Struggling coatings company Eco Building Products Inc. has secured a loan and raised additional capital.

Vista, Calif.-based Eco Building develops a line of protective wood coatings that aim to extend the life of framing lumber and other wood used to construct homes and buildings, as well as protect the wood from mold. The company's products do not emit volatile organic compounds and are sold at the Home Depot.

On Feb. 27, the company closed a securities purchase agreement, raising $675,000. Before that, on Feb. 14, the company entered into a $500,000 loan agreement.

Eco Building said in a Feb. 24 filing with the U.S. Securities and Exchange Commission that an accumulated deficit and lack of profitability have caused substantial doubt about the company's ability to continue as a going concern, or without the threat of liquidation. As of Feb. 24, the company had a deficit of $50.4 million, and a current year net loss of $4.3 million.

At the end of 2013 the company owed about $1.33 million in past-due payroll taxes and accrued penalties, down from the $1.39 million it owed on past-due payroll taxes and penalties in June.

The company said in the Feb. 24 filing that it needed to raise more capital to sustain operations, which cost about $300,000 per month.

The new loan and securities agreement were just some of the ways Eco Building has tried to raise cash.

In November, Eco Building entered into a forbearance agreement with Hudson Bay after it defaulted on a $113,000 note. In January the two parties went to court, and Eco Building agreed to pay $114,275 to settle the debt, according to the SEC filing.

During the last half of 2013, Eco Building issued about $1.7 million in convertible promissory notes, and extended the maturity dates of certain other notes from November 30 to May 15.

The company had a decrease in revenue for the second quarter of 2013, due partially to the "unwinding" of contracts serviced by the company's E Build & Truss division, which is now dormant as the company tries to save money. For the three months ended June 30, 2013, the company's revenue was $316,347, compared to $1.4 million for the same time period the previous year.

Eco Building was able to reduce its operating expenses, bringing them down from almost $2.6 million for the three months ended Dec. 31, 2012 to about $1.6 million for the period ended Dec. 31, 2013.

In the SEC filing, the Eco Building identified weaknesses with the tracking and valuation of inventory, processes, procedures and controls related to financial statements. The company plans to continue implementing a new training program, hire additional staff and hire a principle financial officer before the end of September.

The company also says that it may continue to raise additional capital. "If current and projected revenue growth does not meet management estimates and proceeds received from future financing are insufficient, we may choose to raise additional capital through debt and/or equity instruments," Eco Building says in the SEC filing.

For last week's edition of Turnaround Tuesday, see "Net Restructures Loan." 

For more struggling companies, see Mergers & Acquisitions Distressed Company Watch List. 

Subscribe Now

Complete access to real-time information and analysis of news and trends in the industry.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.