TerrAscend Corp.

Nature ofoperations

TerrAscend Corp. (the "Issuer") was incorporated under the Business Corporations Act (Ontario) on March 7, 2017. The Issuer, through its subsidiaries, TerrAscend Growth Corp. (“TerrAscend”) and its subsidiaries (collectively, the "Company”), is a leading North American cannabis company. TerrAscend has vertically-integrated licensed operations in Pennsylvania, New Jersey, Maryland and California. In addition, the Company has retail operations in Ohio and Ontario, Canada with a majority-owned dispensary in Toronto, Ontario, Canada. In the United States, TerrAscend’s cultivation and manufacturing provide product selection to both the medical and legal adult-use markets. Notwithstanding the fact that various states in the United States have implemented medical marijuana laws or have otherwise legalized the use of cannabis, the use of cannabis remains illegal under U.S. federal law for any purpose, by way of the Controlled Substances Act of 1970.

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TerrAscend New Jersey (“TerrAscend NJ”), a majority-owned operation with four 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 cannabis retailer in New Philadelphia, Ohio withone wholly-owned 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 on October 22, 2018 under the ticker symbol "TRSSF", which was subsequently changed to "TSNDF", effective July 6, 2023. The Company’s registered office is located at 77 City Centre Drive, Suite 501, Mississauga, Ontario, L5B 1M5, Canada.

2. Summary of significant accounting policies

(a) Basis of presentation and measurement and going concern

These consolidated financial statements as of December 31, 2025 and December 31, 2024 and for the years ended December 31, 2025, December 31, 2024, and December 31, 2023 (the “Consolidated Financial Statements”) of the Company were prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”).

The accompanying Consolidated Financial Statements have been prepared on the going concern basis, under the historical cost convention, except for certain financial instruments that are measured at fair value as described herein.

Reclassification

Certain prior year amounts have been reclassified to conform to the current year presentation. Specifically, (Gain) loss on disposal of fixed assets has been reclassified out of Impairment of property and equipment and right of use assets and into Other operating (expense) income on the Consolidated Statements of Operations and Comprehensive Loss.

(b) Functional and presentation currency

All operations in the United States have a functional currency of the U.S dollar ("USD"). Canadian operations have a functional currency of Canadian dollars (“CAD”). The Company’s presentation currency is in USD. All amounts are presented in USD unless otherwise specified. References to CAD are to Canadian dollars.

(c) Basis of consolidation

These Consolidated Financial Statements include the financial information of the Company. The Company consolidates legal entities in which it holds a controlling financial interest. The Company has a two-tier consolidation model: one focused on voting rights (the voting interest model) and the second focused on a qualitative analysis of power over significant activities and exposure to potentially significant losses or benefits (the variable interest model). All entities are first evaluated to determine whether they are variable interest entities (“VIE”). If an entity is determined not to be a VIE, it is assessed on the basis of voting and other decision-making rights under the voting interest model ("VOE").

Voting Interest Entities

A VOE is an entity in which (i) the total equity investment at risk is deemed sufficient to absorb the expected losses of the entity, (ii) the at-risk equity holders, as a group, have all of the characteristics of a controlling financial interest and (iii) the entity is structured with substantive voting rights. The Company consolidates its Canadian operations under a VOE model based on the controlling financial interest obtained through Common Shares with substantive voting rights.

Variable Interest Entities

A VIE is an entity that lacks one or more characteristics of a controlling financial interest defined under the voting interest model. The Company consolidates VIE when it has a variable interest that provide it with (i) the power to direct the activities of a VIE that most significantly impact the VIE’s economic performance (power) and (ii) 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).

The accounts of the subsidiaries are prepared for the same reporting period using consistent accounting policies. For further information on VIEs, see Note 3.

All intercompany balances and transactions were eliminated on consolidation.

(d) Cash, cash equivalents and restricted cash

Cash and cash equivalents include cash on hand at retail locations, demand deposits with financial institutions and other short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and subject to an insignificant risk of change in value. Cash held in money market investments are carried at fair value, cash held in financial institutions and cash held at retail locations have carrying values that approximate fair value. Restricted cash consists of cash held with financial institutions which are subject to certain withdrawal restrictions.

(e) Accounts Receivable

Accounts receivable are recorded net of current expected credit losses. The Company estimates current expected credit losses in accordance with ASC 326, Financial Instruments - Credit Losses, based on existing contractual payment terms, actual payment patterns of its customers, and individual customer circumstances.

(f) Inventory

Inventories of harvested and purchased finished goods as well as packaging materials are valued at the lower of cost or net realizable value. Net realizable value is determined as the estimated selling price in the ordinary course of business less the reasonably predictable costs of completion, disposal and transportation. The direct and indirect costs of inventory include materials, labor and depreciation expense on property and equipment involved in packaging, labeling and inspection. Inventories are generally maintained with the weighted average cost method. Amortization of acquired cannabis production licenses as well as royalties paid relating to the production of inventory are also considered to be indirect costs of inventory.

All direct and indirect costs related to inventory are capitalized as they are incurred and they are subsequently recorded within cost of sales on the Consolidated Statements of Operations and Comprehensive Loss at the time cannabis is sold.

Products for resale and supplies and consumables are valued at the lower of cost or net realizable value. The Company reviews inventory for obsolete, redundant, and slow-moving goods, and any such inventories are written down to net realizable value.

(g) Property and equipment and long-lived assets held for sale

Property and equipment is measured at cost, including capitalized borrowing costs, less accumulated depreciation and impairment losses. Ordinary repairs and maintenance are expensed as incurred. Depreciation is calculated on a straight-line basis over the estimated useful life of the asset using the following terms:

Assets in process are transferred to the appropriate asset type when available for use and depreciation of the assets commences at that point.

The Company classifies assets and liabilities (the "disposal group") as held for sale in the period when all of the relevant criteria to be classified as held for sale are met. Long-lived assets held for sale are recorded at the lower of their carrying value or fair value less costs to sell. Any loss resulting from the measurement is recognized in the period during which the held for sale criteria is met. The Company discontinues depreciation on these assets.

An asset’s residual value, useful life and depreciation method are reviewed annually, or when events or circumstances indicate that the current estimate or depreciation method are no longer applicable. Changes are adjusted prospectively if appropriate. Gains and losses on disposal of an asset are determined by comparing the proceeds from disposal with the carrying amount of the items and are recognized in the Consolidated Statements of Operations and Comprehensive Loss.

The Company evaluates the recoverability of property and equipment whenever events or changes in circumstances indicate that the carrying value of the asset or asset group may not be recoverable. See –Impairment of long-lived assets information within this note for detailed information on the Company’s impairment assessment of its property and equipment.

The Company capitalizes interest and borrowing costs on significant qualifying capital construction projects. Upon the asset becoming available for use, capitalization of borrowing costs ceases, and depreciation commences on a straight-line basis over the estimated useful life of the related asset.

(h)Leases

Leases are classified as operating or finance leases based on the terms of the lease agreement and certain characteristics of the identified assets. The majority of the Company’s leases are operating leases used primarily for corporate offices, retail dispensaries, and cultivation and manufacturing facilities. The remaining operating lease periods range from 1 to 23 years. Additionally, the Company hasno finance leases at December 31, 2025 and December 31, 2024.

The Company’s leases include fixed payments, as well as in some cases, scheduled base rent increases over the term of the lease. Certain leases require variable payments of common area maintenance, operating expenses, and real estate taxes applicable to the property. Variable payments are excluded from the measurements of lease liabilities and are expensed as incurred. Any tenant improvement allowances received from the lessor are recorded as a reduction to rent expense over the term of the lease. None of the Company’s lease agreements contain residual value guarantees or material restrictive covenants.

The Company determines if an arrangement is a lease at the inception of the contract. Lease liabilities are recognized at the commencement date based on the present value of lease payments over the lease term for those arrangements where there is an identified asset and the contract conveys the right to control its use. The right-of-use (“ROU”) asset is measured at the initial amount of the lease liability, adjusted for lease payments made at or before the lease commencement date, and initial direct costs. For operating leases, right-of-use assets are reduced over the lease term by the straight-line expense recognized, less the amount of accretion of the lease liability determined by using the effective interest rate ("EIR") method. Finance leases are included in property and equipment in the Company's Consolidated Balance Sheets.

Operating lease expense is recognized on a straight-line basis over the term of the lease and is included in cost of sales and general and administrative expense in the Company’s Consolidated Statements of Operations and Comprehensive Loss. Finance lease cost includes amortization, which is recognized on a straight-line basis over the expected life of the lease asset, and interest expense, which is recognized following an EIR method and is included in Finance and other expenses in the Company’s Consolidated Statements of Operations and Comprehensive Loss.

The majority of the Company’s leases do not provide an implicit rate that can be easily determined. Therefore, the Company applies its incremental borrowing rate to the lease based on the information available at the commencement date (see Note 11).

