Good day, and welcome to today's Flexible Solutions International Full Year 2022 Financials. At this time, all participants are in a listen-only mode. Later, you will have the opportunity to ask questions during the question-and-answer session. You may register to ask a question at any time by pressing the star one on your touchtone phone. Please note this call may be recorded. It is now my pleasure to turn the call over to Dan O'Brien. Please go ahead. Thank you, Chris. Good morning, this is Dan O'Brien. I'm the 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 full year FSI conference call. I'd like to speak first regarding our company condition and our product lines, along with what we might see in 2023. Afterward, I'll comment on our financials. 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, NCS started food grade toll operations using our spray dryer, which 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 plants to use. TPA is also a biological and biodegradable way of treating oil field water to prevent pipes from plugging with mineral scale. TPA's effect is prevention of mineral scale from minerals that are part of the water fraction in the oil as it exits from the rock formation. Preventing scale keeps the oil recovery pipes from clogging. TPA is also sold as a biodegradable ingredient in cleaning products for certain food uses and as a water treatment chemical. SUN 27 and N Savr 30 are nitrogen conservation products. Nitrogen's a critical fertilizer that can be lost through bacterial breakdown, evaporation, and soil runoff. SUN 27 is used to conserve nitrogen from attack by soil bacterial enzymes that cause evaporation, while N Savr 30 is effective at reducing nitrogen loss from food products. Our Illinois plant is food grade inspected, and we have received our FDA number. We've commercialized one food grade product based on polyaspartates that was developed fully in-house. We have a pipeline of additional products in development that are either our ideas, full production of outside ideas, or a mixture where an outside idea is being optimized by our team. NCS 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're skilled in servicing and where we can obtain good margins. The ENP division. ENP represents most of our other revenue. ENP is focused on sales into the greenhouse, turf, and golf markets, while our NCS sales are into row crop agriculture. Opening of the economy after the pandemic has affected ENP's sales into the home gardening market, especially home cannabis. We still expect revenue growth in 2023 at close to historic rates. The Florida LLC investment. The LLC was profitable for all of 2022, except for a small loss in Q3. Companies focused on international sales into multiple countries, all of which face different issues and respond in varied ways. Revenue was very strong all year. We expect more top-line growth in 2023. However, the LLC remains exposed to high costs of goods while experiencing difficulty passing all the costs to its customers. As a result, margins are compressed, and earnings may not reach historical levels in the near term. Our sales to the LLC continue to grow, and we are able to retain a positive margin. Merger with Lygos did not proceed. On April 18th of last year, FSI and Lygos announced their intent to merge subject to shareholder approval. Merger was not completed by the end date of the agreement. Did not close. Strategic investment in Lygos. In December 2020, we invested $500,000 in Lygos in return for equity. We made a second investment of $500,000 in June 2021. Lygos is using these investments towards development of a microbial route to aspartic acid using sugar as a feedstock. FSI will be the major user of aspartic acid derived this way, and believes that sustainable aspartic acid will allow us to obtain large new customers and develop valuable new products that both biodegrade and come from sustainable sources. We remain optimistic that we can continue to work with Lygos in ways that do not involve merging. FSI is dedicated to the goal of sustainability while finding a route to the goal that is profitable for us, for our suppliers, and for Lygos. Q4 2022 and first half 2023. Agricultural products had a strong early buy season in Q4. It's possible that some orders were pulled from Q1. However, we still feel that agricultural sales for the first half will exceed the same period in 2020. Oil, gas, and industrial sales of TPA experienced increased sales throughout 2022. This was driven by shortfalls of competing products and high oil prices. Sales are expected to remain steady. 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've applied for the export rebates available to recover them. The tariffs are affecting our cost of goods, our cash flow, and our profits negatively. The rebates can take many years to arrive. We submitted our initial applications more than four years ago. The total dollar amount due back to us is well in excess of $1 million. We'll persevere until we succeed in recovering our funds. Shipping and inventory. Ocean shipping from Asia to the US and ocean shipping from the US to international ports are back to pre-COVID speeds, but have settled at higher prices. Land transport inside the US is continuing to normalize. We coped with shipping issues by ordering far ahead and carrying additional inventory in 2022, resulting in some costs that we were unable to pass on to our customers. Raw material prices have also increased substantially in 2022. Passing price increases along to the customers can take several months, is not always possible, and resulted in constrained margins throughout the year. The effects of this are obvious in our full year. Expect revenue, operating cash flow, and profit to grow strongly in 2023, inflationary forces may keep us in a position where selling prices lag cost increases some of the