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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
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☒ |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 |
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For the quarterly period ended |
September 30, 2022
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☐ |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 |
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For the Transition Period From ________ to _________ |
Commission File Number
001-36378
PROFIRE ENERGY, INC.
(Exact name of registrant as specified in its charter)
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Nevada
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20-0019425
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(State or other jurisdiction of incorporation or
organization)
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(I.R.S. Employer Identification No.)
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321 South 1250 West, Suite 1
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Lindon, Utah
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84042
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(Address of principal executive offices)
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(Zip Code)
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(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.
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Large accelerated filer ☐
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Accelerated Filer ☐ |
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Non-accelerated filer ☒
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Smaller reporting company ☒
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Emerging growth company ☐
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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:
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Title of each class |
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Trading Symbol(s) |
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Name of each exchange on which registered |
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Common, $0.001 Par Value |
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PFIE |
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NASDAQ |
As of November 1, 2022, the registrant had 52,078,283 shares
of common stock issued and 47,040,153 shares of common stock
outstanding, par value $0.001.
PROFIRE ENERGY, INC.
FORM 10-Q
TABLE OF CONTENTS
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Page
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PART I — FINANCIAL INFORMATION |
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Item 1. Financial Statements |
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Condensed Consolidated Balance Sheets |
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Condensed Consolidated Statements of Operations and Comprehensive
Income (Loss) (Unaudited) |
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Condensed Consolidated Statements of Stockholders' Equity
(Unaudited) |
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Condensed Consolidated Statements of Cash Flows
(Unaudited) |
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Notes to the Condensed Consolidated Financial Statements
(Unaudited) |
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Item 2. Management's Discussion and Analysis of Financial
Condition And Results of Operations |
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Item 3. Quantitative and Qualitative Disclosure about Market
Risk |
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Item 4. Controls and Procedures |
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PART II — OTHER INFORMATION |
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Item 1. Legal Proceedings |
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Item 1A. Risk Factors |
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Item 2. Unregistered Sales of Equity Securities and Use of
Proceeds |
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Item 3. Defaults Upon Senior Securities |
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Item 4. Mine Safety Disclosures |
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Item 5. Other Information |
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Item 6. Exhibits |
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Signatures |
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PART I. FINANCIAL INFORMATION
Item 1 Financial Information
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| PROFIRE
ENERGY, INC. AND SUBSIDIARIES |
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Condensed Consolidated Balance Sheets |
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As of
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September 30, 2022 |
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December 31, 2021 |
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ASSETS |
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(Unaudited) |
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CURRENT ASSETS |
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Cash and cash equivalents |
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$ |
5,639,865 |
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$ |
8,188,270 |
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Short-term investments |
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867,658 |
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1,013,683 |
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Accounts receivable, net |
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8,933,905 |
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6,262,799 |
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Inventories, net (note 3) |
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10,205,207 |
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7,185,248 |
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Prepaid expenses and other current assets (note 4) |
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2,642,512 |
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1,025,276 |
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Income tax receivable |
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— |
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560,445 |
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Total Current Assets |
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28,289,147 |
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24,235,721 |
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LONG-TERM ASSETS |
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Net deferred tax asset |
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185,772 |
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163,254 |
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Long-term investments |
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7,944,181 |
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8,259,809 |
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Financing right-of-use asset |
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132,760 |
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65,280 |
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Property and equipment, net |
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10,374,126 |
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11,185,539 |
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Intangible assets, net |
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1,312,660 |
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1,549,138 |
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Goodwill |
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2,579,381 |
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2,579,381 |
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Total Long-Term Assets |
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22,528,880 |
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23,802,401 |
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TOTAL ASSETS |
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$ |
50,818,027 |
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$ |
48,038,122 |
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LIABILITIES
AND STOCKHOLDERS' EQUITY |
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CURRENT LIABILITIES |
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Accounts payable |
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$ |
2,008,126 |
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$ |
1,822,559 |
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Accrued liabilities (note 5) |
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3,157,221 |
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1,872,348 |
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Current financing lease liability (note 6) |
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53,084 |
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30,214 |
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Income taxes payable |
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570,430 |
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— |
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Total Current Liabilities |
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5,788,861 |
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3,725,121 |
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LONG-TERM LIABILITIES |
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Net deferred income tax liability |
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480,105 |
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136,106 |
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Long-term financing lease liability (note 6) |
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80,684 |
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35,912 |
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TOTAL LIABILITIES |
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6,349,650 |
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3,897,139 |
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STOCKHOLDERS' EQUITY (note 7) |
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Preferred stock: $0.001 par value, 10,000,000 shares authorized: no
shares issued or outstanding
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— |
