Texas REP Reports Loss, Confirms Network Marketing Channel

Summer Energy Inc., the parent of Texas REP Summer Energy LLC, reported a net loss for the quarter ended March 31, 2014 of $1.0 million, versus the year-ago loss of $325,000.

Summer Energy said that the loss reflects operating expenses and cost of goods sold incurred in excess of revenue as it attempts to obtain economies of scale.

For the quarter ended March 31, 2014, gross profit totaled $495,000, versus $556,000 a year ago.

"We experienced extreme weather events in February 2014 and March 2014 that added significantly to our energy costs and negatively affected our gross margin for the three months ended March 31, 2014," Summer Energy said.

Electric revenues were $7 million for the quarter ended March 31, 2014, with $168,000 in incremental revenue from contract cancellation fees, disconnection fees and late fees. Revenues for the year-ago quarter were $2.7 million from electricity sales and $144,000 from disconnection and late fees.

Summer Energy announced that it recently entered into a master marketing agreement with an unnamed entity which is in the business of using its multi-level marketing network to broker the services of electric providers to potential residential customers.

Although not named, when taken in connection with Summer Energy's recent REP amendment to add the trade name Epiq Energy, this disclosure further confirms Epiq (a unit of Genie Energy, the parent of IDT Energy) will be using its MLM channel to broker for Summer.

Summer Energy said that it issued a warrant to the MLM marketer to purchase up to 275,000 shares of Summer's common stock. A fair value of the warrants of $46,000 was determined using the Black-Scholes option-pricing model