TerrAscend Corp.

1. Nature of operations

TerrAscend Corp. (the "Issuer") was incorporated under the Business Corporations Act (Ontario) on March 7, 2017. The Issuer, through its subsidiaries, including TerrAscend Growth Corp. (“TerrAscend”) and its subsidiaries (collectively, the "Company”), is a leading North American cannabis company. TerrAscend has vertically-integrated licensed operations in Pennsylvania, New Jersey, Maryland and California. 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 United States ("United States" or "U.S.") federal law for any purpose, by way of the Controlled Substances Act of 1970.

The Company operates under three state-level reportable segments consisting of New Jersey, Maryland and Pennsylvania, focused on the production and sale of cannabis products. Operations in other states are presented within "All other segments".

The Company owns a portfolio of operating businesses, including:

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TerrAscend New Jersey (“TerrAscend NJ”), a majority-owned operation with five 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 Toronto, Ontario, Canada with a majority-owned dispensary.

The common shares in the capital of the Company ("Common Shares") commenced trading on the Canadian Securities Exchange (the "CSE") on May 3, 2017 under the ticker symbol "TER" and continued trading on the CSE until the listing of the Common Shares on the Toronto Stock Exchange (the "TSX"). Effective July 4, 2023, the Common Shares commenced trading on the TSX under the ticker symbol "TSND". The Common Shares commenced trading on the OTCQX in the United States on October 22, 2018 under the ticker symbol "TRSSF", which was subsequently changed to "TSNDF", effective July 6, 2023. The Company’s registered office is located at 77 City Centre Drive, Suite 501, Mississauga, Ontario, L5B 1M5, Canada.

Summary of significant accounting policies

(a)

Basis of presentation

These unaudited interim condensed consolidated financial statements included herein (the “Consolidated Financial Statements”) of the Company and its subsidiaries were prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP").

The accompanying Consolidated Financial Statements contained in this report are unaudited. In the opinion of management, these Consolidated Financial Statements have been prepared on the same basis as the annual consolidated financial statements and notes thereto of the Company and include all adjustments considered necessary for the fair presentation of the Company’s financial position and operating results. The results for the three and nine months ended September 30, 2026 are not necessarily indicative of the operating results for the year ended December 31, 2026, or any other interim or future periods.

The accompanying Consolidated Financial Statements should be read in conjunction with the audited consolidated financial statements and notes thereto of the Company for the year ended December 31, 2025 contained in the Company's Annual Report on Form 10-K for the year ended December 31, 2025, which was filed with the Securities and Exchange Commission (the "SEC") on March 12, 2026 (the "Annual Report").

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

There were no significant changes to the policies disclosed in Note 2 of the summary of significant accounting policies of the Company’s audited consolidated financial statements for the year ended December 31, 2025 in the Company's Annual Report.

Consolidation

The Company consolidates entities in which it has a controlling financial interest by evaluating whether the entity is a voting interest entity (“VOE”) or a variable interest entity (“VIE”).

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

Subsequent to the 2023 Reorganization, all operations in the United States have a functional currency of the U.S. dollar ("USD"). Canadian operations continue to have a functional currency of the Canadian dollar ("CAD").

Voting Interest Entities

A VOE is an entity in which (1) the total equity investment at risk is deemed sufficient to absorb the expected losses of the entity, (2) the at-risk equity holders, as a group, have all of the characteristics of a controlling financial interest and (3) the entity is structured with substantive voting rights. The Company consolidates the Canadian operations under a VOE model based on the controlling financial interest obtained through Common Shares with substantive voting rights.

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

Variable Interest Entities

A VIE is an entity that lacks one or more characteristics of a controlling financial interest defined under the voting interest model. The Company consolidates VIE when it has a variable interest that provides 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 (the "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 20, 2023 (the "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 of TerrAscend in accordance with ASC 810. Although the Company does not currently hold Class A Shares, the Non-Voting Shares are exchangeable at the Company’s discretion and represent substantially all of the economic interest in the VIE. The investor’s Class A Shares provide only a fixed annual return and do not participate in the residual economics of the VIE, in accordance with the Protection Agreement, which supports the Company’s conclusion that it is the primary beneficiary of TerrAscend.

