CONSOLIDATED BALANCE SHEETS

(in thousands, except Shares)

		June 30,			December 31,				March 31,				December 31,
		2020			2019				2021				2020
		(Unaudited)							(Unaudited)
ASSETS	ASSETS							ASSETS

Current Assets:
Cash		$	744		$	1,226			$	1,243			$	888
Accounts receivable, net			1,242			693				1,300				835
Short Term investments										40,256				34,045
Inventory			4,768			4,334				2,354				1,602
Prepaid expenses and other assets			459			675				628				234
Current assets of discontinued operations			73			2,440				1				2

Total current assets			7,286			9,368				45,782				37,606

Property, equipment and leasehold improvements, net			34,066			35,469				31,641				32,480
Intangible assets, net			11,733			14,871				7,522				7,714
Goodwill			17,224			21,471				6,171				6,171
Other assets			14,980			10,272				12,844				13,040
Investments			5,330			5,000				330				330
Assets of discontinued operations			10,326			22,799				2,927				2,953

TOTAL ASSETS		$	100,945		$	119,250			$	107,217			$	100,294

LIABILITIES AND STOCKHOLDERS’ EQUITY	LIABILITIES AND STOCKHOLDERS’ EQUITY							LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES:
Current liabilities:
Accounts payable and accrued expenses		$	13,117		$	9,525			$	9,869			$	8,621
Deferred revenue			129			-
Short-term debt			16,885			11,021				12,746				8,033
Current liabilities of discontinued operations			8,083			7,035				9,782				9,768

Total current liabilities			38,216			27,582				32,397				26,422

Long-term liabilities:
Long-term debt, net of discounts			1,878			6,570				3,532				6,632
Long-term lease liabilities			8,202			8,902				7,592				8,082
Long-term liabilities of discontinued operations			-			869				-				28
Total long-term liabilities			10,080			16,341				11,124				14,742

Total liabilities			48,294			43,923				43,521				41,164

STOCKHOLDERS’ EQUITY:
Preferred stock, convertible series A, par value0.001:			-			-
100 shares authorized as of June 30, 2020 and December 31, 2019; 12 shares issued and 8 shares outstanding as of June 30, 2020 and December 31, 2019
Preferred stock, convertible series A, par value 0.001:										-				-
0 and 100 shares authorized as of March 31, 2021 and December 31, 2020; 0 and 8 shares issued and outstanding as of March 31, 2021 and December 31, 2020, respectively.
Preferred stock, convertible series B, par value 0.001:			-			-				-				-
41,000,000 Shares Authorized as of June 30, 2020 and December 31, 2019; 0 Shares Issued and Outstanding as of June 30, 2020 and December 31, 2019
0 and 41,000,000 shares authorized as of March 31, 2021 and December 31, 2020; 0 shares issued and outstanding as of March 31, 2021 and December 31, 2020.
Common stock, par value 0.001:			207			120				256				218
990,000,000 Shares authorized as of June 30, 2020 and December 31, 2019; 204,777,168 issued and 202,468,760 outstanding as of June 30, 2020 and 120,313,386shares issued and 118,004,978 shares outstanding as of December 31, 2019
990,000,000 shares authorized as of March 31, 2021 and December 31, 2020; 235,491,198 shares issued and 233,182,790 shares outstanding as of March 31, 2021; 196,512,867 shares issued and 194,204,459 shares outstanding as of December 31, 2020.
Additional paid-in capital			273,526			260,516				290,225				275,060
Treasury Stock (2,308,408 shares of common stock, 4 shares of Preferred Stock Convertible Series A)			(808	)		(808	)
Treasury Stock (2,308,408 shares of common stock, 12 shares of Preferred Stock Convertible Series A)										(808	)			(808	)
Accumulated deficit			(225,198	)		(189,685	)			(230,822	)			(219,803	)

Total Terra Tech Corp. stockholders’ equity			47,728			70,143				58,851				54,667
Non-controlling interest			4,923			5,184				4,845				4,463
												��
Total stockholders’ equity			52,651			75,327				63,696				59,130

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY		$	100,945		$	119,250			$	107,217			$	100,294

The accompanying notes are an integral part of the unaudited consolidated financial statements.

Table of Contents

~~Table of Contents~~

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

(in thousands, except for shares and per-share information)

	Three Months Ended						Six Months Ended						Three Months Ended
	June 30,						June 30,						March 31,
	2020			2019			2020			2019			2021			2020

Total revenues	$	3,308		$	4,478		$	7,621		$	6,522		$	5,112		$	4,047
Cost of goods sold		1,916			2,177			3,891			2,622			2,680			1,723

Gross profit		1,392			2,301			3,730			3,900			2,432			2,324

Selling, general and administrative expenses		7,377			8,613			16,414			17,204			14,138			8,541
Impairment of assets		11,314			510			16,434			510			-			5,120
(Gain) / Loss on sale of assets		-			-			(35	)		-			-			(35	)
Loss on interest in joint venture		-			-			-			1,067

Loss from operations		(17,299	)		(6,822	)		(29,082	)		(14,880	)		(11,706	)		(11,302	)

Other income (expense):
Loss on Extinguishment of Debt														(6,161	)		-
Interest expense, net		(842	)		(3,620	)		(1,744	)		(6,548	)		(400	)		(902	)
Other income/loss		(88	)		985			(23	)		997			345			65
Unrealized Gain (Loss) on Investments														6,212			-

Total other income (expense)		(930	)		(2,635	)		(1,767	)		(5,551	)		(4	)		(837	)

Income (Loss) from continuing operations		(18,229	)		(9,457	)		(30,849	)		(20,431	)		(11,710	)		(12,139	)
Income (Loss) from discontinued operations, net of tax		(252	)		(839	)		(5,004	)		(1,323	)		14			(5,235	)

NET INCOME (LOSS)		(18,481	)		(10,296	)		(35,853	)		(21,754	)		(11,696	)		(17,374	)

Less: Income (Loss) attributable to non-controlling interest from continuing operations		(298	)		8			(341	)		86			382			(44	)
Less: Income (Loss) attributable to non-controlling interest from discontinued operations		-			(200	)		-			-

NET LOSS ATTRIBUTABLE TO TERRA TECH CORP.	$	(18,183	)	$	(10,104	)	$	(35,512	)	$	(21,840	)	$	(12,078	)	$	(17,330	)

Income / ( Loss) from continuing operations per common share attributable to Terra Tech Corp. common stockholders - basic and diluted	$	(0.10	)	$	(0.09	)	$	(0.17	)	$	(0.21	)
Net Loss per common share attributable to Terra Tech Corp. common stockholders - basic and diluted	$	(0.10	)	$	(0.10	)	$	(0.20	)	$	(0.22	)
Income / ( Loss) from continuing operations per common share attributable to Terra Tech Corp. common stockholders – basic and diluted													$	(0.05	)	$	(0.08	)
Net Loss per common share attributable to Terra Tech Corp. common stockholders – basic and diluted													$	(0.05	)	$	(0.11	)

Weighted-average number of common shares outstanding - basic and diluted		186,068,175			105,360,358			174,781,579			99,319,032
Weighted-average number of common shares outstanding – basic and diluted														237,752,273			150,906,135

The accompanying notes are an integral part of the unaudited consolidated financial statements.

Table of Contents

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE ~~SIX~~THREE MONTHS ENDED ~~JUNE 30, 2020~~MARCH 31, 2021

(UNAUDITED)

(in thousands)

	Six Months Ended						Three Months Ended
	June 30,						March 31,
	2020			2019			2021			2020
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$	(35,853	)	$	(21,754	)	$	(11,696	)	$	(17,374	)
Less: net loss from discontinued operations		5,004			1,323			(14	)		5,235
Net loss from continuing operations		(30,849	)		(20,431	)		(11,710	)		(12,139	)
Adjustments to reconcile net loss to net cash used in operating activities:
Bad debt expense		300			-			-			295
Cancellation of shares issued		-			(58	)
Gain from debt forgiveness								(86	)		-
Unrealized gain on investments								(6,212	)		-
Loss (gain) on extinguishment of debt								6,161			-
Non-cash portion of severance expense								7,990			-
Non-cash interest expense								27			339
Gain on sale of assets		(35	)		(966	)		-			(35	)
Amortization of debt discount		627			6,052
Depreciation and amortization		3,700			2,979			1,141			1,718
Operating lease expense		446			408
Amortization of operating lease right of use asset								195			225
Stock based compensation		1,244			2,686			398			960
Loss on revaluation of equity interests		-			1,064
Impairment loss		16,434			510			-			5,120
Other		-			253
Change in operating assets and liabilities:
Accounts receivable		353			(768	)		(465	)		(161	)
Inventory		(353	)		(1,874	)		(753	)		(516	)
Prepaid expenses and other current assets		(57	)		(240	)		(394	)		215
Other assets		(1,521	)		(962	)		9			11
Accounts payable and accrued expenses		3,847			1,520			991			974
Deferred revenue		(171	)		-
Operating lease liabilities		(655	)		(294	)		(161	)		(221	)
Net cash provided by / (used in) operating activities - continuing operations		(6,690	)		(10,122	)		(2,869	)		(3,215	)
Net cash provided by / (used in) operating activities - discontinued operations		(1,474	)		60			18			(966	)
NET CASH PROVIDED BY / (USED IN) OPERATING ACTIVITIES		(8,164	)		(10,062	)		(2,851	)		(4,181	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, equipment and leasehold improvements		(665	)		77			(110	)		(182	)
Purchase of equity investment		-			(402	)
Cash outflow for loans		(250	)		-
Cash from acquisitions		57			127			-			57
Proceeds from sales of assets		35			1,321			-			35
Net cash provided by / (used in) investing activities - continuing operations		(824	)		1,123			(110	)		(90	)
Net cash provided by / (used in) investing activities - discontinued operations		6,257			(2,782	)		-			2,182
NET CASH PROVIDED BY / (USED IN) INVESTING ACTIVITIES		5,433			(1,659	)		(110	)		2,092

