Terra Tech Corp

All principal and interest due and owing 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) $0.41 or (ii) 83.5% of the average of the three (3) lowest daily volume weighted average prices of the Common Stock in the fifteen (15) trading days prior to the conversion date (the “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 of the Note will automatically become 70% of the average of the three (3) lowest volume weighted average prices of the Common Stock in the twenty (20) consecutive trading days prior to the conversion date for so long as such event of default remains in effect.

In addition, at any time that (i) the daily volume weighted average price of the Common Stock for the prior ten (10) consecutive trading days is $0.70 or more and (ii) the average daily trading value of the Common Stock is greater than $2,500,000 for the prior ten (10) consecutive trading days, then the Company may demand, upon one (1) day’s notice, that the holder convert the Note at the Conversion Price.

The Company may prepay in cash any portion of the outstanding principal amount of the Note and any accrued and unpaid interest by, upon ten (10) days' written notice to the holder, paying an amount equal to (i) 110% of the sum of the then-outstanding principal amount of the Note plus accrued but unpaid interest, if the prepayment date is within 90 days of the issuance date of the Note; (ii) 115% of the sum of the then-outstanding principal amount of the Note plus accrued but unpaid interest, if the prepayment date is between 91 days and 180 days of the issuance date of the Note; or (iii) 125% of the sum of the then-outstanding principal amount of the Note plus accrued but unpaid interest, if the prepayment date is after 180 days of the issuance date of the Note.

The foregoing description of the Purchase Agreement and the Note is qualified in its entirety by reference to the full text of such documents, copies of which are filed as Exhibit 10.38 and Exhibit 4.12, respectively, to this Current Report on Form 8-K (this “Report”) and which are incorporated by reference herein in their entirety.
 

•Total revenues generated for the quarter ended September 30, 2016 were approximately $7.0 million, compared to $2.0 million in the same period in 2015. This is an increase of 244% from the quarter ended September 30, 2015. The increase in third quarter revenues was primarily attributable to sales from the acquisition of the Blüm dispensary in Oakland, California, which closed on April 1, 2016, sales of IVXX cannabis products and Edible Garden sales of its produce, herbs and floral products. Third quarter revenues also benefited from sales from the Western, Las Vegas Blum dispensary which opened during the second fiscal quarter of 2016.
•Gross margin for the third quarter of 2016 was approximately $1.3 million or 19% of sales, compared to a gross margin of approximately $370,000 or 18% of sales for the third quarter of 2015.
•Selling, general and administrative expenses for the third quarter of 2016 amounted to approximately $6.0 million or 86% of sales, compared with approximately $2.1 million or 104% of sales for the third quarter of 2015. The increase was primarily due to an increase in salaries due to new hires associated with the Blum dispensaries. Other expenses include an increase in consultants' fees in connection with the Nevada business and an increase in amortization expense due to intangible assets acquired in the Black Oak Gallery acquisition.
•The Company realized an operating loss of approximately $4.7 million for the third quarter of 2016, compared to an operating loss of approximately $1.7 million for the third quarter of 2015.
•The net loss for the quarter ended September 30, 2016 was approximately $5.9 million or $0.01 per share compared with a loss of approximately $2.0 million or $0.01 per share for the third quarter of 2015. The primary reason for the increase in net loss is the increase in general and administrative expenses.
•Stockholders' equity for the third quarter of 2016 amounted to approximately $39.3 million, compared with approximately $6.3 million as of December 31, 2015. The increase is attributable to the Blum Oakland acquisition reduced by the current quarters' loss.
•Short-term debt as of September 30, 2016 amounted to approximately $2.0 million, compared with approximately $917,000 as of December 31, 2015. Long term debt increased from zero to $836,000 during the first nine months of 2016, due to additional borrowings used for working capital and capital expenditures.

Business Update:
•Cannabis Segment Updates:  •Opened the Company's second Nevada-based medical cannabis dispensary, located at 3650 South Decatur Boulevard, Las Vegas, Nevada

•Opened the Company's second Nevada-based medical cannabis dispensary, located at 3650 South Decatur Boulevard, Las Vegas, Nevada
•Edible Garden Updates: •Shipped the first order of 4 inch potted living herbs to Wegmans Food Markets, Inc. in New Jersey
•Increased automation, productivity and gross margins in building of the Dutch movable table system in an additional acre to meet demand, which is anticipated to be completed in December 2016
•Adding more contract growers throughout the country for additional distribution of the New Organic Super Leaf lettuce
•Planning for additional acreage and growers of the New Organic Super Leaf lettuce to enter the $5.2 billion category of cut leaf lettuce

•Shipped the first order of 4 inch potted living herbs to Wegmans Food Markets, Inc. in New Jersey
•Increased automation, productivity and gross margins in building of the Dutch movable table system in an additional acre to meet demand, which is anticipated to be completed in December 2016
•Adding more contract growers throughout the country for additional distribution of the New Organic Super Leaf lettuce
•Planning for additional acreage and growers of the New Organic Super Leaf lettuce to enter the $5.2 billion category of cut leaf lettuce

Miscellaneous Updates:
•Appointed industry veteran, Joseph E. Segilia, as the Company's General Counsel
•Derek Peterson, Terra Tech's CEO, presented at the Aegis Capital Corp. 2016 Growth Conference