TerrAscend Corp.

Previous wording

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, 2024, which was filed with the Securities and Exchange Commission, (the “SEC”), on March 6, 2025, (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.

Current wording

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 ("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, 2024, which was filed with the Securities and Exchange Commission, (the “SEC”), on March 6, 2025, (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.

Previous wording

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, 2025 and 2024 and the accompanying notes for each respective period.

Current wording

This Management’s Discussion and Analysis (“MD&A”) of the financial condition and results of operations of the Company is for the three and six months ended June 30, 2025 and 2024 and the accompanying notes for each respective period.

Previous wording

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 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.

Current wording

The Company is a leading North American cannabis company. The Company has vertically integrated licensed operations in Pennsylvania, New Jersey, Michigan, Maryland and California and a retail operation in Ohio. 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 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.

Previous wording

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

Current wording

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

Previous wording

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

Current wording

TerrAscend Michigan (“TerrAscend MI”), a wholly-owned operation with twenty dispensaries, one cultivation facility, one processing facility, and two cultivation/processing facilities which were classified as discontinued operations during the six months ended June 30, 2025.

Previous wording

On May 6, 2025, the Company and a consolidated entity completed the acquisition of certain assets of Ratio Cannabis LLC ("Ratio Cannabis"), a dispensary in Ohio. Under the terms of the purchase agreements entered into in connection with the acquisition, each dated as of March 14, 2025, the Company and a consolidated entity acquired certain assets of Ratio Cannabis for total consideration of $10,300, which was comprised of $5,000 in cash, $1,320 in Common Shares and a seller’s note for $3,980 bearing 6% interest with a two-year maturity. The number of Common Shares issued as part of the consideration was calculated based on the twenty (20)-day volume-weighted average price of the Common Shares on the OTCQX for the period ending on May 5, 2025, resulting in the issuance of 4,570,637 Common Shares by the Company on May 6, 2025.

Current wording

On May 6, 2025, the Company and a consolidated entity completed the acquisition of certain assets of Ratio Cannabis LLC, a dispensary in Ohio. Under the terms of the purchase agreements entered into in connection with the acquisition, each dated as of March 14, 2025, the Company and a consolidated entity acquired certain assets of Ratio Cannabis for total consideration of $10,300, which was comprised of $5,000 in cash, $1,320 in Common Shares and a seller’s note for $3,980 bearing 6% interest with a two-year maturity. The number of Common Shares issued as part of the consideration was calculated based on the twenty (20)-day volume-weighted average price of the Common Shares on the OTCQX for the period ending on May 5, 2025, resulting in the issuance of 4,570,637 Common Shares by the Company on May 6, 2025.

Previous wording

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

Current wording

(Gain) loss on fair value of derivative liabilities

Previous wording

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

Current wording

The Company issued convertible debt that contains embedded derivative features, which were bifurcated and accounted for separately as derivative instruments. These derivative liabilities are remeasured to fair value at the end of each reporting period using the Black-Scholes Model in which a gain or loss is recognized as a result of the revaluation.

Previous wording

The decrease of $1,628 in general and administrative expense for the three months ended March 31, 2025 as compared to the three months ended March 31, 2024, is primarily due to the Company's continued operating expense reduction initiative, which drove lower professional fees and reduced sales and marketing costs.

Current wording

The decrease of $1,652 in general and administrative expense for the three months ended June 30, 2025 as compared to the three months ended June 30, 2024, is primarily driven by a reduction in professional fees and stock-based compensation, slightly offset by an increase in provision for expected credit losses.

Previous wording

The decrease of $7,708, in cost of sales for the three months ended March 31, 2025 as compared to the three months ended March 31, 2024 was mainly due to a decrease in sales in Michigan and New Jersey, partially offset by higher sales in Maryland. Cost of sales as a percentage of revenue decreased during the period, primarily due to lower unit costs in New Jersey and greater cost absorption on higher sales volume in Maryland.

Current wording

The decrease of $7,549, in cost of sales for the six months ended June 30, 2025 as compared to the six months ended June 30, 2024 was mainly due to a decrease in sales volume. Cost of sales as a percentage of revenue decreased by 4% due to reduced unit costs and improved cost absorption on higher year-to-date sales.

Previous wording

The change in provision for income taxes from $9,671 for the three months ended March 31, 2024 as compared to a provision for income taxes of $11,447 for the three months ended March 31, 2025 was primarily driven by accrued interest and penalties.

Current wording

The change in provision for income taxes from $16,779 for the six months ended June 30, 2024 as compared to a provision for income taxes of $20,105 for the six months ended June 30, 2025 was primarily driven by accrued interest and penalties.

Previous wording

Since its inception, the Company's primary sources of capital have been through the issuance of equity securities or debt facilities, and the Company has received aggregate net proceeds from such transactions totaling $782,388 as of March 31, 2025.

Current wording

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 $787,388 as of June 30, 2025.

Previous wording

The Company had $203,564 in principal amounts of loans payable at March 31, 2025. Of this amount, $7,536 are due within the next twelve months.

Current wording

The Company had $212,059 in principal amounts of loans payable at June 30, 2025. Of this amount, $703 are due within the next twelve months.

Previous wording

The Company entered into leases for certain premises and offices for which it owes monthly lease payments. The Company had $85,519 in lease obligations. Of this amount, $9,266 are due in the next twelve months.

Current wording

The Company entered into leases for certain premises and offices for which it owes monthly lease payments. The Company had $65,311 in lease obligations. Of this amount, $4,687 are due in the next twelve months.

Previous wording

The Company's undiscounted contingent consideration payable was $3,288 at March 31, 2025, which is due in the next twelve months. The contingent consideration payable relates to the Company's acquisition of the remaining 50.1% equity in both State Flower and three Apothecarium dispensaries in California. The contingent consideration is based upon the price protection of Common Shares issued under the terms of the applicable acquisition agreement. The contingent consideration is measured at fair value using the Black-Scholes Model and revalued at the end of each reporting period.

Current wording

The Company's undiscounted contingent consideration payable was $1,672 at June 30, 2025, which is due in the next twelve months. The contingent consideration payable relates to the Company's acquisition of the remaining 50.1% equity in both State Flower and three Apothecarium dispensaries in California. The contingent consideration is based upon the price protection of Common Shares issued under the terms of the applicable acquisition agreement. The contingent consideration is measured at fair value using the Black-Scholes Model and revalued at the end of each reporting period.

Previous wording

At March 31, 2025, the Company had accounts payable and accrued liabilities of $44,208 and corporate income taxes payable of $11,543.

Current wording

At June 30, 2025, the Company had accounts payable and accrued liabilities of $37,008 and corporate income taxes payable of $12,694.

Previous wording

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

Current wording

On August 1, 2024, the Company and TerrAscend USA, Inc., as guarantors, and each of WDB Holding CA, Inc., WDB Holding PA, Inc., Moose Curve Holdings, LLC, Hempaid, LLC and, pursuant to a joinder agreement dated September 30, 2024, WDB Holding MI, Inc., including certain of each of their respective subsidiaries, as borrowers, and FG Agency Lending LLC, as the Administrative Agent entered into a Loan Agreement for a four-year, $140,000 senior-secured term loan Net proceeds of the FG Loan were received in an amount equal to 95% of the $140,000.

Previous wording

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

Current wording

The FG Loan bears interest at 12.75% per annum and matures on August 1, 2028. The FG Loan is guaranteed by the Company and TerrAscend USA, Inc. and is secured by substantially all of the assets of the Borrowers. Depending on the timing of repayment, an exit fee of between 2.0% and 4.0% of the outstanding principal balance of the FG Loan will be due upon either the date of prepayment or the FG Loan Maturity Date.

Previous wording

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 is based on a variable rate tied to one month 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 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 the Company and are secured by all of the assets of TerrAscend's New Jersey businesses and certain assets of TerrAscend's Maryland business, including certain real estate in Maryland. The Pelorus Term Loan is not secured by any of the MD dispensaries.

Current wording

On October 11, 2022, subsidiaries of TerrAscend, among others, entered into a loan agreement with Pelorus Fund REIT, LLC for a single-draw senior secured term loan in an aggregate principal amount of $45,478. The Pelorus Term Loan is based on a variable rate tied to one month 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

Previous wording

In connection with the Peninsula acquisition the acquisition of Blue Ridge and the acquisition of Herbiculture (collectively, the "Maryland Acquisitions"), the Company entered into a series of promissory notes with an aggregate principal amount of $20,625 that bear interest at rates ranging from 7.0% to 10.75% with maturity dates ranging from June 28, 2025 to June 30, 2027.

Current wording

In connection with the Maryland Acquisitions, the Company entered into a series of promissory notes with an aggregate principal amount of $20,625 that bear interest at rates ranging from 7.0% to 10.75% with maturity dates ranging from June 28, 2025 to June 30, 2027.

Previous wording

As of March 31, 2025, there was an outstanding principal amount of $17,051 under the promissory notes related to the Maryland acquisitions.

Current wording

As of June 30, 2025, there was an outstanding principal amount of $16,373 under the promissory notes related to the Maryland acquisitions.

Previous wording

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, 2025, there was an outstanding principal amount of $1,000.

Current wording

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. As a result, TerrAscend issued Class A Shares to the Investor pursuant to the terms of 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 June 30, 2025, there was an outstanding principal amount of $1,000.

Previous wording

During the first quarter of 2025, the Company repurchased 507,500 common shares under the share repurchase program for total consideration of approximately $231. As of March 31, 2025, the Company had a total of 9,255,600 Common Shares remaining that can be authorized for repurchase.

Current wording

During the second quarter of 2025, the Company repurchased 535,000 common shares under the share repurchase program for total consideration of approximately $157. As of June 30, 2025, the Company had a total of 8,720,600 Common Shares remaining that can be authorized for repurchase.

Previous wording

The decrease of $5,247 in net cash provided by operating activities for the three months ended March 31, 2025 as compared to three months ended March 31, 2024 is primarily driven by a reduction in accounts payables and an increase in income taxes paid.

Current wording

The decrease of $15,318 in net cash provided by operating activities for the six months ended June 30, 2025 as compared to six months ended June 30, 2024 is primarily driven by an increase in working capital including a reduction of accounts payable and an increase in income taxes paid.

Previous wording

The decrease of $139 in net cash used in investing activities for the three months ended March 31, 2025 as compared to three months ended March 31, 2024 is primarily driven by a reduction in capital expenditures.

Current wording

The increase of $6,275 in net cash used in investing activities for the six months ended June 30, 2025 as compared to six months ended June 30, 2024 is primarily driven by the cash consideration paid of $5,261 for the Ratio Cannabis acquisition in the second quarter of 2025.

Previous wording

Cash flows used in financing activities

Current wording

Cash flows provided by (used in) financing activities

Previous wording

The decrease of $7,264 in net cash used in financing activities for the three months ended March 31, 2025 as compared to three months ended March 31, 2024 is primarily driven by fewer loan principal payments due during the three months ended March 31, 2025 as a result of debt refinancing and paydowns completed in 2024.

Current wording

The change of $16,825 in net cash provided by (used in) financing activities for the six months ended June 30, 2025 as compared to the six months ended June 30, 2024 is primarily driven by $5,000 of loan proceeds, net of transaction costs, related to the Ratio Cannabis acquisition. The change also reflects fewer loan principal payments due during the six months ended June 30, 2025 as a result of debt refinancing and paydowns completed in 2024.

Previous wording

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

Current wording

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

Previous wording

The Company believes Adjusted EBITDA is a useful performance measure to assess the performance of the Company as it provides more meaningful ongoing operating results by excluding the effects of expenses that are not reflective of the Company’s underlying business performance and other one-time or non-recurring expenses. The table below reconciles net loss to EBITDA and Adjusted EBITDA for the three months ended March 31, 2025 and 2024:

Current wording

The Company believes Adjusted EBITDA from continuing operations is a useful performance measure to assess the performance of the Company as it provides more meaningful ongoing operating results by excluding the effects of expenses that are not reflective of the Company’s underlying business performance and other one-time or non-recurring expenses. The table below reconciles net loss to EBITDA from continuing operations and Adjusted EBITDA from continuing operations for the three and six months ended June 30, 2025 and 2024:

Previous wording

EBITDA is a non-GAAP measure and is calculated from net loss.

Current wording

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

Previous wording

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

Current wording

Represents impairment charges taken on the Company's property and equipment and right of use assets.

Previous wording

Adjusted EBITDA was relatively flat for the three months ended March 31, 2025 as compared to three months ended March 31, 2024.

Current wording

Adjusted EBITDA from continuing operations was relatively flat for the three and six months ended June 30, 2025 as compared to three and six months ended June 30, 2024.

Previous wording

The table below reconciles net cash provided by operating activities to free cash flow for the three months ended March 31, 2025 and 2024:

Current wording

The table below reconciles net cash provided by operating activities from continuing operations to free cash flow for the six months ended June 30, 2025 and 2024: