Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☒ No ☐

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ☒ No ☐

As of ~~May 11,~~August 9, 2022, the registrant had ~~251,991,026~~252,907,618 shares of common stock, $0.01 par value per share, outstanding.

This Quarterly Report on Form 10-Q contains statements that TerrAscend Corp. (“TerrAscend” or the “Company”) believes are, or may be considered to be, “forward-looking statements.” All statements other than statements of historical fact included in this Quarterly Report on Form 10-Q regarding the prospects of the Company’s industry or the Company’s prospects, plans, financial position or business strategy may constitute forward-looking statements. Such statements can be identified by the use of forward-looking terminology such as “expect”, “likely”, “may”, “will”, “should”, “intend”, “anticipate”, “potential”, “proposed”, “estimate” and other similar words, including negative and grammatical variations thereof, or statements that certain events or conditions “may” or “will” happen, or by discussions of strategy. Forward-looking statements include estimates, plans, expectations, opinions, forecasts, projections, targets, guidance, or other statements that are not statements of fact. Forward-looking statements in this Quarterly Report on Form 10-Q include, but are not limited to, statements with respect to:

Certain of the forward-looking statements contained herein concerning the cannabis industry and the general expectations of the Company concerning the cannabis industry are based on estimates prepared by the Company using data from publicly available governmental sources as well as from market research and industry analysis and on assumptions based on data and knowledge of the cannabis industry. Such data is inherently imprecise. The cannabis industry involves risks and uncertainties that are subject to change based on various factors, which factors are described further below.

With respect to the forward-looking statements contained in this Quarterly Report on Form 10-Q, the Company has made assumptions regarding, among other things: (i) its ability to generate cash flows from operations and obtain necessary financing on acceptable terms; (ii) general economic, financial market, regulatory and political conditions in which the Company operates; (iii) the output from the Company’s operations; (iv) consumer interest in the Company’s products; (v) competition; (vi) anticipated and unanticipated costs; (vii) government regulation of the Company’s activities and products and in the areas of taxation and environmental protection; (viii) the timely receipt of any required regulatory approvals; (ix) the Company’s ability to obtain qualified staff, equipment and services in a timely and cost efficient manner; (x) the Company’s ability to conduct operations in a safe, efficient and effective manner; and (xi) the Company’s construction plans and timeframe for completion of such plans.

Readers are cautioned that the above list of cautionary statements is not exhaustive. Known and unknown risks, many of which are beyond the control of the Company, could cause actual results to differ materially from the forward-looking statements in this Quarterly Report on Form 10-Q. Such risks and uncertainties include, but are not limited to, current and future market conditions; risks related to federal, state, provincial, territorial, local and foreign government laws, rules and regulations, including federal and state laws in the United States relating to cannabis operations in the United States; and those discussed under Item 1A – “Risk Factors” in this Quarterly Report on Form 10-Q. The purpose of forward-looking statements is to provide the reader with a description of management’s expectations, and such forward-looking statements may not be appropriate for any other purpose. You should not place undue reliance

on forward-looking statements contained in this Quarterly Report on Form 10-Q. The Company can give no assurance that such expectations will prove to have been correct. Forward-looking statements contained herein are made as of the date of this Quarterly Report on Form 10-Q and are based on the beliefs, estimates, expectations and opinions of management on the date such

forward-looking statements are made. The Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, estimates or opinions, future events or results or otherwise or to explain any material difference between subsequent actual events and such forward-looking statements, except as required by applicable law.

(Amounts expressed in thousands of United States dollars, except for per share amounts)

The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.

Unaudited Interim Condensed Consolidated Statements of Operations and Comprehensive ~~Loss~~Income (Loss)

(Amounts expressed in thousands of United States dollars, except for per share amounts)

The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.

Unaudited Interim Condensed Consolidated Statements of Changes in Shareholders’ Equity (Deficit)

(Amounts expressed in thousands of United States dollars, except for per share amounts)


	Number of Shares																																				Number of Shares
								Convertible Preferred Stock																																	Convertible Preferred Stock
	Common Stock		Exchangeable Shares		Proportionate Voting Shares			Series A			Series B			Series C			Series D			Common Shares Equivalent		Additional paid in capital			Accumulated other comprehensive income (loss)			Accumulated deficit			Non-controlling interest			Total			Common Stock		Exchangeable Shares		Series A			Series B		Series C		Series D		Common Shares Equivalent		Additional paid in capital			Accumulated other comprehensive income (loss)			Accumulated deficit			Non-controlling interest			Total
Balance at December 31, 2020		79,526,785		38,890,571		76,307			14,258			710			—			—			209,692,379	$	305,138		$	(3,662	)		(318,594	)		3,802		$	(13,316	)
Balance at March 31, 2022																																						251,971,226		52,395,071		13,358			610		—		—		318,334,501	$	850,386		$	(783	)		(329,855	)		5,491		$	525,239
Shares issued - stock option, warrant and RSU exercises		1,970,936		—					—			—			87			1,315			3,372,936		25,298			—			—			—			25,298			36,099		—		—			—		—		—		36,099		1,041			—			—			—			1,041
Private placement net of share issuance costs		18,115,656		—					—			—			—			—			18,115,656		173,477			—			—			—			173,477
Shares issued- conversion		78,058,768		—		(76,307	)		(250	)		(100	)		(87	)		(1,315	)		—		560			—			—			—			560			700,000		—		(700	)		—		—		—		—		—			—			—			—			—
Share-based compensation expense		—		—					—			—			—			—			—		3,567			—			—			—			3,567			—		—		—			—		—		—		—		4,463			—			—			—			4,463
Options expired/forfeited		—		—					—			—			—			—			—		(53	)		—			53			—			—			—		—		—			—		—		—		—		(1,506	)		—			1,506			—			—
Conversion of convertible debt		1,284,221		—					—			—			—			—			1,284,221		5,656			—			—			—			5,656
Capital Contribution		—		—					—			—			—			—			—		—			—			—			(160	)		(160	)		—		—		—			—		—		—		—		564			—			—			(221	)		343
Net loss for the period		—		—					—			—			—			—			—		—			—			(14,174	)		63			(14,111	)
Net income for the period																																						—		—		—			—		—		—		—		—			—			13,217			945			14,162
Foreign currency translation		—		—					—			—			—			—			—		—			2,189			—			—			2,189			—		—		—			—		—		—		—		—			(280	)		—			—			(280	)
Balance at March 31, 2021		178,956,366		38,890,571		—			14,008			610			—			—			232,465,192	$	513,643		$	(1,473	)	$	(332,715	)	$	3,705		$	183,160
Balance at June 30, 2022																																						252,707,325		52,395,071		12,658			610		—		—		318,370,600	$	854,948		$	(1,063	)	$	(315,132	)	$	6,215		$	544,968

The accompanying notes are an integral part of these unaudited condensed consolidated interim financial statements

(Amounts expressed in thousands of United States dollars, except for per share amounts)

The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.

(Amounts expressed in thousands of United States dollars, except for per share amounts)

1. Nature of operations

TerrAscend ~~Corp. (“TerrAscend” or the “Company”)~~ was incorporated under the Ontario Business Corporations Act on March 7, 2017. TerrAscend provides cannabis products, brands, and services in the United States ("US") and Canada cannabinoid markets ~~and participates in the medical and legal adult use market in several US states~~ where cannabis production or consumption has been legalized for therapeutic or adult use. TerrAscend operates a number of synergistic businesses, including Gage Growth Corp. ("Gage"), a cultivator, processor, and ~~processor~~retailer in Michigan, The Apothecarium (“The Apothecarium”), a cannabis dispensary with several retail locations in California, Pennsylvania and New Jersey; TerrAscend NJ, LLC ("TerrAscend NJ"), a cultivator, processor and retailer with operations in New Jersey, Ilera Healthcare (“Ilera”), Pennsylvania’s medical cannabis cultivator, processor and dispenser; HMS Health, LLC and HMS Processing, LLC (collectively “HMS”), a medical cannabis cultivator and processor based in Maryland; Valhalla Confections, a manufacturer of cannabis-infused edibles; State Flower a California-based cannabis producer operating a licensed cultivation facility in San Francisco; and Arise Bioscience Inc., a manufacturer and distributor of hemp-derived products. ~~TerrAscend holds a permit to operate as an alternative treatment center in New Jersey, which allows for the cultivation and processing of cannabis with the ability to operate up to~~ 3 ~~alternative treatment centers.~~

The Company was listed on the Canadian Stock Exchange effective May 3, 2017, having the ticker symbol TER and effective October 22, 2018, the Company began trading on OTCQX under the ticker symbol TRSSF. The Company’s registered office is located at ~~PO Box 43125,~~3610 Mavis Road, Mississauga, Ontario, L5C 1W2.

Summary of significant accounting policies

(a)

Basis of presentation

These unaudited interim condensed consolidated financial statements as of and for the three and six months ended ~~March 31,~~June 30, 2022 and 2021 (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 condensed consolidated financial statements contained in this report are unaudited. In the opinion of management, these unaudited interim condensed consolidated financial statements have been prepared on the same basis as the annual consolidated financial statements and notes thereto of the Company and include all adjustments, consisting only of normal recurring adjustments, considered necessary for the fair presentation of the Company’s financial position and operating results. The results for the three and six months ended ~~March 31,~~June 30, 2022 and 2021 are not necessarily indicative of the operating results for the year ended December 31, 2022, or any other interim or future periods.

The accompanying unaudited interim condensed 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, 2021 contained in the Company's 2021 Form 10-K. 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, 2021 in the Company's 2021 Form 10-K.

(Amounts expressed in thousands of United States dollars, except for per share amounts)

Sales tax receivable represents input tax credits arising from sales tax levied on the supply of goods purchased or services received in Canada. Other receivables at ~~March 31,~~June 30, 2022 and December 31, 2021 mainly include amounts due from the sellers of the Apothecarium.

The over 90 days aged balance relates mainly to 1 customer who has agreed to a payment plan and the Company has received payments in accordance with the payment plan subsequent to June 30, 2022.

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


	March 31, 2022			December 31, 2021			June 30, 2022			December 31, 2021
Beginning of period	$	492			1,782		$	492			1,782
Provision for sales returns		—			1,125			255			1,125
Expected credit losses		859			357			859			357
Write-offs charged against provision		(88	)		(2,772	)		(431	)		(2,772	)
Foreign currency translation adjustments								(27	)		-
Total provision for sales returns and allowances	$	1,263			492		$	1,148			492

Inventory

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


	March 31, 2022		December 31, 2021		June 30, 2022		December 31, 2021
Raw materials	$	4,340	$	3,185	$	7,161	$	3,185
Finished goods		17,720		8,721		16,520		8,721
Work in process		38,725		26,852		27,842		26,852
Accessories, supplies and consumables		3,273		3,565		2,848		3,565
	$	64,058	$	42,323	$	54,371	$	42,323

On February 4, 2022, more than 500 vape products were recalled by the Pennsylvania's Department of Health, including several of the Company's SKUs. As a result of the recall, the Company wrote off $~~854~~1,071 and $1,925 of ~~inventory.~~inventory during the three and six months ended June 30, 2022, respectively.

In addition, management wrote down its inventory by $~~219~~6,351 and $~~584~~6,570 for the three and six months ended ~~March 31,~~June 30, 2022, respectively, and ~~2021, respectively,~~$115 and $699 for the three and six months ended June 30, 2021. The inventory write-downs in the current year period were mainly due to the write down of inventory to lower of cost or market which was related to the Company's operational reconfiguration of its cultivation facility in Pennsylvania, as well as inventory in Canada that the Company deemed unsaleable. The inventory write-downs in the prior year period were related to inventory that itthe Company deemed unsaleable.

Property and equipment

Property and equipment consisted of:

March 31, 2022

December 31, 2021

Land

$
4,135

$
4,183

Assets in process

29,463

6,858

Buildings & improvements

158,251

118,014

Machinery & equipment

29,025

23,424

Office furniture & equipment

8,179

3,232

Assets under finance leases

418

239

Total cost

229,471

155,950

Less: accumulated depreciation

(17,754
)

(15,188
)
Property and equipment, net

$
211,717

$
140,762

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

TerrAscend Corp.

Notes to the Unaudited Condensed Consolidated Financial Statements

(Amounts expressed in thousands of United States dollars, except for per share amounts)


	June 30, 2022			December 31, 2021
Land	$	7,613		$	4,183
Assets in process		52,624			6,858
Buildings & improvements		157,814			118,014
Machinery & equipment		27,906			23,424
Office furniture & equipment		8,290			3,232
Assets under finance leases		4,961			239
Total cost		259,208			155,950
Less: accumulated depreciation		(20,411	)		(15,188	)
Property and equipment, net	$	238,797		$	140,762

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

During the ~~three~~six months ended ~~March 31,~~June 30, 2022 and the twelve months ended December 31, 2021, borrowing costs were 0t capitalized because the assets in process did not meet the criteria of a qualifying asset.

Depreciation expense was $~~2,486~~3,027 and $5,513 for the three and six months ended ~~March 31,~~June 30, 2022, respectively ($~~1,736~~1,670 and $3,406, respectively included in cost of sales) and $~~1,966~~1,805 and $3,771 for the three and six months ended ~~March 31,~~June 30, 2021, respectively ($~~1,098~~1,127 and $2,225 included in cost of sales).

Loans payable


	Canopy Growth (formerly RIV Capital) Loan			Canopy Growth- Canada Inc Loan			Other Loans			Canopy Growth- Arise Loan		Ilera Term Loan			KCR Loan			Gage loans			Total
Balance at December 31, 2021	$	8,680		$	42,165		$	7,915		$	8,900	$	115,233		$	2,250		$	-		$	185,143
Addition on acquisition		—			—			—			—		—			—			60,605			60,605
Loan amendment fee		—			—			—			—		(1,200	)		—			—			(1,200	)
Interest accretion		665			2,739			319			702		8,542			74			2,819			15,860
Principal and interest paid		(624	)		(3,837	)		(2,586	)		—		(7,662	)		(2,324	)		(2,811	)		(19,844	)
Effects of movements in foreign exchange		(142	)		(691	)		(94	)		—		—			—			—			(927	)
Ending carrying amount at June 30, 2022	$	8,579		$	40,376		$	5,554		$	9,602	$	114,913		$	-		$	60,613		$	239,637
Less: current portion		(309	)		(1,170	)		(464	)		—		(42	)		—			(56,871	)		(58,856	)
Non-current loans payable	$	8,270		$	39,206		$	5,090		$	9,602	$	114,871		$	-		$	3,742		$	180,781

TerrAscend Corp.

Notes to the Unaudited Condensed Consolidated Financial Statements

(Amounts expressed in thousands of United States dollars, except for per share amounts)

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 June 30, 2022 and December 31, 2021, respectively, and the exercise price, multiplied by the number of the in-the-money options) that would have been received by the option holders had all option holders exercised their in-the-money options on June 30, 2022 and December 31, 2021, respectively.


	For the Three Months Ended					For the Six Months Ended
		June 30, 2022		June 30, 2021			June 30, 2022		June 30, 2021
Exercised		$	79	$	1,721		$	140	$	4,798

The Gage ~~acquisition~~Acquisition included consideration in the form of 4,940,364 replacement options that had been issued before the acquisition date to employees of Gage. The post-combination options vest over a 1-3 year period. The fair value of the replacement options ~~were~~are estimated using the Black-Scholes ~~option pricing model~~Option Pricing Model with the following assumptions:

The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value (the difference between Company’s closing stock price on March 31, 2022 and December 31, 2021, respectively, and the exercise price, multiplied by the number of the in-the-money options) that would have been received by the option holders had all option holders exercised their in-the-money options on March 31, 2022 and December 31, 2021, respectively.

