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PRHL > SEC Filings for PRHL > Form 10-Q on 28-May-2014All Recent SEC Filings

Show all filings for PREMIER HOLDING CORP.



Quarterly Report

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


Premier Holding Corporation, a Nevada corporation ("Premier" or "PRHL" or the "Company"), provides an array of energy services through its subsidiary companies Energy Efficiency Experts Inc., a Delaware corporation ("E3"), and The Power Company USA, LLC, an Illinois limited liability company ("TPC" or "The Power Company"). Premier provides solutions that enable customers to reduce their energy consumption, lower their operating and maintenance costs, and realize environmental benefits. Our comprehensive set of services includes competitive electricity plans and upgrades to a facility's energy infrastructure.

In addition to organic growth, strategic acquisitions of complementary businesses and assets have been an important part of our historical development. Since inception, Premier has completed numerous acquisitions, which have enabled us to broaden our service offerings and expand our geographical reach.

In 2012, Premier acquired a unique marquee technology for energy efficient lighting, the E-Series controller developed by Active ES. This patented technology provides an upgrade for existing HID lamps for high-bay indoor and outdoor applications where the other current options for efficiency are new and untested, and expensive. This technology is being marketed by E3.

In the fourth quarter of 2012, Premier performed additional research and development to the products from Active ES adding two new products for mass production, the 480 volt version of the controller, suitable for ports and other large facilities, and a 240 volt version of the LiteOwl for Streetlights, vastly increasing the applicable market. Also in the fourth quarter, Premier formed a strategic alliance with Muni-Fed Energy who has strong relationships with municipalities, ports, and real estate investment trusts in the southern California and national market.

In the first quarter of 2013, Premier acquired an 80% stake in The Power Company, a deregulated power broker in Illinois. By the end of that quarter, The Power Company had over 12,000 clients, and has been adding between 1,000 and 3,000 clients per month (closing fourth quarter 2013 with over 40,000 contracts) and expects to continue to do so for the foreseeable future. Over 1,500 of these clients have large commercial/industrial facilities such as warehouses and distribution center, which are candidates for E3.

The Power Company's business model is to acquire commercial and residential clients who benefit from the law passed allowing for competition in the energy markets, known as the deregulation of energy. In many cases TPC saves its clients 10-30% on their energy bills by simply switching suppliers, all while the enrollee remains a client of their local utility (local utility continues to read the meter, bill and service any interruptions). TPC is different than several of its competitors in that is has agreements with multiple energy suppliers allowing TPC to leverage its standing in the marketplace to garner competitive pricing for its clients by having its suppliers compete for their client's business. Currently, TPC has access to over 30 different suppliers and most of the agreements in place allow for TPC to be paid for the life of the client's tenure with the supplier. TPC is garnering its clients through strategic partnerships, trained in-house commercial and door-to-door residential agents and call centers. TPC is launching its online client portal dubbed NEST (National Energy Service Transactor). This sophisticated portal enables rapid, efficient and secure sales transactions of deregulated power. NEST is designed to enable sales agents whether from a computer terminal, a smart phone, or any web browser to access the pertinent information on a particular prospect. Agents can view their clients' energy profiles and quickly access the energy options available to them. The transparency and ease of NEST allows TPC's agents to select the best power provider for their customers and process the paperwork online in real-time, which enables client acquisition in minutes. This sales portal enables large-scale, rapid sales of deregulated power.

Premier strives to serve its' customers with diverse products and solutions to meet their energy needs. In executing this strategy, Premier leverages its core strengths of maintaining and growing strong and diverse supply relationships with retail and wholesale customers, and integrating its' expertise in managing physical and financial risks.

First Quarter 2014 Activities

TPC launched its online energy portal NEST on schedule. NEST is built for scalability so that it can be monetized on its own, meaning it can be offered to any deregulated power company as its sales tool. The technology also provides sales management, reporting, verification, and compliance tracking which may be among the best in the industry. To date E3 and its growing reseller base have prospected over 1,500 qualified potential installations and is developing strategic partners including Energy Auditors, suppliers, installers, sales organizations and funding sources. These suppliers exponentially increased the number of the product offerings mostly in the LED and other lighting field. The installers not only bring a technical expertise in the implementation of solutions E3 provides its customers but they also bring their list of client's and an introduction, and the various funding sources can provide every sort of financing to meet any client's needs from short-term loans, leases to PACE funding.

Premier completed strategic alliances with Norcal Reps, a national sales rep organization and Western Glass, providing efficiency technology to its 8,000 customers and introducing E3 to these customers. In addition, Premier has acquired the resources of AEON Green Energy Solutions by means of an exclusive employment agreement with its founder, Lenard Tercenio, including its strategic alliances, sales agents, manufacturer, finance and auditor relationships, as well as its client base and pipeline estimated to be worth $2,000,000 in sales.

E3 is finding success in recruiting LED resellers whose clients have declined an LED sale (mostly on a performance, price, or personal preference basis) and going back to those clients and offering the E-Series technology as a solution for their existing (and preferred) HID lighting. This includes auto dealerships, warehouses, and parking structures, etc.

The energy services business has contributed a very small amount of revenues to our overall financial performance as of the quarter ended March 31, 2014, as the sales cycles for these large projects can be very long, though Premier has seen closed sales with a municipality and very large proposals to large prospects such as ports, municipalities, big box stores, and fortune 500 companies.

Strategy and Outlook

- Expanding activities in deregulated energy markets through strategic partners. Premier through TPC continues to focus on building sales channels through sales growth strategic partners that either have, or have access to significant customers to which Premier can offer competitive electricity rates.