time. Our inventory was very high in 2022 where we could service our customers. We plan to reduce inventory as a ratio of sales in 2023, resulting in more cash on hand and a more rapid rotation of raw materials. Highlights of the financial reports. Pleased with the results for 2022. Year-over-year revenue and operating cash flow were up significant. Profits were negatively affected by merger costs, shipping costs, and raw material prices, yet were still very good. We estimate that year-over-year growth in revenue, cash flow, and profits will continue in 2023. Sales for the fourth quarter increased 34% to $12.1 million excuse me, paired with $9.04 million for Q4 2021. Sales for the year increased 33% to $45.7 million, $34.4 million in 2021. Profits. Strong growth resulted in profits for full year 2022 of $7.02 million or $0.57 per share, compared to a net income of $0.45 million or $0.28 a share for full year 2021. 2022 had an upward one-time income tax revision of $0.16 per share that should be removed when comparing 2022 to 2021. In addition, 2021 had a one-time $0.03 PVP profit that increased the 2021 numbers, while 2022 had a one-time cost of $0.03 related to the merger that we did not complete. Including the one-time items, a reasonable comparison would be $0.25 for 2021 earnings and $0.44 for 2022. These are non-GAAP estimates only. Operating cash flow. This non-GAAP number is useful to show our progress with non-cash items removed for clarity. Full year 2022, it was $8.44 million or $0.68 a share, up from $5.65 million or $0.46 a share in 2021. Long-term debt. We continue to pay down our long-term debt according to the terms of the loan. We've consolidated all our debt for ENP and NCS with Stock Yards Bank. This has resulted in increased lines of credit with lower interest rates, and reduced interest rates on our long-term debt as well. We bought all the units we did not already own in ENP Peru Investments LLC, and guaranteed the mortgage held by that LLC. The LLC owns the five acres and 60,000 sq ft building on the southwest corner of our Peru, Illinois factory. This action returns the full ownership of the 20-acre parcel and 120,000 square feet of buildings to FSI with a mortgage at favorable terms. Working capital. It's adequate for all our purposes, and it's increasing continuously as we book retained profit from sales. We've got the lines of credit from Stock Yards Bank for ENP and NCS subsidiaries. We're very confident that 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 Tuesday, April 4th. Email or fax copies can be requested from Jason Bloom, jason@flexiblesolutions.com. Thank you. The floor is open for questions. Chris, would you please give the instructions and get that going? Thanks. Certainly. At this time, if you would like to ask a question, please press star and one on your touch tone phone. You may withdraw yourself from the question queue at any time by pressing the star and two. Once again, for everyone, that is star and one to join the question queue. Our first question comes from William Gregozeski from Greenridge Global. Your line is open. Hey, Dan. Heck of a fourth quarter. I know you know, you always wanna talk about everything in terms of an annual basis, just given how high the sales were to the Florida LLC in the fourth quarter, is there any, you know, sales that were pulled from the first quarter or things that were, you know, carried over from, like, the third quarter which is the reason why the revenue was so high there? Thanks for the question, Bill. We think that there might have been some revenue pulled out of Q1, I haven't seen all of Q1 yet, it's entirely possible that it was early buy in general. That, along with the early buy, there's a strong possibility that the agricultural world at the retail level, the farmers, have been not buying, they've been holding off because of uncertainties. That even though the early buy was strong, there is still a strong first half coming as well. That's the reason my speech was somewhat confusing on the subject, is because we don't have enough data for a firm opinion. Okay. On an annual basis, you know, the Florida LLC's revenues were up over 50%. I mean, I assume we should look for slower growth on that for 2023? The Florida LLC is trying to replicate their success from last year. I don't have a firm opinion on whether they're going to be successful or not, my anticipation is that their growth will continue. If I had to guess, I'd say at a slower rate than it did last year. Okay. On the, on the tariffs, you guys haven't gotten any money from that since this all started, correct? We have not. There's still no time or no word from anybody on when you might get anything? No, there isn't. In fact, they're still playing with us, trying to say you need to add more information. Now I purposely cut that paragraph, knowing that it would come up in the Q&A. It's gotten to the stage now where everything we send to the U.S. government is getting copies to our corporate lawyers because some of it is COVID-related, people working from home and not being properly overseen. Some of it is government competence, but some of it is just plain... I don't know. It's just plain unfair. On the other hand, this is an exercise that I feel we must go through. We cannot give up on the money and for international sales, even the smaller, ancient, tariffs, when we get through this whole program and we get into a situation where they accept our documentation and give us our money, even the 3.7%-5.1% tariffs that we had in the past, will all be recoverable, in perpetuity, which will, allow either greater margins or, lower prices internationally that will allow us to increase sales. It's an extremely irritating process, but it is a valuable thing to do. Okay. You mentioned the one-time benefit on taxes in the fourth quarter. Is that anything that's gonna