Summary of our Findings of American Green, Inc. (OTC Pink: ERBB)
- American Green, Inc. is the second oldest publicly-traded U.S. cannabis company, which operates across many different verticals within the emerging marijuana Green Rush. The company’s operations cover cannabis tourism, cultivation, medical-based CBD products, and automated vending technology
- With over 60,000 verified shareholders American Green is by far the largest in shareholder number
- Made national headlines with the purchase of the town of Nipton, California in 2017
- American Green, Inc. is revamping Nipton as a cannabis tourism destination, which will be energy independent and the first city with zero carbon output
- Has partnered with GIS to create the American GreenCrete division located first in Nipton
- Owns and operates a state-of-the-art cultivation facility in Arizona, which will be fully operational by the second quarter of 2018
- AGM vending technology is expanding into Canada, after recent distribution partnership with Dispension Industries, Inc.
- Owns and operates branded Amazon.com store for sale of apparel
- Owns and operates CBD ecommerce store at com as the only company openly stating it is selling CBD rather than ‘enriched hemp oil’
American Green, Inc. (OTC Pink: ERBB)
American Green, Inc. is a Phoenix, Arizona-based company that holds diversified operations throughout the emerging cannabis industry. The company holds the distinction of being the second oldest U.S. cannabis stock. The company’s operations include cannabis tourism, cultivation, medical-based CBD (Cannabidiol) products, and patented high-tech automated cannabis vending technologies.
In 2017, the company made national headlines when it announced the purchase of the town of Nipton, California, a 100-year old community located in San Bernardino county. Management continues to revamp the town to become the “country’s first energy-independent, cannabis-friendly hospitality destination, all while retaining its historic look and value.”
American Green, Inc. is listed on the OTC Pink Sheets and is current with OTC Markets. As of February 2018, American Green, Inc. has a market cap of $20.37 million. Furthermore, the cannabis company maintains a share structure consisting of 25 billion shares authorized, 14.55 billion shares outstanding, and a float of 14.26 billion shares, as of June 2017.
Through the early start to 2018, American Green has seen a high of $0.0023 and a low of $0.0012. The stock currently trades at $0.0014, as of this publication. Like other cannabis stocks, American Green has seen some pressure since U.S. Attorney General Jeff Sessions rescinded the Cole Memo on January 4, 2018. However, there have been little-to-no major federal regulatory changes since the announcement.
The great American “Green Rush” is upon us, as cannabis legalization continues to expand at an unprecedented rate. The U.S. cannabis industry is still in its infancy, much like the alcohol industry right after the repeal of Prohibition. This makes cannabis one of the most exciting and potentially lucrative long-term investment opportunities out there.
Exhibit One – U.S. Cannabis Market Forecast Through 2025
Source: ArcView Market Research
According to ArcView Market Research report showing marijuana sales from 2011-2015, cannabis sales were around $1.5 billion in 2013 and later doubled to $3.5 billion by 2015. This shows the early stages of the expansion of the marijuana market.
According to New Frontier Data, the U.S. marijuana industry is forecast to be worth around $24 billion by 2025. The market research firm notes that its forecast included both medical and recreational cannabis. Separately, New Frontier Data sees medical marijuana growing at an compound annual growth rate (CAGR) of 13% to 2025, while recreational cannabis is forecast to grow at a higher CAGR or 25%.
New Frontier Data acknowledged in the report that the U.S. federal government continues to cloud the industry with uncertainty. As a federal rescheduling or a full-on crackdown could greatly impact the future of the industry in either direction. However, with data showing the cannabis industry employing as many as 255,000 people by 2019, the research shows that marijuana legalization is not “just a flash in the pan.”
However, even the research team at New Frontier Data admits in their report that their cannabis forecast is on the conservative side. Other market research firms see much more explosive growth for the industry. According to Grand View Research, medical marijuana alone will be worth $55.80 billion by 2025. Grand View sees medical marijuana continuing to grow at an exponential rate because of the continued legalization and decriminalization efforts. Furthermore, analysts see further medical research and interest in cannabis as continued benefit for the industry.
American Green, Inc. is well-positioned to benefit from the Green Rush. The company’s diversified holdings across the industry allow it to take advantage of different cannabis trends. The company is not only the second oldest U.S. publicly-traded cannabis company, but it is also the first to purchase an entire town for the purposes of renovating for marijuana tourism purposes. Unlike other companies on the marijuana index , American Green is focused on becoming professionally branded and vertically integrated in the cannabis sector. This allows the company to diversify and cut any regulatory challenges and the uncertainty of an emerging market (volatile pricing, foreign competition, commoditization) more than if it was just a single-focus business.