The Company's U.S. operations are consolidated through the VIE model. Therefore, substantially all of the Company's current assets, non-current assets, current liabilities and non-current liabilities are consolidated through the VIE model.

Accounts receivable, net

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

The following table presents the aging of trade receivables:

Acquisitions

2026 Acquisitions

Aunt Mary's

On September 23, 2026 (the "Aunt Mary's Acquisition Date"), the Company acquired a 35% interest in Aunt Mary's Dispensary LLC ("Aunt Mary's"), a licensed cannabis operator, further expanding its operational footprint in New Jersey. The Company obtained a transferable option to acquire the remaining 65% interest in Aunt Mary's 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 Aunt Mary's under ASC 810 and began consolidating Aunt Mary's as a VIE as of September 23, 2026. The fair value of the non‑controlling interest of the prior owners was determined to be nominal, as all economics flow to the Company through contractual arrangements, leaving no residual economic interest with the prior owners. Subsequent to the acquisition, substantially all earnings are attributed to the Company. The total fair value consideration transferred in connection with the acquisition was $11,967. The fair value consideration was comprised of: (i) $8,967 in cash which included a working capital adjustment of $2,967 and (ii) a $3,000 convertible promissory note bearing interest at a rate of 6.0% per annum and maturing on September 15, 2031 (the "Aunt Mary's Convertible Promissory Note"). For additional information regarding the Aunt Mary’s Convertible Promissory Note, see Note 12.

The following table represents the fair value of assets acquired and liabilities assumed as of the Aunt Mary's 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 30-year period.

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

The accounting for this acquisition remains provisional as of September 30, 2026, primarily with respect to the fair values of intangible assets, goodwill, property and equipment, and deferred tax liabilities. Upon completion of a comprehensive valuation and finalization of the purchase price allocation, the amounts above may be adjusted retrospectively to the acquisition date during the measurement period.

Costs related to this transaction were $280, including legal, accounting, due diligence, and other transaction-related expenses. Of the total amount of transaction costs, $113 was recorded during the three months ended September 30, 2026.

On a standalone basis, had the Company acquired the business on January 1, 2026, sales estimates would have been $8,131 for the nine months ended September 30, 2026 and net income estimate would have been $851. These estimates are presented for informational purposes only and are not necessarily indicative of the results that would have been achieved had the acquisition occurred on that date, or of future results. Actual sales and net income since the Aunt Mary's Acquisition Date are $242 and $121, respectively.

Union Chill

On January 2, 2026 (the "Union Chill Acquisition Date"), the Company acquired a 35% interest in Union Chill Cannabis Company LLC ("Union Chill"), a licensed cannabis operator, expanding its operational footprint in New Jersey. The Company obtained a transferable option to acquire the remaining 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 of January 2, 2026. The fair value of the non‑controlling interest of the prior owners was determined to be nominal, as all economics flow to the Company through contractual arrangements, leaving no residual economic interest with the prior owners. Subsequent to the acquisition, substantially all earnings are attributed to the Company. The total fair value consideration transferred in connection with the acquisition was $13,290. The fair value consideration was comprised of: (i) $4,290 in cash which included a working capital adjustment of $290 and (ii) a $9,000 of convertible promissory note bearing interest at a rate of 6.5% per annum and maturing on December 26, 2029. For additional information regarding the convertible notes, see Note 12.

The following table represents the fair value of assets acquired and liabilities assumed as of the Union Chill 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 30-year period.

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

The accounting for this acquisition remains provisional as of September 30, 2026, primarily with respect to the fair values of intangible assets, goodwill, property and equipment, and deferred tax liabilities. Upon completion of a comprehensive valuation and finalization of the purchase price allocation, the amounts above may be adjusted retrospectively to the acquisition date during the measurement period.