Certain leases include one or more options torenew orterminate the lease at the Company’s discretion. The Company regularly evaluates lease renewal and termination options and, when they are reasonably certain of the exercise of the option to renew or terminate a lease, incorporates the renewal or termination term for accounting purposes.

The Company evaluates its ROU assets for impairment consistent with its impairment of long-lived assets. See –Impairment of long-lived assets information within this note for detailed information on the Company’s impairment assessment of its right-of-use assets.

In some instances, the Company subleases excess office space to third-party tenants. The Company, as sublessor, continues to account for the head lease. If the lease cost for the term of the sublease exceeds the Company’s anticipated sublease income for the same period, this indicates that the ROU asset associated with the head lease should be assessed for impairment under the long-lived asset impairment provisions. Sublease income is included in Finance and other expenses in the Company’s Consolidated Statements of Operations and Comprehensive Loss.

The Company accounts for non-lease and lease components to which they relate as a single lease component. Additionally, the Company recognized lease payments under short-term leases with an initial term of twelve months or less, as well as low value assets, as an expense on a straight-line basis over the lease term without recognizing the lease liability and ROU asset.

(i) Goodwill

Goodwill is recorded at the time of acquisition and represents the excess of the aggregate consideration paid for an acquisition over the fair value of the net tangible and intangible assets acquired. Goodwill is not subject to amortization and is tested for impairment on an annual basis or more frequently if events or changes in circumstances indicate that they might be impaired. See –Impairment of goodwill and intangible assets information within this note for detailed information on the Company’s impairment assessment of its goodwill and intangible assets.

(j) Intangible assets

Intangible assets are recorded at cost less accumulated amortization and impairment losses, if any. Intangible assets acquired in a business combination are measured at fair value at the acquisition date. Amortization is provided on a straight-line basis over the assets’ estimated useful lives, which do not exceed the contractual period, if any. The estimated useful lives, residual values and amortization methods are reviewed annually and any changes in estimates are accounted for prospectively. Amortization is calculated on a straight-line basis over the following terms:

Licenses relating to cultivation and dispensaries are amortized using a useful life consistent with the property and equipment to which they relate.

Intangible assets that have indefinite useful lives, which include brand names, are not subject to amortization but the carrying value is tested for impairment on an annual basis or more frequently if events or changes in circumstances indicate that they may be impaired. See –Impairment of long-lived assets information within this note for detailed information on the Company’s impairment assessment of its goodwill and intangible assets.

(k) Impairment of indefinite lived intangible assets and goodwill

The Company operates asone reportable segment. For the purposes of testing goodwill, the Company has identified five reporting units. The Company analyzed its reporting units by first reviewing the operating statements based on the jurisdictions in which the Company conducts business (or each market).

Goodwill is reviewed for impairment annually and whenever there are events or changes in circumstances that indicate the carrying amount has been impaired. The Company has the option to first assess qualitative factors to determine whether a quantitative goodwill impairment test is necessary. If the Company concludes it is more likely than not that the fair value of a reporting unit exceeds its carrying value, a quantitative fair value test is performed. If the carrying value of the reporting unit exceeds the estimated fair value, a goodwill impairment charge is recorded. The Company performs its annual impairment tests during the fourth quarter each year, comparing the fair value of each of its reporting units with its carrying amount, inclusive of goodwill. Fair value is estimated using the income approach, a discounted cash flow analysis, and the market approach, when applicable.

Indefinite lived intangible assets are tested for impairment annually or more frequently if events or changes in circumstances between annual tests indicate that the asset may be impaired. Impairment losses on indefinite lived intangible assets are reco gnized based on a comparison of the fair value of the asset to its carrying value. The Company performs its annual impairment test in the fourth quarter each year in conjunction with its annual assessment of goodwill. The assessment consists of comparing the carrying value of the indefinite lived intangible asset to its estimated fair value, utilizing the relief from royalty method, an income approach valuation.

(l) Impairment of long-lived assets and definite lived intangible assets

The Company evaluates the recoverability of long-lived assets, including property and equipment, ROU assets, and definite lived intangible assets, based on whether events or changes in circumstances indicate that the carrying value of the asset, or asset group, may not be recoverable.

When the Company determines that the carrying value of the long-lived asset may not be recoverable based upon the existence of one or more indicators, the assets are assessed for impairment based on the estimate of future undiscounted cash flows expected to result from the use of the asset and its eventual disposition. If the undiscounted cash flows are less than the carrying value, the Company measures the fair value of the asset group. In certain circumstances, an appraisal was obtained to determine the fair value of certain long-lived assets. If the carrying value of an asset group exceeds its fair value, an impairment loss is recorded for the excess of the asset group’s carrying value over its estimated fair value.

(m) Revenue recognition

Revenue is recognized by the Company in accordance with ASU 2014-09 Revenue from Contracts with Customers(Topic 606). The standard requires sales to be recognized in a manner that depicts the transfer of promised goods or services to a customer and at an amount that reflects the consideration expected to be received in exchange for transferring those goods or services. This is achieved by applying the following five steps: i) identify the contract with a customer; ii) identify the performance obligations in the contract; iii) determine the transaction price; iv) allocate the transaction price to the performance obligations in the contract; and v) recognize sales when (or as) the entity satisfies a performance obligation.

Revenues consist of wholesale and retail sales, which are recognized when control of the goods has transferred to the purchaser and the collectability is reasonably assured. This is generally when goods have been delivered, which is also when the performance obligations have been fulfilled under the terms of the related sales contract. Revenue from retail sales of cannabis to customers for a fixed price is recognized when the Company transfers control of the goods to the customer at the point of sale and the customer has accepted and paid for the goods. Revenue for wholesale sales for a fixed price is recognized upon delivery to the customer. Sales are recorded net of returns and discounts and incentives, but inclusive of freight. Payment is typically due upon transferring the goods to the customer or within a specified time period permitted under the Company’s credit policy. All shipping and handling activities are performed before the customers obtain control of products and are accounted for as cost of sales.

From time to time, the Company enters into sales agreements with suppliers pursuant to which it also purchases inventory. As part of the five-step revenue model, the Company assesses whether instances of bulk sales made to suppliers of goods have commercial substance and should be recognized as revenue, or whether they should be assessed under Accounting Standards Codification ("ASC") 845, Nonmonetary Transactions.

Local authorities will often impose excise or cultivation taxes on the sale or production of cannabis products. Excise and cultivation taxes are effectively a production tax which become payable when a cannabis product is delivered to the customer and are not directly related to the value of sales. The Company has made a policy election to exclude from the measurement of transaction price all taxes assessed by a governmental authority that are both imposed on and concurrent with the specific revenue-producing transaction and collected by the Company from a customer. Therefore, the net revenue on the Consolidated Statements of Operations and Comprehensive Loss is netted for any excise or cultivation taxes.

(n) Business combinations

The Company accounts for business combinations using the acquisition method when control is obtained by the Company (see Note 2(c)). The Company measures the consideration transferred, the assets acquired, and the liabilities assumed in a business combination at their acquisition-date fair values. Acquisition related costs are recognized as expenses in the periods in which the costs are incurred, and the services are received, except for the costs to issue debt or equity securities which are recognized according to specific requirements. The excess of the consideration transferred to obtain control, over the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed, is recognized as goodwill as of the acquisition date.

Contingent consideration for a business combination is measured at its acquisition-date fair value and included as part of the consideration transferred in a business combination. Contingent consideration that is classified as a liability is measured at subsequent reporting dates at fair value with the corresponding gain or loss being recognized in profit or loss.

If the acquiree’s former owners contractually indemnify the Company for a particular uncertainty, an indemnification asset is recognized on a basis that matches the indemnified item, subject to the contractual provisions or any collectability considerations.

(o) Non-controlling interests

Non-controlling interests (“NCI”) represents equity interests owned by outside parties. NCI is initially measured at fair value as of the acquisition date (see Note 2(y)(vii)).

(p) Income taxes

Income tax expense, consisting of current and deferred tax expense, is recognized in the Consolidated Statements of Operations and Comprehensive Loss. Current tax expense is the expected tax payable on the taxable income for the year, using tax rates enacted at period-end, adjusted for amendments to tax payable with regard to previous years. Deferred tax assets and liabilities and the related deferred income tax expense or recovery are recognized for deferred tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using the enacted tax rates expected to apply when the asset is realized, or the liability settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income (loss) in the period that enactment occurs. A deferred tax asset is recognized to the extent that it is probable that future taxable profits will be available against which the asset can be utilized. To the extent that the Company does not consider it more likely than not that a deferred tax asset will be recovered, the deferred tax asset is reduced. Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Company intends to settle its current tax assets and liabilities on a net basis.

