TerrAscend 10Q 2024 Q3 Quarterly report

ROC

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2024


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 021-340690

TERRASCEND CORP.

(Exact Name of Registrant as Specified in its Charter)


Ontario	N/A
( State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
77 City Centre Drive Suite 501 - East Tower Mississauga, Ontario, Canada	L5B 1M5
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (717) 610-4165

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading

Symbol(s)

Name of each exchange on which registered

None

N/A

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer	☐	Smaller reporting company	☐
Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of November 5, 2024, the registrant had 292,286,858 common shares, no par value, outstanding.

Table of Contents


		Page

PART I.	FINANCIAL INFORMATION	1

Item 1.	Financial Statements (Unaudited)	1
	Unaudited Interim Condensed Consolidated Balance Sheets as of September 30, 2024 and December 31, 2023	1
	Unaudited Interim Condensed Consolidated Statements of Operations and Comprehensive Loss for the three and nine months ended September 30, 2024 and 2023	2
	Unaudited Interim Condensed Consolidated Statements of Changes in Shareholders' Equity for the three and nine months ended September 30, 2024 and 2023	3
	Unaudited Interim Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2024 and 2023	5
	Notes to Unaudited Interim Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	28
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	42
Item 4.	Controls and Procedures	43

PART II.	OTHER INFORMATION	43

Item 1.	Legal Proceedings	43
Item 1A.	Risk Factors	43
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	44
Item 3.	Defaults Upon Senior Securities	44
Item 4.	Mine Safety Disclosures	44
Item 5.	Other Information	44
Item 6.	Exhibits	45
Signatures		47

Cautionary Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q contains statements that TerrAscend Corp. (the "Issuer") believes are, or may be considered to be, “forward-looking" statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). All statements other than statements of historical fact included in this Quarterly Report on Form 10-Q regarding the prospects of the industry in which the Issuer, its subsidiaries, TerrAscend Growth Corp. ("TerrAscend") and its subsidiaries (collectively, the "Company") operate or the Company's prospects, plans, financial position or business strategy may constitute forward-looking statements. Such statements can be identified by the use of forward-looking terminology such as "can", “expect”, “likely”, “may”, “will”, “should”, “intend”, “anticipate”, “potential”, “proposed”, “estimate” and other similar words, including negative and grammatical variations thereof, or statements that certain events or conditions “may” or “will” happen, or by discussions of strategy. Forward-looking statements include estimates, plans, expectations, opinions, forecasts, projections, targets, guidance, or other statements that are not statements of fact. Forward-looking statements in this Quarterly Report on Form 10-Q include, but are not limited to, statements with respect to:

•

the projected performance of the Company’s business and operations;

•

the Company’s estimates and expectations regarding revenues, expenses and need for substantial additional financing, and its ability to obtain additional financing;

•

the Internal Revenue Service's (the "IRS") review of the Company's tax positions, including heightened risk of added scrutiny or increased frequency or depth of reviews or audits by the IRS;

•

the Company's joint venture interests, including, as applicable, required regulatory approvals and licensing, anticipated costs and timing, expected impact thereof, and the ability to enter into future joint ventures;

•

the Company's ability to complete future strategic alliances and the expected impact thereof;

•

the Company's ability to source investment opportunities and complete future acquisitions, including in respect of entities in the United States, the ability to finance such acquisitions or operations in the United States, and the expected impact thereof, including potential issuances of common shares in the capital of the Company ("Common Shares");

•

the Company's ability to market itself to the capital markets, including its ability to raise equity as a result of its corporate ownership structure;

•

the expected growth in the number of customers and patients using the Company's adult-use and medical cannabis, respectively;

•

the expected growth in cultivation and production capacities of the Company;

•

expectations with respect to future production costs;

•

the expected impact of taxation on the Company's profitability and the uncertainty around timing of any legislative changes impacting unfavorable tax treatment;

•

the expected methods to be used by the Company to distribute cannabis;

•

the expected growth in the number of the Company's dispensaries;

•

the competitive conditions of the industry in which the Company operates;

•

federal, state, provincial, territorial, local and foreign government laws, rules and regulations, including federal and state laws in the United States relating to cannabis operations in the United States;

•

the legalization of the regulated use of cannabis for medical and/or adult-use in the United States and the related timing and impact thereof;

•

laws and regulations and any amendments thereto applicable to the business and the impact thereof;

•

the possibility of actions by individuals, or U.S. federal government enforcement actions, against the Company and the potential impact of such actions on the Company;

•

the competitive advantages and business strategies of the Company;

•

the grant, renewal and impact of any license or supplemental license to conduct activities with or without cannabis or any amendments thereof;

•

the medical benefits, viability, safety, efficacy, dosing and social acceptance of cannabis;

•

the Company's future product offerings;

•

the Company’s ability to source and operate facilities in the United States;

•

the Company’s ability to integrate and operate the assets it acquires or may acquire in the future;

•

the Company's ability to protect its intellectual property;

•

the outcome of litigation to which the Company is party;

•

the possibility that the Company's products may be subject to product recalls and returns;

•

the Company’s expectations regarding its liquidity and the impact of its refinancing;

•

the Company's expectations regarding its share repurchase program; and

•

other risks and uncertainties, including those listed under the section titled "Risk Factors" in this Quarterly Report.

Certain of the forward-looking statements contained herein concerning the cannabis industry and the general expectations of the Company concerning the cannabis industry are based on estimates prepared by the Company using data from publicly-available governmental sources as well as from market research and industry analysis and on assumptions based on data and knowledge of the cannabis industry. Such data is inherently imprecise. The cannabis industry involves risks and uncertainties that are subject to change based on various factors, which factors are described further below.

With respect to the forward-looking statements contained in this Quarterly Report on Form 10-Q, the Company has made assumptions regarding, among other things: (i) its ability to generate cash flows from operations and obtain necessary financing on acceptable terms; (ii) general economic, financial market, regulatory and political conditions in jurisdictions in which the Company operates; (iii) the output from the Company’s operations; (iv) consumer interest in the Company’s products; (v) competition in the cannabis industry; (vi) anticipated and unanticipated costs; (vii) government regulation of the Company’s activities and products; (viii) government regulation of licensing, taxation and environmental protection; (ix) the timely receipt of any required regulatory approvals; (x) the Company’s ability to obtain qualified staff, equipment and services in a timely and cost efficient manner; (xi) the Company’s ability to conduct operations in a safe, efficient and effective manner; and (xii) the Company’s construction plans and timeframe for completion of such plans.

Readers are cautioned that the above list of cautionary statements is not exhaustive. Known and unknown risks, many of which are beyond the control of the Company, could cause actual results to differ materially from the forward-looking statements in this Quarterly Report on Form 10-Q. Such risks and uncertainties include, but are not limited to, current and future market conditions; risks related to federal, state, provincial, territorial, local and foreign government laws, rules and regulations, including federal and state laws in the United States relating to cannabis operations in the United States; and those discussed under Item 1A – “Risk Factors” in the Company's Annual Report on Form 10-K for the year ended December 31, 2023, filed with the Securities and Exchange Commission (the “SEC”) on March 14, 2024 and this Quarterly Report on Form 10-Q. The purpose of forward-looking statements is to provide the reader with a description of management’s expectations, and such forward-looking statements may not be appropriate for any other purpose. You should not place undue reliance on forward-looking statements contained in this Quarterly Report on Form 10-Q. The Company can give no assurance that such expectations will prove to have been correct. Forward-looking statements contained herein are made as of the date of this Quarterly Report on Form 10-Q and are based on the beliefs, estimates, expectations and opinions of management on the date such forward-looking statements are made. The Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, estimates or opinions, future events or results or otherwise or to explain any material difference between subsequent actual events and such forward-looking statements, except as required by applicable law.

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

TerrAscend Corp.

Unaudited Interim Condensed Consolidated Balance Sheets

(Amounts expressed in thousands of United States dollars, except for share and per share amounts)


	At			At
	September 30, 2024			December 31, 2023
Assets
Current assets
Cash and cash equivalents	$	26,636		$	22,241
Restricted cash		606			3,106
Accounts receivable, net		17,569			19,048
Investments		1,751			1,913
Inventory		51,424			51,683
Prepaid expenses and other current assets		7,720			4,898
Total current assets		105,706			102,889
Non-current assets
Property and equipment, net		190,526			196,215
Deposits		284			337
Operating lease right of use assets		42,061			43,440
Intangible assets, net		210,699			215,854
Goodwill		106,929			106,929
Other non-current assets		725			854
Total non-current assets		551,224			563,629
Total assets	$	656,930		$	666,518

Liabilities and shareholders' equity
Current liabilities
Accounts payable and accrued liabilities	$	46,381		$	49,897
Deferred revenue		4,969			4,154
Loans payable, current		7,701			137,737
Contingent consideration payable, current		2,546			6,446
Operating lease liability, current		2,431			1,244
Derivative liability, current		756			—
Lease obligations under finance leases, current		1,821			2,030
Corporate income tax payable		11,075			4,775
Other current liabilities		775			717
Total current liabilities		78,455			207,000
Non-current liabilities
Loans payable, non-current		182,578			61,633
Operating lease liability, non-current		43,103			45,384
Lease obligations under finance leases, non-current		—			407
Derivative liability, non-current		1,727			5,162
Convertible debt		8,604			7,266
Deferred income tax liability		16,189			17,175
Contingent consideration payable, non-current		1,827			—
Liability on uncertain tax position and other long term liabilities		117,331			81,751
Total non-current liabilities		371,359			218,778
Total liabilities		449,814			425,778
Commitments and contingencies
Shareholders' equity
Share capital
Series A, convertible preferred stock, no par value, unlimited shares authorized; 12,350 and 12,350 shares outstanding as of September 30, 2024 and December 31, 2023, respectively		—			—
Series B, convertible preferred stock, no par value, unlimited shares authorized; 600 and 600 shares outstanding as of September 30, 2024 and December 31, 2023, respectively		—			—
Exchangeable shares, no par value, unlimited shares authorized; 63,492,038 and 63,492,038 shares outstanding as of September 30, 2024 and December 31, 2023, respectively		—			—
Common shares, no par value, unlimited shares authorized; 292,394,258 and 288,327,497 shares outstanding as of September 30, 2024 and December 31, 2023, respectively		—			—
Treasury stock, no par value; 107,400 and nil shares outstanding as of September 30, 2024 and December 31, 2023, respectively		—			—
Additional paid in capital		950,554			944,859
Accumulated other comprehensive income		2,166			1,799
Accumulated deficit		(746,665	)		(704,162	)
Non-controlling interest		1,061			(1,756	)
Total shareholders' equity		207,116			240,740
Total liabilities and shareholders' equity	$	656,930		$	666,518

The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.

TerrAscend Corp.

Unaudited Interim Condensed Consolidated Statements of Operations and Comprehensive Loss

(Amounts expressed in thousands of United States dollars, except for share and per share amounts)


	For the Three Months Ended						For the Nine Months Ended
	September 30, 2024			September 30, 2023				September 30, 2024			September 30, 2023
Revenue, net	$	74,168		$	89,240			$	232,324		$	230,762

Cost of sales		37,952			41,435				119,694			112,831

Gross profit		36,216			47,805				112,630			117,931

Operating expenses:
General and administrative		31,552			29,299				83,620			87,505
Amortization and depreciation		2,202			2,664				6,607			6,935
Impairment of property and equipment and right of use assets		—			—				2,438			28
Other operating expense (income)		8			(1,879	)			(1,178	)		(1,562	)
Total operating expenses		33,762			30,084				91,487			92,906

Income from operations		2,454			17,721				21,143			25,025

Other expense (income)
Loss (gain) from revaluation of contingent consideration		327			(645	)			3,547			(645	)
Loss on extinguishment of debt		1,662			—				1,662			—
(Gain) loss on fair value of derivative liabilities and purchase option derivative assets		(669	)		3,217				(2,608	)		2,564
Finance and other expenses		8,408			10,083				25,888			28,341
Transaction and restructuring costs		—			—				—			392
Unrealized and realized foreign exchange (gain) loss		(214	)		(43	)			175			(175	)
Unrealized and realized (gain) loss on investments		(14	)		5				213			2,365
(Loss) income from continuing operations before provision for income taxes		(7,046	)		5,104				(7,734	)		(7,817	)
Provision for income taxes		14,373			13,543				34,773			32,655
Net loss from continuing operations	$	(21,419	)	$	(8,439	)		$	(42,507	)	$	(40,472	)

Discontinued operations:
Loss from discontinued operations, net of tax	$	—		$	(232	)		$	—		$	(4,444	)
Net loss	$	(21,419	)	$	(8,671	)		$	(42,507	)	$	(44,916	)

Foreign currency translation adjustment		291			(280	)			(367	)		475
Comprehensive loss	$	(21,710	)	$	(8,391	)		$	(42,140	)	$	(45,391	)

Net loss from continuing operations attributable to:
Common and proportionate Shareholders of the Company	$	(23,148	)	$	(10,601	)		$	(48,383	)	$	(46,963	)
Non-controlling interests	$	1,729		$	2,162			$	5,876		$	6,491

Comprehensive loss attributable to:
Common and proportionate Shareholders of the Company	$	(23,439	)	$	(10,553	)		$	(48,016	)	$	(51,882	)
Non-controlling interests	$	1,729		$	2,162			$	5,876		$	6,491

Net loss per share - basic:
Continuing operations	$	(0.08	)	$	(0.04	)		$	(0.17	)	$	(0.17	)
Discontinued operations		—			—				—			(0.02	)
Net loss per share - basic	$	(0.08	)	$	(0.04	)		$	(0.17	)	$	(0.19	)

Weighted average number of outstanding common shares		291,647,146			287,072,972				291,252,902			276,562,869

Net loss per share - diluted:
Continuing operations	$	(0.08	)	$	(0.04	)		$	(0.17	)	$	(0.17	)
Discontinued operations		—			—				—		$	(0.02	)
Net loss per share - diluted	$	(0.08	)	$	(0.04	)		$	(0.17	)	$	(0.19	)

Weighted average number of outstanding common shares, assuming dilution		291,647,146			287,072,972				291,252,902			276,562,869

The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.

TerrAscend Corp.