The total pre-tax intrinsic value (the difference between the market price of the Company’s Common Stock on the exercise date and the price paid by the option holder to the exercise the option) related to stock options exercised during the three months ended March 31, 2022 and 2021, was $61 ~~and $3,077~~ ~~respectively. The total estimated fair value of stock options that vested during the three months ended March 31, 2022 and 2021 was $2,511~~ ~~and $2,994, respectively.~~

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 US treasury bond issues with a remaining

~~(Amounts expressed in thousands of United States dollars, except for per share amounts)~~

term approximately equal to the expected life of the options. Dividend yield is zero since 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 six months ended June 30, 2022 and 2021 was $4,921 and $9,140, respectively. As of ~~March 31,~~June 30, 2022, there was $~~21,796~~30,806 of total ~~unrecogniz~~edunrecognized compensation cost related to unvested options.

The following table summarizes the activities for the unvested RSUs for the three and six months ended ~~March 31,~~June 30, 2022:


	Number of RSUs			Number of RSUs vested		Weighted average remaining contractual life (in years)	Number of RSUs			Number of RSUs vested		Weighted average remaining contractual life (in years)
Outstanding, December 31, 2021		192,171			13,294	N/A		192,171			13,294	N/A
Granted								573,716
Vested		(42,526	)					(58,825	)
Outstanding, March 31, 2022		149,645			13,050	N/A
Forfeited								(23,250	)
Outstanding, June 30, 2022								683,812			13,050	N/A

As of ~~March 31,~~June 30, 2022, there was $~~1,462~~3,916 of total unrecognized compensation cost related to unvested RSUs.

12.

Non-controlling interest

Non-controlling interest consists mainly of the Company’s ownership minority interest in its New Jersey operations and IHC Real Estate operations and consists of the following amounts:


	March 31, 2022			December 31, 2021			June 30, 2022			December 31, 2021
Opening carrying amount	$	5,367		$	3,802		$	5,367		$	3,802
Capital distributions		(227	)		(53	)		(448	)		(53	)
Investment in NJ partnership		—			(1,406	)		—			(1,406	)
Net income attributable to non-controlling interest		351			3,024			1,296			3,024
Ending carrying amount	$	5,491		$	5,367		$	6,215		$	5,367

14.

Income taxes

The effective tax rate was 25% and 128% for the three and six months ended June 30, 2022, respectively and -31% and -60% for the three and six months ended June 30, 2021, respectively.

Unrecognized tax benefits on the Unaudited Interim Condensed Consolidated Balance Sheets of $9,318 were reclassed from corporate income tax payable to other long term liability at December 31, 2021 as the classification better aligns with the recognition of the benefits.

15.

General and administrative expenses

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


	For the Three Months Ended					For the Six Months Ended
		June 30, 2022		June 30, 2021			June 30, 2022		June 30, 2021
Office and general		$	6,042	$	3,369		$	9,608	$	7,224
Professional fees			3,564		3,070			6,492		5,749
Lease expense			1,105		1,109			2,355		2,109
Facility and maintenance			813		597			1,450		1,315
Salaries and wages			13,629		7,451			22,917		15,102
Share-based compensation			4,463		4,648			7,819		8,215
Sales and marketing			4,365		506			5,892		1,428
Total		$	33,981	$	20,750		$	56,533	$	41,142

16.

Revenue, net

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


	For the Three Months Ended					For the Six Months Ended
		June 30, 2022		June 30, 2021			June 30, 2022		June 30, 2021
Wholesale		$	16,825	$	36,330		$	40,766	$	74,714
Retail			47,979		22,393			73,697		37,363
Total		$	64,804	$	58,723		$	114,463	$	112,077

TerrAscend Corp.

Notes to the Unaudited Condensed Consolidated Financial Statements

(Amounts expressed in thousands of United States dollars, except for per share amounts)

~~14.~~

~~Income taxes~~

~~The effective tax rate was -~~31~~% and -202% for the three months ended March 31, 2022 and 2021, respectively.~~

~~15.~~

~~General and administrative expenses~~

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

For the Three Months Ended

March 31, 2022

March 31, 2021

Office and general

$
3,566

$
3,855

Professional fees

2,928

2,679

Lease expense

1,250

1,000

Facility and maintenance

637

718

Salaries and wages

9,288

7,651

Share-based compensation

3,356

3,567

Sales and marketing

1,527

922

Total

$
22,552

$
20,392

~~16.~~

~~Revenue, net~~

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

For the Three Months Ended

March 31, 2022

March 31, 2021

Wholesale

$
23,941

$
38,384

Retail

25,718

14,970

Total

$
49,659

$
53,354

For the three and six months ended ~~March 31,~~June 30, 2022 and 2021, the Company did 0t have any single customer that accounted for 10% or more of the Company’s revenue.

As a result of the vape recall in Pennsylvania (refer to note 5), the Company recorded sales returns of $nil and $1,040 during the three and six months ended ~~March 31, 2022.~~June 30, 2022, respectively.

17.

Finance and other expenses

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

For the Three Months Ended

March 31, 2022

March 31, 2021

Interest accretion

$
7,102

$
6,282

Forgiveness of principal and interest on loans

—

(766
)
Other (expense) income

(246
)

874

Total

$
6,856

$
6,390


	For the Three Months Ended						For the Six Months Ended
		June 30, 2022		June 30, 2021				June 30, 2022			June 30, 2021
Interest accretion		$	8,758	$	6,464			$	15,860		$	12,746
Forgiveness of principal and interest on loans			—		766				—			-
Indemnification asset release			3,998		2,599				3,973			3,796
Loss on disposal of fixed assets			845		37				929			37
Other expense (income)			301		(947	)			(4	)		(1,270	)
Total		$	13,902	$	8,919			$	20,758		$	15,309

The indemnification asset release is the reduction of the indemnification asset related to the expiration of the escrow agreement related to the acquisition of The Apothecarium.

18.

Segment information

Operating Segment

The Company determines its operating segments according to how the business activities are managed and evaluated by the Company’s chief operating decision maker. The Company operates under 1 operating segment, being the cultivation, production and sale of cannabis products.

Geography

The Company operates with subsidiaries located in Canada and the US.

The Company had the following net revenue by geography of:


	For the Three Months Ended					For the Six Months Ended
		June 30, 2022		June 30, 2021			June 30, 2022		June 30, 2021
United States		$	63,952	$	52,457		$	112,545	$	102,141
Canada			852		6,266			1,918		9,936
Total		$	64,804	$	58,723		$	114,463	$	112,077

The Company had non-current assets by geography of:


	June 30, 2022		December 31, 2021
United States	$	842,569	$	409,150
Canada		28,730		29,563
Total	$	871,299	$	438,713

19.

Capital management

TerrAscend Corp.

Notes to the Unaudited Condensed Consolidated Financial Statements

(Amounts expressed in thousands of United States dollars, except for per share amounts)

~~Geography~~

~~The Company operates with subsidiaries located in Canada and the US.~~

~~The Company had the following net revenue by geography of:~~

For the Three Months Ended

March 31, 2022

March 31, 2021

United States

$
48,593

$
49,684

Canada

1,066

3,670

Total

$
49,659

$
53,354

~~The Company had non-current assets by geography of:~~

March 31, 2022

December 31, 2021

United States

$
819,696

$
409,150

Canada

29,570

29,563

Total

$
849,266

$
438,713

~~19.~~

~~Capital management~~

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

Since inception, the Company has primarily financed its liquidity needs through the issuance of share capital through borrowings. The equity issuances are outlined in Note 11 and debt issuances are outlined in Note 8.

The Company is subject to ~~financial~~ covenants as a result of its loans payable with various lenders. The Company is in compliance with its debt covenants as of ~~March 31,~~June 30, 2022. Other than these items related to loans payable as of ~~March 31,~~June 30, 2022 and December 31, 2021, the Company is not subject to externally imposed capital requirements.

~~Effective March 31,~~On April 28, 2022, the Ilera term loan (refer to Note 8) was amended to provide the Company with greater flexibility, and the optional prepayment date was amended to 30 months (from 18 months) from the closing date, subject to a premium payment due.

On August 10, 2022, the Gage senior secured term loan (refer to Note 8) was amended as a result of the corporate restructure in conjunction with the Gage Acquisition. The amendments to the Gage senior secured term loan include the addition of a borrower and guarantor under the term loan and a right of first offer in favor of the administrative agent for a refinancing of the term loan.

