Struggling Efactor Group Corp. (OTCMKTS: EFCT) is raising money through a stock offering to continue operations.
San Francisco-based Efactor is a holding company that owns several businesses: Efactor.com, a social network for entrepreneurs; EQmentor, an online professional development company; and MCC International, a public relations and communications agency.
Efactor has suffered losses from operations and has a working capital deficit, which raises substantial doubt about its ability to continue as a going concern, or without the threat of liquidation. The company’s management is taking steps to raise money to continue operations for the next year.
In a June 12 filing, Efactor announced that it had entered into a placement agreement to sell up to 8 million shares of its common stock for $0.60 per share, which should bring in about $4.8 million. Monarch Bay Securities LLC is acting as placement agent.
In April, the company issued $194,000 in notes that mature 180 days from the issuance date.
“Because the business is new and has no history and relatively few sales, no certainty of continuation can be stated,” Efactor says in a May 15 filing with the SEC.
For the past two fiscal years, 2013 and 2012, the company has incurred net losses of $5.9 million and $4.1 million, respectively. The company has been generating revenue through networking member fees, sponsorships, public relations services, advertising and advisory services.
For the three-month period ended March 31, the company brought in $116,545 in revenue, compared with $188,762 in revenue for the same period of 2013. The company attributes the decrease to a change in the website, saying it lost fees it previously earned through a mentoring service from transitioning to a new website.
Although Efactor’s revenue declined in the quarter, the company’s operating expenses increased to about $2.4 million from $1.1 million. The increase is because of stock-based compensation and legal, accounting and other expenditures related to the stock offering.
The company plans grow organically and through acquisitions and expects growth to reduce the need for short-term financing.
For the previous edition of Turnaround Tuesday, see “University General Health Considers M&A, Divestitures as Part of Restructuring.”
For more troubled companies, check out Mergers & Acquisitions Distressed Company Watch List.