Explanatory Note

 

We are filing this Amendment No. 1 on Form 10-Q/A (this Form 10-Q/A) to amend our Quarterly Report on Form 10-Q for the quarter ended March 31, 2012 (the Original Filing), as originally filed with the Securities and Exchange Commission (the SEC) on May 21, 2012 (the Original Filing Date) to reflect a restatement of the following previously filed financial statements and data (and related disclosures):

 

●	our condensed consolidated balance sheet as of March 31, 2012 and December 31, 2011, as discussed in Note 2 to the financial statements included in Item 1 of this 10-Q/A;

 

●	our condensed consolidated statements of operations and cash flows for the three months ended March 31, 2012, and March 31, 2011 as discussed in Note 2 to the financial statements included in Item 1 of this Form 10-Q/A; and

 

●	our managements discussion and analysis of financial condition and results of operations as of and for the three months ended March 31, 2012 as discussed in Item 2 of this Form10-Q/A.

 

The restatement corrects the accounting treatment for the merger entered into on February 9, 2012 under the Agreement and Plan of Merger. The Company treated the convertible Series A Preferred Stock and the convertible Series B Preferred Stock as an expense in 2012 whereby it was a exchange of stock. The restatement reflects the change. The Company did not include the operations of GrowOp Technology Ltd. in the financials for the first quarter of 2011. The restatement reflects the change.

 

In connection with the restatement of our financial statements described herein, we have reported an additional material weakness in our internal controls and procedures with regard to the evaluation of, and accounting for, mergers. Due to these material weaknesses, our principal executive officer and principal financial officer also concluded that our disclosure controls and procedures continue not to be effective as of the end of the period covered by this report. For more information, see Item 4 included in this Form 10-Q/A.

 

Although this Form 10-Q/A supersedes the Original Filing in its entirety, this Form 10-Q/A amends and restates only Items 1, 2 and 4 of Part I and the two risk factors set forth in Item 1A of Part II marked with an asterisk, solely as a result of, and to reflect, the restatement, and no other information in the Original Filing is amended hereby. This Form 10-Q/A speaks as of the Original Filing Date and does not reflect any events that may have occurred subsequent to the Original Filing Date. In addition, pursuant to Rule 12b-15 under the Securities Exchange Act of 1934, as amended, as a result of this Form 10-Q/A, the certifications pursuant to Section 302 and Section 906 of the Sarbanes-Oxley Act of 2002, filed and furnished, respectively, as exhibits to the Original Report have been re-executed and re-filed as of the date of this Amended Report and are included as exhibits hereto.

 

 

This Quarterly Report on Form 10-Q of Terra Tech Corp., a Nevada corporation (the “Company”), contains “forward-looking statements,” as defined in the United States Private Securities Litigation Reform Act of 1995.  In some cases, you can identify forward-looking statements by terminology such as “may”, “will”, “should”, “could”, “expects”, “plans”, “intends”, “anticipates”, “believes”, “estimates”, “predicts”, “potential” or “continue” or the negative of such terms and other comparable terminology.  These forward-looking statements include, without limitation, statements about our market opportunity, our strategies, competition, expected activities and expenditures as we pursue our business plan, and the adequacy of our available cash resources.  Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements.  Actual results may differ materially from the predictions discussed in these forward-looking statements.  The economic environment within which we operate could materially affect our actual results. Additional factors that could materially affect these forward-looking statements and/or predictions include, among other things: the volatility of housing prices, the possibility that we will not receive sufficient customers to grow our business, the Company’s need for and ability to obtain additional financing, the exercise of control Amy Almsteier, an officer and director of the Company, holds of the Company’s voting securities, other factors over which we have little or no control; and other factors discussed in the Company’s filings with the Securities and Exchange Commission (“SEC”).

 

Our management has included projections and estimates in this Form 10-Q, which are based primarily on management’s experience in the industry, assessments of our results of operations, discussions and negotiations with third parties and a review of information filed by our competitors with the SEC or otherwise publicly available.  We caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made.  We disclaim any obligation subsequently to revise any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.

		March 31,				December 31,
		2012				2011
Assets
Current Assets:
Cash		$	14,873			$	9,139
Accounts receivable, net			108,400				32,381
Inventories, net			363,228				515,014
Current portion of notes receivable, net of allowance			-				-
Prepaid Inventory			24,951				14,776
Total Current Assets			511,452				571,310
Property and equipment, net			50,575				54,819
Deposits			5,000				5,000
Total Assets		$	567,027			$	631,129
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable and accrued expenses		$	206,226			$	170,200
Note payable			250,000				250,000
Loans from Related Party			175,000				150,000
Due to officers			-				500
Total Current Liabilities			631,226				570,700
Commitment and Contingencies
Stockholders' Equity
Preferred stock, Convertible Series A, Par value $0.001;
authorized and issued 100 shares as of March 31, 2012
and December 31, 2011 respectively			-				-
Preferred stock, Convertible Series B, Par value $0.001;
authorized 24,999,900 shares; issued and outstanding
14,750,000 and 12,750,000 shares as of March 31, 2012
and December 31, 2011, respectively			14,750				12,750
Common stock, Par value $0.001; authorized 350,000,000
shares; issued 81,998,520 and 33,848,520 shares as
of March 31, 2012 and Decemebr 31, 2011, respectively			81,999				33,849
Additional paid-in capital			2,881,278				2,866,428
Accumulated Deficit			(3,042,226	)			(2,852,598	)
Total Stockholders' Equity			(64,199	)			60,429
Total Liabilities and Stockholders' Equity		$	567,027			$	631,129

