Timing is everything for a publicly traded startup that wants to prevent mold growth in homes and apartments.
A year ago, Hurricane Katrina ripped through New Orleans and caused flooding along the Gulf of Mexico, causing billions of dollars in destruction and displacing more than a million people.
American Mold Guard Inc., based in San Juan Capistrano, sees an opportunity in the disaster.
Some four months ago, American Mold raised $16.6 million in an initial public offering to help it build service centers throughout the Gulf, Florida, California and other regions susceptible to mold.
Insurers already have been socked with billions of dollars in mold and water damage claims in these areas, considered hotbeds for the problem.
The company charges about $700 to treat new homes with chemicals and other coatings, such as baking soda.
It uses high-pressure blasts of baking soda to remove mold contamination from wood, concrete and other materials.
American Mold also applies a surface coating to prevent microbes from growing.
Wall Street isn’t impressed. American Mold’s shares are down slightly from their debut. A market value isn’t easy to come by the lightly traded stock.
For the three months ended June 30, the company lost $3.5 million, up from a $1.4 million loss a year earlier. American Mold is burning more than $500,000 a month in cash.
The bright side: Revenue more than doubled to $2.6 million in the quarter.
The company has $9.2 million left from its public offering and no debt as of June 30.
Paul Bowman, chief financial officer of American Mold, said he is hopeful the company will break even by 2007.
To get to that point, Bowman estimates American Mold must generate roughly $5 million a quarter in sales, double where it’s at today.
In the past year, gross profit margins have shot to 43% from 17%. Bowman wants to hold selling, general and administrative expenses at about $2.7 million a quarter,where they are now,and drive up sales.
Bowman said he recently paid a visit to areas of New Orleans and nearby St. Bernard Parish, which were put under water by a massive storm surge caused by Katrina.
“I looked at countless homes devastated by flood conditions that sat underwater for an extended period of time,” he said. “There was visible black mold growing on structures everywhere.”
Mold is a big health concern.
Chronic exposure to black mold toxins has been reported to cause cold or flu symptoms, sore throats, diarrhea, headaches, fatigue, dermatitis, intermittent hair loss, general malaise and other health-related problems.
“It’s staggering,” Bowman said. “It was the first time I had been down there. It’ll be several years before it gets back to where it was,which is a big opportunity for us to offer services.”
The company’s business has started to shift to the Gulf region. In the second quarter of 2005, the company derived 10% of its revenue from the Gulf. Today it’s 31%.
Chief Executive Tom Blakeley of San Clemente started American Mold out of personal experience.
Blakeley, who used to run e-mail marketing company MindArrow Systems Inc., said he got the idea for American Mold when he tried to sell his $1.2 million San Clemente home in 2001.
When prospective buyers sent out inspectors to look for mold, spores were found in a dividing wall between the master bath and bedroom.
“It killed the deal,” Blakeley said in an earlier interview. “I went crazy.”
For the next year, he said he struggled to lift the “black mold cloud” from his home.
The experience prompted Blakeley to research mold problems for homeowners who also saw houses fall out of escrow.
American Mold has set up four service centers in Texas, Louisiana and Mississippi.
Homebuilders have taken to the idea of fighting mold in housing tracts and apartment buildings.
Customers include Miami-based Lennar Corp., Warmington Group of Cos. in Costa Mesa, Fort Worth, Texas-based D.R. Horton Inc. and Dallas-based Centex Corp.
About 1,000 homes in the Gulf region have been treated with American Mold’s soda and surface coatings, according to Bowman.
The company, which has had a radio and TV advertising campaign under way in Louisiana and elsewhere in the Gulf region, has just more than 130 workers in 16 service centers.
Besides the four Gulf centers, American Mold also has nine centers in California and three in Florida,another state prone to hurricanes.
Service centers are planned from Houston to Kansas City and St. Louis, according to Bowman. Others are planned for the rainy Pacific Northwest as well as Boston and Baltimore.
The balancing act is to achieve profitability as soon as possible and capture market share, Bowman said. “Our goal is to get there as quickly as possible,” he said.