Unaudited Interim Condensed Consolidated Statements of Changes in Shareholders’ Equity

(Amounts expressed in thousands of United States dollars, except for share and per share amounts)


	Number of Shares
						Convertible Preferred Stock
	Common Shares		Exchangeable Shares			Series A			Series B		Common Shares Equivalent		Additional paid in capital			Accumulated other comprehensive income (loss)			Accumulated deficit			Non-controlling interest			Total
Balance at December 31, 2022		259,624,531		76,996,538			12,608			600		349,829,273	$	934,972		$	2,085			(618,260	)		2,374		$	321,171
Shares issued - stock options, warrant and RSU exercises		392,846		—			—			—		392,846		81			—			—			—			81
Shares, options and warrants issued - acquisitions		471,681		—			—			—		471,681		743			—			—			—			743
Shares, options and warrants issued - legal settlement		402,185		—			—			—		402,185		593			—			—			—			593
Shares issued- conversion		13,762,500		(13,504,500	)		(258	)		—		—		—			—			—			—			—
Share-based compensation expense		—		—			—			—		—		1,713			—			—			—			1,713
Options and warrants expired/forfeited		—		—			—			—		—		(1,698	)		—			1,698			—			—
Capital distributions		—		—			—			—		—		—			—			—			(1,884	)		(1,884	)
Net loss for the period		—		—			—			—		—		—			—			(24,955	)		2,186			(22,769	)
Foreign currency translation adjustment		—		—			—			—		—		—			(347	)		—			—			(347	)
Balance at March 31, 2023		274,653,743		63,492,038			12,350			600		351,095,985	$	936,404		$	1,738		$	(641,517	)	$	2,676		$	299,301
Shares issued - stock options, warrant and RSU exercises		1,078		—			—			—		1,078		—			—			—			—			—
Shares, options and warrants issued - acquisitions		5,442,282		—			—			—		5,442,282		7,857			—			—			—			7,857
Shares, options and warrants issued - legal settlement		130,000		—			—			—		130,000		201			—			—			—			201
Private placement net of share issuance costs		6,580,677		—			—			—		6,580,677		7,507			—			—			—			7,507
Share-based compensation expense		—		—			—			—		—		1,981			—			—			—			1,981
Options and warrants expired/forfeited		—		—			—			—		—		(3,514	)		—			3,514			—			—
Capital distributions		—		—			—			—		—		—			—			—			(1,531	)		(1,531	)
Acquisition of non-controlling interest		—		—			—			—		—		(6,177	)		—			—			(1,323	)		(7,500	)
Net loss for the period		—		—			—			—		—		—			—			(15,620	)		2,144			(13,476	)
Foreign currency translation adjustment		—		—			—			—		—		—			(408	)		—			—			(408	)
Balance at June 30, 2023		286,807,780		63,492,038			12,350			600		363,250,022	$	944,259		$	1,330		$	(653,623	)	$	1,966		$	293,932
Shares issued - stock options, warrant and RSU exercises		462,734		—			—			—		462,734		17			—			—			—			17
Warrants issued for services performed		—		—			—			—		—		1,000			—			—			—			1,000
Share-based compensation expense		—		—			—			—		—		1,775			—			—			—			1,775
Options and warrants expired/forfeited		—		—			—			—		—		(2,381	)		—			2,381			—			—
Capital distributions		—		—			—			—		—		—			—			—			(3,551	)		(3,551	)
Net loss for the period		—		—			—			—		—		—			—			(10,833	)		2,162			(8,671	)
Foreign currency translation adjustment		—		—			—			—		—		—			280			—			—			280
Balance at September 30, 2023		287,270,514		63,492,038			12,350			600		363,712,756	$	944,670		$	1,610		$	(662,075	)	$	577		$	284,782

The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.

TerrAscend Corp.

Unaudited Interim Condensed Consolidated Statements of Changes in Shareholders’ Equity (Continued)

(Amounts expressed in thousands of United States dollars, except for share and per share amounts)


	Number of Shares
					Convertible Preferred Stock
	Common Shares		Exchangeable Shares		Series A		Series B		Common Shares Equivalent		Treasury Stock		Additional paid in capital			Accumulated other comprehensive income (loss)			Accumulated deficit			Non-controlling interest			Total
Balance at December 31, 2023		288,327,497		63,492,038		12,350		600		364,769,739		—	$	944,859		$	1,799		$	(704,162	)	$	(1,756	)	$	240,740
Shares issued - stock options, warrant and RSU exercises		69,229		—		—		—		69,229		—		—			—			—			—			—
Share-based compensation expense		—		—		—		—		—		—		1,485			—			—			—			1,485
Options and warrants expired/forfeited		—		—		—		—		—		—		(3,819	)		—			3,819			—			—
Capital distributions		—		—		—		—		—		—		—			—			—			(337	)		(337	)
Acquisition of non-controlling interest		2,888,088		—		—		—		2,888,088		—		3,300			—			—			1,374			4,674
Net loss for the period		—		—		—		—		—		—		—			—			(17,055	)		2,204			(14,851	)
Foreign currency translation adjustment		—		—		—		—		—		—		—			398			—			—			398
Balance at March 31, 2024		291,284,814		63,492,038		12,350		600		367,727,056		—	$	945,825		$	2,197		$	(717,398	)	$	1,485		$	232,109
Shares issued - stock options, warrant and RSU exercises		222,616		—		—		—		222,616		—		—			—			—			—			—
Share-based compensation expense		—		—		—		—		—		—		1,960			—			—			—			1,960
Options and warrants expired/forfeited		—		—		—		—		—		—		(1,988	)		—			1,988			—			—
Capital distributions		—		—		—		—		—		—		—			—			—			(1,946	)		(1,946	)
Acquisition of non-controlling interest		—		—		—		—		—		—		—			—			—			—			—
Net loss for the period		—		—		—		—		—		—		—			—			(8,180	)		1,943			(6,237	)
Foreign currency translation adjustment		—		—		—		—		—		—		—			260			—			—			260
Balance at June 30, 2024		291,507,430		63,492,038		12,350		600		367,949,672		—	$	945,797		$	2,457		$	(723,590	)	$	1,482		$	226,146
Shares issued - stock options, warrant and RSU exercises		12,098		—		—		—		12,098		—		—			—			—			—			—
Shares issued - price protection adjustment		874,730		—		—		—		874,730		—		693			—			—			—			693
Share-based compensation expense		—		—		—		—		—		—		4,275			—			—			—			4,275
Options and warrants expired/forfeited		—		—		—		—		—		—		(73	)		—			73			—			—
Capital distributions		—		—		—		—		—		—		—			—			—			(2,150	)		(2,150	)
Repurchases of common shares, including excise tax		—		—		—		—		—		107,400		(138	)		—			—			—			(138	)
Net loss for the period		—		—		—		—		—		—		—			—			(23,148	)		1,729			(21,419	)
Foreign currency translation adjustment		—		—		—		—		—		—		—			(291	)		—			—			(291	)
Balance at September 30, 2024		292,394,258		63,492,038		12,350		600		368,836,500		107,400	$	950,554		$	2,166		$	(746,665	)	$	1,061		$	207,116

The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.

TerrAscend Corp.

Unaudited Interim Condensed Consolidated Statements of Cash Flows

(Amounts expressed in thousands of United States dollars, except for share and per share amounts)


	For the Nine Months Ended
	September 30, 2024			September 30, 2023
Operating activities
Net loss from continuing operations	$	(42,507	)	$	(40,472	)
Adjustments to reconcile net loss to net cash provided by operating activities
Non-cash adjustments of inventory		—			728
Accretion expense		9,162			7,497
Depreciation of property and equipment and amortization of intangible assets		15,029			15,179
Amortization of operating right-of-use assets		2,185			1,630
Share-based compensation		7,720			5,469
Deferred income tax (recovery) expense		(986	)		1,099
(Gain) loss on fair value of derivative liabilities and purchase option derivative assets		(2,608	)		2,564
Gain on disposal of fixed assets		(9	)		(1,534	)
Unrealized and realized loss on investments		213			2,365
Loss (gain) from revaluation of contingent consideration		3,547			(645	)
Impairment of property and equipment and right of use assets		2,438			—
Gain on lease termination and derecognition of finance lease		(1,220	)		—
Bad debt recovery		(1,136	)		—
Loss on extinguishment of debt		1,662			—
Unrealized and realized foreign exchange loss (gain)		175			(175	)
Changes in operating assets and liabilities
Receivables		428			(5,224	)
Inventory		1,559			(10,750	)
Prepaid expense and other current assets		(1,303	)		(808	)
Deposits		53			411
Other assets		77			718
Accounts payable and accrued liabilities and other payables		(7,812	)		7,395
Operating lease liability		(1,804	)		(1,566	)
Other liability		(473	)		1,542
Uncertain tax position liabilities		36,698			—
Corporate income tax payable		6,300			35,140
Deferred revenue		815			1,149
Net cash provided by operating activities- continuing operations		28,203			21,712
Net cash used in operating activities - discontinued operations		—			(3,660	)
Net cash provided by operating activities		28,203			18,052

Investing activities
Investment in property and equipment		(4,623	)		(6,224	)
Investment in note receivable, net of interest received		(1,523	)		—
Investment in intangible assets		(115	)		(262	)
Insurance recovery for property and equipment		871			—
Success fees related to Alternative Treatment Center license		—			(3,750	)
Receipt of convertible debenture payment		—			738
Payment for land contracts		(630	)		(1,047	)
Cash portion of consideration paid in acquisitions, net of cash of acquired		(250	)		(17,032	)
Net cash used in investing activities - continuing operations		(6,270	)		(27,577	)
Net cash provided investing activities - discontinued operations		—			14,285
Net cash used in investing activities		(6,270	)		(13,292	)

Financing activities
Transfer of Employee Retention Credit		—			12,677
Proceeds from loan payable, net of transaction costs		129,382			23,869
Proceeds from options and warrants exercised		—			81
Loan principal paid		(144,771	)		(46,029	)
Loan amendment fee paid and prepayment premium paid		—			(1,178	)
Capital distributions paid to non-controlling interests		(4,433	)		(6,966	)
Proceeds from private placement, net of share issuance costs		—			21,260
Payments made for financing obligations and finance lease		(356	)		(1,158	)
Repurchases of common shares		(138	)		—
Net cash (used in) provided by financing activities- continuing operations		(20,316	)		2,556
Net cash used in financing activities- discontinued operations		—			(5,539	)
Net cash used in financing activities		(20,316	)		(2,983	)

Net increase in cash and cash equivalents and restricted cash during the period		1,617			1,777
Net effects of foreign exchange		278			(24	)
Cash and cash equivalents and restricted cash, beginning of the period		25,347			26,763
Cash and cash equivalents and restricted cash, end of the period	$	27,242		$	28,516

The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.

TerrAscend Corp.

Unaudited Interim Condensed Consolidated Statements of Cash Flows (Continued)

(Amounts expressed in thousands of United States dollars, except for share and per share amounts)


	For the Nine Months Ended
	September 30, 2024			September 30, 2023
Supplemental disclosure with respect to cash flows
Cash received for income tax, net	$	(8,449	)	$	(4,582	)
Interest paid		17,931			16,683
Lease termination fee paid		271			217
Non-cash transactions
Equity and warrant liability issued for acquisitions and non-controlling interest	$	4,674		$	8,600
Equity issued for price protection on contingent consideration		693			—
Accrued capital purchases		526			936
Warrant issued as consideration for services		—			1,000
Promissory note issued as consideration for acquisitions		—			11,689
Shares issued for legal and liability settlement		—			794

The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.

TerrAscend Corp.

Notes to the Unaudited Interim Condensed Consolidated Financial Statements

(Amounts expressed in thousands of United States dollars, except for share and per share amounts)

1. Nature of operations

TerrAscend Corp. (the "Issuer") was incorporated under the Business Corporations Act (Ontario) on March 7, 2017. The Issuer, through its subsidiaries, TerrAscend Growth Corp. (“TerrAscend”) and its subsidiaries (collectively, the Company”), is a leading North American cannabis company. TerrAscend has vertically integrated licensed operations in Pennsylvania, New Jersey, Michigan, Maryland and California. In addition, the Company has retail operations in Ontario, Canada with a majority-owned dispensary in Toronto, Ontario, Canada. In the United States, TerrAscend’s cultivation and manufacturing provide product selection to both the medical and legal adult-use markets. Notwithstanding the fact that various states in the United States have implemented medical marijuana laws or have otherwise legalized the use of cannabis, the use of cannabis remains illegal under U.S. federal law for any purpose, by way of the Controlled Substances Act of 1970.

The Company operates under one operating segment, which is the cultivation, production and sale of cannabis products.

The Company owns a portfolio of operating businesses, including:

•

TerrAscend New Jersey (“TerrAscend NJ”), a majority owned operation with three dispensaries, and a cultivation/processing facility;

•

TerrAscend Maryland (“TerrAscend MD”), a wholly-owned operation with four dispensaries, and a cultivation/processing facility;

•

TerrAscend Pennsylvania (“TerrAscend PA”), a wholly-owned operation with six dispensaries, and a cultivation/processing facility;

•

TerrAscend Michigan (“TerrAscend MI”), a wholly-owned operation with twenty dispensaries, and three cultivation and processing facilities;

•

TerrAscend California (“TerrAscend CA”), a wholly-owned operation with four dispensaries, and a cultivation facility; and

•

TerrAscend Canada Inc. (“TerrAscend Canada”), a cannabis retailer in Ontario, Canada with a majority-owned dispensary in Toronto, Ontario, Canada ("Cookies Canada").

The common shares in the capital of the Company ("Common Shares") commenced trading on the Canadian Securities Exchange ("CSE") on May 3, 2017 under the ticker symbol "TER" and continued trading on the CSE until the listing of the Common Shares on the Toronto Stock Exchange (the "TSX"). Effective July 4, 2023, the Common Shares commenced trading on the TSX under the ticker symbol "TSND". The Common Shares commenced trading on OTCQX on October 22, 2018 under the ticker symbol "TRSSF", which was subsequently changed to "TSNDF", effective July 6, 2023. The Company’s registered office is located at 77 City Centre Drive, Suite 501, Mississauga, Ontario, L5B 1M5, Canada.

Summary of significant accounting policies

(a)

Basis of presentation

These unaudited interim condensed consolidated financial statements included herein (the “Consolidated Financial Statements”) of the Company and its subsidiaries were prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP").

The accompanying Consolidated Financial Statements contained in this report are unaudited. In the opinion of management, these Consolidated Financial Statements have been prepared on the same basis as the annual consolidated financial statements and notes thereto of the Company and include all adjustments, consisting only of normal recurring adjustments, considered necessary for the fair presentation of the Company’s financial position and operating results. The results for the three and nine months ended September 30, 2024 are not necessarily indicative of the operating results for the year ended December 31, 2024, or any other interim or future periods.

The accompanying Consolidated Financial Statements should be read in conjunction with the audited consolidated financial statements and notes thereto of the Company for the year ended December 31, 2023 contained in the Company's Annual Report on Form 10-K for the year ended December 31, 2023, which was filed with the Securities and Exchange Commission (the "SEC") on March 14, 2024 (the "Annual Report"). There were no significant changes to the policies disclosed in Note 2 of the summary of significant accounting

TerrAscend Corp.

Notes to the Unaudited Interim Condensed Consolidated Financial Statements

(Amounts expressed in thousands of United States dollars, except for share and per share amounts)

policies of the Company’s audited consolidated financial statements for the year ended December 31, 2023 in the Company's Annual Report .

The accompanying Consolidated Financial Statements have been prepared on the going concern basis, under the historical cost convention, except for certain financial instruments that are measured at fair value as described herein.

The Company previously concluded that substantial doubt existed as to its ability to continue as a going concern primarily due to the Company's current liabilities exceeding its current assets related to its loans maturing within the current year. During the period ended on September 30, 2024, the Company entered into a four-year $140,000 senior secured term loan which was primarily used to retire a majority of the Company's loans coming due within the next year. See Note 10 for more information regarding the refinancing.

Following the retiring and financing of the Company’s loans coming due within the next year, along with its ability to identify access to future capital, and continued improvement in cash flow from the Company's consolidated operations, management has determined that substantial doubt no longer exists in the Company's ability to continue as a going concern.

Reclassification

Certain prior year amounts have been reclassified to conform to the current year presentation. Specifically, (Gain) loss on disposal of fixed assets has been reclassified out of Impairment of property and equipment and right of use assets and into Other operating (income) expense on the Consolidated Statements of Operations and Comprehensive Loss.

Consolidation

The Company consolidates entities in which it has a controlling financial interest by evaluating whether the entity is a voting interest entity (“VOE”) or a variable interest entity (“VIE”).

In connection with the listing of the Common Shares on the TSX, the Company reorganized its ownership structure to segregate the Company’s Canadian retail operations from TerrAscend's cultivation and manufacturing operations in the United States (the "Reorganization"). Following the completion of the Reorganization, the Company owns 95% of its Canadian retail business. The Company continues to consolidate both its Canadian and U.S. cannabis operations under two different consolidation models.

Subsequent to the Reorganization, all operations in the United States have a functional currency of the U.S. dollar ("USD"). Canadian operations continue to have a functional currency of the Canadian dollar ("CAD").