 

		3 Months				3 Months
		Ended				Ended
		March 31, 2012				March 31, 2011
Total Revenues		$	211,891			$	243,936
Cost of Goods Sold			196,926				210,578
			14,965				33,358
Selling, general and administrative expenses			187,748				123,489
Loss from operations			(172,783	)			(90,131	)
Other Income (Expenses)
Interest Expense			(15,967	)			(10,527	)
Total Other Income (Expense)			(15,967	)			(10,527	)
Loss before Provision of Income Taxes			(188,750	)			(100,658	)
Provision for income taxes			878				-
Net Loss applicable to common shareholders		$	(189,628	)		$	(100,658	)
Net Loss per Common Share Basic and Diluted		$	(0.00	)		$	(0.01	)
Weighted Average Number of Common Shares
Outstanding - Basic and Diluted			69,695,760				16,956,853

 

 

		3 Months				3 Months
		Ended				Ended
		March 31, 2012				March 31, 2011
SUPPLEMENTAL DISCLOSURE FOR OPERATING ACTIVITES
Cash paid for interest		$	-			$	-
SUPPLEMENTAL DISCLOSURE FOR FINANCING ACTIVITES
Warrant expense		$	15,000			$	-

 

TERRA TECH CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

Organization

 

We were incorporated as Private Secretary, Inc. on July 22, 2008 in the State of Nevada. From inception until we completed our reverse acquisition of GrowOp Technology, the principal business of the Company originally was to develop a software program that would allow for automatic call processing through VoIP technology. On January 27, 2012, the Company filed an amendment to its Articles of Incorporation changing its name to Terra Tech Corp. During that time, we had no revenue and our operations were limited to capital formation, organization, and development of our business plan and target customer market. As a result of the merger with GrowOp Technology, on February 9, 2012 we 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.

 

Recent Developments

 

On February 9, 2012, Terra Tech Corp. (formerly named, “Private Secretary, Inc.”) , a Nevada corporation (the “Company”) entered into an Agreement and Plan of Merger dated February 9, 2012 (the “Agreement and Plan of Merger”), by and among the Company, TT Acquisitions, Inc., a Nevada corporation and a wholly-owned subsidiary of the Company (“TT Acquisitions”), and GrowOp Technology Ltd., a Nevada corporation (“GrowOp Technology”).

Under the terms and conditions of the Agreement and Plan of Merger, the Company sold 33,998,500 shares of common stock of the Company in consideration for all the issued and outstanding shares in GrowOp Technology. The effect of the issuance is that GrowOp Technology shareholders now hold approximately 41.46% of the issued and outstanding shares of common stock of the Company. Separately, TT Acquisitions merged with GrowOp Technology, with the effect that GrowOp Technology is a wholly-owned subsidiary of the Company. Articles of Merger, effecting the merger of GrowOp Technology and TT Acquisitions, were filed with the Secretary of State of the State of Nevada on February 9, 2012.

 

GrowOp Technology was founded in March 2010, in Oakland, California. GrowOp Technology’s business (now the principal business of Terra Tech) is the integration of best of breed hydroponic equipment with proprietary technology to create sustainable solutions for the cultivation of indoor agriculture. We work closely with expert horticulturists, engineers, and scientists, to develop and manufacture advanced proprietary products for the hydroponic industry. Our products are utilized by horticulture enthusiasts, local urban farmers, and green house growers. We believe that the emerging trend of urban and indoor agriculture has fostered an entrepreneurial push by companies to bring their concept to market. Many of these companies lack both the intellectual resources and manufacturing capabilities to bring their idea to fruition. That is where Terra Tech is positioned. We have the team and the resources to help bring indoor cultivation designs from concept to production. Our products can be found through specialty retailers throughout the United States.

 

The accompanying unaudited condensed financial statements include all of the accounts of Terra Tech.  These condensed financial statements have been prepared in accordance with accounting principals generally accepted in the United States for financial information and with the instructions to Form S-1 and Regulation S-X.  In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation have been included.

 

TERRA TECH CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

Use of Estimates

 

The preparation of the financial statements in conformity with United States generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.

