November 6, 2024 - 10-Q: Quarterly report pursuant to Section 13 or 15(d)

ROC

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)


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

For the quarterly period ended September 30, 2024


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

For the transition period from to

Commission File Number: 021-340690

TERRASCEND CORP.

(Exact Name of Registrant as Specified in its Charter)


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

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

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

    Title of each class

    Trading
Symbol(s)

    Name of each exchange on which registered

    None

    N/A

    N/A

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

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

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


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

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

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

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

Table of Contents


		Page

PART I.	FINANCIAL INFORMATION	1

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

PART II.	OTHER INFORMATION	43

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

Cautionary Note Regarding Forward-Looking Statements

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

•

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

•

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

•

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

•

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

•

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

•

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

•

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

•

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

•

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

•

expectations with respect to future production costs;

•

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

•

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

•

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

•

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

•

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

•

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

•

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

•

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

•

the competitive advantages and business strategies of the Company;

•

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

•

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

•

the Company's future product offerings;

•

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

•

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

•

the Company's ability to protect its intellectual property;

•

the outcome of litigation to which the Company is party;

•

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

•

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

•

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

•

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

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

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

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

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

TerrAscend Corp.

Unaudited Interim Condensed Consolidated Balance Sheets

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


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

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

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

TerrAscend Corp.

Unaudited Interim Condensed Consolidated Statements of Operations and Comprehensive Loss

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


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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

TerrAscend Corp.

Unaudited Interim Condensed Consolidated Statements of Changes in Shareholders’ Equity

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


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

Form: 10-Q

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