Form: 10-Q

Quarterly report pursuant to Section 13 or 15(d)

May 9, 2024

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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 March 31, 2024

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: 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

 

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 May 8, 2024, the registrant had 291,507,430 common shares, $0.01 par value per share, outstanding.

 

 

 


 

Table of Contents

 

 

 

Page

 

 

 

PART I.

FINANCIAL INFORMATION

1

 

 

 

Item 1.

Financial Statements (Unaudited)

1

 

Unaudited Interim Condensed Consolidated Balance Sheets as of March 31, 2024 and December 31, 2023

1

 

Unaudited Interim Condensed Consolidated Statements of Operations and Comprehensive Loss for the three months ended March 31, 2024 and 2023

2

 

Unaudited Interim Condensed Consolidated Statements of Changes in Shareholders' Equity for the three months ended March 31, 2024 and 2023

Unaudited Interim Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2024 and 2023

4

 

Notes to Unaudited Interim Condensed Consolidated Financial Statements

5

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

22

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

33

Item 4.

Controls and Procedures

33

 

 

 

PART II.

OTHER INFORMATION

34

 

 

 

Item 1.

Legal Proceedings

34

Item 1A.

Risk Factors

34

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

34

Item 3.

Defaults Upon Senior Securities

34

Item 4.

Mine Safety Disclosures

34

Item 5.

Other Information

34

Item 6.

Exhibits

34

Signatures

36

 

 

 


 

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 Company's ability to continue as a going concern;
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;
TerrAscend’s ability to source and operate facilities in the United States and to operate such facilities;
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; 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

 

 

 

March 31, 2024

 

 

December 31, 2023

 

Assets

 

 

 

 

 

 

Current Assets

 

 

 

 

 

 

Cash and cash equivalents

 

$

22,664

 

 

$

22,241

 

Restricted cash

 

 

3,110

 

 

 

3,106

 

Accounts receivable, net

 

 

17,013

 

 

 

19,048

 

Investments

 

 

1,965

 

 

 

1,913

 

Inventory

 

 

49,199

 

 

 

51,683

 

Prepaid expenses and other current assets

 

 

3,704

 

 

 

4,898

 

 

 

 

97,655

 

 

 

102,889

 

Non-Current Assets

 

 

 

 

 

 

Property and equipment, net

 

 

194,256

 

 

 

196,215

 

Deposits

 

 

284

 

 

 

337

 

Operating lease right of use assets

 

 

41,488

 

 

 

43,440

 

Intangible assets, net

 

 

214,060

 

 

 

215,854

 

Goodwill

 

 

106,929

 

 

 

106,929

 

Other non-current assets

 

 

867

 

 

 

854

 

 

 

 

557,884

 

 

 

563,629

 

Total Assets

 

$

655,539

 

 

$

666,518

 

 

 

 

 

 

 

 

Liabilities and Shareholders' Equity

 

 

 

 

 

 

Current Liabilities

 

 

 

 

 

 

Accounts payable and accrued liabilities

 

$

49,673

 

 

$

49,897

 

Deferred revenue

 

 

4,510

 

 

 

4,154

 

Loans payable, current

 

 

133,668

 

 

 

137,737

 

Contingent consideration payable, current

 

 

1,490

 

 

 

6,446

 

Operating lease liability, current

 

 

1,816

 

 

 

1,244

 

Lease obligations under finance leases, current

 

 

2,079

 

 

 

2,030

 

Corporate income tax payable

 

 

5,143

 

 

 

4,775

 

Other current liabilities

 

 

737

 

 

 

717

 

 

 

 

199,116

 

 

 

207,000

 

Non-Current Liabilities

 

 

 

 

 

 

Loans payable, non-current

 

 

58,409

 

 

 

61,633

 

Operating lease liability, non-current

 

 

43,967

 

 

 

45,384

 

Lease obligations under finance leases, non-current

 

 

383

 

 

 

407

 

Derivative liability

 

 

6,075

 

 

 

5,162

 

Convertible debt

 

 

7,682

 

 

 

7,266

 

Deferred income tax liability

 

 

16,919

 

 

 

17,175

 

Contingent consideration payable, non-current

 

 

1,424

 

 

 

 

Liability on uncertain tax position and other long term liabilities

 

 

89,455

 

 

 

81,751

 

 

 

 

224,314

 

 

 

218,778

 

Total Liabilities

 

 

423,430

 

 

 

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 March 31, 2024 and December 31, 2023, respectively

 

 

 

 

 

 

Series B, convertible preferred stock, no par value, unlimited shares authorized; 600 and 600 shares outstanding as of March 31, 2024 and December 31, 2023, respectively

 

 

 

 

 

 

Series C, convertible preferred stock, no par value, unlimited shares authorized; nil and nil shares outstanding as of March 31, 2024 and December 31, 2023, respectively

 

 

 

 

 

 

Series D, convertible preferred stock, no par value, unlimited shares authorized; nil and nil shares outstanding as of March 31, 2024 and December 31, 2023, respectively

 

 

 

 

 

 

Proportionate voting shares, no par value, unlimited shares authorized; nil and nil shares outstanding as of March 31, 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 March 31, 2024 and December 31, 2023, respectively

 

 

 

 

 

 

Common shares, no par value, unlimited shares authorized; 291,284,814 and 288,327,497 shares outstanding as of March 31, 2024 and December 31, 2023, respectively

 

 

 

 

 

 

Additional paid in capital

 

 

945,825

 

 

 

944,859

 

Accumulated other comprehensive income

 

 

2,197

 

 

 

1,799

 

Accumulated deficit

 

 

(717,398

)

 

 

(704,162

)

Non-controlling interest

 

 

1,485

 

 

 

(1,756

)

Total Shareholders' Equity

 

 

232,109

 

 

 

240,740

 

Total Liabilities and Shareholders' Equity

 

$

655,539

 

 

$

666,518

 

 

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

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

 

 

 

For the Three Months Ended

 

 

 

March 31, 2024

 

 

March 31, 2023

 

Revenue, net

 

 

80,633

 

 

 

69,398

 

 

 

 

 

 

 

 

Cost of Sales

 

 

41,902

 

 

 

35,498

 

 

 

 

 

 

 

 

Gross profit

 

 

38,731

 

 

 

33,900

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

General and administrative

 

 

28,008

 

 

 

27,730

 

Amortization and depreciation

 

 

2,215

 

 

 

2,029

 

Impairment of property and equipment and right of use assets

 

 

2,438

 

 

 

335

 

Total operating expenses

 

 

32,661

 

 

 

30,094

 

 

 

 

 

 

 

 

Income from operations

 

 

6,070

 

 

 

3,806

 

 

 

 

 

 

 

 

Other (income) expense

 

 

 

 

 

Loss from revaluation of contingent consideration

 

 

1,393

 

 

 

 

Loss (gain) on fair value of warrants and purchase option derivative assets

 

 

983

 

 

 

(438

)

Finance and other expenses

 

 

8,589

 

 

 

10,087

 

Transaction and restructuring costs

 

 

 

 

 

3

 

