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TerrAscend — Management Reports 2025
Aug 7, 2025
47415_rns_2025-08-07_47d02678-fc8d-4eba-9d32-72b521838724.pdf
Management Reports
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of financial condition and results of operations of TerrAscend Corp. (the "Issuer"), its subsidiaries, TerrAscend Growth Corp. ("TerrAscend") and its subsidiaries (collectively, the "Company") should be read in conjunction with the Company's unaudited interim condensed consolidated financial statements ("Consolidated Financial Statements") and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and the audited consolidated financial information and the notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2024, which was filed with the Securities and Exchange Commission, (the "SEC"), on March 6, 2025, (the "Annual Report"). Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report on Form 10-Q including information with respect to the Company's plans and strategy for its business, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth under "Risk Factors" in the Company's Annual Report, its actual results could differ materially from the results described in or implied by the "Cautionary Note Regarding Forward-Looking Statements" contained in this Quarterly Report on Form 10-Q and in the following discussion and analysis.
Unless otherwise noted, dollar amounts in this Item 2 are in thousands of U.S. dollars.
This Management's Discussion and Analysis ("MD&A") of the financial condition and results of operations of the Company is for the three and six months ended June 30, 2025 and 2024 and the accompanying notes for each respective period.
Overview
The Company is a leading North American cannabis company. The Company has vertically integrated licensed operations in Pennsylvania, New Jersey, Michigan, Maryland and California and a retail operation in Ohio. In addition, the Company has retail operations in Ontario, Canada with a majority-owned dispensary in Toronto, Ontario, Canada. Notwithstanding the fact that various states in the United States have implemented medical marijuana laws or have otherwise legalized the use of cannabis, the use of cannabis remains illegal under U.S. federal law for any purpose, by way of the Controlled Substances Act of 1970.
The Company operates under one reportable segment, which is the cultivation, production and sale of cannabis products.
The Company owns a portfolio of operating businesses, including:
- TerrAscend New Jersey ("TerrAscend NJ"), a majority owned operation with three dispensaries, and a cultivation/processing facility;
- TerrAscend Maryland ("TerrAscend MD"), a wholly-owned operation with four dispensaries, and a cultivation/processing facility;
- TerrAscend Pennsylvania ("TerrAscend PA"), a wholly-owned operation with six dispensaries, and a cultivation/processing facility;
- TerrAscend California ("TerrAscend CA"), a wholly-owned operation with four dispensaries, and a cultivation facility;
- TerrAscend Ohio ("TerrAscend OH"), a wholly-owned operation with one dispensary; and
- TerrAscend Canada Inc. ("TerrAscend Canada"), a cannabis retailer in Ontario, Canada with a majority-owned dispensary in Toronto, Ontario, Canada ("Cookies Canada").
- TerrAscend Michigan ("TerrAscend MI"), a wholly-owned operation with twenty dispensaries, one cultivation facility, one processing facility, and two cultivation/processing facilities which were classified as discontinued operations during the six months ended June 30, 2025.
Recent Developments
- On June 27, 2025, the Company received approval from the board of directors of TerrAscend Corp. (the "Board"), together with TerrAscend Corp.'s consolidated entities, and is currently engaged in an active program to sell the assets of TerrAscend MI, which is expected to be substantially completed in the second half of 2025. As part of the exit plan, the Company intends to sell all of the Company's Michigan assets, including four cultivation and processing facilities, twenty retail dispensaries, and other assets. The actions are expected to include an overall reduction of approximately $21\%$ of the Company's workforce of approximately 1,200 as of June 30, 2025, with most of this reduction expected to occur by the end of the fourth quarter of fiscal year 2025. TerrAscend MI is presented as discontinued operations and has been excluded from continuing operations for all periods presented. Refer to Note 7 in the Consolidated Financial Statements for additional information.
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On May 6, 2025, the Company and a consolidated entity completed the acquisition of certain assets of Ratio Cannabis LLC, a dispensary in Ohio. Under the terms of the purchase agreements entered into in connection with the acquisition, each dated as of March 14, 2025, the Company and a consolidated entity acquired certain assets of Ratio Cannabis for total consideration of $10,300, which was comprised of $5,000 in cash, $1,320 in Common Shares and a seller's note for $3,980 bearing 6% interest with a two-year maturity. The number of Common Shares issued as part of the consideration was calculated based on the twenty (20)-day volume-weighted average price of the Common Shares on the OTCQX for the period ending on May 5, 2025, resulting in the issuance of 4,570,637 Common Shares by the Company on May 6, 2025.
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On May 5, 2025, the Company signed an option agreement to acquire equity interests in, and fully operate, Union Chill Cannabis Company LLC, a dispensary in New Jersey for total consideration of $13,000, which will be comprised of $4,000 in cash and a convertible promissory note for $9,000. The transaction is subject to customary closing conditions and regulatory approvals.
Subsequent Transactions
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On July 18, 2025, Keith Stauffer's resignation as the Company's Chief Financial Officer became effective.
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On July 15, 2025, the Company drew $3,000 of the Uncommitted Term Loan Facility.
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On July 8, 2025, the Incremental Amendment Borrowers, all of which are entities that are consolidated in the financial statements of the Company, became parties to the FG Loan as borrowers pursuant to the FG Loan Amendment, which provided for an additional $79,000 upsize to the existing FG Loan which bears interest at 12.75% per annum and matures on August 1, 2028. The full amount of the FG Loan Amendment of $79,000 was drawn on July 8, 2025, $68,000 of which was used to retire the Pelorus Term Loan, and certain other indebtedness of the Company, in addition to being used for future growth initiatives. As a result, the outstanding obligation under the Pelorus Term Loan were repaid in full and subsequently terminated. In addition, the FG Loan Amendment provides for an Uncommitted Term Loan Facility of up to $35,000. Certain funds controlled by the Company's Executive Chairman, Jason Wild, a related party of the Company, have invested approximately $1,600 under the FG Loan.
Components of Results of Operations
The following discussion sets forth certain components of the Company's unaudited condensed consolidated statements of comprehensive loss as well as factors that impact those items.
Revenue, net
The Company generates revenue from the sale of cannabis products, brands, and services to the U.S. and Canadian markets. Revenues consist of wholesale and retail sales in the legal medical and adult-use market across Canada and in several U.S. states where cannabis has been legalized for medical or adult-use cannabis.
Cost of sales
Cost of sales primarily consists of expenses related to providing cannabis products and services to the Company's customers, including personnel-related expenses, the depreciation of property and equipment, amortization of acquired intangible assets, certain royalties, and other overhead costs.
Operating Expenses
General and administrative
General and administrative ("G&A") expenses consist primarily of personnel costs related to finance, human resources, legal, certain royalties, and other administrative functions. Additionally, G&A expenses include professional fees to third parties, as well as marketing expenses. Moreover, G&A expenses include share-based compensation on options, restricted stock units and warrants. The Company expects that G&A expenses will increase in absolute dollars as the business grows.
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Amortization and depreciation
Amortization and depreciation includes the amortization of intangible assets. Amortization is calculated on a straight-line basis over the following terms:
| Brand intangibles- indefinite lives | Indefinite useful lives |
|---|---|
| Software | 5 years |
| Licenses | 15-30 years |
Depreciation of property and equipment is calculated on a straight-line basis over the estimated useful life of the asset using the following terms:
| Buildings and improvements | 15-30 years |
|---|---|
| Land | Not depreciated |
| Machinery & equipment | 5-15 years |
| Office furniture & production equipment | 3-5 years |
| Right of use assets | Lease term |
| Assets in process | Not depreciated |
Loss from revaluation of contingent consideration
As a result of certain acquisitions, the Company recognized contingent consideration liabilities related to price protection provisions. These provisions may require the Company to issue additional Common Shares to the sellers if subsequent prices fall below certain agreed upon prices. These contingent consideration liabilities are remeasured to fair value at the end of each reporting period using the Black-Scholes Model in which a gain or loss is recognized as a result of the revaluation.
(Gain) loss on fair value of derivative liabilities
The Company issued convertible debt that contains embedded derivative features, which were bifurcated and accounted for separately as derivative instruments. These derivative liabilities are remeasured to fair value at the end of each reporting period using the Black-Scholes Model in which a gain or loss is recognized as a result of the revaluation.
Finance and other expenses
Finance and other expenses consist primarily of interest and accretion expense on the Company's outstanding debt obligations.
Unrealized and realized foreign exchange loss
Unrealized and realized foreign exchange loss represents the loss recognized on the remeasurement of USD denominated cash and other assets recorded in the Canadian dollars functional currency at the Company's Canadian operations.
Provision for income taxes
Provision for income taxes consists of U.S. federal and state income taxes in certain jurisdictions in which the Company conducts business.
Results of Operations - Three Months Ended June 30, 2025 and June 30, 2024
Unless otherwise noted, dollar amounts in this section are in thousands of U.S. dollars.
Continuing Operations
The following tables represent the Company’s results of operations for the three months ended June 30, 2025 and 2024.
Revenue, net
| For the Three Months Ended | |||
|---|---|---|---|
| June 30, 2025 | June 30, 2024 | ||
| (In thousands) | |||
| Revenue, net | $ | 65,006 | $ 67,196 |
| $ change | $ | (2,190) | |
| % change | -3% |
Revenue decreased by $2,190, or 3% from $67,196 for the three months ended June 30, 2024 to $65,006 for the three months ended June 30, 2025. The decrease was primarily due to a $2,592 decline in wholesale revenue, partially offset by a $402 increase in retail revenue.
The $2,592 decrease in wholesale revenue consisted of a $4,438 decline across multiple markets primarily due to price compression. This was partially offset by a $1,846 increase driven by market share growth in Maryland supported by cultivation projects aimed at scaling operations and delivering enhanced product quality.
The $402 increase in retail revenue consisted of $1,242 attributable to acquisitive growth and $1,232 related to strong consumer demand in emerging markets. This was offset by a $2,072 decrease across other markets primarily due to a decrease in foot traffic and average order sizes.
Cost of sales
| For the Three Months Ended | |||
|---|---|---|---|
| June 30, 2025 | June 30, 2024 | ||
| (In thousands) | |||
| Cost of sales | $ | 31,771 | $ 33,837 |
| $ change | $ | (2,066) | |
| % change | -6% | ||
| Cost of sales as a % of revenue | 49% | 50% |
The decrease of $2,066, in cost of sales for the three months ended June 30, 2025 as compared to the three months ended June 30, 2024 was mainly due to a decrease in sales volume. Despite the decline, cost of sales as a percentage of revenue remained relatively flat due to reduced unit costs and improved cost absorption.
General and administrative expense
| For the Three Months Ended | ||
|---|---|---|
| June 30, 2025 | June 30, 2024 | |
| (In thousands) | ||
| General and administrative expense | $ 20,980 | $ 22,632 |
| $ change | $ (1,652) | |
| % change | -7% |
The decrease of $1,652 in general and administrative expense for the three months ended June 30, 2025 as compared to the three months ended June 30, 2024, is primarily driven by a reduction in professional fees and stock-based compensation, slightly offset by an increase in provision for expected credit losses.
