Answer to short article on PFIE

I realized that I should have titled this better so that people would find it, so here it is again:

There are certainly things that have merit in the short article, especially about the CFO, but there are also other “points” that are “pointless”. For example:

Major insider selling since 2012 - If you can find ANY Motley Fool recommendations where there hasn’t been lots of insider selling, let me know. I’m sure that if you look at the best performers on the scoreboard, they’ll have enormous insider selling. This point is meaningless.

“unique” product actually made in China - This one is just silly. Just because they have their product manufactured in China is absolutely no source of criticism. Probably half the companies on the major stock exchanges that sell a product rather than a service have at least some product made in China.

with more competitors in the space than noted by management - Whatever the writer claims, the company is growing revenue very fast, which doesn’t seem to go along with the writers claim that they’ll be overwhelmed by large competitors. (They were just rated one of the fastest growing tech stocks in America by Deloitte, who are certainly reputable).

Unsustainably high gross margin compared to competitors - Now that’s a funny one. They take a sign of success and of lack of true competition and try to turn it into a negative. If they had a low gross margin then the writer would attack them as selling a “low gross margin commodity product” but because they have a successful product that can demand high margins, the author says it’s unsustainable.

$500K paid to stock promotion companies - This is a common practice among small cap companies without analyst coverage. It’s an attempt to get their story to the public.

IPO by reverse-merger instead of traditional IPO process - Here’s an excerpt from an article on reverse mergers:

Buffett bought out a textile manufacturing company and then merged his insurance empire into it without even changing the name. His company, Berkshire Hathaway, is the product of one of the most famous reverse mergers to date.

CNN founder Ted Turner merged his Turner Outdoor Advertising to create the Turner Broadcasting System. Motivational speaker and life coach Anthony “Tony” Robbins was involved with an online self-help company that employed a reverse merger to jump start the going public process.

After becoming the first woman to purchase a seat on the NYSE, Muriel Siebert used a reverse merger to take her titular brokerage firm public.

Oilman and industrialist Armand Hammer (not to be confused with Arm & Hammer baking soda), is considered to be the creator of the reverse merger back in the 1950s. He invested in a shell company and merged his company, now the highly successful Occidental Petroleum into it.

Shifty auditing company and auditor switched shortly after IPO and CFO with a history of stock manipulation schemes and at least one previous lawsuit which he settled. - These I’m not happy with at all, but I think I’m willing to give a small rapidly growing company a chance to sort them out.



Let’s see. The short writer says - Promoters have caused PFIE stock to gush 325% since 2012.

Sounds terrible doesn’t it. Now their fiscal year ends in March but I quickly found their results for the 9 months ending Dec 2012.

Their Total Revenue for the 9 months ending Dec 2012 was $11.6 million.
Their Total Revenue for the most recent 9 months was $38.2 million.

Their total assets at the end of Dec 2012 was $11.8 million.
Now they are $50.2 million!!!

Duh! Is it a surprise that their stock is up 325% since 2012? Was it promoters pushing it up, or was it success in business?


And they just were upgraded in October from the OTC market to the Nasdaq Capital Market. I’m not an expert on these things but I’d assume it’s common sense that if the Nasdaq thought their auditors or CFO were crooked they wouldn’t have accepted them. This is looking more and more like a simple short attack. The price may react to the short article on Monday but most of the attacks seem to be just innuendos.


I saw the article and have been trying to digest it. Thanks for the input Saul, it helps make sense of it.

I also noticed the disclosure at the bottom of the article stating the author is short PFIE. Maybe that’s the pump and dump the title refers to.



Thanks for posting the article DJSka and for your analysis Saul. And thanks for everyone’s other insights on PFIE and other companies on this board.

I’m a strong believer in the role of leadership and culture in companies. So CFO, Limpert’s troubled experience with the SEC (…) and apparent choices of accounting and law firms trouble me. While the board has leaders who I tend to trust as ethical based on their past experiences (some BYU alma mater and a former CEO of Franklin Quest), I also know that this can lead to halo effect and affinity biases, to which unfortunately those in profire’s home state seem to be particularly susceptible and which I want to be careful to avoid here.

Even if Limpert didn’t intend any harm, the SEC report clearly reveals a lack of diligence and of detail in managing his affairs and conflicts of interest and in focusing on providing clients with real value. And the nepotism in Limpert’s prior company and the friendly family arrangements in Profire concern me–imho they are fine for private companies, but require more due diligence and oversight for public companies.

I tend to agree with Saul on the other factors. The founders and officers still own a high percentage of Profire and their sales and profits appear to be growing well. I found their conference call straightfoward with a good focus on customer needs and their industry.

Their recent purchase of VIM Injection Mgt, also increases their risk for me, since incorporating new products and companies requires a particular skillset, and I think it remains to be seen whether Profire’s leaders have that skillset, as well as the expertise and discipline to make wise acquisitions that succeed and increase shareholder value. So some higher risk, with potentially higher reward, is present there. (…)

Finally, a week or so ago, someone noted a concern about legislation aimed at deterring flaring altogether. (…). So I researched this a little and found that there is some risk involved in potential legislation inhibiting flaring. Of course, if they tightened up some, without going too far, it can potentially help Profire, but it appears to be a valid concern and perhaps more of a (long-term) risk factor than I originally accounted for. I’m no expert in this industry and welcome others’ expertise on this topic in particular.

