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	~~June 30, 2023~~March 31, 2024
☐	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)

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

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 ~~August 8, 2023,~~May 7, 2024, the registrant had ~~52,659,763~~53,344,595 shares of common stock issued and ~~47,574,560~~47,101,232 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~~Income 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		18

Item 3. Quantitative and Qualitative Disclosure about Market Risk		2221

Item 4. Controls and Procedures		2221

PART II — OTHER INFORMATION

Item 1. Legal Proceedings		2322

Item 1A. Risk Factors		2322

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		2322

Item 3. Defaults Upon Senior Securities		2322

Item 4. Mine Safety Disclosures		2322

Item 5. Other Information		2322

Item 6. Exhibits		2423

Signatures		24

PART I. FINANCIAL INFORMATION

Item 1 Financial Information

PROFIRE ENERGY, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

As of

June 30, 2023

December 31, 2022

As of

March 31, 2024

December 31, 2023

ASSETS

(Unaudited)

CURRENT ASSETS

Cash and cash equivalents

8,246,092

7,384,578

Short-term investments

1,896,397

1,154,284

Accounts receivable, net

13,987,743

10,886,145

Inventories, net (note 3)

13,016,192

10,293,980

Prepaid expenses and other current assets (note 4)

2,399,676

2,314,639

Total Current Assets

39,546,100

32,033,626

Total Current Assets

LONG-TERM ASSETS

Net deferred tax asset

Long-term investments

7,212,652

7,503,419

Financing lease right-of-use asset

156,943

120,239

Lease right-of-use asset (note 6)

Property and equipment, net

10,627,702

10,423,964

Intangible assets, net

1,182,859

1,268,907

Goodwill

2,579,381

Total Long-Term Assets

21,759,537

21,895,910

TOTAL ASSETS

61,305,637

53,929,536

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES

Accounts payable

2,120,546

2,955,506

Accounts payable

Accrued liabilities (note 5)

4,374,628

3,573,994

Current financing lease liability (note 6)

66,229

53,646

Current lease liability (note 6)

Income taxes payable

887,647

205,169

Total Current Liabilities

7,449,050

6,788,315

LONG-TERM LIABILITIES

Net deferred income tax liability

694,429

488,858

Long-term financing lease liability (note 6)

92,511

67,883

Net deferred income tax liability

Long-term lease liability (note 6)

TOTAL LIABILITIES

8,235,990

7,345,056

STOCKHOLDERS' EQUITY (note 7)

Preferred stock: $0.001 par value, 10,000,000 shares authorized: no shares issued or outstanding

—

Common stock: $0.001 par value, 100,000,000 shares authorized: 52,659,763 issued and 47,574,560 outstanding at June 30, 2023, and 52,143,901 issued and 47,105,771 outstanding at December 31, 2022

52,662

52,144

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: 53,337,589 issued and 47,094,226 outstanding at March 31, 2024, and 53,047,231 issued and 46,803,868 outstanding at December 31, 2023

Treasury stock, at cost

(7,394,281)

(7,336,323)

Additional paid-in capital

32,514,997

31,737,843

Accumulated other comprehensive loss

(2,976,198)

(3,294,873)

Retained earnings

30,872,467

25,425,689

TOTAL STOCKHOLDERS' EQUITY

53,069,647

46,584,480

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

61,305,637

53,929,536

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

											PROFIRE ENERGY, INC. AND SUBSIDIARIES	Condensed Consolidated Statements of Income and Comprehensive Income (Loss)
PROFIRE ENERGY, INC. AND SUBSIDIARIES
PROFIRE ENERGY, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Income and Comprehensive Income											Condensed Consolidated Statements of Income and Comprehensive Income
(Unaudited)
			For the Three Months Ended June 30,				For the Six Months Ended June 30,
			2023		2022		2023		2022
					(See Note 1)				(See Note 1)
		For the Three Months Ended March 31,
			2024
			2024
			2024
					(See Note 1)
					(See Note 1)
					(See Note 1)
REVENUES (note 8)
REVENUES (note 8)
REVENUES (note 8)	REVENUES (note 8)
Sales of products, net	Sales of products, net		$	13,602,884	$	8,860,682	$	27,231,396	$	17,739,105
Sales of products, net
Sales of products, net
Sales of services, net	Sales of services, net		840,693		772,465		1,765,643		1,397,182
Sales of services, net
Sales of services, net
Total Revenues
Total Revenues
Total Revenues	Total Revenues		14,443,577		9,633,147		28,997,039		19,136,287

COST OF SALES	COST OF SALES
Cost of sales - product			6,270,174		4,530,065		12,244,513		8,912,764

COST OF SALES

COST OF SALES
Cost of sales - products
Cost of sales - products
Cost of sales - products
Cost of sales - services	Cost of sales - services		758,958		699,937		1,504,972		1,263,674
Cost of sales - services
Cost of sales - services
Total Cost of Sales
Total Cost of Sales
Total Cost of Sales	Total Cost of Sales		7,029,132		5,230,002		13,749,485		10,176,438

GROSS PROFIT	GROSS PROFIT		7,414,445		4,403,145		15,247,554		8,959,849

GROSS PROFIT

GROSS PROFIT

OPERATING EXPENSES

OPERATING EXPENSES

OPERATING EXPENSES	OPERATING EXPENSES
General and administrative	General and administrative		3,792,127		3,786,561		7,840,093		7,178,938
General and administrative
General and administrative
Research and development
Research and development
Research and development	Research and development		258,317		362,197		594,769		670,512
Depreciation and amortization	Depreciation and amortization		140,093		159,580		282,981		326,597
Depreciation and amortization
Depreciation and amortization
Total Operating Expenses
Total Operating Expenses
Total Operating Expenses	Total Operating Expenses		4,190,537		4,308,338		8,717,843		8,176,047

INCOME FROM OPERATIONS	INCOME FROM OPERATIONS		3,223,908		94,807		6,529,711		783,802

INCOME FROM OPERATIONS

INCOME FROM OPERATIONS

OTHER INCOME (EXPENSE)

OTHER INCOME (EXPENSE)

OTHER INCOME (EXPENSE)	OTHER INCOME (EXPENSE)
Gain on sale of assets	Gain on sale of assets		181,343		214,841		234,418		310,683
Gain on sale of assets
Gain on sale of assets
Other expense
Other expense
Other expense	Other expense		(36,866)		(337)		(46,423)		(18,420)
Interest income	Interest income		123,654		20,307		181,701		41,852
Interest income
Interest income
Interest expense
Interest expense
Interest expense	Interest expense		(854)		(17,612)		(1,787)		(18,308)
Total Other Income	Total Other Income		267,277		217,199		367,909		315,807
Total Other Income
Total Other Income

INCOME BEFORE INCOME TAXES

INCOME BEFORE INCOME TAXES

INCOME BEFORE INCOME TAXES	INCOME BEFORE INCOME TAXES		3,491,185		312,006		6,897,620		1,099,609

INCOME TAX EXPENSE	INCOME TAX EXPENSE		(634,028)		(27,177)		(1,450,842)		(187,619)

INCOME TAX EXPENSE

INCOME TAX EXPENSE

NET INCOME

NET INCOME

NET INCOME	NET INCOME		$	2,857,157	$	284,829	$	5,446,778	$	911,990

OTHER COMPREHENSIVE INCOME (LOSS)	OTHER COMPREHENSIVE INCOME (LOSS)
Foreign currency translation gain (loss)			$	278,328	$	(290,291)	$	272,804	$	(131,933)
Unrealized gains (losses) on investments			(30,416)		(134,662)		45,871		(421,788)

