Profire(PFIE) - 2023 Q4 - Annual Report

PART I Business Profire Energy, Inc. provides solutions to enhance industrial combustion appliances, primarily for the oil and gas industry, while expanding into diversified industrial markets - The company's core business is providing burner-management systems for the oil and gas industry, focusing on enhancing safety, efficiency, and environmental compliance[14][15] - Profire's principal markets are major oil and gas basins in the United States and Western Canada, with strategic expansion into non-oil and gas industries like biogas, power generation, and agriculture[26][28] - The company competes with smaller firms like Clear Rush and Combustex, and is expanding to compete with larger entities such as Honeywell and Emerson in more complex applications[29][30] - No single customer accounted for more than 10% of total revenues in fiscal years 2023 or 2022[36] Research and Development Expenses | Fiscal Year | R&D Expense ($) | | :--- | :--- | | 2023 | $917,123 | | 2022 | $1,051,858 | Risk Factors The company faces significant business risks from oil and gas industry volatility, supply chain dependencies, and regulatory changes, alongside common stock risks from price volatility and insider ownership - Financial performance is heavily dependent on the capital spending of oil and natural gas customers, influenced by volatile commodity prices[54][55] - Dependency on contract manufacturers for outsourced processes creates risk of adverse impact on product market entry if they fail to perform[52] - Executive officers, directors, and beneficial owners collectively owned approximately 25% of common stock as of December 31, 2023, influencing stockholder approval matters[106] - The company has never paid cash dividends and does not anticipate doing so, intending to retain earnings for operations and expansion[114] - Nevada's control share and business combination laws may discourage or delay potential takeovers of the company[115][117][118] Unresolved Staff Comments The company reports no unresolved staff comments as of the reporting period - Not applicable[120] Cybersecurity The company maintains a cybersecurity risk management program with governance by the CFO and IT Manager, overseen by the Audit Committee - The cybersecurity program includes periodic risk assessments, governance policies, an incident response plan, and ongoing employee training[121] - Governance is managed by a cybersecurity team (CFO and IT Manager) reporting quarterly to the Audit Committee of the Board of Directors[125][126] - Prior cybersecurity incidents have not had a material adverse effect on the business or financial condition[128] Properties Profire owns its corporate headquarters in Utah and a facility in Alberta, while leasing additional office and warehouse spaces across several US states Company Facilities | Location | Ownership | Use | Square Footage | | :--- | :--- | :--- | :--- | | Lindon, Utah | Owned | Corporate HQ & Warehouse Assembly | 50,500 | | Acheson, Alberta | Owned | Office & Warehouse Assembly | 25,500 | | Odessa, Texas | Leased | Office & Warehouse Assembly | 6,300 | | Victoria, Texas | Leased | Office & Warehouse Assembly | 3,250 | | Homer City, Pennsylvania | Leased | Office & Warehouse Storage | 2,100 | | Millersburg, Ohio | Leased | Office & Warehouse Assembly | 1,600 | Legal Proceedings Management is unaware of any pending legal proceedings expected to materially impact operations or financial statements as of December 31, 2023 - The company is not aware of any pending legal proceedings that could have a material impact on its operations or financial statements as of December 31, 2023[130] Mine Safety Disclosures This item is not applicable to the company's operations - Not applicable[131] PART II Market for Registrant's Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities The company's common stock trades on NASDAQ under 'PFIE', has not paid dividends, and completed a $2 million share repurchase program in 2023 - The company's common stock is traded on the NASDAQ Capital Market under the symbol "PFIE"[133] - The company has not declared or paid any dividends in the past two years and does not intend to do so in the foreseeable future[134] - The company completed a $2,000,000 share repurchase program by December 31, 2023, having spent the full allotment[136][137] 2023 Share Repurchases | Period | Shares Purchased | Average Price Paid Per Share ($) | | :--- | :--- | :--- | | June | 47,073 | $1.23 | | July | 83,034 | $1.33 | | August | 109,609 | $1.58 | | October | 33,417 | $1.80 | | November | 550,292 | $1.79 | | December | 381,808 | $1.58 | | Total | 1,205,233 | | Selected Financial Data This item is reserved and contains no information - Item 6 is reserved[139] Management's Discussion and Analysis of Financial Condition and Results of Operations Profire achieved a 27% revenue increase to $58.2 million in 2023, with gross profit up 41% to $30.5 million and a strong $20.0 million cash position Results of Operations Total revenues increased 27% to $58.2 million in 2023, with gross profit rising 41% to $30.5 million and gross margin improving to 52% Fiscal Year 2023 vs. 2022 Performance | Metric | 2023 ($) | 2022 ($) | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $58,208,060 | $45,936,643 | $12,271,417 | 27% | | Total Cost of Goods Sold | $27,676,042 | $24,285,253 | $3,390,789 | 14% | | Gross Profit | $30,532,018 | $21,651,390 | $8,880,628 | 41% | | Gross Margin | 52% | 47% | N/A | N/A | - Revenue growth in 2023 occurred despite an 18% decrease in average oil price and a 4% decrease in North American onshore rig count[141] Operating Expenses | Expense Category | 2023 ($) | 2022 ($) | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | General and administrative | $17,184,917 | $14,776,905 | $2,408,012 | 16% | | Research and development | $917,123 | $1,051,858 | ($134,735) | (13)% | Liquidity and Capital Resources The company maintains a debt-free liquidity position, with total cash and investments increasing 25% to $20.0 million and operating cash flow reaching $7.1 million in 2023 - The company has no long-term debt and is committed to maintaining strong liquidity[146] Cash and Investments Position | Category | Dec 31, 2023 ($) | Dec 31, 2022 ($) | % Change | | :--- | :--- | :--- | :--- | | Cash