UNITED
STATES SECURITIES AND EXCHANGE COMMISSION


Washington,
DC 20549





FORM
10-Q





[X]
            QUARTERLY
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934


For
      the Quarterly Period Ended December 31,
      2009





[  ]
            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 000-52376





PROFIRE
ENERGY, INC.


(Exact
name of registrant as specified in its charter)





Nevada
            
            20-0019425(State
      or other jurisdiction of
            
            (I.R.S.
      Employerincorporation
      or organization)
            
            Identification
      No.)1245
      Brickyard Road, Suite 590Salt Lake City, Utah
            
            84106(Address
      of principal executive offices)
            
            (Zip
      Code)





(801)
433-2000


(Registrant’s
telephone number, including area code)





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





Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting company. See
the definitions of “large
accelerated filer,” “accelerated filer” and “smaller reporting company” in
Rule 12b-2 of the Exchange Act. (Check one):





Large accelerated filer
[  ]                                                                 Accelerated
filer [  ]


Non-accelerated filer
[  ]                                                                Smaller
reporting company [X]


(Do
not check if a smaller reporting company)





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





As of
February 10, 2010, the registrant had 45,000,000 shares of common stock, par
value $0.001, issued and outstanding.





PROFIRE
ENERGY, INC.


FORM
10-Q


TABLE
OF CONTENTS








PART I —
FINANCIAL INFORMATION





Item
      1. Financial StatementsCondensed
      Consolidated Balance Sheets as of
              December
      31, 2009 (Unaudited) and March 31, 2009
            3Condensed
      Consolidated Statements of Operations and
              Comprehensive  Income
      (Loss) (Unaudited) for the three and nine month periods ended December 31,
      2009 and 2008
            5Condensed
      Consolidated Statements of Cash Flows (Unaudited) for the
              nine
      month periods ended December 31, 2009 and 2008
            6Notes
      to Condensed Consolidated Financial Statements (Unaudited)
            7Item
      2.  Management’s Discussion and Analysis of Financial
      Condition
              and
      Results of Operations
            11Item
      3.  Quantitative and Qualitative Disclosure about Market
      Risk
            18Item
      4T.  Controls and Procedures
            18PART
      II — OTHER INFORMATIONItem
      1A.  Risk Factors
            19Item
      6.  Exhibits
            20Signatures
            20











PART
I. FINANCIAL INFORMATION





Item
1.  Financial Information








PROFIRE
      ENERGY, INC. AND SUBSIDIARYCondensed
      Consolidated Balance SheetsASSETSDecember
      31,
            
            March
      31,2009
            
            2009(Unaudited)CURRENT
      ASSETSCash
      and cash equivalents
            
            $
            559,180
            
            $
            226,559Accounts
      receivable, net
            
            
            2,407,147
            
            
            989,313Marketable
      securities-available for sale
            
            
            3,716
            
            
            3,110Inventories
            
            
            664,213
            
            
            691,900Prepaid
      expenses
            
            
            1,968
            
            
            812Total
      Current Assets
            
            
            3,636,224
            
            
            1,911,694PROPERTY
      AND EQUIPMENT, net
            
            
            423,221
            
            
            357,613TOTAL
      ASSETS
            
            $
            4,059,445
            
            $
            2,269,307





The
accompanying notes are an integral part of these condensed unaudited
consolidated financial statements.
 
 3





PROFIRE
      ENERGY, INC. AND SUBSIDIARYCondensed
      Consolidated Balance SheetsLIABILITIES AND STOCKHOLDERS'
      EQUITYDecember
      31,
            
            March
      31,2009
            
            2009(Unaudited)CURRENT
      LIABILITIESAccounts
      payable
            
            $
            366,378
            
            $
            147,552Accrued
      liabilities
            
            
            93,733
            
            
            26,926Income
      taxes payable
            
            
            466,884
            
            
            413,862Total
      Current Liabilities
            
            
            926,995
            
            
            588,340TOTAL
      LIABILITIES
            
            
            926,995
            
            
            588,340STOCKHOLDERS'
      EQUITYPreferred
      shares: $0.001 par value,10,000,000
      shares authorized: no sharesissues
      and outstanding
            
            
            -
            
            
            -Common
      shares: $0.001 par value,100,000,000
      shares authorized: 45,000,000shares
      issues and outstanding
            
            
            45,000
            
            
            45,000Additional
      paid-in capital
            
            
            (61,505)
            
            
            (73,237)Accumulated
      other comprehensive income (loss)
            
            
            169,993
            
            
            (224,828)Retained
      earnings
            
            
            2,978,962
            
            
            1,934,032Total
      Stockholders' Equity
            
            
            3,132,450
            
            
            1,680,967TOTAL
      LIABILITIES AND STOCKHOLDERS' EQUITY
            
            $
            4,059,445
            
            $
            2,269,307


The
accompanying notes are an integral part of these condensed unaudited
consolidated financial statements.
 
