Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | ||
Dec. 31, 2018 | Mar. 08, 2019 | Jun. 30, 2018 | |
Document And Entity Information | |||
Entity Registrant Name | Terra Tech Corp. | ||
Entity Central Index Key | 0001451512 | ||
Document Type | 10-K | ||
Document Period End Date | Dec. 31, 2018 | ||
Amendment Flag | false | ||
Current Fiscal Year End Date | --12-31 | ||
Is Entity a Well-known Seasoned Issuer | No | ||
Is Entity a Voluntary Filer | No | ||
Is Entity's Reporting Status Current | Yes | ||
Entity Filer Category | Accelerated Filer | ||
Entity Public Float | $ 142,861,830 | ||
Entity Common Stock, Shares Outstanding | 94,035,688 | ||
Entity Emerging Growth Company | false | ||
Entity Small Business | true | ||
Document Fiscal Period Focus | FY | ||
Document Fiscal Year Focus | 2018 | ||
Entity Shell Company | true |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) | Dec. 31, 2018 | Dec. 31, 2017 |
Current Assets: | ||
Cash | $ 7,193,392 | $ 5,445,582 |
Trade and Other Receivables, net of allowance for doubtful acccounts of $0.33 and $0 million, as of December 31, 2018 and 2017, respectively | 1,246,835 | 959,698 |
Notes Receivable | 5,010,143 | |
Inventory | 2,279,737 | 5,760,019 |
Assets Held for Sale | 7,501,287 | |
Prepaid Expenses and Other Current Assets | 741,261 | 1,067,689 |
Total Current Assets | 18,962,512 | 18,243,131 |
Property, Equipment and Leasehold Improvements, Net | 34,139,089 | 19,191,616 |
Intangible Assets, Net | 18,465,923 | 27,773,110 |
Goodwill | 35,172,508 | 28,921,260 |
Other Assets | 897,395 | 4,058,682 |
Other Investments | 12,450,700 | |
TOTAL ASSETS | 120,088,127 | 98,187,799 |
Current Liabilities: | ||
Accrued Payroll | 2,553,186 | 621,898 |
Accounts Payable and Other Accrued Expenses | 4,348,256 | 4,822,812 |
Derivative Liabilities | 9,331,400 | |
Total Current Liabilities | 6,901,442 | 14,776,110 |
Long-Term Liabilities: | ||
Long-Term Debt | 18,312,877 | 6,609,398 |
Total Long-Term Liabilities | 18,312,877 | 6,609,398 |
Total Liabilities | 25,214,319 | 21,385,508 |
COMMITMENTS AND CONTINGENCIES | ||
STOCKHOLDERS EQUITY: | ||
Common Stock, Par Value $0.001: 990,000,000 Shares Authorized as of December 31, 2018 and 2017; 81,759,415 and 61,818,560 Shares Issued and Outstanding as of December 31, 2018 and 2017, respectively (1) | 81,759 | 61,819 |
Additional Paid-In Capital | 234,972,860 | 181,357,715 |
Accumulated Deficit | (141,184,287) | (105,548,602) |
Total Terra Tech Corp. Stockholders Equity | 93,870,332 | 75,870,932 |
Non-Controlling Interest | 1,003,476 | 931,359 |
Total Stockholders Equity | 94,873,808 | 76,802,291 |
TOTAL LIABILITIES AND STOCKHOLDERS EQUITY | 120,088,127 | 98,187,799 |
Convertible Series A Preferred Stock [Member] | ||
STOCKHOLDERS EQUITY: | ||
Preferred Stock, Value | ||
Convertible Series B Preferred Stock [Member] | ||
STOCKHOLDERS EQUITY: | ||
Preferred Stock, Value |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares | Dec. 31, 2018 | Dec. 31, 2017 |
STOCKHOLDERS' EQUITY: | ||
Preferred stock, par value | $ 0.001 | |
Preferred stock, Authorized | 50,000,000 | |
Common stock, par value | $ 0.001 | $ 0.001 |
Common stock, Authorized | 990,000,000 | 990,000,000 |
Common stock, Issued | 81,759,415 | 61,818,560 |
Common stock, Outstanding | 81,759,415 | 61,818,560 |
Convertible Series A Preferred Stock [Member] | ||
STOCKHOLDERS' EQUITY: | ||
Preferred stock, par value | $ 0.001 | $ 0.001 |
Preferred stock, Authorized | 100 | 100 |
Preferred stock, Issued | 12 | 8 |
Preferred stock, Outstanding | 12 | 8 |
Convertible Series B Preferred Stock [Member] | ||
STOCKHOLDERS' EQUITY: | ||
Preferred stock, par value | $ 0.001 | $ 0.001 |
Preferred stock, Authorized | 41,000,000 | 41,000,000 |
Preferred stock, Issued | 0 | 0 |
Preferred stock, Outstanding | 0 | 0 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Consolidated Statements Of Operations | ||
Total Revenues | $ 31,333,618 | $ 35,800,844 |
Cost of Goods Sold | 18,900,090 | 24,879,428 |
Gross Profit | 12,433,528 | 10,921,416 |
Selling, General and Administrative Expenses | 43,304,374 | 30,801,434 |
Loss from Operations | (30,870,846) | (19,880,018) |
Other Income (Expense): | ||
Impairment of Property | (77,556) | (138,037) |
Impairment of Intangible Assets | (757,467) | |
Loss on Extinguishment of Debt | (7,144,288) | |
Gain (Loss) on Fair Market Valuation of Derivatives | (3,494,550) | |
Interest Expense, Net | (13,092,934) | (2,681,426) |
Share of Loss in Joint Venture | (662,222) | |
Gain on Sale of Assets | 5,229,680 | |
Gain on Settlement of Contingent Consideration | 4,991,571 | |
Gain (Loss) on Fair Market Valuation of Contingent Consideration | (4,426,047) | |
Total Other Income (Expense) | (8,603,032) | (13,650,244) |
Loss Before Provision for Income Taxes | (39,473,878) | (33,530,262) |
Provision for Income Tax Benefit (Expense) | 347,455 | |
Net Loss | (39,473,878) | (33,182,807) |
Net Income / (Loss) Attributable to Non-Controlling Interest | 279,609 | (505,204) |
NET LOSS ATTRIBUTABLE TO TERRA TECH CORP. | $ (39,753,486) | $ (32,677,603) |
Net Loss Per Common Share Attributable to Terra Tech Corp. Common Stockholders Basic and Diluted | $ (0.56) | $ (0.71) |
Weighted-Average Number of Common Shares Outstanding Basic and Diluted | 71,028,851 | 46,072,846 |
CONSOLIDATED STATEMENTS OF STOC
CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY - USD ($) | Convertible Series A Preferred Stock [Member] | Convertible Series B Preferred Stock [Member] | Common Stock | Additional Paid-In Capital | Accumulated Deficit | Noncontrolling Interest | Total |
Beginning balance, Shares at Dec. 31, 2016 | 8 | 2,455,064 | 36,924,254 | ||||
Beginning balance, Amount at Dec. 31, 2016 | $ 2,455 | $ 36,924 | $ 125,466,493 | $ (72,870,999) | $ (480,908) | $ 52,153,965 | |
Sale of Common Stock for Cash, Shares | 2,983,137 | ||||||
Sale of Common Stock for Cash, Amount | $ 2,983 | 9,447,017 | 9,450,000 | ||||
Issuance of warrants | 689,542 | 689,542 | |||||
Stock Option Compensation/Expense | 692,971 | 692,971 | |||||
Issuance of Preferred Stock for compensation, Shares | 40,000 | ||||||
Issuance of Preferred Stock for compensation, Amount | $ 40 | 1,035,366 | 1,035,406 | ||||
Issuance of Common Stock for compensation, Shares | 158,867 | ||||||
Issuance of Common Stock for compensation, Amount | $ 160 | 490,720 | 490,880 | ||||
Issuance of Common Stock for Director Fees, Shares | 81,061 | ||||||
Issuance of Common Stock for Director Fees, Amount | $ 81 | 221,892 | 221,973 | ||||
Issuance of Common Stock for services, Shares | 389,374 | ||||||
Issuance of Common Stock for services, Amount | $ 389 | 1,284,173 | 1,284,562 | ||||
Issuance of Common Stock for Prepaid Inventory, Shares | 892,964 | ||||||
Issuance of Common Stock for Prepaid Inventory, Amount | $ 893 | 1,934,607 | 1,935,500 | ||||
Issuance of Common Stock for debt and interest expense, Shares | 8,284,283 | ||||||
Issuance of Common Stock for debt and interest expense, Amount | $ 8,284 | 29,776,987 | 29,785,271 | ||||
Preferred Stock Series B Converted into Common Stock, Shares | (2,209,741) | 11,897,965 | |||||
Preferred Stock Series B Converted into Common Stock, Amount | $ (2,210) | $ 11,898 | (9,688) | ||||
Purchase of Assets from Tech Center Drive, Shares | 826,105 | ||||||
Purchase of Assets from Tech Center Drive, Amount | $ 826 | 2,725,320 | 2,726,146 | ||||
Settlement of Contingent Consideration, Shares | (285,323) | (619,450) | |||||
Settlement of Contingent Consideration, Amount | $ (285) | $ (619) | 4,740,542 | 4,739,638 | |||
Settlement of Contingent Consideration Recorded Against Additional Paid-In Capital | 4,692,697 | 4,692,697 | |||||
Reclass of Non-Controlling Interest to Additional Paid-In Capital for the Acquisition Additional Interest in Subsidiary | (1,830,924) | 1,830,924 | |||||
Net Loss Attributable to Non-Controlling Interest | (505,204) | (505,204) | |||||
Cash Contribution from Non-Controlling Interest | 86,547 | 86,548 | |||||
Net Loss Attributable to Terra Tech Corp. | (32,677,603) | (32,677,603) | |||||
Ending balance, Shares at Dec. 31, 2017 | 8 | 61,818,560 | |||||
Ending balance, Amount at Dec. 31, 2017 | $ 61,819 | 181,357,715 | (105,548,602) | 931,359 | 76,802,291 | ||
Issuance of warrants | 889,276 | 889,276 | |||||
Stock Option Compensation/Expense | 2,527,982 | 2,527,982 | |||||
Issuance of Common Stock for compensation, Shares | 4 | 201,296 | |||||
Issuance of Common Stock for compensation, Amount | $ 202 | 602,915 | 603,117 | ||||
Issuance of Common Stock for Director Fees, Shares | 49,500 | ||||||
Issuance of Common Stock for Director Fees, Amount | $ 49 | 99,941 | 99,990 | ||||
Issuance of Common Stock for services, Shares | 132,971 | ||||||
Issuance of Common Stock for services, Amount | $ 132 | 225,296 | 225,428 | ||||
Net Loss Attributable to Non-Controlling Interest | 279,609 | 279,609 | |||||
Cash Contribution from Non-Controlling Interest | |||||||
Net Loss Attributable to Terra Tech Corp. | (39,753,486) | (39,753,486) | |||||
Opening Balance Sheet Adjustment - ASU 2017-11 | 5,238,296 | 2,547,801 | 7,786,097 | ||||
Beneficial Conversion Feature - Convertible Notes | 9,014,878 | 9,014,878 | |||||
Reverse Stock Split round up shares, Shares | 46,687 | ||||||
Reverse Stock Split round up shares, Amount | $ 47 | (47) | |||||
Stock Cancellation, Shares | (24,210) | ||||||
Stock Cancellation, Amount | $ (25) | (117,806) | (117,831) | ||||
TCD Acquisition Clawback, Shares | (101,083) | ||||||
TCD Acquisition Clawback, Amount | $ (101) | (350,971) | (351,072) | ||||
Debt Conversion - Common Stock, Shares | 16,652,002 | ||||||
Debt Conversion - Common Stock, Amount | $ 16,652 | 30,957,374 | 30,974,026 | ||||
Stock issued for Assets, Shares | 53,332 | ||||||
Stock issued for Assets, Amount | $ 53 | 199,942 | 199,995 | ||||
Warrant Exercise, Shares | 252,703 | ||||||
Warrant Exercise, Amount | $ 253 | 100,747 | 101,000 | ||||
Issuance of Stock for Non-Controlling Interest, Shares | 200,000 | ||||||
Issuance of Stock for Non-Controlling Interest, Amount | $ 200 | 199,800 | (207,492) | (7,492) | |||
Stock issued for Cash, Shares | 2,477,957 | ||||||
Stock issued for Cash, Amount | $ 2,478 | 5,597,522 | 5,600,000 | ||||
Ending balance, Shares at Dec. 31, 2018 | 12 | 81,759,715 | |||||
Ending balance, Amount at Dec. 31, 2018 | $ 81,759 | $ 236,542,860 | $ (142,754,287) | $ 1,003,476 | $ 94,873,808 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | ||
Net Loss | $ (39,473,878) | $ (33,182,807) |
Adjustments to Reconcile Net Loss to Net Cash Used in Operating Activities: | ||
(Gain) Loss on Fair Market Valuation of Derivatives | 3,494,550 | |
(Gain) Loss on Fair Market Valuation of Contingent Consideration | 4,426,047 | |
Loss on Joint Venture | 662,222 | |
Cancellation of Shares Issued | (117,835) | |
Loss on Extinguishment of Debt | 7,144,288 | |
Gain on Sale of Assets | (5,644,120) | |
Interest Expense | 12,081,765 | 2,138,762 |
Interest income capitalized to notes receivable | (155,784) | (49,911) |
Depreciation and Amortization | 4,981,237 | 3,647,216 |
Stock Issued for Compensation | 603,117 | 1,526,286 |
Stock Issued for Director Fees | 99,991 | 221,973 |
Stock Issued for Services | 225,429 | 1,284,562 |
Stock Option Compensation | 2,527,982 | 692,971 |
Impairment of Property | 77,556 | 138,037 |
Impairment of Intangibles | 757,467 | |
Gain on Settlement of Contingent Consideration | (4,991,571) | |
Warrants Issued with Common Stock and Debt | 211,534 | |
Changes in Operating Assets and Liabilities: | ||
Accounts Receivable | (287,137) | (211,906) |
Inventory | 3,480,282 | (3,736,910) |
Prepaid Expenses and Other Current Assets | (73,083) | 1,572,532 |
Other Assets | (321,247) | (3,999,489) |
Accounts Payable and Accrued Expenses | 1,456,732 | 3,662,710 |
Income Taxes Payable | (615,830) | |
NET CASH USED IN OPERATING ACTIVITIES | (19,876,772) | (15,869,489) |
CASH FLOWS FROM INVESTING ACTIVITIES: | ||
Cash Paid for Acquisition, Net of Cash Acquired | (4,113,779) | |
Purchase of Equity Investments | (7,765,902) | |
Proceeds from sale of PP&E | 5,644,120 | |
Issuance of Note Receivable | (4,960,232) | |
Purchase of Property, Equipment and Leasehold Improvements | (14,409,226) | (6,194,438) |
NET CASH USED IN INVESTING ACTIVITIES | (16,531,008) | (15,268,449) |
CASH FLOWS FROM FINANCING ACTIVITIES: | ||
Proceeds from Issuance of Notes Payable | 33,650,000 | 20,000,000 |
Cash Paid for Debt Discount | (1,195,410) | |
Debt Issuance Cost | (614,600) | |
Proceeds from Issuance of Common Stock, Warrants and Common Stock Subscribed | 5,600,000 | 9,450,000 |
Proceeds from Exercise of Warrants | 101,000 | |
Payment of Contingent Consideration | (2,088,000) | |
Cash Contribution from Non-Controlling Interest | 86,548 | |
NET CASH PROVIDED BY FINANCING ACTIVITIES | 38,155,590 | 26,833,948 |
NET CHANGE IN CASH | 1,747,810 | (4,303,990) |
Cash at Beginning of Period | 5,445,582 | 9,749,572 |
CASH AT END OF PERIOD | 7,193,392 | 5,445,582 |
SUPPLEMENTAL DISCLOSURE FOR OPERATING ACTIVITIES: | ||
Cash Paid for Interest | ||
Cash Paid for Income Taxes | 268,375 | |
Warrant Expense | ||
NON-CASH INVESTING AND FINANCING ACTIVITIES: | ||
Settlement of Contingent Consideration | 4,739,638 | |
Issuance of Stock for Purchase of Non-Controlling Interest | 207,492 | |
Purchase of land and building with a mortgage | 6,500,000 | 4,500,000 |
Gain on Settlement of Contingent Consideration Recorded Against Additional Paid-In Capital | 4,692,697 | |
Fair Value of Debt Discount and Derivative Liability Recorded | 13,073,400 | |
Conversion of Dominion Debt & Adoption of ASU 2017-11 | 34,697,363 | 29,785,271 |
Fair Value of Shares Issued for Acquisition | 2,726,146 | |
Fair Value of Shares Issued for Production Operating Agreement | 1,935,500 | |
Fair Value of Shares Issued for Assets | 200,000 | |
Warrants Issued for Debt Discount | 817,537 | 478,008 |
Conversion of Series B Preferred Stock to Common Stock | 33,146 | |
Share of Loss on Joint Venture | 662,222 | |
Beneficial Conversion Feature | 9,014,875 | |
Deposits Applied to the purchase of property | 3,500,000 | |
Reclass of Non-Controlling Interest to Additional Paid-In Capital for the Acquisition of Additional Interest in Subsidiary | 1,830,924 | |
Claw Back of Escrow Shares From The Tech Center Drive Asset Acquisition | $ 351,072 |
DESCRIPTION OF BUSINESS
DESCRIPTION OF BUSINESS | 12 Months Ended |
Dec. 31, 2018 | |
Description Of Business | |
NOTE 1. DESCRIPTION OF BUSINESS | Organization References in this document to “the Company”, “Terra Tech”, “we”, “us”, or “our” are intended to mean Terra Tech Corp., individually, or as the context requires, collectively with its subsidiaries on a consolidated basis. Terra Tech is a holding company with the following subsidiaries: · 620 Dyer LLC, a California corporation (“Dyer”); · 1815 Carnegie LLC, a California limited liability company (“Carnegie”); · Black Oak Gallery, a California corporation (“Black Oak”); · Blüm San Leandro, a California corporation (“Blüm San Leandro”); · Edible Garden Corp., a Nevada corporation (“Edible Garden”); · EG Transportation, LLC, a Nevada limited liability company (“EG Transportation”); · GrowOp Technology Ltd., a Nevada corporation (“GrowOp Technology”); · IVXX, Inc., a California corporation (“IVXX Inc.”; together with IVXX LLC, “IVXX”); · IVXX, LLC, a Nevada limited liability company (“IVXX LLC”); · MediFarm, LLC, a Nevada limited liability company (“MediFarm”); · MediFarm I, LLC, a Nevada limited liability company (“MediFarm I”); · MediFarm I Real Estate, LLC, a Nevada limited liability company (“MediFarm I RE”); · MediFarm II, LLC, a Nevada limited liability company (“MediFarm II”); and · MediFarm So Cal, Inc., a California corporation (“MediFarm SoCal”) · 121 North Fourth Street, LLC, a Nevada limited liability company ("121 North Fourth") The Company is a retail, production and cultivation company, with an emphasis on providing the highest quality of medical and adult use cannabis products. The Company grows organic antioxidant rich Superleaf rich lettuce and living herbs using classic Dutch hydroponic farming methods. We have licensed an exclusive patent on the Superleaf lettuce. The Company has a presence in three states (California, Nevada and New Jersey), and currently has a concentrated cannabis interest in California and Nevada. All of the Company’s cannabis dispensaries operate under the name Blüm. The Company’s cannabis dispensaries in California operate as MediFarm SoCal in Santa Ana, Black Oak Gallery in Oakland and Blum San Leandro in San Leandro and offer a broad selection of medical and adult-use cannabis products including flowers, concentrates and edibles. In Nevada, the Company has three dispensaries, two under MediFarm in Las Vegas and one under MediFarm I in Reno, which sell quality medical and adult use cannabis products. The Company jointly owns real property in Reno under MediFarm I RE, on which MediFarm I operates its dispensary. Founded on the importance of providing consumers with healthy and natural products, Edible Garden is a wholesale seller of organic and locally grown hydroponic produce and herb products. EG Transportation supports the distribution of Edible Garden products to major grocery stores such as ShopRite, Walmart, Ahold, Aldi, Meijer, Kroger, and others throughout New Jersey, New York, Delaware, Maine, Maryland, Connecticut, Pennsylvania and the Midwest. On April 1, 2016, the Company acquired Black Oak. Black Oak operates a medical marijuana dispensary and cultivation in Oakland, California under the name Blüm, pursuant to that certain Agreement and Plan of Merger, dated December 23, 2015 (the “Merger Agreement”), with Generic Merger Sub, Inc., a California corporation and our wholly-owned subsidiary (the “Merger Sub”), and Black Oak. The Merger Agreement was amended by a First Amendment to the Agreement and Plan of Merger, dated February 29, 2016. Pursuant to the Merger Agreement, the Merger Sub merged with and into Black Oak, with Black Oak as the surviving corporation, and became our wholly-owned subsidiary (the “Merger”). The Merger was intended to qualify for Federal income tax purposes as a tax-free reorganization under the provisions of Section 368(a) of the Internal Revenue Code of 1986, as amended. Subject to the terms and conditions of the Merger Agreement, at the closing of the Merger, the outstanding shares of common stock of Black Oak were converted into the right to receive shares of the Company’s Series Z preferred stock, shares of our Series B preferred stock and shares of our Series Q preferred stock. Subsequent to the Merger, the Series Q Preferred Stock, were all converted to common stock, and all the series Z preferred stock were all converted to Series B Preferred Stock. The Series B Preferred Stock were ultimately converted to common stock during 2017. Due to changes in planned operations of the MediFarm dispensaries, the Company acquired an additional 38.0% ownership for no additional consideration during August 2017. Previously, the Company owned 60.0%. As of December 31, 2017, the Company had 98.0% ownership of MediFarm. In connection with the ownership change the Company recorded a $1.83 million adjustment to additional paid in capital representing the change in non-controlling interest during 2017. In December 2018, we issued 200,000 shares of common stock with a fair value of $0.20 million to acquire the remaining 2.0% interest in MediFarm. MediFarm has received the necessary governmental approvals and permitting to operate medical marijuana and adult use cultivation, production, and/or dispensary facilities in Clark County, Nevada and a medical and adult use marijuana dispensary facility in the City of Las Vegas. On September 13, 2017, MediFarm So Cal Inc. (“MediFarm So Cal”), a wholly-owned subsidiary of the Company acquired all assets of Tech Center Drive LLC (“Tech Center Drive”) and majority control of 55 OC Community Collective Inc. (“55 OC”). The acquisition of Tech Center Drive and 55 OC was accounted for in accordance with ASC 805-10, “ Business Combinations. “Business Combinations”; “Note 5 – Acquisition” On March 12, 2018, the Company implemented 1-for-15 reverse stock split of the Company’s common stock (the “Reverse Stock Split”). The Reverse Stock Split became effective in the stock market upon commencement of trading on March 13, 2018. As a result of the Reverse Stock Split, every fifteen shares of the Company’s Pre-Reverse Stock Split common stock were combined and reclassified into one share of the Company’s common stock. No fractional shares were issued in connection with the Reverse Stock Split, and any fractional shares were rounded up to the nearest whole share. The number of shares of common stock subject to outstanding options, warrants and convertible securities were also reduced by a factor of fifteen as of March 13, 2018. All historical share and per share amounts reflected throughout consolidated financial statements have been adjusted to reflect the Reverse Stock Split. The authorized number of shares and the par value per share of the Company’s common stock were not affected by the Reverse Stock Split. |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 12 Months Ended |
Dec. 31, 2018 | |
Summary Of Significant Accounting Policies | |
