Golden Leaf Holdings (OTCQB:GLDFF) announced it was merging with Terra Tech Corp. (TRTC) after the company reported rising losses in the third quarter. The Canadian-based cannabis company with operations in Oregon, Nevada and Canada delivered quarterly revenues of $5.1 million for Q3 2018, compared to $3.1 million for Q3 2017.
The net loss for Q3 2018 was $5.5 million or $0.01 per share loss, compared with a net loss of $3.2 million or $0.01 per share loss, for Q3 2017. The losses for the quarter increased primarily due to the changes in fair value of biological assets and warrant liability. Adjusted EBITDA for the third quarter of 2018 was a loss of US$2.9 million primarily driven by production costs and operating expenses.
Mr. William Simpson, Chief Executive Officer of Golden Leaf Holdings, commented, “Our third quarter revenue reached yet another record, achieving US$5.1 million, primarily driven by sale of flower in Canada after we received our Canadian Sales license from Health Canada, and seasonal improvements in our Oregon Retail revenue and the addition of two new Retail stores in Oregon when compared to the third quarter 2017. Adjusted EBITDA for the third quarter of 2018 was a loss of US$2.9 million primarily driven by production costs and operating expenses.
Gross profits also fell and were only $0.4 million or 9% of net revenue for Q3 2018, compared with US$0.7 million or 23% of net revenue for Q3 2017. Q3 2018 gross margins decreased primarily due to non-cash valuation of biological assets.
Terra Tech Corp. signed a non-binding letter of intent to merge with Golden Leaf Holdings Ltd. saying that a wholly owned subsidiary of Terra Tech will amalgamate with Golden Leaf, with the resulting amalgamated corporation being a wholly owned subsidiary of Terra Tech.
Derek Peterson, CEO of Terra Tech, commented, “We are planning to merge with Golden Leaf’s operations because its seed-to-sale business model is complementary to ours, encompassing both the Oregon and Canadian market which represent new markets for us, and touching Nevada where we are focused on gaining market share. Its ‘Chalice Farms’ retail dispensaries are well known and have an excellent reputation in Oregon, and the wholesale side of the business offers diverse, high quality cannabis products for all demographics, which are complementary to our existing wholesale product lines. This transaction, if completed, will create a combined company that will control 41 permits across cultivation, manufacturing, distribution and retail spanning Oregon, California and Nevada, in addition to 21 pending permit applications in multiple jurisdictions throughout the U.S.”
The LOI stated that Golden Leaf shareholders would receive 0.1203 common shares of Terra Tech for each common share of Golden Leaf held. Terra Tech currently has 79.2 million shares outstanding. As a condition of closing, Terra Tech will be required to list its shares on the CSE. Listing will be subject to satisfying all of the CSE’s requirements. Upon closing, Derek Peterson will remain in his position as CEO, with William Simpson to become President of the combined company.
As of September 30, 2018, Golden Leaf had approximately $20.1 million in current assets, compared with $11.6 million in current assets at December 31, 2017. The increase is largely because of the bought deal financing which was completed on January 31, 2018,