 4


PROFIRE
      ENERGY, INC. AND SUBSIDIARYCondensed
      Consolidated Statements of Operations and Comprehensive Income
      (Loss)(Unaudited)For
      the Three Months Ended
            
            For
      the Nine Months EndedDecember
      31,
            
            December
      31,2009
            
            2008
            
            2009
            
            2008REVENUESSales
      of goods, net
            $
            2,434,3018
            
            $
            1,355,482
            
            $
            4,023,208
            
            $
            4,235,396Sales
      of services, net
            
            202,124
            
            
            233,548
            
            
            510,306
            
            
            664,144Total
      Revenues
            
            2,636,442
            
            
            1,589,030
            
            
            4,533,514
            
            
            4,899,540COST
      OF SALESCost
      of goods sold
            
            572,445
            
            
            624,441
            
            
            1,253,810
            
            
            2,113,328GROSS
      PROFIT
            
            2,063,997
            
            
            964,589
            
            
            3,279,704
            
            
            2,786,212OPERATING
      EXPENSESGeneral
      and administrative expenses
            
            516,100
            
            
            459,033
            
            
            1,262,778
            
            
            1,293,688Payroll
      expenses
            
            187,472
            
            
            154,884
            
            
            510,353
            
            
            389,394Depreciation
      expense
            
            11,138
            
            
            9,158
            
            
            32,056
            
            
            31,273Total
      Operating Expenses
            
            714,710
            
            
            623,075
            
            
            1,805,187
            
            
            1,714,355INCOME
      FROM OPERATIONS
            
            1,349,287
            
            
            341,514
            
            
            1,474,517
            
            
            1,071,857OTHER
      INCOME (EXPENSE)(Loss)
      gain on sale of fixed assets
            
            -
            
            
            (20)
            
            
            -
            
            
            346Interest
      expense
            
            (77)
            
            
            (4,209)
            
            
            (3,633)
            
            
            (5,016)Interest
      income
            
            56
            
            
            -
            
            
            133
            
            
            -Total
      Other Income (Expense)
            
            (21)
            
            
            (4,229)
            
            
            (3,500)
            
            
            (4,670)NET
      INCOME BEFORE INCOME TAXES
            
            1,349,266
            
            
            337,285
            
            
            1,471,017
            
            
            1,067,187INCOME
      TAX EXPENSE
            
            396,508
            
            
            151,216
            
            
            426,087
            
            
            365,893NET
      INCOME
            $
            952,758
            
            $
            186,069
            
            $
            1,044,930
            
            $
            701,294UNREALIZED
      HOLDING LOSSON
      AVAILABLE FOR SALE SECURITIES
            $
            1,764
            
            $
            -
            
            $
            789
            
            $
            -FOREIGN
      CURRENCY TRANSLATION GAIN (LOSS)
            
            98,500
            
            
            (218,174)
            
            
            394,032
            
            
            (267,090)TOTAL
      COMPREHENSIVE INCOME (LOSS)
            $
            1,053,022
            
            $
            (32,105)
            
            $
            1,439,751
            
            $
            434,204BASIC
      AND DILUTED EARNINGS PER SHARE
            $
            0.02
            
            $
            0.00
            
            $
            0.02
            
            $
            0.02BASIC
      AND DILUTED WEIGHTED AVERAGENUMBER
      OF SHARES OUTSTANDING
            
            45,000,000
            
            
            45,000,000
            
            
            45,000,000
            
            
            45,000,000





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

















PROFIRE
      ENERGY, INC. AND SUBSIDIARYCondensed
      Consolidated Statements of Cash Flows(Unaudited)For
      the Nine Months EndedDecember
      31,2009
            
            2008CASH
      FLOWS FROM OPERATING ACTIVITIESNet
      income
            
            $
            1,044,930
            
            $
            701,294Adjustments
      to reconcile net income tonet
      cash provided by (used in) operating activities:Depreciation
      expense
            
            
            32,056
            
            
            31,273Impairment
      of available for sale securities
            
            
            -
            
            
            -Stock
      options issued for services
            
            
            11,732
            
            
            -Changes
      in operating assets and liabilities:Changes
      in accounts receivable
            
            
            (1,158,988)
            
            
            (515,991)Changes
      in inventories
            
            
            153,831
            
            
            (330,279)Changes
      in prepaid expenses
            
            
            (944)
            
            
            (52)Changes
      in income taxes payable
            
            
            (26,178)
            
            
            346,778Changes
      in accounts payable and accrued liabilities
            
            
            246,066
            
            
            (261,919)Net
      Cash Provided by (Used in) Operating Activities
            
            
            302,505
            
            
            (28,896)CASH
      FLOWS FROM INVESTING ACTIVITIESPurchase
      of fixed assets
            
            
            (28,162)
            
            
            (8,078)Net
      Cash Used in Investing Activities
            
            
            (28,162)
            
            
            (8,078)CASH
      FLOWS FROM FINANCING ACTIVITIESRepayment
      of related party payables
            