Unrealized and realized foreign exchange loss (gain)

 

 

285

 

 

 

(31

)

Unrealized and realized loss on investments

 

 

 

 

 

699

 

Loss from continuing operations before provision for income taxes

 

 

(5,180

)

 

 

(6,514

)

Provision for income taxes

 

 

9,671

 

 

 

12,664

 

Net loss from continuing operations

 

$

(14,851

)

 

$

(19,178

)

 

 

 

 

 

 

 

Discontinued operations:

 

 

 

 

 

 

   Loss from discontinued operations, net of tax

 

$

 

 

$

(3,591

)

Net loss

 

$

(14,851

)

 

$

(22,769

)

 

 

 

 

 

 

 

Foreign currency translation adjustment

 

 

(398

)

 

 

347

 

Comprehensive loss

 

$

(14,453

)

 

$

(23,116

)

 

 

 

 

 

 

 

Net loss from continuing operations attributable to:

 

 

 

 

 

 

Common and proportionate Shareholders of the Company

 

$

(17,055

)

 

$

(21,364

)

Non-controlling interests

 

$

2,204

 

 

$

2,186

 

 

 

 

 

 

 

 

Comprehensive loss attributable to:

 

 

 

 

 

 

Common and proportionate Shareholders of the Company

 

$

(16,657

)

 

$

(25,302

)

Non-controlling interests

 

$

2,204

 

 

$

2,186

 

 

 

 

 

 

 

 

Net loss per share

 

 

 

 

 

 

Net loss per share - basic:

 

 

 

 

 

 

Continuing operations

 

$

(0.06

)

 

$

(0.08

)

Discontinued operations

 

$

 

 

$

(0.01

)

Net loss per share - basic

 

$

(0.06

)

 

$

(0.09

)

Weighted average number of outstanding common shares

 

 

290,618,567

 

 

 

267,211,093

 

 

 

 

 

 

 

 

Net loss per share - diluted:

 

 

 

 

 

 

Continuing operations

 

$

(0.06

)

 

$

(0.08

)

Discontinued operations

 

$

 

 

$

(0.01

)

Net loss per share - diluted

 

$

(0.06

)

 

$

(0.09

)

Weighted average number of outstanding common shares, assuming dilution

 

 

290,618,567

 

 

 

267,211,093

 

 

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

2


 

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

 

 

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

 

 

 

 

 

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 contribution

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(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

 

 

 

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

 

3


 

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 Three Months Ended

 

 

March 31, 2024

 

 

March 31, 2023

 

Operating activities

 

 

 

 

 

Net loss from continuing operations

$

(14,851

)

 

$

(19,178

)

Adjustments to reconcile net loss to net cash provided by operating activities

 

 

 

 

 

Non-cash adjustments of inventory

 

 

 

 

797

 

Accretion expense

 

5,875

 

 

 

4,763

 

Depreciation of property and equipment and amortization of intangible assets

 

5,000

 

 

 

4,771

 

Amortization of operating right-of-use assets

 

716

 

 

 

454

 

Share-based compensation

 

1,485

 

 

 

1,713

 

Deferred income tax expense

 

(256

)

 

 

1,446

 

Loss (gain) on fair value of warrants and purchase option derivative

 

983

 

 

 

(438

)

Gain on disposal of fixed assets

 

 

 

 

307

 

Loss from revaluation of contingent consideration

 

1,393

 

 

 

 

Impairment of property and equipment and right of use assets

 

2,438

 

 

 

 

Loss on derecognition of right of use assets and lease termination

 

 

 

 

205

 

Bad debt expense

 

67

 

 

 

 

Unrealized and realized foreign exchange loss (gain)

 

285

 

 

 

(31

)

Unrealized and realized loss on investments

 

 

 

 

699

 

Changes in operating assets and liabilities

 

 

 

 

 

Receivables

 

1,954

 

 

 

773

 

Inventory

 

2,476

 

 

 

(4,969

)

Prepaid expense and other current assets

 

1,189

 

 

 

1,203

 

Deposits

 

 

 

 

97

 

Other assets

 

(12

)

 

 

(131

)

Accounts payable and accrued liabilities and other payables

 

(3,511

)

 

 

6,882

 

Operating lease liability

 

(670

)

 

 

(473

)

Other liability

 

(537

)

 

 

(14

)

Uncertain tax position liabilities

 

8,503

 

 

 

 

Corporate income tax payable

 

368

 

 

 

11,773

 

Deferred revenue

 

356

 

 

 

(195

)

Net cash provided by operating activities- continuing operations

 

13,251

 

 

 

10,454

 

Net cash used in operating activities - discontinued operations

 

 

 

 

(2,020

)

Net cash provided by operating activities

 

13,251

 

 

 

8,434

 

 

 

 

 

 

 

Investing activities

 

 

 

 

 

Investment in property and equipment

 

(2,796

)

 

 

(2,497

)

Investment in intangible assets

 

(127

)

 

 

(14

)

Principal payments received on lease receivable

 

 

 

 

111

 

Success fees related to ATC and other investment

 

 

 

 

738

 

Payment for land contracts

 

(250

)

 

 

(308

)

Cash portion of consideration paid in acquisitions, net of cash of acquired

 

(250

)

 

 

(9,611

)

Net cash used in investing activities - continuing operations

 

(3,423

)

 

 

(11,581

)

Net cash provided investing activities - discontinued operations

 

 

 

 

 

Net cash used in investing activities

 

(3,423

)

 

 

(11,581

)

 

 

 

 

 

 

Financing activities

 

 

 

 

 

Transfer of Employee Retention Credit

 

 

 

 

12,677

 

Proceeds from loan payable, net of transaction costs

 

3,137

 

 

 

 

Proceeds from options and warrants exercised

 

 

 

 

81

 

Loan principal paid

 

(12,215

)

 

 

(1,204

)

Capital distributions paid to non-controlling interests

 

(337

)

 

 

(1,884

)

Payments made for financing obligations and finance lease

 

(184

)

 

 

(157

)

Net cash (used in) provided by financing activities- continuing operations

 

(9,599

)

 

 

9,513

 

Net cash used in financing activities- discontinued operations

 

 

 

 

(115

)

Net cash (used in) provided by financing activities

 

(9,599

)

 

 

9,398

 

 

 

 

 

 

 

Net increase in cash and cash equivalents and restricted cash during the period

 

229

 

 

 

6,251

 

Net effects of foreign exchange

 

198

 

 

 

523

 

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

$

25,774

 

 

$

33,537

 

 

 

 

 

 

 

Supplemental disclosure with respect to cash flows

 

 

 

 

 

Income taxes paid (refund received)

$

1,013

 

 

$

(551

)

Interest paid

$

6,264

 

 

$

2,456

 

Lease termination fee paid

$

163

 

 

$

 

Non-cash transactions

 

 

 

 

 

Equity and warrant liability issued for acquisitions and non-controlling interest

$

4,674

 

 

$

750

 

Shares issued for Canopy USA arrangement

$

 

 

$

593

 

Accrued capital purchases

$

1,253

 

 

$

555

 

 

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

4


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 nineteen dispensaries, and three cultivation and processing facilities;
TerrAscend California (“TerrAscend CA”), a wholly-owned operation with five dispensaries, and a cultivation facility; and;
TerrAscend Canada Inc. (“TerrAscend Canada”) is 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.