The Internal Revenue Service (the "IRS") has taken the position that cannabis companies are subject to the limits of Section 280E of the Internal Revenue Code of 1986, as amended (the "Code"), under which they are only allowed to deduct expenses directly related to the cost of producing the products or cost of production. The Company has taken the position that it does not owe taxes attributable to the application of Section 280E the Code. This position is treated as an unrecognized tax benefit, and is recorded on the Consolidated Balance Sheets as a liability on uncertain tax position.

(q) Share capital

Common Shares

Common Shares are classified as equity. The proceeds from the exercise of stock options and warrants are recorded as share capital. Incremental costs directly attributable to the issuance of Common Shares are recognized as a deduction from equity.

Equity units

Equity units are comprised of Common Shares and one-half warrants. Warrants issued during the year are classified as liabilities. The proceeds are allocated first to warrants based on their fair value, measured using the Black-Scholes Option Pricing Model (the "Black-Scholes Model"), and the residual is allocated to Common Shares.

Treasury Stock

Repurchases of Common Shares are accounted for at cost and are included as a component of shareholders’ equity in the Consolidated Balance Sheets. The Common Shares are then canceled in subsequent transactions.

(r) Share-based compensation

The Company has a stock option plan in place (the "Stock Option Plan"). The Company measures equity settled share-based payments based on their fair value at the grant date and recognizes compensation expense on a straight-line basis over the vesting period. Fair value is measured using the Black-Scholes Model. In estimating fair value, management is required to make certain assumptions and estimates such as the expected term of the award, volatility of the future price of the Common Shares, risk free rates, and future dividend yields at the initial grant date. Changes in assumptions used to estimate fair value could result in materially different results. Forfeitures are accounted for as they occur rather than estimating for them at the grant date.

Upon exercise of stock options and warrants that are classified as equity, any historical fair value in the warrants and share-based compensation reserve is allocated to additional paid in capital.

The fair value of restricted share units is based on the closing price of the Company’s stock as of the grant date. Compensation expense is recognized on a straight-line basis, by amortizing the grant date fair value over the vesting period.

(s) Convertible instruments

The Company issues convertible debt instruments to raise capital for reasons such as business acquisitions and supporting general corporate needs. The debt component of convertible instruments is recorded at its amortized cost using the EIR method. Accretion expense is recognized over the contractual term of the instrument based on the effective yield, which reflects the amortization of any discounts, premiums, and debt issuance costs. Convertible debt may contain embedded features that require bifurcation as derivative liabilities, see Note 2v.

(t) Convertible preferred stock and detachable warrants

The Company evaluates convertible preferred stock in accordance with ASC 470-20-35-7, Debt with Conversion and Other Options. The preferred shares in the capital of the Company (the "Preferred Shares") are convertible into Common Shares at a conversion ratio ofone Preferred Share for 1,000 Common Shares. All series of Preferred Shares are classified as shareholders’ equity in the Company’s Consolidated Balance Sheets. The fair value of the related Preferred Shares is based on the closing price of the Common Shares on the day of issuance of the Preferred Shares.

Included in the issuance were detachable warrants to purchase Preferred Shares. The detachable purchase warrants were evaluated for equity or liability classification and were determined to meet liability classification. The warrants are legally detachable and separately exercisable from the Preferred Shares.

(u) Warrant liability

The Company may issue Common Share warrants with debt, equity or as a standalone financing instrument that is recorded as either liabilities or equity in accordance with the respective accounting guidance. Warrants recorded as equity are recorded at their relative fair value determined at the issuance date and remeasurement is not required. Warrants recorded as liabilities are recorded at their fair value, within warrant liability on the Consolidated Balance Sheets, and remeasured on each reporting date with changes recorded in the Company's Consolidated Statements of Operations and Comprehensive Loss.

(v) Embedded derivative liabilities

The Company evaluates its financial instruments to determine if those instruments or any embedded components of those instruments qualify as derivatives that need to be separately accounted for in accordance with ASC 815, Derivatives and Hedging. Embedded derivatives satisfying certain criteria are recorded at fair value at issuance and marked-to-market at each balance sheet date with the change in the fair value recorded as income or expense. In addition, upon the occurrence of an event that requires the derivative liability to be reclassified to equity, the derivative liability is revalued to fair value at that date.

(w) Loss per share

The Company presents basic and diluted loss per share data for its ordinary shares. Basic loss per share is calculated using the treasury stock method, by dividing the loss attributable to holders of Common Shares and proportionate voting shares in the capital of the Company ("Proportionate Voting Shares") by the weighted average number of Common Shares and Proportionate Voting Shares outstanding during the period. Contingently issuable shares (including shares held in escrow) are not considered outstanding Common Shares and consequently are not included in the loss per share calculations. The Company has the following categories of potentially dilutive Common Share equivalents: RSUs (as defined below), stock options, warrants, Preferred Shares, non-participating non-voting exchangeable shares in the capital of the Company ("Exchangeable Shares") and convertible debentures.

In order to determine diluted loss per share, it is assumed that any proceeds from the exercise of dilutive instruments would be used to repurchase Common Shares at the average market price during the period. The Company also considers all outstanding convertible securities, such as the Preferred Shares, convertible debentures, and outstanding Exchangeable Shares as if such instruments were converted into Common Shares.

Diluted loss per share is determined by adjusting the loss attributable to common shareholders and the weighted average number of Common Shares and Proportionate Voting Shares outstanding, adjusted for the effects of all dilutive potential Common Shares and Proportionate Voting Shares. Proportionate Voting Shares are converted to their Common Share equivalent of one thousand Common Shares for every one Proportionate Voting Share for the purposes of calculating basic and diluted loss per share. In a period of losses, all of the potentially dilutive Common Share equivalents are excluded in the determination of dilutive net loss per share because their effect is antidilutive. During the years ended December 31, 2025, December 31, 2024 and December 31, 2023, no potentially dilutive Common Share equivalents were included in the computation of diluted loss per share because their impact would have been anti-dilutive.

(x) Discontinued operations

The Company deems it appropriate to classify a part of the business as discontinued operations if the related disposal group meets all of the following criteria: (i) the disposal group is a component of the Company, (ii) the component meets the held-for-sale criteria, and (iii) the disposal of the component represents a strategic shift that has a major effect on the Company's operations and financial results. A disposal group that represents a strategic shift to the Company is reflected as discontinued operations on the Consolidated Statements of Operations and Comprehensive Loss and prior year figures are recast to reflect the earnings or losses as income from discontinued operations.

During the year ended December 31, 2025, the Company committed to a plan to exit the Michigan market. 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 the first half of 2026.

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 Consolidated Balance Sheets of the Company, the operating results are presented as discontinued operations in the Consolidated Statements of Operations and Comprehensive Loss of the Company, and net cash used is presented as discontinued operations in the Statements of Cash Flows of the Company. 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 year amounts have been retrospectively adjusted to conform to the current year presentation. Certain prior year amounts, primarily related to discontinued operations, have been reclassified in the Consolidated Financial Statements and accompanying notes to conform to the current year 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.

(y) Use of significant estimates and judgments

The preparation of the Company’s Consolidated Financial Statements requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected.

Management has applied significant estimates and judgments related to the following:

i)

Inventory

The determination of net realizable value requires significant judgment, including consideration of factors such as shrinkage, the aging of and future demand for inventory, expected future selling price the Company expects to realize by selling the inventory, and the contractual arrangements with customers. Reserves for excess and obsolete inventory are based upon quantities on hand, projected volumes from demand forecasts and net realizable value. The future realization of these inventories may be affected by market-driven changes that may reduce future selling prices. A change to these assumptions could impact the Company’s inventory valuation and gross profit.

The impact of inventory reserves is reflected in cost of sales.

ii)

Share-based payments

In calculating share-based compensation expense, key estimates are used such as the expected term of the award, the volatility of the Company’s stock price, and the risk-free interest rate.

iii)

Derivative liabilities and contingent consideration

The Company calculates the fair value of derivative liabilities and contingent considerations from business combinations using key estimates, including stock price volatility and the risk-free interest rate. The Company exercises judgment in selecting valuation methods and performing fair value calculations, both at the initial measurement upon issuance or acquisition and during subsequent recurring remeasurements.

iv)

Income taxes

The extent to which deferred tax assets can be recognized is based on an assessment of the probability of the Company generating future taxable income against which the deferred tax assets can be utilized. In addition, significant judgment is required in classifying transactions and assessing probable outcomes of tax positions taken, and in assessing the impact of any legal or economic limits or uncertainties in various tax jurisdictions.

