| Acquisitions | 5. Acquisitions AMMD On January 27, 2023, TerrAscend closed the acquisition of AMMD, a dispensary in Cumberland, Maryland. Under the terms of the agreement, TerrAscend acquired a 100 % equity interest in AMMD for total consideration of $ 10,000 in cash, in addition to entering into a long-term lease with the option to purchase the real estate. The cash consideration paid included repayments of indebtedness and transaction expenses on behalf of AMMD of $ 160 and $ 29 , respectively. The following table pre sents the fair value of assets acquired and liabilities assumed as of the January 27, 2023 acquisition date and allocation of the consideration to net assets acquired:
Cash and cash equivalents $ 20
Inventory 303
Prepaid expense 4
Operating right of use asset 781
Fixed assets 416
Intangible asset 5,330
Goodwill 6,005
Accounts payable and accrued liabilities ( 135 )
Deferred tax liability ( 2,021 )
Corporate income taxes payable ( 291 )
Operating lease liability ( 781 )
Net assets acquired $ 9,631
Cash 10,000
Working capital adjustment ( 369 )
Total consideration $ 9,631 The acquired intangible assets include a medical license, which is treated as a definite-lived intangible asset and amortized over a 30-year period. The consideration paid reflected the synergies, economies of scale, and workforce. These benefits were not recognized separately from goodwill because they do not meet the recognition criteria for identifiable intangible assets. None of the goodwill recognized is expected to be deductible for income tax purposes. The accounting for this acquisition has been provisionally determined at June 30, 2023. The fair value of net assets acquired, specifically with respect to inventory, intangible assets, property and equipment, operating right of use assets, lease liabilities, corporate income taxes payable, deferred tax liability, and goodwill have been determined provisionally and are subject to adjustment. Upon completion of a comprehensive valuation and finalization of the purchase price allocation, the amounts above may be adjusted retrospectively to the acquisition date in future reporting periods. During the 3 months ended June 30, 2023, an adjustment was made to decrease intangible assets by $ 620 due to new information regarding the fair value at January 27, 2023. This resulted in an increase to goodwill of the same amount. Costs related to this transaction were $ 191 , including legal, accounting, due diligence, and other transaction-related expenses. Of the total amount of transaction costs, $ 36 and $ 99 were recorded during the six months ended June 30, 2023 and June 30, 2022, respectively. On a standalone basis, had the Company acquired the business on January 1, 2023, sales estimates would have been $ 3,736 for the six months ended June 30, 2023 and net income estimates would have been $ 1,141 . Actual sales and net income for the six months ended June 30, 2023 since the date of acquisition are $ 3,057 and $ 897 , respectively. Peninsula On June 28, 2023, the Company closed the acquisition of Peninsula, a dispensary located in Salisbury, Maryland. Under the terms of the agreement, the Company acquired 100 % of the equity interest in Peninsula for total consideration of $ 14,362 exclusive of assumed financing obligations of $ 7,698 . The consideration was comprised of 5,442,282 common shares of the Company ("Common Shares"), valued at $ 9,524 , a $ 3,927 secured promissory note at an interest rate of 7.25 % maturing on June 28, 2026 , and $ 1,500 in cash, less a working capital adjustment of $ 589 . The cash consideration paid included transaction expenses and repayments of indebtedness on behalf of Peninsula of $ 290 and $ 33 , respectively. As part of the stock consideration, the Company guaranteed the value of the stock consideration as of the transaction date for a period up to 24 months from the transaction d ate. This guarantee in value is accounted for as a derivative in accordance with ASC 815, Derivatives and Hedging. The following table presents the fair value of assets acquired and liabilities assumed as of the June 28, 2023 acquisition date and allocation of the consideration to net assets acquired:
Inventory $ 370
Prepaid expense 371
Operating right of use asset 1,168
Fixed assets 68
Intangible asset 21,800
Goodwill 683
Accounts payable and accrued liabilities ( 1,123 )
Loans payable ( 7,807 )
Operating lease liability ( 1,168 )
Net assets acquired $ 14,362
Cash 1,500
Common shares of TerrAscend 9,524
Loans payable 3,927
Working capital adjustment ( 589 )