OTHER COMPREHENSIVE INCOME (LOSS)

OTHER COMPREHENSIVE INCOME (LOSS)
Foreign currency translation loss
Foreign currency translation loss
Foreign currency translation loss
Unrealized gains on investments
Unrealized gains on investments
Unrealized gains on investments
Total Other Comprehensive Income (Loss)
Total Other Comprehensive Income (Loss)
Total Other Comprehensive Income (Loss)	Total Other Comprehensive Income (Loss)		247,912		(424,953)		318,675		(553,721)

COMPREHENSIVE INCOME	COMPREHENSIVE INCOME		$	3,105,069	$	(140,124)	$	5,765,453	$	358,269

COMPREHENSIVE INCOME

COMPREHENSIVE INCOME

BASIC EARNINGS PER SHARE	BASIC EARNINGS PER SHARE		$	0.06	$	0.01	$	0.12	$	0.02

BASIC EARNINGS PER SHARE

BASIC EARNINGS PER SHARE
FULLY DILUTED EARNINGS PER SHARE
FULLY DILUTED EARNINGS PER SHARE
FULLY DILUTED EARNINGS PER SHARE	FULLY DILUTED EARNINGS PER SHARE		$	0.06	$	0.01	$	0.11	$	0.02

BASIC WEIGHTED AVG NUMBER OF SHARES OUTSTANDING	BASIC WEIGHTED AVG NUMBER OF SHARES OUTSTANDING		47,393,768		47,092,275		47,284,749		47,285,782

BASIC WEIGHTED AVG NUMBER OF SHARES OUTSTANDING

BASIC WEIGHTED AVG NUMBER OF SHARES OUTSTANDING
FULLY DILUTED WEIGHTED AVG NUMBER OF SHARES OUTSTANDING	FULLY DILUTED WEIGHTED AVG NUMBER OF SHARES OUTSTANDING		49,473,080		48,699,208		49,349,488		48,865,186
FULLY DILUTED WEIGHTED AVG NUMBER OF SHARES OUTSTANDING
FULLY DILUTED WEIGHTED AVG NUMBER OF SHARES OUTSTANDING

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

																		PROFIRE ENERGY, INC. AND SUBSIDIARIES																			Condensed Consolidated Statements of Stockholders' Equity			(Unaudited)
			Common Stock			Additional Paid-In Capital				Accumulated Other Comprehensive Income (Loss)		Treasury Stock		Retained Earnings		Total Stockholders' Equity
			Shares	Amount
Balance, December 31, 2022			47,105,771	$	52,144			$	31,737,843			$	(3,294,873)	$	(7,336,323)	$	25,425,689		$	46,584,480
		Common Stock																						Common Stock			Additional Paid-In Capital			Accumulated Other Comprehensive Income (Loss)			Treasury Stock			Retained Earnings			Total Stockholders' Equity
		Shares
Balance, December 31, 2023
Balance, December 31, 2023
Balance, December 31, 2023
Stock based compensation	Stock based compensation		—	—		223,047				—		—		—		223,047		Stock based compensation			—	—	—		197,443	197,443		—	—		—	—		—	197,443			197,443

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

Foreign currency translation	Foreign currency translation		—	—		—				(5,524)		—		—		(5,524)
Foreign currency translation
Foreign currency translation
Unrealized gains on investments	Unrealized gains on investments		—	—		—				76,287		—		—		76,287
Net income	Net income		—	—		—				—		—		2,589,621		2,589,621
Balance, March 31, 2023			47,351,887	$	52,391	$	32,096,662			$	(3,224,110)	$	(7,336,323)	$	28,015,310	$	49,603,930
Stock based compensation			—	—		360,446				—		$	—	—		360,446
Stock issued in exercise of stock options			82,450	$	83	$	65,252			$	—	$	—	$	—	$	65,335
Stock issued in settlement of RSUs			187,296	188		(188)				—		—		—		—
Tax withholdings paid related to stock based compensation			—	—		(7,175)				—		—		—		(7,175)
Treasury stock repurchased			(47,073)	$	—	—				—		(57,958)		—		$	(57,958)
Foreign currency translation			—	—		—				278,328		—		—		278,328
Unrealized losses on investments			—	—		—				(30,416)		—		—		(30,416)
Net income			—	—		—				—		—		2,857,157		2,857,157
Balance, June 30, 2023			47,574,560	$	52,662	$	32,514,997			$	(2,976,198)	$	(7,394,281)	$	30,872,467	$	53,069,647
Balance, March 31, 2024





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

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

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

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, 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


PROFIRE ENERGY, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)
	For the Three Months Ended March 31,
	2024		2023
OPERATING ACTIVITIES
Net income	$	1,434,375	$	2,589,621
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization expense	267,654		262,039
Gain on sale of property and equipment	(44,821)		(53,075)
Bad debt expense	61,684		41,792
Stock awards issued for services	197,443		223,047
Changes in operating assets and liabilities:
Accounts receivable	(23,969)		(1,108,889)
Income taxes receivable/payable	(804,057)		629,371
Inventories	(1,741,768)		(292,119)
Prepaid expenses and other current assets	(564,253)		(335,832)
Deferred tax asset/liability	(7,112)		212,548
Accounts payable and accrued liabilities	(1,467,314)		(1,646,723)
Net Cash Provided by (Used in) Operating Activities	(2,692,138)		521,780

INVESTING ACTIVITIES
Proceeds from sale of property and equipment	46,097		97,886
Sale (purchase) of investments	199,357		(390,548)
Purchase of property and equipment	(776,721)		(153,755)

Net Cash Used in Investing Activities	(531,267)		(446,417)

FINANCING ACTIVITIES
Value of equity awards surrendered by employees for tax liability	(307,933)		(242,506)


Principal paid toward lease liability	(10,875)		(6,947)
Net Cash Used in Financing Activities	(318,808)		(249,453)

Effect of exchange rate changes on cash	(28,882)		8,868

NET DECREASE IN CASH	(3,571,095)		(165,222)
CASH AT BEGINNING OF PERIOD	10,767,519		7,384,578
CASH AT END OF PERIOD	$	7,196,424	$	7,219,356

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

CASH PAID FOR:
Interest	$	2,945	$	933
Income taxes	$	1,056,844	$	—
NON-CASH FINANCING AND INVESTING ACTIVITIES
Common stock issued in settlement of accrued bonuses	$	324,415	$	378,526
Common stock issued for stock options	$	850	$	—

