0001289636
2012-04-01
2012-09-30
0001289636
2012-09-30
0001289636
2012-03-31
0001289636
2011-04-01
2011-09-30
0001289636
2011-03-31
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2012-07-01
2012-09-30
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2011-09-30
0001289636
2012-11-09
iso4217:USD
xbrli:shares
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PROFIRE ENERGY INC
0001289636
10-Q
2012-09-30
false
--03-31
No
No
Yes
Smaller Reporting Company
Q2
2013
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<p style="text-align: justify; text-indent: 0pt; margin-right: 0; margin-left: 0; font: 8pt Times New Roman, Times, Serif">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 September 30, 2012 and for all periods presented have been made.</p>
<p style="text-indent: 0pt; font: 8pt Times New Roman, Times, Serif"></p>
<p style="text-align: justify; text-indent: 0pt; margin-right: 0; margin-left: 0; font: 8pt Times New Roman, Times, Serif">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, 2012
audited financial statements.  The results of operations for the periods ended September 30, 2012 and 2011 are not necessarily
indicative of the operating results for the full years.</p>
<p style="text-indent: 0pt; font: 8pt Times New Roman, Times, Serif"></p>
<p style="text-align: justify; text-indent: 0pt; margin-right: 0; margin-left: 0; font: 8pt Times New Roman, Times, Serif"><u>Use
of Estimates</u></p>
<p style="text-align: justify; text-indent: 0pt; margin-right: 0; margin-left: 0; font: 8pt Times New Roman, Times, Serif">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.</p>
<p style="text-indent: 0pt; font: 8pt Times New Roman, Times, Serif"><br />
</p>
<p style="text-align: left; text-indent: 0pt; margin-right: 0; margin-left: 0; font: 8pt Times New Roman, Times, Serif"><font style="background-color: #ffffff"><u>Cash
and Cash Equivalents</u></font></p>
<p style="text-align: justify; text-indent: 0pt; margin-right: 0; margin-left: 0; font: 8pt Times New Roman, Times, Serif"><font style="background-color: #ffffff">For
purposes of the statement of cash flows, cash and cash equivalents include cash and all debt securities with an original maturity
of 90 days or less. As of September 30, 2012 and March 31, 2012, bank balances included $2,647,608 and $1,914,877, respectively,
held by the Company’s banks guaranteed by the Province of Alberta, Canada.</font></p>
<p style="text-indent: 0pt; font: 8pt Times New Roman, Times, Serif"><br />
</p>
<p style="text-align: left; text-indent: 0pt; margin-right: 0; margin-left: 0; font: 8pt Times New Roman, Times, Serif"><font style="background-color: #ffffff"><u>Accounts
Receivable</u></font></p>
<p style="text-align: justify; text-indent: 0pt; margin-right: 0; margin-left: 0; font: 8pt Times New Roman, Times, Serif"><font style="background-color: #ffffff">Receivables
from the sale of goods and services are stated at net realizable value. This value includes an appropriate allowance for estimated
uncollectible accounts.  The allowance is calculated based on past collectability and customer relationships.  The Company
recorded an allowance for doubtful accounts of $95,820 and $65,110 as of September 30, 2012 and March 31, 2012, respectively.</font></p>
<p style="text-indent: 0pt; font: 8pt Times New Roman, Times, Serif"><br />
</p>
<p style="text-align: left; text-indent: 0pt; margin-right: 0; margin-left: 0; font: 8pt Times New Roman, Times, Serif"><u>Inventory</u></p>
<p style="text-align: justify; text-indent: 0pt; margin-right: 0; margin-left: 0; font: 8pt Times New Roman, Times, Serif">In
accordance with ASC 330, the Company’s inventory is valued at the lower of cost (the purchase price, including additional
fees) or market based on using the entire value of inventory.  Inventories are determined based on the first-in first-out
(FIFO) basis.  As of September 30, 2012 and March 31, 2011 inventory consisted of the following:</p>
<p style="text-indent: 0pt; font: 8pt Times New Roman, Times, Serif"></p>
<p style="text-align: left; font: 8pt Times New Roman, Times, Serif"> </p>
<table cellpadding="0" cellspacing="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom; font: 8pt Times New Roman, Times, Serif">
<td style="text-align: left; font: 8pt Times New Roman, Times, Serif"> </td>
<td colspan="2" style="border-bottom: black 2px double; font: 8pt Times New Roman, Times, Serif; text-align: center; text-indent: 0pt">    September 30, 2012</td>
<td style="font: 8pt Times New Roman, Times, Serif"> </td>
<td colspan="2" style="border-bottom: black 2px double; font: 8pt Times New Roman, Times, Serif; text-align: center; text-indent: 0pt">March 31, 2012</td></tr>
<tr style="font: 8pt Times New Roman, Times, Serif">
