Eco Building Products Issues President's Letter to Shareholders
VISTA, Calif., June 24, 2014 /PRNewswire/ -- Eco Building Products, Inc. (PINK: ECOB) today released the following letter to its shareholders:
With the first half of the year coming to close, and looking toward the second half of 2014, I wanted to take some time to provide our loyal shareholders with some perspective on the Company's current position, the goals and expectations we are setting for the second half of 2014, and our strategic plan for meeting those objectives as we now are gaining national attention with national supply chain via our primary client, a Major Big Box retailer.
WHERE WE ARE TODAY: CROSSING THE BRIDGE INTO THE MAIN SUPPLY MARKET
Moving forward with the Company's new 'supply only'-focused business model, we have created a leaner, better organized company that has transitioned to a business plan positioned to strategically support the supply chain of the $60B North American lumber industry by way of coating services and special orders sales for Eco Red Shield™ protected lumber, the Company's flagship product. Our Big Box retailer customer has deployed Eco Red Shield in dozens of stores throughout the Northeastern United States and is expected to move into California in the near term. Significantly, in the second half of the year, we forecast demand exceeding current capacity as a result of demand seen in the marketplace in the first half of the year. Based on these projections, we are expanding our supply chain capacity as the summer season brings an increase in demand for lumber to support new constructions throughout North America.
From the financial stability standpoint, the Company has reclassified certain liabilities into Preferred Equity and has expanded its access to working capital by way of previously announced financing transactions that significantly mitigate the financing risk for the Company and give us sufficient access to capital to fulfill our long-stated milestone of becoming a cash-flow positive business ahead of turning to significant profitability in 2015. We believe we can achieve a cash-flow positive position in the next four months due to increased expectation in orders, and new access to capital to meet that demand. Going forward, we are working to bolster the Company's financial infrastructure as we prepare to engage additional business opportunities in the lumber industry.
Armed with a forward-looking approach and conscious mindset, founded on the principles of maintaining profitable margins and providing a competitively priced product and assortment driven by consumer demand and market trends, the Company is crossing the bridge into the mainstream market. Our plan of creating primary demand through ECOB's social media campaign driven by the company's vertical plan using E Build & Truss summoned the attention of a select group of consumers who became early adopters due to specific experiences, including both mold due to Hurricane Sandy, and wildfires as recently seen throughout Southern California. The lumber industry is still recovering, and we believe Eco Red Shield represents a unique offering in the industry; affordable mold, wood-rot decay, termite and fire protection for the entire superstructure of wood framed construction projects.
GOALS FOR THE BALANCE OF 2014: BECOMING A PROFITABLE COMPANY
Throughout the course of the current quarter, the Company has successfully managed its supply relationship with a major national retailer including direct in store sales, direct to distribution sales and special order sales. Going forward for the balance of 2014, our goal is to transform these initial successes into meaningful sales that will offset the Company's plateauing production, research & development and marketing activities to position ourselves for massive profit growth in 2015. We have positioned the Company to scale as product demand grows due to our initial marketing efforts, and our increased focus on intellectual property protection. We represent a breakthrough opportunity in a $100B worldwide industry, which is central to infrastructure development, while providing an ecologically friendly solution to key unmet needs in the space. As we begin to achieve economies of scale in our operations, we have three distinct ways of capitalizing on the increasing demand for our product:
- Direct to consumer sales via our Major Big Box retail customer in North America: As the Company gains a footing in the lumber industry, our Big Box retailer is seeing a significant increase in demand due in part to an increased focus on safety and longevity on the part of builders and home buyers. Red infrastructures are becoming a source of pride among a forward thinking segment of the lumber industry. As this occurs, we are hopeful to see additional marketing resources committed by our Big Box retail partner that will not only provide additional credibility to our brand, but further increase sales in existing stores and potentially expand the geographic footprint that Eco Red Shield enjoys in the United States and Canada. While direct to consumer sales represent the lowest profit margin for our Company, at approximately 20%, we believe it is an essential component of our overall strategy by building brand awareness in the marketplace, credibility via the association with our Major Big Box retailer, and revenue that will allow the Company to achieve profitability and stabilize its financial operations prior to addressing the broader lumber industry;
- Partnered, pre-packaged home infrastructures for distribution to emerging high-growth areas in North America, as well as humanitarian use throughout the developing world in situations of natural disaster where current lumber supply has become the root of socioeconomic problems. This effort is meant to fill a key humanitarian need and serve the Company's social responsibility mission as well as job creation. This will represent a niche, but critical component to the Company's revenue model by creating several high profile, large quantity orders that the Company has established an affiliate network to fill without stretching internal Company resources. Additional details will be made available to the marketplace in the near future.
- Affiliate program where the Company supplies coating equipment and follow on sales of only application chemicals to lumber manufacturers for use in broad distribution: This represents the highest margin business for the Company as we ostensibly remove the burden of acquiring wood assets and focus exclusively on supplying chemical, which is the Company's core competency. The maturation of the Company's affiliate program is a direct result of the Company's marketing efforts, along with our product positioning in our Big Box retailer creating demand for Eco Red Shield. We expect this program will continue to grow as more traditional forms of marketing take hold and lumber suppliers face unfilled orders for mold and fire resistant wood. Our proprietary intellectual property positions the Company to be the sole source of this product throughout the industry for the foreseeable future. Specifically, Denver and Austin-based Eco Affiliates are now reaping the benefits of the Company's aggressive marketing and social media campaigns with large multi-family projects in their regions. The affiliates increased production within their respective regions has resulted in repeat bulk orders of Eco's Red Shield chemistry; and with the increase in red lumber being utilized on high-profile jobs serviced by these affiliates, professionals within the Industry are taking note, yet again supporting the shift away from raw, unprotected lumber.
