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A Close Look At Terra Tech Corp (OTCMKTS:TRTC) Second Quarter

A Close Look At Terra Tech Corp (OTCMKTS:TRTC) Second Quarter
Written by
Alex Carlson
Published on
August 17, 2016
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Terra Tech Corp (OTCMKTS:TRTC) just reported second quarter earnings. There was a little bit of both good and bad in the report. For long-term shareholders, it was a solid report as TRTC saw growth across the board. For short term players, not so much as more dilution will pressure the stock in the short term. This weakness will create a great buying opportunity.First up is the positives. Total revenues generated for the quarter ended June 30, 2016 were approximately $9.7 million, compared to $5.0 million in the same period in 2015. This is an increase of 93% from the quarter ended June 30, 2015. While we're not going to argue with this growth, we would have liked the number to have passed $10 million.The increase in second quarter revenues was primarily attributable to sales from the acquisition of the Blüm dispensary in Oakland, California, which closed on April 1, 2016, and sales from the Western, Las Vegas Blum dispensary which opened during the quarter. Second quarter revenues also benefited from higher Edible Garden sales of its produce, herbs and floral products.What we really liked was the gross margin expansion. Gross margin for the second quarter of 2016 amounted to approximately 17%, compared to a gross margin of approximately 5% for the second quarter of 2015. The improved margins were attributable to better margins at Edible Garden, as the business continues to scale and higher gross profit from the cannabis segments of Blum and IVXX.Stockholders' equity for the second quarter of 2016 amounted to approximately $41.5 million, compared with approximately $6.3 million as of December 31, 2015. The increase is attributable to the Blum Oakland acquisition reduced by the current quarters' loss. Shares are now trading at just 3.1 times book value. This is certainly impressive for a cannabis company.On the retail side, Terra Tech opened the Company's first Nevada-based medical cannabis dispensary, located at 1921 Western Avenue in Las Vegas. The second Nevada-based medical dispensary, located at 3650 South Decatur Boulevard, Suite 6 & 7, Las Vegas, Nevada, will have its grand opening on August 20, 2016.On the IVXX side of things, Terra Tech launched two new pre-filled cannabis cartridge lines. These are sold at its Blum locations and to other dispensaries as well. What Terra Tech has been able to do is figure out with its Blum locations is how to best sell IVXX products. The company can then go to other dispensaries and tell them what works and what doesn't. This is a win/win. The dispensary moves product and IVXX sells more cartridges.Now for the bad news. The net loss for the quarter ended June 30, 2016 was approximately $4.9 million or $0.01 per share compared with a loss of approximately $2.8 million or $0.01 per share for the second quarter of 2015. The primary reason for the increase in net loss is an approximately $1.2 million loss from the fair market valuation of derivatives during the quarter ended June 30, 2016 compared to the prior year's second quarter, and operating cost at our Western, Las Vegas Blum dispensary.Selling, general and administrative expenses for the second quarter of 2016 amounted to approximately $5.5 million, compared with approximately $3.4 million for the second quarter of 2015. The increase was primarily due to an increase in consultants' fees mostly paid in common stock due to the appreciation in the market price and an increase in salaries due to new hires associated with the Blum dispensaries, and other expenses. These increases were offset by a decrease in legal fees and a decrease of $1.15 million for no warrants issued in the quarter ended June 30, 2016 versus the warrants issued in 2015.But the most alarming news was the filing of the S-3. Shareholders are about to get diluted by quite a bit. It said:

We have the authority to issue up to 350,000,000 shares of our Common Stock. As of April 7, 2016, there were 349,739,408 shares of our Common Stock issued and outstanding. We are obligated to issue up to an additional 386,971,104 shares of our Common Stock to contemplate the conversion or exercise of all of our currently outstanding Preferred Stock, warrants, options, and convertible debt; however, as of April 7, 2016 we had an insufficient number of authorized shares of our Common Stock to satisfy such obligations.

Overall, the report wasn't great and it wasn't bad. While we can't say we agree with everything Derek Peterson has done as CEO, he is applying the same tactics that Jeff Bezos has with Amazon. Focus on growth and not profits. By adding permits and applying for more licenses, Peterson hopes to position Blum as the Starbucks of dispensaries. The uniformity under the Blum umbrella certainly helps with customers and will build a loyal customer base. A customer from California can go to a Blum Dispensary in Nevada and buy the same cannabis products that were in California. Peterson seeks to dominate the market and focus on profits later.So far, shareholders are sticking with him and still believe. However, the lack of excitement for Q2 numbers explains the current weakness in the market. We believe shares will drift lower and then we will initiate a BUY rating. When we do, our subscribers are the first to know. We've caught several moves in TRTC this year as the stock remains a great trading vehicle. For our latest alerts on TRTC, sign up below!Disclosure: We have no position in TRTC and have not been compensated for this article.

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