During the nine months ended September 30, 2026, the Company recorded the following measurement period adjustments to the provisional purchase price allocation based on additional information obtained about facts and circumstances that existed as of the acquisition date. The more significant adjustments, which resulted in a corresponding change to goodwill, were as follows:

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An increase to property and equipment in the amount of $670.

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A decrease to intangible assets in the amount of $400.

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An increase to deferred tax liability in the amount of $3,390.

Costs related to this transaction were $222, including legal, accounting, due diligence, and other transaction-related expenses. There were no transaction costs recognized during the three months ended September 30, 2026. The Company recognized $39 of transaction costs during the nine months ended September 30, 2026, and the remaining costs were recognized during 2025.

The transaction was completed on the first business day of the fiscal year; therefore, the unaudited pro forma information is not materially different from the reported amounts. Total sales and net income since the Union Chill Acquisition Date are $8,974 and $1,622, respectively.

Inventory

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

Discontinued operations

TerrAscend Michigan

In June 2025, the Company committed to a plan to exit the Michigan market (the "Michigan Exit"). The Company determined that its decision to exit the Michigan market was considered a strategic shift that would have a major effect on the Company’s operations and financial results and met the criteria for classification as discontinued operations as of June 30, 2025.

In connection with the above, on May 5, 2026, FG Agency Lending LLC, as the administrative agent under the FG Loan Agreement (as defined below), filed an application for receivership under the laws of the State of Michigan in the Oakland County Circuit Court (the “Court”), and each of the following entities related to the Michigan business: WDB Holding MI, Inc., AEY Capital LLC, AEY Holdings, LLC, Thrive Enterprises LLC, Spartan Partners Corporation, Spartan Partners Services LLC, Spartan Partners Licensing LLC, Spartan Partners Holdings, LLC and Spartan Partners Properties LLC (the “Michigan Receivership Entities”) have stipulated to the appointment of a receiver (“Receiver”) which was approved by the Court on May 6, 2026 (the “Michigan Receivership”).

As a result of the Receiver’s authority, in accordance with ASC 810, the Company concluded that it lost control of the Michigan Receivership Entities on May 6, 2026 and deconsolidated such entities as of that date. Upon deconsolidation, the Company derecognized the assets and liabilities of the Michigan Receivership Entities and recognized a gain on deconsolidation of $2,377, which is included in income from discontinued operations, net of tax for the nine months ended September 30, 2026.

In connection with the deconsolidation and in accordance with ASC 810, the Company recognized a retained economic interest of $7,787. The retained economic interest was recognized at fair value in accordance with ASC 825, Financial Instruments, representing the estimated net proceeds from certain Michigan property disposals expected to be remitted to FG Agency Lending LLC, as administrative agent and applied as a prepayment of the FG Loan (as defined below in Note 10). Although the Company will not receive the proceeds directly in cash, the required application of such proceeds will reduce the Company’s outstanding obligation under the FG Loan Agreement (as defined below in Note 10). The FG Loan principal will be reduced when proceeds are remitted to the Agent (as defined below in Note 10) and applied as a prepayment. The retained economic interest is included in other current assets on the Company's unaudited interim condensed consolidated balance sheets (the "Consolidated Balance Sheets"). As of September 30, 2026, the remaining carrying amount of the retained economic interest was $7,352.

The following table summarizes the major classes of assets and liabilities of the Company's Michigan operations ("TerrAscend MI") as of September 30, 2026 and December 31, 2025:

The following table presents the results of operations of TerrAscend MI for the three and nine months ended September 30, 2026 and 2025:

During the nine months ended September 30, 2026, the Company incurred restructuring costs of $114. Total cumulative restructuring costs incurred in connection with the Michigan Exit were $720 asof September 30, 2026, consisting of employee transition costs, notice period and severance payments, and employee benefits. The Company does not expect to incur additional restructuring costs related to the Michigan Exit.