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | Basis of Presentation The accompanying consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) and with the instructions to Securities Exchange Commission (“SEC”) Form 10-K and Regulation S-X and reflect the accounts and operations of the Company and those of our subsidiaries in which we have a controlling financial interest. In accordance with the provisions of FASB or ASC 810, “Consolidation” Non-Controlling Interest Non-controlling interest is shown as a component of stockholders’ equity on the consolidated balance sheets and the share of income (loss) attributable to non-controlling interest is shown as a component of income (loss) in the consolidated statements of operations. Use of Estimates The preparation of financial statements in 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, and 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 and stockholders’ equity. 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. There is a reserve for doubtful accounts of $0.33 million as December 31, 2018. There was no allowance recorded as of December 31, 2017. Notes Receivable The Company reviews all outstanding notes receivable for collectability as information becomes available pertaining to the Company’s inability to collect. An allowance for notes receivable is recorded for the likelihood of non-collectability. The Company accrues interest on notes receivable based net realizable value. There was no allowance at December 31, 2018 and 2017. 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 up-front 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.” “Note 8 – Property, Equipment and Leasehold Improvements, Net” 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. When assessing goodwill for impairment, the Company has the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, after assessing the totality of events or circumstances, the Company determines it is more likely than not that the fair value of a reporting unit is less than its carrying amount, then the Company performs a two-step impairment test. If the Company concludes otherwise, then no further action is taken. The Company also has the option to bypass the qualitative assessment and only perform a quantitative assessment, which is the first step of the two-step impairment test. In the two-step impairment test, 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. There were no events or changes in circumstances that indicated potential impairment of intangible assets during 2018 and 2017. In assessing the qualitative factors, the Company assesses relevant events and circumstances that may impact the fair value and the carrying amount of the reporting unit. The identification of relevant events and circumstances, and how these may impact a reporting unit’s fair value or carrying amount involve significant judgments and assumptions. The judgment and assumptions include the identification of macroeconomic conditions, industry, and market considerations, cost factors, overall financial performance and share price trends, and making the assessment as to whether each relevant factor will impact the impairment test positively or negatively and the magnitude of any such impact. The carrying amount of each reporting unit is determined based upon the assignment of our assets and liabilities, including existing goodwill and other intangible assets, to the identified reporting units. Where an acquisition benefits only one reporting unit, 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 of its fair value, an impairment may exist, and the Company must perform the second step of the impairment analysis to measure the amount of the impairment loss, by allocating the reporting unit’s fair value to its assets and liabilities other than goodwill, comparing the carrying amount of the goodwill to the resulting implied fair value of the goodwill, and recording an impairment charge for any excess. The table below summarizes the changes in the carrying amount of goodwill: Goodwill Balance at December 31, 2016 $ 28,921,260 2017 Acquisitions - Balance at December 31, 2017 28,921,260 2018 Acquisitions - Measurement Period Adjustment 6,251,248 Balance at December 31, 2018 $ 35,172,508 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 Management Service Agreement 15 Years In the fourth quarter of 2018, the Company reduced the estimated useful life of its customer relationships to better reflect the expected benefit period. The change in estimated useful life has been accounted for as a change in accounting estimate. The reduction in the useful life increased loss from operations and net loss by approximately $1.58 million for the year ended December 31, 2018. 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. The Company calculates fair value of our intangible assets as the present value of estimated future cash flows the Company expects to generate from the asset using a risk-adjusted discount rate. In determining our estimated future cash flows associated with our intangible assets, The Company uses estimates and assumptions about future revenue contributions, cost structures and remaining useful lives of the asset (asset group). Intangible assets that have indefinite useful lives are tested annually for impairment and are tested for impairment more frequently if events and circumstances indicate that the asset might be impaired. An impairment loss is recognized to the extent that the carrying amount of the asset group exceeds its fair value. Other Assets Other assets are comprised primarily of deposits for the purchase of real property and security deposits for leased properties in California, Nevada and New Jersey. The deposits for the purchase of real property are reclassified to Property and Equipment once the purchase is final. Business Combinations The Company accounts for its business acquisitions in accordance with ASC 805-10, “ Business Combinations. Revenue Recognition and Performance Obligations During the year ended December 31, 2017 the Company recognized revenue in accordance with ASC 605, “Revenue Recognition” On January 1, 2018, the Company adopted Accounting Standards Update (“ASU”) 2014-09, “Revenue from Contracts with Customers” and all the related amendments, which are also codified into ASC 606. The Company elected to adopt this guidance using the modified retrospective method. The adoption of this guidance did not have a material effect on the Company’s financial position, results of operations or cash flows. Under the new standard, the Company recognizes a sale as follows: 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, promotional adjustments and returns. We collect taxes on certain revenue transactions to be remitted to governmental authorities, which may include sales, excise and local taxes. These taxes are not included in the transaction price and are, therefore, excluded from revenue. 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. Herbs and Produce Products The Company recognizes revenue from products grown in its greenhouses upon delivery of the product to the customer at which time control passes to the customer. Upon transfer of control, the Company has no further performance obligations. For sales for which the Company uses an outside grower, the Company evaluates whether it is appropriate to record the gross amount of product sales and related costs or the net amount earned as commissions. The evaluation considers whether the Company takes control of the products of the outside grower, whether it has the ability to direct the outside grower to provide the product to the customer on its behalf or whether it combines products from the outside grower with its own goods and services to provide the products to the customer. In evaluating whether it takes control of the products of the outside grower, the Company considers whether it has primary responsibility for fulfilling the promise to provide the products, whether the Company is subject to inventory risk related to the products and whether it has the ability to set the selling prices for the products. Disaggregation of Revenue See “Note 17 – Segment Information” for revenues disaggregated by type as required by ASC Topic 606. Contract Balances Due to the nature of the Company’s revenue from contracts with customers, the Company does 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 is included in the transaction price. The Company’s contracts do not include multiple performance obligations or material variable consideration. Cost of Goods Sold Cannabis Dispensary, Cultivation and Production Cost of goods sold includes the costs directly attributable to product sales and includes amounts paid for finished goods, such as flower, edibles, and concentrates, as well as packaging and other supplies, fees for services and processing, other expenses for services, and allocated overhead. It also includes the cost incurred in producing the oils, waxes, shatters, and clears sold by IVXX. Overhead expenses include allocations of rent, administrative salaries, utilities, and related costs. Herbs and Produce Products Cost of goods sold include cultivation costs, packaging, other supplies and purchased plants that are sold into the retail marketplace by Edible Garden. Other expenses included in cost of goods sold include freight, allocations of rent, repairs and maintenance, and utilities. 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. In addition, the Company is required to estimate the expected forfeiture rate and only recognize expense for those shares expected to vest. If the actual forfeiture rate is materially different from management’s estimates, the stock-based compensation expense could be significantly different from what the Company has recorded in the current period. Derivative Financial Instruments. ASC 815-40, “Contracts in Entity’s Own Equity” ASC 815, “Derivatives and Hedging” 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. In December 2017, the Tax Cuts and Jobs Act (TJCA or the Act) was enacted, which significantly changes U.S. tax law. In accordance with ASC 740, “Income Taxes” Loss Per Common Share In accordance with the provisions of ASC 260, “Earnings Per Share”, 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 has not elected the fair value option for any eligible financial instruments. 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 5.0% 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 Assets held for sales represent furniture, equipment, and leasehold improvements less accumulated depreciation as well as any other assets that are held for sale in conjunction with the sale of a business. The Company records assets held for sale in accordance with ASC 360, “Property, Plant, and Equipment,” at the lower of carrying value or fair value less costs to sell. Fair value is based on the estimated proceeds from the sale of the facility utilizing recent purchase offers or comparable market data. Our estimate as to the fair value is regularly reviewed and subject to changes in the commercial real estate markets and our continuing evaluation as to the facility’s acceptable sale price. The reclassification takes place when the assets are available for immediate sale and the sale is highly probable. These conditions are usually met from the date on which a letter of intent or agreement to sell is ready for signing. Recently Adopted Accounting Standards FASB ASU No. 2014-09 (Topic 606), “Revenue from Contracts with Customers” FASB ASU 2016-15, “Classification of Certain Cash Receipts and Cash Payments (a consensus of the Emerging Issues Task Force)” FASB ASU 2017-09, “Compensation – Stock Compensation (Topic 718): Scope of Modification Accounting” - FASB ASU 2017-01 (Topic 805), “Business Combinations: Clarifying the Definition of a Business” FASB ASU 2017-11,”Earnings Per Share, Distinguishing Liabilities from Equity, Derivatives and Hedging – (Part I) Accounting for Certain Financial Instruments with Down Round Features, (Part II) Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception” As Reported Cumulative Effect Adjustment Adjusted Derivative Liabilities $ (9,331,400 ) $ 9,331,400 $ - Additional Paid-In Capital 181,357,715 (5,238,296 ) 176,119,419 Accumulated Deficit (105,548,602 ) (2,547,801 ) (108,096,403 ) Debt Discount 4,790,601 (1,545,303 ) 3,245,298 FASB ASU 2018-15 "Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract." – Recently Issued Accounting Standards FASB ASU No. 2018-18, “Clarifying the Interaction between Topic 808 and Topic 606” – FASB ASU No. 2018-13 (Topic 820), “Fair Value Measurement” FASB ASU No. 2018-07 (Topic 718), “Compensation—Stock Compensation: Improvements to Nonemployee Share- Based Payment Accounting” FASB ASU 2017-04 (Topic 350), “Intangibles - Goodwill and Others” FASB ASU No. 2016-02 (Topic 842), “Leases” Leases Targeted Improvements |
CONCENTRATIONS OF BUSINESS AND
CONCENTRATIONS OF BUSINESS AND CREDIT RISK | 12 Months Ended |
Dec. 31, 2018 | |
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 $4.83 million and $2.97 million as of December 31, 2018 and 2017, respectively. The Company provides credit in the normal course of business to customers located throughout the U.S. The Company performs ongoing credit evaluations of its customers and maintains allowances for doubtful accounts based on factors surrounding the credit risk of specific customers, historical trends, and other information. There were no customers that comprised more than 10.0% of the Company’s revenue for the year ended December 31, 2018 and 2017. The Company sources cannabis products for retail, cultivation and production from various vendors. However, as a result of the new regulations in the State of California, the Company’s California retail, cultivation and production operations must use vendors licensed by the State effective January 1, 2018. As a result, we are dependent upon the licensed vendors in California to supply products as of that date. 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 year ended December 31, 2018 and 2017, 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 ENTITY ARRANG
VARIABLE INTEREST ENTITY ARRANGEMENTS | 12 Months Ended |
Dec. 31, 2018 | |
Variable Interest Entity Arrangements | |
NOTE 4. VARIABLE INTEREST ENTITY ARRANGEMENTS | The Company has shared interest in the two entities, MediFarm I and MediFarm I RE, with another investor for the operation of a cultivation and dispensary in Nevada. The entities are considered to be VIE’s and the Company is considered to be the primary beneficiary by reference to the power and benefits criterion under ASC 810, “Consolidation.” As the primary beneficiary of MediFarm I and MediFarm I RE, the financial statements of the entities are consolidated. All intercompany transactions are eliminated in the consolidated financial statements. The aggregate carrying values of the VIEs’ assets and liabilities, after elimination of any intercompany transactions and balances, in the consolidated balance sheets were as follows: December 31, December 31, 2018 2017 Current Assets: Cash $ 893,866 $ 409,029 Accounts Receivable, Net 28,207 232,230 Inventory 556,301 232,231 Prepaid Expenses and Other Current Assets 8,165 302,186 Total Current Assets 1,486,539 1,175,676 Property, Equipment and Leasehold Improvements, Net 1,799,417 1,965,103 TOTAL ASSETS $ 3,285,956 $ 3,140,779 Current Liabilities: Accounts Payable and Accrued Expenses 342,136 419,853 TOTAL LIABILITIES $ 342,136 $ 419,853 |
ACQUISITIONS
ACQUISITIONS | 12 Months Ended |
Dec. 31, 2018 | |
Acquisitions | |
NOTE 5. ACQUISITION | Tech Center Drive On September 13, 2017, MediFarm So Cal Inc. (“MediFarm So Cal”), a wholly-owned subsidiary of the Company acquired all assets of Tech Center Drive LLC (“Tech Center Drive”) and majority control of 55 OC Community Collective Inc. (“55 OC”). The acquisition of Tech Center Drive and 55 OC was accounted for in accordance with ASC 805-10, “Business Combinations.” 55 OC is a mutual benefit corporation which holds a cannabis license with the City of Santa Ana in the State of California. MediFarm So Cal manages the dispensary under the license of 55 OC. Control of 55 OC was obtained by the Company’s CEO and Treasurer holding two of the three Board seats of 55 OC and through the management contract held by MediFarm So Cal. The Company acquired inventory, property, equipment and leasehold improvements and a management service agreement which allows for Tech Center Drive to purchase the medical marijuana dispensary license of 55 OC. As consideration for entering into the Asset Purchase Agreement, the Company paid $4.12 million in cash, issued 633,348 shares of the Company’s common stock with a value of $2.10 million on the closing date and issued 192,758 shares of the Company’s common stock with a value of $0.64 million into an escrow account. The shares held in escrow were to be paid six months after the acquisition date subject to any amounts to be withheld related to working capital adjustments. As a result of the working capital adjustments, the Company withheld and cancelled 101,083 shares with an approximate value of $0.35 million in March 2018. On November 6, 2018, MediFarm So Cal Inc. was converted from a Nonprofit Mutual Benefit Corporation to a General Stock Corporation. During the third quarter of 2018, the Company recorded a $6.30 million adjustment to reflect the fair value of the management services agreement. The adjustment resulted in an increase to goodwill, a decrease in other intangible assets and a $0.43 million decrease in amortization expense. The measurement period was closed during the third quarter of 2018. The following table summarizes the fair value of the assets at the date of acquisition: Assets Acquired Inventory $ 113,779 Property, Equipment and Leasehold Improvements: Furniture and Equipment 52,829 Leasehold Improvements 46,737 Security Deposits 5,000 Management Service Agreement 370,332 Goodwill 6,258,260 Total Assets Acquired $ 6,846,937 The supplemental pro forma information, as if the TCD acquisition had occurred on January 1, 2017, is as follows: 2017 Revenues $ 38,208,172 Net Loss Attributable to Terra Tech Corp. $ (33,472,729 ) Net Loss per Common Share Attributable to Terra Tech Corp. Common Stockholders - Basic and Diluted $ (0.73 ) The supplemental pro forma information above is based on estimates and assumptions that we believe are reasonable. The pro forma information presented is not necessarily indicative of the consolidated results of operations in future periods or the results that would have been realized had the acquisition occurred on January 1, 2017. The supplemental pro forma results above exclude any benefits that may result from the acquisition due to synergies that are expected to be derived from the elimination of any duplicative costs. |
INVESTMENTS IN UNCONSOLIDATED A
INVESTMENTS IN UNCONSOLIDATED AFFILIATES | 12 Months Ended |
Dec. 31, 2018 | |
Investments In Unconsolidated Affiliates | |
NOTE 6. INVESTMENTS IN UNCONSOLIDATED AFFILIATES | NuLeaf On October 26, 2017, the Company entered into joint venture agreements with NuLeaf Sparks Cultivation, LLC and NuLeaf Reno Production, LLC (collectively “NuLeaf”) to build and operate cultivation and production facilities for our IVXX brand of cannabis products in Nevada. 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 6.0% 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 50.0% ownership interest in NuLeaf. The investment in NuLeaf was recorded at cost and accounted for using the equity method. As of December 31, 2018, the $7.81 million investment in NuLeaf was recorded in other investments on the consolidated balance sheet. For the year ended December 31, 2018, the Company recorded $0.66 million loss in earnings in the consolidated statement of operations. 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 investment in Hydrofarm was recorded at cost and is included in other assets on the consolidated balance sheet as of December 31, 2018. If applicable, the fact that the fair value of a cost method investment is not estimated if there are no identified events or changes in circumstances that may have a significant adverse effect on the fair value and the investor does not estimate fair value under either because (1) it is not practicable to estimate fair value or (2) the investor is exempt from estimating fair value. If applicable, the fact that the fair value of a cost method investment is not estimated if there are no identified events or changes in circumstances that may have a significant adverse effect on the fair value and the investor does not estimate fair value under either because (1) it is not practicable to estimate fair value or (2) the investor is exempt from estimating fair value. |
INVENTORY
INVENTORY | 12 Months Ended |
Dec. 31, 2018 | |
Inventory | |
NOTE 7. INVENTORY | Raw materials and work-in-progress consists of cultivation materials and live plants for Edible Garden’s herb product lines. Finished goods consists of cannabis products sold in retail and Edible Garden’s herb product lines. Inventory as of December 31, 2018 and 2017 consists of the following: December 31, 2018 2017 Raw Materials $ 1,213,289 $ 1,450,273 Work-in-Progress 881,932 1,016,596 Finished Goods 1,202,745 3,293,150 Inventory Reserve (1,018,229 ) Total Inventory $ 2,279,737 $ 5,760,019 |
PROPERTY, EQUIPMENT AND LEASEHO
PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS, NET | 12 Months Ended |
Dec. 31, 2018 | |
Property Equipment And Leasehold Improvements Net | |
NOTE 8. PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS, NET | Property, equipment, and leasehold improvements, net consists of the following: December 31, 2018 2017 Land and Building $ 22,401,014 $ 9,047,201 Furniture and Equipment 3,652,044 3,553,587 Computer Hardware and Software 531,119 486,176 Leasehold Improvements 8,524,930 9,316,665 Construction in Progress 12,288,468 1,204,547 Subtotal 47,397,575 23,608,176 Less Accumulated Depreciation (5,807,078 ) (4,416,560 ) Less Assets Held for Sale (7,451,408 ) 0 Property, Equipment and Leasehold Improvements, Net $ 34,139,089 $ 19,191,616 Depreciation expense related to property, equipment and leasehold improvements for the years ended December 31, 2018 and 2017 was $2.00 million and $1.93 million, respectively. During the third quarter of 2017, the Company recorded an impairment charge for land held in Nevada. In accordance with the guidance for the impairment of long-lived assets, the Company evaluated the property for recovery and recorded an impairment charge of $0.14 million to adjust the carrying value of the property to our estimate of fair value. The impairment charge was recorded in other expense in our consolidated statement of operations. Assets Divested On July 6, 2018, Medi Farm LLC, a wholly-owned subsidiary of the Company, entered into an Asset Purchase Agreement (the “Purchase Agreement”) with Exhale Brands Nevada III, 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 1921 Western Ave., Las Vegas, NV 89102 (“Western”). The total consideration was $6.25 million in cash plus the value of the inventory on the closing date. The transaction closed on October 22, 2018 upon receiving approval from the Nevada Department of Taxation. Management has concluded that the Western asset purchase agreement does not meet the definition of the sale of a business. Therefore, the relevant guidance is ASC 610-20 “Other Income.” The following table summarizes the transaction: Total Consideration $ 6,408,239 Inventory 159,161 Prepaid Expenses 9,645 Property & Equipment 597,253 Total Asset Book Value 766,059 Transaction Costs 412,500 Gain on Sale $ 5,229,680 Assets and Liabilities Held-for-Sale During the fourth quarter of 2018, we began actively marketing the real estate held at Carnegie, Santa Ana; therefore $7.45 million of property, plant and equipment assets and $4.50 million of mortgage liabilities have been classified as held-for-sale, as they met the criteria for such classification at December 31, 2018. |
INTANGIBLE ASSETS, NET
INTANGIBLE ASSETS, NET | 12 Months Ended |
Dec. 31, 2018 | |
Intangible Assets Net | |
NOTE 9. INTANGIBLE ASSETS, NET | Intangible assets as of December 31, 2018 and 2017: December 31, 2018 December 31, 2017 Estimated Useful Life in Years Gross Carrying Amount Accumulated Amortization Net Carrying Amount Gross Carrying Value Accumulated Amortization Net Carrying Value Amortizing Intangible Assets: Customer Relationships 3 to 5 $ 8,072,400 $ (3,596,562 ) $ 4,475,838 $ 8,072,400 $ (1,345,191 ) $ 6,727,209 Trademarks and Patent 2 to 8 195,520 (116,552 ) 78,968 195,520 (77,448 ) 118,072 Dispensary Licenses 14 10,270,000 (1,984,632 ) 8,285,368 10,270,000 (1,283,751 ) 8,986,249 Management Service Agreement 15 370,332 (31,891 ) 338,441 6,621,580 - 6,621,580 Total Amortizing Intangible Assets 18,908,252 (5,729,638 ) 13,178,614 25,159,500 (2,706,390 ) 22,453,110 Non-Amortizing Intangible Assets: Trade Name Indefinite 5,320,000 - 5,320,000 5,320,000 - 5,320,000 Total Non-Amortizing Intangible Assets 5,320,000 - 5,320,000 5,320,000 - 5,320,000 Total Intangible Assets, Net $ 24,228,252 $ (5,729,638 ) $ 18,498,614 $ 30,479,500 $ (2,706,390 ) $ 27,773,110 In the fourth quarter of 2018, the Company reduced the estimated useful life of its customer relationships to better reflect the expected benefit period. The change in estimated useful life has been accounted for as a change in accounting estimate. The reduction in the useful life increased loss from operations and net loss by approximately $1.58 million for the year ended December 31, 2018. During the fourth quarter of 2017, the Company recorded an impairment charge for intangible assets related to customer relationships and trademarks and patents held by Edible Garden Corp. The impairment charge of $0.75 million was recorded in other expense in our consolidated statement of operations. The Company recorded amortization expense of $1.47 million and $1.72 million for the years ended December 31, 2018 and 2017, respectively. Based solely on the amortizable intangible assets recorded at December 31, 2018, the Company estimates amortization expense for the next five years to be as follows: Year Ending December 31, 2019 2020 2021 2022 2023 and thereafter Total Amortization expense $ 1,452,361 $ 1,452,361 $ 1,414,017 $ 1,413,257 $ 8,996,850 $ 14,728,846 Actual amortization expense to be reported in future periods could differ from these estimates as a result of new intangible asset acquisitions, changes in useful lives or other relevant factors or changes. |
