pfie-20230331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended	March 31, 2023
☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the Transition Period From ________ to _________

Commission File Number 001-36378

PROFIRE ENERGY, INC.

(Exact name of registrant as specified in its charter)


Nevada			20-0019425
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)
321 South 1250 West, Suite 1
Lindon, Utah			84042
(Address of principal executive offices)			(Zip Code)

(801) 796-5127

(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.


Large accelerated filer ☐			Accelerated Filer ☐
Non-accelerated filer ☒			Smaller reporting company ☒
			Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.) Yes ☐ No ☒

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common, $0.001 Par Value

PFIE

NASDAQ

As of May 8, 2023, the registrant had 52,390,017 shares of common stock issued and 47,351,887 shares of common stock outstanding, par value $0.001.

PROFIRE ENERGY, INC.

FORM 10-Q

TABLE OF CONTENTS


		Page

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

	Condensed Consolidated Balance Sheets	4

	Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) (Unaudited)	5

	Condensed Consolidated Statements of Stockholders' Equity (Unaudited)	6

	Condensed Consolidated Statements of Cash Flows (Unaudited)	7

	Notes to the Condensed Consolidated Financial Statements (Unaudited)	8

Item 2. Management's Discussion and Analysis of Financial Condition And Results of Operations		17

Item 3. Quantitative and Qualitative Disclosure about Market Risk		20

Item 4. Controls and Procedures		20

PART II — OTHER INFORMATION

Item 1. Legal Proceedings		22

Item 1A. Risk Factors		22

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		22

Item 3. Defaults Upon Senior Securities		22

Item 4. Mine Safety Disclosures		22

Item 5. Other Information		22

Item 6. Exhibits		23

Signatures		24

PART I. FINANCIAL INFORMATION

Item 1 Financial Information


PROFIRE ENERGY, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
	As of
	March 31, 2023		December 31, 2022
ASSETS	(Unaudited)
CURRENT ASSETS
Cash and cash equivalents	$	7,219,356	$	7,384,578
Short-term investments	2,071,834		1,154,284

Accounts receivable, net	12,308,290		10,886,145
Inventories, net (note 3)	10,589,023		10,293,980
Prepaid expenses and other current assets (note 4)	2,650,823		2,314,639

Total Current Assets	34,839,326		32,033,626
LONG-TERM ASSETS

Long-term investments	7,052,725		7,503,419

Financing right-of-use asset	106,760		120,239
Property and equipment, net	10,330,685		10,423,964
Intangible assets, net	1,225,154		1,268,907
Goodwill	2,579,381		2,579,381
Total Long-Term Assets	21,294,705		21,895,910
TOTAL ASSETS	$	56,134,031	$	53,929,536

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable	$	1,962,882	$	2,955,506
Accrued liabilities (note 5)	2,922,928		3,573,994
Current financing lease liability (note 6)	51,821		53,646
Income taxes payable	834,542		205,169
Total Current Liabilities	5,772,173		6,788,315
LONG-TERM LIABILITIES
Net deferred income tax liability	701,406		488,858
Long-term financing lease liability (note 6)	56,522		67,883
TOTAL LIABILITIES	6,530,101		7,345,056

STOCKHOLDERS' EQUITY (note 7)
Preferred stock: $0.001 par value, 10,000,000 shares authorized: no shares issued or outstanding	—		—
Common stock: $0.001 par value, 100,000,000 shares authorized: 52,390,017 issued and 47,351,887 outstanding at March 31, 2023, and 52,143,901 issued and 47,105,771 outstanding at December 31, 2022	52,391		52,144
Treasury stock, at cost	(7,336,323)		(7,336,323)
Additional paid-in capital	32,096,662		31,737,843
Accumulated other comprehensive loss	(3,224,110)		(3,294,873)
Retained earnings	28,015,310		25,425,689
TOTAL STOCKHOLDERS' EQUITY	49,603,930		46,584,480
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	56,134,031	$	53,929,536

The accompanying notes are an integral part of these condensed consolidated financial statements.


