Cover
Cover - shares | 9 Months Ended | |
Sep. 30, 2020 | Nov. 02, 2020 | |
Cover [Abstract] | ||
Entity Registrant Name | TERRA TECH CORP. | |
Entity Central Index Key | 0001451512 | |
Document Type | 10-Q | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity Small Business | true | |
Entity Shell Company | false | |
Entity Emerging Growth Company | false | |
Entity Current Reporting Status | Yes | |
Document Period End Date | Sep. 30, 2020 | |
Entity Filer Category | Accelerated Filer | |
Document Fiscal Period Focus | Q3 | |
Document Fiscal Year Focus | 2020 | |
Entity Common Stock Shares Outstanding | 192,395,755 | |
Document Quarterly Report | true | |
Document Transition Report | false | |
Entity File Number | 000-54258 | |
Entity Incorporation State Country Code | NV | |
Entity Tax Identification Number | 26-3062661 | |
Entity Address Address Line 1 | 2040 Main Street | |
Entity Address Address Line 2 | Suite 225 | |
Entity Address City Or Town | Irvine | |
Entity Address State Or Province | CA | |
Entity Address Postal Zip Code | 92614 | |
City Area Code | 855 | |
Local Phone Number | 447-6967 | |
Entity Interactive Data Current | Yes |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Sep. 30, 2020 | Dec. 31, 2019 |
Current Assets: | ||
Cash | $ 2,338 | $ 1,226 |
Accounts receivable, net | 351 | 693 |
Inventory | 4,851 | 4,334 |
Prepaid expenses and other assets | 457 | 675 |
Current assets of discontinued operations | 183 | 2,440 |
Total current assets | 8,180 | 9,368 |
Property, equipment and leasehold improvements, net | 33,345 | 35,469 |
Intangible assets, net | 8,028 | 14,871 |
Goodwill | 6,171 | 21,471 |
Other assets | 13,327 | 10,272 |
Investments | 5,330 | 5,000 |
Assets of discontinued operations | 2,981 | 22,799 |
TOTAL ASSETS | 77,362 | 119,250 |
Current liabilities: | ||
Accounts payable and accrued expenses | 10,752 | 9,526 |
Short-term debt | 12,855 | 11,021 |
Current liabilities of discontinued operations | 8,219 | 7,035 |
Total current liabilities | 31,826 | 27,582 |
Long-term liabilities: | ||
Long-term debt, net of discounts | 1,877 | 6,570 |
Long-term lease liabilities | 8,448 | 8,902 |
Long-term liabilities of discontinued operations | 55 | 869 |
Total long-term liabilities | 10,380 | 16,341 |
Total liabilities | 42,206 | 43,923 |
STOCKHOLDERS' EQUITY: | ||
Common stock, par value 0.001: 990,000,000 Shares authorized as of September 30, 2020 and December 31, 2019; 211,571,970 issued and 209,263,562 outstanding as of September 30, 2020 and 120,313,386 shares issued and 118,004,978 shares outstanding as of December 31, 2019 | 214 | 120 |
Additional paid-in capital | 274,370 | 260,516 |
Treasury Stock (2,308,408 shares of common stock, 4 shares of Preferred Stock Convertible Series A) | (808) | (808) |
Accumulated deficit | (243,358) | (189,685) |
Total Terra Tech Corp. stockholders' equity | 30,418 | 70,143 |
Non-controlling interest | 4,738 | 5,184 |
Total stockholders' equity | 35,156 | 75,327 |
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | 77,362 | 119,250 |
Preferred Stock Convertible Series A [Member] | ||
STOCKHOLDERS' EQUITY: | ||
Preferred stock value | 0 | 0 |
Preferred Stock Convertible Series B [Member] | ||
STOCKHOLDERS' EQUITY: | ||
Preferred stock value | $ 0 | $ 0 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares | Sep. 30, 2020 | Dec. 31, 2019 |
STOCKHOLDERS' EQUITY | ||
Common stock, shares par value | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 990,000,000 | 990,000,000 |
Common stock, shares issued | 211,571,970 | 120,313,386 |
Common stock, shares outstanding | 209,263,562 | 118,004,978 |
Treasury Stock, common shares | 2,308,408 | 2,308,408 |
Treasury Stock, Preferred Stock Convertible Series A | 4 | 4 |
Preferred Stock Convertible Series A | ||
STOCKHOLDERS' EQUITY | ||
Preferred stock, shares par value | $ 0.001 | $ 0.001 |
Preferred stock, shares authorized | 100 | 100 |
Preferred stock, shares issued | 12 | 8 |
Preferred stock, shares outstanding | 12 | 8 |
Preferred Stock Convertible Series B [Member] | ||
STOCKHOLDERS' EQUITY | ||
Preferred stock, shares par value | $ 0.001 | $ 0.001 |
Preferred stock, shares authorized | 41,000,000 | 41,000,000 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) | ||||
Total revenues | $ 3,053,000 | $ 5,477,000 | $ 9,806,000 | $ 12,000,000 |
Cost of goods sold | 1,615,000 | 2,295,000 | 4,796,000 | 4,917,000 |
Gross profit | 1,438,000 | 3,182,000 | 5,010,000 | 7,083,000 |
Selling, general and administrative expenses | 5,588,000 | 9,318,000 | 20,409,000 | 26,521,000 |
Impairment of assets | 9,792,000 | 171,000 | 19,909,000 | 681,000 |
(Gain) / Loss on sale of assets | 0 | (893,000) | (35,000) | (893,000) |
Loss on interest in joint venture | 0 | 0 | 0 | 1,067,000 |
Loss from operations | (13,943,000) | (5,414,000) | (35,273,000) | (20,294,000) |
Other income (expense): | ||||
Interest expense, net | (529,000) | (1,714,000) | (1,885,000) | (8,262,000) |
Other income/loss | 372,000 | (984,000) | 349,000 | 13,000 |
Total other income (expense) | (157,000) | (2,698,000) | (1,536,000) | (8,249,000) |
Income (Loss) from continuing operations | (14,100,000) | (8,112,000) | (36,809,000) | (28,543,000) |
Income (Loss) from discontinued operations, net of tax | (4,199,000) | (811,000) | (17,342,000) | (2,135,000) |
NET INCOME (LOSS) | (18,299,000) | (8,923,000) | (54,151,000) | (30,678,000) |
Less: Income (Loss) attributable to non-controlling interest from continuing operations | 138,000 | 143,000 | 479,000 | 57,000 |
NET LOSS ATTRIBUTABLE TO TERRA TECH CORP. | $ (18,161,000) | $ (8,780,000) | $ (53,672,000) | $ (30,621,000) |
Income / ( Loss) from continuing operations per common share attributable to Terra Tech Corp. common stockholders - basic and diluted | $ (0.07) | $ (0.07) | $ (0.20) | $ (0.28) |
Net Loss per common share attributable to Terra Tech Corp. common stockholders - basic and diluted | $ (0.09) | $ (0.08) | $ (0.29) | $ (0.30) |
Weighted-average number of common shares outstanding - basic and diluted | 206,828,614 | 110,797,214 | 186,295,127 | 102,907,538 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) | 9 Months Ended | |
Sep. 30, 2020 | Sep. 30, 2019 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | ||
Net income (loss) | $ (54,151,000) | $ (30,678,000) |
Less: net loss from discontinued operations | 17,342,000 | 2,135,000 |
Net loss from continuing operations | (36,809,000) | (28,543,000) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Bad debt expense | 650,000 | 319,000 |
Cancellation of shares issued | 0 | (58,000) |
Gain on sale of assets | (35,000) | (893,000) |
Amortization of debt discount | 845,000 | 7,211,000 |
Depreciation and amortization | 5,062,000 | 4,684,000 |
Operating lease expense | 680,000 | 578,000 |
Stock based compensation | 1,672,000 | 3,904,000 |
Impairment loss | 19,910,000 | 681,000 |
Loss on revaluation of equity interests | 0 | 1,067,000 |
Other | 0 | (178,000) |
Change in operating assets and liabilities: | ||
Accounts receivable | 292,000 | (550,000) |
Inventory | (518,000) | (2,934,000) |
Prepaid expenses and other current assets | 218,000 | 174,000 |
Other assets | (1,024,000) | 1,354,000 |
Accounts payable and accrued expenses | 1,567,000 | 4,787,000 |
Operating lease liabilities | (380,000) | (2,137,000) |
Net cash provided by / (used in) operating activities - continuing operations | (7,870,000) | (10,532,000) |
Net cash provided by / (used in) operating activities - discontinued operations | (5,020,000) | (910,000) |
NET CASH PROVIDED BY / (USED IN) OPERATING ACTIVITIES | (12,890,000) | (11,443,000) |
CASH FLOWS FROM INVESTING ACTIVITIES: | ||
Purchase of property, equipment and leasehold improvements | (46,000) | (1,208,000) |
Purchase of equity investment | 243,000 | (409,000) |
Cash outflow for loans | (250,000) | (450,000) |
Cash from acquisitions | 57,000 | 127,000 |
Proceeds from sales of assets | 35,000 | 1,240,000 |
Net cash provided by / (used in) investing activities - continuing operations | 39,000 | (700,000) |
Net cash provided by / (used in) investing activities - discontinued operations | 11,189,000 | 516,000 |
NET CASH PROVIDED BY / (USED IN) INVESTING ACTIVITIES | 11,228,000 | (184,000) |
CASH FLOWS FROM FINANCING ACTIVITIES: | ||
Proceeds from issuance of notes payable | 2,954,000 | 11,000,000 |
Payments of debt principal | (430,000) | (2,000,000) |
Cash paid for debt discount | (8,000) | (150,000) |
Proceeds from issuance of common stock | 250,000 | 4,500,000 |
Cash contribution from non-controlling interest | 152,000 | 0 |
Cash paid for acquisition of non-controlling interest | 0 | (6,250,000) |
Cash distribution to non-controlling interest | (145,000) | 0 |
Purchase of treasury stock | 0 | (808,000) |
Net cash provided by / (used in) financing activities - continuing operations | 2,773,000 | 6,292,000 |
Net cash provided by / (used in) financing activities - discontinued operations | 0 | 0 |
NET CASH PROVIDED BY / (USED IN) FINANCING ACTIVITIES | 2,773,000 | 6,292,000 |
NET CHANGE IN CASH | 1,112,000 | (5,335,000) |
Cash at beginning of period | 1,226,000 | 7,193,000 |
CASH AT END OF PERIOD | 2,338,000 | 1,858,000 |
SUPPLEMENTAL DISCLOSURE FOR OPERATING ACTIVITIES: | ||
Cash paid for interest | 892,000 | 1,352,000 |
SUPPLEMENTAL DISCLOSURE FOR NON-CASH INVESTING AND FINANCING ACTIVITIES: | ||
Debt principal and accrued interest converted into common stock | 2,252,000 | 12,450,000 |
Stock Issued for the acquisition of OneQor | 9,304,000 | 0 |
Fixed assets in accounts payable | 792,000 | 0 |
Non-cash contribution from non-controlling interest | 25,000 | 702,000 |
Consolidation of Joint Venture Net Assets | 0 | 11,957,000 |
Financing Fees in Accounts Payable | 0 | 145,000 |
Warrants issued for debt discount | 0 | 228,000 |
Beneficial Conversion Feature | $ 0 | $ 5,633,000 |
CONSOLIDATED STATEMENTS OF STOC
CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY (UNAUDITED) - USD ($) | Total | Common Stock | Treasury Stock | Additional Paid-In Capital | Accumulated Deficit | Noncontrolling Interest | Preferred Stock Convertible Series A |
Balance, shares at Dec. 31, 2018 | 81,759,415 | 12 | |||||
Balance, amount at Dec. 31, 2018 | $ 94,874,000 | $ 82,000 | $ 0 | $ 236,543,000 | $ (142,754,000) | $ 1,003,000 | $ 0 |
Opening balance sheet adjustment- ASC 842 | 0 | $ 0 | 0 | 0 | 0 | 0 | 0 |
Stock compensation - employees, shares | 564,799 | ||||||
Stock compensation - employees, amount | 428,000 | $ 1,000 | 0 | 428,000 | 0 | 0 | 0 |
Stock compensation - directors, shares | 173,610 | ||||||
Stock compensation - directors, amount | 102,000 | $ 0 | 0 | 102,000 | 0 | 0 | 0 |
Stock compensation - services expense, shares | 66,376 | ||||||
Stock compensation - services expense, amount | 59,000 | $ 0 | 0 | 59,000 | 0 | 0 | 0 |
Stock cancellation, shares | (60,000) | ||||||
Stock cancellation, amount | (58,000) | $ 0 | 0 | (58,000) | 0 | 0 | 0 |
Debt conversion - common stock, shares | 25,251,122 | ||||||
Debt conversion - common stock, amount | 12,681,000 | $ 25,000 | 0 | 12,656,000 | 0 | 0 | 0 |
Stock issued for cash, shares | 7,461,833 | ||||||
Stock issued for cash, amount | 4,500,000 | $ 7,000 | 0 | 4,493,000 | 0 | 0 | 0 |
Stock option expense | 3,314,000 | 0 | 0 | 3,314,000 | 0 | 0 | 0 |
Beneficial conversion feature - convertible notes | 5,862,000 | $ 0 | $ 0 | 5,862,000 | 0 | $ 0 | |
Series A, shares | 4 | (4) | |||||
Common Stock, shares | 2,308,408 | ||||||
Common Stock, amount | (808,000) | $ (808,000) | |||||
Consolidation of NuLeaf joint venture | 5,402,000 | 5,402,000 | |||||
Acquisition of non-controlling interest | (5,770,000) | (5,136,000) | (633,000) | ||||
Contribution (distribution) from non-controlling interest | 702,000 | 702,000 | |||||
Net income attributable to non-controlling interest | (57,000) | (57,000) | |||||
Net loss attributable to Terra Tech Corp. | (30,621,000) | (30,621,000) | |||||
Balance, shares at Sep. 30, 2019 | 115,217,155 | 2,308,412 | 8 | ||||
Balance, amount at Sep. 30, 2019 | 90,610,000 | $ 115,000 | $ (808,000) | 258,262,000 | (173,375,000) | 6,416,000 | $ 0 |
Balance, shares at Dec. 31, 2018 | 81,759,415 | 12 | |||||
Balance, amount at Dec. 31, 2018 | 94,874,000 | $ 82,000 | $ 0 | 236,543,000 | (142,754,000) | 1,003,000 | $ 0 |
Balance, shares at Dec. 31, 2019 | 118,004,978 | 2,308,412 | 8 | ||||
Balance, amount at Dec. 31, 2019 | 75,327,000 | $ 120,000 | $ (808,000) | 260,516,000 | (189,686,000) | 5,184,000 | $ 0 |
Balance, shares at Jun. 30, 2019 | 109,105,288 | 12 | |||||
Balance, amount at Jun. 30, 2019 | 97,368,000 | $ 109,000 | 0 | 255,112,000 | (164,594,000) | 6,741,000 | $ 0 |
Stock compensation - employees, shares | 91,465 | ||||||
Stock compensation - employees, amount | 37,000 | $ 0 | 0 | 37,000 | 0 | 0 | 0 |
Stock compensation - directors, shares | 173,610 | ||||||
Stock compensation - directors, amount | 102,000 | $ 0 | 0 | 102,000 | 0 | 0 | |
Stock cancellation, amount | 0 | ||||||
Debt conversion - common stock, shares | 4,071,410 | ||||||
Debt conversion - common stock, amount | 1,288,000 | $ 4,000 | 0 | 1,284,000 | 0 | 0 | |
Stock issued for cash, shares | 1,775,382 | ||||||
Stock issued for cash, amount | 650,000 | $ 2,000 | 0 | 648,000 | 0 | 0 | 0 |
Stock option expense | 1,078,000 | 0 | $ 0 | 1,078,000 | 0 | 0 | $ 0 |
Series A, shares | 4 | (4) | |||||
Series A, amount | 0 | 0 | $ 0 | 0 | 0 | 0 | $ 0 |
Common Stock, shares | 2,308,408 | ||||||
Common Stock, amount | (808,000) | 0 | $ (808,000) | 0 | 0 | 0 | 0 |
Consolidation of NuLeaf joint venture | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
Contribution (distribution) from non-controlling interest | (182,000) | 0 | 0 | 0 | 0 | (182,000) | 0 |
Net income attributable to non-controlling interest | (143,000) | 0 | 0 | 0 | 0 | (143,000) | 0 |
Net loss attributable to Terra Tech Corp. | (8,780,000) | $ 0 | $ 0 | 0 | (8,780,000) | 0 | $ 0 |
Balance, shares at Sep. 30, 2019 | 115,217,155 | 2,308,412 | 8 | ||||
Balance, amount at Sep. 30, 2019 | 90,610,000 | $ 115,000 | $ (808,000) | 258,262,000 | (173,375,000) | 6,416,000 | $ 0 |
Balance, shares at Dec. 31, 2019 | 118,004,978 | 2,308,412 | 8 | ||||
Balance, amount at Dec. 31, 2019 | 75,327,000 | $ 120,000 | $ (808,000) | 260,516,000 | (189,686,000) | 5,184,000 | $ 0 |
Stock compensation - employees, shares | 3,179,544 | ||||||
Stock compensation - employees, amount | 434,000 | $ 3,000 | 431,000 | 0 | |||
Stock compensation - directors, shares | 909,090 | ||||||
Stock compensation - directors, amount | 19,000 | $ 1,000 | 18,000 | 0 | |||
Stock compensation - services expense, shares | 1,159,615 | ||||||
Stock compensation - services expense, amount | 152,000 | $ 1,000 | 151,000 | 0 | |||
Debt conversion - common stock, shares | 27,694,543 | ||||||
Debt conversion - common stock, amount | 2,252,000 | $ 28,000 | 2,224,000 | 0 | |||
Stock issued for cash, shares | 2,470,173 | ||||||
Stock issued for cash, amount | 250,000 | $ 2,000 | 248,000 | 0 | |||
Stock option expense | 1,536,000 | 1,536,000 | 0 | ||||
Net income attributable to non-controlling interest | (479,000) | 0 | 0 | 0 | (479,000) | 0 | |
Net loss attributable to Terra Tech Corp. | (53,672,000) | $ 0 | 0 | (53,672,000) | 0 | 0 | |
Stock issued for OneQor acquisition, shares | 58,154,027 | ||||||
Stock issued for OneQor acquisition, amount | 9,304,000 | $ 58,000 | 9,246,000 | 0 | |||
Net contribution from non-controlling interest | 33,000 | $ 0 | $ 0 | 0 | 0 | 33,000 | $ 0 |
Balance, shares at Sep. 30, 2020 | 211,571,970 | 2,308,412 | 8 | ||||
Balance, amount at Sep. 30, 2020 | 35,156,000 | $ 214,000 | $ (808,000) | 274,370,000 | (243,358,000) | 4,738,000 | $ 0 |
Balance, shares at Jun. 30, 2020 | 204,777,168 | 2,308,412 | 8 | ||||
Balance, amount at Jun. 30, 2020 | 52,651,000 | $ 207,000 | $ (808,000) | 273,526,000 | (225,198,000) | 4,923,000 | $ 0 |
Stock compensation - employees, amount | $ 0 | 0 | 0 | 0 | 0 | 0 | |
Stock compensation - directors, shares | 1,082,700 | ||||||
Stock compensation - directors, amount | 119,000 | $ 1,000 | 0 | 118,000 | 0 | 0 | 0 |
Stock compensation - services expense, shares | 84,615 | ||||||
Stock compensation - services expense, amount | 11,000 | $ 0 | 11,000 | 0 | |||
Debt conversion - common stock, shares | 5,627,487 | ||||||
Debt conversion - common stock, amount | 423,000 | $ 6,000 | 0 | 417,000 | 0 | 0 | 0 |
Stock option expense | 298,000 | 0 | 0 | 298,000 | 0 | 0 | 0 |
Net income attributable to non-controlling interest | (138,000) | 0 | 0 | 0 | 0 | (138,000) | 0 |
Net loss attributable to Terra Tech Corp. | (18,161,000) | 0 | 0 | 0 | (18,161,000) | 0 | 0 |
Net contribution from non-controlling interest | (48,000) | $ 0 | $ 0 | 0 | 0 | (48,000) | $ 0 |
Balance, shares at Sep. 30, 2020 | 211,571,970 | 2,308,412 | 8 | ||||
Balance, amount at Sep. 30, 2020 | $ 35,156,000 | $ 214,000 | $ (808,000) | $ 274,370,000 | $ (243,358,000) | $ 4,738,000 | $ 0 |
DESCRIPTION OF BUSINESS
DESCRIPTION OF BUSINESS | 9 Months Ended |
Sep. 30, 2020 | |
DESCRIPTION OF BUSINESS | |
NOTE 1. DESCRIPTION OF BUSINESS | NOTE 1 - DESCRIPTION OF BUSINESS References in this document to “the Company”, “Terra Tech”, “we”, “us”, or “our” are intended to mean Terra Tech Corp., individually, or as the context requires, collectively with its subsidiaries on a consolidated basis. We are a retail, production, and cultivation company, with an emphasis on providing the highest quality of medical and adult use cannabis products. We currently have a concentrated cannabis interest in California and Nevada. All of our cannabis dispensaries operate under the name Blüm. Our cannabis dispensaries in California operate as Black Oak Gallery in Oakland and Blum San Leandro in San Leandro and offer a broad selection of medical and adult-use cannabis products including flowers, concentrates and edibles. On February 14, 2020, the Company acquired OneQor Technologies, Inc. (“OneQor”). The acquisition of OneQor was accounted for in accordance with ASC 805-10, “Business Combinations.” Business Combinations” |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 9 Months Ended |
Sep. 30, 2020 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The accompanying interim unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Securities Exchange Commission (“SEC”) Form 10-Q and Article 10 of Regulation S-X of the Securities Act of 1933 and reflect the accounts and operations of the Company and those entities in which we have a controlling financial interest. In accordance with the provisions of the Financial Accounting Standards Board (“FASB”) or Accounting Standards Codification (“ASC”) 810, “Consolidation,” All intercompany accounts and transactions have been eliminated in consolidation. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation have been included. These interim unaudited condensed consolidated financial statements do not include all disclosures required by GAAP for complete financial statements and, therefore, should be read in conjunction with the more detailed audited consolidated financial statements for the year ended December 31, 2019. The December 31, 2019 balances reported herein are derived from the audited consolidated financial statements for the year ended December 31, 2019. The results of operations for the interim periods are not necessarily indicative of the results of operations to be expected for the full year. Revision of Previously Issued Financial Statements On October 26, 2017, the Company entered into joint venture agreements with NuLeaf Sparks Cultivation, LLC and NuLeaf Reno Production, LLC (collectively “NuLeaf”) to build and operate cultivation and production facilities of cannabis products in Nevada. In February 2019, we amended and restated the NuLeaf agreements and obtained control of the operations of NuLeaf. The Company has determined these entities are variable interest entities in which the Company is the primary beneficiary by reference to the power and benefits criterion under ASC 810, “Consolidation.” The provisions within the amended agreement grant the Company the power to manage and make decisions that affect the operation of these entities. As the primary beneficiary of NuLeaf Sparks Cultivation, LLC and NuLeaf Reno Production, LLC, the Company began consolidating the accounts and operations of these entities as of March 1, 2019. All intercompany transactions are eliminated in the consolidated financial statements. On March 1, 2019, we remeasured our equity method investment in NuLeaf to fair value and consolidated the results of NuLeaf in our consolidated financial statements and report its results in our cannabis segment. During the year ended December 31, 2019, management finalized the accounting for the transaction, and recorded a measurement period adjustment that increased net loss by $6.63 million (see Note 4, “ Variable Interest Entities” Going Concern The accompanying unaudited condensed financial statements have been prepared assuming that we will continue as a going concern. In an effort to achieve liquidity that would be sufficient to meet all of our commitments, we have undertaken a number of actions, including minimizing capital expenditures, and reducing recurring expenses. However, we believe that even after taking these actions, we may not have sufficient liquidity to satisfy all of our future financial obligations. The risks and uncertainties surrounding the timing of the close of our pending asset sales in Nevada, our limited capital resources, and the weak industry conditions stemming from the COVID-19 pandemic that are impacting our business raise substantial doubt as to our ability to continue as a going concern. See Note 19 , “Going Concern” Non-Controlling Interest Non-controlling interest is shown as a component of stockholders’ equity on the consolidated balance sheets and the share of net income (loss) attributable to non-controlling interest is shown as a component of net income (loss) in the consolidated statements of operations. Use of Estimates The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the dates of the financial statements and the reported amounts of total net revenue and expenses in the reporting periods. The Company regularly evaluates estimates and assumptions related to revenue recognition, allowances for doubtful accounts, sales returns, inventory valuation, stock-based compensation expense, goodwill and purchased intangible asset valuations, derivative liabilities, deferred income tax asset valuation allowances, uncertain tax positions, tax contingencies, litigation and other loss contingencies. These estimates and assumptions are based on current facts, historical experience and various other factors that the Company believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the recording of revenue, costs and expenses that are not readily apparent from other sources. The actual results the Company experiences may differ materially and adversely from these estimates. To the extent there are material differences between the estimates and actual results, the Company’s future results of operations will be affected. Reclassifications Certain prior period amounts have been reclassified to conform to the current period presentation. These reclassifications did not affect net loss, revenues, or stockholders’ equity. See Note 16, ”Discontinued Operations” Trade and Other Receivables The Company extends non-interest bearing trade credit to its customers in the ordinary course of business which is not collateralized. Accounts receivable are shown on the face of the consolidated balance sheets, net of an allowance for doubtful accounts. The Company analyzes the aging of accounts receivable, historical bad debts, customer creditworthiness and current economic trends, in determining the allowance for doubtful accounts. The Company does not accrue interest receivable on past due accounts receivable. Inventory Inventory is stated at the lower of cost or net realizable value, with cost being determined on the first-in, first-out (“FIFO”) method of accounting. The Company periodically reviews physical inventory for excess, obsolete, and potentially impaired items, and reserves. The reserve estimate for excess and obsolete inventory is based on expected future use. The reserve estimates have historically been consistent with actual experience as evidenced by actual sale or disposal of the goods. Prepaid Expenses and Other Current Assets Prepaid expenses consist of various payments that the Company has made in advance for goods or services to be received in the future. These prepaid expenses include advertising, insurance, and service or other contracts requiring upfront payments. Property, Equipment and Leasehold Improvements, Net Property, equipment, and leasehold improvements are stated at cost less accumulated depreciation. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets. The approximate useful lives for depreciation of our property, equipment and leasehold improvements are as follows: thirty-two years for buildings; three to eight years for furniture and equipment; three to five years for computer and software; five years for vehicles and the shorter of the estimated useful life or the underlying lease term for leasehold improvements. Repairs and maintenance expenditures that do not extend the useful lives of related assets are expensed as incurred. Expenditures for major renewals and improvements are capitalized, while minor replacements, maintenance, and repairs, which do not extend the asset lives, are charged to operations as incurred. Upon sale or disposition, the cost and related accumulated depreciation are removed from the accounts and any gain or loss is included in operations. The Company continually monitors events and changes in circumstances that could indicate that the carrying balances of its property, equipment and leasehold improvements may not be recoverable in accordance with the provisions of ASC 360, “Property, Plant, and Equipment.” “Property, Equipment and Leasehold Improvements, Net” Investments Investments in unconsolidated affiliates are accounted for under the cost or the equity method of accounting, as appropriate. The Company accounts for investments in limited partnerships or limited liability corporations, whereby the Company owns a minimum of 5% of the investee’s outstanding voting stock, under the equity method of accounting. These investments are recorded at the amount of the Company’s investment and adjusted each period for the Company’s share of the investee’s income or loss, and dividends paid. As investments accounted for under the cost method do not have readily determinable fair values, the Company only estimates fair value if there are identified events or changes in circumstances that could have a significant adverse effect on the investment’s fair value. Assets Held for Sale and Discontinued Operations Assets held for sale represent furniture, equipment, and leasehold improvements less accumulated depreciation as well as any other assets that are held for sale in conjunction with the sale of a business. The Company records assets held for sale in accordance with ASC 360 , “Property, Plant, and Equipment,” “Reporting Discontinued Operations and Disclosure of Disposals of Components of an Entity” Goodwill Goodwill is measured as the excess of consideration transferred and the net of the acquisition date fair value of assets acquired, and liabilities assumed in a business acquisition. In accordance with ASC 350, “Intangibles-Goodwill and Other,” The Company reviews the goodwill allocated to each of our reporting units for possible impairment annually as of September 30 and whenever events or changes in circumstances indicate carrying amount may not be recoverable. In the impairment test, the Company measures the recoverability of goodwill by comparing a reporting unit’s carrying amount, including goodwill, to the estimated fair value of the reporting unit. The carrying amount of each reporting unit is determined based upon the assignment of our assets and liabilities, including existing goodwill and other intangible assets, to the identified reporting units. Where an acquisition benefits only one reporting unit, the Company allocates, as of the acquisition date, all goodwill for that acquisition to the reporting unit that will benefit. Where the Company has had an acquisition that benefited more than one reporting unit, The Company has assigned the goodwill to our reporting units as of the acquisition date such that the goodwill assigned to a reporting unit is the excess of the fair value of the acquired business, or portion thereof, to be included in that reporting unit over the fair value of the individual assets acquired and liabilities assumed that are assigned to the reporting unit. If the carrying amount of a reporting unit is in excess or its fair value, the Company recognizes an impairment charge equal to the amount in excess. Intangible Assets Intangible assets continue to be subject to amortization, and any impairment is determined in accordance with ASC 360, “Property, Plant, and Equipment,” Customer relationships 3 to 5 Years Trademarks 2 to 8 Years Dispensary licenses 14 Years Patent 2 Years The Company reviews intangible assets subject to amortization quarterly to determine if any adverse conditions exist or a change in circumstances has occurred that would indicate impairment or a change in the remaining useful life. Conditions that may indicate impairment include, but are not limited to, a significant adverse change in legal factors or business climate that could affect the value of an asset, a product recall, or an adverse action or assessment by a regulator. If an impairment indicator exists, we test the intangible asset for recoverability. For purposes of the recoverability test, we group our amortizable intangible assets with other assets and liabilities at the lowest level of identifiable cash flows if the intangible asset does not generate cash flows independent of other assets and liabilities. If the carrying value of the intangible asset (asset group) exceeds the undiscounted cash flows expected to result from the use and eventual disposition of the intangible asset (asset group), the Company will write the carrying value down to the fair value in the period identified. Intangible assets that have indefinite useful lives are tested annually for impairment and are tested for impairment more frequently if events and circumstances indicate that the asset might be impaired. An impairment loss is recognized to the extent that the carrying amount of the asset group exceeds its fair value. Fair Value of Financial Instruments The Company applies fair value accounting for all financial assets and liabilities and non-financial assets and liabilities that are recognized or disclosed at fair value in the financial statements on a recurring basis. The Company defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities that are required to be recorded at fair value, the Company considers the principal or most advantageous market in which the Company would transact and the market-based risk measurements or assumptions that market participants would use in pricing the asset or liability, such as risks inherent in valuation techniques, transfer restrictions and credit risk. Fair value is estimated by applying the following hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement: Level 1 - Quoted prices in active markets for identical assets or liabilities. Level 2 - Observable inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices for identical or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 3 - Inputs that are generally unobservable and typically reflect management’s estimate of assumptions that market participants would use in pricing the asset or liability. In accordance with the fair value accounting requirements, companies may choose to measure eligible financial instruments and certain other items at fair value. The Company held one investment at fair value as of September 30, 2020. Refer to Note 10, “ Fair Value Measurements” Business Combinations The Company accounts for its business acquisitions in accordance with ASC 805-10, “Business Combinations.” Revenue Recognition and Performance Obligations Cannabis Dispensary, Cultivation and Production The Company recognizes revenue from manufacturing and distribution product sales when our customers obtain control of our products. Revenue from our retail dispensaries is recorded at the time customers take possession of the product. Revenue from our retail dispensaries is recognized net of discounts, rebates, promotional adjustments, price adjustments and returns, and net of taxes collected from customers that are remitted to governmental authorities, with the collected taxes recorded as current liabilities until remitted to the relevant government authority. Upon purchase, the Company has no further performance obligations and collection is assured as sales are paid for at time of purchase. Revenue related to distribution customers is recorded when the customer is determined to have taken control of the product. This determination is based on the customer specific terms of the arrangement and gives consideration to factors including, but not limited to, whether the customer has an unconditional obligation to pay, whether a time period or event is specified in the arrangement and whether the Company can mandate the return or transfer of the products. Revenue is recorded net of taxes collected from customers that are remitted to governmental authorities with collected taxes recorded as current liabilities until remitted to the relevant government authority. Disaggregation of Revenue See Note 17, “ Segment Information” Contract Balances Due to the nature of the Company’s revenue from contracts with customers, our cannabis dispensary, cultivation and production operations do not have material contract assets or liabilities that fall under the scope of ASC Topic 606. Contract Estimates and Judgments The Company’s revenues accounted for under ASC Topic 606, generally, do not require significant estimates or judgments based on the nature of the Company’s revenue streams. The sales prices are generally fixed at the point of sale and all consideration from contracts are included in the transaction price. The Company’s contracts do not include multiple performance obligations or variable consideration. Cost of Goods Sold Cost of goods sold includes the costs directly attributable to product sales and includes amounts paid for finished goods, such as flower, edibles, and concentrates, as well as packaging and delivery costs. It also includes the labor and overhead costs incurred in cultivating and producing cannabis flower and cannabis-derived products. Overhead expenses include allocations of rent, administrative salaries, utilities, and related costs. Advertising Expenses The Company expenses advertising costs as incurred in accordance with ASC 720-35, “Other Expenses - Advertising Cost.” Stock-Based Compensation The Company accounts for its stock-based awards in accordance with ASC Subtopic 718-10, “Compensation - Stock Compensation”, The Black-Scholes option-pricing model requires the input of certain assumptions that require the Company’s judgment, including the expected term and the expected stock price volatility of the underlying stock. The assumptions used in calculating the fair value of stock-based compensation represent management’s best estimates, but these estimates involve inherent uncertainties and the application of judgment. As a result, if factors change resulting in the use of different assumptions, stock-based compensation expense could be materially different in the future. The Company accounts for forfeitures of stock-based awards as they occur. Income Taxes The provision for income taxes is determined in accordance with ASC 740, “Income Taxes” The Company recognizes uncertain tax positions based on a benefit recognition model. Provided that the tax position is deemed more likely than not of being sustained, the Company recognizes the largest amount of tax benefit that is greater than 50.0% likely of being ultimately realized upon settlement. The tax position is derecognized when it is no longer more likely than not of being sustained. The Company classifies income tax related interest and penalties as interest expense and selling, general and administrative expense, respectively, on the consolidated statements of operations. Loss Per Common Share In accordance with the provisions of ASC 260, “Earnings Per Share”, Potentially dilutive securities that are not included in the calculation of diluted net loss per share because their effect is anti-dilutive are as follows (in common equivalent shares): Nine Months Ended September 30, 2020 2019 Common stock warrants 1,088,278 1,170,540 Common stock options 16,259,670 12,365,295 17,347,948 13,535,835 Recently Issued Accounting Standards FASB Accounting Standards Update (“ASU”) No. 2020-06 “Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity” Recently Adopted Accounting Standards FASB Accounting Standards Update (“ASU”) No. 2016-13 “Measurement of Credit Losses on Financial Instruments” Issued in June 2016, ASU 2016-13 replaces the “incurred loss” credit losses framework with a new accounting standard that requires management's measurement of the allowance for credit losses to be based on a broader range of reasonable and supportable information for lifetime credit loss estimates. Effective January 1, 2020, the Company adopted the standard. It has had no material impact. |