<td style="text-align: left; vertical-align: bottom; width: 70%; text-indent: 0pt; font: 8pt Times New Roman, Times, Serif">Raw materials</td>
<td style="text-align: left; vertical-align: bottom; width: 2%; text-indent: 0pt; font: 8pt Times New Roman, Times, Serif">$</td>
<td style="text-align: right; text-indent: 0pt; vertical-align: bottom; width: 12%; font: 8pt Times New Roman, Times, Serif">3,512,457 </td>
<td style="text-align: left; vertical-align: top; width: 2%; font: 8pt Times New Roman, Times, Serif"> </td>
<td style="text-align: left; vertical-align: bottom; width: 2%; text-indent: 0pt; font: 8pt Times New Roman, Times, Serif">$</td>
<td style="text-align: right; vertical-align: bottom; width: 12%; text-indent: 0pt; font: 8pt Times New Roman, Times, Serif">2,026,108 </td></tr>
<tr style="font: 8pt Times New Roman, Times, Serif">
<td style="text-align: left; vertical-align: bottom; text-indent: 0pt; font: 8pt Times New Roman, Times, Serif">Work in progress</td>
<td style="text-align: left; vertical-align: bottom; font: 8pt Times New Roman, Times, Serif"> </td>
<td style="text-align: right; text-indent: 0pt; vertical-align: bottom; font: 8pt Times New Roman, Times, Serif">-</td>
<td style="text-align: left; vertical-align: top; font: 8pt Times New Roman, Times, Serif"> </td>
<td style="text-align: left; vertical-align: bottom; font: 8pt Times New Roman, Times, Serif"> </td>
<td style="text-align: right; vertical-align: bottom; text-indent: 0pt; font: 8pt Times New Roman, Times, Serif">- </td></tr>
<tr style="font: 8pt Times New Roman, Times, Serif">
<td style="text-align: left; vertical-align: bottom; text-indent: 0pt; font: 8pt Times New Roman, Times, Serif">Finished goods</td>
<td style="text-align: left; vertical-align: bottom; font: 8pt Times New Roman, Times, Serif"> </td>
<td style="text-align: right; text-indent: 0pt; vertical-align: bottom; font: 8pt Times New Roman, Times, Serif">-</td>
<td style="text-align: left; vertical-align: top; font: 8pt Times New Roman, Times, Serif"> </td>
<td style="text-align: left; vertical-align: bottom; font: 8pt Times New Roman, Times, Serif"> </td>
<td style="text-align: right; vertical-align: bottom; text-indent: 0pt; font: 8pt Times New Roman, Times, Serif">- </td></tr>
<tr style="font: 8pt Times New Roman, Times, Serif">
<td style="padding-bottom: 2px; text-align: left; vertical-align: bottom; text-indent: 0pt; font: 8pt Times New Roman, Times, Serif">Reserve for obsolescence</td>
<td style="border-bottom: black 2px solid; font: 8pt Times New Roman, Times, Serif; text-align: left; vertical-align: bottom"> </td>
<td style="border-bottom: black 2px solid; font: 8pt Times New Roman, Times, Serif; text-align: right; text-indent: 0pt; vertical-align: bottom">(58,000)</td>
<td style="padding-bottom: 2px; text-align: left; vertical-align: top; font: 8pt Times New Roman, Times, Serif"> </td>
<td style="border-bottom: black 2px solid; font: 8pt Times New Roman, Times, Serif; text-align: left; vertical-align: bottom"> </td>
<td style="border-bottom: black 2px solid; font: 8pt Times New Roman, Times, Serif; text-align: right; vertical-align: bottom; text-indent: 0pt">(57,368)</td></tr>
<tr style="font: 8pt Times New Roman, Times, Serif">
<td style="text-align: left; vertical-align: bottom; text-indent: 0pt; font: 8pt Times New Roman, Times, Serif">Total</td>
<td style="border-bottom: black 4px double; font: 8pt Times New Roman, Times, Serif; text-align: left; vertical-align: bottom; text-indent: 0pt">$</td>
<td style="border-bottom: black 4px double; font: 8pt Times New Roman, Times, Serif; text-align: right; text-indent: 0pt; vertical-align: bottom">3,454,457 </td>
<td style="text-align: left; vertical-align: top; font: 8pt Times New Roman, Times, Serif"> </td>
<td style="border-bottom: black 4px double; font: 8pt Times New Roman, Times, Serif; text-align: left; vertical-align: bottom; text-indent: 0pt">$</td>
<td style="border-bottom: black 4px double; font: 8pt Times New Roman, Times, Serif; text-align: right; vertical-align: bottom; text-indent: 0pt">1,968,740 </td></tr>
</table>
<p style="text-align: right; text-indent: 0pt; margin-right: 0; margin-left: 0; font: 8pt Times New Roman, Times, Serif"> </p>
<p style="text-align: center; text-indent: 0pt; margin-right: 0; margin-left: 0; font: 8pt Times New Roman, Times, Serif"><br /></p>
<p style="text-align: left; text-indent: 0pt; margin-right: 0; margin-left: 0; font: 8pt Times New Roman, Times, Serif"><font style="background-color: #ffffff"><u>Revenue
Recognition</u></font></p>
<p style="text-align: justify; text-indent: 0pt; margin-right: 0; margin-left: 0; font: 8pt Times New Roman, Times, Serif"><font style="background-color: #ffffff">The
Company records sales when a firm sales agreement is in place, delivery has occurred or services have been rendered, and collectability
of the fixed or determinable sales price is reasonably assured.  If customer acceptance of products is not assured, the
Company records sales only upon formal customer acceptance.</font></p>
<p style="text-indent: 0pt; font: 8pt Times New Roman, Times, Serif"><br />
</p>
<p style="text-align: left; text-indent: 0pt; margin-right: 0; margin-left: 0; font: 8pt Times New Roman, Times, Serif"><font style="background-color: #ffffff"><u>Income
Taxes</u></font></p>
<p style="text-align: justify; text-indent: 0pt; margin-right: 0; margin-left: 0; font: 8pt Times New Roman, Times, Serif"><font style="background-color: #ffffff">The
Company is subject to Canadian income taxes on its world-wide income with a credit provided for foreign taxes paid.  Any
income earned in the United States is subject to applicable state and federal tax rates in the United States.  The combined
effective rates of income tax expense (benefit) are 28% and 28% for the three months ended September 30, 2012 and 2011, respectively.</font></p>
<p style="text-indent: 0pt; font: 8pt Times New Roman, Times, Serif"><br />
</p>
<p style="text-align: left; text-indent: 0pt; margin-right: 0; margin-left: 0; font: 8pt Times New Roman, Times, Serif"><font style="background-color: #ffffff"><u>Basic
Earnings Per Share</u></font></p>
<p style="text-align: justify; text-indent: 0pt; margin-right: 0; margin-left: 0; font: 8pt Times New Roman, Times, Serif"><font style="background-color: #ffffff">The
computation of basic earnings per share of common stock is based on the weighted average number of shares outstanding during the
periods presented. The computation of fully diluted earnings per share includes common stock equivalents outstanding at the balance
sheet date. The Company had 530,000 and 273,334 stock options included in the fully diluted earnings per share as of September
30, 2012 and 2011, respectively.  The Company uses the treasury stock method to calculate the dilutive effects of stock
options and warrants.</font></p>
<p style="text-indent: 0pt; font: 8pt Times New Roman, Times, Serif"><br />
</p>
<p style="text-align: left; font: 8pt Times New Roman, Times, Serif"> </p>
<table cellpadding="0" cellspacing="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom; font: 8pt Times New Roman, Times, Serif">
<td style="font: 8pt Times New Roman, Times, Serif"> </td>
<td colspan="5" style="border-bottom: black 2px solid; font: 8pt Times New Roman, Times, Serif">
<p style="font: 8pt Times New Roman, Times, Serif">For the Six Months Ended</p>
<p style="font: 8pt Times New Roman, Times, Serif">September 30,</p></td></tr>
<tr style="font: 8pt Times New Roman, Times, Serif">
<td style="vertical-align: bottom; font: 8pt Times New Roman, Times, Serif"> </td>
<td colspan="2" style="border-bottom: black 2px solid; font: 8pt Times New Roman, Times, Serif; vertical-align: bottom; text-align: center; text-indent: 0pt">2012</td>
<td style="vertical-align: top; font: 8pt Times New Roman, Times, Serif"> </td>
<td colspan="2" style="border-bottom: black 2px solid; font: 8pt Times New Roman, Times, Serif; vertical-align: bottom; text-align: center; text-indent: 0pt">2011</td></tr>
<tr style="font: 8pt Times New Roman, Times, Serif">
<td style="text-align: left; vertical-align: bottom; width: 70%; text-indent: 0pt; font: 8pt Times New Roman, Times, Serif">Net income</td>
<td style="text-align: left; vertical-align: bottom; width: 2%; text-indent: 0pt; font: 8pt Times New Roman, Times, Serif">$</td>
<td style="text-align: right; vertical-align: bottom; width: 12%; text-indent: 0pt; font: 8pt Times New Roman, Times, Serif">1,210,865</td>
<td style="vertical-align: top; width: 2%; font: 8pt Times New Roman, Times, Serif"> </td>
<td style="text-align: left; vertical-align: bottom; width: 2%; text-indent: 0pt; font: 8pt Times New Roman, Times, Serif">$</td>
<td style="text-align: right; vertical-align: bottom; width: 12%; text-indent: 0pt; font: 8pt Times New Roman, Times, Serif">1,960,236</td></tr>
<tr style="font: 8pt Times New Roman, Times, Serif">
<td style="vertical-align: bottom; font: 8pt Times New Roman, Times, Serif"> </td>
<td style="vertical-align: bottom; font: 8pt Times New Roman, Times, Serif"> </td>
<td style="vertical-align: bottom; font: 8pt Times New Roman, Times, Serif"> </td>
<td style="vertical-align: top; font: 8pt Times New Roman, Times, Serif"> </td>
<td style="vertical-align: bottom; font: 8pt Times New Roman, Times, Serif"> </td>
<td style="vertical-align: bottom; font: 8pt Times New Roman, Times, Serif"> </td></tr>
<tr style="font: 8pt Times New Roman, Times, Serif">
<td style="text-align: left; vertical-align: bottom; text-indent: 0pt; font: 8pt Times New Roman, Times, Serif">Basic weighted average number of shares outstanding</td>
<td style="vertical-align: bottom; font: 8pt Times New Roman, Times, Serif"> </td>
<td style="text-align: right; vertical-align: bottom; text-indent: 0pt; font: 8pt Times New Roman, Times, Serif">45,054,918</td>
<td style="vertical-align: top; font: 8pt Times New Roman, Times, Serif"> </td>
<td style="vertical-align: bottom; font: 8pt Times New Roman, Times, Serif"> </td>
<td style="text-align: right; vertical-align: bottom; text-indent: 0pt; font: 8pt Times New Roman, Times, Serif">45,000,000</td></tr>
<tr style="font: 8pt Times New Roman, Times, Serif">
<td style="padding-bottom: 2px; text-align: left; vertical-align: bottom; text-indent: 0pt; font: 8pt Times New Roman, Times, Serif">Common stock equivalents</td>
<td style="border-bottom: black 2px solid; font: 8pt Times New Roman, Times, Serif; vertical-align: bottom"> </td>
<td style="border-bottom: black 2px solid; font: 8pt Times New Roman, Times, Serif; text-align: right; vertical-align: bottom; text-indent: 0pt">381,852</td>
<td style="padding-bottom: 2px; vertical-align: top; font: 8pt Times New Roman, Times, Serif"> </td>
<td style="border-bottom: black 2px solid; font: 8pt Times New Roman, Times, Serif; vertical-align: bottom"> </td>
<td style="border-bottom: black 2px solid; font: 8pt Times New Roman, Times, Serif; text-align: right; vertical-align: bottom; text-indent: 0pt">173,247</td></tr>
<tr style="font: 8pt Times New Roman, Times, Serif">
<td style="text-align: left; vertical-align: bottom; text-indent: 0pt; font: 8pt Times New Roman, Times, Serif">Fully diluted weighted average number of shares outstanding</td>
<td style="vertical-align: bottom; font: 8pt Times New Roman, Times, Serif"> </td>
<td style="text-align: right; vertical-align: bottom; text-indent: 0pt; font: 8pt Times New Roman, Times, Serif">45,436,770</td>
<td style="vertical-align: top; font: 8pt Times New Roman, Times, Serif"> </td>
<td style="vertical-align: bottom; font: 8pt Times New Roman, Times, Serif"> </td>
<td style="text-align: right; vertical-align: bottom; text-indent: 0pt; font: 8pt Times New Roman, Times, Serif">45,173,247</td></tr>
<tr style="font: 8pt Times New Roman, Times, Serif">
<td style="vertical-align: bottom; font: 8pt Times New Roman, Times, Serif"> </td>
<td style="vertical-align: bottom; font: 8pt Times New Roman, Times, Serif"> </td>
<td style="vertical-align: bottom; font: 8pt Times New Roman, Times, Serif"> </td>
<td style="vertical-align: top; font: 8pt Times New Roman, Times, Serif"> </td>
<td style="vertical-align: bottom; font: 8pt Times New Roman, Times, Serif"> </td>
<td style="vertical-align: bottom; font: 8pt Times New Roman, Times, Serif"> </td></tr>
<tr style="font: 8pt Times New Roman, Times, Serif">
<td style="text-align: left; vertical-align: bottom; text-indent: 0pt; font: 8pt Times New Roman, Times, Serif">Basic earnings per share</td>
<td style="text-align: left; vertical-align: bottom; text-indent: 0pt; font: 8pt Times New Roman, Times, Serif">$</td>
<td style="text-align: right; vertical-align: bottom; text-indent: 0pt; font: 8pt Times New Roman, Times, Serif">0.03</td>
<td style="vertical-align: top; font: 8pt Times New Roman, Times, Serif"> </td>
<td style="text-align: left; vertical-align: bottom; text-indent: 0pt; font: 8pt Times New Roman, Times, Serif">$</td>
<td style="text-align: right; vertical-align: bottom; text-indent: 0pt; font: 8pt Times New Roman, Times, Serif">0.04</td></tr>
<tr style="font: 8pt Times New Roman, Times, Serif">
<td style="text-align: left; vertical-align: bottom; text-indent: 0pt; font: 8pt Times New Roman, Times, Serif">Fully diluted earnings per share</td>
<td style="text-align: left; vertical-align: bottom; text-indent: 0pt; font: 8pt Times New Roman, Times, Serif">$</td>
<td style="text-align: right; vertical-align: bottom; text-indent: 0pt; font: 8pt Times New Roman, Times, Serif">0.03</td>
<td style="vertical-align: top; font: 8pt Times New Roman, Times, Serif"> </td>
<td style="text-align: left; vertical-align: bottom; text-indent: 0pt; font: 8pt Times New Roman, Times, Serif">$</td>
<td style="text-align: right; vertical-align: bottom; text-indent: 0pt; font: 8pt Times New Roman, Times, Serif">0.04</td></tr>
</table>
<p style="text-indent: 0pt; font: 8pt Times New Roman, Times, Serif"><br />
</p>
<p style="text-align: left; text-indent: 0pt; margin-right: 0; margin-left: 0; font: 8pt Times New Roman, Times, Serif"><u>Foreign
Currency and Comprehensive Income</u></p>
<p style="text-align: justify; text-indent: 0pt; margin-right: 0; margin-left: 0; font: 8pt Times New Roman, Times, Serif">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 1.0164 and 1.00274 were used to convert
the Company’s September 30, 2012 and March 31, 2012 balance sheets, respectively, and the statements of operations used weighted
average rates of 1.0042 and 1.02760 for the six months ended September 30, 2012 and 2011, 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 Other Comprehensive Income.</p>
<p style="text-align: justify; text-indent: 0pt; margin-right: 0; margin-left: 0; font: 8pt Times New Roman, Times, Serif"> <br /></p>
<p style="text-align: left; text-indent: 0pt; margin-right: 0; margin-left: 0; font: 8pt Times New Roman, Times, Serif"><u>Recent
Accounting Pronouncements</u></p>
<p style="text-align: justify; text-indent: 0pt; margin-right: 0; margin-left: 0; font: 8pt Times New Roman, Times, Serif">The
Company has evaluated recent accounting pronouncements and their adoption has not had or is not expected to have a material impact
on the Company’s financial position, or statements.</p>
<p style="text-indent: 0pt; font: 8pt Times New Roman, Times, Serif"><br />
</p>
<p style="text-indent: 0pt; font: 8pt Times New Roman, Times, Serif"></p>
<p style="text-align: justify; text-indent: 0pt; margin-right: 0; margin-left: 0; font: 8pt Times New Roman, Times, Serif">On
May 14, 2012, the Company issued 60,000 shares of common stock for services at $1.50 per share, for an aggregate value of $90,000.</p>
<p style="text-indent: 0pt; font: 8pt Times New Roman, Times, Serif"><br />
</p>
<p style="text-align: justify; text-indent: 0pt; margin-right: 0; margin-left: 0; font: 8pt Times New Roman, Times, Serif">On
September 12, 2012, the Company issued 95,000 shares of common stock for services at $1.25 per share, for an aggregate value of
$118,750.</p>
<p style="text-indent: 0pt; font: 8pt Times New Roman, Times, Serif"><br />
</p>
<p style="text-align: justify; text-indent: 0pt; margin-right: 0; margin-left: 0; font: 8pt Times New Roman, Times, Serif">On
September 27, 2012, the Company granted stock options to purchase an aggregate of 820,000 shares of Company common stock to 29
Company employees, consultants and advisors.  The options were granted pursuant to the Profire Energy, Inc. 2010 Equity
Incentive Plan.  The options have an exercise price of $1.25.  The options vest in equal amounts over a period
of five years, with the first portion vesting on the one-year anniversary of the date of grant.  Vesting is contingent
upon continued employment with the Company.  The options expire six years from the date of grant. The Company used the
above assumptions in their calculation of the fair value of these grants using the Black-Scholes option pricing model and recognized
an expense for the six months ended September 30, 2012 of $51,668.</p>
<p style="text-indent: 0pt; font: 8pt Times New Roman, Times, Serif"></p>
<p style="text-align: justify; text-indent: 0pt; margin-right: 0; margin-left: 0; font: 8pt Times New Roman, Times, Serif">In
accordance with ASC 855, the Company’s management has evaluated the subsequent events through the date the financial statements
were issued and has found no subsequent events to report.</p>
<p style="text-align: justify; text-indent: 0pt; margin-right: 0; margin-left: 0; font: 8pt Times New Roman, Times, Serif"><u>Use
of Estimates</u></p>
<p style="text-align: justify; text-indent: 0pt; margin-right: 0; margin-left: 0; font: 8pt Times New Roman, Times, Serif">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.</p>
<p style="text-indent: 0pt; font: 8pt Times New Roman, Times, Serif"><br />
</p>
<p style="text-align: left; text-indent: 0pt; margin-right: 0; margin-left: 0; font: 8pt Times New Roman, Times, Serif"><font style="background-color: #ffffff"><u>Cash
and Cash Equivalents</u></font></p>
<p style="text-align: justify; text-indent: 0pt; margin-right: 0; margin-left: 0; font: 8pt Times New Roman, Times, Serif"><font style="background-color: #ffffff">For
purposes of the statement of cash flows, cash and cash equivalents include cash and all debt securities with an original maturity
of 90 days or less. As of September 30, 2012 and March 31, 2012, bank balances included $2,647,608 and $1,914,877, respectively,
held by the Company’s banks guaranteed by the Province of Alberta, Canada.</font></p>
<p style="text-indent: 0pt; font: 8pt Times New Roman, Times, Serif"><br />
</p>
<p style="text-align: left; text-indent: 0pt; margin-right: 0; margin-left: 0; font: 8pt Times New Roman, Times, Serif"><font style="background-color: #ffffff"><u>Accounts
Receivable</u></font></p>
<p style="text-align: justify; text-indent: 0pt; margin-right: 0; margin-left: 0; font: 8pt Times New Roman, Times, Serif"><font style="background-color: #ffffff">Receivables
from the sale of goods and services are stated at net realizable value. This value includes an appropriate allowance for estimated
uncollectible accounts.  The allowance is calculated based on past collectability and customer relationships.  The Company
recorded an allowance for doubtful accounts of $95,820 and $65,110 as of September 30, 2012 and March 31, 2012, respectively.</font></p>
<p style="text-indent: 0pt; font: 8pt Times New Roman, Times, Serif"><br />
</p>
<p style="text-align: left; text-indent: 0pt; margin-right: 0; margin-left: 0; font: 8pt Times New Roman, Times, Serif"><u>Inventory</u></p>
<p style="text-align: justify; text-indent: 0pt; margin-right: 0; margin-left: 0; font: 8pt Times New Roman, Times, Serif">In
accordance with ASC 330, 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 the first-in first-out
(FIFO) basis.  As of September 30, 2012 and March 31, 2011 inventory consisted of the following:</p>
<p style="text-indent: 0pt; font: 8pt Times New Roman, Times, Serif"><br />
</p>
<p style="text-align: left; text-indent: 0pt; margin-right: 0; margin-left: 0; font: 8pt Times New Roman, Times, Serif"><font style="background-color: #ffffff"><u>Revenue
Recognition</u></font></p>
<p style="text-align: justify; text-indent: 0pt; margin-right: 0; margin-left: 0; font: 8pt Times New Roman, Times, Serif"><font style="background-color: #ffffff">The
Company records sales when a firm sales agreement is in place, delivery has occurred or services have been rendered, and collectability
of the fixed or determinable sales price is reasonably assured.  If customer acceptance of products is not assured, the
Company records sales only upon formal customer acceptance.</font></p>
<p style="text-indent: 0pt; font: 8pt Times New Roman, Times, Serif"><br />
</p>
<p style="text-align: left; text-indent: 0pt; margin-right: 0; margin-left: 0; font: 8pt Times New Roman, Times, Serif"><font style="background-color: #ffffff"><u>Income
Taxes</u></font></p>
<p style="text-align: justify; text-indent: 0pt; margin-right: 0; margin-left: 0; font: 8pt Times New Roman, Times, Serif"><font style="background-color: #ffffff">The
Company is subject to Canadian income taxes on its world-wide income with a credit provided for foreign taxes paid.  Any
income earned in the United States is subject to applicable state and federal tax rates in the United States.  The combined
effective rates of income tax expense (benefit) are 28% and 28% for the three months ended September 30, 2012 and 2011, respectively.</font></p>
<p style="text-indent: 0pt; font: 8pt Times New Roman, Times, Serif"><br />
</p>
<p style="text-align: left; text-indent: 0pt; margin-right: 0; margin-left: 0; font: 8pt Times New Roman, Times, Serif"><font style="background-color: #ffffff"><u>Basic
Earnings Per Share</u></font></p>
<p style="text-align: justify; text-indent: 0pt; margin-right: 0; margin-left: 0; font: 8pt Times New Roman, Times, Serif"><font style="background-color: #ffffff">The
computation of basic earnings per share of common stock is based on the weighted average number of shares outstanding during the
periods presented. The computation of fully diluted earnings per share includes common stock equivalents outstanding at the balance
sheet date. The Company had 530,000 and 273,334 stock options included in the fully diluted earnings per share as of September
30, 2012 and 2011, respectively.  The Company uses the treasury stock method to calculate the dilutive effects of stock
options and warrants.</font></p>
<p style="text-indent: 0pt; font: 8pt Times New Roman, Times, Serif"><br />
</p>
<p style="text-align: left; text-indent: 0pt; margin-right: 0; margin-left: 0; font: 8pt Times New Roman, Times, Serif"><u>Foreign
Currency and Comprehensive Income</u></p>
<p style="text-align: justify; text-indent: 0pt; margin-right: 0; margin-left: 0; font: 8pt Times New Roman, Times, Serif">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 1.0164 and 1.00274 were used to convert
the Company’s September 30, 2012 and March 31, 2012 balance sheets, respectively, and the statements of operations used weighted
average rates of 1.0042 and 1.02760 for the six months ended September 30, 2012 and 2011, 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 Other Comprehensive Income.</p>
<p style="text-align: justify; text-indent: 0pt; margin-right: 0; margin-left: 0; font: 8pt Times New Roman, Times, Serif"> </p>
<p style="text-align: center; text-indent: 0pt; margin-right: 0; margin-left: 0; font: 8pt Times New Roman, Times, Serif"> </p>
<p style="text-align: left; text-indent: 0pt; margin-right: 0; margin-left: 0; font: 8pt Times New Roman, Times, Serif"><u>Recent
Accounting Pronouncements</u></p>
<p style="text-align: justify; text-indent: 0pt; margin-right: 0; margin-left: 0; font: 8pt Times New Roman, Times, Serif">The
Company has evaluated recent accounting pronouncements and their adoption has not had or is not expected to have a material impact
on the Company’s financial position, or statements.</p>
<p style="text-indent: 0pt; font: 8pt Times New Roman, Times, Serif"><br />
</p>
<p style="text-indent: 0pt; font: 8pt Times New Roman, Times, Serif"><br /></p>
<table cellpadding="0" cellspacing="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom; font: 8pt Times New Roman, Times, Serif">
<td style="text-align: left; font: 8pt Times New Roman, Times, Serif"> </td>
<td colspan="2" style="border-bottom: black 2px double; font: 8pt Times New Roman, Times, Serif; text-align: center; text-indent: 0pt">    September 30, 2012</td>
<td style="font: 8pt Times New Roman, Times, Serif"> </td>
<td colspan="2" style="border-bottom: black 2px double; font: 8pt Times New Roman, Times, Serif; text-align: center; text-indent: 0pt">March 31, 2012</td></tr>
<tr style="font: 8pt Times New Roman, Times, Serif">
<td style="text-align: left; vertical-align: bottom; width: 70%; text-indent: 0pt; font: 8pt Times New Roman, Times, Serif">Raw materials</td>
<td style="text-align: left; vertical-align: bottom; width: 2%; text-indent: 0pt; font: 8pt Times New Roman, Times, Serif">$</td>
<td style="text-align: right; text-indent: 0pt; vertical-align: bottom; width: 12%; font: 8pt Times New Roman, Times, Serif">3,512,457 </td>
<td style="text-align: left; vertical-align: top; width: 2%; font: 8pt Times New Roman, Times, Serif"> </td>
<td style="text-align: left; vertical-align: bottom; width: 2%; text-indent: 0pt; font: 8pt Times New Roman, Times, Serif">$</td>
<td style="text-align: right; vertical-align: bottom; width: 12%; text-indent: 0pt; font: 8pt Times New Roman, Times, Serif">2,026,108 </td></tr>
<tr style="font: 8pt Times New Roman, Times, Serif">
<td style="text-align: left; vertical-align: bottom; text-indent: 0pt; font: 8pt Times New Roman, Times, Serif">Work in progress</td>
<td style="text-align: left; vertical-align: bottom; font: 8pt Times New Roman, Times, Serif"> </td>
<td style="text-align: right; text-indent: 0pt; vertical-align: bottom; font: 8pt Times New Roman, Times, Serif">-</td>
<td style="text-align: left; vertical-align: top; font: 8pt Times New Roman, Times, Serif"> </td>
<td style="text-align: left; vertical-align: bottom; font: 8pt Times New Roman, Times, Serif"> </td>
<td style="text-align: right; vertical-align: bottom; text-indent: 0pt; font: 8pt Times New Roman, Times, Serif">- </td></tr>
<tr style="font: 8pt Times New Roman, Times, Serif">
<td style="text-align: left; vertical-align: bottom; text-indent: 0pt; font: 8pt Times New Roman, Times, Serif">Finished goods</td>
<td style="text-align: left; vertical-align: bottom; font: 8pt Times New Roman, Times, Serif"> </td>
<td style="text-align: right; text-indent: 0pt; vertical-align: bottom; font: 8pt Times New Roman, Times, Serif">-</td>
<td style="text-align: left; vertical-align: top; font: 8pt Times New Roman, Times, Serif"> </td>
<td style="text-align: left; vertical-align: bottom; font: 8pt Times New Roman, Times, Serif"> </td>
<td style="text-align: right; vertical-align: bottom; text-indent: 0pt; font: 8pt Times New Roman, Times, Serif">- </td></tr>
<tr style="font: 8pt Times New Roman, Times, Serif">
<td style="padding-bottom: 2px; text-align: left; vertical-align: bottom; text-indent: 0pt; font: 8pt Times New Roman, Times, Serif">Reserve for obsolescence</td>
<td style="border-bottom: black 2px solid; font: 8pt Times New Roman, Times, Serif; text-align: left; vertical-align: bottom"> </td>
<td style="border-bottom: black 2px solid; font: 8pt Times New Roman, Times, Serif; text-align: right; text-indent: 0pt; vertical-align: bottom">(58,000)</td>
<td style="padding-bottom: 2px; text-align: left; vertical-align: top; font: 8pt Times New Roman, Times, Serif"> </td>
<td style="border-bottom: black 2px solid; font: 8pt Times New Roman, Times, Serif; text-align: left; vertical-align: bottom"> </td>
<td style="border-bottom: black 2px solid; font: 8pt Times New Roman, Times, Serif; text-align: right; vertical-align: bottom; text-indent: 0pt">(57,368)</td></tr>
<tr style="font: 8pt Times New Roman, Times, Serif">
<td style="text-align: left; vertical-align: bottom; text-indent: 0pt; font: 8pt Times New Roman, Times, Serif">Total</td>
<td style="border-bottom: black 4px double; font: 8pt Times New Roman, Times, Serif; text-align: left; vertical-align: bottom; text-indent: 0pt">$</td>
<td style="border-bottom: black 4px double; font: 8pt Times New Roman, Times, Serif; text-align: right; text-indent: 0pt; vertical-align: bottom">3,454,457 </td>
<td style="text-align: left; vertical-align: top; font: 8pt Times New Roman, Times, Serif"> </td>
<td style="border-bottom: black 4px double; font: 8pt Times New Roman, Times, Serif; text-align: left; vertical-align: bottom; text-indent: 0pt">$</td>
<td style="border-bottom: black 4px double; font: 8pt Times New Roman, Times, Serif; text-align: right; vertical-align: bottom; text-indent: 0pt">1,968,740 </td></tr>
</table>
<p style="text-align: right; text-indent: 0pt; margin-right: 0; margin-left: 0; font: 8pt Times New Roman, Times, Serif"> </p>
<p style="text-indent: 0pt"><br />
</p>
<p style="text-align: left"> </p>
<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td> </td>
<td colspan="5" style="border-bottom: black 2px solid">
<p>For the Six Months Ended</p>
<p>September 30,</p></td></tr>
<tr>
<td style="vertical-align: bottom"> </td>
<td colspan="2" style="border-bottom: black 2px solid; vertical-align: bottom; text-align: center; text-indent: 0pt">2012</td>
<td style="vertical-align: top"> </td>
<td colspan="2" style="border-bottom: black 2px solid; vertical-align: bottom; text-align: center; text-indent: 0pt">2011</td></tr>
<tr>
<td style="text-align: left; vertical-align: bottom; width: 70%; text-indent: 0pt">Net income</td>
<td style="text-align: left; vertical-align: bottom; width: 2%; text-indent: 0pt">$</td>
<td style="text-align: right; vertical-align: bottom; width: 12%; text-indent: 0pt">1,210,865</td>
<td style="vertical-align: top; width: 2%"> </td>
<td style="text-align: left; vertical-align: bottom; width: 2%; text-indent: 0pt">$</td>
<td style="text-align: right; vertical-align: bottom; width: 12%; text-indent: 0pt">1,960,236</td></tr>
<tr>
<td style="vertical-align: bottom"> </td>
<td style="vertical-align: bottom"> </td>
<td style="vertical-align: bottom"> </td>
<td style="vertical-align: top"> </td>
<td style="vertical-align: bottom"> </td>
<td style="vertical-align: bottom"> </td></tr>
<tr>
<td style="text-align: left; vertical-align: bottom; text-indent: 0pt">Basic weighted average number of shares outstanding</td>
<td style="vertical-align: bottom"> </td>
<td style="text-align: right; vertical-align: bottom; text-indent: 0pt">45,054,918</td>
<td style="vertical-align: top"> </td>
<td style="vertical-align: bottom"> </td>
<td style="text-align: right; vertical-align: bottom; text-indent: 0pt">45,000,000</td></tr>
<tr>
<td style="padding-bottom: 2px; text-align: left; vertical-align: bottom; text-indent: 0pt">Common stock equivalents</td>
<td style="border-bottom: black 2px solid; vertical-align: bottom"> </td>
<td style="border-bottom: black 2px solid; text-align: right; vertical-align: bottom; text-indent: 0pt">381,852</td>
<td style="padding-bottom: 2px; vertical-align: top"> </td>
<td style="border-bottom: black 2px solid; vertical-align: bottom"> </td>
<td style="border-bottom: black 2px solid; text-align: right; vertical-align: bottom; text-indent: 0pt">173,247</td></tr>
<tr>
<td style="text-align: left; vertical-align: bottom; text-indent: 0pt">Fully diluted weighted average number of shares outstanding</td>
<td style="vertical-align: bottom"> </td>
<td style="text-align: right; vertical-align: bottom; text-indent: 0pt">45,436,770</td>
<td style="vertical-align: top"> </td>
<td style="vertical-align: bottom"> </td>
<td style="text-align: right; vertical-align: bottom; text-indent: 0pt">45,173,247</td></tr>
<tr>
<td style="vertical-align: bottom"> </td>
<td style="vertical-align: bottom"> </td>
<td style="vertical-align: bottom"> </td>
<td style="vertical-align: top"> </td>
<td style="vertical-align: bottom"> </td>
<td style="vertical-align: bottom"> </td></tr>
<tr>
<td style="text-align: left; vertical-align: bottom; text-indent: 0pt">Basic earnings per share</td>
<td style="text-align: left; vertical-align: bottom; text-indent: 0pt">$</td>
<td style="text-align: right; vertical-align: bottom; text-indent: 0pt">0.03</td>
<td style="vertical-align: top"> </td>
<td style="text-align: left; vertical-align: bottom; text-indent: 0pt">$</td>
<td style="text-align: right; vertical-align: bottom; text-indent: 0pt">0.04</td></tr>
<tr>
<td style="text-align: left; vertical-align: bottom; text-indent: 0pt">Fully diluted earnings per share</td>
<td style="text-align: left; vertical-align: bottom; text-indent: 0pt">$</td>
<td style="text-align: right; vertical-align: bottom; text-indent: 0pt">0.03</td>
<td style="vertical-align: top"> </td>
<td style="text-align: left; vertical-align: bottom; text-indent: 0pt">$</td>
<td style="text-align: right; vertical-align: bottom; text-indent: 0pt">0.04</td></tr>
</table>
<p style="text-indent: 0pt"><br />
</p>
0
0
381852
173247
0
0
530000
218238
107333
273334
51668
1.0042
1.02760