ACCOUNTS PAYABLE AND ACCRUED EX
ACCOUNTS PAYABLE AND ACCRUED EXPENSES | 12 Months Ended |
Dec. 31, 2018 | |
Accounts Payable And Accrued Expenses | |
NOTE 10. ACCOUNTS PAYABLE AND ACCRUED EXPENSES | Accounts payable and accrued expenses consist of the following: December 31, 2018 2017 Accounts Payable $ 2,576,166 $ 2,308,844 Sales & Local Tax Payable 567,886 545,398 Accrued Payroll 2,553,186 Accrued Expenses 1,204,204 2,590,468 Total Accounts Payable and Accrued Expenses $ 6,901,442 $ 5,444,710 |
NOTES PAYABLE
NOTES PAYABLE | 12 Months Ended |
Dec. 31, 2018 | |
Notes Payable | |
NOTE 11. NOTES PAYABLE | Notes payable consists of the following: December 31, December 31, 2018 2017 Senior convertible promissory note dated August 21, 2017, issued to accredited investors, which matures February 21, 2019 and bears interest at a rate of 12.0% per annum. The conversion price is $4.50, subject to adjustment. The balance of the note and accrued interest was converted into common stock in January 2018. $ - $ 1,400,000 Senior convertible promissory note dated December 26, 2017, issued to accredited investors, which matures June 26, 2019 and bears interest at a rate of 12.0% per annum. The conversion price is $4.50, subject to adjustment. The balance of the note and accrued interest was converted into common stock in January 2018. - 5,500,000 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. 4,500,000 4,500,000 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. 6,500,000 - Senior convertible promissory note dated July 25, 2018, issued to accredited investors under the 2018 Master Securities Purchase and Convertible Promissory Notes Agreement, which matures January 25, 2020 and bears interest at a rate of 7.5% per annum. The conversion price is $4.50, subject to adjustment. 150,000 - Senior convertible promissory note dated September 6, 2018, issued to accredited investors under the 2018 Master Securities Purchase and Convertible Promissory Notes Agreement, which matures March 7, 2020 and bears interest at a rate of 7.5% per annum. The conversion price is $4.50, subject to adjustment. 1,200,000 - 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. 1,600,000 - Securities Purchase Agreement dated December 3, 2018, issued to accredited investors, which matures June 3, 2020 and bears interest at a rate of 3.0% per annum. The conversion price is 5.0% discount to the average of the three (3) lowest VWAPs in the five (5) trading days prior to the conversion date. 7,000,000 - Long-Term Debt $ 20,950,000 $ 11,400,000 Less: Debt Discount (2,638,000 ) (4,791,000 ) Net Long Term Debt $ 18,312,000 $ 6,609,000 Scheduled Maturities of Long-Term Debt Scheduled maturities of long-term debt are as follows: Year Ending December 31, 2019 2020 2021 2022 2023 and thereafter Total Total Debt $ - $ 12,850,000 $ 8,100,000 $ - $ - $ 20,950,000 Promissory Notes On November 22, 2017, the Company entered into a $4.50 million promissory note for the purchase of land and a building in California with a third-party creditor. The promissory note is collateralized by the land and building purchased and matures in December 1, 2020. The interest rate for the first year is 12.0% and increases 0.5% per year through 2020. Payments of interest only are due monthly. The full principle balance and accrued interest are due at maturity. On October 5, 2018, the Company entered into a $1.60 million promissory note for the purchase of a building in Nevada with a third-party creditor. The promissory note is collateralized by the building purchased and matures in October 5, 2021. The interest rate for the first year is 12.0% and increases 0.5% per year through 2020. Payments of interest only are due monthly. The full principle balance and accrued interest are due at maturity. On January 18, 2018, the Company entered into a $6.50 million promissory note for the purchase of land and a building in California with a third-party creditor. As part of the closing of the purchase of land, the Company issued warrants with a value of approximately $0.16 million and paid a cash fee of $0.20 million. The warrants and cash fee were recorded as a debt discount. The unamortized balance of such discount as of December 31, 2018 was $0.25 million. The interest rate for the first year is 12.0% and increases 0.5% per year, up to 13.0%, through 2021. Payments of interest only are due monthly. The full principle balance and accrued interest are due at maturity. 2017 Master Securities Purchase Agreement and Convertible Promissory Notes The Company has a Securities Purchase Agreement with an accredited investor pursuant to which the Company sells to the accredited investor Senior Convertible Promissory Notes. During the year ended December 31, 2017, the Company issued five 12.0% convertible notes for an aggregate value of $20.00 million due at various dates through June 2019. Of the $20.00 convertible notes issued during 2017, the Company converted $13.10 million and $6.90 million of the convertible notes into shares of the Company’s common stock during the years ended December 31, 2017 and 2018, respectively. The Company paid $0.60 million in cash and issued approximately $0.56 million of warrants in connection with the notes. The cash fee and warrants issued were recorded as a debt discount. 2018 Master Securities Purchase Agreement and Convertible Promissory Notes 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 averaging $5.00 million, for a total of $40.00 million. The Company converted $18.70 million of convertible notes into the Company’s common stock during the year ended December 31, 2018. As of December 31, 2018, $8.35 million of principle remains outstanding. The Company paid $0.67 million in cash and issued warrants with a total fair value of approximately $0.54 million. The cash fee and warrants issued were recorded as a debt discount. For each note issued under the 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) 85.0% of the lowest daily volume weighted average price of the Common Stock in the fifteen (15) trading days prior to the conversion date (“Conversion Price”), which Conversion Price is subject to adjustment for (i) stock splits, stock dividends, combinations, or similar events and (ii) full ratchet anti-dilution protection. Upon certain events of default, the conversion price will automatically become 70.0% 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) 110.0% 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) 115.0% of the sum of the then-outstanding principal amount of Note A 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) 125.0% 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. Conversion of Notes Payable and Related Loss on Extinguishment of Debt During the years ended December 31, 2018 and 2017, the Company converted debt and accrued interest into 16,652,002 and 8,284,283 shares of the Company’s common stock, respectively. The table below details the conversion of the notes payable into equity and the loss on extinguishment of debt for the years ended December 31, 2017. As a result of adoption of ASU 2017-11, the Company did not record a loss on extinguishment of debt during 2018: For the Year Ended December 31, 2017 Fair market value of common stock issued upon conversion $ 29,785,271 Principal amount of debt converted (19,314,324 ) Accrued interest converted (635,401 ) Fair value of derivative at conversion date (14,223,550 ) Debt discount value at conversion date 11,532,292 Loss on extinguishment of debt $ 7,144,288 |
CONTINGENT CONSIDERATION
CONTINGENT CONSIDERATION | 12 Months Ended |
Dec. 31, 2018 | |
Contingent Consideration | |
NOTE 12. CONTINGENT CONSIDERATION | The Company accounts for “contingent consideration” according to FASB ASC 805, “Business Combinations” Fair Value Measurements One-Year Anniversary Probability Revenue-Based Probability- Date Revenue Payment Amounts Weighted $ 3,200,000 0.00 % $ 800,000 $ – $ 2,000,000 0.50 % $ 200,000 1,000 $ 1,599,999 99.50 % $ – – Fair Value of Expected Earn-out Payment 1,000 Discount Rate 25 % Payments $ 0 Present Value Factor at 20% Discount Rate for 12 Months 0.9457 Present Value of Contingent Consideration $ 946 Black Oak Gallery In the acquisition of Black Oak, the Company valued the Holdback Consideration and the Performance-Based Cash Consideration (collectively, the “Black Oak Contingent Consideration”), based on an analysis using a cash flow model to determine the expected contingent consideration payment, which model determined that the aggregate expected contingent consideration liability was $15.31 million and the present value of the contingent consideration liability was $12.75 million. Accordingly, the Company recognized at April 1, 2016, the closing date of the Black Oak merger, a $12.75 million contingent consideration liability associated with the Black Oak Contingent Consideration paid pursuant to the Merger Agreement. In determining the likelihood of payouts related to the Black Oak Contingent Consideration, the probabilities for various scenarios ( e g Holdback Consideration The Holdback Consideration is comprised of (i) the market-based clawback amount (the “Market-Based Clawback Amount”) and (ii) the performance-based clawback amount (the “Performance-Based Clawback Amount”). The Holdback Consideration, which is comprised of shares of our preferred stock, was issued on April 1, 2016, the closing date of the Black Oak merger. The Market-Based Clawback Amount was determined as follows: a) If the Terra Tech Common Stock 30-day VWAP on the one-year anniversary date of the Merger Agreement exceeds the Terra Tech Closing Price, the Market-Based Clawback Amount shall mean the number of shares of Terra Tech Common Stock equal to (i) (A) $4.91 million divided by (B) the Terra Tech Closing Price, less (ii) (A) $4.91 million divided by (B) the Terra Tech Common Stock 30-day VWAP on such date. b) If the Terra Tech Common Stock 30-day VWAP on the one-year anniversary date of the Merger Agreement is less than or equal to the Terra Tech Closing Price, the Market-Based Clawback Amount shall be zero shares. In no event will the Market-Based Clawback Amount exceed 50.0% of the Holdback Consideration. The Performance-Based Clawback Amount was determined as follows: a) The “Lower Threshold” means an amount equal to $11.98 million, and the “Upper Threshold” means an amount equal to $16.67 million. b) If Black Oak’s operating revenues for the 12-month period following the closing date of the Black Oak merger (the “Year 1 Revenue”) is less than the Lower Threshold, then the Performance-Based Clawback Amount will be the number of shares obtained from a quotient, (A) the numerator of which is equal to the sum of (1) $4.91 million, plus (2) the product of 1.5 multiplied by the difference between the Lower Threshold and the Year 1 Revenue, and (B) the denominator of which is the Terra Tech common stock 30-day VWAP as of the one-year anniversary date of the closing of the Black Oak merger. c) If the Year 1 Revenue is greater than or equal to the Lower Threshold but is less than the Upper Threshold, then the Performance-Based Clawback Amount will be the number of shares obtained from a quotient, (A) the numerator of which is equal to the product of 1.053 multiplied by the difference between the Upper Threshold and the Year 1 Revenue, and (B) the denominator of which is the Terra Tech common stock 30-day VWAP as of the one-year anniversary date of the closing of the Black Oak merger. d) If the Year 1 Revenue is greater than or equal to the Upper Threshold, then the Performance-Based Clawback Amount will be zero shares. Performance-Based Cash Consideration Pursuant to the Merger Agreement, the Group B Shareholders were entitled to receive cash consideration of up to approximately $2,088,000 to be paid on approximately the one-year anniversary date of the closing of the Black Oak merger, based on performance around revenue: Year 1 Revenue $ 16,666,666 Less: 12,000,000 $ 4,666,666 0.44742864 Performance-Based Cash Payment $ 2,088,000 Changes in the fair market valuation of the contingent consideration are recognized in the consolidated statements of operations. During the year ended December 31, 2017, the loss on fair market valuation of contingent consideration was $4.43 million. On April 1, 2017, the anniversary date of the acquisition and the settlement date of the contingent consideration, the final contingent consideration was approximately $16.50 million. A summary of the changes in the contingent consideration as well as the detail is below: Amount Contingent Consideration Summary : Balance at December 31, 2016 $ 12,085,859 Change in Fair Market Valuation of Contingent Consideration 4,348,761 Balance at March 31, 2017 and April 1, 2017 $ 16,434,620 Contingent Consideration Detail : Performance-Based Cash Contingent Consideration $ 2,088,000 Market-Based Stock Contingent Consideration 14,346,620 Balance at March 31, 2017 and April 1, 2017 $ 16,434,620 During April 2017, in final settlement of the contingent consideration, the Company issued approximately $4.70 million in shares of its common stock, or common stock equivalent of approximately 1.21 million shares of its common stock and made a cash payment of approximately $2.10 million. A summary is as follows: Contingent Consideration Balance at March 31, 2017 $ 16,434,620 Change in Fair Market Valuation of Contingent Consideration 77,286 Payment of Contingent Consideration in Cash (2,088,000 ) Settlement of Contingent Consideration (4,739,638 ) Settlement of Contingent Consideration Recorded Against Additional Paid-In Capital (4,692,697 ) Gain on Settlement of Contingent Consideration (4,991,571 ) Contingent Consideration December 31, 2017 and Thereafter $ - Pursuant to the terms of the contingent consideration as outlined in the Merger Agreement, the Company was required to release from escrow shares worth approximately $14.40 million. Of those shares, 1.21 million shares, with a value of $4.79 million, were issued in final settlement of the Market-Based Contingent Consideration, and approximately 2.28 million shares were additionally clawed-back. The Market-Based Clawback associated with common stock equivalent of approximately 2.34 million shares were clawed-back pursuant to the appreciation of the quoted price of the Company’s stock underlying the market-based component of the contingent consideration. An additional common stock equivalent of approximately 2.28 million shares, with a value of $9.68 million, were clawed-back pursuant to disputes between the sellers of Black Oak and the Company with respect to certain operational and performance goals that would have impacted the appreciation of the quoted price of the Company’s common stock underlying the market-based component of the contingent consideration and, in effect, increasing the number of clawback shares. The Company applied the guidance of ASC 470-50-40-2, to account for the additional $9.68 million worth of shares that were clawed back. For the years ended December 31, 2017, the Company recognized a gain on settlement of contingent consideration of $4.99 million. The balance attributable to related parties was recorded in additional paid in capital. See “Note 13 – Fair Value Measurements” |
FAIR VALUE MEASUREMENTS
FAIR VALUE MEASUREMENTS | 12 Months Ended |
Dec. 31, 2018 | |
Fair Value Measurements | |
NOTE 13. FAIR VALUE MEASUREMENTS | Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis The following tables set forth the financial liabilities measured at fair value on a recurring basis by level within the fair value hierarchy as of the dates indicated. As of December 31, 2018, the Company did not hold any financial assets or liabilities measured at fair value on a recurring basis. This was due to adoption of ASU 2017-11, which resulted in the reclassification of conversion feature derivative liabilities to equity as of January 1, 2018: Fair Value at December 31, Fair Value Measurement Using Description 2017 Level 1 Level 2 Level 3 Derivative Liabilities – Conversion Feature $ 9,331,400 $ - $ - $ 9,331,400 $ 9,331,400 $ - $ - $ 9,331,400 The following table presents a reconciliation of the derivative liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3): Balance at December 31, 2016 $ 6,987,000 Change in Fair Market Value of Conversion Feature 3,494,550 Derivative Debt Converted into Equity (14,223,550 ) Issuance of Debt Instruments with Derivatives 13,073,400 Balance at December 31, 2017 $ 9,331,400 Reclassification of Derivative Liabilities to Equity (9,331,400 ) Balance at December 31, 2018 $ - The following table presents a reconciliation of the Black Oak Contingent Consideration liability measured at fair value on a recurring basis using significant unobservable inputs (Level 3): Roll forward of derivative liabilities - Contingent Consideration Balance at December 31, 2016 $ 12,085,859 Change in Fair Market Valuation of Contingent Consideration 4,426,047 Payment of Contingent Consideration in Cash (2,088,000 ) Settlement of Contingent Consideration (4,739,638 ) Settlement of Contingent Consideration Recorded Against Additional Paid-In Capital (4,692,697 ) Gain on Settlement of Contingent Consideration (4,991,571 ) Balance at December 31, 2017 and Thereafter $ - Due to our adoption of ASU 2017-11, the Company did not have any derivative liabilities as of December 31, 2018. The Company estimated the fair value of the derivative liabilities as of December 31, 2017 using the Black-Scholes-Merton option pricing model using the following assumptions: December 31, 2017 Stock Price $ 2.25 - $5.85 Conversion and Exercise Price $ 1.80 - $6.60 Annual Dividend Yield - Expected Life (Years) 0.46 - 3.42 Risk-Free Interest Rate 1.04% - 2.50 % Expected Volatility 43.80% - 123.56 % Volatility is based on historical volatility of our common stock. Historical volatility was computed using weekly pricing observations for our common stock that correspond to the expected term. This method produces an estimate that is representative of our expectations of future volatility over the expected term of these warrants and conversion features. No financial assets were measured on a recurring basis as of December 31, 2018 and 2017. Non-Financial Assets Measured at Fair Value on a Non-Recurring Basis Non-financial assets, such as property, equipment and leasehold improvements, goodwill, and intangible assets, are required to be measured at fair value only when an impairment loss is recognized. See “Note 8 - Property, Equipment and Leasehold Improvements, Net” . “Note 9 – Intangible Assets, Net” |
TAX EXPENSE
TAX EXPENSE | 12 Months Ended |
Dec. 31, 2018 | |
Tax Expense | |
NOTE 14. TAX EXPENSE | The (benefit) expense for income taxes consists of the following: Year Ended December 31, 2018 2017 Current: $ - $ - Federal - (343,943 ) State - (3,512 ) - (347,455 ) Deferred: Federal - - State - - - - Total (Benefit) Expense for Income Taxes $ - $ (347,455 ) The reconciliation between the Company’s effective tax rate and the statutory tax rate is as follows: Year Ended December 31, 2018 2017 Expected Income Tax Benefit at Statutory Tax Rate, Net $ (6,847,005 ) $ (13,456,000 ) Non-Deductible Items - - Warrants Expense - 871,000 Derivatives Expense - 4,104,000 Amortization 641,747 - Amortization of Debt Discount 335,878 - IRC 280E Adjustment 1,565,957 - Net Operating Losses - - Impairment of Property and Intangibles - 365,000 Other 68,792 1,033,545 Change in Valuation Allowance 4,234,631 6,735,000 Reported Income (Benefit) Tax Expense $ - $ (347,455 ) The components of deferred income tax assets and (liabilities) are as follows: Year Ended December 31, 2018 2017 Deferred Income Tax Assets: Options expense $ 1,018,000 $ - Allowance for Doubtful Accounts 33,000 - Net Operating Losses 13,409,000 8,023,000 14,460,000 8,023,000 Deferred Income Tax Liabilities: Depreciation (829,000 ) (850,000 ) Total 13,631,000 7,173,000 Valuation Allowance (13,631,000 ) (7,173,000 ) Net Deferred Tax $ - $ - On December 22, 2017, the Tax Cuts and Jobs Act (the “Tax Act”) was signed into law, making significant changes to taxation of U.S. business entities. The Tax Act reduced the U.S. corporate income tax rate from 35% to 21%, provided for accelerated deductions for capital asset additions, imposed limitations on certain tax deductions (e.g., meals & entertainment, executive compensation, interest, etc.), eliminated the corporate alternative minimum tax, and included numerous other provisions. In connection with the Tax Act, the SEC issued Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act (“SAB 118”) to provide guidance to companies that had not completed their accounting for the income tax effects of the Tax Act. Under SAB 118, companies were permitted to record provisional amounts to the extent reasonable estimates could be made. Additionally, upon obtaining, preparing, or analyzing additional information (including computations), companies were permitted to record additional tax effects and adjustments to previously recorded provisional amounts within one year from the enactment date of the Tax Act. As of December 31, 2017, the Company had recorded a provisional income tax benefit of $3.30 million, which was primarily associated with the remeasurement of certain deferred tax liabilities in the U.S. from 35.0% to 21.0%. As of December 31, 2017, a full valuation allowance was recorded against all net deferred tax assets, as these assets are more likely than not to be unrealized. As of December 31, 2018, the Company completed its accounting for the income tax effects of the Tax Act and concluded that no adjustment to the provisional estimate was required. For the years ended December 31, 2018 and 2017, the Company had subsidiaries that produced and sold cannabis or cannabis pure concentrates, subjecting the Company to the limits of Internal Revenue Code (“IRC”) Section 280E. Pursuant to IRC Section 280E, the Company is allowed only to deduct expenses directly related to sales of product. The State of California does not conform to IRC Section 280E and, accordingly the Company is allowed to deduct all operating expenses on its California income tax returns. As the Company files consolidated federal income tax returns, the taxable income generated from its subsidiaries subject to IRC Section 280E has been offset by losses generated by operations not subject to IRC Section 280E. During 2017, Company amended income tax returns of Black Oak for the periods prior to acquisition, which resulted in a ne t tax refund in 2017. Permanent tax differences include ordinary and necessary business expenses deemed by the Company as non-allowable deductions under IRC Section 280E; non-deductible expenses for interest, derivatives and warrant expense related to debt financings and non-deductible losses related to various acquisitions. As of December 31, 2018, and 2017, the Company had net operating loss carryforwards of approximately $42.78 million and $26.33 million, respectively, which, if unused, will expire beginning in the year 2034. These tax attributes are subject to an annual limitation from equity shifts, which constitute a change of ownership as defined under IRC Section 382, which will limit their utilization. The Company assessed the effect of these limitations and did not believe the losses through December 31, 2017 to be substantially limited. The Company has not completed a study through December 31, 2018 to assess whether an ownership change under Section 382 of the Code has occurred during 2018, due to the costs and complexities associated with such a study. The Company may have experienced various ownership changes, as defined by the Code, as a result of financing transactions. Accordingly, the Company's ability to utilize the aforementioned carryforwards may be limited. Additionally, U.S. tax laws limit the time during which these carryforwards may be applied against future taxes. Therefore, the Company may not be able to take full advantage of these carryforwards for federal or state income tax purposes. Manageme The Company files income tax returns in the U.S. federal jurisdiction and various state and local jurisdictions. All tax years are subject to examination. |