            
            -
            
            
            (91,937)Proceeds
      from revolving credit line
            
            
            -
            
            
            128,296Net
      Cash Provided by Financing Activities
            
            
            -
            
            
            36,359Effect
      of exchange rate changes on cash
            
            
            58,278
            
            
            (5,207)NET
      INCREASE (DECREASE) IN CASH
            
            
            332,621
            
            
            (5,822)CASH
      AT BEGINNING OF PERIOD
            
            
            226,559
            
            
            33,097CASH
      AT END OF PERIOD
            
            $
            559,180
            
            $
            27,275SUPPLEMENTAL
      DISCLOSURES OF CASH FLOW INFORMATIONCASH
      PAID FOR:Interest
            
            $
            3,633
            
            $
            5,016Income
      taxes
            
            $
            454,163
            
            $
            118,397NON
      CASH FINANCING ACTIVITIES:Related
      party payables assumed in merger
            
            $
            -
            
            $
            46,288


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













PROFIRE
ENERGY, INC. AND SUBSIDIARY


Notes to
the Condensed Unaudited Consolidated Financial Statements





NOTE 1 -
CONDENSED FINANCIAL STATEMENTS





The
accompanying financial statements have been prepared by the Company without
audit.  In the opinion of management, all adjustments (which include
only normal recurring adjustments) necessary to present fairly the financial
position, results of operations and cash flows at December 31, 2009 and for all
periods presented have been made.





Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with accounting principles generally accepted in the
United States of America have been condensed or omitted. It is suggested that
these condensed financial statements be read in conjunction with the financial
statements and notes thereto included in the Company's March 31, 2009 audited
financial statements.  The results of operations for the periods ended
December 31, 2009 and 2008 are not necessarily indicative of the operating
results for the full years.





NOTE 2 –
EQUITY TRANSACTIONS


On
September 30, 2008 the Company entered into an Acquisition Agreement with
Profire Combustion, Inc. (“Profire”) and the shareholders of Profire Combustion,
Inc., subject to customary closing conditions. All conditions for closing were
satisfied or waived and the transaction closed on October 9, 2008.





Pursuant
to the terms and conditions of the Acquisition Agreement, 35,000,000 shares of
restricted common stock of the Company were issued to the three shareholders of
Profire Combustion, Inc., (the “Profire Shareholders”) in exchange for all of
the issued and outstanding shares of Profire. As a result of the transaction,
Profire became a wholly-owned subsidiary of the Company. For accounting
purposes, Profire is considered the accounting acquirer.





NOTE 3 –
SIGNIFICANT ACCOUNTING POLICIES





Use of
Estimates





The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts of
revenue and expenses during the reporting period. Actual results could differ
from those estimates.

























PROFIRE
ENERGY, INC. AND SUBSIDIARY


Notes to
the Condensed Unaudited Consolidated Financial Statements





NOTE 3 –
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)





Inventory





In
accordance with ASC Topic 605 “Inventory Pricing,” the
Company’s inventory is valued at the lower of cost (the purchase price,
including additional fees) or market based on using the entire value of
inventory.  Inventories are determined based on a weighted-average price
basis.





Inventory
consisted of the following:





December
      31,
            
            December
      31,2009
            
            2008Raw
      materials
            
            $                   -
            
            $                   -Finished
      goods
            
            711,109
            
            738,796Reserve
      for obsolescence
            
            (46,896)
            
            (46,896)Total
            
            $       664,213
            
            $       691,900





Foreign Currency and
Comprehensive Income





The
Company’s functional currency is the Canadian dollar (CAD). The financial
statements of the Company were translated to United States Dollar (USD) using
year-end exchange rates for the balance sheet, and average exchange rates for
the statements of operations. Equity transactions were translated using
historical rates. The period-end exchange rates of 1.04940 and 1.025376 were
used to convert the Company’s December 31, 2009 and March 31, 2009 balance
sheets, respectively, and the statements of operations used weighted average
rates of 1.108914 and 1.07194 for the nine months ended December 31, 2009 and
2008, respectively. All amounts in the financial statements and footnotes are
presumed to be stated in USD, unless otherwise identified. Foreign currency
translation gains or losses as a result of fluctuations in the exchange rates
are reflected in the Statement of Operations and Total Comprehensive
Income.





Recent Accounting
Pronouncements





In
January 2010, the FASB issued Accounting Standards Update 2010-02, Consolidation
(Topic 810): Accounting and Reporting for Decreases in Ownership of a
Subsidiary. This amendment to Topic 810 clarifies, but does not change, the
scope of current US GAAP. It clarifies the decrease in ownership provisions of
Subtopic 810-10 and removes the potential conflict between guidance in that
Subtopic and asset de-recognition and gain or loss recognition guidance that may
exist in other US GAAP. An entity will be required to follow the amended
guidance beginning in the period that it first adopts FAS 160 (now included in
Subtopic 810-10). For those entities that have already adopted FAS 160, the
amendments are effective at the beginning of the first interim or annual
reporting period ending on or after December 15, 2009. The amendments should be
applied retrospectively to the first period that an entity adopted FAS 160. The
Company does not expect the provisions of ASU 2010-02 to have a material effect
on the financial position, results of operations or cash flows of the
Company.













