Good day, and welcome to the Flexible Solutions International’s First Quarter 2020 Financial Results Conference Call. Today's conference is being recorded.At this time, I would like to turn the conference over to Dan O'Brien. Please go ahead, sir. Dan O'Brien: Thank you, Mary. And good morning, this is Dan O'Brien, CEO of Flexible Solutions. The 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 statements 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. Welcome to the Q1 2020 call. Prior to talking about our financials, I'd like to speak about our corporate condition and product lines, plus what we think might happen over the next several quarters.COVID virus, the NanoChem subsidiary, the ENP subsidiary, and the Florida LLC investment are all engaged in producing for the agriculture sector.Therefore, we’re currently considered essential services. Production and sales are continuing to meet our customers’ orders. In hindsight, inventory at December 31 2019 was too high, we were expecting growth in all product lines in 2020. Instead, the virus is likely to prevent growth or even cause small revenue reductions.We shrank our inventory and increased our cash position in Q1 by ordering less inventory than we consumed. This tactic will continue until we feel that we have the right level of inventory to suit the risks of COVID. Our NanoChem division NCS, it represents more than half the revenue of FSI. This division makes thermal polyaspartic acid, called TPA for short which is a biodegradable polymer with many valuable uses.NCS also manufactures SUN 27 and N Savr 30, which are used to reduce nitrogen fertilizer loss from soil. TPA is used in agriculture to significantly increase crop yield. The method of action is by slowing crystal growth between fertilizer ions and other ions in the soil, resulting in the fertilizer remaining available longer for the plants to use. TPA is also a biodegradable way of treating oilfield water to prevent pipes from plugging with mineral scale. Our sales into this market are well established and normally grow steadily but slowly, a simple explanation of TPA’s effect is that it prevents the scaling out of minerals that are part of the water fraction of oil as it exits the rock formation. Scale must be prevented to keep the oil recovery pipes from clogging.SUN 27 and N Savr 30 are our nitrogen conservation products. Nitrogen is a critical fertilizer but it’s subject to loss through bacterial breakdown, evaporation and soil runoff. SUN 27 is used to conserve nitrogen from attack by soil bacterial enzymes while N Savr 30 is directed towards reducing nitrogen loss through leaching and evaporation. ENP, the October 2018 acquisition, ENP is focused on sales into the greenhouse turf and golf markets, whereas our NCS sales are into real crop agriculture, two very distinct markets.We account for ENP as a subsidiary and as expected it generated consolidated revenue greater than $8 million in full-year 2019. FSI booked annual pretax profits of greater than $1 million from this division in 2019, which saw moderate annual growth. The strong quarters for ENP are two and three to match the U.S. spring and summer.Q1 2020 was stronger than the year earlier period and ENP is hoping for growth again in 2020, with the caution that it could face sales difficulties as a result of the virus. The LLC Investment announced in January 2019, this investment was profitable as usual. The company we invested in ordered similar amounts from us in Q1 2020 as it did in Q1 2019. The company is focused on international sales into multiple countries, all of which are facing different COVID issues and responding in varied ways.The large number of variables prevents any useful prediction other than probable results similar to 2019. WaterSavr, news regarding WaterSavr will be released if and when it occurs. As the rest of the company grows, WaterSavr will become less of a focus but the product will remain available for sale to existing and prospective customers.Q2 2020 and the rest of the year. TPA SUN 27, N Savr 30 for agricultural use have peak uptake in Q1 and Q2. 2020 appears to have more focus on just-in-time ordering which may increase or reduce Q2 sales depending on weather. Sales may also be pulled into Q3. Early buy orders in Q4 could be reduced, if our customers decide to continue with just-in-time strategies.Oil, gas and industrial sales for TPA are expected to be flat or mildly down in Q2 compared to the previous year. While predictions regarding Q3 and Q4 are not possible under the circumstances. Like agriculture, other sales to cleaning products and water treatment are considered essential, leaving only oil and gas as a market vertical at significant risk. The risk in O&G is not permanent loss of business rather it's the possibility of some wells shutting down for maintenance while oil prices are low.Tariffs from September 30 2018, many of our raw materials imported from China have included a 10% additional tariff which then rose to 25% in 2019. U.S. customers receive price increases from us as inventory entered production. International customers are not charged the tariffs because we’re applying for the export rebates available to recover them.As a result, the accumulating tariff payments to the government are affecting our cost of goods, our cash flow and our profits negatively until the rebates are received. Rebates are very complicated to apply for and can take many months to arrive. The total dollar amount due back to us has become significant and continues to increase.The rebates will increase profitability and cash flow while decreasing cost of goods for the future quarters in which rebates are received and we are reasonably comfortable in predicting that some rebates will start to arrive in late Q2 or early Q3.The highlights of our financial results. Sales for the quarter decreased less than 1% to $8.43 million compared with $8.47 million for Q1 2019. The result is a gain of $1.26 million or $0.10 a share in the 2020 period compared to a gain of $1.01 million or $0.09 a share in 2019.Working capital is adequate for our purposes and expected to increase during 2020 as we book became profit from sales effort will be made to reduce inventory and accounts receivable, while increasing cash until the effects of the virus become more predictable. We also have a line of credit with BMO Harris Bank of Chicago. We’re confident that we can execute our plans with our existing capital.The LLC Investment in January of 2019 was made with cash on hand provided by FFL, our Canadian operating. Now the text of this speech will be available on our website by Monday, May 18, email or FAX copies can be requested from Jason Bloom, jason@flexiblesolutions.com. Thank you. The floor is open for questions. Mary, will you give the proper instructions please?