CONCENTRATIONS OF BUSINESS AND
CONCENTRATIONS OF BUSINESS AND CREDIT RISK | 9 Months Ended |
Sep. 30, 2020 | |
CONCENTRATIONS OF BUSINESS AND CREDIT RISK | |
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 either the Federal Deposit Insurance Corporation or the National Credit Union Association up to certain federal limitations. At times, the Company’s cash balance exceeds these federal limitations and it maintains significant cash on hand at certain of its locations. The Company has not historically experienced any material loss from carrying cash on hand. The amount in excess of insured limitations was $0.65 million as September 30, 2020 and was $0.18 million as of December 31, 2019. 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. There were no customers that comprised more than 10.0% of the Company’s revenue for the nine months ended September 30, 2020 and 2019. The Company sources cannabis products for retail, cultivation and production from various vendors. However, as a result of regulations in the State of California, the Company’s California retail, cultivation and production operations must use vendors licensed by the State. As a result, the Company is dependent upon the licensed vendors in California to supply products. If the Company is unable to enter into a relationship with sufficient members of properly licensed vendors, the Company’s sales may be impacted. During the nine months ended September 30, 2020, we did not have any concentration of vendors for inventory purchases. However, this may change depending on the number of vendors who receive appropriate licenses to operate in the State of California. |
VARIABLE INTEREST ENTITIES
VARIABLE INTEREST ENTITIES | 9 Months Ended |
Sep. 30, 2020 | |
VARIABLE INTEREST ENTITIES | |
NOTE 4. VARIABLE INTEREST ENTITIES | NOTE 4 - VARIABLE INTEREST ENTITIES NuLeaf, Inc. On October 26, 2017, the Company entered into operating agreements with NuLeaf, Inc. and formed NuLeaf Sparks Cultivation, LLC and NuLeaf Reno Production, LLC (collectively “NuLeaf”) to build and operate cultivation and production facilities of cannabis products in Nevada. The agreements were subject to approval by the State of Nevada, the City of Sparks and the City of Reno in Nevada. Under the terms of the agreements, the Company remitted to NuLeaf an upfront investment of $4.50 million in the form of convertible loans bearing an interest rate of 6% per annum. On June 28, 2018, the Company received approval from the State of Nevada. The remaining required approvals from local authorities were received in July 2018. As a result, the notes receivable balance was converted into a 50% ownership interest in NuLeaf. The investment in NuLeaf was recorded at cost and accounted for using the equity method as of December 31, 2019. In February 2019, we amended and restated the NuLeaf agreements and obtained control of the operations of NuLeaf. The Company has determined these entities are variable interest entities in which the Company is the primary beneficiary by reference to the power and benefits criterion under ASC 810, “Consolidation.” Year to date revenue and net loss attributed to NuLeaf is $4.96 million and $1.26 million, respectively. The aggregate carrying values of Sparks Cultivation, LLC and NuLeaf Reno Production, LLC assets and liabilities, after elimination of any intercompany transactions and balances, in the consolidated balance sheets were as follows: (in thousands) September 30, December 31, 2020 2019 Current assets: Cash $ 489 $ 243 Accounts receivable, net 74 16 Inventory 3,699 2,910 Prepaid expenses and other current assets 72 35 Total current assets 4,334 3,204 Property, equipment and leasehold improvements, net 7,807 9,543 Other assets 554 598 TOTAL ASSETS $ 12,695 $ 13,344 Liabilities: Total current liabilities $ 391 $ 213 Total long-term liabilities 335 415 TOTAL LIABILITIES $ 726 $ 628 |
INVESTMENTS IN UNCONSOLIDATED A
INVESTMENTS IN UNCONSOLIDATED AFFILIATES | 9 Months Ended |
Sep. 30, 2020 | |
VARIABLE INTEREST ENTITIES | |
NOTE 5. INVESTMENTS IN UNCONSOLIDATED AFFILIATES | NOTE 5 - INVESTMENTS IN UNCONSOLIDATED AFFILIATES Hydrofarm On August 28, 2018, the Company entered into a Subscription Agreement with Hydrofarm Holdings Group, Inc. (“Hydrofarm”), one of the leading independent providers of hydroponic products in North America, pursuant to which the Company agreed to purchase from Hydrofarm and Hydrofarm agreed to sell to the Company 2,000,000 Units, each Unit consisting of one share of common stock and one warrant to purchase one-half of a share of common stock for an initial exercise price of $5.00 per share, for $2.50 per unit for an aggregate purchase price of $5.00 million. The $5.00 million investment in Hydrofarm was recorded at cost and is included in Investments on the unaudited consolidated balance sheet as of September 30, 2020. Edible Garden On March 30, 2020, Edible Garden Corp. (“Edible Garden”), a wholly-owned subsidiary of Terra Tech Corp. (the “Company”), entered into and closed an Asset Purchase Agreement (the “Purchase Agreement”) with Edible Garden Incorporated (the “Purchaser”), pursuant to which Edible Garden sold and the Purchaser purchased substantially all of the assets of Edible Garden. The consideration paid for the assets included two option agreements to purchase up to a 20% interest in the Purchaser for a nominal fee. The first option gives the Company the right to purchase a 10% interest in the Purchaser for one dollar at any time between the one and five-year anniversary of the transaction, or at any time should a change in control event or public offering occur. The second option gives the Company the right to purchase an additional 10% interest in the Purchaser for one dollar at any point prior to the five-year anniversary of the transaction. The options were recorded at fair value and are included in Investments in the unaudited consolidated balance sheet as of September 30, 2020. Refer to Note 10, “Fair Value Measurements” |
INVENTORY
INVENTORY | 9 Months Ended |
Sep. 30, 2020 | |
INVENTORY | |
NOTE 6. INVENTORY | NOTE 6 - INVENTORY Raw materials consist of material for NuLeaf and IVXX’s line of cannabis pure concentrates. Work-in-progress consists of raw materials, labor and overhead expenses associated with the cultivation and production operations at NuLeaf and Black Oak Gallery. Finished goods consists of cannabis products sold in retail. Inventory as of September 30, 2020 and December 31, 2019 consisted of the following: (in thousands) September 30, December 31, 2020 2019 Raw materials $ 1,389 $ 2,400 Work-in-progress 3,056 3,142 Finished goods 406 275 Inventory reserve - (1,483 ) Total inventory $ 4,851 $ 4,334 |
PROPERTY EQUIPMENT AND LEASEHOL
PROPERTY EQUIPMENT AND LEASEHOLD IMPROVEMENTS NET | 9 Months Ended |
Sep. 30, 2020 | |
PROPERTY EQUIPMENT AND LEASEHOLD IMPROVEMENTS NET | |
NOTE 7. PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS, NET | NOTE 7 - PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS, NET Property, equipment, and leasehold improvements, net consists of the following: (in thousands) September 30, December 31, 2020 2019 Land and building $ 11,206 $ 11,206 Furniture and equipment 2,700 2,787 Computer hardware 210 299 Leasehold improvements 16,386 16,545 Construction in progress 10,153 9,676 Subtotal 40,655 40,513 Less accumulated depreciation (7,310 ) (5,044 ) Property, equipment and leasehold improvements, net $ 33,345 $ 35,469 Depreciation expense related to property, equipment and leasehold improvements for the nine months ended September 30, 2020 and 2019 was $2.83 million and $2.86 million, respectively. Assets Divested Blum Santa Ana On February 26, 2020, the Company agreed to transfer governance and control of our dispensary operation located at 2911 Tech Center Drive, Santa Ana, CA to Martin Vivero and Tetra House Co. (“Tetra”), who are unaffiliated third parties. The company received $2.00 million at closing and $1.45 million during the 3rd Quarter of 2020 in exchange for these assets.MediFarm So Cal Inc. (“MediFarm So Cal”), a wholly-owned subsidiary of the Company, terminated the existing management services agreement with 55 OC Community Collective Inc. (“55 OC”). 55 OC is a mutual benefit corporation which holds a cannabis license with the City of Santa Ana in the State of California. Previously, MediFarm So Cal managed the dispensary known as “Blum Santa Ana” under the license of 55 OC. Control of 55 OC was transferred to Mr. Vivero and Tetra House Co. via a new management services agreement and the appointment of Mr. Vivero to the Board of Directors of 55 OC, which was pending final regulatory approval as of the date of our report. The Company recognized a loss upon sale of the assets equal to the difference between the consideration paid and the book value of the assets as of the disposition date, less direct costs to sell, and reflected such loss in discontinued operations. The following table summarizes the transaction: (in thousands) Total consideration $ 3,800 Net book value of assets divested and liabilities transferred Inventory 23 Prepaid and other current assets 33 Property, plant & equipment 98 Intangible assets and goodwill 6,565 Other long-term assets 54 Lease liability, net of right-of-use asset (78 ) Net book value of assets divested and liabilities transferred 6,694 Loss on sale $ (2,894 ) Edible Garden On March 30, 2020, Edible Garden Corp. (“Edible Garden”), a wholly-owned subsidiary of Terra Tech Corp. (the “Company”), entered into and closed an Asset Purchase Agreement (the “Purchase Agreement”) with Edible Garden Incorporated (the “Purchaser”), pursuant to which Edible Garden sold and the Purchaser purchased substantially all of the assets of Edible Garden (the “Business”). The consideration paid for the Business included a five-year $3.00 million secured promissory note bearing interest at 3.5% per annum, which is reflected within the assets under discontinued operations, and two option agreements to purchase up to a 20% interest in the Purchaser for a nominal fee. The first option gives the Company the right to purchase a 10% interest in the Purchaser for one dollar at any time between the one and five-year anniversary of the transaction, or at any time should a change in control event or public offering occur. The second option gives the Company the right to purchase an additional 10% interest in the Purchaser for one dollar at any point prior to the five-year anniversary of the transaction. The second option is automatically terminated upon payment in full of the $3.00 million secured promissory note. Michael James, the Company’s former Chief Financial Officer, is a principal of the Purchaser. There is no material relationship between the Company or its affiliates and the Purchaser other than as set forth in the previous sentence. The Purchase Agreement contains customary conditions, representations, warranties, indemnities and covenants by, among, and for the benefit of the parties. The Company recognized a loss upon sale of the assets equal to the difference between the consideration paid and the book value of the assets as of the disposition date and reflected such loss in discontinued operations. The following table summarizes the transaction: (in thousands) Consideration Fair value of note receivable $ 2,960 Fair value of options 330 Less: cash transferred to purchaser (30 ) Total consideration $ 3,260 Net book value of assets divested and liabilities transferred Accounts receivable $ 360 Inventory 520 Other current assets 80 Property, plant and equipment 4,100 Intangible assets 70 Other long-term assets 200 Accounts payable and accrued expenses (1,700 ) Lease liabilities, net of right of use assets (70 ) Net book value of assets divested and liabilities transferred 3,560 Loss on sale $ (300 ) |
INTANGIBLE ASSETS AND GOODWILL
INTANGIBLE ASSETS AND GOODWILL | 9 Months Ended |
Sep. 30, 2020 | |
INTANGIBLE ASSETS AND GOODWILL | |
NOTE 8 - INTANGIBLE ASSETS AND GOODWILL | NOTE 8 - INTANGIBLE ASSETS AND GOODWILL Intangible Assets, Net Intangible assets, net consisted of the following: (in thousands) September 30, December 31, 2020 2019 Amortizing Intangible Assets: Customer relationships $ 7,400 $ 7,860 Dispensary licenses 10,270 10,270 Trade name 196 196 Gross carrying amount 17,865 18,326 Accumulated Amortization (10,757 ) (8,525 ) Total intangible assets, net 7,108 9,801 Indefinite-lived intangible assets: Trade Name 920 5,070 Total Indefinite-Lived Intangible Assets 920 5,070 Total Intangible Assets, Net $ 8,028 $ 14,871 Amortization expense for the nine months ended September 30, 2020 and 2019 was $2.23 million and $2.26 million, respectively. Impairment of Long-Lived Assets Other than Goodwill and Indefinite-Lived Intangible Assets Long-lived assets other than goodwill and indefinite-lived intangible assets, held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. The Company evaluates recoverability of assets to be held and used and if the carrying value is not recoverable, the Company fair values the asset and compares to the carrying value. If the asset is considered to be impaired, the impairment loss is measured as the amount by which the carrying amount of the asset exceeds its fair value. The analysis for impairment of long-lived assets other than goodwill and indefinite-lived intangible assets is the first impairment analysis performed and related impairment charges are recognized before the impairment of goodwill analysis. During the first three quarters of 2020, the impact of COVID-19 on the retail industry had a negative impact on our revenues and management was forced to limit store operating hours due to the pandemic. Management believes the COVID-19 outbreak will continue to have a material negative impact on the Company’s financial results. These factors, including management’s revised forecast for the future performance of our Black Oak Gallery reporting unit, indicated the carrying value of Black Oak Gallery’s customer relationships and trade name may not be recoverable. Management evaluated the recoverability of the customer relationships using level 3 inputs and a probability-weighted approach to assess the potential impact of a long-term decline in our existing customer base due to the COVID-19 pandemic. The recoverability test indicated that the book value of customer relationships exceeded fair value as of September 30, 2020. As a result, the Company recognized an impairment charge of $0.08 million in the third quarter of 2020 and an impairment of $0.46 million for the nine months ended September 30, 2020. Management completed the annual test of impairment of the Black Oak Gallery trade name using level 3 inputs and an income approach. The recoverability test indicated that the book value of the trade name exceeded the fair value as of September 30, 2020. As a result, the Company recognized an impairment charge of $1.67 million in the third quarter of 2020. For the nine months ended September 30, 2020 the impairment charge totaled $4.15 million. Goodwill The table below summarizes the changes in the carrying amount of goodwill during the nine months ended September 30, 2020: (in thousands) Balance at December 31, 2019 $ 21,471 Impairment (15,300 ) Balance at September 30, 2020 $ 6,171 Impairment of Goodwill The Company tests for impairment annually on September 30, and between annual tests if the Company becomes aware of an event or a change in circumstances that would indicate the carrying value may be impaired. During the first quarter of 2020, the impact of COVID-19 on the retail industry as well as uncertainty around when the Company would be able to resume its normal operations contributed to a significant and prolonged decline in the Company’s stock price, resulting in the market capitalization of the Company falling below its carrying value. As a result, management determined that a triggering event had occurred as it was more likely than not that the carrying values of the Black Oak Gallery reporting unit exceeded its fair value. Accordingly, the Company performed a quantitative assessment of the fair value of Black Oak Gallery’s goodwill as of March 31, 2020 using a market capitalization approach. This analysis resulted in an impairment charge of $4.20 million recorded in the first quarter of 2020. The goodwill impairment charge was measured as the amount by which the carrying amount of the reporting unit, including goodwill, exceeded its fair value. During the second quarter of 2020, COVID-19 and civil unrest in Oakland, California continued to have a material negative impact on the financial results of the Black Oak Gallery reporting unit. As a result, management determined that a triggering event had occurred as it was more likely than not the carrying value Black Oak Gallery’s goodwill exceeded its fair value. Accordingly, the Company performed a quantitative assessment of the fair value of Black Oak Gallery’s goodwill as of June 30, 2020 using an income approach. The analysis resulted in an impairment charge of $2.75 million recorded in the second quarter of 2020. The goodwill impairment charge was measured as the amount by which the carrying amount of the reporting unit, including goodwill, exceeded its fair value. During the third quarter of 2020, COVID-19 and the aftermath of civil unrest in Oakland, California continued to have a material negative impact on the financial results of the Black Oak Gallery reporting unit. The Company completed its annual testing for impairment as of September 30, 2020 using the Guideline Public Company method. The results of the step one assessment indicated the carrying value of the reporting unit exceeded the fair value by $8.35 million as of September 30, 2020. As a result, the Company recognized an impairment charge of $8.35 million during the third quarter of 2020. |
