Good day, and welcome to the Flexible Solutions International Third Quarter 2018 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. Daniel O’Brien: Very good, Jacob. 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 third quarter conference call. Before focusing on our financials, I'd like to speak about our product lines and what we think may occur over the next several quarters. The insurance compensation from the fire has been received in full. There'll be no further payments, but the accounting and tax effects of the payments will continue to distort and complicate our financials for several more quarters. The property where the fire took place has been listed and will be sold when a reasonable offer is received. Our NanoChem division, NCS, represents nearly all the revenue of FSI. This division makes thermal polyaspartate, or 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 losses 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…

[Operator Instructions] We'll take our first question from William Gregozeski.

Dan, congratulations on the acquisition. Can you talk a little more about that? Like, what are the products you're getting? Are they all going to stay manufactured with ENP now? Are you -- how many people are involved in that since you're consolidating all that into your financials? Daniel O’Brien: Yes. Okay. This is something new for me, so my answers may not be as all-covering as you are looking for, but here's how we see it. We're buying 65% of an LLC. We are required to consolidate the financials, but because we still have a partner in the LLC, we will be operating the company as a separate unit. That doesn't prevent the synergies that we see. The new products will be sold by the acquisition still. NanoChem is, of course, the owner of the shares. NanoChem will be able to either sell the products themselves or help the acquisition reach new marketplaces, and we are looking at which of these things are more beneficial in each situation. The number of people involved is about 15 new headcount, and they're in the form of line staff, salespeople and a single Senior Executive Officer, the President, whose name is George Murray. You can see here that the goals behind our acquisition were to bring in new opportunities in the turf, golf and ornamental plant markets, which are -- they're very useful markets. They sell year-round as opposed to having a season. They usually allow larger margins. They are independent of situations such as the crop pricing. So that's a very useful item in a -- in our current economic climate where crop pricing is dropping, input costs are rising and farmers are being squeezed. We see this as very synergistic, and the addition of Mr. Murray is very large for us. We would never consider an acquisition that didn't bring with it management that we felt was exceptional. So that is also, along with the entry into the turf and golf markets, the ability to bring onboard a senior executive that we believe is unusually good is what drove this acquisition. So which of your questions did I fail to hit in that monologue?

No, that covered those. What is the -- are you going to file an 8-K with more information on this? Like what's the origin price and financials? Daniel O’Brien: We're going to file -- yes, the 8-K is being filed after the speech, and the financials will be filed within 60 days, I believe, with the SEC as an addition to the 8-K.

Okay. And then changing gears. Can you talk about the reason for changing the company from Nevada to Canada? Daniel O’Brien: Yes. We've got several reasons. We probably never should have been in Nevada, given that our mind and management's always been in Canada. But we were given the advice when going public that we should be -- that we should move our domicile from Canada to Nevada. So we followed the advice at the time, and that was 20 years ago. Our mind and management, 5 out of 6 Board of Director -- members live in Canada, and the sixth one is a Canadian citizen living outside of Canada. So that is one reason. The second reason is that in the event that, in the future, Flexible Solutions decides that it wishes to pay a dividend, Canadian shareholders would have been at a major disadvantage because their dividends would have been taxed at income levels, which are up -- income tax levels in Canada rise as far as 53% in some places. With a Canadian domicile, there's no effect on American shareholders for dividend taxation, but Canadian shareholders are able to take advantage of something called the Canadian dividend tax credit, which significantly reduces the income tax hit. So between trying to rationalize us to the correct country for our mind and management and positioning ourselves for -- in case a dividend is ever decided, that was the 2 reasons for moving to Canada.

Okay. And last question is, I know we've talked about the oil customer -- the large oil customer that kind of went away. And you mentioned you expected a lot of that revenue in the oil field to pick up in the fourth quarter and into next year. Is that from new customer? Or is that old customer coming back online? Daniel O’Brien: It's likely to be a combination of both. But these are things that -- I mean, I try to predict it for you in the speeches and in my filings, but until the day that the PO arrives on our -- in our inboxes, we are just working towards these things with a very strong expectation of success. So where -- we do expect new customers, we do expect return of old customers, but the timing and the volumes, those are beyond our abilities to predict.

[Operator Instructions] We'll take our next question from Benj Gallander.

Looking at the takeover that you've done, when do you expect it to be accretive? Daniel O’Brien: The documents that we signed provide for us to receive our share of the LLC, both revenue and income, starting from October 1, 2018. So the accretion begins with the first day of the quarter that we're in now, fourth quarter.

