Terra Tech Corp. Reports Financial Results for the Second Quarter of 2017
Terra Tech Corp. (OTCQX: TRTC) (“Terra Tech” or the “Company”), a vertically integrated cannabis-focused agriculture company, today announced its second quarter 2017 financial results for the period ended June 30, 2017.
Derek Peterson, Chief Executive Officer of Terra Tech Corp., commented, “We saw a continued strengthening in demand for cannabis products as sales from both our wholesale IVXX brand and our Blüm dispensaries continued to gain traction. Total cannabis segment revenues were $6.0 million in the second quarter of 2017, compared with $3.8 million in the comparable period in the prior year. The second quarter momentum is expected to accelerate in the second half of the year, boosted by adult-use cannabis sales in Nevada, which commenced in July 2017.
“Edible Garden, which produces fresh, locally-grown herbs and lettuces, continues to provide steady cash flow for the business and we are constantly exploring opportunities to maximize its growth potential. To support these efforts, we chose to discontinue its low-margin floral products, which will enable us to focus our resources on more profitable produce lines in the future. To drive growth in this business, we are also currently implementing a new marketing campaign to improve brand recognition among Edible Garden’s ‘healthy living’ consumer base.
“We are pleased with this quarter’s results and believe the market opportunity for dynamic and aggressive companies in the emerging legal cannabis market is evident. Maximizing value for shareholders remains our top priority as we lay the foundation for future growth at Terra Tech, and we are taking steps to improve the Company’s corporate governance to support this. We leave our revenue guidance of $38 – $40 million for 2017 unchanged,” concluded Mr. Peterson.
- Total revenues generated for the second quarter ended June 30, 2017 were $7.8 million, compared to $9.7 million in the same period in 2016. The decrease was attributable to the expiration of Edible Garden’s contract with a grower of floral products. It was partially offset by the cannabis segment, which increased 57.9%, due to increased sales from the Blüm dispensary in Oakland, California, sales from the Company’s four Nevada-based Blüm Dispensaries and sales of IVXX cannabis products.
- Gross profits for the second quarter ended June 30, 2017 were approximately $1.5 million, compared with $1.6 million in the prior year period. Gross margin for the second quarter of 2017 amounted to approximately 19%, compared with a gross margin of approximately 16% for the second quarter of 2016. The improvement in gross margin was due to the expiration of the floral product contract at Edible Garden, and was partially offset by a decline in margins in the cannabis segment as the Nevada dispensaries discounted the cost of the products sold in an effort to gain market share.
- Selling, general and administrative expenses for the second quarter of 2017 amounted to approximately $6.0 million, compared to approximately $5.4 million for the second quarter of 2016. The increase was partially due to an increase in salaries due to new hires associated with the Blüm dispensaries and an increase in accounting and compliance personnel costs. Other expenses include an increase in depreciation expense due to intangible assets acquired in the acquisition of the Blüm dispensary in Oakland, California. It was partially offset by a decrease in outside consultants’ fees in connection with the Nevada business.
- The Company realized an operating loss of approximately $4.5 million for the second quarter of 2017, compared to an operating loss of approximately $3.8 million for the second quarter of 2016.
- The net loss attributable to Terra Tech for the quarter ended June 30, 2017 was approximately $0.5 million, or $0.00 per share, compared with a net loss of $4.9 million, or $0.01 per share for the quarter ended June 30, 2016.
- Stockholders’ equity for the second quarter of 2017 amounted to approximately $68.3 million, compared to approximately $52.2 million as of December 31, 2016.
- Short-term debt as of June 30, 2017 amounted to approximately $576,000, compared with approximately $564,000 as of December 31, 2016. Long term debt decreased from $1.4 million as of December 31, 2016 to $736,000 as of June 30, 2017, due to conversion of debt in the period.
- Cannabis Segment Updates:
- Expanded its cannabis cultivation capabilities in Northern California with new “Craft Cultivation” model; signed one-year contract with first Craft Cultivator, Panther Gap Farms
- San Leandro, California received provisional permits and expect to be fully operational in the fourth quarter 2017.
- Cultivation facility in Oakland, California received provisional permits and expect to be fully operational in the fourth quarter 2017.
- Subsequent to the quarter end, the Company commenced sales of cannabis for adult-use following the approval of its Dual Use Marijuana business licenses by the State of Nevada Department of Taxation.
- Edible Garden Updates:
- Discontinued low-margin floral product contract, leading to improved margins
- Implemented new marketing strategy to improve brand recognition among Edible Garden’s core target customer base in the healthy living sector.
- Corporate Governance:
- Michael Vande Vrede, Steven Vande Vrede, and Amy Almsteier, one of the original co-founders of the Company, have resigned from Terra Tech’s Board of Directors, effective June 1, 2017. The Company plans to add more independent directors to the Board to enhance its independent oversight by incorporating best practices in corporate governance.