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 Six Months Ended June 30,
2023 2022
OPERATING ACTIVITIES
Net income $ 5,446,778 $ 911,990
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization expense 547,996 558,832
Gain on sale of property and equipment (234,418) (310,683)
Bad debt expense 378,753 28,474
Stock awards issued for services 583,493 412,893
Changes in operating assets and liabilities:
Accounts receivable (3,034,236) (877,417)
Income taxes receivable/payable 682,284 534,456
Inventories (2,662,032) (2,097,471)
Prepaid expenses and other current assets (51,121) (140,352)
Deferred tax asset/liability 205,571 (408)
Accounts payable and accrued liabilities (80,409) 1,601,376
Net Cash Provided by Operating Activities 1,782,659 621,690
INVESTING ACTIVITIES
Proceeds from sale of property and equipment 309,493 412,339
Purchase of investments (405,578) (231,032)
Purchase of property and equipment (607,248) (223,215)
Net Cash Used in Investing Activities (703,333) (41,908)
FINANCING ACTIVITIES
Value of equity awards surrendered by employees for tax liability (248,958) (93,527)
Cash received in exercise of stock options 65,335 25,106
Purchase of treasury stock (57,957) (1,228,731)
Principal paid towards lease liability (13,972) (19,787)
Net Cash Used in Financing Activities (255,552) (1,316,939)
Effect of exchange rate changes on cash 37,740 (32,286)
NET CHANGE IN CASH 861,514 (769,443)
CASH AT BEGINNING OF PERIOD 7,384,578 8,188,270
CASH AT END OF PERIOD $ 8,246,092 $ 7,418,827
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
CASH PAID FOR:
Interest $ 1,787 $ 1,253
Income taxes $ 576,750 $ 21,000
NON-CASH FINANCING AND INVESTING ACTIVITIES
Common stock issued in settlement of accrued bonuses $ 378,526 $ 212,787

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

PROFIRE ENERGY, INC. AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements (Unaudited)

For the ~~Six~~Three Months Ended ~~June 30,~~March 31, 2024 and 2023 ~~and 2022~~

NOTE 1 - CONDENSED FINANCIAL STATEMENTS

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

The accompanying condensed consolidated financial statements have been prepared by the Company without audit. In the opinion of management, all adjustments have been made (which include only normal recurring adjustments) which are necessary to present fairly the financial position, results of operations, stockholders' equity, and cash flows at ~~June 30, 2023~~March 31, 2024 and for all periods presented herein.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America ("US GAAP") have been condensed or omitted. These condensed consolidated financial statements should be read in conjunction with the Company's audited financial statements contained in its annual report on Form 10-K for the year ended December 31, ~~2022~~2023 ("Form 10-K"). The results of operations for the ~~three- and six month~~three-month periods ended ~~June 30,~~March 31, 2024 and 2023 ~~and 2022~~ are not necessarily indicative of the operating results for the full years. Certain amounts in the accompanying ~~June 30, 2022~~March 31, 2023 condensed consolidated statement of income and comprehensive income (loss) and footnotes have been reclassified to conform to the ~~June 30, 2023~~March 31, 2024 presentation.

NOTE 2 – ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization and Line of Business

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

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

Significant Accounting Policies

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

Recent Accounting Pronouncements

Accounting Standards Update No. 2023-07 —Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures The update is intended to improve reportable segment disclosure requirements through enhanced disclosures about significant segment expenses. The amendments require disclosure of significant segment expenses regularly provided to the chief operating decision maker (CODM) as well as other segment items, extend certain annual disclosures to interim periods, clarify the applicability to single reportable segment entities, permit more than one measure of profit or loss to be reported under certain conditions, and require disclosure of the title and position of the CODM. The new disclosures have been adopted in this report. See NOTE 10 – SEGMENT INFORMATION.

Accounting Standards Update No. 2023-09 —Income Taxes (Topic 740): Improvements to Income Tax Disclosures The update requires the annual financial statements to include consistent categories and greater disaggregation of information in the rate reconciliation, and income taxes paid disaggregated by jurisdiction. ASU 2023-09 is effective for the Company’s annual reporting periods beginning after December 15, 2024, with early adoption permitted, and should be applied on a prospective basis, with a retrospective option. We are currently evaluating the effect that adoption of ASU 2023-09 will have on our disclosures.

The Company has evaluated all other recent accounting pronouncements and determined that the adoption of other pronouncements applicable to the Company has not had, ornor 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
June 30, 2023 December 31, 2022
Raw materials $ 219,388 $ 166,927
Finished goods 13,148,684 10,452,930
Subtotal 13,368,072 10,619,857
Reserve for obsolescence (351,880) (325,877)
Total $ 13,016,192 $ 10,293,980

PROFIRE ENERGY, INC. AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

For the ~~Six~~Three Months Ended ~~June 30,~~March 31, 2024 and 2023 ~~and 2022~~

NOTE 3 – INVENTORIES

Inventories consisted of the following at each balance sheet date:


	As of
	March 31, 2024		December 31, 2023
Raw materials	$	398,568	$	338,539
Finished goods	15,802,905		14,171,616

Subtotal	16,201,473		14,510,155
Reserve for obsolescence	(453,656)		(450,499)
Total	$	15,747,817	$	14,059,656

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
		June 30, 2023		December 31, 2022		March 31, 2024	December 31, 2023

Prepaid inventory	Prepaid inventory	$	1,803,652	$	784,420
Prepaid inventory
Prepaid inventory
Accrued receivables	Accrued receivables	127,551		881,176
Prepaid insurance	Prepaid insurance	115,800		240,785
Interest receivables	Interest receivables	79,407		72,761
Tax credits		33		118,035
Other	Other	273,233		217,462
Total	Total	$	2,399,676	$	2,314,639

NOTE 5 – ACCRUED LIABILITIES

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

As of

June 30, 2023

December 31, 2022

Employee-related payables

1,904,768

2,404,848

Employee-related payables

Deferred revenue

619,612

420,827

Inventory-related payables

1,422,623

285,109

Inventory-related payables

Tax-related payables

136,165

54,762

Warranty liabilities

100,156

74,103

Warranty liabilities

Other

191,304

334,345

Total

4,374,628

3,573,994

Total

PROFIRE ENERGY, INC. AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

For the Three Months Ended March 31, 2024 and 2023

NOTE 6 – LEASES


	As of
Components of lease right-of-use assets and liabilities	March 31, 2024		December 31, 2023
Financing lease right-of-use assets	$	93,843	$	106,402
Operating lease right-of-use assets	301,424		326,505
Total Lease right-of-use assets	$	395,267	$	432,907

Financing current lease liability	$	43,775	$	47,492
Operating current lease liability	77,611		82,692
Total Current lease liability	$	121,386	$	130,184

Financing long-term lease liability	$	55,273	$	63,393
Operating long-term lease liability	225,098		244,135
Total Long-term lease liability	$	280,371	$	307,528

We have leases for office equipment and office space. The leases for office equipment are classified as financing leases, and the typical term is between 36 and 60 months. We have the option to extend most office equipment leases, but we do not intend to do so. Accordingly, no extensions have been recognized in the right-of-use asset or lease liability. The office equipment lease payments are not variable, and the lease agreements do not include any non-lease components, residual value guarantees, or restrictions. There are no interest rates implicit in the office equipment lease agreements, so we have used our incremental borrowing rate to determine the discount rate to be applied to our financing leases for the purpose of determining our lease liabilities. The weighted average discount rate applied to our financing leases is 4.50% and the weighted average remaining lease term is ~~3.0~~2.4 years.

