It’s filings season once again and OTC companies are pooling in quarterly reports. Tranzbyte Corp. (OTCMKTS:ERBB, ERBB message board) was among those too and the reaction to the filing was anything but favorable. After a streak of hesitant trading days, ERBB’s share price took another tumble and stopped 9.5% down by the closing bell.
Despite the company’s best efforts to keep investors pumped up about the upcoming maiden voyage of its ZaZZZ vending machine into dispensaries, the hype around ERBB has cooled down significantly. Judging by the initial reaction to the company’s new quarterly filing, investors’ hopes were further doused by the information in it. Here is the brief numbers rundown from the report for the period ended March 2014:
- $30 thousand in cash
- $3.8 million in current liabilities
- $68 thousand in quarterly revenues
- $426 thousand in quarterly net loss
Those figures are not dramatically different from those in the previous quarterly, except for a shrink in revenues, an increase in net loss and a cash position that is now a whopping five-digit number. The more interesting part that possibly attracted the attention of traders was the portion of the report detailing convertibles, which paints a picture that is much more dreary.
ERBB has been busy retiring convertible debt during the last quarter. However, the conversion rates of shares may be significant cause for alarm. According to the report, over the quarter ended March 2014 ERBB issued a total of 274,369,091 shares to clear debt amounting to $150,903 in debenture principal and interest.
This sets the average conversion price of those debentures at a stunning $0.0005 per share. During the same stretch of time when those shares were issued, retail traders bought ERBB stock on the open market at prices as high as $0.10 per share. Those two figures alone hardly warrant any further comments and traders should be able to interpret them on their own.
Where ERBB is headed in the immediate future is not clear. The next report from the company that could potentially contain ZaZZZ revenues will be the annual and that is not due until the end of September. Until then ERBB will have ample time to clear its $1.28 million in outstanding debentures as of March 31.
The practice of accumulating toxic debt seems to continue in the new year, with two new convertibles issued on March 31, for the cumulative sum of $384 thousand. Both of those convert at a 50% discount from the lowest closing bid price of ERBB 18 months prior to conversion. Traders may want to keep in mind that ERBB was trading at $0.001 in December 2013, so to this can once again peg the conversion price of those debentures around $0.0005. The new debentures also come with 9.9% ownership limits attached, so the third parties can conveniently sell their converted shares without filing Form 4-s.
Additionally, in early January, ERBB increased its authorized shares by a full billion, from 3.75 to 4.75 billion (mistakenly stated as 4.75 million in the report). With piles of severely toxic debt that can potentially convert at a 98% discount from the stock’s current price and clear skies for further dilution, investors may want to buckle up for the ride ahead as it may turn out to be a very bumpy one.
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