TerrAscend Corp.

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, including 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, 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. 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 United States ("United States" or "U.S.") federal law for any purpose, by way of the Controlled Substances Act of 1970.

The Company operates under one reportable segment, which is the cultivation, production and sale of cannabis products.

The Company owns a portfolio of operating businesses, including:

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TerrAscend New Jersey (“TerrAscend NJ”), a majority owned operation with three dispensaries, anda cultivation/processing facility;

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TerrAscend Maryland (“TerrAscend MD”), a wholly-owned operation with four dispensaries, anda cultivation/processing facility;

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TerrAscend Pennsylvania (“TerrAscend PA”), a wholly-owned operation withsix dispensaries, anda cultivation/processing facility;

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

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TerrAscend Ohio ("TerrAscend OH"), a wholly-owned operation withone dispensary; and

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TerrAscend Canada Inc. (“TerrAscend Canada”), 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 the OTCQX in the United States 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.

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 and nine months ended September 30, 2025 are not necessarily indicative of the operating results for the year ended December 31, 2025, or any other interim or future periods.

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, 2024 contained 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"). 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, 2024 in the Company's Annual Report.

(b) Discontinued operations and assets held for sale

During the three months ended June 30, 2025, the Company committed to a plan to exit the Michigan market. As of September 30, 2025, the Company remains engaged in an active program to sell the assets of the Michigan business which is expected to be substantially completed by the end of 2025.

The Company evaluated whether its plan to exit the Michigan market qualifies as discontinued operations in accordance with Accounting Standards Codification ("ASC") 205-20, Discontinued Operations. A disposal of a component or a group of components is reported in discontinued operations if the disposal represents a strategic shift that has or will have a major effect on the Company’s operations and financial results when the following occurs: (i) a component (or group of components) meets the criteria to be classified as held for sale; (ii) the component or group of components is disposed of by sale; or (iii) the component or group of components is disposed of other than by sale (for example, by abandonment or in a distribution to owners in a spin-off).

The Company determined that its plan to exit the Michigan market is a strategic shift that will have a major effect on the Company’s operations and financial results and met the criteria for classification as discontinued operations. As a result, the assets and liabilities of TerrAscend Michigan ("TerrAscend MI") are presented as held for sale in accordance with ASC 360-10, Impairment or Disposal of Long Lived Assets("ASC 360-10") in the unaudited interim condensed consolidated balance sheets ("Consolidated Balance Sheets"), the operating results are presented as discontinued operations in the unaudited interim condensed consolidated statements of operations ("Consolidated Statements of Operations and Comprehensive Loss"), and net cash used is presented as discontinued operations in the statements of cash flows. The Company's assets to be disposed of and for which there is a committed plan of disposal are classified as assets held for sale and at the lower of carrying value or fair value, less costs to sell.

Prior period amounts have been retrospectively adjusted to conform to the current period presentation. Certain prior period amounts, primarily related to discontinued operations, have been reclassified in the Consolidated Financial Statements and accompanying notes to conform to the current period presentation. Unless otherwise noted, amounts and disclosures throughout these notes to the Consolidated Financial Statements relate solely to continuing operations and exclude all discontinued operations. See Note 7 for additional information.

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 its Common Shares on the TSX, the Company undertook a strategic reorganization of its ownership structure (the “2023 Reorganization”) to align with TSX regulatory requirements regarding U.S. based operations, in accordance with the TSX's Staff Notice 2017-0009. Specifically, the 2023 Reorganization was designed to separate the Company’s Canadian retail operations from its U.S. cultivation and manufacturing businesses in a manner that supports compliance with applicable listing standards while preserving the Company’s ability to consolidate the financial results of its U.S. operations under U.S. GAAP. Following the completion of the 2023 Reorganization, the Company holds a 95% equity interest in its Canadian retail business and maintains a variable interest in its U.S. operations, which are consolidated through a VIE model. The Company continues to consolidate both operations under two distinct consolidation models in accordance with ASC 810, Consolidation("ASC 810").

Subsequent to the 2023 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.

The Company’s Canadian retail operations are conducted through a subsidiary that is 95% owned by TerrAscend Canada, a wholly owned subsidiary of the Issuer. These operations are consolidated under the VOE model based on the controlling financial interest obtained through Common Shares with substantive voting rights. The remaining Canadian subsidiaries are either wholly owned or majority owned, and are not currently engaged in active operations.