Voting Interest Entities

A VOE is an entity in which (1) the total equity investment at risk is deemed sufficient to absorb the expected losses of the entity, (2) the at-risk equity holders, as a group, have all of the characteristics of a controlling financial interest and (3) the entity is structured with substantive voting rights. The Company consolidates the Canadian operations under a VOE model based on the controlling financial interest obtained through Common Shares with substantive voting rights.

Variable Interest Entities

A VIE is an entity that lacks one or more characteristics of a controlling financial interest defined under the voting interest model. The Company consolidates VIE when it has a variable interest that provide it with (1) the power to direct the activities of a VIE that most significantly impact the VIE’s economic performance (power) and (2) the obligation to absorb losses of the VIE that potentially could be significant to the VIE or the right to receive benefits from the VIE that potentially could be significant to the VIE (benefits).

In connection with the Reorganization, TerrAscend issued and sold, on a private placement basis, Class A shares in the capital of TerrAscend ("Class A Shares") for aggregate gross proceeds of $1,000 to an investor ("Investment"). See Note 10 for accounting treatment of the Class A Shares. Following the closing of the Investment, the Class B shares ("Class B Shares") in the capital of TerrAscend held by the Company, representing all of the issued and outstanding Class B shares, were automatically exchanged for non-voting, non-participating exchangeable shares in the capital of TerrAscend ("Non-Voting Shares"), representing approximately 99.8% of the issued and outstanding shares of TerrAscend on an as-converted basis. As a result of the limited rights associated with Non-Voting Shares that the Company holds following the closing of the Investment, the Company and TerrAscend entered into a protection agreement dated April 18, 2023 ("Protection Agreement"). The Protection Agreement provides for certain negative covenants in order to preserve the value of the Non-Voting Shares until such time as the Non-Voting Shares are converted into Class A Shares.

TerrAscend Corp.

Notes to the Unaudited Interim Condensed Consolidated Financial Statements

(Amounts expressed in thousands of United States dollars, except for share and per share amounts)

The Issuer determined that TerrAscend is a VIE, as all of the Company’s U.S. activities continue to be conducted on behalf of the Company which has disproportionately few voting rights. After conducting an analysis of the following VIE factors; purpose and design of the VIE, the Protection Agreement in place, the structure of the Company's board of directors (the "Board"), and substantive kick-out rights of the holders of the Class A Shares, it was determined that the Company has the power to direct the activities of TerrAscend. In addition, given the structure of the Class A Shares where all of the losses and substantially all of the benefits of TerrAscend are absorbed by the Company, the Company consolidates as the primary beneficiary in accordance with ASC 810, Consolidation.

The Company's U.S. operations are consolidated through the VIE model. Therefore, substantially all of the Company's current assets, non-current assets, current liabilities and non-current liabilities are consolidated through the VIE model. The Company's assets and liabilities that are not consolidated through the VIE model include convertible debt, and derivative liability. The Company also consolidates a minimal amount of assets and liabilities within Canada. See Note 21 for more information.

Accounts receivable, net

The Company's accounts receivable, net consisted of the following:


	September 30, 2024			December 31, 2023
Trade receivables	$	17,888		$	28,403
Sales tax receivable		677			408
Other receivables		181			1,154
Provision for current expected credit losses		(1,177	)		(10,917	)
Total receivables, net	$	17,569		$	19,048


	September 30, 2024			December 31, 2023
Trade receivables	$	17,888		$	28,403
Less: provision for current expected credit losses		(1,177	)		(10,917	)
Total trade receivables, net	$	16,711		$	17,486

Of which
Current		10,988			13,799
31-90 days		3,118			2,837
Over 90 days		3,782			11,767
Less: current expected credit losses		(1,177	)		(10,917	)
Total trade receivables, net	$	16,711		$	17,486

During the second quarter, the Company settled accounts receivable that had been previously accounted for as expected credit losses which resulted in a bad debt recovery of $4,188 within General and administrative expenses on the Consolidated Statements of Operations and Comprehensive Loss.

TerrAscend Corp.

Notes to the Unaudited Interim Condensed Consolidated Financial Statements

(Amounts expressed in thousands of United States dollars, except for share and per share amounts)

Acquisitions

Contingent consideration

The balances of the Company's contingent considerations are as follows:


	State Flower			Apothecarium			Peninsula			Total
Carrying amount, December 31, 2023	$	1,406		$	3,028		$	2,012		$	6,446
Settlement of contingent consideration		(1,335	)		(3,592	)		—			(4,927	)
Payments of contingent consideration		(188	)		(505	)		—			(693	)
Loss on revaluation of contingent consideration		817			2,196			534			3,547
Carrying amount, September 30, 2024	$	700		$	1,127		$	2,546		$	4,373
Less: current portion		—			—			(2,546	)		(2,546	)
Non-current contingent consideration	$	700		$	1,127		$	—		$	1,827

On January 19, 2024, the Company amended the original purchase agreement and issued an aggregate of 2,888,088 Common Shares and paid $250 of cash to the sellers of its previously acquired State Flower and The Apothecarium businesses. The issuance of Common Shares fully settled the previous contingent consideration balances. The Company provided price protection on the Common Shares issued. On September 13, 2024, the Company issued an additional 874,730 Common Shares related to the price protection clause using the Black-Scholes Option Pricing Model ("Black-Scholes Model").

Inventory

The Company’s inventory of dry cannabis and cannabis derived products includes both purchased and internally produced inventory. The Company’s inventory is comprised of the following items:


	September 30, 2024		December 31, 2023
Raw materials	$	459	$	378
Finished goods		19,569		18,821
Work in process		27,755		28,451
Accessories, supplies and consumables		3,641		4,033
Total inventory	$	51,424	$	51,683

Discontinued operations

TerrAscend Canada operated out of a 67,300 square foot facility located in Mississauga, Ontario and was licensed to cultivate, process and sell cannabis for medical and adult-use purposes. These licenses allowed for sales of dried cannabis, cannabis oil and extracts, topicals, and edibles. The Company ceased operations at TerrAscend Canada’s manufacturing facility during the three months ended December 31, 2022. As such, TerrAscend Canada's Licensed Producer (as such term is defined in the Cannabis Act) results are presented in discontinued operations.

TerrAscend Corp.

Notes to the Unaudited Interim Condensed Consolidated Financial Statements

(Amounts expressed in thousands of United States dollars, except for share and per share amounts)

The results of operations for the discontinued operations includes revenues and expenses directly attributable to the disposed of operations. Corporate and administrative expenses, including interest expense, not directly attributable to the operations were not allocated to the Canadian Licensed Producer business. The results of discontinued operations were as follows:


	For the Three Months Ended					For the Nine Months Ended
	September 30, 2024		September 30, 2023			September 30, 2024		September 30, 2023
Revenue, net	$	—	$	—		$	—	$	—

Cost of Sales		—		—			—		—

Gross profit		—		—			—		—

Operating expenses:
General and administrative		—		144			—		900
Amortization and depreciation		—		-			—		48
Impairment of property and equipment		—		—			—		3,036
Total operating expenses		—		144			—		3,984

Loss from discontinued operations		—		(144	)		—		(3,984	)
Other expense
Finance and other expenses		—		88			—		460
Net loss from discontinued operations	$	—	$	(232	)	$	—	$	(4,444	)

Property and equipment

Property and equipment consisted of:


	September 30, 2024			December 31, 2023
Land	$	6,452		$	6,103
Assets in process		18,772			24,211
Buildings & improvements		159,684			151,989
Machinery & equipment		36,648			35,370
Office furniture & equipment		9,251			9,066
Assets under finance leases		1,489			2,362
Total cost		232,296			229,101
Less: accumulated depreciation		(41,770	)		(32,886	)
Property and equipment, net	$	190,526		$	196,215

Assets in process primarily represent construction in progress related to both cultivation and dispensary facilities not yet completed, or otherwise not placed in service. During the nine months ended September 30, 2024, the Company recorded an impairment loss of certain property and equipment of $2,438 due to the wind-down of one of its California dispensaries.

As of September 30, 2024 and December 31, 2023, borrowing costs were not capitalized because the assets in process did not meet the criteria of a qualifying asset.

Depreciation expense was $3,128 and $9,220 for the three and nine months ended September 30, 2024, respectively ($2,110 and $6,250 included in cost of sales) and $2,481 and $9,133 for the three and nine months ended September 30, 2023, respectively ($2,029 and $6,069 included in cost of sales).

TerrAscend Corp.

Notes to the Unaudited Interim Condensed Consolidated Financial Statements

(Amounts expressed in thousands of United States dollars, except for share and per share amounts)

Intangible assets and goodwill

Intangible assets consisted of the following:


At September 30, 2024	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Finite lived intangible assets
Software	$	2,609	$	(2,236	)	$	373
Licenses		187,759		(24,405	)		163,354
Non-compete agreements		280		(280	)		—
Total finite lived intangible assets		190,648		(26,921	)		163,727
Indefinite lived intangible assets
Brand intangibles		46,972		—			46,972
Total indefinite lived intangible assets		46,972		—			46,972
Intangible assets, net	$	237,620	$	(26,921	)	$	210,699


At December 31, 2023	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Finite lived intangible assets
Software	$	2,050	$	(720	)	$	1,330
Licenses		186,624		(20,216	)		166,408
Brand intangibles		1,144		(1,144	)		—
Non-compete agreements		280		(280	)		—
Total finite lived intangible assets		190,098		(22,360	)		167,738
Indefinite lived intangible assets
Brand intangibles		48,116		—			48,116
Total indefinite lived intangible assets		48,116		—			48,116
Intangible assets, net	$	238,214	$	(22,360	)	$	215,854

Amortization expense was $1,895 and $5,767 for the three and nine months ended September 30, 2024, respectively, ($724 and $2,172 included in cost of sales) and $2,878 and $5,987 for the three and nine months ended September 30, 2023 ($725 and $2,175 included in cost of sales).

Estimated future amortization expense for finite lived intangible assets for the next five years is as follows:


2024	$	1,858
2025		7,433
2026		7,422
2027		7,343
2028		7,292
Thereafter		132,379
Total	$	163,727

As of September 30, 2024, the weighted average amortization period remaining on intangible assets was 24.7 years.

The Company's goodwill is allocated to one reportable segment. The following table summarizes the activity in the Company’s goodwill balance:


Balance at December 31, 2023	$	106,929
Additions at acquisition date		-
Impairment of goodwill		-
Balance at September 30, 2024	$	106,929

TerrAscend Corp.

Notes to the Unaudited Interim Condensed Consolidated Financial Statements

(Amounts expressed in thousands of United States dollars, except for share and per share amounts)

10.

Loans payable

The Company's loans payable consisted of the following:


	September 30, 2024			December 31, 2023
Ilera term loan retired August 2024
Principal amount	$	—		$	76,927
Deferred financing cost		—			(3,191	)
Net carrying amount	$	—		$	73,736

Stearns loan retired August 2024
Principal amount	$	—		$	24,809
Deferred financing cost		—			(791	)
Net carrying amount	$	—		$	24,018

Chicago Atlantic term loan retired September 2024
Principal amount	$	—		$	24,611
Deferred financing cost		—			—
Net carrying amount	$	—		$	24,611

Pelorus term loan due October 2027
Principal amount	$	45,478		$	45,478
Deferred financing cost		(1,242	)		(1,490	)
Net carrying amount	$	44,236		$	43,988

Maryland Acquisition loans (1)
Principal amount	$	18,576		$	19,873
Unamortized discount		(902	)		(1,403	)
Net carrying amount	$	17,674		$	18,470

FocusGrowth loan due August 2028
Principal amount	$	140,000		$	—
Unamortized discount and deferred financing cost		(13,439	)		—
Exit fee accretion		129			—
Net carrying amount	$	126,690		$	—

Other loans	$	1,679		$	2,698
Short-term debt		—			11,849
Total debt	$	190,279		$	199,370

Loans payable, current		7,701			137,737
Loans payable, non-current		182,578			61,633

Total principal	$	205,733		$	206,453

(1) For maturity breakout, refer to Maryland Acquisition Loans section below.

Total interest paid on all loan payables was $5,332 and $17,931 for the three and nine months ended September 30, 2024, respectively, and $7,424 and $16,683 for the three and nine months ended September 30, 2023, respectively. The Company had accrued interest on loans payable of $2,112 and $3,491 as of September 30, 2024 and December 31, 2023, respectively, included in accounts payable and accrued liabilities on the Consolidated Balance Sheets.

FocusGrowth Term Loan

On August 1, 2024, the Company and TerrAscend USA, Inc., as guarantors, and each of WDB Holding CA, Inc., WDB Holding PA, Inc., Moose Curve Holdings, LLC, Hempaid, LLC and pursuant to a joinder agreement dated September 30, 2024, WDB Holding MI, Inc., including certain of each of their respective subsidiaries, as borrowers (collectively, the “Borrowers”), and FG Agency Lending LLC, as the Administrative Agent entered into a Loan Agreement (the “FG Loan”). The FG Loan provides for a four-year, $140,000 senior-secured term loan with an initial draw on August 1, 2024 of $114,000 (the “Initial Draw”) and a delayed draw on September 30, 2024 of $26,000 (the “Delayed Draw”). Net proceeds of the FG Loan were received in an amount equal to 95% of the $140,000.

The FG Loan bears interest at 12.75% per annum and matures on August 1, 2028. The FG Loan is guaranteed by the Company and TerrAscend USA, Inc. and is secured by substantially all of the assets of the Borrowers. Depending on the timing of repayment, an exit fee of between 2.0% and 4.0% of the FG Loan (the "Exit Fee") will be due upon either the prepayment or loan’s maturity date.

TerrAscend Corp.

Notes to the Unaudited Interim Condensed Consolidated Financial Statements

(Amounts expressed in thousands of United States dollars, except for share and per share amounts)

Proceeds from the FG Loan were used to retire the Ilera Term Loan, the Stearns Loan, the Chicago Atlantic Term Loan and certain other short-term indebtedness (collectively, the “Retired Loans”), in addition to being used for working capital and general corporate purposes. Each outstanding obligation under the Retired Loans was repaid in full and subsequently terminated.

As of September 30, 2024, there was an outstanding principal amount of $140,000 under the FG Loan.

Chicago Atlantic Term Loan

In connection with the acquisition of Gage Growth on March 10, 2022 (the "Gage Acquisition"), the Company assumed a senior secured term loan that was amended to provide an amount of $25,000 (the “Chicago Atlantic Term Loan”) bearing an interest rate equal to the greater of (i) the U.S. "prime rate" plus 6.00%, and (ii) 13.0% and was set to mature on November 1, 2024. The Chicago Atlantic Loan was secured by a first lien on all Gage Growth assets.

On July 19, 2024, the Company made a prepayment of the Chicago Atlantic Term Loan of $1,500 at par. On August 1, 2024, as described above, the Company entered into the FG Loan, of which, a portion of the proceeds from the Delayed Draw, which occurred on September 30, 2024, was used to retire the then outstanding principal of the Chicago Atlantic Term Loan in the amount of $22,557. Due to the early retirement of the Chicago Atlantic Term Loan, the Company paid an exit fee of $500 and recognized a loss on extinguishment of debt of $500 on the Consolidated Statements of Operations and Comprehensive Loss.

Ilera Term Loan

On December 18, 2020, WDB Holding PA, a subsidiary of TerrAscend, entered into a senior secured term loan with a syndicate of lenders in the amount of $120,000 ("Ilera Term Loan"). The Ilera Term Loan was solely secured by the Company’s Pennsylvania-based Ilera Healthcare LLC (“Ilera”). The Ilera Term Loan bore interest at 12.875% and was set to mature on December 17, 2024.

On January 2, 2024, the Company completed a prepayment of the Ilera Term Loan of $4,800 at the prepayment price of 100% to par. On April 30, 2024, the Company made a prepayment of $3,200 of the Ilera Term Loan, at the prepayment price of 100% to par. In accordance with ASC 470, Debt, these amendments were not considered extinguishment of debt.