 

Fair Value of Financial Instruments

 

The Company applies fair value accounting for all financial assets and liabilities and non-financial assets and liabilities that are recognized or disclosed at fair value in the financial statements on a recurring basis. The Company defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities, which are required to be recorded at fair value, the Company considers the principal or most advantageous market in which the Company would transact and the market-based risk measurements or assumptions that market participants would use in pricing the asset or liability, such as risks inherent in valuation techniques, transfer restrictions and credit risk. Fair value is estimated by applying the following hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement:

 

Level 1 – Quoted prices in active markets for identical assets or liabilities.

 

Level 2 – Observable inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices for identical or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 – Inputs that are generally unobservable and typically reflect management’s estimate of assumptions that market participants would use in pricing the asset or liability.

 

The Company’s valuation techniques used to measure the fair value of money market funds and certain marketable equity securities were derived from quoted prices in active markets for identical assets or liabilities. The valuation techniques used to measure the fair value of all other financial instruments, all of which have counterparties with high credit ratings, were valued based on quoted market prices or model driven valuations using significant inputs derived from or corroborated by observable market data.

 

In accordance with the fair value accounting requirements, companies may choose to measure eligible financial instruments and certain other items at fair value. The Company has not elected the fair value option for any eligible financial instruments.

 

TERRA TECH CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

Accounts Receivable

 

The Company reviews all outstanding accounts receivable for collectability on a quarterly basis.  An allowance for doubtful accounts is recorded for any amounts deemed uncollectable.  The Company does not accrue interest receivable on past due accounts receivable.  There was an allowance of $6,041 at March 31, 2012 and December 31, 2011.

 

Prepaid Inventory

 

Prepaid inventory represents deposits made to foreign manufacturers for purchase orders of specific inventory.

 

Notes receivable

 

Notes receivable due from customers are unsecured loans which assist with the purchase of products.  The notes range from twelve to eighteen months and bear interest at the annual rates of 4% to 9%.  A corresponding reserve is established for any uncollectable interest.  There was a reserve of $29,424 against the collection of notes receivable at March 31, 2012 and December 31, 2011.

 

Property and Equipment

 

Property and equipment are stated at cost less accumulated depreciation.  Depreciation is calculated using the straight-line method over the estimated useful lives of the assets: 3-8 years for machinery and equipment, leasehold improvements are amortized over the shorter of the estimated useful lives or the underlying lease term.  Repairs and maintenance expenditures which do not extend the useful lives of related assets are expensed as incurred.

 

Revenue Recognition

 

Revenue is recognized net of discounts, rebates, promotional adjustments, price adjustments and estimated returns and upon transfer of title and risk to the customer which occurs at shipping (F.O.B. terms).   Upon shipment, the Company has no further performance obligations and collection is reasonably assured as the majority of sales are paid for prior to shipping.

 

Cost of Goods Sold

 

Management decided to change the focus of the business in 2011 to designing, manufacturing and selling hydroponic equipment where favorable gross margins are achieved.

Research and Development

 

Research and development costs are expensed as incurred.

 

 

TERRA TECH CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

 

Income Taxes

 

The Company provides for income taxes based on enacted tax law and statutory tax rates at which items of income and expenses are expected to be settled in the Company’s income tax return.  Certain items of revenue and expense are reported for Federal income tax purposes in different periods than for financial reporting purposes, thereby resulting in deferred income taxes.  Deferred taxes are also recognized for operating losses that are available to offset future taxable income.  Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.  The Company has incurred net operating losses for financial-reporting and tax-reporting purposes.  Accordingly, for Federal and state income tax purposes, the benefit for income taxes has been offset entirely by a valuation allowance against the related federal and state deferred tax asset for the three months ended March 31, 2012.

 

Loss Per Common Share

 

Net loss per share, in accordance with the provisions of ASC 260, “Earnings Per Share” is computed by dividing net loss by the weighted average number of shares of Common Stock outstanding during the period.  During a loss period, the effect of the potential exercise of stock options, warrants, convertible preferred stock and convertible debt are not considered in the diluted income (loss) per share calculation since the effect would be anti-dilutive.  The results of operations were a net loss for the three months ended March 31, 2012 therefore the basic and diluted weighted average common shares outstanding were the same.

 

Recently Issued Accounting Standards

 

Management does not expect the adoption of recently issued accounting pronouncements to have a significant impact on our results of operations, financial position or cash flow.

 

2.  RESTATEMENT OF CONDENSED FINANCIAL STATEMENTS

 

Subsequent to the issuance of our condensed financial statements for the quarter ended March 31, 2012, we have re-evaluated our interpretation of the merger set forth in the Agreement and Plan of Merger dated February 9, 2012 and have determined that the exchange of the Series A Preferred Stock and the Series B Preferred Stock should not have been expensed in the quarter ended March 31, 2012.  We have also determined that the operations for GrowOp Technology should have been included in the quarter ended March 31, 2011.

 

The effect of this restatement is to change previously reported expenses, net loss and loss per share for the three months ended March 31, 2012 and 2011.

 

Impact of the restatement on our Condensed Financial Statements

 

 

 

 

TERRA TECH CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS