Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | ||
Dec. 31, 2016 | Mar. 24, 2017 | Jun. 30, 2016 | |
Document And Entity Information | |||
Entity Registrant Name | Terra Tech Corp. | ||
Entity Central Index Key | 1,451,512 | ||
Document Type | 10-K | ||
Document Period End Date | Dec. 31, 2016 | ||
Amendment Flag | false | ||
Current Fiscal Year End Date | --12-31 | ||
Is Entity a Well-known Seasoned Issuer | No | ||
Is Entity a Voluntary Filer | No | ||
Is Entity's Reporting Status Current | Yes | ||
Entity Filer Category | Smaller Reporting Company | ||
Entity Common Stock, Shares Outstanding | 574,303,117 | ||
Document Fiscal Period Focus | FY | ||
Document Fiscal Year Focus | 2,016 | ||
Entity Public Float | $ 115,713,491 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) | Dec. 31, 2016 | Dec. 31, 2015 |
Current Assets: | ||
Cash | $ 9,749,572 | $ 418,082 |
Accounts Receivable, Net | 747,792 | 741,844 |
Prepaid Expenses | 704,721 | 147,230 |
Inventory | 1,909,330 | 949,448 |
Total Current Assets | 13,111,415 | 2,256,604 |
Property, Equipment and Leasehold Improvements, Net | 10,464,764 | 6,694,975 |
Goodwill | 28,921,260 | |
Intangible Assets, Net | 23,627,098 | 118,932 |
Deposits | 54,193 | 94,528 |
TOTAL ASSETS | 76,178,730 | 9,165,039 |
Current Liabilities: | ||
Accounts Payable and Accrued Expenses | 2,417,400 | 1,119,459 |
Derivative Liability | 6,987,000 | 743,400 |
Short-Term Debt | 564,324 | 917,363 |
Income Taxes Payable | 615,830 | |
Contingent Consideration | 12,085,859 | |
Total Current Liabilities | 22,670,413 | 2,780,222 |
Long-Term Liabilities: | ||
Long-Term Debt | 1,354,352 | |
Deferred Tax Liability, Net | 44,000 | |
Total Long-Term Liabilities | 1,354,352 | 44,000 |
Total Liabilities | 24,024,765 | 2,824,222 |
COMMITMENTS AND CONTINGENCIES | ||
STOCKHOLDERS' EQUITY: | ||
Common Stock, Par Value $0.001:; 990,000,000 Shares Authorized as of December 31, 2016; 350,000,000 Shares Authorized as of December 31, 2015; 553,863,812 Shares Issued and Outstanding as of December 31, 2016; 303,023,744 Shares Issued and Outstanding as of December 31, 2015 | 553,864 | 303,024 |
Additional Paid-In Capital | 124,915,182 | 51,843,071 |
Accumulated Deficit | (72,870,999) | (45,952,109) |
Total Terra Tech Corp. Stockholders' Equity | 52,634,873 | 6,210,286 |
Non-Controlling Interest | (480,908) | 130,531 |
Total Stockholders' Equity | 52,153,965 | 6,340,817 |
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | 76,178,730 | 9,165,039 |
Convertible Series B Preferred Stock | ||
STOCKHOLDERS' EQUITY: | ||
Preferred Stock, Value | 36,826 | 16,300 |
Convertible Series A Preferred Stock | ||
STOCKHOLDERS' EQUITY: | ||
Preferred Stock, Value |
CONDENSED CONSOLIDATED BALANCE3
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares | Dec. 31, 2016 | Dec. 31, 2015 |
Stockholders' Equity | ||
Common stock, par value | $ 0.001 | $ 0.001 |
Common stock, Authorized | 990,000,000 | 350,000,000 |
Common stock, Issued | 553,873,812 | 303,023,744 |
Common stock, Outstanding | 553,873,812 | 303,023,744 |
Convertible Series A Preferred Stock | ||
Stockholders' Equity | ||
Preferred stock, Par value | $ 0.001 | $ 0.001 |
Preferred stock, Authorized | 100 | 100 |
Preferred stock, Issued | 100 | 100 |
Preferred stock, Outstanding | 100 | |
Convertible Series B Preferred Stock | ||
Stockholders' Equity | ||
Preferred stock, Par value | $ 0.001 | $ 0.001 |
Preferred stock, Authorized | 49,999,900 | 24,999,900 |
Preferred stock, Issued | 36,825,953 | 16,300,000 |
Preferred stock, Outstanding | 36,825,953 | 16,300,000 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($) | 12 Months Ended | ||
Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 | |
Condensed Consolidated Statements Of Operations | |||
Total Revenues | $ 25,327,763 | $ 9,975,346 | $ 7,094,270 |
Cost of Goods Sold | 22,755,080 | 8,958,475 | 6,941,278 |
Gross Profit | 2,572,683 | 1,016,871 | 152,992 |
Selling, General and Administrative Expenses | 20,720,535 | 9,833,646 | 18,341,247 |
Loss from Operations | (18,147,851) | (8,816,775) | (18,188,255) |
Other (Expense) Income: | |||
Amortization of Debt Discount | (1,414,202) | (696,180) | |
Loss on Extinguishment of Debt | (5,382,813) | (619,444) | |
Loss from Derivatives Issued With Debt Greater Than Debt Carrying Value | (1,487,500) | (561,000) | (4,808,000) |
Gain (Loss) on Fair Market Valuation of Derivatives | (1,844,500) | 1,800,100 | 1,912,037 |
Interest Expense | (377,349) | (469,576) | (1,096,324) |
Gain on Fair Market Valuation of Contingent Consideration | 668,694 | ||
Total Other (Expense) Income | (9,837,670) | (546,100) | (3,992,287) |
Loss Before Provision for Income Taxes | (27,985,521) | (9,362,875) | (22,180,542) |
Provision for Income Taxes | 44,000 | ||
Net Loss | (27,985,521) | (9,406,875) | (22,180,542) |
Net Loss Attributable to Non-Controlling Interests | 1,066,631 | 181,295 | 291,330 |
NET LOSS ATTRIBUTABLE TO TERRA TECH CORP. | $ (26,918,890) | $ (9,225,580) | $ (21,889,212) |
Net Loss Per Common Share Attributable to Terra Tech Corp. Common Stockholders - Basic and Diluted | $ (0.07) | $ (0.04) | $ (0.13) |
Weighted-Average Number of Common Shares Outstanding - Basic and Diluted | 389,359,598 | 240,194,811 | 174,297,430 |
CONSOLIDATED STATEMENT OF STOCK
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT) - USD ($) | Convertible Series A Preferred Stock | Convertible Series B Preferred Stock | Common Stock | Additional Paid-In Capital | Accumulated Deficit | Noncontrolling Interest | Total |
Beginning balance, Amount at Dec. 31, 2013 | $ 100 | $ 14,750 | $ 146,808 | $ 14,759,246 | $ (14,837,317) | $ 83,487 | |
Beginning balance, Shares at Dec. 31, 2013 | 14,750,000 | 146,806,928 | |||||
Sale of Common Stock, Shares | 6,600,000 | ||||||
Sale of Common Stock, Amount | $ 6,600 | 4,008,319 | 4,014,919 | ||||
Proceeds from issuance of Common Stock from the exercise of warrants, Shares | 4,613,362 | ||||||
Proceeds from issuance of Common Stock from the exercise of warrants, Amount | $ 4,614 | 288,806 | 293,420 | ||||
Issuance of warrants | 5,038,986 | 5,038,986 | |||||
Issuance of Common Stock for services, Shares | 6,973,414 | ||||||
Issuance of Common Stock for services, Amount | $ 6,973 | 3,707,580 | 3,714,553 | ||||
Issuance of Common Stock for debt and interest expense, Shares | 26,097,816 | ||||||
Issuance of Common Stock for debt and interest expense, Amount | $ 26,097 | 7,191,291 | 7,217,388 | ||||
Short swing profit payment | 67,100 | 67,100 | |||||
Common Stock retired, Shares | (740,000) | ||||||
Common Stock retired, Amount | $ (740) | 740 | |||||
Issuance of Common Stock for the exercise of cashless warrants, Shares | 3,003,335 | ||||||
Issuance of Common Stock for the exercise of cashless warrants, Amount | $ 3,003 | (3,003) | |||||
Issuance of Common Stock for compensation, Shares | 4,178,037 | ||||||
Issuance of Common Stock for compensation, Amount | $ 4,178 | 1,937,182 | 1,941,360 | ||||
Issuance of Preferred Stock for compensation, Shares | 750,000 | ||||||
Issuance of Preferred Stock for compensation, Amount | $ 750 | 1,085,537 | 1,086,287 | ||||
Non-controlling Share of Loss | $ (291,330) | (291,330) | |||||
Net loss | (21,889,212) | (21,889,212) | |||||
Ending balance, Amount at Dec. 31, 2014 | $ 15,500 | $ 197,533 | 38,081,784 | (36,726,529) | (291,330) | 1,276,958 | |
Ending balance, Shares at Dec. 31, 2014 | 100 | 15,500,000 | 197,532,892 | ||||
Sale of Common Stock, Shares | 34,301,796 | ||||||
Sale of Common Stock, Amount | $ 34,302 | 3,941,586 | 3,975,888 | ||||
Issuance of warrants | 1,148,069 | 1,148,069 | |||||
Issuance of Common Stock for services, Shares | 10,843,526 | ||||||
Issuance of Common Stock for services, Amount | $ 10,843 | 999,269 | 1,010,112 | ||||
Issuance of Common Stock for debt and interest expense, Shares | 56,645,530 | ||||||
Issuance of Common Stock for debt and interest expense, Amount | $ 56,646 | 6,996,232 | 7,052,878 | ||||
Issuance of Common Stock for compensation, Shares | 3,700,000 | ||||||
Issuance of Common Stock for compensation, Amount | $ 3,700 | 310,800 | 314,500 | ||||
Issuance of Preferred Stock for compensation, Shares | 800,000 | ||||||
Issuance of Preferred Stock for compensation, Amount | $ 800 | 365,331 | 366,131 | ||||
Non-controlling Share of Loss | (181,295) | (181,295) | |||||
Non-controlling cash contribution | 603,156 | 603,156 | |||||
Net loss | (9,225,580) | (9,225,580) | |||||
Ending balance, Amount at Dec. 31, 2015 | $ 16,300 | $ 303,024 | $ 51,843,071 | (45,952,109) | 130,531 | $ 6,340,817 | |
Ending balance, Shares at Dec. 31, 2015 | 100 | 16,300,000 | 303,023,744 | ||||
Sale of Common Stock, Shares | 28,920 | 4,029,214 | 4,058,134 | ||||
Sale of Common Stock, Amount | $ 28,919,227 | ||||||
Issuance of warrants | $ 467,066 | $ 467,066 | |||||
Issuance of Common Stock for services, Shares | 7,415,284 | ||||||
Issuance of Common Stock for services, Amount | $ 7,415 | 2,733,070 | 2,740,485 | ||||
Issuance of Common Stock for debt and interest expense, Shares | 56,678,708 | ||||||
Issuance of Common Stock for debt and interest expense, Amount | $ 56,679 | 20,667,987 | 20,724,666 | ||||
Issuance of Common Stock for the exercise of cashless warrants, Shares | 7,307,531 | ||||||
Issuance of Common Stock for the exercise of cashless warrants, Amount | $ 7,308 | (7,308) | |||||
Exercise of Warrants | $ 17,044 | 3,132,956 | 3,150,000 | ||||
Exercise of Warrants (in shares) | 17,045,455 | ||||||
Issuance of Common Stock for Intangibles | $ 172 | $ 99,828 | $ 100,000 | ||||
Issuance of Common Stock for Intangibles (in shares) | 172,414 | ||||||
Issuance of Common Stock for compensation, Shares | 6,452 | 2,456,168 | 2,462,620 | ||||
Issuance of Common Stock for compensation, Amount | $ 6,451,702 | ||||||
Issuance of Preferred Stock for compensation, Shares | 400 | 714,639 | 715,039 | ||||
Issuance of Preferred Stock for compensation, Amount | $ 400,000 | ||||||
Non-controlling Share of Loss | (1,066,631) | $ (1,066,631) | |||||
Non-controlling cash contribution | 455,192 | 455,192 | |||||
Net loss | (26,918,890) | (26,918,890) | |||||
Ending balance, Amount at Dec. 31, 2016 | $ 36,826 | $ 553,864 | $ 124,915,182 | $ (72,870,999) | $ (480,908) | $ 52,153,965 | |
Ending balance, Shares at Dec. 31, 2016 | 100 | 36,825,953 | 553,863,812 |
CONDENSED CONSOLIDATED STATEME6
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS - USD ($) | 12 Months Ended | ||
Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | |||
Net Loss | $ (26,918,890) | $ (9,225,580) | $ (21,889,212) |
Adjustments to Reconcile Net Loss to Net Cash Used in Operating Activities: | |||
(Gain) Loss on Fair Market Valuation of Derivatives | (1,844,500) | 1,800,100 | 1,912,037 |
Gain (Loss) on Fair Market Valuation of Derivatives | (1,844,500) | 1,800,100 | 1,912,037 |
Loss on Extinguishment of Debt | 5,382,813 | 619,444 | |
Amortization of Debt Discount | 1,414,202 | 696,180 | |
Deferred Tax Expense | 44,000 | ||
Depreciation and Amortization | 2,536,413 | 645,294 | 438,783 |
Warrants Issued With Common Stock and Debt | 467,066 | 1,148,069 | 5,038,986 |
Stock Issued for Interest Expense | 396,555 | ||
Stock Issued for Compensation | 3,177,659 | 680,630 | 3,027,647 |
Stock Issued for Director Fees | 334,424 | ||
Stock Issued for Services | 2,406,061 | 1,010,112 | 3,714,553 |
Stock Option Expense | 190,355 | ||
Equity Instruments Issued With Debt Greater Than Debt Carrying Amount | 1,487,500 | 561,000 | 4,808,000 |
Change in Accounts Receivable Reserve | (168,619) | 153,660 | 18,140 |
Changes in Operating Assets and Liabilities: | |||
Accounts Receivable | 162,671 | (478,041) | (393,700) |
Prepaid Expenses | (32,274) | (65,030) | (81,343) |
Inventory | (797,596) | (279,268) | (670,180) |
Note Receivable | 173,754 | ||
Deposits | (133) | 50 | 5,422 |
Accounts Payable and Accrued Expenses | 65,530 | 1,164,308 | (528,723) |
Income Tax Payable | (254,100) | ||
Net Cash Used in Operations | (9,517,012) | (5,125,272) | (7,853,355) |
CASH FLOWS FROM INVESTING ACTIVITIES: | |||
Cash Assumed in Acquisition | 163,566 | ||
Purchase of Property and Equipment | (4,316,094) | (1,851,045) | (2,337,370) |
Purchase of Intangible Assets - Domain Names | (75,000) | (12,440) | |
Net Cash Used in Investing Activities | (4,227,528) | (1,851,045) | (2,349,810) |
CASH FLOWS FROM FINANCING ACTIVITIES: | |||
Proceeds from Issuance of Notes Payable | 17,479,335 | 2,150,000 | 7,344,737 |
Proceeds from Issuance of Notes Payable to Related Parties | 27,500 | ||
Payments on Notes Payable | (1,000,000) | (303,474) | |
Payments on Notes Payable to Related Parties | (130,000) | ||
Proceeds from Issuance of Common Stock | 4,058,134 | 3,975,888 | 4,014,919 |
Proceeds from Issuance of Common Stock from the Exercise of Warrants | 3,150,000 | 293,420 | |
Short swing profit payment | 67,100 | ||
Payments By Subsidiaries for Non-Controlling Interest | (1,066,631) | (181,295) | (291,330) |
Cash Contribution from Non-Controlling Interest | 455,192 | 603,156 | |
Net Cash Provided by Financing Activities | 23,076,030 | 6,547,749 | 11,022,872 |
NET CHANGE IN CASH AND CASH EQUIVALENTS | 9,331,490 | (428,568) | 819,707 |
Cash and Cash Equivalents at Beginning of Period | 418,082 | 846,650 | 26,943 |
CASH AND CASH EQUIVALENTS AT END OF PERIOD | 9,749,572 | 418,082 | 846,650 |
SUPPLEMENTAL DISCLOSURE FOR OPERATING ACTIVITIES: | |||
Cash Paid for Interest | 13,500 | 4,500 | 285,371 |
Cash Paid for Income Taxes | 400,000 | ||
SUPPLEMENTAL DISCLOSURE FOR FINANCING ACTIVITIES: | |||
Warrant Expense | 142,766 | ||
Issuance of Common Stock for Debt and Interest Expense | $ 13,558,388 | $ 5,773,320 | $ 3,654,026 |
DESCRIPTION OF BUSINESS
DESCRIPTION OF BUSINESS | 12 Months Ended |
Dec. 31, 2016 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
NOTE 1. DESCRIPTION OF BUSINESS | NOTE 1 – DESCRIPTION OF BUSINESS Organization 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. Terra Tech is a holding company with the following subsidiaries: · Edible Garden Corp., a Nevada corporation (“Edible Garden”); · MediFarm, LLC, a Nevada limited liability company (“MediFarm”); · MediFarm I, LLC, a Nevada limited liability company (“MediFarm I”); · MediFarm I Real Estate, LLC, a Nevada limited liability company (“MediFarm I RE”); · MediFarm II, LLC, a Nevada limited liability company (“MediFarm II”); · IVXX, LLC, a Nevada limited liability company (“IVXX LLC”); · IVXX, Inc., a California corporation (“IVXX Inc.”; together with IVXX LLC, “IVXX”); · Blüm San Leandro, a California corporation (“Blüm San Leandro”); · Black Oak Gallery, a California corporation (“Black Oak”); · GrowOp Technology Ltd., a Nevada corporation (“GrowOp Technology”); and · EG Transportation, LLC, a Nevada limited liability company (“EG Transportation”). The Company was incorporated in Nevada on July 22, 2008, under the name Private Secretary, Inc. The Company’s original business was developing a software program that would allow for automatic call processing through voice-over-Internet protocol, or “VoIP”, technology. The Company’s operations were limited to capital formation, organization, and development of its business plan and target customer market. The Company generated no revenue. The Company changed its name to Terra Tech Corp. on January 27, 2012. Through its wholly-owned subsidiary, GrowOp Technology Ltd., a Nevada corporation (“GrowOp Technology”), the Company engages in the design, marketing, and sale of hydroponic equipment with proprietary technology to create sustainable solutions for the cultivation of indoor agriculture. The Company is also a wholesale seller of locally grown hydroponic produce, herbs and floral products through its wholly-owned subsidiary, Edible Garden Corp., a Nevada corporation (“Edible Garden”). Through MediFarm, LLC, a Nevada limited liability company (“MediFarm”), MediFarm I, LLC, a Nevada limited liability company (“MediFarm I”), and MediFarm II, LLC, a Nevada limited liability company (“MediFarm II”), subsidiaries in which the Company owns interests, the Company plans to operate medical marijuana cultivation, production, and dispensary facilities in Nevada. Through IVXX, LLC, a Nevada limited liability company (“IVXX”), the Company’s wholly-owned subsidiary, the Company produces and sells a line of cannabis flowers and cigarettes, as well as a line of cannabis pure concentrates. Most recently, the Company formed another wholly-owned subsidiary, MediFarm I Real Estate, LLC, a Nevada limited liability company (“MediFarm I RE”), which will own the real property on which a medical marijuana dispensary will be constructed. The dispensary will be operated by MediFarm I. Through Black Oak, we operate a medical marijuana retail dispensary, a medical marijuana cultivation, and have a second medical marijuana cultivation facility in the early stages of construction, all in Oakland, California. EG Transportation is a company in good standing and no operations to date. The Company acquired its second wholly-owned subsidiary, Edible Garden, in 2013. Edible Garden is a wholesale seller of locally grown hydroponic produce, which is distributed throughout the Midwest and the Northeast United States. The Company entered into a Share Exchange Agreement, dated March 23, 2013 (the “Share Exchange Agreement”), by and among the Company, Edible Garden, and the stockholders of Edible Garden. Pursuant to the Share Exchange Agreement, the Company offered and sold 1,250,000 shares of its common stock in consideration for all the issued and outstanding shares in Edible Garden. Separately, Amy Almsteier, one of the Company’s stockholders and a director (and, at that time, an executive officer), offered and sold 7,650,000 shares of Series B Preferred Stock to Kenneth Vande Vrede, Michael Vande Vrede, Steven Vande Vrede, Dan Vande Vrede, Beverly Willekes, and David Vande Vrede (collectively, the “Former EG Principal Stockholders”). The 7,650,000 shares of Series B Preferred Stock are convertible at any time into 36,344,198 shares of common stock and have voting power equal to 765,000,000 shares of common stock. The effect of the issuance of the 1,250,000 shares of common stock and the sale of the 7,650,000 shares of Series B Preferred Stock by Ms. Almsteier was that the Former EG Principal Stockholders held approximately 25.7% of the Company’s issued and outstanding shares of common stock and approximately 43.3% of the Company’s voting power as of March 23, 2013. Articles of Exchange, consummating the share exchange, were filed with the Secretary of the State of Nevada on April 24, 2013. On March 19, 2014, the Company formed MediFarm, a subsidiary. On July 18, 2014, the Company formed MediFarm I, a subsidiary. On July 30, 2014, the Company formed MediFarm II, a subsidiary. Through MediFarm, MediFarm I, and MediFarm II, the Company plans to operate medical marijuana cultivation, production, and dispensary facilities in Nevada. On September 16, 2014, the Company formed IVXX for the purpose of producing a line of cannabis flowers and cigarettes, as well as a complete line of cannabis pure concentrates