On August 1, 2024, as described above, the Company entered into the FG Loan, of which, a portion of the proceeds from the Initial Draw was used to retire the Ilera Term Loan and pay the outstanding principal amount of $68,927. Due to the early retirement of the Ilera Term Loan, the Company recognized a loss on extinguishment of debt of $1,272 on the Consolidated Statements of Operations and Comprehensive Loss.

Stearns Loan

On August 1, 2024, as described above, the Company entered into the FG Loan, of which, a portion of the proceeds from the Initial Draw was used to retire the Stearns Loan and pay the outstanding principal amount of $24,638. Due to the early retirement of the Stearns Loan, the Company recognized a loss on extinguishment of debt of $369 on the Consolidated Statements of Operations and Comprehensive Loss.

Pelorus Term Loan

On October 11, 2022, subsidiaries of, TerrAscend, among others, entered into a loan agreement with Pelorus Fund REIT, LLC ("Pelorus") for a single-draw senior secured term loan (the “Pelorus Term Loan") in an aggregate principal amount of $45,478. The Pelorus Term Loan is based on a variable rate tied to the one month Secured Overnight Financing Rate ("SOFR"), subject to a base rate, plus 9.5%, with interest-only payments for the first 36 months and matures on October 11, 2027. The base rate is defined as, on any day, the greatest of: (i) 2.5%, (b) the effective federal funds rate in effect on such day plus 0.5%, and (c) one month Secured Overnight Financing Rate ("SOFR") in effect on such day. The obligations of the borrowers under the Pelorus Term Loan are guaranteed by the Company, TerrAscend USA and certain other subsidiaries of TerrAscend and are secured by all of the assets of TerrAscend's New Jersey businesses and certain assets of TerrAscend's Maryland business, including certain real estate in Maryland. The Pelorus Term Loan is not secured by any of the MD dispensaries.

As of September 30, 2024, there was an outstanding principal amount of $45,478 under the Pelorus Term Loan.

TerrAscend Corp.

Notes to the Unaudited Interim Condensed Consolidated Financial Statements

(Amounts expressed in thousands of United States dollars, except for share and per share amounts)

Maryland Acquisition Loans

In connection with the acquisition of Derby 1, LLC ("Peninsula"), Hempaid, LLC ("Blue Ridge"), and Herbiculture Inc. ("Herbiculture"), (collectively, the "Maryland Acquisitions"), the Company entered into promissory notes with an aggregate principal amount of $20,625 that bear interest at rates ranging from 7.0% to 10.5% with maturities ranging from June 28, 2025 to June 30, 2027.

As of September 30, 2024, there was an outstanding principal amount of $18,576 under the Maryland Acquisition Loans.

Other loans

Stadium Ventures

In connection with the Gage Acquisition, the Company assumed existing indebtedness in the form of a promissory note in the amount of $4,500, which was set to mature on January 1, 2025 ("Stadium Ventures Note"). The promissory note bore interest at a rate of 6%.

As of September 30, 2024, there was an outstanding principal amount of $539 under the Stadium Ventures Note. On October 1, 2024, the Company paid the outstanding principal amount of $539 and retired the promissory note (see Note 25).

Class A Shares of TerrAscend Growth

In connection with the Reorganization (see Note 3), TerrAscend issued $1,000 of Class A shares with a 20% guaranteed annual dividend to an investor (the “Investor”) pursuant to the terms of a subscription agreement between TerrAscend and the Investor dated April 20, 2023 (the “Subscription Agreement”). Pursuant to the terms of the Subscription Agreement, TerrAscend holds a call right to repurchase all of the Class A Shares issued to the Investor for an amount equal to the sum of: (a) the Repurchase/Put Price (as defined in the Subscription Agreement); plus (b) the amount equal to 40% of the subscription amount less the aggregate dividends paid to the Investor as of the date of the exercise of the option. In addition, the Investor holds a put right that is exercisable at any time after four months’ advanced written notice following the five-year anniversary of the closing of the investment to put all (and only all) of the Class A Shares owned by the Investor to TerrAscend at the Repurchase/Put Price, payable in cash or shares. The instrument is considered as a debt for accounting purposes due to the economic characteristics and risks.

Short-Term Debt

On January 15, 2024, the Company paid off the IHC Real Estate LP promissory note with a payment of $5,000.

On August 1, 2024, as described above, the Company entered into the FG Loan, of which, a portion of the proceeds from the Initial Draw was used to retire certain short-term debt and pay an outstanding principal amount of $1,333. The Company recognized a gain on extinguishment of debt of $45 on the Consolidated Statements of Operations and Comprehensive Loss.

On August 13, 2024, the Company paid off and retired two promissory notes from the Pinnacle Acquisition with a payment of $5,582. The Company recognized a gain on extinguishment of debt of $434 on the Consolidated Statements of Operations and Comprehensive Loss.

Maturities of loans payable

Stated maturities of loans payable over the next five years are as follows:


	September 30, 2024
2024	$	1,383
2025		7,942
2026		10,925
2027		44,483
2028 (1)		141,000
Thereafter		—
Total principal payments	$	205,733

(1) Balance excludes the Exit Fee, as described above within this note.

TerrAscend Corp.

Notes to the Unaudited Interim Condensed Consolidated Financial Statements

(Amounts expressed in thousands of United States dollars, except for share and per share amounts)

11.

Leases

The majority of the Company’s leases are operating leases used primarily for corporate offices and retail. The operating lease periods generally range from 1 to 25 years. The Company had one finance lease at September 30, 2024 and two finance leases at December 31, 2023.

Amounts recognized in the consolidated balance sheet were as follows:


	September 30, 2024		December 31, 2023
Operating leases:
Operating lease right-of-use assets	$	42,061	$	43,440

Operating lease liability classified as current		2,431		1,244
Operating lease liability classified as non-current		43,103		45,384
Total operating lease liabilities	$	45,534	$	46,628

Finance leases:
Property and equipment, net	$	1,382	$	2,112

Lease obligations under finance leases classified as current		1,821		2,030
Lease obligations under finance leases classified as non-current		-		407
Total finance lease obligations	$	1,821	$	2,437

The Company recognized operating lease expense of $1,860 and $5,884 for the three and nine months ended September 30, 2024, respectively, and $1,747 and $4,198 for the three and nine months ended September 30, 2023, respectively.

Other information related to operating leases at September 30, 2024 and December 31, 2023 consisted of the following:


	September 30, 2024		December 31, 2023
Weighted-average remaining lease term (years)
Operating leases		12.2		12.5
Finance leases		1.0		1.2

Weighted-average discount rate
Operating leases	11.45%			11.43	%
Finance leases	9.44%			9.47	%

Supplemental cash flow information related to leases are as follows:


	September 30, 2024		December 31, 2023
Cash paid for amounts included in measurement of operating lease liabilities	$	5,560	$	6,264
Right-of-use assets obtained in exchange for operating lease obligations		1,594		16,603
Cash paid for amounts included in measurement of finance lease liabilities		75		153

TerrAscend Corp.

Notes to the Unaudited Interim Condensed Consolidated Financial Statements

(Amounts expressed in thousands of United States dollars, except for share and per share amounts)

Undiscounted lease obligations are as follows:


	Operating			Finance			Total
2024	$	1,831		$	—		$	1,831
2025		7,433			2,000			9,433
2026		7,205			—			7,205
2027		7,089			—			7,089
2028		6,888			—			6,888
Thereafter		57,403			—			57,403
Total lease payments		87,849			2,000			89,849
Less: interest		(42,315	)		(179	)		(42,494	)
Total lease liabilities	$	45,534		$	1,821		$	47,355

12.

Convertible Debt

The Company's convertible debt consisted of the following:


	September 30, 2024		December 31, 2023
Convertible debt proceeds, net of transaction costs - Maturing June 2026	$	10,098	$	10,098
Allocation to conversion option		3,600		3,600
Allocation to debt		6,498		6,498
Interest and accretion		2,106		768
Net carrying amount	$	8,604	$	7,266

The Company had $986 of accrued interest on convertible debt as of September 30, 2024 and no accrued interest on convertible debt as of December 31, 2023, included in accounts payable and accrued liabilities on the Consolidated Balance Sheets.

13.

Shareholders' equity

Share Repurchase Authorization

On August 20, 2024, the Board approved a share repurchase program to repurchase up to $10,000 of the Company’s common shares (“Shares”). The share repurchase program authorizes the Company to repurchase up to 10,000,000 common shares of the Company at any time, or from time to time, from August 22, 2024 until August 21, 2025. The share repurchase program authorizes the Company to repurchase up to 65,361 Shares daily, which represents 25% of the Company’s average daily trading volume on the Toronto Stock Exchange of 261,445 Shares. Any repurchases under the program may be made by means of open market transactions, negotiated block transactions, or otherwise, including pursuant to a repurchase plan administered in accordance with Rules 10b5-1 and 10b-18 under the Securities Exchange Act of 1934, as amended. The size and timing of any repurchases will depend on price, market and business conditions, and other factors.

During the third quarter of 2024, the Company repurchased 107,400 common shares under the share repurchase program for total consideration of approximately $133. As of September 30, 2024, the Company had a total of 9,892,600 shares remaining that can be authorized for repurchase.

TerrAscend Corp.

Notes to the Unaudited Interim Condensed Consolidated Financial Statements

(Amounts expressed in thousands of United States dollars, except for share and per share amounts)


	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2024		2023		2024		2023
	(In thousands, except per share data)
Shares repurchased		107,400		—		107,400		—
Weighted average price per share	$	1.24	$	—	$	1.24	$	—
Total cost	$	133	$	—	$	133	$	—
Excise tax (1)	$	5	$	—	$	5	$	—

(1) The excise tax accrued in connection with the share repurchases was recorded as an adjustment to the cost basis of repurchased shares in treasury stock and within Accrued expenses on the Company’s Condensed Consolidated Balance Sheets as of September 30, 2024.

Warrants

The following is a summary of the outstanding warrants for Common Shares:


	Number of Common Share Warrants Outstanding			Number of Common Share Warrants Exercisable			Weighted Average Exercise Price $		Weighted Average Remaining Life (years)
Outstanding, December 31, 2023		23,330,542			818,927		$	4.56		8.74
Granted		344,140			344,140			2.17		2.75
Expired		(117,148	)		(117,148	)		7.00		—
Outstanding, September 30, 2024		23,557,534			1,045,919		$	4.41		7.96

The weighted-average exercise price in the above table is denominated in a currency that is different from the functional currency of the Company and can influence the USD conversion.

The following is a summary of the outstanding warrant liabilities that are exchangeable into Common Shares:


	Number of Common Share Warrants Outstanding		Number of Common Share Warrants Exercisable		Weighted Average Exercise Price $		Weighted Average Remaining Life (years)
Outstanding, December 31, 2023		3,590,334		—	$	1.95		1.48
Granted		—		—		—		—
Expired		—		—		—		—
Outstanding, September 30, 2024		3,590,334		—	$	1.95		0.73

14.

Share-based compensation plans

Share-based payments expense

Total share-based payments expense was as follows:


	For the Three Months Ended					For the Nine Months Ended
		September 30, 2024		September 30, 2023			September 30, 2024		September 30, 2023
Stock options		$	3,553	$	845		$	5,640	$	3,542
Restricted share units			722		930			2,080		1,927
Total share-based payments		$	4,275	$	1,775		$	7,720	$	5,469

TerrAscend Corp.

Notes to the Unaudited Interim Condensed Consolidated Financial Statements

(Amounts expressed in thousands of United States dollars, except for share and per share amounts)

During the period ended September 30, 2024, the Company modified the expiration date of certain stock options from five to ten years, resulting in a one-time adjustment of $1,527 on the Consolidated Statements of Operations and Comprehensive Loss.

Stock Options

The following table summarizes the stock option activity for the nine months ended September 30, 2024:


	Number of Stock Options			Weighted average remaining contractual life (in years)		Weighted Average Exercise Price (per share) $		Aggregate intrinsic value
Outstanding, December 31, 2023		16,278,380			4.74	$	3.35	$	658
Granted		2,375,000			—		2.30		—
Exercised		(30,625	)		—		1.55		—
Forfeited		(522,626	)		—		2.45		—
Expired		(1,672,533	)		—		3.33		—
Outstanding, September 30, 2024		16,427,596			5.98	$	3.28	$	141
				.
Exercisable, September 30, 2024		11,909,430			5.02	$	3.55	$	130

The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value (the difference between Company’s closing stock price on September 30, 2024 and December 31, 2023, respectively, and the exercise price, multiplied by the number of the in-the-money options) that would have been received by the option holders had they exercised their in-the-money options on September 30, 2024 and December 31, 2023, respectively.

The total pre-tax intrinsic value (the difference between the market price of the Common Shares on the exercise date and the price paid by the option holder to exercise the option) related to stock options exercised is presented below:


	For the Three Months Ended				For the Nine Months Ended
	September 30, 2024		September 30, 2023			September 30, 2024		September 30, 2023
Exercised	$	1	$	7		$	6	$	558

The fair value of the various stock options granted were estimated using the Black-Scholes Model with the following assumptions:


	September 30, 2024			December 31, 2023
Common Stock Price of TerrAscend Corp.	$1.18 - $2.14			$1.25 - $2.05
Volatility	77.54% - 78.31%			77.79% - 80.16%
Risk-free interest rate	3.18% - 4.45%			2.85% - 4.26%
Expected life (years)	4.01 - 10.01			9.78 - 10.01
Dividend yield		0.00	%		0.00	%

Volatility was estimated by using the historical volatility of the Company's stock price in USD as reflected on the OTCQX. In prior periods, the Company’s fair value calculations for stock options were consistently reported in USD. However, the stock price assumption used in calculating the fair value was previously stated in CAD. Effective as of the current period, the stock price assumption has been updated to reflect a USD-denominated stock price for consistency in financial reporting. The fair value amounts reported in prior periods remain unchanged, as the fair value itself has always been presented in USD. The expected life in years represents the period of time that the options issued are expected to be outstanding. The risk-free rate is based on U.S. treasury bond issues with a remaining term approximately equal to the expected life of the options. Dividend yield is based on the fact that the Company has never paid cash dividends and does not expect to pay cash dividends in the foreseeable future.

The total estimated fair value of stock options that vested during the nine months ended September 30, 2024 and 2023 was $5,647 and $4,587, respectively. As of September 30, 2024, there was $6,677 of total unrecognized compensation cost related to unvested options.

TerrAscend Corp.

Notes to the Unaudited Interim Condensed Consolidated Financial Statements

(Amounts expressed in thousands of United States dollars, except for share and per share amounts)

Restricted Share Units

The following table summarizes the activities for the RSUs for the nine months ended September 30, 2024:


	Number of RSUs
Outstanding, December 31, 2023		1,078,584
Granted		2,449,011
Vested		(342,510	)
Forfeited		(155,617	)
Outstanding, September 30, 2024		3,029,468

As of September 30, 2024, there was $4,262 of total unrecognized compensation cost related to unvested RSUs.

15.

Non-controlling interest

Non-controlling interest consists mainly of a 12.5% minority ownership interest in TerrAscend's New Jersey operations.

On January 19, 2024, the Company reduced its non-controlling interest through the acquisition of the remaining 50.1% equity in both State Flower and the three Apothecarium dispensaries in California. The carrying amount of non-controlling interest was adjusted by $1,374 and recognized in additional paid in capital and attributed to the parent's equity holders.

The following table summarizes the non-controlling interest activity for the nine months ended September 30, 2024:


	September 30, 2024			December 31, 2023
Opening carrying amount	$	(1,756	)	$	2,374
Capital distributions		(4,433	)		(11,622	)
Acquisition of non-controlling interest		1,374			(1,323	)
Net income attributable to non-controlling interest		5,876			8,815
Ending carrying amount	$	1,061		$	(1,756	)

16.