I still want to own PFIE given its high growth and apparently friendly valuation and potentially strong leadership and culture, but due to more risks than I originally accounted for, I feel I have been a bit overly enthusiastic about them and plan to find a good opportunity to reduce my PFIE holdings by to be more in line with PFIE’s higher risk status in my portfolio.




It seems other parties rather than Limpert were the main offenders. Still , it’s a warning sign

Eventually there will be legislation to reduce NG flaring but it will be a slow process since if you have a well producing both oil and gas without a pipeline there is no way to market the gas. Oil producers don’t like to see money burning up in flames , often it is just not possible or economical to get rid of the gas any other way. If it was cost feasible not to flare, few would.…

lists some pros and cons of flaring. It might be pointed out that Texas has a vastly superior infrastructure for gas transport than most states, lots of big and small pipelines, established geographical areas of production where they keep finding more formations to drill.

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Finally, a week or so ago, someone noted a concern about legislation aimed at deterring flaring altogether. (…). So I researched this a little and found that there is some risk involved in potential legislation inhibiting flaring.

Is PFIE’s burner used for flaring? So first I try to find out what is flaring. According to Schlumberger website…

The burning of unwanted gas through a pipe (also called a flare). Flaring is a means of disposal used when there is no way to transport the gas to market and the operator cannot use the gas for another purpose. Flaring generally is not allowed because of the high value of gas and environmental concerns.

According to PFIE, its burner management systems are used in two steps of the several steps of oil production

At the surface, the oil/gas must undergo some initial production processes before it can be transported or refined. Many applications are used in this processing, which require heat to function properly. This heat is provided by a burner flame, which can be managed by a Profire Energy Burner Management System (BMS).

The gas from each well is piped through a “gathering line” to a “mainline”, where it is compressed and then piped to a refinery. Line heaters are used to intermittently heat the gas as it travels to a refinery.
The oil can also be piped to a refinery, or it can be stored temporarily in a heated tank, where a truck will pick-up and transport it to refinery. Adequate heat is needed for these transportation processes to work properly. Heat is provided by a burner flame, which can be managed by a Profire Energy BMS.

I find no mention that PFIE’s products are used for flaring.



I find no mention that PFIE’s products are used for flaring.

Thanks M, that’s really helpful.

I find no mention that PFIE’s products are used for flaring. -M

You might wish to revisit PFIE’s website and give it a closer look. Among PFIE’s product offerings are its Flare Ignition Systems:

What I don’t know is the sales/revenue stream attributable to this line of their products.


So if flaring is reduced ,producers will have to do something else with the NG,. Either inject it deep underground (hopefully into the same formation as production so as to provide extra drive for the oil) or build a pipeline to carry the NG. The latter helps PFIE, the former doesn’t impact PFIE directly. Unless the NG somehow needs to be cleaned up before injection.

Competition ( from the 10K)

Based on our experience, we believe most of the other companies in our industry are either small-sized service companies or product retailers who sell products but have a limited service department to support their products. In the U.S. market, there are several companies that are marketing related and somewhat similar products. They include SureFire, Platinum, and ACL (note: Some larger conglomerates, such as Siemens, Honeywell, and others, manufacture BMS for very sophisticated refinery environments and some larger (e.g. forced-air) systems in the oilfield. But they have not, historically, emphasized sales for natural draft smaller- and mid-size oilfield applications). We had previously included TitanLogix as a competitor, but their recent voluntary recall of their FGI 351 burner management system—together with their recent announcements of additional products in other areas of the industry—suggest to us that they currently do not have a directly competitive position in our area of the industry.

Profire also has patents, but in my experience few patents hold up, often resulting in expensive legal fees more than anything else.A company like Samsung can blatantly copy, even if rulings go against them, often the profits from the copying are more than the fines.


You are right. I was searching for Bms. But indeed they also has FMCS, which I missed. So pfie may be impacted if there is a ban of flaring.


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the competition
On a quick look it seems very similar to ProFiire . With a neat ROI calculator. It does look like there is a quick payback on these systems months rather than years.

It doesn’t look like PFIE patents are preventing competition. But I lack the specific knowledge to evaluate these in detail.

I doubt that ProFire has any sustainable competitive advantage. Very few companies do, and most of those have been discovered by investors so have a high P/E. If an industry or technology is growing fast enough there is room for several companies to do well. But eventually this will be a commodity business if it isn’t already. At that point price will be almost everything, and profit margins for all will be slim.


Thanks everyone for the thorough responses to every part of the short attack. While I am still concerned about the CFO and auditor, I see how the author of the article tried to basically imply and suggest that the product is undifferentiated and margins are not sustainable without any real evidence.

In a press release yesterday, the Profire CEO responded to the short article with this:…

“We’ve received a few questions recently about a disparaging online article that was published last week by a paid antagonist and short-seller of the Company’s stock. We believe most of our stakeholders know the article contains many inaccuracies, and we simply want to emphasize that we believe the best indicator of performance is performance itself. Our history shows the simple, straightforward story of Profire of disciplined growth and management to deliver long-term stakeholder value. If a stakeholder has genuine concerns about management, we invite you to report such to the proper regulatory body—not a self-serving online platform.”

Hatch concluded,

“We do not plan to publicly address this article further, and encourage stakeholders to do their own due diligence and contact us anytime with relevant, genuine questions about the Company. We will gladly discuss any concerns or questions with you.”

What I don’t know is the sales/revenue stream attributable to this line of their products.

It’s a new product line for Profire.

Denny Schlesinger