Replies to post #101840 on Blum Holdings Inc (BLMH)

[Mediman420]

Nice!

[MonestHind]

Report:"TRTC remains a glorified lettuce producer"

Prior to the acquisition of Edible Gardens, TRTC's hydroponics business had faded away to less than $100,000 of revenue per quarter. After the inclusion of Edible Gardens in Q2 of 2013, management discussed the increase in revenue and admitted that "The primary reason was due the revenue generated from Edible Gardens." Certainly some people have bought hydroponic equipment from TRTC to grow marijuana for either legal or illegal purposes. But the reality is that almost all the business now is growing produce (source).

But hold on, perhaps the company has intellectual property in hydroponics it can leverage for fast growth? Unfortunately, it does not.

Per the 2013 10-K, the business "ceased our prior operations and we are now a holding company and our wholly owned subsidiary engages in the design, marketing and sale of hydroponic equipment with proprietary technology to create sustainable solutions for the cultivation of indoor agriculture.", and the company also states "We do not own patents." The net result is a company that is overvalued on all fundamentals with no real intellectual property.

So it begs the question, where is the value in the company?

Perhaps the 2013 acquisition of Edible Garden should help. On April 24, 2013, Terra Tech purchased Edible Garden and its 5 acres of greenhouse structures through a share exchange. The company in its own disclosure lays out the potential of the land "The facility, at maximum production, can produce up to 25,000 plants per week, per acre, operating 52 weeks a year at an average sale price of $1.55 per plant. The Company believes that at full production, the facility is capable of producing up to $10 million in annual sales." With $2 million of revenue in 2013, Terra Tech is far from its prior promises.

Refer to Appendix J for details on valuation.

The business is so bad, TRTC is forced to raise capital on egregious terms

The company on March 23, 2013, raised $504,500 through a senior secured promissory note bearing interest at 60% per annum. It raised another $250,000, $153,000 and $229,000 for another 60% annual interest rate in Apr-13, May-13 and Jul-13.

In Feb-14, Terra Tech entered another significantly dilutive agreement with Dominion Capital to receive up to $6.6 million for 18 months of liquidity. All notes are convertible at $0.307 a share which represented a 46% discount to the close price on February 5, 2014. I note that this does not even include the warrants.

Terra Tech has also done toxic financings with Hanover Holdings. Hanover Holdings and Magna Group have a history of destroying shareholder value for their own benefit.

"As of October 28, 2013, there were 123,577,646 shares of common stock". Shortly thereafter: "As of December 31, 2013, the Registrant had a total of 233,802,141 shares of common stock issued and outstanding". There have been minimal changes in operations or the company during this three month period. The only change was Terra Tech being forced to report their real share count (inclusive of converted preferred shares).

As at 31-Mar-14, the company has 246 million shares outstanding in addition to 19.5 million warrants outstanding (at an average price of $0.21 per share). Couple that with the 21 million shares and 11 million warrants granted to Dominion Capital for convertible notes held and to be issued. Total shares outstanding are approximately 298 million. The market cap is thus just shy of $224 million for a company that has $2 million in revenue. This 112x revenue multiple yells 'overvalued'.

With only $3 million of cash on its books as at March 31, 2014 (per latest 10-Q) and $1.5 million cash burn (aka cash used in operations per cash flow statement), the company is on pace to be out of cash in one or two more quarters. I guess it makes sense that they filed an S-3 on April 17, 2014 for a proposed raise of up to $50 million which basically sets the current shareholders up for massive dilution.

To top it off, insiders are cashing out

Insiders have sold $1.1 million of the company in the last few months. In addition to that, take a look at the circled disposition from Amy Almsteier (treasurer/decorator) to Michael Nahass. Why would one director transfer 2.5 million shares to another for no consideration?

Additionally, it looks like Amy Almsteier purchased 100k of shares at $0.58, but do not be fooled - she was really paying a penalty as a result of yet another violation of Section 16(b) of the Securities Exchange Act of 1934. Derek and Amy, CEO and treasurer, have cashed out a little under $400,000 recently and like other areas of their lives are unable to follow rules.

Conclusion

Terra Tech is another story whereby a faulty management team is touting a lot more than they will ever achieve. Eight companies that operate in the marijuana have had their trading suspended this year, I would not be surprised if TRTC is next (refer to Appendix A for details). Management's history is quite the opposite of the pristine quality that they proclaim. TRTC has a downside of 90% to equity holders with insiders selling out and an imminent financing.