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of notes payable		1,953			10,000			3,500			1,392
Payments of debt principal		(35	)		(1,000	)		(6	)		-
Cash paid for debt discount		-			(150	)
Cash paid for debt issuance costs								(178	)		-
Proceeds from issuance of common stock		250			3,850			-			250
Cash paid for acquisition of non-controlling interest		-			(6,250	)
Cash contribution (distribution) from non-controlling interest		80			-			-			165
Net cash provided by / (used in) financing activities - continuing operations		2,249			6,450			3,316			1,807
Net cash provided by / (used in) financing activities - discontinued operations		-			-			-			-
NET CASH PROVIDED BY / (USED IN) FINANCING ACTIVITIES		2,249			6,450			3,316			1,807

NET CHANGE IN CASH		(482	)		(5,271	)		355			(282	)

Cash at beginning of period		1,226			7,193			888			1,226

CASH AT END OF PERIOD	$	744		$	1,922		$	1,243		$	944

SUPPLEMENTAL DISCLOSURE FOR OPERATING ACTIVITIES:
Cash paid for interest	$	625		$	909		$	182		$	360

SUPPLEMENTAL DISCLOSURE FOR NON-CASH INVESTING AND FINANCING ACTIVITIES:
Debt principal and accrued interest converted into common stock	$	1,829		$	11,200		$	3,596		$	1,028
Promissory note issued for severance							$	2,100		$	-
Stock Issued for the acquisition of OneQor	$	9,305		$	-		$	-		$	9,305
Fixed assets in accounts payable	$	35		$	-		$	-		$	167
Consolidation of Joint Venture Net Assets	$	-		$	11,957
Financing Fees in Accounts Payable	$	-		$	145
Warrants issued for debt discount	$	-		$	228
Beneficial Conversion Feature	$	-		$	5,633
Stock options exercised on a net share basis							$	1		$	-

The accompanying notes are an integral part of the unaudited consolidated financial statements.

Table of Contents

CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY

FOR THE THREE MONTHS ENDED MARCH 31, 2021

(UNAUDITED)

(in thousands, except for Shares)

	Preferred Stock Convertible Series A					Common Stock				Additional Paid-In			Treasury Stock					Accumulated			Non-Controlling
	Shares			Amount		Shares		Amount		Capital			Shares		Amount			Deficit			Interest		Total

Balance at December 31, 2020		8		$	-		194,204,459	$	218	$	275,060			2,308,412	$	(808	)	$	(219,803	)	$	4,463	$	59,130
Adoption of ASU 2020-06		-			-		-		-		(1,071	)							1,059					(12	)
Debt conversion - common stock		-			-		20,391,774		20		3,989			-		-			-			-		4,009
Warrants issued to Dominion		-			-		-		-		5,978			-		-			-			-		5,978
Stock compensation - directors		-			-		541,666		1		121			-		-			-			-		122
Stock compensation - services expense		-			-		322,947		0		32			-		-			-			-		32
Stock Option Exercises		-			-		1,226,230		1		(1	)		-		-			-			-		-
Acquisition of A shares		(8	)		-		16,485,714		16		5,873			8		-			-			-		5,889
Stock option expense		-			-		-		-		244			-		-			-			-		244
Net income attributable to non-controlling interest		-			-		-		-		-			-		-			-			382		382
Net loss attributable to Terra Tech Corp.		-			-		-		-		-			-		-			(12,078	)		-		(12,078	)
Balance at March 31, 2021		-		$	-		233,172,790	$	256	$	290,225			2,308,420	$	(808	)	$	(230,822	)	$	4,845	$	63,696

The accompanying notes are an integral part of the unaudited consolidated financial statements.

~~Table of Contents~~

~~TERRA TECH CORP. AND SUBSIDIARIES~~

~~CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY~~

~~FOR THE THREE MONTHS ENDED JUNE 30, 2020~~

~~(UNAUDITED)~~

~~(in thousands, except for Shares)~~

Preferred Stock

Convertible

Additional

Non-

Series A

Common Stock

Paid-In

Treasury Stock
Accumulated
Controlling

Shares

Amount

Shares

Amount

Capital

Shares

Amount

Deficit

Interest

Total

Balance at March 31, 2020

8

$ -

190,930,853

$ 193

$ 272,455

2,308,412

$ (808 )

$ (207,015 )

$ 5,305

$ 70,130

Debt conversion - common stock

-

-

12,943,496

13

788

-

-

-

-

801

Stock compensation - employees

-

-

826,429

1

57

-

-

-

-

58

Stock compensation - directors

-

-

(173,610 )

(0 )

(100 )

-

-

-

-

(100 )
Stock compensation - services expense

-

-

250,000

0

32

-

-

-

-

33

Stock option expense

-

-

-

-

294

-

-

-

-

294

Contribution from non-controlling interest

-

-

-

-

-

-

-

-

(85 )

(85 )
Net income attributable to non-controlling interest

-

-

-

-

-

-

-

-

(298 )

(298 )
Net loss attributable to Terra Tech Corp.

-

-

-

-

-

-

-

(18,183 )

-

(18,183 )
Balance at June 30, 2020

8

$ -

204,777,168

$ 207

$ 273,526

2,308,412

$ (808 )

$ (225,198 )

$ 4,923

$ 52,651

Table of Contents

TERRA TECH CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

FOR THE THREE MONTHS ENDED ~~JUNE 30, 2019~~MARCH 31, 2020

(UNAUDITED)

(in thousands, except for Shares)

	Preferred Stock																								Preferred Stock Convertible Series A				Common Stock				Additional Paid-In		Treasury Stock					Accumulated			Non- Controlling
	Convertible								Additional										Non-						Shares		Amount		Shares		Amount		Capital		Shares		Amount			Deficit			Interest			Total
	Series A				Common Stock				Paid-In			Treasury Stock				Accumulated			Controlling
	Shares		Amount		Shares		Amount		Capital			Shares		Amount		Deficit			Interest			Total
Balance at March 31, 2019		12	$	-		100,648,444	$	101	$	253,066			-	$	-	$	(154,489	)	$	6,682		$	105,359
Balance at December 31, 2019																										8	$	-		118,004,978	$	120	$	260,516		2,308,412	$	(808	)	$	(189,686	)	$	5,184		$	75,326
Debt conversion - common stock																										-		-		9,123,560		9		1,018		-		-			-			-			1,027
Stock compensation - employees		-		-		87,798		0		75			-		-		-			-			75			-		-		2,353,115		2		374		-		-			-			-			376
Stock compensation - services expense		-		-		40,000		0		36			-		-		-			-			36			-		-		825,000		1		108		-		-			-			-			109
Debt conversion - common stock		-		-		6,140,763		6		3,532			-		-		-			-			3,538
Stock issued for cash		-		-		2,188,283		2		1,548			-		-		-			-			1,550			-		-		2,470,173		2		248		-		-			-			-			250
Stock issued for OneQor acquisition																										-		-		58,154,027		58		9,246		-		-			-			-			9,304
Stock option expense		-		-		-		-		954			-		-		-			-			954			-		-		-		-		944		-		-			-			-			944
Issuance of warrants		-		-		-		-		1,037					-		-			-			1,037
Acquisition of non-controlling interest		-		-		-		-		(5,136	)		-		-		-			(633	)		(5,769	)
Contribution (distribution) from non-controlling interest		-		-		-		-		-			-		-		-			884			884
Contribution from non-controlling interest																										-		-		-		-		-		-		-			-			165			165
Net income attributable to non-controlling interest		-		-		-		-		-			-		-		-			(192	)		(192	)		-		-		-		-		-		-		-			-			(44	)		(44	)
Net loss attributable to Terra Tech Corp.		-		-		-		-		-			-		-		(10,105	)		-			(10,105	)		-		-		-		-		-		-		-			(17,330	)		-			(17,330	)
Balance at June 30, 2019		12	$	-		109,105,288	$	109	$	255,112			-	$	-	$	(164,594	)	$	6,741		$	97,368
Balance at March 31, 2020																										8	$	-		190,930,853	$	192	$	272,454		2,308,412	$	(808	)	$	(207,016	)	$	5,305		$	70,127

The accompanying notes are an integral part of the unaudited consolidated financial statements.