Provisions for taxes are made using the best estimate of the amount expected to be paid based on a qualitative assessment of all relevant factors. The Company reviews the adequacy of these provisions at the end of the reporting period. It is possible, however, that at some future date, an additional liability could result from audits by taxing authorities.

v)

Impairment of goodwill, intangible assets, and long-lived assets

The Company assesses goodwill and indefinite-lived intangible assets for impairment annually, while definite-lived intangible assets and long-lived assets are evaluated whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. The Company’s impairment loss calculation contains significant estimates and assumptions while applying judgment to qualitative factors as well as estimating future cash flows and asset fair values, including forecasting projected financial information and selecting the discount rate that reflects the risk inherent in future cash flows.

Certain significant estimates and assumptions include:

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Cash flows: estimated cash flows are projected based on actual operating results from internal sources, as well as industry and market trends. The forecasts are extended through a discrete projection period, after which a terminal value was applied to reflect the remaining economic useful life of the reporting units and asset groups;

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Royalty rate: estimated royalty rate is projected based on industry and market trends.

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Post-tax discount rate: the post-tax discount rate is reflective of the weighted average cost of capital ("WACC"). The WACC is estimated based on the risk-free rate, equity risk premium, beta premium, and after-tax cost of debt based on corporate bond yields; and

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Tax rate: the tax rates used in determining future cash flows are those substantively enacted at the respective valuation date.

vi)

Business combinations

Classification of an acquisition as a business combination or an asset acquisition depends on whether the asset acquired constitutes a business, which can be a complex judgment. The Company has determined that its acquisitions in Note 5 are business combinations under ASC, 805 Business Combinations.

In a business combination, substantially all identifiable assets, liabilities and contingent liabilities acquired are recorded at the date of acquisition at their respective fair values. One of the most significant areas of judgment and estimation relates to the determination of the fair value of these assets and liabilities, including the fair value of contingent consideration, if applicable. If any intangible assets are identified, depending on the type of intangible asset and the complexity of determining its fair value, the Company may utilize an independent external valuation expert to develop the fair value, using appropriate valuation techniques, which are generally based on a forecast of the total expected future net cash flows. These valuations are linked closely to the assumptions made by management regarding the future performance of the assets concerned and any changes in the discount rate applied.

vii)

Incremental borrowing rates

Lease payments are discounted using the rate implicit in the lease if that rate is readily available. If that rate cannot be easily determined, the lessee is required to use its incremental borrowing rate. The incremental borrowing rate is the rate of interest that the Company estimates it would have to pay on a collateralized basis to borrow an amount equal to the lease payments under similar terms. The Company calculates its incremental borrowing rate as the interest rate the Company would pay to borrow funds necessary to obtain an asset of similar value over similar terms taking into consideration the economic factors and the credit risk rating at the commencement date of the lease.

viii)

Variable Interest Entity

The Company consolidates legal entities in which it holds a controlling financial interest. Determining whether it has a controlling financial interest in VIE is subject to significant judgment and estimates. There is inherent uncertainty in evaluating who has the power to direct the activities of the VIE that most significantly impact the entity's economic performance. The Company's considerations include, but are not limited to, voting interests of the VIE, management, service and other agreements with the VIE, involvement in the VIE’s initial design and the existence of explicit or implicit financial guarantees. Management has applied significant judgment when evaluating the facts and circumstances of the VIE (see Note 3).

ix)

Current Expected Credit Losses

The allowance for credit losses represents management’s estimate of expected credit losses over the contractual life of the Company’s trade receivables. Determining the adequacy of the allowance is complex and requires significant judgment regarding customer creditworthiness, historical collection experience, current economic conditions, and reasonable and supportable forecasts. Changes in customer financial performance or economic conditions could result in material changes to the allowance in future periods.

(z) New standards, amendments and interpretations adopted

(i)

In December 2023, the Financial Accounting Standards Board ("FASB") issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires, among other things, additional disclosures primarily related to the income tax rate reconciliation and income taxes paid. The expanded annual disclosures is effective for the financial year ending December 31, 2025 and will be applied retrospectively to all prior periods presented. The Company adopted this standard during the year ended December 31, 2025, see Note 17.

(aa) New standards, amendments and interpretations not yet adopted

(i)

In November 2024, the FASB issued ASU 2024-03, Income Statement – Reporting Comprehensive Loss – Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, a new accounting standard to improve the disclosures about an entity’s expenses and address requests from investors for more detailed information about the types of expenses included in commonly presented expense captions. The new standard will be effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027, with retrospective application permitted. The Company is currently evaluating the impact of ASU 2024-03 on its Consolidated Financial Statements; however, the Company does not expect the adoption of ASU 2024-03 to have a material impact on its Consolidated Financial Statements.

(ii)

In July 2025, the FASB issued Accounting Standards Update (ASU) 2025-05, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets. This accounting pronouncement provides all entities with a practical expedient to assume that current conditions as of the balance sheet date do not change for the remaining life of the assets when measuring credit losses. ASU 2025-05 is effective for fiscal years beginning after December 15, 2025. The Company is currently evaluating the impact of ASU 2025-05 on its Consolidated Financial Statements; however, the Company does not expect the adoption of ASU 2025-05 to have a material impact on its Consolidated Financial Statements.

(iii)

In December 2025, the FASB issued ASU 2025-11, Interim Reporting (Topic 270): Narrow-Scope Improvements. The standard improves the navigability of interim disclosures, clarifies when Topic 270 applies and provides additional interim disclosure guidance, including a principle to disclose material events since the most recent annual reporting period. The amendments do not change the underlying objectives of interim reporting but are designed to enhance clarity in application. The standard is effective for the Company beginning January 1, 2028, with early adoption permitted, and may be applied prospectively or retrospectively. The Company is currently evaluating the impact of ASU 2025-11 on its Consolidated Financial Statements; however, the Company does not expect the adoption of ASU 2025-11 to have a material impact on its Consolidated Financial Statements.

3. Consolidation

The Company consolidates entities in which it has a controlling financial interest by evaluating whether the entity is a VOE or 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 segregate the Company’s Canadian retail operations from TerrAscend’s cultivation and manufacturing operations in the United States. 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 TerrAscend’s 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").

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.

4. Accounts receivable, net

The following table presents the Company’s accounts receivable balances, including the allowance for credit losses:

The following table presents the aging of trade receivables, including the allowance for credit losses:

The following is a roll-forward of the provision for expected credit losses and sales returns and allowances related to trade accounts receivable:

5. Acquisitions

2025 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 inconnection 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.

Costs related to this transaction were $122, including legal, accounting, due diligence, and other transaction-related expenses and were recorded during the year ended December 31, 2025.

On a standalone basis, had the Company acquired the business on January 1, 2025, sales estimates would have been $7,652 for the year ended December 31, 2025 and net income estimates would have been $1,738. Actual sales and net income since the Ratio Acquisition Date are $4,934 and $664, respectively.

Other

On December 26, 2025, the Company issued $9,000 of convertible notes in exchange for an option to purchase a 35% interest in Union Chill (the “Union Chill Option”). The Company is required to pay an additional $4,000 upon exercise of the Union Chill Option. As the Company was required to exercise the option by May 2026, the $4,000 was recorded in accounts payable and accrued liabilities. The 35% option was initially recorded at its fair value of $13,000, with no material change recognized upon remeasurement as of December 31, 2025. The Union Chill Option is included in other non‑current assets in the Consolidated Balance Sheets. For additional information regarding the convertible notes, see Note 12.

On December 10, 2025, the Company paid a refundable deposit of $3,400 in connection with a potential acquisition. The deposit is included in Other current assets in the Consolidated Balance Sheets.

Contingent consideration

Contingent consideration recorded relates to the Company’s business acquisitions. Contingent consideration is based upon the potential earnout of the underlying business unit and is measured at fair value using a projection model for the business and the formulaic structure for determining the consideration under the terms of the agreement.

The balance of contingent consideration is as follows:

State Flower and Apothecarium

On January 19, 2024, the Company amended the original purchase agreement and issued an aggregate of 2,888,088 Common Shares and paid $250 of cash to the sellers of its previously acquired State Flower and The Apothecarium businesses. The issuance of Common Shares fully settled the previous contingent consideration balances. The remaining balance owing relates to a price protection the Company provided on the Common Shares issued.

In accordance with the price protection clause, the Company issued additional Common Shares on September 13, 2024, June 2, 2025, and September 19, 2025, for an aggregate of 9,176,140 Common Shares. On October 17, 2025, the Company canceled 1,609,089 Common Shares as a result of certain clawback provisions. As a result of the issuances, the cancellation, and the proximity to expiration of the price protection, the estimated fair value of the contingent consideration liability was reduced to $nil as of December 31, 2025.

Subsequent to the year end the price protection clause expired with no additional payouts.

Peninsula

On December 28, 2024 the Company settled its contingent consideration associated with the Peninsula acquisition in the amount of $386. This amount was paid subsequent to the year end. In connection with the settlement, management recognized a gain on revaluation of contingent consideration in the amount of $1,626 on the consolidated statements of operations and comprehensive loss.