The following table shows the components of financing lease cost:


		For the Three Months Ended June 30,				For the Six Months Ended June 30,
		For the Three Months Ended March 31,
		For the Three Months Ended March 31,
		For the Three Months Ended March 31,
Financing Lease Cost
Financing Lease Cost
Financing Lease Cost	Financing Lease Cost	2023		2022		2023		2022
Amortization of right-of-use assets	Amortization of right-of-use assets	$	7,240	$	8,651	$	14,478	$	21,068
Amortization of right-of-use assets
Amortization of right-of-use assets
Interest on lease liabilities
Interest on lease liabilities
Interest on lease liabilities	Interest on lease liabilities	854		556		1,787		1,252
Total financing lease cost	Total financing lease cost	$	8,094	$	9,207	$	16,265	$	22,320
Total financing lease cost
Total financing lease cost

~~PROFIRE ENERGY, INC. AND SUBSIDIARIES~~

~~Notes to the Condensed Consolidated Financial Statements~~

~~For the Six Months Ended June 30, 2023 and 2022~~

~~The Company leases~~We lease two warehouse spaces, one ~~warehouse space~~ with a two-year lease, and another with a four-year lease, both of which isare recorded as an operating ~~lease. We consider~~leases. The weighted average discount rate applied to our financing leases is 4.5% and the weighted average remaining lease term is 3.7 years. 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-~~three-months ended March 31, 2024 and ~~six months ended June 30,~~March 31, 2023 was $38,665 and ~~June 30, 2022 was $18,352~~$18,852, respectively.

PROFIRE ENERGY, INC. AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

For the Three Months Ended March 31, 2024 and ~~$16,261, and $37,204 and $36,914, respectively.~~2023

~~Supplemental operating lease information as of June 30, 2023 is as follows:~~


~~Operating right of use assets~~	$	~~23,753~~
~~Current operating lease liabilities~~	~~23,753~~
~~Long-term operating lease liabilities~~	—
~~Weighted-average remaining lease term in years~~	~~1.0~~
~~Weighted-average discount rate~~	~~4.5~~		%

As of ~~June 30, 2023,~~March 31, 2024, maturities of lease liabilities are as follows:


Years ending December 31,	Years ending December 31,	Amount		Years ending December 31,	Amount
2023		$	42,744
2024	2024	68,456
2025	2025	39,497
2026	2026	25,712
2027	2027	6,959
2028
Thereafter	Thereafter	—
Total future minimum lease payments	Total future minimum lease payments	$	183,368
Less: Amount representing interest	Less: Amount representing interest	24,628
Present value of future payments	Present value of future payments	$	158,740
Current portion	Current portion	$	66,229
Long-term portion	Long-term portion	$	92,511

NOTE 7 – STOCKHOLDERS' EQUITY

As of ~~June 30, 2023~~both March 31, 2024 and December 31, ~~2022,~~2023, the Company held ~~5,085,203 and 5,038,130~~6,243,363 shares of its common stock in treasury at a total cost of ~~$7,394,281 and $7,336,323, respectively.~~$9,324,272.

On May 9, 2023, the Company announced that its Board of Directors (the "Board") had 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 April 30, 2024. ~~Any purchases~~Purchases under the program ~~will be~~were made at the discretion of management ~~or may also be made~~ pursuant to a Rule 10b5-1 plan. The size and timing of any purchases ~~will depend~~were dependent on price, market and business conditions and other factors. As of December 2023, the Company had spent the full allotment under the program.

As of ~~June 30, 2023,~~March 31, 2024, the Company had ~~785,995~~742,855 restricted stock units ("RSUs"), ~~1,057,044~~752,338 performance-based RSUs, and ~~673,450~~204,000 stock options outstanding with ~~$986,064~~$1,289,440 in remaining compensation expense to be recognized over the next ~~1.6~~1.9 years. See further details below about certain subsets of these outstanding equity-based awards.

On June 29, 2023, pursuant to the annual renewal of director compensation, the Board approved a grant of 195,966 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 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 $243,000 to be recognized over the vesting period.

~~PROFIRE ENERGY, INC. AND SUBSIDIARIES~~

~~Notes to the Condensed Consolidated Financial Statements~~

~~For the Six Months Ended June 30,~~ 2023 EIP and ~~2022~~

LTIP

On April 25, 2023, the Compensation Committee of the Board (the "Compensation Committee") approved the 2023 Executive Incentive Plan (the “2023 EIP”) for ~~Messrs.~~Ryan W. Oviatt, the Company's Co-CEO, Co-President, and CFO, Cameron M. Tidball, the Company's Co-CEO and ~~Fisher.~~Co-President, and Patrick D. Fisher, the Company's Vice President of Product Development. The 2023 EIP ~~provides~~provided for the potential award of incentive compensation to the participants based on the Company’s financial performance in fiscal 2023. ~~If earned, the~~The incentive compensation ~~will be~~was payable in cash and stock, and the stock portion of the incentive compensation ~~is intended to constitute~~constituted an award under the Company’s 2023 Equity Incentive Plan (the “2023 Plan”). In addition to the 2023 EIP, the Board also approved as a long-term incentive plan the grants of a restricted stock unit awards to Messrs. Oviatt, Tidball, and Fisher pursuant to the 2023 Plan (the “2023 LTIP”). The 2023 Plan was adopted by the Board of Directors on April 25, 2023, subject to shareholder approval at the annual meeting of stockholders of the Company (the “Annual Meeting”). The 2023 Plan was approved by the shareholders of the Company at the Annual Meeting which was held on June 14, 2023.

~~2023 EIP~~

Under the terms of the 2023 EIP, each participating executive officer has been assigned a target incentive compensation amount for fiscal 2023. The target incentive compensation amount for Mr. Oviatt is equal to 62% of his base salary as of December 31, 2023, the target incentive compensation amount for Mr. Tidball is equal to 62% of his base salary as of December 31, 2023, and the target incentive compensation for Mr. Fisher is equal to 37% of his base salary as of December 31, 2023. 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 2023. The performance goals in the 2023 EIP ~~are~~were based on the Company’s total revenue, EBITDA, and two non-financial factors including revenue source diversification and safety and environmental

PROFIRE ENERGY, INC. AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

For the Three Months Ended March 31, 2024 and 2023

performance. Each of the revenue, EBITDA, and revenue diversification performance goals will be weighted 30% while the safety and environment goal will be weighted 10% in calculating incentive compensation amounts.

On March 6, 2024, the Compensation Committee approved the incentive compensation amounts based on achieving certain targets pursuant to the 2023 EIP. The incentive compensation amounts earned under the 2023 EIP ~~if any, will be~~were paid 50% in cash and 50% in shares of restricted stock under the 2023 ~~Plan, subject~~Plan. In satisfaction of the 50% of the 2023 EIP plan that was payable in stock, the Compensation Committee approved a one-time bonus for Company executives that was settled by issuing a total of 225,698 shares of common stock, or 121,624 shares net of tax withholding. These shares were fully vested as of March 6, 2024.

In addition to the 2023 EIP, the Board also approved as a long-term incentive plan the grants of RSU awards to Messrs. Oviatt, Tidball, and Fisher pursuant to the 2023 Plan being approved by shareholders as described above. 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 2023 Plan. The actual incentive compensation amounts, if any, will be determined by the Compensation Committee upon the completion of fiscal 2023 and paid by March 15, 2024, subject to all applicable tax withholding.

