Good day, everyone, and welcome to today's Flexible Solutions International Full Year 2023 Financials. [Operator Instructions] Please note, this call may be recorded, and I'll be standing by if you need in any assistance. It is now my pleasure to turn the conference over to Dan O'Brien. Please go ahead. Dan O'Brien: Thanks, James. 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 FSI conference call for full year 2023. To start, I'd like to discuss our company condition and our product lines, along with what we think may occur in 2024. I will comment on our financials afterwards. The NanoChem division. NCS represents approximately 70% of FSI's revenue. This division makes thermal polyaspartic acid, called TPA for short, 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. In 2022, MTS started food-grade toll operations using the spray dryer we installed over the last several years. TPA is used in agriculture to significantly increase crop yield. It acts by slowing crystal growth between fertilizer ions and other ions in the soil, resulting in the fertilizer remaining available longer for the plant to use. TPA is also a biodegradable way of treating oilfield water to prevent pipes from plugging with mineral scale. TPA's effect is prevention of scale for minerals that are part of the water fraction of oil as it exits a rock formation. Preventing scale keeps the oil recovery pipes from clogging. TPA is also sold as a biodegradable ingredient in cleaning products in our Food division as a stability aid and as a water treatment chemical. SUN 27 and N Savr 30, they're nitrogen conservation products. Nitrogen is a critical fertilizer that is lost through bacterial breakdown, evaporation and soil runoff. SUN 27 conserves nitrogen from attack by soil bacterial enzymes that cause evaporation, while N Savr 30 is effective at reducing nitrogen loss from reaching leaching [ph] Food products. Our Illinois plant is food-grade qualified, and we've received our FDA number. We've commercialized one food product based on polyaspartates that was developed fully in house. We have a pipeline of additional products in development that are either our ideas, toll production of outside ideas, or a mixture where an outside idea is being optimized by our team. NCS [ph] will focus on food products equally with our other market verticals because we've determined that this is an area with large markets that we are skilled in servicing and where we can obtain good margins. We did not receive the food product orders we'd hoped for in 2023. We're still convinced that this is an excellent business, and we expect to obtain significant sales in 2024. The ENP division. ENP represents most of our other revenue. ENP is focused on sales into the greenhouse, turf and golf markets, while NCS sells into row crop agriculture. We expect some ENP revenue growth in 2024 with the growth concentrated in Q3 and Q4. Our Florida LLC investment, the LLC was profitable in all four quarters during 2023 and was one area where there some revenue growth. The company is focused on international sales into multiple countries, all of which face different issues and respond in varied ways. Also, the LLC remains exposed to high cost of goods, while experiencing difficulty passing all the goods -- all the costs on to its customers. As a result, margins are compressed and earnings may not reach historical levels for some time. Regardless, we expect sales of the LLC to grow again in 2024, leading to a larger profit on our investment. 2024, agriculture products were not as strong in 2023 as they were in 2022. As a result, total revenue for the year was well below the previous year period. Agriculture customers are showing resistance to spending on inputs when crop prices are not increasing at the rate of inflation. We think that growth in 2024 is probable, but most of it will be through the Florida LLC. Oil, gas and industrial sales of TPA were lower in 2023 than 2022, and this is likely to continue into 2024. The possibility of reduced hydrocarbon demand in 2024 could slow sales, but the most likely outcome is a flat 2024 for this market vertical. Tariffs. Since 2019, several of our raw materials imported from China have included a 25% tariff. International customers are not charged the tariffs because we have applied for the export rebates available to recover them. The tariffs are affecting our cost of goods, our cash flow and our profits negatively. Rebates are extremely difficult to obtain even though we are entitled to them. We submitted our initial applications more than 5 years ago. The total dollar amount due back to us is well in excess of $1 million and grows