FLEXIBLE SOLUTIONS INTERNATIONAL INC

December 31, 2025 and 2024

1. BASIS OF PRESENTATION

These consolidated financial statements (“consolidated financial statements”) include the accounts of Flexible Solutions International, Inc. (the “Company”), its wholly-owned subsidiaries Flexible Fermentation Ltd., NanoChem Solutions Inc. (“NanoChem”), Flexible Solutions Ltd., Flexible Biomass LP, FS Biomass Inc., NCS Deferred Corp., Natural Chem SEZC Ltd. (“Natural Chem”), Pana Chem Solutions Inc. (Pana Chem”), InnFlex Holdings Inc., ENP Peru Investments LLC (“ENP Peru”), its 80% controlling interest in 317 Mendota LLC (“317 Mendota”), and its 65% controlling interest in ENP Investments, LLC (“ENP Investments”) and ENP Mendota, LLC (“ENP Mendota”). All inter-company balances and transactions have been eliminated upon consolidation. The Company was incorporated on May 12, 1998 in the State of Nevada and in 2019 the Company redomiciled into Alberta, Canada.

In 2023, the Company purchased an 80% interest in 317 Mendota, a newly incorporated company established to purchase a large manufacturing building. ENP Investments occupies part of this building, freeing up more space in the building owned by ENP Peru for NanoChem. The remaining 20% non-controlling interest is held by unrelated parties. The manufacturing building was sold in October 2025 and ENP Investments continues to lease the space the Company occupies from the new owner (see Note 3 and 6).

The Company and its subsidiaries develop, manufacture and market specialty chemicals which slow the evaporation of water. One product, HEATSAVR®, is marketed for use in swimming pools and spas where its use, by slowing the evaporation of water, allows the water to retain a higher temperature for a longer period of time and thereby reduces the energy required to maintain the desired temperature of the water in the pool. Another product, WATERSAVR®, is marketed for water conservation in irrigation canals, aquaculture, and reservoirs where its use slows water loss due to evaporation. In addition to the water conservation products, the Company also manufactures and markets water-soluble chemicals utilizing thermal polyaspartate biopolymers (hereinafter referred to as “TPAs”), which are beta-proteins manufactured from the common biological amino acid, L-aspartic. TPAs can be formulated to prevent corrosion and scaling in water piping within the petroleum, chemical, utility and mining industries. TPAs are also used as proteins to enhance fertilizers in improving crop yields and can be used as additives for household laundry detergents, consumer care products and pesticides. The TPA division also manufactures two nitrogen conservation products for agriculture that slows nitrogen loss from fields and has installed custom equipment for production of food and nutritional materials. All the ingredients the Company produces are custom products for specific clients and are confidential. The Company anticipates that this market vertical will grow over time. The Company also manufactures food grade products that are made and sold by the TPA division. The TPA division recognizes research and development income from time to time.

2. SIGNIFICANT ACCOUNTING POLICIES

These consolidated financial statements have been prepared on a historical cost basis, except where otherwise noted, in accordance with accounting principles generally accepted in the United States applicable to a going concern and reflect the policies outlined below.

(a)Cash and Cash Equivalents.

The Company considers all highly liquid investments purchased with an original or remaining maturity of less than three months at the date of purchase to be cash equivalents. Cash and cash equivalents are maintained with several financial institutions. As of December 31, 2025 and 2024, the Company did not have any cash equivalents.

Certain term deposits previously included in cash and cash equivalents have been reclassified to reflect this policy. Accordingly, the prior year comparative statement of cash flows has been reclassified to present term deposits with original maturities greater than three months within investing activities. These reclassifications had no effect on previously reported net income, total assets, or shareholders’ equity.

(b)Term Deposits.

Term deposits with original maturities greater than three months but less than one year are classified as current assets and carried at amortized cost, which approximates fair value. Interest income is recognized on the accrual basis.

At December 31, 2025, the Company had three term deposits that are maintained by commercials banks. The first term deposit is for $313,225 and matures in February 2026. This deposit pays 3% interest and, if withdrawn before maturity, a penalty may be applied. The second term deposit is for $752,682, matures in March 2026 and pays interest at a rate of 1.65%. If withdrawn before maturity, the greater of the loss of accrued interest or $150, plus 1% of the principal shall be levied. The third term deposit is for $320,243, matures in February 2026 and pays interest at a rate of 3%. If withdrawn before maturity, a penalty may be applied.

(c)Inventories and Cost of Sales.

The Company has three major classes of inventory: completed goods, work in progress and raw materials and supplies. In all classes, inventories are stated at the lower of cost or net realizable value with cost determined using either weighted average cost or the first-in, first-out (FIFO) method, depending on the entity. Cost of sales includes all expenditures incurred in bringing the goods to the point of sale. Inventory costs and costs of sales include direct costs of the raw material, inbound freight charges, warehousing costs, handling costs (receiving and purchasing) and utilities and overhead expenses related to the Company’s manufacturing and processing facilities. The Company periodically reviews its inventory for slow-moving or obsolete items and writes down the inventory carrying value to its estimated net realizable value based on assumptions about future demand and market conditions.