Related parties

Parties are related if one party has the ability to control or exercise significant influence over the other party in making financing and operating decisions. At September 30, 2024, amounts due to/from related parties consisted of:

(a)

Loans payable: During the period ended September 30, 2024, a related person, who is a key stakeholder of the Company, participated in the FG Loan (see Note 10), which makes up $5,500 of the total loan principal balance at September 30, 2024.

17.

Income taxes

The Company's effective tax rate was (204)% and (450)% for the three and nine months ended September 30, 2024 and (265)% and (418)% for the three and nine months ended September 30, 2023.

The Company has computed its provision for income taxes based on the actual effective tax rate for the quarter as the Company believes this is the best estimate for the annual effective tax rate. The Company is subject to income taxes in the United States and Canada.

Significant judgment is required in evaluating the Company’s uncertain tax positions and determining the provision for income taxes. The Company recognizes benefits from uncertain tax positions based on the cumulative probability method whereby the largest benefit with a cumulative probability of greater than 50% is recorded. An uncertain tax position is not recognized if it has less than a 50% likelihood of being sustained.

TerrAscend Corp.

Notes to the Unaudited Interim Condensed Consolidated Financial Statements

(Amounts expressed in thousands of United States dollars, except for share and per share amounts)

A reconciliation of the beginning and ending amount of unrecognized tax benefits for the period presented:


	For the Nine Months Ended September 30, 2024
Balance, beginning of period	$	84,485
Increases based on tax positions related to prior years		31,378
Additions based on tax positions related to the current year		23,746
Expirations of applicable statutes of limitations		—
Settlements with tax authorities		—
Ending carrying amount	$	139,609

A reconciliation of the beginning and ending amount of uncertain tax liabilities, inclusive of accruals for related penalties and interest, for the period presented:


	For the Nine Months Ended September 30, 2024
Balance, beginning of period	$	77,084
Increases based on tax positions related to prior years		12,633
Additions based on tax positions related to the current year		20,305
Additions based on refunds received related to prior years		8,371
Reclass of tax payments on deposit		(2,068	)
Ending carrying amount	$	116,325

The Company had an unrecognized tax benefits of $139,609 and $84,485 as of September 30, 2024 and December 31, 2023, respectively. The increase in uncertain tax positions is primarily due to legal interpretations that challenge the Company's tax liability under the Code (“280E Tax Position”). The Company believes that it is reasonably possible that the unrecognized tax benefits will increase over the next 12 months due to its 280E Tax Position. Of the unrecognized tax benefits amounts, $13,900 and $10,459 as of September 30, 2024 and December 31, 2023, respectively, is unrelated to its 280E Tax Position. The unrecognized tax liabilities are combined with other long term liabilities of $1,006 and $4,667 as at September 30, 2024 and December 31, 2023, respectively, on the consolidated balance sheets.

Related to its 280E Tax Position, the Company has filed all of its amended federal and state returns for tax years 2020 through 2022. During the period ended September 30, 2024, the Company received refunds related primarily to the amended federal tax return for tax year 2020 in the amount of $8,699, including interest. During the period ended September 30, 2024, the Company's 2021 amended federal income tax return, which requests a refund of $14,940, was selected for a routine examination by the Internal Revenue Service. The Company does not currently anticipate completion of the audit within the next twelve months. Subsequent to the period ended September 30, 2024, upon the expiration of the statute of limitations associated with tax year 2020, the Company expects to release a portion of its uncertain tax benefits in the amount of $8,361.

TerrAscend Corp.

Notes to the Unaudited Interim Condensed Consolidated Financial Statements

(Amounts expressed in thousands of United States dollars, except for share and per share amounts)

18.

General and administrative expenses

The Company’s general and administrative expenses were as follows:


	For the Three Months Ended				For the Nine Months Ended
	September 30, 2024		September 30, 2023			September 30, 2024			September 30, 2023
Office and general	$	3,484	$	4,785		$	11,035			12,613
Professional fees		3,158		1,923			10,059			10,399
Lease expense		1,933		1,916			5,957			4,454
Facility and maintenance		1,331		1,125			3,690			3,733
Salaries and wages		15,381		15,716			45,251			43,546
Share-based compensation		4,275		1,775			7,720			5,469
Sales and marketing		1,819		1,909			4,777			7,164
Bad debt expense (recovery)		171		150			(3,998	)		127
Insurance recovery for property and equipment		—		—			(871	)		—
Total	$	31,552	$	29,299		$	83,620		$	87,505

19.

Revenue, net

The Company’s disaggregated net revenue by source, primarily due to the Company’s contracts with its external customers was as follows:


	For the Three Months Ended					For the Nine Months Ended
		September 30, 2024		September 30, 2023			September 30, 2024		September 30, 2023
Retail		$	51,036	$	66,142		$	158,134	$	179,817
Wholesale			23,132		23,098			74,190		50,945
Total		$	74,168	$	89,240		$	232,324	$	230,762

For the three and nine months ended September 30, 2024 and 2023, the Company did not have any single customer that accounted for 10% or more of the Company’s revenue.

20.

Finance and other expenses

The Company’s finance and other expenses included the following:


	For the Three Months Ended							For the Nine Months Ended
		September 30, 2024			September 30, 2023				September 30, 2024			September 30, 2023
Interest and accretion		$	8,610		$	10,203			$	26,614		$	26,041
Employee retention credits and transfer fee			—			—				—			2,235
Other (income) expense			(202	)		(120	)			(726	)		65
Total		$	8,408		$	10,083			$	25,888		$	28,341

TerrAscend Corp.

Notes to the Unaudited Interim Condensed Consolidated Financial Statements

(Amounts expressed in thousands of United States dollars, except for share and per share amounts)

21. Segment information

Operating Segment

The Company determines its operating segments according to how the business activities are managed and evaluated by the Company’s chief operating decision maker. The Company operates under one operating segment, being the cultivation, production and sale of cannabis products.

Geography

The Company has subsidiaries located in Canada and the United States. For the three months ended September 30, 2024, net revenue was primarily generated from sales in the United States. As a result of the Reorganization (see Note 3), the Company consolidated its retail location in Canada and generated net revenue of $279 and $817 the three and nine months ended September 30, 2024, respectively.

The Company had non-current assets by geography of:


	September 30, 2024		December 31, 2023
United States	$	550,687	$	562,854
Canada		537		775
Total	$	551,224	$	563,629

22.

Capital management

The Company’s objective in managing capital is to ensure a sufficient liquidity position to safeguard the Company’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders. In order to achieve this objective, the Company prepares a capital budget to manage its capital structure. The Company defines capital as borrowings, equity comprised of issued share capital, share-based payments and accumulated deficit, as well as funds borrowed from related parties.

Since inception, the Company has primarily financed its liquidity needs through the issuance of share capital and debt. The equity issuances are outlined in Note 13, debt modifications are outlined in Note 10, and debt financings are outlined in Note 12.

The Company is subject to financial covenants as a result of its loans payable with various lenders. The Company is in compliance with its debt covenants as of September 30, 2024. In the event that, in future periods, the Company’s financial results are below levels required to maintain compliance with any of its covenants, the Company will assess and undertake appropriate corrective initiatives with a view to allowing it to continue to comply with its covenants. Other than these items related to loans payable, the Company is not subject to externally imposed capital requirements.

TerrAscend Corp.

Notes to the Unaudited Interim Condensed Consolidated Financial Statements

(Amounts expressed in thousands of United States dollars, except for share and per share amounts)

23.

Financial instruments and risk management

Assets and liabilities measured at fair value

Cash and cash equivalents, net accounts receivable, accounts payable and accrued liabilities, loans payable, convertible debentures, and other current receivables and payables represent financial instruments for which the carrying amount approximates fair value due to their short-term maturities.

The following table represents the fair value amounts of financial assets and financial liabilities measured at estimated fair value on a recurring basis:


	At September 30, 2024							At December 31, 2023
		Level 1		Level 2		Level 3			Level 1		Level 2		Level 3
Assets
Cash and cash equivalents		$	26,636		—		—		$	22,241		—		—
Restricted cash			606		—		—			3,106		—		—
Total Assets		$	27,242		—		—		$	25,347		—	$	—
Liabilities
Contingent consideration payable			—		4,373		—			—		2,012		4,434
Detachable warrants			—		1,727		—			—		3,332		—
Bifurcated conversion options			—		756		—			—		1,830		—
Total Liabilities		$	—	$	6,856	$	—		$	—	$	7,174	$	4,434

There were no transfers between the levels of fair value hierarchy during the three and nine months ended September 30, 2024.

The valuation approaches and key inputs for each category of assets or liabilities that are classified within levels of the fair value hierarchy are presented below:

Level 1

Cash, cash equivalents, and restricted cash, net accounts receivable, accounts payable and accrued liabilities, and other current receivables and payables represent financial instruments for which the carrying amount approximates fair value due to their short-term maturities.

Level 2

The following table summarizes the changes in the derivative liability for the nine months ended September 30, 2024:


Balance at December 31, 2023	$	5,162
Fair value gain on revaluation of warrants and conversion option		(2,608	)
Effects of movements in foreign exchange		(71	)
Balance at September 30, 2024	$	2,483

TerrAscend Corp.

Notes to the Unaudited Interim Condensed Consolidated Financial Statements

(Amounts expressed in thousands of United States dollars, except for share and per share amounts)

Warrant liability and conversion option

The Company's warrant liability consists of a detachable warrant issued through the private placement (Note 13), and a conversion option related to the convertible debenture offering (Note 12).

Detachable Warrants

The detachable warrants issued as a part of the June 2023 private placement (Note 13) have been measured at fair value as of September 30, 2024. Key inputs and assumptions used in the Black-Scholes Model were as follows:


	September 30, 2024			December 31, 2023
Common Stock Price of TerrAscend Corp.	$	1.29		$	1.63
Option exercise price	$	1.95		$	1.95
Annual volatility		85.9	%		74.7	%
Annual risk-free rate		3.98	%		4.23	%
Expected term (in years)		0.73			1.48

Bifurcated conversion options

The conversion option issued as a part of the June and August 2023 private placement (Note 12) has been measured at fair value as of September 30, 2024. Key inputs and assumptions used in the Black-Scholes Model were as follows:


	September 30, 2024			December 31, 2023
Common Stock Price of TerrAscend Corp.	$	1.29		$	1.63
Option exercise price	$	2.01		$	2.01
Annual volatility		73.1	%		70.1	%
Annual risk-free rate		4.71	%		4.23	%
Expected term (in years)	1.73 - 1.84			2.48 - 2.59

Contingent Consideration Payable

The fair value of the Peninsula Contingent Consideration was calculated using the Black-Scholes Model. Key inputs and assumptions were as follows:


	September 30, 2024			December 31, 2023
Common Stock Price of TerrAscend Corp.	$	1.29		$	1.63
Option exercise price	$	1.65		$	1.65
Annual volatility		92.5	%		63.3	%
Annual risk-free rate		4.73	%		4.73	%
Expected term (in years)		0.24			0.99

The fair value of the State Flower and The Apothecarium Contingent Considerations were calculated using the Black-Scholes Model. Key inputs and assumptions were as follows:


	September 30, 2024			January 19, 2024
Common Stock Price of TerrAscend Corp.	$	1.29		$	1.95
Option exercise price	$	1.33		$	1.76
Annual volatility		90.6	%		68.7	%
Annual risk-free rate		4.38	%		5.21	%
Expected term (in years)		1.30			2.00

TerrAscend Corp.

Notes to the Unaudited Interim Condensed Consolidated Financial Statements

(Amounts expressed in thousands of United States dollars, except for share and per share amounts)

24.

Commitments and contingencies

Legal proceedings

In the ordinary course of business, the Company is involved in a number of lawsuits incidental to its business, including litigation related to intellectual property, employment, and commercial matters. Although it is difficult to predict the ultimate outcome of these matters, management believes that any ultimate liability would not have a material adverse effect on the Company’s Consolidated Balance Sheets or Consolidated Statements of Operations and Comprehensive Loss. At September 30, 2024, there were no pending lawsuits that could reasonably be expected to have a material effect on the results of the Company’s Consolidated Financial Statements, except for the proceedings described below.

Pure X Litigation

On August 9, 2023, AEY Capital LLC (“AEY”), a licensed subsidiary of TerrAscend, filed a lawsuit in Oakland County Circuit Court (the "Oakland Court") against Pure X, LLC (“Pure X”) seeking damages in the amount of $14,969 (the “AEY Claim”). The AEY Claim alleged breach of contract, quantum meruit/unjust enrichment, account stated and statutory conversion. AEY’s alleged damages were related to Pure X’s failure to pay for various cannabis products sold by AEY. This matter was settled between the parties and dismissed with prejudice by the Oakland Court on June 28, 2024.

TerrAscend Corp.

Notes to the Unaudited Interim Condensed Consolidated Financial Statements

(Amounts expressed in thousands of United States dollars, except for share and per share amounts)

25.

Subsequent events

On October 1, 2024, the Company paid the outstanding principal amount of the Stadium Ventures Note of $539 and retired the promissory note.

On October 15, 2024, the statute of limitations for the Company’s 2020 amended tax returns expired, which resulted in refunds received of $8,361 being recognized as a tax benefit and no longer recognized as an uncertain tax position.

On November 5, 2024, the Company signed a definitive agreement providing it the option to acquire the assets of Ratio Cannabis LLC, a dispensary in Ohio.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of financial condition and results of operations of TerrAscend Corp. (the “Issuer”), its subsidiaries, TerrAscend Growth Corp. (“TerrAscend”) and its subsidiaries (collectively, the “Company”) should be read in conjunction with the Company's unaudited interim condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and the audited consolidated financial information and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, which was filed with the Securities and Exchange Commission, (the “SEC”), on March 14, 2024, (the “Annual Report”). Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report on Form 10-Q including information with respect to the Company's plans and strategy for its business, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth under "Risk Factors" in the Company's Annual Report, its actual results could differ materially from the results described in or implied by the "Cautionary Note Regarding Forward-Looking Statements" contained in this Quarterly Report on Form 10-Q and in the following discussion and analysis.

Unless otherwise noted, dollar amounts in this Item 2 are in thousands of U.S. dollars.

This Management’s Discussion and Analysis (“MD&A”) of the financial condition and results of operations of the Company is for the three and nine months ended September 30, 2024 and 2023 and the accompanying notes for each respective period.

Overview

The Company is a leading North American cannabis company. The Company has vertically integrated licensed operations in Pennsylvania, New Jersey, Michigan, Maryland and California. In addition, the Company has retail operations in Ontario, Canada with a majority-owned dispensary in Toronto, Ontario, Canada. Notwithstanding the fact that various states in the U.S. have implemented medical marijuana laws or have otherwise legalized the use of cannabis, the use of cannabis remains illegal under U.S. federal law for any purpose, by way of the Controlled Substances Act of 1970.

The Company operates under one operating segment, which is the cultivation, production and sale of cannabis products.

The Company owns a portfolio of operating businesses, including:

•

TerrAscend New Jersey (“TerrAscend NJ”), a majority owned operation with three dispensaries, and a cultivation/processing facility;

•

TerrAscend Maryland (“TerrAscend MD”), a wholly-owned operation with four dispensaries, and a cultivation/processing facility;

•

TerrAscend Pennsylvania (“TerrAscend PA”), a wholly-owned operation with six dispensaries, and a cultivation/processing facility;

•

TerrAscend Michigan (“TerrAscend MI”), a wholly-owned operation with twenty dispensaries, and three cultivation and processing facilities;

•

TerrAscend California (“TerrAscend CA”), a wholly-owned operation with four dispensaries, and a cultivation facility; and

•

TerrAscend Canada Inc. (“TerrAscend Canada”), a cannabis retailer in Ontario, Canada with a majority-owned dispensary in Toronto, Ontario, Canada ("Cookies Canada").