Property and equipment

Property and equipment consisted of:

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

Depreciation expense was $2,301 and $7,002 for the three and nine months ended September 30, 2026, respectively, ($1,914 and $5,778 included in cost of sales) and $2,202 and $6,840 for the three and nine months ended September 30, 2025, respectively, ($1,817 and $5,654 included in cost of sales).

Intangible assets and goodwill

Intangible assets consisted of the following:

Amortization expense was $1,675 and $4,994 for the three and nine months ended September 30, 2026, respectively, ($662 and $1,985 included in cost of sales) and $1,731 and $4,816 for the three and nine months ended September 30, 2025, respectively, ($660 and $1,979 included in cost of sales)

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

As of September 30, 2026, the weighted average amortization period remaining on intangible assets was 21.2 years.

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

Loans payable

The Company's loans payable consisted of the following:

The Company had accrued interest on loans payable of $2,328 and $2,365 as of September 30, 2026 and December 31, 2025, respectively, included in accounts payable and accrued liabilities on the Consolidated Balance Sheets.

FocusGrowth Term Loan

On August 1, 2024, the Issuer and TerrAscend USA, Inc., as guarantor, certain subsidiaries and affiliates of the Company, as borrowers, the lenders party thereto and FG Agency Lending LLC, as administrative agent for the lenders(the “Agent”), entered into a Loan Agreement, dated as of August 1, 2024, which provided for afour-year $140,000 senior secured term loan that was upsized on July 8, 2025 to pay off certain other indebtedness by $79,000 to $219,000 (the “FG Loan” and, such Loan Agreement, as previously amended, the “FG Loan Agreement”), and following which TerrAscend USA, Inc. became a borrower and no longer served as guarantor. The FG Loan bears interest at 12.75% per annum with a maturity date of August 1, 2028 (the "FG Loan Maturity Date"). The FG Loan is guaranteed by the Issuer and is secured by substantially all of the assets of the Borrowers. Depending on the timing of repayment, an exit fee of between 2.0% and 4.0% of the FG Loan (the "Exit Fee") will be due upon either the prepayment, in part or in full, of the FG Loan or the FG Loan Maturity Date.

The FG Loan Agreement also provides for an uncommitted term loan facility of up to $35,000 (the "Uncommitted Term Loan Facility"). The terms of the Uncommitted Term Loan Facility are consistent with the FG Loan. As of September 30, 2026, the Company has drawn $3,105 of the Uncommitted Term Loan Facility with a remaining availability of $31,895.

During the nine months ended September 30, 2026, the Company made aggregate prepayments of $16,501 of principal on the FG Loan, including applicable 3% prepayment fees.

Blue Ridge Promissory Note

In connection with the acquisition of Hempaid, LLC on June 30, 2023 ("Blue Ridge") the Company entered into a promissory note with Blue Ridge bearing interest at 7.0% with a maturity date of June 30, 2027.

Ratio Promissory Note

In connection with the acquisition of the assets of Ratio Cannabis, LLC on May 7, 2025 ("Ratio") the Company entered into a promissory note with Ratio bearing interest at 6.0% per annum with a maturity date of May 7, 2027.

Other Loans

Class A Shares of TerrAscend Growth

In connection with the 2023 Reorganization (see Note 3), TerrAscend issued $1,000 of Class A shares with a 20% guaranteed annual dividend ("Class A Shares") to an investor (the “Investor”) pursuant to the terms of a subscription agreement between TerrAscend and the Investor dated April 20, 2023 (the “Subscription Agreement”). Pursuant to the terms of the Subscription Agreement, TerrAscend holds a call right to repurchase all of the Class A Shares issued to the Investor for an amount equal to the sum of: (a) the Repurchase/Put Price (as defined in the Subscription Agreement); plus (b) the amount equal to 40% of the subscription amount less the aggregate dividends paid to the Investor as of the date of the exercise of the repurchase right. In addition, the Investor holds a put right that is exercisable at any time after four months’ advance written notice following June 28, 2028 to put all (and only all) of the Class A Shares owned by the Investor to TerrAscend at the Repurchase/Put Price, payable in cash or shares. The instrument is considered as a debt for accounting purposes due to the economic characteristics and risks.

