ROC
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
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:
(Exact Name of Registrant as Specified in its Charter)
( State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer |
(Address of principal executive offices) |
(Zip Code) |
Registrant’s telephone number, including area code: (
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
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Trading Symbol(s) |
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Name of each exchange on which registered |
None |
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N/A |
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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.
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).
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 |
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Accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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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 August 9, 2023, the registrant had
Table of Contents
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Page |
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PART I. |
1 |
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Item 1. |
1 |
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Unaudited Interim Condensed Consolidated Balance Sheets as of June 30, 2023 and December 31, 2022 |
1 |
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2 |
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5 |
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Notes to Unaudited Interim Condensed Consolidated Financial Statements |
7 |
Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
27 |
Item 3. |
41 |
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Item 4. |
41 |
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PART II. |
42 |
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Item 1. |
42 |
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Item 1A. |
42 |
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Item 2. |
42 |
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Item 3. |
42 |
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Item 4. |
42 |
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Item 5. |
42 |
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Item 6. |
42 |
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45 |
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q contains statements that TerrAscend Corp. ("TerrAscend" or the "Company") 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 TerrAscend’s industry or TerrAscend’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:
Certain of the forward-looking statements contained herein concerning the cannabis industry and the general expectations of TerrAscend concerning the cannabis industry are based on estimates prepared by TerrAscend 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, TerrAscend 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 which TerrAscend operates; (iii) the output from TerrAscend’s operations; (iv) consumer interest in TerrAscend’s products; (v) competition; (vi) anticipated and unanticipated costs; (vii) government regulation of TerrAscend’s activities and products and in the areas of taxation and environmental protection; (viii) the timely receipt of any required regulatory approvals; (ix) TerrAscend’s ability to obtain qualified staff, equipment and services in a timely and cost efficient manner; (x) TerrAscend’s ability to conduct operations in a safe, efficient and effective manner; and (xi) 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 TerrAscend, 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 ("U.S.") relating to cannabis operations in the U.S.; and those discussed under Item 1A – “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the Securities and Exchange Commission (the “SEC”) on March 16, 2023 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. TerrAscend 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. TerrAscend 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)
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At |
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At |
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June 30, 2023 |
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December 31, 2022 |
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Assets |
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Current Assets |
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Cash and cash equivalents |
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$ |
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$ |
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Restricted cash |
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Accounts receivable, net |
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Investments |
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Inventory |
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Assets held for sale |
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— |
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Prepaid expenses and other current assets |
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Current assets from discontinued operations |
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Non-Current Assets |
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Restricted cash - Non-current |
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— |
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Property and equipment, net |
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Deposits |
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Operating lease right of use assets |
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Intangible assets, net |
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Goodwill |
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Other non-current assets |
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Total Assets |
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$ |
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$ |
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Liabilities and Shareholders' Equity |
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Current Liabilities |
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Accounts payable and accrued liabilities |
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$ |
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$ |
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Deferred revenue |
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Loans payable, current |
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Contingent consideration payable, current |
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Operating lease liability, current |
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Lease obligations under finance leases, current |
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Corporate income tax payable |
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Other current liabilities |
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Current liabilities from discontinued operations |
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Non-Current Liabilities |
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Loans payable, non-current |
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Operating lease liability, non-current |
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Lease obligations under finance leases, non-current |
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Derivative liability |
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Convertible debt |
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— |
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Deferred income tax liability |
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Financing obligations |
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Other long term liabilities |
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Total Liabilities |
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Shareholders' Equity |
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Share Capital |
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Series A, convertible preferred stock, par value, shares authorized; |
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Series B, convertible preferred stock, par value, shares authorized; |
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Series C, convertible preferred stock, par value, shares authorized; and shares outstanding as of June 30, 2023 and December 31, 2022, respectively |
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Series D, convertible preferred stock, par value, shares authorized; and shares outstanding as of June 30, 2023 and December 31, 2022, respectively |
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Proportionate voting shares, par value, shares authorized; and shares outstanding as of June 30, 2023 and December 31, 2022, respectively |
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Exchangeable shares, par value, shares authorized; |
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Common shares, par value, shares authorized; |
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Additional paid in capital |
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Accumulated other comprehensive income |
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Accumulated deficit |
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( |
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( |
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Non-controlling interest |
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Total Shareholders' Equity |
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Total Liabilities and Shareholders' Equity |
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$ |
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$ |
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The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.