each quarter. And we will persevere until we succeed in recovering our funds. Shipping and inventory. Shipping prices are stable, but higher than prior to COVID. Shipping times are reasonable on the REITs we use. None of our products or raw materials ship through the Red Sea area. Raw material prices do not appear to be reverting to historic levels. Instead, they're stable at a new base level that is increasing with inflation. Passing price increases, even small inflation-related ones, along to customers always takes several months. It's not always possible and will probably result in margins not as high as we prefer until inflation is back at the 2% level or lower. We believe that the some of the issues we faced during 2023, which resulted in lower revenue, lower cash flow and lower profits for the full year have partly resolved. Therefore, we expect that growth will resume in all three categories during 2024. Highlights of the financial results. Well, we're not happy with the results for 2023. Year-over-year revenue profits and operating cash flow were down. Profits were negatively affected by product mix, cost of goods, margin reduction and reduced sales volume. It's important to mention that 2022 profits included a $0.16 positive tax adjustment and several more cents from COVID loan forgiveness. We think an adjusted profit of $0.44 a share in 2022 could be used in place of the $0.57 published numbers when comparing 2022 and 2023. Even so, our 2023 profit compares badly with 2022, and we will work to return to our historic peak earnings during the coming year. The financials show that our cost increase as the year progressed. Wages have gone up substantially over the last 2 years to retain staff. Raw materials have dropped from the highest levels, but the new normal is higher than the past. Volume is down, and we were unable to raise prices sufficiently to cover costs increases and maintain our margin goals. Our plans to enter the food industry were delayed into 2024. And of course, higher interest rates are consuming more of our funds. FSI and its subsidiaries will continue to examine all our costs and economize where possible. Even more critical is increasing sales in our existing businesses and obtaining sales in the food industry to ensure that our wage and other base costs are spread over more revenue dollars. We expect to show incremental success in all of these areas during the course of the 2024 year. Sales for the year, they decreased 16% to $38.3 million compared to $45.8 million. Profits of 2023 shows a profit of $2.78 million or $0.22 a share compared to a profit of $7.02 million or $0.57 a share in 2022. Operating cash flow. This is a non-GAAP number, and it's useful to show our progress with noncash items removed for clarity. In 2023, it was $4.60 million or $0.37 a share, down from $8.44 million or $0.68 a share in 2022. Long-term debt, we're continuing to pay down our long-term debt according to the terms of our loans. However, we did consolidate all our debt for ENP and NCS with Stock Yards Bank. This is reduced in increased lines of credit and lower interest rates for the lines of credit, along with reduced interest rates on our long-term debt. At the same time, we bought all the units we did not already own in an LLC called ENP Peru Investments and guaranteed the mortgage held by the LLC. This LLC owns the 5 acres and 60,000 square feet of building in Peru, Illinois, to the Southwest corner of our property. This action returns full ownership of the 20-acre parcel and 120,000 square feet of buildings to FSI with a mortgage at favorable terms. Additional factory space in Illinois. In the second quarter of 2023, we invested to acquire 80% of an LLC, we call 317 Mendota that, in turn, purchased a large building on 37 acres of land in Mendota, Illinois. We've determined that 240,000 square feet of the building is available for our use or for rental. The ENP division has moved all operations to 60,000 square feet of this and the remaining 180,000 square feet will be rented as suitable tenants are found. The NCS division will recover the use of 30,000 square feet in Peru, Illinois from ENP, making room for our expected potential growth. Working capital, it's adequate for all our purposes. We have our lines of credit for both ENP and the NCS subsidiaries. We're confident we can execute our plans with our existing capital. The text of this speech will be available as an 8-K filing on www.sec.gov by Friday, April 5, e-mail or fax copies can be requested from Jason Bloom, jason@flexiblesolutions.com. Thank you. The floor is open for questions. And James, will you set all that up for us, please?