Cannabis – A Background
Cannabis has long been a highly-controversial topic, but it wasn’t always associated with stigma. In fact, marijuana use dates back to ancient cultures. Historians have been able to trace cannabis use all the way back to around 500 BC in Asia. However, at the time, it was not used to get people “high,” rather it was utilized as a herbal medicine.
Interestingly enough, hemp was a major cash crop even in the American colonies. While cotton and tobacco are typically highlighted in the history books, it was actually hemp that was grown by early American colonists in order to form rope and textiles. Americans would not start utilizing marijuana for recreational purposes until the early 1900s.
In early 1900s Mexicans immigrating to the United States during the Mexican Revolution ultimately introduced the concept of recreational cannabis to the United States. However, the Great Depression shifted public opinion on substances, particularly alcohol and cannabis. By 1931, cannabis and alcohol were beginning to be outlawed across the United States. Unfortunately, the drive to ban cannabis was mostly due to corrupt business practices which used racism and anti-immigration views to remove the competition of hemp from the paper and plastics market.
“Massive unemployment and social unrest during the Great Depression stoked resentment of Mexican immigrants and public fear of the “evil weed.” As a result—and consistent with the Prohibition era’s view of all intoxicants—29 states had outlawed cannabis by 1931.”
Exhibit Two – A Brief History Of Marijuana Laws
Source: Kushca.com 1
The Marijuana Tax Act of 1937 was the first U.S. federal law that severely regulated the cannabis market and criminalized some aspects of cultivation and trade. The law imposed an excise tax on the sale, possession or transfer of hemp and marijuana products. Only slight industrial uses were allowed under the law.
For the next several decades following the Great Depression, cannabis continued to be painted in a very evil light. In 1970, President Richard Nixon would take it a step further, as he effectively ramped up the “War on Drugs” through the passage of the Controlled Substances Act of 1970. This repealed the longstanding Marijuana Tax Act and labeled cannabis as a Schedule 1 drug (meaning highly addictive, dangerous with no medicinal properties) against the recommendation of the committee created to establish the CSA. It remains there today along with heroin, LSD, and ecstasy in spite of the US Government awarding itself patent number 6,630,507.
The current cannabis landscape did not begin to take shape until 1996, when California passed the Compassionate Use Act, which made the state the first to legalize medical marijuana for severe illnesses. Today, 29 other states and Washington D.C. allow medical marijuana. Nine states have legalized recreational cannabis use, as of early 2018.
The Current U.S. Cannabis Landscape
The U.S. cannabis industry has seen some very wild changes in the past twenty years. After California legalized medical marijuana in 1996, the legalization movement effectively began. However, it wouldn’t be until the 2010s that the movement really begins to gain traction and public opinion shifts in favor of cannabis for the first time in decades. As of 2018, 29 states and Washington D.C. have legalized medical marijuana, with nine states and D.C. legalizing recreational use.
In fact, the cannabis movement has already reached unprecedented levels in 2018, with Vermont being the first U.S. state to legalize recreational cannabis through lawmaker legislation. Previously, all other states that had legalized recreational cannabis had come from citizen ballot measures and propositions. Vermont effectively is the first state that legalized recreational cannabis through government legislation.
Exhibit Three – Marijuana Legalization In The United States
Source: lbmediagroupllc.com & Leafbuyer 1
However, it has not been all good news for the emerging industry. In the first several days into 2018, U.S. Attorney General Jeff Sessions announced the nullification of the Cole Memo, an Obama-era guidance that deferred federal interference in state laws that allowed medical and recreational marijuana. The federal policy shift essentially resumes a strict interpretation of the Controlled Substances Act of 1970, and jumpstarts the old “War on Drugs.” While there is yet to be any signs of major crackdowns or any implementation of new federal policies, this certainly throws a wrinkle into the blooming cannabis industry.
Make no mistake, state governments are largely breaking away from long-standing federal guidance of cannabis. Vermont’s action show that state governments are continuing to eye the major potential to generate strong tax revenues from a regulated cannabis environment. Most states are increasingly cash-strapped and desperately looking for more ways to raise revenues.
Just look at Colorado, which was the first state to legalize recreational cannabis in January 2014. As of July 2017, Colorado has received over half a billion dollars in taxes and fees from recreational cannabis.
American Green: Nipton, CA Development
American Green, Inc. has been very busy with the development of its newly acquired town of Nipton, CA, since the announcement in August 2017. The 100-year-old community in Southern California has over 120 acres of potential development and is only 10 minutes away from main highways. Nipton is a perfectly placed near a railway that links Las Vegas and Los Angeles, which are already loaded with cannabis enthusiasts and potential tourists.