PROFIRE ENERGY, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Income and Comprehensive Income (Loss)
(Unaudited)
	For the Three Months Ended March 31,
	2023		2022
			(See Note 1)
REVENUES (note 8)
Sales of products, net	$	13,628,512	$	8,878,423
Sales of services, net	924,949		624,717
Total Revenues	14,553,461		9,503,140

COST OF SALES
Cost of sales - product	5,974,339		4,382,700
Cost of sales - services	746,014		563,736
Total Cost of Sales	6,720,353		4,946,436

GROSS PROFIT	7,833,108		4,556,704

OPERATING EXPENSES
General and administrative	4,047,969		3,392,379
Research and development	336,452		308,316
Depreciation and amortization	142,887		167,015
Total Operating Expenses	4,527,308		3,867,710

INCOME FROM OPERATIONS	3,305,800		688,994

OTHER INCOME (EXPENSE)
Gain on sale of assets	53,075		95,842
Other expense	(9,553)		(18,081)
Interest income	58,047		21,545
Interest expense	(933)		(697)
Total Other Income	100,636		98,609

INCOME BEFORE INCOME TAXES	3,406,436		787,603

INCOME TAX EXPENSE	(816,815)		(160,442)

NET INCOME	$	2,589,621	$	627,161

OTHER COMPREHENSIVE INCOME (LOSS)
Foreign currency translation gain (loss)	$	(5,524)	$	158,359
Unrealized gains (losses) on investments	76,287		(287,126)
Total Other Comprehensive Income (Loss)	70,763		(128,767)

COMPREHENSIVE INCOME	$	2,660,384	$	498,394

BASIC EARNINGS PER SHARE	$	0.05	$	0.01
FULLY DILUTED EARNINGS PER SHARE	$	0.05	$	0.01

BASIC WEIGHTED AVG NUMBER OF SHARES OUTSTANDING	47,174,518		47,481,439
FULLY DILUTED WEIGHTED AVG NUMBER OF SHARES OUTSTANDING	48,612,833		48,536,418

The accompanying notes are an integral part of these condensed consolidated financial statements.


PROFIRE ENERGY, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Stockholders' Equity
(Unaudited)
	Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Income (Loss)		Treasury Stock		Retained Earnings		Total Stockholders' Equity
	Shares	Amount
Balance, December 31, 2022	47,105,771	$	52,144	$	31,737,843	$	(3,294,873)	$	(7,336,323)	$	25,425,689	$	46,584,480
Stock based compensation	—	—		223,047		—		—		—		223,047

Stock issued in settlement of RSUs and accrued bonuses	246,116	247		378,279		—		—		—		378,526
Tax withholdings paid related to stock based compensation	—	—		(242,506)		—		—		—		(242,506)

Foreign currency translation	—	—		—		(5,524)		—		—		(5,524)
Unrealized gains on investments	—	—		—		76,287		—		—		76,287
Net income	—	—		—		—		—		2,589,621		2,589,621
Balance, March 31, 2023	47,351,887	$	52,391	$	32,096,662	$	(3,224,110)	$	(7,336,323)	$	28,015,310	$	49,603,930





	Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Income (Loss)		Treasury Stock		Retained Earnings		Total Stockholders' Equity
	Shares	Amount
Balance, December 31, 2021	47,643,233	$	51,720	$	30,819,394	$	(2,100,467)	$	(6,107,593)	$	21,477,929	$	44,140,983
Stock based compensation	—	—		138,503		—		—		—		138,503

Stock issued in settlement of RSUs and accrued bonuses	139,894	140		212,647		—		—		—		212,787
Tax withholdings paid related to stock based compensation	—	—		(91,098)		—		—		—		(91,098)
Treasury stock repurchased	(509,631)	—		—		—		(622,263)		—		(622,263)
Foreign currency translation	—	—		—		158,359		—		—		158,359
Unrealized losses on investments	—	—		—		(287,126)		—		—		(287,126)
Net income	—	—		—		—		—		627,161		627,161
Balance, March 31, 2022	47,273,496	$	51,860	$	31,079,446	$	(2,229,234)	$	(6,729,856)	$	22,105,090	$	44,277,306

The accompanying notes are an integral part of these condensed consolidated financial statements.