The Company accounts for shipping and handling activities as fulfillment costs and shipping and handling charges included in the consolidated statements of income and comprehensive income are as follows:

(d)Allowance for Doubtful Accounts.

The Company maintains an allowance for expected credit losses at a level management believes is adequate to absorb estimated losses at the balance sheet date. The Company’s expected credit losses are determined through a review using historical credit loss experience; changes in asset specific characteristics, current conditions, and reasonable and supportable future forecasts, among other specific account data. The Company develops and documents its methodology to determine its allowance for expected credit losses. Risk characteristics used by the Company may include customer mix, knowledge of customers and general economic conditions of the various local economics, among others. Specific account balances are written off when management determines the amounts to be uncollectible. Management monitors the adequacy of the allowance through quarterly reviews of customer creditworthiness and local economic trends.

(e)Property, Equipment, and Leaseholds.

The following assets are recorded at cost and depreciated using the methods and annual rates shown below:

The Company capitalizes expenditures for improvements that significantly extend the useful life of an asset. The Company recognizes a gain (loss) on a sale of property, equipment, and leaseholds assets based upon the proceeds received on the sale less the net carrying value of the asset. The Company charges expenditures for maintenance and repairs to operations when incurred.

(f)Impairment of Long-Lived Assets.

Property, Equipment, Leasehold, and Definite-lived Intangible Assets:

The Company reviews the carrying amount of our property, equipment, leasehold, and definite-lived intangible assets for impairment when events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. We measure recoverability of these assets by comparing the carrying amounts to the future undiscounted cash flows that the assets or asset group are expected to generate. If the carrying value of the assets or asset group are not recoverable, impairment is measured and recognized as the amount by which the carrying value exceeds its fair value. Fair value is generally determined based on discounted future cash flows.

Goodwill and Indefinite-lived Intangible Assets:

Goodwill and indefinite-lived intangible assets are tested for impairment annually by the Company on December 31 or more frequently if events or changes in circumstances indicate that the carrying amount may not be recoverable. Goodwill is tested for impairment at the reporting unit level using a two-step process which includes a qualitative and quantitative assessment. Indefinite-lived intangible assets are tested for impairment by comparing their fair value to their carrying amount. If the carrying amount exceeds the fair value, an impairment loss is recognized in the period it is identified. The Company determines fair value using appropriate valuation methodologies, including discounted cash flow models and market-based approaches, which incorporate assumptions regarding future performance, growth rates, discount rates, and other relevant factors. Any impairment losses recognized are recorded as an expense in the consolidated statements of income.

(g)Foreign Currency.

The functional currency of the Company is the U.S. dollar. The functional currency of three of the Company’s subsidiaries is the Canadian dollar. The translation of the Canadian dollar to the reporting currency of the Company, the U.S. dollar, is performed for assets and liabilities using exchange rates in effect at the balance sheet date. Revenue and expense transactions are translated using average exchange rates prevailing during the period. Translation adjustments arising on conversion of the Company’s financial statements from the subsidiary’s functional currency, Canadian dollars, into the reporting currency, U.S. dollars, are excluded from the determination of income (loss) and are disclosed as other comprehensive income in the consolidated statements of operations and comprehensive income.

Foreign exchange gains and losses relating to transactions not denominated in the applicable local currency are included in operating income (loss) if realized during the year and in comprehensive income (loss) if they remain unrealized at the end of the year.

(h)Revenue Recognition.

The Company recognizes revenue when control of promised goods is transferred to customers in an amount that reflects the consideration the Company expects to receive in exchange for those goods. Revenue is recognized at a point in time, generally upon shipment, as this represents the transfer of the risk of loss and control to the carrier (F.O.B. shipping point). Shipping and handling activities are accounted for as fulfillment costs.

Returns and Allowances

The Company’s historical experience with product returns has been insignificant; accordingly, no allowance for returns is recorded at the balance sheet date.

Deferred Revenue

Deferred revenues consist of products sold to distributors with payment terms greater than the Company’s customary business terms due to lack of credit history or operating in a new market in which the Company has no prior experience. The Company defers the recognition of revenue until the criteria for revenue recognition has been met and payments become due or cash is received from these distributors.

(i)Research and Development Services.

Income from research and development services is recognized over a period of time as the Company satisfies contractual performance obligations. Costs related to these services are expensed as research and development costs as incurred.

(j)Stock Issued in Exchange for Services.

The Company’s common stock issued in exchange for services is valued at fair value based upon trading prices of the Company’s common stock on the dates the stock is granted. The corresponding expense of the services rendered is recognized over the period that the services are performed.

(k)Stock-based Compensation.

