Flexible Solutions International, Inc. (FSI) Q3 2022 Earnings Report, Transcript and Summary

Good day, and welcome to the Flexible Solutions International Third Quarter 2022 Financial Results Conference Call. [Operator Instructions] Please note, this call is being recorded. I would now like to turn the conference over to Mr. Dan O'Brien. Please go ahead, sir. Daniel O’Brien: Thank you, Jess. 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 FSI conference call. I'd like to speak first regarding our company condition and our product lines, along with what, in our opinion, might occur in the fourth quarter and in early [indiscernible]. Afterwards, I'll comment on our financials. COVID virus. We're not experiencing problems due to the virus other than occasional mild cases in our employee ranks and shipping delays when Asian ports experienced lockdowns. The NanoChem division, NCS, it represents the majority of the revenue of FSI. 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 has started food-grade total operations using spray dryer. We installed over the last several years. TPA is used in agriculture which significantly increases crop yield backed 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 biodegradable way of treating oilfield water to prevent pipes from plugging with mineral scale. TPA's effect is that it prevents the scaling out of minerals that are part of the water fraction of oil as it exits the rock formation. Scale must be prevented to keep the oil recovery pipes from clogging. TPA is also sold as biodegradable ingredient and cleaning products, certain food uses and as a water treatment chemical. SUN 27 and N Savr 30 are nitrogen conservation products. Nitrogen is 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 bacteria enzymes that cause into evaporation while N Savr 30 is effective at reducing nitrogen loss from leaching. 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, oil 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 were 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. The opening of the economy after the pandemic has affected ENP sales into the home gardening market, especially home cannabis. We now expect 2022 sales be similar to 2021. Programs we have put in place to invigorate growth that ENP will begin to take effect in 2022. The Florida LLC investment. The LLC was not profitable in Q3. The company is focused on international sales, multiple countries, all of which faced different issues and respond in varied ways. Revenue has been very strong in all this year, and we see it continuing in the last quarter and into 2023. However, the LLC is exposed to high cost of goods while experiencing difficulty passing all the costs to customers. As a result, margins are compressed and earnings may not reach historical levels plus raw material prices abate. Our sales to the LLC continue to grow, and we are able to maintain positive margins. Merger with Lygos did not proceed on April 18, FSI and Lygos announced their intent to merge subject to shareholder approval. The 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 in June 2021, also $500,000. Lygos is using the 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 reach new customers and develop valuable new products to 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 the intellectual property developments. Q4 2022 and early 2023. TPA, SUN 27 and N Savr 30 for agricultural use have an early [indiscernible] in Q4, followed by the strongest uptick in Q1 and [indiscernible]. Therefore, we expect to see moderate growth in Q4, strong growth in Q1 2023. Other valuable aspect of our Florida LLC that they have their strongest sales in the second half, while our American distribution is strongest since the first half. Very good for our inventory management. Oil, gas and industrial sales and TPA experienced increased sales in late -- Q4 '21 and throughout 2022. This was driven by shortfalls of competing products and high oil prices. It also appears to be true in Q4. Tariffs. September 30, 2018, several of our raw materials imported from China have included a 10% additional tariff, which rose to 25% in 2019. International customers are not charged with tariffs because we have applied for export rebates available to recover them. The accumulating tariff payments to the government are affecting our cost of goods, our cash flow and our profits negatively until the rebates are received. Rebates take many years to arrive. We submitted our initial applications 4 years ago. Total dollar amount due back to us exceeds $1 million and continue to increase. Rebates will increase profitability and cash flow while decreasing cost of goods for future quarters in which the rebates are received. Most recent information from the government is that we must reapply at a different office. This is the second time they have played this game. We're bringing our attorneys into the process now as it is obvious, we're not being treated fairly. Shipping and inventory. Ocean shipping from Asia to the U.S. and ocean ship from the U.S. to international ports are quicker than in Q1 and Q2, but still slow. Prices per container remain elevated. Land transport inside the United States is still taking longer than usual, while pricing is dropping slowly. We're coping with shipping issues by ordering far ahead. However, some disruption as possible, and some of the extra costs are being borne by us in order to retain customers. Raw material prices have also increased substantially over the last 12 months. Passing price increases along to customers can take several months and result in temporarily constrained margins. Just as we finish raising customer prices related to raw material increases in Q4 '21 and Q1 2022, new increases were imposed on us, and we worked with our customers on pricing, again, all summer. The effects of this are obvious in our Q3 financials. We still expect revenue, operating cash flow and profit to grow strongly in 2023, but inflationary forces may keep selling prices lag cost increases some of the time. Highlights of the financial results. We're pleased with the results for Q3. Year-over-year revenue and operating cash flow were up significantly. Profits were negatively affected by merger costs, product mix, shipping and raw material prices. We estimate that year-over-year growth in revenue, cash flow and profits will continue in Q4. Sales for the quarter increased 27% to $11.69 million compared with $9.21 million. Profits. Result is a profit of $1.1 million or $0.09 per share in 2022 that compared to a gain of $1.16 million or $0.09 a share in 2020. Year-to-date profits for the 9 months of 2022, profits were $0.35 per share, up from $0.31 per share in the year early period. It's notable that 2021 included a onetime positive PPP profit item, while the 2022 period had a onetime negative item from merger costs. Operating cash flow. So this non-GAAP number is useful to show our progress with noncash items removed for clarity. For Q1, Q2, Q3 combined, was $6.88 million or $0.56 per share up from $5.51 million or $0.45 a share in the 2021 period. The onetime merger costs are added back, cash flow would be $7.23 million or $0.59 per share. Long-term debt. We're continuing to pay down our long-term debt according to the terms of the loan. However, we have consolidated all our debt both 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 term debt. At the same time, we bought all the units we did not already own in ENP Peru Investments LLC, guaranteed the mortgage held by the LLC. LLC owns the 5 acres and 60,000 square foot building on the Southwest corner of our Peru, Illinois factory. This action returns full ownership of the 20-acre parcel and the 120,000 square feet of building to FSI with a mortgage at favorable terms. Working capital is adequate for all our purposes and is increasing continuously as we book retained profit from sales. We have lines of credit with Stock Yards Bank for the NCS and ENP subsidiaries, confident that we can execute our plans with our existing capital. Text of this speech will be available as an 8-K filing on www.sec.gov by Wednesday, November 16, e-mail or fax copies can be requested from Jason Bloom, jason@flexiblesolutions.com. Thank you. The floor is open for questions. And Jess, will you set that up for me, please?