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— |
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Common stock: $0.001 par value, 100,000,000 shares authorized:
52,078,283 issued and 47,040,153 outstanding at September 30, 2022,
and 51,720,142 issued and 47,643,233 outstanding at December 31,
2021
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52,079 |
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51,720 |
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Treasury stock, at cost |
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(7,336,323) |
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(6,107,593) |
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Additional paid-in capital |
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31,570,226 |
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|
30,819,394 |
|
|
Accumulated other comprehensive loss |
|
(3,418,272) |
|
|
(2,100,467) |
|
|
Retained earnings |
|
23,600,667 |
|
|
21,477,929 |
|
|
TOTAL STOCKHOLDERS' EQUITY |
|
44,468,377 |
|
|
44,140,983 |
|
|
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY |
|
$ |
50,818,027 |
|
|
$ |
48,038,122 |
|
The accompanying notes are an integral part of these condensed
consolidated financial statements.
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PROFIRE ENERGY, INC. AND
SUBSIDIARIES
|
|
Condensed Consolidated Statements of Operations and Comprehensive
Income (Loss)
|
|
(Unaudited)
|
|
|
For the Three Months Ended September 30, |
|
For the Nine Months Ended September 30, |
|
|
2022 |
|
2021 |
|
2022 |
|
2021 |
|
REVENUES (note 8) |
|
|
|
|
|
|
|
|
|
Sales of products, net |
|
$ |
11,895,881 |
|
|
$ |
6,296,736 |
|
|
$ |
29,634,986 |
|
|
$ |
16,328,810 |
|
|
Sales of services, net |
|
933,457 |
|
|
646,462 |
|
|
2,330,639 |
|
|
1,741,020 |
|
|
Total Revenues |
|
12,829,338 |
|
|
6,943,198 |
|
|
31,965,625 |
|
|
18,069,830 |
|
|
|
|
|
|
|
|
|
|
|
|
COST OF SALES |
|
|
|
|
|
|
|
|
|
Cost of sales - product |
|
5,960,311 |
|
|
3,217,655 |
|
|
14,873,075 |
|
|
8,666,168 |
|
|
Cost of sales - services |
|
750,151 |
|
|
606,075 |
|
|
2,013,825 |
|
|
1,451,775 |
|
|
Total Cost of Sales |
|
6,710,462 |
|
|
3,823,730 |
|
|
16,886,900 |
|
|
10,117,943 |
|
|
|
|
|
|
|
|
|
|
|
|
GROSS PROFIT |
|
6,118,876 |
|
|
3,119,468 |
|
|
15,078,725 |
|
|
7,951,887 |
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES |
|
|
|
|
|
|
|
|
|
General and administrative |
|
3,413,048 |
|
|
2,980,945 |
|
|
10,591,986 |
|
|
8,319,353 |
|
|
Research and development |
|
435,059 |
|
|
290,657 |
|
|
1,105,571 |
|
|
848,993 |
|
|
Depreciation and amortization |
|
152,876 |
|
|
166,155 |
|
|
479,473 |
|
|
500,492 |
|
|
Total Operating Expenses |
|
4,000,983 |
|
|
3,437,757 |
|
|
12,177,030 |
|
|
9,668,838 |
|
|
|
|
|
|
|
|
|
|
|
|
INCOME (LOSS) FROM OPERATIONS |
|
2,117,893 |
|
|
(318,289) |
|
|
2,901,695 |
|
|
(1,716,951) |
|
|
|
|
|
|
|
|
|
|
|
|
OTHER INCOME (EXPENSE) |
|
|
|
|
|
|
|
|
|
Gain on sale of assets |
|
12,887 |
|
|
31,685 |
|
|
323,570 |
|
|
144,078 |
|
|
Other income (expense) |
|
(6,839) |
|
|
(2,984) |
|
|
(43,567) |
|
|
1,755 |
|
|
Interest income |
|
45,107 |
|
|
33,067 |
|
|
86,959 |
|
|
82,698 |
|
|
Total Other Income |
|
51,155 |
|
|
61,768 |
|
|
366,962 |
|
|
228,531 |
|
|
|
|
|
|
|
|
|
|
|
|
INCOME (LOSS) BEFORE INCOME TAXES |
|
2,169,048 |
|
|
(256,521) |
|
|
3,268,657 |
|
|
(1,488,420) |
|
|
|
|
|
|
|
|
|
|
|
|
INCOME TAX BENEFIT (EXPENSE) |
|
(958,300) |
|
|
348,767 |
|
|
(1,145,919) |
|
|
582,000 |
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME (LOSS) |
|
$ |
1,210,748 |
|
|
$ |
92,246 |
|
|
$ |
2,122,738 |
|
|
$ |
(906,420) |
|
|
|
|
|
|
|
|
|
|
|
|
OTHER COMPREHENSIVE INCOME (LOSS) |
|
|
|
|
|
|
|
|
|
Foreign currency translation gain (loss) |
|
$ |
(591,282) |
|
|
$ |
(263,908) |
|
|
$ |
(723,209) |
|
|
$ |
39,183 |
|
|
Unrealized gains (losses) on investments |
|
(172,802) |
|
|
(20,811) |
|
|
(594,596) |
|
|
26,744 |
|
|
Total Other Comprehensive Income (Loss) |
|
(764,084) |
|
|
(284,719) |
|
|
(1,317,805) |
|
|
65,927 |
|
|
|
|
|
|
|
|
|
|
|
|
COMPREHENSIVE INCOME (LOSS) |
|
$ |
446,664 |
|
|
$ |
(192,473) |
|
|
$ |
804,933 |
|
|
$ |
(840,493) |
|
|
|
|
|
|
|
|
|
|
|
|
BASIC EARNINGS (LOSS) PER SHARE |
|
$ |
0.03 |
|
|
$ |
— |
|
|
$ |
0.04 |
|
|
$ |
(0.02) |
|
|
FULLY DILUTED EARNINGS (LOSS) PER SHARE |
|
$ |
0.02 |
|
|
$ |
— |
|
|
$ |
0.04 |
|
|
$ |
(0.02) |
|
|
|
|
|
|
|
|
|
|
|
|
BASIC WEIGHTED AVG NUMBER OF SHARES OUTSTANDING |
|
47,036,012 |
|
|
48,239,236 |
|
|
47,201,611 |
|
|
48,095,404 |
|
|
FULLY DILUTED WEIGHTED AVG NUMBER OF SHARES OUTSTANDING |
|
48,558,207 |
|
|
49,328,808 |
|
|
48,761,346 |
|
|
48,095,404 |
|
The accompanying notes are an integral part of these condensed
consolidated financial statements.
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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, 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 |
|
|
Stock based compensation |
|
— |
|
|
— |
|
|
274,390 |
|
|
— |
|
|
$ |
— |
|
|
— |
|
|
274,390 |
|
|
Stock issued in exercise of stock options |
|
27,200 |
|
|
$ |
28 |
|
|
$ |
21,554 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
21,582 |
|
|
Stock issued in settlement of RSUs |
|
184,047 |
|
|
184 |
|
|
(184) |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
Tax withholdings paid related to stock based
compensation |
|
— |
|
|
— |
|
|
(3,524) |
|
|
— |
|
|
— |
|
|
— |
|
|
(3,524) |
|
|
Treasury stock repurchased |
|
(451,590) |
|
|
$ |
— |
|
|
— |
|
|
— |
|
|
(606,467) |
|
|
— |
|
|
$ |
(606,467) |
|
|
Foreign currency translation |
|
— |
|
|
— |
|
|
— |
|
|
(290,292) |
|
|
— |
|
|
— |
|
|
(290,292) |
|
|
Unrealized losses on investments |
|
— |
|
|
— |
|
|
— |
|
|
(134,662) |
|
|
— |
|
|
— |
|
|
(134,662) |
|
|
Net income |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
284,829 |
|
|
284,829 |
|
|
Balance, June 30, 2022 |
|
47,033,153 |
|
|
$ |
52,072 |
|
|
$ |
31,371,682 |
|
|
$ |
(2,654,188) |
|
|
$ |
(7,336,323) |
|
|
$ |
22,389,919 |
|
|
$ |
43,823,162 |
|
|
Stock based compensation |
|
— |
|
|
— |
|
|
193,056 |
|
|
— |
|
|
— |
|
|
— |
|
|
193,056 |
|
|
Stock issued in exercise of stock options |
|
7,000 |
|
|
7 |
|
|
5,488 |
|
|
— |
|
|
— |
|
|
— |
|
|
5,495 |
|
|
Stock issued in settlement of RSUs |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
Tax withholdings paid related to stock based
compensation |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
Treasury stock repurchased |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
Foreign currency translation |
|
— |
|
|
— |
|
|
— |
|
|
(591,282) |
|
|
— |
|
|
— |
|
|
(591,282) |
|
|
Unrealized losses on investments |
|
— |
|
|
— |
|
|
— |
|
|
(172,802) |
|
|
— |
|
|
— |
|
|
(172,802) |
|
|
Net income |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
1,210,748 |
|
|
1,210,748 |
|
|
Balance, September 30, 2022 |
|
$ |
47,040,153 |
|
|
$ |
52,079 |
|
|
$ |
31,570,226 |
|
|
$ |
(3,418,272) |
|
|
$ |
(7,336,323) |
|
|
$ |
23,600,667 |
|
|
$ |
44,468,377 |
|
The accompanying notes are an integral part of these condensed
consolidated financial statements.
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PROFIRE ENERGY, INC. AND SUBSIDIARIES
|
|
Condensed Consolidated Statements of Stockholders' Equity
(Continued)
|
|
(Unaudited)
|
|
|
Common Stock |
|
Additional Paid-In Capital |
|
Accumulated Other Comprehensive Income (Loss) |
|
Treasury Stock |
|
Retained Earnings |
|
Total Stockholders' Equity |
|
|
Shares |
|
Amount |
|
|
|
|
|
|
Balance, December 31, 2020 |
|
47,972,583 |
|
|
$ |
51,385 |
|
|
$ |
30,293,472 |
|
|
$ |
(2,148,924) |
|
|
$ |
(5,353,019) |
|
|
$ |
22,529,472 |
|
|
$ |
45,372,386 |
|
|
Stock based compensation |
|
— |
|
|
— |
|
|
125,043 |
|
— |
|
|
— |
|
|
— |
|
|
125,043 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock issued in settlement of RSUs |
|
49,113 |
|
|
49 |
|
|
(49) |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
Tax withholdings paid related to stock based
compensation |
|
— |
|
|
— |
|
|
(26,629) |
|
|
— |
|
|
— |
|
|
— |
|
|
(26,629) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation |
|
— |
|
|
— |
|
|
— |
|
|
139,606 |
|
|
— |
|
|
— |
|
|
139,606 |
|
|
Unrealized losses on investments |
|
— |
|
|
— |
|
|
— |
|
|
(7,974) |
|
|
— |
|
|
— |
|
|
(7,974) |
|
|
Net loss |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(601,500) |
|
|
(601,500) |
|
|
Balance, March 31, 2021 |
|
48,021,696 |
|
|
$ |
51,434 |
|
|
$ |
30,391,837 |
|
|
$ |
(2,017,292) |
|
|
$ |
(5,353,019) |
|
|
$ |
21,927,972 |
|
|
$ |
45,000,932 |
|
|
Stock based compensation |
|
— |
|
|
— |
|
|
207,084 |
|
— |
|
|
— |
|
|
— |
|
|
207,084 |
|
Stock issued in exercise of stock options |
|
— |
|
|
— |
|
|
— |
|
|
|
|
|
|
|
|
— |
|
|
Stock issued in settlement of RSUs |
|
217,312 |
|
|
217 |
|
|
(217) |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
Tax withholdings paid related to stock based
compensation |
|
|
|
|
|
(16,200) |
|
|
|
|
|
|
|
|
(16,200) |
|
|
Treasury stock repurchased |
|
— |
|
|
|
|
|
|
|
|
— |
|
|
|
|
— |
|
|
Foreign currency translation |
|
— |
|
|
— |
|
|
— |
|
|
163,485 |
|
|
— |
|
|
— |
|
|
163,485 |
|
|
Unrealized gains on investments |
|
— |
|
|
— |
|
|
— |
|
|
55,529 |
|
|
— |
|
|
— |
|
|
55,529 |
|
|
Net loss |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(397,166) |
|
|
(397,166) |
|
|
Balance, June 30, 2021 |
|
48,239,008 |
|
|
$ |
51,651 |
|
|
$ |
30,582,504 |
|
|
$ |
(1,798,278) |
|
|
$ |
(5,353,019) |
|
|
$ |
21,530,806 |
|
|
$ |
45,013,664 |
|
|
Stock based compensation |
|
— |
|
|
— |
|
|
142,754 |
|
|
— |
|
|
— |
|
|
— |
|
|
142,754 |
|
|
Stock issued in exercise of stock options |
|
3,000 |
|
|
3 |
|
|
2,670 |
|
|
— |
|
|
— |
|
|
— |
|
|
2,673 |
|
|
Stock issued in settlement of RSUs |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
Stock issues in acquisition (note 9) |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
Tax withholdings paid related to stock based
compensation |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
Treasury stock repurchased |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
Foreign currency translation |
|
— |
|
|
— |
|
|
— |
|
|
(263,908) |
|
|
— |
|
|
— |
|
|
(263,908) |
|
|
Unrealized losses on investments |
|
— |
|
|
— |
|
|
— |
|
|
(20,811) |
|
|
— |
|
|
— |
|
|
(20,811) |
|
|
Net loss |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
92,246 |
|
|
92,246 |
|
|
Balance, September 30, 2021 |
|
$ |
48,242,008 |
|
|
$ |
51,654 |
|
|
$ |
30,727,928 |
|
|
$ |
(2,082,997) |
|
|
$ |
(5,353,019) |
|
|
$ |
21,623,052 |
|
|
$ |
44,966,618 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these condensed
consolidated financial statements.