Stock-based compensation expense is recognized for equity awards granted to employees, directors and other eligible participants based on the fair value of the awards at the grant date. For stock options, fair value is estimated using an appropriate valuation model such as the Black-Scholes option pricing model. The fair value of stock options is recognized as an expense of the requisite service period, typically the vesting period, using the graded-vesting method. The Company estimates expensed forfeitures based on historical data and adjusts stock-based compensation expenses accordingly. Shares are issued from Treasury upon exercise of stock options.

(l)Other Comprehensive Income.

Other comprehensive income refers to revenues, expenses, gains and losses that under generally accepted accounting principles are included in comprehensive income, but are excluded from net income as these amounts are recorded directly as an adjustment to stockholders’ equity. The Company’s other comprehensive income is comprised only of unrealized foreign exchange gains and losses related to the translation of subsidiaries’ functional currency into the reporting currency.

(m)Income Per Share.

Basic earnings per share is computed by dividing net income (loss) attributable to controlling interest available to common stockholders by the weighted average number of common shares outstanding in the period. Diluted earnings per share are calculated giving effect to the potential dilution of the exercise of options and stock awards. Common equivalent shares, composed of incremental common shares issuable upon the exercise of stock options and stock awards are included in diluted net income per share to the extent that these shares are dilutive. Common equivalent shares that have an anti-dilutive effect on net income per share have been excluded from the calculation of diluted weighted average shares outstanding for the years ended December 31, 2025 and 2024.

(n)Use of Estimates.

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates and would impact the results of operations and cash flows.

Estimates and underlying assumptions are reviewed at each period end. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected.

Significant areas requiring the use of management estimates include long-lived asset impairment analysis, share-based payments, valuation allowances for deferred income tax assets, determination of useful lives of property, equipment and leaseholds and intangible assets, recoverability of accounts receivable, recoverability of investments, discount rates for right of use assets and the costing and recoverable value of inventory.

(o)Fair Value of Financial Instruments.

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The standard describes a fair value hierarchy based on three levels of inputs described below, of which the first two are considered observable and the last unobservable, that may be used to measure fair value.

The fair values of cash, term deposits, investments and the line of credit for all periods presented approximate their respective carrying amounts due to the short-term nature of these financial instruments.

The fair value of the long-term debt for all periods presented approximate their respective carrying amounts due to these financial instruments being at market rates.

(p)Contingencies.

The Company accrues for loss contingencies when it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. If a contingency is at least reasonably possible but not probable, or if the amount cannot be estimated, the Company discloses the nature of the contingency in the notes to the financial statements. Legal costs associated with such matters are expensed as incurred, and no accruals are recorded for contingencies where the likelihood of loss is remote.

(q)Income Taxes.

Income taxes are computed by multiplying the Company’s taxable net income by the Company’s effective tax rates. Deferred income tax assets and liabilities are recognized for the future tax consequences attributable to differences between the consolidated financial statement carrying amounts of existing assets and liabilities and their respective tax bases, and operating loss carry-forwards, if any. Deferred income tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred income tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is provided to reduce the carrying amount of deferred income tax assets if it is considered more likely than not that some portion, or all, of the deferred income tax assets will not be realized.

It is the Company’s policy to provide for uncertain tax positions and the related interest and penalties based upon management’s assessment of whether a tax benefit is more likely than not to be sustained upon examination by tax authorities.

To the extent the Company prevails in matters for which a liability for an unrecognized benefit is established or is required to pay amounts in excess of the liability, the Company’s effective tax rate in a given financial statement period may be affected. Interest and penalties associated with the Company’s tax positions are recorded as tax expense (benefit) in the consolidated statements of income and comprehensive income.

(r)Risk Management and Concentrations.

The Company’s credit risk is primarily attributable to its accounts receivable. The amounts presented in the consolidated balance sheets are net of allowances for doubtful accounts, estimated by the Company’s management based on prior experience and the current economic environment. The Company is exposed to credit-related losses in the event of non-payment by customers. Credit exposure is minimized by dealing with only credit worthy counterparties.

Excluding research and development services revenue, total revenue for the Company’s three primary customers in each period is as follows:

Total accounts receivable for the Company’s three primary product sales customers for the full year ended December 31, 2025 is as follows:

There wasno research and development sales account receivable at December 31, 2025 and 2024.

See Note 4 for allowance for doubtful accounts, all unrelated to our primary or research and development customers.

The credit risk on cash is limited because the Company limits its exposure to credit loss by placing its cash with major financial institutions. The Company maintains cash balances at financial institutions which at times exceed federally insured amounts. The Company has not experienced any losses in such accounts.

(s)Leases.