Certainly, Mr. O'Brien. [Operator Instructions] We'll take our first question from Greg Hillman.

Dan, hi. First, I had a question about the sales cycle. Could you like go through like all your major products in terms of sales cycle from the longest time to the shortest time? Dan O'Brien: Sure. Good to hear you, Greg Yes, the longest cycle is for new products, which is, in our case, the basic new products are in the Food division. And obviously, we had one existing food product, which we we're already making. So that one was a zero time frame. But the other ones where we're having to reach out or have customers reach in, we're seeing about 12 months on that one. And then if you move backwards to our agriculture industry sales cycles there are, I would say, quarterly to 6 months depending on the area of the world. Increases out of Brazil, which is serviced by the Florida LLC, there's two crops a year down there. So they can have a 3 to 6 month period, whereas in North America, we would be looking more at a 6 to 12 month period for cycles for new sales. Industrial, those ones are quite random because it depends on a customer wanting to change into a biodegradable from a non-biodegradable product. In the event that we find a customer that wants to do this, the process is between 6 months and a year. And then in the oilfield, we are not seeing new customers in the oilfield. We're seeing variations in uptake depending on the number of wells in operation and the amount of shutdowns for maintenance. So in oilfield, it wouldn't be appropriate to put a number on the sales cycle.

Okay. And then Dan, I wanted to ask you about the inputs, the cost of inputs in particular. Could you touch on aspartic acid that comes from China, how the price has varied over the last, like, 10 years, where it's at now and what your outlook is for that? Dan O'Brien: Okay. I think we're getting into a pretty speculative area here. Over the last 10 years, we've seen prices between 1,500 a ton, it's a metric ton and 3,800 a metric ton, sometimes including shipping, sometimes having an extra 10,000 and shipping bolted on, such as during the COVID mess. So as you can see, it's a wild world out there. Our recent experience has been in the area of $2,300 a metric ton. And it appears relatively stable, but with maybe a 10% variance. I'm not sure how helpful that is though.

Okay. And then on your website, when you talk about for some of the divisions, I forget which one, that use fermentation to make L-alpha [ph] TPA think that has a certain cost and then another division from natural sources. Can you explain the differentiation between those two and what it means for cost for your company? Dan O'Brien: Certainly. First point I should make is that sustainable aspartic acid is not yet available. Our work with Lygos several years ago was intended to get there. Our factory in Taber back in 2011 was also intended to do the same process. We have not been able to make it economically, nor has Lygos at this point. So the only source of aspartic acid in today's world in any volume more than a few grams is by fermenting fumaric acid and the fumaric acid is usually obtained from benzene and the benzene is usually obtained from fractioning oils. So in a way, the oil price can have an effect on the aspartic acid price. But it's a very small effect because as the oil price varies and the benzene price varies, all the people in the lineup ahead of us, take a little smaller or a little bigger piece of the pie as they can. And so oil is a little bit of a way to predict what our pricing is going to be, but it's not a very good correlation. It's an indicator, rather. Hopefully, that helped too.

Okay. Thanks for your comment. I'll get back in line. Dan O'Brien: Thank you.

Our next question will come from Tim Clarkson with Van Clemens.

Hey, Dan, good to talk to you again. Just again, some basic questions for a small company. You guys are actually pretty complicated. So on this TPA, what percentage of your business is fertilizer and what percentage of it is this mineral scale stuff for the oil industry? How would that break down? Dan O'Brien: Well, we don't break it down specifically for investors. I'll give you general opinions...

Okay... Dan O'Brien: That will be plus or minus 5% to 10%. Agriculture of our polyaspartic business, agriculture is in the range of 30%, oilfield is in the range of 30%, and industrial is in the range of 30%.

Okay. Are the margins any different from industry to industry? Or are they about the same? Dan O'Brien: We don't -- we definitely don't talk about specific margin...

Okay. All right I get it. So I noticed that at a fairly large capital expenditure last year, do you expect large capital expenditures this year? Dan O'Brien: At this point, no. We have completed and installed all the equipment we think is needed for our Food division. And it's now time to make it work for its supper.

Okay. Good. Now is this enzyme product that you talk about, is that different than the TPA product? Is that a separate aspect of nitrogen fertilizer stuff? Dan O'Brien: Yes. The enzymes and the soil that damage nitrogen, they are fought with chemical called MBPT and literally, everybody calls it that because the name is one of the longest words on earth. So that's a different field. It's still part of our agriculture division. It does not use TPA, and it, like all our other things, we aim to be as green as possible. So by working with nitrogen conservation, even though it's not with a full biodegradable ingredient, we are doing our best to be good corporate citizens.

Okay. So which product is bigger than in terms of fertilizer stuff? The enzyme product or the TPA product in terms of revenue growth - revenues, total revenues? Dan O'Brien: I'm not going to disclose that.

Okay. All right. That's fine. I can -- that's one reason I'm always confused is this some of the stuff isn't so clear. And then can you say anything about the new food product, what it is and how it's selling and why it works? Or is that kind of still a secret? Dan O'Brien: That one -- let me keep it as a secret, some of it is a secret for now, but I'm going to ask the customer if I can disclose it because they've had some recent success in their industry that I think they may say that they feel well enough protected that I can speak about.

Okay. Dan O'Brien: But in general, it is a TPA based product. So it's fully biodegradable and it is a food product that is very, very useful in preventing precipitation. So again, in food, it goes all the way back to the scale control aspect of polyaspartate, preventing one ion from affecting another ion.

Sure. Well, that makes sense. Are you happy with the margins on that so far? Dan O'Brien: Yes. They're decent, not great, but the volumes are very reliable and have potential for growth.

Okay. Okay. Good. Okay. That's helpful. And I'll hand it over to some other people. Thank you. Dan O'Brien: Thank you, Tim.

[Operator Instructions] And Mr. O'Brien, there are no further questions. Dan O'Brien: Thank you very much, James. I'd - everybody a wonderful call. We look forward to talking to you in six weeks and we're going to keep working as hard as we can.

This does conclude today's program. Thank you for your participation. You may now disconnect.