6
|
|
|
|
|
|
|
|
|
|
|
|
|
PROFIRE ENERGY, INC. AND SUBSIDIARIES
|
|
Condensed Consolidated Statements of Cash Flows
|
|
(Unaudited)
|
|
For the Nine Months Ended September 30, |
|
2022 |
|
2021 |
|
OPERATING ACTIVITIES |
|
|
|
|
Net income (loss) |
$ |
2,122,738 |
|
|
$ |
(906,420) |
|
|
Adjustments to reconcile net income (loss) to net cash provided by
operating activities: |
|
|
|
|
Depreciation and amortization expense |
831,036 |
|
|
971,712 |
|
|
Gain on sale of property and equipment |
(314,059) |
|
|
(144,078) |
|
|
Gain on sale of intangibles |
(9,511) |
|
|
— |
|
|
Bad debt expense |
40,948 |
|
|
2,622 |
|
|
Stock awards issued for services |
605,955 |
|
|
474,881 |
|
|
Changes in operating assets and liabilities: |
|
|
|
|
Accounts receivable |
(2,620,155) |
|
|
(904,325) |
|
|
Income taxes receivable/payable |
1,130,931 |
|
|
(606,128) |
|
|
Inventories |
(3,190,546) |
|
|
946,865 |
|
|
Prepaid expenses and other current assets |
(1,668,442) |
|
|
532,519 |
|
|
Deferred tax asset/liability |
307,663 |
|
|
49,851 |
|
|
Accounts payable and accrued liabilities |
1,566,810 |
|
|
540,322 |
|
|
Net Cash Provided by (Used in) Operating Activities |
(1,196,632) |
|
|
957,821 |
|
|
|
|
|
|
|
INVESTING ACTIVITIES |
|
|
|
|
Proceeds from sale of property and equipment |
464,574 |
|
|
101,169 |
|
|
Proceeds from sale of intangibles |
85,000 |
|
|
— |
|
|
Purchase of investments |
(133,371) |
|
|
(881,588) |
|
|
Purchase of property and equipment |
(370,791) |
|
|
(138,562) |
|
|
|
|
|
|
Net Cash Provided by (Used in) Investing Activities |
45,412 |
|
|
(918,981) |
|
|
|
|
|
|
|
FINANCING ACTIVITIES |
|
|
|
|
Value of equity awards surrendered by employees for tax
liability |
(94,802) |
|
|
(42,829) |
|
|
Cash received in exercise of stock options |
31,084 |
|
|
2,673 |
|
|
Purchase of treasury stock |
(1,228,731) |
|
|
— |
|
|
Principal paid towards lease liability |
(28,145) |
|
|
(31,911) |
|
|
Net Cash Used in Financing Activities |
(1,320,594) |
|
|
(72,067) |
|
|
|
|
|
|
|
Effect of exchange rate changes on cash |
(76,591) |
|
|
14,331 |
|
|
|
|
|
|
|
NET DECREASE IN CASH |
(2,548,405) |
|
|
(18,896) |
|
|
CASH AT BEGINNING OF PERIOD |
8,188,270 |
|
|
9,148,312 |
|
|
CASH AT END OF PERIOD |
$ |
5,639,865 |
|
|
$ |
9,129,416 |
|
|
|
|
|
|
|
SUPPLEMENTAL
DISCLOSURES OF CASH FLOW INFORMATION |
|
|
|
|
|
|
|
|
|
CASH PAID FOR: |
|
|
|
|
Interest |
$ |
2,331 |
|
|
$ |
2,689 |
|
|
Income taxes |
$ |
21,000 |
|
|
$ |
17,150 |
|
|
NON-CASH FINANCING AND INVESTING ACTIVITIES |
|
|
|
|
Common stock issued in settlement of accrued bonuses |
$ |
212,787 |
|
|
$ |
— |
|
|
|
|
|
The accompanying notes are an integral part of these condensed
consolidated financial statements.
7
PROFIRE ENERGY, INC. AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial Statements
(Unaudited)
For the nine months ended September 30, 2022 and 2021
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 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 September 30, 2022 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, 2021 ("Form
10-K"). The results of operations for the three- and
nine-month periods ended September 30, 2022 and 2021 are not
necessarily indicative of the operating results for the full
years.
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 begun expanding outside of these
markets to other international locations and into other industries
with combustion and burner management requirements.
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 |
|
September 30, 2022 |
|
December 31, 2021 |
|
Raw materials |
$ |
245,049 |
|
|
$ |
301,320 |
|
|
Finished goods |
10,312,904 |
|
|
7,556,048 |
|
|
|
|
|
|
Subtotal |
10,557,953 |
|
|
7,857,368 |
|
|
Reserve for obsolescence |
(352,746) |
|
|
(672,120) |
|
|
Total |
$ |
10,205,207 |
|
|
$ |
7,185,248 |
|
The accompanying notes are an integral part of these condensed
consolidated financial statements.
8
PROFIRE ENERGY, INC. AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial
Statements
For the nine months ended September 30, 2022 and 2021
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 |
|
|
September 30, 2022 |
|
December 31, 2021 |
|
|
|
|
|
Prepaid inventory |
$ |
997,885 |
|
|
$ |
530,725 |
|
|
Accrued receivables |
767,110 |
|
|
— |
|
|
Prepaid insurance |
356,718 |
|
|
228,849 |
|
|
Interest receivables |
60,248 |
|
|
63,841 |
|
|
Tax credits |
161,385 |
|
|
— |
|
|
Other |
299,166 |
|
|
201,861 |
|
|
Total |
$ |
2,642,512 |
|
|
$ |
1,025,276 |
|
NOTE 5 – ACCRUED LIABILITIES
Accrued liabilities consisted of the following at each balance
sheet date:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of |
|
|
|
September 30, 2022 |
|
December 31, 2021 |
|
|
Employee-related payables |
$ |
1,785,874 |
|
|
$ |
1,621,131 |
|
|
|
Deferred revenue |
328,744 |
|
|
817 |
|
|
|
Inventory-related payables |
483,382 |
|
|
67,027 |
|
|
|
Tax-related payables |
84,763 |
|
|
37,880 |
|
|
|
Warranty liabilities |
45,407 |
|
|
49,624 |
|
|
|
Other |
429,051 |
|
|
95,869 |
|
|
|
Total |
$ |
3,157,221 |
|
|
$ |
1,872,348 |
|
|
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 36 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 purposes 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 3.6 years.
The following table shows the components of financing lease
cost:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended September 30, |
|
For the Nine Months Ended September 30, |
|
|
Financing Lease Cost |
2022 |
2021 |
|
2022 |
2021 |
|
|
|
Amortization of right-of-use assets |
$ |
7,240 |
|
$ |
9,811 |
|
|
$ |
28,308 |
|
$ |
31,014 |
|
|
|
|
Interest on lease liabilities |
1,078 |
|
337 |
|
|
2,331 |
|
2,690 |
|
|
|
|
Total financing lease cost |
$ |
8,318 |
|
$ |
10,148 |
|
|
$ |
30,639 |
|
$ |
33,704 |
|
|
|
PROFIRE ENERGY, INC. AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial
Statements
For the nine months ended September 30, 2022 and 2021
The Company leases one warehouse space with a two-year lease, which
is recorded as an operating lease. The remainder of our office
space leases are considered 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- and nine months ended September 30, 2022 and September
30, 2021 was $13,356 and $50,270, and $19,000 and $35,263,
respectively.