Recent Developments

•

On July 19, 2024, the Company made a prepayment of the Chicago Atlantic Term Loan of $1,500 at par.

•

On August 1, 2024, the Company and TerrAscend USA, Inc., as guarantors, and each of WDB Holding CA, Inc., WDB Holding PA, Inc., Moose Curve Holdings, LLC, Hempaid, LLC and, pursuant to a joinder agreement dated September 30, 2024, WDB Holding MI, Inc., including certain of each of their respective subsidiaries, as borrowers (collectively, the “Borrowers”), and FG Agency Lending LLC, as the Administrative Agent entered into a Loan Agreement (the “FG Loan”). The FG Loan provides for a four-year, $140,000 senior-secured term loan with an initial draw on August 1, 2024, of $114,000 (the “Initial Draw”) and a delayed draw on September 30, 2024 of $26,000 (the “Delayed Draw”). Proceeds from the FG Loan were used to retire the Ilera Term Loan, the Stearns Loan, the Chicago Atlantic Term Loan and certain other indebtedness (collectively, the “Retired Loans”), in addition to being used for working capital and general corporate purposes. Each outstanding obligation under the Retired Loans

was repaid in full and subsequently terminated. The FG Loan is guaranteed by the Company and TerrAscend USA, Inc. and is secured by substantially all of the assets of the Borrowers. On September 30, 2024, the Borrowers and FG Agency Lending LLC, as the Administrative Agent, entered into an amendment to the FG Loan to amend certain schedules and definitions.

•

On August 13, 2024, the Company paid off and retired two promissory notes from the Pinnacle Acquisition with a payment of $5,582.

•

On August 20, 2024, the Company's board of directors (the "Board") approved a share repurchase program, which authorized the Company to repurchase up to 10 million common shares of the Company at any time, or from time to time, from August 22, 2024 until August 21, 2025. During the third quarter of 2024, the Company repurchased 107,400 common shares under the share repurchase program for total consideration of approximately $133. As of September 30, 2024, the Company had a total of 9,892,600 shares remaining that can be authorized for repurchase.

Subsequent Transactions

•

On October 1, 2024, the Company paid the outstanding principal amount of the Stadium Ventures Note of $539 and retired the promissory note.

•

On November 5, 2024, the Company signed a definitive agreement providing it the option to acquire the assets of Ratio Cannabis LLC, a dispensary in Ohio.

Components of Results of Operations

The following discussion sets forth certain components of the Company's Unaudited Condensed Consolidated Statements of Comprehensive Loss as well as factors that impact those items.

Revenue, net

The Company generates revenue from the sale of cannabis products, brands, and services to the U.S. and Canadian markets. Revenues consist of wholesale and retail sales in the legal medical and adult-use market across Canada and in several U.S. states where cannabis has been legalized for medical or adult-use cannabis.

Cost of sales

Cost of sales primarily consists of expenses related to providing cannabis products and services to the Company's customers, including personnel-related expenses, the depreciation of property and equipment, amortization of acquired intangible assets, certain royalties, and other overhead costs.

Operating Expenses

General and administrative

General and administrative ("G&A") expenses consist primarily of personnel costs related to finance, human resources, legal, certain royalties, and other administrative functions. Additionally, G&A expenses include professional fees to third parties, as well as marketing expenses. Moreover, G&A expenses includes share-based compensation on options, restricted stock units and warrants. The Company expects that G&A expenses will increase in absolute dollars as the business grows.

Amortization and depreciation

Amortization and depreciation includes the amortization of intangible assets. Amortization is calculated on a straight-line basis over the following terms:


Brand intangibles- indefinite lives	Indefinite useful lives
Brand intangibles- definite lives	3 years
Software	5 years
Licenses	5-30 years
Non-compete agreements	3 years

Depreciation of property and equipment is calculated on a straight-line basis over the estimated useful life of the asset using the following terms:


Buildings and improvements	15-30 years
Land	Not depreciated
Machinery & equipment	5-15 years
Office furniture & production equipment	3-5 years
Right of use assets	Lease term
Assets in process	Not depreciated

Impairment of intangible assets and goodwill

Goodwill and indefinite lived intangible assets are reviewed for impairment annually and whenever there are events or changes in circumstances that indicate that the carrying amount has been impaired. The Company first performs a qualitative assessment. If based on the results of a qualitative assessment it has been determined that it is more likely than not that the fair value of a reporting unit exceeds its carrying value, an additional quantitative impairment test is performed which compares the carrying value of the reporting unit to its estimated fair value. If the carrying value exceeds the estimated fair value, an impairment is recorded.

Definite lived intangible assets are tested for impairment when there are indications that an asset may be impaired. When indicators of impairment exist, the Company performs a quantitative impairment test which compares the carrying value of the assets for intangible assets to their estimated fair values. If the carrying value exceeds the estimated fair value, an impairment is recorded.

Impairment of property and equipment and right of use assets

The Company evaluates the recoverability of property and equipment and right of use assets whenever events or changes in circumstances indicate that the carrying value of the asset, or asset group, may not be recoverable. When the Company determines that the carrying value of the long-lived asset may not be recoverable based upon the existence of one or more indicators, the assets are assessed for impairment based on the estimate of future undiscounted cash flows expected to result from the use of the asset and its eventual disposition. If the carrying value of an asset exceeds its estimated future undiscounted cash flows, an impairment loss is recorded for the excess of the asset’s carrying value over its fair value.

Other operating expense (income)

Other operating expense (income) primarily represents (gains) losses on lease terminations and (gains) losses on disposal of fixed assets.

Loss (gain) from revaluation of contingent consideration

As a result of some of its acquisitions, the Company recognizes a contingent consideration payable, which is an obligation to transfer additional assets to the seller if future events occur. The liability is revalued at the end of each reporting period to determine its fair value. A gain or loss is recognized as a result of the revaluation.

(Gain) loss on fair value of derivative liabilities and purchase option derivative assets

The Company issues warrants that are remeasured to fair value at the end of each reporting unit using the Black-Scholes Option Pricing Model. A gain or loss is recognized as a result of the revaluation.

Finance and other expenses

Finance and other expenses consist primarily of interest and accretion expense on the Company's outstanding debt obligations.

Transaction and restructuring costs

Transaction costs include costs incurred in connection with the Company's acquisitions, such as expenses related to professional fees, consulting, legal and accounting. Restructuring costs are those costs associated with severance and restructuring of business units.

Unrealized and realized foreign exchange (gain) loss

Unrealized and realized foreign exchange (gain) loss represents the (gain) loss recognized on the remeasurement of USD denominated

cash and other assets recorded in the Canadian dollars functional currency at the Company's Canadian operations.

Unrealized and realized (gain) loss on investments

The Company accounts for its investment in equity securities without readily determinable fair values using a valuation technique which maximizes the use of relevant observable inputs, with subsequent holding changes in fair value recognized in unrealized gain or loss on investments in the Consolidated Statement of Comprehensive Loss.

Loss on extinguishment of debt

Loss on extinguishment of debt represents the Company's debt that was retired prior to its scheduled maturity at a different amount than the book value and the amount paid.

Provision for income taxes

Provision for income taxes consists of U.S. federal and state income taxes in certain jurisdictions in which the Company conducts business.

Results from Operations - Three Months Ended September 30, 2024 and September 30, 2023

The following tables represent the Company’s results from operations for the three months ended September 30, 2024 and 2023.

Revenue, net


	For the Three Months Ended
		September 30, 2024			September 30, 2023
Revenue, net		$	74,168		$	89,240
$ change		$	(15,072	)
% change			-17	%

Revenue decreased from $89,240 to $74,168 for the three months ended September 30, 2024 as compared to the three months ended September 30, 2023 primarily driven by a decline in retail sales in Michigan and New Jersey. The decline in retail sales was related to reduced discounting and promotions in Michigan leading to lower foot traffic and increased competitive pressure in New Jersey.

Cost of sales


	For the Three Months Ended
		September 30, 2024			September 30, 2023
Cost of sales		$	37,952		$	40,707
Non-cash adjustment of inventory			-			728
Total cost of sales		$	37,952		$	41,435
$ change		$	(3,483	)
% change			-8	%
Cost of sales as a % of revenue			51	%		46	%

The decrease of $3,483, in cost of sales for the three months ended September 30, 2024 as compared to the three months ended September 30, 2023 was mainly due to a decrease in sales. Cost of sales as a percentage of revenue increased primarily due to a decline in sales for the three months ended September 30, 2024, as compared to the three months ended September 30, 2023.

General and administrative expense


	For the Three Months Ended
		September 30, 2024			September 30, 2023
General and administrative expense		$	31,552		$	29,299
$ change		$	2,253
% change			8	%

The increase of $2,253 in general and administrative expense for the three months ended September 30, 2024 as compared to the three months ended September 30, 2023, is primarily related to an increase in stock-based compensation due to a one-time modification for option expiry from five years to ten years. This was offset by a reduction in headcount.

Loss (gain) from revaluation of contingent consideration


	For the Three Months Ended
		September 30, 2024			September 30, 2023
Loss (gain) from revaluation of contingent consideration		$	327		$	(645	)
$ change		$	972
% change			-151	%

The loss from the revaluation of contingent consideration for the three months ended September 30, 2024 as compared to the gain from the revaluation of contingent consideration for the three months ended September 30, 2023 was due to a loss on the revaluation of contingent liability for State Flower, The Apothecarium, and Peninsula acquisition resulting from a decrease in the Company's share price.

(Gain) loss on fair value of derivative liabilities and purchase option derivative assets


	For the Three Months Ended
		September 30, 2024			September 30, 2023
(Gain) loss on fair value of derivative liabilities and purchase option derivative assets		$	(669	)	$	3,217
$ change		$	(3,886	)
% change			-121	%

The warrant liability was remeasured to fair value at September 30, 2024 using the Black-Scholes Model. The Company recognized a gain of $669 during the three months ended September 30, 2024 as a result of the reduction of the Company's share price.

During the three months ended September 30, 2023, the Company recognized a loss on fair value warrants of $3,217 as a result of the reduction of the Company's share price.

Other operating expense (income)


	For the Three Months Ended
		September 30, 2024			September 30, 2023
Other operating expense (income)		$	8		$	(1,879	)
$ change		$	1,887
% change			100	%

During the three months ended September 30, 2024, Other operating expense (income) increased as compared to the three months ended September 30, 2023, primarily due to the derecognition of the Company's financial obligations and underlying assets in the third quarter of 2023.

Loss on extinguishment of debt


	For the Three Months Ended
		September 30, 2024			September 30, 2023
Loss on extinguishment of debt		$	1,662		$	-
$ change		$	1,662
% change			100	%

During the three months ended September 30, 2024, Loss on extinguishment of debt increased as compared to the three months ended September 30, 2023, primarily due to extinguishment of the majority of the Company's debt in relation to the FG Loan which included write-offs of deferred financing costs.

Provision for income taxes


	For the Three Months Ended
		September 30, 2024			September 30, 2023
Provision for income taxes		$	14,373		$	13,543
$ change		$	830
% change			6	%

The change in provision for income taxes from $13,543 for the three months ended September 30, 2023 as compared to a provision for income taxes of $14,373 for the three months ended September 30, 2024 was primarily driven by accrued interest and penalties.

Results from Operations - Nine Months Ended September 30, 2024 and September 30, 2023

The following tables represent the Company’s results from operations for the nine months ended September 30, 2024 and 2023.

Revenue, net


	For the Nine Months Ended
	September 30, 2024			September 30, 2023
Revenue, net	$	232,324		$	230,762
$ change	$	1,562
% change		1	%

Revenue increased from $230,762 to $232,324 for the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023 primarily driven by the implementation of adult-use sales in Maryland and the Company's four Maryland acquisitions in 2023 combined with growth in wholesale across Pennsylvania, New Jersey, and Maryland, partially offset by retail declines in New Jersey and Michigan.

Cost of sales


	For the Nine Months Ended
	September 30, 2024			September 30, 2023
Cost of sales	$	119,694		$	112,103
Non-cash adjustment of inventory		-			728
Total cost of sales	$	119,694		$	112,831
$ change	$	6,863
% change		6	%
Cost of sales as a % of revenue		52	%		49	%

The increase of $6,863 in cost of sales for the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023 was mainly due to an increase in sales and an increase in cost of sales as a percentage of revenue. Cost of sales as a percentage of revenue for the nine months ended September 30, 2024, as compared to the nine months ended September 30, 2023 increased primarily due to higher input costs and higher costs per pound, which reduced gross profit margins.

General and administrative expense


	For the Nine Months Ended
	September 30, 2024			September 30, 2023
General and administrative expense	$	83,620		$	87,505
$ change	$	(3,885	)
% change		-4	%

The decrease of $3,885 in general and administrative expense for the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023, is primarily related to a bad debt recovery of $4,188 as well as an insurance recovery of $871.

Loss (gain) from revaluation of contingent consideration


	For the Nine Months Ended
	September 30, 2024			September 30, 2023
Loss (gain) from revaluation of contingent consideration	$	3,547		$	(645	)
$ change	$	4,192
% change		-650	%

The loss from the revaluation of contingent consideration for the nine months ended September 30, 2024 as compared to the gain from the revaluation of contingent consideration nine months ended September 30, 2023 was due to a loss on the revaluation of contingent liability for State Flower, The Apothecarium, and Peninsula acquisition resulting from a decrease in the Company's share price.

(Gain) loss on fair value of derivative liabilities and purchase option derivative assets


	For the Nine Months Ended
	September 30, 2024			September 30, 2023
(Gain) loss on fair value of derivative liabilities and purchase option derivative assets	$	(2,608	)	$	2,564
$ change	$	(5,172	)
% change		-202	%

The warrant liability was remeasured to fair value at September 30, 2024 using the Black-Scholes Model. The Company recognized a gain of $2,608 during the nine months ended September 30, 2024 as a result of the reduction of the Company's share price.

During the nine months ended September 30, 2023, the Company recognized a loss on fair value warrants of $2,564 as a result of the increase of the Company's share price.

Impairment of property and equipment and right of use assets


	For the Nine Months Ended
	September 30, 2024			September 30, 2023
Impairment of property and equipment and right of use assets	$	2,438		$	28
$ change	$	2,410
% change		8607	%

During the nine months ended September 30, 2024, the Company recorded an impairment of property and equipment of $2,438 due to the wind-down of one of its California dispensaries.

Loss on extinguishment of debt


	For the Nine Months Ended
	September 30, 2024			September 30, 2023
Loss on extinguishment of debt	$	1,662		$	-
$ change	$	1,662
% change		100	%

During the nine months ended September 30, 2024, Loss on extinguishment of debt increased as compared to the nine months ended September 30, 2023, due to extinguishment of the majority of the Company's debt in relation to the FG Loan which included write-offs of deferred financing costs.

Provision for income taxes


	For the Nine Months Ended
	September 30, 2024			September 30, 2023
Provision for income taxes	$	34,773		$	32,655
$ change	$	2,118
% change		6	%

The provision for income taxes from $32,655 for the nine months ended September 30, 2023 increased to $34,773 for the nine months ended September 30, 2024 primarily due to an adjustment reflecting the impact of limitations on interest deductibility along with accrued interest and penalties related to the 280E Tax Position in 2024.

Liquidity and Capital Resources


	September 30, 2024		December 31, 2023
Cash and cash equivalents	$	26,636	$	22,241
Restricted Cash		606		3,106
Current assets		105,706		102,889
Non-current assets		551,224		563,629
Current liabilities		78,455		207,000
Non-current liabilities		371,359		218,778
Working capital		27,251		(104,111	)
Total shareholders' equity	$	207,116	$	240,740

The calculation of working capital provides additional information and is not defined under GAAP. The Company defines working capital as current assets less current liabilities. This measure should not be considered in isolation or as a substitute for any standardized measure under GAAP.