[Operator Instructions] Our first question comes from Tim Clarkson with Van Clemens.

Yes, Mr. O'Brien. Good to talk to you, and I want to commend you on you being flexible on that going forward with that Lygos deals, you are as good as the naming your company. So I appreciate that. Are you there? Daniel O’Brien: Yes. yes.

So I mean, the basic question I have is, I mean, what percentage of the farmers out there that could be using your nitrogen extending TPA product are using it? And what potential do we have to get more of that market? Daniel O’Brien: Well, we estimate that through our distribution, we are successfully trading between 2 million and 3 million acres of American territory annually, and another 2 million to 3 million acres internationally through the marketing efforts of the Florida LLC that we own part of that 6 -- call it, 6 million acres, that is a pretty small fraction of the 700 million to 1 billion acres that most people allow as primary agricultural land. So we've got a piece of the marketplace. It's dependent on us to continue successfully opening up more distribution because we've looked at it several times, and trying to sell direct to farmers, alienates distribution and increases your risk dramatically. And yes, it can be done, but the cost in both money and risk is more than we want to take on.

Right. So what -- I mean, what -- makes the magic of somebody a farmer deciding to use your product versus not deciding to use it? Is it just availability? Or are there being needed to be educated on it or what? Daniel O’Brien: Well, there are competitive products, for instance, Coke industry sells a nitrogen conservation fertilizer. In fact, there are many competitors. So the question is, the distributors that we've attracted successfully sell it onwards to a farmer. And do they get more farmers and more land treated each year? And the answer is, obviously, yes, they do. So we're consistently looking for more distributors and working with our distributors to have them sell more to the farmers that they are with. So it's a growth program. But between us and the farmers, there's definitely distribution and thousands of products on the market. We've got a great product. We have to keep working hard. And as you can see, we do grow, but there is no magic bullet that gets us 25% of the farmers on earth are 10% of the farmers on earth, we just have to keep working our way up and giving out good products at good prices.

