interpretation states, "if the
exercise price of a fixed stock option award is
reduced, the award shall be accounted for as a
variable from the date of the modification to the
date the award is exercised, is forfeited, or expired
unexercised, the exercise price of an option award
has been reduced if the fair value of the
consideration required to be remitted pursuant to the
award's original terms". There is no impact on the
Company for fiscal 2001.
8
FLEXIBLE SOLUTIONS INTERNATIONAL INC.
Notes to Consolidated Financial Statements
Years Ended December 31, 2001, 2000 and 1999
(U.S. Dollars)
--------------------------------------------------------------------------------
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
(iii) On September 2000, the EITF reached a final consensus
on EITF Issue 00-10, "Accounting for Shipping and
Handling Fees and Costs." This consensus requires
that all amounts billed to a customer in a sale
transaction related to shipping and handling, if any,
represent revenue and should be classified as
revenue. Adoption of this consensus did not change
the Company's existing accounting policies or
disclosures.
4. LOAN RECEIVABLE
-----------------------------------------------------------
2001
-----------------------------------------------------------
5% loan receivable due October 17, 2002 $9,516
-----------------------------------------------------------
5. NOTE RECEIVABLE
The note receivable is without stated terms of repayment or interest
and was received in full subsequent to year end.
6. PROPERTY AND EQUIPMENT
-----------------------------------------------------------------------
2001
Accumulated
Cost Depreciation Net
-----------------------------------------------------------------------
Manufacturing equipment $110,105 $43,303 $66,802
Computer hardware 5,190 1,927 3,263
Furniture and fixtures 3,786 1,372 2,414
Office equipment 534 260 274
----------------------------------------------------------------------
$119,615 $46,862 $72,753
-----------------------------------------------------------------------
The trailer was sold on September 1, 2001 in exchange for free rent of
a month and a half at the Victoria location. Depreciation was
calculated up to date of sale.
-----------------------------------------------------------------------
2000
Accumulated Net Book
Cost Depreciation Value
-----------------------------------------------------------------------
Manufacturing equipment $75,757 $26,602 $49,155
Trailer 1,510 770 740
Computer hardware 1,039 530 509
Furniture and fixtures 3,087 769 2,318
Office equipment 534 192 342
-----------------------------------------------------------------------
$81,927 $28,863 $53,064
-----------------------------------------------------------------------
9
FLEXIBLE SOLUTIONS INTERNATIONAL INC.
Notes to Consolidated Financial Statements
Years Ended December 31, 2001, 2000 and 1999
(U.S. Dollars)
--------------------------------------------------------------------------------
7. COMPREHENSIVE (LOSS) INCOME
-----------------------------------------------------------------------
2001 2000 1999
-----------------------------------------------------------------------
Net income (loss) $(233,955) $138,971 $102,848
Other comprehensive
income (loss) (22,003) (8,516) 7,053
-----------------------------------------------------------------------
Comprehensive (loss) income $(255,958) $130,455 $109,901
-----------------------------------------------------------------------
8. INCOME TAX
Total income tax expense differs from the amounts computed by applying
the combined Canadian federal and provincial statutory rate of 44.62%
to income before income taxes. The income to which this is applied is
as follows:
-------------------------------------------------------------------------------
2001 2000 1999
-------------------------------------------------------------------------------
Income (loss) before income tax
per entity
Flexible Solutions International Inc. $(396,470) $0 $(10,766)
Flexible Solutions Ltd. 262,779 229,856 180,922
-------------------------------------------------------------------------------
Consolidated income (loss) before
income tax (133,691) 229,856 170,156
Permanent Difference:
Stock option benefit 256,076 0 0
Other 0
Stock issued for services 140,000 0 0
Miscellaneous 394 0 0
-------------------------------------------------------------------------------
Taxable income $262,779 $229,856 $170,156
-------------------------------------------------------------------------------
10
FLEXIBLE SOLUTIONS INTERNATIONAL INC.