EQUITY
EQUITY | 12 Months Ended |
Dec. 31, 2018 | |
Equity | |
NOTE 15. EQUITY | Preferred Stock The Company filed an Amended and Restated Certificate of Designation of Series B Preferred Stock (the “Amended Series B Certificate”) with the Secretary of State of the State of Nevada, effective March 29, 2016. The Amended Series B Certificate decreased the number of authorized shares of Series B Preferred Stock, specified a liquidation preference, clarified the provisions related to adjustments to the conversion rate upon certain events, and made such other amendments as the Company’s Board of Directors deemed necessary. On July 26, 2017, the Company filed a Certificate of Amendment to the Certificate of Designation of the Company’s Series B Preferred Stock (the “Amendment”) with the Secretary of State of the State of Nevada to provide for an adjustment of the Conversion Rate of the Company’s Series B Preferred Stock in the event of a reverse stock split or combination in the same ratio as the Company’s common stock. A copy of the Amendment was filed as Exhibit 3.14 to the Company’s Current Report on Form 8-K dated July 26, 2017. The Company authorized 50.00 million shares of preferred stock with $0.001 par value per share. The Company designated 100 shares of preferred stock as “Series A Preferred Stock,” of which there were 12 and 8 shares of Series A Preferred Stock outstanding as of December 31, 2018 and 2017, respectively. Series A Preferred Stock is convertible on a one-for-one basis into common stock and has all of the voting rights of the Company’s common stock. The Company designated 41.00 million shares of preferred stock as “Series B Preferred Stock,”. Each share of Series B Preferred Stock: (i) is entitled to 100 votes for each share of common stock into which a share of Series B Preferred Stock is convertible and (ii) is convertible, at the option of the holder, on a 1-for-5.38 basis, into shares of the Company’s common stock. During the year ended December 31, 2017, all Series B Preferred Stock were converted to common stock. Common Stock The Company authorized 990.00 million shares of common stock with $0.001 par value per share. As of December 31, 2018 and 2017, 81.76 million and 61.82 million shares of common stock were issued and outstanding, respectively. On March 12, 2018, we implemented a 1-for-15 reverse stock split of our common stock (the “Reverse Stock Split”). The Reverse Stock Split became effective in the stock market upon commencement of trading on March 13, 2018. As a result of the Reverse Stock Split, every fifteen shares of our Pre-Reverse Stock Split common stock were combined and reclassified into one share of our common stock. No fractional shares were issued in connection with the Reverse Stock Split, and any fractional shares were rounded up to the nearest whole share. The number of shares of common stock subject to outstanding options, warrants and convertible securities were also reduced by a factor of fifteen as of March 13, 2018. All historical share and per share amounts reflected throughout this report have been adjusted to reflect the Reverse Stock Split. The authorized number of shares and the par value per share of our common stock were not affected by the Reverse Stock Split. |
STOCK-BASED COMPENSATION
STOCK-BASED COMPENSATION | 12 Months Ended |
Dec. 31, 2018 | |
Stock-based Compensation | |
NOTE 16. STOCK-BASED COMPENSATION | 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. The following table contains information about both plans as of December 31, 2018: Awards Reserved for Issuance Awards Issued Awards Available for Grant 2016 Equity Incentive Plan 2,000,000 1,541,064 458,936 2018 Equity Incentive Plan 6,600,000 5,100,000 1,500,000 Stock Options The following table summarizes the Company’s stock option activity and related information for the year ended December 31, 2018 and 2017: 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, 2017 446,667 $ 1.35 Options Granted 731,065 $ 2.68 Options Exercised - $ - Options Forfeited - $ - Options Expired - $ - Options Outstanding as of December 31, 2017 1,177,732 $ 2.17 Options Granted 6,911,667 $ 1.56 Options Exercised - $ - Options Forfeited (436,668 ) $ 2.36 Options Expired - $ - Options Outstanding as of December 31, 2018 7,652,731 $ 1.61 9.6 years $ - Options Exercisable as of December 31, 2018 1,870,039 $ 1.92 9.1 years $ - The aggregate intrinsic value is calculated as the difference between the Company’s closing stock price of $0.56 on December 31, 2018 and the exercise price of options, multiplied by the number of options. As of December 31, 2018, there was $7,967,114 total unrecognized stock-based compensation. Such costs are expected to be recognized over a weighted-average period of approximately 2.75 years. The Company recognizes compensation expense for stock option awards on a straight-line basis over the applicable service period of the award. The service period is generally the vesting period. The following weighted-average assumptions were used to calculate stock-based compensation: Year Ended December 31, 2018 2017 Expected term (years) 6 Years 5 Years Volatility 113.2-128.0 % 117.3-120.9 % Risk-Free Interest Rate 2.5-2.9 % 2.0-2.4 % 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. The Company estimates the forfeiture rate at the time of grant and revisions, if necessary, were estimated based on management’s expectation through industry knowledge and historical data. Stock-Based Compensation Expense 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: For the Year Ended December 31, 2018 December 31, 2017 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 6,911,667 $ 2,527,982 731,065 $ 692,971 Stock Grants: Employees (Common Stock) 201,296 603,117 158,867 490,880 Employees (Series B Preferred Stock) 0 0 40,000 1,035,406 Directors (Common Stock) 49,500 99,990 81,061 221,973 Non–Employee Consultants (Common Stock) 132,971 225,428 389,374 1,284,562 Total Stock–Based Compensation Expense $ 3,456,517 $ 3,725,792 |
WARRANTS
WARRANTS | 12 Months Ended |
Dec. 31, 2018 | |
Warrants | |
NOTE 17. WARRANTS | The following table summarizes warrant activity for the years ended December 31, 2018 and 2017: Shares Weighted-Average Exercise Price Warrants Outstanding as of January 1, 2017 1,055,761 $ 2.85 Warrants Exercised - $ - Warrants Granted 214,915 $ 2.79 Warrants Expired (79,309 ) $ 3.34 Warrants Outstanding as of December 31, 2017 1,191,367 $ 2.85 Warrants Exercised (339,275 ) $ 1.96 Warrants Granted 420,093 $ 2.67 Warrants Expired (218,933 ) $ 1.17 Warrants Outstanding as of December 31, 2018 1,053,252 $ 4.28 The weighted-average exercise price and weighted-average fair value of the warrants granted by the Company are as follows: For the Year Ended December 31, 2018 December 31, 2017 Weighted-Average Exercise Price Weighted-Average Fair Value Weighted-Average Exercise Price Weighted-Average Fair Value Warrants Granted Whose Exercise Price Exceeded Fair Value at the Date of Grant $ 2.37 $ 1.61 $ - $ - Warrants Granted Whose Exercise Price Was Equal or Lower Than Fair Value at the Date of Grant $ 3.95 $ 4.53 $ 2.79 $ 3.20 For the warrants issued in 2018 and 2017 the Company valued the warrants utilizing the Black-Scholes option-pricing model with the following weighted-average inputs: Year Ended December 31, 2018 2017 Stock Price on Date of Grant $ 2.63 $ 4.15 Exercise Price $ 2.67 $ 2.79 Volatility 115.7 % 126.1 % Term 5-Years 5-Years Risk-Free Interest Rate 2.7 % 1.9 % Expected Dividend Rate 0 % 0 % Warrant expense of $0 and $0.21 million was recorded during the years ended December 31, 2018 and 2017, respectively. For the year ended December 31, 2018, $0.73 million of warrants were issued in connection with debt and recorded as a debt discount. |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 12 Months Ended |
Dec. 31, 2018 | |
Commitments And Contingencies | |
NOTE 18. COMMITMENTS AND CONTINGENCIES | Operating Lease Commitments The Company leases certain business facilities under operating lease agreements that specify minimum rentals. Many of these have renewal provisions. The Company’s net rent expense for the years ended December 31, 2018 and 2017 was $2.05 million and $1.38 million, respectively. Future minimum lease payments under non-cancelable operating leases having an initial or remaining term of more than one year are as follows: Scheduled Year Ending December 31 Payments 2019 $ 1,850,593 2020 1,716,997 2021 1,667,166 2022 1,645,435 2023 1,665,780 2024 and Thereafter 6,496,092 Total Future Minimum Lease Payments $ 15,042,063 California Operating Licenses Effective January 1, 2018 the State of California allowed for adult use cannabis sales. California’s cannabis licensing system is being implemented in two phases. First, beginning January 1, 2018, temporary permits were to be issued and the state anticipated issuing annual licenses by May of 2018. Licensees were eligible for several 90 days extensions to their temporary licenses. Throughout 2018 Terra Tech subsidiaries operated compliantly and were eligible for all of the extensions. As of March 2019, the State of California has yet to issue annual permits. The Company has received a temporary license for each local jurisdiction in which it has active operations and temporary licenses have been issued through the second quarter of 2019. The temporary permits may be extended for an additional period of time. The Company has submitted its applications for the annual permits to the state. Although the Company believes it will receive the necessary licenses from the state to conduct its business in a timely fashion, the state has already exceeded the anticipated time by which it would have issued all annual licenses, and there is no guarantee the State will not continue to extend the temporaries or that the Company will be able to do so and any failure to do so may have a negative effect on its business and results of operations. |
SELECTED QUARTERLY FINANCIAL DA
SELECTED QUARTERLY FINANCIAL DATA (Unaudited) | 12 Months Ended |
Dec. 31, 2018 | |
Selected Quarterly Financial Data | |
NOTE 19. SELECTED QUARTERLY FINANCIAL DATA (Unaudited) | No longer required |
SEGMENT INFORMATION
SEGMENT INFORMATION | 12 Months Ended |
Dec. 31, 2018 | |
Segment Information | |
NOTE 20. SEGMENT INFORMATION | During 2018, the Company acquired additional real property and determined that a previously insignificant operating segment “Real Estate and Construction” is now significant and is a reportable segment requiring disclosure in accordance with ASC 280. Prior period information below has been revised to conform to current period presentation. We are now organized into three reportable segments: · Herbs and Produce Products · Cannabis Dispensary, Cultivation and Production · Real Estate and Construction Our segment net revenue and contributions to consolidated net revenue for each of the last two fiscal years were as follows: Total Revenue % of Total Revenue Year Ended December 31, Year Ended December 31, 2018 2017 2018 2017 Herbs and Produce Products $ 5,585,447 $ 5,701,233 17.8 % 15.9 % Cannabis Dispensary, Cultivation and Production 25,978,118 30,031,046 82.9 % 83.9 % Real Estate 62,574 - 0.2 % -% Other and Eliminations (292,521 ) 68,565 (0.9 )% 0.2 % Total $ 31,333,618 $ 35,800,844 100.0 % 100.0 % See “Note 2 – Summary of Significant Accounting Policies” “Item 1A. Risk Factors” Herbs and Produce Products Either independently or in conjunction with third parties, we are a retail seller of locally grown hydroponic herbs and produce, which are distributed through major grocery stores throughout the East, West and Midwest regions of the U.S. Cannabis Dispensary, Cultivation and Production Either independently or in conjunction with third parties, we operate medical marijuana retail and adult use dispensaries and a medical marijuana and adult use cultivation in California. In addition, we operate four retail medical and adult use marijuana dispensary facilities in Nevada, and have in various stages of construction, medical marijuana and adult use cultivation and production facilities in Nevada. We own real property in Nevada on which we plan to build a medical and adult use marijuana dispensary. All of our retail dispensaries in California and Nevada offer a broad selection of medical and adult use cannabis products including flowers, concentrates and edibles. We also produce and sell a line of medical and adult use cannabis flowers, as well as a line of medical and adult use cannabis-extracted products, which include concentrates, cartridges, vape pens and wax products. Real Estate We own real property in Nevada on which we plan to build a medical and adult use marijuana dispensary. Additionally, we own properties in California that are in various stages of construction for medical marijuana and adult use cultivation and production facilities and dispensaries. Summarized financial information concerning the Company’s reportable segments is shown in the following tables. Total asset amounts at December 31, 2018 and 2017 excludes intercompany receivable balances eliminated in consolidation. For the Year Ended December 31, 2018 Herbs and Produce Products Cannabis Dispensary, Cultivation and Production Real Estate Eliminations and Other Total Total Revenues $ 5,585,447 $ 25,978,118 $ 62,574 $ (292,521 ) $ 31,333,618 Cost of Goods Sold 4,232,875 14,091,651 - 575,564 18,900,090 Gross Profit 1,352,572 11,886,467 62,574 (868,085 ) 12,433,528 Depreciation & Amortization 522,669 4,272,592 31,061 232,468 5,058,790 Stock-Based Compensation - - - 603,117 603,117 Selling, General and Administrative Expenses (All Other) 3,682,386 15,221,640 984,845 17,753,596 37,642,467 Loss from Operations (2,852,483 ) (7,607,765 ) (953,332 ) (19,457,266 ) (30,870,846 ) Other Income (Expense): Impairment of Property (77,556 ) - - - (77,556 ) Impairment of Intangible Assets - - - - - Loss on Extinguishment of Debt - - - - - Loss from Derivatives Issued with Debt Greater Than Debt Carrying Value - - - - - Gain (Loss) on Fair Market Valuation of Derivatives - - - - - Interest Expense, Net - (524,271 ) (793,690 ) (11,774,973 ) (13,092,934 ) Share of Loss in Joint Venture - - - (662,222 ) (662,222 ) Gain on Sale of Assets - - - 5,229,680 5,229,680 Gain on Settlement of Contingent Consideration - - - - - Gain (Loss) on Fair Market Valuation of Contingent Consideration - - - - - Gain on Sale of Assets - - - - - Total Other Income (Expense) (77,556 ) (524,271 ) (793,690 ) (7,207,515 ) (8,603,032 ) Loss Before Provision for Income Taxes $ (2,930,039 ) $ (8,132,036 ) $ (1,747,022 ) $ (26,664,781 ) $ (39,473,878 ) Total Assets at December 31, 2018 $ 15,109,512 $ 78,307,074 $ 15,109,512 $ 22,494,829 $ 131,020,927 Capital Expenditures $ 1,036,566 $ 8,062,552 $ 13,229,942 $ 3,079,650 $ 25,408,710 For the Year Ended December 31, 2017 Herbs and Produce Products Cannabis Dispensary, Cultivation and Production Real Estate Eliminations and Other Total Total Revenues $ 5,701,233 $ 30,031,046 68,565 $ - $ 35,800,844 Cost of Goods Sold 5,211,658 25,112,113 - - 30,323,771 Gross Profit 489,575 4,918,933 68,565 - 5,477,073 Selling, General and Administrative Expenses 3,123,037 10,843,210 334,813 11,056,031 25,357,091 Loss from Operations (2,633,462 ) (5,924,277 ) (266,248 ) (11,056,031 ) (19,880,018 ) Other Income (Expense): Amortization of Debt Discount - - - (2,138,762 ) (2,138,762 ) (Loss) Gain on Extinguishment of Debt (18 ) 187 30 (7,144,487 ) (7,144,288 ) Loss on Fair Market Valuation of Derivatives - - - (3,494,550 ) (3,494,550 ) Interest (Expense) Income - 110 1 (542,775 ) (542,664 ) Impairment of Property - - - (138,037 ) (138,037 ) Impairment of Intangibles (757,467 ) - - - (757,467 ) Loss from Derivatives Issued with Debt Greater than Debt Carrying Value - - - - - Gain on Settlement of Contingent Consideration - 4,991,571 - - 4,991,571 Loss on Fair Market Valuation of Contingent Consideration - (4,426,047 ) - - (4,426,047 ) Share of Loss in Joint Venture - - - - - Gain on Sale of Assets - - - - - Total Other Income (Expense) (757,485 ) 565,821 31 (13,458,611 ) (13,650,244 ) Loss Before Provision for Income Taxes $ (3,390,947 ) $ (5,358,456 ) $ (266,217 ) $ (24,514,642 ) $ (33,530,262 ) Total Assets at December 31, 2017 $ 5,847,286 $ 69,844,546 $ 1,791,889 $ 20,704,078 $ 98,187,799 Note that in 2018, Herbs & Produce revenue and cost of goods sold each include $1.11 million of intercompany transactions that were eliminated within the consolidation. As of December 31, 2018, total assets associated with the Other & Eliminations segment included $8.48 million of investments in unconsolidated affiliates accounted for under the equity method of accounting. |
LITIGATION AND CLAIMS
LITIGATION AND CLAIMS | 12 Months Ended |
Dec. 31, 2018 | |
Litigation And Claims | |
NOTE 21. 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 matters that required an accrual as of December 31, 2018 nor were there any asserted or unasserted material claims for which material losses are reasonably possible. On April 11, 2018, the Company filed a lawsuit in the United States District Court, Central District of California against Kenneth Vande Vrede, Michael Vande Vrede, Steven Vande Vrede, Daniel Vande Vrede, Greda Vande Vrede, Beverly Willekes, Brian Vande Vrede, Gro-Rite, Inc. (“Gro-Rite”) and Naturally Beautiful Plant Products, LLC (“Naturally Beautiful”) alleging breach of contract, breach of fiduciary duties, conversion, fraud, breach of covenant of good faith and fair dealing, misappropriation of trade secrets, and conspiracy related to, among other things, the Share Exchange Agreement, dated as of April 24, 2013 among the Company, the Company’s wholly-owned subsidiary, Edible Garden Corp. (“Edible Garden”), and the individual defendants (the “Share Exchange Agreement”). The Company is seeking monetary damages, including attorneys’ fees and expenses, return of shares of the Company’s common stock issued to the individual defendants under the Share Exchange Agreement, return of stock options issued to the individual defendants, and return of the Company’s intellectual property. As of February 25, 2019, the Court has dismissed all defendants except for Kenneth Vande Vrede based on the other defendants’ lack of contacts with the State of California. The Company intends to appeal this decision and still seeks monetary damages, including attorneys’ fees and expenses, return of shares of the Company’s common stock issued to the individual defendants under the Share Exchange Agreement, return of stock options issued to the individual defendants, and return of the Company’s intellectual property in this case and in other cases discussed herein. On April 10, 2018, Gro-Rite, Naturally Beautiful and Whitetown Realty (“Whitetown Realty” and collectively, the “Whitetown Realty Plaintiffs”) filed a lawsuit in the Superior Court of New Jersey Law Division, Morris County against the Company and Edible Garden alleging, among other things, that Edible Garden owes certain amounts to Gro-Rite under a Marketing and Distribution Agreement between Edible Garden and Gro-Rite, dated May 7, 2013, and Naturally Beautiful under a Marketing and Distribution Agreement between Edible Garden and Naturally Beautiful, dated May 13, 2013 (collectively, the “Marketing and Distribution Agreements”), and that Edible Garden owes certain amounts to Whitetown Realty under the Lease between Whitetown Realty and Edible Garden, dated January 1, 2015 (the “Lease”). The Whitetown Realty Plaintiffs are seeking, among other things, compensatory damages for the amounts claimed are owed and attorneys’ fees and costs. The Company disputes that Edible Garden owes any payments under the Marketing and Distribution Agreements or the Lease and intends to vigorously defend itself. Accordingly, on May 18, 2018, the company and Edible Garden filed an answer denying the allegations of the plaintiffs. In that same pleading, Edible Garden filed a counterclaim against Naturally Beautiful and Gro-Rite asserting claims for breach of contract, breach of the implied covenant of good faith and fair dealing, unjust enrichment, trademark infringement/unfair competition, and tortious interference with contractual relations. Edible Garden also filed a third-party complaint against previously unidentified defendants John Doe Entities 1-10 and John Doe Individuals 1-10 arising from the wrongful misappropriation and pirating of electricity from the Edible Garden facility located at 283 Route 519, Belvidere, New Jersey. That third-party complaint alleges claims for unjust enrichment, tortious interference with contractual relations and conversion. On June 8, 2018, Edible Garden filed an amended counterclaim adding a count for conversion against Naturally Beautiful and Gro-Rite. On June 12, 2018, Edible Garden Corp. filed an amended third-party complaint adding Gerda Vande Vrede as a named third-party defendant. On June 13, 2018, Gro-Rite and Naturally Beautiful filed an answer to Edible Garden’s amended counterclaim and Gerda Vande Vrede filed an answer to Edible Garden’s amended third-party complaint denying the allegations asserted against them. No counterclaims, crossclaims or fourth party complaints were filed on behalf of Gerda Vande Vrede, Naturally Beautiful or Gro-Rite. On April 13, 2018, Edible Garden Corp. filed a lawsuit in the Superior Court of New Jersey Chancery Division, Warren County against Whitetown Realty in response to a letter from a law firm representing Whitetown Realty alleging Edible Garden was in default of the Lease. Edible Garden is seeking declaratory and equitable relief to prevent Whitetown Realty from terminating the Lease and for attorneys’ fees and costs. The Company believes that Edible Garden has made all payments due to Whitetown Realty under the Lease and maintains Edible Garden is not in default of the Lease. On April 23, 2018, by order of the assignment judge of Warren County, the lawsuit was transferred to Morris County and consolidated with the April 10, 2018 lawsuit previously filed by Gro-Rite, Naturally Beautiful and Whitetown Realty in the Superior Court of New Jersey, Law Division, Morris County. On June 13, 2018, Whitetown Realty filed its answer to the Edible Garden Complaint. In that answer, Whitetown Realty denies that Edible Garden is entitled to the declaratory and equitable relief that Edible Garden requested. No counterclaim was filed by Whitetown Realty. On April 11, 2018, Kenneth Vande Vrede, Michael Vande Vrede and Steven Vande Vrede (collectively, the “Vande Vrede Brothers”) filed a lawsuit in the Superior Court of New Jersey Law Division, Warren County against the Company and Edible Garden alleging, among other things, that the Company and Edible Garden improperly suspended the Vande Vrede Brothers from their positions with