CEO: David Natan
About: ForceField Energy Inc. and its subsidiaries comprise a global company whose products and solutions focus on sustainable energy solutions and improved energy efficiency. ForceField is a distributor of LED and other lighting products for a number of premier LED lighting manufacturers; and through its award-winning subsidiaries, American Lighting and ESCO, have completed lighting installations and retrofits as well as energy efficiency upgrades, for numerous high profile concerns in a variety of industries.
WSA: Good day from Wall Street. This is Juan Costello Senior Analyst at the Wall Street Analyzer. Joining us today is David Natan, the CEO of Forcefield Energy, the company trades on NASDAQ ticker symbol FNRG. Thanks for joining us today David.
David Natan: Thanks for having me on. Nice talking to you, Juan.
WSA: Anytime. Now, starting of please give us a history and overview there of the company for some of our listeners that are new to your story.
David Natan: Forcefield Energy used to be a supplier of a specialty chemical to the solar industry. We’ve transitioned to being an LED distributor and installer and provider of solutions in the Energy Management Sector, and we think that that transition has been very good for our company and are excited about the profile of the industry. So, I think it has been a very good move. We are one of the few companies that migrated successfully from Bulletin Board to the NASDAQ. We were listed October of 2013. We’ve had a nice run since we’ve been listed.
WSA: Great. And please bring us up to speed on some of your recent highlights. You recently had a sale of some of your interest in TransPacific Energy.
David Natan: Yes. Last Friday we announced the sale of our waste heat segment TransPacific Energy. It was a waste heat technology that converted waste heat into clean energy. It was renewable energy company. And we felt that given the huge opportunities and the progress we’re making on the LED side, that it was a better use of capital to divest that division. That division has been effectively inactive and not part of our business plan or guidance for the last year and a half. And given the low oil price although there’s some different opinion, we think renewable energy projects will be harder to finance. Also they are so capital intense. We had an opportunity to get back almost $2 million worth of our stock (255,000 shares), which we retired to treasury, as well as receiving $50,000 in cash.
So, on an overall basis, we ended up getting more, almost half a million dollars more than we paid for TPE, in value. And we thought there was no doubt that this is the right strategic move for our shareholders to enable us to focus 100% on the LED sector. So, we announced that last Friday. Some of the more recent previous news relates to our Connecticut Streetlight Program, which we may talk more about later, and the progress we’ve made there. And additionally we partnered with a company called Noveda Technologies which is based in New Jersey that enables us to make our product offering on the LED side more attractive to end users.
And what they do is Noveda Technologies has developed energy management software where you can manage and look at in real time what the energy consumption is of a building, a group of buildings, a chain of stores. They’ve got 3500 locations around the world where they managed in real time. For example Noveda’s technology is in a 1500 store chain (all stores). The management of those stores can see in real time what the energy usage is, and gas, heat, light, power, solar, real time and we feel they’ll be an excellent partner to be a source of additional business on some of those locations.
WSA: Excellent. And what are some of the key trends that you’re focused on right now in the sector and how is the company positioned to capitalize?
David Natan: I think the Connecticut–our Connecticut involvement gives a great case study of what’s happening in the country and the industry. We were awarded–we were selected as one of the three preferred suppliers to the league of cities in Connecticut to replace all of the streetlights over the next five years in every Connecticut municipality. They have the option, it’s not mandatory, but we feel that most cities in Connecticut will convert their streetlights to LED. It’s a $75 to a $100 million project. We’re the only local company that was approved. The other two are outside of the region. And due to the low cost of financing and the financing that’s out there, the cities are able to replace their streetlights with new LED streetlights they use–that save 50, 60 in some cases 70% of the energy used in traditional streelights. The municipalities are now able to finance them at literally 2% to 3% interest because of the low prevailing interest rates available and due to our private label lease program that we’ve developed for them.
And by adding the Noveda Technology, the town manager can control every LED streetlight. He can see on his desk which lights are meeting norms, if somebody is using lights in the park too long or leaving them on too long, or wants to dim a light if there’s a storm, if there’s a parade, they can change the lighting so they can manage each individual light etc. So, the combination package of LED lighting plus the technology element, these lights have Wi-Fi, they’re basically mini computers. And that trend coupled with the ability to provide low cost financing is a very exciting development in the industry. Everybody is realizing that LED lighting saves energy and the payback in most cases is two to three years coupled with low cost financing makes it very attractive.