2.
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 months ended March 31, 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 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. At March 31, 2024, the Company had an accumulated deficit of $717,398. During the three months ended March 31, 2024, the Company incurred a net loss from continuing operations of $14,851. Additionally, as of March 31, 2024 the Company’s current liabilities exceeded its current assets due

5


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)

to loans maturing within the current year. Therefore, the Company expects that it may need to refinance this debt or access additional capital to continue to fund its operations.

The aforementioned indicators raise substantial doubt about the Company's ability to continue as a going concern for at least one year from the issuance of these Consolidated Financial Statements. The Company believes this concern is mitigated by steps it has taken, or intends to take to improve its operations and cash position, including: (i) identifying access to future capital required to pay down or refinance the Company’s maturing debt, (ii) improved cashflow growth from the Company's consolidated operations, particularly TerrAscend's operations in New Jersey and most recently Maryland with conversion to adult-use sales, and (iii) various cost and efficiency improvements. The Consolidated Financial Statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amounts of and classification of liabilities that may result should the Company be unable to continue as a going concern.

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

3.
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.

 

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

6


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)

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 Accounting Standards Codification ("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.

4.
Accounts receivable, net

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

 

 

 

March 31, 2024

 

 

December 31, 2023

 

Trade receivables

 

$

26,535

 

 

$

28,403

 

Sales tax receivable

 

 

515

 

 

 

408

 

Other receivables

 

 

887

 

 

 

1,154

 

Provision for current expected credit losses

 

 

(10,924

)

 

 

(10,917

)

Total receivables, net

 

$

17,013

 

 

$

19,048

 

 

 

 

March 31, 2024

 

 

December 31, 2023

 

Trade receivables

 

$

26,535

 

 

$

28,403

 

Less: provision for current expected credit losses

 

 

(10,924

)

 

 

(10,917

)

Total trade receivables, net

 

$

15,611

 

 

$

17,486

 

 

 

 

 

 

 

 

Of which

 

 

 

 

 

 

Current

 

 

12,110

 

 

 

13,799

 

31-90 days

 

 

2,545

 

 

 

2,837

 

Over 90 days

 

 

11,880

 

 

 

11,767

 

Less: current expected credit losses

 

 

(10,924

)

 

 

(10,917

)

Total trade receivables, net

 

$

15,611

 

 

$

17,486

 

 

The over 90 days aged balance relates mainly to one customer which was deemed uncollectible.

 

5.
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

 

Reduction of contingent consideration

 

 

(1,334

)

 

 

(3,591

)

 

 

 

 

 

(4,925

)

Loss (gain) on revaluation of contingent consideration

 

 

519

 

 

 

1,396

 

 

 

(522

)

 

 

1,393

 

Carrying amount, March 31, 2024

 

$

591

 

 

$

833

 

 

$

1,490

 

 

$

2,914

 

Less: current portion

 

 

 

 

 

 

 

 

(1,490

)

 

 

(1,490

)

Non-current contingent consideration

 

$

591

 

 

$

833

 

 

$

 

 

$

1,424

 

 

During the three months ended March 31, 2024, the Company 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 previously owing contingent consideration balances. The Company provided a price protection on the Common Shares issued. The remaining balance recorded as at March 31, 2024 relates to the fair value of the price protection clause using the Black-Scholes Option Pricing Model ("Black-Scholes Model")

7


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)

 

6.
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:

 

 

 

March 31, 2024

 

 

December 31, 2023

 

Raw materials

 

$

730

 

 

$

378

 

Finished goods

 

 

17,650

 

 

 

18,821

 

Work in process

 

 

27,559

 

 

 

28,451

 

Accessories, supplies and consumables

 

 

3,260

 

 

 

4,033

 

 

 

$

49,199

 

 

$

51,683

 

 

7.
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.

The results of operations for the discontinued operations includes revenues and expenses directly attributable to the operations disposed. 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

 

 

March 31, 2024

 

 

March 31, 2023

 

 

 

 

 

 

 

Revenue, net

$

 

 

$

 

 

 

 

 

 

 

Cost of Sales

 

 

 

 

 

 

 

 

 

 

 

Gross profit

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

General and administrative

 

 

 

 

301

 

Amortization and depreciation

 

 

 

 

48

 

Impairment of property and equipment

 

 

 

 

3,064

 

Total operating expenses

 

 

 

 

3,413

 

 

 

 

 

 

 

Loss from discontinued operations

 

 

 

 

(3,413

)

Other expense

 

 

 

 

 

Finance and other expenses

 

 

 

 

178

 

Net loss from discontinued operations

$

 

 

$

(3,591

)

 

8


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)

8.
Property and equipment

Property and equipment consisted of:

 

 

 

March 31, 2024

 

 

December 31, 2023

 

Land

 

$

6,129

 

 

$

6,103

 

Assets in process

 

 

26,085

 

 

 

24,211

 

Buildings & improvements

 

 

150,673

 

 

 

151,989

 

Machinery & equipment

 

 

35,869

 

 

 

35,370

 

Office furniture & equipment

 

 

9,084

 

 

 

9,066

 

Assets under finance leases

 

 

2,362

 

 

 

2,362

 

Total cost

 

 

230,202

 

 

 

229,101

 

Less: accumulated depreciation

 

 

(35,946

)

 

 

(32,886

)

Property and equipment, net

 

$

194,256

 

 

$

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.

 

As of March 31, 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 $3,037 for the three months ended March 31, 2024 ($2,061 included in cost of sales) and $3,257 for the three months ended March 31, 2023 ($2,017 included in cost of sales).

9.
Intangible assets and goodwill

 

Intangible assets consisted of the following:

 

At March 31, 2024

 

Gross Carrying Amount

 

 

Accumulated Amortization

 

 

Net Carrying Amount

 

Finite lived intangible assets

 

 

 

 

 

 

 

 

 

 Software

 

$

2,177

 

 

$

(1,217

)

 

$

960

 

 Licenses

 

 

187,759

 

 

 

(21,631

)

 

 

166,128

 

 Non-compete agreements

 

 

280

 

 

 

(280

)

 

 

 

 Total finite lived intangible assets

 

 

190,216

 

 

 

(23,128

)

 

 

167,088

 

Indefinite lived intangible assets

 

 

 

 

 

 

 

 

 

 Brand intangibles

 

 

46,972

 

 

 

 

 

 

46,972

 

 Total indefinite lived intangible assets

 

 

46,972

 

 

 

 

 

 

46,972

 

 Intangible assets, net

 

$

237,188

 

 

$

(23,128

)

 

$

214,060

 

 

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

 

 

9


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)

Amortization expense was $1,941 for the three months ended March 31, 2024 ($724 included in cost of sales) and $1,514 for the three months ended March 31, 2023 ($725 included in cost of sales).