PROFIRE
ENERGY, INC. AND SUBSIDIARY


Notes to
the Condensed Unaudited Consolidated Financial Statements





NOTE 3 –
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)





Recent Accounting
Pronouncements (continued)





In
January 2010, the FASB issued Accounting Standards Update 2010-01, Equity (Topic
505): Accounting for Distributions to Shareholders with Components of Stock and
Cash (A Consensus of the FASB Emerging Issues Task Force). This amendment to
Topic 505 clarifies the stock portion of a distribution to shareholders that
allows them to elect to receive cash or stock with a limit on the amount of cash
that will be distributed is not a stock dividend for purposes of applying Topics
505 and 260. Effective for interim and annual periods ending on or after
December 15, 2009, and would be applied on a retrospective basis. The Company
does not expect the provisions of ASU 2010-01 to have a material effect on the
financial position, results of operations or cash flows of the
Company.





In
December 2009, the FASB issued Accounting Standards Update 2009-17,
Consolidations (Topic 810): Improvements to Financial Reporting by Enterprises
Involved with Variable Interest Entities. This Accounting Standards Update
amends the FASB Accounting Standards Codification for Statement
167.


In
December 2009, the FASB issued Accounting Standards Update 2009-16, Transfers
and Servicing (Topic 860): Accounting for Transfers of Financial Assets. This
Accounting Standards Update amends the FASB Accounting Standards Codification
for Statement 166.





In
October 2009, the FASB issued Accounting Standards Update 2009-15, Accounting
for Own-Share Lending Arrangements in Contemplation of Convertible Debt Issuance
or Other Financing. This Accounting Standards Update amends the FASB Accounting
Standard Codification for EITF 09-1.





In
October 2009, the FASB issued Accounting Standards Update 2009-14, Software
(Topic 985): Certain Revenue Arrangements That Include Software Elements. This
update changed the accounting model for revenue arrangements that include both
tangible products and software elements. Effective prospectively for revenue
arrangements entered into or materially modified in fiscal years beginning on or
after June 15, 2010. Early adoption is permitted. The Company does not expect
the provisions of ASU 2009-14 to have a material effect on the financial
position, results of operations or cash flows of the Company.





In
October 2009, the FASB issued Accounting Standards Update 2009-13, Revenue
Recognition (Topic 605): Multiple-Deliverable Revenue Arrangements. This update
addressed the accounting for multiple-deliverable arrangements to enable vendors
to account for products or services (deliverables) separately rather than a
combined unit and will be separated in more circumstances that under existing US
GAAP. This amendment has eliminated that residual method of allocation.
Effective prospectively for revenue arrangements entered into or materially
modified in fiscal years beginning on or after June 15, 2010. Early adoption is
permitted. The Company does not expect the provisions of ASU 2009-13 to have a
material effect on the financial position, results of operations or cash flows
of the Company.












PROFIRE
ENERGY, INC. AND SUBSIDIARY


Notes to
the Condensed Unaudited Consolidated Financial Statements





NOTE 3 –
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)





Recent Accounting
Pronouncements (continued)





In
September 2009, the FASB issued Accounting Standards Update 2009-12, Fair Value
Measurements and Disclosures (Topic 820): Investments in Certain Entities That
Calculate Net Asset Value per Share (or Its Equivalent). This update provides
amendments to Topic 820 for the fair value measurement of investments in certain
entities that calculate net asset value per share (or its equivalent). It is
effective for interim and annual periods ending after December 15, 2009. Early
application is permitted in financial statements for earlier interim and annual
periods that have not been issued. The Company does not expect the provisions of
ASU 2009-12 to have a material effect on the financial position, results of
operations or cash flows of the Company.





In July
2009, the FASB ratified the consensus reached by EITF (Emerging Issues Task
Force) issued EITF No. 09-1, (ASC Topic 470) "Accounting for Own-Share Lending
Arrangements in Contemplation of Convertible Debt Issuance" ("EITF 09-1"). The
provisions of EITF 09-1, clarifies the accounting treatment and disclosure of
share-lending arrangements that are classified as equity in the financial
statements of the share lender. An example of a share-lending arrangement is an
agreement between the Company (share lender) and an investment bank (share
borrower) which allows the investment bank to use the loaned shares to enter
into equity derivative contracts with investors. EITF 09-1 is effective for
fiscal years that beginning on or after December 15, 2009 and requires
retrospective application for all arrangements outstanding as of the beginning
of fiscal years beginning on or after December 15,2009. Share-lending
arrangements that have been terminated as a result of counterparty default prior
to December 15, 2009, but for which the entity has not reached a final
settlement as of December 15, 2009 are within the scope. Effective for
share-lending arrangements entered into on or after the beginning of the first
reporting period that begins on or after June 15,2009. The Company does not
expect the provisions of EITF 09-1 to have a material effect on the financial
position, results of operations or cash flows of the Company.