6. Inventory

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

7. Discontinued operations

TerrAscend Michigan

During the year ended December 31, 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 December 31, 2025, the Company remains engaged in an active program to sell the remaining assets of TerrAscend MI, which is expected to be substantially completed by the end of the first half of 2026. 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 total amount of costs expected to be incurred in connection with the Michigan exit is between $1,050 to $1,200 in cash expenditures for employee transition, notice period and severance payments, and employee benefits ("restructuring costs"). Total cumulative restructuring costs are$606 as of December 31, 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, equip ment, and leasehold improvements. During the year ended December 31, 2025, the Company recognized impairment loss of $41,271. The fair value of the disposal groups was primarily determined based on actual closing prices or 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 year ended December 31, 2025, the Company recognized an inventory impairment charge of $4,551, 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 or destruction of inventory.

During the year ended December 31, 2025, the Company reassessed certain assets previously included in the Michigan disposal group. Based on market conditions and the absence of prospective buyers at acceptable pricing, management determined that a sale of one owned property ("Monitor") was no longer probable within one year. The Company entered into a sublease arrangement on November 1, 2025 for Monitor, which will generate ongoing rental income. As a result, this property no longer met the criteria for classification as held for sale and was removed from the disposal group. The asset is now included within the Company's continuing operations. The reclassification did not change management’s conclusion that the exit of Michigan operations represents a strategic shift and continues to qualify for discontinued operations presentation. There was no gain or loss recognized upon the reclassification of Monitor.

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

The results of operations for the discontinued operations includes revenues and expenses directly attributable to the disposed of operations. Corporate and administrative expenses, including interest expense, not directly attributable to the operations were not allocated to discontinued operations.

The results of discontinued operations were as follows:

8. Property and equipment, net

Property and equipment consisted of:

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

During the years ended December 31, 2025, and December 31, 2024, borrowing costs werenot capitalized because the assets in process did not meet the criteria of a qualifying asset.

Depreciation expense was $9,141 ($7,577 included in cost of sales) for the year ended December 31, 2025, $8,954 (7,285 included in cost of sales) for the year ended December 31, 2024, and $8,097 ($6,911 included in cost of sales) for the year ended December 31, 2023.

Impairment of Property and Equipment

The impairment test for property and equipment follows the same criteria as finite-lived intangible assets (see Note 9) with the exception of obtaining independent appraisals for certain properties to determine the fair value of the asset groups. During the years ended December 31, 2024, the Company determined that the carrying value of the certain assets may not be recoverable. As a result, the Company recorded an impairment loss of $2,438 for certain California properties during the year ended December 31, 2024. This impairment was primarily due to the closure of one of its California retail stores.

9. Intangible assets, net and goodwill

Intangible assets consisted of the following:

Amortization expense was $6,472 ($2,639 included in cost of sales) for the year ended December 31, 2025, $6,230 ($2,832 included in cost of sales) for the year ended December 31, 2024, and $7,518 ($2,900 included in cost of sales) for the year ended December 31, 2023.

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

As of December 31, 2025, the weighted average amortization period remaining on intangible assets was 24.4 years.

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

Impairment of indefinite-lived and definite-lived intangible assets

The Company recorded the following impairment losses by category of intangible assets:

During the year ended December 31, 2025, the Company determined that changes in market expectations of cash flows in its California wholesale business, as well as increased competition and supply in the state, were indicators that a quantitative impairment test was appropriate.

During the year ended December 31, 2025, for the State Flower brand name in California, the Company compared the carrying value to its fair value using the relief-from royalty method and determined that the carrying value exceeded the fair value. The Company recorded impairment charges of $1,350, reducing its carrying value to $nil. The estimates and assumptions used in testing include such values as; no future revenue growth, a 1% royalty rate, and a WACC of 13.4%.

During the year ended December 31, 2025, for the California asset group, the Company compared the carrying value of the wholesale license to its fair value using a discounted cash flow analysis and determined that the carrying value exceeded the fair value. The Company recorded impairment charges of $1,256, reducing its carrying value to $nil. The estimates and assumptions used in testing include such values as; no future revenue growth, a 2% increase in operating expenses, and a WACC of 13.4%.

Impairment of Goodwill

The Company performed its annual goodwill impairment test during the fourth quarter of 2025.

The Company performed a qualitative assessment of the Pennsylvania reporting unit and based on current market conditions and the uncertainty surrounding the timing of potential adult-use cannabis legalization in Pennsylvania, it was determined that a quantitative assessment was appropriate. The fair value of the Pennsylvania reporting unit was estimated using a Probability-Weighted DCF model. The valuation incorporated multiple legalization timing scenarios, including adult-use legalization occurring in 2026, 2027, 2028, and a scenario in which legalization does not occur. Probabilities were assigned to each scenario with the vast majority of the weighting for legalization to occur in 2026 or 2027, based on management’s assessment of current legislative activity, regulatory developments, and industry conditions. Other estimates and assumptions used in the valuation included projected revenues, operating margins, a WACC of 13.4%, and terminal value multiples ranging from 7.7x to 8.8x depending on the scenario. The Company considered, but did not rely upon, a market approach, as recent observed transactions were not deemed comparable to the Company’s Pennsylvania operations. Accordingly, the income approach was determined to be the most appropriate valuation methodology. Based on the analysis performed, the estimated fair value of the Pennsylvania reporting unit exceeded its carrying value as of the testing date, and no goodwill impairment was recorded. Changes in the timing or an adverse outcome of adult-use legalization could adversely affect operating results which would result in a reduction in the estimated fair value of the reporting unit below its carrying value and result in goodwill impairment. In the sensitivity analysis performed, holding all other assumptions constant, management increased the probability of no legalization from its baseline assumption of approximately 5% to approximately 30%, starting at which point the estimated fair value of the Pennsylvania reporting unit would fall below its carrying value and result in an impairment. Under the base case assumptions, the estimated fair value of the Pennsylvania reporting unit exceeded the carrying value by approximately 14%.

The Company performed qualitative assessments of the Maryland and Ohio reporting units and based on current market conditions, operating performance, and regulatory developments, the Company concluded that it was more likely than not that the fair values of the Maryland and Ohio reporting unit exceeded their carrying values. Accordingly, quantitative impairment tests were not performed.

The following table summarizes the Company's goodwill by reporting unit which is aggregated into one reportable segment:

10. Loans payable

The Company had accrued interest for its loan payables of $2,365 and $2,537 as of December 31, 2025 and December 31, 2024, respectively, included in accounts payable and accrued liabilities on the Consolidated Balance Sheets.

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 outstanding principal amount 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, TerrAscend, TerrAscend USA, Inc., TerrAscend NJ LLC, TER Holding MD, Inc., and WDB Holding MD, Inc., including certain of each of their respective subsidiaries, and other borrowers, all of which are entities that are consolidated in the financial statements of the Company (the "Incremental Amendment Borrowers"), 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 provided 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(as defined below), 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.

During the year ended December 31, 2025, the Company made prepayments in aggregate of $4,423, including a 3% prepayment fee.

As of December 31, 2025, there was an outstanding principal amount of $217,682 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 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, 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 of the FG Loan Amendment 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 of the FG Loan Amendment was used to retire a series of Maryland promissory notes and 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 December 31, 2025, there was an outstanding principal amount of $2,758 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 completed the acquisition of certain assets of Ratio Cannabis LLC, a dispensary in Ohio (the "Ratio Acquisition"). In connection with the Ratio Acquisition, the Company 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 of the FG Loan Amendment 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 December 31, 2025, there was an outstanding principal amount of $3,980 under the Ratio Promissory Note.

Other loans

Class A Shares of TerrAscend

In connection with the 2023 Reorganization (see Note 3), TerrAscend issued $1,000 of Class A shares with a 20% guaranteed annual dividend to an investor (the “Investor”) pursuant to the terms of a subscription agreement between TerrAscend and the Investor dated April 20, 2023 (the “Subscription Agreement”). Pursuant to the terms of the Subscription Agreement, TerrAscend holds a call right to repurchase all of the Class A Shares issued to the Investor for an amount equal to the sum of: (a) the Repurchase/Put Price (as defined in the Subscription Agreement); plus (b) the amount equal to 40% of the subscription amount less the aggregate dividends paid to the Investor as of the date of the exercise of the option. In addition, the Investor holds a put right that is exercisable at any time after four months’ advanced written notice following the five-year anniversary of the closing of the investment to put all (and only all) of the Class A Shares owned by the Investor to TerrAscend at the Repurchase/Put Price, payable in cash or shares. The instrument is considered as a debt for accounting purposes due to the economic characteristics and risks.

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 December 31, 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.

11. Leases

Amounts recognized in the Consolidated Balance Sheets were as follows:

The Company recognized operating lease expense of$4,975 ($380 included in cost of sales), $5,282 ($369 included in cost of sales), and $5,527 ($558 included in cost of sales) for the years ended December 31, 2025, 2024 and 2023, respectively.