Is there a measurable competitive difference between you and say that coke product? Daniel O’Brien: I would say that we have equal products. I would definitely say that our product is not significantly better. You can buy it in different formats. For instance, the coke product that I referenced is sold already combined with the fertilizer. We sell an equally valuable product in a liquid format that other people can add to their fertilizers. So we have an advantage in that aspect. It's a -- Tim, it's a pretty competitive market. We're competing well, and I expect us to continue growing.

[Operator Instructions] We'll go next to Chris Bechowski, Private Investor. Please go ahead.

So I guess, first, I wanted to ask you about, I'm sure this quarter and this past year, we are benefiting from higher fertilizer prices. And do you think it's the case that this high fertilizer prices are just kind of introducing the farmers to these types of products and they will continue to use them even when fertilizer prices normalize? Daniel O’Brien: I believe that you're correct that there will be -- that there has been an introduction effect and that people who are introduced to using less fertilizer and getting the same results by spreading their input costs to an additive, which is essentially what we suggest. There are more advantages to it than simply reducing your fertilizer cost, you have to deal with fewer tons of material, which is significant when labor is expensive and sometimes nonexistent. It reduces your trucking costs. It's a more efficient route and it's a little known fact, but the farming community are extremely interested in keeping their land as good as possible because they are the foster children of passing good things along to their children. So when they are introduced to a product that saves them money and saves them work and improves the future of their land for their family. Once they're involved in it, they typically will stay involved in it unless the -- it's economically unfeasible.

So using less fertilizer improves the quality of the land or keeps the quality of the land better. Is that correct? Daniel O’Brien: It is in nitrogen case because you're not blowing off into gas or nitrous oxides into the atmosphere, both the nitrous oxides affect the greenhouse effect. And the other thing is if you can reduce leaching, leaching isn't just a problem at the mouth of the Mississippi River, where the fertilizers end up, it's a problem on your own farm. It leaches into your ponds and promotes algae growth that you don't want. Farmers are very interested in keeping their land as pristine as possible.

Okay. That is good to know that there was an environmental benefit. I mean, for the farmer, I know there was total environmental benefit. All right. So about cost, I know you said that high costs are persisting, but they are decrease. Do you think this -- in this current quarter will kind of have better margins and lower cost pressures? Daniel O’Brien: I do. Now that is always an issue, though, where -- because we've been so careful to make sure we have enough product on hand so that we don't ever have to -- they know we can't supply you to a customer. We've usually got between 4 and 6 months of raw materials in inventory. Of course, you can see that on our financials. So we take a while and work through things. And there's going to be some effects left over in Q4, but if the prices stay down or stay flat, then we will be acted normalization by Q1 at the very [indiscernible].

Okay. Please, good to hear. And yes, it's always better to serve your customers first than worry about costs. All right. About your new food products, can you give us a little bit more information of what they're going into and what benefits they provide? Daniel O’Brien: I think I'd like to wait on that a little bit, Chris. We've got a situation where I want to be sure that the customers are comfortable with what I say. So if you could leave that until the next conference call, I'll make sure that I've got permission to speak openly or no permission, in which case, I won't, but just a little bit more color on that. The whole idea of going into food grade processing was driven by one of our European customers who does put our products into food. And it's expensive and interferes with production to become food grade and to maintain it. So we realized very quickly that we had to utilize all the opportunity in food, every pound of potential production. And so we moved very quickly to learn our business and it is a competitive world, but with excellent margins. So we're going to be how many million pounds of food grade products we can develop and sell, and this will become, overtime, another significant market vertical for the company.

So -- but as you're saying that you already need to keep confidentiality, which probably suggests that you already have customer traction. Daniel O’Brien: That is correct. We have one significant customer and I know that they would like to be confidential, but the new customers that are coming on may not feel the same way. In fact, I suspect that some of them would like me to mention the products to help them with their [indiscernible] sales to their customers. I just need a little more time. We're pretty new in this field.