Maturities of loans payable

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

The Company is subject to a financial covenant as a result of its loan payable with its primary lender. The Company was in compliance with its financial covenant as of September 30, 2026. In the event that, in future periods, the Company’s financial results are below levels required to maintain compliance with its covenant, the Company will assess and undertake appropriate corrective initiatives with a view to allowing it to continue to comply with its covenant.

Leases

The majority of the Company’s leases are operating leases used primarily for corporate offices and retail. The operating lease periods generally range from 1 to 24 years. The Company hadno finance leases at September 30, 2026 and December 31, 2025.

Amounts recognized in the Consolidated Balance Sheets were as follows:

The Company recognized operating lease expense of $1,136 and $3,576 for the three and nine months ended September 30, 2026, respectively, and $1,307 and $3,785 for thethree and nine months ended September 30, 2025, respectively.

Other information related to operating leases at September 30, 2026 and December 31, 2025 consisted of the following:

Supplemental cash flow information related to leases is as follows:

Undiscounted lease obligations are as follows:

Convertible Debt

On June 23, June 30, and August 2, 2026, the Company entered into subscription agreements with certain accredited investors (the “Debenture Subscription Agreements”) in connection with a private placement offering of secured convertible debentures of the Company (the “2026 Private Placement Convertible Debentures”) and closed the issuance and sale of an aggregate of 22,169 debentures at a purchase price of $1,000 per debenture (the “Debenture Offering”). The Company used $11,124 of the proceeds from the Debenture Offering to retire the Company’s existing senior unsecured convertible debentures that matured on June 23, June 30, and August 2 2026, as described below, with the remaining portion of the proceeds available for mergers and acquisitions, and the repayment or refinancing of indebtedness.

The Company’s existing senior unsecured convertible debentures had an aggregate principal balance of $10,355 which matured on June 23, June 30, and August 2, 2026. Of the principal that matured, certain holders elected to roll over $1,725 into the 2026 Private Placement Convertible Debentures. The $11,124 paid consisted of $8,630 of principal and $2,494 of accrued interest.

The 2026 Private Placement Convertible Debentures mature on September 30, 2031 (the “Maturity Date”) and bear interest at a rate of 8.00% per annum, payable quarterly in arrears in cash, beginning on September 30, 2026. The Company may elect to pay all or any portion of such interest in kind by capitalizing the interest as additional principal (“PIK Interest”). Any PIK Interest will accrue at a rate of 9.00% per annum for the first four interest periods in which PIK Interest is paid and at 10.00%per annum for each additional interest period in which PIK Interest is paid; provided that any Common Shares that are issuable upon conversion of any PIK Interest added to the principal pursuant to the terms of the 2026 Private Placement Convertible Debentures will be subject to TSX approval.

The 2026 Private Placement Convertible Debentures are convertible, in whole or in part, into Common Shares, at the option of the holder, at any time prior to the closeof business on the last business day immediately preceding the Maturity Date, at a conversion price of $0.87 per Common Share. The 2026 Private Placement Convertible Debentures are secured by a second lien on certain assets of the U.S. business and also secured by certain personal property assets of TerrAscend USA, Inc. under a subordinated guaranty and security agreement.

In accordance with ASC 815, Derivatives and Hedging("ASC 815"), 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 Option Pricing Model (the "Black-Scholes Model") (see Note 22). The proceeds are allocated first to the conversion option based on its fair value of $11,879, and the residual was allocated to the host instrument and recorded as convertible debt at a residual value of $9,697, net of transaction costs.