including: oils, waxes, shatters, and clears. The Company began producing and selling IVXX’s products during the first quarter of fiscal 2015. The Company currently offers these products to 200 select dispensaries in California. The Company uses its supercritical CO 2 On October 14, 2015, the Company formed MediFarm I RE. MediFarm I RE is a real estate holding company that owns the real property and building at which a medical marijuana dispensary facility will be located. It is the Company’s intention that MediFarm I will operate the medical marijuana dispensary. The Company owns 50% of the membership interests in MediFarm I RE. The remaining membership interests are owned by Forever Young Investments, LLC (50%), an otherwise unaffiliated entity. On April 1, 2016, the Company acquired Black Oak Gallery, a California corporation (“Black Oak”). Black Oak operates a medical marijuana dispensary in Oakland, California under the name Blüm, pursuant to that certain Agreement and Plan of Merger, dated December 23, 2015 (the “Merger Agreement”), with Generic Merger Sub, Inc., a California corporation and our wholly-owned subsidiary (the “Merger Sub”), and Black Oak. The Merger Agreement was amended by a First Amendment to the Agreement and Plan of Merger, dated February 29, 2016. Pursuant to the Merger Agreement, the Merger Sub merged with and into Black Oak, with Black Oak as the surviving corporation, and became our wholly-owned subsidiary (the “Merger”). The Merger is intended to qualify for Federal income tax purposes as a tax-free reorganization under the provisions of Section 368(a) of the Internal Revenue Code of 1986, as amended. Subject to the terms and conditions of the Merger Agreement, at the closing of the Merger, the outstanding shares of common stock of Black Oak held by (i) three of the current shareholders of Black Oak (the “Group A Shareholders”) were converted into the right to receive approximately 8,166 shares of our Series Z preferred stock, par value $0.001 per share (“Series Z Preferred Stock”), of which approximately 1,175 shares of Series Z Preferred Stock were issued and paid at closing, and approximately 8,668,700 shares of our Series B preferred stock, par value $0.001 per share (“Series B Preferred Stock”), of which approximately 1,248,300 shares of Series B Preferred Stock were issued and paid at closing and (ii) the remaining shareholders of Black Oak (the “Group B Shareholders”) were converted into the right to receive approximately 21,378 shares of our Series Q preferred stock, par value $0.001 per share (“Series Q Preferred Stock), of which approximately 3,695 shares of Series Q Preferred Stock were issued and paid at closing. The shares of Series Z Preferred Stock, Series B Preferred Stock, and Series Q Preferred Stock that were issued but not paid to the Black Oak shareholders at closing are subject to certain holdback and lockup provisions, and held in an escrow account as security for the satisfaction of any post-closing adjustments or indemnification claims, as provided for in the Merger Agreement. Each share of Series Q Preferred Stock is to be converted into 5,000 shares of our Common Stock and each share of Series Z Preferred Stock is to be converted into 1,857 shares of our Series B Preferred Stock, in each case immediately upon our filing with the Secretary of State of the State of Nevada an Amendment to our Articles of Incorporation to increase our authorized capital for, among other reasons, satisfaction of the terms of this potential transaction. Accordingly, the approximately 21,378 shares of Series Q Preferred Stock to be issued to the Group B Shareholders is convertible into approximately 106,890,000 shares of Common Stock and the approximately 8,166 shares of Series Z Preferred Stock to be issued to the Group A Shareholders is convertible into approximately 15,164,262 shares of Series B Preferred Stock. The Series Z Preferred Stock is intended to mirror the rights of the holders of our Series B Preferred Stock. Each share of our Series B Preferred Stock remains convertible into 5.384325537 shares of our Common Stock. The aggregate fair market value of the securities issued in the Merger was approximately $22.9 million. The Group B Shareholders may also receive cash consideration equal to approximately $2.1 million. The securities paid to the Group A Shareholders and the Group B Shareholders are subject to certain post-closing adjustments that are based on certain performance indicators as of the first anniversary of the closing date of the Merger. The first indicator is based on the performance of the volume-weighted average price of our Common Stock on the first anniversary of the closing date of the Merger compared to the price of our Common Stock on the date of the Merger Agreement. The second indicator is based on our revenues for the twelve-month period following the closing date of the Merger. A portion of the securities that the Group A Shareholders and the Group B Shareholders are entitled to receive at closing of the Merger will be held in an escrow until the first anniversary of the closing date of the Merger and the post-closing adjustments are complete. Since the Merger was completed on April 1, 2016, Black Oak’s financial results are included in our consolidated financial statements for the nine months ended December 31, 2016. |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 12 Months Ended |
Dec. 31, 2016 | |
Notes to Financial Statements | |
Note 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The accompanying consolidated financial statements include all of the accounts of Terra Tech. These consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for financial information and with the instructions to Form 10-K and Regulation S-X. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation have been included. Certain amounts reported in prior periods have been reclassified to conform with the current presentation. Non-Controlling Interest Non-controlling interest is shown as a component of shareholders’ equity on the consolidated balance sheets and the share of income (loss) attributable to non-controlling interest is shown as a component of income (loss) in the consolidated statements of operations. Use of Estimates The preparation of financial statements in conformity with United States generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Accounts Receivable The Company reviews all outstanding accounts receivable for collectability on a quarterly basis. An allowance for doubtful accounts is recorded for any amounts deemed uncollectable. The Company does not accrue interest receivable on past due accounts receivable. There was an allowance of $0 and $184,642 at December 31, 2016 and 2015, respectively. The allowance decreased from $184,642 as of December 31, 2015 to $0 at December 31, 2016 due to write-offs of accounts receivable totaling $159,169 and payments on allowed for accounts receivable totaling $25,473. Inventory We value our inventory at the lower of the actual cost of our inventory, as determined using the first-in, first-out method, or its current estimated market value. We periodically review our physical inventory for excess, obsolete, and potentially impaired items and reserve accordingly. Our reserve estimate for excess and obsolete is based on expected future use. Our reserve estimates have historically been consistent with our actual experience as evidenced by actual sale or disposal of the goods. Property, Equipment and Leasehold Improvements 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: 32 years for buildings; three to eight years for furniture and equipment; and 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. For the years ended December 31, 2016 and 2015, we have concluded that the sum of the undiscounted cash flows exceeds the carry amount of the assets. 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. Goodwill is not amortized for accounting purposes. We review the goodwill allocated to each of our reporting units for possible impairment annually on August 1 and whenever events or changes in circumstances indicate its carrying amount may not be recoverable. When assessing goodwill for impairment, we have the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, after assessing the totality of events or circumstances, we determine it is more likely than not that the fair value of a reporting unit is less than its carrying amount, then we perform a two-step impairment test. If, we conclude otherwise, then no further action is taken. We also have the option to bypass the qualitative assessment and only perform a quantitative assessment, which is the first step of the two-step impairment test. In the two-step impairment test, we measure the recoverability of goodwill by comparing a reporting unit’s carrying amount, including goodwill, to the estimated fair value of the reporting unit. In assessing the qualitative factors, we assess relevant events and circumstances that may impact the fair value and the carrying amount of the reporting unit. The identification of relevant events and circumstances, and how these may impact a reporting unit’s fair value or carrying amount involve significant judgments and assumptions. The judgment and assumptions include the identification of macroeconomic conditions, industry, and market considerations, cost factors, overall financial performance and share price trends, and making the assessment as to whether each relevant factor will impact the impairment test positively or negatively and the magnitude of any such impact. 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, we allocate, as of the acquisition date, all goodwill for that acquisition to the reporting unit that will benefit. Where we have had an acquisition that benefited more than one reporting unit, we have 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. The estimated fair value of the reporting units is determined using the income approach. The income approach focuses on the income-producing capability of an asset, measuring the current value of the asset by calculating the present value of its future economic benefits such as cash earnings, cost savings, tax deductions, and proceeds from disposition. Value indications are developed by discounting expected cash flows to their present value at a rate of return that incorporates the risk-free rate for the use of funds, the expected rate of inflation, and risks associated with the particular investment. Cash flow projections are based on management’s estimates of revenue growth rates and operating margins, taking into consideration industry and market conditions. The discount rate used is based on the weighted-average cost of capital adjusted for the relevant risk associated with business-specific characteristics and the uncertainty related to the business’s ability to execute on the projected cash flows. In order to assess the reasonableness of the calculated fair values of its reporting units, we compare the sum of the reporting units’ fair values to our market capitalization and calculate an implied control premium (the excess of the sum of the reporting units’ fair values over the market capitalization). We evaluate the reasonableness of the premium over market capitalization by first quantifying certain controlling market participants’ synergies included in the income approach. We then supplement this step by comparing the implied premiums for each reporting unit to the premiums implied by recent comparable transactions. If the implied control premium is not reasonable in light of these recent transactions, we will reevaluate our fair value estimates of the reporting units by adjusting the discount rates or other assumptions. If the carrying amount of a reporting unit is in excess of its fair value, an impairment may exist, and we must perform the second step of the impairment analysis to measure the amount of the impairment loss, by allocating the reporting unit’s fair value to its assets and liabilities other than goodwill, comparing the carrying amount of the goodwill to the resulting implied fair value of the goodwill, and recording an impairment charge for any excess. Intangibles Intangible assets are stated at historical cost and amortized over their estimated useful lives. We use 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 5 to 12 Years Trade Names 2 to 8 Years Dispensary License 14 Years Patent 2 Years We review 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), we will write the carrying value down to the fair value in the period identified. We calculate fair value of our intangible assets as the present value of estimated future cash flows we expect to generate from the asset using a risk-adjusted discount rate. In determining our estimated future cash flows associated with our intangible assets, we use estimates and assumptions about future revenue contributions, cost structures and remaining useful lives of the asset (asset group). 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 reporting unit exceeds its fair value. Impairment of Long-Lived Assets We have adopted paragraph 360-10-35-17 of FASB Accounting Standards Codification (“ASC”) for our long-lived assets. Our long -lived assets are reviewed for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. We assess the recoverability of our long-lived assets by comparing the projected undiscounted net cash flows associated with the related long-lived asset or group of assets over their remaining estimated useful lives against their respective carrying amounts. Impairment, if any, is based on the excess of the carrying amount over the fair value of those assets. Fair value is generally determined using the assets expected future discounted cash flows or market value, if readily determinable. If long-lived assets are determined to be recoverable, but the newly determined remaining estimated useful lives are shorter than originally estimated, the net book values of the long-lived assets are depreciated over the newly determined remaining estimated useful lives. We consider the following to be some examples of important indicators that may trigger an impairment review: (i) significant under-performance or losses of assets relative to expected historical or projected future operating results; (ii) significant changes in the manner or use of assets or in our overall strategy with respect to the manner of use of the acquired assets or changes in our overall business strategy; (iii) significant negative industry or economic trends; (iv) increased competitive pressures; (v) a significant decline in our stock price for a sustained period of time; and (vi) regulatory changes. We evaluate acquired assets for potential impairment indicators at least annually and more frequently upon the occurrence of such events. The impairment charges, if any, are included in operating expenses in the accompanying consolidated statements of operations. Based on the test results, no impairments have occurred. Deposits Deposits are security deposits for leased properties in California, Nevada and New Jersey. The deposits will be returned at the end of the lease term. Revenue Recognition Cannabis Products We recognize revenue from product sales net of discounts, rebates, promotional adjustments, price adjustments, and estimated returns and upon transfer of title and risk to the customer, which occurs at shipping (F.O.B. terms). Upon shipment, we have no further performance obligations, selling price is fixed, and collection is reasonably assured. We recognize revenue in accordance with ASC 605, “Revenue Recognition,” Revenue 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. Revenue is recorded upon transfer of title and risk to the customer which occurs at the time customers take delivery of our products at our retail dispensary. Upon purchase, we have no further performance obligations and collection is assured as sales are paid for at time of purchase. Revenue related to the sale of consignment inventory is not recognized until the product is pulled from inventory and sold directly to end-customers. We recognize revenue from the sale of consignment inventory on a gross basis, as we have determined that: 1) we are the primary obligor to the customer; 2) we have latitude in establishing the sales prices and profit margins of our products; 3) we have discretion in selecting our suppliers; 4) we are responsible for loss or damage to consigned inventory; and 5) our customer validation process performs an important part of the process of providing such products to authorized customers. We believe that these factors outweigh the fact that we do not have title to the consigned inventory prior to its sale. During the years ended December 31, 2016 and 2015, sales returns were not significant and, as such, no sales return allowance has been recorded as of December 31, 2016 and 2015. Hydroponic Produce We recognize revenue from products grown in our greenhouses and sold net of discounts, rebates, promotional adjustments, price adjustments, and estimated returns and upon transfer of title and risk to the customer, which occurs at shipping (F.O.B. terms). Upon shipment, we have no further performance obligations, selling price is fixed, and collection is reasonably assured. For sales for which we use an outside grower, we evaluate whether it is appropriate to record the gross amount of product sales and related costs or the net amount earned as commissions. We determine the product specifications, cultivation, and packaging, while disclosing trade and operational secrets, greenhouse technologies, and nutrients used to grow. We are the primary obligor in the transaction because it is our brand that is sold into the retail channel. We are subject to inventory risk until product is accepted by the retailer. We bear credit risk for the amount billed to the retailer and, thus, must pay the grower in the event the selling price is not collected. This revenue is recorded at the gross sale price once the retailer has accepted delivery, selling price is fixed, and collection is reasonably assured. For the years ended December 31, 2016, 2015, and 2014, the Company had such sales of $7,649,125, $6,166,927 and $2,581,983, respectively. Cost of Goods Sold Cannabis Products 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 other supplies, fees for services and processing, other expenses for services, and allocated overhead. Overhead expenses include allocations of rent, administrative salaries, utilities, and related costs. It also includes the cost incurred in producing the oils, waxes, shatters, and clears sold by IVXX. Hydroponic Produce Cost of goods sold are for the plants grown and purchased and sold into the retail marketplace by Edible Garden. Loyalty Rewards Program We offer a customer loyalty rewards program that allows members to earn discounts on future purchases. Unused discounts earned by our loyalty rewards program members are included in accrued liabilities and recorded as a reduction of revenue at the time a qualifying purchase is made. Revenue is recognized when points are redeemed by the loyalty rewards program member. The loyalty rewards program was part of the acquisition of Black Oak, who began offering customers the loyalty rewards program in April 2015. The value of points accrued as of December 31, 2016 was $21,627. Stock-Based Compensation The Company accounts for its stock-based awards in accordance with Accounting Standards Codification subtopic 718-10, “Compensation,” Warrants ASC 815-40, “Contracts in Entity’s Own Equity” ASC 815, “Derivatives and Hedging” Research and Development Research and development costs are expensed as incurred. Income Taxes We provide for income taxes based on enacted tax law and statutory tax rates at which items of income and expenses 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. We have incurred net operating losses for financial-reporting and tax-reporting purposes. Accordingly, for Federal and state income tax purposes, the benefit for income taxes has been offset entirely by a valuation allowance against the related Federal and state deferred tax asset for the year ended December 31, 2016. 