STRATEGY TO MEET OUR GOALS: 2H-2014 IS TURNING FROM A FUNDAMENTAL PERSPECTIVE
We believe the Company remains grossly undervalued due to our breakthrough technology in a $100B worldwide industry. Eco's existence in the Building and Lumber Industries was perpetuated by built-in challenges, including mold and rot-decay infestation, coupled with the fact that today's engineered lumber and sheeting is more prone to fire ignition than old growth lumber. In our opinion, we feel that in order to be most effective in the manufacturing and distribution of a cost-effective, defensive lumber product, we change the perception that Eco Red Shield is a luxury commodity, and instead use targeted marketing and education to appropriately instruct the marketplace that Eco Red Shield is a critical component to large infrastructure planning going forward and not using Eco Red Shield is exposing end users and insurance companies to significant additional safety risk and rehabilitation expense.
In order to be effective in the lumber commodity business, companies like Eco must fight tooth and nail to avoid becoming a commodity themselves. This requires constant brand awareness while allowing no one particular party or business channel the opportunity to monopolize our brand. Eco's early decision to stay away from lumber mills looking to use the Eco Red Shield brand has proven to be the right decision, as today we have gained and maintained Big Box visibility, and a healthy and growing Affiliate network. This strategy has allowed the Company to create a product that serves as a solution to the snowballing problems in the Building Industry, as we continue mitigating builder and contractor risk against the growing community of lawyers in construction defects and mold related lawsuits. As we continue our quest at leading the world with defensive building products, we strive to build a brand as big as Coca-Cola.
To accomplish this feat, we've first had to ensure that our product offering in the protected lumber space is vastly different and of great significance; complete with testing and code approvals, as opposed to the look-a-likes backed by hype and technical fluff. Furthermore, the Company had to properly position its operation to have the ability to consistently produce and deliver a quality-controlled finished product. We've successfully completed these tasks through the implementation of Eco's quality-control program, enabling consistent and high-quality Eco Red Shield production anywhere in the world. With global delivery now at our fingertips, marketing this revolutionary product's uniqueness and availability in a cost-effective way was our next challenge to overcome. Reaching back to the Company's roots as "builders first", we understand that good contractors and builders want to embrace more defensive ways to protect the buildings they construct for their clients, but we first and foremost recognized the need to educate these builders and contractors on the realities of building with Eco Red Shield. We're now creating the best brand of lumber the world has ever seen, and our next move is to promote it as the American Brand as we show up in every rebuild disaster, backed by an army of like-minded builders and contractors that have embraced this new and defensive way to build.
FINANCIAL INSIGHT AND DETAILS
Eco Building Products recently closed on a financing package for up to $3.4M in financing to fill pending purchase orders and support capital expansion. Under the terms of the agreements, the Company will receive up to $1.4M in capital in equal installments of $350,000 over the next four months, to support the company's monthly overhead and meet increasing demand for Eco Red Shield, with the goal of reaching sales of $1.5M in the fourth month, which will potentially put the Company in a cash flow positive position. Our recent addition of an acting CFO will allow the company to closely manage the monthly budget and cash flow freeing up Steve Conboy's time to drive sales, allowing the company to reach our established aggressive sales target. Concurrently, the Company received equity financing of up to $800,000 in two tranches to support the expansion in production capacity at its core manufacturing facilities from $750,000 in production capacity per month to $2,000,000 per month, as well as retire approximately $300,000 in convertible debt financing previously entered into on unfavorable terms. In addition, the Company will enter into an expandable revolving credit facility agreement for $1.2M to support its supply chain that will allow the Company to confidently increase its marketing efforts and demonstrate long term sustainability to its Major Big Box Customer.
FOCUSED: ONWARD AND UPWARD
In closing, it is my desire to assure all shareholders that Eco Building Products is accessible to you. If at any time you wish to express concerns or offer suggestions, you can email us directly at firstname.lastname@example.org. We are listening, and we are excited and committed to enhancing value to our shareholders and the customers who have come to depend on the products and services we provide. As this company continues to expand in the national supply chain, we are actively seeking strategic institutional funding partners.
Steve Conboy; President – CEO
About Eco Building Products, Inc.
Eco Building Products, Inc. is a manufacturer of treated wood products that are protected against fire, mold/mycotoxins, fungus, rot-decay, wood ingesting insects and termites by our proprietary eco-friendly chemistry utilizing ECOB WoodSurfaceFilm™ and FRC™ technology (Fire Retardant Coating). Eco Building products, "Eco Red Shield" utilizing patent pending technology is the ultimate in wood protection, preservation, and fire safety to building components constructed of wood; from joists, beams and paneling, to floors and ceilings.
Safe Harbor Statement: This press release may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 (the "Act"). In particular, when used in the preceding discussion, the words "believes," "expects," "intends," "plans," "anticipates," or "may," and similar conditional expressions are intended to identify forward-looking statements within the meaning of the Act, and are subject to the safe harbor created by the Act. Any statements made in this news release other than those of historical fact, about an action, event or development, are forward-looking statements. Forward looking statements involve known and unknown risks and uncertainties, which may cause the Company's actual results in future periods to be materially different from any future performance that may be suggested in this release. ECOB takes no obligation to update or correct forward-looking statements, and also takes no obligation to update or correct information prepared by third parties.
Eco Building Products, Inc.
Phone: 1 888 Red Shld (888.733.7453)
Web Site: www.ecob.net
Visit us on YouTube at: www.youtube.com/ecobuildingproducts
SOURCE Eco Building Products, Inc.