The following table summarizes the Company’s 2026 Private Placement Convertible Debentures activity for the nine months ended September 30, 2026:

On September 16, 2026, the Company issued the Aunt Mary's Convertible Promissory Note. Unless repaid or converted earlier, the outstanding principal and interest shall be due and payable on September 15, 2031 (the "Aunt Mary's Convertible Note Maturity Date"). The convertible promissory note bears interest at the rate of 6.0% per annum payable in quarterly payments within five days following the first business day of each fiscal quarter. The Company may, at its sole discretion, elect PIK Interest which will accrue at a rate of 7.00% per annum for the first four interest periods in which PIK Interest is paid and at 8.00% per annum for each additional interest period in which PIK Interest is paid; provided that any Common Shares that are issuable upon conversion of any PIK Interest added to the principal pursuant to the terms of the Aunt Mary's Convertible Promissory Note will be subject to TSX approval. The Aunt Mary's 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 Aunt Mary's Convertible Note Maturity Date, at a conversion price of $0.79 per Common Share.

In accordance with ASC 815, 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 22). The proceeds are allocated first to the conversion option based on its fair value of $1,888, and the residual was allocated to the host instrument and recorded as convertible debt at a residual value of $1,112.

The following table summarizes the Aunt Mary's Convertible Promissory Note activity for the nine months ended September 30, 2026:

The following table summarizes the Company's convertible promissory note in connection with the acquisition of Union Chill ("Union Chill Convertible Promissory Note") activity for the nine months ended September 30, 2026:

The Company had accrued interest on convertible debt of $150 and $2,171 as of September 30, 2026 and December 31, 2025, respectively, included in accounts payable and accrued liabilities on the Consolidated Balance Sheets.

Shareholders' equity

Share Repurchase Authorization

On August 20, 2026, the Board approved a programto repurchase up to the lesser of 10,000,000 Common Shares or $10,000 of Common Shares (the "Share Repurchase Program"), which replaced the Company's share repurchase program previously in place (the "Previous Program"). The Share Repurchase Program authorizes the Company to repurchase such Common Shares at any time, or from time to time, from August 24, 2026 until August 23, 2027. The Share Repurchase Program authorizes the Company to repurchase up to 58,784 Common Shares daily, which represents 25% of the Company’s average daily trading volume on the TSX of 235,136 Common Shares. Any repurchases under the program may be made by means of open market transactions, negotiated block transactions, or otherwise, including pursuant to a repurchase plan administered in accordance with Rules 10b5-1 and 10b-18 under the Securities Exchange Act of 1934, as amended. The size and timing of any repurchases will depend on price, market and business conditions, and other factors.

As of September 30, 2026, the Company had a total of 9,357,000 Common Shares remaining available for repurchase under the Share Repurchase Program. The following is a summary of the Common Shares that were repurchased for thethree and nine months ended September 30, 2026 and 2025 under the Share Repurchase Program, the Previous Program and the share repurchase program in place prior thereto:

(1) The excise tax accrued in connection with the share repurchases was recorded as an adjustment to the cost basis of repurchased shares in treasury stock and within accrued expenses on the Consolidated Balance Sheets as of September 30, 2026 and December 31, 2025, as applicable.

Warrants

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

Share-based compensation plans

Share-based payments expense

Total share-based payments expense was as follows:

Stock Options

The following table summarizes the stock option activity for the nine months ended September 30, 2026:

(1) Includes options that were canceled and re-granted as part of the repricing of stock options, as further discussed below.

Repricing of Stock Options

On June 24, 2025, the Board approved a repricing of certain outstanding stock options, subject to the holders satisfying a twelve-month service condition. The modification affected 8,279,003 vested and unvested stock options and, in accordance with ASC 718, Stock-Based Compensation, resulted in incremental compensation cost of $868. Upon satisfaction of the service condition, the repricing became effective on June 24, 2026 ("Repricing Effective Date"), and the exercise price of the modified stock options was reduced to $0.26 per Common Share. The incremental compensation cost was recognized over the requisite service period and was fully recognized as of the Repricing Effective Date.