~~2023 LTIP~~

(the “2023 LTIP”). The 2023 LTIP consists of total awards of up to 287,076 ~~restricted stock units~~RSUs (“Units”) to Mr. Oviatt, up to 287,076 Units to Mr. Tidball, and up to 50,868 Units to Mr. Fisher, pursuant to two separate restricted stock unit award agreements (collectively, the ~~“Restricted~~“2023 LTIP Restricted Stock Unit Award Agreements”) to be entered between the Company and each participant. One such agreement ~~will cover~~covers 33% of each award recipient’s Units that are subject to time-based vesting, and the other such agreement ~~will cover~~covers the remaining 67% of such award recipient’s Units that may vest based on performance metrics. Upon vesting, ~~and subject to the 2023 Plan being approved by shareholders as described above,~~ 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 2023 LTIP began on January 1, 2023 and terminates on December 31, 2025 (the ~~“Performance~~“2023 LTIP Performance Vesting Date”).

The Units subject to time-based vesting, including 95,692 Units to Mr. Oviatt, 95,692 Units for Mr. Tidball, and 16,956 Units to Mr. Fisher, will vest in three equal and annual installments beginning December 31, 2023 and ending on December 31, 2025 if the award recipients’ employment continues with the Company through such dates.

The performance-vesting Units, including up to 191,384 Units for Mr. Oviatt, 191,384 Units for Mr. Tidball, and 33,912 Units to Mr. Fisher, may vest over a three-year performance period beginning January 1, 2023 (the ~~“Performance~~“2023 LTIP Performance Period”) based upon the following Company performance metrics:

~~PROFIRE ENERGY, INC. AND SUBSIDIARIES~~

~~Notes to the Condensed Consolidated Financial Statements~~

~~For the Six Months Ended June 30, 2023 and 2022~~

Performance Metrics 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 2022) 1/3 94.2% 142.7% 191.3%
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 15% 17.5% 20%

Performance Metrics

Weight

Target

Above Target

Outstanding

Total Shareholder Return (based on the Company’s closing price of its common stock at the end of the 2023 LTIP Performance Period relative to its closing price as of the last trading day in 2022)

1/3

94.2%

142.7%

191.3%

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 2023 LTIP Performance Period)

1/3

Third Quartile

Second Quartile

First Quartile

EBITDA as a Percentage of Total Revenue

1/3

15%

17.5%

20%

One-third of such performance-vesting Units, consisting of 63,794 Units for Mr. Oviatt, 63,794 Units for Mr. Tidball, and 11,304 Units for Mr. Fisher, may vest for each of the three performance metrics identified in the table above. The number of Units that will vest for each performance metric on the 2023 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 Units 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 Units relating to such performance metric will vest; and

d.if the “Outstanding” level for such performance metric is achieved, 100% of the Units relating to such performance metric will vest.

The foregoing summary of the 2023 ~~Executive Incentive Plan~~EIP and the 2023 LTIP Restricted Stock Unit Award Agreements relating to the 2023 LTIP is qualified in its entirety by the text of the 2023 ~~Executive Incentive Plan~~EIP and each of the 2023 LTIP Restricted Stock Unit Award Agreements, which ~~are~~were filed as exhibits to ~~this~~the Quarterly Report on Form 10-Q for the quarter ending March 31, 2023.

2022 ~~EIP and~~ LTIP

PROFIRE ENERGY, INC. AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

For the Three Months Ended March 31, 2024 and 2023

On April 6, 2022, the ~~Compensation~~Compenstion Committee of the Board (the "Compensation Committee") approved the 2022 Executive Incentive Plan (the “2022 EIP”) for Messrs. Oviatt, Tidball, and Fisher. The 2022 EIP provided for the potential award of incentive compensation to the participants based on the Company’s financial performance in fiscal 2022. The incentive compensation was payable in cash and stock, and the stock portion of the incentive compensation constituted an award under the Company's 2014 Equity Incentive Plan, as amended (the "Plan").

Participants were 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 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 6, 2023, the Compensation Committee approved the incentive compensation amounts based on achieving certain targets pursuant to the 2022 EIP. The incentive compensation amounts earned under the 2022 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 341,961 shares of common stock, or 192,964 shares net of tax withholding. These shares were fully vested as of March 6, 2023.

~~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 (the "2022 LTIP") pursuant to the Company's 2014 Equity Incentive Plan, as amended (the ~~“2022 LTIP”~~“2014 Plan”). 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”).

~~PROFIRE ENERGY, INC. AND SUBSIDIARIES~~

~~Notes to the Condensed Consolidated Financial Statements~~

~~For the Six Months Ended June 30, 2023 and 2022~~

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 (the "2022 LTIP Performance Period") based upon the following Company performance metrics:

Performance Metric

Weight

Target

Above Target

Outstanding

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

Total Shareholder Return (based on the Company’s closing price of its common stock at the end of the 2022 LTIP 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 2022 LTIP Performance Period)

1/3

Third Quartile

Second Quartile

First Quartile

EBITDA as a Percentage of Total Revenue

1/3

10%

15%

20%

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 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~~were filed as exhibits to the Company's Form 10-Q for the quarter ending March 31, 2022.

~~2022 RSUs~~

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.

2021 LTIP

On May 28, 2021, the Board approved as a long-term incentive plan, the grants of restricted stock unit awards to Messrs. Oviatt, Tidball, Fugal, and Fisher pursuant to the 2014 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~~terminated on December 31, 2023 (the “2021 LTIP Performance Vesting Date”).

PROFIRE ENERGY, INC. AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

For the Three Months Ended March 31, 2024 and 2023

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~~vested in three equal annual installments that began on December 31, 2021 and ~~will end~~ended on December 31, ~~2023 if the award recipients’ employment continues with the Company through such dates.~~

~~PROFIRE ENERGY, INC. AND SUBSIDIARIES~~

~~Notes to the Condensed Consolidated Financial Statements~~

~~For the Six Months Ended June 30, 2023 and 2022~~

2023.

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~~were eligible to vest over a three-year performance period beginning January 1, 2021 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 RSUs, consisting of 45,454 RSUs for Mr. Oviatt, 45,454 RSUs for Mr. Tidball, 19,091 RSUs for Mr. Jay Fugal, the Company's former Vice President of Operations, and 10,661 RSUs for Mr. Fisher, ~~are~~were eligible to vest for each of the three performance metrics identified in the table above. The number of RSUs that ~~will vest~~vested for each performance metric on the 2021 LTIP Performance Vesting Date ~~shall be~~was 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 ~~will~~did not receive incentive compensation under the 2021 LTIP, and his unvested RSUs have been forfeited.

On March 6, 2024, the Compensation Committee approved the incentive compensation amounts based on achieving certain targets pursuant to the 2021 LTIP. The performance vesting RSUs were settled by issuing a total of 152,354 shares of common stock, or 80,059 shares net of tax withholding.

The foregoing summary of the 2021 LTIP is qualified in its entirety by the text of each of the 2021 LTIP 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.

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 ~~June 30, 2023.~~March 31, 2024.