Notes to Consolidated Financial Statements
Years Ended December 31, 2001, 2000 and 1999
(U.S. Dollars)
--------------------------------------------------------------------------------
8. INCOME TAX (Continued)
Application of the federal and provincial statutory rate results in the
following:
------------------------------------------------------------------
2001 2000 1999
------------------------------------------------------------------
Expected tax expense at
statutory rates $117,252 $104,860 $77,625
Increase (decrease) resulting
from manufacturing and
processing deduction (18,395) (16,090) (11,911)
Other 1,407 2,115 1,594
------------------------------------------------------------------
Income tax expense $100,264 $90,885 $67,308
------------------------------------------------------------------
The Company's losses for U.S. income tax purposes are U.S. $30,272
which may be carried forward to apply against future income for U.S.
income tax purposes, expiring between 2018 and 2019. The future benefit
of these loss carry-forwards has been offset with a full valuation
allowance. These losses expire as follows:
--------------------------------------- --------------------
Available to Amount
--------------------------------------- --------------------
2018 $16,858
2019 13,414
--------------------------------------- --------------------
$30,272
--------------------------------------- --------------------
9. NET (LOSS) INCOME PER SHARE
-----------------------------------------------------------------------
Net
Income (Loss) Shares Per Share
(Numerator) (Denominator) Amount
-----------------------------------------------------------------------
2001
Basic net (loss) per share
Net loss $(233,955) 9,247,949 $(0.03)
2000
Basic net income per share
Net income $138,971 9,131,316 $ 0.02
1999
Basic net income per share
Net income $102,848 9,131,316 $ 0.01
-----------------------------------------------------------------------
There were no preferred shares issued and outstanding for the years
ended December 31, 2001, 2000 and 1999.
11
FLEXIBLE SOLUTIONS INTERNATIONAL INC.
Notes to Consolidated Financial Statements
Years Ended December 31, 2001, 2000 and 1999
(U.S. Dollars)
--------------------------------------------------------------------------------
10. STOCK OPTIONS
The Company may issue stock options and stock bonuses for common stock
of the Company to provide incentives to directors, key employees and
other persons who contribute to the success of the Company. The
exercise price of the Incentive Options (employees of the Company or
its subsidiaries) is not less than the fair market value of the stock
at the date of the grant and for non-employees the exercise price is no
less than 80% of the fair market value (defined by the most recent
closing sale price reported by NASDAQ) on the date of the grant.
The following table summarizes the Company's stock option activity for
the year ended December 31, 2001:
------------------------------------------------------------------------------------
Weighted
Number of Exercise Price Average
Shares Per Share Exercise Price
------------------------------------------------------------------------------------
Granted during year ended
December 31, 2001 1,898,000 $ 0.25 - $ 3.50 $ 1.47
Exercised (2,000) $ 1.00 $ 1.00
------------------------------------------------------------------------------------
Balance, December 31, 2001 1,896,000 $ 0.25 - $ 3.50 $ 1.63
------------------------------------------------------------------------------------
The Company applies APB Opinion No. 25 and related interpretations in
accounting for its stock options granted to employees, and accordingly,
compensation expense of $173,750 was recognized as wages expense. Had
compensation expense been determined as provided in SFAS 123 using
Black-Scholes option - pricing model, the pro-forma effect on the
Company's net loss and per share amounts would have been as follows:
-----------------------------------------------------------------------
2001 2000 1999
-----------------------------------------------------------------------
Net loss, as reported $(233,955) $138,971 $102,848
Net loss, pro-forma (955,071) 138,971 102,848
Net loss per share, as reported $ (0.03) $ 0.02 $ 0.01
Net loss per share, pro-forma $ (0.10) $ 0.02 $ 0.01
-----------------------------------------------------------------------
The fair value of each option grant is calculated using the following
weighted average assumptions:
----------------------------------------------------- -------------
2001
----------------------------------------------------- -------------
Expected life (years) 3.5
Interest rate 4.00%
Volatility 58.27%
Dividend yield 0.00%
----------------------------------------------------- -------------
12
FLEXIBLE SOLUTIONS INTERNATIONAL INC.
Notes to Consolidated Financial Statements
Years Ended December 31, 2001, 2000 and 1999
(U.S. Dollars)
--------------------------------------------------------------------------------
10. STOCK OPTIONS (Continued)
During the year the Company granted stock options to consultants. These
options have been recognized applying SFAS 123 using the Black-Scholes
option-pricing model which resulted in additional stock promotion,
advertising, professional fees, subcontracting and office expenses of
$82,326 in the accounts.