the Company and Edible Garden. The Vande Vrede Brothers were seeking, among other things, a declaratory judgment that they did not violate their fiduciary duties owed to the Company or Edible Garden and reinstating the Vande Vrede Brothers to their status with the Company and Edible Garden prior to their suspensions and attorneys’ fees and costs. The original complaint in this matter was never served, and on June 12, 2018, the Vande Vrede Brothers, and now David Vande Vrede, Daniel Vande Vrede, Beverly Willekes, and Whitetown Realty filed an amended complaint against Terra Tech, Edible Garden, Derek Peterson, Michael James, and Michael Nahass. The Company filed a pre-answer motion to dismiss the amended complaint, arguing that any of the plaintiffs’ claims that relate to the Share Exchange Agreement, belong in the already existing lawsuit in California, and any of the plaintiffs’ claims that relate to the lease, belong in the already existing lawsuits in New Jersey. The Company disputes the Vande Vredes’ allegations in the lawsuit and intends to vigorously defend itself. On September 19, 2018, the Superior Court of New Jersey, Warren County denied the Company’s pre-answer motion to dismiss without prejudice and transferred the matter to Morris County to be consolidated with the other two matters already pending in Morris County, and the Company renewed its pre-answer motion to dismiss in Morris County. On December 17, 2018, the Superior Court of New Jersey, Morris County denied the Company’s motion to dismiss. On January 22, 2019, the Company filed its answer and asserted counterclaims for breach of contract, breach of fiduciary duty, conversion, fraud, misappropriation of trade secrets, and conspiracy in Superior Court of New Jersey, Morris County against the Vande Vredes. We are awaiting the answer to the Company’s counterclaims. On February 28, 2019, the court held a case management conference for all the three consolidated matters in Morris County and set a discovery end date of October 15, 2019. On September 15, 2017, through our wholly-owned subsidiary, IVXX, Inc., we filed a lawsuit against Callow Distribution, LLC, a California limited liability company controlled by David Weidenbach, in the Superior Court of the State of California, County of Orange. In the Complaint for Breach of Contract, Conversion, and Injunctive Relief, we requested that the Court award to us, among other things, damages according to proof, attorneys’ fees, and costs of suit. On December 3, 2018, we appeared for trial and provided sufficient evidence to the Court to prove our case in full to its satisfaction. The judge ruled from the bench in our favor. We then prepared the form of Judgment, which the Court entered on December 10, 2018, and made publicly available on December 13, 2018. The judgment in our favor and against Callow Distribution, LLC is in the amount of $0.95 million. We intend to pursue our post-judgment collection rights vigorously, although there is no assurance as to the timing of collection and the amount that we will collect. On November 21, 2018, Heidi Loeb Hegerich, Forever Green NV, and Forever Young Investments, L.L.C. filed a lawsuit against the Company, certain of its subsidiaries and affiliates, and certain unrelated parties in the Second Judicial District of the County of Washoe, State of Nevada, alleging, among other things, breach of fiduciary duty, breach of contract, and fraud, and seeking monetary damages and equitable relief. On February 26, 2019, the parties entered into a settlement agreement pursuant to which the plaintiffs agreed to settle and dismiss the lawsuit with prejudice. See “ Note 23 – Subsequent Events” |
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS | 12 Months Ended |
Dec. 31, 2018 | |
Related Party Transactions | |
NOTE 22. RELATED PARTY TRANSACTIONS | Except as described below, during the past fiscal year, there have been no transactions, whether directly or indirectly, between the Company and any of its respective officers, directors, beneficial owners of more than 5% of our outstanding Common Stock or their family members, that exceeded the lesser of $120,000 or 1% of the average of our total assets at year-end for the last completed fiscal year. The Company leases the land in Belvidere, New Jersey, on which Edible Garden’s greenhouse structure is situated. The land is being leased from Whitetown Realty, LLC, an entity in which David Vande Vrede and Greda Vande Vrede own interests. David Vande Vrede and Greda Vande Vrede are the parents of one our former directors, Kenneth Vande Vrede. The lease commenced on January 1, 2015 and expires December 31, 2029. The current monthly lease amount is $14,859 and increases 1.5% each calendar year. Kenneth Vande Vrede was terminated in April 2018. Pursuant to an Independent Director Agreement dated June 1, 2017 by and between us and Steven J. Ross, we agreed to pay Mr. Ross $10,000 per month for a period of one year. We also issued to Mr. Ross an aggregate of 72,727 restricted shares of Common Stock, of which all of the shares vested on the date of appointment. Pursuant to an Independent Director Agreement dated July 31, 2018 by and between us and Steven J. Ross, we agreed to pay Mr. Ross $8,333 per month for a period of one year. We also issued to Mr. Ross an aggregate of 24,750 restricted shares of Common Stock, of which all of the shares vested on the date of appointment. Pursuant to an Independent Director Agreement dated November 15, 2017 by and between us and Alan Gladstone, we agreed to pay Mr. Gladstone $6,250 per month for a period of one year. We also issued to Mr. Gladstone an aggregate of 29,167 shares of the Company’s stock options, to be fully vested on the date of appointment. Pursuant to an Independent Director Agreement dated July 31, 2018 by and between us and Alan Gladstone, we agreed to pay Mr. Ross $8,333 per month for a period of one year. We also issued to Mr. Gladstone an aggregate of 24,750 restricted shares of Common Stock, of which all of the shares vested on the date of appointment. |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 12 Months Ended |
Dec. 31, 2018 | |
Subsequent Events | |
NOTE 23. SUBSEQUENT EVENTS | The Company evaluated subsequent events through the date of the filing of this Annual Report on Form 10-K with the SEC, to ensure that this filing includes appropriate disclosure of events both recognized in the financial statements as of December 31, 2018, and the events which occurred subsequent to December 31, 2018 but were not recognized in the financial statements. The company has determined that there were no subsequent events which required recognition, adjustment to or disclosure in the financial statements except as below and except as discussed below. Subsequent to the balance sheet date, the Company converted $6.25 million of convertible notes and $0.10 million of interest into 12.13 million shares of the Company’s common stock. Subsequent to the balance sheet date, the Company issued 1,272,231 shares of common stock for $0.80 million in cash in settlement of put notices pursuant to the Investor Agreement dated November 28, 2016 with an accredited investor. On March 12, 2019, the Company issued a 7.5% Senior Convertible Promissory Note, due September 12, 2020, in the principal amount of $5.00 million to an accredited investor pursuant to the 2018 Securities Purchase Agreement. The Note accrues interest at a rate of 7.5% per annum, payable on the Maturity Date or upon any conversion, prepayment, event of default or other acceleration of payment under the Note. On March 6, 2019, Terra Tech Corp. (the “Company”) granted ten-year options to employees, pursuant to which the such individuals are entitled to exercise options to purchase an aggregate of up to 0.29 million shares of Common Stock. These options have an exercise price of $0.84 per share and vest immediately. On March 4, 2019, the Company issued a Promissory Note (the “Note”) in the principal amount of $1.0 million to an accredited investor. The Note is due on the earlier of (i) April 4, 2019 or (ii) the closing of a financing with gross proceeds equal to or greater than $1.0 million (the “Maturity Date”). The Note accrues interest at a rate of 1.5% per month, payable on the Maturity Date or prepayment of the Note, with 30-days of interest guaranteed. The note was paid in full during March 2019. On February 26, 2019, the Company issued entered into a Securities Purchase Agreement (the “SPA”) with Forever Green NV (“Forever Green”) and Forever Young Investments, L.L.C. (“Forever Young”) pursuant to which the Company purchased Forever Green’s 50% membership interest in MediFarm I LLC (“MediFarm I”), Forever Green’s 15% membership interest in MediFarm II, LLC (“MediFarm II”), and Forever Young’s 50% membership interest in MediFarm I Real Estate, LLC (“MediFarm I RE”) for aggregate consideration of $6.30 million. MediFarm I owns the Company’s Blüm dispensary located at 1085 S. Virginia St. Suite A, Reno, NV 89502, and MediFarm I RE owns the building which houses the dispensary. Closing of the SPA is subject to the approval of the Nevada Department of Taxation, which the Company expects to receive in approximately 60-90 days. Following closing, the Company will own 100% of MediFarm I, 100% of MediFarm RE and 70% of MediFarm II. Also on February 26, 2019, the Company, MediFarm I, MediFarm II, MediFarm I RE and other parties (collectively, the “Terra Tech Parties”) entered into a Settlement Agreement and Release (the “Settlement Agreement”) with Heidi Loeb Hegerich, Forever Green and Forever Young (collectively, the “Loeb Parties”) pursuant to which the Terra Tech Parties and the Loeb Parties agreed to settle and dismiss with prejudice the lawsuit filed by the Loeb Parties against the Terra Tech Parties in the Second Judicial District of the County of Washoe, State of Nevada, Case Number CV-18-02322 on November 21, 2018 (the “Lawsuit”). Entering into the Settlement Agreement is not an admission or acknowledgement of liability or responsibility on the part of the Company in connection with the Lawsuit. The only material relationship between the Company and Ms. Hegerich, Forever Green and Forever Young, other than in respect of the SPA and the Settlement Agreement, was their membership in MediFarm I, MediFarm II and MediFarm I RE. |
SUMMARY OF SIGNIFICANT ACCOUN_2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 12 Months Ended |
Dec. 31, 2018 | |
Summary Of Significant Accounting Policies Policies | |
Basis of Presentation | The accompanying consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) and with the instructions to Securities Exchange Commission (“SEC”) Form 10-K and Regulation S-X and reflect the accounts and operations of the Company and those of our subsidiaries in which we have a controlling financial interest. In accordance with the provisions of FASB or ASC 810, “Consolidation” |
Non-Controlling Interest | Non-controlling interest is shown as a component of stockholders’ equity on the consolidated balance sheets and the share of income (loss) attributable to non-controlling interest is shown as a component of income (loss) in the consolidated statements of operations. |
Use of Estimates | The preparation of financial statements in 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, and 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 and stockholders’ equity. |
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. There is a reserve for doubtful accounts of $0.33 million as December 31, 2018. There was no allowance recorded as of December 31, 2017. |
Notes Receivable | The Company reviews all outstanding notes receivable for collectability as information becomes available pertaining to the Company’s inability to collect. An allowance for notes receivable is recorded for the likelihood of non-collectability. The Company accrues interest on notes receivable based net realizable value. There was no allowance at December 31, 2018 and 2017. |
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 up-front 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.” “Note 8 – Property, Equipment and Leasehold Improvements, Net” |
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. When assessing goodwill for impairment, the Company has the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, after assessing the totality of events or circumstances, the Company determines it is more likely than not that the fair value of a reporting unit is less than its carrying amount, then the Company performs a two-step impairment test. If the Company concludes otherwise, then no further action is taken. The Company also has the option to bypass the qualitative assessment and only perform a quantitative assessment, which is the first step of the two-step impairment test. In the two-step impairment test, 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. There were no events or changes in circumstances that indicated potential impairment of intangible assets during 2018 and 2017. In assessing the qualitative factors, the Company assesses relevant events and circumstances that may impact the fair value and the carrying amount of the reporting unit. The identification of relevant events and circumstances, and how these may impact a reporting unit’s fair value or carrying amount involve significant judgments and assumptions. The judgment and assumptions include the identification of macroeconomic conditions, industry, and market considerations, cost factors, overall financial performance and share price trends, and making the assessment as to whether each relevant factor will impact the impairment test positively or negatively and the magnitude of any such impact. The carrying amount of each reporting unit is determined based upon the assignment of our assets and liabilities, including existing goodwill and other intangible assets, to the identified reporting units. Where an acquisition benefits only one reporting unit, 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 of its fair value, an impairment may exist, and the Company must perform the second step of the impairment analysis to measure the amount of the impairment loss, by allocating the reporting unit’s fair value to its assets and liabilities other than goodwill, comparing the carrying amount of the goodwill to the resulting implied fair value of the goodwill, and recording an impairment charge for any excess. The table below summarizes the changes in the carrying amount of goodwill: Goodwill Balance at December 31, 2016 $ 28,921,260 2017 Acquisitions - Balance at December 31, 2017 28,921,260 2018 Acquisitions - Measurement Period Adjustment 6,251,248 Balance at December 31, 2018 $ 35,172,508 |
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 Management Service Agreement 15 Years In the fourth quarter of 2018, the Company reduced the estimated useful life of its customer relationships to better reflect the expected benefit period. The change in estimated useful life has been accounted for as a change in accounting estimate. The reduction in the useful life increased loss from operations and net loss by approximately $1.58 million for the year ended December 31, 2018. 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. The Company calculates fair value of our intangible assets as the present value of estimated future cash flows the Company expects to generate from the asset using a risk-adjusted discount rate. In determining our estimated future cash flows associated with our intangible assets, The Company uses estimates and assumptions about future revenue contributions, cost structures and remaining useful lives of the asset (asset group). Intangible assets that have indefinite useful lives are tested annually for impairment and are tested for impairment more frequently if events and circumstances indicate that the asset might be impaired. An impairment loss is recognized to the extent that the carrying amount of the asset group exceeds its fair value. |
Other Assets | Other assets are comprised primarily of deposits for the purchase of real property and security deposits for leased properties in California, Nevada and New Jersey. The deposits for the purchase of real property are reclassified to Property and Equipment once the purchase is final. |
Business Combinations | The Company accounts for its business acquisitions in accordance with ASC 805-10, “ Business Combinations. |
Revenue Recognition and Performance Obligations | During the year ended December 31, 2017 the Company recognized revenue in accordance with ASC 605, “Revenue Recognition” On January 1, 2018, the Company adopted Accounting Standards Update (“ASU”) 2014-09, “Revenue from Contracts with Customers” and all the related amendments, which are also codified into ASC 606. The Company elected to adopt this guidance using the modified retrospective method. The adoption of this guidance did not have a material effect on the Company’s financial position, results of operations or cash flows. Under the new standard, the Company recognizes a sale as follows: 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, promotional adjustments and returns. We collect taxes on certain revenue transactions to be remitted to governmental authorities, which may include sales, excise and local taxes. These taxes are not included in the transaction price and are, therefore, excluded from revenue. 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. Herbs and Produce Products The Company recognizes revenue from products grown in its greenhouses upon delivery of the product to the customer at which time control passes to the customer. Upon transfer of control, the Company has no further performance obligations. For sales for which the Company uses an outside grower, the Company evaluates whether it is appropriate to record the gross amount of product sales and related costs or the net amount earned as commissions. The evaluation considers whether the Company takes control of the products of the outside grower, whether it has the ability to direct the outside grower to provide the product to the customer on its behalf or whether it combines products from the outside grower with its own goods and services to provide the products to the customer. In evaluating whether it takes control of the products of the outside grower, the Company considers whether it has primary responsibility for fulfilling the promise to provide the products, whether the Company is subject to inventory risk related to the products and whether it has the ability to set the selling prices for the products. Disaggregation of Revenue See “Note 17 – Segment Information” for revenues disaggregated by type as required by ASC Topic 606. Contract Balances Due to the nature of the Company’s revenue from contracts with customers, the Company does 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 is included in the transaction price. The Company’s contracts do not include multiple performance obligations or material variable consideration. |
Cost of Goods Sold | Cannabis Dispensary, Cultivation and Production Cost of goods sold includes the costs directly attributable to product sales and includes amounts paid for finished goods, such as flower, edibles, and concentrates, as well as packaging and other supplies, fees for services and processing, other expenses for services, and allocated overhead. It also includes the cost incurred in producing the oils, waxes, shatters, and clears sold by IVXX. Overhead expenses include allocations of rent, administrative salaries, utilities, and related costs. Herbs and Produce Products Cost of goods sold include cultivation costs, packaging, other supplies and purchased plants that are sold into the retail marketplace by Edible Garden. Other expenses included in cost of goods sold include freight, allocations of rent, repairs and maintenance, and utilities. |
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. In addition, the Company is required to estimate the expected forfeiture rate and only recognize expense for those shares expected to vest. If the actual forfeiture rate is materially different from management’s estimates, the stock-based compensation expense could be significantly different from what the Company has recorded in the current period. |
Derivative Financial Instruments | ASC 815-40, “Contracts in Entity’s Own Equity” ASC 815, “Derivatives and Hedging” |
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. In December 2017, the Tax Cuts and Jobs Act (TJCA or the Act) was enacted, which significantly changes U.S. tax law. In accordance with ASC 740, “Income Taxes” |
Loss Per Common Share | In accordance with the provisions of ASC 260, “Earnings Per Share”, |
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 has not elected the fair value option for any eligible financial instruments. |
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 5.0% 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 | Assets held for sales represent furniture, equipment, and leasehold improvements less accumulated depreciation as well as any other assets that are held for sale in conjunction with the sale of a business. The Company records assets held for sale in accordance with ASC 360, “Property, Plant, and Equipment,” at the lower of carrying value or fair value less costs to sell. Fair value is based on the estimated proceeds from the sale of the facility utilizing recent purchase offers or comparable market data. Our estimate as to the fair value is regularly reviewed and subject to changes in the commercial real estate markets and our continuing evaluation as to the facility’s acceptable sale price. The reclassification takes place when the assets are available for immediate sale and the sale is highly probable. These conditions are usually met from the date on which a letter of intent or agreement to sell is ready for signing. |
Recently Adopted Accounting Standards | FASB ASU No. 2014-09 (Topic 606), “Revenue from Contracts with Customers” FASB ASU 2016-15, “Classification of Certain Cash Receipts and Cash Payments (a consensus of the Emerging Issues Task Force)” FASB ASU 2017-09, “Compensation – Stock Compensation (Topic 718): Scope of Modification Accounting” - FASB ASU 2017-01 (Topic 805), “Business Combinations: Clarifying the Definition of a Business” FASB ASU 2017-11,”Earnings Per Share, Distinguishing Liabilities from Equity, Derivatives and Hedging – (Part I) Accounting for Certain Financial Instruments with Down Round Features, (Part II) Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception” As Reported Cumulative Effect Adjustment Adjusted Derivative Liabilities $ (9,331,400 ) $ 9,331,400 $ - Additional Paid-In Capital 181,357,715 (5,238,296 ) 176,119,419 Accumulated Deficit (105,548,602 ) (2,547,801 ) (108,096,403 ) Debt Discount 4,790,601 (1,545,303 ) 3,245,298 FASB ASU 2018-15 "Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract." – |
Recently Issued Accounting Standards | FASB ASU No. 2018-18, “Clarifying the Interaction between Topic 808 and Topic 606” – FASB ASU No. 2018-13 (Topic 820), “Fair Value Measurement” FASB ASU No. 2018-07 (Topic 718), “Compensation—Stock Compensation: Improvements to Nonemployee Share- Based Payment Accounting” FASB ASU 2017-04 (Topic 350), “Intangibles - Goodwill and Others” FASB ASU No. 2016-02 (Topic 842), “Leases” Leases Targeted Improvements |
SUMMARY OF SIGNIFICANT ACCOUN_3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Summary Of Significant Accounting Policies Tables | |