NOTES PAYABLE
NOTES PAYABLE | 9 Months Ended |
Sep. 30, 2020 | |
NOTES PAYABLE | |
NOTE 9. NOTES PAYABLE | NOTE 9 - NOTES PAYABLE Notes payable consist of the following: (in thousands) September 30, December 31, 2020 2019 Promissory note dated November 22, 2017, issued for the purchase of real property. Matures December 1, 2020, with an option to extend the maturity date 1 year. The promissory note bears interest at 12.0% for year one and escalates 0.5% per year thereafter up to 13.5%. In the event of default, the note is convertible at the holder's option. $ - $ 4,500 Promissory note dated January 18, 2018, issued for the purchase of real property. The promissory note is collateralized by the land and building purchased and matures February 1, 2021, with an option to extend the maturity date 1 year. The promissory note bears interest at 12.0% for year one and escalates 0.5% per year thereafter up to 13.0%. The full principle balance and accrued interest are due at maturity. In the event of default, the note is convertible at the holder's option. 6,500 6,500 Promissory note dated October 5, 2018, issued for the purchase of real property. Matures October 5, 2021. The promissory note bears interest at 12.0% for year one and escalates 0.5% per year thereafter up to 13.5%. In the event of default, the note is convertible at the holder's option. 1,600 1,600 Promissory note dated June 11, 2019, issued to accredited investors, which matures December 11, 2020 and bears interest at a rate of 7.5% per annum. The conversion price is $4.50 or 87% of the average of the two (2) lowest VWAPs in the thirteen (13) trading days prior to the conversion date. 2,900 4,000 Promissory note dated October 21, 2019, issued to accredited investors, which matures April 21, 2021 and bears interest at a rate of 7.5% per annum. The conversion price is $4.50 or 87% of the average of the two (2) lowest VWAPs in the thirteen (13) trading days prior to the conversion date. 775 1,500 Secured promissory note dated December 30, 2019, issued to Matthew Lee Morgan Trust (a related party), which matures December 30, 2020, and bears interest at a rate of 10% per annum. The note is secured by the Company's HydroFarm investment. 500 500 Secured promissory note dated January 10, 2020, issued to an unaffilitated third party. The note matures on January 10, 2021 and incurs an interest rate of 15.0% per annum. 1,000 - Promissory note dated May 4, 2020, issued to Harvest Small Business Finance, LLC, an unaffiliated third party. Loan is part of the Paycheck Protection Program ("PPP Loan") offered by the U.S. Small Business Administration. The interest rate on the note is 1%. The note requires interest and principle payments seven months from April 2020. The note matures in two years. 562 - Promissory note dated July 29, 2020, issued to an unaffilitated third party. The note incurs an interest rate of 8% per annum and matures on April 28, 2021. 1,000 - Secured promissory note dated September 30, 2020 issued to an unaffiliated third party. The loan accrues interest at a rate of 10% per annum and matures on December 31, 2020. 73 - Notes payable - promissory notes & mortgages $ 14,910 $ 18,600 Vehicle loans & other loan agreements 32 46 Less: Short term debt, net of discounts (12,855 ) (11,021 ) Less: Debt discount (210 ) (1,055 ) Net Long Term Debt $ 1,877 $ 6,570 2018 Master Securities Purchase and Convertible Promissory Notes Agreement In March 2018, the Company entered into the 2018 Master Securities Purchase Agreement with an accredited investor pursuant to which the Company sells to the accredited investor 7.5% Senior Convertible Promissory Notes in eight tranches of $5.00 million, for a total of $40.00 million. The Company converted $1.83 million of convertible notes into shares of the Company’s common stock during the nine months ended September 30, 2020. As of September 30, 2020, $3.68 million of principle remains outstanding. For each note issued under the 2018 Master Securities Purchase Agreement, the principal and interest due and owed 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) the original conversion price as defined in each note issuance or (ii) 87% of the average of the two lowest daily volume weighted average price of the Common Stock in the thirteen (13) trading days prior to the conversion date (“Conversion Price”). The 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 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 $10.50 or more and (ii) the average daily trading value of the Common Stock is greater than $2.50 million for the prior ten (10) consecutive trading days, then the Company may demand, upon one (1) days’ notice, that the holder convert the notes at the Conversion Price. The Company may prepay in cash any portion of the outstanding principal amount of the notes 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 notes plus accrued but unpaid interest, if the prepayment date is within 90 days of the issuance date of the notes; (ii) 115% of the sum of the then-outstanding principal amount plus accrued but unpaid interest, if the prepayment date is between 91 days and 180 days of the issuance date of the notes; or (iii) 125% of the sum of the then-outstanding principal amount of the notes plus accrued but unpaid interest, if the prepayment date is after 180 days of the issuance date of the notes. During the nine months ended September 30, 2020, the Company converted debt and accrued interest into 27,694,593 shares of the Company’s common stock. Additional Financing Arrangements On December 30, 2019, the Company issued a promissory note to Matthew Lee Morgan Trust (a related party), which matures on December 30, 2020.The note accrues interest at a rate of 10% per annum. The note is secured by the Company’s HydroFarm investment. On January 10, 2020, the Company issued a promissory note to an unaffiliated third party, in the amount of $1.00 million dollars. The note accrues interest at a rate of 15.00% per annum and matures on January 10, 2021. The note is secured by the Company’s real estate located at 620 E. Dyer Rd., Santa Ana, CA. On May 4, 2020, OneQor Technologies, Inc entered into a Promissory Note dated May 4, 2020 (the “PPP Note”) with Harvest Small Business Finance, LLC (the “Lender”), pursuant to which the Lender agreed to make a loan to the Company under the Paycheck Protection Program (the “PPP Loan”) offered by the U.S. Small Business Administration (the “SBA”) in a principal amount of $0.56 million pursuant to Title 1 of the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”). The PPP Loan proceeds are available to be used to pay for payroll costs, including salaries, commissions, and similar compensation, group health care benefits, and paid leaves; rent; utilities; and interest on certain other outstanding debt. The amount that will be forgiven will be calculated in part with reference to OneQor’s full time headcount during the eight week period following the funding of the PPP loan. The interest rate on the PPP Note is a fixed rate of 1% per annum. To the extent that the amounts owed under the PPP Loan, or a portion of them, are not forgiven, OneQor will be required to make principal and interest payments in monthly installments beginning seven months from April 2020. The PPP Note matures in two years. The PPP Note includes events of default. Upon the occurrence of an event of default, the lender will have the right to exercise remedies against OneQor, including the right to require immediate payment of all amounts due under the PPP Note. On September 30, 2020, the Company issued a promissory note to an unaffiliated third party, in the amount of $0.07 million. The note accrues interest at a rate of 10.00% per annum and matures on December 31, 2020. |
FAIR VALUE MEASUREMENTS
FAIR VALUE MEASUREMENTS | 9 Months Ended |
Sep. 30, 2020 | |
FAIR VALUE MEASUREMENTS | |
NOTE 10. FAIR VALUE MEASUREMENTS | NOTE 10 - FAIR VALUE MEASUREMENTS On March 30, 2020, Edible Garden Corp. (“Edible Garden”), a wholly-owned subsidiary of Terra Tech Corp. (the “Company”), entered into and closed an Asset Purchase Agreement (the “Purchase Agreement”) with Edible Garden Incorporated (the “Purchaser”), pursuant to which Edible Garden sold and the Purchaser purchased substantially all of the assets of Edible Garden (the “Business”). The consideration paid for the Business included two option agreements to purchase up to a 20% interest in the Purchaser for a nominal fee. The first option gives the Company the right to purchase a 10% interest in the Purchaser for one dollar at any time between the one and five-year anniversary of the transaction, or at any time should a change in control event or public offering occur. The second option gives the Company the right to purchase an additional 10% interest in the Purchaser for one dollar at any point prior to the five-year anniversary of the transaction. The second option is automatically terminated upon payment in full of the $3.00 million secured promissory note. Management estimated the fair value of the options using the Black-Scholes model, utilizing level 3 inputs that included the stock price, annual volatility, and the probability the second option will be terminated due to repayment of the secured promissory note. The estimated fair value of the options was $0.33 million as of September 30, 2020. The options are included in Investments in the unaudited consolidated balance sheet. |
EQUITY
EQUITY | 9 Months Ended |
Sep. 30, 2020 | |
EQUITY | |
NOTE 11. EQUITY | NOTE 11 - EQUITY Common Stock During the nine months ended September 30, 2020, senior secured convertible promissory notes and accrued interest in the amount of $2.25 million were converted into 27,694,543 shares of common stock. During the nine months ended September 30, 2020, the Company issued 5,248,249 shares of common stock for compensation in the amount of $0.61 million. |
STOCK-BASED COMPENSATION
STOCK-BASED COMPENSATION | 9 Months Ended |
Sep. 30, 2020 | |
STOCK-BASED COMPENSATION | |
NOTE 12. STOCK-BASED COMPENSATION | NOTE 12 - STOCK-BASED COMPENSATION 2016 & 2018 Equity Incentive Plans In the first quarter of 2016, the Company adopted the 2016 Equity Incentive Plan. In the fourth quarter of 2018, the Company adopted the 2018 Equity Incentive Plan. On February 14, 2020, the Company amended the number of shares reserved for issuance under the 2018 Equity Incentive Plan to 43,976,425. The following table contains information about the 2016 and the 2018 Equity Incentive Plans as of September 30, 2020: Awards Reserved for Issuance Awards Outstanding Awards Available for Grant 2016 Equity incentive plan 2,000,000 544,397 1,455,603 2018 Equity incentive plan 43,976,425 15,055,708 28,920,717 Stock Options The following table summarizes the Company’s stock option activity and related information for the nine months ended September 30, 2020: 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, 2020 12,365,295 $ 0.46 Options granted 10,559,090 $ 0.07 Options exercised - $ - Options forfeited (6,566,667 ) $ 1.29 Options expired (248,048 ) $ 1.33 Options outstanding as of September 30, 2020 16,109,670 $ 0.46 9.0 years $ - Options exercisable as of September 30, 2020 5,593,814 $ 0.91 8.4 years $ - As of September 30, 2020, there was $1.54 million total unrecognized stock-based compensation. Such costs are expected to be recognized over a weighted-average period of approximately 2.58 years. The weighted average fair value of options exercisable as of September 30, 2020 was $0.80. 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 stock-based compensation for issuances during the three months ended September 30, 2020: September 30, September 30, 2020 2019 Expected term (years) 6 Years 6 Years Volatility 104.2 % 115.7 % Risk-free interest rate 0.5 % 1.9 % Dividend yield 0 % 0 % 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 stock-based compensation. Stock-Based Compensation Expense The following table sets forth the total stock-based compensation expense resulting from stock options and restricted grants of common stock to employees, directors and non-employee consultants in the consolidated statement of operations which are included in selling, general and administrative expenses, within continuing operations: (in thousands except for shares / options) For the Three Months Ended September 30, 2020 September 30, 2019 Type of Award Number of Shares or Options Granted Stock-Based Compensation Expense Number of Shares or Options Granted Stock-Based Compensation Expense Stock options 909,090 $ 298 143,848 $ 1,078 Stock grants: Employees (common stock) - - 91,465 38 Directors (common stock) 1,082,700 119 173,610 102 Non–employee consultants (common stock) 84,615 11 0 0 Total stock–based compensation expense $ 428 $ 1,218 For the Nine Months Ended September 30, 2020 September 30, 2019 Type of Award Number of Shares or Options Granted Stock-Based Compensation Expense Number of Shares or Options Granted Stock-Based Compensation Expense Stock options 10,559,090 $ 1,536 4,144,666 $ 3,314 Stock grants: Employees (common stock) 3,179,544 58 (a) 564,799 428 Directors (common stock) 909,090 19 (b) 173,610 102 Non–employee consultants (common stock) 1,159,615 59 66,376 59 Total stock–based compensation expense $ 1,672 $ 3,904 (a) Expense for Q1 grants attributed to 2019 bonuses was recorded in 2019. (b) Clawback of shares granted in 2019. |
BUSINESS COMBINATIONS
BUSINESS COMBINATIONS | 9 Months Ended |
Sep. 30, 2020 | |
BUSINESS COMBINATIONS | |
NOTE 13. BUSINESS COMBINATIONS | NOTE 13 - BUSINESS COMBINATIONS On February 14, 2020, the Company acquired all of the assets of OneQor Technologies, Inc. (“OneQor”). The acquisition of OneQor was accounted for in accordance with ASC 805-10, “Business Combinations.” (in thousands) Assets acquired Accounts receivable $ 51 Inventory 81 Prepaid expenses 241 Property, plant and equipment 80 Customer relationships 3,070 Trade name 690 Goodwill 6,763 Other long-term assets 260 Total Assets acquired $ 11,237 Liabilities assumed Accounts payable and accrued expenses $ 1,481 Deferred income 300 Short-term debt 100 Long-term lease liabilities 108 Total liabilities assumed $ 1,990 During the nine months ended September 30, 2020, the Company recognized $1.07 million of revenue and a net loss of $12.07 million from OneQor. In the view of management, goodwill reflects the future cash flow expectations for OneQor’s market position in the growing CBD industry, synergies and the assembled workforce. Goodwill recorded for the OneQor transaction is non-deductible for tax purposes. Supplemental Pro-Forma Information Supplemental information on an unaudited pro-forma basis is reflected as if each of the OneQor acquisition had occurred at the beginning of 2019, after giving effect to certain pro forma adjustments primarily related to interest expense, amortization of acquired intangible assets and the elimination of expense associated with convertible debt securities that were accounted for as derivative instruments. The unaudited pro-forma supplemental information is based on estimates and assumptions that the Company believes are reasonable. The supplemental unaudited pro-forma financial information is presented for comparative purposes only and is not necessarily indicative of what the Company’s financial position or results of operations actually would have been had the Company completed the acquisitions at the dates indicated, nor is it intended to project the future financial position or operating results of the Company as a result of the OneQor acquisition. Please note that in the 3 rd (in thousands) For the Nine Months Ended September 30, 2020 Pro-forma revenues $ 11,182 Pro-forma net loss from continuing operations $ (52,330 ) (in thousands) For the Three Months Ended For the Nine Months Ended September 30, 2019 September 30, 2019 Pro-forma revenues $ 5,607 $ 12,391 Pro-forma net loss from continuing operations $ (9,411 ) $ (32,440 ) |
LEASES
LEASES | 9 Months Ended |
Sep. 30, 2020 | |
LEASES | |
NOTE 14. LEASES | NOTE 14 - LEASES A lease provides the lessee the right to control the use of an identified asset for a period of time in exchange for consideration. Operating lease right-of-use assets (“ROU assets”) and lease liabilities are included in other assets and other liabilities on the Company’s Condensed Consolidated Balance Sheets. ROU assets represent the Company’s right to use an underlying asset for the lease term and operating lease liabilities represent the Company’s obligation to make lease payments arising from the lease. The Company determines if an arrangement is a lease at inception. ROU assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. Most operating leases contain renewal options that provide for rent increases based on prevailing market conditions. The lease term used to calculate the ROU asset includes any renewal options or lease termination that the Company expects to exercise. The discount rate used to determine the commencement date present value of lease payments is the interest rate implicit in the lease, or when that is not readily determinable, the Company utilizes its secured borrowing rate. ROU assets include any lease payments required to be made prior to commencement and exclude lease incentives. Both ROU assets and lease liabilities exclude variable payments not based on an index or rate, which are treated as period costs. The Company’s lease agreements do not contain significant residual value guarantees, restrictions or covenants. The Company occupies office facilities under lease agreements that expire at various dates. In addition, office, production and transportation equipment is leased under agreements that expire at various dates. The Company does not have any significant finance leases. Total operating lease costs were $0.68 million in the nine months ended September 30, 2020. Short-term lease costs during the nine months ended September 30, 2020 were not material. Cash paid for amounts included in operating lease liabilities was $1.17 million for the nine months ended September 30, 2020. As of September 30, 2020, short term lease liabilities of $0.85 million are included in “Accounts Payable and Accrued Expenses” on the unaudited consolidated balance sheet. The table below presents total operating lease ROU assets and lease liabilities as of September 30, 2020: (in thousands) Nine Months Ended September 30, 2020 Operating lease ROU assets $ 8,553 Operating lease liabilities 9,301 The table below presents the maturities of operating lease liabilities as of September 30, 2020: (in thousands) Operating Leases 2020 $ 1,680 2021 1,745 2022 2,587 2023 1,885 2024 1,590 Thereafter 6,486 Total lease payments 15,973 Less: payments made to date 2020 (1,201 ) Less: discount (5,471 ) Total operating lease liabilities $ 9,301 The table below presents the weighted average remaining lease term for operating leases and weighted average discount rate used in calculating operating lease right-of-use assets: Nine Months Ended September 30, 2020 Weighted average remaining lease term (years) 8.3 Weighted average discount rate 11.5 % |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 9 Months Ended |