Table of Contents

~~CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY~~

~~FOR THE SIX MONTHS ENDED JUNE 30, 2020~~

~~(UNAUDITED)~~

~~(in thousands, except for Shares)~~

Preferred Stock

Convertible

Additional

Non-

Series A

Common Stock

Paid-In

Treasury Stock

Accumulated

Controlling

Shares

Amount

Shares

Amount

Capital

Shares

Amount

Deficit

Interest

Total

Balance at December 31, 2019

8

$ -

118,004,978

$ 120

$ 260,516

2,308,412

$ (808 )

$ (189,686 )

$ 5,184

$ 75,327

Debt conversion - common stock

-

-

22,067,056

22

1,807

1,829

Stock compensation - employees

-

-

3,179,544

3

431

434

Stock compensation - directors

-

-

(173,610 )

(0 )

(100 )

(100 )
Stock compensation - services expense

-

-

1,075,000

1

140

141

Stock issued for cash

-

-

2,470,173

3

248

250

Stock issued for assets

-

-

58,154,027

58

9,246

9,305

Stock option expense

-

-

1,238

1,238

Contribution from non-controlling interest

-

-

-

-

-

-

-

-

80

80

Net income attributable to non-controlling interest

-

-

-

-

-

(341 )

(341 )
Net loss attributable to Terra Tech Corp.

-

-

-

-

(35,512 )

-

(35,512 )
Balance at June 30, 2020

8

$ -

204,777,168

$ 207

$ 273,526

2,308,412

$ (808 )

$ (225,198 )

$ 4,923

$ 52,651

⁽¹⁾ ~~Adjusted to reflect the 1 for 15 reverse stock split. See Note 1 Description of Business.~~

~~TERRA TECH CORP. AND SUBSIDIARIES~~

~~CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY~~

~~FOR THE SIX MONTHS ENDED JUNE 30, 2019~~

~~(UNAUDITED)~~

~~(in thousands, except for Shares)~~

Preferred Stock

Convertible

Additional

Non-

Series A

Common Stock

Paid-In

Treasury Stock

Accumulated

Controlling

Shares

Amount

Shares

Amount

Capital

Shares

Amount

Deficit

Interest

Total

Balance at December 31, 2018

12

$ -

81,759,415

$ 82

$ 236,543

-

$ -

$ (142,754 )

$ 1,003

$ 94,874

Stock compensation - employees

-

-

473,334

0

390

-

-

-

391

Stock compensation - services expense

-

-

66,376

0

59

-

-

-

59

Stock cancellation

-

-

(60,000 )

-

(58 )

-

-

-

-

(58 )
Debt conversion - common stock

-

-

21,179,712

21

11,372

-

-

-

-

11,393

Stock issued for cash

-

-

5,686,451

6

3,844

-

-

-

-

3,850

Stock option expense

-

-

-

-

2,236

-

-

-

-

2,236

Issuance of warrants

-

-

-

-

5,862

-

-

-

5,862

Consolidation of NuLeaf joint venture

-

-

-

-

-

-

-

-

5,402

5,402

Acquisition of non-controlling interest

-

-

-

-

(5,136 )

-

-

(633 )

(5,769 )
Contribution (distribution) from non-controlling interest

-

-

-

-

-

-

-

-

884

884

Net income attributable to non-controlling interest

-

-

-

-

-

-

-

-

86

86

Net loss attributable to Terra Tech Corp.

-

-

-

-

-

-

-

(21,840 )

-

(21,840 )
Balance at June 30, 2019

12

$ -

109,105,288

$ 109

$ 255,112

-

$ -

$ (164,594 )

$ 6,741

$ 97,368

~~The accompanying notes are an integral part of the unaudited consolidated financial statements.~~

~~TERRA TECH CORP. AND SUBSIDIARIES~~

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 -– DESCRIPTION OF BUSINESS

References in this document to “the Company”, “Terra Tech”, “we”, “us”, or “our” are intended to mean Terra Tech Corp., individually, or as the context requires, collectively with its subsidiaries on a consolidated basis.

~~We are~~Terra Tech is a holding company with the following subsidiaries:

·	620 Dyer LLC, a California corporation (“Dyer”)
·	1815 Carnegie LLC, a California limited liability company (“Carnegie”)
·	Black Oak Gallery, a California corporation (“Black Oak”)
·	Blüm San Leandro, a California corporation (“Blüm San Leandro”)
·	GrowOp Technology Ltd., a Nevada corporation (“GrowOp Technology”)
·	IVXX, Inc., a California corporation (“IVXX Inc.”; together with IVXX LLC, “IVXX”)
·	IVXX, LLC, a Nevada limited liability company (“IVXX LLC”)
·	MediFarm, LLC, a Nevada limited liability company (“MediFarm”)
·	MediFarm I, LLC, a Nevada limited liability company (“MediFarm I”)
·	MediFarm II, LLC, a Nevada limited liability company (“MediFarm II”)
·	MediFarm So Cal, Inc., a California corporation (“MediFarm SoCal”)
·	121 North Fourth Street, LLC, a Nevada limited liability company ("121 North Fourth")
·	OneQor Technologies, Inc., a Delaware corporation ("OneQor")

The Company is a retail, production and cultivation company, with an emphasis on providing the highest quality of medical and adult use cannabis products. We currently have a concentrated cannabis interest in ~~California and Nevada.~~California. All of ~~our~~the Company’s cannabis dispensaries operate under the name Blüm. ~~Our~~The Company’s cannabis dispensaries in California operate as Black Oak Gallery in Oakland and Blum San Leandro in San Leandro and offer a broad selection of medical and adult-use cannabis products including flowers, concentrates and edibles.

In Nevada, we have one dispensary operating under MediFarm in Las Vegas which sells quality medical and adult use cannabis products. The cannabis dispensary in Nevada has been categorized as a discontinued operation as we have entered into an agreement to sell the related assets to an unaffiliated third party.

~~On February 14, 2020, the Company acquired OneQor Technologies, Inc. (“OneQor”). The acquisition of OneQor was accounted for in accordance with ASC 805-10,~~ ~~“Business Combinations.”~~ OneQor is a cannabinoid-focused company, concentrating on the development, manufacturing, and delivery of patented, proprietary over-the-counter CBD products to established suppliers and consumer brands. Refer to Note 13, “~~Business Combinations”~~ ~~for additional information regarding the transaction.~~

NOTE 2 -– SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying ~~interim unaudited condensed~~ consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) ~~for interim financial information~~ and with the instructions to Securities Exchange Commission (“SEC”) Form 10-Q and Article 10 of Regulation S-X of the Securities Act of 1933 and reflect the accounts and operations of the Company and those ~~entities~~of our subsidiaries in which we have a controlling financial interest. In accordance with the provisions of ~~the Financial Accounting Standards Board (“FASB”)~~FASB or ~~Accounting Standards Codification (“ASC”)~~ASC 810, “Consolidation,” we consolidate any variable interest entity (“VIE”), of which we are the primary beneficiary. The typical condition for a controlling financial interest ownership is holding a majority of the voting interests of an entity; however, a controlling financial interest may also exist in entities, such as VIEs, through arrangements that do not involve controlling voting interests. ASC 810 requires a variable interest holder to consolidate a VIE if that party has the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and the obligation to absorb losses of the VIE that could potentially be significant to the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE. We do not consolidate a VIE in which we have a majority ownership interest when we are not considered the primary beneficiary. We ~~have determined that we are the primary beneficiary of certain VIEs. We~~ evaluate our relationships with all the VIEs on an ongoing basis to reassess if we continue to be the primary beneficiary.

All intercompany ~~accounts~~transactions and ~~transactions~~balances have been eliminated in consolidation. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation of the consolidated financial position of the Company as of March 31, 2021 and 2020, and the consolidated results of operations and cash flows for the quarters ended March 31, 2021 and 2020 have been included. These interim unaudited condensed consolidated financial statements do not include all disclosures required by GAAP for complete financial statements and, therefore, should be read in conjunction with the more detailed audited consolidated financial statements for the year ended December 31, ~~2019.~~2020. The December 31, ~~2019~~2020 balances reported herein are derived from the audited consolidated financial statements for the year ended December 31, ~~2019.~~2020. The results of operations for the interim periods are not necessarily indicative of the results of operations to be expected for the full year.