Right. Okay. That's good to hear. And about Lygos -- feel free to not answer the question, and I apologize if this brings up bad memories. But do you think Lygos can just making stuff biodegradable and natural with Lygos would help us get back into the water conservation market? Daniel O’Brien: Actually, no, because the water conservation market is that product, WaterSavr, which is growing in the oilfield use, but it's too small to comment on in speeches. WaterSavr is made from a combination of fatty alcohols C16 and C16 fatty alcohols and food grade calcium hydroxide. Neither of those products were being targeted with the Lygos merger. Lygos was -- and it is -- because they're still very good friends, and we're still trying to find ways to develop the product, but just without merging and the situation with Lygos is that the aspartic acid takes us into water treatment, which is a replacement for acrylic acid, and polyacrylates takes us into replacing both the builder and the a couple of other products in all detergents, and we were especially aiming at groups such as [indiscernible]. We were aiming for the major detergent market by replacing polyacrylates with polyaspartate from natural sources. So that is still going to go on. It's just that market conditions definitely changed the start of the merger and the end of the merger, and it didn't make sense for the shareholders of flexible to be exposed to that. So the project is ongoing, and the relationship is hurt, but it's not destroyed.

Okay. That's good to hear and good to hear that you're going after big markets. Do you think that despite the merger Lygos will have find enough funding to continue the development work? Daniel O’Brien: I mean commenting on their business is probably not my by business. But yes, they are a research and development company without revenue at this point. So they will need to continue to raise capital and go forward. They've got brilliant technology and amazing scientists. So it may be more difficult in today's economic environment, but I believe they will be [indiscernible].

We'll go next to William Gregozeski with Greenridge Global.

Dan, just two quick questions for you. On the WaterSavr side, it looks like things are picking up a little bit there. I mean it's obviously still small, but there was a profit in the quarter and sales are going up a little bit. Can you provide an update on that? Daniel O’Brien: Sure. And thanks for your question, Bill. WaterSavr in this format, we are actually selling a fair amount of it into the oil industry in Oklahoma and Texas and New Mexico. And it's going into a unique use being sold to the fracking industry to protect their freshwater that they buy at high level -- at high prices to protect that from evaporation while it's on the surface prior to being pumped down the wells, and they're very pleased with the results. They test it regularly and it saves 30% of their water evaporation numbers like that. And the sales are going up steadily through a distribution group, and it's also sold in a pretty funny format. We wrap it in polyvinyl alcohol sheeting and seal it or that we have somebody else to do this for us actually. And it looks like a sort of a small burrito or a large egg roll and the staff drive between the tanks where they're storing their water and throw the burritos into the pond. [indiscernible] final alcohol dissolves just like it does in your dishwasher tablets and the WaterSavr is released to save water.

It was pretty funny. All right. Well, that makes a new market for that. Other question I have is you mentioned the Florida LLC, their cost of goods are usually about what you book as revenue to them. But this quarter, there was about $0.5 million in additional cost of goods they had. Do you know what type of deal that is? Daniel O’Brien: There are very specific times when they are allowed to purchase from other people because we can't supply. So that -- if you see that discrepancy, it's because we had a shortfall on our raw materials due to shipping delays or whatever it might have been and that would be the cause of the discrepancy.

Next question comes from David James, Private Investor.

A quick question. I'm just wondering about Lygos and Ginkgo hooking up to develop organic acids, if that's going to affect your deal with Lygos at all or whatever deal you may have or not at all. I just saw that they're getting together. Daniel O’Brien: Was that today's news?

A couple of days ago, I think, they have a 2-year research agreement to develop organic acids. Daniel O’Brien: Well, that's great news. That will, obviously, it takes some of the costs off of the shoulders of Lygos. It should accelerate organic acids, research and development and Ginkgo being so much larger when they're successful in getting all the way to a perfected aspartic acid, which is an organic acid. That means that things will move forward more quickly. So I'm very excited about that. I hadn't seen that news, but thanks for bringing it up, David. Yes, this -- that's a positive development.

Our next question is Joseph Nerges with Segren Investment.

A couple of quick things. On your last comments you made on the WaterSavr, and you talked about the fracking industry pretty much in the Southwest there. What about the possibility of expanding that to, let's say, the Marcellus Shale up here in the Northeast and other areas? Because the packaging seems almost ideal to ship distances. Daniel O’Brien: Well, yes, it works quite well. The packaging is extremely useful for dispensing it, which -- when you're dispensing powders onto water surfaces, it's a problem, and you have to solve it one way or another. When I don't know much about the water on the ground in the Marcellus Shale area. If there's enough water and people are not being charged outrageous prices for it, then WaterSavr would not be a good choice because spending money on our products to save water that is free or almost free is not a good business plan. So I believe that the people who are marketing our products out of Texas are looking at every opportunity throughout America where water for the oil industry is outrageously expensive. And those are the places that they will target. If water is, let's say, less than $200 an acre foot, that would be a poor choice. So my feeling is that as they expand, and this is their business because we're not going to put our marketing dollars into it. But as they expand, I think they will look at other places in the hot, high evaporation states of America where an easy-to-use WaterSavr product would be easy to sell. Does that answer your question?

