Don't Let Your Cannabis Investments Go Up in Smoke

11/16/2015 11:33 am EST

Focus: CANNABIS INVESTMENTS

Michael Berger

President & Founder, Technical420.com

Earnings season in the cannabis industry has started to heat up and a number of companies have already announced results, says Michael Berger of Technical420.com. A few companies have reported results that show significant improvement, while some others have reported very lackluster results.

The growth of the cannabis industry has led to a surge in the number of publicly traded cannabis companies. Investors must perform thorough due diligence prior to investing and we recommend looking into factors such as revenue growth, institutional investment, dilution potential, share count growth, and recent trading activity.

Today, we are going to highlight the quarterly results for Terra Tech Corp. (TRTC), Mentor Capital (MNTR), and Two Rivers Water & Farming Company (TURV).

Terra Tech Corp. (TRTC)

TRTC is a holding company that is focused on the cannabis industry through a few of its subsidiaries. TRTC’s consists of the following subsidiaries:

  1. GrowOp Technology: specializes in controlled environment agricultural technologies. 
  2. Edible Garden: cultivates a premier brand of local and sustainably grown hydroponic produce sold through major grocery stores such as Shoprite, Walmart, Krogers, and others throughout New Jersey, New York, Delaware, Maryland, Connecticut, Pennsylvania, and the Midwest. 
  3. MediFarm: focused on the medical marijuana industry in Nevada. 
  4. IVXX: produces medical marijuana extracted products for medical marijuana dispensaries in California.

Financial Highlights

  • During the quarter, TRTC generated around $2 million in revenue through its Edible Garden and IVXX subsidiaries. This represented an increase of 53% on a year-over- year basis.
  • TRTC reported an 18% gross margin during quarter, which represents an increase of approximately 478% on a year-over- year basis. During the same quarter last year, TRTC reported a 4% gross margin.
  • TRTC incurred a $2 million net loss, which is substantially lower than $9.5 million net loss reported during the same period last year.

Liquidity Highlights

  • Stockholders' equity during the quarter amounted to around $5.2 million, an increase of approximately $3.9 million compared to approximately $1.3 million as of December 31, 2014.
  • As of September 30, 2015, debt was around $1.5 million, a decrease of approximately $3.1 million compared to approximately $4.6 million as of December 31, 2014.

Mentor Capital, Inc. (MNTR)

MNTR invests in medical marijuana and cannabis companies to provide public market liquidity for founders, protection for investors, funding for cannabis companies, and to incubate private cannabis companies that have the potential to be spun off as stand-alone pubic companies. The company owns an equity interest in

  1. Waste Consolidators
  2. MicroCannaBiz
  3. Investor Webcast
  4. Electrum Partners
  5. Canyon Crest Holdings

Financial Highlights

  • During the quarter, MNTR generated $669,263 in revenue (up from $546,215 in revenue during the same period last year). The increase was due to higher WCI monthly service fees, higher ancillary WCI service fees, and revenue from CAST, which was acquired in April 2015.
  • MNTR recorded a $246,839 gross profit during the quarter.
  • Selling, general and administrative expenses were $432,424
  • The company recorded a $161,947 net loss during the quarter.

Liquidity Highlights

  • Since its reorganization, MNTR has raised capital through warrant holder exercise of warrants for common stock. The company will be required to raise additional funds through financing, additional collaborative relationships or other arrangements until they are able to raise revenues to a point of positive cash flow.
  • As of September 30, 2015, MNTR had $199,818 in cash and cash equivalents and a working capital of $491,286.

Two Rivers Water & Farming Company (TURV)

TURV is focused on converting irrigated farmland from traditional use to grow marginally profitable feed crops to use for growing fruit and vegetable crops that generate more revenue at better margins. The company is focused on concentrating its acquisitions on water rights and infrastructure that are, in part, owned by municipalities, which can alleviate and expedite the legal and political processes necessary for municipal consumers to obtain excess water.

Financial Highlights

  • During the quarter, TURV recognized $1,685,000 in revenue ($1,072,000 during the same period last year). The company’s primary revenue source is from the sale of agriculture products grown by TURV. This is a seasonal business that generates revenue during the third and fourth quarter of the year. The higher revenue is primarily due to an increase in farm acreage production and from the beginning of rent of the first greenhouse.
  • Costs directly associated with revenue were $1,174,000 during the quarter. These costs increased on a quarter-over-quarter basis ($786,000 during the same period last year).
  • TURV recorded $510,000 in gross profit, which is almost double than the same period last year. The increase is due to the increase of farm revenue and the beginning of the greenhouse lease. Since the lease is a "triple-net" lease, there were no direct costs of the lease revenue.
  • During the quarter, TURV incurred $607,000 in operating expenses which was lower than last year. The decrease was primarily due to management's continued cost cutting efforts.
  • TURV recorded a $1,141,000 net loss during the quarter.

Liquidity Highlights

  • As of September 30, 2015, TURV had $510,000 in cash and cash equivalents, $2,789,000 in current assets and $9,473,000 in current liabilities. 
  • TURV expects cash expenditures to increase for the foreseeable future, as the company tries to expand its farmland business and GrowCo operations. As a result, existing cash and cash equivalents may not be sufficient to meet all of the projected cash needs contemplated by its business strategies for the remainder of 2015 and for 2016.
  • TURV may need to either slow its growth initiatives or raise additional funds through public or private equity or debt financings. The capital that may be raised by TURV will not be the most shareholder friendly and it will most likely be dilutive for shareholders.

Michael Berger, Founder and President, Technical420.com

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