11. CONTINGENCIES
The Company has been named plaintiff in a lawsuit demanding the return
of the share certificate for 100,000 shares of stock originally given
to the defendant as payment in advance for services. The services for
which the advance was given were never performed or given to the
Company, and the Company therefore received no consideration or value
for such advance. Return of the share certificate for 100,000 shares
was demanded within ten (10) days, namely by August 22, 2001, however,
to date remains unreturned.
On date of issue, January 4, 2001, the share transaction was recorded
as shares issued for services at fair market value, a value of $0.80
per share.
12. SEGMENTED AND SIGNIFICANT CUSTOMER INFORMATION
The Company operates in a single segment, involving the development and
marketing of two lines of energy and water conservation products.
The first line consists of a liquid swimming pool blanket which saves
energy and water by storing evaporation from the pool surface. The
second line consists of a food safe powdered form of the active
ingredient within the liquid blanket and is designed to be used in
still or slow moving drinking water sources.
The Company's sales in the United States of America and abroad amounted
to 5%, 3% and 28.8% for the years ended December 31, 2001, 2000 and
1999 respectively. The remainder were earned in Canada.
All the Company's long-lived assets are located in Canada. The Company
had one major customer, Sunsolar Energy Technologies which comprised
94%, 96% and 70% of total sales for the years ended December 31, 2001,
2000 and 1999 respectively. There were no significant concentrations of
credit risk.
13
FLEXIBLE SOLUTIONS INTERNATIONAL INC.
Notes to Consolidated Financial Statements
Years Ended December 31, 2001, 2000 and 1999
(U.S. Dollars)
--------------------------------------------------------------------------------
13. COMMITMENTS
Property and premises leases
The Company is committed to minimum rental payments for property and
premises aggregating approximately $235,202 over the terms of leases
expiring September 1, 2003.
Commitments in each of the next three years are approximately as
follows:
---------------------------------- ---------------------
2001 $85,528
2002 85,528
2003 64,146
---------------------------------- ---------------------
14. SUBSEQUENT EVENTS
(a) Subsequent to the year end, 47,000 common shares were issued.
(b) In January, 2002, U.S. $29,000 was received upon exercise of
options for shares of stock.
14
FLEXIBLE SOLUTIONS INTERNATIONAL INC.
Consolidated Balance Sheets (Unaudited)
As of June 30
(U.S. Dollars)
----------------------------------------------------------------------------
2002 2001
----------------------------------------------------------------------------
Assets
Current
Cash $374,064 $153,109
Accounts receivable 250,287 540,844
In Trust 22,756 25,000
Short Term Loans 23,097 0
Inventory 128,050 86,836
Income Tax Installments 57,157 42,745
Prepaid expenses 14,148 3459
----------------------------------------------------------------------------
Total Current Assets 869,560 851,993
Investments 913,307
Property and Equipment 76,213 66,289
----------------------------------------------------------------------------
Total Assets $1,859,080 $918,282
----------------------------------------------------------------------------
Liabilities
Current
Accounts payable 16,377 64,419
Accrued liabilities 49,917 61,628
Income tax payable 42,095 151,313
----------------------------------------------------------------------------
Total Current Liabilities 108,389 277,360
----------------------------------------------------------------------------
Stockholders' Equity
Capital Stock
Authorized
50,000,000 Common shares with a par value of $0.001 each
1,000,000 Preferred shares with a par value of $0.01 each
Issued
10,025,816 & 9,233,816 Common shares 10,026 9,233
Capital in Excess of Par Value 1,704,568 164,378
Other Comprehensive Income (Loss) (17,196) 5,106
Retained Earnings 53,293 462,205
----------------------------------------------------------------------------
1,750,691 640,922
----------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity $1,859,080 $918,282
FLEXIBLE SOLUTIONS INTERNATIONAL INC.