- Creating and leveraging sales leads from TPC's deregulated sales efforts to drive sales opportunities for the demand management business. As TPC continues to build its commercial and business customer base, it informs these customers that in addition to financial savings that they can achieve through the negotiation of more competitive electricity rates, E3 can also provide energy savings through the installation of lighting, and other building envelope technologies.

- Focusing on building channel sales partners for E3. Premier has established strategic partners in key growth markets that advocate and introduce our lighting and related demand management technologies to TPC customer base. Premier intends to continue to build and develop these channel partnerships both domestically and internationally.

- Plan to become a power provider/supplier. By adding a third subsidiary, a power provider, the company can book the entire energy bill as revenue as opposed to only the commission. This revenue is estimated to provide two to three times the earnings on the same customer currently being acquired by TPC, by picking up the margin between the wholesale and retail price.

- One-Stop shop for "everything energy." Premier believes that it can best serve our customers by providing all energy related products and services under one cohesive and coordinated package with over 30 energy supplier partnerships, and plans to operate also as a supplier, and with E3 representing an expanding array of products, some proprietary, which enables us to providing the most appropriate and effective solution to meet our customers' needs and financial objectives.

- Provide funding sources to enable our clients to adopt new technology. Premier believes it can offer a wide range of funding options which will allow its' clients to structure the finances to best suit their needs. From 100% no money down, to straight purchases, E3 is putting together a number of strategic financial partners and programs to facilitate a quick sale. In addition the company has resources to maximize tax credits and incentives for Premier's clients.

Known Trends and Uncertainties Affecting Our Business

Market Volatility. Management believes that the market for energy efficiency will continue to grow, and Premier will increase penetration in this market, and that revenue will continue to increase over time. Continued fiscal uncertainty has and may continue to contribute to a lengthening of our sales cycle for both municipal and commercial customers.

Long and Variable Selling Cycle for E3 Business. The sales, design and implementation process for energy efficiency projects can take from several months to 36 months. Existing and potential customers generally follow extended budgeting and procurement processes, and sometimes must engage in regulatory approval processes. This extended sales process requires the dedication of significant time by sales and management personnel and the use of significant financial resources, with no certainty of success or recovery of related expenses. All of these factors can contribute to fluctuations in quarterly financial performance and increase the likelihood that operating results in any particular quarter may fall below investor expectations.

Results of Operations

The unaudited condensed consolidated financial information with respect to the three months ended March 31, 2014 and 2013 that is discussed below is unaudited. In the opinion of management, such information contains all adjustments, consisting only of normal recurring accruals, necessary for a fair presentation of the results for such periods. The results of operations for interim periods are not necessarily indicative of the results of operations for the full fiscal year.

Company Overview for the Three Months ended March 31, 2014 and 2013

For the three months ended March 31, 2014 and 2013 sales of products totaled $667,662 and $129,236, respectively. During the three months ended March 31, 2014 and 2013, cost of sales totaled $46,679 and $1,491, respectively. The increase in sales is primarily due to the acquisition of The Power Company USA, LLC.

During the three months ended March 31, 2014 and 2013, selling, general and administrative expenses were $1,606,802 and $630,192, respectively. The increase in selling, general and administrative expenses in the three months ended March 31, 2014 as compared to the same period in 2013 can be attributed increase operational expense related to the acquisition of The Power Company USA, LLC, and increased stock compensation expense.

For the three months ended March 31, 2014 the net loss was $1,017,378 before non-controlling interest and discontinued operations. For the same period in 2013 there was a comparative loss of $519,601. During the 3 months ended March 31, 2014 there was a gain of $45,066 attributed to non-controlling interest of $5,066 resulting in a net loss of $972,312. During the 3 months ended March 31, 2013 the was a gain of 985,138 related to discontinued operations, as a result there was net income of $466,146.

Liquidity and Capital Resources

During Premier's most recent quarter ended March 31, 2014, cash flows from operations were not sufficient to meet operating commitments. Cash flows from operations continue to be, and are expected to continue to be, insufficient to meet operating commitments throughout the remainder of the fiscal year ending December 31, 2014.

As of March 31, 2014 working capital was $688,884 and cash was $715,423 while at December 31, 2013 working capital was $682,793 and cash was $781,569. The increase in working capital is primarily attributable to the sale of common stock. Additional working capital might be required as the Company's subsidiaries continue their growth.

Cash Flow. Net cash used in or provided by operating, investing and financing activities for the three months ended March 31, 2014 and 2013 were as follows:

                                               Three months Ended
                                                    March 31,
                                               2014           2013

Net cash (used) in operating activities     $ (795,897 )     (596,072 )
Net cash provided by financing activities   $  845,243        677,288

The changes in net cash used in operating activities are attributable to net income adjusted for non-cash charges as presented in the statements of cash flows and changes in working capital as discussed above. Net cash provided by financing activities relates primarily to cash received from sales of common stock.

Off-Balance Sheet Arrangements

There are no off-balance sheet arrangements.

Critical Accounting Policies and Estimates

The discussion and analysis of its financial condition and results of operations is based upon the Company's unaudited condensed financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires it to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. On an on-going basis, the Company evaluates its critical accounting policies and estimates. The Company bases its estimates on historical experience and on various other assumptions that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. The Company's critical accounting policies and estimates are discussed in its Annual Report on Form 10-K for the fiscal year ended December 31, 2013.

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