PROFIRE ENERGY, INC. AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

For the Three Months Ended March 31, 2024 and 2023

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

~~PROFIRE ENERGY, INC. AND SUBSIDIARIES~~

~~Notes to the Condensed Consolidated Financial Statements~~

~~For the Six Months Ended June 30, 2023 and 2022~~

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

We consider all revenue recognized in the income statement to be revenue from contracts with customers. The table below shows revenue by category:


		For the Three Months Ended June 30,				For the Six Months Ended June 30,
		2023		2022		2023		2022
		For the Three Months Ended March 31,
		For the Three Months Ended March 31,
		For the Three Months Ended March 31,
		2024
		2024
		2024
Electronics
Electronics
Electronics	Electronics	$	5,530,863	$	3,596,755	$	11,616,476	$	7,131,762
Manufactured	Manufactured	3,272,774		1,765,916		6,397,599		3,673,455
Manufactured
Manufactured
Re-Sell
Re-Sell
Re-Sell	Re-Sell	4,799,247		3,498,011		9,217,321		6,933,888
Service	Service	840,693		772,465		1,765,643		1,397,182
Service
Service
Total Revenue	Total Revenue	$	14,443,577	$	9,633,147	$	28,997,039	$	19,136,287
Total Revenue
Total Revenue

~~PROFIRE ENERGY, INC. AND SUBSIDIARIES~~

~~Notes to the Condensed Consolidated Financial Statements~~

~~For the Six Months Ended June 30, 2023 and 2022~~

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 June 30,
			2023					2022
			Income (Numerator)		Weighted Average Shares (Denominator)	Per-Share Amount		Income (Numerator)		Weighted Average Shares (Denominator)	Per-Share Amount
		For the Three Months Ended March 31,																For the Three Months Ended March 31,
		2024													2024				2023
		Income (Numerator)											Income (Numerator)	Weighted Average Shares (Denominator)		Per-Share Amount	Income (Numerator)			Weighted Average Shares (Denominator)	Per-Share Amount
Basic EPS	Basic EPS
Net income available to common stockholders
Net income available to common stockholders
Net income available to common stockholders	Net income available to common stockholders		$	2,857,157	47,393,768	$	0.06	$	284,829	47,092,275	$	0.01

Effect of Dilutive Securities	Effect of Dilutive Securities
Effect of Dilutive Securities
Effect of Dilutive Securities
Stock options & RSUs
Stock options & RSUs
Stock options & RSUs	Stock options & RSUs		—		2,079,312			—		1,606,933

Diluted EPS	Diluted EPS

Diluted EPS

Diluted EPS
Net income available to common stockholders + assumed conversions
Net income available to common stockholders + assumed conversions
Net income available to common stockholders + assumed conversions	Net income available to common stockholders + assumed conversions		$	2,857,157	49,473,080	$	0.06	$	284,829	48,699,208	$	0.01

			For the Six Months Ended June 30,
			2023					2022
			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			$	5,446,778	47,284,749	$	0.12	$	911,990	47,285,782	$	0.02

Effect of Dilutive Securities
Stock options & RSUs			—		2,064,739			—		1,579,404

Diluted EPS
Net income (loss) available to common stockholders + assumed conversions			$	5,446,778	49,349,488	$	0.11	$	911,990	48,865,186	$	0.02

1614

PROFIRE ENERGY, INC. AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

For the ~~Six~~Three Months Ended ~~June 30,~~March 31, 2024 and 2023 ~~and 2022~~

NOTE 10 – SEGMENT INFORMATION

We are required to report segment information in the same way that we internally organize our business for assessing performance and making decisions regarding allocation of resources. Our product and services lines are similar in their production processes, customers, and economic characteristics; and we do not manage the business or allocate costs based on individual product or service lines. Revenues are regularly reviewed on a disaggregated basis between our US and Canada subsidiaries; however, individual subsidiary operating performance is not reviewed regularly. Each subsidiary has a different purpose within the consolidated organization as a whole and they are not comparable to one another. As a result, we have concluded that we only have one operating segment, which is the consolidated company as a whole. We record inter-subsidiary revenues and costs for transfer pricing purposes related to income tax planning.

~~The Company operates in the United States and Canada.~~ Segment information for these geographic areas is as follows:


		For the Three Months Ended June 30,				For the Six Months Ended June 30,
Sales		2023		2022		2023		2022
				For the Three Months Ended March 31,
				For the Three Months Ended March 31,
				For the Three Months Ended March 31,
Revenues										Revenues	2024	2023
Revenue from external customers
Canada
Canada
Canada	Canada	$	2,050,148	$	1,886,332	$	4,186,352	$	3,883,583
United States	United States	12,393,429		7,746,815		24,810,687		15,252,704
Total Consolidated		$	14,443,577	$	9,633,147	$	28,997,039	$	19,136,287

		For the Three Months Ended June 30,				For the Six Months Ended June 30,
Profit (Loss)		2023		2022		2023		2022
Inter-subsidiary revenue
Canada
Canada
Canada	Canada	$	(465,768)	$	(601,435)	$	(956,458)	$	(954,005)
United States	United States	3,322,925		886,264		6,403,236		1,865,995
Total Consolidated		$	2,857,157	$	284,829	$	5,446,778	$	911,990
Inter-subsidiary eliminations
Total Revenue

				For the Three Months Ended March 31,
				For the Three Months Ended March 31,
				For the Three Months Ended March 31,
Income from Operations										Income from Operations	2024	2023
Canada
United States
Total Income from Operations
Gain on sale of fixed assets
Other expense
Interest income
Interest expense
Income before income taxes
						As of
						As of
						As of
						As of
Long-Lived Assets	Long-Lived Assets					June 30, 2023		December 31, 2022		Long-Lived Assets	March 31, 2024	December 31, 2023
Canada	Canada					$	5,130,003	$	5,067,965
United States	United States					5,654,642		5,476,238
Total Consolidated	Total Consolidated					$	10,784,645	$	10,544,203

NOTE 11 – SUBSEQUENT EVENTS

In accordance with ASC 855 "Subsequent Events," Company management reviewed all material events through the date this report was issued.

On April 9, 2024, the Compensation Committee approved the 2024 Executive Incentive Plan (the “2024 EIP”) for Messrs. Oviatt, Tidball, and Fisher. The 2024 EIP provides for the potential award of incentive compensation to the participants based on the Company’s financial performance in fiscal 2024. 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 2023 Plan. In addition to the 2024 EIP, the Board also approved as a long-term incentive plan the grants of a restricted stock unit awards to Messrs. Oviatt, Tidball, and Fisher pursuant to the 2023 Plan (the “2024 LTIP”).

PROFIRE ENERGY, INC. AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

For the Three Months Ended March 31, 2024 and 2023

2024 EIP

Under the terms of the 2024 EIP, each participating executive officer has been assigned a target incentive compensation amount for fiscal 2024. The target incentive compensation amount for Mr. Oviatt is equal to 65% of his base salary as of December 31, 2024, the target incentive compensation amount for Mr. Tidball is equal to 65% of his base salary as of December 31, 2024, and the target incentive compensation for Mr. Fisher is equal to 40% of his base salary as of December 31, 2024. Under no circumstance can the participants receive more than two times the assigned target incentive compensation.

Participants will be eligible to receive incentive compensation based upon reaching or exceeding performance goals established by the Compensation Committee for fiscal 2024. The performance goals in the 2024 EIP are based on the Company’s total revenue, EBITDA, and two non-financial factors including strategic growth initiatives and safety and other. Each of the revenue, EBITDA, and strategic growth initiatives performance goals will be weighted 30% while the safety and other goal will be weighted 10% in calculating incentive compensation amounts.

The incentive compensation amounts earned under the 2024 EIP, if any, will be paid 50% in cash and 50% in shares of restricted stock under the 2023 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 2023 Plan. The actual incentive compensation amounts, if any, will be determined by the Compensation Committee upon the completion of fiscal 2024 reporting period and paid by March 15, 2025, subject to all applicable tax withholding.