Ultimately, management’s goal is to turn the Nipton community into the U.S.’s first energy-independent and cannabis-friendly hospitality destination. American Green, Inc.’s first plans with the town are to begin developing and bottling fresh, CBD-infused water. Nipton is home to a fresh water aquifer nearby. Furthermore, management is in discussions with several “well-established edible and extraction companies” that are interested in building facilities in the town.
Exhibit Four – Nipton, CA Pathways Map
Source: American Green 1
American Green “would like to offer a variety of commercial and recreational attractions including: CBD and mineral baths, cannabis-product retail outposts, artists-in-residence programs, culinary events, and Bed-and-Breakfast lodging to complete the charming small town experience.”
In December 2017, the company launched the Nipton Commemorative Paver program. Each paver is derived from hemp and 75% recycled materials, which is able to be personalized with a message that will be embedded into the town’s pathway. Each paver is $50 and allows shareholders and enthusiasts to etch their name in history. Also, the paver can be used to receive a 10% discount on anything purchased in Nipton during initial visits in 2018.
In February 2018, American Green announced the establishment of the Nipton Industrial Park, which will help establish the town’s “zero-carbon” pledge. American GreenCrete and its venture partners GIS are the newest tenants. The companies will be focused on constructing buildings that are made entirely from dumpster trash that is formed into pre-cast construction materials.
American Green: AGM Vending Technology
Within American Green’s diversified holdings is the high-tech AGM vending technology. AGM provided automated cannabis vending services. However, AGM is not your typical vending machine. Being that cannabis does carry age restrictions, it is important for the technology to prevent underage use and access. Furthermore, the AGM vending technology can be incorporated into other age-restricted products, such as alcohol, tobacco, pharmaceuticals, and more.
The secret behind the AGM technology is military-grade biometrics software, which requires a finger vein authentication to pass through the system. The system is backed by Tomassi, a patented technology. The system has advanced telemetry and remote management capabilities, which can allow companies to determine when the machine runs out of inventory, errors, vandalism, and more.
Exhibit Five – AGM Machine In Action
AGM has a stunning display that is highly interactive and very catchy to help standout to consumers. Flexible payment options are available, which allow consumers to pay for products using cash, coins, credit cards, bitcoin, loyalty points, QR codes, mobile payment apps, and more. Lastly, the machine is designed to be ADA compliant for consumers with disabilities and utilizes eco-friendly energy solutions.
In January 2018, American Green announced that it has partnered with a Canadian distributor to help increase AGM’s footprint up North. Under the deal, Dispension Industries, Inc. will be AGM’s exclusive distributor in Canada, which will be branded as the Verified Identity Dispenser in the country. This comes as American Green looks to capitalize on the upcoming national Canadian cannabis legalization, which could come as soon as this Fall.
“We have been confident in this market segment for nearly ten years. It was only a matter of time before the demand found its way to us and the AGM [the Verified Identity Dispenser or VID in Canada]” detailed David Gwyther, President and Chairman of American Green. “Our challenge will be keeping up with demand now that the market has arrived, and between our own team and our partners in the business, we have no doubt we can do that. These are exciting times.”
American Green: Phoenix Cultivation Facility
Among the other exciting developments at American Green is its state-of-the-art Phoenix cultivation facility, which is expected to be operational by Q2 of this year. This is part of the company’s cannabis grow operations, which will provide the company multiple levels of synergistic value. The cultivation facility could help supply American Green’s other holdings with the cannabis necessary to create its or its partners branded products.
In August 2017, management provided an update on the construction of the facility, which announced that the project has moved into final stages. American Green has named Natural Herbal Remedies its licensed grow partner for the facility, as the two companies reestablished their partnership. Management expanded its headquarters to account for its growing operations and workforce.
“I’ve been involved in many projects over the years and have never seen one present a challenge at every turn,” said Pat Carrigan, Chief Operating Officer of American Green. “What we started working with was little more than an idea. NHR have been great to work with. They are solid people and we look forward to a long, successful relationship.”
Status of American Green, Inc.
Overall, American Green continues to focus on key trends in the emerging cannabis industry. Being diversified throughout the Green Rush allows the company to capitalize on multiple opportunities, while limiting its regulatory and downside risk. The company continues to maintain a strong ecommerce presence through its CBD store AmericanGreenCBD.com and Amazon.com page.
The AGM vending technology is a next-gen approach to automating sales of age-restricted products, such as cannabis, alcohol, tobacco, pharmaceuticals, and more. Using military-grade biometrics and interactive technologies, the machine can safely dispense these products to adults and provide measures against underage access. American Green’s recent distribution deal to expand the AGM concept across Canada could not come at a better time, as the country prepares for full recreational legalization later this year.
Nipton, CA provides a massive long-term opportunity for the company to create the first major cannabis tourism destination within the United States. American Green will use the opportunity to create a zero-carbon community that will serve as an example for cities in the future. The acquisition of the Southern California town made national headlines when it was announced last year and has used that exposure to expand the opportunities in Nipton to include other industry, commerce and educational symposiums on sustainable architecture and living.
