American Green Inc (OTCMKTS:ERBB) has not been in the best of positions in recent time. From declining revenues to a fall in its stock price, its management has had to answer questions as to how to take it back to its former position.
In this piece, we give you details of the company, analyze its financials and discuss its most recent announcement. Take a look at the stock price movement in the last year:
American Green, Inc. was established in November 1998 and its head office is located in Phoenix, Arizona. The firm operates in the manufacturing, extraction, cultivation, and sale (wholesale and retail) of medical marijuana. The firm also provides tracking inventory services to growers.
The firm is America’s second oldest publicly-traded cannabis firm, having well over 65,000 shareholders. The firm is focused on the production of advanced cannabis sector solutions. In its long history, the company has been a part of almost every aspect of the cannabis market and some of its products include the renovation of almost uninhibited areas to cannabis permitting locations, advertising of medical-focused Cannabidiol products from both whole plant and organic hemp sources, a high-tech cultivation facility in Arizona, individuals wishing to purchase controlled products which consist of cannabis along with a smart automated vending solution system called AGM which was developed specially identify CBD electronically, alcoholic beverages and pharmaceuticals in casinos and sports stadiums. Furthermore, the company has recognized that the continuing legalization of cannabis across to country as a similar opportunity as the gold rush in America in the gold rush back in the mid-1800’s.
Very recently, the firm announced that it had collected certificates which were representative of one hundred and sixty thousand shares of Secured Convertible Preferred Stock from Delta International Oil and Gas’ Series A.
Along with this, ERMM is also to provide Delta International with certificates which are representative of one million shares of Nipton, Inc. (this represents 100% of the shares of Nipton). Hence, Delta will hold the title to all of American Green’s Nipton properties which were acquired by the firm back in 2017.
Presently, American Green owns over 82% of the equity shares of Delta International, which means that Delta is being operated as a subsidiary of American Green and their financial statements have therefore been consolidated.
However, as Delta has been registered as a fully reporting public firm, it can approach a separate tier of investors in order to raise capital, using its registered offerings, along with the private placement systems used by American Green in the past. This mix being utilized in order to raise capital is expected to lead to less expensive capital and reduced dilution for American Green’s shareholders.
Another benefit of the equity capital raise is that Delta will increase its assets which enable the firm qualify to be listed on an exchange, hence providing new opportunities to gain access to capital. Along with this, as a consolidated subsidiary of American Green, it will increase the parent company’s book value along with the subsidiary i.e increasing shareholder value.
At the end of 2017, the firm recorded revenues of $39,335 a major drop of 90% from the previous year revenues of $0.38 million. Worryingly, this decrease has continued a trend of falling revenues over the last couple of years for the company. However, it is anticipated that with some of its more innovative business solutions, its consumer base will continue to grow which will help to boost sales revenues in the coming years.
However, the firm recorded cost of sales of $22,284, dropping by 93% from the previous year’s cost of sales of $0.32 million. A pointer that the firm has retained a bit of its production efficiency in its sales operations although not very material.
Unlike the cost of sales, sales, general and administrative expenses remained relatively within the previous year’s range, only falling by 35% year on year while the firm also incurred non-recurring costs of $0.41 million and other expenses of $1,900 respectively during the year. With no other additional income operating loss for the year was recorded at $1.44 million, almost the same as the previous year’s operating loss of $1.79 million. Net loss for the year was $1.87 million, down from $2.71 million in 2016.
The statement of financial position reveals that the firm is somewhat highly geared. On its books, its total debt is worth an estimated $9.4 million, nearly 30% of which is part of account payables leading to a high debt to equity ratio. Worryingly, it also has a low liquidity ratio of 0.049, which is unlikely to be considered as acceptable for any industry.
ERBB is in a good position to take advantage of the burgeoning medical marijuana space. However, the firm needs to find ways to improve its cash flow and pay of its huge liabilities as soon as possible.
Disclosure: We have no position in ERBB and have not been compensated for this article.