PROFIRE ENERGY, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)
	For the Three Months Ended March 31,
	2023		2022
OPERATING ACTIVITIES
Net income	$	2,589,621	$	627,161
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization expense	262,039		281,119
Gain on sale of property and equipment	(53,075)		(95,842)
Bad debt expense	41,792		28,453
Stock awards issued for services	223,047		138,503
Changes in operating assets and liabilities:
Accounts receivable	(1,108,889)		(1,663,295)
Income taxes receivable/payable	629,371		439,034
Inventories	(292,119)		(530,568)
Prepaid expenses and other current assets	(335,832)		49,283
Deferred tax asset/liability	212,548		47,030
Accounts payable and accrued liabilities	(1,646,723)		(513,227)
Net Cash Provided by (Used in) Operating Activities	521,780		(1,192,349)

INVESTING ACTIVITIES
Proceeds from sale of property and equipment	97,886		112,982
Sale (purchase) of investments	(390,548)		679,636
Purchase of property and equipment	(153,755)		(207,848)

Net Cash Provided by (Used in) Investing Activities	(446,417)		584,770

FINANCING ACTIVITIES
Value of equity awards surrendered by employees for tax liability	(242,506)		(91,098)
Cash received in exercise of stock options	—		—
Purchase of treasury stock	—		(622,263)
Principal paid towards lease liability	(6,947)		(12,629)
Net Cash Used in Financing Activities	(249,453)		(725,990)

Effect of exchange rate changes on cash	8,868		24,766

NET DECREASE IN CASH	(165,222)		(1,308,803)
CASH AT BEGINNING OF PERIOD	7,384,578		8,188,270
CASH AT END OF PERIOD	$	7,219,356	$	6,879,467

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

CASH PAID FOR:
Interest	$	933	$	697
Income taxes	$	—	$	—
NON-CASH FINANCING AND INVESTING ACTIVITIES
Common stock issued in settlement of accrued bonuses	$	378,526	$	212,787

The accompanying notes are an integral part of these condensed consolidated financial statements.

PROFIRE ENERGY, INC. AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements (Unaudited)

For the Three Months Ended March 31, 2023 and 2022

NOTE 1 - CONDENSED FINANCIAL STATEMENTS

Except where the context otherwise requires, all references herein to the "Company," "Profire," "we," "us," "our," or similar words and phrases are to Profire Energy, Inc. and its wholly owned subsidiaries, taken together.

The accompanying condensed consolidated financial statements have been prepared by the Company without audit. In the opinion of management, all adjustments have been made (which include only normal recurring adjustments) which are necessary to present fairly the financial position, results of operations, stockholders' equity, and cash flows at March 31, 2023 and for all periods presented herein.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America ("US GAAP") have been condensed or omitted. These condensed consolidated financial statements should be read in conjunction with the Company's audited financial statements contained in its annual report on Form 10-K for the year ended December 31, 2022 ("Form 10-K"). The results of operations for the three-month periods ended March 31, 2023 and 2022 are not necessarily indicative of the operating results for the full years. Certain amounts in the accompanying March 31, 2022 condensed consolidated statement of income and comprehensive income (loss) have been reclassified to conform to the March 31, 2023 presentation.

NOTE 2 – ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization and Line of Business

This Organization and Summary of Significant Accounting Policies of the Company is presented to assist in understanding the Company's condensed consolidated financial statements. The Company's accounting policies conform to "US GAAP."

The Company provides burner-management products, solutions and services primarily for the oil and gas industry within the US and Canadian markets. The Company has made progress in expansion efforts outside of these markets into other industries with combustion and burner management requirements as well as into other international locations.

Significant Accounting Policies

There have been no changes to the significant accounting policies of the Company from the information provided in Note 1 of the notes to the consolidated financial statements in the Company's most recent Form 10-K.