Leases are evaluated and classified as either operating or finance leases by the lessee and as either operating, sales-type or direct financing leases by the lessor. For leases with terms greater than 12 months, the Company records the related right-of-use (“ROU”) asset and lease obligation at the present value of lease payments over the term. Leases may include fixed rental escalation clauses, renewal options and / or termination options that are factored into the determination of lease payments when appropriate. The Company’s operating leases are included in ROU assets, lease liabilities-current portion and lease liability-long term portion in the accompanying consolidated balance sheets. ROU assets represent the Company’s right to use an underlying asset for the lease term, and lease liabilities represent the obligation to make lease payments arising from the lease. The Company’s leases do not usually provide a readily determinable implicit rate; therefore, an estimate of the Company’s incremental borrowing rate is used to discount the lease payments based on information available at the lease commencement date.

(t)Investments.

Investment, at cost

The Company accounts for investments in equity securities that do not have a readily determinable fair value using the cost method. These investments are initially recorded at cost and are not subsequently remeasured unless impaired. Dividends received from cost-method investments are recognized as income when declared, provided they do not represent a return of capital. The Company evaluates these investments for impairment at each reporting period based on qualitative factors, such as financial condition, operational performance, and general market conditions affecting the investee. If an investment is determined to be impaired and the impairment is considered other than temporary, the carrying amount is reduced to its estimated recoverable value, with the impairment loss recognized in earnings.

Investment, equity method

The Company accounts for investments in entities over which it has significant influence, but not control, using the equity method of accounting. Under the equity method, the investment is initially recorded at cost, and the carrying amount is subsequently adjusted for the Company’s share of the investee’s income, losses, and dividends received. When a portion of an equity-method investment is sold, the Company recognizes a gain or loss on the sale based on the difference between the carrying amount of the investment sold and the proceeds received. The Company adjusts the carrying amount of the remaining investment based on its proportionate share of the investee’s equity after the sale. The Company assesses its equity-method investments for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. If the carrying amount of an equity-method investment exceeds its recoverable amount, an impairment loss is recognized.

(u)Reclassification.

Certain prior year amounts have been reclassified to conform to the 2025 financial statements presentation. Reclassifications had no effect on net income, cash flows, or stockholders’ equity as previously reported.

(v)Goodwill and Intangible Assets.

Goodwill

Goodwill represents the excess of the purchase price over the fair value of identifiable net assets acquired in a business combination. Goodwill is assigned to reporting units at the date of acquisition and is not amortized but is subject to periodic impairment testing. The carrying amount of goodwill is adjusted only in the event of impairment or upon the disposal of a business.

Intangible Assets

Intangible assets acquired separately are recorded at cost, while those acquired in a business combination are recognized at fair value as of the acquisition date. Intangible assets are classified into the following categories:

(w)Recent Accounting Pronouncements.

In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-09 (Topic 740) Improvements to Income Tax Disclosures. The new guidance is intended to enhance annual income tax disclosures to address investor requests for more information about the tax risks and opportunities present in an entity’s operations. The amendments in this standard require disclosure of additional information in specified categories with respect to the reconciliation of the effective tax rate to the statutory rate (the rate reconciliation) for federal, state, and foreign income taxes. They also require greater detail about individual reconciling items in the rate reconciliation to the extent the impact of those items exceeds a specified threshold. In addition to new disclosures associated with the rate reconciliation, the amendments in this update require information pertaining to taxes paid (net of refunds received) to be disaggregated for federal, state, and foreign taxes and further disaggregated for specific jurisdictions to the extent the related amounts exceed a quantitative threshold. The amendments in this update are effective on January 1, 2025 for annual periods beginning after December 15, 2024, and early adoption is permitted. We adopted this guidance which resulted in additional required disclosures included in our consolidated financial statements for the year ended December 31, 2025 and income tax disclosure for the comparative year ended December 31, 2024 were modified retrospectively to include the new requirements.

In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, which requires disclosure about the types of costs and expenses included in certain expense captions presented on the income statement. The new disclosure requirements are effective for the Company’s annual periods beginning after December 15, 2026, and interim periods beginning after December 15, 2027, with early adoption permitted, and may be applied either prospectively or retrospectively. The Company is currently evaluating the ASU to determine its impact on its consolidated financial statements and disclosures.

Management does not believe that any other recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying financial statements.

3. LEASES

Naperville Operating Lease

In January 2016, NanoChem Solutions Inc. leased a space in Naperville, IL for office and research and development. The lease was for an initial five years and renewable every five years for a further five years. In March 2024, the Company consolidated NanoChem operations into the Peru, IL locations and terminated the lease in Naperville, IL. The Company had to pay a penalty of $35,910 and forfeited the $5,440 security deposit to terminate the lease early and incurred a loss of $41,350 on early termination of the lease that is shown on the consolidated statement of income and comprehensive income as a part of non-operating income (loss).

Panama Operating Lease

In 2024, the Company executed a contract to lease 37,500 sq. ft for manufacturing space with a lease term of 122 months with the option to renew the lease for a further 36 months at the end and total payments during the term, starting at $31,324 per month with a 3% increase each year, or $3,461,568 in total. The Company recorded the present value of the lease payments over the term as a lease liability and an ROU asset. The Company’s incremental borrowing rate of 7% was used as the discount rate since the rate implicit in the lease was not readily determinable.

The lease liability related to this operating lease, which represents the present value of the lease payments, and the corresponding ROU asset were both $2,341,339 at inception of the lease. The ROU asset was $2,111,027 and the lease liability was $2,543,723 at December 31, 2025. During 2025, the Company recognized $432,696 of lease expense related to this lease in “General and administrative” in the consolidated statements of income and comprehensive income. There were no payments made or expense recorded for this lease in 2024. The Company is waiting for final requirements to be met by the lessor before starting to pay rent. At year end, the difference between the ROU asset and lease liability is attributable to the timing of the commencement of rent payments.

Mendota, Illinois Operating Leases

In October 2025, in connection with the sale of a building previously occupied by the Company’s subsidiary ENP Investments (see Note 6), ENP Investments entered into operating leases with the new owner for a total of 125,500 square feet of manufacturing and office space, comprised of two lease sections. The Company’s incremental borrowing rate of 7% was used as the discount rate for both leases as the implicit rate was not readily determinable.

Section A (110,000 sq. ft.): Initial term of 60 months with an option to renew. Monthly base rent begins at $27,492 and escalates at approximately 3.6% annually, for total undiscounted payments of $1,771,552. At inception, both the ROU asset and lease liability were recorded at $1,483,227. The option to renew was not considered in calculating the initial carrying values. As of December 31, 2025, both the ROU asset and lease liability were $1,426,447. For the year ended December 31, 2025, operating lease expense of $82,475 was recognized in “Selling, general and administrative” in the consolidated statements of income and comprehensive income.

Section B (15,500 sq. ft.): Initial term of 60 months with an option to renew. Monthly base rent begins at $4,856 and escalates at approximately 3.6% annually, for total undiscounted payments of $312,625. At inception, both the ROU asset and lease liability were recorded at $263,383. The option to renew was not considered in calculating the initial carrying values. As of December 31, 2025, both the ROU asset and lease liability were $253,213 For the year ended December 31, 2025, operating lease expense of $14,567 was recognized in “Selling, general and administrative” in the consolidated statements of income and comprehensive income.

The following table summarizes expense and cash payments for operating leases during the periods noted:

The following table contains the weighted average remaining lease term and discount rate for operating leases as of the end of the period:

The table below presents a maturity analysis of the future minimum lease payments for operating leases as of December 31, 2025:

4. ACCOUNTS RECEIVABLE

5. INVENTORIES

6. PROPERTY, EQUIPMENT AND LEASEHOLDS

Amount of depreciation expense for 2025 was: $1,805,688 (2024 - $1,797,476) and is included in cost of sales in the consolidated statements of income and comprehensive income.

In October 2025, the Company completed a sale of its land and building owned by its subsidiary 317 Mendota for gross proceeds of $3,750,000. In connection with the sale, the Company paid off the $2,184,591 debt obligation with Stock Yards Bank. This transaction resulted in a gain of $1,209,939, which is recognized within operating income in the consolidated statement of income and comprehensive income. Subsequent to the sale, the Company entered into an operating lease agreement with the purchaser (See Note 3).

In late 2025, management committed to a plan to sell the 14,000 sq. ft. former manufacturing facility located in Mendota, IL. As of December 31, 2025, the carrying value of the property has been reclassified to Property Held for Sale on the consolidated balance sheet at its estimated net realizable value of $425,000. In connection with this reclassification, the Company recognized a loss of $183,423, representing the write-down of the property’s carrying amount to its estimated net proceeds from the anticipated sale.

7. GOODWILL AND INTANGIBLE ASSETS

Goodwill and intangibles assets, all of which relates to the acquisition of ENP Investments in 2018, at December 31, 2025 and 2024 consisted of the following:

The amount of amortization for 2025 was $160,000 (2024 - $160,000) and was included in cost of sales in the consolidated statements of income and comprehensive income. Estimated amortization expense over the next five years is as follows:

8. LONG TERM DEPOSITS

The Company has security deposits that are long term in nature which consist of damage deposits held by lessors and deposits held by various vendors for equipment purchases.

9. INVESTMENTS

The Company’s investments at December 31, 2025 and 2024 consisted of the following:

****In 2020, the Company invested $500,000 in Lygos Inc. (“Lygos”), a privately held entity, under a Simple Agreement for Future Equity (“SAFE”) agreement. Lygos is a company developing a sustainable aspartic acid microbe strain. In 2021, the Company made a second SAFE investment of $500,000 for a total of $1,000,000. In 2025, the investment was deemed impaired by the Company’s management and the loss is shown in the consolidated statements of income and comprehensive income.

In September 2025, the Company received a return of $500,000 on its initial investment of 50,000 Class B shares of Trio Opportunity Corp. The Company still holds 47,000 Class B shares.

In January 2019, the Company invested in a Florida based LLC that is engaged in international sales of fertilizer additives. According to the operating agreement, the Company had a 50% interest in the profit and loss of the Florida based LLC but did not have control. In August 2024, the Company sold a 30.1% interest in the Florida based LLC to a third party for consideration of $2,000,000. In addition, the Company entered into a subsequent agreement for the sale of its remaining 19.9% interest over the next five years for an additional $4,000,000. Starting in 2025, the Company will sell a further 3.98% per year upon receipt of that year’s $800,000 payment. In December 2025, the purchaser advised that there would be a delay in funding the 2025 tranche and that they would pay the $100,000 penalty in January 2026, which has been received. At December 31, 2025, the Company continues to account for this investment using the equity investment as it exercises significant influence.

A summary of the activity associated with the Company’s investment in the Florida based LLC during the years ended December 31, 2025 and 2024 is follows:

Summarized profit and loss information related to the Florida based LLC is as follows:

During the year ended December 31, 2025, the Company had sales of $6,169,277 (2024 - $8,235,394) to the Florida based LLC, of which $980,638 is included within Accounts Receivable as at December 31, 2025 (2024 - $1,866,645).

10. SHORT-TERM LINES OF CREDIT

**(****a)**In June 2025, ENP Investments renewed the line of credit with Stock Yards Bank and Trust (“Stock Yards”). The revolving line of credit is for an aggregate amount of up to the lesser of (i) $5,000,000, or (ii)50-80% of eligible domestic accounts receivable plus 50% of inventory, capped at $2,500,000. Interest on the unpaid principal balance of this loan will be calculated using the greater of prime or 4.0%. The interest rate at December 31, 2025 is 6.75% (December 31, 2024 -7.5%).

The revolving line of credit contains customary affirmative and negative covenants, including the following: compliance with laws, provisions of financial statements and periodic reports, payment of taxes, maintenance of inventory and insurance, maintenance of operating accounts at Stock Yards, Stock Yard’s access to collateral, formation or acquisition of subsidiaries, incurrence of indebtedness, dispositions of assets, granting liens, changes in business, ownership or business locations, engaging in mergers and acquisitions, making investments or distributions and affiliate transactions. NanoChem is a guarantor of 65% of all the principal and other loan costs not to exceed $3,250,000. The non-controlling interest is the guarantor of the remaining 35% of all the principal and other loan costs not to exceed $1,750,000.

To secure the repayment of any amounts borrowed under the revolving line of credit, the Company granted Stock Yards a security interest in substantially all of the assets of ENP Investments, exclusive of intellectual property assets.

The balance outstanding under this revolving line as of December 31, 2025 was $2,092,097 (2024 - $2,052,159).

**(b)**In August 2025, the Company renewed the line of credit with Stock Yards Bank and Trust (“Stock Yards”). The revolving line of credit is for an aggregate amount of up to the lesser of (i) $2,000,000, or (ii)80% of eligible domestic accounts receivable plus 50% of inventory, capped at $1,000,000. Interest on the unpaid principal balance of this loan will be calculated using the greater of prime or 4.0%. The interest rate at December 31, 2025 is 6.75% (December 31, 2024 -8%).

The revolving line of credit contains customary affirmative and negative covenants, including the following: compliance with laws, provision of financial statements and periodic reports, payment of taxes, maintenance of inventory and insurance, maintenance of operating accounts at Stock Yards, Stock Yards access to collateral, formation or acquisition of subsidiaries, incurrence of indebtedness, dispositions of assets, granting liens, changes in business, ownership or business locations, engaging in mergers and acquisitions, making investments or distributions and affiliate transactions. The covenants also require that the Company maintain a minimum ratio of qualifying financial assets to the sum of qualifying financial obligations.

To secure repayment of any amounts borrowed under the revolving line of credit, the Company granted Stock Yards a security interest in substantially all of the assets of NanoChem, exclusive of intellectual property assets.

The balance outstanding under this revolving line as of December 31, 2025 was $56,289 (2024 - $nil).

11. LONG TERM DEBT

Debt, all of which is with StockYards Bank and Trust, at December 31, 2025 and 2024 consisted of the following:

The following table summarizes the scheduled annual future principal payments as of December 31, 2025

12. INCOME TAXES

The provision for income tax expense (benefit) is comprised of the following:

Income taxes paid in cash, net refunds received, during the years ended December 31, 2025 and 2024 were as follows:

The following table reconciles the income tax expense at the U.S. Federal statutory rate to income tax expense at the Company’s effective tax rates.