Supplemental operating lease information as of September 30, 2022
is as follows:
|
|
|
|
|
|
|
|
|
|
Operating right of use assets |
|
$ |
42,473 |
|
|
Current operating lease liabilities |
|
25,101 |
|
|
Long-term operating lease liabilities |
|
17,372 |
|
|
Weighted-average remaining lease term in years |
|
1.8 |
|
Weighted-average discount rate |
|
4.5 |
% |
As of September 30, 2022, maturities of lease liabilities are as
follows:
|
|
|
|
|
|
|
|
|
|
Years ending December 31, |
|
Amount |
|
2022 |
|
$ |
14,480 |
|
|
2023 |
|
57,919 |
|
|
2024 |
|
40,886 |
|
|
2025 |
|
11,927 |
|
|
2026 |
|
11,927 |
|
|
Thereafter |
|
5,963 |
|
|
Total future minimum lease payments |
|
$ |
143,102 |
|
|
Less: Amount representing interest |
|
9,334 |
|
|
Present value of future payments |
|
$ |
133,768 |
|
|
Current portion |
|
$ |
53,084 |
|
|
Long-term portion |
|
$ |
80,684 |
|
NOTE 7 – STOCKHOLDERS' EQUITY
As of September 30, 2022 and December 31, 2021, the Company held
5,038,130 and 4,076,909 shares of its common stock in treasury at a
total cost of $7,336,323 and $6,107,593, respectively.
On September 15, 2021, the Board of Directors of the Company
(the "Board") authorized a share repurchase program allowing the
Company to repurchase up to $2,000,000 worth of the Company’s
common stock from time to time through September 30, 2022. All
purchases under this program were made at the discretion of
management. The size and timing of purchases were dependent on
price, market and business conditions and other factors. As of June
2022, the Company had spent the full allotment under the
program.
As of September 30, 2022, the Company had 536,361 restricted stock
units ("RSUs"), 735,512 performance-based RSUs, and 827,500 stock
options outstanding with $746,570 in remaining compensation expense
to be recognized over the next 1.4 years. See further details below
about certain subsets of these outstanding equity-based
awards.
On June 15, 2022, pursuant to the annual renewal of director
compensation, the Board approved a grant of 178,623 RSUs to the
Company's independent directors. Half of the RSUs vested
immediately on the date of grant and the remaining 50% of the RSUs
will vest on the first anniversary of the grant date or at the
Company's next annual meeting of stockholders, whichever is
earlier. The awards will result in total compensation expense of
approximately $234,000 to be recognized over the vesting
period.
PROFIRE ENERGY, INC. AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial
Statements
For the nine months ended September 30, 2022 and 2021
On April 6, 2022, the Compensation Committee of the Board (The
"Compensation Committee") approved the 2022 Executive Incentive
Plan (the “2022 EIP”) for Ryan W. Oviatt, the Company's Co-CEO,
Co-President, and CFO, Cameron M. Tidball, the Company's Co-CEO and
Co-President, and Patrick D. Fisher, the Company's Vice President
of Product Development. The 2022 EIP provides for the potential
award of incentive compensation to the participants based on the
Company’s financial performance in fiscal 2022. If earned, the
incentive compensation will be payable in cash and stock, and the
stock portion of the incentive compensation is intended to
constitute an award under the Company's 2014 Equity Incentive Plan,
as amended (the " Plan"). In addition to the 2022 EIP, the Board
also approved as a long-term incentive plan the grants of
restricted stock unit awards to Messrs. Oviatt, Tidball, and Fisher
pursuant to the Plan (the “2022 LTIP”).
2022 EIP
Under the terms of the 2022 EIP, each participating executive
officer has been assigned a target incentive compensation amount
for fiscal 2022. The target incentive compensation amount for Mr.
Oviatt is $198,000, the target incentive compensation amount for
Mr. Tidball is $198,000, and the target incentive compensation for
Mr. Fisher is $64,750 CAD.
Participants will be eligible to receive incentive compensation
based upon reaching or exceeding performance goals established by
the Compensation Committee for fiscal 2022. The performance goals
in the 2022 EIP are based on the Company’s total revenue, EBITDA,
and a non-financial milestone relating to revenue source
diversification to be determined by the Compensation Committee.
Each of these performance goals will be weighted one third in
calculating incentive compensation amounts.
The incentive compensation amounts earned under the 2022 EIP, if
any, will be paid 50% in cash and 50% in shares of restricted stock
under the Plan. In no event shall the total award exceed 200% of
the target incentive compensation amount for each participant, or
exceed any limitations otherwise set forth in the Plan. The actual
incentive compensation amounts, if any, will be determined by the
Compensation Committee upon the completion of fiscal 2022 and paid
by March 15, 2023, subject to all applicable tax
withholding.
2022 LTIP
The 2022 LTIP consists of total awards of up to 230,232 RSUs to Mr.
Oviatt, up to 230,232 RSUs to Mr. Tidball, and up to 43,023 RSUs to
Mr. Fisher, pursuant to two separate restricted stock unit award
agreements (collectively, the “2022 LTIP Restricted Stock Unit
Award Agreements”) entered into between the Company and each
participant. One such agreement covers the 33% of each award
recipient’s RSUs that are subject to time-based vesting, and the
other such agreement covers the remaining 67% of such award
recipient’s RSUs that may vest based on performance metrics. Upon
vesting, the award agreements entitle the award recipients to
receive one share of the Company’s common stock for each vested
unit. The vesting period of the 2022 LTIP began on January 1,
2022 and terminates on December 31, 2024 (the “2022 LTIP
Performance Vesting Date”).
The RSUs subject to time-based vesting, including 76,744 RSUs to
Mr. Oviatt, 76,744 RSUs for Mr. Tidball, and 14,341 RSUs to Mr.
Fisher, will vest in three equal and annual installments beginning
December 31, 2022 and ending on December 31, 2024 if the award
recipients’ employment continues with the Company through such
dates.
The performance-vesting RSUs, including up to 153,488 RSUs for Mr.
Oviatt, 153,488 RSUs for Mr. Tidball, and 28,682 RSUs to Mr.
Fisher, may vest at the end of the three-year performance period
beginning January 1, 2022 based upon the following Company
performance metrics:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance Metric |
Weight |
Target |
Above Target |
Outstanding |
|
Total Shareholder Return (based on the Company’s closing price of
its common stock at the end of the Performance Period relative to
its closing price as of the last trading day in 2021) |
1/3 |
89% |
136% |
183% |
|
Relative Total Shareholder Return (based on the Company’s ranked
performance in closing stock price growth relative to a peer group
of companies during the Performance Period) |
1/3 |
Third Quartile |
Second Quartile |
First Quartile |
|
EBITDA as a Percentage of Total Revenue |
1/3 |
10% |
15% |
20% |
|
|
|
|
|
PROFIRE ENERGY, INC. AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial
Statements
For the nine months ended September 30, 2022 and 2021
One-third of such performance-vesting RSUs, consisting of 51,163
RSUs for Mr. Oviatt, 51,163 RSUs for Mr. Tidball, and 9,561 RSUs
for Mr. Fisher, may vest for each of the three performance metrics
identified in the table above. The number of RSUs that will vest
for each performance metric on the 2022 LTIP Performance Vesting
Date shall be determined as follows:
a.if
the “Target” level for such performance metric is not achieved,
none of the RSUs relating to such performance metric will
vest;
b.if
the “Target” level (but no higher level) for such performance
metric is achieved, 50% of the RSUs relating to such performance
metric will vest;
c.if
the “Above Target” level (but no higher level) for such performance
metric is achieved, 75% of the RSUs relating to such performance
metric will vest; and
d.if
the “Outstanding” level for such performance metric is achieved,
100% of the RSUs relating to such performance metric will
vest.
The foregoing summary of the 2022 EIP and the 2022 LTIP Restricted
Stock Unit Award Agreements is qualified in its entirety by the
text of the 2022 EIP and each of the 2022 LTIP Restricted Stock
Unit Award Agreements, which are filed as exhibits to Form 10-Q for
the quarter ending March 31, 2022.
2021 EIP and LTIP
On May 28, 2021, the Compensation Committee approved the 2021
Executive Incentive Plan (the “2021 EIP”) for Brenton W. Hatch, the
Company’s former Executive Chairman, Ryan W. Oviatt, Cameron M.