Sep. 30, 2020 | |
COMMITMENTS AND CONTINGENCIES | |
NOTE 15. COMMITMENTS AND CONTINGENCIES | NOTE 15 - COMMITMENTS AND CONTINGENCIES California Operating Licenses Terra Tech entities have operated compliantly and have been eligible for applicable licenses and renewals of those licenses. Currently, we have received annual as well as provisional licenses from California’s cannabis licensing agencies. We are actively working with the State to provide all required information and have confidence that the provisional licenses that we have received will become annual licenses in the future. |
DISCONTINUED OPERATIONS
DISCONTINUED OPERATIONS | 9 Months Ended |
Sep. 30, 2020 | |
DISCONTINUED OPERATIONS | |
NOTE 16. DISCONTINUED OPERATIONS | NOTE 16 - DISCONTINUED OPERATIONS On May 8, 2019, MediFarm LLC, a wholly-owned subsidiary of Terra Tech Corp. (the “Company”), entered into an Asset Purchase Agreement (the “Purchase Agreement”) with Picksy, LLC (the “Purchaser”) pursuant to which the Company agreed to sell and the Purchaser agreed to purchase substantially all of the assets of the Company related to the Company’s dispensary located at 1130 East Desert Inn Road, Las Vegas, NV 89109 (the “Business”). The aggregate consideration to be paid for the Business is $10.00 million, of which $7.20 million is cash (the “Purchase Price”). A portion of the Purchase Price is payable by the Purchaser pursuant to a 12 month Secured Promissory Note with a principal amount of $2.80 million (the “Note”). The Note is secured by all the assets sold pursuant to the Purchase Agreement. In conjunction with the Note, Purchaser and the Company entered into a Security Agreement granting the Company a security interest in all the assets sold pursuant to the Purchase Agreement. The transaction is subject to approval by the Nevada Department of Taxation and is expected to close promptly following receipt of such approval. As of September 30, 2020, we are still awaiting regulatory approval. On August 19, 2019, MediFarm I LLC, a wholly-owned subsidiary of Terra Tech Corp. (the “Company”), entered into an Asset Purchase Agreement (the “Purchase Agreement”) with Picksy Reno, LLC (the “Purchaser”) pursuant to which the Company agreed to sell and the Purchaser agreed to purchase substantially all of the assets of the Company related to the Company’s dispensary located at 1085 S Virginia St Suite A, Reno, NV 89502 (the “Business”). The aggregate consideration to be paid for the Business is $13.50 million, of which $9.30 million is cash (the “Purchase Price”). A portion of the Purchase Price is payable by the Purchaser pursuant to a 12 month Secured Promissory Note with a principal amount of $4.20 million (the “Note”). The Note is secured by all the assets sold pursuant to the Purchase Agreement. In conjunction with the Note, Purchaser and the Company entered into a Security Agreement granting the Company a security interest in all the assets sold pursuant to the Purchase Agreement. The transaction is subject to approval by the Nevada Department of Taxation and is expected to close promptly following receipt of such approval. As of September 30, 2020, we are still awaiting regulatory approval. On April 15, 2020, MediFarm LLC, a wholly-owned subsidiary of Terra Tech Corp. (the “Company”), entered into an Asset Purchase Agreement (the “Purchase Agreement”) with Natural Medicine, LLC, a non-affiliated third party (the “Purchaser”) pursuant to which the Company agreed to sell and the Purchaser agreed to purchase substantially all of the assets of the Company related to the Company’s dispensary located at 3650 S. Decatur Blvd., Las Vegas, NV. The aggregate consideration to be paid for the Business is $5.25 million, of which $2.50 million is cash and $2.75 million is payable by the Purchaser pursuant to a 12-month Secured Promissory Note bearing 8% interest per annum, which is secured by all of the assets sold pursuant to the Purchase Agreement. The transaction is subject to approval by the Nevada Department of Taxation, and other customary closing conditions, and is expected to close promptly following receipt of such approval and satisfaction of all conditions to close. The company will recognize a gain upon completion of the sale of the assets, equal to the difference between the consideration paid and the book value of the assets as of the disposition date, less direct costs to sell, and reflected such loss in discontinued operations. As of September 30, 2020, Management classified a real estate asset held in California and a real estate asset held in Nevada as available-for-sale, as they met the criteria of ASC 360-10-45-9. Assets divested, as disclosed in Note 7, “Property, Equipment and Leasehold Improvements,” The pending sales of our Nevada dispensaries, expected sales of real estate assets, and assets divested in the first half of 2020 represent a strategic shift that will have a major effect on the Company’s operations and financial results. As a result, Management determined the results of these components qualified for discontinued operations presentation in accordance with ASC 205, “Reporting Discontinued Operations and Disclosure of Disposals of Components of an Entity.” As of September 30, 2020, Management has suspended the operations of OneQor Technologies due to (i) a lack of proper growth in customer acquisition and revenue for this CBD operation during the COVID-19 pandemic and (ii) the overall financial health of the Company as a result of COVID-19 and social unrest. The Company plans to focus its attention and resources on growing its THC business. Operating results for the discontinued operations were comprised of the following: (in thousands) (in thousands) Three Months Nine Months 2020 2019 2020 2019 Total revenues $ 203 $ 6,283 $ 3,478 $ 17,491 Cost of goods sold 94 3,458 2,755 9,646 Gross profit 109 2,825 723 7,845 Selling, general and administrative expenses 1,355 3,466 5,224 9,440 Impairment of Assets 4,043 - 10,359 - (Gain) / Loss on sale of assets (1,203 ) 9 1,994 9 Income (Loss) from operations $ (4,086 ) $ (650 ) $ (16,854 ) $ (1,604 ) Other income (expense) (113 ) (161 ) (488 ) (531 ) Income (Loss) from discontinued operations $ (4,199 ) $ (811 ) $ (17,342 ) $ (2,135 ) Income (Loss) from discontinued operations per common share attributable to Terra Tech Corp common stockholders - basic and diluted $ (0.05 ) $ (0.01 ) $ (0.09 ) $ (0.02 ) The carrying amounts of the major classes of assets and liabilities for the discontinued operations are as follows: (in thousands) September 30, 2020 December 31, 2019 Accounts receivable, net $ 97 1,096 Inventory 19 1,073 Prepaid expenses and other assets 67 271 Property, equipment and leasehold improvements, net 2,769 15,069 Intangible assets, net - 399 Goodwill - 6,251 Other assets 212 1,079 Assets of discontinued operations $ 3,164 $ 25,238 Accounts payable and accrued expenses $ 984 $ 3,285 Deferred gain on sale of assets 7,236 3,750 Liabilities of discontinued operations $ 8,220 $ 7,035 |
SEGMENT INFORMATION
SEGMENT INFORMATION | 9 Months Ended |
Sep. 30, 2020 | |
NOTE 17. SEGMENT INFORMATION | NOTE 17 - SEGMENT INFORMATION During 2018, the Company acquired additional real property and determined that a previously insignificant operating segment “Real Estate and Construction” Real Estate and Construction Cannabis Real Estate and Construction Cannabis Dispensary, Cultivation, and Production During the second Quarter ended June 30, 2020, the “ Herbs and Produce Products” |
LITIGATION AND CLAIMS
LITIGATION AND CLAIMS | 9 Months Ended |
Sep. 30, 2020 | |
LITIGATION AND CLAIMS | |
NOTE 18. LITIGATION AND CLAIMS | NOTE 18 - LITIGATION AND CLAIMS The Company is the subject of lawsuits and claims arising in the ordinary course of business from time to time. The Company reviews any such legal proceedings and claims on an ongoing basis and follows appropriate accounting guidance when making accrual and disclosure decisions. The Company establishes accruals for those contingencies where the incurrence of a loss is probable and can be reasonably estimated, and it discloses the amount accrued and the amount of a reasonably possible loss in excess of the amount accrued if such disclosure is necessary for the Company’s financial statements to not be misleading. To estimate whether a loss contingency should be accrued by a charge to income, the Company evaluates, among other factors, the degree of probability of an unfavorable outcome and the ability to make a reasonable estimate of the amount of the loss. The Company does not record liabilities when the likelihood that the liability has been incurred is probable, but the amount cannot be reasonably estimated. Based upon present information, the Company determined that there were no material matters that required an accrual as of September 30, 2020. |
GOING CONCERN
GOING CONCERN | 9 Months Ended |
Sep. 30, 2020 | |
CONCENTRATIONS OF BUSINESS AND CREDIT RISK | |
NOTE 19 - GOING CONCERN | NOTE 19 - GOING CONCERN We have incurred significant losses in prior periods. For the nine months ended September 30, 2020, we incurred a net loss of $53.67 million and cash outflows from operations were $12.58 million. For the year ended December 31, 2019, we incurred a net loss of $46.93 million, cash outflows from operations of $14.74 million, and, as of that date, we had an accumulated deficit of $189.69 million. We expect to experience further significant net losses in 2020 and the foreseeable future. In an effort to achieve liquidity that would be sufficient to meet all of our commitments, we have undertaken a number of actions, including minimizing capital expenditures and reducing recurring expenses. However, we believe that even after taking these actions, we may not have sufficient liquidity to satisfy all of our future financial obligations and execute our business plan. The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America, which contemplate our continuation as a going concern. If the Company is unable to obtain the funds due upon the close of our pending asset sales or obtain additional financing, future operations would need to be scaled back or discontinued. The risks and uncertainties surrounding the timing of the close of our pending asset sales in Nevada, our limited capital resources, and the weak industry conditions impacting our business raise substantial doubt as to our ability to continue as a going concern for twelve months from the issuance of these financial statements. |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 9 Months Ended |
Sep. 30, 2020 | |
SUBSEQUENT EVENTS | |
NOTE 20. SUBSEQUENT EVENTS | NOTE 20 - SUBSEQUENT EVENTS On October 12, 2020, the Company announced the resignation of Matthew Morgan, its Chief Executive Officer. Mr. Morgan forfeited 14,616,118 shares of common stock of Terra Tech issued to him pursuant to the merger between the Company and OneQor Technologies. The shares will be cancelled and retired on the books and records of Terra Tech. The Matthew Lee Morgan Trust holds a $0.50 million note that is payable by Terra Tech on December 30, 2020. The Trust grants to Terra Tech an expiring, one-time $0.25 million credit which it may use solely as an offset against the Note. On October 12, 2020, the Board of Directors of the Company appointed Mr. Nahass to the position of Chief Executive Officer, effective October 12, 2020. Mr. Nahass has served as a Director since January 26, 2012, and as the Company’s President and Chief Operating Officer since November 6, 2017. Mr. Nahass forfeited 3,654,030 shares of common stock of Terra Tech issued to him pursuant to the merger between the Company and OneQor Technologies. The shares will be cancelled and retired on the books and records of Terra Tech. On October 22, 2020, the Company agreed to an amendment to its August 19, 2019 Asset Purchase Agreement with Picksy Reno LLC (Mystic Holdings, Inc) to substitute shares Mystic common stock for the cash portion of the purchase price that was due at closing. The cash portion is $8,332,096. There are safeguards in the amendment that help to assure that Terra Tech will be able to liquidate the Mystic LLC stock for a minimum of $8,332,096. Subsequent to September 30, 2020, senior convertible promissory notes and accrued interest in the amount of $0.05 million and $0.01 million, respectively, were converted into 1,037,314 shares of common stock. |
SUMMARY OF SIGNIFICANT ACCOUN_2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 9 Months Ended |
Sep. 30, 2020 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Basis of Presentation | The accompanying interim unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Securities Exchange Commission (“SEC”) Form 10-Q and Article 10 of Regulation S-X of the Securities Act of 1933 and reflect the accounts and operations of the Company and those entities in which we have a controlling financial interest. In accordance with the provisions of the Financial Accounting Standards Board (“FASB”) or Accounting Standards Codification (“ASC”) 810, “Consolidation,” All intercompany accounts and transactions have been eliminated in consolidation. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation have been included. These interim unaudited condensed consolidated financial statements do not include all disclosures required by GAAP for complete financial statements and, therefore, should be read in conjunction with the more detailed audited consolidated financial statements for the year ended December 31, 2019. The December 31, 2019 balances reported herein are derived from the audited consolidated financial statements for the year ended December 31, 2019. The results of operations for the interim periods are not necessarily indicative of the results of operations to be expected for the full year. |
Revision of Previously Issued Financial Statements | On October 26, 2017, the Company entered into joint venture agreements with NuLeaf Sparks Cultivation, LLC and NuLeaf Reno Production, LLC (collectively “NuLeaf”) to build and operate cultivation and production facilities of cannabis products in Nevada. In February 2019, we amended and restated the NuLeaf agreements and obtained control of the operations of NuLeaf. The Company has determined these entities are variable interest entities in which the Company is the primary beneficiary by reference to the power and benefits criterion under ASC 810, “Consolidation.” The provisions within the amended agreement grant the Company the power to manage and make decisions that affect the operation of these entities. As the primary beneficiary of NuLeaf Sparks Cultivation, LLC and NuLeaf Reno Production, LLC, the Company began consolidating the accounts and operations of these entities as of March 1, 2019. All intercompany transactions are eliminated in the consolidated financial statements. On March 1, 2019, we remeasured our equity method investment in NuLeaf to fair value and consolidated the results of NuLeaf in our consolidated financial statements and report its results in our cannabis segment. During the year ended December 31, 2019, management finalized the accounting for the transaction, and recorded a measurement period adjustment that increased net loss by $6.63 million (see Note 4, “ Variable Interest Entities” |
Going Concern | The accompanying unaudited condensed financial statements have been prepared assuming that we will continue as a going concern. In an effort to achieve liquidity that would be sufficient to meet all of our commitments, we have undertaken a number of actions, including minimizing capital expenditures, and reducing recurring expenses. However, we believe that even after taking these actions, we may not have sufficient liquidity to satisfy all of our future financial obligations. The risks and uncertainties surrounding the timing of the close of our pending asset sales in Nevada, our limited capital resources, and the weak industry conditions stemming from the COVID-19 pandemic that are impacting our business raise substantial doubt as to our ability to continue as a going concern. See Note 19 , “Going Concern” |
Non-Controlling Interest | Non-controlling interest is shown as a component of stockholders’ equity on the consolidated balance sheets and the share of net income (loss) attributable to non-controlling interest is shown as a component of net income (loss) in the consolidated statements of operations. |