Income
Taxes





The
Parent is subject to U.S. income taxes on its world-wide income with a credit
provided for foreign taxes paid however; the U.S. parent company recorded a net
loss and thus is not subject to U.S. income tax during either period being
reported.  The Canadian subsidiary is subject to Canadian income
taxes. The effective Canadian income tax rates are 29.0% and 34.3% for the nine
months ended December 31, 2009 and 2008, respectively.





Subsequent
Events





In
accordance with ASC 855-10 Company management reviewed all material events
through February 10, 2010 and there are no material subsequent events to report
other than those reported.











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





This discussion summarizes
the significant factors affecting our consolidated operating results, financial
condition, liquidity and capital resources during the three and nine months
ended December 31, 2009 and 2008.For a
complete understanding, 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 March 31, 2009.





Forward-Looking
Statements





This quarterly report contains
forward-looking statements as that term is defined in Section 27A of the United
States Securities Act of 1933 and Section 21E of the Securities Exchange Act of
1934.  These statements relate to future events or our future
financial performance.  In some cases, you can identify
forward-looking statements by terminology such as “may”, “should”, “expects”, “plans”, “anticipates”, “believes”, “estimates”, “predicts”, “potential” or “continue” or the negative of
these terms or other comparable terminology.  Such statements are
based on currently available financial and competitive information and are
subject to various risks and uncertainties that could cause actual results to
differ materially from our historical experience and our present
expectations.  Undue reliance should not be placed on such
forward-looking statements as such statements speak only as of the date on which
they are made.  These statements are only predictions and involve
known and unknown risks, uncertainties and other factors that may cause our or
our industry’s actual results, levels of activity, performance or achievements
to be materially different from any future results, levels of activity,
performance or achievements expressed or implied by these forward-looking
statements.





Although
we believe that the expectations reflected in the forward-looking statements are
reasonable, we cannot guarantee future results, levels of activity, performance
or achievements.  Except as required by applicable law, including the
securities laws of the United States, we do not intend to update any of the
forward-looking statements to conform these statements to actual
results.





General





On September 30, 2008 the Company
entered into an Acquisition Agreement with Profire Combustion, Inc., an Alberta,
Canada corporation, under which the Company acquired 100% of the outstanding
common shares of Profire Combustion, Inc. in exchange for the issuance of
35,000,000 common shares.





Following the closing of the
Acquisition Agreement, the three Profire Combustion, Inc. shareholders held 78%
of the Company’s common stock outstanding after the transaction.  As a
result, Profire Combustion, Inc. is considered the acquirer for financial
reporting purposes.  Accordingly, the accompanying financial
statements are the financial statements of Profire Combustion, Inc. for all
periods presented.












Results of
Operations





Comparison of the three
months ended December 31, 2009 and 2008.





Total
Revenues





Our total revenues during the quarter
ended December 31, 2009 increased 66% compared to the quarter ended December 31,
2008.  We have worked to expand our operations during the past quarter
with continuing efforts to research the sales possibilities in the
U.S.   We believe the rise in revenues compared to the same
quarter of 2008 is primarily attributable to current economic conditions and in
reaction to the rise in oil prices.  We know some customers were
delaying projects as they waited to see what would happen with oil prices and
demand before committing to new capital expenditures.





During the quarter ended December 31,
2008, product sales accounted for 85% of total revenues and service sales
accounted for 15% of total revenue.  During the quarter ended December
31, 2009 the mix of product and service sales shifted, with product sales at 92%
of total revenues and service sales accounting for 8% of total
revenue.





We believe the increase in product
revenues as a percentage of total revenues is the result of the effects of the
rising oil prices, which encouraged some clients to fulfill product purchases
they had been delaying.  In the most recently completed quarter, we
realized a large spike in sales.  We believe this was due to pent-up
demand resulting from the slower previous three quarters combined with more
favorable oil prices during the current quarter. We expect total revenues will
continue to grow as we expand our operations, however, with the volatility in
oil prices and the general economic slowdown,  we expect revenue
growth to be more modest than it was during the quarter ended December 31,
2009.





Cost of Goods
Sold





Cost of goods sold during the three
months ended December 31, 2009 was $572,445 compared to $624,441 during the
three months ended December 31, 2008.  This 8% decrease is a result
two main factors.  First, due to high and steady demand, a large
portion of our orders were on back order.  This resulted in virtually
no holding costs as units were received, assembled and shipped in less time,
sometimes on the same day.  The high demand also allowed our workers
to increase overall productivity as they were able to produce more units in less
time.  These conditions substantially lowered the fixed costs that are
allocated to our cost of goods sold.  Second, because we had steady
and reliable orders to place with vendors, we were able to negotiate more
favorable prices and terms.





As a percentage of revenue, cost of
goods sold decreased 17% during the three months ended December 31, 2009
compared to the same three month period in 2008, as a result of pricing volume
discounts from certain suppliers that offered incentives to buy inventory in
greater quantity during the period and more efficiency relating to assembly of
components before sale and installation.  During the three months
ended December 31, 2009, cost of goods sold as a percentage of total revenues
was 22% of total revenue compared to 39% during the three months ended December
31, 2008.  Much of this decrease was due to the favorable conditions
mentioned above which may not continue.  We do believe that as we
expand and continue to improve our operations that an overall improvement in our
margins will persist over prior years.