Tidball, Jay G. Fugal, the Company’s former Vice President of
Operations, and Patrick D. Fisher. The 2021 EIP provided for the
potential award of incentive compensation to the participants based
on the Company’s financial performance in fiscal 2021. The
incentive compensation was payable in cash and stock, and the stock
portion of the incentive compensation was intended to constitute an
award under the Plan.
Participants were eligible to receive incentive compensation based
upon reaching or exceeding performance goals established by the
Compensation Committee for fiscal 2021. The performance goals in
the 2021 EIP were based on the Company’s total revenue, EBITDA, and
a non-financial milestone relating to revenue source
diversification. Each of these performance goals were weighted one
third in calculating incentive compensation amounts.
On March 2, 2022, the Compensation Committee approved the
incentive compensation amounts based on achieving certain targets
pursuant to the 2021 EIP. The incentive compensation amounts earned
under the 2021 EIP were paid 50% in cash and 50% in shares of
restricted stock under the Plan. The incentive compensation amounts
resulted in the Compensation Committee approving a one-time bonus
for Company executives that was settled by issuing a total of
182,626 shares of common stock, or 120,097 shares net of tax
withholding. These shares were fully vested as of March 2,
2022.
In addition to the 2021 EIP, the Board also approved as a long-term
incentive plan, the grants of restricted stock unit awards to
Messrs. Oviatt, Tidball, Fugal, and Fisher pursuant to the Plan
(the “2021 LTIP”). The 2021 LTIP consists of total awards of up to
204,543 RSUs to Mr. Oviatt, up to 204,543 RSUs to Mr. Tidball, up
to 85,908 RSUs to Mr. Fugal, and up to 47,973 RSUs to Mr. Fisher,
pursuant to two separate restricted stock unit award agreements
(collectively, the “2021 LTIP Restricted Stock Unit Award
Agreements”) between the Company and each participant. One
agreement covers the 33% of each award recipient’s RSUs that are
subject to time-based vesting, and the other agreement covers the
remaining 67% of such award recipient’s RSUs that may vest based on
performance metrics. Upon vesting, the award agreements entitle the
award recipients to receive one share of the Company’s common stock
for each vested RSU. The vesting period of the 2021 LTIP began on
January 1, 2021 and terminates on December 31, 2023 (the “2021 LTIP
Performance Vesting Date”).
The RSUs subject to time-based vesting, including 68,181 RSUs to
Mr. Oviatt, 68,181 RSUs for Mr. Tidball, 28,636 RSUs to Mr. Fugal,
and 15,991 RSUs to Mr. Fisher, vest in
three equal annual installments that began on December 31,
2021 and will end on December 31, 2023 if the award recipients’
employment continues with the Company through such
dates.
The performance-vesting RSUs, including up to 136,362 RSUs for Mr.
Oviatt, 136,362 RSUs for Mr. Tidball, 57,272 RSUs for Mr. Fugal,
and 31,982 RSUs to Mr. Fisher, are eligible to vest over a
three-year performance period beginning January 1, 2021 based upon
the following Company performance metrics:
PROFIRE ENERGY, INC. AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial
Statements
For the nine months ended September 30, 2022 and 2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance Metric |
Weight |
Target |
Above Target |
Outstanding |
Total Shareholder Return
|
1/3 |
135% |
194% |
253% |
|
Relative Total Shareholder Return |
1/3 |
Third Quartile |
Second Quartile |
First Quartile |
|
EBITDA as a Percentage of Total Revenue |
1/3 |
10% |
15% |
20% |
|
|
|
|
|
One-third of such performance-vesting RSUs, consisting of 45,454
RSUs for Mr. Oviatt, 45,454 RSUs for Mr. Tidball, 19,091 RSUs for
Mr. Fugal, and 10,661 RSUs for Mr. Fisher, are eligible to vest for
each of the three performance metrics identified in the table
above. The number of RSUs that will vest for each performance
metric on the 2021 LTIP Performance Vesting Date shall be
determined as follows:
•if
the “Target” level for such performance metric is not achieved,
none of the RSUs relating to such performance metric will
vest;
•if
the “Target” level (but no higher level) for such performance
metric is achieved, 50% of the RSUs relating to such performance
metric will vest;
•if
the “Above Target” level (but no higher level) for such performance
metric is achieved, 75% of the RSUs relating to such performance
metric will vest; and
•if
the “Outstanding” level for such performance metric is achieved,
100% of the RSUs relating to such performance metric will
vest.
Mr. Fugal resigned, effective October 31, 2021, from his position
as Vice President of Operations to pursue an opportunity as CEO of
another company. Accordingly, Mr. Fugal did not receive incentive
compensation under the 2021 EIP and will not receive incentive
compensation under the 2021 LTIP, and his unvested RSUs have been
forfeited.
The foregoing summary of the 2021 EIP, the 2021 LTIP and the
Restricted Stock Unit Award Agreements is qualified in its entirety
by the text of the 2021 EIP and each of the Restricted Stock Unit
Award Agreements, which the Company filed as exhibits to its
quarterly report on Form 10-Q for the quarter ended June 30,
2021.
2021 RSUs
On February 18, 2021, the Board, upon the recommendation of
the Compensation Committee, approved a restricted stock award of
18,852 shares of common stock to each of Cameron M. Tidball and
Ryan W. Oviatt. Messrs. Tidball and Oviatt entered into Restricted
Stock Award Agreements, the forms of which were approved pursuant
to the Plan. These restricted stock awards, which vested
immediately, were settled by the issuance of a total of 27,334
shares of common stock, net of tax withholding and resulted in
$45,999 of compensation expense.
On June 16, 2021, pursuant to the annual renewal of director
compensation, the Board approved a grant of 189,471 RSUs to the
Company's independent directors. Half of the RSUs vested
immediately on the date of grant and the remaining 50% of the RSUs
vested as the Company's annual meeting of stockholders on June 15,
2022. The awards resulted in total compensation expense of
approximately $216,000 recognized over the vesting
period.
NOTE 8 – REVENUE
Performance Obligations
Our performance obligations include providing product and servicing
our product as well as other combustion related equipment. We
recognize product revenue performance obligations in most cases
when the product is delivered to the customer. Occasionally, if we
are shipping the product on a customer’s account, we recognize
revenue when the product has been shipped. At that point in time,
the control of the product is transferred to the customer. When we
perform service work, we apply the practical expedient that allows
us to recognize service revenue when we have the right to invoice
the customer for the work completed. We do not engage in
transactions acting as an agent. The time needed to complete our
performance obligations varies based on the size of the project;
however, we typically satisfy our performance obligations within a
few months of entering into the applicable sales contract or
service contract.
Our customers have the right to return certain unused and unopened
products within 90 days for a restocking fee. We provide a warranty
on some of our products ranging from 90 days to 2 years, depending
on the product. See
Note
5
for the amount accrued for expected returns and warranty claims as
of September 30, 2022.
PROFIRE ENERGY, INC. AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial
Statements
For the nine months ended September 30, 2022 and 2021
Contract Balances
We have elected to use the practical expedient in ASC 340-40-25-4
(regarding recognition of the incremental costs of obtaining a
contract) for costs related to contracts that are estimated to be
completed within one year. All of our current sales contracts and
service contracts are expected to be completed within one year, and
as a result, we have not recognized a contract asset account. If we
had chosen not to use this practical expedient, we would not expect
a material difference in the contract balances. Occasionally, we
collect milestone payments up front from customers on larger jobs.
These payments are classified as deferred revenue until the
deliverables have been met and revenue can be properly recognized
in our financial statements. Each of the contracts related to these
milestone payments is short-term in nature and we expect to
recognize associated revenues within one year. As a result, we
consider it appropriate to record deferred revenue for these
transactions and do not have any other contract liability
balances.
