American Green, Inc. (OTCMKTS:ERBB) Stacks Another $1.2 Million in Toxic Debt

The third quarter report of American Green, Inc. (OTCMKTS:ERBB) was finally made public. The numbers disclosed were nothing short of hair-raising once again. ERBB closed flat on Friday, on 31 million shares traded, as the report was made public after the bell and the company didn’t get a chance to trade on the news.

Probably the most important part of the new report is the new accumulation of toxic debt described under ‘Outstanding debentures’. After ERBB issued $1 million in toxic convertibles over the last quarter of its previous fiscal year, Q1 saw the issuance of another $1.28 million in convertible debt under five debentures. All the new notes have the usual toxic provisions the company has been using for quite a while. The notes convert into ERBB shares at a fixed 50% discount from the lowest closing bid price 12 months prior to conversion, which means no matter how far the price may climb, the noteholders will always be able to get cheap shares. The beneficial ownership provision limiting note holder ownership to under 10% means the selling can happen without anyone filing any disclosure.

The company pumped out 130 million new shares to clear just $164 thousand worth of debt over the quarter. This brings the tally of new shares issued in 2014 to 544 million and the company’s OS number to 4 billion.

There’s nothing dramatically different from what we expected on the balance sheet for Q1:

• $49 thousand in cash
• $5.8 million in current liabilities
• $60 thousand in quarterly revenues
• $573 thousand in quarterly net loss

Revenues are still miniscule, despite the Sep 3 acquisition of what ERBB describes as the “leader in full-spectrum lighting” – a company named Truth Lighting Systems. The only time the report mentions Truth Lighting is under ‘Project costs’ with $19 thousand attached to it. We will have to assume this is the acquisition price ERBB paid because the deal is not detailed anywhere else in the filing. Additionally, it seems ERBB published somewhat misleading PR on Sep 12, announcing the company ‘has acquired’ OG Tea and explaining the acquisition ‘adds’ to the company’s top line. The deal is recorded under ‘Potential acquisitions’ in the report and is currently a non-binding memorandum of understanding, as an agreement is being worked on.

Even though there is still no real news or numbers concerning actual orders of the Zazzz machine, those would have to be incredibly good to offset the grim mountain of toxic debt towering over the company and the continually diluted share structure. The company expects to have its first Zazzz orders fulfilled in ‘early December’.