General and Administrative
Expenses





General and administrative expenses for
the three months ended December 31, 2009 were $516,100, a $57,067 or 12%
increase from $459,033 for the same three month period ended December 31,
2008.  This increase in general and administrative expense was largely
due to our planned expansion and the recent rise in demand for our products and
services.  Our company has hired additional sales and administrative
staff and increased spending on product development and general costs related to
the expansion. We expect overall general and administrative expenses will
continue to increase as we continue our efforts to expand our
business.





Payroll
Expense





Payroll expense during the three months
ended December 31, 2009 increased 21% to $187,472 from $154,884 for the three
months ended December 31, 2008.  We anticipate payroll expense will
continue to be somewhat higher through the remainder of the current fiscal year
as compared to our prior fiscal year due to the hiring of management and
marketing personnel during 2009.





Income from
Operations





The 8% decrease in cost of goods sold
compared to the December 31, 2008 numbers coupled with the 66% increase in
revenue was somewhat offset by a 15% increase in total operating
expense.  As a result we realized a net income before income taxes and
foreign currency gain of $1,349,266 during the three months ended December 31,
2009 compared to net income before income taxes of $337,285 during the three
months ended December 31, 2008.





Income Tax
Expense





During the quarter ended December 31,
2009, we realized an income tax expense of $396,508, compared to an income tax
expense of $151,216 during the quarter ended December 31, 2008.  This
increase was due to the spike in sales mentioned previously.





Foreign Currency Translation
Gain (Loss)





The
consolidated financial statements are presented in U.S. dollars.  Our
functional currency is Canadian dollars.  The financial statements of
the Company were translated to U.S. dollars using year-end exchange rates for
the balance sheet and weighted average exchange rates for the statements of
operations.  Equity transactions were translated using historical
rates.  Foreign currency translation gains or losses as a result of
fluctuations in the exchange rates are reflected in the statement of operations
and comprehensive income.







Therefore,
the translation adjustment in the consolidated financial statements represents
the translation differences from translation of our financial statements. As a
result, the translation adjustment is commonly, but not always, positive if the
average exchange rates are lower than exchange rates on the date of the
financial statements and negative if the average exchange rates are higher than
exchange rates on the date of the financial statements.





During the three months ended December
31, 2009, we recognized a foreign currency translation gain of $98,500 compared
to foreign currency translation loss of $218,174 during the three months ended
December 31, 2008 due to the decline of the value of the U.S. dollar against the
Canadian dollar during the quarter ended December 31, 2009.





Total Comprehensive Income
(Loss)





For the foregoing reasons, we realized
total comprehensive income of $1,053,022 during the three months ended December
31, 2009 compared to total comprehensive loss of $32,105 during the three months
ended December 31, 2008.





Comparison of the nine
months ended December 31, 2009 and 2008.





Total
Revenues





During the nine months ended December
31, 2009 total revenues were $4,533,514 compared to $4,899,540 during the nine
months ended December 31, 2008.  The decrease in total revenues is
primarily attributable to a 5% decrease in sales of goods during the nine month
period ended December 31, 2009.  This decrease in sales was primarily
attributable to current economic conditions and a reaction to the decline in oil
prices since 2008.  The decline in sales resulting from negative
economic conditions and falling oil prices has been partially offset by the
recent economic rally and firming up of oil prices.





The 66% increase in total revenues
during the 2009 third quarter over the 2008 third quarter noted above was
insufficient to completely offset the decreases we experienced in the first two
quarters of the fiscal year. Customers who previously were delaying projects
have begun to resume buying however, we know some customers continue to delay
projects as they wait to see what will happen with oil prices and demand before
committing to new capital expenditures.





During the nine months ended December
31, 2008, product sales accounted for 86% of total revenues.  By
comparison, during the nine months ended December 31, 2009, product sales
accounted for 89% of total revenues.  Service revenue decreased 23%
from 2008 to 2009 and accounted for 11% of total revenue, compared to 14% during
2008.  We believe the decrease in services revenues as a percentage of
total revenues is related to our efforts to establishing ourselves as a product
manufacturer and retailer. We expect total revenues will grow as oil prices
recover.










Cost of Goods
Sold





Cost of goods sold during the nine
months ended December 31, 2009 was $1,253,810 compared to $2,113,328 during the
nine months ended December 31, 2008.  This 41% decrease for the nine
month period is primarily the result of the positive outcomes of the most recent
fiscal quarter.  During the nine month period ended December 31, 2009,
cost of goods sold as a percentage of total revenues was 28% compared to 43%
during the nine months ended December 31, 2008.    As we
continue to develop our business, we anticipate that our cost of goods sold
ratios will begin to stabilize.  While the efficiencies and high
demand mentioned earlier may not continue at the same rate as what was
experienced this quarter, as we grow and develop our company, we believe the
much of the achieved improvements will persist over time.