Use of Estimates | The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the dates of the financial statements and the reported amounts of total net revenue and expenses in the reporting periods. The Company regularly evaluates estimates and assumptions related to revenue recognition, allowances for doubtful accounts, sales returns, inventory valuation, stock-based compensation expense, goodwill and purchased intangible asset valuations, derivative liabilities, deferred income tax asset valuation allowances, uncertain tax positions, tax contingencies, litigation and other loss contingencies. These estimates and assumptions are based on current facts, historical experience and various other factors that the Company believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the recording of revenue, costs and expenses that are not readily apparent from other sources. The actual results the Company experiences may differ materially and adversely from these estimates. To the extent there are material differences between the estimates and actual results, the Company’s future results of operations will be affected. |
Reclassifications | Certain prior period amounts have been reclassified to conform to the current period presentation. These reclassifications did not affect net loss, revenues, or stockholders’ equity. See Note 16, ”Discontinued Operations” |
Trade and other Receivables | The Company extends non-interest bearing trade credit to its customers in the ordinary course of business which is not collateralized. Accounts receivable are shown on the face of the consolidated balance sheets, net of an allowance for doubtful accounts. The Company analyzes the aging of accounts receivable, historical bad debts, customer creditworthiness and current economic trends, in determining the allowance for doubtful accounts. The Company does not accrue interest receivable on past due accounts receivable. |
Inventory | Inventory is stated at the lower of cost or net realizable value, with cost being determined on the first-in, first-out (“FIFO”) method of accounting. The Company periodically reviews physical inventory for excess, obsolete, and potentially impaired items, and reserves. The reserve estimate for excess and obsolete inventory is based on expected future use. The reserve estimates have historically been consistent with actual experience as evidenced by actual sale or disposal of the goods. |
Prepaid Expenses and Other Current Assets | Prepaid expenses consist of various payments that the Company has made in advance for goods or services to be received in the future. These prepaid expenses include advertising, insurance, and service or other contracts requiring upfront payments. |
Property, Equipment and Leasehold Improvements, Net | Property, equipment, and leasehold improvements are stated at cost less accumulated depreciation. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets. The approximate useful lives for depreciation of our property, equipment and leasehold improvements are as follows: thirty-two years for buildings; three to eight years for furniture and equipment; three to five years for computer and software; five years for vehicles and the shorter of the estimated useful life or the underlying lease term for leasehold improvements. Repairs and maintenance expenditures that do not extend the useful lives of related assets are expensed as incurred. Expenditures for major renewals and improvements are capitalized, while minor replacements, maintenance, and repairs, which do not extend the asset lives, are charged to operations as incurred. Upon sale or disposition, the cost and related accumulated depreciation are removed from the accounts and any gain or loss is included in operations. The Company continually monitors events and changes in circumstances that could indicate that the carrying balances of its property, equipment and leasehold improvements may not be recoverable in accordance with the provisions of ASC 360, “Property, Plant, and Equipment.” “Property, Equipment and Leasehold Improvements, Net” |
Investments | Investments in unconsolidated affiliates are accounted for under the cost or the equity method of accounting, as appropriate. The Company accounts for investments in limited partnerships or limited liability corporations, whereby the Company owns a minimum of 5% of the investee’s outstanding voting stock, under the equity method of accounting. These investments are recorded at the amount of the Company’s investment and adjusted each period for the Company’s share of the investee’s income or loss, and dividends paid. As investments accounted for under the cost method do not have readily determinable fair values, the Company only estimates fair value if there are identified events or changes in circumstances that could have a significant adverse effect on the investment’s fair value. |
Assets Held for Sale and Discontinued Operations | Assets held for sale represent furniture, equipment, and leasehold improvements less accumulated depreciation as well as any other assets that are held for sale in conjunction with the sale of a business. The Company records assets held for sale in accordance with ASC 360 , “Property, Plant, and Equipment,” “Reporting Discontinued Operations and Disclosure of Disposals of Components of an Entity” |
Goodwill | Goodwill is measured as the excess of consideration transferred and the net of the acquisition date fair value of assets acquired, and liabilities assumed in a business acquisition. In accordance with ASC 350, “Intangibles-Goodwill and Other,” The Company reviews the goodwill allocated to each of our reporting units for possible impairment annually as of September 30 and whenever events or changes in circumstances indicate carrying amount may not be recoverable. In the impairment test, the Company measures the recoverability of goodwill by comparing a reporting unit’s carrying amount, including goodwill, to the estimated fair value of the reporting unit. The carrying amount of each reporting unit is determined based upon the assignment of our assets and liabilities, including existing goodwill and other intangible assets, to the identified reporting units. Where an acquisition benefits only one reporting unit, the Company allocates, as of the acquisition date, all goodwill for that acquisition to the reporting unit that will benefit. Where the Company has had an acquisition that benefited more than one reporting unit, The Company has assigned the goodwill to our reporting units as of the acquisition date such that the goodwill assigned to a reporting unit is the excess of the fair value of the acquired business, or portion thereof, to be included in that reporting unit over the fair value of the individual assets acquired and liabilities assumed that are assigned to the reporting unit. If the carrying amount of a reporting unit is in excess or its fair value, the Company recognizes an impairment charge equal to the amount in excess. |
Intangible Assets | Intangible assets continue to be subject to amortization, and any impairment is determined in accordance with ASC 360, “Property, Plant, and Equipment,” Customer relationships 3 to 5 Years Trademarks 2 to 8 Years Dispensary licenses 14 Years Patent 2 Years The Company reviews intangible assets subject to amortization quarterly to determine if any adverse conditions exist or a change in circumstances has occurred that would indicate impairment or a change in the remaining useful life. Conditions that may indicate impairment include, but are not limited to, a significant adverse change in legal factors or business climate that could affect the value of an asset, a product recall, or an adverse action or assessment by a regulator. If an impairment indicator exists, we test the intangible asset for recoverability. For purposes of the recoverability test, we group our amortizable intangible assets with other assets and liabilities at the lowest level of identifiable cash flows if the intangible asset does not generate cash flows independent of other assets and liabilities. If the carrying value of the intangible asset (asset group) exceeds the undiscounted cash flows expected to result from the use and eventual disposition of the intangible asset (asset group), the Company will write the carrying value down to the fair value in the period identified. Intangible assets that have indefinite useful lives are tested annually for impairment and are tested for impairment more frequently if events and circumstances indicate that the asset might be impaired. An impairment loss is recognized to the extent that the carrying amount of the asset group exceeds its fair value. |
Fair Value of Financial Instruments | The Company applies fair value accounting for all financial assets and liabilities and non-financial assets and liabilities that are recognized or disclosed at fair value in the financial statements on a recurring basis. The Company defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities that are required to be recorded at fair value, the Company considers the principal or most advantageous market in which the Company would transact and the market-based risk measurements or assumptions that market participants would use in pricing the asset or liability, such as risks inherent in valuation techniques, transfer restrictions and credit risk. Fair value is estimated by applying the following hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement: Level 1 - Quoted prices in active markets for identical assets or liabilities. Level 2 - Observable inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices for identical or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 3 - Inputs that are generally unobservable and typically reflect management’s estimate of assumptions that market participants would use in pricing the asset or liability. In accordance with the fair value accounting requirements, companies may choose to measure eligible financial instruments and certain other items at fair value. The Company held one investment at fair value as of September 30, 2020. Refer to Note 10, “ Fair Value Measurements” |
Business Combinations | The Company accounts for its business acquisitions in accordance with ASC 805-10, “Business Combinations.” |
Revenue Recognition and Performance Obligations | Cannabis Dispensary, Cultivation and Production The Company recognizes revenue from manufacturing and distribution product sales when our customers obtain control of our products. Revenue from our retail dispensaries is recorded at the time customers take possession of the product. Revenue from our retail dispensaries is recognized net of discounts, rebates, promotional adjustments, price adjustments and returns, and net of taxes collected from customers that are remitted to governmental authorities, with the collected taxes recorded as current liabilities until remitted to the relevant government authority. Upon purchase, the Company has no further performance obligations and collection is assured as sales are paid for at time of purchase. Revenue related to distribution customers is recorded when the customer is determined to have taken control of the product. This determination is based on the customer specific terms of the arrangement and gives consideration to factors including, but not limited to, whether the customer has an unconditional obligation to pay, whether a time period or event is specified in the arrangement and whether the Company can mandate the return or transfer of the products. Revenue is recorded net of taxes collected from customers that are remitted to governmental authorities with collected taxes recorded as current liabilities until remitted to the relevant government authority. |
Disaggregation of Revenue | See Note 17, “ Segment Information” |
Contract Balances | Due to the nature of the Company’s revenue from contracts with customers, our cannabis dispensary, cultivation and production operations do not have material contract assets or liabilities that fall under the scope of ASC Topic 606. |
Contract Estimates and Judgments | The Company’s revenues accounted for under ASC Topic 606, generally, do not require significant estimates or judgments based on the nature of the Company’s revenue streams. The sales prices are generally fixed at the point of sale and all consideration from contracts are included in the transaction price. The Company’s contracts do not include multiple performance obligations or variable consideration. |
Cost of Goods Sold | Cost of goods sold includes the costs directly attributable to product sales and includes amounts paid for finished goods, such as flower, edibles, and concentrates, as well as packaging and delivery costs. It also includes the labor and overhead costs incurred in cultivating and producing cannabis flower and cannabis-derived products. Overhead expenses include allocations of rent, administrative salaries, utilities, and related costs. |
Advertising Expenses | The Company expenses advertising costs as incurred in accordance with ASC 720-35, “Other Expenses - Advertising Cost.” |
Stock-Based Compensation | The Company accounts for its stock-based awards in accordance with ASC Subtopic 718-10, “Compensation - Stock Compensation”, The Black-Scholes option-pricing model requires the input of certain assumptions that require the Company’s judgment, including the expected term and the expected stock price volatility of the underlying stock. The assumptions used in calculating the fair value of stock-based compensation represent management’s best estimates, but these estimates involve inherent uncertainties and the application of judgment. As a result, if factors change resulting in the use of different assumptions, stock-based compensation expense could be materially different in the future. The Company accounts for forfeitures of stock-based awards as they occur. |
Income Taxes | The provision for income taxes is determined in accordance with ASC 740, “Income Taxes” The Company recognizes uncertain tax positions based on a benefit recognition model. Provided that the tax position is deemed more likely than not of being sustained, the Company recognizes the largest amount of tax benefit that is greater than 50.0% likely of being ultimately realized upon settlement. The tax position is derecognized when it is no longer more likely than not of being sustained. The Company classifies income tax related interest and penalties as interest expense and selling, general and administrative expense, respectively, on the consolidated statements of operations. |
Loss Per Common Share | In accordance with the provisions of ASC 260, “Earnings Per Share”, Potentially dilutive securities that are not included in the calculation of diluted net loss per share because their effect is anti-dilutive are as follows (in common equivalent shares): Nine Months Ended September 30, 2020 2019 Common stock warrants 1,088,278 1,170,540 Common stock options 16,259,670 12,365,295 17,347,948 13,535,835 |
Recently Issued Accounting Standards | FASB Accounting Standards Update (“ASU”) No. 2020-06 “Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity” |
Recently Adopted Accounting Standards | FASB Accounting Standards Update (“ASU”) No. 2016-13 “Measurement of Credit Losses on Financial Instruments” Issued in June 2016, ASU 2016-13 replaces the “incurred loss” credit losses framework with a new accounting standard that requires management's measurement of the allowance for credit losses to be based on a broader range of reasonable and supportable information for lifetime credit loss estimates. Effective January 1, 2020, the Company adopted the standard. It has had no material impact. |
SUMMARY OF SIGNIFICANT ACCOUN_3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Schedule of estimated useful lives of Intangible assets | Customer relationships 3 to 5 Years Trademarks 2 to 8 Years Dispensary licenses 14 Years Patent 2 Years |
Schedule of anti-dilutive securities | Nine Months Ended September 30, 2020 2019 Common stock warrants 1,088,278 1,170,540 Common stock options 16,259,670 12,365,295 17,347,948 13,535,835 |
VARIABLE INTEREST ENTITIES (Tab
VARIABLE INTEREST ENTITIES (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
VARIABLE INTEREST ENTITIES (Tables) | |
Schedule of assets and liabilities | (in thousands) September 30, December 31, 2020 2019 Current assets: Cash $ 489 $ 243 Accounts receivable, net 74 16 Inventory 3,699 2,910 Prepaid expenses and other current assets 72 35 Total current assets 4,334 3,204 Property, equipment and leasehold improvements, net 7,807 9,543 Other assets 554 598 TOTAL ASSETS $ 12,695 $ 13,344 Liabilities: Total current liabilities $ 391 $ 213 Total long-term liabilities 335 415 TOTAL LIABILITIES $ 726 $ 628 |
INVENTORY (Tables)
INVENTORY (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
INTANGIBLE ASSETS AND GOODWILL | |
Schedule of inventory | (in thousands) September 30, December 31, 2020 2019 Raw materials $ 1,389 $ 2,400 Work-in-progress 3,056 3,142 Finished goods 406 275 Inventory reserve - (1,483 ) Total inventory $ 4,851 $ 4,334 |
PROPERTY EQUIPMENT AND LEASEH_2
PROPERTY EQUIPMENT AND LEASEHOLD IMPROVEMENTS NET (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Schedule Property, equipment, and leasehold improvements | (in thousands) September 30, December 31, 2020 2019 Land and building $ 11,206 $ 11,206 Furniture and equipment 2,700 2,787 Computer hardware 210 299 Leasehold improvements 16,386 16,545 Construction in progress 10,153 9,676 Subtotal 40,655 40,513 Less accumulated depreciation (7,310 ) (5,044 ) Property, equipment and leasehold improvements, net $ 33,345 $ 35,469 |
Blum Santa Ana [Member] | |
Schedule of gain upon sale of the assets | (in thousands) Total consideration $ 3,800 Net book value of assets divested and liabilities transferred Inventory 23 Prepaid and other current assets 33 Property, plant & equipment 98 Intangible assets and goodwill 6,565 Other long-term assets 54 Lease liability, net of right-of-use asset (78 ) Net book value of assets divested and liabilities transferred 6,694 Loss on sale $ (2,894 ) |
Edible Garden [Member] | |
Schedule of gain upon sale of the assets | (in thousands) Consideration Fair value of note receivable $ 2,960 Fair value of options 330 Less: cash transferred to purchaser (30 ) Total consideration $ 3,260 Net book value of assets divested and liabilities transferred Accounts receivable $ 360 Inventory 520 Other current assets 80 Property, plant and equipment 4,100 Intangible assets 70 Other long-term assets 200 Accounts payable and accrued expenses (1,700 ) Lease liabilities, net of right of use assets (70 ) Net book value of assets divested and liabilities transferred 3,560 Loss on sale $ (300 ) |
INTANGIBLE ASSETS AND GOODWILL
INTANGIBLE ASSETS AND GOODWILL (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
