TUSTIN, CA--(Marketwired - Apr 30, 2014) - Premier Holding Corporation (OTCQB: PRHL)
As we move forward I believe it is important to provide a short history for current and prospective shareholders here is a recap of our management history including commentary relating to the recent annual filing:
Current Management took control of the public company Premier Holding Corporation (PRHL) in the fourth quarter of 2012. At that time new management believed it was crucial that we derive immediate revenue to gain investor and shareholder interest and support. We revamped our operating subsidiary WePower Ecolutions by changing both its name and focus to Energy Efficiency Experts (or E3). We were excited about E3's long-term prognosis and plans to market our proprietary technology (The E-Series) along with other innovative green solutions, but we would have to withstand the long sales cycles associated with this business, we felt it was critical to acquire a company with a corresponding customer base that could affect sales quickly (daily/weekly) and also provide prospects for E3 and its product array. The company needed a shot of adrenalin that would not only jump start the business but also become the catalyst and foundation for what management hopes will be a much bigger build out of Premier. We believed we found a perfect company -- The Power Company LLC (TPC).
We acquired 80% of The Power Company in February of 2013. TPC is a reseller of energy (electricity and gas) that can operate in all deregulated states -- One of the reasons that the acquisition of TPC makes sense is that this potential deregulated market is estimated to be 7 to 10 times larger than telecom deregulation. TPC resells power from multiple suppliers in order to offer a "one stop shopping" model. This model has resulted in the Company's first ever substantial revenue, totaling $1,804,980 last year. Please note that this is only 10 months of revenue and that these contracts/sales generate renewals that are equal to the initial commission payout. More importantly it has resulted in over 1500 commercial accounts sold by TPC (the accounts now become additional prospects for E3). TPC has over 40,000 residential accounts as well. These contracts traditionally have high industry renewals beyond the contract termination and we should continue to receive revenue for multiple terms on these contracts. In the meantime we continue to grow our sales, literally adding thousands more contracts each month. Again, the stated revenue for 2013 represents approximately 10 months of revenue. While we have not yet provided the market forecasts or Market Guidance for our financial expectations from this operation, we believe that the market conditions that led us to acquire this business opportunity are only improving. The current position of TPC, along with general market conditions and our position in the marketplace, gives us the expectation that we will continue to grow our business rapidly. Following are some of the salient items to consider:
- TPC plans expansion of deregulation into more states, and at the same time more states themselves are instituting deregulation models. In Q1 of 2014 we opened an office in Maryland and have streamlined the process allowing us to rapidly expand to new states with a goal of 3-4 more offices by year end.
- Competitive advantage provided by our energy portal "National Energy Services Transactor" or NEST (see press release of November 12, 2013 for more details). The further development of NEST, a scalable web-based automated sales and compliance tool that reduces the time to make a sale to a matter of minutes. NEST also records sales calls and 3rd party verification, and provides accounting modules for rapid expansion that will include channel partners, affinity groups and even charities that can offer deregulated power through TPC.
- We are also pleased with the growth of the underlying contracts that provide The Power Company with an expanding base of recurring revenue. While these contracts will eventually expire, our experience and that of the industry is that they generally last beyond the contract dates with renewal rates expected to be 70% or more. This means that our cost of acquisition for a customer will decrease, and the ultimate returns are potentially greater than the original contract.
- More states will be opening up to deregulation as the federal government would like each state to have a plan for deregulation by 2020.
- Industry acceptance -- the market is both expanding and maturing and customers are beginning to realize they can change their power provider to suit their needs and achieve lower cost power and/or budget certainty.
Energy Efficiency Experts: We have mentioned The Power Company's marketing success and potential and this year we hope to use that to benefit E3.
- We recruited a new President for E3, Mark Dunnett (Started in Jan 2014) with over 35 years' experience. Not only is E3 approaching the 1,500 plus commercial accounts supplied by TPC as planned, but he is bringing his own client list to E3 (and many of these become leads for TPC as well). Mr. Dunnett is expected to have success with E3 as he is approaching clients we have already saved money for or created budget certainty. Now E3 can now offer these price conscience customers energy efficiency strategies through E3 by lowering their actual usage.
Plans to become a Supplier: This is all in light of our recent announcement regarding EB5 funding we expect to obtain and our strategy to become a power provider/supplier. To be named "Kratos Power" would immediately grow our current business in numerous ways and have already started the process and believe that within the next few months we can have FERC (Federal Energy Regulatory Commission) approvals in place. While TPC operates as an energy broker or reseller and as we garner accounts, only the sales commission is booked as revenue. As a supplier we will book the customers entire energy supply bill as revenue (estimated to be 8 to 12 times higher than the commission). In addition to the current revenue to TPC, as the supplier we would also gain the difference between the wholesale and retail cost of energy (estimated to be 2 to 3 times what we currently earn).
Financial Information: This growth and execution on our strategy was not without some cost. Our Operating Costs increased by $5.5 million, and while $2.0 million of our Operating Costs were based on non-cash expenses (shares issued for services), much of the rest of our spending was to build a software platform that positions us as a leader and innovator in the deregulated power industry, pay for prospecting and lead generation, and build out the infrastructure for future growth.
- Our cash balance at the end of the year was approximately $780,000, compared with $44,311 in 2012. We believe that without expansion we could be profitable in the TPC subsidiary but we have made an internal management decision that is supported throughout the company that we need to build up marketing and get as many contracts in place as fast as we can as we believe that customer base will increase our enterprise value going forward. We also expect that should we be successful in becoming a supplier there is additional value in moving as many of those client to Kratos Power (anticipated to become a subsidiary of PRHL).
- Our Company operates various subsidiaries which have different operating metrics. For example, TPC receives revenue on a "net" basis therefore it has no COGS, whereas E3 delivers products and services and does report COGS.
- A list of the more relevant operating costs summarized in the 10K are:
- CONTRACT LABOR: $830,500.00 paid to over 30 contractors who performed prospecting and lead generation services; $203,000 paid to 7 individual contractors for direct costs of running and reporting for a public company, not counting additional legal fees; $288,000 for nine entities performing operational services. This is important to note as there were virtually no employees in 2013, all functions were performed by consultants and contract labor, much of it lays the groundwork, both operationally, and in prospecting, that will pay off over the next two to three years.
- Legal fees: $154,996.06; Accounting fees: $100,279.38
- G&A totaled $248,710.35 including some items listed above.
All above items are taken from the audited financials summarized in the 10K.
As you can see from our recently filed 10k, the company has made substantial progress in the last year, and Q1 of this year continues that growth. The investment we have made in the company is starting to show results and 2014 ought to be an impressive year of continued growth and accomplishments.
We appreciate the support we have had from our shareholders and hope to add many more in the years to come!
Randall Letcavage, President and CEO
Premier Holding Corporation