and cash equivalents | $10,767,519 | $7,384,578 | 46% | | Short-term investments | $2,799,539 | $1,154,284 | 143% | | Long-term investments | $6,425,582 | $7,503,419 | (14)% | | Total | $19,992,640 | $16,042,281 | 25% | Cash Flow Summary | Activity | 2023 ($) | 2022 ($) | | :--- | :--- | :--- | | Net Cash from Operating Activities | $7,064,050 | $516,077 | | Net Cash from (Used in) Investing Activities | ($1,266,492) | $10,657 | | Net Cash Used in Financing Activities | ($2,454,519) | ($1,375,011) | Quantitative and Qualitative Disclosures About Market Risk This section is not required for the registrant - This section is not required[154] Financial Statements and Supplementary Data This section presents the company's audited consolidated financial statements for 2023 and 2022, along with the independent auditor's unqualified opinion and detailed notes Key Financial Statement Highlights (2023 vs 2022) | Metric | 2023 ($) | 2022 ($) | | :--- | :--- | :--- | | Total Revenues | $58,208,060 | $45,936,643 | | Gross Profit | $30,532,018 | $21,651,390 | | Income from Operations | $11,854,100 | $5,194,608 | | Net Income | $10,776,714 | $3,947,760 | | Diluted EPS | $0.22 | $0.08 | | Total Assets | $66,293,845 | $53,929,536 | | Total Stockholders' Equity | $56,838,226 | $46,584,480 | Note 9 – Stockholders' Equity This note details equity activities, including share repurchases and executive compensation plans, featuring time-based and performance-based restricted stock units - The company repurchased 1,205,233 shares in 2023 and 961,221 shares in 2022 under authorized programs[231] - The 2023 Executive Incentive Plan (EIP) awards are based on performance goals for total revenue, EBITDA, revenue diversification, and safety, with payouts split 50% cash and 50% restricted stock[233][236][237] - The 2023 Long-Term Incentive Plan (LTIP) grants restricted stock units (RSUs) vesting over three years, with 33% time-based and 67% performance-based on Total Shareholder Return, Relative TSR, and EBITDA margin[238][240] Note 10 - Revenue This note outlines revenue recognition policies and disaggregates revenue streams, with Electronics, Re-Sell, and Manufactured goods as the largest categories Revenue by Category | Category | 2023 Revenue ($) | 2022 Revenue ($) | | :--- | :--- | :--- | | Electronics | $22,329,182 | $16,439,208 | | Manufactured | $13,188,773 | $9,282,342 | | Re-Sell | $18,766,340 | $16,596,713 | | Service | $3,923,765 | $3,618,380 | | Total Revenue | $58,208,060 | $45,936,643 | Note 13 – Basic and Diluted Earnings Per Share Basic EPS for 2023 was $0.23 and diluted EPS was $0.22, significantly higher than $0.08 for both in 2022, reflecting increased profitability Earnings Per Share (EPS) Calculation | Metric | 2023 | 2022 | | :--- | :--- | :--- | | Net Income ($) | $10,776,714 | $3,947,760 | | Basic Weighted Average Shares | 47,355,978 | 47,161,101 | | Basic EPS ($) | $0.23 | $0.08 | | Diluted Weighted Average Shares | 49,127,558 | 48,447,342 | | Diluted EPS ($) | $0.22 | $0.08 | Note 14 – Segment Information The company operates in two geographic segments, with the United States accounting for approximately 73% of total revenues and 82% of total net income in 2023 2023 Revenue and Net Income by Geographic Segment | Segment | Revenue ($) | Net Income ($) | | :--- | :--- | :--- | | Canada | $15,692,080 | $1,934,718 | | United States | $42,515,980 | $8,841,996 | | Total | $58,208,060 | $10,776,714 | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure No changes in or disagreements with accountants on accounting and financial disclosure were reported - None[301] Controls and Procedures Management concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2023 - Management concluded that the company's disclosure controls and procedures were effective as of December 31, 2023[302] - Management concluded that the company's internal control over financial reporting was effective as of December 31, 2023[306] - The company is exempt from external audit on the effectiveness of its internal financial reporting controls as a smaller reporting company[308] Other Information No directors or officers adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the period - No directors or officers adopted or terminated any Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the period[311] Disclosure Regarding Foreign Jurisdictions that Prevent Inspections This item is not applicable to the company - This item is not applicable[312] PART III Directors, Executive Officers and Corporate Governance Information for this item is incorporated by reference from the company's Definitive Proxy Statement for the Annual Meeting of Stockholders - Information is incorporated by reference to the company's Proxy Statement[314] Executive Compensation Information for this item is incorporated by reference from the company's Definitive Proxy Statement - Information is incorporated by reference to the company's Proxy Statement[315] Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Information for this item is incorporated by reference from the company's Definitive Proxy Statement - Information is incorporated by reference to the company's Proxy Statement[316] Certain Relationships and Related Transactions and Director Independence Information for this item is incorporated by reference from the company's Definitive Proxy Statement - Information is incorporated by reference to the company's Proxy Statement[317] Principal Accounting Fees and Services Sadler, Gibb & Associates, LLC serves as the independent registered public accounting firm, with further details incorporated by reference from the Proxy Statement - The company's independent registered public accounting firm is Sadler, Gibb & Associates, LLC, with additional information incorporated by reference to the Proxy Statement[318][319] PART IV Exhibits, Financial Statement Schedules This section provides a comprehensive list of all exhibits filed as part of the Form 10-K report, including corporate documents and agreements - This item provides a comprehensive list of all exhibits filed with the annual report[321] Form 10-K Summary The company has opted not to include an optional summary of the information required by the Form 10-K - The Company has chosen not to include an optional Form 10-K summary[324]