COMMITMENTS AND CONTINGENCIES | |
Schedule of Intangible Assets, Net | (in thousands) September 30, December 31, 2020 2019 Amortizing Intangible Assets: Customer relationships $ 7,400 $ 7,860 Dispensary licenses 10,270 10,270 Trade name 196 196 Gross carrying amount 17,865 18,326 Accumulated Amortization (10,757 ) (8,525 ) Total intangible assets, net 7,108 9,801 Indefinite-lived intangible assets: Trade Name 920 5,070 Total Indefinite-Lived Intangible Assets 920 5,070 Total Intangible Assets, Net $ 8,028 $ 14,871 |
Schedule of changes in the carrying amount of goodwill | (in thousands) Balance at December 31, 2019 $ 21,471 Impairment (15,300 ) Balance at September 30, 2020 $ 6,171 |
NOTES PAYABLE (Tables)
NOTES PAYABLE (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
NOTES PAYABLE (Tables) | |
Schedule Notes payable | (in thousands) September 30, December 31, 2020 2019 Promissory note dated November 22, 2017, issued for the purchase of real property. Matures December 1, 2020, with an option to extend the maturity date 1 year. The promissory note bears interest at 12.0% for year one and escalates 0.5% per year thereafter up to 13.5%. In the event of default, the note is convertible at the holder's option. $ - $ 4,500 Promissory note dated January 18, 2018, issued for the purchase of real property. The promissory note is collateralized by the land and building purchased and matures February 1, 2021, with an option to extend the maturity date 1 year. The promissory note bears interest at 12.0% for year one and escalates 0.5% per year thereafter up to 13.0%. The full principle balance and accrued interest are due at maturity. In the event of default, the note is convertible at the holder's option. 6,500 6,500 Promissory note dated October 5, 2018, issued for the purchase of real property. Matures October 5, 2021. The promissory note bears interest at 12.0% for year one and escalates 0.5% per year thereafter up to 13.5%. In the event of default, the note is convertible at the holder's option. 1,600 1,600 Promissory note dated June 11, 2019, issued to accredited investors, which matures December 11, 2020 and bears interest at a rate of 7.5% per annum. The conversion price is $4.50 or 87% of the average of the two (2) lowest VWAPs in the thirteen (13) trading days prior to the conversion date. 2,900 4,000 Promissory note dated October 21, 2019, issued to accredited investors, which matures April 21, 2021 and bears interest at a rate of 7.5% per annum. The conversion price is $4.50 or 87% of the average of the two (2) lowest VWAPs in the thirteen (13) trading days prior to the conversion date. 775 1,500 Secured promissory note dated December 30, 2019, issued to Matthew Lee Morgan Trust (a related party), which matures December 30, 2020, and bears interest at a rate of 10% per annum. The note is secured by the Company's HydroFarm investment. 500 500 Secured promissory note dated January 10, 2020, issued to an unaffilitated third party. The note matures on January 10, 2021 and incurs an interest rate of 15.0% per annum. 1,000 - Promissory note dated May 4, 2020, issued to Harvest Small Business Finance, LLC, an unaffiliated third party. Loan is part of the Paycheck Protection Program ("PPP Loan") offered by the U.S. Small Business Administration. The interest rate on the note is 1%. The note requires interest and principle payments seven months from April 2020. The note matures in two years. 562 - Promissory note dated July 29, 2020, issued to an unaffilitated third party. The note incurs an interest rate of 8% per annum and matures on April 28, 2021. 1,000 - Secured promissory note dated September 30, 2020 issued to an unaffiliated third party. The loan accrues interest at a rate of 10% per annum and matures on December 31, 2020. 73 - Notes payable - promissory notes & mortgages $ 14,910 $ 18,600 Vehicle loans & other loan agreements 32 46 Less: Short term debt, net of discounts (12,855 ) (11,021 ) Less: Debt discount (210 ) (1,055 ) Net Long Term Debt $ 1,877 $ 6,570 |
STOCK-BASED COMPENSATION (Table
STOCK-BASED COMPENSATION (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
DESCRIPTION OF BUSINESS | |
Schedule of Equity incentive plan | Awards Reserved for Issuance Awards Outstanding Awards Available for Grant 2016 Equity incentive plan 2,000,000 544,397 1,455,603 2018 Equity incentive plan 43,976,425 15,055,708 28,920,717 |
Schedule of Stock option activity | 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, 2020 12,365,295 $ 0.46 Options granted 10,559,090 $ 0.07 Options exercised - $ - Options forfeited (6,566,667 ) $ 1.29 Options expired (248,048 ) $ 1.33 Options outstanding as of September 30, 2020 16,109,670 $ 0.46 9.0 years $ - Options exercisable as of September 30, 2020 5,593,814 $ 0.91 8.4 years $ - |
Schedule of Stock based compensation assumptions | September 30, September 30, 2020 2019 Expected term (years) 6 Years 6 Years Volatility 104.2 % 115.7 % Risk-free interest rate 0.5 % 1.9 % Dividend yield 0 % 0 % |
Schedule of Stock-based compensation expense | (in thousands except for shares / options) For the Three Months Ended September 30, 2020 September 30, 2019 Type of Award Number of Shares or Options Granted Stock-Based Compensation Expense Number of Shares or Options Granted Stock-Based Compensation Expense Stock options 909,090 $ 298 143,848 $ 1,078 Stock grants: Employees (common stock) - - 91,465 38 Directors (common stock) 1,082,700 119 173,610 102 Non–employee consultants (common stock) 84,615 11 0 0 Total stock–based compensation expense $ 428 $ 1,218 For the Nine Months Ended September 30, 2020 September 30, 2019 Type of Award Number of Shares or Options Granted Stock-Based Compensation Expense Number of Shares or Options Granted Stock-Based Compensation Expense Stock options 10,559,090 $ 1,536 4,144,666 $ 3,314 Stock grants: Employees (common stock) 3,179,544 58 (a) 564,799 428 Directors (common stock) 909,090 19 (b) 173,610 102 Non–employee consultants (common stock) 1,159,615 59 66,376 59 Total stock–based compensation expense $ 1,672 $ 3,904 |
BUSINESS COMBINATIONS (Tables)
BUSINESS COMBINATIONS (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
BUSINESS COMBINATIONS (Tables) | |
Schedule of purchase price of assets and liabilities acquired | (in thousands) Assets acquired Accounts receivable $ 51 Inventory 81 Prepaid expenses 241 Property, plant and equipment 80 Customer relationships 3,070 Trade name 690 Goodwill 6,763 Other long-term assets 260 Total Assets acquired $ 11,237 Liabilities assumed Accounts payable and accrued expenses $ 1,481 Deferred income 300 Short-term debt 100 Long-term lease liabilities 108 Total liabilities assumed $ 1,990 |
Schedule of unaudited proforma financial information | (in thousands) For the Nine Months Ended September 30, 2020 Pro-forma revenues $ 11,182 Pro-forma net loss from continuing operations $ (52,330 ) (in thousands) For the Three Months Ended For the Nine Months Ended September 30, 2019 September 30, 2019 Pro-forma revenues $ 5,607 $ 12,391 Pro-forma net loss from continuing operations $ (9,411 ) $ (32,440 ) |
LEASES (Tables)
LEASES (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
NOTES PAYABLE (Tables) | |
Schedule of operating lease ROU assets and lease liabilities | (in thousands) Nine Months Ended September 30, 2020 Operating lease ROU assets $ 8,553 Operating lease liabilities 9,301 |
Schedule of maturities of operating lease liabilities | (in thousands) Operating Leases 2020 $ 1,680 2021 1,745 2022 2,587 2023 1,885 2024 1,590 Thereafter 6,486 Total lease payments 15,973 Less: payments made to date 2020 (1,201 ) Less: discount (5,471 ) Total operating lease liabilities $ 9,301 |
Schedule of operating lease right-of-use assets | Nine Months Ended September 30, 2020 Weighted average remaining lease term (years) 8.3 Weighted average discount rate 11.5 % |
DISCONTINUED OPERATIONS (Tables
DISCONTINUED OPERATIONS (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
DISCONTINUED OPERATIONS (Tables) | |
Schedule of discontinued operations | (in thousands) (in thousands) Three Months Nine Months 2020 2019 2020 2019 Total revenues $ 203 $ 6,283 $ 3,478 $ 17,491 Cost of goods sold 94 3,458 2,755 9,646 Gross profit 109 2,825 723 7,845 Selling, general and administrative expenses 1,355 3,466 5,224 9,440 Impairment of Assets 4,043 - 10,359 - (Gain) / Loss on sale of assets (1,203 ) 9 1,994 9 Income (Loss) from operations $ (4,086 ) $ (650 ) $ (16,854 ) $ (1,604 ) Other income (expense) (113 ) (161 ) (488 ) (531 ) Income (Loss) from discontinued operations $ (4,199 ) $ (811 ) $ (17,342 ) $ (2,135 ) Income (Loss) from discontinued operations per common share attributable to Terra Tech Corp common stockholders - basic and diluted $ (0.05 ) $ (0.01 ) $ (0.09 ) $ (0.02 ) The carrying amounts of the major classes of assets and liabilities for the discontinued operations are as follows: (in thousands) September 30, 2020 December 31, 2019 Accounts receivable, net $ 97 1,096 Inventory 19 1,073 Prepaid expenses and other assets 67 271 Property, equipment and leasehold improvements, net 2,769 15,069 Intangible assets, net - 399 Goodwill - 6,251 Other assets 212 1,079 Assets of discontinued operations $ 3,164 $ 25,238 Accounts payable and accrued expenses $ 984 $ 3,285 Deferred gain on sale of assets 7,236 3,750 Liabilities of discontinued operations $ 8,220 $ 7,035 |
SUMMARY OF SIGNIFICANT ACCOUN_4
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) | 9 Months Ended |
Sep. 30, 2020 | |
Dispensary Licenses [Member] | |
Useful Life (in Years) | 14 years |
Patent [Member] | |
Useful Life (in Years) | 2 years |
Minimum [Member] | Trademarks [Member] | |
Useful Life (in Years) | 2 years |
Minimum [Member] | Customer Relationships [Member] | Amortized Intangible Assets [Member] | |
Useful Life (in Years) | 3 years |
Maximum [Member] | Trademarks [Member] | |
Useful Life (in Years) | 8 years |
Maximum [Member] | Customer Relationships [Member] | Amortized Intangible Assets [Member] | |
Useful Life (in Years) | 5 years |
SUMMARY OF SIGNIFICANT ACCOUN_5
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 1) - shares | 9 Months Ended | |
Sep. 30, 2020 | Sep. 30, 2019 | |
Loss Per share, potentially dilutive securities | 17,347,948 | 13,535,835 |
Common stock warrants [Member] | ||
Loss Per share, potentially dilutive securities | 1,088,278 | 1,170,540 |
Common stock options [Member] | ||
Loss Per share, potentially dilutive securities | 16,259,670 | 12,365,295 |
SUMMARY OF SIGNIFICANT ACCOUN_6
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($) $ in Thousands | 9 Months Ended | 12 Months Ended | |
Sep. 30, 2020 | Sep. 30, 2019 | Dec. 31, 2019 | |
Advertising expenses | $ 210 | $ 1,320 | |
Description for useful lives of assets | The Company accounts for investments in limited partnerships or limited liability corporations, whereby the Company owns a minimum of 5% of the investee’s outstanding voting stock, under the equity method of accounting. | ||
NuLeaf [Member] | Revision of Previously Issued Financial Statements [Member] | |||
Increase in net loss | $ (6,630) | ||
Decrease in accumulated deficit | $ (1,070) |
CONCENTRATIONS OF BUSINESS AN_2
CONCENTRATIONS OF BUSINESS AND CREDIT RISK (Details Narrative) - USD ($) $ in Thousands | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Dec. 31, 2019 | |
Cash in excess of FDIC insured limit | $ 650 | $ 180 | |
One Customer [Member] | |||
Concentration risk of revenue, description | There were no customers that comprised more than 10.0% of the Company’s revenue | There were no customers that comprised more than 10.0% of the Company’s revenue |
VARIABLE INTEREST ENTITIES (Det
VARIABLE INTEREST ENTITIES (Details) - USD ($) $ in Thousands | Sep. 30, 2020 | Dec. 31, 2019 | Sep. 30, 2019 | Dec. 31, 2018 |
Current assets: | ||||
Cash | $ 2,338 | $ 1,226 | $ 1,858 | $ 7,193 |
Accounts receivable, net | 351 | 693 | ||
Inventory | 4,851 | 4,334 | ||
Prepaid expenses and other current assets | 457 | 675 | ||
Total current assets | 8,180 | 9,368 | ||
Property, equipment and leasehold improvements, net | 33,345 | 35,469 | ||
Other assets | 13,327 | 10,272 | ||
TOTAL ASSETS | 77,362 | 119,250 | ||
Liabilities: | ||||
Total current liabilities | 31,826 | 27,582 | ||
Total long-term liabilities | 10,380 | 16,341 | ||
TOTAL LIABILITIES | 42,206 | 43,923 | ||
VARIABLE INTEREST ENTITIES [Member] | ||||
Current assets: | ||||
Cash | 489 | 243 | ||
Accounts receivable, net | 74 | 16 | ||
Inventory | 3,699 | 2,910 | ||
Prepaid expenses and other current assets | 72 | 35 | ||
Total current assets | 4,334 | 3,204 | ||
Property, equipment and leasehold improvements, net | 7,807 | 9,543 | ||
Other assets | 554 | 598 | ||
TOTAL ASSETS | 12,695 | 13,344 | ||
Liabilities: | ||||
Total current liabilities | 391 | 213 | ||
Total long-term liabilities | 335 | 415 | ||
TOTAL LIABILITIES | $ 726 | $ 628 |
VARIABLE INTEREST ENTITIES (D_2
VARIABLE INTEREST ENTITIES (Details Narrative) - USD ($) | 3 Months Ended | 6 Months Ended | 9 Months Ended | |||||
Sep. 30, 2020 | Jun. 30, 2020 | Sep. 30, 2019 | Jun. 30, 2019 | Jun. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | Oct. 26, 2017 | |
Net Loss | $ (18,161,000) | $ (8,780,000) | $ (53,672,000) | $ (30,621,000) | ||||
Revenue | $ 3,053,000 | $ 3,308 | $ 5,477,000 | $ 4,478 | $ 6,522 | 9,806,000 | $ 12,000,000 | |
NuLeaf [Member] | ||||||||
Net Loss | (1,260,000) | |||||||
Revenue | $ 4,960,000 | |||||||
NuLeaf [Member] | Operating Agreements [Member] | ||||||||
Convertible loans | $ 4,500,000 | |||||||
Interest rate per annum | 600.00% | |||||||
Ownership percentage | 5000.00% |
INVESTMENTS IN UNCONSOLIDATED_2
INVESTMENTS IN UNCONSOLIDATED AFFILIATES (Details Narrative) - $ / shares | 1 Months Ended | |
Mar. 30, 2020 | Aug. 28, 2018 | |
Securities Purchase Agreement [Member] | Edible Garden Inc. [Member] | ||
Consideration received under agreement, description | The consideration paid for the assets included two option agreements to purchase up to a 20% interest in the Purchaser for a nominal fee. The first option gives the Company the right to purchase a 10% interest in the Purchaser for one dollar at any time between the one and five-year anniversary of the transaction, or at any time should a change in control event or public offering occur. The second option gives the Company the right to purchase an additional 10% interest in the Purchaser for one dollar at any point prior to the five-year anniversary of the transaction. | |
Subscription Agreement [Member] | Hydrofarm [Member] | ||
Common stock purchase description | Hydrofarm Holdings Group, Inc. (“Hydrofarm”), one of the leading independent providers of hydroponic products in North America, pursuant to which the Company agreed to purchase from Hydrofarm and Hydrofarm agreed to sell to the Company 2,000,000 Units, each Unit consisting of one share of common stock and one warrant to purchase one-half of a share of common stock for an initial exercise price of $5.00 per share, for $2.50 per unit for an aggregate purchase price of $5.00 million. | |
Initial exercise price | $ 5 |
INVENTORY (Details)
INVENTORY (Details) - USD ($) $ in Thousands | Sep. 30, 2020 | Dec. 31, 2019 |
Total inventory | $ 4,851 | $ 4,334 |
Inventory [Member] | ||
Raw materials | 1,389 | 2,400 |
Work-in-progress | 3,056 | 3,142 |
Finished goods | 406 | 275 |
Inventory reserve | 0 | (1,483) |
Total inventory | $ 4,851 | $ 4,334 |
PROPERTY EQUIPMENT AND LEASEH_3
PROPERTY EQUIPMENT AND LEASEHOLD IMPROVEMENTS NET (Details) - USD ($) $ in Thousands | Sep. 30, 2020 | Dec. 31, 2019 |
Subtotal | $ 40,655 | $ 40,513 |
Less Accumulated Depreciation | (7,310) | (5,044) |
Property, equipment and leasehold improvements, net | 33,345 | 35,469 |
Land and building [Member] | ||
Subtotal | 11,206 | 11,206 |
Furniture and equipment [Member] | ||
Subtotal | 2,700 | 2,787 |
Computer and Software [Member] | ||
Subtotal | 210 | 299 |
Leasehold improvements [Member] | ||
Subtotal | 16,386 | 16,545 |
Construction in progress [Member] | ||
Subtotal | $ 10,153 | $ 9,676 |
PROPERTY EQUIPMENT AND LEASEH_4
PROPERTY EQUIPMENT AND LEASEHOLD IMPROVEMENTS NET (Details 1) - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2020 | Dec. 31, 2019 | |
Total inventory | $ 4,851 | $ 4,334 |
Other long-term assets | 13,327 | 10,272 |
Accounts payable and accrued expenses | 10,752 | 9,526 |
Prepaid and other current assets | 457 | $ 675 |
Asset Purchase Agreement [Member] | Edible Garden [Member] | ||
Fair value of note receivable | 2,960 | |
Fair value of options | 330 | |
Less: cash transferred to purchaser | (30) | |
Total Consideration | 3,260 | |
Account receivable | 360 | |
Total inventory | 520 | |
Other current assets | 80 | |
Property, plant & equipment | 4,100 | |
Intangible assets and goodwill | 70 | |
Other long-term assets | 200 | |
Accounts payable and accrued expenses | (1,700) | |
Lease liability, net of right-of-use asset | (70) | |
Net book value of assets divested and liabilities transferred | 3,560 | |
Loss on sale | (300) | |
Asset Purchase Agreement [Member] | Blum Santa Ana [Member] | ||
Total Consideration | 3,800 | |
Total inventory | 23 | |
Property, plant & equipment | 98 | |
Intangible assets and goodwill | 6,565 | |
Other long-term assets | 54 | |
Lease liability, net of right-of-use asset | (78) | |
Net book value of assets divested and liabilities transferred | 6,694 | |
Loss on sale | (2,894) | |
Prepaid and other current assets | $ 33 |
PROPERTY EQUIPMENT AND LEASEH_5
PROPERTY EQUIPMENT AND LEASEHOLD IMPROVEMENTS NET (Details Narrative) - USD ($) | 1 Months Ended | 3 Months Ended | 9 Months Ended | ||
Mar. 30, 2020 | Feb. 26, 2020 | Sep. 30, 2020 | Sep. 30, 2020 | Sep. 30, 2019 | |
Depreciation expense | $ 2,830,000 | $ 2,860,000 | |||
Martin Vivero and Tetra House Co. [Member] | |||||
Amount received by Blum Santa under agreement | $ 2,000,000 | $ 1.45 | |||
Securities Purchase Agreement [Member] | Edible Garden Inc. [Member] | |||||