So, we won the first two–we got the first two orders in Connecticut. We’re currently bidding on 20 others. We expect a lot of them to be booked very shortly. And that type of trend throughout the country is the concept of no-money-down financing. LED is one of the hottest sectors, if not the hottest sector, in the energy arena because everyone is realizing it has applications everywhere. We don’t focus on the residential market but if you look at universities, warehouses, multi-location retail stores, outdoor lighting, Fortune 500 companies, every operation, there’s an opportunity to reduce lighting coupled with the fact that bankers, investors, financiers are realizing they’re generating their own cash flow because of the energy reduction. And in the case of Connecticut the cost of financing is so low. By changing their streetlights, they’re actually generating positive cash flow because the savings from the streetlight or LED project is greater than the amount of financing they’re paying and we are paid 100% when the job is completed with no recourse against us.
So, you get new lights, you get better aesthetics, you get more functionality, you get more management, you can get better lighting, better safety wise, better for students, and you get it for no money down. Consumers are used to the seven year solar lease. What’s exciting about this is it’s a three-year, two to three-year payback. So, we see an enormous market developing at the early stages both domestically and internationally.
WSA: Great. And what are some of the other key factors that you feel make Forcefield unique from some of the other players in the sector.
David Natan: We have the ability to get the decision makers without having a huge overhead structure; we’re–based on our industry experience. I work closely with Richard St. Julien the Executive Chairman and President of the LED Division. If you look at us compared to our peer group, we don’t have a huge overhead structure. We try to be as lean as possible.
So, the companies that are going to win at the end of the day are the ones that can get to market and do so at a reasonable cost. We’re leveraging our corporate overhead through our acquisitions. We have acquired two award-winning companies, American Lighting in San Diego and ESCO in Boston/Lenox, Mass area. Both have consistent strong leadership through Neil Miller and Mitch Barack, each with over 20 years industry experience. And some of the biggest names in the country we’ve done work for and successfully completed on the ALD side. We have done work for Home Depot, Wal-Mart, QUALCOMM Stadium for the San Diego Chargers, MGM Casino, Northrop Grumman, 300 hotels, 300 auto dealerships and on the East Coast through ESCO Energy, working with the likes of Honeywell and utility companies. So, well regarded companies that that have a track record of being able to see a project from beginning to end using high quality products.
Also, we think that going to market without having a manufacturing facility is actually a stronger strategy than trying to support a factory overseas or where product may not be competitive. We don’t want to be in a situation where we’re forced to sell the production of our own factory which is not competitive. So, by being nimble, we can distribute all products, ones that are competitive in different markets. So, we think that that gives us an edge. We’re not tied to any one LED product line, we’re agnostic, and the LED products, there are some very high quality companies but there are also many, many brands that are also getting certified that are competitive pricing-wise. So, by doing that ability to go to market plus our technology has been that we talked about with Noveda and that gives us a platform to provide more of a package, not only LED but the ability to manage energy consumption.
WSA: Great. And what are some of the key goals and milestone you’re hoping to accomplish over the course of the next 12 months?
David Natan: We’ve said publicly, we want to close more transactions like the Connecticut transaction. We’re talking to some very large entities about providing LED lighting and other services for them. We have to deliver. We’re confident that we will do so. So, our goals are to–what we’ve done is we’ve already made tremendous progress in establishing the credibility and what our capabilities are. The next step is to deliver some larger projects based on the track record that we’re establishing. So, during this year we want to grow our businesses organically. We want to close on some larger–some potentially very large projects that we’re working on. We want to close on those and we’re still acquisitive looking for opportunistic acquisitions. We paid a five-and-a-half time multiple for two quality companies, two private companies that in effect went public through us. We think that there are others out there. We know there are others out there that want to become a part of our group. We already covered 20 states with these two locations.
So, both of our acquisitions are operating in an enormous market. We don’t think that there’s going to be any overlap. So, if there’s another opportunity in California, Massachusetts, to Midwest –we will not hesitate. Because of being our NASDAQ platform, and by communicating what we’re doing, we’re already receiving a lot of calls, and request for bids in other parts of the country on streetlights and other projects that we’re working on.
Also, we recently announced the deal with Constellation Energy, which is a very large energy provider. It’s really an enhancement of a previous deal and still along the theme of in some states where energy is deregulated, Constellation will partner with a subcontractor such as us. They’ll put in the LED lighting for a customer. We’ll serve as their subcontractor, and that your cost of electricity that you’re buying from the power company is less on a net basis because you have LED lighting in. So, they deliver a no money down package to an end user where their lighting or their electric bill goes down in net. So, we’ve done some work for Constellation. We’re expanding that around the country, and they want to do a lot more of that type of work.