Summary of changes in goodwill | The table below summarizes the changes in the carrying amount of goodwill: Goodwill Balance at December 31, 2016 $ 28,921,260 2017 Acquisitions - Balance at December 31, 2017 28,921,260 2018 Acquisitions - Measurement Period Adjustment 6,251,248 Balance at December 31, 2018 $ 35,172,508 |
Useful Lives for amortization of our Intangible assets | The approximate useful lives for amortization of our intangible assets are as follows: Customer Relationships 3 to 5 Years Trademarks 2 to 8 Years Dispensary Licenses 14 Years Patent 2 Years Management Service Agreement 15 Years |
Summary of cumulative-effect adjustment to financial position | The January 1, 2018 cumulative-effect adjustment to the Company’s financial position was as follows: As Reported Cumulative Effect Adjustment Adjusted Derivative Liabilities $ (9,331,400 ) $ 9,331,400 $ - Additional Paid-In Capital 181,357,715 (5,238,296 ) 176,119,419 Accumulated Deficit (105,548,602 ) (2,547,802 ) (108,096,404 ) Debt Discount 4,790,601 (1,545,302 ) 3,245,299 |
VARIABLE INTEREST ENTITY ARRA_2
VARIABLE INTEREST ENTITY ARRANGEMENTS (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Variable Interest Entity Arrangements Tables | |
Variable Interest Entity Arrangements | The aggregate carrying values of the VIEs’ assets and liabilities, after elimination of any intercompany transactions and balances, in the consolidated balance sheets were as follows: December 31, December 31, 2018 2017 Current Assets: Cash $ 893,866 $ 409,029 Accounts Receivable, Net 28,207 232,230 Inventory 556,301 232,231 Prepaid Expenses and Other Current Assets 8,165 302,186 Total Current Assets 1,486,539 1,175,676 Property, Equipment and Leasehold Improvements, Net 1,799,417 1,965,103 TOTAL ASSETS $ 3,285,956 $ 3,140,779 Current Liabilities: Accounts Payable and Accrued Expenses 342,136 419,853 TOTAL LIABILITIES $ 342,136 $ 419,853 |
ACQUISITIONS (Tables)
ACQUISITIONS (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Acquisitions Tables Abstract | |
Acquisition with a purchase price | Assets Acquired Inventory $ 113,779 Property, Equipment and Leasehold Improvements: Furniture and Equipment 52,829 Leasehold Improvements 46,737 Security Deposits 5,000 Management Service Agreement 370,332 Goodwill 6,258,260 Total Assets Acquired $ 6,846,937 |
Pro forma results of operations | The supplemental pro forma information, as if the TCD acquisition had occurred on January 1, 2017, is as follows: 2017 Revenues $ 38,208,172 Net Loss Attributable to Terra Tech Corp. $ (33,472,729 ) Net Loss per Common Share Attributable to Terra Tech Corp. Common Stockholders - Basic and Diluted $ (0.73 ) |
INVENTORY (Tables)
INVENTORY (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Inventory Tables Abstract | |
Schedule of inventory | Inventory as of December 31, 2018 and 2017 consists of the following: December 31, 2018 2017 Raw Materials $ 1,213,289 $ 1,450,273 Work-in-Progress 881,932 1,016,596 Finished Goods 1,202,745 3,293,150 Inventory Reserve (1,018,229 ) Total Inventory $ 2,279,737 $ 5,760,019 |
PROPERTY, EQUIPMENT AND LEASE_2
PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS, NET (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Property Equipment And Leasehold Improvements Nettable | |
Property, equipment, and leasehold improvements | Property, equipment, and leasehold improvements, net consists of the following: December 31, 2018 2017 Land and Building $ 22,401,014 $ 9,047,201 Furniture and Equipment 3,652,044 3,553,587 Computer Hardware and Software 531,119 486,176 Leasehold Improvements 8,524,930 9,316,665 Construction in Progress 12,288,468 1,204,547 Subtotal 47,397,575 23,608,176 Less Accumulated Depreciation (5,807,078 ) (4,416,560 ) Less Assets Held for Sale (7,451,408 ) 0 Property, Equipment and Leasehold Improvements, Net $ 34,139,089 $ 19,191,616 |
Summary of gain upon sale of the assets | The following table summarizes the transaction: Total Consideration $ 6,408,239 Inventory 159,161 Prepaid Expenses 9,645 Property & Equipment 597,253 Total Asset Book Value 766,059 Transaction Costs 412,500 Gain on Sale $ 5,229,680 |
INTANGIBLE ASSETS, NET (Tables)
INTANGIBLE ASSETS, NET (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Intangible Assets Net Tables | |
Intangible assets | Intangible assets as of December 31, 2018 and 2017: December 31, 2018 December 31, 2017 Estimated Useful Life in Years Gross Carrying Amount Accumulated Amortization Net Carrying Amount Gross Carrying Value Accumulated Amortization Net Carrying Value Amortizing Intangible Assets: Customer Relationships 3 to 5 $ 8,072,400 $ (3,596,562 ) $ 4,475,838 $ 8,072,400 $ (1,345,191 ) $ 6,727,209 Trademarks and Patent 2 to 8 195,520 (116,552 ) 78,968 195,520 (77,448 ) 118,072 Dispensary Licenses 14 10,270,000 (1,984,632 ) 8,285,368 10,270,000 (1,283,751 ) 8,986,249 Management Service Agreement 15 370,332 (31,891 ) 338,441 6,621,580 - 6,621,580 Total Amortizing Intangible Assets 18,908,252 (5,729,638 ) 13,178,614 25,159,500 (2,706,390 ) 22,453,110 Non-Amortizing Intangible Assets: Trade Name Indefinite 5,320,000 - 5,320,000 5,320,000 - 5,320,000 Total Non-Amortizing Intangible Assets 5,320,000 - 5,320,000 5,320,000 - 5,320,000 Total Intangible Assets, Net $ 24,228,252 $ (5,729,638 ) $ 18,498,614 $ 30,479,500 $ (2,706,390 ) $ 27,773,110 |
Estimated amortization expense of intangible assets | Based solely on the amortizable intangible assets recorded at December 31, 2018, the Company estimates amortization expense for the next five years to be as follows: Year Ending December 31, 2019 2020 2021 2022 2023 and thereafter Total Amortization expense $ 1,452,361 $ 1,452,361 $ 1,414,017 $ 1,413,257 $ 8,996,850 $ 14,728,846 |
ACCOUNTS PAYABLE AND ACCRUED _2
ACCOUNTS PAYABLE AND ACCRUED EXPENSES (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Accounts Payable And Accrued Expenses Tables | |
Accounts payable and accrued expenses | Accounts payable and accrued expenses consist of the following: December 31, 2018 2017 Accounts Payable $ 2,576,166 $ 2,308,844 Sales & Local Tax Payable 567,886 545,398 Accrued Payroll 2,553,186 Accrued Expenses 1,204,204 2,590,468 Total Accounts Payable and Accrued Expenses $ 6,901,442 $ 5,444,710 |
NOTES PAYABLE (Tables)
NOTES PAYABLE (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Notes Payable Tables Abstract | |
Notes payable | Notes payable consists of the following: December 31, December 31, 2018 2017 Senior convertible promissory note dated August 21, 2017, issued to accredited investors, which matures February 21, 2019 and bears interest at a rate of 12.0% per annum. The conversion price is $4.50, subject to adjustment. The balance of the note and accrued interest was converted into common stock in January 2018. $ - $ 1,400,000 Senior convertible promissory note dated December 26, 2017, issued to accredited investors, which matures June 26, 2019 and bears interest at a rate of 12.0% per annum. The conversion price is $4.50, subject to adjustment. The balance of the note and accrued interest was converted into common stock in January 2018. - 5,500,000 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. 4,500,000 4,500,000 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. 6,500,000 - Senior convertible promissory note dated July 25, 2018, issued to accredited investors under the 2018 Master Securities Purchase and Convertible Promissory Notes Agreement, which matures January 25, 2020 and bears interest at a rate of 7.5% per annum. The conversion price is $4.50, subject to adjustment. 150,000 - Senior convertible promissory note dated September 6, 2018, issued to accredited investors under the 2018 Master Securities Purchase and Convertible Promissory Notes Agreement, which matures March 7, 2020 and bears interest at a rate of 7.5% per annum. The conversion price is $4.50, subject to adjustment. 1,200,000 - 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. 1,600,000 - Securities Purchase Agreement dated December 3, 2018, issued to accredited investors, which matures June 3, 2020 and bears interest at a rate of 3.0% per annum. The conversion price is 5.0% discount to the average of the three (3) lowest VWAPs in the five (5) trading days prior to the conversion date. 7,000,000 - Long-Term Debt $ 20,950,000 $ 11,400,000 Less: Debt Discount (2,638,000 ) (4,791,000 ) Net Long Term Debt $ 18,312,000 $ 6,609,000 |
Scheduled maturities of long-term debt | Scheduled maturities of long-term debt are as follows: Year Ending December 31, 2019 2020 2021 2022 2023 and thereafter Total Total Debt $ - $ 12,850,000 $ 8,100,000 $ - $ - $ 20,950,000 |
Conversion of the notes payable | As a result of adoption of ASU 2017-11, the Company did not record a loss on extinguishment of debt during 2018: For the Year Ended December 31, 2017 Fair market value of common stock issued upon conversion $ 29,785,271 Principal amount of debt converted (19,314,324 ) Accrued interest converted (635,401 ) Fair value of derivative at conversion date (14,223,550 ) Debt discount value at conversion date 11,532,292 Loss on extinguishment of debt $ 7,144,288 |
CONTINGENT CONSIDERATION LIABIL
CONTINGENT CONSIDERATION LIABILITY (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Contingent Consideration Liability | |
Contingent consideration | One-Year Anniversary Probability Revenue-Based Probability- Date Revenue Payment Amounts Weighted $ 3,200,000 0.00 % $ 800,000 $ – $ 2,000,000 0.50 % $ 200,000 1,000 $ 1,599,999 99.50 % $ – – Fair Value of Expected Earn-out Payment 1,000 Discount Rate 25 % Payments $ 0 Present Value Factor at 20% Discount Rate for 12 Months 0.9457 Present Value of Contingent Consideration $ 946 |
Performance-based cash consideration | Year 1 Revenue $ 16,666,666 Less: 12,000,000 $ 4,666,666 0.44742864 Performance-Based Cash Payment $ 2,088,000 |
The summary of contingent consideration | Amount Contingent Consideration Summary : Balance at December 31, 2016 $ 12,085,859 Change in Fair Market Valuation of Contingent Consideration 4,348,761 Balance at March 31, 2017 and April 1, 2017 $ 16,434,620 Contingent Consideration Detail : Performance-Based Cash Contingent Consideration $ 2,088,000 Market-Based Stock Contingent Consideration 14,346,620 Balance at March 31, 2017 and April 1, 2017 $ 16,434,620 |
The summary of additional market-based contingent consideration clawbacks | Contingent Consideration Balance at March 31, 2017 $ 16,434,620 Change in Fair Market Valuation of Contingent Consideration 77,286 Payment of Contingent Consideration in Cash (2,088,000 ) Settlement of Contingent Consideration (4,739,638 ) Settlement of Contingent Consideration Recorded Against Additional Paid-In Capital (4,692,697 ) Gain on Settlement of Contingent Consideration (4,991,571 ) Contingent Consideration December 31, 2017 and Thereafter $ - |
FAIR VALUE MEASUREMENTS (Tables
FAIR VALUE MEASUREMENTS (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Fair Value Measurements Tables | |
Fair value hierarchy financial assets measured | This was due to adoption of ASU 2017-11, which resulted in the reclassification of conversion feature derivative liabilities to equity as of January 1, 2018: Fair Value at December 31, Fair Value Measurement Using Description 2017 Level 1 Level 2 Level 3 Derivative Liabilities – Conversion Feature $ 9,331,400 $ - $ - $ 9,331,400 $ 9,331,400 $ - $ - $ 9,331,400 |
Fair value of the derivative liabilities using | The following table presents a reconciliation of the derivative liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3): Balance at December 31, 2016 $ 6,987,000 Change in Fair Market Value of Conversion Feature 3,494,550 Derivative Debt Converted into Equity (14,223,550 ) Issuance of Debt Instruments with Derivatives 13,073,400 Balance at December 31, 2017 $ 9,331,400 Reclassification of Derivative Liabilities to Equity (9,331,400 ) Balance at December 31, 2018 $ - |
Reconciliation of the derivative liabilities measured | The following table presents a reconciliation of the Black Oak Contingent Consideration liability measured at fair value on a recurring basis using significant unobservable inputs (Level 3): Roll forward of derivative liabilities - Contingent Consideration Balance at December 31, 2016 $ 12,085,859 Change in Fair Market Valuation of Contingent Consideration 4,426,047 Payment of Contingent Consideration in Cash (2,088,000 ) Settlement of Contingent Consideration (4,739,638 ) Settlement of Contingent Consideration Recorded Against Additional Paid-In Capital (4,692,697 ) Gain on Settlement of Contingent Consideration (4,991,571 ) Balance at December 31, 2017 and Thereafter $ - |
Reconciliation of the contingent consideration liability | The Company estimated the fair value of the derivative liabilities as of December 31, 2017 using the Black-Scholes-Merton option pricing model using the following assumptions: December 31, 2017 Stock Price $ 2.25 - $5.85 Conversion and Exercise Price $ 1.80 - $6.60 Annual Dividend Yield - Expected Life (Years) 0.46 - 3.42 Risk-Free Interest Rate 1.04% - 2.50 % Expected Volatility 43.80% - 123.56 % |
TAX EXPENSE (Tables)
TAX EXPENSE (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Tax Expense Tables | |
Income taxes expense benefit | The (benefit) expense for income taxes consists of the following: Year Ended December 31, 2018 2017 Current: $ - $ - Federal - (343,943 ) State - (3,512 ) - (347,455 ) Deferred: Federal - - State - - - - Total (Benefit) Expense for Income Taxes $ - $ (347,455 ) |
Schedule of effective income tax rate reconciliation | The reconciliation between the Company’s effective tax rate and the statutory tax rate is as follows: Year Ended December 31, 2018 2017 Expected Income Tax Benefit at Statutory Tax Rate, Net $ (6,847,005 ) $ (13,456,000 ) Non-Deductible Items - - Warrants Expense - 871,000 Derivatives Expense - 4,104,000 Amortization 641,747 - Amortization of Debt Discount 335,878 - IRC 280E Adjustment 1,565,957 - Net Operating Losses - - Impairment of Property and Intangibles - 365,000 Other 68,792 1,033,545 Change in Valuation Allowance 4,234,631 6,735,000 Reported Income (Benefit) Tax Expense $ - $ (347,455 ) |
Deferred tax assets and liabilities | The components of deferred income tax assets and (liabilities) are as follows: Year Ended December 31, 2018 2017 Deferred Income Tax Assets: Options expense $ 1,018,000 $ - Allowance for Doubtful Accounts 33,000 - Net Operating Losses 13,409,000 8,023,000 14,460,000 8,023,000 Deferred Income Tax Liabilities: Depreciation (829,000 ) (850,000 ) Total 13,631,000 7,173,000 Valuation Allowance (13,631,000 ) (7,173,000 ) Net Deferred Tax $ - $ - |
STOCK-BASED COMPENSATION (Table
STOCK-BASED COMPENSATION (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Disclosure Stockbased Compensation Tables Abstract | |
Equity incentive plan | The following table contains information about both plans as of December 31, 2018: Awards Reserved for Issuance Awards Issued Awards Available for Grant 2016 Equity Incentive Plan 2,000,000 1,541,064 458,936 2018 Equity Incentive Plan 6,600,000 5,100,000 1,500,000 |
Stock option activity | The following table summarizes the Company’s stock option activity and related information for the year ended December 31, 2018 and 2017: 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, 2017 446,667 $ 1.35 Options Granted 731,065 $ 2.68 Options Exercised - $ - Options Forfeited - $ - Options Expired - $ - Options Outstanding as of December 31, 2017 1,177,732 $ 2.17 Options Granted 6,911,667 $ 1.56 Options Exercised - $ - Options Forfeited (436,668 ) $ 2.36 Options Expired - $ - Options Outstanding as of December 31, 2018 7,652,731 $ 1.61 9.6 years $ - Options Exercisable as of December 31, 2018 1,870,039 $ 1.92 9.1 years $ - |
Weighted-average assumptions stock-based compensation | The following weighted-average assumptions were used to calculate stock-based compensation: Year Ended December 31, 2018 2017 Expected term (years) 6 Years 5 Years Volatility 113.2-128.0 % 117.3-120.9 % Risk-Free Interest Rate 2.5-2.9 % 2.0-2.4 % Dividend Yield 0 % 0 % |
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: For the Year Ended December 31, 2018 December 31, 2017 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 6,911,667 $ 2,527,982 731,065 $ 692,971 Stock Grants: Employees (Common Stock) 201,296 603,117 158,867 490,880 Employees (Series B Preferred Stock) 0 0 40,000 1,035,406 Directors (Common Stock) 49,500 99,990 81,061 221,973 Non–Employee Consultants (Common Stock) 132,971 225,428 389,374 1,284,562 Total Stock–Based Compensation Expense $ 3,456,517 $ 3,725,792 |
WARRANTS (Tables)
WARRANTS (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Warrants Tables | |
Warrants outstanding | The following table summarizes warrant activity for the years ended December 31, 2018 and 2017: Shares Weighted-Average Exercise Price Warrants Outstanding as of January 1, 2017 1,055,761 $ 2.85 Warrants Exercised - $ - Warrants Granted 214,915 $ 2.79 Warrants Expired (79,309 ) $ 3.34 Warrants Outstanding as of December 31, 2017 1,191,367 $ 2.85 Warrants Exercised (339,275 ) $ 1.96 Warrants Granted 420,093 $ 2.67 Warrants Expired (218,933 ) $ 1.17 Warrants Outstanding as of December 31, 2018 1,053,252 $ 4.28 |
Weighted-average fair value of the warrants granted | The weighted-average exercise price and weighted-average fair value of the warrants granted by the Company are as follows: For the Year Ended December 31, 2018 December 31, 2017 Weighted-Average Exercise Price Weighted-Average Fair Value Weighted-Average Exercise Price Weighted-Average Fair Value Warrants Granted Whose Exercise Price Exceeded Fair Value at the Date of Grant $ 2.37 $ 1.61 $ - $ - Warrants Granted Whose Exercise Price Was Equal or Lower Than Fair Value at the Date of Grant $ 3.95 $ 4.53 $ 2.79 $ 3.20 |
Warrants utilizing weighted-average inputs | For the warrants issued in 2018 and 2017 the Company valued the warrants utilizing the Black-Scholes option-pricing model with the following weighted-average inputs: Year Ended December 31, 2018 2017 Stock Price on Date of Grant $ 2.63 $ 4.15 Exercise Price $ 2.67 $ 2.79 Volatility 115.7 % 126.1 % Term 5-Years 5-Years Risk-Free Interest Rate 2.7 % 1.9 % Expected Dividend Rate 0 % 0 % |
COMMITMENTS AND CONTINGENCIES (
COMMITMENTS AND CONTINGENCIES (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Commitments And Contingencies Tables | |
Future minimum lease payments | Future minimum lease payments under non-cancelable operating leases having an initial or remaining term of more than one year are as follows: Scheduled Year Ending December 31 Payments 2019 $ 1,850,593 2020 1,716,997 2021 1,667,166 2022 1,645,435 2023 1,665,780 2024 and Thereafter 6,496,092 Total Future Minimum Lease Payments $ 15,042,063 |
SEGMENT INFORMATION (Tables)
SEGMENT INFORMATION (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Segment Information Tables | |
Summary of consolidated net revenue | Our segment net revenue and contributions to consolidated net revenue for each of the last two fiscal years were as follows: Total Revenue % of Total Revenue Year Ended December 31, Year Ended December 31, 2018 2017 2018 2017 Herbs and Produce Products $ 5,585,447 $ 5,701,233 17.8 % 15.9 % Cannabis Dispensary, Cultivation and Production 25,978,118 30,031,046 82.9 % 83.9 % Real Estate 62,574 - 0.2 % -% Other and Eliminations (292,521 ) 68,565 (0.9 )% 0.2 % Total $ 31,333,618 $ 35,800,844 100.0 % 100.0 % |
Summarized financial information | Summarized financial information concerning the Company’s reportable segments is shown in the following tables. Total asset amounts at December 31, 2018 and 2017 excludes intercompany receivable balances eliminated in consolidation. For the Year Ended December 31, 2018 Herbs and Produce Products Cannabis Dispensary, Cultivation and Production Real Estate Eliminations and Other Total Total Revenues $ 5,585,447 $ 25,978,118 $ 62,574 $ (292,521 ) $ 31,333,618 Cost of Goods Sold 4,232,875 14,091,651 - 575,564 18,900,090 Gross Profit 1,352,572 11,886,467 62,574 (868,085 ) 12,433,528 Depreciation & Amortization 522,669 4,272,592 31,061 232,468 5,058,790 Stock-Based Compensation - - - 603,117 603,117 Selling, General and Administrative Expenses (All Other) 3,682,386 15,221,640 984,845 17,753,596 37,642,467 Loss from Operations (2,852,483 ) (7,607,765 ) (953,332 ) (19,457,266 ) (30,870,846 ) Other Income (Expense): Impairment of Property (77,556 ) - - - (77,556 ) Impairment of Intangible Assets - - - - - Loss on Extinguishment of Debt - - - - - Loss from Derivatives Issued with Debt Greater Than Debt Carrying Value - - - - - Gain (Loss) on Fair Market Valuation of Derivatives - - - - - Interest Expense, Net - (524,271 ) (793,690 ) (11,774,973 ) (13,092,934 ) Share of Loss in Joint Venture - - - (662,222 ) (662,222 ) Gain on Sale of Assets - - - 5,229,680 5,229,680 Gain on Settlement of Contingent Consideration - - - - - Gain (Loss) on Fair Market Valuation of Contingent Consideration - - - - - Gain on Sale of Assets - - - - - Total Other Income (Expense) (77,556 ) (524,271 ) (793,690 ) (7,207,515 ) (8,603,032 ) Loss Before Provision for Income Taxes $ (2,930,039 ) $ (8,132,036 ) $ (1,747,022 ) $ (26,664,781 ) $ (39,473,878 ) Total Assets at December 31, 2018 $ 15,109,512 $ 78,307,074 $ 15,109,512 $ 22,494,829 $ 131,020,927 Capital Expenditures $ 1,036,566 $ 8,062,552 $ 13,229,942 $ 3,079,650 $ 25,408,710 For the Year Ended December 31, 2017 Herbs and Produce Products Cannabis Dispensary, Cultivation and Production Real Estate Eliminations and Other Total Total Revenues $ 5,701,233 $ 30,031,046 68,565 $ - $ 35,800,844 Cost of Goods Sold 5,211,658 25,112,113 - - 30,323,771 Gross Profit 489,575 4,918,933 68,565 - 5,477,073 Selling, General and Administrative Expenses 3,123,037 10,843,210 334,813 11,056,031 25,357,091 Loss from Operations (2,633,462 ) (5,924,277 ) (266,248 ) (11,056,031 ) (19,880,018 ) Other Income (Expense): Amortization of Debt Discount - - - (2,138,762 ) (2,138,762 ) (Loss) Gain on Extinguishment of Debt (18 ) 187 30 (7,144,487 ) (7,144,288 ) Loss on Fair Market Valuation of Derivatives - - - (3,494,550 ) (3,494,550 ) Interest (Expense) Income - 110 1 (542,775 ) (542,664 ) Impairment of Property - - - (138,037 ) (138,037 ) Impairment of Intangibles (757,467 ) - - - (757,467 ) Loss from Derivatives Issued with Debt Greater than Debt Carrying Value - - - - - Gain on Settlement of Contingent Consideration - 4,991,571 - - 4,991,571 Loss on Fair Market Valuation of Contingent Consideration - (4,426,047 ) - - (4,426,047 ) Share of Loss in Joint Venture - - - - - Gain on Sale of Assets - - - - - Total Other Income (Expense) (757,485 ) 565,821 31 (13,458,611 ) (13,650,244 ) Loss Before Provision for Income Taxes $ (3,390,947 ) $ (5,358,456 ) $ (266,217 ) $ (24,514,642 ) $ (33,530,262 ) Total Assets at December 31, 2017 $ 5,847,286 $ 69,844,546 $ 1,791,889 $ 20,704,078 $ 98,187,799 |
DESCRIPTION OF BUSINESS (Detail
DESCRIPTION OF BUSINESS (Details Narrative) - USD ($) | Mar. 12, 2018 | Dec. 31, 2018 | Dec. 31, 2017 | Aug. 31, 2017 | Dec. 31, 2016 |
State of Incorporation | Nevada | ||||
Reclass of Non-Controlling Interest to Additional Paid-In Capital for the Acquisition of Additional Interest in Subsidiary | $ 1,830,924 | ||||
Reverse Stock Split | 1-for-15 | ||||
Subsequent Event [Member] | |||||
Reverse Stock Split | 1-for-15 | ||||
MediFarm LLC [Member] | |||||
Ownership percentage | 98.00% | 60.00% | |||
Additional ownership percentage acquired | 38.00% | ||||
Business acquisition common stock shares issued | 200,000 | ||||
Business acquisition fair value of common stock | $ 200,000 | ||||
Business acquisition, ownership interests acquired | 2.00% |
SUMMARY OF SIGNIFICANT ACCOUN_4
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Goodwill, beginning balance | $ 28,921,260 | |
Goodwill, ending balance | 35,172,508 | $ 28,921,260 |
Goodwill [Member] | ||
