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	~~September 30, 2021~~March 31, 2022
☐	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 ~~November 1, 2021,~~May 2, 2022, the registrant had ~~51,658,386~~51,860,036 shares of common stock issued and ~~48,105,774~~47,126,537 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	3

	Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) (Unaudited)	4

	Condensed Consolidated Statements of Stockholders' Equity (Unaudited)	5

	Condensed Consolidated Statements of Cash Flows (Unaudited)	76

	Notes to the Condensed Consolidated Financial Statements (Unaudited)	87

Item 2. Management's Discussion and Analysis of Financial Condition And Results of Operations		1615

Item 3. Quantitative and Qualitative Disclosure about Market Risk		2018

Item 4. Controls and Procedures		2018

PART II — OTHER INFORMATION

Item 1. Legal Proceedings		2119

Item 1A. Risk Factors		2119

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		2119

Item 3. Defaults Upon Senior Securities		2119

Item 4. Mine Safety Disclosures		2119

Item 5. Other Information		2119

Item 6. Exhibits		2220

Signatures		2320

PART I. FINANCIAL INFORMATION

Item 1 Financial Information


PROFIRE ENERGY, INC. AND SUBSIDIARIES	PROFIRE ENERGY, INC. AND SUBSIDIARIES					PROFIRE ENERGY, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets	Condensed Consolidated Balance Sheets					Condensed Consolidated Balance Sheets
		As of					As of
		September 30, 2021		December 31, 2020			March 31, 2022		December 31, 2021
ASSETS	ASSETS	(Unaudited)				ASSETS	(Unaudited)
CURRENT ASSETS	CURRENT ASSETS					CURRENT ASSETS
Cash and cash equivalents	Cash and cash equivalents	$	9,129,416	$	9,148,312	Cash and cash equivalents	$	6,879,467	$	8,188,270
Short-term investments	Short-term investments	1,420,884		2,388,601		Short-term investments	454,046		1,013,683

Accounts receivable, net	Accounts receivable, net	4,632,245		3,719,508		Accounts receivable, net	8,137,354		6,262,799
Inventories, net (note 3)	Inventories, net (note 3)	7,472,750		8,414,772		Inventories, net (note 3)	7,744,924		7,185,248
Prepaid expenses and other current assets (note 4)	Prepaid expenses and other current assets (note 4)	1,184,717		1,678,428		Prepaid expenses and other current assets (note 4)	1,066,799		1,025,276
Income tax receivable	Income tax receivable	1,092,282		486,154		Income tax receivable	121,407		560,445
Total Current Assets	Total Current Assets	24,932,294		25,835,775		Total Current Assets	24,403,997		24,235,721
LONG-TERM ASSETS	LONG-TERM ASSETS					LONG-TERM ASSETS
Net deferred tax asset	Net deferred tax asset	—		—		Net deferred tax asset	165,797		163,254
Long-term investments	Long-term investments	7,939,582		6,064,294		Long-term investments	7,852,860		8,259,809

Financing right-of-use asset	Financing right-of-use asset	19,798		50,094		Financing right-of-use asset	52,862		65,280
Property and equipment, net	Property and equipment, net	11,401,978		12,021,811		Property and equipment, net	11,165,706		11,185,539
Intangible assets, net	Intangible assets, net	1,604,821		1,771,870		Intangible assets, net	1,493,455		1,549,138
Goodwill	Goodwill	2,579,381		2,579,381		Goodwill	2,579,381		2,579,381
Total Long-Term Assets	Total Long-Term Assets	23,545,560		22,487,450		Total Long-Term Assets	23,310,061		23,802,401
TOTAL ASSETS	TOTAL ASSETS	$	48,477,854	$	48,323,225	TOTAL ASSETS	$	47,714,058	$	48,038,122

LIABILITIES AND STOCKHOLDERS' EQUITY	LIABILITIES AND STOCKHOLDERS' EQUITY					LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES	CURRENT LIABILITIES					CURRENT LIABILITIES
Accounts payable	Accounts payable	$	1,495,216	$	1,178,979	Accounts payable	$	1,505,193	$	1,822,559
Accrued liabilities (note 5)	Accrued liabilities (note 5)	1,422,372		1,196,870		Accrued liabilities (note 5)	1,694,926		1,872,348
Current financing lease liability (note 6)	Current financing lease liability (note 6)	20,927		39,451		Current financing lease liability (note 6)	22,096		30,214

Total Current Liabilities	Total Current Liabilities	2,938,515		2,415,300		Total Current Liabilities	3,222,215		3,725,121
LONG-TERM LIABILITIES	LONG-TERM LIABILITIES					LONG-TERM LIABILITIES
Net deferred income tax liability	Net deferred income tax liability	572,721		522,870		Net deferred income tax liability	183,136		136,106
Long-term financing lease liability (note 6)	Long-term financing lease liability (note 6)	—		12,669		Long-term financing lease liability (note 6)	31,401		35,912
TOTAL LIABILITIES	TOTAL LIABILITIES	3,511,236		2,950,839		TOTAL LIABILITIES	3,436,752		3,897,139

STOCKHOLDERS' EQUITY (note 7)	STOCKHOLDERS' EQUITY (note 7)					STOCKHOLDERS' EQUITY (note 7)
Preferred stock: $0.001 par value, 10,000,000 shares authorized: no shares issued or outstanding	Preferred stock: $0.001 par value, 10,000,000 shares authorized: no shares issued or outstanding	—		—		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: 51,654,386 issued and 48,242,008 outstanding at September 30, 2021, and 51,384,961 issued and 47,972,583 outstanding at December 31, 2020		51,654		51,385
Common stock: $0.001 par value, 100,000,000 shares authorized: 51,860,036 issued and 47,273,496 outstanding at March 31, 2022, and 51,720,142 issued and 47,643,233 outstanding at December 31, 2021						Common stock: $0.001 par value, 100,000,000 shares authorized: 51,860,036 issued and 47,273,496 outstanding at March 31, 2022, and 51,720,142 issued and 47,643,233 outstanding at December 31, 2021	51,860		51,720
Treasury stock, at cost	Treasury stock, at cost	(5,353,019)		(5,353,019)		Treasury stock, at cost	(6,729,856)		(6,107,593)
Additional paid-in capital	Additional paid-in capital	30,727,928		30,293,472		Additional paid-in capital	31,079,446		30,819,394
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(2,082,997)		(2,148,924)		Accumulated other comprehensive loss	(2,229,234)		(2,100,467)
Retained earnings	Retained earnings	21,623,052		22,529,472		Retained earnings	22,105,090		21,477,929
TOTAL STOCKHOLDERS' EQUITY	TOTAL STOCKHOLDERS' EQUITY	44,966,618		45,372,386		TOTAL STOCKHOLDERS' EQUITY	44,277,306		44,140,983
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	48,477,854	$	48,323,225	TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	47,714,058	$	48,038,122

