Terra Tech to Double Down on California After Reporting Revenue Decrease

Terra Tech Corp.  blamed heavy taxes and regulatory headwinds as it reported that revenue dropped by 12.5% in 2018 versus the previous year.

Terra Tech stock dropped from $3.15 in April 2018 to $0.56 by Dec. 18 to cap a disappointing eight months for investors.

The business also saw its net loss widen from $32.7 million in 2017 to $39.8 million last year. Derek Peterson, who has served as chairman and chief executive at Terra Tech since 2012, admitted it has been “a challenging year”.

The stock reached a high of $3.15 in April 2018, but it then emerged as a huge underperformer in the cannabis sector over the past year. Its price decreased to $0.56 by Dec. 18 to cap a disappointing eight months for investors.

However, it finally appeared to shake off the dark cloud hanging over it and turned bullish in 2019 after agreeing to acquire the remainder of interest in the Blüm dispensary in Reno, Nevada, from partner Heidi Loeb Hegerich. She was suing Terra Tech, having accused it of stock manipulation and false accounting, and that had kicked TRTC stock over a cliff.

That suit was settled once the Reno deal was completed and shares increased from $0.68 on Feb. 11 to $1.46 on March 11, although it has now given around half of that back in the past couple of days. TRTC closed at $1.18 on Thurs., March 14, and it opened at $1.12 on Friday, after its 2018 financial results were announced. It then hit a day low of $0.91 within the first half hour of trading, although it recovered to reach $1.03 by 11 a.m.

Headwinds Knock 2018 Sales

A change in regulations in California delivered a hammer blow for the company’s IVXX wholesale subsidiary. It was forced to shut down operations and rebuild its cultivation and manufacturing facilities to comply with the state’s new rules, resulting in limited wholesale revenue throughout the year.

“These rebuilds left us with unplanned, one-time expenses and without the ability to capture sales in the wholesale market throughout 2018,” said Peterson. “We feel all of these issues combined weighed on the Company while ultimately affecting our value in the public markets. The good news is the worst is behind us and the best is ahead.”

It ended up having to rely upon its Blüm retail stores for revenue in 2018, and it believes this will continue to be a strong part of the business going forward. Blüm is one of four subsidiaries for Terra Tech, along with IVXX, a Nevada cultivation business called MediPharm LLCm, and Edible Garden, which supplies nationwide retailers such as ShopRite, Walmart, Ahold, Aldi, Meijer, Kroger, and Stop & Shop with herbs, flowers, and other hydroponic produce.

Doubling Down on California

The firm believes there is a “sizable disconnect” between its current market cap and its true value. It has therefore decided to overhaul its strategy to turn things around.

It has recently pursued national expansion, but it has decided to abandon that goal and double down on California instead. The Golden State would be the world’s fifth largest economy if separated from the rest of the U.S., and Peterson claims Terra Tech has a strong political, reputational, and operational footprint in California, so it will sell non-core assets and focus more on the state.

It believes it can increase revenue from $31.3 million in 2018 to $63.3 million this year, and the Blüm retail estate is tipped to lead the charge. It now has stores in San Leandro, Oakland, and Santa Ana in California, plus two in Las Vegas and one in Reno.

Terra Tech aims to squeeze another $10 million from Blüm Santa An and to bring in another $5 million from San Leandro, assuming adult use sales are permitted there. It expects a further $3.5 million from cultivation in Hegenberger, $2.5 million from West Grand cultivation, $4.5 million from Nevada cultivation, $3.5 million from Nevada manufacturing, $2 million from the launch of branded delivery, and $1 million from special events.

Its goals include increasing gross margin to 45%, delivered a “meaningful” EBITDA improvement, streamlining operations and headcount, enhanced corporate governance, and improved stockholder communication, while it will also open pop-up stores.

In Q2 2019, the Company intends to take one more tranche of approximately $5 million from the $40 million financing it signed in March of 2018. Its intention is to fulfill a final round of funding and to complete the sale of certain non-core assets and freeze additional funding for at least 12 months or until the stock price makes a material recovery.

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The opinions provided in this article are those of the author and do not constitute investment advice. Readers should assume that the author and/or employees of Capital 10X hold positions in the company or companies mentioned in the article. For more information, please see our Content Disclaimer.

Martin Green
Martin Green is an experienced journalist with a strong focus on the cannabis, alcohol, and gambling industries. He is particularly interested in the political issues affecting the global marijuana trade, and he has a keen focus on regulation changes and legal topics. He holds a BA English Literature, MA Creative Writing and a National Qualification in Journalism diploma. He has worked in journalism since 2009 and written for a broad range of newspapers, business titles and magazines, including The Sun, The Metro, The Journal, Livestrong, Drinks Retailing News, Harpers, Sportsbook Review, Vital Football, Essex Live and Surrey Live. Address: 682 Indian Road, Toronto, Ontario, M6P 2C9. Phone: 416-721-8257.
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