Deferred taxes reflect the tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes. Deferred tax assets (liabilities) at December 31, 2025 and 2024 are comprised of the following:

The Company has non-capital loss carryforwards of $5,328,621 which may be carried forward to apply against future year income tax for Canadian income tax purposes, subject to the final determination by taxation authorities, expiring in the following years:

As at December 31, 2025, the Company has federal and state income tax net operating loss carryforwards of $10,234 available for US tax purposes. The NOLs carry forward indefinitely, with utilization limited to offsetting up to 80% of taxable income in any given year.

As at December 31, 2025, the Company has income tax net operating loss carryforwards of $666,745 available for Panama tax purposes. The NOLs carry forward five years.

The Company’s federal income tax returns for fiscal years 2022 through 2025 remain open and subject to examination.

The Company recognizes income tax liabilities from uncertain tax positions where there is uncertainty as to whether a tax position is sustainable using the more-likely-than-not threshold. During the years ended December 31, 2025 and 2024, the total liability for uncertain tax positions changed by $(161,320) and $419,214, respectively, primarily due to increased liabilities based on existing tax positions. As of December 31, 2025 and 2024, the Company has recognized liabilities for uncertain tax positions of $1,964,485 and $2,125,805, respectively, which is included in income taxes payable on the consolidated balance sheets. All recorded uncertain tax positions impact the Company’s effective tax rate.

Subsequent to December 31, 2025, based on discussions with its tax consultants, management determined that the Company is responsible for paying income taxes with respect to tax positions taken since 2019. This determination confirms the existence of the liability previously accrued by the Company. The liability recorded as of December 31, 2025 represents management’s best estimate of the obligation based on information available at the balance sheet date. Management is currently working with its tax consultants to assess the full extent of the obligation, and any adjustment to the estimated recorded liability resulting from this process will be reflected in the period in which the change in estimate is identified.

Additionally, the Company has accrued interest and penalties related to these tax liabilities, which are recorded as a component of income tax expense (benefit). As of December 31, 2025 and 2024, the Company recorded a change of $277,262 and $333,086 in accrued interest and penalties. At December 31, 2025 and 2024, the Company had accrued cumulative interest and penalties of $1,064,926 and $787,664, respectively, which is included in income taxes payable on the consolidated balance sheets. Given the confirmation of the underlying tax liability, the Company expects that interest and penalties will continue to accrue until the matter is resolved with the taxing authorities.

13. INCOME PER SHARE

The Company presents both basic and diluted income per share on the face of its consolidated statements of income and comprehensive income. Basic and diluted income per share is calculated as follows:

Certain stock options whose terms and conditions are described in Note 14, “Stock Based Compensation” could potentially dilute basic EPS in the future, but were not included in the computation of diluted EPS because to do so would have been anti-dilutive. Those anti-dilutive options are as follows.

There wereno preferred shares issued and outstanding during the years ended December 31, 2025 and 2024.

14. STOCK BASED COMPENSATION

The Company has a stock option plan and stock incentive plan (“Plan”). The purpose of this Plan is to provide additional incentives to key employees, officers, directors and consultants of the Company and its subsidiaries in order to help attract and retain the best available personnel for positions of responsibility and otherwise promote the success of the Company’s business. It is intended that options issued under this Plan constitute non-qualified stock options. The general terms of awards under the plan are that 100% of the awards granted will vest the year following the grant unless an executive employee is granted a multi-year stock option award where an equal amount vests over the next 5 years. The maximum term of options granted is 5 years and the exercise price for all options are issued for not less than fair market value at the date of the grant.

During the years ended December 31, 2025 and 2024, the Company recognized stock-based compensation as follows:

The following table summarizes the Company’s stock option activities for the years ended December 31, 2025 and 2024:

During the year ended December 31, 2025, the Company granted 36,000 (2024 –102,000) stock options to consultants and 30,000 (2024 –979,000) stock options to employees. The fair value of options and awards granted during 2025 and 2024 was calculated using the following range of assumptions:

As of December 31, 2025, the weighted-average remaining contractual life of outstanding and exercisable options is 2.7 years and 2.6 years, respectively. As of December 31, 2025, there was approximately $380,604 of compensation expense related to non-vested options that is expected to be recognized over a weighted average period of 1.5 years.

The aggregate intrinsic value of options outstanding and exercisable at December 31, 2025 is $6,620,185 (2024 - $1,709,850) and $4,318,585 (2024 - $843,790), respectively. During the year ended December 31, 2025, the intrinsic value of stock options exercised was $861,973 (2024 - $88,730).

During the year ended December 31, 2025, the Company granted 50,000 shares as a stock award. The total fair value of the stock award was $350,000 with 10,000 shares vested upon issuance and 10,000 shares vest on each anniversary date through 2029. As of December 31, 2025, there was approximately $248,720 of compensation related to non-vested stock awards that is expected to be recognized through 2029.

15. CAPITAL STOCK

During the year ended December 31, 2025,107,000 shares were issued upon the exercise of employee stock options (2024 –47,000) and 99,966 shares were issued upon the exercise of consultant stock options (2024 –33,000).