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

 

2024

 

$

5,257

 

2025

 

 

6,835

 

2026

 

 

6,820

 

2027

 

 

6,740

 

2028

 

 

6,740

 

 

As of March 31, 2024, the weighted average amortization period remaining on intangible assets was 27.3 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 March 31, 2024

 

$

106,929

 

 

10.
Loans payable

The Company's loans payable consisted of the following:

 

 

 

March 31, 2024

 

 

December 31, 2023

 

Chicago Atlantic term loan due November 2024

 

 

 

 

 

 

Principal amount

 

$

24,404

 

 

$

24,611

 

Deferred financing cost

 

 

 

 

 

 

Net carrying amount

 

$

24,404

 

 

$

24,611

 

 

 

 

 

 

 

 

Ilera term loan due December 2024

 

 

 

 

 

 

Principal amount

 

$

72,127

 

 

$

76,927

 

Deferred financing cost

 

 

(2,340

)

 

 

(3,191

)

Net carrying amount

 

$

69,787

 

 

$

73,736

 

 

 

 

 

 

 

 

Stearns loan due December 2024

 

 

 

 

 

 

Principal amount

 

$

24,721

 

 

$

24,809

 

Deferred financing cost

 

 

(611

)

 

 

(791

)

Net carrying amount

 

$

24,110

 

 

$

24,018

 

 

 

 

 

 

 

 

Pelorus term loan due October 2027

 

 

 

 

 

 

Principal amount

 

$

45,478

 

 

$

45,478

 

Deferred financing cost

 

 

(1,413

)

 

 

(1,490

)

Net carrying amount

 

$

44,065

 

 

$

43,988

 

 

 

 

 

 

 

 

Maryland Acquisition loans (1)

 

 

 

 

 

 

Principal amount

 

$

19,495

 

 

$

19,873

 

Unamortized discount

 

 

(1,229

)

 

 

(1,403

)

Net carrying amount

 

$

18,266

 

 

$

18,470

 

 

 

 

 

 

 

 

Other loans

 

$

2,322

 

 

$

2,698

 

 

 

 

 

 

 

 

Short-term debt

 

$

9,123

 

 

$

11,849

 

Current portion of long-term debt

 

$

124,545

 

 

 

125,888

 

Loans payable, current

 

$

133,668

 

 

 

137,737

 

 

 

 

 

 

 

 

Loans payable, non-current

 

$

58,409

 

 

$

61,633

 

Total loans payable

 

$

192,077

 

 

$

199,370

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

10


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)

Total interest paid on all loan payables was $6,264 for the three months ended March 31, 2024, and $2,456 for the three months ended March 31, 2023. The Company had accrued interest on loans payable of $3,064 and $3,491 as of March 31, 2024 and December 31, 2023, respectively, included in accounts payable and accrued liabilities on the Consolidated Balance Sheets.

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 matures on November 1, 2024. The Chicago Atlantic Loan was secured by a first lien on all Gage Growth assets.

As of March 31, 2024, there was an outstanding principal amount of $24,404 under the Chicago Atlantic Term 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 ("Ilera Term Loan"). The Ilera Term Loan is solely secured by the Company’s Pennsylvania-based Ilera Healthcare LLC (“Ilera”). The Ilera Term Loan bears interest at 12.875% matures 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. Subsequent to March 31, 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.

As of March 31, 2024, there was an outstanding principal amount of $72,127 under the Ilera 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 ("Stearns Loan"). The Stearns Loan bears an interest rate of prime plus 2.25% and matures on December 26, 2024.

As of March 31, 2024, there was an outstanding principal amount of $24,721 under the Stearns Loan.

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 Maryland and New Jersey businesses, including certain real estate in Maryland and New Jersey, but excludes all MD dispensaries

As of March 31, 2024, there was an outstanding principal amount of $45,478 under the Pelorus Term Loan.

Maryland Acquisition Loans

In connection with the acquisition 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 March 31, 2024, there was an outstanding principal amount of $19,495 under the Maryland Acquisition Loans.

11


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)

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 $4,065, which matures on December 31, 2024. The promissory note bears interest at a rate of 6%.

As of March 31, 2024, there was an outstanding principal amount of $1,322 under the Stadium Ventures loan.

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

The average dollar amount of short-term debt for the three months ended March 31, 2024 was $10,254 with a weighted-average interest rate of 16.69% as of March 31, 2024.

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

 

Maturities of loans payable

 

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

 

 

 

March 31, 2024

 

2024

 

$

132,677

 

2025

 

 

7,942

 

2026

 

 

11,082

 

2027

 

 

44,483

 

2028

 

 

1,000

 

Thereafter

 

 

 

Total principal payments

 

$

197,184

 

 

12


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, retail, cultivation and manufacturing. The operating lease periods generally range from 1 to 26 years. The Company had two finance leases at March 31, 2024 and December 31, 2023.

Amounts recognized in the consolidated balance sheet were as follows:

 

 

March 31, 2024

 

 

December 31, 2023

 

Operating leases:

 

 

 

 

 

 

Operating lease right-of-use assets

 

$

41,488

 

 

$

43,440

 

 

 

 

 

 

 

 

Operating lease liability classified as current

 

 

1,816

 

 

 

1,244

 

Operating lease liability classified as non-current

 

 

43,967

 

 

 

45,384

 

Total operating lease liabilities

 

$

45,783

 

 

$

46,628

 

 

 

 

 

 

 

 

Finance leases:

 

 

 

 

 

 

Property and equipment, net

 

$

2,073

 

 

$

2,112

 

 

 

 

 

 

 

 

Lease obligations under finance leases classified as current

 

 

2,079

 

 

 

2,030

 

Lease obligations under finance leases classified as non-current

 

 

383

 

 

 

407

 

Total finance lease obligations

 

$

2,462

 

 

$

2,437

 

 

The Company recognized operating lease expense of $2,034 for the three months ended March 31, 2024 and $1,254 for the three months ended March 31, 2023.

 

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

 

 

 

March 31, 2024

 

 

December 31, 2023

 

Weighted-average remaining lease term (years)

 

 

 

 

 

 

Operating leases

 

 

12.5

 

 

 

12.5

 

Finance leases

 

 

2.0

 

 

 

1.2

 

 

 

 

 

 

 

 

Weighted-average discount rate

 

 

 

 

 

 

Operating leases

 

 

11.43

%

 

 

11.43

%

Finance leases

 

 

9.47

%

 

 

9.47

%

 

Supplemental cash flow information related to leases are as follows:

 

 

 

March 31, 2024

 

 

December 31, 2023

 

Cash paid for amounts included in measurement of operating lease liabilities

 

$

2,034

 

 

$

6,264

 

Right-of-use assets obtained in exchange for operating lease obligations

 

 

 

 

 

16,603

 

Cash paid for amounts included in measurement of finance lease liabilities

 

 

32

 

 

 

153

 

 

13


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

 

$

5,513

 

 

$

98

 

 

$

5,611

 

2025

 

 

7,393

 

 

 

2,132

 

 

 

9,525

 

2026

 

 

7,158

 

 

 

134

 

 

 

7,292

 

2027

 

 

7,014

 

 

 

136

 

 

 

7,150

 

2028

 

 

6,852

 

 

 

80

 

 

 

6,932

 

Thereafter

 

 

56,206

 

 

 

 

 

 

56,206

 

Total lease payments

 

 

90,136

 

 

 

2,580

 

 

 

92,716

 

Less: interest

 

 

(44,353

)

 

 

(118

)

 

 

(44,471

)

Total lease liabilities

 

$

45,783

 

 

$

2,462

 

 

$

48,245

 

 

 

12.
Convertible Debt

The Company's convertible debt consisted of the following:

 

 

 

March 31, 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

 

 

1,184

 

 

 

768

 

Net carrying amount

 

$

7,682

 

 

$

7,266

 

The Company had accrued interest on convertible debt of $577 and $nil as of March 31, 2024 and December 31, 2023, respectively, included in accounts payable and accrued liabilities on the Consolidated Balance Sheets.

 

13.
Shareholders' equity

 

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

 

 

 

 

 

 

 

 

 

 

 

 

Expired

 

 

 

 

 

 

 

 

 

 

 

 

Outstanding, March 31, 2024

 

 

23,330,542

 

 

 

818,927

 

 

$

4.45

 

 

 

8.49

 

 

14


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 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, March 31, 2024

 

 

3,590,334

 

 

 

 

 

$

1.95

 

 

 

1.23

 

 

 

14.
Share-based compensation plans

Share-based payments expense

 

Total share-based payments expense was as follows:

 

 

For the Three Months Ended

 

 

 

March 31, 2024

 

 

March 31, 2023

 

Stock options

 

$

904

 

 

$

1,260

 

Restricted share units

 

 

581

 

 

 

453

 

Total share-based payments

 

$

1,485

 

 

$

1,713

 

Stock Options

 

The following table summarizes the stock option activity for the three months ended March 31, 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

 

495,000

 

 

 

 

 

1.86

 

 

 

Exercised

 

 

 

 

 

 

 

 

 

Forfeited

 

(219,312

)

 

 

 

 

1.67

 

 

 

Expired

 

(1,256,315

)

 

 

 

 

2.55

 

 

 

Outstanding, March 31, 2024

 

15,297,753

 

 

 

5.64

 

$

3.48

 

$

1,917

 

 

 

 

 

 

 

 

 

 

 

Exercisable, March 31, 2024

 

10,437,578

 

 

 

4.25

 

$

3.78

 

$

636

 

 

 

 

 

 

 

 

 

 

 

Nonvested, March 31, 2024

 

4,860,175

 

 

 

8.63

 

$

2.82

 

$

1,281

 

 

The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value (the difference between Company’s closing stock price on March 31, 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 March 31, 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:

 

15


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

 

 

 

March 31, 2024

 

 

March 31, 2023

 

Exercised

 

$

 

 

$

551

 

 

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

 

 

 

March 31, 2024

 

 

March 31, 2023

 

Volatility

 

77.70% - 77.79%

 

 

80.04% - 80.16%

 

Risk-free interest rate

 

3.18% - 3.50%

 

 

2.85% - 3.21%

 

Expected life (years)

 

10.01

 

 

10.01

 

Dividend yield

 

 

0.00

%

 

 

0.00

%

Forfeiture rate

 

 

26.11

%

 

 

26.11

%

 

Volatility was estimated by using the historical volatility of the Company's stock price. 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 three months ended March 31, 2024 and 2023 was $3,395 and $4,263, respectively. As of March 31, 2024, there was $8,570 of total unrecognized compensation cost related to unvested options.

Restricted Share Units

 

The following table summarizes the activities for the RSUs for the three months ended March 31, 2024:

 

 

 

Number of RSUs

 

Outstanding, December 31, 2023

 

 

1,078,584

 

Granted

 

 

3,750

 

Vested

 

 

(82,365

)

Forfeited

 

 

 

Outstanding, March 31, 2024

 

 

999,969

 

 

As of March 31, 2024, there was $2,232 of total unrecognized compensation cost related to unvested RSUs.

15.
Non-controlling interest

Non-controlling interest consists mainly of TerrAscend's 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 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 three months ended March 31, 2024:

 

 

March 31, 2024

 

 

December 31, 2023

 

Opening carrying amount

 

$

(1,756

)

 

$

2,374

 

Capital distributions

 

 

(337

)

 

 

(11,622

)

Acquisition of non-controlling interest

 

 

1,374

 

 

 

(1,323

)

Net income attributable to non-controlling interest

 

 

2,204

 

 

 

8,815

 

Ending carrying amount

 

$

1,485

 

 

$

(1,756

)

 

16


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)

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 March 31, 2024, amounts due to/from related parties consisted of:

 

(a)
Loans payable: During the year ended December 31, 2020, a small number of related persons, which consisted of key management of the Company, participated in the Ilera term loan (Note 10), which makes up $149 and $159 of the total loan principal balance at March 31, 2024 and December 31, 2023, respectively.
17.
Income taxes

The Company's effective tax rate was (186.7)% for the three months ended March 31, 2024 and (194.4)% for the three months ended March 31, 2023. As the Company operates in the cannabis industry, it is subject to Section 280E of the Internal Revenue Code of 1986, as amended (the "Code"), under which the Company is only allowed to deduct expenses directly related to sales of product. This results in permanent differences between ordinary and necessary business expenses deemed non-deductible under the Code. Therefore, the effective tax rate can be highly variable and may not necessarily correlate with pre-tax income or loss.

The Company had an unrecognized tax benefits of $93,955 and $84,485 as of March 31, 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, $11,537 and $10,459 as of March 31, 2024 and December 31, 2023, respectively, is unrelated to its 280E Tax Position.

Related to its 280E Tax Position, the Company has filed amended federal returns related to 2020 and 2021 and is in the process of completing various other federal and state amendments related to 2020, 2021 and 2022. The Company’s tax returns generally remain subject to examination by the U.S. Federal, U.S. State and non U.S. taxing authorities for years ending December 31, 2020 and forward.

 

18.
General and administrative expenses

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

 

 

 

For the Three Months Ended

 

 

 

March 31, 2024

 

 

March 31, 2023

 

Office and general

 

$

3,956

 

 

$

4,004

 

Professional fees

 

 

3,061

 

 

 

3,373

 

Lease expense

 

 

1,820

 

 

 

1,244

 

Facility and maintenance

 

 

1,325

 

 

 

1,244

 

Salaries and wages

 

 

14,896

 

 

 

13,496

 

Share-based compensation

 

 

1,485

 

 

 

1,713

 

Sales and marketing

 

 

1,465

 

 

 

2,656

 

Total

 

$

28,008

 

 

$

27,730

 

 

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

 

 

 

March 31, 2024

 

 

March 31, 2023

 

Retail

 

$

53,858

 

 

$

55,422

 

Wholesale

 

 

26,775

 

 

 

13,976

 

Total

 

$

80,633

 

 

$

69,398

 

 

17


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 March 31, 2024, 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

 

 

 

March 31, 2024

 

 

March 31, 2023

 

Interest and accretion

 

$

8,872

 

 

$

7,875

 

Employee retention credits and transfer fee

 

 

 

 

 

2,235

 

Other income

 

 

(283

)

 

 

(23

)

Total

 

$

8,589

 

 

$

10,087

 

 

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 March 31, 2024, net revenue was primarily generated from sales in the United States. As a result of the Reorganization (Note 3), the Company consolidated its retail location in Canada and generated net revenue of $264 the three months ended March 31, 2024.

