TerrAscend Corp

Investing in the Common Shares involves risks. You should carefully consider the risks described in Item 1A – “Risk Factors” beginning on page 26 of this Annual Report before deciding to invest in the Common Shares. If any of these risks actually occur, the Company’s business, financial condition and results of operations could likely be materially adversely affected. In such case, the trading price of the Common Shares may decline, and you may lose all or part of your investment. Set forth below is a summary of some of the principal risks that the Company faces:

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There is a substantial risk of regulatory or political change with respect to cannabis, which could have a material adverse effect on the Company’s business.

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Compliance with regulations regarding cannabis is difficult, because the regulation of cannabis is uncertain and frequently changes. The Company’s failure to comply with applicable laws regarding cannabis may materially adversely affect the Company’s business.

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The Company’s business relies heavily on its ability to obtain and maintain required licenses, and failure to do so may adversely affect the Company’s business.

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As a cannabis business, the Company is subject to unfavorable tax treatment under U.S. federal income tax law.

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The Company may be at a higher risk of an IRS audit.

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If the Company is or becomes a "passive foreign investment company", its U.S. investors may suffer adverse tax consequences.

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If the Company (or any of its non-U.S. subsidiaries) is a "controlled foreign corporation", certain of its U.S. investors may suffer adverse tax consequences.

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The Company's ability to use its U.S. net operating loss carryforwards to offset its future U.S. taxable income may be subject to limitations.

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Tax and accounting requirements may change or be interpreted in ways that are unforeseen to the Company, and the Company may face difficulty or be unable to implement and/or comply with any such changes or interpretations.

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Cannabis remains illegal under U.S. federal law, and enforcement of cannabis laws could change. The Company may be subject to action by the U.S. federal government due to TerrAscend's involvement with cannabis in the United States, and such action could materially adversely affect the Company’s business.

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The Company’s business is subject to applicable anti-money laundering laws and regulations, and therefore, the Company has restricted access to capital markets, banking and other financial services, which may adversely affect the Company’s business.

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The Company operates in a highly-regulated sector and may not always succeed in complying fully with applicable regulatory requirements in all of the jurisdictions in which it operates, which could negatively affect the Company’s business.

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Regulatory restrictions on ownership outside of the control of the Company may have a material adverse impact on the Company's operations in certain markets.

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Failure to comply with privacy or medical practice laws and regulations may result in impacts to the Company's operations, the imposition of monetary fines or the commencement of legal proceedings.

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The Company’s products may be subject to product recalls or returns, which may result in expenses, the commencement of legal proceedings or regulatory action, loss of sales, diminished reputation, and the diversion of management attention.

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The Company faces an inherent risk of product liability claims and other consumer protection claims as a manufacturer, processor and producer of products that are meant to be ingested by people. Addressing such claims could cause the Company to incur substantial expenses and have a material adverse effect on the Company’s business.

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The Company may be subject to constraints on and differences in marketing its products under varying regulatory restrictions among the jurisdictions in which it operates.

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The Company may be subject to heightened scrutiny by Canadian regulatory authorities, which could negatively affect its business.

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The Company’s investors, directors, officers and employees who are not U.S. citizens may be denied entry into the United States, which may negatively affect the Company’s business.

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Because the Company’s contracts involve cannabis and cannabis-related activities, which are not legal under U.S. federal law, the Company may face difficulties in enforcing its contracts.

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The Company may encounter increasingly strict environmental health and safety regulations in connection with its operations, which may harm the Company’s business.

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The Company’s indebtedness may adversely affect the Company’s business, results of operations and financial condition. the Company’s failure to comply with applicable covenants could trigger events that may materially adversely affect the Company’s business, results of operations and financial condition.

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The Company may require substantial additional financing to operate its business and it may face difficulties acquiring additional financing on terms acceptable to the Company, or at all.

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Raising additional funds by issuing equity securities will cause dilution to existing stockholders. Raising additional funds through debt financings may involve restrictive covenants and raising additional funds through lending and licensing arrangements may restrict the Company's operations or require it to relinquish proprietary rights. The Company may not be able to secure additional debt or equity financing on favorable terms or at all.

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An adverse change in market conditions, including a sustained decline in the Company’s share price, negative changes to the Company’s position in the market, or lack of growth in demand for its products and services could be considered to be an impairment triggering event. Such changes could impact valuation assumptions relating to the recoverability of assets and have resulted in, and may in the future result in, impairment charges to the Company’s goodwill or long-lived asset balances, which would negatively impact the Company’s operating results and harm its business.

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The Company may be required to write down intangible assets, including goodwill, due to impairment, which could have a material adverse effect on the Company's results of operations or financial position.

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The Company faces intense competition and its business could be adversely affected by other businesses in a better competitive position. Consolidation in the cannabis industry and other changes to the competitive environment can impact the Company's margins and profitability.

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Consolidation in the cannabis industry and other changes to the competitive environment can impact the Company's margins and profitability.

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The cannabis industry and market are relatively new, and this industry and market may not continue to exist or grow as expected.

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The Company's profitability may be impacted by declining wholesale or retail cannabis prices in certain markets and shifting market conditions.

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The Company has historically had negative cash flows from operating activities, and continued losses could have a material negative effect on the Company's business and prospects and could impact the Company's ability to continue as a going concern.

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The Company may be affected by currency fluctuations.

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Demand for the Company’s products is difficult to forecast due to limited and unreliable market data.

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The Company’s inability to attract and retain key personnel, or its inability to maintain relations with its employees, unions and other employee representatives, could materially adversely affect its business.

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The Company may face unfavorable publicity or consumer perception of the safety, efficacy and quality of its cannabis products.

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The Company faces reputational risks, which may negatively impact its business.

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The Company is dependent on suppliers and key inputs for the cultivation, extraction and production of cannabis products.

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The Company’s business is subject to the risks inherent in agricultural operations.

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The Company may be adversely impacted by rising or volatile energy costs.

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The Company’s intellectual property may be difficult to protect, and failure to do so may negatively impact its business.

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The Company and its investors may have difficulty enforcing their legal rights.

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The Company (and the third parties upon which it relies) faces physical security risks, as well as risks related to its information technology systems, potential cyber-attacks, and security breaches.

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The Company is or may become subject to stringent and evolving U.S. and foreign laws, regulations, rules, contractual obligations, policies and other obligations related to data privacy and security. Its actual or perceived failure to comply with such obligations could lead to regulatory investigations or actions, litigation, fines and penalties, disruptions of its business operations, reputational harm, loss of revenue or profits, and other adverse business consequences.

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The Company faces exposure to fraudulent or illegal activities by employees, contractors and consultants, which may subject the Company to investigations or other actions.

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Directors and officers of the Company have faced, and may in the future face, conflicts of interest regarding the Company's business strategy.

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The Company’s internal controls over financial reporting may not be effective, and the Company’s independent auditors may not be able to certify as to their effectiveness, which could have a significant and adverse effect on the Company’s business.

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The Company’s business could be adversely affected by economic downturns, inflation, increases in interest rates, natural disasters, public health crises, political crises, geopolitical events, such as the crisis in Ukraine and the hostilities in the Middle East, or other macroeconomic conditions, which have in the past and may in the future negatively impact the Company’s business and financial performance.

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The Company may not have access to United States bankruptcy protections available to non-cannabis businesses.

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The development of the Company’s products is complex and requires significant investment. Failure to develop new technologies and products could adversely affect the Company’s business.

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The Company needs to attract and retain customers and patients in order to succeed, and failure to do so may have a material adverse effect on the Company’s business.

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The Company has a limited operating history, which makes it difficult to evaluate its prospects and predict future operating results.

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The Company may be subject to growth-related risks, which could negatively affect its business.

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The success of the Companyʼs business depends, in part, on its ability to successfully integrate recently acquired businesses and to retain key employees of acquired businesses, and the failure to do so may negatively affect the Companyʼs business.

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There can be no assurance that the Company’s current and future strategic alliances will have a beneficial impact on the Company’s business, financial condition and results of operations.

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The Company’s use of joint ventures may expose the Company to risks associated with jointly owned investments.

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The Company may not realize the benefits of its growth strategy, which could have an adverse effect on its business.

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The Company’s voting control is concentrated.

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The preferred shares in the capital of the Company ("Preferred Shares") have a liquidation preference over the Common Shares, which could limit the Company’s ability to make distributions to the holders of Common Shares in certain circumstances.

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An investor may face liquidity risks with an investment in the Common Shares.

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The price of the Common Shares may be volatile, and may be adversely affected by the price of cannabis.

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Additional issuances of the Company’s securities may result in dilution.

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Sales of substantial amounts of the Common Shares may have an adverse effect on the market price of the Common Shares.

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The Company’s management will continue to have broad discretion over the use of certain proceeds the Company receives in connection with public offerings, private placements, warrant exercises and loans, as applicable. The Company may not apply such proceeds in ways that increase the value of your investment.

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Risks related to potential disqualification of equity holders by regulatory authorities.

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The Company does not intend to pay dividends on the Common Shares for the foreseeable future and, consequently, your ability to achieve a return on your investment will depend on appreciation in the price of the Common Shares.

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“Penny stock” rules may make buying or selling the Company’s securities difficult which may make its securities less liquid and make it harder for investors to buy and sell such securities.

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“Cannabis related business” rules or policies may restrict certain financial institutions from holding the Company’s securities which may make its securities less liquid.

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The Company may not be able to obtain necessary permits and authorizations.

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Due to the uncertainty regarding the implementation of the CARES Act and other legislation related to COVID-19, and their application to businesses in the cannabis industry there is a risk that that a determination could be made that the Company is not eligible for the ERC distributions it has received, which may negatively impact the Company.

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The Company may be subject to litigation, which could divert the attention of management and cause the Company to expend significant resources.

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The Company faces risks and hazards that may not be covered by insurance.

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The Company has incurred and will continue to incur substantial costs as a result of operating as a public company in Canada and the United States, and its management will continue to devote substantial time to new compliance initiatives.

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The Company is currently an “emerging growth company” within the meaning of the Securities Act and to the extent that the Company has taken advantage of certain exemptions from disclosure requirements available to emerging growth companies, this could make its securities less attractive to investors and may make it more difficult to compare the Company’s performance with other public companies.

Part I