Consolidated Statement of Operations (Unaudited)
Quarters Ended June 30
(U.S. Dollars)
----------------------------------------------------------------------------
2002 2001
----------------------------------------------------------------------------
Sales $665,245 $808,025
Cost of Sales (Exclusive of Depreciation) 351,048 459,836
----------------------------------------------------------------------------
Gross Profit 314,197 348,189
----------------------------------------------------------------------------
Operating Expenses
Wages 75,449 47,564
Bad Debt Expense 64 0
Administrative salaries and benefits 47,012 18,638
Advertising 3,054 1,308
Professional fees 2,545 15,797
Subcontracting 9,642 4,987
Shipping 2,434 3,850
Rent 13,664 6,683
Travel 2,725 1,414
Office 2,672 2,209
Telecommunications 2,677 2,193
Commission 0 266
Utilities 1,950 0
Entertainment 829 0
Stock promotion and transfer agent fees 54,477 2,737
Insurance 1,061 0
Miscellaneous 7,402 1,706
Water$avr 175 654
Depreciation 4,425 2,884
----------------------------------------------------------------------------
232,257 112,890
----------------------------------------------------------------------------
Income Before Income Tax 81,940 235,299
Income Tax 59,678 89,414
----------------------------------------------------------------------------
Net Income $22,262 $145,885
----------------------------------------------------------------------------
Earnings Per Share $0.00 $0.02
----------------------------------------------------------------------------
Weighted Average Number of Shares 9,893,728 9,232,966
----------------------------------------------------------------------------
FLEXIBLE SOLUTIONS INTERNATIONAL INC.
Consolidated Statement of Operations (Unaudited)
Six Months Ended June 30
(U.S. Dollars)
----------------------------------------------------------------------------
2002 2001
----------------------------------------------------------------------------
Sales $1,041,865 $1,159,472
Cost of Sales (Exclusive of Depreciation) 538,458 575,591
----------------------------------------------------------------------------
Gross Profit 503,407 583,881
----------------------------------------------------------------------------
Operating Expenses
Wages 107,204 72,345
Bad Debt Expense -346 0
Administrative salaries and benefits 72,026 31,802
Advertising 18,382 2,828
Professional fees 29,497 20,010
Subcontracting 15,677 10,616
Shipping 5,598 5,762
Rent 29,437 10,971
Travel 10,336 9,868
Office 7,564 3,799
Telecommunications 4,934 2,746
Commission 0 444
Utilities 4,290 0
Entertainment 1,190 0
Stock promotion and transfer agent fees 58,297 8,208
Insurance 2,288 0
Miscellaneous 12,403 3,068
Water$avr 175 654
Depreciation 8,613 5,568
----------------------------------------------------------------------------
387,566 188,689
----------------------------------------------------------------------------
Income Before Income Tax 115,841 395,192
Income Tax 72,560 150,173
----------------------------------------------------------------------------
Net Income $43,281 $245,019
----------------------------------------------------------------------------
Earnings Per Share $0.00 $0.03
----------------------------------------------------------------------------
Weighted Average Number of Shares 9,645,601 9,229,797
FLEXIBLE SOLUTIONS INTERNATIONAL INC.
Consolidated Statement of Cash Flow (Unaudited)
Quarters Ended June 30
(U.S. Dollars)
----------------------------------------------------------------------------
2002 2001
----------------------------------------------------------------------------
Operating Activities
Net income $22,262 $145,885
provided by (used in) operating activities
Depreciation 4,425 2,884
Changes in non-cash working capital
Accounts receivable 165,272 (129,721)
Notes receivable (277) 0
Inventory 5,571 33,151
Prepaid expenses & deposits (5,529) (965)
Short Term Loans (13,482) 0
Income Tax Installments (29,704) (42,745)
Accounts payable & accrued liabilities (91,696) 110,889
Income tax payable 50,584 (1,184)
------------------------------------------------------------------------
Cash provided (Used in) Operating Activities 107,427 118,194
Investing Activities
Acquisitions and Equipment 0 (8,763)
Investments (US Treasury Bills) (913,307) 0
Financing Activities
Funds received for share issues 1,080,108 0
Income Taxes Paid -$29,704 -$42,745
Effect of Exchange Rate Changes on Cash (9,495) 8,099
------------------------------------------------------------------------
Inflow (Outflow) of Cash 264,733 117,530
Cash, Beginning of Quarter 109,331 35,579
------------------------------------------------------------------------
Cash, End of Quarter $374,064 $153,109
------------------------------------------------------------------------
Flexible Solutions International Inc.