Liquidity and going concern

Since its inception, the Company's primary sources of capital have been through the issuance of equity securities or debt facilities, and the Company has received aggregate net proceeds from such transactions totaling $782,388 as of September 30, 2024.

The Company expects to fund any additional future requirements through the following sources of capital:

•

cash from ongoing operations.

•

market offerings.

•

additional debt from additional creditors.

•

sale of real property.

•

sale leaseback transactions.

•

exercise of options and warrants.

Capital requirements

The Company has $205,733 in principal amounts of loans payable at September 30, 2024. Of this amount, $8,387 are due within the next twelve months.

The Company has entered into leases for certain premises and offices for which it owes monthly lease payments. The Company has $89,849 in lease obligations. Of this amount, $9,402 are due in the next twelve months.

The Company's undiscounted contingent consideration payable is $4,373 at September 30, 2024, of which, $2,546 is due in the next twelve months. The contingent consideration payable relates to the Company's acquisitions of Peninsula and the remaining 50.1% equity in both State Flower and three Apothecarium dispensaries in California. The contingent considerations are based upon the price protection of Common Shares issued under the terms of the applicable acquisition agreements. The contingent considerations are measured at fair value using the Black-Scholes Model and revalued at the end of each reporting period.

At September 30, 2024, the Company had accounts payable and accrued liabilities of $46,381 and corporate income taxes payable of $11,075.

The Company does not have any off-balance sheet arrangements that have, or are reasonably likely to have, a current or future effect on the Company's results of operations or financial condition, including and without limitation, such consideration as liquidity and capital resources.

The Company intends to meet its capital commitments through any or all of the sources of capital noted above. The Company's objective with respect to its capital management is to ensure it has sufficient cash resources to maintain its ongoing operations and finance future obligations.

Debt facilities

FocusGrowth Term Loan

On September 30, 2024, the Borrowers, and FG Agency Lending LLC, as the Administrative Agent entered into an amendment to the FG Loan to amend certain schedules and definitions.

As of September 30, 2024, there was an outstanding principal amount of $140,000 under the FG Loan.

Ilera Term Loan

On December 18, 2020, WDB Holding PA, a subsidiary of TerrAscend, entered into a senior secured term loan with a syndicate of lenders in the amount of $120,000 (the “Ilera Term Loan”). The Ilera Term Loan was solely secured by Ilera. The Ilera Term Loan bore interest at 12.875% per annum and was set to mature on December 17, 2024. Subject to certain conditions of the agreement, the Company had the ability to increase the facility by up to $30,000. WDB Holding PA's obligations under the Ilera Term Loan and related transaction documents were guaranteed by the Company, TerrAscend USA, Inc. ("TerrAscend USA"), and certain subsidiaries of WDB Holding PA, and secured by TerrAscend USA's equity interest in WDB Holding PA and substantially all of the assets of WDB Holding PA and the subsidiary guarantors party thereto. The loan could be refinanced at the option of the WDB Holding PA after 18 months from the closing date subject to a premium payment due. Of the total proceeds received, $105,767 was used to satisfy the remaining Ilera earn-out payments.

On April 28, 2022, the Ilera Term Loan was amended to provide WDB Holding PA with greater flexibility by resetting the minimum consolidated interest coverage ratio levels that must be satisfied at the end of each measurement period and extending the date in which WDB Holding PA was required to deliver its budget for the fiscal year ending December 31, 2021. In addition, the no-call period was extended from 18 months to 30 months, subject to a premium payment. This modification was not considered extinguishments of debt under ASC 470, Debt.

On November 11, 2022, WDB Holding PA, the Company, TerrAscend USA and the subsidiary guarantors party to the Ilera Term Loan and the PA Agent (on behalf of the required lenders) entered into an amendment to the Ilera Term Loan, pursuant to which the parties agreed that WDB Holding PA’s obligation to maintain the consolidated interest coverage ratio as set forth in the Ilera Term Loan for the period ended September 30, 2022, shall not apply, subject to certain conditions, including (but not limited to) an obligation to enter into a subsequent amendment agreement on or before December 15, 2022, documenting certain enhancements and amendments to the Ilera Term Loan. In addition, WDB Holding PA offered a prepayment of $5,000 pro rata to all lenders holding outstanding loans thereunder at a price equal to 103.22% of the principal amount prepaid, plus accrued and unpaid interest.

On December 21, 2022, WDB Holding PA completed an amendment to reduce the Company’s principal debt by $35,000 and annual interest expense by $5,000. The Company agreed to make a $35,000 payment at the original prepayment price of 103.22% to par, and agreed to use commercially reasonable efforts to add certain collateral to the Ilera Term Loan, collectively by March 15, 2023. The

amendment further provided that should WDB Holding PA fail to maintain the prescribed interest coverage ratio, the Company shall be required to deposit funds, as outlined in the amendment, into a restricted account, and no event of default shall occur. This amendment was not considered an extinguishment of debt under ASC 470, Debt.

On March 15, 2023, WDB Holding PA, in exchange for a fee in the amount of 1% of the then outstanding principal loan balance, agreed to an amendment to, among other things: (i) extend the obligation date to prepay the Company’s debt from March 15, 2023 to June 30, 2023, during which WDB Holding PA agreed to use commercially reasonable efforts to add additional collateral to the Ilera Term Loan, (ii) increase the amount of debt to be reduced by up to $37,000, subject to certain reductions in amount based on meeting certain time based milestones, at a prepayment price of 103.22% to par, and (iii) extend the next test date in respect of the interest coverage ratio until June 30, 2023. This amendment was not considered an extinguishment of debt under ASC 470, Debt.

On April 14, 2023, WDB Holding PA entered into an amendment to the Ilera Term Loan to, among other things, (i) permit changes necessary for the TSX Transaction (as defined in the Ilera Term Loan), and (ii) to waive certain tax provisions.

On June 8, 2023, June 15, 2023, and June 29, 2023, WBD Holding PA made repayments of principal in the amounts of $7,896, $442, and $28,236, respectively.

On June 22, 2023, WDB Holding PA entered into a further amendment to the Ilera Term Loan to, among other things, (i) extend the next test date for the interest coverage ratio from June 30, 2023 to September 30, 2023, and (ii) amend the terms for which WDB Holding PA may incur certain indebtedness and liens. This amendment was not considered extinguishment of debt under ASC 470, Debt.

On October 2, 2023, the Company made a mandatory prepayment of the Ilera Term Loan of $1,500 at the original prepayment price of 103.22% to par.

On December 4, 2023, the parties entered into an amendment that required WDB Holding PA to make a prepayment of $4,800 by January 2, 2024 and a prepayment of $3,200 by April 30, 2024, at the prepayment price of 100% to par. On January 2, 2024, the Company made a prepayment of $4,800 of the Ilera Term Loan, at the prepayment price of 100% to par.

On April 30, 2024, the Company made a prepayment of the Ilera Term Loan of $3,200 of the Ilera Term Loan, at the prepayment price of 100% to par.

Chicago Atlantic Term Loan

In connection with the Gage Acquisition, the Company assumed a senior secured term loan (the "Chicago Atlantic Term Loan") with an acquisition date fair value of $53,857. The credit agreement bore interest at a rate equal to the greater of (i) the Prime Rate plus 7% or (ii) 10.25%. The term loan was payable monthly and had a maturity date of November 30, 2022. The Chicago Atlantic Term Loan was secured by a first lien on all Gage Growth assets. As a result of the amendment, the Company paid a loan amendment fee of $1,109 which was capitalized.

On August 10, 2022, the Chicago Atlantic Term Loan was amended as a result of the corporate restructure in conjunction with the Gage Acquisition. The amendment to the Chicago Atlantic Term Loan included the addition of a borrower and guarantor under the term loan and a right of first offer in favor of the administrative agent for a refinancing of the term loan. This amendment was not considered extinguishment of debt under ASC 470, Debt.

On November 29, 2022, the Company repaid $30,000 outstanding principal amount on the Chicago Atlantic Term Loan. On November 30, 2022, the remaining loan principal amount of $25,000 on the Chicago Atlantic Term Loan was amended (the "Amended Chicago Atlantic Term Loan"). The Amended Chicago Atlantic Term Loan bore an interest on $25,000 at a per annum rate equal to the greater of (i) the U.S. "prime rate" plus 6.00%, and (ii) 13.0% and was set to mature on November 1, 2024. Commencing on May 31, 2023, the Company made monthly principal repayments of 0.40% of the aggregate principal amount outstanding. Additionally, the unpaid principal amount of the loan bore paid in kind interest at a rate of 1.50% per annum. No prepayment fees were owed if the Company voluntarily prepaid the loan after 18 months. If such prepayment occurred prior to 18 months, a prepayment fee equal to all of the interest on the loans that would be due after the date of such prepayment, was owed. Under the Amended Chicago Atlantic Term Loan, the Company had the ability to borrow incremental term loans of $30,000 at the option of the Company and subject to consents from the required lenders. The additional $30,000 incremental term loans available under the amendment were not drawn as of December 31, 2023. This loan represents a loan syndication, and therefore the Company assessed each of the lenders separately under ASC 470, Debt to determine if this represented a modification, or an extinguishment of debt. For three of the four remaining lenders, it was determined

that this was a modification. For the remaining lender, it was determined that this represented an extinguishment of debt and therefore the fees paid to the lenders on modification were expensed. As a result of this transaction, the Company expensed $1,907 of fees paid to the lenders and third parties as they did not meet the criteria for capitalization under ASC 470, Debt.

On June 9, 2023, the Company agreed to an amendment, among other things, to (i) permit changes necessary for the TSX Transaction (as defined therein) and (ii) to permit certain indebtedness and waive certain tax provisions. This amendment was not considered extinguishment of debt under ASC 470, Debt.

On July 19, 2024, the Company made a prepayment of the Chicago Atlantic Term Loan of $1,500 at par.

On August 1, 2024, as described above, the Company entered into the FG Loan, of which, a portion of the proceeds from the Delayed Draw, which occurred on September 30, 2024, was used to retire the Chicago Atlantic Term Loan and pay the outstanding principal amount of $22,557.

Pinnacle Loans

The Pinnacle Acquisition purchase price included two promissory notes in an aggregate amount of $10,000 to pay down all Pinnacle liabilities and encumbrances. The promissory note was set to mature on June 30, 2023 and bore interest rates of 6%. On June 27, 2023, Spartan Partners Properties, LLC, agreed to an amendment among other things, that extended the obligation date of the loans until December 1, 2023. On August 13, 2024, the Company paid the outstanding principal amount of $5,582 and retired the promissory notes.

Pelorus Term Loan

On October 11, 2022, subsidiaries of TerrAscend, among others, entered into a loan agreement with Pelorus Fund REIT, LLC ("Pelorus") for a single-draw senior secured term loan ("Pelorus Term Loan") in an aggregate principal amount of $45,478. The Pelorus Term Loan bears interest at a variable rate tied to the one month SOFR, subject to a base rate, plus 9.5%, with interest-only payments for the first 36 months. The base rate is defined as, on any day, the greatest of (a) 2.5%, (b) the effective federal funds rate in effect on such day plus 0.5%, and (c) SOFR in effect on such day. The obligations of the borrowers under the Pelorus Term Loan are guaranteed by the Company, TerrAscend USA and certain other subsidiaries of TerrAscend and are secured by all of the assets of the Company's Maryland and New Jersey businesses, including certain real estate in Maryland and New Jersey, but excludes all Maryland dispensaries. The Pelorus Term Loan matures on October 11, 2027.

On April 17, 2023, TerrAscend NJ, LLC agreed to an amendment to the Pelorus Term Loan to, among other things, (i) permit changes necessary for the TSX Transaction (as defined therein), and (ii) to waive certain tax provisions.

On June 22, 2023, TerrAscend NJ, LLC further agreed to an amendment to the Pelorus Term Loan to permit the Company to incur certain indebtedness. This amendment was not considered an extinguishment of debt under ASC 470, Debt. As of September 30, 2024, there was an outstanding principal amount of $45,478 under the Pelorus Term Loan.

Stearns Loan

On June 26, 2023, the Company closed on a $25,000 commercial loan with Stearns Bank, secured by the Company's cultivation facility in Pennsylvania and its Allegany Medical Marijuana Dispensary ("AMMD") dispensary in Cumberland, Maryland (the “Stearns Loan”). The Company was required to hold $5,000 on deposit in a restricted account, of which $2,500 of the restricted cash was released on July 28, 2023 upon meeting certain criteria pursuant to the terms of the Stearns Loan. The Stearns Loan bore interest at a rate of prime plus 2.25% and was set to mature on December 26, 2024. The proceeds from the loan were used to pay down the Company's higher interest rate debt, thereby lowering the Company's overall interest expense.

Maryland Acquisition Loans

On June 28, 2023, in connection with the Peninsula Acquisition, the Company assumed existing indebtedness in the form of a promissory note in the amount of $7,698, which matures on June 28, 2025. The promissory note bears interest at a rate of 8.25%. The Company will make monthly payments of principal and interest totaling $157 beginning on July 28, 2023. The Company is required to make a mandatory prepayment of 50% of the outstanding principal balance on January 28, 2025. The consideration also included a promissory

note in the amount of $3,927. The promissory note interest at a rate of 7.25% and is payable in twelve quarterly installments, maturing on June 28, 2026.

On June 30, 2023, in connection with the Blue Ridge Acquisition, the Company entered into a promissory note in the amount of $3,750 payable in four quarterly installments of accrued interest commencing on September 30, 2023 and twelve equal quarterly installments of principal and accrued interest commencing on September 30, 2024. The remaining amount of the principal and accrued interest is due on June 30, 2027, the maturity date. The promissory note bears interest at a rate of 7.0%.

On July 10, 2023, in connection with the Herbiculture Acquisition, the Company entered into a promissory note in the amount of $5,250. The promissory note bears interest at a rate of 10.50%. Commencing on September 30, 2023, and thereafter until December 31, 2024, all accrued interest during each quarter will be added to the outstanding principal balance on the last day of each fiscal quarter. Beginning on March 31, 2025, and thereafter until March 31, 2026, only interest payments will be due on the last day of each fiscal quarter. The entire outstanding balance of the principal and accrued interest is due on June 30, 2026, the maturity date of the promissory note.

As of September 30, 2024, there was an outstanding principal amount of $18,576 under the promissory notes related to the Maryland acquisitions.

Stadium Ventures

In connection with the Gage Acquisition, the Company assumed existing indebtedness in the form of a promissory note in the amount of $4,500, which was set to mature on January 1, 2024. The promissory note bore interest at a rate of 6%. As of September 30, 2024, there was an outstanding principal amount of $539 on the promissory note.

On October 1, 2024, the Company paid the outstanding principal amount of $539 and retired the promissory note.

Class A Share of TerrAscend Growth

In connection with the Reorganization (see Note 3), TerrAscend Growth Corp. ("TerrAscend") issued $1,000 of Class A shares with a 20% guaranteed annual dividend ("Class A Shares") to an investor (the “Investor”) pursuant to the terms of a subscription agreement between TerrAscend and the Investor dated April 20, 2023 (the “Subscription Agreement”). Pursuant to the terms of the Subscription Agreement, TerrAscend holds a call right to repurchase all of the Class A Shares issued to the Investor for an amount equal to the sum of: (a) the Repurchase/Put Price (as defined in the Subscription Agreement); plus (b) the amount equal to 40% of the subscription amount less the aggregate dividends paid to the Investor as of the date of the exercise of the option. In addition, the Investor holds a put right that is exercisable at any time after four months’ advanced written notice following the five-year anniversary of the closing of the investment to put all (and only all) of the Class A Shares owned by the Investor to TerrAscend at the Repurchase/Put Price, payable in cash or shares. The instrument is considered as a debt for accounting purposes due to the economic characteristics and risks. As of September 30, 2024, there was an outstanding principal amount of $1,000.