Total consideration $ 14,362 The acquired intangible assets include a medical license, which is treated as a definite-lived intangible asset and amortized over a 30-year period. The consideration paid reflected the synergies, economies of scale, and workforce. These benefits were not recognized separately from goodwill because they do not meet the recognition criteria for identifiable intangible assets. None of the goodwill recognized is expected to be deductible for income tax purposes. The accounting for this acquisition has been provisionally determined at June 30, 2023. The fair value of net assets acquired, specifically with respect to inventory, intangible assets, property and equipment, operating right of use assets, lease liabilities, deferred tax liability, and goodwill have been determined provisionally and are subject to adjustment. Upon completion of a comprehensive valuation and finalization of the purchase price allocation, the amounts above may be adjusted retrospectively to the acquisition date in future reporting periods. Costs related to this transaction were $ 445 , including legal, accounting, due diligence, and other transaction-related expenses and were recorded during the six months ended June 30, 2023. On a standalone basis, had the Company acquired the business on January 1, 2023, sales estimates would have been $ 6,987 for the six months ended June 30, 2023 and net income estimates would have been $ 1,168 . Actual sales and net loss for the six months ended June 30, 2023 since the date of acquisition are $ 200 and $ 129 , respectively. Blue Ridge On June 30, 2023, the Company closed the acquisition of Blue Ridge, a dispensary located in Parkville, Maryland. The Company has plans to relocate Blue Ridge in the next six months to a new, high-traffic retail center. Under the terms of the agreement, the Company acquired a 100 % equity interest in Blue Ridge for total consideration of $ 6,188 , comprised of a promissory note of $ 3,750 at an interest rate of 7.0 % maturing on June 30, 2027 and $ 3,000 in cash, less a working capital adjustment of $ 562 . The cash consideration paid included repayments of indebtedness and transaction expenses on behalf of Blue Ridge of $ 707 and $ 281 , respectively. The following table presents the fair value of assets acquired and liabilities assumed as of the June 30, 2023 acquisition date and allocation of the consideration to net assets acquired:
Inventory $ 234
Prepaid expense 192
Operating right of use asset 2,325
Intangible asset 6,410
Goodwill 2,936
Deferred tax liability ( 2,653 )
Accounts payable and accrued liabilities ( 931 )
Operating lease liability ( 2,325 )
Net assets acquired $ 6,188
Cash 3,000
Loans payable 3,750
Working capital adjustment ( 562 )
Total consideration $ 6,188 The acquired intangible assets include a medical license, which is treated as a definite-lived intangible asset and amortized over a 30 -year period. The consideration paid reflected the synergies, economies of scale, and workforce. These benefits were not recognized separately from goodwill because they do not meet the recognition criteria for identifiable intangible assets. None of the goodwill recognized is expected to be deductible for income tax purposes. The accounting for this acquisition has been provisionally determined at June 30, 2023. The fair value of net assets acquired, specifically with respect to inventory, intangible assets, operating right of use assets, lease liabilities, deferred tax liability, and goodwill have been determined provisionally and are subject to adjustment. Upon completion of a comprehensive valuation and finalization of the purchase price allocation, the amounts above may be adjusted retrospectively to the acquisition date in future reporting periods. Costs related to this transaction were $ 163 , including legal, accounting, due diligence, and other transaction-related expenses and were recorded during the six months ended June 30, 2023. On a standalone basis, had the Company acquired the business on January 1, 2023, sales estimates would have been $ 2,018 for the six months ended June 30, 2023 and net income estimates would have been $ 383 . Actual sales and net loss for the six months ended June 30, 2023 since the date of acquisition are $ 21 and $ 84 , respectively. Contingent consideration Contingent consideration recorded relates to the Company’s business acquisitions. Contingent consideration is based upon the potential earnout of the underlying business unit and is measured at fair value using a projection model for the business and the formulaic structure for determining the consideration under the terms of the agreement. The balance of contingent consideration is as follows:
State Flower Apothecarium Pinnacle Total
Carrying amount, December 31, 2022 $ 1,406 $ 3,028 $ 750 $ 5,184
Payments of contingent consideration — — ( 750 ) ( 750 )
Carrying amount, June 30, 2023 $ 1,406 $ 3,028 — $ 4,434
Less: current portion ( 1,406 ) ( 3,028 ) — ( 4,434 )
Non-current contingent consideration — — — — During the six months ended June 30, 2023, the Company issued 471,681 shares of common stock to the sellers of its previously acquired Pinnacle business. The issuance of shares fully settles the $ 750 earn out consideration provision in the stock purchase agreement. |
