The Company manufactures and markets biodegradable polymers which are used in the oil, gas and agriculture industries. The Company also develops, manufactures and markets specialty chemicals that slow the evaporation of water.

For financial information concerning the Company and Lygos as a combined entity after the merger, refer to the section of the recently filed S-4 registration statement of FSI captioned "Unaudited Pro Forma Condensed Combined Consolidated Financial Information.

The Company has two product lines:

The first is a chemical ("EWCP") used in swimming pools and spas. The product forms a thin, transparent layer on the water's surface. The transparent layer slows the evaporation of water, allowing the water to retain a higher temperature for a longer period of time thereby reducing the energy required to maintain the desired temperature of the water. A modified version of EWCP can also be used in reservoirs, potable water storage tanks, livestock watering pods, canals, and irrigation ditches for the purpose of reducing evaporation.

The second product, biodegradable polymers ("TPAs"), is used by the petroleum, chemical, utility and mining industries to prevent corrosion and scaling in water piping. TPAs can also be used to increase biodegradability in detergents and in the agriculture industry 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.

Material changes in the Company's Statement of Operations for the six and three months ended June 30, 2022 compared to the same period in the prior year are discussed below:

Three customers accounted for 53% of our sales during the three months ended June 30, 2022 (2021 -44%) and 53% of our sales during the six months ended June 30, 2022 (2021 - 43%). The amount of revenue (all from the sale of TPA products) attributable to each customer is shown below.

Customers with balances greater than 10% of our receivables as of June 30, 2022 and 2021 are shown below:

Other factors that will most significantly affect future operating results will be:

Other than the foregoing we do not know of any trends, events or uncertainties that have had, or are reasonably expected to have, a material impact on our revenues or expenses.

The Company's sources and (uses) of cash for the six months ended June 30, 2022 and 2021 are shown below:

Proceeds of equity investment distributions 108,750 119,999 Purchase of equipment

Repayments of short term line of credit (1,151,165 ) (626,919 ) Repayments of loans

Distributions to non-controlling interest (382,856 ) (309,666 ) Proceeds from issuance of common stock

The Company has sufficient cash resources to meets its future commitments and cash flow requirements for the coming year. As of June 30, 2022, working capital was $16,805,406 (December 31, 2021 - $13,986,013) and the Company has no substantial commitments that require significant outlays of cash over the coming fiscal year.

We are committed to minimum rental payments for property and premises aggregating approximately $297,720 over the term of two leases, the last expiring on December 31, 2025.

Commitments for rent in the next five years are as follows:

Other than as disclosed above, we do not anticipate any material capital requirements for the twelve months ending December 31, 2022.

Other than as disclosed above, we do not know of any trends, demands, commitments, events or uncertainties that will result in, or that are reasonable likely to result in, our liquidity increasing or decreasing in any material way.

Other than as disclosed above, we do not know of any significant changes in our expected sources and uses of cash.

We do not have any commitments or arrangements from any person to provide us with any equity capital.

See Note 2 to the unaudited interim condensed consolidated financial statements included as part of this report for a description of our significant accounting policies.

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