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% 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 Statement of Operations. Loss Per Common Share Net loss per share is computed in accordance with the provisions of ASC 260, “Earnings Per Share,” Fair Value of Financial Instruments We apply 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. We define 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, which are required to be recorded at fair value, we consider the principal or most advantageous market in which we 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 – Level 2 – Level 3 – In accordance with the fair value accounting requirements, companies may choose to measure eligible financial instruments and certain other items at fair value. We have not elected the fair value option for any eligible financial instruments. Recently Issued Accounting Standards Intra-Entity Transfers of Assets Other Than Inventory Stock Compensation - Employee Share-Based Payments • Prospectively for the recognition of excess tax benefits and deficiencies in the tax provision. • Retrospectively or prospectively for the classification of excess tax benefits and deficiencies in the statement of cash flows. • Retrospectively for the classification of cash paid for shares withheld to satisfy employee taxes in the statement of cash flows. Leases – “Leases (Topic 842)” Balance Sheet Classification of Deferred Taxes – “Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes” Inventory Measurement “Inventory (Topic 330): Simplifying the Measurement of Inventory” Going Concern Disclosures “Disclosure of Uncertainties About an Entity’s Ability to Continue as a Going Concern” |
CONCENTRATIONS OF BUSINESS AND
CONCENTRATIONS OF BUSINESS AND CREDIT RISK | 12 Months Ended |
Dec. 31, 2016 | |
Notes to Financial Statements | |
Note 3. CONCENTRATIONS OF BUSINESS AND CREDIT RISK | NOTE 3 – CONCENTRATIONS OF BUSINESS AND CREDIT RISK The Company maintains cash balances in several financial institutions that are insured by the Federal Deposit Insurance Corporation up to certain federal limitations. At times, the Company’s cash balance exceeds these federal limitations. The amount in excess was $9,022,253 and $102,189 as of December 31, 2016 and 2015, respectively. The Company provides credit in the normal course of business to customers located throughout the U.S. The Company performs ongoing credit evaluations of its customers and maintains allowances for doubtful accounts based on factors surrounding the credit risk of specific customers, historical trends, and other information. One customer comprised 29%, 74% and 83% of the Company’s revenues for the years ended December 31, 2016, 2015 and 2014, respectively. The loss of this customer would not have a material adverse effect on the Company’s business, financial condition, or results of operation. |
ACQUISITIONS
ACQUISITIONS | 12 Months Ended |
Dec. 31, 2016 | |
Notes to Financial Statements | |
Note 4. ACQUISITIONS | NOTE 4 – ACQUISITIONS Therapeutics Medical On March 10, 2016, we acquired finished goods inventory, trademarks, a patent, and a customer list along with vendor numbers from Therapeutics Medical, a company which had previously been engaged in the research, development, and marketing of nutraceutical supplements. The assets were acquired at auction and were selected from among a group of assets held for sale by Therapeutics Medical. The total consideration transferred in connection with the acquisition was $1,250,000. The Company acquired the finished goods inventory, which was valued at replacement cost in the amount of $58,622. The trademarks of certain brands were valued at $300,000 based on an estimated royalty approach. The patent was valued at $3,078. The customer list with vendor numbers was valued at $888,300 based on an estimate of the cost to enter into such relationships. The Company complied with ASC 350 and accounted for the Therapeutics Medical transaction as an asset purchase. As consideration for the asset purchase, we issued a $1,250,000 principal amount convertible promissory note due September 10, 2017, which accrues interest at the rate of one percent per annum, and is convertible into shares of the Company’s common stock at a conversion price equal to 90% of the average of the lowest three volume-weighted average prices of one share of common stock for the five consecutive trading days prior to the conversion date. During October 2016, the convertible promissory note was converted into 2,837,899 shares of common stock at a weighted-average price of $0.44 per share. The Company determined that the trademarks, patent, and customer list with vendor numbers have a definite useful life because of legal, regulatory, or contractual provisions that limit the useful life of the assets and therefore, the assets will be amortized over the estimated useful life as follows: • Customer List with Vendor Numbers • Trademarks of the Brands • Patent The following table summarizes the allocation of a purchase price of $1,250,000: Finished Goods Inventory $ 58,622 Brands 300,000 Patent 3,078 Customer Relationships 888,300 Total Assets Acquired $ 1,250,000 Refer to “Note 10 – Contingent Consideration (Therapeutics Medical)” Black Oak Gallery On April 1, 2016, we acquired all of the assets of Black Oak. The acquisition of Black Oak was accounted for in accordance with ASC 805-10, “Business Combinations.” The preliminary allocation of the purchase price was based upon a preliminary valuation, and the Company’s estimates and assumptions of the assets acquired and liabilities assumed were subject to change within the measurement period pending the finalization of a third-party valuation, which was obtained in December 2016. The table below represents the allocation of the preliminary purchase price to the assets acquired and liabilities assumed that were recognized at the closing date, the adjustments made as a result of purchase price adjustments during the second and third quarters of 2016, and the final purchase price amounts based on the final third-party valuations: Preliminary Final as of as of 04/01/16 Adjustments 12/31/16 Current Assets (Inclusive of Cash of $163,566) $ 792,447 $ – $ 792,447 Property, Plant and Equipment 681,896 – 681,896 Customer Relationships 7,480,800 379,200 7,860,000 * Trade Name 4,280,000 1,040,000 5,320,000 * Dispensary License 8,214,700 2,055,300 10,270,000 * Liabilities (2,355,938 ) – (2,355,938 ) Total Identifiable Net Assets 19,093,905 3,474,500 22,568,405 Goodwill 32,395,760 (3,474,500 ) 28,921,260 Net Assets $ 51,489,665 $ – $ 51,489,665 ________________ * From final third-party valuation report. The estimated purchase price of Black Oak (for accounting purposes) was $51,489,665. The purchase price was determined based on the value of the shares of our common stock issuable upon conversion of the various series of preferred stock issued in connection with the acquisition, or $0.2620 per share of common stock, which was the closing sales price of our common stock on April 1, 2016, as quoted on the OTC Market Group Inc.’s OTCQX tier. The purchase price represents the sum of: (i) the issuance of approximately 1,176 shares of our Series Z Preferred Stock (or, upon conversion, 11,759,242 shares of our common stock), approximately 1,248,300 shares of our Series B Preferred Stock (or, upon conversion, 6,721,254 shares of our common stock), and approximately 3,696 shares of our Series Q Preferred Stock (or, upon conversion, 18,480,493 shares of our common stock), which collectively, were converted into 36,960,989 shares of our common stock (the “Closing Consideration”); and (ii) the issuance of approximately 4,210 shares of our Series Z Preferred Stock (or, upon conversion, 42,098,295 shares of our common stock), approximately 4,468,872 shares of our Series B Preferred Stock (or, upon conversion, 24,061,862 shares of our common stock), and approximately 8,945 shares of our Series Q Preferred Stock (or, upon conversion, 44,722,796 shares of our common stock), which collectively, were converted into approximately 110,882,953 shares of our common stock (the “Lockup Consideration”); and (iii) the issuance of approximately 2,781 shares of our Series Z Preferred Stock (or, upon conversion, 27,804,112 shares of our common stock), approximately 2,951,528 shares of our Series B Preferred Stock (or, upon conversion, 15,891,988 shares of our common stock), and approximately 8,739 shares of our Series Q Preferred Stock (or, upon conversion, 43,696,102 shares of our common stock), which collectively, were converted into approximately 87,392,202 shares of our common stock (the “Holdback Consideration”); and (iv) the contingent cash consideration of up to $2,088,000 pursuant to certain earn-out provisions set forth in the Merger Agreement, payable to the Group B Shareholders (the “Performance-Based Cash Consideration”). Closing Consideration Lockup Consideration Holdback Consideration Performance-Based Cash Consideration The below chart outlines a summary of the purchase price: Purchase Price Detail Series B Preferred Stock Series Q Preferred Stock Series Z Preferred Stock Preferred Stock Converted into Common Stock Total Consideration Closing Consideration 1,248,300 3,696 1,176 36,960,989 $ 9,683,779 Lockup Consideration 4,468,872 8,945 4,210 110,882,953 29,051,334 Holdback Consideration 2,951,528 8,739 2,781 87,392,202 11,324,969 Performance-Based Cash Consideration – – – – 1,429,583 Totals 8,668,700 21,380 8,167 235,236,144 $ 51,489,665 The Series Q Preferred Stock was converted into 106,890,000 shares of common stock in September 2016. The Series Z Preferred Stock was converted into 15,164,262 shares of Series B Preferred Stock in September 2016. Refer to “Note 10 – Contingent Consideration (Black Oak Gallery)” |
INVENTORY
INVENTORY | 12 Months Ended |
Dec. 31, 2016 | |
Notes to Financial Statements | |
Note 5. INVENTORY | NOTE 5 – INVENTORY Inventory consists of raw materials for Edible Garden’s herb product lines and IVXX’s line of cannabis pure concentrates. Work-in-progress consists of live plants grown for Edible Garden’s herb product lines, live plants grown at Black Oak, and IVXX’s line of cannabis pure concentrates. Finished goods consists of IVXX’s line of cannabis packaged to be sold into dispensaries. Cost of goods sold is calculated using the average costing method. The Company reviews its inventory periodically to determine net realizable value. The Company writes down inventory, if required, based on forecasted demand. These factors are impacted by market and economic conditions, new products introductions, and require estimates that may include uncertain elements. As of December 31, 2016 and 2015, inventory consisted of the following: December 31, 2016 2015 Raw Materials $ 486,119 $ 277,340 Work-in-Progress 570,145 542,530 Finished Goods 853,066 129,578 Total Inventory $ 1,909,330 $ 949,448 |
PROPERTY, EQUIPMENT AND LEASEHO
PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS | 12 Months Ended |
Dec. 31, 2016 | |
Notes to Financial Statements | |
Note 6. PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS | NOTE 6 – PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS As of December 31, 2016 and 2015, property, equipment and leasehold improvements at cost, less accumulated depreciation, consisted of the following: December 31, 2016 2015 Land and Building $ 1,454,124 $ 1,454,124 Furniture and Equipment 3,141,244 2,226,051 Computer Hardware and Software 396,479 133,714 Leasehold Improvements 8,027,792 3,926,795 Subtotal 13,019,639 7,740,684 Less Accumulated Depreciation (2,554,875 ) (1,045,709 ) Property, Equipment and Leasehold Improvements, Net $ 10,464,764 $ 6,694,975 Depreciation expense related to property, equipment and leasehold improvements for the years ended December 31, 2016, 2015 and 2014 was $969,185, $602,814 and $392,883, respectively. |
INTANGIBLE ASSETS
INTANGIBLE ASSETS | 12 Months Ended |
Dec. 31, 2016 | |
Notes to Financial Statements | |
Note 7. INTANGIBLE ASSETS | NOTE 7 – INTANGIBLE ASSETS Intangible assets as of December 31, 2016 and 2015 consisted of the following: December 31, 2016 December 31, 2015 Estimated Useful Life in Years Gross Carrying Amount Accumulated Amortization Net Carrying Value Gross Carrying Amount Accumulated Amortization Net Carrying Value Amortized Intangible Assets: Customer Relationships 5 to 12 $ 8,960,700 $ (780,960 ) $ 8,179,740 $ 212,400 $ (113,988 ) $ 98,412 Trade Brands 2 to 8 495,520 (89,907 ) 405,613 20,520 – 20,520 Dispensary License 14 10,270,000 (550,179 ) 9,719,821 – – – Patent 2 3,078 (1,154 ) 1,924 – – – Total Amortized Intangible Assets 19,729,298 (1,422,200 ) 18,307,098 232,920 (113,988 ) 118,932 Unamortized Intangible Assets: Trade Name Indefinite 5,320,000 – 5,320,000 – – – Total Unamortized Intangible Assets 5,320,000 – 5,320,000 – – – Total Intangible Assets $ 25,049,298 $ (1,422,200 ) $ 23,627,098 $ 232,920 $ (113,988 ) $ 118,932 Intangible assets with finite lives are amortized over their estimated useful lives. We recorded amortization expense of $1,308,212, $42,480 and $42,480 for the years ended December 31, 2016, 2015 and 2014, respectively. Based solely on the amortizable intangible assets recorded at December 31, 2016, we estimate amortization expense for the next five years to be as follows: Year Ending December 31, Amount 2017 $ 1,718,104 2018 1,668,789 2019 1,645,582 2020 1,626,231 2021 1,460,486 Thereafter 10,187,906 $ 18,307,098 Actual amortization expense to be reported in future periods could differ from these estimates as a result of new intangible asset acquisitions, changes in useful lives or other relevant factors or changes. |
ACCOUNTS PAYABLE AND ACCRUED EX
ACCOUNTS PAYABLE AND ACCRUED EXPENSES | 12 Months Ended |
Dec. 31, 2016 | |
Notes to Financial Statements | |
Note 8. ACCOUNTS PAYABLE AND ACCRUED EXPENSES | NOTE 8 – ACCOUNTS PAYABLE AND ACCRUED EXPENSES As of December 31, 2016 and 2015, accounts payable and accrued expenses consisted of the following: December 31, 2016 2015 Accounts Payable $ 1,986,907 $ 1,015,994 Sales Tax Payable 122,470 – Accrued Interest Payable 96,633 103,465 Accrued Expenses 211,390 – Total Accounts Payable and Accrued Expenses $ 2,417,400 $ 1,119,459 |
NOTES PAYABLE
NOTES PAYABLE | 12 Months Ended |
Dec. 31, 2016 | |
Notes to Financial Statements | |
Note 9. NOTES PAYABLE | NOTE 9 – NOTES PAYABLE As of December 31, 2016 and 2015, notes payable were as follows: December 31, 2016 2015 Promissory note dated July 25, 2014 issued to an accredited investor, which matured July 24, 2015 and bore interest at a rate of 12% per annum. The holder of the note extended the maturity to July 25, 2017. Principal and interest may be converted into common stock based on the average trading price of the ten days prior to maturity at the holder’s option. In November 2016, the holder of the note exchanged the note with another accredited investor. $ – $ 150,000 Unsecured promissory demand notes issued to an accredited investor, which bears interest at a rate of 4% per annum. Holder may elect to convert into common stock at $0.75 per share. In 2015, the investor exchanged the notes from other accredited investors. In October 2016, the holder of the note converted some of the debt and accrued interest into common stock. 64,324 114,306 Convertible promissory note dated April 7, 2015 issued to accredited investors, which matures October 7, 2016 and bears interest at a rate of 12% per annum. The conversion price in effect is $0.1303, subject to adjustment. The remaining balance of the note and accrued interest was converted into common stock in January 2016. – 170,856 5% original issue discount senior secured convertible promissory note dated May 5, 2014 issued to accredited investors, which matured November 5, 2015, and bore interest at a rate of 12% per annum. The fixed conversion price in effect was set at 90% of the 20-day volume weighted average price (“VWAP”) of our common stock on February 5, 2014, or $0.30753 per share. In 2015, the holder of the note converted some of the debt and accrued interest into common stock. The remaining balance of the note and accrued interest was converted into common stock in March 2016. – 96,491 Convertible promissory note dated May 13, 2015 issued to accredited investors, which matures November 13, 2016 and bears interest at a rate of 12% per annum. The conversion price in effect is $0.1211, subject to adjustment. The remaining balance of the note and accrued interest was converted into common stock in January 2016. – 170,783 Convertible promissory note dated December 14, 2015, issued to accredited investors, which matured December 13, 2016 and bears interest at a rate of 12% per annum. The holder of the note extended the maturity to December 13, 2017. The conversion price in effect is $0.1211, subject to adjustment. 500,000 214,927 Senior convertible promissory note dated October 28, 2016, issued to accredited investors, which matures April 28, 2018 and bears interest at a rate of 1% per annum. The conversion price in effect is 90% of the average of the lowest three (3) VWAPs for the five (5) consecutive trading days prior to the conversion date. 102,582 – Senior convertible promissory note dated November 1, 2016, issued to accredited investors, which matures May 1, 2018 and bears interest at a rate of 12% per annum. The conversion price in effect is $0.35, subject to adjustment. 31,615 – Senior convertible promissory note dated December 16, 2016, issued to accredited investors, which matures June 16, 2018 and bears interest at a rate of 12% per annum. The conversion price in effect is $0.27, subject to adjustment. 