Cannabis-focused agriculture firm Terra Tech Corp. (OTCQX: TRTC) published a letter sent to shareholders written by CEO Derek Peterson, focusing on California for further expansion following a restructuring.
According to the letter, 2018 was a challenging year for the company and but management has developed a strategy to improve the company’s performance this year.
“We are confident that with our strategy selection and focused execution we can continue to build significant, identifiable retail and wholesale brands in what we believe is the most significant market in the world,” Peterson states.
Terra Tech Challenges
During the last year, Terra Tech navigated a plethora of major regulatory changes, managed multiple construction projects as well as several operational hurdles, all while dealing with litigation issues, according to the letter.
The company had limited IVXX wholesale revenue throughout the year and most of the sales came through its Blüm retail stores.
Due to the new regulations in California, the company needed to shut down and rebuild its cultivation and manufacturing infrastructure within the state to bring operations up to compliance. As a result, the company left with unplanned, one- time expenses and without the ability to capture sales in the wholesale market throughout 2018.
“We feel all of these issues combined weighed on the Company while ultimately affecting our value in the public markets. The good news is the worst is behind us and the best is ahead,” Peterson notes.
Strategy
Currently, Terra Tech’s management feels a sizable disconnect between the company’s true value and the current market cap. They believe that using balance sheet to fuel growth is better than accessing the capital markets on a regular basis.
Terra Tech is restructuring to improve profitability and build value for its shareholders. Management has conducted a substantial review of the company’s assets and their respective performance in conjunction with an in-depth analysis of the competitive climate within the U.S., according to the letter.
“While we may not become the largest player in the U.S. market at this juncture, we have the opportunity to become one of the healthiest. In response to our current positioning Terra Tech has developed a focused list of material corporate goals for 2019 and 2020,” Peterson notes.
The company is now positioning itself to primarily focus on California for further expansion.
“Not only is California the 5th largest economy in the world, and arguably the largest cannabis market in the U.S., it is also the core of our Company. We are seeing more attractive organic permitting opportunities coupled with more reasonable valuations for mergers and acquisitions within the State. We have a strong political, reputational and operational nexus within California that we can effectively leverage with a sizable non-dilutive capital infusion from the sale of some non-core assets,” Peterson states.
Terra Tech has completed all material construction expenses at its Oakland and Nevada cultivation and manufacturing facilities and has several operations in various stages of development that will add to the company’s revenue in 2019 and 2020. It has limited construction expenses for the remainder of 2019 and its focus is now on bringing all current projects through the final stages of permitting and opening.
Further, the company started selling wholesale cannabis in Nevada. Meanwhile, it expects to establish a branded delivery service and focus on creating pop-up retail experiences at multiple venues throughout California.
“With the existing permits we hold, we believe we can grow top line revenue to a $63.3M run rate by Q4 2019, while executing on our plan to focus on generating positive cash flow,” according to the letter.