~~Revision of Previously Issued Financial Statements~~

On October 26, 2017, the Company entered into joint venture agreements with NuLeaf Sparks Cultivation, LLC and NuLeaf Reno Production, LLC (collectively “NuLeaf”) to build and operate cultivation and production facilities for our IVXX brand of cannabis products in Nevada. In February 2019, we amended and restated the NuLeaf agreements and obtained control of the operations of NuLeaf. The Company has determined these entities are variable interest entities in which the Company is the primary beneficiary by reference to the power and benefits criterion under ASC 810, “Consolidation.” The provisions within the amended agreement grant the Company the power to manage and make decisions that affect the operation of these entities. As the primary beneficiary of NuLeaf Sparks Cultivation, LLC and NuLeaf Reno Production, LLC, the Company began consolidating the accounts and operations of these entities as of March 1, 2019. All intercompany transactions are eliminated in the consolidated financial statements. On March 1, 2019, we remeasured our equity method investment in NuLeaf to fair value and consolidated the results of NuLeaf in our consolidated financial statements and report its results in our cannabis segment.

~~During the year ended December 31, 2019, management finalized the accounting for the transaction, and recorded a measurement period adjustment that increased net loss by $6.63 million (see Note 4, “~~~~Variable Interest Entities”~~ for a description of the transaction). The Company has revised the condensed unaudited consolidated statement of operations and condensed unaudited consolidated statements of stockholders’ equity for the six months ended June 30, 2019 to restate the loss on remeasurement of our equity interests in NuLeaf to equal the loss as reported at the close of the measurement period. The revision resulted in a decrease in accumulated deficit and net loss reported as of and during the six months ended June 30, 2019 of $6.63 million.

118

Going Concern

The accompanying ~~unaudited condensed~~ financial statements have been prepared assuming that we will continue as a going concern. In an effort to achieve liquidity that would be sufficient to meet all of our commitments, we have undertaken a number of actions, including minimizing capital expenditures, and reducing recurring expenses. However, we believe that even after taking these actions, we may not have sufficient liquidity to satisfy all of our future financial obligations. The risks and uncertainties ~~surrounding~~on the ~~timing of the close~~future of our ~~pending asset sales~~business due to COVID-19 and regulatory uncertainty, combined with the fact that we have historically lost money, have in ~~Nevada, our limited capital resources, and~~ the ~~weak industry conditions impacting our business raise~~past, raised substantial doubt as to our ability to continue as a going concern. ~~See Note 19~~~~, “Going Concern”~~ ofHowever, management believes that proceeds due from its Hydrofarm investment, proceeds from the ~~Notes~~Nevada asset sales, management’s past and on-going efforts to ~~Consolidated Financial Statements.~~trim costs and management’s recent efforts to boost sales will lead to cash sustainability. Therefore management believes that there is no material uncertainty as to the Company’s ability to continue as a going concern.

Non-Controlling Interest

Non-controlling interest is shown as a component of stockholders’ equity on the consolidated balance sheets and the share of net income (loss) attributable to non-controlling interest is shown as a component of net income (loss) in the consolidated statements of operations.

Use of Estimates

The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the dates of the financial statements and the reported amounts of total net revenue and expenses in the reporting periods. The Company regularly evaluates estimates and assumptions related to revenue recognition, allowances for doubtful accounts, sales returns, inventory valuation, stock-based compensation expense, goodwill and purchased intangible asset valuations, derivative liabilities, deferred income tax asset valuation allowances, uncertain tax positions, tax contingencies, litigation and other loss contingencies. These estimates and assumptions are based on current facts, historical experience and various other factors that the Company believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the recording of revenue, costs and expenses that are not readily apparent from other sources. The actual results the Company experiences may differ materially and adversely from these estimates. To the extent there are material differences between the estimates and actual results, the Company’s future results of operations will be affected.

Reclassifications

Certain prior period amounts have been reclassified to conform to the current period presentation. These reclassifications did not affect net loss, revenues or stockholders’ equity. See Note 16,~~”Discontinued~~ “Discontinued Operations” for further discussion regarding discontinued operations.

Trade and Other Receivables

The Company extends ~~non-interest~~noninterest bearing trade credit to its customers in the ordinary course of business which is not collateralized. Accounts receivable are shown on the face of the consolidated balance sheets, net of an allowance for doubtful accounts. The Company analyzes the aging of accounts receivable, historical bad debts, customer creditworthiness and current economic trends, in determining the allowance for doubtful accounts. The Company does not accrue interest receivable on past due accounts receivable. The allowance for doubtful accounts was zero as of March 31, 2021 and December 31, 2020.

Investments

Investments in unconsolidated affiliates are accounted for under the cost or the equity method of accounting, as appropriate. The Company accounts for investments in limited partnerships or limited liability corporations, whereby the Company owns a minimum of 5% of the investee’s outstanding voting stock, under the equity method of accounting. These investments are recorded at the amount of the Company’s investment and adjusted each period for the Company’s share of the investee’s income or loss, and dividends paid. As investments accounted for under the cost method do not have readily determinable fair values, the Company only estimates fair value if there are identified events or changes in circumstances that could have a significant adverse effect on the investment’s fair value.

Publicly held equity securities are recorded at fair value with unrealized gains or losses resulting from changes in fair value reflected as unrealized gains or losses on equity securities in our consolidated statements of operations.

Inventory

Inventory is stated at the lower of cost or net realizable value, with cost being determined on the first-in, first-out (“FIFO”) method of accounting. The Company periodically reviews physical inventory for excess, obsolete, and potentially impaired items and reserves. The reserve estimate for excess and obsolete inventory is based on expected future use. The reserve estimates have historically been consistent with actual experience as evidenced by actual sale or disposal of the goods.

Prepaid Expenses and Other Current Assets

Prepaid expenses consist of various payments that the Company has made in advance for goods or services to be received in the future. These prepaid expenses include advertising, insurance, and service or other contracts requiring upfront payments.

Property, Equipment and Leasehold Improvements, Net

Property, equipment and leasehold improvements are stated at cost less accumulated depreciation. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets. The approximate useful lives for depreciation of our property, equipment and leasehold improvements are as follows: thirty-two years for buildings; three to eight years for furniture and equipment; three to five years for computer and software; five years for vehicles and the shorter of the estimated useful life or the underlying lease term for leasehold improvements. Repairs and maintenance expenditures that do not extend the useful lives of related assets are expensed as incurred.

Expenditures for major renewals and improvements are capitalized, while minor replacements, maintenance and repairs, which do not extend the asset lives, are charged to operations as incurred. Upon sale or disposition, the cost and related accumulated depreciation are removed from the accounts and any gain or loss is included in operations. The Company continually monitors events and changes in circumstances that could indicate that the carrying balances of its property, equipment and leasehold improvements may not be recoverable in accordance with the provisions of ASC 360, “Property, Plant, and Equipment.” When such events or changes in circumstances are present, the Company assesses the recoverability of long-lived assets by determining whether the carrying value of such assets will be recovered through undiscounted expected future cash flows. If the total of the future cash flows is less than the carrying amount of those assets, the Company recognizes an impairment loss based on the excess of the carrying amount over the fair value of the assets. See Note 7, “Property, Equipment and Leasehold Improvements, Net” for further information.

~~Investments~~

~~Assets Held for Sale and Discontinued Operations~~

Assets held for sale represent furniture, equipment, and leasehold improvements less accumulated depreciation as well as any other assets that are held for sale in conjunction with the sale of a business. The Company records assets held for sale in accordance with ASC 360~~, “Property, Plant, and Equipment,”~~ at the lower of carrying value or fair value less costs to sell. Fair value is based on the estimated proceeds from the sale of the facility utilizing recent purchase offers, market comparables and/or data. Our estimate as to fair value is regularly reviewed and subject to changes in the commercial real estate markets and our continuing evaluation as to the facility’s acceptable sale price. The reclassification takes place when the assets are available for immediate sale and the sale is highly probable. These conditions are usually met from the date on which a letter of intent or agreement to sell is ready for signing. The Company follows the guidance within ASC 205, ~~“Reporting Discontinued Operations and Disclosure of Disposals of Components of an Entity”~~ ~~when assets held for sale represent a strategic shift in the Company’s operations and financial results.~~

~~Goodwill~~

Goodwill is measured as the excess of consideration transferred and the net of the acquisition date fair value of assets acquired, and liabilities assumed in a business acquisition. In accordance with ASC 350, ~~“Intangibles-Goodwill and Other,”~~ goodwill and other intangible assets with indefinite lives are no longer subject to amortization but are tested for impairment annually or whenever events or changes in circumstances indicate that the asset might be impaired.

The Company reviews the goodwill allocated to each of our reporting units for possible impairment annually as of September 30 and whenever events or changes in circumstances indicate carrying amount may not be recoverable. In the impairment test, the Company measures the recoverability of goodwill by comparing a reporting unit’s carrying amount, including goodwill, to the estimated fair value of the reporting unit.

The carrying amount of each reporting unit is determined based upon the assignment of our assets and liabilities, including existing goodwill and other intangible assets, to the identified reporting units. Where an acquisition benefits only one reporting unit, the Company allocates, as of the acquisition date, all goodwill for that acquisition to the reporting unit that will benefit. Where the Company has had an acquisition that benefited more than one reporting unit, The Company has assigned the goodwill to our reporting units as of the acquisition date such that the goodwill assigned to a reporting unit is the excess of the fair value of the acquired business, or portion thereof, to be included in that reporting unit over the fair value of the individual assets acquired and liabilities assumed that are assigned to the reporting unit.