1,220,155 – Total Debt 1,918,676 917,363 Less Short-Term Portion 564,324 917,363 Long-Term Portion $ 1,354,352 $ – Total debt as of December 31, 2016 and 2015 was $1,918,676 and $917,363, respectively, which included unamortized debt discount of $4,295,648 and $693,435, respectively. The senior secured promissory notes are secured by shares of common stock. There was accrued interest payable of $96,633 and $103,465 as of December 31, 2016 and 2015, respectively. Scheduled Maturities of Long-Term Debt Scheduled maturities of long-term debt, including the amortization of debt discounts of approximately $4,295,648, are as follows for the years ending December 31, 2017 and 2018 are $0 and $1,354,352, respectively, and $0 for the years ending December 31, 2019 and thereafter. Securities Purchase Agreement Dated October 28, 2016 and 12% Senior Convertible Promissory Note Due April 28, 2018 On October 28, 2016, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with an accredited investor (the “Purchaser”) relating to the sale of a 12% Senior Convertible Promissory Note due April 28, 2018 (the “Note”) in the principal amount of $7,051,000 for a purchase price of $7,051,000 (the “Offering”). There were no fees or expenses deducted from the net proceeds received by the Company in the Offering. The Note and the shares of the Company’s common stock, par value $0.001 per share (the “Common Stock”) issuable upon conversion of the Note (the “Conversion Shares”) are collectively referred to herein as the “Securities.” The Purchase Agreement contains customary representations, warranties, and covenants by, among, and for the benefit of the parties. Pursuant to the Purchase Agreement, the Company agreed to sell the Securities pursuant to an effective shelf registration statement on Form S-3 (Registration No 333-210673), declared effective by the Securities and Exchange Commission on August 12, 2016, and a related prospectus supplement thereto. The Note matures on April 28, 2018 (the “Maturity Date”), less any amounts converted or redeemed prior to the Maturity Date. The Note accrues interest at a rate of 12% per annum, payable on the Maturity Date or upon any conversion, prepayment, event of default or other acceleration of payment under the Note. All interest payments under the Note are payable, at the Company’s option, in cash or shares of Common Stock. All principal and interest due and owing under the Note is convertible into shares of Common Stock at any time at the election of the holder at a conversion price per share equal to the lower of (i) $0.41 or (ii) 83.5% of the average of the three (3) lowest daily volume weighted average prices of the Common Stock in the fifteen (15) trading days prior to the conversion date (the “Conversion Price”), which Conversion Price is subject to adjustment for (i) stock splits, stock dividends, combinations, or similar events and (ii) full ratchet anti-dilution protection. Upon certain events of default, the conversion price of the Note will automatically become 70% of the average of the three (3) lowest volume weighted average prices of the Common Stock in the twenty (20) consecutive trading days prior to the conversion date for so long as such event of default remains in effect. In addition, at any time that (i) the daily volume weighted average price of the Common Stock for the prior ten (10) consecutive trading days is $0.70 or more and (ii) the average daily trading value of the Common Stock is greater than $2,500,000 for the prior ten (10) consecutive trading days, then the Company may demand, upon one (1) day’s notice, that the holder convert the Note at the Conversion Price. The Company may prepay in cash any portion of the outstanding principal amount of the Note and any accrued and unpaid interest by, upon ten (10) days’ written notice to the holder, paying an amount equal to (i) 110% of the sum of the then-outstanding principal amount of the Note plus accrued but unpaid interest, if the prepayment date is within 90 days of the issuance date of the Note; (ii) 115% of the sum of the then-outstanding principal amount of the Note plus accrued but unpaid interest, if the prepayment date is between 91 days and 180 days of the issuance date of the Note; or (iii) 125% of the sum of the then-outstanding principal amount of the Note plus accrued but unpaid interest, if the prepayment date is after 180 days of the issuance date of the Note. The foregoing description of the Purchase Agreement and the Note is qualified in its entirety by reference to the full text of such documents, copies of which are filed as Exhibit 10.38 and Exhibit 4.12, respectively, to the Current Report on Form 8-K dated October 28, 2016 and which are incorporated by reference herein in their entirety. Securities Purchase Agreement Dated December 16, 2016 and 12% Senior Convertible Promissory Note Due June 16, 2018 On December 16, 2016, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with an accredited investor (the “Purchaser”) pursuant to which the Company sold to the Purchaser a 12% Senior Convertible Promissory Note due June 16, 2018 (the “Note”) in the principal amount of $5,000,000 for a purchase price of $5,000,000 (the “Offering”). There were no fees or expenses deducted from the net proceeds received by the Company in the Offering. The Note and the shares of the Company’s common stock, par value $0.001 per share (the “Common Stock”) issuable upon conversion of the Note (the “Conversion Shares”) are collectively referred to herein as the “Securities.” The Purchase Agreement contains customary representations, warranties, and covenants by, among, and for the benefit of the parties. Pursuant to the Purchase Agreement, the Company agreed to sell the Securities pursuant to an effective shelf registration statement on Form S-3 (Registration No 333-210673), declared effective by the Securities and Exchange Commission on August 12, 2016, and a related prospectus supplement thereto. The Note matures on June 16, 2018 (the “Maturity Date”), less any amounts converted or redeemed prior to the Maturity Date. The Note accrues interest at a rate of 12% per annum, payable on the Maturity Date or upon any conversion, prepayment, event of default or other acceleration of payment under the Note. All interest payments under the Note are payable, at the Company’s option, in cash or shares of Common Stock. All principal and interest due and owing under the Note is convertible into shares of Common Stock at any time at the election of the holder at a conversion price per share equal to the lower of (i) $0.27 or (ii) 85% of the lowest daily volume weighted average price of the Common Stock in the fifteen (15) trading days prior to the conversion date (the “Conversion Price”), which Conversion Price is subject to adjustment for (i) stock splits, stock dividends, combinations, or similar events and (ii) full ratchet anti-dilution protection. Upon certain events of default, the conversion price of the Note will automatically become 70% of the average of the three (3) lowest volume weighted average prices of the Common Stock in the twenty (20) consecutive trading days prior to the conversion date for so long as such event of default remains in effect. In addition, at any time that (i) the daily volume weighted average price of the Common Stock for the prior ten (10) consecutive trading days is $0.70 or more and (ii) the average daily trading value of the Common Stock is greater than $2,500,000 for the prior ten (10) consecutive trading days, then the Company may demand, upon one (1) day’s notice, that the holder convert the Note at the Conversion Price. The Company may prepay in cash any portion of the outstanding principal amount of the Note and any accrued and unpaid interest by, upon ten (10) days’ written notice to the holder, paying an amount equal to (i) 110% of the sum of the then-outstanding principal amount of the Note plus accrued but unpaid interest, if the prepayment date is within 90 days of the issuance date of the Note; (ii) 115% of the sum of the then-outstanding principal amount of the Note plus accrued but unpaid interest, if the prepayment date is between 91 days and 180 days of the issuance date of the Note; or (iii) 125% of the sum of the then-outstanding principal amount of the Note plus accrued but unpaid interest, if the prepayment date is after 180 days of the issuance date of the Note. |
CONTINGENT CONSIDERATION LIABIL
CONTINGENT CONSIDERATION LIABILITY | 12 Months Ended |
Dec. 31, 2016 | |
Notes to Financial Statements | |
Note 10. CONTINGENT CONSIDERATION LIABILITY | NOTE 10 – CONTINGENT CONSIDERATION The Company accounts for “contingent consideration” according to FASB ASC 805, “Business Combinations” Fair Value Measurements Therapeutics Medical In the acquisition of assets from Therapeutics Medical, the Company may be required to issue an additional Convertible Promissory Note to the seller based on the following calculation (the “Therapeutics Contingent Consideration”): (i) if the total revenue (“Total Revenue”) generated by the assets for the period beginning on April 1, 2016 and ending on March 31, 2017 (the “Applicable Period”) is greater than $1.6 million but less than $3.2 million, the Company will issue to the Seller an additional Convertible Promissory Note in the principal amount equal to 50% of the Total Revenue in excess of $1.6 million; or (ii) if the Total Revenue generated by the assets for the Applicable Period is greater than $3.2 million, the Company will issue to the Seller an additional Convertible Promissory Note in the principal amount equal to the sum of: (a) $800,000 (which equals 50% of the Total Revenue in excess of $1.6 million up to $3.2 million), plus (b) 25% of the Total Revenue for the Applicable Period in excess of $3.2 million. The Company valued the Therapeutics Contingent Consideration based on an analysis using a cash flow model to determine the expected contingent consideration payment. The model determined that the aggregate expected contingent consideration liability was an immaterial amount ($4,000) with an associated immaterial present value of the contingent consideration liability of $3,200. At the time of purchase, Therapeutics Medical had gone out of business, and the assets acquired were selected from a lot at auction. As such, the Company did not recognize a contingent consideration liability associated with the Therapeutics Contingent Consideration because management’s best estimates resulted in an extremely low, in fact near zero likelihood, of the revenue targets being achieved. In determining the likelihood of payouts related to the Therapeutics Contingent Consideration, the probabilities for various scenarios ( e g The Company calculated the Therapeutics Contingent Consideration based upon the following formula: One-Year Anniversary Date Revenue Probability Revenue-Based Payment Probability-Weighted Amounts $3,200,000 0.00% $800,000 $ – $2,000,000 0.50% $200,000 1,000 $1,599,999 99.50% $ – – Fair Value of Expected Earn-out Payment 1,000 Discount Rate 25% Payments $0 Present Value Factor at 20% Discount Rate for 12 Months 0.9457 Present Value of Contingent Consideration $ $946 As of December 31, 2016, based on revenues achieved throughout the year, the probability of a contingent payment is near zero and as such, no amount will be due. Black Oak Gallery In the acquisition of Black Oak, the Company valued the Holdback Consideration and the Performance-Based Cash Consideration (collectively, the “Black Oak Contingent Consideration”), based on an analysis using a cash flow model to determine the expected contingent consideration payment, which model determined that the aggregate expected contingent consideration liability was $15,305,463 and the present value of the contingent consideration liability was $12,754,553. Accordingly, the Company recognized at April 1, 2016, the closing date of the Black Oak merger, a $12,754,553 contingent consideration liability associated with the Black Oak Contingent Consideration paid pursuant to the Merger Agreement. In determining the likelihood of payouts related to the Black Oak Contingent Consideration, the probabilities for various scenarios ( e g Holdback Consideration The Holdback Consideration is comprised of (i) the market-based clawback amount (the “Market-Based Clawback Amount”) and (ii) the performance-based clawback amount (the “Performance-Based Clawback Amount”). The Holdback Consideration, which is comprised of shares of our preferred stock, was issued on April 1, 2016, the closing date of the Black Oak merger, and will be held in an escrow account for a period of one year. The Market-Based Clawback Amount is determined as follows: a) If the Terra Tech Common Stock 30-day VWAP on the one-year anniversary date of the Merger Agreement exceeds the Terra Tech Closing Price, the Market-Based Clawback Amount shall mean the number of shares of Terra Tech Common Stock equal to (i) (A) $4,912,000 divided by (B) the Terra Tech Closing Price, less (ii) (A) $4,912,000 divided by (B) the Terra Tech Common Stock 30-day VWAP on such date. b) If the Terra Tech Common Stock 30-day VWAP on the one-year anniversary date of the Merger Agreement is less than or equal to the Terra Tech Closing Price, the Market-Based Clawback Amount shall be zero shares. In no event will the Market-Based Clawback Amount exceed 50% of the Holdback Consideration. The Performance-Based Clawback Amount is determined as follows: a) The “Lower Threshold” means an amount equal to $11,979,351, and the “Upper Threshold” means an amount equal to $16,667,000. b) If Black Oak’s operating revenues for the 12-month period following the closing date of the Black Oak merger (the “Year 1 Revenue”) is less than the Lower Threshold, then the Performance-Based Clawback Amount will be the number of shares obtained from a quotient, (A) the numerator of which is equal to the sum of (1) $4,912,000, plus (2) the product of 1.5 multiplied by the difference between the Lower Threshold and the Year 1 Revenue, and (B) the denominator of which is the Terra Tech common stock 30-day VWAP as of the one-year anniversary date of the closing of the Black Oak merger. c) If the Year 1 Revenue is greater than or equal to the Lower Threshold but is less than the Upper Threshold, then the Performance-Based Clawback Amount will be the number of shares obtained from a quotient, (A) the numerator of which is equal to the product of 1.053 multiplied by the difference between the Upper Threshold and the Year 1 Revenue, and (B) the denominator of which is the Terra Tech common stock 30-day VWAP as of the one-year anniversary date of the closing of the Black Oak merger. d) If the Year 1 Revenue is greater than or equal to the Upper Threshold, then the Performance-Based Clawback Amount will be zero shares. Performance-Based Cash Consideration Pursuant to the Merger Agreement, the Group B Shareholders may receive cash consideration of up to approximately $2,088,000 to be paid on approximately the one-year anniversary date of the closing of the Black Oak merger, to be determined as follows: a) $0 if Year 1 Revenue is less than or equal to $12,000,000; and b) the product obtained by multiplying 0.447 times Year 1 Revenue if Year 1 Revenue is greater than $12,000,000; provided, that in no event will the Performance-Based Cash Consideration amount exceed $2,088,000. For example, pursuant to the above formula, if the revenue in Year 1 equals $16,666,666, then the Performance-Based Cash Consideration will be $2,088,000 calculated as follows: Year 1 Revenue $ 16,666,666 Less: 12,000,000 $ 4,666,666 0.44742864 Performance-Based Cash Payment $ 2,088,000 As of December 31, 2016, the Black Oak Contingent Consideration was based upon the following formula: One-Year Anniversary Value of Probability-Weighted Date of the Common Performance- Amounts Year 1 Merger 30- Stock to Based Cash Earn-Out Performance- Revenue Day VWAP Issue Payment Probability Shares Based Cash Total 20% $15,788,827 $2,088,000 4.0% $631,553 $83,520 $715,073 $0.2108 Upside 20% 70% $13,824,526 $2,088,000 14.0% $1,935,434 $292,320 $2,227,754 $16,667,000 $0.3108 10% $12,816,555 $2,088,000 2.0% $256,331 $41,760 $298,091 $0.4108 20% $11,867,575 $747,500 15.0% $1,780,136 $112,125 $1,892,261 $0.2108 Base 75% 70% $11,164,938 $747,500 52.5% $5,861,592 $392,438 $6,254,030 $13,670,835 $0.3108 10% $10,804,383 $747,500 7.5% $810,329 $56,063 $866,391 $0.4108 20% $7,251,428 $ – 1.0% $72,514 $ – $72,514 $0.2108 Downside 5% 70% $8,034,038 $ – 3.5% $281,191 $ – $281,191 $10,674,670 $0.3108 10% $8,435,630 $ – 0.5% $42,178 $ – $42,178 $0.4108 Fair Value of Expected Earn-Out Payment $11,671,259 $978,225 $12,649,484 Price Per Common Share $0.2620 $0.2620 Discount Rate 20% 20% Periods (nper) 0.250 0.250 Payments $ – $ – Present Value Factor at 20% Discount Rate for 12 Months 0.9554 0.9554 Present Value of Contingent Consideration $11,151,221 $934,638 Present Value of Contingent Consideration $12,085,859 Changes in the fair value of the Black Oak Contingent Consideration are recognized in the consolidated statements of operations. For the year ended December 31, 2016, the change in the fair market valuation of contingent consideration was $668,694. The below table summarizes adjustments made to the Black Oak Contingent Consideration during the year ended December 31, 2016. Preliminary April 1, 2016 Adjust- ments June 30, 2016 June 30, 2016 Adjust- ments September 30, 2016 September 30, 2016 Adjust- ments December 31, 2016 Final as of December 31, 2016 Holdback Consideration Stock $ 11,324,969 $ (514,339 ) $ 10,810,630 $ 217,895 $ 11,028,525 $ 122,695 $ 11,151,220 Performance-Based Cash 1,429,583 66,669 1,496,252 130,963 1,627,215 (692,577 ) 934,638 Adjustment to Goodwill – 447,670 (1) – (348,858 ) (1) – (98,812 ) (2) – Change in Fair Value of Contingent Consideration – – – – – 98,812 – Total Contingent Consideration $ 12,754,553 $ – $ 12,306,882 $ – $ 12,655,740 $ (569,882 ) $ 12,085,858 _____________________ ( 1) Changes in fair value of the Black Oak Contingent Consideration during the second and third quarter of 2016 (during measurement period) were taken to goodwill. Total adjustment was $98,812 which was recorded to the income statement at December 31, 2016. (2) $98,812 is the combined adjustments to goodwill ($447,670 less $348,858) recorded to Change in Fair Value of Contingent Considerat at December 31, 2016. See “Note 11 – Fair Value Measurements” |
FAIR VALUE MEASUREMENTS
FAIR VALUE MEASUREMENTS | 12 Months Ended |
Dec. 31, 2016 | |
Notes to Financial Statements | |