Disaggregation of Revenue
All revenue recognized in the income statement is considered to be
revenue from contracts with customers. The table below shows
revenue by category:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended September 30, |
|
For the Nine Months Ended September 30, |
|
|
|
|
2022 |
|
2021 |
|
2022 |
|
2021 |
|
|
|
|
|
Electronics |
|
$ |
4,415,011 |
|
|
$ |
2,327,854 |
|
|
$ |
11,456,616 |
|
|
$ |
6,196,529 |
|
|
|
|
|
|
Manufactured |
|
974,081 |
|
|
346,952 |
|
|
1,998,981 |
|
|
908,592 |
|
|
|
|
|
|
Re-Sell |
|
6,506,789 |
|
|
3,621,930 |
|
|
16,179,388 |
|
|
9,223,689 |
|
|
|
|
|
|
Service |
|
933,457 |
|
|
646,462 |
|
|
2,330,639 |
|
|
1,741,020 |
|
|
|
|
|
|
Total Revenue |
|
$ |
12,829,338 |
|
|
$ |
6,943,198 |
|
|
$ |
31,965,625 |
|
|
$ |
18,069,830 |
|
|
|
|
|
NOTE 9 – BASIC AND DILUTED EARNINGS (LOSS) PER SHARE
The following table is a reconciliation of the numerator and
denominators used in the earnings per share
calculation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended September 30, |
|
|
2022 |
|
2021 |
|
|
Income (Numerator) |
|
Weighted Average Shares (Denominator) |
|
Per-Share
Amount |
|
Income (Numerator) |
|
Weighted Average Shares (Denominator) |
|
Per-Share
Amount |
|
Basic EPS |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income available to common stockholders |
|
$ |
1,210,748 |
|
|
47,036,012 |
|
|
$ |
0.03 |
|
|
$ |
92,246 |
|
|
48,239,236 |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of Dilutive Securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options & RSUs |
|
— |
|
|
1,522,195 |
|
|
|
|
— |
|
|
1,089,572 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted EPS |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income available to common stockholders + assumed
conversions |
|
$ |
1,210,748 |
|
|
$ |
48,558,207 |
|
|
$ |
0.02 |
|
|
$ |
92,246 |
|
|
$ |
49,328,808 |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PROFIRE ENERGY, INC. AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial
Statements
For the nine months ended September 30, 2022 and 2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Nine Months Ended September 30, |
|
|
2022 |
|
2021 |
|
|
Loss (Numerator) |
|
Weighted Average Shares (Denominator) |
|
Per-Share
Amount |
|
Loss (Numerator) |
|
Weighted Average Shares (Denominator) |
|
Per-Share
Amount |
|
Basic EPS |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) available to common stockholders |
|
$ |
2,122,738 |
|
|
47,201,611 |
|
|
$ |
0.04 |
|
|
$ |
(906,420) |
|
|
48,095,404 |
|
|
$ |
(0.02) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of Dilutive Securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options & RSUs |
|
— |
|
|
1,559,735 |
|
|
|
|
— |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted EPS |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) available to common stockholders + assumed
conversions |
|
$ |
2,122,738 |
|
|
48,761,346 |
|
|
$ |
0.04 |
|
|
$ |
(906,420) |
|
|
48,095,404 |
|
|
$ |
(0.02) |
|
Stock options and RSUs to purchase 1,773,776 shares of common stock
at a weighted average price of $1.13 per share were outstanding
during the nine months ended September 30, 2021, but were not
included in the computation of diluted EPS because the impact of
these shares would be antidilutive. These RSUs, which expire
between December 2022 and December 2024, were still outstanding at
September 30, 2021.
NOTE 10 – SEGMENT INFORMATION
The Company operates in the United States and Canada. Segment
information for these geographic areas is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended September 30, |
|
For the Nine Months Ended September 30, |
|
Sales |
|
2022 |
|
2021 |
|
2022 |
|
2021 |
|
Canada |
|
$ |
2,160,495 |
|
|
$ |
1,825,056 |
|
|
$ |
6,044,077 |
|
|
$ |
3,688,878 |
|
|
United States |
|
10,668,843 |
|
5,118,142 |
|
25,921,548 |
|
|
14,380,952 |
|
|
Total Consolidated |
|
$ |
12,829,338 |
|
|
$ |
6,943,198 |
|
|
$ |
31,965,625 |
|
|
$ |
18,069,830 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended September 30, |
|
For the Nine Months Ended September 30, |
|
Profit (Loss) |
|
2022 |
|
2021 |
|
2022 |
|
2021 |
|
Canada |
|
$ |
(353,245) |
|
|
$ |
(506,076) |
|
|
$ |
(1,307,250) |
|
|
$ |
(1,383,553) |
|
|
United States |
|
1,563,993 |
|
598,322 |
|
3,429,988 |
|
|
477,133 |
|
|
Total Consolidated |
|
$ |
1,210,748 |
|
|
$ |
92,246 |
|
|
$ |
2,122,738 |
|
|
$ |
(906,420) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of |
|
Long-Lived Assets |
|
|
|
|
|
September 30, 2022 |
|
December 31, 2021 |
|
Canada |
|
|
|
|
|
$ |
5,082,785 |
|
|
$ |
5,667,225 |
|
|
United States |
|
|
|
|
|
5,424,101 |
|
|
5,583,594 |
|
|
Total Consolidated |
|
|
|
|
|
$ |
10,506,886 |
|
|
$ |
11,250,819 |
|
|
|
|
|
|
|
|
|
|
|
NOTE 11 – SUBSEQUENT EVENTS
In accordance with ASC 855 "Subsequent Events," Company management
reviewed all material events through the date this report was
issued noting no items requiring disclosure.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
This discussion summarizes the significant factors affecting our
consolidated operating results, financial condition, liquidity, and
capital resources during the three- and nine-month periods ended
September 30, 2022 and 2021. This Management's Discussion and
Analysis of Financial Condition and Results of Operations should be
read in conjunction with the financial statements and notes to the
financial statements contained in this quarterly report on Form
10-Q and our annual report on Form 10-K for the year ended December
31, 2021.
Forward-Looking Statements
This quarterly report on Form 10-Q contains forward-looking
statements within the meaning of Section 27A of the Securities Act
of 1933, as amended (the "Securities Act"), and Section 21E of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"),
that are based on management's beliefs and assumptions and on
information currently available to management. For this
purpose, any statement contained in this report that is not a
statement of historical fact may be deemed to be forward-looking,
including, but not limited to, statements relating to our future
actions, intentions, plans, strategies, objectives, results of
operations, cash flows and the adequacy of or need to seek
additional capital resources and liquidity. Words such as
"may,"
"should,"
"expect,"
"project,"
"plan,"
"anticipate,"
"believe,"
"estimate,"
"intend,"
"budget,"
"forecast,"
"predict,"
"potential,"
"continue,"
"should,"
"could,"
"will,"
or comparable terminology or the negative of such terms are
intended to identify forward-looking statements; however, the
absence of these words does not necessarily mean that a statement
is not forward-looking. Forward-looking statements by their
nature involve known and unknown risks and uncertainties and other
factors that may cause actual results and outcomes to differ
materially depending on a variety of factors, many of which are not
within our control. Such factors include, but are not limited
to, economic conditions generally and in the oil and gas industry
in which we and our customers participate; competition within our
industry; legislative requirements or changes which could render
our products or services less competitive or obsolete; our failure
to successfully develop new products and/or services or to
anticipate current or prospective customers' needs; price
increases; limits to employee capabilities; delays,
reductions, or cancellations of contracts we have previously
entered into; sufficiency of working capital, capital resources and
liquidity and other factors detailed herein and in our other
filings with the United States Securities and Exchange Commission
(the "SEC" or "Commission"). Should one or more of these risks or
uncertainties materialize, or should underlying assumptions prove
incorrect, actual outcomes may vary materially from those
indicated. The foregoing factors should not be construed as
exhaustive and should be read in conjunction with the other
cautionary statements that are included in this report. For a more
detailed discussion of the principal factors that could cause
actual results to be materially different, you should read our risk
factors in
Item
1A. Risk Factors,
included elsewhere in this report.
Forward-looking statements are based on current industry,
financial, and economic information which we have assessed but
which by its nature is dynamic and subject to rapid and possibly
abrupt changes. Due to risks and uncertainties associated with
our business, our actual results could differ materially from those
stated or implied by such forward-looking statements. Moreover,
neither we nor any other person assumes responsibility for the
accuracy and completeness of these forward-looking statements and
we hereby qualify all of our forward-looking statements by these
cautionary statements.
Forward-looking statements in this report are based only on
information currently available to us and speak only as of the date
on which they are made. We undertake no obligation to amend
this report or revise publicly these forward-looking statements
(other than as required by law) to reflect subsequent events or
circumstances, whether as the result of new information, future
events or otherwise.
The following discussion should be read in conjunction with our
financial statements and the related notes contained elsewhere in
this report and in our other filings with the
Commission.
Overview
We are a technology company providing solutions that enhance the
efficiency, safety, and reliability of industrial combustion
appliances while mitigating potential environmental impacts related
to the operation of these devices. Our legacy business is primarily
focused in the upstream, midstream, and downstream transmission
segments of the oil and gas industry; however, we continue to gain
traction in several diversified non-oil and gas markets as well. We
specialize in the engineering and design of burner and combustion
management systems and solutions used on a variety of natural and
forced draft applications. We sell our products and services
primarily throughout North America. Our experienced team of sales
and service professionals are strategically positioned across the
United States and Canada providing support and service for our
products.