Recent Accounting Pronouncements

The Company has evaluated all recent accounting pronouncements and determined that the adoption of pronouncements applicable to the Company has not had or is not expected to have a material impact on the Company's financial position, results of operations or cash flows.

NOTE 3 – INVENTORIES

Inventories consisted of the following at each balance sheet date:


	As of
	March 31, 2023		December 31, 2022
Raw materials	$	152,080	$	166,927
Finished goods	10,773,616		10,452,930

Subtotal	10,925,696		10,619,857
Reserve for obsolescence	(336,673)		(325,877)
Total	$	10,589,023	$	10,293,980

PROFIRE ENERGY, INC. AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

For the Three Months Ended March 31, 2023 and 2022

NOTE 4 – PREPAID EXPENSES AND OTHER CURRENT ASSETS

Prepaid expenses and other current assets consisted of the following at each balance sheet date:


	As of
	March 31, 2023		December 31, 2022

Prepaid inventory	$	1,273,029	$	784,420
Accrued receivables	866,677		881,176
Prepaid insurance	164,951		240,785
Interest receivables	59,163		72,761
Tax credits	98,586		118,035
Other	188,417		217,462
Total	$	2,650,823	$	2,314,639

NOTE 5 – ACCRUED LIABILITIES

Accrued liabilities consisted of the following at each balance sheet date:


	As of
	March 31, 2023		December 31, 2022
Employee-related payables	$	1,416,556	$	2,404,848
Deferred revenue	466,048		420,827
Inventory-related payables	644,629		285,109
Tax-related payables	106,002		54,762
Warranty liabilities	90,248		74,103
Other	199,445		334,345
Total	$	2,922,928	$	3,573,994

NOTE 6 – LEASES

We have leases for office equipment and office space. The leases for office equipment are classified as financing leases, and the typical term is between 36 and 60 months. We have the option to extend most office equipment leases, but we do not intend to do so. Accordingly, no extensions have been recognized in the right-of-use asset or lease liability. The office equipment lease payments are not variable, and the lease agreements do not include any non-lease components, residual value guarantees, or restrictions. There are no interest rates implicit in the office equipment lease agreements, so we have used our incremental borrowing rate to determine the discount rate to be applied to our financing leases for the purpose of determining our lease liabilities. The weighted average discount rate applied to our financing leases is 4.50% and the weighted average remaining lease term is 3.3 years.

The following table shows the components of financing lease cost:


	For the Three Months Ended March 31,
Financing Lease Cost	2023		2022
Amortization of right-of-use assets	$	7,240	$	12,418
Interest on lease liabilities	933		696
Total financing lease cost	$	8,173	$	13,114

PROFIRE ENERGY, INC. AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

For the Three Months Ended March 31, 2023 and 2022

The Company leases one warehouse space with a two-year lease, which is recorded as an operating lease. We consider the remainder of our office space leases to be short-term, and we have elected not to recognize those on our balance sheet under the short-term recognition exemption. Operating lease expense recognized during the three-months ended March 31, 2023 and March 31, 2022 was $18,852 and $20,652, respectively.

Supplemental operating lease information as of March 31, 2023 is as follows:


Operating right of use assets	$	30,063
Current operating lease liabilities	25,671
Long-term operating lease liabilities	4,392
Weighted-average remaining lease term in years	1.3
Weighted-average discount rate	4.5		%

As of March 31, 2023, maturities of lease liabilities are as follows:


Years ending December 31,	Amount
2023	$	43,439
2024	40,886
2025	11,927
2026	11,927
2027	6,958
Thereafter	—
Total future minimum lease payments	$	115,137
Less: Amount representing interest	6,794
Present value of future payments	$	108,343
Current portion	$	51,821
Long-term portion	$	56,522

NOTE 7 – STOCKHOLDERS' EQUITY

As of March 31, 2023 and December 31, 2022, the Company held 5,038,130 shares of its common stock in treasury at a total cost of $

SEC Form 10-Q filed by Profire Energy Inc.