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

															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,					For the Three Months Ended March 31,
		2021		2020		2021		2020			2022		2021
REVENUES (note 8)	REVENUES (note 8)									REVENUES (note 8)
Sales of goods, net		$	6,296,736	$	3,517,280	$	16,328,810	$	14,377,377
Sales of products, net										Sales of products, net	$	8,878,423	$	4,657,535
Sales of services, net	Sales of services, net	646,462		482,826		1,741,020		1,429,350		Sales of services, net	624,717		434,814
Total Revenues	Total Revenues	6,943,198		4,000,106		18,069,830		15,806,727		Total Revenues	9,503,140		5,092,349

COST OF SALES	COST OF SALES									COST OF SALES
Cost of goods sold-product		3,217,655		2,141,888		8,666,168		7,919,959
Cost of goods sold-services		606,075		337,795		1,451,775		1,114,804
Total Cost of Goods Sold		3,823,730		2,479,683		10,117,943		9,034,763
Cost of sales - product										Cost of sales - product	4,382,700		2,537,634
Cost of sales - services										Cost of sales - services	563,736		380,028
Total Cost of Sales										Total Cost of Sales	4,946,436		2,917,662

GROSS PROFIT	GROSS PROFIT	3,119,468		1,520,423		7,951,887		6,771,964		GROSS PROFIT	4,556,704		2,174,687

OPERATING EXPENSES	OPERATING EXPENSES									OPERATING EXPENSES
General and administrative	General and administrative	2,980,945		2,247,614		8,319,353		8,273,925		General and administrative	3,392,379		2,554,536
Research and development	Research and development	290,657		433,800		848,993		1,073,074		Research and development	308,316		256,891
Depreciation and amortization	Depreciation and amortization	166,155		168,507		500,492		496,976		Depreciation and amortization	167,015		167,485
Total Operating Expenses	Total Operating Expenses	3,437,757		2,849,921		9,668,838		9,843,975		Total Operating Expenses	3,867,710		2,978,912

LOSS FROM OPERATIONS		(318,289)		(1,329,498)		(1,716,951)		(3,072,011)
INCOME (LOSS) FROM OPERATIONS										INCOME (LOSS) FROM OPERATIONS	688,994		(804,225)

OTHER INCOME (EXPENSE)	OTHER INCOME (EXPENSE)									OTHER INCOME (EXPENSE)
Gain on sale of property and equipment	Gain on sale of property and equipment	31,685		36,483		144,078		193,938		Gain on sale of property and equipment	95,842		73,901
Other income (expense)		(2,984)		(48,349)		1,755		(49,667)
Other expense										Other expense	(18,778)		(97)
Interest income	Interest income	33,067		103,364		82,698		255,289		Interest income	21,545		21,062
Total Other Income	Total Other Income	61,768		91,498		228,531		399,560		Total Other Income	98,609		94,866

LOSS BEFORE INCOME TAXES		(256,521)		(1,238,000)		(1,488,420)		(2,672,451)
INCOME (LOSS) BEFORE INCOME TAXES										INCOME (LOSS) BEFORE INCOME TAXES	787,603		(709,359)

INCOME TAX BENEFIT		348,767		180,252		582,000		440,936
INCOME TAX BENEFIT (EXPENSE)										INCOME TAX BENEFIT (EXPENSE)	(160,442)		107,859

NET INCOME (LOSS)	NET INCOME (LOSS)	$	92,246	$	(1,057,748)	$	(906,420)	$	(2,231,515)	NET INCOME (LOSS)	$	627,161	$	(601,500)

OTHER COMPREHENSIVE INCOME (LOSS)	OTHER COMPREHENSIVE INCOME (LOSS)									OTHER COMPREHENSIVE INCOME (LOSS)
Foreign currency translation gain (loss)		$	(263,908)	$	233,170	$	39,183	$	(336,986)
Unrealized gains (losses) on investments		(20,811)		(36,840)		26,744		(121,319)
Foreign currency translation gain										Foreign currency translation gain	$	158,359	$	139,606
Unrealized losses on investments										Unrealized losses on investments	(287,126)		(7,974)
Total Other Comprehensive Income (Loss)	Total Other Comprehensive Income (Loss)	(284,719)		196,330		65,927		(458,305)		Total Other Comprehensive Income (Loss)	(128,767)		131,632

TOTAL COMPREHENSIVE LOSS		$	(192,473)	$	(861,418)	$	(840,493)	$	(2,689,820)
TOTAL COMPREHENSIVE INCOME (LOSS)										TOTAL COMPREHENSIVE INCOME (LOSS)	$	498,394	$	(469,868)

BASIC EARNINGS (LOSS) PER SHARE	BASIC EARNINGS (LOSS) PER SHARE	$	—	$	(0.02)	$	(0.02)	$	(0.05)	BASIC EARNINGS (LOSS) PER SHARE	$	0.01	$	(0.01)
FULLY DILUTED EARNINGS (LOSS) PER SHARE	FULLY DILUTED EARNINGS (LOSS) PER SHARE	$	—	$	(0.02)	$	(0.02)	$	(0.05)	FULLY DILUTED EARNINGS (LOSS) PER SHARE	$	0.01	$	(0.01)

BASIC WEIGHTED AVG NUMBER OF SHARES OUTSTANDING	BASIC WEIGHTED AVG NUMBER OF SHARES OUTSTANDING	48,239,236		47,933,318		48,095,404		47,717,114		BASIC WEIGHTED AVG NUMBER OF SHARES OUTSTANDING	47,481,439		47,990,101
FULLY DILUTED WEIGHTED AVG NUMBER OF SHARES OUTSTANDING	FULLY DILUTED WEIGHTED AVG NUMBER OF SHARES OUTSTANDING	49,328,808		47,933,318		48,095,404		47,717,114		FULLY DILUTED WEIGHTED AVG NUMBER OF SHARES OUTSTANDING	48,536,418		47,990,101

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					Common Stock				Additional Paid-In Capital					Accumulated Other Comprehensive Income (Loss)				Treasury Stock				Retained Earnings				Total Stockholders' Equity
		Shares		Amount													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
Balance, December 31, 2021																					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	Stock based compensation	—		—		125,043				—		—		—				125,043			Stock based compensation		—		—		138,503					—				—				—				138,503

Stock issued in settlement of RSUs		49,113		49		(49)				—		—		—				—
Stock issued in settlement of RSUs and accrued bonuses																					Stock issued in settlement of RSUs and accrued bonuses		139,894		140		212,647					—				—				—				212,787
Tax withholdings paid related to stock based compensation	Tax withholdings paid related to stock based compensation	—		—		(26,629)				—		—		—				(26,629)			Tax withholdings paid related to stock based compensation		—		—		(91,098)					—				—				—				(91,098)

Treasury stock repurchased																					Treasury stock repurchased		(509,631)		—		—					—				(622,263)				—				(622,263)
Foreign currency translation	Foreign currency translation	—		—		—				139,606		—		—				139,606			Foreign currency translation		—		—		—					158,359				—				—				158,359
Unrealized losses on investments	Unrealized losses on investments	—		—		—				(7,974)		—		—				(7,974)			Unrealized losses on investments		—		—		—					(287,126)				—				—				(287,126)
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 settlement of RSUs		217,312		217		(217)				—		—		—				—
Tax withholdings paid related to stock based compensation		—		—		(16,200)				—		—		—				(16,200)

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
Net income																					Net income		—		—		—					—				—				627,161				627,161
Balance, March 31, 2022																					Balance, March 31, 2022		47,273,496		$	51,860	$	31,079,446				$	(2,229,234)			$	(6,729,856)			$	22,105,090			$	44,277,306

Foreign currency translation		—		—		—				(263,908)		—		—				(263,908)
Unrealized losses on investments		—		—		—				(20,811)		—		—				(20,811)
Net income		—		—		—				—		—		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





	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

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

Common Stock Additional Paid-In Capital Accumulated Other Comprehensive Income (Loss) Treasury Stock Retained Earnings Total Stockholders' Equity
Shares Amount
Balance, December 31, 2019 47,411,977 $ 50,824 $ 29,584,172 $ (2,415,460) $ (5,353,019) $ 24,705,069 $ 46,571,586
Stock based compensation — — 66,348 — — — 66,348
Stock issued in exercise of stock options 2,000 2 2,018 — — — 2,020
Stock issued in settlement of RSUs and accrued bonuses 271,684 272 419,101 — — — 419,373
Tax withholdings paid related to stock based compensation — — (148,879) — — — (148,879)
Foreign currency translation — — — (945,423) — — (945,423)
Unrealized losses on investments — — — (157,354) — — (157,354)
Net loss — — — — — (365,264) (365,264)
Balance, March 31, 2020 47,685,661 $ 51,098 $ 29,922,760 $ (3,518,237) $ (5,353,019) $ 24,339,805 $ 45,442,407
Stock based compensation — — 183,850 — — — 183,850
Stock issued in settlement of RSUs 227,454 227 (227) — — — —
Foreign currency translation — — — 375,267 — — 375,267
Unrealized gains on investments — — — 72,875 — — 72,875
Net loss — — — — — (808,503) (808,503)
Balance, June 30, 2020 47,913,115 $ 51,325 $ 30,106,383 $ (3,070,095) $ (5,353,019) $ 23,531,302 $ 45,265,896
Stock based compensation — — 101,745 — — — 101,745
Stock issued in settlement of RSUs 46,467 46 (46) — — — —
Foreign currency translation — — — 233,170 — — 233,170
Unrealized losses on investments — — — (36,840) — — (36,840)
Net loss — — — — — (1,057,748) (1,057,748)
Balance, September 30, 2020 $ 47,959,582 $ 51,371 $ 30,208,082 $ (2,873,765) $ (5,353,019) $ 22,473,554 $ 44,506,223


PROFIRE ENERGY, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)
	For the Three Months Ended March 31,
	2022		2021
OPERATING ACTIVITIES
Net income (loss)	$	627,161	$	(601,500)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization expense	281,119		293,615
Gain on sale of property and equipment	(95,842)		(73,901)
Bad debt expense	28,453		(3,084)
Stock awards issued for services	138,503		125,043
Changes in operating assets and liabilities:
Accounts receivable	(1,663,295)		974,602
Income taxes receivable/payable	439,034		(94,597)
Inventories	(530,568)		342,980
Prepaid expenses and other current assets	49,283		906,459
Deferred tax asset/liability	47,030		(707)
Accounts payable and accrued liabilities	(513,227)		(48,245)
Net Cash Provided by (Used in) Operating Activities	(1,192,349)		1,820,665

INVESTING ACTIVITIES
Proceeds from sale of property and equipment	112,982		27,784
Sale (purchase) of investments	679,636		(438,830)
Purchase of property and equipment	(207,848)		(57,825)

Net Cash Provided by (Used in) Investing Activities	584,770		(468,871)

FINANCING ACTIVITIES
Value of equity awards surrendered by employees for tax liability	(91,098)		(26,629)

Purchase of treasury stock	(622,263)		—
Principal paid towards lease liability	(12,629)		(11,227)
Net Cash Used in Financing Activities	(725,990)		(37,856)

Effect of exchange rate changes on cash	24,766		13,179

NET CHANGE IN CASH	(1,308,803)		1,327,117
CASH AT BEGINNING OF PERIOD	8,188,270		9,148,312
CASH AT END OF PERIOD	$	6,879,467	$	10,475,429

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

CASH PAID FOR:
Interest	$	697	$	1,936
Income taxes	$	—	$	��
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.

PROFIRE ENERGY, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)
For the Nine Months Ended September 30,
2021 2020
OPERATING ACTIVITIES
Net loss $ (906,420) $ (2,231,515)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization expense 971,712 860,028
Gain on sale of fixed assets (144,078) (193,938)
Bad debt expense 2,622 182,179
Stock awards issued for services 474,881 351,943
Changes in operating assets and liabilities:
Accounts receivable (904,325) 3,404,439
Income taxes receivable/payable (606,128) (404,304)
Inventories 946,865 714,245
Prepaid expenses and other current assets 532,519 43,099
Deferred tax asset/liability 49,851 44,840
Accounts payable and accrued liabilities 540,322 (2,648,339)
Net Cash Provided by Operating Activities 957,821 122,677
INVESTING ACTIVITIES
Proceeds from sale of property and equipment 101,169 16,313
Sale (purchase) of investments (881,588) 1,814,070
Purchase of property and equipment (138,562) (1,146,400)
Net Cash Provided by (Used in) Investing Activities (918,981) 683,983
FINANCING ACTIVITIES
Value of equity awards surrendered by employees for tax liability (42,829) (148,879)
Cash received in exercise of stock options 2,673 2,020
Principal paid towards lease liability (31,911) (45,965)
Net Cash Used in Financing Activities (72,067) (192,824)
Effect of exchange rate changes on cash 14,331 (53,147)
NET CHANGE IN CASH (18,896) 560,689
CASH AT BEGINNING OF PERIOD 9,148,312 7,358,856
CASH AT END OF PERIOD $ 9,129,416 $ 7,919,545
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
CASH PAID FOR:
Interest $ 2,689 $ 4,946
Income taxes $ 17,150 $ 402,510
NON-CASH FINANCING AND INVESTING ACTIVITIES
Common stock issued in settlement of accrued bonuses $ — $ 419,373

~~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 ~~and nine~~ months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~

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 (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations, stockholders' equity, and cash flows at ~~September 30, 2021~~March 31, 2022 and for all periods presented herein have been made.

