Terra Tech Corp Turns Bullish on the Heels of Acquisition & Lead-Up to Earnings

Terra Tech Corp Turns Bullish
iStock.com/Tinnakorn Jorruang

Terra Tech Corp Makes Acquisition and Quashes Accusations

After a year of disappointing investors, the Terra Tech Corp (OTCMKTS:TRTC) share price has finally turned bullish.

Investors have taken a shine to Terra Tech stock ever since the cannabis-focused agriculture company revealed that it had agreed to acquire the remainder of interest in the Blüm dispensary in Reno, Nevada.

The acquisition also helped put to rest a nasty lawsuit that a former business associate had launched against the company, accusing it of stock manipulation and dubious accounting, among other things.

With the acquisition and the resolved lawsuit, Terra Tech can now concentrate on cultivating and selling cannabis.

Advertisement

Terra Tech Corp Overview

Based in Irvine, California, Terra Tech is a vertically integrated agricultural business that operates in two complementary segments: “Cannabis” and “Produce.” (Source: “Investor Presentation January 2019,” Terra Tech Corp, last accessed March 13, 2019.)

The Produce segment offers hydroponic herbs, produce, and floral products. Through this segment, Terra Tech operates its Edible Garden Corp. subsidiary, providing its own brand of locally grown herbs and greens to more than 1,800 retailers including Walmart Inc (NYSE:WMT), ShopRite Holdings Inc (OTCMKTS:SRGHY, JSE:SHP), Winn-Dixie, Raley’s, Meijuer, and Kroger Co (NYSE:KR).

When it comes right down to it though, most investors today are most interested in the potential from Terra Tech’s Cannabis segment. That segment is made up of three subsidiaries: Blüm, IVXX, Inc., and MediFarm, LLC.

Blüm is the company’s retail medical cannabis dispensary chain, with locations in Oakland, California, and numerous locations in Nevada. Through Blüm, Terra Tech offers a wide selection of medical cannabis and related products, including flowers, concentrates, and edibles.

IVXX (i.e. 420 in Roman numerals) is a wholly-owned subsidiary that makes cannabis-extracted products for regulated medical cannabis dispensaries throughout California and for medical and recreational dispensaries in Nevada. IVXX products are carried in more than 200 locations.

In Nevada, Terra Tech secured eight new medical cannabis provisional operational certificates. This includes four dispensaries (which are all open), two cultivation centers, and two production and extraction facilities. That makes Terra Tech one of the largest operators in Nevada.

Terra Tech’s MediFarm subsidiary is focused on medical and recreational cannabis cultivation and production. The MediFarm team has operated licensed facilities in California for more than two years and was recently awarded approval to operate facilities in Nevada.

Terra Tech Stock Information
Market Cap $122.7 million
Beta 2.95
52-Week Change -62.08
52-Week High $4.14
52-Week Low $0.46
Shares Outstanding 92.9 million
Float 74.3 million
50-Day Moving Average $0.79
200-Day Moving Average $1.26

(Source: “Terra Tech Corp. (TRTC),” Yahoo! Finance, last accessed March 13, 2019.)

Terra Tech stock did not exactly ride the legal cannabis craze in 2018. In fact, the first three quarters of 2018 were disappointing. Then it got abysmal as Terra Tech stock, along with the broader market, sold off in October and then had a meltdown in December. In 2018, the stock lost 91.7% of its value.

Admittedly, Terra Tech had some bad news in December that helped send its share price tumbling.

Lawsuit Kicks TRTC Stock Over a Cliff

On December 18, Terra Tech responded to allegations in a lawsuit filed against it by Heidi Loeb Hegerich. The suit was related to MediFarm, which owns the Blüm dispensary in Reno.

Hegerich had gone on record saying Terra Tech that “has a long history of inaccurate bookkeeping practices and filing deceptive financial reports.” (Source: “Cannabis company Terra Tech sued for alleged theft, deceptive finances,” Marijuana Business Daily, December 17, 2018.)

She also accused Terra Tech of looting from the Blüm dispensary, a venture she co-owned with the company, to fund other business interests.