As the state-of-the-art cannabis cultivation facility nears completion this year, American Green is preparing for enough synergistic value potential across its other holdings and partnerships. The Phoenix facility is located just a short ways away from the company’s new, expanded headquarters.
The Balance Sheet and Income Statement
As of December 31, 2017, American Green reported the following current assets: cash of $231,131, inventory of $22,887, and loans receivable of $100,000. This gives the company total current assets of $354,018, as of the end of the period. Furthermore, the company reported other assets consisting of $9.47 million, which gives American Green total assets greater than $9.82 million.
Exhibit Six – American Green Balance Sheet Q4 2017
Turning to liabilities, American Green reported accounts payable and accrued expenses of $134,611, shareholder loans of $2.5 million, and debentures payable & accrued interest of $9.99 million. This gives the company total current liabilities of $12.62 million, as of the end of 2017. Long-term liabilities included: mortgage payable of $2.87 million and acquisition debt of $614,484. Overall, the company reported total liabilities of $16.11 million.
In shareholders’ equity, American Green reported Series B preferred stock of $79,000, Series C preferred stock of $60,000, common stock of $19.12 million, additional paid-in capital of $8.58 million, and accumulated deficit of $34.15 million. This gives the company total shareholders’ deficit of $6.31 million. Total liabilities and shareholders’ deficit came in at $9.82 million, as of the end of 2017.
Exhibit Seven – American Green Income Statement Q4 2017
Turning to the income statement, American Green reported total revenue of $24,550 and gross profit of $5,625, during the fourth quarter 2017. The company listed total operating expenses of $618,771 and a net loss of $613,146.
Management Team and Board Members
David Gwyther, Chairman – Acting President, Director
In May of 2014, the Company changed its name to American Green and David Gwyther remained as Chairman, Principal Financial Officer, Principal Accounting Officer, Secretary, Chief Financial Officer, Chief Executive Officer, and Treasurer and the Company. Currently, Mr. Gwyther owns 36,264,788 shares of American Green, Inc. common stock.
Mr. Gwyther graduated from the University of Oregon with a BS in Economics. He co-founded Koobdooga Books and Whole-Earth Truckstore Distribution. He was successful in wholesaling books and magazines and was a co-founder and owner in the first Rolling Stone Magazine a nationwide distribution company which also were the original distributors for Mother Earth News and over 8 additional magazine publications. The distribution company had over 400 accounts by spring of 1970 when it acquired national distribution and co-publishing rights to The Cultivators Handbook of Marijuana. The bookstore and the company were sold in December of 1972, after which he was involved in the transportation industry and start-up companies.
From 1980-2005 he worked in the securities industry with Series 7, 63 and 24 licenses. During the last 15 years in the securities industry, he assisted small start-ups and developmental-stage companies go public using reverse mergers. Ti-mail was one of those companies and that company evolved into American Green. He was a consultant to the various companies during their evolution to American Green. During 2012 was asked to become chairman and then interim president during its move into the cannabis industry.
Mr. Gwyther has extensive political experience as he has been the Precinct Committeeman since 1984 in Multnomah County, Oregon #36 and served as the District Leader from 2002-2006.
Since 2005, he has consulted to numerous political campaigns and has been an advisor to CEO’s of small publicly traded companies. During 2012 he was asked to become chairman and then interim president during American Green’s move into the cannabis industry.
Colleen Manley, Esq. – Director
Ms. Manley became a director of the Company on May 8, 2011. Currently, Ms. Manley owns 13,645,992 shares of American Green common stock.
Colleen Manley is a 4th generation Arizonian and member of one of the state’s oldest family law firms. Colleen has been a member of the Arizona State Bar and admitted to the United States District Court since 1985. In 1986, she was admitted to the United States Court of Appeals for the Ninth Circuit. She is a member of the American Bar Association in good standing. Colleen holds the coveted “AV” rating, the highest rating, and her firm Manley Law, also holds the “preeminent” status.
Colleen is related to the late Tom Forcade, a local Arizona historical figure who founded High Times Magazine. Tom Forcade hailed from Phoenix and was one of the original advocates supporting the medicinal use of cannabis during the late 1960s and 70s. Colleen also serves as a Chairman of the Board and significant shareholder of Trans High Corporation, the owner of High Times, High Times Medical Marijuana Magazine, and many other national ventures. Colleen is active in the community as well. She is a past president of Arizona Clean and Beautiful; a member of the National Charity League; a founding member of the Board of Regents of Golden Karma Awards; a founding member of Our Power of Community Circle; past Director of ESCOM; past member of the North Central