Consideration received by Edible Garden Corp. under agreement, description | The consideration paid for the Business included a five-year $3.00 million secured promissory note bearing interest at 3.5% per annum, which is reflected within the assets under discontinued operations, and two option agreements to purchase up to a 20% interest in the Purchaser for a nominal fee. The first option gives the Company the right to purchase a 10% interest in the Purchaser for one dollar at any time between the one and five-year anniversary of the transaction, or at any time should a change in control event or public offering occur. The second option gives the Company the right to purchase an additional 10% interest in the Purchaser for one dollar at any point prior to the five-year anniversary of the transaction. The second option is automatically terminated upon payment in full of the $3.00 million secured promissory note. |
INTANGIBLE ASSETS AND GOODWIL_2
INTANGIBLE ASSETS AND GOODWILL (Details) - USD ($) $ in Thousands | Sep. 30, 2020 | Dec. 31, 2019 |
Total Intangible Assets, Net | $ 8,028 | $ 14,871 |
Indefinite Lived Intangible Assets [Member] | ||
Total Indefinite-Lived Intangible Assets | 920 | 5,070 |
Customer Relationships [Member] | Amortized Intangible Assets [Member] | ||
Gross Carrying Amount | 7,400 | 7,860 |
Trademarks and Patent [Member] | Amortized Intangible Assets [Member] | ||
Gross Carrying Amount | 196 | 196 |
Dispensary License [Member] | Amortized Intangible Assets [Member] | ||
Gross Carrying Amount | 10,270 | 10,270 |
Finite-Lived Intangible Assets [Member] | ||
Gross Carrying Amount | 17,865 | 18,326 |
Accumulated Amortization | (10,757) | (8,525) |
Total intangible assets, net | 7,108 | 9,801 |
Trade Name [Member] | Indefinite Lived Intangible Assets [Member] | ||
Gross Carrying Amount | $ 920 | $ 5,070 |
INTANGIBLE ASSETS AND GOODWIL_3
INTANGIBLE ASSETS AND GOODWILL (Details 1) $ in Thousands | 9 Months Ended |
Sep. 30, 2020USD ($) | |
Goodwill, beginning | $ 21,471 |
Goodwill, ending | 6,171 |
Goodwill [Member] | |
Goodwill, beginning | 21,471 |
Impairment | (15,300) |
Goodwill, ending | $ 6,171 |
INTANGIBLE ASSETS AND GOODWIL_4
INTANGIBLE ASSETS AND GOODWILL (Details Narrative) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2020 | Jun. 30, 2020 | Mar. 31, 2020 | Sep. 30, 2020 | Sep. 30, 2019 | |
Amortization expense | $ 2,230 | $ 2,260 | |||
Impairement of goodwill | $ 2,750 | $ 4,200 | |||
Impairment charges | $ 8,350 | 8,350 | |||
Customer Relationships [Member] | |||||
Impairment charges | 80 | 460 | |||
Trade Name [Member] | |||||
Impairment charges | $ 1,670 | $ 4,150 |
NOTES PAYABLE (Details)
NOTES PAYABLE (Details) - USD ($) $ in Thousands | Sep. 30, 2020 | Dec. 31, 2019 |
Notes payable - promissory notes | $ 14,910 | $ 18,600 |
Vehicle loans | 32 | 46 |
Less: Short term debt | (12,855) | (11,021) |
Less: Debt discount | (210) | (1,055) |
Net Long Term Debt | 1,877 | 6,570 |
Secured promissory note one [Member] | ||
Net Long Term Debt | 500 | 500 |
Secured promissory note two [Member] | ||
Net Long Term Debt | 1,000 | 0 |
Secured promissory note three [Member] | ||
Net Long Term Debt | 73 | 0 |
Promissory Note One [Member] | ||
Net Long Term Debt | 0 | 4,500 |
Promissory Note Two [Member] | ||
Net Long Term Debt | 6,500 | 6,500 |
Promissory Note Three [Member] | ||
Net Long Term Debt | 1,600 | 1,600 |
Promissory Note Four [Member] | ||
Net Long Term Debt | 2,900 | 4,000 |
Promissory Note Five [Member] | ||
Net Long Term Debt | 775 | 1,500 |
Promissory Note Six [Member] | ||
Net Long Term Debt | 562 | 0 |
Promissory Note Seven [Member] | ||
Net Long Term Debt | $ 1,000 | $ 0 |
NOTES PAYABLE (Details Narrativ
NOTES PAYABLE (Details Narrative) - USD ($) $ in Thousands | Jan. 10, 2020 | Jul. 29, 2020 | Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | May 04, 2020 |
Common stock issued upon conversion of debt and accrued interest | 27,694,593 | ||||||
Debt conversion, converted instrument, amount | $ 423 | $ 1,288 | $ 2,252 | $ 12,681 | |||
Unaffiliated Third Party [Member] | Promissory Note [Member] | |||||||
Interest rate | 15.00% | 8.00% | 10.00% | 10.00% | |||
Debt instrument, amount | $ 1,000 | $ 1,000 | $ 70 | $ 70 | |||
Maturity date | Jan. 10, 2021 | Apr. 28, 2021 | Dec. 31, 2020 | ||||
2018 [Member] | Convertible promissory note [Member] | Securities Purchase Agreement [Member] | |||||||
Interest rate | 75.00% | 75.00% | |||||
Debt conversion, converted instrument, amount | $ 1,830 | ||||||
Description of outstanding principal amount | the outstanding principal amount of the notes 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 notes plus accrued but unpaid interest, if the prepayment date is within 90 days of the issuance date of the notes; (ii) 115% of the sum of the then-outstanding principal amount plus accrued but unpaid interest, if the prepayment date is between 91 days and 180 days of the issuance date of the notes; or (iii) 125% of the sum of the then-outstanding principal amount of the notes plus accrued but unpaid interest, if the prepayment date is after 180 days of the issuance date of the notes. | ||||||
Description of conversion price | For each note issued under the 2018 Master Securities Purchase Agreement, the principal and interest due and owed 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) the original conversion price as defined in each note issuance or (ii) 87% of the average of the two lowest daily volume weighted average price of the Common Stock in the thirteen (13) trading days prior to the conversion date (“Conversion Price”). The 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 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 | ||||||
Convertible debt aggregate value | $ 40,000 | $ 40,000 | |||||
Amount per tranches | 5,000 | 5,000 | |||||
Principle remains outstanding balance | $ 3,680 | $ 3,680 | |||||
Additional conversion conditions, description | 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 $10.50 or more and (ii) the average daily trading value of the Common Stock is greater than $2.50 million for the prior ten (10) consecutive trading days, then the Company may demand, upon one (1) days’ notice, that the holder convert the notes at the Conversion Price. | ||||||
May 4, 2020 [Member] | Lender [Member] | OneOor Technologies Inc. [Member] | |||||||
Principal amount | $ 560 | ||||||
Interest rate | 100.00% |
FAIR VALUE MEASUREMENTS (Detail
FAIR VALUE MEASUREMENTS (Details Narrative) - Edible Garden Corp [Member] - USD ($) $ in Thousands | 1 Months Ended | |
Mar. 30, 2020 | Sep. 30, 2020 | |
Estimated fair value of the options | $ 330 | |
Payment of secured promissory note | $ 3,000 | |
Consideration received under agreement, description | The consideration paid for the Business included two option agreements to purchase up to a 20% interest in the Purchaser for a nominal fee. The first option gives the Company the right to purchase a 10% interest in the Purchaser for one dollar at any time between the one and five-year anniversary of the transaction, or at any time should a change in control event or public offering occur. The second option gives the Company the right to purchase an additional 10% interest in the Purchaser for one dollar at any point prior to the five-year anniversary of the transaction. |
EQUITY (Details Narrative)
EQUITY (Details Narrative) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Debt instrument converted amount | $ 423 | $ 1,288 | $ 2,252 | $ 12,681 |
Senior Secured Convertible Promissory Notes [Member] | ||||
Debt instrument converted amount | $ 2,250 | |||
Debt instrument converted amount shares issued | 27,694,543 | |||
OneQor Technologies, Inc [Member] | ||||
Common stock shares issued for compensation, amount | $ 610 | |||
Common stock shares issued for compensation | 5,248,249 |
STOCKBASED COMPENSATION (Detail
STOCKBASED COMPENSATION (Details) | Sep. 30, 2020shares |
2018 Equity incentive plan [Member] | |
Awards Reserved for Issuance | 43,976,425 |
Awards Outstanding | 15,055,708 |
Awards Available for Grant | 28,920,717 |
2016 Equity incentive plan [Member] | |
Awards Reserved for Issuance | 2,000,000 |
Awards Outstanding | 544,397 |
Awards Available for Grant | 1,455,603 |
STOCKBASED COMPENSATION (Deta_2
STOCKBASED COMPENSATION (Details 1) - Stock Options [Member] - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Number of Shares , beginning balance | 12,365,295 | |||
Options granted | 909,090 | 143,848 | 10,559,090 | 4,144,666 |
Options forfeited | (6,566,667) | |||
Options expired | (248,048) | |||
Number of Shares , ending balance | 16,109,670 | |||
Number of Shares , Options exercisable | 5,593,814 | |||
Weighted-Average Exercise Price Per Share, beginning balance | $ 0.46 | |||
Weighted-Average Exercise Price Per Share, Options granted | 0.07 | |||
Weighted-Average Exercise Price Per Share, Options exercised | 0 | |||
Weighted-Average Exercise Price Per Share, Options forfeited | 1.29 | |||
Weighted-Average Exercise Price Per Share, Options expired | 1.33 | |||
Weighted-Average Exercise Price Per Share, ending balance | $ 0.46 | |||
Weighted-Average Remaining Contractual Life, ending balance | 9 years | |||
Weighted-Average Remaining Contractual Life, Exercisable | 8 years 4 months 24 days | |||
Weighted-Average Exercise Price Per Share,Options exercisable | $ 0.91 | |||
Aggregate Intrinsic Value of In-the-Money Options, beginning balance | $ 0 | |||
Aggregate Intrinsic Value of In-the-Money Options, ending balance | $ 0 |
STOCKBASED COMPENSATION (Deta_3
STOCKBASED COMPENSATION (Details 2) - Stock Options [Member] | 9 Months Ended | |
Sep. 30, 2020 | Sep. 30, 2019 | |
Expected term (years) | 6 years | 6 years |
Volatility | 1042.00% | 1157.00% |
Risk-free interest rate | 5.00% | 19.00% |
Dividend yield | 0.00% | 0.00% |
STOCKBASED COMPENSATION (Deta_4
STOCKBASED COMPENSATION (Details 3) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Stock-Based Compensation Expense | $ 428,000 | $ 1,218,000 | $ 1,672,000 | $ 3,904,000 |
Stock Options [Member] | ||||
Stock-Based Compensation Expense | $ 298,000 | $ 1,078,000 | $ 1,536,000 | $ 3,314,000 |
Number of Shares or Options Granted | 909,090 | 143,848 | 10,559,090 | 4,144,666 |
Employees (Common Stock) [Member] | ||||
Stock-Based Compensation Expense | $ 0 | $ 38,000 | $ 58,000 | $ 428,000 |
Number of Shares or Options Granted | 91,465 | 3,179,544 | 564,799 | |
Directors (Common Stock) [Member] | ||||
Stock-Based Compensation Expense | $ 119,000 | $ 102,000 | $ 19,000 | $ 102,000 |
Number of Shares or Options Granted | 1,082,700 | 173,610 | 909,090 | 173,610 |
Non-Employee Consultants (Common Stock) [Member] | ||||
Stock-Based Compensation Expense | $ 11,000 | $ 0 | $ 59,000 | $ 59,000 |
Number of Shares or Options Granted | 84,615 | 0 | 1,159,615 | 66,376 |
STOCKBASED COMPENSATION (Deta_5
STOCKBASED COMPENSATION (Details Narrative) $ / shares in Units, $ in Thousands | 9 Months Ended |
Sep. 30, 2020USD ($)$ / sharesshares | |
Unrecognized stock-based compensation | $ | $ 1,540 |
Weighted-average period | 2 years 6 months 29 days |
Options exercisable | $ / shares | $ 0.80 |
2018 Equity incentive plan [Member] | |
Awards Reserved for Issuance | shares | 43,976,425 |
BUSINESS COMBINATIONS (Details)
BUSINESS COMBINATIONS (Details) - USD ($) $ in Thousands | Sep. 30, 2020 | Feb. 14, 2020 | Dec. 31, 2019 |
Goodwill | $ 6,171 | $ 21,471 | |
Short-term debt | $ (12,855) | $ (11,021) | |
OneQor Technologies, Inc [Member] | |||
Accounts receivable | $ 51 | ||
Inventory | 81 | ||
Prepaid expenses | 241 | ||
Property, plant and equipment | 80 | ||
Customer relationships | 3,070 | ||
Trade name | 690 | ||
Goodwill | 6,763 | ||
Other long-term assets | 260 | ||
Total Assets acquired | 11,237 | ||
Accounts payable and accrued expenses | 1,481 | ||
Deferred income | 300 | ||
Short-term debt | 100 | ||
Long-term lease liabilities | 108 | ||
Net book value of assets divested and liabilities transferred | $ 1,990 |
BUSINESS COMBINATIONS (Details
BUSINESS COMBINATIONS (Details 1) - OneQor Technologies, Inc [Member] - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | |
Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Pro-forma revenues | $ 5,607 | $ 11,182 | $ 12,391 |
Pro-forma net loss from continuing operations | $ (9,411) | $ (52,330) | $ (32,440) |
BUSINESS COMBINATIONS (Detail_2
BUSINESS COMBINATIONS (Details Narrative) - USD ($) | 1 Months Ended | 3 Months Ended | 6 Months Ended | 9 Months Ended | ||||
Feb. 14, 2020 | Sep. 30, 2020 | Jun. 30, 2020 | Sep. 30, 2019 | Jun. 30, 2019 | Jun. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Revenues | $ 3,053,000 | $ 3,308 | $ 5,477,000 | $ 4,478 | $ 6,522 | $ 9,806,000 | $ 12,000,000 | |
Net loss | $ (18,299,000) | $ (8,923,000) | (54,151,000) | $ (30,678,000) | ||||
OneQor Technologies, Inc [Member] | ||||||||
Revenues | 1,070,000 | |||||||
Fair value of Common stock shares issued for business combinations | $ 9,310,000 | |||||||
Common stock shares issued for business combinations | 58,154,027 | |||||||
Net loss | $ (12,070,000) |
LEASES (Details)
LEASES (Details) $ in Thousands | Sep. 30, 2020USD ($) |
LEASES (Details) | |
Operating lease ROU assets | $ 8,553 |
Operating lease liabilities | $ 9,301 |
LEASES (Details 1)
LEASES (Details 1) $ in Thousands | Sep. 30, 2020USD ($) |
LEASES (Details) | |
2020 | $ 1,680 |
2021 | 1,745 |
2022 | 2,587 |
2023 | 1,885 |
2024 | 1,590 |
Thereafter | 6,486 |
Total lease payments | 15,973 |
Less: payments made to date 2020 | (1,201) |
Less: Discount | (5,471) |
Total operating lease liabilities | $ 9,301 |
LEASES (Details 2)
LEASES (Details 2) | 9 Months Ended |
Sep. 30, 2020 | |
LEASES (Details) | |
Weighted average remaining lease term (years) | 8 years 3 months 18 days |
Weighted average discount rate | 115.00% |
LEASES (Details Narrative)
LEASES (Details Narrative) $ in Thousands | 9 Months Ended |
Sep. 30, 2020USD ($) | |
LEASES | |
Short term lease liabilities | $ 850 |
Cash paid for operating lease liabilities | 1,170 |
Total operating lease costs | $ 680 |
DISCONTINUED OPERATIONS (Detail
DISCONTINUED OPERATIONS (Details) - USD ($) | 3 Months Ended | 6 Months Ended | 9 Months Ended | ||||
Sep. 30, 2020 | Jun. 30, 2020 | Sep. 30, 2019 | Jun. 30, 2019 | Jun. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Revenues | $ 3,053,000 | $ 3,308 | $ 5,477,000 | $ 4,478 | $ 6,522 | $ 9,806,000 | $ 12,000,000 |
Gross profit | 1,438,000 | 3,182,000 | 5,010,000 | 7,083,000 | |||
Selling, general and administrative expenses | 5,588,000 | 9,318,000 | 20,409,000 | 26,521,000 | |||
(Gain) / Loss on sale of assets | $ (13,943,000) | $ (5,414,000) | (35,273,000) | (20,294,000) | |||
Income (Loss) from operations | $ (36,809,000) | $ (28,543,000) | |||||
Income (Loss) from discontinued operations per common share attributable to Terra Tech Corp common stockholders - basic and diluted | $ (0.09) | $ (0.08) | $ (0.29) | $ (0.30) | |||
Discontinued Operations [Member] | |||||||
Revenues | $ 203,000 | $ 6,283,000 | $ 3,478,000 | $ 17,491,000 | |||
Cost of goods sold | 94,000 | 3,458,000 | 2,755,000 | 9,646,000 | |||
Gross profit | 109,000 | 2,825,000 | 723,000 | 7,845,000 | |||
Selling, general and administrative expenses | 1,355,000 | 3,466,000 | 5,224,000 | 9,440,000 | |||
Impairment of Assets | 4,043,000 | 0 | 10,359,000 | 0 | |||
(Gain) / Loss on sale of assets | (1,203,000) | 9,000 | 1,994,000 | 9,000 | |||
Income (Loss) from operations | (4,086,000) | (650,000) | (16,854,000) | (1,604,000) | |||
Other income (expense) | (113,000) | (161,000) | (488,000) | (531,000) | |||
Income Loss From Discontinued Operations Net Of Tax | $ (4,199,000) | $ (811,000) | $ (17,342,000) | $ (2,135,000) | |||
Income (Loss) from discontinued operations per common share attributable to Terra Tech Corp common stockholders - basic and diluted | $ (0.05) | $ (0.01) | $ (0.09) | $ (0.02) |
DISCONTINUED OPERATIONS (Deta_2
DISCONTINUED OPERATIONS (Details 1) - USD ($) | Sep. 30, 2020 | Dec. 31, 2019 |
Total inventory | $ 4,851,000 | $ 4,334,000 |
Property, equipment and leasehold improvements, net | 33,345,000 | 35,469,000 |
Goodwill | 6,171,000 | 21,471,000 |
Accounts payable and accrued expenses | 10,752,000 | 9,526,000 |
Discontinued Operations [Member] | ||
Accounts receivable, net | 97,000 | 1,096,000 |
Total inventory | 19,000 | 1,073,000 |
Prepaid expenses and other assets | 67,000 | 271,000 |
Property, equipment and leasehold improvements, net | 2,769,000 | 15,069,000 |
Intangible assets, net | 0 | 399,000 |
Goodwill | 0 | 6,251,000 |
Other assets | 212,000 | 1,079,000 |
Assets of discontinued operations | 3,164,000 | 25,238,000 |
Accounts payable and accrued expenses | 984,000 | 3,285,000 |
Deferred gain on sale of assets | 7,236,000 | 3,750,000 |
Liabilities of discontinued operations | $ 8,220,000 | $ 7,035,000 |
DISCONTINUED OPERATIONS (Deta_3
DISCONTINUED OPERATIONS (Details Narrative) - MediFarm I [Member] - USD ($) $ in Thousands | 1 Months Ended | ||
Apr. 15, 2020 | Aug. 19, 2019 | May 08, 2019 | |
Consideration paid | $ 5,250 | $ 13,500 | $ 10,000 |
Cash | 2,500 | 9,300 | 7,200 |
Principal amount | $ 2,750 | $ 4,200 | $ 2,800 |
GOING CONCERN (Details Narrativ
GOING CONCERN (Details Narrative) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | Dec. 31, 2019 | |
Accumulated deficit | $ (243,358) | $ (243,358) | $ (189,685) | ||
Net Loss | $ (18,161) | $ (8,780) | (53,672) | $ (30,621) | |
Going Concern [Member] | |||||
Accumulated deficit | (189,690) | ||||
Cash outflows from operations | 12,580 | 14,740 | |||
Net Loss | $ (53,670) | $ (46,930) |
SUBSEQUENT EVENTS (Details Narr
SUBSEQUENT EVENTS (Details Narrative) - USD ($) | Oct. 12, 2020 | Oct. 22, 2020 | Sep. 30, 2020 | Sep. 30, 2019 |
Payment of third party loan | $ 430,000 | $ 2,000,000 | ||
Senior Secured Convertible Promissory Notes [Member] | ||||
Debt conversion converted instrument, shares issued | 27,694,543 | |||
Subsequent Event [Member] | Mr. Nahass [Member] | ||||
Common stock shares forfeited | 3,654,030 | |||
Debt description | The Trust grants to Terra Tech an expiring, one-time $0.25 million credit which it may use solely as an offset against the Note. | |||
Subsequent Event [Member] | Matthew Morgan [Member] | ||||
Common stock shares forfeited | 14,616,118 | |||
Notes payable | $ 500,000 | |||
Subsequent Event [Member] | Asset Purchase Agreement [Member] | ||||
Payment of third party loan | $ 8,332,096 | |||
Subsequent Event [Member] | Senior Secured Convertible Promissory Notes [Member] | ||||
Debt conversion converted amount, principal | $ 50,000 | |||
Debt conversion converted amount, accrued interest | $ 10,000 | |||
Debt conversion converted instrument, shares issued | 1,037,314 |