NOTE 11. FAIR VALUE MEASUREMENTS | NOTE 11 – FAIR VALUE MEASUREMENTS Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis The following tables set forth the financial liabilities measured at fair value on a recurring basis by level within the fair value hierarchy as of the dates indicated: Description Fair Value at December 31, 2016 Fair Value Measurement Using Level 1 Level 2 Level 3 Derivative Liabilities – Conversion Feature $ 6,975,000 $ – $ – $ 6,975,000 Liability - Black Oak Contingent Consideration 12,085,859 – – 12,085,859 $ 19,060,859 $ – $ – $ 19,060,859 Description Fair Value at December 31, 2015 Fair Value Measurement Using Level 1 Level 2 Level 3 Derivative Liabilities – Conversion Feature $ 743,400 $ – $ – $ 743,400 Liability - Black Oak Contingent Consideration – – – – $ 743,400 $ – $ – $ 743,400 No financial assets were measured on a recurring basis as of December 31, 2016 and 2015. The following table presents a reconciliation of the derivative Balance at December 31, 2014 $ 1,253,000 Change in Fair Market Value of Conversion Feature (1,800,100 ) Issuance of Equity Instruments with Debt Greater Than Debt Carrying Amount 561,000 Derivative Debt Converted into Equity (1,168,500 ) Issuance of Debt Instruments with Derivatives 1,898,000 Balance at December 31, 2015 743,400 Change in Fair Market Value of Conversion Feature 489,700 Issuance of Equity Instruments with Debt Greater Than Debt Carrying Amount 1,487,500 Derivative Debt Converted into Equity (14,232,100 ) Issuance of Debt Instruments with Derivatives 18,486,500 Balance at December 31, 2016 $ 6,975,000 The following table presents a reconciliation of the Black Oak Contingent Consideration Balance at December 31, 2015 $ – Purchase of Black Oak Gallery 12,754,553 Change in Fair Market Valuation of Black Oak Contingent Consideration (668,694 ) Balance at December 31, 2016 $ 12,085,859 Non-Financial Assets Measured at Fair Value on a Non-Recurring Basis Non-financial assets, such as property, equipment and leasehold improvements, goodwill, and intangible assets, are required to be measured at fair value only when an impairment loss is recognized. The Company did not record an impairment charge related to these assets during the years ended December 31, 2016, 2015 or 2014. |
INCOME TAXES
INCOME TAXES | 12 Months Ended |
Dec. 31, 2016 | |
Notes to Financial Statements | |
Note 12. INCOME TAXES | NOTE 12 – TAX EXPENSE The expense (benefit) for income taxes consists of the following: Year Ended December 31, 2016 2015 Current: Federal $ – $ – State – – Deferred: Federal – 44,000 State – – Total Expense (Benefit) for Income Taxes $ – $ 44,000 The reconciliation between the Company’s effective tax rate and the statutory tax rate is as follows: December 31, 2016 2015 Expected Income Tax Benefit at Statutory Tax Rate, Net $ (9,469,000 ) $ (3,694,000 ) Non-Deductible Items 1,263,000 368,000 Warrants Expense – 1,196,000 Derivatives Expense – (545,000 ) Net Operating Losses – 2,667,000 Change in Valuation Allowance 8,206,000 52,000 Reported Income Tax Expense $ – $ 44,000 Effective Tax Rate – % (0.49% ) The components of deferred income tax assets and deferred income tax liabilities are as follows: December 31, 2016 2015 Deferred Income Tax Assets: Allowance for Bad Debt $ – $ 74,000 Warrants Expense 4,186,000 3,412,000 Derivatives Expense 4,067,000 729,000 Net Operating Losses 15,242,000 7,029,000 Deferred Income Tax Liabilities: Depreciation (1,334,000 ) (44,000 ) Total 22,161,000 11,200,000 Valuation Allowance (22,161,000 ) (11,244,000 ) Net Deferred Tax Liabilities $ – $ (44,000 ) Permanent differences include ordinary and necessary business expenses deemed by the Company as a non-allowable deduction under IRC Section 280E, and tax deductions related to equity compensation that are less than the compensation recognized for financial reporting. As of December 31, 2016, and 2015, the Company had net operating loss carryforwards of approximately $34,940,000 and $16,250,000, respectively, which, if unused, will expire beginning in the year 2034. These tax attributes are subject to an annual limitation from equity shifts, which constitute a change of ownership as defined under Internal Revenue Code (“IRC”) Section 382, which will limit their utilization. The Company has yet to assess the effect of these limitations, but expects these losses to be substantially limited. Accordingly, the Company has placed a reserve against any assets associated with these losses. The Company files income tax returns in the U.S. federal jurisdiction and various state and local jurisdictions. All tax years from 2012 to 2016 are subject to examination. Management assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to use the existing deferred tax assets. A significant piece of objective negative evidence evaluated was the cumulative losses incurred through the period ended December 31, 2016. Such objective evidence limits the ability to consider other subjective evidence, such as our projections for future growth. On the basis of this evaluation, as of December 31, 2016, a valuation allowance of has been recorded against all deferred tax assets as these assets are more likely than not to be unrealized. The amount of the deferred tax asset considered realizable, however, could be adjusted if estimates of future taxable income during the carryforward period are reduced or increased or if objective negative evidence in the form of cumulative losses is no longer present and additional weight may be given to subjective evidence such as our projections for growth. For the years ended December 31, 2016, 2015 and 2014, certain of the Company’s subsidiaries produced and sold cannabis or cannabis pure concentrates, subjecting the Company to the limits of IRC Section 280E. Pursuant to IRC Section 280E, the Company is allowed only to deduct expenses directly related to sales of product. The Company has allocated accelerated depreciation related to production equipment and other expenses directly related to sales of product, which results in a difference in the cost of sales for financial reporting and tax reporting taxable income. As a result, the Company had no current taxable income for the year ended December 31, 2016. |
CAPITAL STOCK
CAPITAL STOCK | 12 Months Ended |
Dec. 31, 2016 | |
Notes to Financial Statements | |
Note 13. CAPITAL STOCK | NOTE 13 – EQUITY Preferred Stock The Company authorized 50,000,000 shares of preferred stock with $0.001 par value per share. The Company designated 100 shares of preferred stock as “Series A Preferred Stock,” of which there were 100 shares of Series A Preferred Stock outstanding as of December 31, 2016. Series A Preferred Stock is convertible on a one-for-one basis into common stock and has all of the voting rights of the Company’s common stock. The Company designated 49,990,900 shares of preferred stock as “Series B Preferred Stock,” of which there were 36,825,953 shares of Series B Preferred Stock outstanding as of December 31, 2016. Each share of Series B Preferred Stock: (i) is entitled to 100 votes for each share of common stock into which a share of Series B Preferred Stock is convertible and (ii) is convertible, at the option of the holder, on a 1-for-5.384325537 basis, into shares of the Company’s common stock. Common Stock The Company authorized 990,000,000 shares of common stock with $0.001 par value per share. As of December 31, 2016, 553,873,812 shares of common stock were issued and outstanding. Issuances and Sales of Common Stock During the year ended December 31, 2016, senior secured convertible promissory notes and accrued interest in the amount of $13,558,388 were converted into 56,678,708 shares of common stock. In the first quarter of 2016, the Company sold 25,715,674 shares of common stock for the net amount of $3,208,134 pursuant to an equity financing facility with Magna Equities II, LLC. In the fourth quarter of 2016, the Company sold 3,203,553 shares of common stock for the net amount of $850,000 pursuant to an equity financing facility with Dominion Capital LLC. Amendment to Certificate of Designation of Series B Preferred Stock; Designation of New Series of Preferred Stock The Company filed an Amended and Restated Certificate of Designation of Series B Preferred Stock (the “Amended Series B Certificate”) with the Secretary of State of the State of Nevada, effective March 29, 2016. The Amended Series B Certificate decreased the number of authorized shares of Series B Preferred Stock, specified a liquidation preference, clarified the provisions related to adjustments to the conversion rate upon certain events, and made such other amendments as the Company’s Board of Directors deemed necessary. Effective March 29, 2016, the Company also designated two additional series of preferred stock: (i) Series Z Preferred Stock and (ii) Series Q Preferred Stock, by filing Certificate of Designations with the Secretary of State of the State of Nevada. The Certificate of Designation of Series Z Preferred Stock (the “Series Z Certificate”) designates 8,300 shares as Series Z Preferred Stock and is intended to mirror the rights of the holders of the Series B Preferred Stock. Each share of Series Z Preferred Stock is convertible into 1,857 shares of Series B Preferred Stock immediately upon the Company filing with the Secretary of State of the State of Nevada an Amendment to its Articles of Incorporation to increase its authorized capital for, among other reasons, satisfaction of the terms of the potential acquisition of Black Oak, as discussed in more detail below. The holders of the Series Z Preferred Stock are entitled to a liquidation preference equal to $10.00 per share (subject to appropriate adjustment in the event of any stock dividend, forward stock split, or other similar recapitalization). Such liquidation preference is in preference (but equal with the holders of the Company’s Series B Preferred Stock) to the holders of the common stock, but subordinate in preference to any sum to which the holders of the Company’s Series A Preferred Stock are entitled. The Certificate of Designation of Series Q Preferred Stock (the “Series Q Certificate”) designates 21,600 shares as Series Q Preferred Stock. Each share of Series Q Preferred Stock is convertible into 5,000 shares of the Company’s common stock immediately upon the Company filing with the Secretary of State of the State of Nevada an Amendment to its Articles of Incorporation to increase its authorized capital for, among other reasons, satisfaction of the terms of the potential acquisition of Black Oak, as discussed in more detail below. The holders of the Series Q Preferred Stock are entitled to a liquidation preference equal to $0.001 per share (subject to appropriate adjustment in the event of any stock dividend, forward stock split, or other similar recapitalization). Such liquidation preference is in preference to the holders of the common stock, but subordinate in preference to any sum to which the holders of any shares of any other series of the Corporation’s preferred stock are entitled. |
STOCK-BASED COMPENSATION
STOCK-BASED COMPENSATION | 12 Months Ended |
Dec. 31, 2016 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
NOTE 14. STOCK-BASED COMPENSATION | NOTE 14 – STOCK-BASED COMPENSATION 2016 Equity Incentive Plan In the first quarter of 2016, the Company adopted the 2016 Equity Incentive Plan. The Company granted ten-year options to directors, officers, and employees, pursuant to which such individuals are entitled to exercise options to purchase an aggregate of up to 6.7 million shares of the Company’s common stock. The options have an exercise price of $0.09 per share, and vest quarterly over a three-year period. The following table contains information about the 2016 Equity Incentive Plan as of December 31, 2016: Awards Reserved for Issuance Awards Issued Awards Available for Grant 2016 Equity Incentive Plan 30,000,000 6,700,000 23,300,000 Stock Options The following table summarizes the Company’s stock option activity and related information for the year ended December 31, 2016: Number of Shares Weighted-Average Exercise Price Per Share Weighted-Average Remaining Contractual Life Aggregate Intrinsic Value of In-the-Money Options Options Outstanding as of January 1, 2016 – $ – Options Granted 6,700,000 $0.09 Options Exercised – $ – Options Forfeited – $ – Options Expired – $ – Options Outstanding as of December 31, 2016 6,700,000 $0.09 9.0 years $1,524,250 Options Exercisable as of December 31, 2016 2,233,332 $0.09 9.0 years $ 508,083 The aggregate intrinsic value is calculated as the difference between the Company’s closing stock price of $0.3175 on December 31, 2016 and the exercise price of options, multiplied by the number of options. As of December 31, 2016, there was $380,710 total unrecognized share-based compensation. Such costs are expected to be recognized over a weighted-average period of approximately 1.8 years. The Company recognizes compensation expense for stock option awards on a straight-line basis over the applicable service period of the award. The service period is generally the vesting period. The following weighted-average assumptions were used to calculate share based compensation: Volatility 121.62% Risk-Free Interest Rate 2.50% Dividend Yield 0.00% The Company does not have sufficient historical information to develop reasonable expectations about future exercise patterns and post-vesting employment termination behavior. Hence, the Company uses the “simplified method” described in Staff Accounting Bulletin 107 to estimate the expected term of share option grants. The expected stock price volatility assumption was determined by examining the historical volatilities for the Company’s common stock. The Company will continue to analyze the historical stock price volatility and expected term assumptions as more historical data for the Company’s common stock becomes available. The risk-free interest rate assumption is based on the U.S. treasury instruments whose term was consistent with the expected term of the Company’s stock options. The expected dividend assumption is based on the Company’s history and expectation of dividend payouts. The Company has never paid dividends on its common stock and does not anticipate paying dividends on its common stock in the foreseeable future. Accordingly, the Company has assumed no dividend yield for purposes of estimating the fair value of the Company share-based compensation. The Company estimates the forfeiture rate at the time of grant and revisions, if necessary, were estimated based on management’s expectation through industry knowledge and historical data. Stock-Based Compensation Expense For the year ended December 31, 2016, the Company recognized stock-based compensation expense (stock options and restricted grants of common stock to employees, directors and non-employee consultants) in the consolidated statement of operations as follows: Year Ended December 31, 2016 Type of Award Number of Shares or Options Granted Stock-Based Compensation Expense Stock Options 6,700,000 $ 190,355 Stock Grants: Employees 6,451,702 2,451,220 Directors 1,070,721 334,424 Non-Employee Consultants 6,344,563 2,406,061 Total Stock-Based Compensation Expense $ 5,382,060 There was no stock-based compensation expense for the years ended December 31, 2015 and 2014. |
WARRANTS
WARRANTS | 12 Months Ended |
Dec. 31, 2016 | |
Notes to Financial Statements | |
Note 15. WARRANTS | NOTE 15 – WARRANTS The Company has the following shares of common stock reserved for exercise of the warrants outstanding as of December 31, 2016: Shares Weighted-Average Exercise Price Warrants Outstanding as of January 1, 2016 32,426,008 $0.18 Warrants Exercised (28,098,084 ) $0.17 Warrants Granted 12,031,830 $0.23 Warrants Expired (523,333 ) $0.45 Warrants Outstanding as of December 31, 2016 15,836,421 $0.19 The weighted-average exercise price and weighted-average fair value of the warrants granted by us during the year ended December 31, 2016 are as follows: Year Ended December 31, 2016 Weighted-Average Exercise Price Weighted-Average Fair Value Warrants Granted Whose Exercise Price Exceeded Fair Value at the Date of Grant $0.30 $0.25 Warrants Granted Whose Exercise Price Was Equal or Lower Than Fair Value at the Date of Grant $0.29 $0.32 The following table summarizes information about fixed-price warrants outstanding as of December 31, 2016: Range of Exercise Prices Number Outstanding at December 31, 2016 Average Remaining Contractual Life Weighted-Average Exercise Price $0.33 439,637 1 Month $0.33 $0.16 750,000 3 Months $0.16 $0.14 to $0.21 1,979,611 18 Months $0.15 $0.06 3,317,001 21 Months $0.06 $0.06 1,250,001 22 Months $0.06 $0.16 1,118,068 26 Months $0.16 $0.13 863,392 27 Months $0.13 $0.12 928,984 29 Months $0.12 $0.35 1,625,000 41 Months $0.35 $0.35 535,714 43 Months $0.35 $0.44 1,214,286 44 Months $0.44 $0.37 178,571 45 months $0.37 $0.07 249,433 48 Months $0.07 $0.35 45,000 52 Months $0.35 $0.35 30,000 53 Months $0.35 $0.35 120,000 54 Months $0.35 $0.35 150,000 56 Months $0.35 $0.35 21,429 57 Months $0.35 $0.35 25,714 58 Months $0.35 $0.41 439,024 59 Months $0.41 $0.27 555,556 60 Months $0.27 15,836,421 For the warrants issued in 2016, the Company valued the warrants utilizing the Black-Scholes option-pricing model Stock Price on Date of Grant $0.32 Exercise Price $0.30 Volatility 138.0% Term 5 Years Risk-Free Interest Rate 4.25% Expected Dividend Rate 0% Based on the Black-Scholes calculations, warrant expense of $467,066 was recorded during the year ended December 31, 2016. |
OPERATING LEASE COMMITMENTS
OPERATING LEASE COMMITMENTS | 12 Months Ended |
Dec. 31, 2016 | |
Leases [Abstract] | |
NOTE 16. OPERATING LEASE COMMITMENTS | NOTE 16 – OPERATING LEASE COMMITMENTS The Company leases certain business facilities under operating lease agreements that specify minimum rentals. Many of these have renewal provisions. The Company’s net rent expense for the years ended December 31, 2016, 2015 and 2014 was $515,413, $501,449 and $100,400, respectively. Future minimum lease payments under non-cancelable operating leases having an initial or remaining term of more than one year are as follows: Year Ending December 31 Scheduled Payments 2017 $ 1,522,311 2018 1,545,893 2019 1,479,234 2020 1,452,645 2021 1,497,038 2022 and Thereafter 3,944,331 Total Future Minimum Lease Payments $ 11,441,452 |
SELECTED QUARTERLY FINANCIAL DA
SELECTED QUARTERLY FINANCIAL DATA | 12 Months Ended |
Dec. 31, 2016 | |
Quarterly Financial Information Disclosure [Abstract] | |