General and Administrative
Expenses





General and administrative expenses for
the nine months ended December 31, 2009 were $1,262,778, a $30,910 or a 2%
decrease compared to the same nine month period ended December 31,
2008.  This decrease in general and administrative expense was largely
the result of cost cutting during the first two quarters of the year in reaction
to the decline in demand for our products and services.  During the
most recent quarter, these savings were offset as expenses increased due to the
rebound in demand. We expect general and administrative expenses will continue
to increase as we continue our efforts to expand our business.





Payroll
Expense





Payroll expense during the nine months
ended December 31, 2009 was $510,353 or 31% higher than during the nine months
ended December 31, 2008.  This increase in payroll expense was the
result of both the hiring of additional employees and wage increases for
existing employees.  We anticipate payroll expense will remain higher
during the remainder of the current fiscal year.





Net
Income (Loss) Before Income Tax





As a result of the 7% decrease in total
revenue, which was more than offset by the 41% decrease in cost of goods sold,
net income before income taxes increased by $403,830 to $1,471,017 during the
nine months ended December 31, 2009 compared to the nine months ended December
31, 2008.





Income Tax
Expense





Income tax expense during the nine
months ended December 31, 2009 was $426,087 compared to $365,893 during the nine
months ended December 31, 2008. This increase in income tax expense was due to
the significant jump in sales in during the three months ended December 31,
2009.










Foreign Currency Translation
Gain (Loss)





During the nine months ended December
31, 2009, we recognized a foreign currency translation gain of $394,032 compared
to foreign currency translation loss of $267,090 during the nine months ended
December 31, 2008. This gain in 2009 is a function of the appreciation of the
Canadian dollar vs. the US dollar compared to a decline of the Canadian dollar
vs the US dollar during 2008.  The Canadian dollar rose to
approximately $0.97 per US dollar at December 31, 2009 from approximately $0.80
at March 31, 2009.





Total Comprehensive Income
(Loss)





For the foregoing reasons, we realized
a $1,005,547 increase in total comprehensive income to $1,439,751 during the
nine months ended December 31, 2009 compared to total comprehensive income of
$434,204 during the nine months ended December 31, 2008.





Liquidity and Capital
Resources





Since inception, we have financed our
business primarily from cash flows from operations and loans from Company
executives.  We have a $400,000 revolving credit line with a local
banking institution that we also use from time to time to satisfy short-term
fluctuations in cash flows.  At December 31, 2009, we had $0
outstanding on our line of credit.





As of December 31, 2009 we had current
assets of $3,636,224 and total assets of $4,059,445 including cash and cash
equivalents of $559,180.  At December 31, 2009 total liabilities were
$926,995, all of which were current liabilities.





During the nine months ended December
31, 2009 and 2008 cash was primarily used to fund operations.  See
below for additional discussion and analysis of cash flow.





Nine
      months ended December 31, 2009
            
            Nine  months
      ended December 31, 2008Net
      cash provided by (used in) operating activities
            $
            302,505
            
            $
            (28,896)Net
      cash (used in) investing activities
            $
            (28,162)
            
            $
            (8,078)Net
      cash provided by financing activities
            $
            -
            
            $
            36,359Effect
      of exchange rate changes on cash
            $
            58,278
            
            $
            (5,207)NET
      INCREASE (DECREASE) IN CASH
            $
            332,621
            
            $
            (5,822)










Net cash provided by our operating
activities increased by $302,505.  During the nine months ended
December 31, 2009 we realized increases in net income, accounts payable and
accrued liabilities which was partially offset by a significant increase in
accounts receivable.





We have no current capital commitments
outside of general operations and do not anticipate any in the near
future.  We believe between cash on hand and our revolving credit line
we have sufficient resources to meet our short-term cash needs.





Our accounts receivables were 143%
higher over the period ended March 31, 2009 as several of our customers have
commenced ordering products as they deem conditions to be improving
somewhat.  We anticipate these accounts will be converted to cash on
normal terms.  Inventory may fluctuate as we have opportunities to
stock at favorable rates as we buy in scale.  This may ebb and flow
from quarter to quarter.  Accrued liabilities will fluctuate as
liabilities accrue.





During the nine months ended December
31, 2009 we realized a net cash gain of $332,621.





Summary of Material Contractual
Commitments





The Company had no material contractual
commitments as of December 31, 2009.





Inflation





We believe that inflation has not had a
significant impact on our operations since inception.




Seasonality





Activity of our customers will
sometimes be affected by weather and season.  As the majority of our
operations currently are in western Canada, sales may slow due to winter
conditions that may hamper the ability of our customers to build out new
locations or maintain and access current locations.  We typically have
our strongest revenue growth cycles in the non-winter months, however the
economic conditions that prevailed during this past year and the abnormal jump
in sales this last quarter this effect was not as pronounced as in past
years.  As our Company begins to expand southward into the United
States we anticipate this effect to diminish.





Off-Balance Sheet
Arrangements





As of December 31, 2009 and March 31,
2009 we had no off-balance sheet arrangements.