Loss from revaluation of contingent consideration
| For the Three Months Ended | ||
|---|---|---|
| June 30, 2025 | June 30, 2024 | |
| (In thousands) | ||
| (Gain) loss from revaluation of contingent consideration | $ (34) | $ 1,827 |
| $ change | $ (1,861) | |
| % change | -102% |
The gain of $34 for the three months ended June 30, 2025, compared to a loss of $1,827 for the three months ended June 30, 2024, reflects a decrease in the fair value of the contingent consideration liability. This change was primarily driven by the Company's issuance of Common Shares, which triggered a reduction in the exercise price under the price protection agreement and significantly lowered the likelihood of additional Common Shares being issued.
Gain on fair value of derivative liabilities
| For the Three Months Ended | ||
|---|---|---|
| June 30, 2025 | June 30, 2024 | |
| (In thousands) | ||
| Gain on fair value of derivative liabilities | $ (279) | $ (2,922) |
| $ change | $ 2,643 | |
| % change | -90% |
The lower gain on derivative liabilities of $279 for the three months ended June 30, 2025 compared the gain of $2,922 for the three months ended June 30, 2024, reflects a reduced fair value impact, as the Company's stock price had already declined significantly in the prior period. As the derivative instruments remain out of the money and the stock price stabilizes at lower levels, subsequent remeasurements result in smaller gains. The warrant liability also expired in the three months ended June 30, 2025.
Provision for income taxes
| For the Three Months Ended | ||
|---|---|---|
| June 30, 2025 | June 30, 2024 | |
| (In thousands) | ||
| Provision for income taxes | $ 9,598 | $ 9,126 |
| $ change | $ 472 | |
| % change | 5% |
The provision for income taxes remained relatively flat with a increase of $472 from $9,126 for the three months ended June 30, 2024 compared to $9,598 for the three months ended June 30, 2025.
Discontinued Operations
Discontinued Operations
For the Three Months Ended
| June 30, 2025 | June 30, 2024 | |
|---|---|---|
| (In thousands) | ||
| (Loss) income from discontinued operations, net of tax | $ (41,701) | $ 48 |
| $ change | $ (41,749) | |
| % change | 86977% |
The change in (loss) income from discontinued operations, net of tax from $48 for the three months ended June 30, 2024 as compared to the loss from discontinued operations, net of tax of $41,701 was primarily due to a $34,959 impairment charge that was recognized in the three months ended June 30, 2025. The impairment charge was 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. The remaining increase in loss resulted from continued market saturation and price compression in Michigan which negatively impacted gross margins.
Results of Operations - Six Months Ended June 30, 2025 and June 30, 2024
Unless otherwise noted, dollar amounts in this section are in thousands of U.S. dollars.
Continuing Operations
The following tables represent the Company's results of operations for the six months ended June 30, 2025 and 2024.
Revenue, net
For the Six Months Ended
| June 30, 2025 | June 30, 2024 | |
|---|---|---|
| (In thousands) | ||
| Revenue, net | $ 129,309 | $ 136,471 |
| $ change | $ (7,162) | |
| % change | -5% |
Revenue decreased by $7,162, or 5% from $136,471 for the six months ended June 30, 2024 to $129,309 for the six months ended June 30, 2025. The decrease was primarily due to a $5,539 decline in wholesale revenue a $1,623 decline in retail revenue.
Wholesale revenue for the six months ended June 30, 2025 and June 30, 2024, reflected similar trends to the three month ended periods previously mentioned with declines across multiple markets primarily due to price compression partially offset by an increase driven by market share growth in Maryland from cultivation projects focused on expansion and high product quality.
Retail revenue for the six months ended June 30, 2025 and June 30, 2024, also followed similar trends to the three month ended periods previously mentioned with positive acquisitive growth and strong consumer demand in emerging markets, offset by lower foot traffic and reduced average order sizes in certain markets.
Cost of sales
For the Six Months Ended
| June 30, 2025 | June 30, 2024 | |
|---|---|---|
| (In thousands) | ||
| Total cost of sales | $ 61,393 | $ 68,942 |
| $ change | $ (7,549) | |
| % change | -11% | |
| Cost of sales as a % of revenue | 47% | 51% |
The decrease of $7,549, in cost of sales for the six months ended June 30, 2025 as compared to the six months ended June 30, 2024 was mainly due to a decrease in sales volume. Cost of sales as a percentage of revenue decreased by 4% due to reduced unit costs and improved cost absorption on higher year-to-date sales.
General and administrative expense
| For the Six Months Ended | ||
|---|---|---|
| June 30, 2025 | June 30, 2024 | |
| (In thousands) | ||
| General and administrative expense | $ 42,129 | $ 43,709 |
| $ change | $ (1,580) | |
| % change | -4% |
The decrease of $1,580 in general and administrative expense for the six months ended June 30, 2025 as compared to the six months ended June 30, 2024 reflected similar trends to the three month ended periods previously mentioned with a reduction in professional fees and stock-based compensation, slightly offset by an increase in provision for expected credit losses.
Loss from revaluation of contingent consideration
| For the Six Months Ended | ||
|---|---|---|
| June 30, 2025 | June 30, 2024 | |
| (In thousands) | ||
| Loss from revaluation of contingent consideration | $ 346 | $ 3,220 |
| $ change | $ (2,874) | |
| % change | -89% |
The loss of $346 for the six months ended June 30, 2025, compared to a loss of $3,220 for the six months ended June 30, 2024, reflects a decrease in the fair value of the contingent consideration liability. This change was primarily driven by the Company's issuance of Common Shares, which triggered a reduction in the exercise price under the price protection agreement and significantly lowered the likelihood of additional Common Shares being issued. There was also an expiration of a contingent consideration liability during the six months ended June 30, 2025.