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 2023 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 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 ASC 810. Although the Company does not currently hold Class A Shares, the Non-Voting Shares are exchangeable at the Company’s discretion and represent substantially all of the economic interest in the VIE. The investor’s Class A Shares provide only a fixed annual return and do not participate in the residual economics of the VIE, in accordance with the Protection Agreement, which supports the Company’s conclusion that it is the primary beneficiary of TerrAscend.

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.

Accounts receivable, net

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

Acquisitions

Ratio Cannabis

On May 6, 2025 ("Ratio Acquisition Date"), the Company completed the acquisition of certain assets of Ratio Cannabis, LLC, a licensed cannabis operator, to expand its operational footprint to include Ohio. The total fair value consideration transferred in connection with the acquisition was $10,103. The fair value consideration was comprised of: (i) $5,261 in cash, (ii) a $3,564 secured promissory note bearing interest at a rate of 6.00% and maturing on May 6, 2027, and (iii)4,570,637 Common Shares (the Ratio Share Consideration") valued at $1,278 using the trading price of the Common Shares on the Ratio Acquisition Date less the applicable share restriction discount, as described below, of 30%.

The Ratio Share Consideration was subject to a statutory holding period restriction of six months, and therefore, a share restriction discount was considered in determining the fair value of the Ratio Share Consideration on the date of issuance, using an option pricing model.

The following table represents the fair value of assets acquired and liabilities assumed as of the Ratio Acquisition Date and allocation of the consideration to net assets acquired:

The acquired intangible assets include a license, which is treated as a definite lived intangible asset and amortized over a 15-year period.

The consideration paid reflected the synergies, economies of scale, and workforce. These benefits were not recognized separately from goodwill because they do not meet the recognition criteria for identifiable intangible assets. None of the goodwill recognized is expected to be deductible for income tax purposes.

The accounting for this acquisition has been provisionally determined at June 30, 2025. The fair value of net assets acquired, specifically with respect to intangible assets and goodwill have been determined provisionally and are subject to adjustment. Upon completion of a comprehensive valuation and finalization of the purchase price allocation, the amounts above may be adjusted retrospectively to the acquisition date in future reporting periods.

Costs related to this transaction were $122, including legal, accounting, due diligence, and other transaction-related expenses and were recorded during the nine months ended September 30, 2025.

On a standalone basis, had the Company acquired the business on January 1, 2025, sales estimates would have been $5,830 for the nine months ended September 30, 2025 and net income estimates would have been $1,222. Actual sales and net income since the Ratio Acquisition Date are $3,112 and $352, respectively.

Contingent consideration

The balances of the Company's contingent considerations are as follows:

On June 2, 2025, the Company issued an additional 7,577,349 Common Shares, and on September 19, 2025, the Company issued an additional 724,061 Common Shares, each related to the contingent liability from the previous acquisitions of State Flower and The Apothecarium businesses.

Inventory

The Company’s inventory of dry cannabis and cannabis derived products includes both purchased and internally produced inventory and is comprised of the following items:

Discontinued operations

During the three months ended June 30, 2025, the Company committed to a plan to exit the Michigan market. The Company received approval from the Board, together with TerrAscend Corp.’s consolidated entities. As of September 30, 2025, the Company remains engaged in an active program to sell the assets of TerrAscend MI, which is expected to be substantially completed in the second half of 2025. The Company determined that its decision to exit the Michigan market is considered a strategic shift that will have a major effect on the Company’s operations and financial results and met the criteria for classification as discontinued operations.

The following table summarizes the major classes of assets and liabilities of TerrAscend MI as of September 30, 2025 and December 31, 2024:

The following table presents the results of operations of TerrAscend MI for the three and nine months ended September 30, 2025 and 2024:

The total amount of costs expected to be incurred in connection with the Michigan exit is between $1,050 to $1,200 incash expenditures for employee transition, notice period and severance payments, and employee benefits. During the three months ended

September 30, 2025, the Company incurred $304 of restructuring costs. Total cumulative restructuring costs are$304 as of September 30, 2025.

ASC 360-10 requires a held-for-sale disposal group to be measured at the lower of its carrying amount and fair value less cost to sell. The Company adjusted the carrying amount of the fixed assets in the disposal group within the scope of ASC 360-10 relating to certain buildings, equipment, and leasehold improvements. During the three and nine months ended September 30, 2025, the Company recognized impairment loss of $6,312 and $41,271, respectively. The fair value of the disposal groups was primarily determined based on purchase offers from market participants. An estimated cost to sell of 4% was used in the valuations. The impairments were primarily attributable to the Company’s expedited sales strategy, constructions in process that will no longer be completed, and the continued increase of competition in the Michigan market.

During the three months ended September 30, 2025, the Company recognized an inventory impairment charge of $3,320, recorded in cost of goods sold, to reduce the carrying value of certain inventory items to their net realizable value. The impairment charge was primarily related to inventory designated for sale below cost.

Property and equipment

Property and equipment consisted of:

Assets in process primarily represent construction in progress related to both cultivation and dispensary facilities not yet completed, or otherwise not placed in service.

Depreciation expense was $2,202 and $6,840 for thethree and nine months ended September 30, 2025, respectively, ($1,817 and $5,654 included in cost of sales) and $2,225 and $6,651 for thethree and nine months ended September 30, 2024, respectively, ($1,818 and $5,393 included in cost of sales).

Intangible assets and goodwill

Intangible assets consisted of the following:

Amortization expense was $1,731 and $4,816 for the three and nine months ended September 30, 2025, respectively, ($660 and $1,979 included in cost of sales) and $1,555 and $4,700 for the three and nine months ended September 30, 2024, respectively, ($724 and $2,172 included in cost of sales).

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

As of September 30, 2025, the weighted average amortization period remaining on intangible assets was 24.7 years.

The following table summarizes the activity in the Company’s goodwill balance:

Loans payable

The Company's loans payable consisted of the following:

Total interest paid on all loan payables was $7,361 and $20,627 for the three and nine months ended September 30, 2025, respectively, and $5,332 and $17,931 for the three and nine months ended September 30, 2024, respectively. The Company had accrued interest on loans payable of $2,444 and $2,537 as of September 30, 2025 and December 31, 2024, respectively, included in accounts payable and accrued liabilities on the Company's Consolidated Balance Sheets.

FocusGrowth Term Loan

On August 1, 2024, the Issuer 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 (the "Agent") entered into a Loan Agreement (the “FG Loan”) for afour-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.

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 Issuer 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 FG Loan (the "Exit Fee") will be due upon either the prepayment, in part or in full, of the FG Loan or the FG Loan Maturity Date.

On July 8, 2025, the Incremental Amendment Borrowers (as defined below), became parties to the FG Loan as borrowers pursuant to a joinder agreement, by and among the Incremental Amendment Borrowers and the Agent, (the "FG Loan Amendment") which provides for a $79,000 upsize to the existing FG Loan. Net proceeds of the FG Loan were received in an amount equal to 95% of the $79,000. Additionally, the FG Loan Amendment provides for an uncommitted term loan facility of up to $35,000 (the"Uncommitted

Term Loan Facility"). The terms of the FG Loan Amendment and the Uncommitted Term Loan Facility are consistent with the initial FG Loan.

The Company drew down in full the $79,000 available under the FG Loan Amendment on July 8, 2025, $64,489 of which was used to retire the Pelorus Term Loan, and certain other indebtedness of the Company, in addition to being used for future growth initiatives. This amendment was not considered extinguishment of debt under ASC 470, Debt.

On July 15, 2025, the Company drew $3,105 of the Uncommitted Term Loan Facility. Net proceeds of the FG Loan were received in an amount equal to 95% of the $3,105.

As of September 30, 2025, there was an outstanding principal amount of $222,105 under the FG Loan.

Pelorus Term Loan

On October 11, 2022, certain 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 was 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 was set to mature on October 11, 2027.

On July 8, 2025, as described above, the Company entered into the FG Loan Amendment, of which, a portion of the proceeds was used to retire the Pelorus Term Loan and pay the full outstanding principal amount of $45,478. Due to the early retirement of the Pelorus Term Loan, the Company paid an exit fee of $233 and recognized a loss on extinguishment of debt of$1,192 on the Consolidated Statements of Operations and Comprehensive Loss.

Maryland Acquisition Loans

In connection with the acquisition of Derby 1, LLC on June 28, 2023 ("Peninsula"), Hempaid, LLC on June 30, 2023 ("Blue Ridge"), and Herbiculture Inc. on July 10, 2023 ("Herbiculture"), (collectively, the "Maryland Acquisitions"), the Company entered into promissory notes with an aggregate principal amount of $20,625 (the “Maryland Acquisition Loans”).

On July 8, 2025, as described above, the Company entered into the FG Loan Amendment, of which, a portion of the proceeds was used to retire a series of Maryland promissory notesand pay an outstanding principal amount of $13,077. Due to the early retirement of the certain Maryland promissory notes, the Company recognized a loss on extinguishment of debt of$240 on the Consolidated Statements of Operations and Comprehensive Loss.

As of September 30, 2025, there was an outstanding principal amount of$2,931 under the Maryland Acquisition Loans associated with Blue Ridge, which bears interest at 7.0% with a maturity date of June 30, 2027.

Ratio Acquisition Loans

FG Bridge Loan

On May 6, 2025, the Company and Ohio Dispensing 1, LLC, a consolidated entity of the Company, completed the acquisition of certain assets of Ratio Cannabis LLC, a dispensary in Ohio (the "Ratio Acquisition"). In connection with the Ratio Acquisition, Ohio Dispensing 1, LLC, and FG Agency Lending LLC, as the Administrative Agent, entered into a Loan Agreement for a $5,208 term loan (the “FG Bridge Loan”).

On July 8, 2025, as described above, the Company entered into the FG Loan Amendment, of which, a portion of the proceeds was used to retire the FG Bridge Loan and pay the full outstanding principal amount of $5,208.

Ratio Promissory Note

Additionally, as a part of the Ratio Acquisition, the Company entered into a promissory note for $3,980 bearing 6% interest with atwo-year maturity (the "Ratio Promissory Note").

As of September 30, 2025, there was an outstanding principal amount of $3,980 under the Ratio Promissory Note.

Other Loans

Class A Shares of TerrAscend Growth

In connection with the 2023 Reorganization (see Note 3), 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 repurchase right. In addition, the Investor holds a put right that is exercisable at any time after four months’ advanced written notice following June 28, 2028 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.

Maturities of loans payable

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

The Company is subject to financial covenants as a result of its loans payable with various lenders. The Company was in compliance with its debt covenants as of September 30, 2025. 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.

Leases

The majority of the Company’s leases are operating leases used primarily for corporate offices and retail. The operating lease periods generally range from 1 to 24 years. The Company hadno finance leases at September 30, 2025 and December 31, 2024.

Amounts recognized in the Consolidated Balance Sheets were as follows:

The Company recognized operating lease expense of $1,307 and $3,785 for the three and nine months ended September 30, 2025, respectively, and $1,295 and $4,002 for the three and nine months ended September 30, 2024, respectively.

Other information related to operating leases at September 30, 2025 and December 31, 2024 consisted of the following:

Supplemental cash flow information related to leases are as follows:

Undiscounted lease obligations are as follows:

Convertible Debt

The Company's convertible debt consisted of the following:

The Company had accrued interest on convertible debt of $1,866 and $1,200 as of September 30, 2025 and December 31, 2024, respectively, included in accounts payable and accrued liabilities on the Consolidated Balance Sheets.

Shareholders' equity

Share Repurchase Authorization

On August 20, 2025, the Board approved a programto repurchase up to $10,000 of Common Shares (the "Share Repurchase Program"), which replaced the Company's share repurchase program previously in place (the "Original Program"). The Share Repurchase Program authorizes the Company to repurchase up to 10,000,000 Common Shares of the Company at any time, or from time to time, from August 22, 2025 until August 21, 2026. The Share Repurchase Program authorizes the Company to repurchase up to 60,255 Common Shares daily, which represents 25% of the Company’s average daily trading volume on the TSX of 241,023 Common Shares. Any repurchases under the program may be made by means of open market transactions, negotiated block transactions, or otherwise, including pursuant to a repurchase plan administered in accordance with Rules 10b5-1 and 10b-18 under the Securities Exchange Act of 1934, as amended. The size and timing of any repurchases will depend on price, market and business conditions, and other factors.

As of September 30, 2025, the Company had a total of 10,000,000 Common Shares remaining that can be authorized for repurchase. The following is a summary of the Common Shares that were repurchased for thethree and nine months ended September 30, 2025 and 2024 under the Original Program:

(1) The excise tax accrued in connection with the share repurchases was recorded as an adjustment to the cost basis of repurchased shares in treasury stock and within accrued expenses on the Consolidated Balance Sheets as of September 30, 2025 and 2024, as applicable.

Warrants

The following is a summary of the outstanding warrants for Common Shares:

The following is a summary of the outstanding warrant liabilities that are exchangeable into Common Shares:

Share-based compensation plans

Share-based payments expense

Total share-based payments expense was as follows:

Stock Options

The following table summarizes the stock option activity for the nine months ended September 30, 2025:

The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value (the difference between Company’s closing stock price on September 30, 2025 and December 31, 2024, respectively, and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had they exercised their in-the-money options on September 30, 2025 and December 31, 2024, respectively.

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

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 nine months ended September 30, 2025 and 2024 was $3,925 and $5,647, respectively. As of September 30, 2025, total unrecognized compensation cost related to unvested options was $3,035, which is expected to be recognized over a weighted-average period of 1.96 years.

Repricing of Stock Options

On June 24, 2025 (the "Option Modification Date"), the Board approved a stock option repricing for employees and insiders of the Company (the "Option Repricing") pursuant to which the exercise price of certain outstanding options to purchase Common Shares under the Company's stock option plan will be reduced to $0.26 per share, which represented the five-day volume weighted average price of the Common Shares immediately preceding the Option Modification Date, subject to such employee or insider continuing to perform their duties on behalf of the Corporation for a period of at least twelve months following the Option Modification Date ("Service Period Requirement"). The Option Repricing with respect to insiders of the Company was approved by the Company's shareholders at its Annual General Meeting held on June 24, 2025. As a result of the Option Repricing,8,279,003 shares of vested and unvested stock options outstanding were modified, in accordance with ASC 718, Stock-Based Compensation, as of the Option Modification Date resulting in an incremental expense to the Company of $868. The vested portion of the repriced options are recognized on a straight-lined basis over the Service Period Requirement and the unvested portion will be recognized over the remaining vesting periods of each respective award.

Restricted Share Units

The following table summarizes the activities for the RSUs for the nine months ended September 30, 2025:

As of September 30, 2025, total unrecognized compensation cost related to unvested RSUs was $3,006, which is expected to be recognized over a weighted-average period of 2.57 years.

Non-controlling interest

Non-controlling interest consists mainly of a 12.5% minority ownership interest in TerrAscend's New Jersey operations.

The following table summarizes the non-controlling interest activity for the nine months ended September 30, 2025:

Related parties

Parties are related if one party has the ability, directly or indirectly, to control or exercise significant influence over the other party in making financing and operating decisions. As of September 30, 2025, certain funds controlled by Jason Wild, a related party of the Company, held $7,100 of the total principal balance of the FG Loan (see Note 10), as members of the loan syndicate.

Income taxes

The Company's effective tax rate was 979% and 435% for the three and nine months ended September 30, 2025, respectively, and (518)% and (2,376)% for the three and nine months ended September 30, 2024, respectively.

The Company has computed its provision for income taxes based on the actual effective tax rate for the quarter as the Company believes this is the best estimate for the annual effective tax rate. The Company is subject to income taxes in the United States and Canada.

Significant judgment is required in evaluating the Company’s uncertain tax positions and determining the provision for income taxes. The Company recognizes benefits from uncertain tax positions based on the cumulative probability method whereby the largest benefit with a cumulative probability of greater than 50% is recorded. An uncertain tax position is not recognized if it has less than a 50% likelihood of being sustained.

A reconciliation of the beginning and ending amount of unrecognized tax benefits for the period presented:

A reconciliation of the beginning and ending amount of uncertain tax liabilities, inclusive of accruals for related penalties and interest, for the period presented:

(1) Related to uncertain tax liabilities, the Company accrued $12,046 in interest and $8,639 in penalties as of September 30, 2025, and $8,006 in interest and $4,803 in penalties as of December 31, 2024.

The increase in uncertain tax positions is primarily due to legal interpretations that challenge the application of Section 280E of the Code to the Company (“280E Tax Position”). The Company believes it is reasonably possible that the unrecognized tax benefits will increase over the next twelve months due to its 280E Tax Position.