Notes to Consolidated Financials
For the Quarter Ended June 30, 2002
Note 1 Interim Reporting
While the information presented in the accompanying interim six months to June
30, 2002 financial statements is unaudited, it includes all adjustments which
are, in the opinion of management, necessary to present fairly the financial
position, results of operations and cash flows for the interim periods
presented. These interim financial statements follow the same accounting
policies and methods of their application as the December 31, 2001 annual
financial statements. It is suggested that these interim financial statements be
read in conjunction with the company's December 31, 2001 annual financial
statements.
Note 2 FASB 123
If FASB 123 was used, Wages and Administrative Benefits would have an additional
$127,975 expensed for first quarter and $141,964 expensed for second quarter.
[OUTSIDE BACK COVER OF THE PROSPECTUS]
No dealer, salesman or any other person has been authorized to give any
information or to make any representation other than those contained in this
prospectus, and, if given or made, such information or representations must not
be relied upon as having been authorized by the Company.
This Prospectus does not constitute an offer of any securities other than those
to which it relates or an offer to sell or a solicitation of any offer to buy
any securities in any jurisdiction to any person to whom it is unlawful to make
such offer in such jurisdiction. The delivery of this Prospectus at any time
does not imply that the information herein is correct as of any time subsequent
to its date. Notwithstanding the foregoing, the Company has undertaken to amend
this Prospectus in the event of any fundamental changes in the affair of the
Company.
--------------------------------------------------------------------------------
TABLE OF CONTENTS
Prospectus Summary ......................................................
Risk Factors ............................................................
Use of Proceeds .........................................................
Market for Securities....................................................
Dividend Policy..........................................................
Management's Discussion and Analysis of
Results of Operation and Financial Condition.........................
Our Business ............................................................
Management ..............................................................
Indemnification .........................................................
Security Ownership of Certain Beneficial
Owners and Management ...............................................
Description of Securities ...............................................
Selling Shareholder .....................................................
Plan of Distribution ....................................................
Selling Security Holders ................................................
Legal Matters ...........................................................
Experts .................................................................
Additional Information ..................................................
Index to Financial Statements ...........................................
UNTIL ____________, 2002 (90 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THE DISTRIBUTION DESCRIBED HEREIN, MAY BE REQUIRED TO DELIVER A
PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATIONS OF DEALERS TO DELIVER A
PROSPECTUS WHEN ACTING AS UNDERWRITERS WITH RESPECT TO THE OFFERING HEREIN.
20
PART II - INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of directors and officers.
Reference is hereby made to the provisions of Section 78.03 and 78.378 to
78.3793 of the Nevada Revised Statutes which provides for indemnification of
directors and officers under certain circumstances.
Reference is hereby made to Article V and VI of Registrant's Articles of
Incorporation which is hereby incorporated by reference.
Reference is hereby made to Article VI of Registrant's By-laws which is hereby
incorporated by reference.
Item 25. Other expenses of issuance and distribution
The following table sets forth the expenses in connection with the issuance and
distribution of the securities offered hereby.
------------------------------------------------------- ----------
Registration Fee $518
------------------------------------------------------- ----------
Estimated Printing Expenses $500
------------------------------------------------------- ----------
Legal Fees and Expenses $25,000
------------------------------------------------------- ----------
Estimated Accounting Fees and Expenses $1,000
------------------------------------------------------- ----------
Blue Sky Fees and Expenses $0
------------------------------------------------------- ----------
Estimated Transfer Agent Fees and Expenses $200
------------------------------------------------------- ----------
Estimated Misc. $1,000
------------------------------------------------------- ----------
Total $28,218
------------------------------------------------------- ----------
Item 26. Recent sales of unregistered securities.
The following provides information of all sales of securities that were not
registered under the Securities Act of 1933 during the last three years.
In January 2001 we issued 100,000 shares of our common stock to Equity Trust for
services to be rendered. Such shares were issued pursuant to an exemption from
registration under Section 4(2) of the Securities Act of 1933. Such shares were
issued pursuant to an investment letter under which the shareholder acknowledged
that the shares were restricted securities and would not be sold without
registration or an exemption from registration. The certificate for such shares
contained a legend restricting transfer without such registration or exemption
and a stop transfer order was lodged against the shares with our transfer agent.