~~If the carrying amount of a reporting unit is in excess or its fair value, the Company recognizes an impairment charge equal to the amount in excess.~~

Intangible Assets

Intangible assets continue to be subject to amortization, and any impairment is determined in accordance with ASC 360, “Property, Plant, and Equipment,” intangible assets are stated at historical cost and amortized over their estimated useful lives. The Company uses a straight-line method of amortization unless a method that better reflects the pattern in which the economic benefits of the intangible asset are consumed ~~or otherwise used up~~ can be reliably determined. The approximate useful lives for amortization of our intangible assets are as follows:

Customer relationships		3 to 5 Years
Trademarks and Patent		2 to 8 Years
Dispensary licenses		14 Years


10
~~Patent~~		~~2 Years~~
Table of Contents

The Company reviews intangible assets subject to amortization quarterly to determine if any adverse conditions exist or a change in circumstances has occurred that would indicate impairment or a change in the remaining useful life. Conditions that may indicate impairment include, but are not limited to, a significant adverse change in legal factors or business climate that could affect the value of an asset, a product recall, or an adverse action or assessment by a regulator. If an impairment indicator exists, we test the intangible asset for recoverability. For purposes of the recoverability test, we group our amortizable intangible assets with other assets and liabilities at the lowest level of identifiable cash flows if the intangible asset does not generate cash flows independent of other assets and liabilities. If the carrying value of the intangible asset (asset group) exceeds the undiscounted cash flows expected to result from the use and eventual disposition of the intangible asset (asset group), the Company will write the carrying value down to the fair value in the period identified.

Intangible assets that have indefinite useful lives are tested annually for impairment and are tested for impairment more frequently if events and circumstances indicate that the asset might be impaired. An impairment loss is recognized to the extent that the carrying amount of the asset group exceeds its fair value.

Goodwill

Goodwill is measured as the excess of consideration transferred and the net of the acquisition date fair value of assets acquired, and liabilities assumed in a business acquisition. In accordance with ASC 350, “Intangibles—Goodwill and Other,” goodwill and other intangible assets with indefinite lives are no longer subject to amortization but are tested for impairment annually or whenever events or changes in circumstances indicate that the asset might be impaired.

If the carrying amount of a reporting unit is in excess or its fair value, the Company recognizes an impairment charge equal to the amount in excess.

Notes Receivable

The Company reviews all outstanding notes receivable for collectability as information becomes available pertaining to the Company’s inability to collect. An allowance for notes receivable is recorded for the likelihood of non-collectability. The Company accrues interest on notes receivable based on net realizable value. The allowance for uncollectible notes was zero as of March 31, 2021 and December 31, 2020.

Assets Held for Sale and Discontinued Operations

Assets held for sale represent furniture, equipment, and leasehold improvements less accumulated depreciation as well as any other assets that are held for sale in conjunction with the sale of a business. The Company records assets held for sale in accordance with ASC 360, “Property, Plant, and Equipment,” at the lower of carrying value or fair value less costs to sell. Fair value is based on the estimated proceeds from the sale of the facility utilizing recent purchase offers, market comparables and/or data. Our estimate as to fair value is regularly reviewed and subject to changes in the commercial real estate markets and our continuing evaluation as to the facility’s acceptable sale price. The reclassification takes place when the assets are available for immediate sale and the sale is highly probable. These conditions are usually met from the date on which a letter of intent or agreement to sell is ready for signing. The Company follows the guidance within ASC 205, “Reporting Discontinued Operations and Disclosure of Disposals of Components of an Entity” when assets held for sale represent a strategic shift in the Company’s operations and financial results.

Fair Value of Financial Instruments

The Company applies fair value accounting for all financial assets and liabilities and non-financial assets and liabilities that are recognized or disclosed at fair value in the financial statements on a recurring basis. The Company defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities that are required to be recorded at fair value, the Company considers the principal or most advantageous market in which the Company would transact and the market-based risk measurements or assumptions that market participants would use in pricing the asset or liability, such as risks inherent in valuation techniques, transfer restrictions and credit risk. Fair value is estimated by applying the following hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement:

Level 1 -– Quoted prices in active markets for identical assets or liabilities.

Level 2 -– Observable inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices for identical or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 -– Inputs that are generally unobservable and typically reflect management’s estimate of assumptions that market participants would use in pricing the asset or liability.

In accordance with the fair value accounting requirements, companies may choose to measure eligible financial instruments and certain other items at fair value. The Company ~~held one investment~~has not elected the fair value option for any eligible financial instruments.

The following table presents the Company’s financial instruments that are measured and recorded at fair value on the Company’s balance sheets on a recurring basis, and their level within the fair value hierarchy as of ~~June 30, 2020. Refer to Note 10, “~~~~Fair Value Measurements”~~ ~~for details.~~March 31, 2021:

Investments:	Amount		Level 1		Level 2		Level 3
Warrants to acquire shares of HydroFarm	$	10,452	$	-	$	10,452	$	-
Shares in HydroFarm		29,804		-		29,804		-
Option to acquire Edible Garden Inc		330		-		-		330

Total	$	40,586	$	-	$	40,256	$	330

1412

Business Combinations

The Company accounts for its business acquisitions in accordance with ASC 805-10, “Business Combinations.” The Company allocates the total cost of the acquisition to the underlying net assets based on their respective estimated fair values. As part of this allocation process, the Company identifies and attributes values and estimated lives to the intangible assets acquired. These determinations involve significant estimates and assumptions regarding multiple, highly subjective variables, including those with respect to future cash flows, discount rates, asset lives, and the use of different valuation models, and therefore require considerable judgment. The Company’s estimates and assumptions are based, in part, on the availability of listed market prices or other transparent market data. These determinations affect the amount of amortization expense recognized in future periods. The Company bases its fair value estimates on assumptions it believes to be reasonable but are inherently uncertain.

Revenue Recognition and Performance Obligations

Cannabis Dispensary, Cultivation and Production

The Company recognizes revenue from manufacturing and distribution product sales when our customers obtain control of our products. Revenue from our retail dispensaries is recorded at the time customers take possession of the product. Revenue from our retail dispensaries is recognized net of discounts, rebates, promotional adjustments, price adjustments and returns, and net of taxes collected from customers that are remitted to governmental authorities, with the collected taxes recorded as current liabilities until remitted to the relevant government authority. Upon purchase, the Company has no further performance obligations and collection is assured as sales are paid for at time of purchase.

Revenue related to distribution customers is recorded when the customer is determined to have taken control of the product. This determination is based on the customer specific terms of the arrangement and gives consideration to factors including, but not limited to, whether the customer has an unconditional obligation to pay, whether a time period or event is specified in the arrangement and whether the Company can mandate the return or transfer of the products. Revenue is recorded net of taxes collected from customers that are remitted to governmental authorities with collected taxes recorded as current liabilities until remitted to the relevant government authority.

~~Cannabinoid Products~~Disaggregation of Revenue

~~Under ASC 606,~~The table below shows the revenue ~~from~~break between California operations and Nevada operations for the sale of OneQor’s products is generally recognized at a point in time when control over the goods has been transferred to the customer. Payment is typically due upon transferring the goods to the customer or within a specified time period permitted under the Company’s credit policy. Revenue is recognized upon the satisfaction of the performance obligation. The Company satisfies its performance obligationthree months ended March 31, 2021 and ~~transfers control upon delivery and acceptance by the customer.~~2020.

	(in thousands)
	2021		2020

California	$	2,057	$	2,442
Nevada		3,055		1,605
Total	$	5,112	$	4,047

~~Disaggregation of Revenue~~

~~See Note 17,~~ ~~“ Segment Information”~~ for revenues disaggregated by type as required by ASC Topic 606. The company believes this level of disaggregation sufficiently depicts how the nature, amount, timing and uncertainty of our revenue and cash flows are affected by economic factors.

Contract Balances

~~Cannabis Dispensary, Cultivation and Production~~

Due to the nature of the Company’s revenue from contracts with customers, ~~our cannabis dispensary, cultivation and production operations do~~the Company does not have material contract assets or liabilities that fall under the scope of ASC Topic 606.

~~Cannabinoid Products~~

The Company has established terms with its customers whereby customers generally will pay 50 percent at the time an order is placed and 50 percent at the time of completion to release the order. These terms are typically mirrored with the Company’s suppliers who are paid 50 percent at the time an order is placed and the balance also due upon manufacturing completion. Deposit payments made to suppliers are recorded as prepaid inventory until fully paid, whereby goods are then shipped to customers. As of June 30, 2020, deposits from customers totaled $0.13 million and prepaid inventory totaled $0.09 million. Deposits from customers are reflected as deferred revenue on the balance sheet until the performance obligation has been fulfilled.