Item
3.  Quantitative and Qualitative Disclosure about Market
Risk





We are a smaller reporting company, as
defined in Rule 12b-2 promulgated under the Securities Exchange Act of
1934, and accordingly we are not required to provide the information required by
this Item.





Item
4T.  Controls and Procedures





Management
is responsible for establishing and maintaining adequate internal control over
financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the
Securities Exchange Act of 1934, as amended.  Our internal control
over financial reporting is designed to ensure that information required to be
disclosed in reports filed under the Securities Exchange Act of 1934, as amended
(the “Exchange Act”), is recorded, processed, summarized and reported within the
time periods specified in the rules and forms of the Securities and Exchange
Commission, and that such information is accumulated and communicated to
management, including our Chief Executive Officer and Chief Financial Officer,
as appropriate, to allow timely decisions regarding required disclosure and to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with U.S. generally accepted accounting principles.





As of December 31, 2009 we conducted an
evaluation, under the supervision and with the participation of our principal
executive officer and principal financial officer, of the effectiveness of our
internal control over financial reporting based on the criteria for effective
internal control over financial reporting established in “Internal
Control — Integrated Framework,” issued by the Committee of Sponsoring
Organizations (COSO) of the Treadway Commission.  Based upon this
assessment, we determined that there are material weaknesses affecting our
internal control over financial reporting.





The
matters involving internal controls and procedures that our management considers
to be material weaknesses under COSO and SEC rules are: (1) lack of a
functioning audit committee and lack of independent directors on the Company’s
board of directors, resulting in ineffective oversight in the establishment and
monitoring of required internal controls and procedures; (2) inadequate
segregation of duties consistent with control objectives; (3) insufficient
written policies and procedures for accounting and financial reporting with
respect to the requirements and application of US GAAP and SEC disclosure
requirements; and (4) ineffective controls over period end financial disclosure
and reporting processes.  The aforementioned potential material
weaknesses were identified by our Chief Financial Officer in connection with the
preparation of our financial statements as of December 31, 2009, who
communicated the matters to our management and board of directors.





Management
believes that the material weaknesses set forth in items (2), (3) and (4) above
did not have an effect on our financial results. However, the lack of a
functioning audit committee and lack of a majority of independent directors on
our board of directors, resulting in ineffective oversight in the establishment
and monitoring of required internal controls and procedures, can impact our
financial statements for the future years.












Management’s
Remediation Initiatives





Although
we are unable to meet the standards under COSO because of the limited funds
available to a company of our size, we are committed to improving our financial
organization.  As funds become available, we will undertake to: (1)
create a position to segregate duties consistent with control objectives, (2)
increase our personnel resources and technical accounting expertise within the
accounting function (3) appoint one or more outside directors to our board of
directors who shall be appointed to the audit committee of the Company resulting
in a fully functioning audit committee who will undertake the oversight in the
establishment and monitoring of required internal controls and procedures; and
(4) prepare and implement sufficient written policies and checklists which will
set forth procedures for accounting and financial reporting with respect to the
requirements and application of US GAAP and SEC disclosure requirements.





We will
continue to monitor and evaluate the effectiveness of our internal controls and
procedures and our internal control over financial reporting on an ongoing basis
and are committed to taking further action and implementing additional
enhancements or improvements, as necessary and as funds allow.  However,
because of the inherent limitations in all control systems, no evaluation of
controls can provide absolute assurance that misstatements due to error or fraud
will not occur or that all control issues and instances of fraud, if any, within
the Company have been detected.  These inherent limitations include the
realities that judgments in decision making can be faulty and that breakdowns
can occur because of simple error or mistake. The design of any system of
controls is based in part on certain assumptions about the likelihood of future
events, and there can be no assurance that any design will succeed in achieving
its stated goals under all potential future conditions.  Projections of any
evaluation of controls effectiveness to future periods are subject to risks.





PART
II - OTHER INFORMATION





Item
1A.  Risk Factors





In
addition to the other information set forth in this Quarterly Report, you should
carefully consider the risks discussed in our Annual Report on Form 10-K for the
year ended March 31, 2009, 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 also may materially adversely affect our
business, financial condition or future results.










Item
6.  Exhibits





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





Exhibit
      31.1
            
            Certification
      of Principal Executive Officer Pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002Exhibit
      31.2
            
            Certification
      of Principal Financial Officer Pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002Exhibit
      32.1
            
            Certification
      of Principal Executive Officer Pursuant to Section 906 of the
      Sarbanes-Oxley Act of 2002Exhibit
      32.2
            
            Certification
      of Principal Executive Officer Pursuant to Section 906 of the
      Sarbanes-Oxley Act of 2002








SIGNATURES





In accordance with Section 12 of the
Securities Exchange Act of 1934, the registrant caused this report to be signed
on its behalf, thereunto duly authorized.





PROFIRE
      ENERGY, INC.








Date:
            February
      11, 2010
            
            By:
            /s/
      Brenton W. HatchBrenton
      W. HatchChief
      Executive Officer














Date:
            February
      11, 2010
            
            By:
            /s/
      Andrew LimpertAndrew
      LimpertChief
      Financial Officer