20.

Financial instruments and risk management

Assets and liabilities measured at fair value

Cash and cash equivalents, net accounts receivable, accounts payable and accrued liabilities, loans payable, convertible debentures, and other current receivables and payables represent financial instruments for which the carrying amount approximates fair value due to their short-term maturities.

~~TerrAscend Corp.~~

~~Notes to the Unaudited Condensed Consolidated Financial Statements~~

~~(Amounts expressed in thousands of United States dollars, except for per share amounts)~~

The following table represents the fair value amounts of financial assets and financial liabilities measured at estimated fair value on a recurring basis:


	At March 31, 2022								At December 31, 2021								At June 30, 2022								At December 31, 2021
		Level 1		Level 2			Level 3			Level 1		Level 2			Level 3			Level 1		Level 2			Level 3			Level 1		Level 2			Level 3
Assets
Cash and cash equivalents		$	88,407	$	-	—	$	-		$	79,642	$	-	—	$	-		$	48,426	$	-	—	$	-		$	79,642	$	-	—	$	-
Restricted cash																			605		—			—			—		—			—
Purchase option derivative asset			—		—			550			—		—			868			—		—			50			—		—			868
Total Assets		$	88,407	$	-		$	550		$	79,642	$	-		$	868		$	49,031	$	-		$	50		$	79,642	$	-		$	868
Liabilities
Contingent consideration payable			—	$	-		$	5,700		$	-	$	-		$	12,535			—	$	-		$	5,648		$	-	$	-		$	12,535
Warrant liability			—		55,021			—			—		54,986			—			—		6,176			—			—		54,986			—
Total Liabilities		$	-	$	55,021		$	5,700		$	-	$	54,986		$	12,535		$	-	$	6,176		$	5,648		$	-	$	54,986		$	12,535

There were 0 transfers between the levels of fair value hierarchy during the three and six months ended ~~March 31,~~June 30, 2022.

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

Level 2

Warrant liability

The following table summarizes the changes in the warrant liability for the ~~three~~six months ended ~~March 31,~~June 30, 2022:

Balance at December 31, 2021

$
54,986

Addition on acquisition

6,756

Included in gain on fair value of warrants

(6,031
)
Exercises

(690
)
Balance at March 31, 2022

$
55,021

~~The warrant liability has been measured at fair value at March 31, 2022. Key inputs and assumptions used in the Black Scholes valuation were as follows:~~

March 31, 2022

December 31, 2021

Common Stock Price of TerrAscend Corp.

$
5.70

$
6.11

Warrant exercise price

$
3,000

$
3,000

Warrant conversion ratio

$
1,000

$
1,000

Annual volatility

60.9
%

65.5
%
Annual risk-free rate

2.2
%

0.6
%
Expected term (in years)

1.2

1.4

~~Level 3~~

~~Purchase option derivative asset~~

~~The following table summarizes the changes in the purchase option derivative asset:~~

TerrAscend Corp.

Notes to the Unaudited Condensed Consolidated Financial Statements

(Amounts expressed in thousands of United States dollars, except for per share amounts)

Balance at December 31, 2021

$
868

Revaluation of purchase option derivative asset

(318
)
Balance at March 31, 2022

$
550


Balance at December 31, 2021	$	54,986
Addition on acquisition		6,756
Included in gain on fair value of warrants		(53,876	)
Exercises		(1,690	)
Balance at June 30, 2022	$	6,176

The Company's warrant liability consists of its Series A, B, C, and D convertible preferred stock issued through its 2020 private placements ("private placement warrant liability"), as well as the warrant liability acquired through its Gage Acquisition ("Gage warrant liability") (refer to Note 4).

The private placement warrant liability has been measured at fair value at June 30, 2022. Key inputs and assumptions used in the Black Scholes valuation were as follows:


	June 30, 2022			December 31, 2021
Common Stock Price of TerrAscend Corp.	$	2.28		$	6.11
Warrant exercise price	$	3,000		$	3,000
Warrant conversion ratio	$	1,000		$	1,000
Annual volatility		65.7	%		65.5	%
Annual risk-free rate		2.9	%		0.6	%
Expected term (in years)		0.9		1.4

The Gage warrant liability has been remeasured at fair value at June 30, 2022. Key inputs and assumptions used in the Black Scholes valuation were as follows:


	June 30, 2022			March 10, 2022
Common Stock Price of TerrAscend Corp.	$	2.28		$	5.70
Warrant exercise price	$	8.66		$	8.66
Annual volatility	62.88% - 63.73%			61.65% - 61.87%
Annual risk-free rate		2.9	%		1.8	%
Expected term (in years)		1.5			1.7

Level 3

Purchase option derivative asset

The following table summarizes the changes in the purchase option derivative asset:


Balance at December 31, 2021	$	868
Revaluation of purchase option derivative asset		(818	)
Balance at June 30, 2022	$	50

The purchase option derivative asset has been measured at fair value at the transaction date using the Monte Carlo simulation model that relies on assumptions around the Company's EBITDA volatility and risk adjusted discount, among others. Key inputs and assumptions used in the Monte Carlo simulation model are summarized below:


	March 31, 2022			December 31, 2021			June 30, 2022			December 31, 2021
Term (in years)		1.2			1.3			0.8			1.3
Risk-free rate		1.4	%		0.4	%		2.5	%		0.4	%
EBITDA discount rate		15.0	%		15.0	%		15.5	%		15.0	%
EBITDA volatility		43.0	%		44.0	%		37.1	%		44.0	%

Contingent Consideration Payable

TerrAscend Corp.

Notes to the Unaudited Condensed Consolidated Financial Statements

(Amounts expressed in thousands of United States dollars, except for per share amounts)

The fair value of contingent consideration at ~~March 31,~~June 30, 2022 and December 31, 2021 was determined using a probability weighted model based on the likelihood of achieving certain revenue and EBITDA scenario outcomes. A discount rate of 12.2% ~~(March 31,~~(June 30, 2021 – 12.8%) was utilized to determine the present value of the liabilities, resulting in a loss on revaluation of contingent consideration of $~~119~~34 and $153 for the three and six months ended ~~March 31,~~June 30, 2022, ~~(March 31,~~respectively (June 30, 2021 - ($7) and $~~2,997~~2,990), respectively).

The illustrative variance of the total contingent consideration at ~~March 31,~~June 30, 2022 based on reasonably possible changes to one of the significant unobservable inputs, holding other inputs constant, would have the following effects:


Discount rate sensitivity	KCR		KCR
Increase 100 basis points	$	1,139	$	1,175
Increase 50 basis points	$	1,160	$	1,195
Decrease 50 basis points	$	1,203	$	1,236
Decrease 100 basis points	$	1,225	$	1,258

21.

Commitments and contingencies

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 cases, management believes that any ultimate liability would not have a material adverse effect on the Company's consolidated balance sheets or results of operations. ~~However, an unforeseen unfavorable development.~~ At ~~March 31,~~June 30, 2022, there were no pending lawsuits ~~other than those disclosed~~ that could reasonably be expected to have a material effect on the results of the Company’s consolidated financial statements.

TerrAscend Corp.

Notes to the Unaudited Condensed Consolidated Financial Statements

(Amounts expressed in thousands of United States dollars, except for per share amounts)

22.

Subsequent events

~~On April 8, 2022, the Company entered into a definitive agreement~~Subsequent to ~~acquire Allegany Medical Marijuana Dispensary ("AMMD"), a medical dispensary in Maryland from Moose Curve Holdings, LLC. Under the terms of the agreement, the Company will acquire~~ ~~100% equity interest in AMMD for total consideration of $10,000~~ ~~in cash, in addition to acquiring the real estate for $1,700. The transaction is subject to customary closing conditions and regulatory approvals. The Company intends to rebrand the~~ ~~8,000~~ ~~square foot dispensary as The Apothecarium.~~

~~ii)~~

~~On April 8,~~June 30, 2022, the Company opened ~~a Cookies dispensary in Ann Arbor, Michigan.~~ The ~~cannabis provisioning center will be operated by Gage in exclusive partnership with Cookies.~~

~~iii)~~

On April 14, 2022, the Company entered into a definitive agreement to acquire KISA Enterprises MI, LLC and KISA Holdings, LLC ("Pinnacle"), a dispensary operator in Michigan, and related real estate, for total consideration of $~~28,500. The transaction includes~~ 6Apothecarium Lodi, its third retail ~~dispensary licenses,~~ 5 of which are currently operational and located in the cities of Addison, Buchanan, Camden, Edmore, and Morenci. The Company intends to rebrand each of the dispensaries under either the Gage or Cookies retail brand.