Gain on fair value of derivative liabilities
| For the Six Months Ended | ||
|---|---|---|
| June 30, 2025 | June 30, 2024 | |
| (In thousands) | ||
| Gain on fair value of derivative liabilities | $ (376) | $ (1,939) |
| $ change | $ 1,563 | |
| % change | -81% |
The lower gain on derivative liabilities of $376 for the six months ended June 30, 2025 compared the gain of $1,939 for the six months ended June 30, 2024, reflects a reduced fair value impact, as the Company's stock price had already declined significantly in the prior period. As the derivative instruments remain out of the money and the stock price stabilizes at lower levels, subsequent remeasurements result in smaller gains. The warrant liability also expired in the six months ended June 30, 2025.
Provision for income taxes
| For the Six Months Ended | ||
|---|---|---|
| June 30, 2025 | June 30, 2024 | |
| (In thousands) | ||
| Provision for income taxes | $ 20,105 | $ 16,779 |
| $ change | $ 3,326 | |
| % change | 20% |
The change in provision for income taxes from $16,779 for the six months ended June 30, 2024 as compared to a provision for income taxes of $20,105 for the six months ended June 30, 2025 was primarily driven by accrued interest and penalties.
Discontinued Operations
Discontinued Operations
For the Six Months Ended
| June 30, 2025 | June 30, 2024 | |
|---|---|---|
| (In thousands) | ||
| Loss from discontinued operations, net of tax | $ (46,305) | $ (5,607) |
| $ change | $ (40,698) | |
| % change | 726% |
The change in loss from discontinued operations, net of tax from $5,607 for the six months ended June 30, 2024 as compared to the loss from discontinued operations, net of tax of $46,305 reflected similar trends to the three month ended periods previously mentioned with a $34,959 impairment charge that was recognized in the six months ended June 30, 2025 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 and continued market saturation and price compression in Michigan which negatively impacted gross margins.
Liquidity and Capital Resources
Unless otherwise noted, dollar amounts in this section are in thousands of U.S. dollars.
| June 30, 2025 | December 31, 2024 | |
|---|---|---|
| Cash and cash equivalents | $ 26,672 | $ 26,381 |
| Restricted Cash | 110 | 606 |
| Current assets | 133,083 | 176,888 |
| Non-current assets | 438,924 | 430,343 |
| Current liabilities | 91,663 | 91,049 |
| Non-current liabilities | 361,957 | 339,366 |
| Working capital | 41,420 | 85,839 |
| Total shareholders' equity | $ 118,387 | $ 176,816 |
The calculation of working capital provides additional information and is not defined under accounting principles generally accepted in the United States of America ("GAAP"). The Company defines working capital as current assets less current liabilities. This measure should not be considered in isolation or as a substitute for any standardized measure under GAAP.
Since its inception, the Company's primary sources of capital have been through the issuance of equity securities or debt facilities, and the Company has received aggregate net proceeds from such transactions totaling $787,388 as of June 30, 2025.
The Company expects to fund any additional future requirements through the following sources of capital:
- cash from ongoing operations.
- market offerings.
- additional debt from additional creditors.
- sale of real property.
- sale leaseback transactions.
- exercise of options and warrants.
The Company had $212,059 in principal amounts of loans payable at June 30, 2025. Of this amount, $703 are due within the next twelve months.
The Company entered into leases for certain premises and offices for which it owes monthly lease payments. The Company had $65,311 in lease obligations. Of this amount, $4,687 are due in the next twelve months.
The Company's undiscounted contingent consideration payable was $1,672 at June 30, 2025, which is due in the next twelve months. The contingent consideration payable relates to the Company's acquisition of the remaining 50.1% equity in both State Flower and three Apothecarium dispensaries in California. The contingent consideration is based upon the price protection of Common Shares issued
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under the terms of the applicable acquisition agreement. The contingent consideration is measured at fair value using the Black-Scholes Model and revalued at the end of each reporting period.
At June 30, 2025, the Company had accounts payable and accrued liabilities of $37,008 and corporate income taxes payable of $12,694.
The Company does not have any off-balance sheet arrangements that have, or are reasonably likely to have, a current or future effect on the Company's results of operations or financial condition, including and without limitation, such consideration as liquidity and capital resources.
The Company intends to meet its capital commitments through any or all of the sources of capital noted above. The Company's objective with respect to its capital management is to ensure it has sufficient cash resources to maintain its ongoing operations and finance future obligations.
Debt Facilities
Unless otherwise noted, dollar amounts in this section are in thousands of U.S. dollars.
| Principal Paid during the Six Months Ended June 30, 2025 | Principal Outstanding as of June 30, 2025 | |
|---|---|---|
| (In thousands) | ||
| FocusGrowth Term Loan | $ — | $ 140,000 |
| Pelorus Term Loan | — | 45,478 |
| Maryland Acquisition Loans | 1,963 | 16,373 |
| FG Bridge Loan | — | 5,193 |
| Ratio Promissory Note | — | 3,980 |
| Other Loans | 3 | 1,035 |
| Total | $ 1,966 | $ 212,059 |
FocusGrowth Term Loan
On August 1, 2024, the Company and TerrAscend USA, Inc., as guarantors, and each of WDB Holding CA, Inc., WDB Holding PA, Inc., Moose Curve Holdings, LLC, Hempaid, LLC and, pursuant to a joinder agreement dated September 30, 2024, WDB Holding MI, Inc., including certain of each of their respective subsidiaries, as borrowers, and FG Agency Lending LLC, as the Administrative Agent entered into a Loan Agreement for a four-year, $140,000 senior-secured term loan Net proceeds of the FG Loan were received in an amount equal to 95% of the $140,000.