So you expect that it will be profitable right away? Daniel O’Brien: Yes. Ben, you know me, I'm cheap.

It's true, just double checking. It's going to increase your revenues quite a bit. It's going to up them by, let's say, about 50%. Daniel O’Brien: That's about right, yes.

Okay. When we talked last, and you had mentioned it on the call, we had talked about the possibility of a dividend. I'm just wondering, is that on the table in the near future? Is there any changes because of this acquisition and the debt you've taken on? Daniel O’Brien: Well, as you know, it was -- that was a what-if conversation. It's -- our business is becoming -- it's changing. It's going to spin off more money. We have to decide what to do with the money. We would like to return it to shareholders. We'd also like to grow. At the point we're at right now, I don't see anything that prevents us from doing both. But there has been no decision anywhere in our company, at the board level, at the senior management level, that a dividend is in the immediate cards. We are always looking at what to do next, and we listen to our shareholders and then we take our time deciding. So the answer to your question is reply hazy, but the action we've just taken does not prohibit us from taking other actions that might or might not include dividends.

Okay, well, as when we talked, I'd mentioned to you that companies that do start a dividend, their share price goes up more than the market on a normal basis for the following 3 years. With the extra revenue and especially if the bottom line improves a fair bit, I hope that, at some point, you'll say it's in the immediate future, and you'll just do it. That's my hope, anyhow. Daniel O’Brien: Okay. Well, thanks, Benj.

Okay, thanks for your work, and I continue to hold the stock and hope that it moves up smartly. Daniel O’Brien: All right. Well, we're doing our best to make the company better. The stock should take notice.

[Operator Instructions] We'll take our next question from [ Raymond Howey ].

Getting back to the acquisition, can you disclose who owns the remaining 35%? Daniel O’Brien: Yes, because it will appear in the 8-K and then, again, in the financials. It is a company called ATS of Indiana. Their full name is Advanced Turf Solutions. We've known them for a long time, and they're great people and they're a good customer of ENP.

Were they the seller of the 65%? Daniel O’Brien: They were a group of sellers that added up to 65%.

And do you have any options to acquire the remaining 35%? Daniel O’Brien: We do not. We actually feel that this is perfectly structured. If the -- if our partner wanted to sell, we would buy. But we feel it's perfectly structured. They are a distributor of the ENP products. They are a very large customer of ENP. We feel that it's a synergistic partnership relationship where they want ENP to succeed and continue to outperform. We want the same, and we want our scientific staff to be able to work with the ENP scientists to improve all the products and help push them through to ATS and the other turf customers and golf customers that ENP has. So having one of our major ENP customers with skin remaining in the game strikes me as a very good structure.

And the gentleman, the executive that's coming over, I think you mentioned you've been familiar with him and have a long-term history with him. Daniel O’Brien: That's correct. We would love to have him as an executive in our team, but that's a terrible thing to do to a customer, so we didn't do it. But we did arrange range in this deal so that Mr. Murray can wear 2 hats and consult into the NanoChem company, provided it's not interfering with his work with ENP. So we've got the best of both worlds on that one again.

And with regard to the BMO Harris financing, is that a short-term financing? Or is that more long-term package that's already been placed? Daniel O’Brien: Long term. That's a 7-year term. So we'll be paid off in 7 years.

So it amortizes quarterly, annually? Daniel O’Brien: Quarterly payments with an annual or -- well, this is where you get into words that differ between Canada and the United States. But at any rate, we're paying down the principal by $600,000 a year and the interest as we go.

Got you. And lastly, could you talk a little bit more about if -- how tariffs have impacted, if at all, sales to this point or what you're sort of seeing from customers? Daniel O’Brien: Hasn't affected sales at this point. Our international customers are protected by -- we can get tariff rebates for products that reship outside the United States. So that's fine there. We won't be losing international customers over tariffs. We -- national customers in the United States, because this is a business -- the businesses we're in, everybody is affected. So what we think is going to happen, and we're not experts, but we think there's going to be a general inflation in chemical prices across the United States that people will have to accept and find a way to work into their system. We're not being aggressive. We're raising prices as little as we can afford to without damaging our profitability. But we do see this as being an inflationary event rather than a change in who provides what products into the marketplace.

It appears there are no further questions at this time. Mr. O'Brien, I'd like to return the call back to you. Daniel O’Brien: Thank you, Jacob. Well, thank you all, and it was a pleasure to have this conversation. I look forward to the next one in the new year and to continuing to build and run this thing properly. And given the date, Happy Thanksgiving. Goodbye.

This concludes today's call. Thank you for your participation. You may now disconnect.