The Company declared a special dividend of $0.10 per share on May 7, 2025, paid on May 28, 2025 to shareholders of record on May 19, 2025 for a total payment of $1,274,753.

The Company declared a special dividend of $0.10 per share on April 23, 2024, paid on May 16, 2024 to shareholders of record on April 30, 2024, for a total payment of $1,255,053.

16. NON-CONTROLLING INTERESTS

**(****a)**ENP Investments is a limited liability corporation (“LLC”) that manufactures and distributes golf, turf and ornamental agriculture products in Mendota, Illinois. The Company owns a 65% interest in ENP Investments through its wholly-owned subsidiary NanoChem. An unrelated party (“NCI”) owns the remaining 35% interest in ENP Investments. ENP Mendota is a wholly owned subsidiary of ENP Investments. ENP Mendota is a LLC that leases warehouse space. For financial reporting purposes, the assets, liabilities and earnings of both of the LLC’s are consolidated into these financial statements. The NCI’s ownership interest in ENP Investments is recorded in non-controlling interests in these consolidated financial statements. The non-controlling interest represents NCI’s interest in the earnings and equity of ENP Investments. ENP Investments is allocated to the TPA segment. See Note 17.

ENP Investments makes cash distributions to its equity owners based on formulas defined within its Ownership Interest Purchase Agreement dated October 1, 2018. Distributions are defined in the Ownership Interest Purchase Agreement as cash on hand to the extent it exceeds current and anticipated long-term and short-term needs, including, without limitation, needs for operating expenses, debt service, acquisitions, reserves, and mandatory distributions, if any.

From the effective date of acquisition onward, the minimum distributions requirements under the Ownership Interest Purchase Agreement were satisfied. The total distribution from the effective date of acquisition onward was $4,862,387.

During the year ended December 31, 2025, the Company had sales of $8,817,331 (2024 - $8,050,462) to the NCI, of which $6,652,611 is included within Accounts Receivable as of December 31, 2025 (2024 – $5,377,088).

**b)**317 Mendota is a LLC that owned real estate that the Company occupies part of while the excess was rented out. In October 2025, the Company sold the building but continues to rent from the new owner (see Note 3 and 6). The Company owns an 80% interest in 317 Mendota and an unrelated party (“317 NCI”) owns the remaining 20% interest in 317 Mendota. For financial reporting purposes, the assets, liabilities and earnings of 317 Mendota are consolidated into these financial statements. The 317 NCI’s ownership interest in 317 Mendota is recorded in non-controlling interests in these consolidated financial statements. The non-controlling interest represents 317 NCI’s interest in the earnings and equity of 317 Mendota. 317 Mendota is allocated to the TPA segment as that is the intended use of the building.

17. SEGMENTS AND SIGNIFICANT CONCENTRATIONS

The Company operates intwo segments:

**(a)**Energy and water conservation products (as shown under the column heading “EWCP” below), which consists of a (i) liquid swimming pool blankets which save energy and water by inhibiting evaporation from the pool surface, and (ii) food-safe powdered form of the active ingredient within the liquid blankets and which are designed to be used in still or slow moving drinking water sources.

**(b)**Biodegradable polymers, also known as TPA’s (as shown under the column heading “BCPA” below), used by the petroleum, chemical, utility and mining industries to prevent corrosion and scaling in water piping. This product can also be used in detergents to increase biodegradability and in agriculture to increase crop yields by enhancing fertilizer uptake.

The third product line is nitrogen conservation products used for the agriculture industry. These products decrease the loss of nitrogen fertilizer after initial application and allows less fertilizer to be used. These products are made and sold by the Company’s TPA division.

The Company also manufactures food grade products that are made and sold by the TPA division.

The Company’s reportable segments are strategic business units that offer different, but synergistic products and services. They are managed separately because each business requires different technology and marketing strategies. The economic factors that impact the nature, amount, timing, and uncertainty of revenue and cash flows vary among the Company’s operating segments and the geographical regions in which they operate. This operating segment structure is used by the Chief Operating Decision Maker (“CODM”), who has been determined to be the Chief Executive Officer, to make key operating decisions and assess performance of the Company. The CODM evaluates segment operating performance, and makes resource allocation and performance evaluation decisions, based on gross profit and net operating income.

Year ended December 31, 2025:

Year ended December 31, 2024:

Sales by territory are shown below:

The Company’s long-lived assets (property, equipment, leaseholds, right of use assets, intangibles, and goodwill) are located in Canada and the United States as follows:

Three customers accounted for $18,055,599 (50%) of sales made in 2025 (2024 - $20,779,311 or 54%).

18. SUBSEQUENT EVENTS

In March 2026, the Company had a term deposit in the amount of $752,682 mature.

In the three months ended March 31, 2026, the Company issued 15,000 shares to employees upon the exercise of employee stock options.