Other information related to operating leases consisted of the following:

Supplemental cash flow information related to leases were as follows:

Undiscounted lease obligations as of December 31, 2025 are as follows:

12. Convertible debt

Private Placement Convertible Debentures

In June and August 2023, the Company closed the private placements of a total of 10,355 senior unsecured convertible debentures at a price of $1,000 per debenture for total gross proceeds of $10,355. Unless repaid or converted earlier, the outstanding principal and accrued and unpaid interest on the debentures will be due and payable 36 months following the closing of the debenture offering (the “Debenture Maturity Date”). Each debenture bears interest at a rate of 9.9% per annum from the date of issuance, calculated and compounded semi-annually, and payable on the Debenture Maturity Date. Each holder has the option to elect to receive up to 4.95% per annum of such interest payable in cash on asemi-annual basis. Each debenture is convertible into Common Shares, at the option of the holder, at any time or times prior to the close of business on the last business day immediately preceding the Debenture Maturity Date, at a conversion price of $2.01 per Common Share. Holders converting their debentures will receive accrued and unpaid interest for the period from and including the date of the last interest payment date, to and including, the date of conversion.

In accordance with ASC 815, Derivatives and Hedging, the conversion option was bifurcated from the host instrument as the instrument's strike price is denominated in a currency other than the functional currency of the Issuer. It was recorded at fair value, using the Black-Scholes Model (see Note 23). The proceeds are allocated first to the conversion option based on its fair value of $3,600, and the residual was allocated to the host instrument and recorded as convertible debt at a residual value of $6,755.

The following table summarizes the Private Placement Convertible Debentures activity for the year-ended December 31, 2025:

Union Chill Convertible Promissory Note

On December 26, 2025, the Company issued a convertible promissory note for $9,000 in relation to the transaction with Union Chill Cannabis Company LLC (“Union Chill”). Unless repaid or converted earlier, the outstanding principal and interest shall be due and payable 48 months following the date of issuance (the "Convertible Note Maturity Date"). The convertible promissory note bears interest at the rate of 6.5% per annum payable inquarterly payments within five days following the first business day of each fiscal quarter. The convertible promissory note is convertible into Common Shares, at the option of the holder, at any time or times prior to the close of business on the last business day immediately preceding the Convertible Note Maturity Date, at a conversion price of $1.89 per Common Share.

In accordance with ASC 815, Derivatives and Hedging, the conversion option was bifurcated from the host instrument as the instrument's strike price is denominated in a currency other than the functional currency of the Issuer. It was recorded at fair value, using the Black-Scholes Model (see Note 23). The proceeds are allocated first to the conversion option based on its fair value of $2,104, and the residual was allocated to the host instrument and recorded as convertible debt at a residual value of $6,896.

The following table summarizes the Union Chill Convertible Promissory Note activity for the year-ended December 31, 2025:

The Company had accrued interest for its convertible debt of $2,171 and $1,200 as of December 31, 2025 and December 31, 2024, respectively, included in accounts payable and accrued liabilities on the Consolidated Balance Sheets.

13. Shareholders’ equity

The Company is authorized to issue an unlimited number of Common Shares, an unlimited number of Proportionate Voting Shares, an unlimited number of Exchangeable Shares, and an unlimited number of Preferred Shares, issuable in series. The Board has the discretion to determine the rights, preferences, privileges, and restrictions, including voting rights, dividend rights, conversion rights, redemption privileges, and liquidation preferences, of each class of the Company’s capital stock.

Unlimited Number of Preferred Shares

The Board has authorized the Company to issue an unlimited number of Series A, Series B, Series C and Series D Preferred Shares. The Preferred Shares of each series will, with respect to the payment of dividends and the distribution of assets in the event of the liquidation, dissolution or winding-up of the Company, whether voluntarily or involuntarily, rank on parity with the Preferred Shares of every other series, and will be entitled to preference over the Proportionate Voting Shares, Common Shares and Exchangeable Shares.

Holders of Preferred Shares are not entitled to receive notice of, or to attend or to vote at any meeting of the shareholders of the Company.

Holders of Preferred Shares are not entitled to receive any dividends, except if the Company issues a dividend when necessary to comply with contractual provisions in respect of an adjustment to the conversion ratio in connection with any dividend paid on the Common Shares.

Conversion Rights

Holders of Preferred Shares are entitled to convert each outstanding Preferred Share into 1,000 Common Shares of the Company (or the economic equivalent in Proportionate Voting Shares for U.S. investors) at the option of the holder, subject to customary anti-dilution provisions.

The Preferred Shares will be automatically converted into Proportionate Voting Shares at the then-effective conversion ratio, instead of being redeemed for cash and other assets, in the event of a change in control.

Redemption Rights

The Company classified the Preferred Shares as permanent equity in the financial statements given that the terms do not obligate the Company to buy back the shares of Preferred Shares in exchange for cash or other assets, nor do the shares represent an obligation that must or may be settled with a variable number of shares, which are debt-like features. No other redemption provisions exist within the terms of the instrument.

Liquidation Preference

In the event of liquidation, dissolution, or winding up of the Company, whether voluntary or involuntary, or upon any other return of capital or distribution of the assets of the Company among its shareholders, in each case for the purposes of winding up its affairs, each Preferred Share entitles the holder thereof to receive and to be paid out of the assets of the Company available for distribution, before any distribution or payment may be made to a holder of any Common Shares, Proportionate Voting Shares, Exchangeable Shares or any other shares ranking junior in such liquidation, dissolution, or winding up to the Preferred Shares, an amount per Preferred Share equal to the fair market value of the consideration paid for such Preferred Share upon issuance.

The Company’s Series A, Series B, Series C and Series D Preferred Shares have a liquidation preference that is initially equal to $2,000, $2,000, $3,000 and $3,000, respectively, per Preferred Share; provided that if the Company makes a distribution to holders of all or substantially all of the respective series of Preferred Shares, or if the Company effects a share split or share consolidation of the respective series of Preferred Shares, then the liquidation preference will then be adjusted on the effective date of such event by a rate computed as (i) the number of respective series of Preferred Shares outstanding immediately before giving effect to such event divided by (ii) the number of respective series of Preferred Shares outstanding immediately after such event.

After payment to the holders of the Preferred Shares of the full liquidation preference to which they are entitled in respect of outstanding Preferred Shares (which, for greater certainty, have not been converted prior to such payment), such Preferred Shares will have no further right or claim to any of the assets of the Company.

The liquidation preference will be payable to holders of Preferred Shares in cash; provided, however, that to the extent the Company has, having exercised commercially reasonable efforts to make such payment, insufficient cash available to pay the liquidation preference in full in cash, the portion of the liquidation preference with respect to which the Company has insufficient cash may be paid in property or other assets of the Company. The value of any property or assets not consisting of cash that is distributed by the Company in satisfaction of any portion of the liquidation preference will equal the fair market value on the date of distribution. As of December 31, 2025, the Convertible Preferred Series A and B Shares had an aggregate liquidation value of $22,650.

Unlimited Number of Proportionate Voting Shares

Holders of Proportionate Voting Shares are entitled to receive, as and when declared by the Board, dividends in cash or property of the Company. No dividend may be declared on the Proportionate Voting Shares unless the Company simultaneously declares dividends on the Common Shares in an amount equal to the dividend declared per Proportionate Voting Share divided by 1,000.

In the event of the liquidation, dissolution or winding-up of the Company, whether voluntary or involuntary, or in the event of any other distribution of assets of the Company among its shareholders for the purpose of winding up its affairs, the holders of Proportionate Voting Shares are entitled to participate pari passu with the holders of Common Shares in an amount equal to the amount of such distribution per Common Share multiplied by 1,000.

Holders of Proportionate Voting Shares are not entitled to a right of first refusal to subscribe for, purchase or receive any part of any issue of shares, or bonds, debentures or other securities of the Company.

There may be no subdivision or consolidation of the Proportionate Voting Shares unless, simultaneously, the Common Shares and Exchangeable Shares are subdivided or consolidated using the same divisor or multiplier.

Proportionate Voting Shares carry 1,000 votes per share.

Unlimited Number of Exchangeable Shares

Holders of Exchangeable Shares will not be entitled to receive notice of, attend or vote at meetings of the shareholders of the Company; provided that the holders of Exchangeable Shares will, however, be entitled to receive notice of meetings of shareholders called for the purpose of authorizing the dissolution of the Company or the sale of its assets, or a substantial part thereof, but holders of Exchangeable Shares will not be entitled to vote at such meeting of the shareholders of the Company.

Holders of Exchangeable Shares will not be entitled to receive any dividends.