 

The Company had non-current assets by geography of:

 

 

 

March 31, 2024

 

 

December 31, 2023

 

United States

 

$

557,235

 

 

$

562,854

 

Canada

 

 

649

 

 

 

775

 

Total

 

$

557,884

 

 

$

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, 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 financing 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 March 31, 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.

18


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 March 31, 2024

 

At December 31, 2023

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

22,664

 

 

 

 

 

 

 

 

$

22,241

 

 

 

 

 

 

 

Restricted cash

 

 

3,110

 

 

 

 

 

 

 

 

 

3,106

 

 

 

 

 

 

 

Total Assets

 

$

25,774

 

 

 

 

 

 

 

 

$

25,347

 

 

 

 

 

$

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Contingent consideration payable

 

 

 

 

 

2,914

 

 

 

 

 

 

 

 

 

2,012

 

 

 

4,434

 

Derivative liability

 

 

 

 

 

6,075

 

 

 

 

 

 

 

 

 

5,162

 

 

 

 

Total Liabilities

 

$

 

 

$

8,989

 

 

$

 

 

$

 

 

$

7,174

 

 

$

4,434

 

 

There were no transfers between the levels of fair value hierarchy during the three months ended March 31, 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 three months ended March 31, 2024:

 

Balance at December 31, 2023

 

$

5,162

 

Fair value gain on revaluation of warrants and conversion option

 

 

983

 

Effects of movements in foreign exchange

 

 

(70

)

Balance at March 31, 2024

 

$

6,075

 

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 March 31, 2024. Key inputs and assumptions used in the Black-Scholes Model were as follows:

 

 

 

March 31, 2024

 

 

December 31, 2023

 

Common Stock Price of TerrAscend Corp.

 

$

1.89

 

 

$

1.63

 

Option exercise price

 

$

1.95

 

 

$

1.95

 

Annual volatility

 

 

64.6

%

 

 

74.7

%

Annual risk-free rate

 

 

5.03

%

 

 

4.23

%

Expected term (in years)

 

 

1.23

 

 

 

1.48

 

 

19


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)

 

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 March 31, 2024. Key inputs and assumptions used in the Black-Scholes Model were as follows:

 

 

March 31, 2024

 

 

December 31, 2023

 

Common Stock Price of TerrAscend Corp.

 

$

1.89

 

 

$

1.63

 

Option exercise price

 

$

2.01

 

 

$

2.01

 

Annual volatility

 

 

72.1

%

 

 

70.1

%

Annual risk-free rate

 

 

4.59

%

 

 

4.23

%

Expected term (in years)

 

2.23 - 2.34

 

 

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:

 

 

 

March 31, 2024

 

 

December 31, 2023

 

Common Stock Price of TerrAscend Corp.

 

$

1.89

 

 

$

1.63

 

Option exercise price

 

$

1.65

 

 

$

1.65

 

Annual volatility

 

 

69.2

%

 

 

63.3

%

Annual risk-free rate

 

 

5.21

%

 

 

4.73

%

Expected term (in years)

 

 

0.75

 

 

 

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:

 

 

 

March 31, 2024

 

 

January 19, 2024

 

Common Stock Price of TerrAscend Corp.

 

$

1.89

 

 

$

1.95

 

Option exercise price

 

$

1.76

 

 

$

1.76

 

Annual volatility

 

 

70.0

%

 

 

68.7

%

Annual risk-free rate

 

 

5.38

%

 

 

5.21

%

Expected term (in years)

 

 

1.81

 

 

 

2.00

 

 

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, product liability, 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 Income (Loss). Other than as set out below, at March 31, 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 alleges breach of contract, quantum meruit/unjust enrichment, account stated and statutory conversion. AEY’s alleged damages are related to Pure X’s failure to pay for various cannabis products sold by AEY. This matter is still pending. The Company has not recorded an additional receivable for this matter as of March 31, 2024.

20


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

21


 

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 months ended March 31, 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 nineteen dispensaries, and three cultivation and processing facilities;
TerrAscend California (“TerrAscend CA”), a wholly-owned operation with five dispensaries, and a cultivation facility; and;
TerrAscend Canada Inc. (“TerrAscend Canada”) is a cannabis retailer in Ontario, Canada with a majority-owned dispensary in Toronto, Ontario, Canada ("Cookies Canada").

 

Recent Developments

 

On January 2, 2024, the Company made a prepayment of the Ilera Term Loan of $4,800 at 100% to par.
On January 15, 2024, the Company paid off the IHC Real Estate LP promissory note with a final payment of $5,000.
On January 19, 2024, the Company acquired the remaining 50.1% equity in State Flower, a California cultivator, with a payment of $250 in cash and an aggregate of 2,888,088 Common Shares. The Company also acquired the remaining 50.1% equity in three Apothecarium dispensaries in California with a payment of $1,233 in stock for each entity. As a result of these acquisitions, the Company now wholly owns State Flower and the three Apothecarium dispensaries in California.

22


 

 

Subsequent Transactions

 

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

 

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

23


 

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.

 

(Gain) loss 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.

 

Loss (gain) on fair value of warrants and purchase option derivative asset

 

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 loss represents the 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 loss (gain) 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.

 

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.

 

24


 

Results from Operations - Three Months Ended March 31, 2024 and March 31, 2023

 

The following tables represent the Company’s results from operations for the three months ended March 31, 2024 and 2023.

Revenue, net

 

 

For the Three Months Ended

 

 

 

March 31, 2024

 

 

March 31, 2023

 

Revenue, net

 

$

80,633

 

 

$

69,398

 

$ change

 

$

11,235

 

 

 

 

% change

 

 

16

%

 

 

 

 

Revenue increased from $69,398 to $80,633 for the three months ended March 31, 2024 as compared to the three months ended March 31, 2023 primarily driven by the implementation of adult-use sales in Maryland and the Company's four Maryland acquisitions in 2023, a doubling of wholesale sales in New Jersey, and an 80% increase in wholesale sales in Pennsylvania, partially offset by retail declines in New Jersey and Michigan.

Cost of sales

 

 

For the Three Months Ended

 

 

 

March 31, 2024

 

 

March 31, 2023

 

Cost of sales

 

$

41,902

 

 

$

34,701

 

Non-cash adjustment of inventory

 

 

-

 

 

 

797

 

Total cost of sales

 

$

41,902

 

 

$

35,498

 

$ change

 

$

6,404

 

 

 

 

% change

 

 

18

%

 

 

 

Cost of sales as a % of revenue

 

 

52

%

 

 

51

%

 

The increase of $6,404 in cost of sales for the three months ended March 31, 2024 as compared to the three months ended March 31, 2023 was mainly due to an increase in sales. Cost of sales as a percentage of revenue was relatively constant for the three months ended March 31, 2024, as compared to the three months ended March 31, 2023.