[Operator Instructions] We can take our first question now. Caller, your line is open. Please go ahead.

Hi, Dan. How are you doing? Dan O'Brien: Good morning.

Just a really quick question. So on the Florida LLC, I guess can you talk a little bit more about saw that gain on the Florida LLC was down slightly year-over-year, is that kind of driven by lower demand in the international markets, I guess can you give a little bit more color on that? Dan O'Brien: Great. We’re an investor, not an operator. So, I can't go too far into the private business. But I can, I would suggest to you that when you deal in 15 or 20 countries, you get ups in some, downs in others, the currency world, it becomes part of the transaction that every time. So if a currency for instance, one that we track regularly is Brazil.If a currency is very far down against the U.S. dollar, these customers likely to delay an order and look for an update in the currency markets. So it's a very complicated situation. I have no doubt in the skill set of the managers of the company, we invested in. But me from a position as an investor in their company trying to tell you as an investor in Flexible Solutions, that I know how everything is going to work and come out doesn't seem very appropriate. Our best guess is they're going to achieve about what they did last year, which was very good. But just like all our other divisions, we're going to have trouble or investments, we're going to have trouble booking growth.

Yes, that makes a lot of sense. What are the effects of the lower oil prices, I guess on these margins, I remember you kind of mentioned the effect was kind of ambiguous perhaps. And hard to kind of say, did you guys see an effect of lower oil prices on your guidance possibly this quarter or was there something else going on the gross margin isn't it? Dan O'Brien: The gross margin improvement was almost certainly more affected by product mix and low oil prices. The suppliers of our products indeed they use oil as their base chemistry, but the oil has to be fractionated to a chemical called benzene and then the benzene goes through three processes before it reaches aspartic acid. So if the people, the middle people in all those areas including our suppliers, decide to use the opportunity to gain more margin, then we don't see a huge downward difference in our cost of goods.So in the case, the cases that have been going on recently with oil, couple of things, the price didn't go low enough or long enough or anything to percolate through and the three, four middle groups in China, I doubt were willing to reduce their margins and in fact, I think they probably gained some margin. So long winded way of saying the benefits in Q1 were more related to product mix than to cost of goods reductions.

Got it. And just kind of lastly, what are you seeing in terms of demand trends and so far in the current quarter, if you can speak to it, kind of on the TPA side, it seems like the planting season is probably a little bit better this year versus last year and farmers might be in better shape compared to their kind of disastrous environment last year because of the weather. I guess what are you guys seeing in terms of TPA for Ag so far in the quarter, it may be better than you thought. Maybe kind of the same, if you kind of give a little bit of color. Dan O'Brien: That's it. It's largely the same and I don't get a lot of data that I can rely on this early in the quarter. I mean, yes it seems like the quarters have gone but we've only seen a month of revenue and in a company like ours, where we have pre-order sales for products in Q4, we have quasi earlier order sales in Q1 that by the end of Q1 are becoming just-in-time sales. A month of Q2 is in my opinion not something to predict. But if you want a guesstimate here, I'd say things look about the same.

