Investors Unfazed by American Green, Inc. (OTCMKTS:ERBB)’s Report

Yesterday’s session showed one very important thing concerning American Green, Inc. (OTCMKTS:ERBB) and its investor base. It’s now almost certain that no matter what the company does and what sordid information it discloses, it will always have the unflinching support of its devotees.

Even though the company posted a new batch of numbers in its new quarterly that some might consider downright scary, the market barely reacted on Monday. ERBB went through an intra-day dip but eventually closed just 2% down. The company’s report was made public on Friday, after the closing bell and contained the following:

• $48 thousand in cash
• $5.8 million in current liabilities
• $60 thousand in Q1 revenues
• $573 thousand in Q1 net loss

The underwhelming numbers should come as no surprise as the company’s potential future revenue engine – the Zazzz machine is still not out in dispensaries, despite ERBB‘s expectations to have 1000 machines up and running by Christmas.

The scary part of the report which might be too difficult for some to figure out is the ‘Debentures payable’ section. As of September 30, 2014 the company still had $3,487,919 worth of outstanding convertible debt. This sum can convert into ERBB common stock at a 50% discount from the lowest bid price 12 months / 360 days prior to conversion.
If we theoretically assume those notes were converted in full, right now, the company would need to issue around 5,800,000,000 new common shares. The toxic nature of the fixed percentile discount and the time frame means that even if ERBB miraculously goes to $1 per share in January, the note holders will still be able to get tens of millions of shares priced at $0.003 if they choose to convert their debentures.
Obviously, none of this seems to matter to those who truly believe in the company’s future and were not disappointed by the nonchalance with which ERBB missed three of its own launch dates for the Zazzz machine without any official explanation of the delays. The last word the company dropped on a possible launch for the Zazzz was ‘early December’. However, that was just a Facebook post so it carries even less weight that the previous official PR announcements.