Yes, yes, it does. And it's my guess, access to water is really the key here. And obviously, the cost -- I'm guessing that the Northeast is probably has better -- less costly access to power -- water let's put it that way. Daniel O’Brien: So I think you're right.

One of the big question is the -- on the tariff rebate situation that you're getting [indiscernible] here for years and years and years. I mean, this can't be -- I mean to say that you've got to go to a different office, I mean, this can't be the first tariff rebate situation, I'm talking about this particular -- your particular situation, it must be other tariff rebate operations that had specific places to note to. I can't understand how you could be passed around to different offices when this thing should have existed long ago with other companies in other situations. Daniel O’Brien: We can't understand it either. That's why we're bringing legal help in. We've already done everything we felt we could do without lawyers. We sent two of our employees down to specialist training camps for learning how to file these applications properly. We understand everything about it. We have trouble getting people to answer us by telephone or e-mail, the COVID situation, the contacts on the government side would disappear for months at a time. They wouldn't answer our employees' e-mails. We're very aware that if you become abusive, it gets worse. So we've kept our temper and been nice Canadians about it, but we finally got to the point where the money is extremely significant and the mistreatment of an American company that is buying products, converting them and selling them internationally, just the way the business of America should be is being mistreated by the government of America that's supposed to oversee good business. So yes, we've -- as you can hear in my voice, we've reached the tipping point.

Well, it sounds that way. What did you say the money is right now? It was like $7 million last conference call. Would you say it's up to now approximately what... Daniel O’Brien: Sorry, I said $1 million last -- this conference call. I haven't been keeping a direct track, but it's probably over $1.5 million. And they're not paying us interest either. That's a little bit more of a slap on the face.

Well, where am I getting the $7 million that you talked to -- you think your tariffs are old over -- from the last [indiscernible]... Daniel O’Brien: That's a no -- that's a misunderstanding. 7 has never been.

Okay. Well, that, I believe, was in the last conference call, but so you're talking about your old million, somewhere in that area. Daniel O’Brien: Our orders between $1 million and $2 million, yes.

$2 million. Okay. And then, of course, you commented on this already about the food operation. And of course, you got the compliance was approved in, I guess, June of this year for a food grade total operations. And I think in that press release, you said there's significant opportunities and it sounds that way. So you can't quantify some kind of dollar figure that you're shooting for down the road? Or is that something they're still working on as far coming up with an annual estimate of what that could mean to the company? Daniel O’Brien: Well, Yes, we don't usually make forward projections on dollar values, but I'm happy to say that -- tell you what our goals are across 2 to 3 years, we'd like to see this new market vertical in the $10 million to $15 million revenue range. And across 5 years, we'd like to see it $30 million or larger. So these are significant goals and there it become significant percentages of our total revenue.

That's terrific numbers for a company of your size. And just -- and what about the capacity of your existing plant? Can that do -- handle most of that revenue that you're looking for or at least you're hoping for? Daniel O’Brien: I think that -- we'll find that the first number that I talked about, the $10 million to $15 million is feasible in the existing plant and we'll have to look it all to moderate expansion -- you get to the bigger number?

All right. Well, thank you very much for answering my questions. I appreciate it. It sounds like you've got a great opportunity going forward if you ever get the government to pay off. Daniel O’Brien: All right. Well, don't cross your fingers and hold your breath.

Our final question comes from Raymond Howe with CFP.

As far as sales increase this year, can you quantify that in volume versus price terms? How much is volume? How much is price increase? Daniel O’Brien: I can guesstimate at it -- it's not...

That's close enough. Daniel O’Brien: Just let me make sure that I am speaking. Sales for the year were up, I believe 33%. Of that, I would say 1/3 was increase in costs and 2/3 were increase in volumes, a very, very little profit.