NOTE 17. SELECTED QUARTERLY FINANCIAL DATA | NOTE 17 – SELECTED QUARTERLY FINANCIAL DATA Selected financial data for 2016 and 2015 is summarized as follows and highlights certain items that impacted our quarterly results (unaudited): Year Ended December 31, 2016 First Quarter Second Quarter Third Quarter Fourth Quarter Total Revenues $ 1,548,167 $ 9,699,909 $ 6,950,365 $ 7,129,322 Gross Profit $ 133,974 $ 1,649,944 $ 1,319,386 $ (530,621 ) Loss from Operations $ (1,912,374 ) $ (3,817,377 ) $ (4,686,560 ) $ (7,731,540 ) Amortization of Debt Discount $ (94,406 ) $ (218,126 ) $ (610,089 ) $ (491,581 ) Loss on Extinguishment of Debt $ (920,797 ) $ – $ – $ (4,462,016 ) Loss from Derivatives Issued with Debt Greater Than Debt Carrying Value $ – $ (488,000 ) $ (867,000 ) $ (132,500 ) (Loss) Gain on Fair Market Valuation of Derivatives $ (1,160,700 ) $ (206,000 ) $ 771,000 $ (1,248,800 ) Interest Expense $ (55,995 ) $ (60,565 ) $ (159,633 ) $ (101,156 ) Gain on Fair Market Valuation of Contingent Consideration $ – $ – $ – $ 668,694 Provision (Benefit) for Income Taxes – $ 381,000 $ 410,300 $ (791,300 ) Net Loss Attributable to Terra Tech Corp. $ (4,126,064 ) $ (4,934,238 ) $ (5,587,759 ) $ (12,270,829 ) Net Loss Per Common Share Attributable to Terra Tech Corp. Common Stockholders – Basic and Diluted $ (0.01 ) $ (0.01 ) $ (0.01 ) $ (0.04 ) Stock Price Per Share: High $ 0.42 $ 0.75 $ 0.51 $ 0.56 Low $ 0.09 $ 0.22 $ 0.27 $ 0.22 Year Ended December 31, 2015 First Quarter Second Quarter Third Quarter Fourth Quarter Total Revenues $ 763,353 $ 5,024,290 $ 2,018,351 $ 2,169,352 Gross Profit $ 217,941 $ 262,614 $ 369,806 $ 166,510 Loss from Operations $ (2,104,570 ) $ (3,099,232 ) $ (1,729,508 ) $ (1,883,465 ) Amortization of Debt Discount $ (41,126 ) $ (224,729 ) $ (258,306 ) $ (172,019 ) Loss on Extinguishment of Debt – – $ (263,950 ) $ (355,494 ) Loss from Derivatives Issued with Debt Greater Than Debt Carrying Value $ (224,000 ) $ (337,000 ) – – Gain on Fair Market Valuation of Derivatives $ 408,200 $ 999,000 $ 372,400 $ 20,500 Interest Expense $ (188,529 ) $ (129,701 ) $ (108,563 ) $ (42,783 ) Gain on Fair Market Valuation of Contingent Consideration $ – – – 668,694 Provision for Income Taxes $ – $ 3,076 $ 3,000 $ 37,924 Net Loss Attributable to Terra Tech Corp. $ (2,076,514 ) $ (2,756,576 ) $ (1,958,167 ) $ (2,434,323 ) Net Loss Per Common Share Attributable to Terra Tech Corp. Common Stockholders – Basic and Diluted $ (0.01 ) $ (0.01 ) $ (0.01 ) $ (0.01 ) Stock Price Per Share: High $ 0.33 $ 0.22 $ 0.20 $ 0.14 Low $ 0.17 $ 0.10 $ 0.08 $ 0.08 |
SEGMENT INFORMATION
SEGMENT INFORMATION | 12 Months Ended |
Dec. 31, 2016 | |
Notes to Financial Statements | |
Note 18. SEGMENT INFORMATION | NOTE 18 – SEGMENT INFORMATION The Company’s operating and reportable segments are currently organized around the following products that it offers as part of its core business strategy: · Hydroponic Produce · Cannabis Products These two reportable segments, which are described in greater detail below, had previously been reported on a combined basis as they had been operated and evaluated as one operating segment. The Company experienced significant growth over the last year in most of our product areas. As the Company has grown organically, and as the Company previously added to its capabilities through acquisitions, its products have increased in scale and become more strategically important and distinctly organized and managed under these two groupings. In addition, Derek Peterson, the Company’s chief operating decision maker (“CODM”) has begun reviewing results and managing and allocating resources between these two strategic business groupings, and has begun budgeting using these business segments. The Company’s CODM reviews revenues including intersegment revenues, gross profit and operating income (loss) before income taxes when evaluating segment performance and allocating resources to each segment. Accordingly, intersegment revenue is included in the segment revenues presented in the tables below and is eliminated from revenues and cost of sales in the “Eliminations and Other” column. The “Eliminations and Other” column also includes various income and expense items that the Company does not allocate to its operating segments. These income and expense amounts include the results of the Company’s hydroponic equipment, which are not material, interest income, interest expense, corporate overhead, and corporate-wide expense items such as legal and professional fees as well as expense items for which we have not identified a reasonable basis for allocation. The accounting policies of the reportable segments are the same as those described in Note 2 of the Notes to the Consolidated Financial Statements. Hydroponic Produce The Company’s locally grown hydroponic produce, which includes produce, herbs, and floral products, is started from seed and is grown in environmentally controlled greenhouses. When harvested, the products are sold through retailers targeted to customers seeking fresh produce locally grown using environmentally sustainable methods. Cannabis Products We operate a medical marijuana retail dispensaries in California and Nevada all of which operate under the name Blüm, which offer a broad selection of medical cannabis products including flowers, concentrates and edibles. Through IVXX, we produce and sell a line of medical cannabis flowers, as well as a line of medical cannabis-extracted products, which include concentrates, cartridges, vape pens and wax products. Summarized financial information concerning the Company’s reportable segments is shown in the following tables. Total asset amounts at December 31, 2016, 2015 and 2014 exclude intercompany receivable balances eliminated in consolidation. Year Ended December 31, 2016 Hydroponic Produce Cannabis Products Eliminations and Other Total Total Revenues $ 12,000,423 $ 13,207,327 $ 120,014 $ 25,327,764 Cost of Goods Sold 11,021,449 11,664,737 68,894 22,755,080 Gross Profit 978,974 1,542,590 51,120 2,572,684 Selling, General and Administrative Expenses 2,520,061 5,729,884 12,470,590 20,720,535 Loss from Operations (1,541,087 ) (4,187,294 ) (12,419,470 ) (18,147,851 ) Other Expense: Amortization of Debt Discount – – (1,414,202 ) (1,414,202 ) Loss on Extinguishment of Debt – – (5,382,813 ) (5,382,813 ) Loss from Derivatives Issued with Debt Greater than Debt Carrying Value – – (1,487,500 ) (1,487,500 ) Loss on Fair Market Valuation of Derivatives – – (1,844,500 ) (1,844,500 ) Interest Income (Expense) – – (377,349 ) (377,349 ) Gain on Fair Market Valuation of Contingent Consideration – – 668,694 668,694 Total Other Expense – – (9,837,670 ) (9,837,670 ) Loss Before Provision for Income Taxes $ (1,541,087 ) $ (4,187,294 ) $ (22,257,140 ) $ (27,985,521 ) Total Assets at December 31, 2016 $ 7,064,697 $ 12,516,441 $ 56,597,592 $ 76,178,730 Year Ended December 31, 2015 Hydroponic Produce Cannabis Products Eliminations and Other Total Total Revenues $ 8,633,538 $ 1,207,424 $ 134,384 $ 9,975,346 Cost of Goods Sold 7,771,039 1,078,852 108,584 8,958,475 Gross Profit 862,499 128,572 25,800 1,016,871 Selling, General and Administrative Expenses 1,910,375 763,728 7,159,543 9,833,646 Loss from Operations (1,047,876 ) (635,156 ) (7,133,743 ) (8,816,775 ) Other Expense: Amortization of Debt Discount – – (696,180 ) (696,180 ) Loss on Extinguishment of Debt – – (619,444 ) (619,444 ) Loss from Derivatives Issued with Debt Greater than Debt Carrying Value – – (561,000 ) (561,000 ) Gain on Fair Market Valuation of Derivatives – – 1,800,100 1,800,100 Interest Expense – – (469,576 ) (469,576 ) Total Other Expense – – (546,100 ) (546,100 ) Loss Before Provision for Income Taxes $ (1,047,876 ) $ (635,156 ) $ (7,679,843 ) $ (9,362,875 ) Total Assets at December 31, 2015 $ 5,383,659 $ 1,671,966 $ 2,109,414 $ 9,165,039 Year Ended December 31, 2014 Hydroponic Produce Cannabis Products Eliminations and Other Total Total Revenues $ 6,627,109 $ – $ 467,161 $ 7,094,270 Cost of Goods Sold 6,667,967 – 273,311 6,941,278 – Gross Profit (Loss) (40,858 ) – 193,850 152,992 Selling, General and Administrative Expenses 1,506,684 1,115,577 15,718,986 18,341,247 Loss from Operations (1,547,542 ) (1,115,577 ) (15,525,136 ) (18,188,255 ) Other Income (Expense): Loss from Derivatives Issued with Debt Greater than Debt Carrying Value – – (4,808,000 ) (4,808,000 ) Gain on Fair Market Valuation of Derivatives – – 1,912,037 1,912,037 Interest Income (Expense) 2,232 – (1,098,556 ) (1,096,324 ) Total Other Income (Expense) 2,232 – (3,994,519 ) (3,992,287 ) Loss Before Provision for Income Taxes $ (1,545,310 ) $ (1,115,577 ) $ (19,519,655 ) $ (22,180,542 ) Total Assets at December 31, 2014 $ 5,956,861 $ 858,180 $ 904,185 $ 7,719,226 |
LITIGATION AND CLAIMS
LITIGATION AND CLAIMS | 12 Months Ended |
Dec. 31, 2016 | |
Notes to Financial Statements | |
Note 19. LITIGATION AND CLAIMS | NOTE 19 – 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 follow 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 matters that required an accrual as of December 31, 2016, nor were there any asserted or unasserted claims for which material losses are reasonably possible. |
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS | 12 Months Ended |
Dec. 31, 2016 | |
Notes to Financial Statements | |
NOTE 20. RELATED PARTY TRANSACTIONS | NOTE 20 – RELATED PARTY TRANSACTIONS During the three months ended March 31, 2016, our subsidiary, IVXX, purchased raw materials totaling $16,076 from Black Oak, an entity in which the Company's Chief Executive Officer then-held an ownership interest of 12% prior to the acquisition. On April 1, 2016, we acquired Black Oak and it became a wholly-owned subsidiary of the Company. There was no accounts receivable balance from Black Oak as of March 31, 2016. Prior to the acquisition of Black Oak, IVXX had historically not been charged any rent for use of the space where its extraction lab is located. We lease the land in Belvidere, New Jersey, on which Edible Garden’s greenhouse structure is situated. The land is being leased from Whitetown Realty, LLC, an entity in which David Vande Vrede and Greda Vande Vrede own interests. David Vande Vrede and Greda Vande Vrede are the parents of three of our directors, Kenneth Vande Vrede, Michael Vande Vrede, and Steven Vande Vrede. The lease commenced on January 1, 2014 and expires December 31, 2029. The current monthly lease amount is $14,423 and increases 1.5% each calendar year. Pursuant to an Independent Director Agreement dated June 9, 2016 by and between us and Steven J. Ross, we agreed to pay Mr. Ross $8,333 per month for a period of one year. We also issued to Mr. Ross an aggregate of 720,721 restricted shares of Common Stock, of which all of the shares vested on the date of appointment. On May 7, 2013, Edible Garden entered into a letter agreement with Gro-Rite related to Edible Garden’s right to purchase and distribute a majority of Gro-Rite’s plant products. Gro-Rite is affiliated with three of our directors, Kenneth Vande Vrede, Michael Vande Vrede, and Steven Vande Vrede, and another member of their family. Edible Garden receives a valuable strategic partnership through this letter agreement. On May 7, 2013, Edible Garden entered into a letter agreement with NB Plants related to Edible Garden’s right to purchase and distribute a majority of NB Plants’ plant products. NB Plants is affiliated with three of our directors, Kenneth Vande Vrede, Michael Vande Vrede, and Steven Vande Vrede, and another member of their family. Edible Garden receives a valuable strategic partnership through this letter agreement. Pursuant to the Krueger Independent Director Agreement, we agreed to issue to Mr. Krueger an aggregate of 350,000 restricted shares of our Common Stock, to be fully vested on the date of appointment. The value of the 350,000 shares of Common Stock was equal to approximately $60,550. |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 12 Months Ended |
Dec. 31, 2016 | |
Notes to Financial Statements | |
Note 21. SUBSEQUENT EVENTS | NOTE 21 – SUBSEQUENT EVENTS In the first quarter of 2017, senior secured convertible promissory notes and accrued interest in the amount of $3,434,463 were converted into 15,115,154 shares of common stock. In the first quarter of 2017, the Company sold 4,631,504 shares of common stock for the net amount of $1,300,000 pursuant to an equity financing facility with Dominion Capital, LLC. Securities Purchase Agreement Dated February 22, 2017 and 12% Senior Convertible Promissory Note Due August 22, 2018 On February 22, 2017, the Company entered into a Securities Purchase Agreement (the ‘Purchase Agreement”) with an accredited investor (the “Purchaser”) pursuant to which the Company sold to the Purchaser a 12% Senior Convertible Promissory Note due August 22, 2018 (the “Note”) in the principal amount of $3,000,000 for a purchase price of $3,000,000 (the “Offering”). There were no fees or expenses deducted from the net proceeds received by the Company in the Offering. The Note and the shares of the Company’s common stock, par value $0.001 per share (the “Common Stock”) issuable upon conversion of the Note (the “Conversion Shares”) are collectively referred to herein as the “Securities.” The Purchase Agreement contains customary representations, warranties, and covenants by, among, and for the benefit of the parties. Pursuant to the Purchase Agreement, the Company agreed to sell the Securities pursuant to an effective shelf registration statement on Form S-3 (Registration No 333-210673), declared effective by the Securities and Exchange Commission on August 12, 2016, and a related prospectus supplement thereto. The Note matures on August 22, 2018 (the “Maturity Date”), less any amounts converted or redeemed prior to the Maturity Date. The Note accrues interest at a rate of 12% per annum, payable on the Maturity Date or upon any conversion, prepayment, event of default or other acceleration of payment under the Note. All interest payments under the Note are payable, at the Company’s option, in cash or shares of Common Stock. All principal and interest due and owing under the Note is convertible into shares of Common Stock at any time at the election of the holder at a conversion price per share equal to the lower of (i) $0.2495 or (ii) 85% of the lowest daily volume weighted-average price of the Common Stock in the fifteen (15) trading days prior to the conversion date (the “Conversion Price”), which Conversion Price is subject to adjustment for (i) stock splits, stock dividends, combinations, or similar events and (ii) full ratchet anti-dilution protection. Upon certain events of default, the conversion price of the Note will automatically become 70% of the average of the three (3) lowest volume weighted-average prices of the Common Stock in the twenty (20) consecutive trading days prior to the conversion date for so long as such event of default remains in effect. In addition, at any time that (i) the daily volume weighted-average price of the Common Stock for the prior ten (10) consecutive trading days is $0.70 or more and (ii) the average daily trading value of the Common Stock is greater than $2,500,000 for the prior ten (10) consecutive trading days, then the Company may demand, upon one (1) day’s notice, that the holder convert the Note at the Conversion Price. The Company may prepay in cash any portion of the outstanding principal amount of the Note and any accrued and unpaid interest by, upon ten (10) days’ written notice to the holder, paying an amount equal to (i) 110% of the sum of the then-outstanding principal amount of the Note plus accrued but unpaid interest, if the prepayment date is within 90 days of the issuance date of the Note; (ii) 115% of the sum of the then-outstanding principal amount of the Note plus accrued but unpaid interest, if the prepayment date is between 91 days and 180 days of the issuance date of the Note; or (iii) 125% of the sum of the then-outstanding principal amount of the Note plus accrued but unpaid interest, if the prepayment date is after 180 days of the issuance date of the Note. |
SUMMARY OF SIGNIFICANT ACCOUN28
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 12 Months Ended |
Dec. 31, 2016 | |
Summary Of Significant Accounting Policies Policies | |
Basis of Presentation | Basis of Presentation The accompanying consolidated financial statements include all of the accounts of Terra Tech. These consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for financial information and with the instructions to Form 10-K and Regulation S-X. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation have been included. Certain amounts reported in prior periods have been reclassified to conform with the current presentation. |
Non Controlling Interest | Non-Controlling Interest Non-controlling interest is shown as a component of shareholders’ equity on the consolidated balance sheets and the share of income (loss) attributable to non-controlling interest is shown as a component of income (loss) in the consolidated statements of operations. |
Use of Estimates | Use of Estimates The preparation of financial statements in conformity with United States generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. |
Accounts Receivable | Accounts Receivable The Company reviews all outstanding accounts receivable for collectability on a quarterly basis. An allowance for doubtful accounts is recorded for any amounts deemed uncollectable. The Company does not accrue interest receivable on past due accounts receivable. There was an allowance of $0 and $184,642 at December 31, 2016 and 2015, respectively. The allowance decreased from $184,642 as of December 31, 2015 to $0 at December 31, 2016 due to write-offs of accounts receivable totaling $159,169 and payments on allowed for accounts receivable totaling $25,473. |
Inventory | Inventory We value our inventory at the lower of the actual cost of our inventory, as determined using the first-in, first-out method, or its current estimated market value. We periodically review our physical inventory for excess, obsolete, and potentially impaired items and reserve accordingly. Our reserve estimate for excess and obsolete is based on expected future use. Our reserve estimates have historically been consistent with our actual experience as evidenced by actual sale or disposal of the goods. |
Property, Equipment and Leasehold Improvements | Property, Equipment and Leasehold Improvements 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: 32 years for buildings; three to eight years for furniture and equipment; and 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. For the years ended December 31, 2016 and 2015, we have concluded that the sum of the undiscounted cash flows exceeds the carry amount of the assets. |
Intangibles | Intangibles Intangible assets are stated at historical cost and amortized over their estimated useful lives. We use 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 5 to 12 Years Trade Names 2 to 8 Years Dispensary License 14 Years Patent 2 Years We review 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), we will write the carrying value down to the fair value in the period identified. We calculate fair value of our intangible assets as the present value of estimated future cash flows we expect to generate from the asset using a risk-adjusted discount rate. In determining our estimated future cash flows associated with our intangible assets, we use estimates and assumptions about future revenue contributions, cost structures and remaining useful lives of the asset (asset group). 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 reporting unit exceeds its fair value. |
