Flexible Solutions International Inc.

Good day, everyone, and welcome to today's Flexible Solutions International's first quarter 2026 financial conference call. At this time, all participants are in a listen-only mode. Later, you will have an opportunity to ask questions during the question-and-answer session. You may register to ask a question at any time by pressing the star and 1 on your telephone keypad. Please note this call is being recorded. and I'll be standing by if you should need any assistance. It is now my pleasure to turn the conference over to Dan O'Brien. Please go ahead, sir.

Thanks, Ross. Good morning. This is Dan O'Brien, CEO of Flexible Solutions. The Safe Harbor Provision. The Private Securities Litigation Reform Act of 95 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 involves 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 first quarter FSI conference call. To begin, I'll review our company condition and our product lines, along with what we think might occur in Q2 and Q3 2026. I'll comment on our financials in the second part of the speech. The nanochem division. NCS represents the majority of FSI's revenue. In 2022, NCS started food grade operations. By the end of 2026, we expect that NCS will be 100% focused on food grade products. Growth in the NCS division will be in food and nutraceuticals only. The Panama Division. This division makes thermal polyaspartic acid called TPA for short. is a biodegradable polymer with many valuable uses. Anima also manufactures Sun 27 and N-SABER 30, which are used to reduce nitrogen fertilizer loss from soil. Anima is taking over production of all the legacy industrial and agricultural products historically made by NCS. This is a step-by-step process that will be complete by the end of 2026. is a biodegradable way of treating oil field water for scale prevention. TPA is used in agriculture to significantly increase crop yield. It is also sold as a biodegradable ingredient in cleaning products and as a water treatment chemical. Nearly all of our products for international sales will be made in Panama using raw materials sourced without the US tariffs. There will also be shipping advantages. The new plant is 30 minutes from the port, inbound raw material, and outbound finished goods will not have to be shipped across the US to and from Illinois for our international customers. Delivery times will be shortened by many days. Reduced shipping times and no exposure to US tariffs on international sales could allow us to increase sales to existing customers and obtain new customers. We're already engaging with potential new customers. of NCS Food Products. Our Illinois plant is FDA and SQF certified. We've commercialized two food products. The first was our wine additive based on polysparcates. In August 2025, we announced our second major food grade contract of 2025 and our third overall. As noted in the news release, it's a five-year contract with protection from tariffs and inflation. It has a minimum revenue of $6.5 million per year and a maximum, if the customer requests it, of greater than $25 million per year. The contract has reached full production. It's running 24 hours per day, and it's now our second food grade product after the wine product. We're reviewing methods of increasing production quickly if the customer requests it. Production is utilizing the equipment that we've been buying and installing over the last two years but had no customer for. Therefore, little capex will be needed to reach 13 to 15 million per year in sales and mild capex in the 2 to 3 million range to reach 25 million. In January 2025, we announced another larger food grade contract. Actual production at small volume started several weeks ago and will be increased weekly until full production is achieved. Significant revenue from this contract may be visible in our Q2 financials and will increase rapidly in Q3 and Q4. Growing these two food contracts to the estimated maximum revenues, combined revenues of greater than $50 million per year, is our critical goal for the next four to six quarters. We hope to execute this to the customer's absolute satisfaction and obtain all their business before taking on additional major projects. This doesn't mean that we're not looking for more customers. We're already doing R&D work in certain areas. However, it does mean that several quarters are likely to elapse before other major customers are announced. We'd also like to be clear regarding margins in the food division. In order to obtain such large contracts and in order to negotiate tariff and inflation protection clauses, we have lower margins than we prefer. We hope to be in the 22% to 25% range before tax. Future customers will be selected in order to increase our average margins now that we have a profitable base in place. Our E&P Division E&P represents most of our other revenue. E&P is focused on sales into the greenhouse, turf, and golf markets. E&P grew in 2025 and growth is expected again in 2026. Q1 is the weakest quarter for this division, followed by Q2, and the growth is usually concentrated in the second half of the year. Agricultural Products In the U.S., In some cases, sales are lost for the whole season. As a result, We saw weakness in Q1 and expect 2026 to be another difficult year. The Florida LLC Investment The LLC had a small loss in Q1 2026. The company's focused on international agriculture sales into multiple countries. It faces the same issues I noted regarding our internal agricultural sales. Paris Well, the current tariff on all our imports of raw materials from China into the U.S. is between 15% and 58.5%, depending on the material. We're being careful not to import materials unless destined for U.S. customers who are guaranteed to purchase from us and are aware that the tariffs will be added to their invoices. Moving agriculture and polymer production to Panama has freed space at the Illinois plant so that Food grade production in the US for US customers can be optimized and expanded substantially. Shipping and inventory. Shipping prices are not stable. Shipping times are longer than usual on the routes we use. These issues are caused by the Iran war and are expected to subside if the war does. Raw material prices are unstable and increasing to account for the oil prices caused by the RM Warp. We have a significant inventory of most raw materials, but estimate that we will have to raise prices to our customers in third quarter unless there is a significant reduction in the price of oil that reduces our raw material costs. Highlights of the financial results. Sales for the quarter increased by 11% compared with Q1 2020-2025. 8.3 million compared to 7.47 million. Profits, 2026 has a loss of 241,000 or two cents a share compared to a loss of 278,000, also two cents a share in 2025. Many costs incurred to prepare for the potential new revenue from the food grade contracts announced in January and August negatively affected 2025 profits because they were expensed as they occurred. Substantial costs for the Panama factory were also expensed quarter by quarter. This continued in Q1, 2026 in Panama and for food products in Illinois, but at much lower levels. We anticipate some profits in Q2, 2026, followed by rapidly increasing profits in the second half of the year. Operating cash flow. This non-GAAP number is useful to show our progress, especially with the non-cash items removed for clarity. For Q1 2026, it was $575,000, or $0.05 a share, up from $480,000, or $0.04 a share, in 2025. has been impacted by the same costs as noted for profits and is expected to rebound in Q2 and for the remainder of 2026. Long-term debt. We continue to pay down our long-term debt according to the terms of the loan. The loan we used to buy our EMP division was paid in full in June 2025, and our three-year note for equipment was fully paid in December 2025. This has freed up over $2 million in cash flow per year for other purposes. Only one small-term loan and the small mortgage on our Illinois factory remain. Working capital. It's adequate for all our purposes. We've got lines of credit for the EMP and MCS subsidiaries. We're confident that we can execute our plans with our existing capital and without resorting to any equity actions. The text of this speech will be available as an 8K filing on www.sec.gov by Tuesday, May 19th. Email copies can be requested from Jason Bloom, jason at flexiblesolutions.com. Thank you. The floor is open for questions, and Ross, will you take it away, please?

At this time, we'll open the question and answer session. If you would like to ask a question, please press star and one on your telephone keypad, and you will be placed into the queue in the order received. You may remove yourself from the queue at any time by pressing pound and one. Once again, to ask a question, please press star and one on your phone now. And our first question comes from William Gregoskiski, an investor. Please go ahead, William.