The FG Loan bears interest at 12.75% per annum and matures on August 1, 2028. The FG Loan is guaranteed by the Company and TerrAscend USA, Inc. and is secured by substantially all of the assets of the Borrowers. Depending on the timing of repayment, an exit fee of between 2.0% and 4.0% of the outstanding principal balance of the FG Loan will be due upon either the date of prepayment or the FG Loan Maturity Date.
As of June 30, 2025, there was an outstanding principal amount of $140,000 under the FG Loan.
Subsequent to June 30, 2025, TerrAscend Growth Corp., 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, became parties to the FG Loan as borrowers pursuant to a joinder agreement, and through the FG Loan Amendment, which provided for an additional $79,000 upsize to the existing FG Loan. Additionally, the Amendment provides for the $35,000 Uncommitted Term Loan Facility. The full amount of the FG Loan Amendment of $79,000 was drawn on July 8, 2025, $68,000 of which was used to retire the Pelorus Term Loan, and certain other indebtedness of the Company, in addition to being used for future growth initiatives.
On July 15, 2025, the Company drew $3,000 of the Uncommitted Term Loan Facility.
Pelorus Term Loan
On October 11, 2022, subsidiaries of TerrAscend, among others, entered into a loan agreement with Pelorus Fund REIT, LLC for a single-draw senior secured term loan in an aggregate principal amount of $45,478. The Pelorus Term Loan is based on a variable rate tied to one month SOFR, subject to a base rate, plus 9.5%, with interest-only payments for the first 36 months and matures on October 11, 2027. The base rate is defined as, on any day, the greatest of: (i) 2.5%, (b) the effective federal funds rate in effect on such day plus
0.5%, and (c) one month SOFR in effect on such day. The obligations of the borrowers under the Pelorus Term Loan are guaranteed by the Company, TerrAscend USA and certain other subsidiaries of the Company and are secured by all of the assets of TerrAscend's New Jersey businesses and certain assets of TerrAscend's Maryland business, including certain real estate in Maryland. The Pelorus Term Loan is not secured by any of the MD dispensaries.
On April 17, 2023, TerrAscend NJ agreed to an amendment to the Pelorus Term Loan to, among other things: (i) permit changes necessary for the TSX Transaction (as defined in the Pelorus Term Loan), and (ii) waive certain tax provisions. On June 22, 2023, TerrAscend NJ agreed to a further amendment to the Pelorus Term Loan to permit the Company to incur certain indebtedness. This amendment was not considered an extinguishment of debt under ASC 470, Debt.
As of June 30, 2025, there was an outstanding principal amount of $45,478 under the Pelorus Term Loan.
Subsequent to June 30, 2025, on July 8, 2025, the Company retired the Pelorus Term Loan and paid the outstanding principal amount of $45,478.
Maryland Acquisition Loans
In connection with the Maryland Acquisitions, the Company entered into a series of promissory notes with an aggregate principal amount of $20,625 that bear interest at rates ranging from 7.0% to 10.75% with maturity dates ranging from June 28, 2025 to June 30, 2027.
As of June 30, 2025, there was an outstanding principal amount of $16,373 under the promissory notes related to the Maryland acquisitions.
Subsequent to June 30, 2025, on July 8, 2025, the Company retired a series of promissory notes and paid an outstanding principal amount of $12,877.
Ratio Acquisition Loans
On May 6, 2025, the Company and Ohio Dispensing 1, LLC, a consolidated entity of the Company, completed the acquisition of certain assets of Ratio Cannabis LLC, a dispensary in Ohio. In connection with the Ratio Acquisition, Ohio Dispensing 1, LLC, and FG Agency Lending LLC, as the Administrative Agent entered into a Loan Agreement for a $5,208 term loan. The FG Bridge Loan bears interest at 12.75% per annum and matures on November 2, 2025.
As of June 30, 2025, there was an outstanding principal amount of $5,193 under the FG Bridge Loan.
Subsequent to June 30, 2025, the Company retired the FG Bridge Loan and paid the outstanding principal amount of $5,280.
Additionally, as a part of the Ratio Acquisition, the Company entered into a promissory note for $3,980 bearing 6% interest with a two-year maturity.
As of June 30, 2025, there was an outstanding principal amount of $3,980 under the Ratio Promissory Note.
Class A Share of TerrAscend Growth
In connection with the listing of the Common Shares on the TSX, the Company reorganized its ownership structure to segregate the Company's Canadian retail operations from TerrAscend's cultivation and manufacturing operations in the United States. As a result, TerrAscend issued Class A Shares to the Investor pursuant to the terms of the Subscription Agreement. Pursuant to the terms of the Subscription Agreement, TerrAscend holds a call right to repurchase all of the Class A Shares issued to the Investor for an amount equal to the sum of: (a) the Repurchase/Put Price (as defined in the Subscription Agreement); plus (b) the amount equal to 40% of the subscription amount less the aggregate dividends paid to the Investor as of the date of the exercise of the option. In addition, the Investor holds a put right that is exercisable at any time after four months' advanced written notice following the five-year anniversary of the closing of the investment to put all (and only all) of the Class A Shares owned by the Investor to TerrAscend at the Repurchase/Put Price, payable in cash or shares. The instrument is considered as a debt for accounting purposes due to the economic characteristics and risks. As of June 30, 2025, there was an outstanding principal amount of $1,000.
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Share Repurchases
Unless otherwise noted, dollar amounts in this section are in thousands of U.S. dollars.