Okay, that's helpful. And any idea if you can, I know this is you had assets before but if you had any idea of kind of the magnitude of the peers kind of rebate, if you kind of executed what will be the range? If you had any idea or is it just too early to tell? Dan O'Brien: It’s not too early. But I don’t like to be tied down to an accounting number that can be varied by government's opinion. So what I will say is that, it is now residing between $500,000 and $1 million is a million would be at the very far end if every single one of our rebates is approved and the $500,000 is probably at the bottom end even if we run into, what you might call key opinions from the U.S. government.

And we can now take our next question, caller your line is open. Please go ahead.

Dan, it’s [indiscernible]. It sounds like you're saying, you're looking for about flat to down sales for the year. And that a lot of the customers are just-in-time ordering, is it fair to say them that you're not seeing right now any sharp declines in orders from end customers. And it's really, it really is just a shift in just-in-time and not someone pulling back. Dan O'Brien: Good morning, Bill. I would say, you've hit the nail on the head. The situation in today's world is that people vary just as my first -- one of my first comments in this speech was we're reducing inventory and increasing cash. I would say that only extremely optimistic people are doing anything other than that.So, yes, we don't we have not found any customers we’ve have said are going out of business. Send us your last bill, we have, we’re seeing what we believe is just-in-time ordering and but of course, we’re not privy to the inside of our customers brains.And given the magnitude of this crisis, I think that flat to down, but only it's somewhat down because of the essential services aspect of our company. I think that's a good guess for the coming year. And then, of course what we look for in our business, we're looking for a vaccine, and we're looking for widespread use of the vaccine or of course, the alternative, a very effective cure for people who do get infected. Those things would be what for us indicate resumption of growth.

Okay. And then on the tariff, you mentioned you’re looking to start getting some of that in like the next three months, is that, is getting these rebates in something that you're expecting regularly that we can look for each quarter going forward, or is it just going to be extremely lumpy do you think? Dan O'Brien: It's going to be lumpy at the beginning and once we have gone through the initial lumps of our historical applications, we expect to be able to apply continuously or what new products are coming in. So a lumpy initial and then a situation where tariff money is going out every quarter and some tariff money is coming back every quarter.So it looks more in the books as though our cost of sales, or sorry, cost of goods has gone down and it's staying down. But in effect, what we will be having is a continuous payout in rebate program running in the background.

Okay. So it's possible, just say Q3, you have a massive gross margin because there's a big amount that comes in? Dan O'Brien: It is possible and I will personally promise that if that's going on, I will have a number and statement in the financials for any quarter where it's gotten weird that way.

[Operator Instructions] We will take our next question, caller your line is open. Please go ahead.

Dan, it’s [indiscernible] how are you? Dan O'Brien: I'm fine. How are you?

I'm good. Hey, a couple of quick questions about the Florida LLC. I know first quarter is one of their stronger quarters, is fourth quarter the other typically strong quarter? Dan O'Brien: It’s a funny situation. Last year, second quarter was their worst quarter and they were very strong in three, four and one. This year, early indications are a very stable one, two, three, four. I think again my comments to the first question are, there's an awful lot of moving parts when you're dealing in 15 or 20 countries with 15 or 20 currencies that are moving for and against the U.S. dollar. And of course both Southern Hemisphere and Northern Hemisphere planting seasons. So my thinking is that a normal, if there was such a thing, a normal year would have roughly equivalent quarters, but there are going to be very few normal years.

Okay. And do they actually manufacture product or they more of a distributor? Dan O'Brien: There are distribution and sales and we as part of our purchase of 50% of their company are their first choice for 100% of manufacturing. If we can't manufacture it because we're too busy, they can go somewhere else but otherwise it's exclusive.

[Operator Instructions] We have no further questions over the phones at this time. Dan O'Brien: Thank you, Mary. Everyone, I hope you stay healthy and well and have a good years as possible under the circumstances. Thank you for listening and we'll talk again in three months. Take care. Bye.

This concludes today's call. Thank you for your participation. You may now disconnect.