IHC Real Estate LP Loan

On June 26, 2023, the Company bought out the minority interest in IHC Real Estate LP and entered into a promissory note of $7,500. The promissory note carried an interest rate of 15% and matured on January 15, 2024. On June 28, 2023 and July 31, 2023, the Company made a payment of $1,500 and $1,000, respectively. On January 15, 2024, the Company paid off all amounts owed under the promissory note with a payment of $5,000.

Share Repurchases

Cash Flows

Cash flows provided by operating activities


	For the Nine Months Ended
	September 30, 2024		September 30, 2023
Net cash provided by operating activities	$	28,203	$	18,052

The increase of $10,151 in net cash provided by operating activities for the nine months ended September 30, 2024 as compared to nine months ended September 30, 2023 is primarily driven by $2,881 of cash received for a bad debt recovery and an income tax refund related to the amended federal tax return for tax year 2020 in the amount of $8,361.

Cash flows used in investing activities


	For the Nine Months Ended
	September 30, 2024			September 30, 2023
Net cash used in investing activities	$	(6,270	)	$	(13,292	)

The net cash used in investing activities for the nine months ended September 30, 2024 primarily relates to the investment in property and equipment of $4,623 and the investment in note receivable of $1,556 related to a settlement agreement.

Net cash used in investing activities for the nine months ended September 30, 2023 primarily relates to the cash paid for the acquisition of three dispensaries in Maryland. Additionally, the Company increased the investment in property and equipment by $6,224 during the nine months ended September 30, 2023. The Company also recognized a disposal of fixed assets related to its discontinued operations of $14,285.

Cash flows used in financing activities


	For the Nine Months Ended
	September 30, 2024			September 30, 2023
Net cash used in financing activities	$	(20,316	)	$	(2,983	)

Net cash used in financing activities for the nine months ended September 30, 2024 was primarily due to net loan principal payments of $14,889, distributions to non-controlling interests of $4,433, and the repurchase of common shares of $138.

Net cash used in financing activities for the nine months ended September 30, 2023 was primarily due to $46,029 in loan principal paid and $6,966 in distributions to non-controlling interests, offset by cash inflow as a result of transfer with recourse of Employee Retention Credit of $12,677, net proceeds from the commercial loan with Stearns bank of $23,872, and net proceeds from private placements of $21,260.

Reconciliation of Non-GAAP Measures

In addition to reporting the financial results in accordance with GAAP, the Company reports certain financial results that differ from what is reported under GAAP. Non-GAAP measures used by management do not have any standardized meaning prescribed by GAAP and may not be comparable to similar measures presented by other companies. The Company believes that certain investors and analysts use these measures to measure a company’s ability to meet other payment obligations or as a common measurement to value companies in the cannabis industry, and the Company calculates: (i) Free cash flow from net cash provided by operating activities from continuing operations less capital expenditures for property and equipment which management believes is an important measurement of the Company's ability to generate additional cash from its business operations, and (ii) EBITDA from continuing operations and Adjusted EBITDA from continuing operations as net loss, adjusted to exclude provision for income taxes, finance expenses, depreciation and amortization, share-based compensation, loss on extinguishment of debt, loss (gain) from revaluation of contingent consideration, loss (gain) on disposal of fixed assets, impairment of property and equipment and right of use assets, bad debt recovery, unrealized and realized loss on investments, (gain) loss on lease termination and derecognition of finance lease, unrealized and realized foreign exchange, gain on fair value of derivative liabilities and purchase option derivative assets, Employee Retention Credits and Transfer Fee, and certain other items, which management believes is not reflective of the ongoing operations and performance of the Company.

Such information is intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP.

The Company believes Adjusted EBITDA from continuing operations is a useful performance measure to assess the performance of the Company as it provides more meaningful ongoing operating results by excluding the effects of expenses that are not reflective of the Company’s underlying business performance and other one-time or non-recurring expenses. The table below reconciles net loss to EBITDA from continuing operations and Adjusted EBITDA from continuing operations for the three and nine months ended September 30, 2024 and 2023:



		For the Three Months Ended							For the Nine Months Ended
	Notes		September 30, 2024			September 30, 2023				September 30, 2024			September 30, 2023
Net loss			$	(21,419	)	$	(8,671	)		$	(42,507	)	$	(44,916	)
Loss from discontinued operations				—			232				—			4,444
Loss from continuing operations				(21,419	)		(8,439	)			(42,507	)		(40,472	)

Add (deduct) the impact of:
Provision for income taxes				14,373			13,543				34,773			32,655
Finance expenses				8,610			10,203				26,614			26,041
Amortization and depreciation				5,036			5,417				15,029			15,179
EBITDA from continuing operations	(a)			6,600			20,724				33,909			33,403
Add (deduct) the impact of:
Share-based compensation	(b)			4,275			1,775				7,720			5,469
Loss on extinguishment of debt	(c)			1,662			—				1,662			—
Loss (gain) from revaluation of contingent consideration	(d)			327			(645	)			3,547			(645	)
Loss (gain) on disposal of fixed assets	(e)			8			(1,879	)			(9	)		(1,879	)
Impairment of property and equipment and right of use assets	(f)			—			—				2,438			345
Bad debt recovery	(g)			—			—				(4,169	)		—
Unrealized and realized loss on investments	(h)			(14	)		5				213			2,365
(Gain) loss on lease termination and derecognition of finance lease	(i)			(51	)		—				(1,220	)		205
Unrealized and realized foreign exchange (gain) loss	(j)			(214	)		(43	)			175			(175	)
(Gain) loss on fair value of derivative liabilities and purchase option derivative assets	(k)			(669	)		3,217				(2,608	)		2,564
Other one-time items	(l)			1,793			998				3,927			5,287
Employee Retention Credits and Transfer Fee	(m)			—			—				—			2,236
Adjusted EBITDA from continuing operations			$	13,717		$	24,152			$	45,585		$	49,175

The table below reconciles net cash provided by operating activities from continuing operations to free cash flow for the nine months ended September 30, 2024 and 2023:


	For the Nine Months Ended
	September 30, 2024			September 30, 2023
Net cash provided by operating activities - continuing operations	$	28,203		$	18,052
Capital expenditures for property and equipment		(4,623	)		(6,224	)
Free Cash Flow	$	23,580		$	11,828

EBITDA from continuing operations is a non-GAAP measure and is calculated from net (loss) income.

Represents non-cash share-based compensation expense.

Represents the loss taken to extinguish certain debt.

Represents the revaluation of the Company's contingent consideration liabilities.

Represents the loss (gain) taken on write-down of property and equipment.

Represents impairment charges taken on the Company's property and equipment.

Represents the recovery of one-time write offs of accounts receivable related to one customer that were deemed uncollectible.

Represents unrealized and realized gain on fair value changes on strategic investments.

Represents the (gain) loss taken as a result on lease termination and derecognition of right of use assets.

Represents the remeasurement of USD denominated cash and other assets recorded in CAD functional currency.

Represents the (gain) loss on fair value of warrants, including effects of the foreign exchange of the U.S. denominated Preferred Share warrants, as well as the revaluation of the fair value of the purchase option derivative asset.

Includes one-time fees incurred primarily in connection with the Company's acquisitions and other costs considered one-time in nature, such as expenses related to professional fees, consulting, legal, and accounting. These fees are not indicative of the Company's ongoing costs.

Represents income recorded from ERC as a result of the CARES Act and its transfer fee.

The decrease in Adjusted EBITDA from continuing operations for the three months ended September 30, 2024 compared to the three months ended September 30, 2023 was primarily due to a decrease in gross profit driven by reduced sales. The decrease for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023 was primarily due a decrease in gross profit margin.

Critical Accounting Estimates and Policies

The condensed consolidated financial statements have been prepared in accordance with GAAP. The preparation of these condensed consolidated financial statements requires the Company to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosures. The Company bases its estimates on historical experience and assumptions on an ongoing basis. Actual results may differ from these estimates. To the extent that there are material differences between these estimates and actual results, the Company's future financial statements will be affected.

There have been no significant changes to the critical accounting estimates from the information provided in Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations", as contained in the Company's Annual Report on Form 10-K for the year ended December 31, 2023.

Emerging Growth Company Status

The Company is an emerging growth company, as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. The Company has elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that the Company (i) is no longer an emerging growth company or (ii) affirmatively and irrevocably opts out of the extended transition period provided in the JOBS Act. As a result, the Company's Consolidated Financial Statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of public company effective dates.

The Company will remain an emerging growth company until the earlier to occur of: (i) December 31, 2027 (a) in which the Company has total annual gross revenue of $1,235,000 or more, or (b) in which the Company is deemed to be a large accelerated filer, which means the market value of the Company's Common Stock that is held by non-affiliates exceeds $700,000 as of the last business day of the Company’s most recent second fiscal quarter; and (ii) the date on which the Company has issued more than $1,000,000 in non-convertible debt during the prior three-year period.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

There have been no material changes in the Company's primary risk exposures or management of market risks from those disclosed in its Annual Report on Form 10-K for the fiscal year ended December 31, 2023.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

The Company's management, with the participation of its Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company's disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act), as of the end of the period covered by this Quarterly Report on Form 10-Q. Based upon that evaluation, the Company's Chief Executive Officer and Chief Financial Officer concluded that, as of September 30, 2024, the Company's disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms and to provide reasonable assurance that such information is accumulated and communicated to the Company's management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

There were no changes in the Company's internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended September 30, 2024, that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

Limitations on Effectiveness of Controls and Procedures

In designing and evaluating the Company's disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.

PART II—OTHER INFORMATION

Item 1. Legal Proceedings.

In the ordinary course of business, the Company is involved in a number of lawsuits incidental to its business, including litigation related to intellectual property, employment, and commercial matters. Although it is difficult to predict the ultimate outcome of these matters, management believes that any ultimate liability would not have a material adverse effect on the Company’s Consolidated Balance Sheets or results of operations. As of September 30, 2024, there were no pending lawsuits that could reasonably be expected to have a material effect on the results of the Company’s consolidated financial statements, except for the proceedings described below.

Pure X Litigation

On August 9, 2023, AEY Capital LLC (“AEY”), a licensed subsidiary of the Company, filed a lawsuit in Oakland County Circuit Court (the “Oakland Court”) against Pure X, LLC (“Pure X”) seeking damages in the amount of $14,969 (the “AEY Claim”). The AEY Claim alleged breach of contract, quantum meruit/unjust enrichment, account stated and statutory conversion. AEY’s alleged damages were related to Pure X’s failure to pay for various cannabis products sold by AEY. This matter was settled between the parties and dismissed with prejudice by the Oakland Court on June 28, 2024.

Item 1A. Risk Factors.

Investing in the Company's Common Shares involves a high degree of risk. In addition to the information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the factors described in Part I, Item 1.A. “Risk Factors” in the Company's Annual Report. The Company may disclose changes to risk factors or disclose additional factors from time to time in its future filings with the SEC. Additional risks and uncertainties not presently known to the Company or that the Company currently deems immaterial may impair its business operations. Except as set forth below, there have been no material changes to the risk factors previously disclosed in Part I, Item 1A “Risk Factors” in the Company's Annual Report.

The Company cannot guarantee that the share repurchase program will be fully consummated or that it will enhance long-term stockholder value. Share repurchases could also increase the volatility of the trading price of the Company’s Common Shares and could diminish our cash reserves.

While the Company’s board of directors authorized a share repurchase program, the program does not obligate the Company to repurchase any specific dollar amount or acquire any specific number of Common Shares. The actual timing and number of shares repurchased remains subject to a variety of factors, including share price, trading volume, market conditions, compliance with applicable legal requirements, and other general business considerations. The share repurchase program expires on August 21, 2025, and the

Company cannot guarantee that the share purchase program will be fully utilized or that it will enhance long-term stockholder value. The Company’s failure to repurchase Common Shares after announcing a share repurchase program may negatively impact the Company’s share price, reputation, and investor confidence.

Furthermore, the Company’s execution of the share repurchase program could affect the trading price of its Common Stock and increase volatility. The existence of a share repurchase program could cause the Company’s share price to be higher than it otherwise would be and could potentially reduce the market liquidity for the Company's shares. Although the Company's share repurchase program is intended to enhance long-term stockholder value, there is no assurance that it will do so because the market price of the Company’s Common Shares may decline below the levels at which it repurchases shares, and short-term shares price fluctuations could reduce the effectiveness of the program. Repurchasing Common Shares reduces the amount of cash the Company has available to fund working capital, capital expenditures, strategic acquisitions or investments, other business opportunities, and other general corporate projects, as well as to invest in securities to generate returns on the Company's cash balance. The Company also may fail to realize the anticipated long-term stockholder value of any share repurchase program.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.


Period	Total Number of Shares Purchased		Weighted Average Price Paid per Share		Total Number of Shares as Part of a Publicly Announced Program		Number of Shares that may yet be Purchased under the Program
July 1 through July 30, 2024		—	$	—		—		10,000,000
August 1 through August 31, 2024		—	$	—		—		10,000,000
September 1 through September 30, 2024		107,400	$	1.24		107,400		9,892,600
For the Quarter Ended September 30, 2024		107,400	$	1.24		107,400		9,892,600

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

Item 6. Exhibits.


Exhibit		Description of Exhibit Incorporated Herein by Reference				Filed
Number	Description	Form	File No.	Exhibit	Filing Date	Herewith

3.1	Articles of TerrAscend Corp., dated March 7, 2017.	10-12G	000-56363	3.1	11/02/2021

3.2	Articles of Amendment to the Articles of TerrAscend Corp., dated November 30, 2018.	10-12G/A	000-56363	3.2	12/22/2021

3.3	Articles of Amendment to the Articles of TerrAscend Corp., dated May 22, 2020.	10-12G/A	000-56363	3.3	12/22/2021

3.4	By-laws of TerrAscend Corp., dated March 7, 2017.	10-12G	000-56363	3.3	11/02/2021

10.1#†	Loan Agreement, dated August 1, 2024, by and among TerrAscend USA, Inc., as Borrower Representative, the subsidiaries and affiliates of the Borrower Representative, as Borrowers, and FG Agency Lending LLC, as the Administrative Agent.					X

10.2#	Amendment No. 1, dated September 30, 2024, by and among TerrAscend USA, Inc., as Borrower Representative, the subsidiaries and affiliates of the Borrower Representative, as Borrowers, and FG Agency Lending LLC, as the Administrative Agent.					X

31.1	Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.					X

31.2	Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.					X

32.1*	Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.					X

32.2*	Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.					X

101.INS	Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document.					X

101.SCH	Inline XBRL Taxonomy Extension Schema With Embedded Linkbase Documents					X

104	Cover Page Interactive Data File (embedded within the Inline XBRL document)					X

* This certification accompanies the Form 10-Q to which it relates, is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by reference into any filing of TerrAscend Corp. under the Securities Exchange Act of 1934, as amended (whether made before or after the date of the Form 10-Q), irrespective of any general incorporation language contained in such filing.

# Certain information contained in this agreement has been omitted because it is not material and is the type that the registrant treats as private or confidential.

† Certain schedules and exhibits have been omitted pursuant to Item 601(a)(5) of Regulation S-K. A copy of any omitted schedule or exhibit will be furnished supplementally to the Securities and Exchange Commission upon request.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	TerrAscend Corp.

Date: November 6, 2024	By:	/s/ Ziad Ghanem
		Ziad Ghanem
		President and Chief Executive Officer (Principal Executive Officer)






Date: November 6, 2024	By:	/s/ Keith Stauffer
		Keith Stauffer
		Chief Financial Officer (Principal Financial Officer)

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TerrAscend (TSNDF) 10-Q2024 Q3 Quarterly report

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