During 2024, certain of the Company’s amended federal income tax returns were selected for routine examinations by the Internal Revenue Service. As of September 30, 2025, there have been no material developments related to these examinations. The Company does not currently anticipate completion of the audits within the next twelve months.

General and administrative expenses

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

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 and nine months ended September 30, 2025 and 2024, the Company didnot have any single customer that accounted for 10% or more of the Company’s revenue.

The Company’s finance and other expenses included the following:

Segment information

Operating Segment

The Company has determined that it operates asone reportable segment focused on the production and sale of cannabis products. While the Company manages its operations through state-level operating segments, these segments have been aggregated into one reportable segment due to similar long-term economic characteristics and other required criteria of similarity outlined in ASC 280, Segment Reporting, and in accordance with ASU 2023-07. The Chief Operating Decision Maker (“CODM”) was determined to be the Chief Executive Officer of the Company. The CODM regularly evaluates the performance of the single reportable segment using gross profit margin as its closest measure to GAAP. Gross margin is a measure that is calculated as total revenue minus cost of goods sold, divided by total revenue. The CODM monitors this metric to assess the efficiency of the Company’s production and distribution processes, as well as the effectiveness of pricing strategies.

Assets

The measure of reportable segment assets is consistent with the presentation of total consolidated assets as reported on the Consolidated Balance Sheets.

Geography

The Company has subsidiaries located in Canada and the United States. For the three and nine months ended September 30, 2025, net revenue was primarily generated from sales in the United States. As a result of the 2023 Reorganization (see Note 3), the Company consolidated its retail location in Canada and generated net revenue of $247 and $644 for the three and nine months ended September 30, 2025, respectively, and $279 and $817 for the three and nine months ended September 30, 2024, respectively.

The Company had non-current assets by geography of:

Financial instruments and risk management

Assets and liabilities measured at fair value

Financial instruments recorded at fair value are estimated by applying a fair value hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement. The hierarchy is summarized as follows:

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Level 1 - quoted prices (unadjusted) in active markets for identical assets and liabilities

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Level 2 - inputs other than quoted prices that are observable for the asset or liability, either directly (prices) or indirectly (derived from prices) from observable market data

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Level 3 - inputs for assets and liabilities not based upon observable market data

The following table represents the fair value amounts of financial assets and financial liabilities:

There wereno transfers between the levels of fair value hierarchy during thethree and nine months ended September 30, 2025.

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

Includes cash, cash equivalents, and restricted cash represent financial instruments for which the carrying amount approximates fair value due to their short-term maturities.

Level 2

Includes detachable warrants, bifurcated conversion options, and a contingent consideration, which are valued using the Black-Scholes Model with observable market inputs such as stock price, historical volatility, risk-free rate, and expected term. These inputs are derived from market data and do not require significant judgment.

Detachable Warrants

The detachable warrants expired during the second quarter of 2025.

Bifurcated conversion options

The conversion options have been measured at fair value as of September 30, 2025. Key inputs and assumptions used in the Black-Scholes Model were as follows:

The following table summarizes the changes in the detachable warrants and bifurcated conversion options:

Contingent Consideration Payable

The contingent consideration has been measured at fair value as of September 30, 2025. Key inputs and assumptions used in the Black-Scholes Model were as follows:

Commitments and contingencies

Commitments

On May 5, 2025, the Company signed an agreement to acquire equity interests in, and fully operate, Union Chill Cannabis Company LLC, a dispensary in New Jersey for total consideration of $13,000, which will be comprised of $4,000 in cash and a convertible promissory note for $9,000. The transaction is subject to customary closing conditions and regulatory approvals.

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 Consolidated Balance Sheets or Consolidated Statements of Operations and Comprehensive Loss. At September 30, 2025, 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.

Subsequent events

The Company received additional indications of interest and preliminary offers from potential buyers for properties within its Michigan disposal group. These offers, which were below the previously estimated fair value less cost to sell, provided additional evidence about conditions that existed as of the balance sheet date. Accordingly, management concluded this represented a Type I subsequent event under ASC 855, Subsequent Events, and updated the estimated fair value less cost to sell of the Michigan disposal group as of September 30, 2025. The Company recognized an incremental impairment loss of approximately $6,312 within discontinued operations for the three months ended September 30, 2025.

In addition, one of the owned properties included in the Michigan disposal group was subsequently leased to a third party under a lease agreement effective November 1, 2025.