As expected, Terra Tech denied any wrongdoing and refuted all of the allegations. It also said it was pursuing numerous counter-claims against Hegerich. (Source: “Terra Tech Corp Issues Statement in Response to Meritless Lawsuit Filed by Business Associate in State of Nevada,” Terra Tech Corp, December 18, 2018.)

Of the claims made against Terra Tech, Derek Peterson, Chairman and CEO said the following:

Far from the image portrayed in recent interviews, Heidi Loeb Hegerich is in fact a wealthy, sophisticated investor with a history of disputes with business partners. Ms. Hegerich was married to David Loeb, one of the founders of Countrywide Mortgage. She has described herself as a business executive, real estate developer and self-described ‘mistress to the rich and famous.’ We reaffirm our commitment to our shareholders to correct any misleading and inaccurate reports and remain committed to providing accurate information to our investors.

(Source: Ibid.)

Terra Tech went on to say that Hegerich’s lawsuit was an attempt to manipulate the company into paying her money she was not owed.

Despite the company’s reassurances, investors were not all that keen to jump back in. They were given more reason to be bullish in 2019, though.

Terra Tech Corp Acquires 100% Stake in Blüm Reno Dispensary

On February 28, Terra Tech announced that it had entered into an agreement to acquire the remainder of the interest in the Blüm Reno dispensary (which includes its cannabis licenses), increasing its stake from 50% to 100%. (Source: “Terra Tech Enters into Agreement to Acquire Remainder of Interest in Blüm Reno Dispensary,” Terra Tech Corp, February 28, 2019.)

“This purchase allows us to have complete ownership and control of the Reno Blüm dispensary…at a price that we believe accurately represents a fair value. It also settles the lawsuit with Heidi Loeb Hegerich and we are pleased to put this matter behind us and look to the future,” said Peterson.

Since that announcement, Terra Tech stock has been on a tear, up by about 160%, far surpassing the losses that came since the lawsuit was announced in mid-December. Since the beginning of 2019, TRTC stock has increased by about 235%.

Chart courtesy of StockCharts.com

Terra Tech Corp’s Third-Quarter Results

On November 8, Terra Tech announced its financial results for the third quarter ended September 30, 2018.

Third-quarter revenue came in at $7.1 million, compared to $10.1 million in the same prior-year period. (Source: “Terra Tech Corp Reports Financial Results for the Third Quarter of 2018,” Terra Tech Corp, November 8, 2018.)

The almost-30% drop in revenue was the result of IVXX production facilities being relocated to an upgraded facility.

The upgrade will help increase production, which will support greater distribution throughout California. Terra Tech Corp expects the project to be completed in Q4 2018.

The company reported a third-quarter net loss of $13.7 million ($0.19 per share), compared to a loss of $7.8 million ($0.16 per share) in the third quarter of 2017.

It ended the 2018 third quarter with $3.4 million in cash and no short-term debt. Long-term debt was $13.8 million, compared with $6.6 million as of December 31, 2017.

Terra Tech will be releasing its financial results for its fourth quarter and full-year 2018 after the markets close on March 14.

New Facility Capable of 1,120 Pounds of Cannabis Annually

To prepare for the increased demand for legal recreational cannabis, Terra Tech said in early March that it had completed the renovation of its cultivation facility in Oakland, and that it would be planting new crops later that week. (Source: “Terra Tech Announces Renovation of West Grand Avenue Cultivation Facility in Oakland, California,” Terra Tech Corp, March 4, 2019.)

The newly renovated facility is capable of producing 1,120 pounds of cannabis annually. All of the cannabis from the facility will be sold under the company’s IVXX brand to California’s medical and recreational marijuana markets.

Analyst Take

You certainly can’t blame some investors for running for the exits in December when Terra Tech Corp was being accused of inaccurate bookkeeping practices and filing deceptive financial reports. That issue has since been resolved, seemingly vindicating the company.

All things being equal, Terra Tech remains a financially solid cannabis company with a growing presence in California (the largest legal marijuana market in North America) and Nevada.

Things are looking up for Terra Tech stock. 2019 could be the year that the company rewards all those patient TRTC stock investors who weathered 2018.