Dissolution

In the event of liquidation, dissolution or winding up of the Company, whether voluntary or involuntary, or any other distribution of assets of the Company among its shareholders for the purpose of winding-up its affairs, holders of Exchangeable Shares will not be entitled to receive any amount, property or assets of the Company.

Exchange Rights

Each issued and outstanding Exchangeable Share may, at any time following the exchange start date applicable to the holder of such Exchangeable Share, at the option of the holder and subject to any restrictions or limitations, be exchanged forone Common Share.

Unlimited Number of Common Shares

Holders of Common Shares are entitled to receive notice of, and to attend, all meetings of the shareholders of the Company and shall haveone vote per each Common Share held at all meetings of the Company, except for meetings at which only holders of another specified class or series of shares of the Company are entitled to vote separately as a class or series.

Dividend Rights

Holders of Common Shares are entitled to receive, subject to the rights of the holder of any other class of shares, any dividends declared by the Company. If, as and when dividends are declared by the directors, each Common Share will be entitled to 0.001 times the amount paid or distributed per Proportionate Voting Share (or, if a stock dividend is declared, each Common Share will be entitled to receive the same number of Common Shares per Common Share of Proportionate Voting Shares entitled to be received per Proportionate Voting Share).

Dissolution

In the event of liquidation, dissolution or winding up of the Company, whether voluntary or involuntary, or any other distribution of assets of the Company among its shareholders for the purpose of winding-up its affairs, the holders of the Common Shares will, subject to the rights of any other class of shares, be entitled to receive the remaining property of the Company on the basis that each Common Share will be entitled to 0.001 times the amount distributed per Proportionate Voting Share, but otherwise there is no preference or distinction among or between the Proportionate Voting Shares and the Common Shares.

Conversion Rights

Each issued and outstanding Common Share may at any time, at the option of the holder, be converted into 0.001 of a Proportionate Voting Share.

Description of Transactions:

Share Repurchase Authorization

On August 20, 2025, the Board approved a normal course issuer bid program to repurchase up to $10,000 of Common Shares (the "Share Repurchase Program"), which replacedthe 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 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. Common Shares may be purchased on the TSX, the OTCQX, or alternative trading systems and are subject to the limitations and rules imposed by U.S. and Canadian securities regulations. The actual number of Common Shares purchased, timing of purchases and share price depend upon market conditions at the time and securities law requirements. Any Common Shares acquired pursuant to the Share Repurchase Program will be returned to treasury and cancelled. Shareholders may obtain a copy of the Form 12 – Notice of Intention to make a Normal Course Issuer Bid filed by the Company with the TSX, without charge, by contacting the Company.

During the year ended December 31, 2025, the Company repurchased 1,117,500 common shares under its share repurchase programs, consisting of 75,000 Common Shares under the Share Repurchase Program and 1,042,500 Common Shares under the Original Program, for total consideration of approximately$428, including excise tax. As of December 31, 2025, the Company had a total of 9,925,000 shares remaining that can be authorized for repurchase pursuant to the Share Repurchased 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 Company’s Consolidated Balance Sheets as of December 31, 2025 and 2024, as applicable.

Warrants

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

On December 9, 2022, the Company entered into an arrangement with Canopy USA, LLC ("Canopy USA") and certain of its subsidiaries to convert CAD$125,500 in aggregate loans plus accrued interest in exchange for 24,601,467 Exchangeable Shares at a notional price of CAD$5.10 per Exchangeable Share and 22,474,130 new Common Share purchase warrants (the "New Warrants") to acquire Common Shares at a weighted average exercise price of CAD$6.07 per Common Share. In addition, the Company, TerrAscend Canada and Arise Bioscience, Inc. (collectively, "TerrAscend Entities") and Canopy USA, Canopy USA I Limited Partnership ("Canopy USA LP I") and Canopy USA III Limited Partnership ("Canopy USA LP III") entered into a debt settlement agreement (the "Debt Settlement Agreement"), pursuant to which the TerrAscend Entities are required to deliver to Canopy USA LP I and Canopy USA LP III an aggregate of 24,601,467 Exchangeable Shares and New Warrants with exercise prices ranging from CAD$3.74 to CAD$17.19 as consideration for extinguishing the debt obligations, including all principal and interest on the amounts outstanding thereunder. All of the New Warrants expire on December 31, 2032.

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

14. Share-based compensation plans

Share-based payments expense

Total share-based payments expense was as follows:

As of December 31, 2025, the total unrecognized compensation cost related to nonvested stock options was$2,294. The weighted average period over which it is expected to be recognized is 1.89 years for options.

Stock Options

The Company’s 15% rolling Stock Option Plan was originally adopted and approved by the Board effective March 8, 2017 and was most recently amended and restated on June 26, 2023. The Stock Option Plan governs the grant, administration and exercise of options to purchase Common Shares, which may be granted to employees, directors or consultants ("Eligible Persons") of the Company. The number of Common Shares reserved for issuance to any one person under an option granted pursuant to the Stock Option Plan, when combined with the number of Common Shares reserved for issuance under all awards granted within theone-year period prior to the date of grant under all other share compensation plans, including the Stock Option Plan and the Company’s share unit plan (the “RSU Plan”), may not exceed 5%of the issued and outstanding Common Shares at the date of grant on a non-diluted basis, unless the Company has obtained disinterested shareholder approval. Options to purchase Common Shares granted under the Stock Option Plan will have an exercise price not less than the “fair market value” of a Common Share on the date of grant, being the five-day volume weighted average price of the Common Shares based on the date of grant of the option. The exercise price, term and vesting of options to purchase Common Shares shall otherwisebe as approved by the Board. Unless otherwise determined by the Board, options to purchase Common Shares typically vest and become exercisable at a rate of 25% on each of the first four anniversary dates from the date of grant.

The options to purchase Common Shares outstanding noted below consist of service-based options granted to employees, the majority of which vest over a one tofour-year period and have afive toten-year contractual term. These awards are subject to the risk of forfeiture until vested by virtue of continued employment or service to the Company.

The following table summarizes the stock option activity:

The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value (the difference between Company’s closing stock price at the end of the year and the exercise price, multiplied by the number of the in-the-money options) that would have been received by the option holders had all option holders exercised their in-the-money options on December 31, 2025, 2024, and 2023, respectively.

The total pre-tax intrinsic value (the difference between the market price of the Common Shares on the exercise date and the price paid to exercise the option) related to stock options exercised is presented below:

The total estimated fair value of stock options that vested during the years ended December 31, 2025, 2024, and 2023, was $3,849, $5,943, and $5,552, respectively.

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

Volatility was estimated by using the historical volatility of the Company. 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.

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 Company 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 Company’s RSU Plan was approved by the Board effective November 19, 2019, and was most recently amended and restated on June 26, 2023. The RSU Plan governs the grant, administration and release of share units ("RSUs") which may be granted to Eligible Persons of the Company. Pursuant to the RSU Plan, the number of Common Shares that may be reserved for issuance under the RSU Plan and under any other share compensation plans of the Company, including the Stock Option Plan, may not exceed (in the aggregate)15% of the outstanding Common Shares on the date of grant on a non-diluted basis. The Company is required, at all times during the term of the RSU Plan, to reserve and keep available the number of Common Shares necessary to satisfy the requirements of the RSU Plan.

The following table summarizes the activities for the RSUs:

RSUs granted during the year ended December 31, 2025, vest over asix month to four year term. RSUs granted during the year ended December 31, 2024, vest over athree month tofour year term. Of the RSUs granted in 2023,602,183 vested on the grant date, with the remainder vesting over asix month tofour year term.

As of December 31, 2025, there was $2,185 of total unrecognized compensation cost related to unvested RSUs.

15. Non-controlling interest

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

On January 19, 2024, the Company reduced its non-controlling interest through the acquisition of the remaining 50.1% equity in both State Flower and the three Apothecarium dispensaries in California. The carrying amount of non-controlling interest was adjusted by $1,374 and recognized in additional paid in capital and attributed to the parent's equity holders.

The following table summarizes the non-controlling interest activity for the years ended:

16. Related parties

The amounts due to/from related parties consisted of:

(a)

Loans payable: During the year ended December 31, 2025, certain funds controlled by the Company's Executive Chairman, a related party of the Company, invested $1,600 as a member of the loan syndicate, for an aggregate investment of $7,100 of the total loan principal balance of the FG Loan (see Note 10).

(b)

Private Placements: The Private Placements constitute a related party transaction because related persons, which consisted of key management and directors of the Company participated in the transaction. The Company’s Executive Chairman, participated, directly and indirectly, in the Private Placement and acquired 800,002 units for gross proceeds of $1,200. In total, the related persons acquired, in the aggregate,2,000 debentures and 825,734 units in connection with the Private Placements for aggregate gross proceeds of $3,239.

17. Income taxes

The domestic and foreign components of loss from continuing operations before provision for income taxes are as follows:

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.