On August 20, 2024, the Board approved a share repurchase program to repurchase up to $10,000 of Common Shares. The share repurchase program authorizes the Company to repurchase up to 10,000,000 Common Shares of the Company at any time, or from time to time, from August 22, 2024 until August 21, 2025. The share repurchase program authorizes the Company to repurchase up to 65,361 Common Shares daily, which represents 25% of the Company's average daily trading volume on the TSX of 261,445 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.
During the second quarter of 2025, the Company repurchased 535,000 common shares under the share repurchase program for total consideration of approximately $157. As of June 30, 2025, the Company had a total of 8,720,600 Common Shares remaining that can be authorized for repurchase.
Cash Flows
Unless otherwise noted, dollar amounts in this section are in thousands of U.S. dollars.
Cash flows provided by operating activities
| For the Six Months Ended | ||
|---|---|---|
| June 30, 2025 | June 30, 2024 | |
| Net cash provided by operating activities | $ 10,821 | $ 26,139 |
The decrease of $15,318 in net cash provided by operating activities for the six months ended June 30, 2025 as compared to six months ended June 30, 2024 is primarily driven by an increase in working capital including a reduction of accounts payable and an increase in income taxes paid.
Cash flows used in investing activities
| For the Six Months Ended | ||
|---|---|---|
| June 30, 2025 | June 30, 2024 | |
| Net cash used in investing activities | $ (11,118) | $ (4,843) |
The increase of $6,275 in net cash used in investing activities for the six months ended June 30, 2025 as compared to six months ended June 30, 2024 is primarily driven by the cash consideration paid of $5,261 for the Ratio Cannabis acquisition in the second quarter of 2025.
Cash flows provided by (used in) financing activities
| For the Six Months Ended | ||
|---|---|---|
| June 30, 2025 | June 30, 2024 | |
| Net cash provided by (used in) financing activities | $ 283 | $ (16,542) |
The change of $16,825 in net cash provided by (used in) financing activities for the six months ended June 30, 2025 as compared to the six months ended June 30, 2024 is primarily driven by $5,000 of loan proceeds, net of transaction costs, related to the Ratio Cannabis acquisition. The change also reflects fewer loan principal payments due during the six months ended June 30, 2025 as a result of debt refinancing and paydowns completed in 2024.
Reconciliation of Non-GAAP Measures
Unless otherwise noted, dollar amounts in this section are in thousands of U.S. dollars.
In addition to reporting the financial results in accordance with GAAP, the Company reports certain financial results that differ from what is reported under GAAP. Non-GAAP measures used by management do not have any standardized meaning prescribed by GAAP and may not be comparable to similar measures presented by other companies. The Company believes that certain investors and analysts use these measures to measure a company's ability to meet other payment obligations or as a common measurement to value companies in the cannabis industry, and the Company calculates: (i) Free cash flow from net cash provided by operating activities from continuing operations less capital expenditures for property and equipment which management believes is an important measurement of the Company's ability to generate additional cash from its business operations, and (ii) EBITDA from continuing operations and Adjusted EBITDA from continuing operations as net loss, adjusted to exclude provision for income taxes, finance expenses, depreciation and amortization, share-based compensation, unrealized and realized (gain) loss on investments, (gain) loss from revaluation of contingent consideration, unrealized and realized foreign exchange (gain) loss, gain on fair value of derivative liabilities, impairment of property and equipment and right of use assets, gain on lease terminations, and certain other items, which management believes is not reflective of the ongoing operations and performance of the Company. Such information is intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP.
The Company believes Adjusted EBITDA from continuing operations is a useful performance measure to assess the performance of the Company as it provides more meaningful ongoing operating results by excluding the effects of expenses that are not reflective of the Company's underlying business performance and other one-time or non-recurring expenses. The table below reconciles net loss to EBITDA from continuing operations and Adjusted EBITDA from continuing operations for the three and six months ended June 30, 2025 and 2024:
| For the Three Months Ended | For the Six Months Ended | ||||
|---|---|---|---|---|---|
| Notes | June 30, 2025 | June 30, 2024 | June 30, 2025 | June 30, 2024 | |
| (In thousands) | |||||
| Net loss | $ (48,107) | $ (6,237) | $ (60,376) | $ (21,088) | |
| Loss (income) from discontinued operations | 41,701 | (48) | 46,305 | 5,607 | |
| Loss from continuing operations | (6,406) | (6,285) | (14,071) | (15,481) | |
| Add (deduct) the impact of: | |||||
| Provision for income taxes | 9,598 | 9,126 | 20,105 | 16,779 | |
| Finance expenses | 8,962 | 8,745 | 17,383 | 17,140 | |
| Amortization and depreciation | 3,784 | 3,780 | 7,729 | 7,576 | |
| EBITDA from continuing operations | (a) | 15,938 | 15,366 | 31,146 | 26,014 |
| Add (deduct) the impact of: | |||||
| Share-based compensation | (b) | 779 | 1,960 | 2,293 | 3,445 |
| Unrealized and realized (gain) loss on investments | (c) | (7) | 227 | 735 | 227 |
| (Gain) Loss from revaluation of contingent consideration | (d) | (34) | 1,827 | 346 | 3,220 |
| Gain on fair value of derivative liabilities | (e) | (279) | (2,922) | (376) | (1,939) |
| Unrealized and realized foreign exchange (gain) loss | (f) | (648) | 104 | (607) | 389 |
| Impairment of property and equipment and right of use assets | (g) | — | — | — | 2,438 |
| Gain on lease termination | (h) | — | (1,169) | — | (1,169) |
| Other one-time items | (i) | 267 | 1,879 | 625 | 2,665 |
| Adjusted EBITDA from continuing operations | $ 16,016 | $ 17,272 | $ 34,162 | $ 35,290 |
a) EBITDA from continuing operations is a non-GAAP measure and is calculated from net loss.
b) Represents non-cash share-based compensation expense.
c) Represents unrealized and realized loss on fair value changes investments.
d) Represents the revaluation of the Company's contingent consideration liabilities.
e) Represents the gain on fair value of conversion options.
f) Represents the remeasurement of USD denominated cash and other assets recorded in CAD functional currency.
g) Represents impairment charges taken on the Company's property and equipment and right of use assets.
h) Represents the gain taken as a result on lease termination.
i) Includes one-time fees incurred primarily in connection with the Company's acquisitions and other costs considered one-time in nature, such as expenses related to professional, consulting, legal, and accounting fees. These fees are not indicative of the Company's ongoing costs.