Goodwill, beginning balance | 28,921,260 | 28,921,260 |
Acquisitions | ||
Measurement Period Adjustment | 6,251,248 | |
Goodwill, ending balance | $ 35,172,508 | $ 28,921,260 |
SUMMARY OF SIGNIFICANT ACCOUN_5
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 1) | 12 Months Ended |
Dec. 31, 2018 | |
Minimum [Member] | Trademarks [Member] | |
Useful Life (in Years) | 2 years |
Maximum [Member] | Trademarks [Member] | |
Useful Life (in Years) | 8 years |
Customer Relationships [Member] | Minimum [Member] | |
Useful Life (in Years) | 3 years |
Customer Relationships [Member] | Maximum [Member] | |
Useful Life (in Years) | 5 years |
Dispensary Licenses [Member] | |
Useful Life (in Years) | 14 years |
Management Service Agreement [Member] | |
Useful Life (in Years) | 15 years |
Patent [Member] | |
Useful Life (in Years) | 2 years |
SUMMARY OF SIGNIFICANT ACCOUN_6
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 2) - USD ($) | Dec. 31, 2018 | Dec. 31, 2017 |
Additional Paid-In Capital | $ 234,972,860 | $ 181,357,715 |
Accumulated Deficit | (141,184,287) | (105,548,602) |
Debt Discount | $ (2,638,000) | (4,791,000) |
Cumulative Effect Adjustment [Member] | ||
Derivative Liabilities | 9,331,400 | |
Additional Paid-In Capital | (5,238,296) | |
Accumulated Deficit | (2,547,802) | |
Debt Discount | (1,545,302) | |
Adjusted [Member] | ||
Derivative Liabilities | ||
Additional Paid-In Capital | 176,119,419 | |
Accumulated Deficit | (108,096,404) | |
Debt Discount | 3,245,299 | |
As Reported [Member] | ||
Derivative Liabilities | (9,331,400) | |
Additional Paid-In Capital | 181,357,715 | |
Accumulated Deficit | (105,548,602) | |
Debt Discount | $ 4,790,601 |
SUMMARY OF SIGNIFICANT ACCOUN_7
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Allowance for doubtful accounts | $ 330,000 | |
Advertising expenses | $ 1,440,000 | $ 1,210,000 |
Description for investments in LP's and LLC's under equity method accounting | The Company accounts for investments in limited partnerships or limited liability corporations, whereby the Company owns a minimum of 5.0% of the investee’s outstanding voting stock, under the equity method of accounting | |
Buildings [Member] | ||
Estimated useful life | 32 years | |
Furniture and Equipment [Member] | Minimum [Member] | ||
Estimated useful life | 3 years | |
Furniture and Equipment [Member] | Maximum [Member] | ||
Estimated useful life | 8 years | |
Computer Hardware and Software [Member] | Minimum [Member] | ||
Estimated useful life | 3 years | |
Computer Hardware and Software [Member] | Maximum [Member] | ||
Estimated useful life | 5 years | |
Vehicles [Member] | ||
Estimated useful life | 5 years | |
Leasehold Improvements [Member] | ||
Estimated useful life | 5 years | |
January 1, 2019 [Member] | ||
Right of use asset and lease liability | $ 9,290,000 | |
Finite-Lived Intangible Assets [Member] | ||
Change in income (loss) from operations due to reduction in useful life | $ (1,580,000) |
CONCENTRATIONS OF BUSINESS AN_2
CONCENTRATIONS OF BUSINESS AND CREDIT RISK (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Cash in excess of FDIC insured limit | $ 4,830,000 | $ 2,970,000 |
One Customer [Member] | ||
Concentration risk of revenue, description | There were no customers that comprised more than 10.0% of the Companys revenue for the year ended December 31, 2018 and 2017. |
VARIABLE INTEREST ENTITY ARRA_3
VARIABLE INTEREST ENTITY ARRANGEMENTS (Details) - USD ($) | Dec. 31, 2018 | Dec. 31, 2017 |
Current Assets: | ||
Cash | $ 7,193,392 | $ 5,445,582 |
Accounts Receivable, Net | 330,000 | |
Inventory | 2,279,737 | 5,760,019 |
Prepaid Expenses and Other Current Assets | 741,261 | 1,067,689 |
Total Current Assets | 18,962,512 | 18,243,131 |
Property, Equipment and Leasehold Improvements, Net | 34,139,089 | 19,191,616 |
TOTAL ASSETS | 120,088,127 | 98,187,799 |
Current Liabilities: | ||
Accounts Payable and Accrued Expenses | 4,348,256 | 4,822,812 |
Total Liabilities | 25,214,319 | 21,385,508 |
Variable Interest Entity [Member] | ||
Current Assets: | ||
Cash | 893,866 | 409,029 |
Accounts Receivable, Net | 28,207 | 232,230 |
Inventory | 556,301 | 232,231 |
Prepaid Expenses and Other Current Assets | 8,165 | 302,186 |
Total Current Assets | 1,486,539 | 1,175,676 |
Property, Equipment and Leasehold Improvements, Net | 1,799,417 | 1,965,103 |
TOTAL ASSETS | 3,285,956 | 3,140,779 |
Current Liabilities: | ||
Accounts Payable and Accrued Expenses | 342,136 | 419,853 |
Total Liabilities | $ 342,136 | $ 419,853 |
ACQUISITIONS (Details)
ACQUISITIONS (Details) | Dec. 31, 2018USD ($) |
Assets Acquired | |
Inventory | $ 113,779 |
Property, Equipment and Leasehold Improvements: | |
Furniture and Equipment | 52,829 |
Leasehold Improvements | 46,737 |
Security Deposits | 5,000 |
Management Service Agreement | 370,332 |
Goodwill | 6,258,260 |
Total Assets Acquired | $ 6,846,937 |
ACQUISITIONS (Details 1)
ACQUISITIONS (Details 1) - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Revenues | $ 31,333,618 | $ 35,800,844 |
Net Loss Attributable to Terra Tech Corp. | $ (39,753,486) | $ (32,677,603) |
Net Loss per Common Share Attributable to Terra Tech Corp. Common Stockholders - Basic and Diluted | $ (0.56) | $ (0.71) |
Pro Forma | ||
Revenues | $ 38,208,172 | |
Net Loss Attributable to Terra Tech Corp. | $ (33,472,729) | |
Net Loss per Common Share Attributable to Terra Tech Corp. Common Stockholders - Basic and Diluted | $ (0.73) |
ACQUISITIONS (Details Narrative
ACQUISITIONS (Details Narrative) - USD ($) | 3 Months Ended | 12 Months Ended | |
Sep. 30, 2018 | Dec. 31, 2018 | Mar. 31, 2018 | |
Consideration for assets acquired | $ 6,846,937 | ||
Escrow [Member] | |||
Common stock, shares issued | 192,758 | ||
Common stock shares issued, value | $ 640,000 | ||
Asset purchase agreement [Member] | |||
Cash paid as consideration | $ 4,120,000 | ||
Common stock, shares issued | 633,348 | ||
Common stock shares issued, value | $ 2,100,000 | ||
Cancelled shares | 101,083 | ||
Cancelled shares, amount | $ 350,000 | ||
MediFarm So Cal Inc [Member] | |||
Cash paid as consideration | $ 6,250,000 | ||
Fair value of the management services agreement adjustment | $ 6,300,000 | ||
Decrease in amortization expense | $ 430,000 |
INVESTMENTS IN UNCONSOLIDATED_2
INVESTMENTS IN UNCONSOLIDATED AFFILIATES (Details Narrative) - USD ($) | 1 Months Ended | 12 Months Ended | ||
Aug. 28, 2018 | Dec. 31, 2018 | Dec. 31, 2017 | Oct. 26, 2017 | |
Loss | $ (39,753,486) | $ (32,677,603) | ||
Initial exercise price | $ 1.56 | $ 2.68 | ||
Subscription Agreement [Member] | NuLeaf [Member] | ||||
Common stock purchase description | 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. | |||
Initial exercise price | $ 5 | |||
Joint Venture Agreements [Member] | NuLeaf [Member] | ||||
Convertible loans | $ 4,500,000 | |||
Interest rate per annum | 6.00% | |||
Ownership percentage | 50.00% | |||
Other investments | $ 7,810,000 | |||
Loss | $ 660,000 |
INVENTORY (Details)
INVENTORY (Details) - USD ($) | Dec. 31, 2018 | Dec. 31, 2017 |
Inventory Details | ||
Raw Materials | $ 1,213,289 | $ 1,450,273 |
Work-In-Progress | 881,932 | 1,016,596 |
Finished Goods | 1,202,745 | 3,293,150 |
Inventory Reserve | (1,018,229) | |
Total Inventory | $ 2,279,737 | $ 5,760,019 |
PROPERTY, EQUIPMENT AND LEASE_3
PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS, NET (Details) - USD ($) | Dec. 31, 2018 | Dec. 31, 2017 |
Property, Equipment and Leasehold Improvements, Gross | $ 47,397,575 | $ 23,608,176 |
Less Accumulated Depreciation | (5,807,078) | (4,416,560) |
Less Assets Held for Sale | (7,451,408) | 0 |
Property, Equipment and Leasehold Improvements, Net | 34,139,089 | 19,191,616 |
Land and Building [Member] | ||
Property, Equipment and Leasehold Improvements, Gross | 22,401,014 | 9,047,201 |
Furniture and Equipment [Member] | ||
Property, Equipment and Leasehold Improvements, Gross | 3,652,044 | 3,553,587 |
Computer Hardware and Software [Member] | ||
Property, Equipment and Leasehold Improvements, Gross | 531,119 | 486,176 |
Leasehold Improvements [Member] | ||
Property, Equipment and Leasehold Improvements, Gross | 8,524,930 | 9,316,665 |
Construction in Progress [Member] | ||
Property, Equipment and Leasehold Improvements, Gross | $ 12,288,468 | $ 1,204,547 |
PROPERTY, EQUIPMENT AND LEASE_4
PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS, NET (Details 1) - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Inventory | $ 2,279,737 | $ 5,760,019 |
Property & Equipment | 34,139,089 | 19,191,616 |
Gain on Sale of Assets | 5,229,680 | |
MediFarm LLC [Member] | ||
Total Consideration | 6,408,239 | |
Inventory | 159,161 | |
Prepaid Expenses | 9,645 | |
Property & Equipment | 597,253 | |
Total Asset Book Value | 766,059 | |
Transaction Costs | $ 412,500 |
PROPERTY, EQUIPMENT AND LEASE_5
PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS, NET (Details Narrative) - USD ($) | 3 Months Ended | 12 Months Ended | |
Sep. 30, 2017 | Dec. 31, 2018 | Dec. 31, 2017 | |
Depreciation expense | $ 2,000,000 | $ 1,930,000 | |
Impairment of Property | $ (140,000) | (77,556) | $ (138,037) |
Property, plant and equipment held-for-sale | 7,450,000 | ||
Mortgage liabilities held-for-sale | 4,500,000 | ||
MediFarm So Cal Inc [Member] | |||
Cash paid as consideration | $ 6,250,000 |
INTANGIBLE ASSETS, NET (Details
INTANGIBLE ASSETS, NET (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Gross Carrying Amount | $ 24,228,252 | $ 30,479,500 |
Accumulated Amortization | (5,729,638) | (2,706,390) |
Net carrying value | $ 18,498,614 | 27,773,110 |
Customer Relationships [Member] | Minimum [Member] | ||
Useful Life (in Years) | 3 years | |
Customer Relationships [Member] | Maximum [Member] | ||
Useful Life (in Years) | 5 years | |
Management Service Agreement [Member] | ||
Useful Life (in Years) | 15 years | |
Amortized Intangible Assets [Member] | ||
Gross Carrying Amount | $ 18,908,252 | 25,159,500 |
Accumulated Amortization | (5,729,638) | (2,706,390) |
Net carrying value | 13,178,614 | 22,453,110 |
Amortized Intangible Assets [Member] | Customer Relationships [Member] | ||
Gross Carrying Amount | 8,072,400 | 8,072,400 |
Accumulated Amortization | (3,596,562) | (1,345,191) |
Net carrying value | 4,475,838 | 6,727,209 |
Amortized Intangible Assets [Member] | Trademarks and Patent [Member] | ||
Gross Carrying Amount | 195,520 | 195,520 |
Accumulated Amortization | (116,552) | (77,448) |
Net carrying value | $ 78,968 | 118,072 |
Amortized Intangible Assets [Member] | Trademarks and Patent [Member] | Minimum [Member] | ||
Useful Life (in Years) | 2 years | |
Amortized Intangible Assets [Member] | Trademarks and Patent [Member] | Maximum [Member] | ||
Useful Life (in Years) | 8 years | |
Amortized Intangible Assets [Member] | Dispensary License [Member] | ||
Gross Carrying Amount | $ 10,270,000 | 10,270,000 |
Accumulated Amortization | (1,984,632) | (1,283,751) |
Net carrying value | $ 8,285,368 | 8,986,249 |
Useful Life (in Years) | 14 years | |
Amortized Intangible Assets [Member] | Management Service Agreement [Member] | ||
Gross Carrying Amount | $ 370,332 | 6,621,580 |
Accumulated Amortization | (31,891) | |
Net carrying value | $ 8,285,368 | 6,621,580 |
Useful Life (in Years) | 15 years | |
Non- Amortized Intangible Assets [Member] | ||
Gross Carrying Amount | $ 5,320,000 | 5,320,000 |
Accumulated Amortization | ||
Net carrying value | 5,320,000 | 5,320,000 |
Non- Amortized Intangible Assets [Member] | Trade Name [Member] | ||
Gross Carrying Amount | 5,320,000 | 5,320,000 |
Accumulated Amortization | ||
Net carrying value | $ 5,320,000 | $ 5,320,000 |
Estimated useful lives | Indefinite |
INTANGIBLE ASSETS, NET (Detai_2
INTANGIBLE ASSETS, NET (Details 1) | Dec. 31, 2018USD ($) |
Amortization expense | |
2019 | $ 1,452,361 |
2020 | 1,452,361 |
2021 | 1,414,017 |
2022 | 1,413,257 |
2022 and thereafter | 8,996,850 |
Amortization expense, Net | $ 14,728,846 |
INTANGIBLE ASSETS, NET (Detai_3
INTANGIBLE ASSETS, NET (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Intangible Assets Details Narrative | ||
Loss from operations | $ 1,580,000 | |
Amortization expense | 1,470,000 | $ 1,720,000 |
Impairment of Intangible Assets | $ (757,467) |
ACCOUNTS PAYABLE AND ACCRUED _3
ACCOUNTS PAYABLE AND ACCRUED EXPENSES (Details) - USD ($) | Dec. 31, 2018 | Dec. 31, 2017 |
Accounts Payable And Accrued Expenses Details | ||
Accounts payable | $ 2,576,166 | $ 2,308,844 |
Sales & Local Tax Payable | 567,886 | 545,398 |
Accrued Payroll | 2,553,186 | |
Accrued expenses | 1,204,204 | 2,590,468 |
Total Accounts Payable and Accrued Expenses | $ 6,901,442 | $ 5,444,710 |
NOTES PAYABLE (Details)
NOTES PAYABLE (Details) - USD ($) | Dec. 31, 2018 | Dec. 31, 2017 |
Long-Term Debt | $ 20,950,000 | $ 11,400,000 |
Less: Debt Discount | (2,638,000) | (4,791,000) |
Net Long Term Debt | 18,312,000 | 6,609,000 |
Securities Purchase Agreement [Member] | ||
Long-Term Debt | 7,000,000 | |
Convertible promissory note [Member] | ||
Long-Term Debt | 1,400,000 | |
Convertible promissory note one [Member] | ||
Long-Term Debt | 5,500,000 | |
Promissory Note [Member] | ||
Long-Term Debt | 4,500,000 | 4,500,000 |
Promissory Note One [Member] | ||
Long-Term Debt | 6,500,000 | |
Convertible promissory note Two [Member] | ||
Long-Term Debt | 150,000 | |
Convertible promissory note Three [Member] | ||
Long-Term Debt | 1,200,000 | |
Promissory Note Two [Member] | ||
Long-Term Debt | $ 1,600,000 |
NOTES PAYABLE (Details 1)
NOTES PAYABLE (Details 1) - USD ($) | Dec. 31, 2018 | Dec. 31, 2017 |
Total Debt | $ 20,950,000 | $ 11,400,000 |
2019 [Member] | ||
Total Debt | ||
2020 [Member] | ||
Total Debt | 12,850,000 | |
2021 [Member] | ||
Total Debt | 8,100,000 | |
2022 [Member] | ||
Total Debt | ||
2023 and thereafter [Member] | ||
Total Debt |
NOTES PAYABLE (Details 2)
NOTES PAYABLE (Details 2) - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Note Payable Tables | ||
Fair market value of common stock issued upon conversion | $ 29,785,271 | |
Principal amount of debt converted | (19,314,324) | |
Accrued interest converted | (635,401) | |
Fair value of derivative at conversion date | (14,223,550) | |
Debt discount value at conversion date | 11,532,292 | |
Loss on Extinguishment of Debt | $ 7,144,288 |
NOTES PAYABLE (Details Narrativ
NOTES PAYABLE (Details Narrative) | Oct. 05, 2018USD ($) | Jan. 18, 2018USD ($) | Nov. 22, 2017USD ($) | Dec. 31, 2018USD ($)Numbershares | Dec. 31, 2017USD ($)shares |
Unamortized debt discount remaining balance | $ 250,000 | ||||
Total debt | 6,609,398 | $ 1,918,676 | |||
Unamortized debt discount | (2,638,000) | (4,791,000) | |||
Debt conversion, converted instrument, amount | (19,314,324) | ||||
Cash paid for debt discount | $ 614,600 | ||||
Common stock issued in conversion of debt | shares | 16,652,002 | 8,284,283 | |||
Convertible promissory note One [Member] | Securities Purchase Agreement [Member] | March 2018 [Member] | |||||
Issuance of warrants value | $ 540,000 | ||||
Debt conversion, converted instrument, amount | 18,700,000 | ||||
Cash paid for debt discount | 670,000 | ||||
Convertible promissory note [Member] | Securities Purchase Agreement [Member] | March 2018 [Member] | |||||
Issuance of warrants value | $ 560,000 | ||||
Interest rate | 7.50% | ||||
Debt conversion, converted instrument, amount | $ 13,100,000 | ||||
Unamortized debt due discount amount | 6,900,000 | ||||
Cash paid for debt discount | 600,000 | ||||
Convertible debt aggregate value | 40,000,000 | ||||
Amount per tranches | $ 5,000,000 | ||||
Number of tranches | Number | 8 | ||||
Principle remains outstanding balance | $ 8,350,000 | ||||
Description of conversion price | For each note issued under the 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) 85.0% of the lowest daily volume weighted average price of the Common Stock in the fifteen (15) trading days prior to the conversion date (Conversion Price), which Conversion Price is subject to adjustment for (i) stock splits, stock dividends, combinations, or similar events and (ii) full ratchet anti-dilution protection. Upon certain events of default, the conversion price will automatically become 70.0% 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. | ||||
Convertible promissory note [Member] | Securities Purchase Agreement [Member] | |||||
Interest rate | 12.00% | ||||
Issuance of promissory note | shares | 20,000,000 | ||||
Debt conversion, converted instrument, amount | $ 13,100,000 | ||||
Unamortized debt due discount amount | $ 6,900,000 | ||||
Promissory Note [Member] | California [Member] | Third Party Creditor [Member] | |||||
Purchase of land and building | $ 1,600,000 | $ 6,500,000 | $ 4,500,000 | ||
Issuance of warrants value | $ 160,000 | ||||
Interest rate | 12.00% | 12.00% | 12.00% | ||
Debt instrument maturity date | Oct. 5, 2021 | Dec. 1, 2020 | |||
Interest rate increase per year through 2020 | 0.50% | 0.50% | |||
Interest rate escalation description | The interest rate for the first year is 12.0% and increases 0.5% per year through 2020. | The interest rate for the first year is 12.0% and increases 0.5% per year, up to 13.0%, through 2021. | The promissory note is collateralized by the land and building purchased and matures in December 1, 2020. | ||
Cash paid for debt discount | $ 200,000 |
CONTINGENT CONSIDERATION (Detai
CONTINGENT CONSIDERATION (Details) | 12 Months Ended |
Dec. 31, 2018 | |
Contingent Consideration Details | |
Formula to calculate performance based cash consideration, descriptions | One-Year Anniversary Probability Revenue-Based Probability- Date Revenue Payment Amounts Weighted $ 3,200,000 0.00 % $ 800,000 $ – $ 2,000,000 0.50 % $ 200,000 1,000 $ 1,599,999 99.50 % $ – – Fair Value of Expected Earn-out Payment 1,000 Discount Rate 25 % Payments $ 0 Present Value Factor at 20% Discount Rate for 12 Months 0.9457 Present Value of Contingent Consideration $ 946 |
CONTINGENT CONSIDERATION (Det_2
CONTINGENT CONSIDERATION (Details 1) | 12 Months Ended |
Dec. 31, 2018 | |
Contingent Consideration Details 1 | |
Formula to calculate performance based cash consideration, descriptions | Year 1 Revenue $ 16,666,666 Less: 12,000,000 $ 4,666,666 0.44742864 Performance-Based Cash Payment $ 2,088,000 |
CONTINGENT CONSIDERATION (Det_3
CONTINGENT CONSIDERATION (Details 2) - USD ($) | 3 Months Ended | 9 Months Ended | 12 Months Ended |
Mar. 31, 2017 | Dec. 31, 2017 | Dec. 31, 2017 | |
Contingent Consideration Liability Details 2 | |||
Contingent Consideration, beginning balance | $ 12,085,859 | $ 16,434,620 | $ 12,085,859 |
Change in Fair Market Valuation of Contingent Consideration | 4,348,761 | 77,286 | |
Contingent Consideration, ending balance | 16,434,620 | ||
Contingent Consideration Detail | |||
Performance-Based Cash Contingent Consideration | 2,088,000 | ||
Market-Based Stock Contingent Consideration | 14,346,620 | ||
Total | $ 16,434,620 |
CONTINGENT CONSIDERATION (Det_4
CONTINGENT CONSIDERATION (Details 3) - USD ($) | 3 Months Ended | 9 Months Ended | 12 Months Ended | |
Mar. 31, 2017 | Dec. 31, 2017 | Dec. 31, 2018 | Dec. 31, 2017 | |
Contingent Consideration Liability Details 3 | ||||
Contingent Consideration, beginning balance | $ 12,085,859 | $ 16,434,620 | $ 12,085,859 | |
Change in Fair Market Valuation of Contingent Consideration | 4,348,761 | 77,286 | ||
Payment of Contingent Consideration in Cash | (2,088,000) | |||
Settlement of Contingent Consideration | (4,739,638) | (4,739,638) | ||
Settlement of Contingent Consideration Recorded Against Additional Paid-In Capital | (4,692,697) | (4,692,697) | ||
Gain on Settlement of Contingent Consideration | (4,991,571) | (4,991,571) | ||
Contingent Consideration, ending balance | $ 16,434,620 |
CONTINGENT CONSIDERATION (Det_5
CONTINGENT CONSIDERATION (Details Narrative) - USD ($) | 9 Months Ended | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2018 | Dec. 31, 2017 | |
Gain on Settlement of Contingent Consideration Liability | $ (4,991,571) | $ (4,991,571) | |
Loss on Fair Market Valuation of Contingent Consideration | $ 4,426,047 | ||
Contingent consideration, shares issued value | $ 4,790,000 | ||
Additional shares clawed-back, shares | 2,280,000 | ||
Additional shares clawed-back, value | $ 9,680,000 | ||
Market-Based Claw back associated with common stock | 2,340,000 | ||
April 1, 2016 (Acquisition Date) [Member] | |||
Contingent Consideration liability | $ 12,750,000 | ||
April 1, 2017 (Acquisition Date) [Member] | |||
Final contingent consideration | $ 16,500,000 | ||
Contingent consideration, shares issued | 1,210,000 | ||
Contingent consideration, shares issued value | $ 4,790,000 | ||
Contingent consideration, cash payment | 2,100,000 | ||
Shares released from escrow, value | 14,400,000 | ||
Black Oak acquisition [Member] | |||
Contingent Consideration liability | $ 12,750,000 | ||
Description for likelihood of payouts related to contingent consideration | In determining the likelihood of payouts related to the Black Oak Contingent Consideration, the probabilities for various scenarios (e.g., a 75.0% probability that the maximum amount of Black Oak Contingent Consideration will be payable), as well as the discount rate used in the Company’s calculations were based on internal projections, all of which were vetted by the Company’s senior management. | ||
Expected contingent consideration liability | $ 15,310,000 | ||
Black Oak acquisition [Member] | Performance-Based Cash Consideration [Member] | |||
Due date description | Approximately the one-year anniversary date of the closing of the Black Oak merger | ||
Black Oak acquisition [Member] | Performance-Based Cash Consideration [Member] | Maximum [Member] | |||
Cash consideration payable | $ 2,088,000 | ||
Black Oak acquisition [Member] | Holdback Consideration [Member] | |||
Description for determination of market-based claw back amount | a) If the Terra Tech Common Stock 30-day VWAP on the one-year anniversary date of the Merger Agreement exceeds the Terra Tech Closing Price, the Market-Based Clawback Amount shall mean the number of shares of Terra Tech Common Stock equal to (i) (A) $4.91 million divided by (B) the Terra Tech Closing Price, less (ii) (A) $4.91 million divided by (B) the Terra Tech Common Stock 30-day VWAP on such date. | ||
Description for determination of performance-based claw back amount | a) The “Lower Threshold” means an amount equal to $11.98 million, and the “Upper Threshold” means an amount equal to $16.67 million. b) If Black Oak’s operating revenues for the 12-month period following the closing date of the Black Oak merger (the “Year 1 Revenue”) is less than the Lower Threshold, then the Performance-Based Clawback Amount will be the number of shares obtained from a quotient, (A) the numerator of which is equal to the sum of (1) $4.91 million, plus (2) the product of 1.5 multiplied by the difference between the Lower Threshold and the Year 1 Revenue, and (B) the denominator of which is the Terra Tech common stock 30-day VWAP as of the one-year anniversary date of the closing of the Black Oak merger. c) If the Year 1 Revenue is greater than or equal to the Lower Threshold but is less than the Upper Threshold, then the Performance-Based Clawback Amount will be the number of shares obtained from a quotient, (A) the numerator of which is equal to the product of 1.053 multiplied by the difference between the Upper Threshold and the Year 1 Revenue, and (B) the denominator of which is the Terra Tech common stock 30-day VWAP as of the one-year anniversary date of the closing of the Black Oak merger. d) If the Year 1 Revenue is greater than or equal to the Upper Threshold, then the Performance-Based Clawback Amount will be zero shares. |
FAIR VALUE MEASUREMENTS (Detail
FAIR VALUE MEASUREMENTS (Details) - USD ($) | Dec. 31, 2018 | Dec. 31, 2017 |