Contract Estimates and Judgments

The Company’s revenues accounted for under ASC Topic 606, generally, do not require significant estimates or judgments based on the nature of the Company’s revenue streams. The sales prices are generally fixed at the point of sale and all consideration from contracts ~~are~~is included in the transaction price. The Company’s contracts do not include multiple performance obligations or material variable consideration.

Cost of Goods Sold

Cannabis Dispensary, Cultivation and Production

Cost of goods sold includes the costs directly attributable to product sales and includes amounts paid for finished goods, such as flower, edibles, and concentrates, as well as packaging and delivery costs. It also includes the labor and overhead costs incurred in cultivating and producing cannabis flower and cannabis-derived products. Overhead expenses include allocations of rent, administrative salaries, utilities, and related costs.

Cannabinoid Products

Cost of goods sold includes the fees charged by suppliers to manufacture CBD products as well as packaging and shipping costs for finished goods.

Advertising Expenses

The Company expenses advertising costs as incurred in accordance with ASC 720-35, “Other Expenses -– Advertising Cost.” Advertising expenses recognized totaled ~~$0.25~~$0.03 million and ~~$1.09~~$0.11 million for the ~~six~~three months ended ~~June 30,~~March 31, 2021 and 2020, ~~and 2019,~~ respectively.

Stock-Based Compensation

The Company accounts for its stock-based awards in accordance with ASC Subtopic 718-10, “Compensation -– Stock Compensation”, which requires fair value measurement on the grant date and recognition of compensation expense for all stock-based payment awards made to employees and directors, including restricted stock awards. For stock options, the Company estimates the fair value using a closed option valuation (Black-Scholes) model. The fair value of restricted stock awards is based upon the quoted market price of the common shares on the date of grant. The fair value is then expensed over the requisite service periods of the awards, net of estimated forfeitures, which is generally the performance period and the related amount is recognized in the consolidated statements of operations.

The Black-Scholes option-pricing model requires the input of certain assumptions that require the Company’s judgment, including the expected term and the expected stock price volatility of the underlying stock. The assumptions used in calculating the fair value of stock-based compensation represent management’s best estimates, but these estimates involve inherent uncertainties and the application of judgment. As a result, if factors change resulting in the use of different assumptions, stock-based compensation expense could be materially different in the future. The Company accounts for forfeitures of stock-based awards as they occur.

Income Taxes

The provision for income taxes is determined in accordance with ASC 740, “Income Taxes”. The Company files a consolidated United States federal income tax return. The Company provides for income taxes based on enacted tax law and statutory tax rates at which items of income and expense are expected to be settled in our income tax return. Certain items of revenue and expense are reported for Federal income tax purposes in different periods than for financial reporting purposes, thereby resulting in deferred income taxes. Deferred taxes are also recognized for operating losses that are available to offset future taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. The Company has incurred net operating losses for financial-reporting and tax-reporting purposes. At ~~June 30,~~March 31, 2021 and 2020, ~~and 2019,~~ such net operating losses were offset entirely by a valuation allowance.

The Company recognizes uncertain tax positions based on a benefit recognition model. Provided that the tax position is deemed more likely than not of being sustained, the Company recognizes the largest amount of tax benefit that is greater than 50.0% likely of being ultimately realized upon settlement. The tax position is derecognized when it is no longer more likely than not of being sustained. The Company classifies income tax related interest and penalties as interest expense and selling, general and administrative expense, respectively, on the consolidated statements of operations.

Loss Per Common Share

In accordance with the provisions of ASC 260, “Earnings Per Share”, net loss per share is computed by dividing net loss by the weighted-average shares of common stock outstanding during the period. During a loss period, the effect of the potential exercise of stock options, warrants, convertible preferred stock, and convertible debt are not considered in the diluted loss per share calculation since the effect would be anti-dilutive. The results of operations were a net loss for the ~~six~~three months ended ~~June 30, 2020~~March 31, 2021 and ~~2019.~~2020. Therefore, the basic and diluted weighted-average shares of common stock outstanding were the same for ~~all~~both years.

Potentially dilutive securities that are not included in the calculation of diluted net loss per share because their effect is anti-dilutive are as follows (in common equivalent shares):

	Six Months Ended June 30,				Three Months Ended March 31,
	2020		2019		2021		2020

Common stock warrants		1,205,126		1,170,540		16,076,556		1,313,459
Common stock options		15,350,580		12,321,447		11,937,987		5,715,294
		16,555,706		13,491,987
						28,014,543		7,028,753

Warrants issued that are exercisable for little to no cost are included in the denominator of basic earnings per share. During the three months ended March 31, 2021, the Company issued 24,945,055 such warrants that are included in the calculation of net loss per share.

Recently ~~Issued~~Adopted Accounting Standards

FASB ~~Accounting Standards Update (“ASU”)~~ASU No. 2020-06 ~~“Accounting~~“Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity”- – Issuedin August 2020, ASU 2020-06simplifiesthe accounting for convertible instruments by eliminating the requirement to separate embedded conversion features from the host contract when the conversionfeatures are not required to be accounted for as derivatives under Topic 815, Derivatives and Hedging, or that do not result in substantial premiums accounted foras paid-incapital. By removing the separation model, a convertible debt instrument will be accounted for as a single liability measured at its amortized cost andthe interest rate on convertible debt instruments will typically be closer to the coupon interest rate when applying the guidance in Topic 835,Interest. ASU 2020-06is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted, but no earlierthan fiscal years beginning after December 15, 2020, including interim periods within those years. The Company adopted ASU 2020-06 as of January 1, 2021, utilizing the modified retrospective method of adoption. As a result of adoption of the new standard, previously recognized beneficial conversion features for convertible debt instruments outstanding as of January 1, 2021 were removed from additional paid-in capital and the debt discount. A cumulative impact adjustment was recorded to account for a reduction in interest expense due to a decrease in the discount, which is ~~currently evaluating~~recognized as interest expense upon conversion of the ~~adoption date and impact adoption will have on its~~convertible notes. The January 1, 2021 cumulative effect adjustment to the Company’s financial position ~~and results of operations.~~ was as follows:

The pending sales of our Nevada dispensaries, expected ~~sales~~sale of real estate, ~~assets,~~ and assets divested ~~in the first half of~~during 2020 represent a strategic shift that will have a major effect on the Company’s operations and financial results. As a result, Management determined the results of these components qualified for discontinued operations presentation in accordance with ASC 205, ““Reporting Discontinued Operations and Disclosure of Disposals of Components of an ~~Entity.~~Entity.”

During 2020, Management suspended the operations of OneQor Technologies due to (i) a lack of proper growth in customer acquisition and revenue for this CBD operation during the COVID-19 pandemic and (ii) the overall financial health of the Company as a result of COVID-19 and social unrest. The Company plans to focus its attention and resources on growing its THC business.

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Operating results for the discontinued operations were comprised of the following:


	(in thousands)						(in thousands)						(in thousands)
	Three Months ended June 30,						Six Months ended June 30,						Three Months Ended March 31,
	2020			2019			2020			2019			2021		2020
Total revenues	$	97		$	5,025		$	2,407		$	11,207		$	-	$	2,576
Cost of goods sold		164			2,621			1,951			6,189			-		2,039

Gross profit		(67	)		2,404			456			5,018			-		537

Selling, general and administrative expenses		186			2,924			2,275			5,338			-		2,594
(Gain) / Loss on sale of assets		-			-
Loss on sale of assets														-		3,188

Income (Loss) from operations	$	(253	)	$	(520	)	$	(1,819	)	$	(320	)	$	-	$	(5,245	)

Other income (expense)		(408	)		36			(3,197	)		(387	)
Interest expense
Other income (loss)														14		11

Income (Loss) from discontinued operations	$	(661	)	$	(484	)	$	(5,016	)	$	(707	)	$	14	$	(5,235	)

Income (Loss) from discontinued operations per common share attributable to Terra Tech Corp common stockholders - basic and diluted	$	(0.00	)	$	(0.01	)	$	(0.01	)	$	(0.00	)	$	0.00	$	(0.03	)

The carrying amounts of the major classes of assets and liabilities for the discontinued operations are as follows:

(in thousands)

June 30,
2020

December 31,
2019

Accounts receivable, net

$ 73

1,096

Inventory

-

1,073

Prepaid expenses and other assets

-

271

Property, equipment and leasehold improvements, net

10,325

15,069

Intangible assets, net

-

399

Goodwill

-

6,251

Other assets

1

1,079

Investments

-

-

Assets of discontinued operations

$ 10,399

$ 25,238

Accounts payable and accrued expenses

$ 388

$ 3,285

Deferred gain on sale of assets

7,695

3,750

Liabilities of discontinued operations

$ 8,083

$ 7,035

The carrying amounts of the major classes of assets and liabilities for the discontinued operations are as follows:

	(in thousands)
	March 31, 2021		December 31, 2020
Prepaid expenses and other assets	$	1	$	2
Property, equipment and leasehold improvements, net		2,766		2,766
Intangible assets, net		-		-
Goodwill		-		-
Other assets		161		186
Assets of discontinued operations	$	2,928	$	2,954

Accounts payable and accrued expenses	$	999	$	985
Deferred gain on sale of assets		8,783		8,783
Long-term lease liabilities		-		28
Liabilities of discontinued operations	$	9,782	$	9,796

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NOTE 17 ~~- SEGMENT INFORMATION~~

~~During 2018, the Company acquired additional real property and determined that a previously insignificant operating segment~~ ~~“Real Estate and Construction”~~ was significant and was a reportable segment requiring disclosure in accordance with ASC 280. As of June 30, 2020, the majority of our real property is included in discontinued operations. As of June 30, 2020, the “~~Real Estate and Construction~~~~” has been merged with our “Corporate & Other” reportable segment.~~

~~During the six months ended June 30, 2020, the “~~~~Herbs and Produce Products”~~ ~~segment was discontinued as was included in discontinued operations. Prior period information below has been revised to conform to current period presentation.~~

~~We are now organized into two reportable segments:~~

	•	~~Cannabis Dispensary, Cultivation and Production~~ ~~- Includes cannabis-focused retail, cultivation and production operations; and~~

	•	~~Corporate / CBD~~ ~~- Includes CBD formulation and production, building ownership and corporate support operations.~~

As of and For the Three Months Ended June 30, 2020
(Unaudited)
(in thousands)

Cannabis

Corporate / CBD

Total

Total Revenues

$ 3,007

$ 301

$ 3,308

Cost of Goods Sold

1,759

157

1,916

Gross Profit

1,248

144

1,392

Selling, General and Administrative Expenses

3,606

3,770

7,377

Impairment of Assets

4,998

6,316

11,314

(Gain) / Loss on Sale of Assets

-

-

-

(Gain) / Loss on Interest in Joint Venture

-

-

-

Loss from operations

(7,356 )

(9,943 )

(17,299 )

Other Income (Expense):

Interest Income (Expense)

(243 )

(599 )

(842 )
Other Income / (Loss)

(89 )

1

(88 )

Total Other Income (Expense)

(332 )

(598 )

(930 )

Net Income (Loss) from continuing operations

$ (7,688 )

$ (10,541 )

$ (18,229 )

Total assets at June 30, 2020

$ 69,684

$ 20,862

$ 90,546

As of and For the Six Months Ended June 30, 2020
(Unaudited)
(in thousands)

Cannabis

Corporate / CBD

Total

Total Revenues

$ 6,753

$ 868

$ 7,621

Cost of Goods Sold

3,181

710

3,891

Gross Profit

3,572

158

3,730

Selling, General and Administrative Expenses

7,484

8,929

16,414

Impairment of Assets

10,118

6,316

16,434

(Gain) / Loss on Sale of Assets

(35 )

-

(35 )
(Gain) / Loss on Interest in Joint Venture

-

-

-

Loss from operations

(13,995 )

(15,087 )

(29,082 )

Other Income (Expense):

Interest Income (Expense)

(488 )

(1,256 )

(1,744 )
Other Income / (Loss)

(51 )

28

(23 )

Total Other Income (Expense)

(539 )

(1,228 )

(1,767 )

Net Income (Loss) from continuing operations

$ (14,534 )

$ (16,315 )

$ (30,849 )

Total assets at June 30, 2020

$ 69,684

$ 20,862

$ 90,546

As of and For the Three Months Ended June 30, 2019
(Unaudited)
(in thousands)

Cannabis

Corporate / CBD

Total

Total Revenues

$ 4,477

$ -

$ 4,477

Cost of Goods Sold

2,177

-

2,177

Gross Profit

2,300

-

2,300

Selling, General and Administrative Expenses

3,402

5,211

8,613

Impairment of Assets

114

396

510

(Gain) / Loss on Sale of Assets

-

-

-

(Gain) / Loss on Interest in Joint Venture

(0 )

-

(0 )

Loss from operations

(1,215 )

(5,607 )

(6,822 )

Other Income (Expense):

Interest Income (Expense)

(305 )

(3,314 )

(3,620 )
Other Income / (Loss)

(12 )

997

985

Total Other Income (Expense)

(318 )

(2,318 )

(2,635 )

Net Income (Loss) from continuing operations

$ (1,533 )

$ (7,924 )

$ (9,457 )

Total assets at June 30, 2019

$ 92,974

$ 9,941

$ 102,916

As of and For the Six Months Ended June 30, 2019
(Unaudited)
(in thousands)

Cannabis

Corporate / CBD

Total

Total Revenues

$ 6,522

$ -

$ 6,522

Cost of Goods Sold

2,622

-

2,622

Gross Profit

3,900

-

3,900

Selling, General and Administrative Expenses

6,454

10,750

17,204

Impairment of Assets

114

396

510

(Gain) / Loss on Sale of Assets

-

-

-

(Gain) / Loss on Interest in Joint Venture

1,067

-

1,067

Loss from operations

(3,734 )

(11,146 )

(14,880 )

Other Income (Expense):

Interest Income (Expense)

(532 )

(6,015 )

(6,548 )
Other Income / (Loss)

(12 )

1,009

997

Total Other Income (Expense)

(545 )

(5,007 )

(5,551 )

Net Income (Loss) from continuing operations

$ (4,279 )

$ (16,152 )

$ (20,431 )

Total assets at June 30, 2019

$ 92,974

$ 9,941

$ 102,916

~~NOTE 18 -~~– LITIGATION AND CLAIMS

The Company is the subject of lawsuits and claims arising in the ordinary course of business from time to time. The Company reviews any such legal proceedings and claims on an ongoing basis and follows appropriate accounting guidance when making accrual and disclosure decisions. The Company establishes accruals for those contingencies where the incurrence of a loss is probable and can be reasonably estimated, and it discloses the amount accrued and the amount of a reasonably possible loss in excess of the amount accrued if such disclosure is necessary for the Company’s financial statements to not be misleading. To estimate whether a loss contingency should be accrued by a charge to income, the Company evaluates, among other factors, the degree of probability of an unfavorable outcome and the ability to make a reasonable estimate of the amount of the loss. The Company does not record liabilities when the likelihood that the liability has been incurred is probable, but the amount cannot be reasonably estimated. Based upon present information, the Company determined that there were no material matters that required an accrual as of ~~June 30, 2020.~~March 31, 2021.

On January 6, 2021, a putative, nationwide class action for violations of the Telephone Consumer Protection Act (the “TCPA”), captioned as Stanley, et al. v Terra Tech Corp., et al., Civil Action No. 8:21-cv00022, was filed against Terra Tech and MediFarm LLC (the “Defendants”) in the United States District Court for the Central District of California (the “TCPA Action”). In the TCPA Action, Plaintiffs alleged that Defendants violated the TCPA by sending text messages to them and other persons using an automated telephone dialing system without consent. Plaintiffs sought on behalf of themselves and other purportedly similarly situated-persons, statutory damages and an unspecified amount of actual damages for each alleged violation, declaratory and injunctive relief, and attorneys’ fees and costs. On March 5, 2021, Defendants filed a motion to dismiss the TCPA Action in its entirety. See Note 19, “Subsequent Events” for additional information regarding settlement of the TCPA matter.

NOTE ~~19 - GOING CONCERN~~

We have incurred significant losses in prior periods. For the six months ended June 30, 2020, we incurred a net loss of $35.51 million and cash outflows from operations were $8.16 million. For the year ended December 31, 2019, we incurred a net loss of $46.93 million, cash outflows from operations of $14.74 million, and, as of that date, we had an accumulated deficit of $189.69 million. We expect to experience further significant net losses in 2020 and the foreseeable future.

In an effort to achieve liquidity that would be sufficient to meet all of our commitments, we have undertaken a number of actions, including minimizing capital expenditures and reducing recurring expenses. However, we believe that even after taking these actions, we may not have sufficient liquidity to satisfy all of our future financial obligations and execute our business plan.

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America, which contemplate our continuation as a going concern. If the Company is unable to obtain the funds due upon the close of our pending asset sales or obtain additional financing, future operations would need to be scaled back or discontinued. The risks and uncertainties surrounding the timing of the close of our pending asset sales in Nevada, our limited capital resources, and the weak industry conditions impacting our business raise substantial doubt as to our ability to continue as a going concern for twelve months from the issuance of these financial statements.

~~NOTE 20 - SUBSEQUENT EVENTS~~18 – RELATED PARTY TRANSACTIONS

On January 11, 2021 the Company entered into a separation agreement with Alan Gladstone, formerly a director of the Company. Pursuant to the agreement, the Company issued to Mr. Gladstone 500,000 freely-trading shares of the Company’s common stock. The Independent Director Agreement between the Company and Mr. Gladstone, dated as of July 1, ~~2020,~~2019, was terminated. The Company recognized $0.11 million of stock-based compensation expense in the three months ended March 31, 2021 as a result of the separation agreement with Mr. Gladstone.

