Tranzbyte Corp. (OTCMKTS:ERBB) Dips to Three-Month Low

When trading on the OTC marketplace, people should learn how to manage their losses. Lately, Tranzbyte Corp. (OTCMKTS:ERBB) has given traders ample opportunity to flex their loss management muscles. The ticker managed to slip to a new three-month low, closing another 8% down yesterday. ERBB is now nearly 80% down from its hype-induced peak in late March.

It seems like the last quarterly report is pushing ERBB closer to the prices at which the company so liberally accumulates and clears convertible debt. There seem to be a large number of traders out there who don’t understand why toxic convertibles are an issue, so it bears repeating what exactly happened over the first three months of 2014.

ERBB cleared $150 thousand in debt over the quarter, but in doing so issued 274 million shares. This sets the conversion price at $0.0005 per share. This both dilutes the company and hands the note holders ridiculously discounted shares that they can sell freely without informing the public, as the convertibles come with provisions that the note holders cannot own more that 9.9% of the company’s common stock, preventing them from filing beneficial owner Form 4-s. This happened over a period of time when ERBB was trading as high as $0.099 per share, or about 200 times higher than the conversion price of those 274 million shares.

The line of toxic financing stretched into the first months of the new year. On the last day of March ERBB issued two new convertibles for the sum of $384 thousand. Conversion prices are once again abysmal, set at a 50% discount from the lowest price over the last year and a half before the conversion date. Seeing how ERBB was priced at $0.001 in December 2013, this means that those notes can once again convert at $0.0005, still 40 times cheaper than what retail investors pay for ERBB shares at the moment.

If traders are still unable to figure out how this affects the company and their own investment, they should possibly consult an investment advisor before they go any further.

As far as ERBB‘s ZaZZZ machine goes, ERBB has gone very quiet about it. In the absence of news to keep people pumped up and with a dismal report out, where ERBB will find its bottom remains to be seen.

Another popular contender in the OTC pot race, Creative Edge Nutrition, Inc. (OTCMKTS:FITX) suffered an even bigger drop yesterday, slipping nearly 15% to a close of $0.05 per share. With the SEC issuing yet another investor alert related to the potential dangers of investing in marijuana, traders would do well to tread carefully and be very thorough with their own research.