August 12, 2010

Conference call scheduled for Friday August 13th, 11:00am Eastern time, 8:00am Pacific Time
See dial in number below

VICTORIA, BRITISH COLUMBIA, August 12, 2010 – FLEXIBLE SOLUTIONS INTERNATIONAL, INC. (NYSE Amex: FSI, FRANKFURT: FXT), is the developer and manufacturer of biodegradable polymers for oil extraction, detergent ingredients and crop nutrient availability chemistry, as well as biodegradable and environmentally safe water and energy conservation technologies. Today the Company announces financial results for the second quarter (Q2) ended June 30, 2010.

Mr. Daniel B. O’Brien, CEO, states, “This quarter was significant for the Company in demonstrating the continued strong turn around in both sales and profit since the first half of 2009. In particular, the more than 400% increase in non-GAAP operating cash flow shows that the Company is in good health and ready to take advantage of new opportunities. Quarter over quarter sales may track higher for the rest of the year. An income tax adjustment has been made in Q2 due to higher than expected inme in first half of 2010, as well as possible higher than expected income in second half. The income tax expense taken in Q2 is $413,080. Revenue forecasts will be updated at each financial reporting date.”

  • Sales in Q2 were $2,833,552, up approximately 25% when compared to sales of $2,272,759, in the corresponding period a year ago. The result was a GAAP net loss of $133,590, or $0.01 per share, compared with a net loss of $214,844, or $0.02 per share, in Q2, 2009. See the financial statements regarding the significant increase in income tax expense taken in Q2, 2010.
  • Basic weighted average shares used in computing per share amounts in Q2 were 13,962,567 for 2010 and 13,994,435 for 2009.
  • Non-GAAP operating cash flow: For the 6 months ending June 30, 2010, net income reflects a $241,179 of non-cash charges (depreciation and stock option expenses), $482,080 of income tax, as well as $414,182 in new factory development costs and interest expense. These items are either non-cash items or items not related to operations or current operating activities of the Company. When these items are removed, the Company shows operating cash flow of $1,519,523, or $0.11 per share. This compares with operating cash flow of $254,576, or $0.02 per share, in the corresponding 6 months of 2009 (see the table that follows for details of these calculations).

Mr. O’Brien continues, “The Company will continue to update the progress of the sugar to aspartic acid plant, in Alberta, on a timely basis. Production from the Alberta plant will allow FSI to supply the only renewably-based poly-aspartic acid in the world. This will allow access to customers who demand this level of environmentally sound behavior as well as insulating the company from future oil price shocks.”

The NanoChem division continues to contribute most of our sales and cash flow, and new opportunities are unfolding to further increase sales in this division. NanoChem sales have been less seasonal than those of our WaterSavr and Flexible Solutions Ltd divisions. This has lead to less volatility in total revenue figures quarter over quarter. However, in the future, Q1 and Q2 sales may be much larger than sales in Q3 and Q4. This is largely due to potential growth in agricultural product sales (sales which tend to occur largely in Q1 and Q2).

* CEO, Dan O’Brien has scheduled a conference call for 11:00am EST, 8:00am PST, Friday August 13th to discuss the financials. Call 1-877-941-8609 (or 1-480-629-9818). The conference call title, “Second Quarter Financials,” may be requested.*

The above information and following table contain supplemental information regarding income and cash flow from operations for the 6 months ended June 30, 2010. Adjustments to exclude depreciation, stock option expenses and one time charges are given. This financial information is a Non-GAAP financial measure as defined by SEC regulation G. The GAAP financial measure most directly comparable is net income. The reconciliation of each of the Non-GAAP financial measures is as follows:


Consolidated Statement of Operations

For 3 Months Ended June 30 (6 Months Operating Cash Flow)



3 months ended June 30



Revenue      $2,833,552 $  2,272,759
Net income (loss) before income tax – NONGAAP      $   279,490 $   (214,844)
Income tax      $   413,080 a $                0
Net income (loss) – GAAP      $ (133,590) $   (214,844)
Net income (loss) per common share – basic. – GAAP      $         (0.1) $           (0.2)
Net income (loss) excluding items not related to certain current operating activities  – NON-GAAP      $ (133,590) $   (294,844) b
Net income (loss) per common share – basic. NONGAAP      $        (0.01) $         (0.02) b
3 month weighted average shares outstanding – basic. GAAP       13,962,567    13,994,435 h

6 month Operating Cash Flow

Ended June 30

Operating Cash flow (6months). NON-GAAP      $   623,261 c $     (12,673) d
Operating Cash flow excluding certain non-operating items and items not related to current operations (6 months). NON-GAAP      $1,519,523 e $    254,576   f
Operating Cash flow per share excluding non-operating items and items not related to current operations (6 months) – basic. NON-GAAP      $         0.11 e $             0.2  f
Non-cash Adjustments (6 month)      $   241,179 g $     335,398 g
Shares (6 month basic weighted average)  used in computing per share amounts – basic GAAP      13,962,567   14,028,313 h

Notes: certain items not related to “operations” of the Company have been excluded from net income as follows.
a) Income tax – accounting adjustment to second quarter income tax. Income during the first six months was higher than expected resulting in higher income tax expense.
b) Non-GAAP – non-cash amount excludes certain items not related to current operating activities (recapture of past non-cash expense in 2009 due to cancellation of 100,000 shares valued at $80,000). See Operating Cash Flow for other adjustments.
c) Non-GAAP – amounts exclude certain non-cash items (depreciation and stock option expense totaling $241,179)
d) Non-GAAP – amounts exclude certain non-cash items (depreciation and stock option expense totaling $335,398)
e) NON-GAAP amounts exclude certain non-cash items and items not related to operations or current operating activities (depreciation, stock option expense ($241,179), income tax of $482,080, and new factory construction costs ($414,182).
f) Non-GAAP – amounts exclude certain non-cash items (depreciation and stock option expense totaling $335,398), and recapture of past non-cash expense (cancellation of 100,000 shares valued at $80,000), as well as items unrelated to current operating activities (new factory construction costs and related Interest expense totaling $347,249).
g) Non-GAAP – amounts represent depreciation and stock option expense
h) Significant change from 2008 shares outstanding was due to cancellation of 100,000 shares issued in a previous year. See the Consolidated Balance Sheet for shares outstanding.

Safe Harbor Provision
The Private Securities Litigation Reform Act of 1995 provides a “Safe Harbor” for forward-looking statements. Certain of the statements contained herein, which are not historical facts, are forward looking statement with respect to events, the occurrence of which involve risks and uncertainties. These forward-looking statements may be impacted, either positively or negatively, by various factors. Information concerning potential factors that could affect the company is detailed from time to time in the company’s reports filed with the Securities and Exchange Commission.