The Carrying Value, Recoverability and Impairment of Long-Lived Assets | Impairment of Long-Lived Assets We have adopted paragraph 360-10-35-17 of FASB Accounting Standards Codification (“ASC”) for our long-lived assets. Our long -lived assets are reviewed for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. We assess the recoverability of our long-lived assets by comparing the projected undiscounted net cash flows associated with the related long-lived asset or group of assets over their remaining estimated useful lives against their respective carrying amounts. Impairment, if any, is based on the excess of the carrying amount over the fair value of those assets. Fair value is generally determined using the assets expected future discounted cash flows or market value, if readily determinable. If long-lived assets are determined to be recoverable, but the newly determined remaining estimated useful lives are shorter than originally estimated, the net book values of the long-lived assets are depreciated over the newly determined remaining estimated useful lives. We consider the following to be some examples of important indicators that may trigger an impairment review: (i) significant under-performance or losses of assets relative to expected historical or projected future operating results; (ii) significant changes in the manner or use of assets or in our overall strategy with respect to the manner of use of the acquired assets or changes in our overall business strategy; (iii) significant negative industry or economic trends; (iv) increased competitive pressures; (v) a significant decline in our stock price for a sustained period of time; and (vi) regulatory changes. We evaluate acquired assets for potential impairment indicators at least annually and more frequently upon the occurrence of such events. The impairment charges, if any, are included in operating expenses in the accompanying consolidated statements of operations. Based on the test results, no impairments have occurred. |
Deposits | Deposits Deposits are security deposits for leased properties in California, Nevada and New Jersey. The deposits will be returned at the end of the lease term. |
Revenue Recognition | Revenue Recognition Cannabis Products We recognize revenue from product sales net of discounts, rebates, promotional adjustments, price adjustments, and estimated returns and upon transfer of title and risk to the customer, which occurs at shipping (F.O.B. terms). Upon shipment, we have no further performance obligations, selling price is fixed, and collection is reasonably assured. We recognize revenue in accordance with ASC 605, “Revenue Recognition,” Revenue 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. Revenue is recorded upon transfer of title and risk to the customer which occurs at the time customers take delivery of our products at our retail dispensary. Upon purchase, we have no further performance obligations and collection is assured as sales are paid for at time of purchase. Revenue related to the sale of consignment inventory is not recognized until the product is pulled from inventory and sold directly to end-customers. We recognize revenue from the sale of consignment inventory on a gross basis, as we have determined that: 1) we are the primary obligor to the customer; 2) we have latitude in establishing the sales prices and profit margins of our products; 3) we have discretion in selecting our suppliers; 4) we are responsible for loss or damage to consigned inventory; and 5) our customer validation process performs an important part of the process of providing such products to authorized customers. We believe that these factors outweigh the fact that we do not have title to the consigned inventory prior to its sale. During the years ended December 31, 2016 and 2015, sales returns were not significant and, as such, no sales return allowance has been recorded as of December 31, 2016 and 2015. Hydroponic Produce We recognize revenue from products grown in our greenhouses and sold net of discounts, rebates, promotional adjustments, price adjustments, and estimated returns and upon transfer of title and risk to the customer, which occurs at shipping (F.O.B. terms). Upon shipment, we have no further performance obligations, selling price is fixed, and collection is reasonably assured. For sales for which we use an outside grower, we evaluate whether it is appropriate to record the gross amount of product sales and related costs or the net amount earned as commissions. We determine the product specifications, cultivation, and packaging, while disclosing trade and operational secrets, greenhouse technologies, and nutrients used to grow. We are the primary obligor in the transaction because it is our brand that is sold into the retail channel. We are subject to inventory risk until product is accepted by the retailer. We bear credit risk for the amount billed to the retailer and, thus, must pay the grower in the event the selling price is not collected. This revenue is recorded at the gross sale price once the retailer has accepted delivery, selling price is fixed, and collection is reasonably assured. For the years ended December 31, 2016, 2015, and 2014, the Company had such sales of $7,649,125, $6,166,927 and $2,581,983, respectively. |
Cost of Goods Sold | Cost of Goods Sold Cannabis Products 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 other supplies, fees for services and processing, other expenses for services, and allocated overhead. Overhead expenses include allocations of rent, administrative salaries, utilities, and related costs. It also includes the cost incurred in producing the oils, waxes, shatters, and clears sold by IVXX. Hydroponic Produce Cost of goods sold are for the plants grown and purchased and sold into the retail marketplace by Edible Garden. |
Loyalty Rewards Program | Loyalty Rewards Program We offer a customer loyalty rewards program that allows members to earn discounts on future purchases. Unused discounts earned by our loyalty rewards program members are included in accrued liabilities and recorded as a reduction of revenue at the time a qualifying purchase is made. Revenue is recognized when points are redeemed by the loyalty rewards program member. The loyalty rewards program was part of the acquisition of Black Oak, who began offering customers the loyalty rewards program in April 2015. The value of points accrued as of December 31, 2016 was $21,627. |
Stock-Based Compensation | Stock-Based Compensation The Company accounts for its stock-based awards in accordance with Accounting Standards Codification subtopic 718-10, “Compensation,” |
Warrants | Warrants ASC 815-40, “Contracts in Entity’s Own Equity” ASC 815, “Derivatives and Hedging” |
Research and Development | Research and Development Research and development costs are expensed as incurred. |
Income Taxes | Income Taxes We provide for income taxes based on enacted tax law and statutory tax rates at which items of income and expenses 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. We have incurred net operating losses for financial-reporting and tax-reporting purposes. Accordingly, for Federal and state income tax purposes, the benefit for income taxes has been offset entirely by a valuation allowance against the related Federal and state deferred tax asset for the year ended December 31, 2016. 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% 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 Statement of Operations. |
Loss Per Common Share | Loss Per Common Share Net loss per share is computed in accordance with the provisions of ASC 260, “Earnings Per Share,” |
Fair Value of Financial Instruments | Fair Value of Financial Instruments We apply 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. We define 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, which are required to be recorded at fair value, we consider the principal or most advantageous market in which we 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 – Level 2 – Level 3 – In accordance with the fair value accounting requirements, companies may choose to measure eligible financial instruments and certain other items at fair value. We have not elected the fair value option for any eligible financial instruments. |
Recently Issued Accounting Standards | Recently Issued Accounting Standards Intra-Entity Transfers of Assets Other Than Inventory Stock Compensation - Employee Share-Based Payments • Prospectively for the recognition of excess tax benefits and deficiencies in the tax provision. • Retrospectively or prospectively for the classification of excess tax benefits and deficiencies in the statement of cash flows. • Retrospectively for the classification of cash paid for shares withheld to satisfy employee taxes in the statement of cash flows. Leases – “Leases (Topic 842)” Balance Sheet Classification of Deferred Taxes – “Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes” Inventory Measurement “Inventory (Topic 330): Simplifying the Measurement of Inventory” Going Concern Disclosures “Disclosure of Uncertainties About an Entity’s Ability to Continue as a Going Concern” |
ACQUISITIONS (Tables)
ACQUISITIONS (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Acquisitions Tables | |
Summary of Acquisition | Finished Goods Inventory $ 58,622 Brands 300,000 Patent 3,078 Customer Relationships 888,300 Total Assets Acquired $ 1,250,000 |
Summary of Acquisition purchase price | Preliminary Final as of as of 04/01/16 Adjustments 12/31/16 Current Assets (Inclusive of Cash of $163,566) $ 792,447 $ – $ 792,447 Property, Plant and Equipment 681,896 – 681,896 Customer Relationships 7,480,800 379,200 7,860,000 * Trade Name 4,280,000 1,040,000 5,320,000 * Dispensary License 8,214,700 2,055,300 10,270,000 * Liabilities (2,355,938 ) – (2,355,938 ) Total Identifiable Net Assets 19,093,905 3,474,500 22,568,405 Goodwill 32,395,760 (3,474,500 ) 28,921,260 Net Assets $ 51,489,665 $ – $ 51,489,665 |
INVENTORY (Tables)
INVENTORY (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Inventory Tables | |
Inventory | December 31, 2016 2015 Raw Materials $ 486,119 $ 277,340 Work-in-Progress 570,145 542,530 Finished Goods 853,066 129,578 Total Inventory $ 1,909,330 $ 949,448 |
PROPERTY, EQUIPMENT AND LEASE31
PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Property Equipment And Leasehold Improvements Tables | |
Property, equipment, and leasehold improvements | December 31, 2016 2015 Land and Building $ 1,454,124 $ 1,454,124 Furniture and Equipment 3,141,244 2,226,051 Computer Hardware and Software 396,479 133,714 Leasehold Improvements 8,027,792 3,926,795 Subtotal 13,019,639 7,740,684 Less Accumulated Depreciation (2,554,875 ) (1,045,709 ) Property, Equipment and Leasehold Improvements, Net $ 10,464,764 $ 6,694,975 |
INTANGIBLE ASSETS (Tables)
INTANGIBLE ASSETS (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Intangible Assets Tables | |
Finite lives intangible assets | December 31, 2016 December 31, 2015 Estimated Useful Life in Years Gross Carrying Amount Accumulated Amortization Net Carrying Value Gross Carrying Amount Accumulated Amortization Net Carrying Value Amortized Intangible Assets: Customer Relationships 5 to 12 $ 8,960,700 $ (780,960 ) $ 8,179,740 $ 212,400 $ (113,988 ) $ 98,412 Trade Brands 2 to 8 495,520 (89,907 ) 405,613 20,520 – 20,520 Dispensary License 14 10,270,000 (550,179 ) 9,719,821 – – – Patent 2 3,078 (1,154 ) 1,924 – – – Total Amortized Intangible Assets 19,729,298 (1,422,200 ) 18,307,098 232,920 (113,988 ) 118,932 Unamortized Intangible Assets: Trade Name Indefinite 5,320,000 – 5,320,000 – – – Total Unamortized Intangible Assets 5,320,000 – 5,320,000 – – – Total Intangible Assets $ 25,049,298 $ (1,422,200 ) $ 23,627,098 $ 232,920 $ (113,988 ) $ 118,932 |
ACCOUNTS PAYABLE AND ACCRUED 33
ACCOUNTS PAYABLE AND ACCRUED EXPENSES (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Accounts Payable And Accrued Expenses Tables | |
Accounts payable and accrued expenses | December 31, 2016 2015 Accounts Payable $ 1,986,907 $ 1,015,994 Sales Tax Payable 122,470 – Accrued Interest Payable 96,633 103,465 Accrued Expenses 211,390 – Total Accounts Payable and Accrued Expenses $ 2,417,400 $ 1,119,459 |
NOTES PAYABLE (Tables)
NOTES PAYABLE (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Notes Payable Tables | |
Notes payable | December 31, 2016 2015 Promissory note dated July 25, 2014 issued to an accredited investor, which matured July 24, 2015 and bore interest at a rate of 12% per annum. The holder of the note extended the maturity to July 25, 2017. Principal and interest may be converted into common stock based on the average trading price of the ten days prior to maturity at the holder’s option. In November 2016, the holder of the note exchanged the note with another accredited investor. $ – $ 150,000 Unsecured promissory demand notes issued to an accredited investor, which bears interest at a rate of 4% per annum. Holder may elect to convert into common stock at $0.75 per share. In 2015, the investor exchanged the notes from other accredited investors. In October 2016, the holder of the note converted some of the debt and accrued interest into common stock. 64,324 114,306 Convertible promissory note dated April 7, 2015 issued to accredited investors, which matures October 7, 2016 and bears interest at a rate of 12% per annum. The conversion price in effect is $0.1303, subject to adjustment. The remaining balance of the note and accrued interest was converted into common stock in January 2016. – 170,856 5% original issue discount senior secured convertible promissory note dated May 5, 2014 issued to accredited investors, which matured November 5, 2015, and bore interest at a rate of 12% per annum. The fixed conversion price in effect was set at 90% of the 20-day volume weighted average price (“VWAP”) of our common stock on February 5, 2014, or $0.30753 per share. In 2015, the holder of the note converted some of the debt and accrued interest into common stock. The remaining balance of the note and accrued interest was converted into common stock in March 2016. – 96,491 Convertible promissory note dated May 13, 2015 issued to accredited investors, which matures November 13, 2016 and bears interest at a rate of 12% per annum. The conversion price in effect is $0.1211, subject to adjustment. The remaining balance of the note and accrued interest was converted into common stock in January 2016. – 170,783 Convertible promissory note dated December 14, 2015, issued to accredited investors, which matured December 13, 2016 and bears interest at a rate of 12% per annum. The holder of the note extended the maturity to December 13, 2017. The conversion price in effect is $0.1211, subject to adjustment. 500,000 214,927 Senior convertible promissory note dated October 28, 2016, issued to accredited investors, which matures April 28, 2018 and bears interest at a rate of 1% per annum. The conversion price in effect is 90% of the average of the lowest three (3) VWAPs for the five (5) consecutive trading days prior to the conversion date. 102,582 – Senior convertible promissory note dated November 1, 2016, issued to accredited investors, which matures May 1, 2018 and bears interest at a rate of 12% per annum. The conversion price in effect is $0.35, subject to adjustment. 31,615 – Senior convertible promissory note dated December 16, 2016, issued to accredited investors, which matures June 16, 2018 and bears interest at a rate of 12% per annum. The conversion price in effect is $0.27, subject to adjustment. 1,220,155 – Total Debt 1,918,676 917,363 Less Short-Term Portion 564,324 917,363 Long-Term Portion $ 1,354,352 $ – |
FAIR VALUE MEASUREMENTS (Tables
FAIR VALUE MEASUREMENTS (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Fair Value Measurements Tables | |
Fair value hierarchy financial assets measured | The following tables set forth the financial liabilities measured at fair value on a recurring basis by level within the fair value hierarchy as of the dates indicated: Description Fair Value at December 31, 2016 Fair Value Measurement Using Level 1 Level 2 Level 3 Derivative Liabilities – Conversion Feature $ 6,975,000 $ – $ – $ 6,975,000 Liability - Black Oak Contingent Consideration 12,085,859 – – 12,085,859 $ 19,060,859 $ – $ – $ 19,060,859 Description Fair Value at December 31, 2015 Fair Value Measurement Using Level 1 Level 2 Level 3 Derivative Liabilities – Conversion Feature $ 743,400 $ – $ – $ 743,400 Liability - Black Oak Contingent Consideration – – – – $ 743,400 $ – $ – $ 743,400 |
Liabilities measured at fair value on a recurring basis using significant unobservable inputs | Balance at December 31, 2014 $ 1,253,000 Change in Fair Market Value of Conversion Feature (1,800,100 ) Issuance of Equity Instruments with Debt Greater Than Debt Carrying Amount 561,000 Derivative Debt Converted into Equity (1,168,500 ) Issuance of Debt Instruments with Derivatives 1,898,000 Balance at December 31, 2015 743,400 Change in Fair Market Value of Conversion Feature 489,700 Issuance of Equity Instruments with Debt Greater Than Debt Carrying Amount 1,487,500 Derivative Debt Converted into Equity (14,232,100 ) Issuance of Debt Instruments with Derivatives 18,486,500 Balance at December 31, 2016 $ 6,975,000 |
INCOME TAXES (Tables)
INCOME TAXES (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Income Taxes Tables | |
Schedule of expense (benefit) for income taxes | Year Ended December 31, 2016 2015 Current: Federal $ – $ – State – – Deferred: Federal – 44,000 State – – Total Expense (Benefit) for Income Taxes $ – $ 44,000 |
Deferred tax assets and liabilities | December 31, 2016 2015 Deferred Income Tax Assets: Allowance for Bad Debt $ – $ 74,000 Warrants Expense 4,186,000 3,412,000 Derivatives Expense 4,067,000 729,000 Net Operating Losses 15,242,000 7,029,000 Deferred Income Tax Liabilities: Depreciation (1,334,000 ) (44,000 ) Total 22,161,000 11,200,000 Valuation Allowance (22,161,000 ) (11,244,000 ) Net Deferred Tax Liabilities $ – $ (44,000 ) |
WARRANTS (Tables)
WARRANTS (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Warrants Tables | |
Warrants outstanding | Shares Weighted-Average Exercise Price Warrants Outstanding as of January 1, 2016 32,426,008 $0.18 Warrants Exercised (28,098,084 ) $0.17 Warrants Granted 12,031,830 $0.23 Warrants Expired (523,333 ) $0.45 Warrants Outstanding as of December 31, 2016 15,836,421 $0.19 |
Summarizes information about fixed-price warrants outstanding | Range of Exercise Prices Number Outstanding at December 31, 2016 Average Remaining Contractual Life Weighted-Average Exercise Price $0.33 439,637 1 Month $0.33 $0.16 750,000 3 Months $0.16 $0.14 to $0.21 1,979,611 18 Months $0.15 $0.06 3,317,001 21 Months $0.06 $0.06 1,250,001 22 Months $0.06 $0.16 1,118,068 26 Months $0.16 $0.13 863,392 27 Months $0.13 $0.12 928,984 29 Months $0.12 $0.35 1,625,000 41 Months $0.35 $0.35 535,714 43 Months $0.35 $0.44 1,214,286 44 Months $0.44 $0.37 178,571 45 months $0.37 $0.07 249,433 48 Months $0.07 $0.35 45,000 52 Months $0.35 $0.35 30,000 53 Months $0.35 $0.35 120,000 54 Months $0.35 $0.35 150,000 56 Months $0.35 $0.35 21,429 57 Months $0.35 $0.35 25,714 58 Months $0.35 $0.41 439,024 59 Months $0.41 $0.27 555,556 60 Months $0.27 15,836,421 |
COMMITMENTS (Tables)
COMMITMENTS (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Commitments Tables | |
Future minimum lease payments | Year Ending December 31 Scheduled Payments 2017 $ 1,522,311 2018 1,545,893 2019 1,479,234 2020 1,452,645 2021 1,497,038 2022 and Thereafter 3,944,331 Total Future Minimum Lease Payments $ 11,441,452 |
SEGMENT INFORMATION (Tables)
SEGMENT INFORMATION (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Segment Information Tables | |
Summarized financial information | Summarized financial information concerning the Company’s reportable segments is shown in the following tables. Total asset amounts at December 31, 2016, 2015 and 2014 exclude intercompany receivable balances eliminated in consolidation. Year Ended December 31, 2016 Hydroponic Produce Cannabis Products Eliminations and Other Total Total Revenues $ 12,000,423 $ 13,207,327 $ 120,014 $ 25,327,764 Cost of Goods Sold 11,021,449 11,664,737 68,894 22,755,080 Gross Profit 978,974 1,542,590 51,120 2,572,684 Selling, General and Administrative Expenses 2,520,061 5,729,884 12,470,590 20,720,535 Loss from Operations (1,541,087 ) (4,187,294 ) (12,419,470 ) (18,147,851 ) Other Expense: Amortization of Debt Discount – – (1,414,202 ) (1,414,202 ) Loss on Extinguishment of Debt – – (5,382,813 ) (5,382,813 ) Loss from Derivatives Issued with Debt Greater than Debt Carrying Value – – (1,487,500 ) (1,487,500 ) Loss on Fair Market Valuation of Derivatives – – (1,844,500 ) (1,844,500 ) Interest Income (Expense) – – (377,349 ) (377,349 ) Gain on Fair Market Valuation of Contingent Consideration – – 668,694 668,694 Total Other Expense – – (9,837,670 ) (9,837,670 ) Loss Before Provision for Income Taxes $ (1,541,087 ) $ (4,187,294 ) $ (22,257,140 ) $ (27,985,521 ) Total Assets at December 31, 2016 $ 7,064,697 $ 12,516,441 $ 56,597,592 $ 76,178,730 Year Ended December 31, 2015 Hydroponic Produce Cannabis Products Eliminations and Other Total Total Revenues $ 8,633,538 $ 1,207,424 $ 134,384 $ 9,975,346 Cost of Goods Sold 7,771,039 1,078,852 108,584 8,958,475 Gross Profit 862,499 128,572 25,800 1,016,871 Selling, General and Administrative Expenses 1,910,375 763,728 7,159,543 9,833,646 Loss from Operations (1,047,876 ) (635,156 ) (7,133,743 ) (8,816,775 ) Other Expense: Amortization of Debt Discount – – (696,180 ) (696,180 ) Loss on Extinguishment of Debt – – (619,444 ) (619,444 ) Loss from Derivatives Issued with Debt Greater than Debt Carrying Value – – (561,000 ) (561,000 ) Gain on Fair Market Valuation of Derivatives – – 1,800,100 1,800,100 Interest Expense – – (469,576 ) (469,576 ) Total Other Expense – – (546,100 ) (546,100 ) Loss Before Provision for Income Taxes $ (1,047,876 ) $ (635,156 ) $ (7,679,843 ) $ (9,362,875 ) Total Assets at December 31, 2015 $ 5,383,659 $ 1,671,966 $ 2,109,414 $ 9,165,039 Year Ended December 31, 2014 Hydroponic Produce Cannabis Products Eliminations and Other Total Total Revenues $ 6,627,109 $ – $ 467,161 $ 7,094,270 Cost of Goods Sold 6,667,967 – 273,311 6,941,278 – Gross Profit (Loss) (40,858 ) – 193,850 152,992 Selling, General and Administrative Expenses 1,506,684 1,115,577 15,718,986 18,341,247 Loss from Operations (1,547,542 ) (1,115,577 ) (15,525,136 ) (18,188,255 ) Other Income (Expense): Loss from Derivatives Issued with Debt Greater than Debt Carrying Value – – (4,808,000 ) (4,808,000 ) Gain on Fair Market Valuation of Derivatives – – 1,912,037 1,912,037 Interest Income (Expense) 2,232 – (1,098,556 ) (1,096,324 ) Total Other Income (Expense) 2,232 – (3,994,519 ) (3,992,287 ) Loss Before Provision for Income Taxes $ (1,545,310 ) $ (1,115,577 ) $ (19,519,655 ) $ (22,180,542 ) Total Assets at December 31, 2014 $ 5,956,861 $ 858,180 $ 904,185 $ 7,719,226 |
SUMMARY OF SIGNIFICANT ACCOUN40
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) | 12 Months Ended |
Dec. 31, 2016 | |
Customer Relationships [Member] | Minimum [Member] | |
Useful Life (in Years) | 5 years |
Customer Relationships [Member] | Maximum [Member] | |
Useful Life (in Years) | 12 years |
Trade Name [Member] | Minimum [Member] | |
Useful Life (in Years) | 2 years |
Trade Name [Member] | Maximum [Member] | |
Useful Life (in Years) | 8 years |
Dispensary license [Member] | |
Useful Life (in Years) | 14 years |
Patent [Member] | |
Useful Life (in Years) | 2 years |
ACQUISITIONS (Details)
ACQUISITIONS (Details) | Dec. 31, 2016USD ($) |
Preliminary [Member] | |
Current assets, (inclusive of cash of $163,566) | $ 792,447 |
Property, plant and equipment | 681,896 |
Customer relationships | 7,480,800 |
Trade Name | 4,280,000 |
Dispensary license | 8,214,700 |
Liabilities | (2,355,938) |
Total identifiable net assets | 19,093,905 |
Goodwill | 32,395,760 |
Net assets | 51,489,665 |
Adjustment [Member] | |
Current assets, (inclusive of cash of $163,566) | |
Property, plant and equipment | |
Customer relationships | 379,200 |
Trade Name | 1,040,000 |
Dispensary license | 2,055,300 |
Liabilities | |
Total identifiable net assets | 3,474,500 |
Goodwill | (3,474,500) |
Net assets | |
Acquisitions [Member] | |
Current assets, (inclusive of cash of $163,566) | 792,447 |
Property, plant and equipment | 681,896 |
Customer relationships | 7,860,000 |
Trade Name | 5,320,000 |
Dispensary license | 10,270,000 |
Liabilities | (2,355,938) |
Total identifiable net assets | 22,568,405 |
Goodwill | 28,921,260 |
Net assets | $ 51,489,665 |
ACQUISITIONS (Details 2)
ACQUISITIONS (Details 2) | Dec. 31, 2016shares |
Convertible Series B Preferred Stock | |
Closing Consideration | 1,248,300 |
Lockup Consideration | 4,468,872 |
Holdback Consideration | 2,951,528 |
Performance-based Cash Consideration | |
Totals | 8,668,700 |
Convertible Series Q Preferred Stock | |
Closing Consideration | 3,696 |
Lockup Consideration | 8,945 |
Holdback Consideration | 8,739 |
Performance-based Cash Consideration | |
Totals | 21,380 |
Convertible Series Z Preferred Stock | |
Closing Consideration | 1,176 |
Lockup Consideration | 4,210 |
Holdback Consideration | 2,781 |
Performance-based Cash Consideration | |
Totals | 8,167 |
Preferred Stock Converted Into Common Stock [Member] | |
Closing Consideration | 36,960,989 |
Lockup Consideration | 110,882,953 |
Holdback Consideration | 87,392,202 |
Performance-based Cash Consideration | |
Totals | 235,236,144 |
Total Consideration [Member] | |
Closing Consideration | 9,683,779 |
Lockup Consideration | 29,051,334 |
Holdback Consideration | 11,324,969 |
Performance-based Cash Consideration | 1,429,583 |
Totals | 51,489,665 |
INVENTORY (Details)
INVENTORY (Details) - USD ($) | Dec. 31, 2016 | Dec. 31, 2015 |
Inventory Tables | ||
Raw Materials | $ 486,119 | $ 277,340 |
Work-In-Progress | 570,145 | 542,530 |
Finished Goods | 853,066 | 129,578 |
Total | $ 1,909,330 | $ 949,448 |
PROPERTY, EQUIPMENT AND LEASE44
PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS (Details) - USD ($) | Dec. 31, 2016 | Dec. 31, 2015 |
Property Equipment And Leasehold Improvements Details | ||
Land | $ 1,454,124 | $ 1,454,124 |
Furniture | 3,141,244 | 2,226,051 |
Computer Hardware and Software | 396,479 | 133,714 |
Leasehold improvements | 8,027,792 | 3,926,795 |
Subtotal | 13,019,639 | 7,740,684 |
Less accumulated depreciation | (2,554,875) | (1,045,709) |
Total | $ 10,464,764 | $ 6,694,975 |
PROPERTY, EQUIPMENT AND LEASE45
PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS (Details Narrative) - USD ($) | 12 Months Ended | ||
Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 | |
Property Equipment And Leasehold Improvements Details Narrative | |||
Depreciation expense | $ 969,185 | $ 602,814 | $ 392,883 |
INTANGIBLE ASSETS (Details)
INTANGIBLE ASSETS (Details) | 12 Months Ended |
Dec. 31, 2016USD ($) | |
Gross Carrying Amount | $ 19,729,298 |
Accumulated Amortization | (1,422,200) |
Customer Relationships [Member] | |
Gross Carrying Amount | 8,960,700 |
Accumulated Amortization | $ (780,960) |
Customer Relationships [Member] | Minimum [Member] | |
Useful Life (in Years) | 5 years |
Customer Relationships [Member] | Maximum [Member] | |
Useful Life (in Years) | 12 years |
Trade Name [Member] | |
Gross Carrying Amount | $ 495,520 |
Accumulated Amortization | $ (89,907) |
Trade Name [Member] | Minimum [Member] | |
Useful Life (in Years) | 2 years |
Trade Name [Member] | Maximum [Member] | |
Useful Life (in Years) | 8 years |
Dispensary license [Member] | |
Gross Carrying Amount | $ 10,270,000 |
Accumulated Amortization | $ (550,179) |
Useful Life (in Years) | 14 years |
Patent [Member] | |
Gross Carrying Amount | $ 3,078 |
Accumulated Amortization | $ (1,154) |
Useful Life (in Years) | 2 years |
INTANGIBLE ASSETS (Details Narr
INTANGIBLE ASSETS (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Intangible Assets Details Narrative | ||
Amortization expense | $ 1,308,212 | $ 42,480 |
Estimate amortization expense in 2017 | 1,718,104 | |
Estimate amortization expense in 2018 | 1,668,789 | |
Estimate amortization expense in 2019 | 1,645,582 | |
Estimate amortization expense in 2020 | 1,626,231 | |
Estimate amortization expense in 2021 | 1,460,486 | |
Estimate amortization expense after 2021 | 10,187,906 | |
Estimate amortization expense, Net | $ 18,307,098 |
ACCOUNTS PAYABLE AND ACCRUED 48
ACCOUNTS PAYABLE AND ACCRUED EXPENSES (Details) - USD ($) | Dec. 31, 2016 | Dec. 31, 2015 |
Accounts Payable And Accrued Expenses Details | ||
Accounts payable | $ 1,986,907 | $ 1,105,994 |
Sales tax payable | 122,470 | |
Accrued expenses | 211,390 | |
Interest payable | 96,633 | 103,465 |
Accounts payable and accrued expenses | $ 2,417,400 | $ 1,119,459 |
NOTES PAYABLE (Details)
NOTES PAYABLE (Details) - USD ($) | Dec. 31, 2016 | Dec. 31, 2015 |
Total Debt | $ 1,918,676 | $ 917,363 |
Less short-term portion | 564,324 | 917,363 |
Long-term portion | 1,354,352 | |
Convertible promissory note [Member] | ||
Total Debt | 170,856 | |
Convertible promissory note six [Member] | ||
Total Debt | ||
Convertible promissory note five [Member] | ||
Total Debt | ||
Convertible promissory note four [Member] | ||
Total Debt | ||
Convertible promissory note three [Member] | ||
Total Debt | ||
Convertible promissory note two [Member] | ||
Total Debt | 500,000 | 214,927 |
Convertible promissory note one [Member] | ||
Total Debt | 170,783 | |
Convertible promissory note seven [Member] | ||
Total Debt | ||
Original issue discount senior secured convertible promissory note [Member] | ||
Total Debt | 96,491 | |
Promissory Demand Note [Member] | ||
Total Debt | 150,000 | |
Unsecured Promissory Demand Note [Member] | ||
Total Debt | 64,324 | $ 114,306 |
Senior Convertible promissory note [Member] | ||
Total Debt | 102,582 | |
Senior Convertible promissory note 1 [Member] | ||
Total Debt | 31,615 | |
Senior Convertible promissory note 2 [Member] | ||
Total Debt | $ 1,220,155 |
NOTES PAYABLE (Details Narrativ
NOTES PAYABLE (Details Narrative) - USD ($) | Dec. 31, 2016 | Dec. 31, 2015 |
Notes Payable Details Narrative | ||
Total Debt | $ 1,918,676 | $ 917,363 |
Unamortized debt discount | 4,295,648 | 693,435 |
Accrued interest | $ 96,633 | $ 103,465 |
FAIR VALUE MEASUREMENTS (Detail
FAIR VALUE MEASUREMENTS (Details) - USD ($) | Dec. 31, 2016 | Dec. 31, 2015 |
Derivative liability - Conversion Feature | $ 6,895,000 | $ 743,400 |
Derivative liability | 6,987,000 | 743,400 |
Liability - Black Oak Contingent Consideration | 12,085,859 | |
Fair Value Measurement Using, Level 3 [Member] | ||
Derivative liability - Conversion Feature | 6,975,000 | 743,400 |
Derivative liability | 6,975,000 | 743,400 |
Liability - Black Oak Contingent Consideration | 12,085,859 | |
Fair Value Measurement Using, Level 2 [Member] | ||
Derivative liability - Conversion Feature | ||
Derivative liability | ||
Fair Value Measurement Using, Level 1 [Member] | ||
Derivative liability - Conversion Feature | ||
Derivative liability |
FAIR VALUE MEASUREMENTS (Deta52
FAIR VALUE MEASUREMENTS (Details 1) - USD ($) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Fair Value Measurements Details 1 | ||
Liabilities measured at fair value Beginning Balance | $ 743,400 | $ 1,253,000 |
Change in fair market value of Conversion Feature | 489,700 | (1,800,100) |
Issuance of equity instruments with debt greater than debt carrying amount | 1,487,500 | 561,000 |
Derivative debt converted into equity | (14,232,100) | (1,168,500) |
Issuance of equity instruments with derivatives | (14,232,100) | 1,898,000 |
Liabilities measured at fair value Ending Balance | $ 6,975,000 | $ 743,400 |
INCOME TAXES (Details)
INCOME TAXES (Details) - USD ($) | 12 Months Ended | ||
Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 | |
Current: | |||
Federal | |||
State | |||
Total | |||
Deferred: | |||
Federal | 44,000 | ||
State | |||
Total | $ 44,000 |
INCOME TAXES (Details 2)
INCOME TAXES (Details 2) - USD ($) | Dec. 31, 2016 | Dec. 31, 2015 |
Deferred income tax assets: | ||
Allowance for bad debt | $ 74,000 | |
Warrants and interest expense | $ 4,186,000 | 3,412,000 |
Derivatives expense | 4,067,000 | 729,000 |
Net operating losses | 15,242,000 | 7,029,000 |
Total | (22,161,000) | (11,244,000) |
Deferred income tax liabilities: | ||
Depreciation | (1,334,000) | (44,000) |
Total | 22,161,000 | 11,200,000 |
Valuation allowance | (22,161,000) | (11,244,000) |
Net deferred tax asset (liability) | $ (44,000) |
INCOME TAXES (Details Narrative
INCOME TAXES (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Income Taxes Details Narrative | ||
Net operating loss carryforwards | $ 34,940,000 | $ 16,250,000 |
Net operating loss carryforwards expiring from | 2,034 |
CAPITAL STOCK (Details Narrativ
CAPITAL STOCK (Details Narrative) - $ / shares | Dec. 31, 2016 | Dec. 31, 2015 |
Common stock, par value | $ 0.001 | $ 0.001 |
Common stock, Authorized | 990,000,000 | 350,000,000 |
Common stock, Issued | 553,873,812 | 303,023,744 |
Common stock, Outstanding | 553,873,812 | 303,023,744 |
Convertible Series A Preferred Stock | ||
Preferred stock, Par value | $ 0.001 | $ 0.001 |
Preferred stock, Authorized | 100 | 100 |
Preferred stock, Outstanding | 100 | |
Convertible Series B Preferred Stock | ||
Preferred stock, Par value | $ 0.001 | $ 0.001 |
Preferred stock, Authorized | 49,999,900 | 24,999,900 |
Preferred stock, Outstanding | 36,825,953 | 16,300,000 |
WARRANTS (Details)
WARRANTS (Details) | 12 Months Ended |
Dec. 31, 2016$ / sharesshares | |
Shares | |
Warrants outstanding - beginning of year | shares | 32,426,008 |
Warrants exercised | shares | (28,098,084) |
Warrants granted | shares | 12,031,830 |
Warrants expired | shares | (523,333) |
Warrants outstanding - end of period | shares | 15,836,421 |
Weighted Average Exercise Price | |
Warrants outstanding - beginning of year | $ / shares | $ 0.18 |
Warrants exercised | $ / shares | 0.17 |
Warrants granted | $ / shares | .23 |
Warrants expired | $ / shares | .45 |
Warrants outstanding - end of period | $ / shares | $ .19 |
COMMITMENTS (Details)
COMMITMENTS (Details) | Dec. 31, 2016USD ($) |
Year Ending December 31: | |
2,017 | $ 1,522,311 |
2,018 | 1,545,893 |
2,019 | 1,479,234 |
2,020 | 1,452,645 |
2,021 | 1,497,038 |
2022 and thereafter | 3,944,331 |
Total minimum rental payments | $ 11,441,452 |
COMMITMENTS (Details Narrative)
COMMITMENTS (Details Narrative) - USD ($) | 12 Months Ended | ||
Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 | |
Commitments Details Narrative | |||
Net rent expense | $ 515,413 | $ 501,449 | $ 100,400 |
SEGMENT INFORMATION (Details)
SEGMENT INFORMATION (Details) - USD ($) | 12 Months Ended | ||
Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 | |
Total Revenues | $ 25,327,764 | $ 9,975,346 | $ 7,094,270 |
Cost of Goods Sold | 22,755,080 | 8,958,475 | 6,941,278 |
Gross Margin | 25,327,763 | 9,975,346 | 7,094,270 |
Selling, general and administrative expenses | 20,720,535 | 9,833,646 | 18,341,247 |
Loss from operations | (18,147,851) | (8,816,775) | (18,188,255) |
Other Income (Expenses) | |||
Amortization of debt discount | (1,414,202) | (696,180) | |
Loss on extinguishment of debt | (5,382,813) | (619,444) | |
Loss from derivatives issued with debt greater than debt carrying value | (1,487,500) | (561,000) | (4,808,000) |
Gain (Loss) on fair market valuation of derivatives | (1,844,500) | 1,800,100 | 1,912,037 |
Interest Income (Expense) | (377,349) | (469,576) | (1,096,324) |
Gain on Fair Market Valuation of Contingent Consideration | (668,694) | ||
Total Other Income (Expense) | (9,837,670) | (546,100) | (3,992,287) |
Loss before Provision of Income Taxes | (27,985,521) | (9,362,875) | (22,180,542) |
Total assets | 76,178,730 | 9,165,039 | 7,719,226 |
Hydroponic Produce [Member] | |||
Total Revenues | 12,000,423 | 8,633,538 | 6,627,109 |
Cost of Goods Sold | 11,021,449 | 7,771,039 | 6,667,967 |
Gross Margin | 978,974 | 862,499 | (40,858) |
Selling, general and administrative expenses | 2,520,061 | 1,910,375 | 1,506,684 |
Loss from operations | (1,541,087) | (1,047,876) | (1,547,542) |
Other Income (Expenses) | |||
Amortization of debt discount | |||
Loss on extinguishment of debt | |||
Loss from derivatives issued with debt greater than debt carrying value | |||
Gain (Loss) on fair market valuation of derivatives | |||
Interest Income (Expense) | 2,232 | ||
Gain on Fair Market Valuation of Contingent Consideration | |||
Total Other Income (Expense) | 2,232 | ||
Loss before Provision of Income Taxes | (1,541,087) | (1,047,876) | (1,545,310) |
Total assets | 7,064,697 | 5,383,659 | 5,956,861 |
Cannabis Products [Member] | |||
Total Revenues | 13,207,327 | 1,207,424 | |
Cost of Goods Sold | 11,664,737 | 1,078,852 | |
Gross Margin | 1,542,590 | 128,572 | |
Selling, general and administrative expenses | 5,729,884 | 763,728 | 1,115,577 |
Loss from operations | (4,187,294) | (635,156) | (1,115,577) |
Other Income (Expenses) | |||
Amortization of debt discount | |||
Loss on extinguishment of debt | |||
Loss from derivatives issued with debt greater than debt carrying value | |||
Gain (Loss) on fair market valuation of derivatives | |||
Interest Income (Expense) | |||
Gain on Fair Market Valuation of Contingent Consideration | |||
Total Other Income (Expense) | |||
Loss before Provision of Income Taxes | (4,187,294) | (635,156) | (1,115,577) |
Total assets | 12,516,441 | 1,671,966 | 858,180 |
Eliminations And Other [Member] | |||
Total Revenues | 120,014 | 134,384 | 467,161 |
Cost of Goods Sold | 68,894 | 108,584 | 273,311 |
Gross Margin | 51,120 | 25,800 | 193,850 |
Selling, general and administrative expenses | 12,470,590 | 7,159,543 | 15,718,986 |
Loss from operations | (12,419,470) | (7,133,743) | (15,525,136) |
Other Income (Expenses) | |||
Amortization of debt discount | (1,414,202) | (696,180) | |
Loss on extinguishment of debt | (5,382,813) | (619,444) | |
Loss from derivatives issued with debt greater than debt carrying value | (1,487,500) | (561,000) | (4,808,000) |
Gain (Loss) on fair market valuation of derivatives | (1,844,500) | 1,800,100 | 1,912,037 |
Interest Income (Expense) | (377,349) | (469,576) | (1,098,556) |
Gain on Fair Market Valuation of Contingent Consideration | 668,694 | ||
Total Other Income (Expense) | (9,837,670) | (546,100) | (3,994,519) |
Loss before Provision of Income Taxes | (22,257,140) | (7,679,843) | (19,519,655) |
Total assets | $ 56,597,592 | $ 2,109,414 | $ 904,185 |