2024 LTIP

The 2024 LTIP consists of total awards of up to 204,651 restricted stock units (“Units”) to Mr. Oviatt, up to 204,651 Units to Mr. Tidball, and up to 36,195 Units to Mr. Fisher, pursuant to two separate restricted stock unit award agreements (collectively, the “2024 LTIP Restricted Stock Unit Award Agreements”) entered between the Company and each participant. One such agreement covers 33% of each award recipient’s Units that are subject to time-based vesting, and the other such agreement covers the remaining 67% of such award recipient’s Units 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 2024 LTIP began on January 1, 2024 and terminates on December 31, 2026 (the “2024 LTIP Performance Vesting Date”).

The Units subject to time-based vesting, including 68,217 Units to Mr. Oviatt, 68,217 Units for Mr. Tidball, and 12,065 Units to Mr. Fisher, will vest in three equal and annual installments beginning January 1, 2024 and ending on December 31, 2026 if the award recipients’ employment continues with the Company through such dates.

The performance-vesting Units, including up to 136,434 Units for Mr. Oviatt, 136,434 Units for Mr. Tidball, and 24,130 Units to Mr. Fisher, may vest over a three-year performance period beginning January 1, 2024 (the “2024 LTIP Performance Period”) based upon the following Company performance metrics:

Performance Metrics

Weight

Target

Above Target

Outstanding

Total Shareholder Return (based on the Company’s closing price of its common stock at the end of the 2024 LTIP Performance Period relative to its closing price as of the last trading day in 2023)

1/3

26.0%

47.9%

77.5%

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 2024 LTIP Performance Period)

1/3

Third Quartile

Second Quartile

First Quartile

EBITDA as a Percentage of Total Revenue

1/3

17.5%

20.0%

22.5%

One-third of such performance-vesting Units, consisting of 45,477 Units for Mr. Oviatt, 45,477 Units for Mr. Tidball, and 8,043 Units for Mr. Fisher, may vest for each of the three performance metrics identified in the table above. The number of Units that will vest for each performance metric on the 2024 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;

PROFIRE ENERGY, INC. AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

For the Three Months Ended March 31, 2024 and 2023

b.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;

c.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

d.if the “Outstanding” level for such performance metric is achieved, 100% of the Units relating to such performance metric will vest.

The foregoing summary of the 2024 EIP and the 2024 LTIP Restricted Stock Unit Award Agreements relating to the 2024 LTIP is qualified in its entirety by the text of the 2024 EIP and each of the 2024 LTIP Restricted Stock Unit Award Agreements, which were filed as exhibits to this Quarterly Report on Form 10-Q for the quarter ending March 31, 2024.

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 six month~~three-month periods ended ~~June 30, 2023~~March 31, 2024 and ~~2022.~~2023. 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, ~~2022.~~2023.

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, in recent years, we have completed many installations of our burner-management solutions in other industries ~~that~~for which 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.

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 to support the production and or processing function. 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 safely 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 optimized burner operation.

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~~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 operational 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 applicable to our customers. We believe ~~that~~our 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 (E&P), midstream operators, pipeline operators, as well as downstream transmission and utility providers. Our customers include Antero, ATCO, Chesapeake, Chevron, ~~Chesapeake,~~ CNRL, ~~Conoco,~~ConocoPhillips, 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 developing sales in diversified industries where we can utilize our combustion ~~technology can be utilized.~~technology.

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’ ~~resources and~~ investments are essential to our business objectives. 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 ~~specialized~~ peripheral solutions, increase site and location safety while reducing emissions. ~~Profire~~Profire's 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. By dramatically reducing the number and frequency of physical trips to site, 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 safe each day. Adding greater physical distance between humans and the combustion process, as well as ensuring ~~fuel~~ gas ~~for combustion equipment is~~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:


		For the three months ended
		June 30, 2023			March 31, 2023			December 31, 2022			September 30, 2022			June 30, 2022
	For the three months ended																											For the three months ended
	March 31, 2024																			March 31, 2024			December 31, 2023			September 30, 2023			June 30, 2023			March 31, 2023
Total Revenues	Total Revenues	$	14,443,577		$	14,553,461		$	13,971,018		$	12,829,338		$	9,633,148
Gross Profit Percentage	Gross Profit Percentage	51.3		%	53.8		%	47.0		%	47.7		%	45.7		%	Gross Profit Percentage	49.5	%		53.9	%		50.0	%		50.9	%		53.3	%
Operating Expenses	Operating Expenses	$	4,190,537		$	4,527,308		$	4,279,751		$	4,000,983		$	4,308,337
Income from Operations	Income from Operations	$	3,223,908		$	3,305,800		$	2,292,914		$	2,117,893		$	94,806
Net Income	Net Income	$	2,857,157		$	2,589,621		$	1,825,022		$	1,210,748		$	284,829
Operating Cash Flow	Operating Cash Flow	$	1,260,879		$	521,780		$	1,712,709		$	(1,818,322)		$	1,814,039

Revenues for the quarter ended ~~June 30, 2023 increased~~March 31, 2024 decreased by ~~50%~~7% or ~~$4,810,429~~$1,043,488 compared to the quarter ended ~~June 30, 2022, which was driven by ongoing strong customer demand, increases~~March 31, 2023, due to decreases in ~~Profire sales prices~~North America rig count and ~~supply chain improvements related to Profire BMS systems and components.~~lower natural gas prices. The ~~second~~first quarter of ~~2023~~2024 weekly average rig count for North America was ~~815~~810 compared to ~~810~~977 in the same period of last year. ~~Strong oil and~~Average natural gas prices ~~also~~ have ~~contributed~~decreased 19% in the first quarter of 2024 compared to ~~ongoing investments~~the same period in ~~new technology~~the prior year. As indicated by ~~E&P operators over the past year. Overall~~these industry trends, overall customer demand ~~increased~~for hydrocarbons decreased during the quarter ended ~~June 30, 2023,~~March 31, 2024 which caused a decrease in ~~response to these industry trends.~~revenue for Profire.

Revenues for the quarter ended ~~June 30, 2023~~March 31, 2024 decreased by 1%6% or ~~$109,884~~$854,584 compared to the quarter ended ~~March~~December 31, 2023, ~~but was greater than any prior year quarter, driven by continued strong customer demand and higher sales prices. The second~~also due to the lower natural gas prices in the first quarter of ~~2023 weekly average rig count for North America decreased by 17% compared to the prior quarter.~~2024.

Our gross profit margin for the ~~second~~first quarter of ~~2023~~2024 was ~~up 5.6%~~down 3.8% from the same quarter of last year and down ~~2.5%~~4.4% from quarter ended ~~March~~December 31, 2023. The gross margin percentage was impacted by normal fluctuations in product, service and customer mix.

Operating expenses for the quarter ended ~~June 30, 2023 decreased $117,800~~March 31, 2024 increased $492,375 from the same quarter of last year, ~~which~~due primarily ~~results from receipt of a the employee retention payroll tax credit, that became available~~ to the Company through the CARES Act. The Company filed amended payroll tax returns in the third quarter of 2022 and recognized 50% of the credit on the books at that time. The Company received the credit in full during the quarter ended June 30, 2023 and recognized the remaining 50% in the quarter then ended. This benefit was offset by increases in headcount and cost inflation across the business. Operating expenses for the quarter ended ~~June 30, 2023 decreased $336,771 from~~March 31, 2024 were roughly flat with the prior quarter ended ~~March~~December 31, ~~2023 for the same reason.~~2023.