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, ~~2020~~2021 ("Form 10-K"). The results of operations for the ~~three and nine-month~~three-month periods ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~ 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 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					As of
		September 30, 2021		December 31, 2020			March 31, 2022		December 31, 2021
Raw materials	Raw materials	$	468,855	$	328,772	Raw materials	$	264,861	$	301,320
Finished goods	Finished goods	7,917,491		9,229,298		Finished goods	8,023,220		7,556,048

Subtotal	Subtotal	8,386,346		9,558,070		Subtotal	8,288,081		7,857,368
Reserve for obsolescence	Reserve for obsolescence	(913,596)		(1,143,298)		Reserve for obsolescence	(543,157)		(672,120)
Total	Total	$	7,472,750	$	8,414,772	Total	$	7,744,924	$	7,185,248

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

For the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~

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					As of
		September 30, 2021		December 31, 2020			March 31, 2022		December 31, 2021
Assets classified as held for sale	Assets classified as held for sale	$	—	$	623,805	Assets classified as held for sale	$	84,996	$	—
Prepaid inventory	Prepaid inventory	534,897		542,313		Prepaid inventory	592,209		530,725
Prepaid insurance	Prepaid insurance	315,327		217,465		Prepaid insurance	157,029		228,849
Interest receivables	Interest receivables	64,722		65,984		Interest receivables	60,449		63,841
Vehicle trade-in credits		1,359		55,733

Other	Other	268,412		173,128		Other	172,116		201,861
Total	Total	$	1,184,717	$	1,678,428	Total	$	1,066,799	$	1,025,276

In the table above, the assets classified as "held for sale" consisted of an office and storage building located in ~~Spruce Grove, Alberta, Canada. During~~Greeley, Colorado. We entered into a contract to sell this building on February 14, 2022. The sale closed on April 13, 2022 at which time, we received cash proceeds from the ~~nine months ended September 30, 2021, we sold the remaining 3 bays that were part~~sale of ~~the office building, which resulted in a gain of $42,378 CAD that was recorded during the period.~~$299,837.

NOTE 5 – ACCRUED LIABILITIES

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


		As of					As of
		September 30, 2021		December 31, 2020			March 31, 2022		December 31, 2021
Employee-related payables	Employee-related payables	$	1,159,283	$	789,573	Employee-related payables	$	1,135,327	$	1,621,131
Deferred revenue						Deferred revenue	175,540		817
Inventory-related payables	Inventory-related payables	50,916		158,519		Inventory-related payables	82,295		67,027
Tax-related payables						Tax-related payables	73,790		37,880
Warranty liabilities	Warranty liabilities	44,248		71,852		Warranty liabilities	56,737		49,624
Other	Other	167,925		176,926		Other	171,237		95,869
Total	Total	$	1,422,372	$	1,196,870	Total	$	1,694,926	$	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 ~~7.6~~29.5 months.

The following table shows the components of financing lease cost:


		For the Three Months Ended September 30,				For the Nine Months Ended September 30,					For the Three Months Ended March 31,
Financing Lease Cost	Financing Lease Cost	2021		2020		2021		2020		Financing Lease Cost	2022		2021
Amortization of right-of-use assets	Amortization of right-of-use assets	$	9,811	$	11,567	$	31,014	$	45,064	Amortization of right-of-use assets	$	12,418	$	11,567
Interest on lease liabilities	Interest on lease liabilities	337		699		2,690		4,946		Interest on lease liabilities	696		699
Total financing lease cost	Total financing lease cost	$	10,148	$	12,266	$	33,704	$	50,010	Total financing lease cost	$	13,114	$	12,266

PROFIRE ENERGY, INC. AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

For the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~

The following table reconciles future minimum lease payments to the discounted finance lease liability:


Years ending December 31,	Years ending December 31,	Amount		Years ending December 31,	Amount
2021 - remaining		$	8,462
2022	2022	12,803		2022	$	19,068
2023	2023	—		2023	19,591
2024	2024	—		2024	17,960
2025	2025	—		2025	—
2026				2026	—
Thereafter	Thereafter	—		Thereafter	—
Total future minimum lease payments	Total future minimum lease payments	$	21,265	Total future minimum lease payments	$	56,619
Less: Amount representing interest	Less: Amount representing interest	338		Less: Amount representing interest	3,122
Present value of future payments	Present value of future payments	$	20,927	Present value of future payments	$	53,497
Current portion	Current portion	$	20,927	Current portion	$	22,096
Long-term portion	Long-term portion	$	—	Long-term portion	$	31,401

Because our office space leases are substantially all considered to be short-term, we have elected not to recognize them on our balance sheet under the short-term recognition exemption. During the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 and March 31, 2021, we recognized ~~$11,186~~$20,652 and ~~$46,448,~~$16,262, respectively, in short-term lease costs associated with office space leases.

NOTE 7 – STOCKHOLDERS' EQUITY

As of ~~September 30, 2021,~~March 31, 2022, and December 31, ~~2020,~~2021, the Company held ~~3,412,378~~4,586,540 and 4,076,909 shares of its common stock in treasury at a total cost of ~~$5,353,019,~~$6,729,856 and $6,107,593, respectively.

On September 15, 2021, the Company's board of directors 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. ~~Any~~All purchases under ~~the~~this program will be made at the discretion of management. The size and timing of ~~any~~ purchases ~~will depend~~depends on price, market and business conditions and other factors.

As of ~~September 30, 2021,~~March 31, 2022, the Company had ~~361,409~~373,956 restricted stock units ("RSUs"), ~~480,667 performance based restricted stock units,~~399,854 performance-based RSUs, and ~~931,700~~861,700 stock options outstanding with ~~$703,804~~$576,248 in remaining compensation expense to be recognized over the next ~~1.7~~1.5 years. See further details below about certain subsets of these outstanding equity-based awards.

2021 EIP and LTIP

On May 28, 2021, the Compensation Committee (the "Compensation Committee") of the Board of Directors of the Company (the “Board”) approved the 2021 Executive Incentive Plan (the “2021 EIP”) for Brenton W. Hatch, the Company’s Executive Chairman, Ryan W. Oviatt, the Company’s Co-CEO, Co-President, and CFO, Cameron M. Tidball, the Company’s Co-CEO and Co-President, Jay G. Fugal, the Company’s former Vice President of Operations, and Patrick D. Fisher, the Company’s Vice President of Product Development. The 2021 EIP ~~provides~~provided for the potential award of incentive compensation to the participants based on the Company’s financial performance in fiscal 2021. ~~If earned, the~~The incentive compensation ~~will be~~was payable in cash and stock, and the stock portion of the incentive compensation iswas intended to constitute an award under the Company’s 2014 Equity Incentive Plan, as amended (the “Plan”).

Under the terms of the 2021 EIP, each participating executive officer has been assigned a target incentive compensation amount for fiscal 2021. The target incentive compensation amount for Mr. Hatch is $200,000, the target incentive compensation amount for Mr. Oviatt is $150,000, the target incentive compensation amount for Mr. Tidball is $150,000, the target incentive compensation for Mr. Fugal is $54,000, and the target incentive compensation for Mr. Fisher is $51,000 CAD. Under no circumstance can the participants receive more than two times the assigned target incentive compensation.

Participants ~~will be~~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 ~~are~~were based on the Company’s total revenue, EBITDA, and a non-financial milestone relating to revenue source diversification. Each of these performance goals ~~will be~~were weighted one third in calculating incentive compensation amounts.

PROFIRE ENERGY, INC. AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

For the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~

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 ~~if any, will be~~were 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~~resulted in the Compensation Committee ~~upon the completion~~approving a one-time bonus for company executives that was settled by issuing a total of ~~fiscal 2021 and paid by~~182,626 shares of common stock, or 120,097 shares net of tax withholding. These shares were fully vested as of March ~~15, 2022, subject to all applicable tax withholding.~~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 ~~restricted stock units (“Units”)~~RSUs to Mr. Oviatt, up to 204,543 ~~Units~~RSUs to Mr. Tidball, up to 85,908 ~~Units~~RSUs to Mr. Fugal, and up to 47,973 ~~Units~~RSUs to Mr. Fisher, pursuant to ~~two~~2 separate restricted stock unit award agreements (collectively, the ~~“Restricted~~“2021 LTIP Restricted Stock Unit Award Agreements”) between the Company and each participant. One agreement covers 33% of each award recipient’s ~~Units~~RSUs that are subject to time-based vesting, and the other agreement covers the remaining 67% of such award recipient’s ~~Units~~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 2021 LTIP began on January 1, 2021 and terminates on December 31, 2023 (the ~~“Performance~~“2021 LTIP Performance Vesting Date”).