Adjusted EBITDA from continuing operations was relatively flat for the three and six months ended June 30, 2025 as compared to three and six months ended June 30, 2024.
The table below reconciles net cash provided by operating activities from continuing operations to free cash flow for the six months ended June 30, 2025 and 2024:
| For the Six Months Ended | ||
|---|---|---|
| June 30, 2025 | June 30, 2024 | |
| (In thousands) | ||
| Net cash provided by operating activities - continuing operations | $ 18,479 | $ 33,316 |
| Capital expenditures for property and equipment | (4,650) | (4,094) |
| Free Cash Flow | $ 13,829 | $ 29,222 |
Critical Accounting Estimates and Policies
The Consolidated Financial Statements have been prepared in accordance with GAAP. The preparation of these condensed consolidated financial statements requires the Company to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosures. The Company bases its estimates on historical experience and assumptions on an ongoing basis. Actual results may differ from these estimates. To the extent that there are material differences between these estimates and actual results, the Company's future financial statements will be affected.
There have been no significant changes to the critical accounting estimates from the information provided in Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations", as contained in the Company's Annual Report on Form 10-K for the year ended December 31, 2024.
Emerging Growth Company Status
The Company is an emerging growth company, as defined in the Jumpstart Our Business Startups Act of 2012 (the "JOBS Act"). Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. The Company has elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that the Company (i) is no longer an emerging growth company or (ii) affirmatively and irrevocably opts out of the extended transition period provided in the JOBS Act. As a result, the Company's Consolidated Financial Statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of public company effective dates.
The Company will remain an emerging growth company until the earlier to occur of: (i) December 31, 2027 (a) in which the Company has total annual gross revenue of $1,235,000 or more, or (b) in which the Company is deemed to be a large accelerated filer, which means the market value of the Company's Common Shares that are held by non-affiliates exceeds $700,000 as of the last business day of the Company's most recent second fiscal quarter; and (ii) the date on which the Company has issued more than $1,000,000 in non-convertible debt during the prior three-year period.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
There have been no material changes in the Company's primary risk exposures or management of market risks from those disclosed in its Annual Report on Form 10-K for the fiscal year ended December 31, 2024.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
The Company's management, with the participation of its Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company's disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act), as of the end of the period covered by this Quarterly Report on Form 10-Q. Based upon that evaluation, the Company's Chief Executive Officer and Chief Financial Officer concluded that, as of June 30, 2025, the Company's disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms and to provide reasonable assurance that such information is accumulated and
communicated to the Company's management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
There were no changes in the Company's internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended June 30, 2025, that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.
Limitations on Effectiveness of Controls and Procedures
In designing and evaluating the Company's disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.
PART II—OTHER INFORMATION
Item 1. 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, employment, and commercial matters. Although it is difficult to predict the ultimate outcome of these matters, management believes that any ultimate liability would not have a material adverse effect on the Consolidated Balance Sheets or results of operations. As of June 30, 2025, there were no pending lawsuits that could reasonably be expected to have a material effect on the results of the Company's Consolidated Financial Statements.
Item 1A. Risk Factors.
Investing in the Company's Common Shares involves a high degree of risk. Please refer to Part I, Item 1A, "Risk Factors" in the Company's Annual Report for a description of the material risks and uncertainties to which the Company's business, financial condition and results of operations are subject. The Company may disclose changes to risk factors or disclose additional factors from time to time in its future filings with the SEC. Additional risks and uncertainties not presently known to the Company or that the Company currently deems immaterial may impair its business operations. There have been no material changes to the risk factors previously disclosed in Part I, Item 1A, "Risk Factors" in the Company's Annual Report.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Unless otherwise noted, dollar amounts in this section are in thousands of U.S. dollars.
On August 20, 2024, the Board approved a share repurchase program to repurchase up to $10,000 of Common Shares. The share repurchase program authorizes the Company to repurchase up to 10,000,000 Common Shares of the Company at any time, or from time to time, from August 22, 2024 until August 21, 2025. The share repurchase program authorizes the Company to repurchase up to 65,361 Common Shares daily, which represents 25% of the Company's average daily trading volume on the TSX of 261,445 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
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of 1934, as amended. The size and timing of any repurchases will depend on price, market and business conditions, and other factors. During the second quarter of 2025, the Company repurchased Common Shares as set forth below:
| Period | Total Number of Common Shares Purchased | Weighted Average Price Paid per Share | Total Number of Common Shares as Part of a Publicly Announced Program | Number of Common Shares that may yet be Purchased under the Program |
|---|---|---|---|---|
| April 1 through April 30, 2025 | — | $ — | — | 9,255,600 |
| May 1 through May 31, 2025 | 141,000 | $ 0.38 | 141,000 | 9,114,600 |
| June 1 through June 30, 2025 | 394,000 | $ 0.26 | 394,000 | 8,720,600 |
| For the Quarter Ended June 30, 2025 | 535,000 | $ 0.29 | 535,000 | 8,720,600 |
ABI SF LLC Issuance
As previously disclosed, on January 23, 2020, the Company and certain consolidated entities acquired 49.9% of the outstanding equity interests in ABI SF, LLC. On January 19, 2024, the Company entered into an amendment to the original purchase agreement, pursuant to which the Company acquired the remaining 50.1% of outstanding equity interests in ABI SF, LLC. Pursuant to the amendment to the original purchase agreement, on June 2, 2025, the Company issued an aggregate of 2,119,451 common shares to the seller parties thereto at a price of $0.38 per share, which represents the twenty (20)-day volume-weighted average price of the Company's common shares on the OTCQX for the period ending on May 20, 2025, for a total approximate aggregate value of $805.