Due to the factors discussed above, we reported income from operations of ~~$3,223,908~~$1,737,089 for the quarter ended ~~June 30, 2023~~March 31, 2024 compared to income from operations of ~~$94,806~~$3,305,801 for the same quarter in ~~2022~~2023 and income from operations of ~~$3,305,800~~$2,780,784 in the quarter ended ~~March~~December 31, 2023.

Due to the combination of factors discussed above relating to revenues, gross profit margin and operating expenses, we reported net income of ~~$2,857,157~~$1,434,375 for the quarter ended ~~June 30, 2023~~March 31, 2024 compared to net income of ~~$284,829~~$2,589,621 for the same quarter in ~~2022~~2023 and net income of ~~$2,589,621~~$3,290,545 in the quarter ended December 31, 2023.

The Company used operating cash of $2,692,138 during the quarter ended March 31, ~~2023.~~

~~The Company achieved~~2024 compared to operating cash flows of ~~$1,260,879 during the quarter ended June 30, 2023 compared to $1,814,039~~$521,780 during the same quarter of ~~2022~~2023 and ~~$521,780~~operating cash flows of $4,395,818 in the quarter ended ~~March~~December 31, 2023. The fluctuations in operating cash flows are due primarily to the changes in net income and working capital balances.

~~Comparison of the six months ended June 30, 2023 and 2022~~

~~The table below presents certain financial data comparing the six months ended June 30, 2023 to the same period ended June 30, 2022:~~
For the Six Months Ended June 30,
2023 2022 $ Change % Change
Total Revenues $ 28,997,039 $ 19,136,287 $ 9,860,752 51.5 %
Gross Profit Percentage 52.6 % 46.8 % 5.8 %
Operating Expenses $ 8,717,843 $ 8,176,047 $ 541,796 6.6 %
Income from Operations $ 6,529,711 $ 783,802 $ 5,745,909 733.1 %
Net Income $ 5,446,778 $ 911,990 $ 4,534,788 497.2 %
Operating Cash Flow $ 1,782,659 $ 621,690 $ 1,160,969 (186.7) %

Revenues during the six-month period ended June 30, 2023, increased 51.5% compared to the same period of last year. The increase in revenue was driven by strong customer demand, increases in Profire sales prices and improvements in Profire BMS system availability. For the six months ended June 30, 2023, the weekly average rig count for North America was 896 compared to 813 in the same period of last year. Although oil and natural gas prices are lower than they were in the prior year period, they remain strong and have contributed to ongoing investments in new technology by E&P operators over the past year. Overall customer demand increased during the period ended June 30, 2023, in response to these industry trends. Our gross profit percentage increased by 5.8% during the six months ended June 30, 2023 compared to the same period in 2022, primarily due to changes in product mix, inventory adjustments and the fixed cost coverage from a higher revenue base. Operating expenses increased 6.6% due to increases in headcount and general cost inflation in the current year, offset by the employee retention payroll tax credit noted above. Due to the increase in revenue and gross margin, which exceeded the increase in operating expenses, we recognized net income of $5,446,778 for the six months ended June 30, 2023 compared to net income of $911,990 for the same period in 2022. The Company generated operating cash flows of $1,782,659 during the six-month period ended June 30, 2023 compared to $621,690 during the six-month period ended June 30, 2022 due to the changes in net income and working capital balances.

Liquidity and Capital Resources

Working capital at ~~June 30, 2023~~March 31, 2024 was ~~$32,097,050~~$36,521,702 compared to ~~$25,245,311~~$35,377,246 at December 31, ~~2022.~~2023.

Our liquidity position is impacted by operating, investing and financing activities. During the ~~six~~three months ended ~~June 30, 2023,~~March 31, 2024, we ~~generated $1,782,659~~used $2,692,138 of cash from operating activities, primarily due to ~~an increase~~a decrease in net income, ~~which offset an increase in accounts receivable~~purchases of inventory and ~~inventory.~~payment of income taxes and other liabilities. Operating activity trends consist of cash inflows and outflows related to changes in operating assets and liabilities. During the ~~six~~three months ended ~~June 30, 2023,~~March 31, 2024, we used ~~$703,333~~$531,267 of cash from investing activities to purchase ~~investments,~~ property and equipment. Investing activity trends consist of changes in the mix of our investment portfolio and purchases or sales of fixed ~~assets, and acquisition activities.~~assets. During the ~~six~~three months ended ~~June 30, 2023,~~March 31, 2024, we used ~~$255,552~~$318,808 of cash in financing activities, primarily related to taxes paid on employee stock ~~awards issued~~award settlements during the quarter. Financing activity trends consist of transactions related to equity ~~awards and purchases of treasury stock pursuant to our share repurchase program.~~awards. 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 ~~June 30, 2023,~~March 31, 2024, we held ~~$17,355,141~~$16,233,347 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 ~~June 30, 2023.~~March 31, 2024.

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 ~~June 30, 2023,~~March 31, 2024, that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

2221

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, ~~2022,~~2023, 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

~~The table below sets forth additional information regarding our share repurchases during the three months ended June 30, 2023:~~

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
April — — — —
May — — — 2,000,000
June 47,073 $ 1.23 47,073 $ 1,942,051
Total 47,073 47,073
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.~~During the quarterly period ended March 31, 2024, none of our directors or officers (as defined in Rule 16a-1(f) under the Exchange Act) adopted or terminated any Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement (as such terms are defined in Item 408 of Regulation S-K under the Securities Act).

2322

Item 6. Exhibits

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
















Exhibit 10.110.1 +			Restricted Stock Unit Award Agreement (Performance Vesting) between Profire Energy and Ryan Oviatt dated April 9, 2024

Exhibit 10.2 *+			Restricted Stock Unit Award Agreement (Time Vesting) between Profire Energy and Ryan Oviatt dated April 9, 2024

Exhibit 10.3 *+			Restricted Stock Unit Award Agreement (Performance Vesting) between Profire Energy and Cameron Tidball dated April 9, 2024

Exhibit 10.4 *+			Restricted Stock Unit Award Agreement (Time Vesting) between Profire Energy and Cameron Tidball dated April 9, 2024

Exhibit 10.5 *+			Restricted Stock Unit Award Agreement (Performance Vesting) between Profire Energy and Patrick Fisher dated April 9, 2024

Exhibit 10.6 *+			Restricted Stock Unit Award Agreement (Time Vesting) between Profire Energy and Patrick Fisher dated April 9, 2024

Exhibit 10.7*+			Profire Energy, Inc. ~~2023 Equity~~2024 Executive Incentive Plan

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

Exhibit 104			Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

* Filed herewith.

+Indicates Management contract, compensatory plan, or arrangement with the Company.

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:	~~August 9, 2023~~May 8, 2024	By:	/s/ Ryan W. Oviatt
			Ryan W. Oviatt
			Co-Chief Executive Officer and Chief Financial Officer


Date:	~~August 9, 2023~~May 8, 2024	By:	/s/ Cameron M. Tidball
			Cameron M. Tidball
			Co-Chief Executive Officer


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
April	—	—		—	—
May	—	—		—	2,000,000
June	47,073	$	1.23	47,073	$	1,942,051
Total	47,073			47,073