Flexible Solutions International Inc. (NYSE MKT:FSI) Q1 2020 Earnings Conference Call - Preliminary Transcript

May 15, 2020 • 11:00 am ET

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Flexible Solutions International Inc. (NYSE MKT:FSI) Q1 2020 Earnings Conference Call - Preliminary Transcript

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Presentation
Operator
Operator

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.

Executive
Dan O'Brien

Thank you, Mary. And good morning, this is Dan O'Brien, CEO of Flexible Solutions. 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 investments 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 sweep 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