The ~~Units~~RSUs subject to time-based vesting, including 68,181 ~~Units~~RSUs to Mr. Oviatt, 68,181 ~~Units~~RSUs for Mr. Tidball, 28,636 ~~Units~~RSUs to Mr. Fugal, and 15,991 ~~Units~~RSUs to Mr. Fisher, will vest in three equal annual installments beginning December 31, 2021 and ending on December 31, 2023 if the award recipients’ employment continues with the Company through such dates.

The performance-vesting ~~Units,~~RSUs, including up to 136,362 ~~Units~~RSUs for Mr. Oviatt, 136,362 ~~Units~~RSUs for Mr. Tidball, 57,272 ~~Units~~RSUs for Mr. Fugal, and 31,982 ~~Units~~RSUs to Mr. Fisher, are eligible to vest over a three-year performance period beginning January 1, 2021 ~~(the “Performance Period”)~~ based upon the following Company performance metrics:

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 ~~Units,~~RSUs, consisting of 45,454 ~~Units~~RSUs for Mr. Oviatt, 45,454 ~~Units~~RSUs for Mr. Tidball, 19,091 ~~Units~~RSUs for Mr. Fugal, and 10,661 ~~Units~~RSUs for Mr. Fisher, are eligible to vest for each of the 3 performance metrics identified in the table above. The number of ~~Units~~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 Units relating to such performance metric will vest;

•if the “Target” level (but no higher level) for such performance metric is achieved, 50% of the Units 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 Units relating to such performance metric will vest; and

•if the “Outstanding” level for such performance metric is achieved, 100% of the Units 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 ~~will~~did not ~~be eligible to~~ receive incentive compensation under the 2021 EIP and will not receive incentive compensation under the 2021 LTIP, and his unvested ~~restricted stock units will be~~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 ~~has~~ filed as an exhibits to its quarterly report on Form 10-Q for the quarter ended June 30, 2021.

~~2020 EIP and LTIP~~

Due to economic uncertainties including those caused by the COVID-19 pandemic, the Board, with the support of the Company's executives, elected not to adopt an executive incentive plan ("2020 EIP") or long-term incentive plan ("2020

1110

PROFIRE ENERGY, INC. AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

For the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~

LTIP") for 2020. The Board and executives believed this was an appropriate short-term measure that helped align the Company's cost structure with the extraordinary conditions that affected the industry in which we operate.

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 ~~Unit~~ 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 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 $216,000 to be recognized over the vesting period.

~~2020 RSUs~~

On June 17, 2020, pursuant to the annual renewal of director compensation, the Board approved a grant of 270,966 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 on June 17, 2021. The awards resulted in a total compensation expense of $209,999, post forfeitures, which was recognized over the vesting period.

Mr. Arlen B. Crouch resigned from his position as a member of the Board, effective August 3, 2020. Mr. Crouch’s resignation did not result from any disagreements with management or the Board. On the effective date of Mr. Crouch's resignation, all of his unvested RSUs were forfeited. The related compensation expense associated with Mr. Crouch's unvested RSUs was recaptured. On July 30, 2020, the Board appointed Colleen Larkin Bell to serve as a director to fill the vacancy resulting from Mr. Crouch’s resignation, effective August 3, 2020. Ms. Bell was also appointed as Chair of the Nominating Committee and as a member of the Audit and Compensation Committees. As part of her compensation for her service as a director and committee member, on August 21, 2020, the Board approved a grant of 92,934 RSUs. Half of the RSUs vested immediately on the date of the grant and the remaining 50% of the RSUs vested on June 16, 2021. The awards resulted in a total compensation expense of $72,953 which was recognized over the vesting period.

~~2020 Stock Options~~

On March 17, 2020 (the "March Grant Date"), the Board approved a grant of options to purchase 115,200 shares of the Company's common stock at a strike price of $0.81 to various employees (the "March 2020 Options"). The March 2020 Options terminate four years from the March Grant Date and become exercisable as to one-third of the shares of common stock covered thereby on each anniversary of the March Grant Date for the next three years following the March Grant Date. The March 2020 Options resulted in a total compensation expense of $40,280.

On July 2, 2020 (the "July Grant Date"), upon the recommendation of the Compensation Committee, the Board approved the grant of a non-qualified stock option to purchase 100,000 shares of the Company’s common stock to each of Mr. Oviatt and Mr. Tidball under the Plan and pursuant to the standard form of notice of stock option grant and stock option agreement under the Plan (the “July 2020 Options”). The exercise price of the July 2020 Options is equal to the closing bid price of the Company's common stock on July 2, 2020, or $0.8439 per share. The July 2020 Options vest equally over a period of three years from the July Grant Date. Vesting occurs on the anniversary date of the July Grant Date, with one-third of the total shares vesting on each of the next three anniversaries of the July Grant Date. Vesting is contingent upon the executive’s continued employment with the Company on each applicable vesting date. The July 2020 Options expire on July 2, 2024. The July 2020 Options will result in a total compensation expense of $79,431 to be recognized over the vesting period.

~~PROFIRE ENERGY, INC. AND SUBSIDIARIES~~

~~Notes to the Condensed Consolidated Financial Statements~~

~~For the three and nine months ended September 30, 2021 and 2020~~

On August 21, 2020 (the "August Grant Date"), the Board approved a grant of options to purchase 630,000 shares of the Company's common stock at a strike price of $0.785 to various employees (the "August 2020 Options"). The August 2020 Options terminate four years from the August Grant Date and become exercisable as to one-third of the shares of common stock covered thereby on each anniversary of the August Grant Date for the next three years following the August Grant Date. The August 2020 Options will result in a total compensation expense of $233,111 to be recognized over the vesting period.

NOTE 8 – REVENUE

Performance Obligations

Our performance obligations include providing product and servicing our product. 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 N~~ote~~Note 5 for the amount accrued for expected returns and warranty claims as of ~~September 30, 2021.~~March 31, 2022.

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. ~~We also did~~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 ~~material~~other contract ~~liabilities because we typically do not receive payments in advance of recognizing revenue.~~liability balances.