On January 22, 2021, the Company ~~granted Alan Gladstone~~entered into a Resignation and ~~Steven J. Ross, our independent directors, each 541,350~~Release Agreement and a Series A Preferred Stock Purchase Agreement with Michael A. Nahass. Mr. Nahass agreed to resign from his positions as a director, executive officer and employee of the Company, and the Company agreed to purchase from Mr. Nahass the four shares of the Company’s Series A Preferred Stock held by Mr. Nahass for an aggregate purchase price of $3.1 million, of which (i) $1.00 million was paid in cash, and $2.10 million was paid in the form of promissory notes. As a result of the separation agreement with Mr. Nahass, the Company recorded $2.10 million of short-term debt and $3.10 million of severance expense as of and during the three months ended March 31, 2021.

On January 22, 2021, the Company entered into a Resignation and Release Agreement with Derek Peterson, pursuant to which Mr. Peterson agreed to resign from his positions as a director, executive officer and employee of the Company effective immediately upon the Company’s closing of a private placement in the amount of not less than $3,500,000, which occurred. In addition, the Company extended the time within which vested common stock options held by Mr. Peterson may be exercised to 150 days after the date of resignation.

Mr. Peterson agreed to the cancellation of his Series A Preferred Stock though conversion into 16,485,714 shares of common stock and, in consideration of the conversion, was issued 4,945,055 warrants to purchase common stock, expiring in June 2026, with an exercise price of $0.01 per share, which are subject to a one-year lockup with registration rights. The Company recognized $5.90 million of severance expense in the three months ended March 31, 2021 as a result of the separation agreement with Mr. Peterson.

On February 1, 2021, Terra Tech Corp. (the “Company”) entered into an Amended and Restated Independent Director Agreement with Nicholas Kovacevich, the Chairman of the Company’s Board of Directors (the “Kovacevich Agreement”). Pursuant to the Kovacevich Agreement, (1) the Company issued to Mr. Kovacevich 500,000 restricted shares of the Company’s common stock ~~and 454,545 options to purchase common stock. The options~~(the “Common Stock”), which vest ~~quarterly over~~in twelve equal installments on the first day of each month beginning on March 1, 2021 (provided Mr. Kovacevich is a ~~three year period. These grants are part~~director of the ~~Independent Director Agreements~~Company on the applicable vesting date) and (2) the Company agreed to pay Mr. Kovacevich cash compensation of five thousand dollars per month, payable on the first day of each month beginning March 1, 2021 for ~~Mr. Gladstone and Mr. Ross signed on July 1, 2019.~~

~~On July 29, 2020, 1815 Carnegie LLC, a wholly-owned subsidiary of Terra Tech Corp. (the “Company”), completed its previously announced disposition~~the term of the real property located at 1815 E. Carnegie, Santa Ana, CA to Dyer 18 LLC (the “Buyer”) for $9.20 million in cash pursuant to a Standard Offer, Agreement and Escrow Instructions for Purchase of Real Estate (the “PSA”) between the Company and the Buyer, dated April 13, 2020.Kovacevich Agreement. There is no material relationship between the Company or its affiliates and ~~the Buyer~~Mr. Kovacevich, other than in respect of the transactions contemplated by the ~~PSA.~~Kovacevich Agreement.

On February 1, 2021, the Company entered into an Amended and Restated Independent Director Agreement with Ira Ritter, a member of the Company’s Board of Directors (the “Ritter Agreement”). Pursuant to the Ritter Agreement, (1) the Company issued to Mr. Ritter an option to purchase 500,000 shares of Common Stock at the closing price of the Common Stock on the date of the Ritter Agreement, which vest in twelve equal installments on the first day of each month beginning on March 1, 2021 (provided Mr. Ritter is a director of the Company on the applicable vesting date) and (2) the Company agreed to pay Mr. Ritter cash compensation of five thousand dollars per month, payable on the first day of each month beginning March 1, 2021 for the term of the Ritter Agreement. There is no material relationship between the Company or its affiliates and Mr. Ritter, other than in respect of the transactions contemplated by the Ritter Agreement.

On ~~July 31, 2020,~~February 3, 2021, the Company ~~paid off~~entered into an Exchange Agreement with Matthew Lee Morgan, formerly the Chief Executive Officer of the Company. Pursuant to the agreement, the secured ~~borrowing agreements with Clearfi, LLC, an unaffiliated third party~~promissory note held by Mr. Morgan in the amount of ~~$0.37 million.~~

~~Subsequent to June 30, 2020, senior convertible promissory notes and accrued interest in the amount of $0.20~~$0.50 million ~~and $0.04 million, respectively, were~~was converted into ~~2,959,670~~1,428,571 shares of common ~~stock.~~stock, with a fair value of $0.41 million. During the three months ended March 31, 2021, the Company recognized a gain of $0.09 million for debt forgiveness upon conversion of the promissory note.

On March 2, 2021, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with UMBRLA, Inc., a Nevada corporation (“UMBRLA”), a diversified cannabis company with distribution, manufacturing and dispensary operations, Phoenix Merger Sub Corp., a Nevada corporation and wholly owned subsidiary of the Company (“Merger Sub”), and Dallas Imbimbo, as the stockholder representative for the UMBRLA stockholders. Upon the terms and subject to the satisfaction of the conditions described in the Merger Agreement, Merger Sub will be merged with and into UMBRLA (the “Merger”), with UMBRLA surviving the Merger as a wholly owned subsidiary of the Company. The Merger is intended to qualify as a tax-free reorganization for U.S. federal income tax purposes. There is ownership in UMBRLA stock by members of the Company’s Board of Directors as well as certain Terra Tech Corp Note Holders who also hold UMBRLA stock and warrants. As such, the Merger may be considered a related party transaction.

All related party transactions are monitored quarterly by the Company and approved by the Audit Committee of the Board of Directors.

NOTE 19 – SUBSEQUENT EVENTS

On April 6, 2021, the Company entered into an Independent Director Agreement (the “Director Agreement”), a Director Indemnification Agreement (the “Indemnification Agreement”) and a Stock Option Agreement (the “Option Agreement”) with Tiffany Davis in connection with her appointment to the Board of Directors of the Company.

Pursuant to the Director Agreement, among other things, (1) the Company agreed to enter into a Stock Option Agreement to issue to Ms. Davis an option to purchase 409,716 shares of the Company’s Common Stock at the closing price of the Common Stock on the date of the Director Agreement and (2) the Company agreed to pay Ms. Davis cash compensation of five thousand dollars per month, pro-rated for any partial months, payable on the first day of each month beginning on the date of the Director Agreement.

Pursuant to the Indemnification Agreement, among other things, the Company agreed to hold harmless and indemnify Ms. Davis to the fullest extent permitted by law, including indemnification of expenses such as attorneys’ fees, judgments, penalties, fines and settlement amounts incurred by Ms. Davis in any proceeding arising out of her services as a director.

Pursuant to the Option Agreement, among other things, the Company issued to Ms. Davis an option to purchase 409,716 shares of the Company’s Common Stock at the closing price of the Common Stock on the date of the Option Agreement. The stock options vest in ten installments, with the first installment of 34,722 shares vesting on date of the Option Agreement, and the remaining installments vesting equally on the first day of each month thereafter (provided Ms. Davis is a director of the Company on the applicable vesting date).

There is no material relationship between the Company or its affiliates and Ms. Davis, other than in respect of the transactions contemplated by the Director Agreement, the Indemnification Agreement and the Option Agreement.

On April 13, 2021, in connection with the resignation of Steven Ross as a director of the Company, the Company and Mr. Ross agreed to terminate the Director Agreement and enter into a Separation Agreement (the “Separation Agreement”). Pursuant to the Separation Agreement, among other things, the Company agreed to 1) make cash payments to Mr. Ross of $0.09 million on April 30, 2021, $0.08 million on August 16, 2021, and $0.08 million on December 31, 2021, and 2) issue to Mr. Ross $0.05 million of freely-trading shares of the Common Stock on each of April 30, 2021, August 16, 2021, and December 31, 2021. The number of shares of common stock issued on each issuance date will be calculated based on the closing price of the Common Stock on the trading day immediately prior to such issuance date. In addition, all vested options to acquire Common Stock held by Mr. Ross remain exercisable pursuant to their terms and all unvested options to acquire Common Stock held by Mr. Ross’ will accelerate and become vested. The Separation Agreement contains mutual releases and other customary terms and conditions as more fully set forth therein. There is no material relationship between the Company or its affiliates and Mr. Ross other than in respect of the transactions contemplated by the Separation Agreement.

On April 29, 2021, the Company and the Plaintiffs of the TCPA Action filed a joint notice advising the court that they had reached a settlement of the Plaintiffs’ individual claims and expect to (1) finalize the settlement and (2) file a joint stipulation of dismissal of the TCPA Action with prejudice by May 29, 2021.

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