Loss from revaluation of contingent consideration

 

 

For the Three Months Ended

 

 

 

March 31, 2024

 

 

March 31, 2023

 

Loss from revaluation of contingent consideration

 

$

1,393

 

 

$

-

 

$ change

 

$

1,393

 

 

 

 

% change

 

 

100

%

 

 

 

The loss from the revaluation of contingent consideration for the three months ended March 31, 2024 as compared to the three months ended March 31, 2023 was due to fair value changes of $1,915 relating to the settlement of the State Flower and The Apothecarium contingent consideration. This was offset by a gain on the revaluation of contingent liability for Peninsula acquisition of $522, resulting from the increase in the Company's share price from December 31, 2023, as compared to March 31, 2024.

Loss (gain) on fair value of warrants and purchase option derivative asset

 

For the Three Months Ended

 

 

 

March 31, 2024

 

 

March 31, 2023

 

Loss (gain) on fair value of warrants and purchase option derivative assets

 

$

983

 

 

$

(438

)

$ change

 

$

1,421

 

 

 

 

% change

 

 

-324

%

 

 

 

The warrant liability was remeasured to fair value at March 31, 2024 using the Black-Scholes Model. The Company recognized a loss of $983 during the three months ended March 31, 2024 as a result of the rising share price from March 31, 2024, as compared to December 31, 2023.

During the three months ended March 31, 2023, the Company recognized a gain on fair value warrants of $438 as a result of the reduction of the Company's share price from March 31, 2023, as compared to December 31, 2022.

25


 

Impairment of property and equipment and right of use assets

 

 

For the Three Months Ended

 

 

 

March 31, 2024

 

 

March 31, 2023

 

Impairment of property and equipment and right of use assets

 

$

2,438

 

 

$

335

 

$ change

 

$

2,103

 

 

 

 

% change

 

 

628

%

 

 

 

During the three months ended March 31, 2024, the Company recorded an impairment of property and equipment of $2,438 due to the wind-down of one of its California dispensaries.

Provision for income taxes

 

 

For the Three Months Ended

 

 

 

March 31, 2024

 

 

March 31, 2023

 

Provision for income taxes

 

$

9,671

 

 

$

12,664

 

$ change

 

$

(2,993

)

 

 

 

% change

 

 

24

%

 

 

 

 

The change in provision for income taxes from $12,664 for the three months ended March 31, 2023 as compared to a provision for income taxes of $9,671 for the three months ended March 31, 2024 was primarily driven by a return to provision adjustment.

 

Liquidity and Capital Resources

 

 

March 31, 2024

 

 

December 31, 2023

 

 

 

$

 

 

$

 

Cash and cash equivalents

 

 

22,664

 

 

 

22,241

 

Restricted Cash

 

 

3,110

 

 

 

3,106

 

Current assets

 

 

97,655

 

 

 

102,889

 

Non-current assets

 

 

557,884

 

 

 

563,629

 

Current liabilities

 

 

199,116

 

 

 

207,000

 

Non-current liabilities

 

 

224,314

 

 

 

218,778

 

Working capital

 

 

(101,461

)

 

 

(104,111

)

Total shareholders' equity

 

 

232,109

 

 

 

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

 

At March 31, 2024, the Company had an accumulated deficit of $717,398. During the three months ended March 31, 2024, the Company incurred a net loss from continuing operations of $14,851. Additionally, as of March 31, 2024 the Company’s current liabilities exceed its current assets. Therefore, it is possible that the Company may need additional capital to continue to fund its operations.

 

The aforementioned indicators raise substantial doubt about the Company's ability to continue as a going concern for at least one year from the issuance of the Consolidated Financial Statements included elsewhere in this Quarterly Report on From 10-Q. The Company believes this concern is mitigated by steps it has taken, or intends to take to improve its operations and cash position, including: (i) identifying access to future capital required to pay down or refinance the Company’s maturing debt, (ii) improved cashflow growth from the Company's consolidated operations, particularly TerrAscend's operations in New Jersey and most recently Maryland with conversion to adult-use sales, and (iii) various cost and efficiency improvements. The Consolidated Financial Statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amounts of and classification of liabilities that may result should the Company be unable to continue as a 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 $656,143 as of March 31, 2024.

 

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

cash from ongoing operations.
market offerings.

26


 

additional debt from additional creditors.
sale of real property.
sale leaseback transactions.
exercise of options and warrants.

Capital requirements

The Company has $197,184 in principal amounts of loans payable at March 31, 2024. Of this amount, $136,291 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 $92,716 in lease obligations. Of this amount, $9,479 are due in the next twelve months.

The Company's undiscounted contingent consideration payable is $2,914 at March 31, 2024, of which, $1,490 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 March 31, 2024, the Company had accounts payable and accrued liabilities of $49,673 and corporate income taxes payable of $5,143.

 

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

 

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 is solely secured by Ilera. The Ilera Term Loan bears interest at 12.875% per annum and matures on December 17, 2024. Subject to certain conditions of the agreement, the Company has 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 are 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 can 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 is 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

27


 

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 requires 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.

As of March 31, 2024, there was an outstanding principal amount of $72,127 under the Ilera Term Loan. Subsequently, the Company paid an additional $3,200 which resulted in a current outstanding principal amount of $68,927.

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 bears 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 includes 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 bears 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 matures on November 1, 2024. Commencing on May 31, 2023, the Company will make monthly principal repayments of 0.40% of the aggregate principal amount outstanding. Additionally, the unpaid principal amount of the loan shall bear paid in kind interest at a rate of 1.50% per annum. No prepayment fees are owed if the Company voluntarily prepays the loan after 18 months. If such prepayment occurs 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, is owed. Under the Amended Chicago Atlantic Term Loan, the Company has 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 have not been 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

28


 

this represents 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.

 

As of March 31, 2024, there was an outstanding principal amount of $24,404 under the Chicago Atlantic Term Loan.

 

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 matures on June 30, 2023 and bears interest rates of 6%. On June 27, 2023, Spartan Partners Properties, LLC, agreed to an amendment among other things, to extend the obligation date of the loan until December 1, 2023. As of March 31, 2024, there was an outstanding principal amount of $5,582 on the two promissory notes. The obligations are subject to restructuring upon the resolution of indemnity claims.

 

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 March 31, 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 bears interest at a rate of prime plus 2.25% and matures 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. As of March 31, 2024, there was an outstanding principal amount of $24,721 under the Stearns Loan.

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.

 

29


 

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 March 31, 2024, there was an outstanding principal amount of $19,495 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 $4,065, which matures on December 31, 2024. The promissory note bears interest at a rate of 6%. As of March 31, 2024, there was an outstanding principal amount of $1,322 on 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 March 31, 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 carries an interest rate of 15% and matures 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.