The provision for income taxes consists of:

The following table reconciles the expected statutory federal income tax to the actual income tax provision:

(a) State taxes in New Jersey, Pennsylvania and Maryland made up the majority (greater than 50 percent) of the tax effect in this category

The Company is subject to income taxes in Canada and the U.S. As the operations of the Company are predominantly U.S. based, the Company has prepared the tax rate table using the U.S. Federal tax rate of 21%.

The principal component of deferred taxes are as follows:

The Company assesses available positive and negative evidence to estimate if it is more likely than not to use certain jurisdiction-based deferred tax assets including net operating loss carryovers. On the basis of this assessment, a valuation allowance was recorded during the year ended December 31, 2025.

As of December 31, 2025, the Company has $138,945 of Canadian net operating loss carryovers that expire at different times, the earliest of which is 2037 for $130. As of December 31, 2025, the Company has $25,633 of domestic federal net operating loss carryovers with no expiration date. As of December 31, 2025, the Company has various state net operating loss carryovers that expire at different times. The statute of limitations with respect to our federal returns remains open for tax years 2022 and forward.

As the Company operates in the cannabis industry, the IRS has taken the position that the Company is subject to the limitations of IRC Section 280E, under which the Company is only allowed to deduct expenses directly related to sales of product. This results in permanent differences between book and taxable income related to ordinary and necessary business expenses that are deemed non-deductible expenditures under IRC Section 280E. Therefore, the Company's effective tax rate can be highly variable and may not necessarily correlate with pre-tax income or loss.

The following table presents a reconciliation of unrecognized tax benefits:

Interest and penalties related to unrecognized tax benefits are recorded as components of the provision for income taxes. As of December 31, 2025 and December 31, 2024, the Company had interest and penalties accrued of $19,803 and $12,809, respectively.

The increase in uncertain tax positions is primarily related to tax positions based on legal interpretations that challenge the Company's tax liability under IRC Section 280E. The Company believes it is reasonably possible that the unrecognized tax benefits will increase over the next 12 months as a result of new tax positions expected to be taken with respect to IRC Section 280E.

During the year, the Company released a portion of uncertain tax benefits and related penalties and interest in the amount of $18,418.

A reconciliation of the beginning and ending amount of uncertain tax liabilities, inclusive of accruals for related penalties and interest, recorded in the consolidated balance sheets for the years presented:

The Company files income tax returns in the U.S. federal jurisdiction, multiple U.S. state jurisdictions, and certain non-U.S. jurisdictions. The Company and its subsidiaries are subject to examination by various U.S. and non-U.S. taxing authorities. The Company is no longer subject to U.S. federal, state, or non-U.S. income tax examinations for tax years prior to 2022, other than items under examination. The Company is currently under examination by the Internal Revenue Service for U.S. federal income tax years 2021 through 2023.

18. General and administrative expenses

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

19. Revenue, net

The Company’s disaggregated revenue by source, primarily due to the Company’s contracts with its external customers were as follows:

For the years ended December 31, 2025, 2024, and 2023, the Company didnot have any single customer that accounted for 10% or more of the Company’s revenue.

20. Finance and other expense

Finance and other expenses were as follows:

21. 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 balance sheets.

Geography

The Company has subsidiaries located in Canada and the United States. For each of the twelve months ended December 31, 2025 and 2024, net revenue was primarily generated from sales in the United States. The Company's retail location in Canada generated$847, $1,042, and $925 for the year ended December 31, 2025, 2024, and 2023, respectively.

The Company had non-current assets by geography of:

22. Capital management

The Company’s objective in managing capital is to ensure a sufficient liquidity position to safeguard the Company’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders. In order to achieve this objective, the Company prepares a capital budget to manage its capital structure. The Company defines capital as borrowings, equity comprised of issued share capital, share-based payments, accumulated deficit, as well as funds borrowed from related parties.

Since inception, the Company has primarily financed its liquidity needs through the issuance of share capital and debt. The equity issuances are outlined in Note 13, debt financings are outlined in Note 10, and convertible debt is outlined in Note 12.

The Company is subject to a financial covenant as a result of its loan payable with its primary lender. The Company was in compliance with its debt covenant as of December 31, 2025. In the event that, in future periods, the Company’s financial results are below levels required to maintain compliance with it covenant, the Company will assess and undertake appropriate corrective initiatives with a view to allowing it to continue to comply with its covenant. Other than the covenant related to loans payable, the Company is not subject to externally imposed capital requirements.

23. 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:

•

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

•

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

•

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 measured at estimated fair value on a recurring basis:

There wereno transfers between the levels of fair value hierarchy during the years ended December 31, 2025 or December 31, 2024.

The valuation approaches and key inputs for each category of assets or liabilities that are classified within Level 1 and Level 2 of the fair value hierarchy are presented below.

Level 1

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

The Company's derivative liability consists of conversion options related to the convertible debenture offering and Union Chill transaction (see Note 12).

The following table summarizes the changes in the derivative liability:

Bifurcated conversion options

The conversion option issued as a part of the June and August 2023 private placement (see Note 12) has been measured at fair value as of December 31, 2025. Key assumptions used in the Black-Scholes Model were as follows:

The conversion option issued as a part of the Union Chill transaction (see Note 12) has been measured at fair value as of December 31, 2025. Key assumptions used in the Black-Scholes Model were as follows:

Risk Management

The Company’s risk exposure and the impact on the Company’s financial instruments are summarized below:

(a) Credit risk

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations. Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash and cash equivalents, and accounts receivable, net. The Company assesses the credit risk of trade receivables by evaluating the aging of trade receivables based on the invoice date. The carrying amounts of trade receivables are reduced through the use of an allowance account and the amount of the loss is recognized in the Consolidated Statements of Operations and Comprehensive Loss. When a trade receivable balance is considered uncollectible, it is written off against the allowance for expected credit losses.

Subsequent recoveries of amounts previously written off are credited against operating expenses in the Consolidated Statements of Operations and Comprehensive Loss. The Company regularly monitors credit risk exposure and takes steps to mitigate the likelihood of these exposures resulting in actual loss. The Company hadno customers whose balance is greater than 10% of total trade receivables as of December 31, 2025.

(b) Liquidity risk

The Company is exposed to liquidity risk, or the risk that the Company will not be able to meet its financial obligations as they become due. The Company manages liquidity risk through ongoing review of its capital requirements. The Company’s objective with respect to its capital management is to ensure it has sufficient cash resources to maintain its ongoing operations.

(c) Market Risk

The significant market risk exposures to which the Company is exposed are foreign currency risk and interest rate risk.

i)

Foreign currency risk:

Foreign currency risk is the risk that a variation in exchange rates between the Canadian dollar and U.S. dollar and other foreign currencies will affect the Company’s operations and financial results.

The Company holds cash and cash equivalents in currencies other than their functional currency. The Company does not currently engage in currency hedging activities to limit the risks of currency fluctuations. Consequently, fluctuations in foreign currencies could have a negative impact on the profitability of the Company's operations. However, as of the year ended December 31, 2025, a 10% change in the value of the U.S. dollar compared to the Canadian dollar would not result in a material impact on unrealized foreign exchange for the Company.

ii)

Interest rate risk:

Interest rate risk is the risk that future cash flows will fluctuate as a result of changes in market interest rates. In respect of financial assets, the Company's policy is to invest excess cash at floating rates of interest in cash equivalents, in order to maintain liquidity, while achieving a satisfactory return. Fluctuations in interest rates impact the value of cash equivalents. The Company’s investments in guaranteed investment certificates bear a fixed rate and are cashable at any time prior to maturity date. The Company does not have significant cash equivalents for the year ended December 31, 2025. The Company’s loans payable have fixed interest rates from 6.00% to 12.75% per annum. All other financial liabilities are non-interest-bearing instruments.

24. Commitments and contingencies

Commitments

As of December 31, 2025, the Company did not have any material commitments.

Legal proceedings

In the ordinary course of business, the Company is involved in a number of lawsuits incidental to its business, including litigation related to intellectual property, product liability, employment, and commercial matters. Although it is difficult to predict the ultimate outcome of these matters, management believes that any ultimate liability would not have a material adverse effect on the Company’s Consolidated Balance Sheets or Consolidated Statements of Operations and Comprehensive Loss. At December 31, 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.

25. Subsequent events

On January 2, 2026, the Company exercised the Union Chill Option and paid the remaining cash consideration of $4,000. Upon exercise, the Company obtained a transferable option to acquire a 65% interest in Union Chill at a nominal exercise price and entered into a series of agreements granting the Company certain protective rights. As a result, the Company determined that it became the primary beneficiary of Union Chill under ASC 810 and began consolidating Union Chill as a VIE as at January 2, 2026. The Company determined it was not the primary beneficiary prior to exercising the 35% option.