PROFIRE ENERGY, INC. AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

For the three months ended March 31, 2022 and 2021

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,					For the Three Months Ended March 31,
		2021		2020		2021		2020			2022		2021
Electronics	Electronics	$	2,327,854	$	1,406,681	$	6,196,529	$	5,708,436	Electronics	$	3,478,112	$	1,851,799
Manufactured	Manufactured	346,952		139,057		908,592		682,149		Manufactured	521,128		236,810
Re-Sell	Re-Sell	3,621,930		1,971,542		9,223,689		7,986,792		Re-Sell	4,879,183		2,568,926
Service	Service	646,462		482,826		1,741,020		1,429,350		Service	624,717		434,814
Total Revenue	Total Revenue	$	6,943,198	$	4,000,106	$	18,069,830	$	15,806,727	Total Revenue	$	9,503,140	$	5,092,349

~~PROFIRE ENERGY, INC. AND SUBSIDIARIES~~

~~Notes to the Condensed Consolidated Financial Statements~~

~~For the three and nine months ended September 30, 2021 and 2020~~

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,											For the Three Months Ended March 31,
		2021					2020						2022					2021
		Income (Numerator)		Weighted Average Shares (Denominator)	Per-Share Amount		Loss (Numerator)		Weighted Average Shares (Denominator)	Per-Share Amount			Income (Numerator)		Weighted Average Shares (Denominator)	Per-Share Amount		Loss (Numerator)		Weighted Average Shares (Denominator)	Per-Share Amount
Basic EPS	Basic EPS											Basic EPS
Net income (loss) available to common stockholders	Net income (loss) available to common stockholders	$	92,246	48,239,236	$	—	$	(1,057,748)	47,933,318	$	(0.02)	Net income (loss) available to common stockholders	$	627,161	47,481,439	$	0.01	$	(601,500)	47,990,101	$	(0.01)

Effect of Dilutive Securities	Effect of Dilutive Securities											Effect of Dilutive Securities
Stock options & RSUs	Stock options & RSUs	—		1,089,572			—		—			Stock options & RSUs	—		1,054,979			—		—

Diluted EPS	Diluted EPS											Diluted EPS
Net income (loss) available to common stockholders + assumed conversions	Net income (loss) available to common stockholders + assumed conversions	$	92,246	49,328,808	$	—	$	(1,057,748)	47,933,318	$	(0.02)	Net income (loss) available to common stockholders + assumed conversions	$	627,161	48,536,418	$	0.01	$	(601,500)	47,990,101	$	(0.01)

Stock options to purchase and RSUs to vest totaling ~~527,904~~1,339,450 shares of common stock at a weighted average price of ~~$0.83~~$1.15 per share were outstanding during the three months ended ~~September 30, 2020,~~March 31, 2021, but were not included in the computation of diluted EPS because the impact of these shares would be antidilutive. These options ~~which expire between March 2021~~ and ~~March 2024, were still outstanding at September 30, 2020.~~

For the Nine Months Ended September 30,
2021 2020
Loss (Numerator) Weighted Average Shares (Denominator) Per-Share
Amount Loss (Numerator) Weighted Average Shares (Denominator) Per-Share
Amount
Basic EPS
Net loss available to common stockholders $ (906,420) 48,095,404 $ (0.02) $ (2,231,515) 47,717,114 $ (0.05)
Effect of Dilutive Securities
Stock options & RSUs — — — —
Diluted EPS
Net loss available to common stockholders + assumed conversions $ (906,420) 48,095,404 $ (0.02) $ (2,231,515) 47,717,114 $ (0.05)

Stock options to purchase and RSUs to vest totaling 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.~~

Stock options to purchase and RSUs to vest totaling 666,714 shares of common stock at a weighted average price of $0.85 per share were outstanding during the nine months ended September 30, 2020, but were not included in the computation of diluted EPS because the impact of these shares would be antidilutive. These options, which expire between MarchApril 2021 and August 2024, were still outstanding at ~~September 30, 2020.~~March 31, 2021.

1412

PROFIRE ENERGY, INC. AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

For the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~

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,					For the Three Months Ended March 31,
Sales	Sales	2021		2020		2021		2020		Sales		2022		2021
Canada	Canada	$	1,825,056	$	755,701	$	3,688,878	$	2,365,118	Canada		$	1,997,251	$	828,445
United States	United States	5,118,142		3,244,405		14,380,952		13,441,609		United States		7,505,889		4,263,904
Total Consolidated	Total Consolidated	$	6,943,198	$	4,000,106	$	18,069,830	$	15,806,727	Total Consolidated		$	9,503,140	$	5,092,349

		For the Three Months Ended September 30,				For the Nine Months Ended September 30,					For the Three Months Ended March 31,
Profit (Loss)	Profit (Loss)	2021		2020		2021		2020		Profit (Loss)		2022		2021
Canada	Canada	$	(506,076)	$	(473,395)	$	(1,383,553)	$	(1,059,627)	Canada		$	(352,570)	$	(320,762)
United States	United States	598,322		(584,353)		477,133		(1,171,888)		United States		979,731		(280,738)
Total Consolidated	Total Consolidated	$	92,246	$	(1,057,748)	$	(906,420)	$	(2,231,515)	Total Consolidated		$	627,161	$	(601,500)

						As of						As of
Long-Lived Assets	Long-Lived Assets					September 30, 2021		December 31, 2020		Long-Lived Assets		March 31, 2022		December 31, 2021
Canada	Canada					$	5,765,817	$	6,049,790	Canada		$	5,680,731	$	5,667,225
United States	United States					5,655,959		6,022,115		United States		5,537,837		5,583,594
Total Consolidated	Total Consolidated					$	11,421,776	$	12,071,905	Total Consolidated		$	11,218,568	$	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.

~~Pursuant~~On April 6, 2022, the Compensation Committee approved the 2022 Executive Incentive Plan (the “EIP”) for, Ryan W. Oviatt, Cameron M. Tidball, and Patrick D. Fisher. The 2022 EIP provides for the potential award of incentive compensation to the ~~board~~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 ~~directors approval~~the incentive compensation is intended to constitute an award under 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 ~~share repurchase program allowing~~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.

PROFIRE ENERGY, INC. AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

For the three months ended March 31, 2022 and 2021

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 2 separate restricted stock unit award agreements (collectively, the “2022 LTIP Restricted Stock Unit Award Agreements”) to be entered between the Company and each participant. One such agreement will cover 33% of each award recipient’s RSUs that are subject to ~~repurchase up~~time-based vesting, and the other such agreement will cover 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 ~~$2,000,000 worth~~receive one share of the Company’s common stock ~~from time~~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~~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 ~~September 30,~~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 over a 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

88.7%

135.8%

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%

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 Units 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 this Form 10-Q for the quarter ending March 31, 2022.

Stock Repurchase

During the period beginning April 1, 2022 and ended May 2, 2022, the Company ~~entered in to a 10b5-1 Plan in September of 2021. After an initial 30-day cooling off period the Company began purchasing~~repurchased 142,683 shares of its common stock for a total repurchase price of $188,526 pursuant to ~~the terms of the 10b5-1 Plan in October of 2021. The Company is not obligated to make any purchases and the program may be suspended or discontinued~~its previously authorized repurchase program. All repurchases were made at ~~any time.~~

market rates.

1514

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~~three-month periods ended ~~September 30, 2021~~March 31, 2022 and ~~2020.~~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, ~~2020.~~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,~~industry. However, in recent years, we have commenced identifying applications and completed several installations in other industries where we believe our solutions will be applicable as we expand our addressable market over time. 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.

1615

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 ~~enables us to provide~~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~~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 ~~proscribed~~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, ~~(E&P),~~ midstream operators, pipeline operators, as well as downstream transmission and utility providers. Our customers include, Antero, ATCO, ~~Cenovus,~~ Chevron, CNRL, Concho Resources, Devon Energy, Dominion Energy, EQT, ~~Hess, Pioneer Natural~~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 the broader combustion industries.

Environmental, Social and Governance Focus

As guiding principles and core to our strategy, 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 ~~key~~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. ~~Our~~Providing our customers with safety-approved and certified technology, ~~which is~~ 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.

1716

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. ~~The use~~Integration of ~~these systems~~our solutions and products helps our customers increase the likelihood that their employees ~~perform their jobs safely and~~ return home safe each day. Adding greater physical distance between humans and the combustion process, as well as ensuring gas supplies are properly ~~shutoff~~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:


		For the three months ended																For the three months ended
		September 30, 2021			June 30, 2021			March 31, 2021			December 31, 2020			September 30, 2020				March 31, 2022			December 31, 2021			September 30, 2021			June 30, 2021			March 31, 2021
Total Revenues	Total Revenues	$	6,943,198		$	6,034,283		$	5,092,349		$	5,651,883		$	4,000,106		Total Revenues	$	9,503,140		$	8,286,346		$	6,943,198		$	6,034,283		$	5,092,349
Gross Profit Percentage	Gross Profit Percentage	44.9		%	44.0		%	42.7		%	48.8		%	38.0		%	Gross Profit Percentage	47.9		%	41.6		%	44.9		%	44.0		%	42.7		%
Operating Expenses	Operating Expenses	$	3,437,757		$	3,252,169		$	2,978,912		$	2,762,437		$	2,849,921		Operating Expenses	$	3,867,710		$	3,747,177		$	3,437,757		$	3,252,169		$	2,978,912
Loss from Operations		$	(318,289)		$	(594,437)		$	(804,225)		$	(8,200)		$	(1,329,498)
Income (loss) from Operations																	Income (loss) from Operations	$	688,994		$	(298,049)		$	(318,289)		$	(594,437)		$	(804,225)
Net Income (Loss)	Net Income (Loss)	$	92,246		$	(397,166)		$	(601,500)		$	55,918		$	(1,057,748)		Net Income (Loss)	$	627,161		$	(145,123)		$	92,246		$	(397,166)		$	(601,500)
Operating Cash Flow	Operating Cash Flow	$	(598,001)		$	(264,843)		$	1,820,665		$	141,723		$	(724,342)		Operating Cash Flow	$	(1,192,349)		$	(308,894)		$	(598,001)		$	(264,843)		$	1,820,665

Revenues for the quarter ended ~~September 30, 2021,~~March 31, 2022, increased by ~~74%~~87% or ~~$2,943,092~~$4,410,791 compared to the quarter ended ~~September 30, 2020,~~March 31, 2021, which was ~~mostly~~ driven by improved customer demand associated with ~~modest~~industry recoveries from the COVID-19 pandemic, a significant rise in oil prices, and ~~associated macro industry challenges.~~an increase in rig counts. The average oil price during the three months ended ~~September 30, 2021,~~March 31, 2022, was ~~$70.58~~$95.18 per barrel compared to ~~$40.89~~$58.09 per barrel for the same period of last year, representing an increase of ~~73%~~64%. Additionally, the ~~third~~first quarter of ~~2021~~2022 weekly average rig count for North America was ~~634~~816 compared to ~~287~~522 in the same period of last year, which represents an increase of ~~121%~~56%. ~~Although oil prices have recovered from~~Customer demand increased during the ~~historic lows of 2020, which were caused by a flood of supply from Russia and Saudi Arabia and a dramatic drop~~quarter ended March 31, 2022, in ~~global demand due~~response to the COVID-19 pandemic, the operating environment in the third quarter of 2021 continued to be characterized by uncertainty surrounding economic recovery from the COVID-19 pandemic and geopolitical factors. This uncertainty continued to create strain in oil supply and demand dynamics. As a result of these extraordinary macro pressures and uncertainties, exploration and production companies remain cautious and have not invested in new production at the same pace as they did prior to the pandemic when oil prices were last at their current levels. Until our customers return to higher capital expenditure levels, our business is likely to continue to be adversely affected.industry trends.

Our gross profit margin for the ~~third~~first quarter of ~~2021~~2022 was up ~~6.9%~~5.2% from the same quarter of last ~~year but was below our historically expected range.~~year. The gross margin percentage normally fluctuates each quarter due to changes in product mix and product related reserves, which ~~contributed to~~impacted the ~~change in~~most recently concluded quarter. The gross ~~profit~~ margin ~~for~~of the ~~third~~first quarter of ~~2021. During~~2022 also benefited from greater fixed cost coverage from the ~~third quarter of 2021, a smaller portion of our revenue was generated from service work which also contributed to the~~significant increase in ~~profit margin compared to the same quarter last year. Fixed costs will continue to impact our gross profit margin until revenues recover.~~revenue over prior quarters.

Operating expenses increased ~~$587,836~~$888,798 from the same quarter of last year, which is primarily a result of increases in employee related costs and travel ~~expense~~expenses as we unwound the significant cost reduction measures implemented in 2020 and 2021 in response to the COVID-19 pandemic and the resulting oil market supply and demand dynamics.

Due to the factors discussed above, we reported income from operations of $688,994 for the quarter ended March 31, 2022, compared to a ~~net~~ loss from operations of ~~$318,289 for the quarter ended September 30, 2021, compared to a net loss from operations of $1,329,498~~$804,225 for the same quarter in ~~2020.~~

During 2021, the Company engaged tax consultants to advise on the Company's transfer pricing policies between its US and Canadian subsidiaries. Updates were made to the Company's transfer pricing approach in the third quarter of 2021, which has

~~allowed for the recognition of a portion of the total tax loss carryforwards in its Canadian subsidiary. We anticipate fully utilizing these tax losses in the coming years before they expire.~~2021.

Due to the combination of factors discussed above relating to revenues, gross profit margin and operating ~~losses and recognition of tax loss carry forwards,~~expenses, we reported net income of ~~$92,246~~$627,161 for the quarter ended ~~September 30, 2021,~~March 31, 2022, compared to a net loss of ~~$1,057,748~~$601,500 for the same quarter in ~~2020.~~2021.

Operating cash flows ~~increased~~decreased during the ~~third~~first quarter of ~~2021~~2022 compared to the ~~third~~first quarter of ~~2020,~~2021, due primarily to changes in working capital balances, including increases in customer accounts receivable and inventory and a decrease in accounts payable and ~~inventory.~~

The global COVID-19 pandemic continued to impact our business during the third quarter of 2021 and will likely continue to impact our business in future quarters. However, we remain optimistic that our results of operations will improve as vaccine distribution continues and a larger percentage of the population becomes immune to infection, which we anticipate will result in improved global economic conditions and greater demand for oil and gas.

~~Comparison of the nine months ended September 30, 2021 and 2020~~

~~The table below presents certain financial data comparing the nine months ended September 30, 2021 to the same period ended September 30, 2020:~~
For the Nine Months Ended September 30,
2021 2020 $ Change % Change
Total Revenues $ 18,069,830 $ 15,806,727 $ 2,263,103 14.3 %
Gross Profit Percentage 44.0 % 42.8 % 1.2 %
Operating Expenses $ 9,668,838 $ 9,843,975 $ (175,137) (1.8) %
Loss from Operations $ (1,716,951) $ (3,072,011) $ 1,355,060 (44.1) %
Net Loss $ (906,420) $ (2,231,515) $ 1,325,095 (59.4) %
Operating Cash Flow $ 957,821 $ 122,677 $ 835,144 680.8 %

Revenues during the nine-month period ended September 30, 2021, increased 14.3% compared to the same period of last year. The increase in revenue was largely due to ongoing improvements in the economic recovery from the COVID-19 pandemic and higher oil and gas prices. Our gross profit percentage increased slightly by 1.2% during the nine months ended September 30, 2021, compared to the same period in 2020, primarily due to changes in product mix, direct labor costs, inventory adjustments and the fixed cost structure within cost of goods and services. Operating expenses decreased 1.8% year-over-year due to our focus on cost control measures in the last nine months of 2020. Due to improvements in revenue, a slight reduction in operating costs, and realization of tax benefits related to prior tax losses in our Canadian subsidiary, we recognized a net loss of $906,420 for the nine months ended September 30, 2021, compared to a net loss of $2,231,515 for the same period in 2020.accrued liabilities.

Liquidity and Capital Resources

Working capital at ~~September 30, 2021~~March 31, 2022 was ~~$21,993,779,~~$21,181,782, compared to ~~$23,420,475~~$20,510,600 at December 31, ~~2020.~~2021.

Our liquidity position is impacted by operating, investing and financing activities. During the ~~nine~~three months ended ~~September 30, 2021,~~March 31, 2022, we ~~generated $957,821~~used $1,192,349 of ~~positive~~ cash ~~flow from~~in operating activities, primarily due to ~~cash received from selling the remaining bays from our old office building in Canada and from changes in inventory levels, which was partially offset by the impact of changes~~a large increase in accounts receivable driven by strong sales, particularly towards the end of the quarter, and ~~income tax accounts.~~an increase in inventory, due to our strategic investment approach to mitigate certain supply chain challenges. We expect to collect accounts receivable balances and convert inventory supply into sales during the remainder of 2022. Operating activity trends consist of cash inflows and outflows related to changes in operating assets and liabilities. During the ~~nine~~three months ended ~~September 30, 2021,~~March 31, 2022, we ~~used $918,981~~generated $584,770 of cash infrom investing activities, primarily due to the ~~reinvestment~~sale of ~~cash from~~certain financial ~~investment maturities in our bond and CD portfolio.~~investments. 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~~three months ended ~~September 30, 2021,~~March 31, 2022, we used ~~$72,067~~$725,990 of cash in financing activities, primarily related to ~~equity awards issued to management.~~purchases of treasury stock during the quarter. Financing activity trends consist of transactions related to equity awards and purchases ~~or sales~~ of treasury ~~stock. We did not purchase any treasury~~ stock ~~during the first nine months of 2021; however,~~pursuant to our ~~Board has authorized the~~open share repurchase ~~of up to $2 million of our common stock from time to time through September 30, 2022, at the discretion of management.~~program. The extent to which ~~the global COVID-19 pandemic will continue to affect~~ our liquidity position will ~~depend~~be impacted in the future depends on ~~future~~industry trends and developments, which are highly uncertain and

cannot be predicted with confidence. As of ~~September 30, 2021,~~March 31, 2022, we held ~~$18,489,882~~$15,186,373 of cash and investments that form our core excess liquidity which could be utilized, if required, due to the issues described above. See also Item 1A. Risk Factors for further discussion on the impact of COVID-19 on our business.

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, 2021.~~March 31, 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, 2021,~~March 31, 2022, that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

2018

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, ~~2020,~~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.~~The table below sets forth additional information regarding our share repurchases during the three months ended March 31, 2022:


Period	(a) Total Number of Shares Purchased	(b) Weighted Average Price Paid Per Share		(c) Total Number of Shares Purchased as Part of Publicly Announced Plans	(d) Maximum Dollar Value of Shares that May Yet Be Purchased Under the Plans
January	144,742	$	1.12	144,742	$	1,083,268
February	82,540	$	1.16	82,540	$	987,657
March	282,349	$	1.29	282,349	$	623,163
Total	509,631			509,631

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.

2119

Item 6. Exhibits

Exhibits. The following exhibits are included as part of this report:


Exhibit 10.1*			Profire Energy, Inc. 2022 Executive Incentive Plan

Exhibit 10.2*			Restricted Stock Unit Award Agreement (Performance Vesting) between Profire Energy and Ryan Oviatt dated April 6, 2022

Exhibit 10.3*			Restricted Stock Unit Award Agreement (Time Vesting) between Profire Energy and Ryan Oviatt dated April 6, 2022

Exhibit 10.4*			Restricted Stock Unit Award Agreement (Performance Vesting) between Profire Energy and Cameron Tidball dated April 6, 2022

Exhibit 10.5*			Restricted Stock Unit Award Agreement (Time Vesting) between Profire Energy and Cameron Tidball dated April 6, 2022

Exhibit 10.6*			Restricted Stock Unit Award Agreement (Performance Vesting) between Profire Energy and Patrick Fisher dated April 6, 2022

Exhibit 10.7*			Restricted Stock Unit Award Agreement (Time Vesting) between Profire Energy and Patrick Fisher dated April 6, 2022

Exhibit 31.1*			Certification of Co-Principal Executive Officer Pursuant to Rule 13a-14(a) Ryan W. Oviatt

Exhibit 31.2*			Certification of Co-Principal Executive Officer Pursuant to Rule 13a-14(a) Cameron M. Tidball

Exhibit 31.3*			Certification of Principal Financial Officer Pursuant to Rule 13a-14(a)

Exhibit 32.1*			Certification of Principal Executive Officers pursuant to 18 U.S.C. Section 1350

Exhibit 32.2*			Certification of Ryan W. Oviatt, Principal Financial Officer pursuant to 18 U.S.C. Section 1350

Exhibit 101.INS*			XBRL Instance Document

Exhibit 101.SCH*			XBRL Taxonomy Extension Schema Document

Exhibit 101.CAL*			XBRL Taxonomy Extension Calculation Linkbase Document

Exhibit 101.DEF*			XBRL Taxonomy Definition Linkbase Document

Exhibit 101.LAB*			XBRL Taxonomy Extension Label Linkbase Document

Exhibit 101.PRE*			XBRL Taxonomy Extension Presentation Linkbase Document

* Filed herewith

SIGNATURES

~~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.


			PROFIRE ENERGY, INC.

Date:	~~November~~May 3, ~~2021~~2022	By:	/s/ Ryan W. Oviatt
			Ryan W. Oviatt
			Co-Chief Executive Officer and Chief Financial Officer


Date:	~~November~~May 3, ~~2021~~2022	By:	/s/ Cameron M. Tidball
			Cameron M. Tidball
			Co-Chief Executive Officer

2321