The securities described above were offered and sold in reliance upon (i) an exemption from registration provided by Section 4(a)(2) of the Securities Act, and (ii) exemptions from the formal valuation and minority shareholder approval requirements of MI 61-101 contained in sections 5.5(a) and 5.7(1)(a) of MI 61-101 in respect of the Insider Participation as the fair market value (as determined under MI 61-101) of the Insider Participation in the Private Placement is below 25% of the Company's market capitalization (as determined in accordance with MI 61-101).
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
Unless otherwise noted, dollar amounts in this section are in thousands of U.S. dollars.
Disclosure in Lieu of Form 8-K Reporting
On June 30, 2025, the Company filed a Current Report on Form 8-K (the "Original Form 8-K") disclosing, among other things, the approval by the Board of certain restructuring actions related to the Company's exit from the Michigan market, which is discussed under the caption "Recent Developments" in Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations in this Quarterly Report on Form 10-Q.
At the time of the filing of the Original Form 8-K, the Company was unable to make a good faith determination of an estimate or range of estimates required by paragraphs (b), (c) and (d) of Item 2.05 of Form 8-K with respect to the foregoing. The following disclosure amends, updates and restates the disclosure contained in Item 2.05 of the Original Form 8-K for the purpose of providing these estimates and serves as the required amendment to the Original Form 8-K.
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Under Items 2.05 Costs Associated with Exit or Disposal Activities.
As previously disclosed, on June 27, 2025, the Board approved certain restructuring actions related to the Company’s exit from the Michigan market, aimed at enabling the Company to focus on its operations in its more profitable markets. As part of the exit plan, the Company intends to sell of the Company’s Michigan assets, including four cultivation and processing facilities, twenty retail dispensaries and real estate. The actions are expected to include an overall reduction of approximately 21% of the Company’s workforce of approximately 1,200 as of June 30, 2025, with most of this reduction expected to occur by the end of the fourth quarter of fiscal year 2025. The Company expects the workforce reduction to comply with applicable laws. As a result, the Company estimates that it will incur approximately $1,050 to $1,200 in cash expenditures for employee transition, notice period and severance payments, and employee benefits.
The Company is currently engaged in an active program to sell the assets of TerrAscend MI, which is expected to be substantially completed in the second half of 2025. TerrAscend MI is presented as discontinued operations and has been excluded from continuing operations for all periods presented. As a result, the Company recognized a total impairment loss of $34,959 on certain buildings, equipment and leasehold improvements. Refer to Note 7 in the Consolidated Financial Statements for additional information.
Upon full implementation, the company expects the plan to result in reduced annual run-rate expenses by more than $200,000 by the end of its 2025 fiscal year. We may not be able to realize the cost savings and benefits initially anticipated, and costs may be greater than expected.
Item 5.02 of Form 8-K. Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
On August 6, 2025, the Board appointed Ziad Ghanem as Principal Financial Officer of the Company in addition to his current role as President and Chief Executive Officer, effective immediately.
Item 6. Exhibits.
| Exhibit Number | Description | Description of Exhibit Incorporated Herein by Reference | Filed Herewith | |||
|---|---|---|---|---|---|---|
| Form | File No. | Exhibit | Filing Date | |||
| 3.1 | Articles of TerrAscend Corp., dated March 7, 2017. | 10-12G | 000-56363 | 3.1 | 11/02/2021 | |
| 3.2 | Articles of Amendment to the Articles of TerrAscend Corp., dated November 30, 2018. | 10-12G/A | 000-56363 | 3.2 | 12/22/2021 | |
| 3.3 | Articles of Amendment to the Articles of TerrAscend Corp., dated May 22, 2020. | 10-12G/A | 000-56363 | 3.3 | 12/22/2021 | |
| 3.4 | By-laws of TerrAscend Corp., dated March 7, 2017. | 10-12G | 000-56363 | 3.3 | 11/02/2021 | |
| 31.1 | Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | X | ||||
| 31.2 | Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | X | ||||
| 32.1* | Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | X | ||||
| 32.2* | Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | X | ||||
| 101.INS | Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document. | X | ||||
| 101.SCH | Inline XBRL Taxonomy Extension Schema With Embedded Linkbase Documents | X | ||||
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) | X |
- This certification accompanies the Form 10-Q to which it relates, is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by reference into any filing of TerrAscend Corp. under the Securities Exchange Act of 1934, as amended (whether made before or after the date of the Form 10-Q), irrespective of any general incorporation language contained in such filing.
Certain information contained in this agreement has been omitted because it is not material and is the type that the registrant treats as private or confidential.
† Certain schedules and exhibits have been omitted pursuant to Item 601(a)(5) of Regulation S-K. A copy of any omitted schedule or exhibit will be furnished supplementally to the Securities and Exchange Commission upon request.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
TerrAscend Corp.
Date: August 7, 2025
By: _____ /s/ Ziad Ghanem
Ziad Ghanem
President and Chief Executive Officer
(Principal Executive Officer and Principal Financial Officer)