FLEXIBLE SOLUTIONS INTERNATIONAL INC Annual Report Summary

I’m writing this guide to help you understand how Flexible Solutions International (FSI) performed this year. My goal is to turn complex financial filings into plain English so you can decide if this company fits your investment goals.

1. What does this company do?

Flexible Solutions International makes specialty chemicals. They create "smart" chemicals—specifically Thermal Polyaspartates (TPAs)—that save water, prevent corrosion in oil pipes, and help farmers grow more crops by boosting fertilizer effectiveness. Their main product, Sun-H2O, is a biodegradable water-saving polymer. They operate internationally across the U.S., Canada, and a new manufacturing facility in Panama. The company earned about $34.5 million in total revenue this past year.

2. Financial performance and health

The company is currently adjusting its operations to improve its cash position. In October 2025, they sold their building in Mendota, Illinois, for about $2.8 million and transitioned to a 10-year lease. This move frees up cash to pay down debt and fund their Panama expansion.

Three customers provide about 45% of their total revenue. The company’s financial stability is tied to these specific relationships. Maintaining these contracts is a priority for managing their $4.2 million in long-term debt.

3. Major wins and strategic changes

The company opened a new manufacturing facility in Panama in 2025, with shipments starting in January 2026. This plant increases production capacity for their "Legacy" products by 25%, lowers labor costs, and improves shipping logistics to Latin American markets. Additionally, they are simplifying their business structure to manage subsidiaries more efficiently, with a target of cutting administrative costs by about 10% each year.

4. Key risks

• Customer Concentration: Relying on three customers for nearly half of their revenue creates a significant dependency. Losing any single contract could cause a notable drop in yearly sales.
• Operational Complexity: Managing subsidiaries, international leases, and loans across the U.S., Canada, and Panama introduces risks related to currency fluctuations and regulatory compliance, which increases accounting and administrative costs.
• Market Sensitivity: Because their products are used in oilfields and farming, their success is tied to commodity prices. A downturn in fertilizer prices or a slowdown in oil drilling can directly impact demand for their chemical solutions.

5. Future outlook

FSI is focused on long-term growth through infrastructure investment. By establishing the Panama manufacturing hub and refining their technology, they aim to solidify their position as an essential supplier in their niche. Management expects 5-8% revenue growth over the next two years, contingent on the successful ramp-up of the Panama facility.

6. Bottom line for investors

FSI is a small, specialized company that avoids broad competition by focusing on specific chemical solutions. They are currently prioritizing growth through new facilities and strategic real estate moves. If you are considering an investment, monitor their ability to diversify their customer base beyond their top three clients and track how the Panama plant impacts their profit margins, which currently range between 30% and 35%.