Irvine-based Terra Tech Corp. (OTCQX: TRTC), a cannabis-focused agriculture company that operates retail and medical dispensaries for the product in California and Nevada, is being acquired by a privately held pharmaceutical company based in Phoenix.
Under terms of the agreement expected to be completed early next month, OneQor Pharmaceutical will own 55% of the combined companies’ shares while current Terra Tech shareholders will hold the remainder.
Terra Tech, one of the first cannabis-focused companies to have its shares traded on the U.S. stock exchange, is valued at about $30 million. Its stock is worth about one-sixth of what it was at the start of the year.
“The cannabis industry is facing strong headwinds, from both a capital and a regulatory standpoint,” Terra Tech Chief Executive Derek Peterson said in a statement. “We feel confident that this is the best use of the company’s balance sheet in order to achieve growth and profitable returns for shareholders.”
The company will be called OneQor Pharmaceutical following the completion of the merger. It intends to trade on the OTC Market under a new ticker symbol to be announced.
The combined company’s headquarters will remain in Orange County; OneQor founder Matthew Morgan will split his time between here and Phoenix, a spokesperson told the Business Journal.
Going forward, the company said it intends “to list on a national securities exchange.”
Doing so could result in the firm shedding cannabis-related assets, to avoid regulatory interference.
The combined company intends to weigh several strategic options for the legacy Terra Tech business segments that may include a spinoff, special dividend, merger or potential sale.
Trouble Spots
The merger is the latest sign of growing pains for Orange County’s fledgling cannabis industry, which has reported problems raising capital and implementing new cannabis regulations in California.
Irvine-based Weedmaps, which calls itself the most widely used online locator of marijuana dispensaries in the U.S., last month said it was cutting 100 employees, about 25% of its workforce, citing slower-than-expected industry growth.
Shares of Cypress-based KushCo Holdings Inc. (OTC: KSHB) have fallen two-thirds to a $155 million market cap since September when it tried to raise funds by diluting the firm’s share count.
On Nov. 7, the supplier of cartridges and containers for the cannabis industry reported its fourth-quarter revenue climbed 135% to $47 million. While that topped the $45.8 million consensus estimate of analysts, KushCo warned that the controversy over vaping is causing an industrywide slowdown.
“We believe there will be some topline softness in the first half of fiscal 2020 related to vape, as our customers have been more cautious with their spending and have been slowing down their vape purchasing activity,” KushCo CEO Nick Kovacevich said in a statement.
Wall Street Veteran
Terra Tech’s Peterson, a former senior vice president at Morgan Stanley, co-founded the company in 2010 when California’s industry was limited to medical marijuana. Even though publicly traded, the firm has struggled to raise capital and Peterson even took out a full-page advertisement last year to ask President Donald Trump to loosen regulations.
Peterson plans to stay at Terra Tech as vice chairman following the sale.
Even with the sale to OneQor, the company hasn’t indicated a change in plans for a new, 45,000-square-foot “cannabis complex” in Santa Ana, just off the Costa Mesa (55) Freeway. Construction is expected to be completed early next year.
Terra Tech on Nov. 12 reported third-quarter revenue rose 131% to $7.6 million. The company reported a wider loss of $14.3 million.
Terra Tech’s most recent financial report showed it had $1.9 million in cash.
Cannabis Focused
Morgan has been involved in founding several cannabis-related companies.
OneQor is described as a cannabis-focused pharmaceutical company that produces over-the-counter cannabis-derived medications.
The acquisition of Terra Tech will allow OneQor to expand its cannabidiol portfolio.
“We are confident OneQor will be able to positively impact the way society and big-box retailers approach OTC care,” Morgan said in a statement.
“I have known the Terra Tech team for years and we believe that the alignment with Terra Tech will make this fundamental vision a reality.”