be replicated, or will taxes, you know, on an annual basis look roughly the same as they have been in the past going forward? There is another rub. That is a great question. This is our relatively new auditors, looking back over time at the allowances for tax and saying, the allowances were too high. We're going to bring them back into line according to our opinions. It's going to happen all at once. I believe that they have a much better handle on what tax we should be paying, and that there won't be any more of these huge one-time situations. I think that we've moved to a better auditor, better tax understanding, and I'm truly hoping that we don't have this again. Okay. Okay. On Lygos, have you guys ever received any product samples from them? Yes, we have. Very small samples quite some time ago. They're still working hard and they are properly financed now. They did close the financing with a European investor, and they've got a at least a three to five- year runway. They can do it. They have the money to do it. Okay. No timeline for when you guys might be able to get something of, you know, commercial quantity? None whatsoever. That is sort of how developmental companies in the bio space have been operating recently. Okay. Last question is in terms of Peru, how are you guys looking in, you know, in terms of utilization and if there's any need to expand space or equipment? Well, I think you probably saw from the notes to the financials that we have been expanding equipment, and we're going to continue to do so. We're not in need of duplicating anything yet, but it's coming, maybe a year, maybe two years out, depending on how fast we grow our food division. As for space, we'd like to have more space. We're looking at alternatives. We definitely don't wanna pay too much. One of the places where inflation has been highest is in new construction. We're not in an emergency situation, we're really just taking a look-see, a planning position on that. If we see something unique and valuable, we'll do it. Okay. All right, great. Thank you, Dan. Thank you, Bill. Our next question comes from Gregg Hillman, who is a Private Investor. Your line is open. Yeah. Hi, Dan. Good morning. Hey, first of all, I wanted to go to detergents for a minute. You know, in what percentage of detergents is acrylic acid you use currently? What kind of market size is that potentially, you know, to be replaced with, you know, polyaspartic acid? Okay. Thanks, appreciate it, Gregg. I would say that at this point in time, virtually all laundry detergent and almost all clothes washing detergent and virtually all hard surface cleaners use some variation of polyacrylic acid or polyacrylates. It's a little bit hard to predict what the marketplace is because everyone is keeping their formulations fairly secret, and they can range from 2% to as much as 12% of polyacrylate builders. What we've used as a marker in this is 250,000 metric tons. 250 what? 1,000 metric tons. Okay is the potential. That's a pretty significant amount, given that, although I'm not gonna tell you what we make, our factory has a nameplate of 10,000 metric tons. What's, what would be the value of that? What's the value of the acrylic acid that's going in there right now? Not knowing which grades they buy, I think what you can probably use as a marker is $2,500 per metric. Uh- That come out to $225 or $2.25 billion, something like that, as a market. Okay, great. Then, Dan, I wanted to move to the so-called sales cycle, you know, for your products. You know, the time between when you first contact a customer and when he, you know, uses the product. Could you just talk about what of your products has the longest sales cycle and what has the shortest sales cycle? Is your end customer the distributor or is he like the farmer? It's always a distributor. We have no direct sales. Okay would put us in competition with our existing customers and would cost us a lot of money. It might be terminal to the company. We. Okay we don't do that. In the agriculture industry, we find that it's a two-year cycle. If somebody's going to be a brand new customer rather than a growing existing customer, they will test it on selected customer land for one year for sure. Mm-hmm. They will increase that to three or four select customers in the 2nd year, and then in the 3rd year, push it quite a bit harder. It's definitely a two to three-year program with the significant sales coming in. Okay. If, you know, you move to more pure fertilizer type products, would the sales cycle be different? Yes, it would. If we were in pure fertilizer products, we would be having to carry the cost of the base. For instance, if we were the owners of the urea or the urea ammonium nitrate, that we were adding our products to make them work better, we'd be owners of that base material. We would run the risk of the markets going against us, which is, that's the big worry that fertilizer companies have. You know, they buy 500,000 metric tons of urea, and suddenly, somebody opens a new plant or a war starts in Ukraine, and they can't plant in one area. The price of fertilizer drops, and they're left holding stuff that they have to sell at a loss. We're not a company that can absorb those kind of risks. Right. We would need partners for that. Right. Finally, I wanted to go to the food division and what foods is this is TPA that's going into foods. What foods is it going into, and what does it do for the food? Our customer for that has asked us not to disclose what they're doing because they have market conditions that they'd prefer not to know that we're supplying into. Okay. I won't speak to that one, but I will talk about some of the other things we're looking at. We're looking at organic juices that can be spray dried. We're looking at potentially nutraceuticals, things like vitamin C supplements, combination supplements