Got you. 2/3 volume, 1/3 price, big picture? Inventory levels. I know that's a moving target, but do you feel there -- what's the goldilocks of inventory levels for you? Daniel O’Brien: Well, obviously, as low as possible, but let me first start by saying we don't buy any inventory that can go bad. So if we have it, it will get sold. The question is, how fast can you rotate it and how many rotations per year can you achieve because that's more efficient use of your money. My feeling is that we are not going to be able to take advantage of all the opportunities unless we are carrying somewhere in the 3- to 4-month range of inventory. And if we see good prices, for instance, there are times of the year when aspartic acid is much cheaper than other times. It's often in the fall. And it's because aspartic acid also gets used for aspartame by companies other than us. And aspartame has lower uptake in the fall going into the winter when people drink more coffee and tea and less soft drinks. And in the spring and summer, we definitely see rises in aspartic acid prices as the soft drink season comes on, especially in third world countries. This is not necessarily a U.S. phenomenon because there's a lot more sucralose and other perhaps safer zero-calorie sweeteners out there. So what I'm saying is that we're going to be opportunistic as well. Even with 6% and 7% interest rates if we can get a 15% discount on aspartic acid because it's out of favor temporarily. We're going to carry 6 months inventory instead of 4. So the right amount is going to be a changing target. And as I say, it doesn't go bad. So I think you should assume that we will -- are on the side of more inventory and fewer turnovers per year.

Got you. And do you feel for -- are you happy with where you are now? Or you wish you had more inventory, less? Daniel O’Brien: I wish we had lower prices. I think we're at a stage now where some inventory for the nitrogen products. We are extremely well off. And as I mentioned, we're looking at this being a potential buying period for aspartic acid inventory. I don't usually go into this level of depth. It's a good question. But I'd say we're about right. And your growth question is another aspect of that. The speed with which we grew this year definitely stressed our cash as we bought more and more inventory to supply more and more sales. It's a great problem to have. We handled it well. And I'm certainly hopeful that we'll have the same problem again next year.

Good problem to have. Last question, a couple of small balance sheet items or really investments. I was hoping you could clarify for me. I've forgotten, candidly, what are applied Holding and Trio opportunity? What exactly do they do? And what's sort of the long-term plan with those investments? Daniel O’Brien: Okay. I'll take Trio, it's the easiest one to explain. It is a private investment, an American company that -- sorry, purchases houses, brand-new houses from the major sellers like Toll Brothers, and leases them to own to people who don't quite make the mortgage terms. It's been an exceptional investment. It pays 8% guaranteed on a monthly basis. And once every 3 years, there is a top-up payment. This year, we received, I believe, it was a 19% onetime top-up payment for the 3-year term. Actually aim to this investment because I own it personally and felt that I've owned it for 7 years, not 3, and I've received 2 sets of top-ups. And I've been extraordinarily pleased with the investment. It works well in both down markets and up markets for real estate. So we are keeping that as a method of utilizing cash that is being held in one of our accounts in Grand Cayman, until we find a better use for it. So it's a salable security, but you have to find an even better use. [ Bright Holdings ] is from the same group of people. It's not been performing as well, and it is an investment in a captive insurance corporation that belongs to Trio. That would be the first security to be sold if we [indiscernible].

Got you. And lastly, yes, I get ENP, Peru and ENP Mendota mix up. Peru is the one you just acquired your extra interest in, correct? Daniel O’Brien: Correct.

And that owns the 5 acres and most of the plants. Is that [indiscernible]... Daniel O’Brien: Maybe I should just give an overview of the two situations. ENP Peru investments owns 5 acres of land and the second 60,000 square foot building, the newer one. So at the Peru plant site, there's a 20-acre parcel with two buildings and NCS, ENP now control 100% of both buildings. We were -- originally, it was financed in different way. ENP Mendota owns ENP's factories in Mendota, which is just up the road from Peru.

Okay. And -- is that, I mean sizable? Daniel O’Brien: I guess, yes, let's say, 20,000 square feet older buildings, very functional, but not particularly valuable except [indiscernible].

Mr. O'Brien with no other questions holding, I'll turn the conference back to you for any additional or closing comments. Daniel O’Brien: Thank you, Jess. Everybody, thanks for the call. Thanks for the good questions. Looking forward to performing for you and having another positive conference call in the new year. All the best. Thank you.

Ladies and gentlemen now we will conclude today's conference. We thank you for your participation. You may disconnect at this time.