Cash Flows

Cash flows provided by operating activities

 

 

 

For the Three Months Ended

 

 

 

March 31, 2024

 

 

March 31, 2023

 

Net cash provided by operating activities

 

$

13,251

 

 

$

8,434

 

 

The increase of $4,826 in net cash provided by operating activities for the three months ended March 31, 2024 as compared to three months ended March 31, 2023 is due primarily to growth in revenue and gross margin while maintaining SG&A expenses relatively flat.

Cash flows used in investing activities

 

 

 

For the Three Months Ended

 

 

 

March 31, 2024

 

 

March 31, 2023

 

Net cash used in investing activities

 

$

(3,423

)

 

$

(11,581

)

 

30


 

The net cash used in investing activities for the three months ended March 31, 2024 primarily relates to investment in property and equipment of $2,796.

Net cash used in investing activities for the three months ended March 31, 2023 primarily relates to the cash paid to AMMD of $9,611. Additionally, investment in property and equipment was $2,497 during the three months ended March 31, 2023.

Cash flows (used in) provided by financing activities

 

 

 

For the Three Months Ended

 

 

 

March 31, 2024

 

 

March 31, 2023

 

Net cash (used in) provided by financing activities

 

$

(9,599

)

 

$

9,398

 

 

Net cash used in financing activities for the three months ended March 31, 2024 was primarily due to net loan principal payments of $9,078 and distributions to minority partners of $337.

Net cash provided by financing activities for the three months ended March 31, 2023 was primarily due to cash inflow of $12,677 as a result of transfer with recourse of Employee Retention Credit, offset by principal payments on loans of $1,204 and capital contributions paid to non-controlling interest holders of $1,884.

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 (used in) 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) Adjusted EBITDA from continuing operations as net (loss) income, adjusted to exclude provision for income taxes, finance expenses, depreciation and amortization, relief of fair value upon acquisition, share-based compensation, gain on extinguishment of debt, restructuring related charges, impairment of goodwill and intangible assets and certain other items, which management believes is not reflective of the ongoing operations and performance. 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

31


 

EBITDA from continuing operations and Adjusted EBITDA from continuing operations for the three months ended March 31, 2024 and 2023:

 

 

 

 

 

 

 

 

 

 

 

Notes

 

March 31, 2024

 

 

 

March 31, 2023

 

Net loss

 

 

$

(14,851

)

 

 

$

(22,769

)

Loss from discontinued operations

 

 

 

 

 

 

 

3,591

 

Loss from continuing operations

 

 

 

(14,851

)

 

 

 

(19,178

)

 

 

 

 

 

 

 

 

 

Add (deduct) the impact of:

 

 

 

 

 

 

 

 

Provision for income taxes

 

 

 

9,671

 

 

 

 

12,664

 

Finance expenses

 

 

 

8,872

 

 

 

 

7,875

 

Amortization and depreciation

 

 

 

5,000

 

 

 

 

4,771

 

EBITDA from continuing operations

(a)

 

 

8,692

 

 

 

 

6,132

 

Add (deduct) the impact of:

 

 

 

 

 

 

 

 

Share-based compensation

(b)

 

 

1,485

 

 

 

 

1,713

 

Loss from revaluation of contingent consideration

(c)

 

 

1,393

 

 

 

 

 

Other one-time items

(d)

 

 

958

 

 

 

 

1,358

 

Employee Retention Credits and Transfer Fee

(e)

 

 

 

 

 

 

2,235

 

Loss on lease termination and derecognition of right of use assets

(f)

 

 

 

 

 

 

205

 

Loss (gain) on fair value of warrants and purchase option derivative asset

(g)

 

 

983

 

 

 

 

(438

)

Impairment of property and equipment and right of use assets

(h)

 

 

2,438

 

 

 

 

335

 

Unrealized and realized loss on investments

(i)

 

 

 

 

 

 

699

 

Unrealized and realized foreign exchange loss (gain)

(j)

 

 

285

 

 

 

 

(31

)

Adjusted EBITDA from continuing operations

 

 

$

16,234

 

 

 

$

12,208

 

 

The table below reconciles net cash provided by (used in) operating activities from continuing operations to free cash flow for the three months ended March 31, 2024 and 2023:

 

 

 

 

For the Three Months Ended

 

 

Notes

 

March 31, 2024

 

 

 

March 31, 2023

 

Net cash provided by operating activities - continuing operations

 

 

$

13,251

 

 

 

$

10,454

 

Capital expenditures for property and equipment

 

 

 

(2,796

)

 

 

 

(2,497

)

 Free Cash Flow

 

 

$

10,455

 

 

 

$

7,957

 

 

a)
EBITDA from continuing operations is a non-GAAP measure and is calculated from net (loss) income.
b)
Represents non-cash share-based compensation expense.
c)
Represents the revaluation of the Company's contingent consideration liabilities.
d)
Includes one-time fees incurred in connection with the Company's acquisitions, such as expenses related to professional fees, consulting, legal, and accounting, that would otherwise not have incurred. These fees are not indicative of the Company's ongoing costs.
e)
Represents income recorded from ERC as a result of the CARES Act and its transfer fee.
f)
Represents the (gain) loss taken as a result on lease termination and derecognition of right of use assets.
g)
Represents the gain 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.
h)
Represents impairment charges taken on the Company's property and equipment.
i)
Represents unrealized and realized gain on fair value changes on strategic investments.
j)
Represents the remeasurement of USD denominated cash and other assets recorded in CAD functional currency.

 

The increase in Adjusted EBITDA from continuing operations for the three months ended March 31, 2024 compared to the three months ended March 31, 2023 was primarily due to the implementation of adult-use sales in Maryland and the Company's four Maryland acquisitions in 2023 while cost of sales for the Company remained constant.

 

Critical Accounting Estimates and Policies

32


 

 

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 March 31, 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 March 31, 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.

33


 

 

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, product liability, 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 March 31, 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 alleges breach of contract, quantum meruit/unjust enrichment, account stated and statutory conversion. AEY’s alleged damages are related to Pure X’s failure to pay for various cannabis products sold by AEY. This matter is still pending.

Item 1A. Risk Factors.

 

Investing in the Company's Common Shares involves a high degree of risk. In addition to the other 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.

 

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

 

None.

 

 

 

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

34


 

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

Form Unit Purchase Agreement, dated January 19, 2024, by and among RHMT, LLC, Deep Thought, LLC, Howard Street Partners, LLC, Anthony and Jamie Shira, Arion Luce, Michael Thomsen, Ryan Hudson and WDB Holding CA, Inc., a wholly-owned subsidiary of TerrAscend Corp.

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

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.

 

35


 

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: May 9, 2024

By:

/s/ Ziad Ghanem

Ziad Ghanem

President and Chief Executive Officer

(Principal Executive Officer)

 

 

 

 

 

 

 

 

 

 

 

 

 

Date: May 9, 2024

By:

/s/ Keith Stauffer

Keith Stauffer

Chief Financial Officer

(Principal Financial Officer)

 

 

36