that other people are not capable of drying as a group. It ends up pre-mixed, ready for our customer, who is likely a capsule maker who then passes it on to the retailer. That's the area that we're working in. We're aiming very much for high revenue areas, high margin areas. At this point, we don't know what our next major product will be. It's likely to be in the nutraceutical area. Mm-hmm. We've made several products. We've made some sales. We're waiting to see which of the customers come back with volume. As you know, we're a volume company. We're not making 500 kilos of something for somebody. We wanna make a truckload. Okay, great. I'll get back to you. Thanks for your comments, Dan. Appreciate it, Gregg. Our next question comes from Tim Clarkson from Van Clemens. Your line is open. Hey, Dan. good to see your results. Outstanding as usual. Just in a big picture basis, you know, what are the three key products of the company now, and where do you think the most potential lies in the future? I'm still trying to get a grasp on this company and understand it, that would be helpful for me. Okay. In agriculture, we've got two products, so two of the three that you're asking about. Polyaspartates are becoming better and better known and are increasing their position in fertilizer additives because they do increase yield, and they're especially good at maintaining or increasing yield under tough conditions such as drought. That's going to continue growing, and it's got good margins. Also in agriculture are nitrogen conservation products. As oil stays high and natural gas stays high, nitrogen fertilizers are staying expensive, and they're likely to remain expensive, so it's worth protecting them in the soil. Right. We see that group of products continuing to grow substantially, and a lot of that goes through our customer, Florida LLC, but an awful lot of it goes into the American market through other distributors. Is that like 50% of your business now then, would you say? Uh. Those two products. The 2 nitrogen ones are between 35% and 45%. Okay. That's a wild guess because we don't. Okay. We don't break things out. Yeah, yeah. Yeah. That just gives me a handle on it, though. Okay. Yep. The third area is the growing food industry. The advantage there is that in the food industry, none of our suppliers will be from Asia, and all of our customers will either be in the United States or Europe. We see that as both a very profitable business in itself, but as a very useful counterbalance or hedge to issues that can come up between America and Asia. I think over the next five years, what you'll see is the food grade division growing hopefully as rapidly as the other two in agriculture, but with potentially better margins and of course- Uh-huh. Less risk. If you had to tie up- 20%, would 20% be a reasonable guess just in general on that right now? It's not 20% today, no. It's less than 10% today. Okay. To be up to 30% across five years. Okay. Okay, great. Great. what would be the application on the foodstuff what's the value added for that? Why would someone buy that? We are, we're an exceptionally skilled toll manufacturer. We expect a lot of it to be toll business that the customer will not want to put a $5 million machine into their operation. They will say to Flexible Solutions or NanoChem, the NanoChem division. They'll say, "How much would you charge us to make this? Because we don't wanna have the employees, the management or the equipment." We'll say, raw materials times X, plus packaging and how many 100 tons do you want a year? That's one situation. There are also situations where we believe we can invent things that will be better than the existing products and be able to go out into the food and nutraceutical market and say, "You're using X, Y, and Z. here is, here's a better product at the same price," and take market share from them. Right. Have you hired talented people to be able to do those things? Rather than hiring them, we have connections that carry commissions. We did hire into our factory one person who has the expertise. Yes, we're in position to do this. We're using the older gentleman we hired with several decades of experience as the mentor for our younger guys who are going to carry on after he goes. Right. Now, what, you know, if you make this product for food, what would be the benefit that someone would be looking for? What would be a typical benefit that, without disclosing secrets, that someone would be using this for? Well, okay. Let me, something that I would buy personally because I believe in it, are mineral ascorbates. It's ascorbic acid, mineralized with things like selenium, calcium, zinc. These are extraordinarily bioavailable to the human body as opposed to traditional vitamin C products. You can also do it with aspartates, which would, same minerals, with aspartic acid, which in some cases, for instance, some bodybuilders might prefer to have an aspartic acid backbone to their mineral supplement. Not only would we be able to make these in manners that were food grade and top quality, but we would be making the aspartic, the polyaspartate, precursor in the same factory. We're looking to our strengths of... Some of our strengths are chemical and some of them are management-oriented. Right. That's just. Yeah, those would be a great business to get into. I encourage you, if you can get in those areas, those are real moneymakers, so. Thank you. All right. Great, Dan. That was very helpful. I hope it helped some other people too. With that, it appears that there are no further questions over the line at this time. Chris, thank you very much. Everybody, thanks for calling in. I look forward to talking to you in as little as six weeks with Q1 data. Thanks very much and goodbye. This does conclude today's program. Thank you for your participation. You may disconnect at any time.