In July 2001 we issued 30,000 shares of our common stock to Patrick Grant, an
employee, for services for the period from July 1, 2001 to December 31, 2001.
Such shares were issued pursuant to an exemption
21
from registration under Section 4(2) of the Securities Act of 1933. Such shares
were issued pursuant to an investment letter under which the shareholder
acknowledged that the shares were restricted securities and would not be sold
without registration or an exemption from registration. The certificate for such
shares contained a legend restricting transfer without such registration or
exemption and a stop transfer order was lodged against the shares with our
transfer agent.
In January 2002 we issued 30,000 shares of our common stock to Patrick Grant, an
employee, for services for the period from January 1, 2002 to June 30, 2002.
Such shares were issued pursuant to an exemption from registration under Section
4(2) of the Securities Act of 1933. Such shares were issued pursuant to an
investment letter under which the shareholder acknowledged that the shares were
restricted securities and would not be sold without registration or an exemption
from registration. The certificate for such shares contained a legend
restricting transfer without such registration or exemption and a stop transfer
order was lodged against the shares with our transfer agent.
In April 2002 we sold 400,000 shares of our common stock in a private placement
to managed accounts of Sprott Asset Management, Inc. for $2.50 per share. Such
shares were issued pursuant to an exemption from registration under Section 4(2)
of the Securities Act of 1933. Such shares were issued pursuant to an investment
letter under which the shareholder acknowledged that the shares were restricted
securities and would not be sold without registration or an exemption from
registration. The certificate for such shares contained a legend restricting
transfer without such registration or exemption and a stop transfer order was
lodged against the shares with our transfer agent.
In July 2002 we sold 1,400,000 shares of our common stock in a private placement
to managed accounts of Sprott Asset Management, Inc. and 428,600 shares to
Pictet Global Sector Fund for $3.50 per share. Such shares were issued pursuant
to an exemption from registration under Section 4(2) of the Securities Act of
1933. Such shares were issued pursuant to an investment letter under which the
shareholder acknowledged that the shares were restricted securities and would
not be sold without registration or an exemption from registration. The
certificate for such shares contained a legend restricting transfer without such
registration or exemption and a stop transfer order was lodged against the
shares with our transfer agent.
Item 27. Exhibits.
Exhibit No. Description
3.1 Articles of Incorporation of the Registrant (Incorporated by reference
to Exhibit 3.1 to Registrant's Registration Statement on Form 10-SB
filed February 22, 2000).
3.2 Bylaws of the Registrant (Incorporated by reference to Exhibit 3.2
Registrant's Registration Statement on Form 10- SB-2 filed February
22,2000).
5.1 Opinion of counsel
23 Consent of counsel is contained in Exhibit 5.1
23.1 Consent of Independent Chartered Accountants.
22
Item 28. Undertakings.
A. Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel, the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the questions whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
B. The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this registration statement
to:
(i) Include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) Reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the
information in the registration statement. Notwithstanding the
foregoing, any increase or decrease in volume of securities offered (if
the total dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high end of the
estimated offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in the aggregate,
the changes in volume and price represent no more than a 20% change in
the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective Registration Statement.
(iii) Include any additional or changed material information
on the plan of distribution.
(2) For determining any liability under the Securities Act, treat each
such post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the initial bona
fide offering.
(3) File a post-effective amendment to remove from registration any of
the securities that remain unsold at the end of the offering.
II-3
23
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned, in the City of
Victoria, British Columbia, Canada on September 16, 2002.
FLEXIBLE SOLUTIONS INTERNATIONAL, INC.
By:s/DAN O'BRIEN
------------------------------------------
Dan O'Brien
President
Pursuant to the requirements of the Securities Act of 1933, this registration
statement or amendment thereto has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
s/DAN O'BRIEN President, Chairman, September 16, 2002
--------------- Director
Dan O'Brien (Principal executive
officer and Principal
Accounting Officer)
s/ROBERT O'BRIEN Director September 16, 2002
----------------
Robert O'Brien
s/JOHN BIENTJES Director September 16, 2002
---------------
John Bientjies
24