Principal Products and Services
Across the energy industry, there are numerous demands for heat
generation and control. Applications such as combustors, enclosed
flares, gas production units, treaters, glycol and amine reboilers,
indirect line-heaters, heated tanks, and process heaters require
heat as part of their production and or processing functions. This
heat is generated through the process of combustion, which must be
controlled, managed, and supervised. Combustion and the resulting
generation of heat are integral to the process of separating,
treating, storing, incinerating, and transporting oil and gas.
Factors such as specific gravity, the presence of hydrates,
temperature and hydrogen sulfide content contribute to the need for
heat generation in oil and gas production and processing
applications. Our burner-management systems ignite, monitor, and
manage pilot and burner systems that are utilized in this process.
Our technology affords remote operation, reducing the need for
employee interaction with the appliance's burner for purposes such
as re-ignition or temperature monitoring. In addition, our
burner-management systems can help reduce emissions by efficiently
reigniting a failed flame, thereby improving efficiencies and
up-time. Our extensive service and combustion experience provides
customers with solutions that are consistent with industry trends
and regulatory requirements to mitigate environmental impacts and
reduce emissions through increased efficiency.
Oil and gas companies, including upstream, midstream, downstream,
pipeline, and gathering operators, utilize burner-management
systems to achieve increased safety, greater operational
efficiencies, and improved compliance with industry regulations.
Without a burner-management system, a field employee must discover
and reignite an extinguished burner flame, then restart the
application manually. Therefore, without a proper burner-management
system, all application monitoring must be accomplished in-person,
directly on-site. This requirement for on-site monitoring, in an
environment with limited field personnel, can result in the
potential interruption of production for long periods of time and
increased risks associated with reigniting a flame, which can lead
to site hazards, including explosions and the possibility of
venting gas into the atmosphere. In addition, without a
burner-management system, burners often operate for longer
durations, frequently with lower efficiency, resulting in increased
equipment fatigue and greater expense related to fuel consumption.
We continue to assess regulatory requirements on behalf of our
customers. We believe that burner-management systems and services
offer solutions for customers to meet compliance standards where
applicable. In addition to product sales, we dispatch specialized
service technicians to provide maintenance and installation support
throughout the United States and Canada.
We initially developed our first burner-management controller in
2005. Since that time, our systems have become widely adopted
throughout the United States and Western Canada. Profire
burner-management systems have been designed to comply with widely
accepted safety and industrial codes and standards in North
America, including those prescribed and certified by the Canadian
Standards Association (CSA), Underwriters Laboratories (UL), and
Safety Integrity Level (SIL) standards.
Our systems and solutions have been widely adopted by exploration
and production companies, midstream operators, pipeline operators,
as well as downstream transmission and utility providers. Our
customers include Antero, ATCO, Chevron, CNRL, Concho Resources,
Devon Energy, Dominion Energy, EQT, Kinder Morgan, National Grid,
Ovintiv, Oxy, Range Resources, Williams, XTO, and others. Our
systems have also been sold and installed in other parts of the
world including many countries in South America, Europe, Africa,
the Middle East, and Asia. Though firmly established and primarily
focused on North American oil and gas markets, we continue to
invest in expansion efforts in international markets and other
industries with significant combustion requirements.
Environmental, Social and Governance Focus
Our products and solutions are developed with a focus on safety,
environmental impacts, reliability and efficiency. Protecting human
life, protecting the environment, and protecting our customers’
investments are key guiding principles. Our products play a crucial
role in supporting our customers’ existing and future initiatives
regarding improving workplace safety and environmental
impacts.
Our burner-management technology is designed to monitor, operate,
and manage a wide array of complex industrial heat -applications.
Providing our customers with safety-approved and certified
technology, purposefully designed and built to meet regulatory
requirements and process needs, is a critical component of our
customers’ safety protocols and initiatives.
Proper burner and combustion management control, coupled with
peripheral solutions, increase site and location safety while
reducing emissions. Profire technology and solutions are integrated
into a variety of applications to significantly reduce the release
of methane and volatile organic compounds into the
environment.
Profire burner-management controls and complementary solutions
provide users with the ability to monitor field equipment remotely.
This reduces truck rolls and the need for field personnel to travel
to and manually inspect burner malfunctions in remote sites and
locations. Our automated solutions help our customers improve
safety, reduce emissions, and decrease operating
costs.
Operator safety is at the heart of our burner-management solution
technology. Integration of our solutions and products helps our
customers increase the likelihood that their employees return home
safely each day. Adding greater physical distance between humans
and the combustion process, as well as ensuring gas supplies are
properly shut off when no flame is present, are two of the critical
elements of how our burner-management solutions help protect human
life.
Results of Operations
Comparison quarter over quarter
The table below presents certain financial data comparing the most
recent quarter to prior quarters:
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For the three months ended |
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September 30, 2022 |
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June 30, 2022 |
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March 31, 2022 |
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December 31, 2021 |
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September 30, 2021 |
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Total Revenues |
$ |
12,829,338 |
|
|
$ |
9,633,148 |
|
|
$ |
9,503,140 |
|
|
$ |
8,286,345 |
|
|
$ |
6,943,198 |
|
|
Gross Profit Percentage |
47.7 |
% |
|
45.7 |
% |
|
47.9 |
% |
|
41.6 |
% |
|
44.9 |
% |
|
Operating Expenses |
$ |
4,000,983 |
|
|
$ |
4,308,337 |
|
|
$ |
3,867,709 |
|
|
$ |
3,747,420 |
|
|
$ |
3,437,757 |
|
|
Income (loss) from Operations |
$ |
2,117,893 |
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$ |
94,806 |
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$ |
688,995 |
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|
$ |
(298,291) |
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|
$ |
(318,289) |
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|
Net Income (Loss) |
$ |
1,210,748 |
|
|
$ |
284,829 |
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$ |
627,160 |
|
|
$ |
(145,364) |
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$ |
92,246 |
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Operating Cash Flow |
$ |
(1,818,322) |
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|
$ |
1,814,039 |
|
|
$ |
(1,192,349) |
|
|
$ |
(308,894) |
|
|
$ |
(598,001) |
|
Revenues for the quarter ended September 30, 2022 increased by 85%
or $5,886,140 compared to the quarter ended September 30, 2021,
which was driven by improved customer demand associated with
industry recoveries from the COVID-19 pandemic, a significant rise
in oil prices, and an increase in rig counts and resulting
completion activity. The average oil price during the three months
ended September 30, 2022 was $93.06 per barrel compared to $70.58
per barrel for the same period of last year, representing an
increase of approximately 32%. The average Henry Hub natural gas
price increased by 84% during this same time period. Additionally,
the third quarter of 2022 weekly average rig count for North
America was 942 compared to 634 in the same period of last year,
which represents an increase of 49%. Customer demand increased
during the quarter ended September 30, 2022, in response to these
industry trends. The quarter also benefited from strong, ongoing
progress in our strategic growth initiatives that are targeted at
expansion into new industries and new areas within the oil and gas
industry.
Revenues for the quarter ended September 30, 2022 increased by 33%
or $3,196,190 compared to the quarter ended June 30, 2022,
which was driven by improved customer demand, a rise in natural gas
prices, and an increase in drilling and completion activity. The
average Henry Hub natural gas price increased by 7% during the
three months ended September 30, 2022. Additionally, the third
quarter of 2022 weekly average rig count for North America
increased by 16% compared to the prior quarter. Customer demand
increased during the quarter ended September 30, 2022 in response
to these industry trends.
Our gross profit margin for the third quarter of 2022 was up 2.8%
from the same quarter of last year and up 2.0% from quarter ended
June 30, 2022. The gross margin percentage was impacted by
normal fluctuations in product mix and product related reserves.
The gross margin of the third quarter of 2022 also benefited from
greater fixed cost coverage from the significant increase in
revenue over prior quarters. These improvements were partially
offset by significant inflationary cost pressure including higher
costs of freight, and shipping and direct labor.
Operating expenses for the quarter ended September 30, 2022
increased $563,226 from the same quarter of last year, which
primarily results from increases in headcount and cost inflation
across the business. Operating expenses for the quarter ended
September 30, 2022 decreased $307,354 from the prior quarter ended
June 30, 2022 primarily due to the recognition of an employee
retention payroll tax credit, that became available to the Company
through the CARES Act. The Company has filed amended payroll tax
returns for this credit and expects to receive the refund within
the next twelve months.