1
TerrAscend Corp.
Unaudited Interim Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income
(Amounts expressed in thousands of United States dollars, except for share and per share amounts)
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For the Three Months Ended |
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For the Six Months Ended |
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June 30, 2023 |
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June 30, 2022 |
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June 30, 2023 |
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June 30, 2022 |
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Revenue |
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$ |
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$ |
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$ |
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$ |
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Excise and cultivation tax |
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( |
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( |
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( |
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( |
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Revenue, net |
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Cost of Sales |
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Gross profit |
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Operating expenses: |
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General and administrative |
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Amortization and depreciation |
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Impairment of property and equipment |
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— |
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— |
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Total operating expenses |
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Income (loss) from operations |
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( |
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( |
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Other (income) expense |
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Loss from revaluation of contingent consideration |
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— |
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— |
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Gain on fair value of warrants and purchase option derivative asset |
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( |
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( |
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( |
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( |
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Finance and other expenses |
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Transaction and restructuring costs |
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Unrealized and realized foreign exchange (gain) loss |
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( |
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( |
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( |
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Unrealized and realized loss on investments |
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(Loss) Income from continuing operations before provision from income taxes |
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( |
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( |
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Provision for income taxes |
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Net (loss) income from continuing operations |
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$ |
( |
) |
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$ |
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$ |
( |
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$ |
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Discontinued operations: |
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Loss from discontinued operations, net of tax |
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$ |
( |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
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Net (loss) income |
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$ |
( |
) |
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$ |
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$ |
( |
) |
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$ |
( |
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Foreign currency translation |
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Comprehensive (loss) income |
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$ |
( |
) |
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$ |
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$ |
( |
) |
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$ |
( |
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Net (loss) income from continuing operations attributable to: |
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Common and proportionate Shareholders of the Company |
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$ |
( |
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$ |
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$ |
( |
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$ |
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Non-controlling interests |
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$ |
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$ |
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$ |
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$ |
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Comprehensive (loss) income from continuing operations attributable to: |
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Common and proportionate Shareholders of the Company |
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$ |
( |
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$ |
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$ |
( |
) |
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$ |
( |
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Non-controlling interests |
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$ |
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$ |
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$ |
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$ |
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Net (loss) income per share |
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Net (loss) income per share - basic: |
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Continuing operations |
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$ |
( |
) |
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$ |
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$ |
( |
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$ |
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Discontinued operations |
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$ |
- |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
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Net (loss) income per share - basic |
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$ |
( |
) |
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$ |
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$ |
( |
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$ |
( |
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Weighted average number of outstanding common and proportionate voting shares |
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Net (loss) income per share - diluted: |
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Continuing operations |
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$ |
( |
) |
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$ |
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$ |
( |
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$ |
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Discontinued operations |
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— |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
) |
Net (loss) income per share - diluted |
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$ |
( |
) |
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$ |
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$ |
( |
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$ |
( |
) |
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Weighted average number of outstanding common and proportionate voting shares, assuming dilution |
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The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.
2
TerrAscend Corp.
(Amounts expressed in thousands of United States dollars, except for share and per share amounts)
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Number of Shares |
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Convertible Preferred Stock |
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Common Shares |
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Exchangeable Shares |
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Series A |
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Series B |
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Common Shares Equivalent |
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Additional paid in capital |
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Accumulated other comprehensive income (loss) |
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Accumulated deficit |
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Non-controlling interest |
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Total |
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Balance at March 31, 2023 |
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$ |
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