WSA: And perhaps you can walk us through your background and experience and talk a little bit about the management.
David Natan: Sure, we have a hardworking management team, I know everyone says that. We wear a lot of hats, and have lot of public company experience. The CFO Jason Williams and myself have been CFO’s during our careers of seven public companies; raised half a billion dollars on favorable terms, have grown companies to be very large, delivered shareholder value, know, how to manage a public company in terms of what type of financing to take, what are our differentiators. We’re at this point where we are now because we didn’t take any financing for what I call would have “mortgaged our future”. We didn’t do any financing which was readily available but would have resulted in the issuance of a lot of shares which would have hurt our shareholders. And didn’t give away any free warrants, we didn’t do any convertible notes that would have resulted in the issuance of extra shares that will dilute the shareholders.
So, as a group we have a lot of public company experience in many sectors. Working with analyst coverage. Jason and I have been on teams that have raised half a billion dollars. We’ve seen different types of converts, we’ve funded acquisitions, and as a group including Richard St Julien, we have done over 30 MNA transactions. We’ve passed on many others that didn’t meet our criteria. So, we are very careful to acquire companies that the management is going to remain on. We don’t want companies that have to be “fixed per se” where you have to lay off people to make the numbers work.
So, we have a very strict acquisition criteria that we stick to. We integrate operations and do a lot of financial oversight in the company. I have seven–we’ve been CFOs of seven public companies. Our head of our Audit Committee is a CFO of a public company. He has a lot of financial oversight in the company. We have the ability as a team to take a concept, and make it very large. The last public company that Jason and I worked at together, we grew revenues from 30 million to 400 million in a three-year period and did eight acquisitions, and got a huge price increase in the stock price. So, every business is different but the team or the management team has done this before, and we’re confident we’re going to do it again.
WSA: And as far as investors in the financial committee are concerned as–you know, we spoke with you last year and, you know, the stocks were doing pretty well since then. Do you believe that the financial community is starting to catch on to your story, and what do you still wish investors better understood about you guys?
David Natan: Well, I think we’re starting to show up on the radar screen–They’re understanding our capabilities, the strength of the industry as a hot sector, we still have to deliver results, as I said, and “execute”. We know we have to do that and we’re confident that we can. You look at the structure of our company compared to some of our peers in the LED sector, we have some debt on the books, but we only have a modest 18.7 million shares outstanding. We don’t have five layers of preferred stock or events that will trigger something negative.
We funded the company in a nontraditional yet efficient way through 144 offerings, raising it through private placements. It’s been very successful. We’ve raised about $12 million over the last three or four years spread out over a lot of investors. So, our investors know they’re not going to wake up one morning and find that somebody with a large concentration of stock didn’t like the management team or had the cash out for reasons unrelated to us, and had to liquidate their position, and negatively impacting the shareholders. The entire executive management stocks have been voluntarily locked up since 2010. This sends a strong message.
Our salaries have been historically and still are pretty, pretty low, and much lower than peers and lower than the marketplace because we want to send a strong message that we’re in this for the long run. We are shareholders ourselves. We own 23% or 24% of the company. So, we’re highly motivated to make the company successful. And we have a track record in public companies and know what to do. So, we think those type of things are getting out to the investor. Our ability to close on orders will be important and we’re confident we’re going to deliver.
WSA: Great. And once again joining us today is David Natan, the CEO of ForceField Energy which trades on NASDAQ ticker symbol FNRG, trading currently at 7.49 a share market cap, is around 135 million. And before we conclude here, David, to briefly recap some of your key points, why do you believe investors should consider the company as a good investment opportunity today?
David Natan: We’re in the right sector. It’s an enormous and growing market. We’re well positioned with key companies that we have that the companies that we’re working on, the product that we deliver, the sense of urgency that we have and our ability to deliver results with a low overhead structure relatively speaking. Our ability to manage public companies, and minimize dilution, and still accomplish our goals we think is very attractive reason to, and that’s why they should consider us.
WSA: Well, we certainly look forward to continuing to track the company’s growth and report on your upcoming progress. And we’d like to thank you for taking the time to join us today, David, and update our investor audience on ForceField. It was great to have you on.
David Natan: Thank you very much for the opportunity to get our message out and we look forward to working with you in the future.