Derivative liability - Conversion Feature | $ 9,331,400 | |
Fair value of financial liabilities | 9,331,400 | |
Fair Value Measurement Using, Level 1 [Member] | ||
Derivative liability - Conversion Feature | ||
Fair value of financial liabilities | ||
Fair Value Measurement Using, Level 2 [Member] | ||
Derivative liability - Conversion Feature | ||
Fair value of financial liabilities | ||
Fair Value Measurement Using, Level 3 [Member] | ||
Derivative liability - Conversion Feature | 9,331,400 | |
Fair value of financial liabilities | $ 9,331,400 |
FAIR VALUE MEASUREMENTS (Deta_2
FAIR VALUE MEASUREMENTS (Details 1) - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Fair Value Measurements Details 1 | ||
Liabilities measured at fair value Beginning Balance | $ 9,331,400 | $ 6,987,000 |
Change in fair market value of Conversion Feature | 3,494,550 | |
Derivative debt converted into equity | (14,223,550) | |
Issuance of equity instruments with derivatives | 13,073,400 | |
Reclassification of Derivative Liabilities to Equity | (9,331,400) | |
Liabilities measured at fair value Ending Balance | $ 9,331,400 |
FAIR VALUE MEASUREMENTS (Deta_3
FAIR VALUE MEASUREMENTS (Details 2) - USD ($) | 3 Months Ended | 9 Months Ended | 12 Months Ended | |
Mar. 31, 2017 | Dec. 31, 2017 | Dec. 31, 2018 | Dec. 31, 2017 | |
Fair Value Measurements Details 2 | ||||
Contingent Consideration, beginning balance | $ 12,085,859 | $ 16,434,620 | $ 12,085,859 | |
Change in fair market value of contingent conversion Feature | 4,426,047 | |||
Payment of Contingent Consideration in Cash | (2,088,000) | |||
Settlement of Contingent Consideration | (4,739,638) | (4,739,638) | ||
Settlement of Contingent Consideration Recorded Against Additional Paid-In Capital | (4,692,697) | (4,692,697) | ||
Gain on Settlement of Contingent Consideration Liability | (4,991,571) | (4,991,571) | ||
Contingent Consideration, ending balance | $ 16,434,620 |
FAIR VALUE MEASUREMENTS (Deta_4
FAIR VALUE MEASUREMENTS (Details 3) - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Stock Price | $ 0.56 | |
Expected Life (Years) | 6 years | 5 years |
Minimum [Member] | ||
Risk-Free Interest Rate | 2.50% | 2.00% |
Expected Volatility | 113.20% | 117.30% |
Maximum [Member] | ||
Risk-Free Interest Rate | 2.90% | 2.40% |
Expected Volatility | 128.00% | 120.90% |
Derivative liabilities [Member] | ||
Annual Dividend Yield | ||
Derivative liabilities [Member] | Minimum [Member] | ||
Stock Price | $ 2.25 | |
Conversion and Exercise Price | $ 1.80 | |
Expected Life (Years) | 5 months 16 days | |
Risk-Free Interest Rate | 1.04% | |
Expected Volatility | 43.80% | |
Derivative liabilities [Member] | Maximum [Member] | ||
Stock Price | $ 5.85 | |
Conversion and Exercise Price | $ 6.60 | |
Expected Life (Years) | 3 years 5 months 1 day | |
Risk-Free Interest Rate | 2.50% | |
Expected Volatility | 123.56% |
TAX EXPENSE (Details)
TAX EXPENSE (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Current: | ||
Federal | $ (343,943) | |
State | (3,512) | |
Total | (347,455) | |
Deferred: | ||
Federal | ||
State | ||
Total | ||
Total (Benefit) Expense for Income Taxes | $ (347,455) |
TAX EXPENSE (Details 1)
TAX EXPENSE (Details 1) - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Income Taxes Details 1 | ||
Expected Income Tax Benefit at Statutory Tax Rate, Net | $ (6,847,005) | $ (13,456,000) |
Non-Deductible Items | ||
Warrants Expense | 871,000 | |
Derivatives Expense | 4,104,000 | |
Amortization | 641,747 | |
Amortization of Debt Discount | 335,878 | |
IRC 280E Adjustment | 1,565,957 | |
Net Operating Losses | ||
Impairment of Property and Intangibles | 365,000 | |
Other | 68,792 | 1,033,545 |
Change in Valuation Allowance | 4,234,631 | 6,735,000 |
Reported Income (Benefit) Tax Expense | $ (347,455) |
TAX EXPENSE (Details 3)
TAX EXPENSE (Details 3) - USD ($) | Dec. 31, 2018 | Dec. 31, 2017 |
Deferred Income Tax Assets: | ||
Options expense | $ 1,018,000 | |
Allowance for Doubtful Accounts | 33,000 | |
Net Operating Losses | 13,409,000 | 8,023,000 |
Deferred Income Tax Assets | 14,460,000 | 8,023,000 |
Deferred Income Tax Liabilities: | ||
Depreciation | (829,000) | (850,000) |
Total | 13,631,000 | 7,173,000 |
Valuation Allowance | (13,631,000) | (7,173,000) |
Net Deferred Tax |
TAX EXPENSE (Details Narrative)
TAX EXPENSE (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Tax Expense Details Nattative Abstract | ||
Net operating loss carry forwards | $ 42,780,000 | $ 26,333,000 |
Net operating loss carry forwards expiring year | beginning in 2034 | |
Provisional income tax benefit | $ 3,300,000 |
EQUITY (Details Narrative)
EQUITY (Details Narrative) | Mar. 12, 2018 | Dec. 31, 2017Number$ / sharesshares | Dec. 31, 2018$ / sharesshares |
Preferred stock, Par value | $ / shares | $ 0.001 | ||
Preferred stock, Authorized | 50,000,000 | ||
Common stock, par value | $ / shares | $ 0.001 | $ 0.001 | |
Common stock, Authorized | 990,000,000 | 990,000,000 | |
Common stock, Issued | 61,818,560 | 81,759,415 | |
Common stock, Outstanding | 61,818,560 | 81,759,415 | |
Reverse Stock Split | 1-for-15 | ||
Convertible Series A Preferred Stock [Member] | |||
Preferred stock, Par value | $ / shares | $ 0.001 | $ 0.001 | |
Preferred stock, Authorized | 100 | 100 | |
Preferred stock, Issued | 8 | 12 | |
Preferred stock, Outstanding | 8 | 12 | |
Convertible Series B Preferred Stock [Member] | |||
Number of votes | Number | 100 | ||
Common stock conversion basis | 1-for-5.384325537 | ||
Preferred stock, Par value | $ / shares | $ 0.001 | $ 0.001 | |
Preferred stock, Authorized | 41,000,000 | 41,000,000 | |
Preferred stock, Issued | 0 | 0 | |
Preferred stock, Outstanding | 0 | 0 |
STOCK-BASED COMPENSATION (Detai
STOCK-BASED COMPENSATION (Details) | Dec. 31, 2018shares |
2016 Equity Incentive Plan [Member] | |
Awards Reserved for Issuance | 2,000,000 |
Awards Issued | 1,541,064 |
Awards Available for Grant | 458,936 |
2018 Equity Incentive Plan [Member] | |
Awards Reserved for Issuance | 6,600,000 |
Awards Issued | 5,100,000 |
Awards Available for Grant | 1,500,000 |
STOCK-BASED COMPENSATION (Det_2
STOCK-BASED COMPENSATION (Details 1) - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Number of Options | ||
Options/Warrants outstanding - beginning balance | 1,177,732 | 446,667 |
Options granted | 6,911,667 | 731,065 |
Options exercised | ||
Options forfeited | (436,668) | |
Options Expired | ||
Options/Warrants outstanding - ending balance | 7,652,731 | 1,177,732 |
Options exercisable | 1,870,039 | |
Weighted average exercise price | ||
Options/Warrants outstanding - beginning balance | $ 2.17 | $ 1.35 |
Options granted | 1.56 | 2.68 |
Options exercised | ||
Options forfeited | 2.36 | |
Options Expired | ||
Options/Warrants outstanding - ending balance | 1.61 | $ 2.17 |
Options exercisable | $ 1.92 | |
Weighted average remaining contracted term | ||
Options outstanding - ending balance | 9 years 7 months 6 days | |
Options exercisable | 9 years 1 month 6 days | |
Aggregate intrinsic value | ||
Options outstanding - ending balance | ||
Options exercisable |
STOCK-BASED COMPENSATION (Det_3
STOCK-BASED COMPENSATION (Details 2) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Expected term (years) | 6 years | 5 years |
Dividend Yield | 0.00% | 0.00% |
Minimum [Member] | ||
Volatility | 113.20% | 117.30% |
Risk-Free Interest Rate | 2.50% | 2.00% |
Maximum [Member] | ||
Volatility | 128.00% | 120.90% |
Risk-Free Interest Rate | 2.90% | 2.40% |
STOCK-BASED COMPENSATION (Det_4
STOCK-BASED COMPENSATION (Details 3) - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Number of Shares or Options Granted | ||
Stock-Based Compensation Expense | $ 3,456,517 | $ 3,725,792 |
Stock Options [Member] | ||
Number of Shares or Options Granted | 6,911,667 | 731,065 |
Stock-Based Compensation Expense | $ 2,527,982 | $ 692,971 |
Employees (Common Stock) [Member] | ||
Number of Shares or Options Granted | 201,296 | 158,867 |
Stock-Based Compensation Expense | $ 603,117 | $ 490,880 |
Employees (Series B Preferred Stock) [Member] | ||
Number of Shares or Options Granted | 0 | 40,000 |
Stock-Based Compensation Expense | $ 0 | $ 1,035,406 |
Directors (Common Stock) [Member] | ||
Number of Shares or Options Granted | 49,500 | 81,061 |
Stock-Based Compensation Expense | $ 99,990 | $ 221,973 |
Non-Employee Consultants (Common Stock) [Member] | ||
Number of Shares or Options Granted | 132,971 | 389,374 |
Stock-Based Compensation Expense | $ 225,428 | $ 1,284,562 |
STOCK-BASED COMPENSATION (Det_5
STOCK-BASED COMPENSATION (Details Narrative) | 12 Months Ended |
Dec. 31, 2018USD ($)$ / shares | |
Stockbased Compensation Details Narrative | |
Closing stock price | $ / shares | $ 0.56 |
Unrecognized stock-based compensation | $ | $ 7,967,114 |
Weighted-average period | 2 years 9 months |
WARRANTS (Details)
WARRANTS (Details) - $ / shares | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Shares | ||
Options/Warrants outstanding - beginning balance | 1,177,732 | 446,667 |
Warrants exercised | ||
Warrants granted | ||
Options/Warrants outstanding - ending balance | 7,652,731 | 1,177,732 |
Weighted Average Exercise Price | ||
Options/Warrants outstanding - beginning balance | $ 2.17 | $ 1.35 |
Warrants exercised | ||
Warrants granted | 1.56 | 2.68 |
Options/Warrants outstanding - ending balance | $ 1.61 | $ 2.17 |
Warrant [Member] | ||
Shares | ||
Options/Warrants outstanding - beginning balance | 1,191,367 | 1,055,761 |
Warrants exercised | (339,275) | |
Warrants granted | 420,093 | 214,915 |
Warrants expired | (218,933) | (79,309) |
Options/Warrants outstanding - ending balance | 1,053,252 | 1,191,367 |
Weighted Average Exercise Price | ||
Options/Warrants outstanding - beginning balance | $ 2.85 | $ 2.85 |
Warrants exercised | 1.96 | |
Warrants granted | 2.67 | 2.79 |
Warrants expired | 1.17 | 3.34 |
Options/Warrants outstanding - ending balance | $ 4.28 | $ 2.85 |
WARRANTS (Details 1)
WARRANTS (Details 1) - $ / shares | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Warrant [Member] | ||
Weighted average exercise price of warrants granted | $ 2.37 | |
Weighted average fair value of warrants granted | 3.95 | 2.79 |
Warrant One [Member] | ||
Weighted average exercise price of warrants granted | 1.61 | |
Weighted average fair value of warrants granted | $ 4.53 | $ 3.20 |
WARRANTS (Details 2)
WARRANTS (Details 2) - $ / shares | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Stock Price on Date of Grant | $ 0.56 | |
Term | 6 years | 5 years |
Expected Dividend Rate | 0.00% | 0.00% |
Warrant [Member] | ||
Stock Price on Date of Grant | $ 2.63 | $ 4.15 |
Exercise Price | $ 2.67 | $ 2.79 |
Volatility | 115.70% | 126.10% |
Term | 5 years | 5 years |
Risk-Free Interest Rate | 2.70% | 1.90% |
Expected Dividend Rate | 0.00% | 0.00% |
WARRANTS (Details Narrative)
WARRANTS (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Warrants Issued with Common Stock and Debt | $ 211,534 | |
Warrants Issued for Debt Discount | 817,537 | 478,008 |
Warrant [Member] | ||
Warrants Issued with Common Stock and Debt | $ 210,000 | |
Warrants Issued for Debt Discount | $ 730,000 |
COMMITMENTS AND CONTINGENCIES_2
COMMITMENTS AND CONTINGENCIES (Details) | Dec. 31, 2018USD ($) |
Year Ending December 31: | |
2019 | $ 1,850,593 |
2020 | 1,716,997 |
2021 | 1,667,166 |
2022 | 1,645,435 |
2023 | 1,665,780 |
2024 and Thereafter | 6,496,092 |
Total Future Minimum Lease Payments | $ 15,042,063 |
COMMITMENTS AND CONTINGENCIES_3
COMMITMENTS AND CONTINGENCIES (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Operating Lease Commitments Details Narrative | ||
Net rent expense | $ 2,050,000 | $ 1,383,033 |
SEGMENT INFORMATION (Details)
SEGMENT INFORMATION (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Herbs and Produce Products [Member] | ||
Total Revenues | $ 5,585,447 | $ 5,701,233 |
% of Total Revenue | 17.80% | 15.90% |
Cannabis Dispensary Cultivation and Production [Member] | ||
Total Revenues | $ 25,978,118 | $ 30,031,046 |
% of Total Revenue | 82.90% | 83.90% |
Real Estate [Member] | ||
Total Revenues | $ 62,574 | |
% of Total Revenue | 0.20% | 0.00% |
Other and Eliminations [Member] | ||
Total Revenues | $ (292,521) | $ 68,565 |
% of Total Revenue | (0.90%) | (0.20%) |
Segment Information [Member] | ||
Total Revenues | $ 31,333,618 | $ 35,800,844 |
% of Total Revenue | 100.00% | 100.00% |
SEGMENT INFORMATION (Details 1)
SEGMENT INFORMATION (Details 1) - USD ($) | 3 Months Ended | 9 Months Ended | 12 Months Ended | |
Sep. 30, 2017 | Dec. 31, 2017 | Dec. 31, 2018 | Dec. 31, 2017 | |
Total Revenues | $ 31,333,618 | $ 35,800,844 | ||
Cost of Goods Sold | 18,900,090 | 24,879,428 | ||
Gross Profit | 12,433,528 | 10,921,416 | ||
Depreciation & Amortization | 4,981,237 | 3,647,216 | ||
Stock-Based Compensation | 603,117 | 1,526,286 | ||
Selling, general and administrative expenses | 43,304,374 | 30,801,434 | ||
Loss from operations | (30,870,846) | (19,880,018) | ||
Other Income Expense: | ||||
Amortization of debt discount | (335,878) | |||
Impairment of Property | $ 140,000 | 77,556 | 138,037 | |
Gain (Loss) on Fair Market Valuation of Derivatives | (3,494,550) | |||
Interest (Expense) Income | (13,092,934) | (2,681,426) | ||
Share of Loss in Joint Venture | (662,222) | |||
Gain on Sale of Assets | 5,229,680 | |||
Gain on Settlement of Contingent Consideration | $ (4,991,571) | (4,991,571) | ||
Loss on Fair Market Valuation of Contingent Consideration | 4,426,047 | |||
Total Other Income (Expense) | (8,603,032) | (13,650,244) | ||
Loss Before Provision for Income Taxes | (39,473,878) | (33,530,262) | ||
Herbs and Produce Products [Member] | ||||
Total Revenues | 5,585,447 | 5,701,233 | ||
Cost of Goods Sold | 4,232,875 | 5,211,658 | ||
Gross Profit | 1,352,572 | 489,575 | ||
Depreciation & Amortization | 522,669 | |||
Stock-Based Compensation | ||||
Selling, general and administrative expenses | 3,682,386 | 3,123,037 | ||
Loss from operations | (2,852,483) | (2,633,462) | ||
Other Income Expense: | ||||
Amortization of debt discount | ||||
Impairment of Property | (77,556) | |||
Impairment of Intangibles | (757,467) | |||
(Loss) Gain on Extinguishment of Debt | (18) | |||
Gain (Loss) on Fair Market Valuation of Derivatives | ||||
Loss from Derivatives Issued with Debt Greater Than Debt Carrying Value | ||||
Interest (Expense) Income | ||||
Share of Loss in Joint Venture | ||||
Gain on Sale of Assets | ||||
Gain on Settlement of Contingent Consideration | ||||
Loss on Fair Market Valuation of Contingent Consideration | ||||
Gain on Sale of Assets | ||||
Total Other Income (Expense) | (77,556) | (757,485) | ||
Loss Before Provision for Income Taxes | (2,930,039) | (3,390,947) | ||
Total assets | 15,109,512 | 5,847,286 | ||
Capital Expenditures | 1,036,566 | |||
Cannabis Dispensary Cultivation and Production [Member] | ||||
Total Revenues | 25,978,118 | 30,031,046 | ||
Cost of Goods Sold | 14,091,651 | 25,112,113 | ||
Gross Profit | 11,886,467 | 4,918,933 | ||
Depreciation & Amortization | 4,272,592 | |||
Stock-Based Compensation | ||||
Selling, general and administrative expenses | 15,221,640 | 10,843,210 | ||
Loss from operations | (7,607,765) | (5,924,277) | ||
Other Income Expense: | ||||
Amortization of debt discount | ||||
Impairment of Property | ||||
Impairment of Intangibles | ||||
(Loss) Gain on Extinguishment of Debt | 187 | |||
Gain (Loss) on Fair Market Valuation of Derivatives | ||||
Loss from Derivatives Issued with Debt Greater Than Debt Carrying Value | ||||
Interest (Expense) Income | (524,271) | 110 | ||
Share of Loss in Joint Venture | ||||
Gain on Sale of Assets | ||||
Gain on Settlement of Contingent Consideration | 4,991,571 | |||
Loss on Fair Market Valuation of Contingent Consideration | (4,426,047) | |||
Gain on Sale of Assets | ||||
Total Other Income (Expense) | (524,271) | 565,821 | ||
Loss Before Provision for Income Taxes | (8,132,036) | (5,358,456) | ||
Total assets | 78,307,074 | 69,844,546 | ||
Capital Expenditures | 8,062,552 | |||
Real Estate [Member] | ||||
Total Revenues | 62,574 | 68,565 | ||
Cost of Goods Sold | ||||
Gross Profit | 62,574 | 68,565 | ||
Depreciation & Amortization | 31,061 | |||
Stock-Based Compensation | ||||
Selling, general and administrative expenses | 984,845 | 334,813 | ||
Loss from operations | (953,332) | (266,248) | ||
Other Income Expense: | ||||
Amortization of debt discount | ||||
Impairment of Property | ||||
Impairment of Intangibles | ||||
(Loss) Gain on Extinguishment of Debt | 30 | |||
Gain (Loss) on Fair Market Valuation of Derivatives | ||||
Loss from Derivatives Issued with Debt Greater Than Debt Carrying Value | ||||
Interest (Expense) Income | (793,690) | 1 | ||
Share of Loss in Joint Venture | ||||
Gain on Sale of Assets | ||||
Gain on Settlement of Contingent Consideration | ||||
Loss on Fair Market Valuation of Contingent Consideration | ||||
Gain on Sale of Assets | ||||
Total Other Income (Expense) | (793,690) | 31 | ||
Loss Before Provision for Income Taxes | (1,747,022) | (266,217) | ||
Total assets | 15,109,512 | 1,791,889 | ||
Capital Expenditures | 13,229,942 | |||
Eliminations And Other [Member] | ||||
Total Revenues | (292,521) | |||
Cost of Goods Sold | 575,564 | |||
Gross Profit | (868,085) | |||
Depreciation & Amortization | 232,468 | |||
Stock-Based Compensation | 603,117 | |||
Selling, general and administrative expenses | 17,753,596 | 11,056,031 | ||
Loss from operations | (19,457,266) | (11,056,031) | ||
Other Income Expense: | ||||
Amortization of debt discount | (2,138,762) | |||
Impairment of Property | (138,037) | |||
Impairment of Intangibles | ||||
(Loss) Gain on Extinguishment of Debt | (7,144,487) | |||
Gain (Loss) on Fair Market Valuation of Derivatives | (3,494,550) | |||
Loss from Derivatives Issued with Debt Greater Than Debt Carrying Value | ||||
Interest (Expense) Income | (11,774,973) | (542,775) | ||
Share of Loss in Joint Venture | (662,222) | |||
Gain on Sale of Assets | 5,229,680 | |||
Gain on Settlement of Contingent Consideration | ||||
Loss on Fair Market Valuation of Contingent Consideration | ||||
Gain on Sale of Assets | ||||
Total Other Income (Expense) | (7,207,515) | (13,458,611) | ||
Loss Before Provision for Income Taxes | (26,664,781) | (24,514,642) | ||
Total assets | 22,494,829 | 20,704,078 | ||
Capital Expenditures | 3,079,650 | |||
Segment Information [Member] | ||||
Total Revenues | 31,333,618 | 35,800,844 | ||
Cost of Goods Sold | 18,900,090 | 30,323,771 | ||
Gross Profit | 12,433,528 | 5,477,073 | ||
Depreciation & Amortization | 5,058,790 | |||
Stock-Based Compensation | 603,117 | |||
Selling, general and administrative expenses | 37,642,467 | 25,357,091 | ||
Loss from operations | (30,870,846) | (19,880,018) | ||
Other Income Expense: | ||||
Amortization of debt discount | (2,138,762) | |||
Impairment of Property | (77,556) | (138,037) | ||
Impairment of Intangibles | (757,467) | |||
(Loss) Gain on Extinguishment of Debt | (7,144,288) | |||
Gain (Loss) on Fair Market Valuation of Derivatives | (3,494,550) | |||
Loss from Derivatives Issued with Debt Greater Than Debt Carrying Value | ||||
Interest (Expense) Income | (13,092,934) | (542,664) | ||
Share of Loss in Joint Venture | (662,222) | |||
Gain on Sale of Assets | 5,229,680 | |||
Gain on Settlement of Contingent Consideration | 4,991,571 | |||
Loss on Fair Market Valuation of Contingent Consideration | (4,426,047) | |||
Gain on Sale of Assets | ||||
Total Other Income (Expense) | (8,603,032) | (13,650,244) | ||
Loss Before Provision for Income Taxes | (39,473,878) | (33,530,262) | ||
Total assets | 131,020,927 | $ 98,187,799 | ||
Capital Expenditures | $ 25,408,710 |
SEGMENT INFORMATION (Details Na
SEGMENT INFORMATION (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Revenue | $ 31,333,618 | $ 35,800,844 |
Cost of goods sold | 18,900,090 | 24,879,428 |
Total assets | 120,088,127 | $ 98,187,799 |
Herbs & Produce [Member] | ||
Revenue | 1,110,000 | |
Cost of goods sold | 1,110,000 | |
Other and Eliminations [Member] | ||
Total assets | $ 8,480,000 |
LITIGATION AND CLAIMS (Details
LITIGATION AND CLAIMS (Details Narrative) | 12 Months Ended |
Dec. 31, 2018USD ($) | |
Litigation And Claims Details Narrative | |
Litigation settlement amount | $ 950,000 |
RELATED PARTY TRANSACTIONS (Det
RELATED PARTY TRANSACTIONS (Details Narrative) - USD ($) | Jun. 01, 2017 | Jul. 31, 2018 | Nov. 15, 2017 | Dec. 31, 2018 | Dec. 31, 2017 |
Common Stock outstanding beneficial owners description | Beneficial owners of more than 5% of our outstanding Common Stock or their family members, | ||||
Average of total assets description | The lesser of $120,000 or 1% of the average of our total assets at year-end for the last completed fiscal year. | ||||
Whitetown Realty, LLC [Member] | |||||
Lease commenced period | The lease commenced on January 1, 2015 and expires December 31, 2029. | ||||
Lease monthly rent amount | $ 14,859 | ||||
Increases monthly rent percentage | 1.50% | ||||
Alan Gladstone [Member] | Independent Director Agreement [Member] | |||||
Restricted common stock shares issued | 24,750 | 29,167 | |||
Proceeds from lease amount (per month) | $ 8,333 | $ 6,250 | |||
Steven J. Ross [Member] | Independent Director Agreement [Member] | |||||
Restricted common stock shares issued | 72,727 | 24,750 | |||
Proceeds from lease amount (per month) | $ 10,000 | $ 8,333 |
SUBSEQUENT EVENTS (Details Narr
SUBSEQUENT EVENTS (Details Narrative) - Subsequent Event [Member] - USD ($) | Mar. 12, 2019 | Mar. 06, 2019 | Mar. 04, 2019 | Feb. 26, 2019 | Mar. 14, 2019 |
Employee [Member] | Stock Options [Member] | |||||
Maturity period | 10 years | ||||
Exercise price | $ 0.84 | ||||
Employee [Member] | Stock Options [Member] | Maximum [Member] | |||||
Common stock shares reserve for future issuance | 290,000 | ||||
Convertible notes [Member] | |||||
Debt conversion converted amount, debt | $ 6,250,000 | ||||
Debt conversion converted amount, accrued interest | $ 100,000 | ||||
Debt conversion converted instrument, shares issued | 12,130,000 | ||||
Securities Purchase Agreement [Member] | MediFarm II [Member] | |||||
Ownership percentage | 70.00% | ||||
Securities Purchase Agreement [Member] | MediFarm RE [Member] | |||||
Ownership percentage | 100.00% | ||||
Securities Purchase Agreement [Member] | MediFarm I [Member] | |||||
Ownership percentage | 100.00% | ||||
Securities Purchase Agreement [Member] | Forever Young [Member] | |||||
Securities purchase agreement description | Forever Young Investments, L.L.C. (Forever Young) pursuant to which the Company purchased Forever Greens 50% membership interest in MediFarm I LLC (MediFarm I), Forever Greens 15% membership interest in MediFarm II, LLC (MediFarm II), and Forever Youngs 50% membership interest in MediFarm I Real Estate, LLC (MediFarm I RE) for aggregate consideration of $0.63 million. | ||||
Convertible promissory note [Member] | |||||
Interest rate | 1.50% | ||||
Default penalty percentage | 2.00% | ||||
Convertible note maturity date | Apr. 4, 2019 | ||||
Principal amount | $ 1,000,000 | ||||
Accredited Investor [Member] | Investor agreement date November 28, 2016 [Member] | |||||
Common stock shares issued upon settlement of put notices | 1,272,231 | ||||
Common stock value issued upon settlement of put notices | $ 800,000 | ||||
Accredited Investor [Member] | Convertible promissory note [Member] | |||||
Interest rate | 7.50% | ||||
Convertible note | $ 5,000,000 | ||||
Convertible note maturity date | Sep. 12, 2020 | ||||
Subsequent event description | The Note is due on the earlier of (i) April 4, 2019 or (ii) the closing of a financing with gross proceeds equal to or greater than $1.0 million (the Maturity Date). The Note accrues interest at a rate of 1.5% per month, payable on the Maturity Date or prepayment of the Note, with 30-days of interest guaranteed. |