Due to the factors discussed above, we reported income from
operations of $2,117,893 for the quarter ended September 30, 2022
compared to a loss from operations of $318,289 for the same quarter
in 2021, and income from operations of $94,806 in the quarter ended
June 30, 2022.
Due to the combination of factors discussed above relating to
revenues, gross profit margin and operating expenses, we reported
net income of $1,210,748 for the quarter ended September 30, 2022
compared to net income of $92,246 for the same quarter in 2021 and
net income of $284,829 in the quarter ended June 30,
2022.
Operating cash flows decreased $1,818,322 during the quarter ended
September 30, 2022 compared to a decrease of $598,001 during the
same quarter of 2021 and an increase in operating cash flow of
$1,814,039 during the quarter ended June 30, 2022 due
primarily to changes in working capital balances, including
increases in customer accounts receivable and
inventory.
Comparison of the nine months ended September 30, 2022 and
2021
The table below presents certain financial data comparing the nine
months ended September 30, 2022 to the same period ended September
30, 2021:
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For the Nine Months Ended September 30, |
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2022 |
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2021 |
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$ Change |
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% Change |
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Total Revenues |
$ |
31,965,625 |
|
|
$ |
18,069,830 |
|
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$ |
13,895,795 |
|
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76.9 |
% |
|
Gross Profit Percentage |
47.2 |
% |
|
44.0 |
% |
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3.2 |
% |
|
Operating Expenses |
$ |
12,177,030 |
|
|
$ |
9,668,838 |
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$ |
2,508,192 |
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25.9 |
% |
|
Income (Loss) from Operations |
$ |
2,901,695 |
|
|
$ |
(1,716,951) |
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$ |
4,618,646 |
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|
269.0 |
% |
|
Net Income (Loss) |
$ |
2,122,738 |
|
|
$ |
(906,420) |
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$ |
3,029,158 |
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|
334.2 |
% |
|
Operating Cash Flow |
$ |
(1,196,632) |
|
|
$ |
957,821 |
|
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$ |
(2,154,453) |
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(224.9) |
% |
Revenues during the nine-month period ended September 30, 2022,
increased 76.9% compared to the same period of last year. The
increase in revenue was largely due to significant rises in oil and
natural gas prices, an increase in drilling and completion activity
and ongoing reinvestment activity by the oil and gas producers in
response to years of underinvestment to support production. Such
nine-month period of 2022 has also benefited from significant
progress in our diversification efforts with many projects
completed in other industries such as RNG, Biogas and industrial
applications. Our gross profit percentage increased slightly by
3.2% during the nine months ended September 30, 2022 compared to
the same period in 2021, primarily due to changes in product mix,
inventory adjustments and the fixed cost coverage from a higher
revenue base. Operating expenses increased 25.9% due to increases
in headcount and general cost inflation in the current year. Due to
the increase in revenue and gross margin, which exceeded the
increase in operating expenses, we recognized net income of
$2,122,738 for the nine months ended September 30, 2022 compared to
a net loss of $906,420 for the same period in 2021. The Company
used operating cash flows of $1,196,632 during the nine-month
period ended September 30, 2022 primarily due to increases in
inventory and accounts receivable. During the same period in 2021,
the Company generated operating cash flows of $957,821 due to
decreases in inventory and an increase in accounts
payable.
Liquidity and Capital Resources
Working capital at September 30, 2022 was $22,500,286 compared to
$20,510,600 at December 31, 2021.
Our liquidity position is impacted by operating, investing and
financing activities. During the nine months ended September 30,
2022, we used $1,196,632 of cash from operating activities,
primarily due to inventory purchases and an increase in accounts
receivable as sales grew substantially. These increases were
partially offset by increases in accounts payable and income taxes
payable. Operating activity trends consist of cash inflows and
outflows related to changes in operating assets and liabilities.
During the nine months ended September 30, 2022, we generated
$45,412 of cash from investing activities, primarily due to the
sale of property, equipment, and intangibles. Investing activity
trends consist of changes in the mix of our investment portfolio,
purchases or sales of fixed assets, and acquisition activities.
During the nine months ended September 30, 2022, we used $1,320,594
of cash in financing activities, primarily related to purchases of
treasury stock during the year. Financing activity trends consist
of transactions related to equity awards and purchases of treasury
stock pursuant to our now completed share repurchase program. The
extent to which our liquidity position will be impacted in the
future depends on industry trends and developments, which are
highly uncertain and cannot be predicted with confidence.
As
of September 30, 2022, we held $14,451,704 of cash and investments
that form our core excess liquidity which could be utilized, if
required, due to the issues described above.
Off-Balance Sheet Arrangements
We have not engaged in any off-balance sheet arrangements, nor do
we plan to engage in any in the foreseeable future.
Item 3. Quantitative and Qualitative Disclosure about Market
Risk
This section is not required.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of the Principal Executive
Officers and Principal Financial Officer, evaluated the
effectiveness of the design and operation of our disclosure
controls and procedures pursuant to Rule 13a-15(b) under the
Exchange Act, as of the end of the period covered by this quarterly
report on Form 10-Q. Our disclosure controls and procedures are
designed to ensure that the information required to be disclosed by
us in reports that we file under the Exchange Act is accumulated
and communicated to our management, including our Principal
Executive Officers and Principal Financial Officer, as appropriate,
to allow timely decisions regarding required disclosure and is
recorded, processed, summarized and reported within the time
periods specified in the rules and forms of the SEC. Based on the
evaluation performed, our management, including the Principal
Executive Officers and Principal Financial Officer, concluded that
the disclosure controls and procedures were effective as of
September 30, 2022.
Changes in Internal Control over Financial Reporting
Our management, with the participation of our Principal Executive
Officers and Principal Financial Officer, evaluated the changes in
our internal control over financial reporting that occurred during
the quarterly period covered by this quarterly report on Form 10-Q.
Based on that evaluation, management concluded that no change in
our internal control over financial reporting (as such term is
defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act)
occurred during the quarter ended September 30, 2022, that
materially affected, or is reasonably likely to materially affect,
our internal control over financial reporting.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
To the best of our knowledge, there are no legal proceedings
pending or threatened against us that may have a material impact on
us and there are no actions pending or threatened against any of
our directors or officers that are adverse to us.
Item 1A. Risk Factors
In addition to the other information set forth in this quarterly
report on Form 10-Q, you should carefully consider the risks
discussed in our annual report on Form 10-K for the year ended
December 31, 2021, which risks could materially affect our
business, financial condition, or future results. These risks are
not the only risks facing our Company. Additional risks and
uncertainties not currently known to us or that we currently deem
to be immaterial may also have a material, adverse effect on our
business, financial condition or future results.
Item 2. Unregistered Sales of Equity Securities and Use of
Proceeds
This item is not applicable.
Item 3. Defaults Upon Senior Securities
This item is not applicable.
Item 4. Mine Safety Disclosures
This item is not applicable.
Item 5. Other Information
This item is not applicable.
Item 6. Exhibits
Exhibits. The following exhibits are included as part of this
report:
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Certification of Co-Principal Executive Officer Pursuant to Rule
13a-14(a) Ryan W. Oviatt |
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Certification of Co-Principal Executive Officer Pursuant to Rule
13a-14(a) Cameron M. Tidball |
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Certification of Principal Financial Officer Pursuant to Rule
13a-14(a) |
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Certification of Principal Executive Officers pursuant to 18 U.S.C.
Section 1350 |
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Certification of Ryan W. Oviatt, Principal Financial Officer
pursuant to 18 U.S.C. Section 1350 |
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Exhibit 101.INS* |
XBRL Instance Document |
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Exhibit 101.SCH* |
XBRL Taxonomy Extension Schema Document |
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Exhibit 101.CAL* |
XBRL Taxonomy Extension Calculation Linkbase Document |
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Exhibit 101.DEF* |
XBRL Taxonomy Definition Linkbase Document |
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Exhibit 101.LAB* |
XBRL Taxonomy Extension Label Linkbase Document |
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Exhibit 101.PRE* |
XBRL Taxonomy Extension Presentation Linkbase Document |
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Exhibit 104 |
Cover Page Interactive Data File (formatted as Inline XBRL and
contained in Exhibit 101) |
* Filed herewith
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly
authorized.
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PROFIRE ENERGY, INC.
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Date:
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November 2, 2022 |
By:
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/s/ Ryan W. Oviatt |
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Ryan W. Oviatt |
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Co-Chief Executive Officer and Chief Financial Officer |
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Date:
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November 2, 2022 |
By:
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/s/ Cameron M. Tidball |
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Cameron M. Tidball |
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Co-Chief Executive Officer |
Profire Energy (NASDAQ:PFIE)
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