The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value (the difference between the Company’s closing stock price on September 30, 2026 and December 31, 2025, respectively, and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had they exercised their in-the-money options on September 30, 2026 and December 31, 2025, respectively.

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

Volatility was estimated by using the historical volatility of the Company's stock price. The expected life in years represents the period of time that the options issued are expected to be outstanding. The risk-free rate is based on U.S. treasury bond issues with a remaining term approximately equal to the expected life of the options. Dividend yield reflects that the Company has never paid cash dividends and does not expect to pay cash dividends in the foreseeable future.

The total estimated fair value of stock options that vested during the nine months ended September 30, 2026 and 2025 was $1,930 and $3,925, respectively. As of September 30, 2026, total unrecognized compensation cost related to unvested options was $2,035, which is expected to be recognized over a weighted-average period of 2.71 years.

Restricted Share Units

The following table summarizes the activities for the restricted share units ("RSUs") for the nine months ended September 30, 2026:

As of September 30, 2026, total unrecognized compensation cost related to unvested RSUs was $4,123, which is expected to be recognized over a weighted-average period of 2.98 years.

Non-controlling interest

Non-controlling interest consists mainly of a 12.5% minority ownership interest in TerrAscend NJ. During the nine months ended, September 30, 2026, in connection with the acquisition of Aunt Mary's and Union Chill (see Note 5), there was $1,496 and $1,681, respectively, of capital contributions, each in the form of a note receivable in relation to minority ownership interest in TerrAscend NJ.

The following table summarizes the non-controlling interest activity for the nine months ended September 30, 2026:

Related parties

Parties are related if one party has the ability, directly or indirectly, to control or exercise significant influence over the other party in making financing and operating decisions. As of September 30, 2026, certain funds controlled by the Company's Executive Chairman, a related party of the Company, held an aggregate of $7,100 of the outstanding principal balance of the FG Loan as members of the loan syndicate, including $1,600 invested in connection with the July 8, 2025 closing (see Note 10). In addition, during the nine months ended September 30, 2026, a director of the Company participated in the Debenture Offering by acquiring 1,000 convertible debentures for aggregate gross proceeds of $1,000 (see Note 12).

Income taxes

The Company's effective tax rate was 185% and 297% for the three and nine months ended September 30, 2026, respectively, and 979% and 435% for thethree and nine months ended September 30, 2025, respectively.

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

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

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

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

(1) Interest and penalties related to uncertain tax liabilities are recorded as components of the provision for income taxes. As of September 30, 2026 and December 31, 2025, the Company had interest and penalties accrued of $30,093 and $19,803, respectively.

The increase in uncertain tax positions is primarily due to legal interpretations that challenge the application of Section 280E of the Internal Revenue Code of 1986, as amended, to the Company (“280E Tax Position”). The Company believes it is reasonably possible that the unrecognized tax benefits will increase over the next twelve months due to its 280E Tax Position.

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 2024. On April 6, 2026, the Company received correspondence from the U.S. Department of Justice ("DOJ") related to a federal income tax refund previously received by the Company for the 2020 tax year. The correspondence seeks repayment of approximately $9,533, inclusive of estimated interest of $1,172. On or about May 18, 2026, the United States of America filed a complaint to recover an erroneous refund in the United States District Court for the District of New Jersey. The Company is evaluating the matter, believes it has substantive defenses to the assertions raised, and intends to vigorously defend its position. Based on information currently available, the recent rescheduling of medical cannabis, and in consultation with external legal and tax advisors, the Company believes the likelihood of loss is not probable and, accordingly, no liability has been recorded as of September 30, 2026.

General and administrative expenses

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

The Company’s disaggregated net revenue by source, substantially all of which arises from contracts with external customers was as follows:

For the three and nine months ended September 30, 2026 and 2025, the Company didnot have any single customer that accounted for 10% or more of the Company’s revenue.

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

Segment information

Operating Segment

The Company manages its operations through state-level operating segments, focused on the production and sale of cannabis products and regularly monitors for changes in facts and circumstances that may affect its determination of operating segments. Following further evaluation of the aggregation criteria under ASC 280, Segment Reporting, the Company determined that it operates under three reportable segments consisting of New Jersey, Maryland and Pennsylvania. Operations in other states did not meet the quantitative threshold and are presented within All other segments. 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 three reportable segments using gross profit and gross profit margin as its closest measures to GAAP. The CODM monitors these metrics to assess the efficiency of the Company’s production and distribution processes, as well as the effectiveness of pricing strategies.

The following tables summarize financial information for the Company's reportable segments:

(1) Depreciation and amortization included in cost of sales for the three months ended September 30, 2026 and 2025 was $563 and $467 for New Jersey, $623 and $613 for Maryland, $1,307 and $1,314 for Pennsylvania, and $84, and $83 for All other segments, respectively.

(2) The calculation of Gross profit margin is revenue, net less cost of sales, divided by revenue, net.

(1) Depreciation and amortization included in cost of sales for the nine months ended September 30, 2026 and 2025 was $1,682 and $1,480 for New Jersey, $1,859 and $1,761 for Maryland, $3,972 and $4,146 for Pennsylvania, and $250, and $246 for All other segments, respectively.

(2) The calculation of Gross profit margin is revenue, net less cost of sales, divided by revenue, net.

Assets

Information about total assets by segment is not disclosed because such information is not regularly provided to, or used by the CODM.

Geography

The Company has subsidiaries located in Canada and the United States. For the three and nine months ended September 30, 2026, net revenue was primarily generated from sales in the United States. The Company's consolidated retail location in Canada generated net revenue of $197 and $565 for the three and nine months ended September 30, 2026, respectively, and $247 and $644 for thethree and nine months ended September 30, 2025, respectively. Substantially all of the Company's non-current assets are held within its U.S. operations.

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

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

•

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

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

There wereno transfers between the levels of fair value hierarchy during thethree and nine months ended September 30, 2026.

The valuation approaches and key inputs for each category of assets or liabilities that are classified within levels of the fair value hierarchy are presented below:

Level 1

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

Level 2

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

The following table summarizes the changes in the derivative liability:

Bifurcated conversion options

The conversion option bifurcated from the 2026 Private Placement Convertible Debentures (see Note 12) has been measured at fair value as of September 30, 2026 and at initial recognition on June 23, 2026. Key inputs and assumptions used in the Black-Scholes Model were as follows:

The conversion option bifurcated from the Aunt Mary's Convertible Promissory Note has been measured at fair value as of September 30, 2026 and at initial recognition on September 16, 2026. Key assumptions used in the Black-Scholes Model were as follows:

The conversion option bifurcated from the Union Chill Convertible Promissory Note has been measured at fair value as of September 30, 2026 and December 31, 2025. Key assumptions used in the Black-Scholes Model were as follows:

Commitments and contingencies

Commitments

As of September 30, 2026, the Company did not have any material commitments or contingencies.

Legal proceedings

In the ordinary course of business, the Company is involved in a number of lawsuits incidental to its business, including litigation related to intellectual property, product liability, employment, and commercial matters. Although it is difficult to predict the ultimate outcome of these matters, management believes that any ultimate liability would not have a material adverse effect on the Consolidated Financial Statements. As of September 30, 2026 there were no pending lawsuits that could reasonably be expected to have a material effect on the results of the Company’s Consolidated Financial Statements.

Subsequent events

The Company evaluated subsequent events through the filing date of this Quarterly Report on Form 10-Q and determined that there were no subsequent events have occurred that would require recognition or disclosure.