~~iv)~~

On April 20, 2022, the Company announced that it received an amended cannabis business cultivation and manufacturing license from the New Jersey Cannabis Regulatory Commission ("NJCR"). The Company is now permitted to grow, produce, and sell adult-use cannabis productslocation in New Jersey and ~~commenced sales~~27th dispensary overall. The retail location was opened on ~~April 21,~~July 25, 2022 ~~at the Company's Apothecarium Maplewood and Apothecarium Phillipsburg locations.~~

to medical patients. On ~~May 1,~~July 26, 2022, the Company received ~~a full and final release from the 261 Claim.~~approval for Adult Use sales at this location.

~~vi)~~ii)

~~Effective May 11,~~On July 27, 2022, the ~~Company appointed Lynn Gefen as Chief Legal Officer and Corporate Secretary.~~Company's first "Cookies Corner" opened in its Maplewood dispensary in New Jersey.

~~ITEM~~Item 2. ~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of ~~our~~the Company's financial condition and results of operations should be read in conjunction with ~~our~~the Company's unaudited interim condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and the audited consolidated financial information and the notes thereto included in ~~our~~the Company's Annual Report on Form 10-K for the year ended December 31, 2021, which was filed with the Securities and Exchange Commission, or SEC, on March 17, 2022. 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 ~~our~~the Company's plans and strategy for ~~our~~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 ~~our~~the Company's Annual Report on Form 10-K, ~~our~~its actual results could differ materially from the results described in or implied by the "Cautionary Note Regarding Forward-Looking Statements" contained in ~~our~~this Quarterly Report on Form 10-Q and in the following discussion and analysis.

This Management’s Discussion and Analysis (“MD&A”) of the financial condition and results of operations of TerrAscend is for the three and six months ended ~~March 31,~~June 30, 2022 and 2021 and the accompanying notes for each respective period.

Business Overview

TerrAscend is a leading North American cannabis operator with vertically integrated operations in Pennsylvania, New Jersey, and California, licensed cultivation and processing operations in Michigan and Maryland, and licensed processing operations in Canada. TerrAscend operates a chain of Apothecarium dispensary retail locations, as well as scaled cultivation, processing, and manufacturing facilities on both the east and west coasts of the United States. TerrAscend’s cultivation and manufacturing practices yield consistent, high-quality cannabis, providing industry-leading product selection to both the medical and legal adult-use market. Notwithstanding various states in the US which have implemented medical marijuana laws, or which have otherwise legalized the use of cannabis, the use of cannabis remains illegal under US federal law for any purpose, by way of the ~~CSA~~CSA.

TerrAscend operates under one operating segment ~~being~~which is the cultivation, production and sale of cannabis products.

TerrAscend’s portfolio of operating businesses and brands include:

●

Gage Growth Corp. ("Gage"), a cultivator and processor in Michigan

●

Ilera Healthcare, a vertically integrated cannabis cultivator, processor and dispensary operator in Pennsylvania;

●

TerrAscend NJ LLC, a majority owned subsidiary that holds a permit to operate up to three alternative treatment centers in New Jersey with the ability to cultivate and process;

●

The Apothecarium, consisting of retail dispensaries in California, Pennsylvania and New Jersey;

●

Valhalla Confections, a provider of premium edible products;

●

State Flower, a California-based cannabis producer operating a licensed cultivation facility in San Francisco, California;

●

HMS Health, LLC and HMS Processing, LLC, a producer and seller of dried flower and oil products for the wholesale medical cannabis market in Maryland;

●

TerrAscend Canada Inc., a Licensed Producer (as such term is defined in the Cannabis Act) of cannabis, with its current principal business activities including processing and sale of cannabis flower and oil products in Canada;

●

Cookies Canada, the operator of a minority owned retail cannabis dispensary in Toronto, Canada; and

●

Arise Bioscience, a manufacturer and distributor of hemp-derived products, located in Boca Raton, Florida.

Objective

TerrAscend's MD&A is designed to provide information about its financial condition and results of operations from management's perspective. It includes relevant components of TerrAscend's financial condition and current and long-term liquidity. Primary revenue drivers include the manufacture, distribution, and sale of medical and adult-use cannabis products where permitted. TerrAscend's primary obligations are related to compliance with state and federal regulators, as applicable. TerrAscend's primary sources of capital have been through the issuance of equity securities or debt. TerrAscend's objective is to discuss how all these factors have affected our historical results and, where applicable, how it expects these factors to impact its future results and future liquidity.

Results from Operations- Three months ended ~~March 31,~~June 30, 2022 and ~~March 31,~~June 30, 2021

The following tables represent the Company’s results from operations for the three months ended ~~March 31,~~June 30, 2022 and 2021.

Revenue, net


	For the Three Months Ended							For the Three Months Ended
		March 31, 2022			March 31, 2021				June 30, 2022			June 30, 2021
Revenue		$	50,445		$	56,496			$	65,367		$	61,977
Excise and cultivation taxes			(786	)		(3,142	)			(563	)		(3,254	)
Revenue, net		$	49,659		$	53,354			$	64,804		$	58,723
$ change		$	(3,695	)					$	6,081
% change			-7	%						10	%

The ~~decrease~~increase in net revenue at ~~March 31,~~June 30, 2022 as compared to ~~March 31,~~June 30, 2021 was due to ~~a decrease~~an increase in ~~wholesale~~retail revenue of ~~$14,443~~$25,586 from ~~$38,384~~$22,393 for the three months ended ~~March 31,~~June 30, 2021 to ~~$23,941~~$47,979 for the three months ended June 30, 2022. The increase in revenue is mainly due to adult use sales in New Jersey which commenced during the three months ended June 30, 2022, as well as the acquisition of Gage (the "Gage Acquisition") in Michigan in March ~~31,~~ 2022. ~~This reduction~~Retail dispensaries increased from thirteen at June 30, 2021 to twenty-six at June 30, 2022.

The increase is partially offset by the decrease of $19,505 in wholesale revenue from $36,330 at June 30, 2021 to $16,825 for the three months ended June 30, 2022 which was mainly related to ~~a reset~~the operational reconfiguration of the Company's cultivation facility in Pennsylvania.

Cost of Sales


	For the Three Months Ended
		June 30, 2022			June 30, 2021
Cost of sales		$	34,389		$	23,773
Impairment and write downs of inventory			7,422			115
Total cost of sales		$	41,811		$	23,888
$ change		$	17,923
% change			75	%
Cost of sales as a % of revenue			65	%		41	%

The increase in cost of sales for the three months ended June 30, 2022 as compared to the three months ended June 30, 2021 was driven mainly by the Gage Acquisition, as well as an increase in New Jersey due to the increase in adult use sales which commenced during the three months ended June 30, 2022. The increase in cost of sales as a percentage of revenue was due to lower volumes in Pennsylvania leading to under-absorption, primarily related to lower wholesale flower sales, as well as operational challenges at the Company's cultivation facility in Frederick, Maryland as the Company transitions to its Hagerstown location.

In addition, management wrote down its inventory by $7,422 and $115 for the three months ended June 30, 2022 and 2021, respectively. The inventory write-downs in the current year period were mainly due to the write down of inventory to lower of cost or market which was related to the aforementioned operational reconfiguration of its cultivation facility in Pennsylvania, write downs of inventory related to a recall by the Pennsylvania Department of Health of certain vape products produced by the ~~Company.~~Company, as well as inventory in Canada that the Company deemed unsaleable. On February 4, 2022, more than 500 vape products were recalled by the Pennsylvania's Department of Health, including several of the Company's SKUs. As a result of the recall, the Company ~~recorded sales returns~~wrote off $1,071 of ~~$1,040~~inventory during the three months ended ~~March 31,~~June 30, 2022. ~~In addition, the Company continued its intentional accumulation of~~The inventory ~~in New Jersey, versus selling wholesale, in preparation for adult use sales.~~

This decrease is partially offset by an increase of $10,748 in retail sales from $14,970 for the three months ended March 31, 2021 to $25,718 for the three months ended March 31, 2022 which is primarily a result of the increase in retail dispensaries across Pennsylvania, California, and New Jersey, as well as the acquisition of Gage (the "Gage Acquisition") in Michigan in March 2022. Retail dispensaries increased from ninewrite-downs in the ~~first quarter of 2021 to twenty-five during the first quarter of 2022.~~

~~Cost of Sales~~

For the Three Months Ended

March 31, 2022

March 31, 2021

Cost of sales

$
33,446

$
17,828

Impairment and write downs of inventory

1,073

584

Total cost of sales

$
34,519

$
18,412

$ change

$
16,107

% change

87
%

Cost of sales as a % of revenue

70
%

35
%

The increase in cost of sales, as well as cost of sales as a percentage of revenue, for the three months ended March 31, 2022 as compared to the three months ended March 31, 2021 was driven mainly by lower volumes in Pennsylvania leading to under-absorption, primarily related to lower wholesale flower sales, as well as the aforementioned vape recall.

~~As a result of the recall, the Company wrote off $854 of inventory. In addition, management wrote down its inventory by $219 and $584 for the three months ended March 31, 2022 and 2021, respectively,~~prior year period were related to inventory that itthe Company deemed unsaleable.

General and Administrative Expense (G&A)


	For the Three Months Ended							For the Three Months Ended
		March 31, 2022			March 31, 2021				June 30, 2022			June 30, 2021
General and administrative expense		$	22,552		$	20,392			$	33,981		$	20,750
$ change		$	2,160						$	13,231
% change			11	%						64	%
G&A excluding share-based compensation		$	19,196		$	16,825			$	29,518		$	16,102
G&A excluding share-based compensation as a % of revenue			39	%		32	%			46	%		27	%

The increase in G&A expenses was primarily a result of increased salaries and wages of ~~$1,637 and~~$6,178, sales and marketing expense of ~~$605,~~$3,859, and office and general expense of $2,673, which is primarily a result of the Gage Acquisition in March 2022.

Amortization and Depreciation Expense

For the Three Months Ended

March 31, 2022

March 31, 2021

Amortization and depreciation

$
2,618

$
1,873

$ change

$
745

% change

40
%


	For the Three Months Ended
		June 30, 2022			June 30, 2021
Amortization and depreciation		$	3,016		$	1,844
$ change		$	1,172
% change			64	%

The increase in amortization and depreciation expense for the three months ended ~~March 31,~~June 30, 2022 as compared to the three months ended ~~March 31,~~June 30, 2021 is primarily due to the Gage Acquisition during March 2022. The company acquired intangible assets including cultivation and processing licenses, as well as retail licenses, which are amortized over a 15 year period. The fair value of the cultivation and processing and retail licenses at acquisition were $77,198 and $53,321, respectively.

(Gain) loss on fair value of warrants and purchase option derivative asset


	For the Three Months Ended
		June 30, 2022			June 30, 2021
(Gain) loss on fair value of warrants and purchase option derivative asset		$	(47,345	)	$	19,891
$ change		$	(67,236	)
% change			-338	%

The warrant liability has been remeasured to fair value at June 30, 2022 using the Black Scholes model. The Company recognized a gain during the three months ended June 30, 2022 as a result of the reduction of the Company's share price from March 31, 2021 as compared to June 30, 2022, as well as from warrants exercised during the three months ended June 30, 2022. The combined impact resulted in a gain on fair value of warrants of $47,845.

For the three months ended June 30, 2022, the purchase option derivative asset related to the option to purchase an additional 6.25% ownership of the Company's New Jersey partnership, was remeasured using the Monte Carlo simulation model and resulted in a loss of $500.

During the three months ended June 30, 2021, the Company recognized a loss on fair value of warrants of $19,891 as a result of the increase in the Company's share price from December 31, 2020 to June 30, 2021 as well as warrants exercised during the three months ended June 30, 2021.

Finance and other expenses


	For the Three Months Ended
		June 30, 2022			June 30, 2021
Finance and other expenses		$	13,902		$	8,919
$ change		$	4,983
% change			56	%

The increase in finance expense for the three months ended June 30, 2022 as compared to the three months ended June 30, 2021 is primarily due to interest expense recognized on the loans acquired as part of the Gage Acquisition, as well as a loss recognized on disposal of fixed assets of $981 related to lights at the Pennsylvania cultivation facility which were discarded during the three months ended June 30, 2022.

Transaction and restructuring costs


	For the Three Months Ended
		June 30, 2022			June 30, 2021
Transaction and restructuring costs		$	627		$	432
$ change		$	195
% change			45	%

The increase in transaction and restructuring costs for the three months ended June 30, 2022 as compared to the three months ended June 30, 2021 was primarily due to work done for Sarbanes Oxley implementation during the three months ended June 30, 2022.

Impairment of goodwill


	For the Three Months Ended
		June 30, 2022			June 30, 2021
Impairment of goodwill		$	-		$	5,007
$ change		$	(5,007	)
% change			-100	%

The impairment of goodwill for the three months ended June 30, 2021 was related to the Company's Florida reporting unit as the Company ~~recorded additional definite lived~~determined that the estimated cash flows of its Arise business did not support the carrying value of the intangible assets and goodwill. As a result, the Company recorded impairment to reduce the balance of ~~$130,519.~~goodwill at its Florida reporting unit to $nil.

Impairment of intangible assets


	For the Three Months Ended
		June 30, 2022			June 30, 2021
Impairment of intangible assets		$	-		$	3,633
$ change		$	(3,633	)
% change			-100	%

The impairment recorded during the three months ended June 30, 2021 relates to the write-off of intellectual property at the Company's Arise business.

Unrealized and realized foreign exchange loss


	For the Three Months Ended
		June 30, 2022			June 30, 2021
Unrealized and realized foreign exchange loss		$	(306	)	$	3,055
$ change		$	(3,361	)
% change			-110	%

The decrease in unrealized foreign exchange loss for the three months ended June 30, 2022 as compared to the three months ended June 30, 2021 is a result of the remeasurement of USD denominated cash and other assets recorded in C$ functional currency at the Company’s Canadian operations.

Unrealized and realized gain on investments


	For the Three Months Ended
		June 30, 2022			June 30, 2021
Unrealized and realized loss (gain) on investments		$	234		$	(5,964	)
$ change		$	6,198
% change			-104	%

The loss on investment during the three months ended June 30, 2022 is related to the revaluation of the investments acquired through the Gage Acquisition. The gain on investment during the three months ended June 30, 2021 relates to the acquisition of the remaining 90% investment in Guadco LLC and KCR Holdings LLC on April 30, 2021.

Provision for income taxes


	For the Three Months Ended
		June 30, 2022			June 30, 2021
Provision for income taxes		$	4,688		$	6,937
$ change		$	(2,249	)
% change			-32	%

The decrease in provision for income taxes for the three months ended June 30, 2022 as compared to the three months ended June 30, 2021 was due to the decline in revenue and associated decline in gross profit, mainly related to the operational reconfiguration of the Company's cultivation facility in Pennsylvania.

Results from Operations- Six months ended June 30, 2022 and June 30, 2021

The following tables represent the Company’s results from operations for the six months ended June 30, 2022 and 2021.

Revenue, net


	For the Six Months Ended
		June 30, 2022			June 30, 2021
Revenue		$	115,812		$	118,473
Excise and cultivation taxes			(1,349	)		(6,396	)
Revenue, net		$	114,463		$	112,077
$ change		$	2,386
% change			2	%

The increase in net revenue at June 30, 2022 as compared to June 30, 2021 was due to an increase in retail revenue of $36,334 from $37,363 for the six months ended June 30, 2021 to $73,697 for the six months ended June 30, 2022. The increase in revenue is mainly due to adult use sales in New Jersey which commenced during the six months ended June 30, 2022, as well as the Gage Acquisition. Retail dispensaries increased from thirteen at June 30, 2021 to twenty-six at June 30, 2022.

This increase is partially offset by a decrease of $33,948 in wholesale revenue from $74,714 for the six months ended June 30, 2021 to $40,766 for the six months ended June 30, 2022, which was mainly related to a decline in the Canada business, as well as the operational reconfiguration of the Company's cultivation facility in Pennsylvania, as well as the aforementioned vape recall. As a result of the recall, the Company recorded sales returns of $1,040 during the six months ended June 30, 2022.

Cost of Sales


	For the Six Months Ended
		June 30, 2022			June 30, 2021
Cost of sales		$	67,835		$	41,601
Impairment and write downs of inventory			8,495			699
Total cost of sales		$	76,330		$	42,300
$ change		$	34,030
% change			80	%
Cost of sales as a % of revenue			67	%		38	%

The increase in cost of sales for the six months ended June 30, 2022 as compared to the six months ended June 30, 2021 was driven mainly by the Gage Acquisition, as well as an increase in New Jersey due to adult use sales which commenced during the six months ended June 30, 2022. The increase in cost of sales as a percentage of revenue was primarily due to lower wholesale flower sales volume in Pennsylvania leading to under-absorption, and unfavorable mix, primarily related to lower Gage bulk wholesale sales at the end of the first quarter.

In addition, management wrote down its inventory by $8,495 and $699 for the six months ended June 30, 2022 and 2021, respectively. The inventory write-downs in the current year period were mainly due to the write down of inventory to lower of cost or market which was related to the Company's operational reconfiguration of its cultivation facility in Pennsylvania, write downs of inventory related to the vape recall, as well as inventory in Canada that the Company deemed unsaleable. As a result of the recall, the Company wrote off $1,925 of inventory during the six months ended June 30, 2022. The inventory write-downs in the prior year period were related to inventory that the Company deemed unsaleable.

General and Administrative Expense (G&A)


	For the Six Months Ended
		June 30, 2022			June 30, 2021
General and administrative expense		$	56,533		$	41,142
$ change		$	15,391
% change			37	%
G&A excluding share-based compensation		$	48,714		$	32,927
G&A excluding share-based compensation as a % of revenue			43	%		29	%

The increase in G&A expenses was primarily a result of increased salaries and wages of $7,815, sales and marketing expense of $4,464, and office and general expense of $2,384, which is primarily a result of the Gage Acquisition.

Amortization and Depreciation Expense


	For the Six Months Ended
		June 30, 2022			June 30, 2021
Amortization and depreciation		$	5,634		$	3,717
$ change		$	1,917
% change			52	%

The increase in amortization and depreciation expense for the six months ended June 30, 2022 as compared to the six months ended June 30, 2021 is primarily due to the Gage Acquisition. The Company acquired intangible assets including cultivation and processing licenses, as well as retail licenses, which are amortized over a 15 year period. The fair value of the cultivation and processing licenses and retail licenses at acquisition were $77,198 and $53,321, respectively.

Revaluation of contingent consideration


	For the Three Months Ended						For the Six Months Ended
		March 31, 2022			March 31, 2021			June 30, 2022			June 30, 2021
Revaluation of contingent consideration		$	119		$	2,997		$	153		$	2,990
$ change		$	(2,878	)				$	(2,837	)
% change			-96	%					-95	%

The decrease in the revaluation of contingent consideration for the ~~three~~six months ended ~~March 31,~~June 30, 2022 as compared to the ~~three~~six months ended ~~March 31,~~June 30, 2021 is a result of a reduction in the liability as compared to ~~March 31,~~June 30, 2021 due to payments for the earnout of Ilera of $29,668, and State Flower of ~~$6,954~~$7,040 made subsequent to ~~March 31,~~June 30, 2021, reducing the amount outstanding. This decrease is partially offset by the accretion of the contingent consideration payable for KCR, which are recorded at the present value of future payments upon initial recognition.

(Gain) loss on fair value of warrants and purchase option derivative asset


	For the Three Months Ended						For the Six Months Ended
		March 31, 2022			March 31, 2021			June 30, 2022			June 30, 2021
(Gain) loss on fair value of warrants and purchase option derivative asset		$	(5,713	)	$	5,410		$	(53,058	)	$	25,301
$ change		$	(11,123	)				$	(78,359	)
% change			-206	%					-310	%

The ~~Preferred Share~~ warrant ~~liability has~~liabilities have been remeasured to fair value at ~~March 31,~~June 30, 2022 using the Black Scholes model. The Company recognized a gain during the ~~three~~six months ended ~~March 31,~~June 30, 2022 as a result of the reduction of the Company's share price from December 31, 2021 as compared to ~~March 31,~~June 30, 2022, as well as from warrants exercised during the ~~three~~six months ended ~~March 31,~~June 30, 2022. The combined impact resulted in a gain on fair value of warrants of $7,208. Additionally, the Company remeasured the warrant liability acquired through the Gage Acquisition at March 31, 2022 using the Black Scholes model. The Company recognized a loss of $3,864 during the three months ended March 31, 2022 as a result of the increase in the Company's stock price at the acquisition date of March 10, 2022, as compared to March 31, 2022.

During the three months ended March 31, 2021, the Company recognized a loss on fair value of warrants of $5,410 as a result of the increase in the Company's share price from December 31, 2020 to March 31, 2021.$53,876.

For the ~~three~~six months ended ~~March 31,~~June 30, 2022, the purchase option derivative asset related to the option to purchase an additional 6.25% ownership of the Company's New Jersey partnership, was remeasured using the Monte Carlo simulation model and resulted in a loss of ~~$318.~~$818.

During the six months ended June 30, 2021 the Company recognized a loss on fair value of warrants of $25,301 as a result of the increase in the Company's share price from December 31, 2020 to June 30, 2021 as well as warrants exercised during the six months ended June 30, 2021.

Finance and other expenses


	For the Three Months Ended						For the Six Months Ended
		March 31, 2022			March 31, 2021			June 30, 2022			June 30, 2021
Finance and other expenses		$	6,856		$	6,390		$	20,758		$	15,309
$ change		$	466					$	5,449
% change			7	%					36	%

The increase in finance expense infor the ~~current period~~six months ended June 30, 2022 as compared to the six months ended June 30, 2021 is primarily due to interest expense recognized on the loans acquired as part of the Gage ~~Acquisition during March 2022.~~Acquisition.

Transaction and restructuring costs


	~~For the Three Months Ended~~
		~~March 31, 2022~~			~~March 31, 2021~~
~~Transaction and restructuring costs~~		$	~~615~~		$	-
~~$ change~~		$	~~615~~
~~% change~~			~~100~~	%


	For the Six Months Ended
		June 30, 2022			June 30, 2021
Transaction and restructuring costs		$	1,242		$	432
$ change		$	810
% change			188	%

The increase in transaction and restructuring costs for the ~~three~~six months ended ~~March 31,~~June 30, 2022 as compared to the ~~three~~six months ended ~~March 31,~~June 30, 2021 was primarily due to the Gage ~~Acquisition.~~Acquisition, as well as work done for Sarbanes Oxley implementation.

Impairment of goodwill


	For the Six Months Ended
		June 30, 2022			June 30, 2021
Impairment of goodwill		$	-		$	5,007
$ change		$	(5,007	)
% change			-100	%

The impairment of goodwill for the six months ended June 30, 2021 was related to the Company's Florida reporting unit as the Company determined that the estimated cash flows of its Arise business did not support the carrying value of the intangible assets and goodwill. As a result, the Company recorded impairment to reduce the balance of goodwill at its Florida reporting unit to $nil.

Impairment of intangible assets


	For the Six Months Ended
		June 30, 2022			June 30, 2021
Impairment of intangible assets		$	-		$	3,633
$ change		$	(3,633	)
% change			-100	%

The impairment recorded during the six months ended June 30, 2021 relates to the write-off of intellectual property at the Company's Arise business.

Unrealized and realized foreign exchange loss


	For the Three Months Ended						For the Six Months Ended
		March 31, 2022			March 31, 2021			June 30, 2022			June 30, 2021
Unrealized and realized foreign exchange loss		$	356		$	2,783		$	50		$	5,838
$ change		$	(2,427	)				$	(5,788	)
% change			-87	%					-99	%

The decrease in unrealized foreign exchange loss for the six months ended June 30, 2022 as compared to the six months ended June 30, 2021 is a result of the remeasurement of USD denominated cash and other assets recorded in C$ functional currency at the Company’s Canadian operations.

Unrealized and realized gain on investments


	For the Six Months Ended
		June 30, 2022			June 30, 2021
Unrealized and realized loss (gain) on investments		$	234		$	(6,192	)
$ change		$	6,426
% change			-104	%

The loss on investment during the six months ended June 30, 2022 is related to the revaluation of the investments acquired through the Gage Acquisition. The gain on investment during the six months ended June 30, 2021 relates to the acquisition of the remaining 90% investment in Guadco LLC and KCR Holdings LLC on April 30, 2021.

Provision for income taxes


	For the Three Months Ended						For the Six Months Ended
		March 31, 2022			March 31, 2021			June 30, 2022			June 30, 2021
Provision for income taxes		$	3,743		$	9,436		$	8,431		$	16,373
$ change		$	(5,693	)				$	(7,942	)
% change			-60	%					-49	%

The decrease in provision for income taxes for the six months ended June 30, 2022 as compared to the six months ended June 30, 2021 was due to the decline in revenue and associated decline in gross profit, mainly related to the ~~reset~~operational reconfiguration of the Company's cultivation facility in Pennsylvania, ~~facility and~~as well as the vape recall by the Pennsylvania Department of Health.

Liquidity and Capital Resources

March 31, 2022

December 31, 2021

$

$

Cash and cash equivalents

88,407

79,642

Current assets

187,135

143,221

Non-current assets

849,266

438,713

Current liabilities

148,266

70,362

Non-current liabilities

362,896

282,618

Working capital

38,869

72,859

Total shareholders' equity

525,239

228,954


	June 30, 2022			December 31, 2021
	$			$
Cash and cash equivalents		48,426			79,642
Current assets		137,318			143,221
Non-current assets		871,299			438,713
Current liabilities		140,403			61,044
Non-current liabilities		323,246			291,936
Working capital		(3,085	)		82,177
Total shareholders' equity		544,968			228,954

The calculation of working capital provides additional information and is not defined under 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.

At ~~March 31,~~June 30, 2022, TerrAscend had cash and cash equivalents of ~~$88,407,~~$48,426, which is sufficient to fund the Company’s ongoing operations. Any additional future requirements will be funded through the following sources of capital:

•

Cash from ongoing ~~operations~~operations.

•

Market ~~offerings~~offerings.

•

Debt - the Company may seek to obtain additional debt from additional creditors.

•

Sale leaseback - the Company may seek to sell and lease back its capital properties.

•

Exercise of options and warrants - the Company would receive funds from exercise of options and warrants from the holders of such securities in the event they are exercised.

~~For additional information regarding regulatory and legal risks, please see Item 1A – “Risk Factors” in the Company's Annual Report on Form 10-K for the year ended December 31, 2021, which was filed on March 17, 2022.~~

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 its research and development activities, corporate and administration expenses, working capital and overall capital expenditures. Since inception, the Company has primarily financed its liquidity needs through the issuance of shares and utilization of borrowings.

The Company has ~~$280,332~~$280,136 in principal amounts of loans payable at ~~March 31,~~June 30, 2022. Of this amount, ~~$59,490~~$68,955 are due within the next twelve months. The Company has entered into operating leases for certain premises and offices for which it owes monthly lease payments.

In addition, the Company's undiscounted contingent consideration payable is ~~$10,820~~$10,734 at ~~March 31,~~June 30, 2022. The contingent consideration payable relates to the Company's business acquisitions of The Apothecarium, State Flower, and KCR. Contingent consideration is based upon the potential earnout of the underlying business unit and is measured at fair value using a projection model for the business and the formulaic structure for determining the consideration under the agreement. The contingent consideration is revalued at the end of each reporting period.

The Company expects that its cash on hand and cash flows from operations, along with financing transactions, will be adequate to meet its capital requirements and operational needs for at least the next 12 months.

Cash Flows

Cash flows from operating activities

For the Three Months Ended

March 31, 2022

March 31, 2021

Net cash (used in) provided by operating activities

$
(18,847
)

$
6,212


	For the Six Months Ended
		June 30, 2022			June 30, 2021
Net cash used in operating activities		$	(34,976	)	$	(10,076	)

The increase in cash used in operating activities for the ~~three~~six months ended ~~March 31,~~June 30, 2022 is primarily due to an increase in loss from operations to ~~$10,030~~$24,034 from a profit of ~~$12,677~~$24,918 in the prior year period, as well as ~~a $5,276 increase in~~ changes in working capital ~~items.~~items of $16,081.

Cash flows from investing activities

For the Three Months Ended

March 31, 2022

March 31, 2021

Net cash provided by (used in) investing activities

$
13,913

$
(12,885
)


	For the Six Months Ended
		June 30, 2022			June 30, 2021
Net cash provided used in investing activities		$	(39	)	$	(63,387	)

The net cash ~~provided by~~used in investing activities for the ~~three~~six months ended ~~March 31,~~June 30, 2022 primarily relates to ~~the cash acquired through the Gage Acquisition of $24,716. The cash provided by investing activities is offset by~~ investments in property and equipment of ~~$4,193~~$12,500 and deposits for property and equipment of $10,036, primarily related to the buildout of a cultivation site in Maryland, continuing renovations at the Company's Pennsylvania cultivation site, as well as the continued buildout of the Company's Lodi alternative treatment center in New Jersey. Additionally, the Company had investments in intangible assets of $1,330, primarily related to adult use licenses in New Jersey. The cash used in investing activities is offset by cash inflows of $24,716 related to the cash acquired through the Gage Acquisition.

In comparison, the net cash ~~outflow from~~used in investing activities ~~during~~for the ~~three~~six months ended ~~March 31,~~June 30, 2021 ~~was~~ primarily ~~related~~relates to cash consideration paid for the acquisitions of KCR and HMS totaling $42,736. Additionally, the Company had investments in property and equipment of ~~$8,311~~$10,856 primarily related to the buildout of the New Jersey operations and expansions in Pennsylvania cultivation and $10,583 related to deposits ~~of $4,826~~ paid for expansion of the cultivation premises in Pennsylvania.

Cash flows from financing activities

For the Three Months Ended

March 31, 2022

March 31, 2021

Net cash provided by financing activities

$
17,068

$
183,252


	For the Six Months Ended
		June 30, 2022		June 30, 2021
Net cash provided by financing activities		$	8,781	$	168,507

During the ~~three~~six months ended ~~March 31,~~June 30, 2022, 7,989,436 Common Share warrants were exercised for total proceeds of ~~$23,330~~$23,797 and ~~68,215~~88,015 stock options were exercised ~~at $1.93-$5.21 (C$2.42-$6.53) per unit~~ for total gross proceeds of ~~$192.~~$361. The cash provided by financing activities was offset by payments of contingent consideration related to the acquisition of State Flower of ~~$6,630.~~$6,630, loan principal payments of $5,203, loan amendment fee paid on the modification of the Ilera term loan of $1,200, and tax distributions paid on behalf of the partners of the New Jersey operations of $1,436.

Net cash provided by financing activities for the ~~three~~six months ended ~~March 31,~~June 30, 2021, was mainly the result of the private placement on January 28, 2021, in which the Company issued 18,115,656 Common Shares at a price of $9.64 (C$12.35) per Common Share for total proceeds of $173,477, net of share issuance costs of $1,643. Additionally, during the ~~three~~six months ended ~~March 31,~~June 30, 2021, ~~1,486,075~~2,590,178 Common Share warrants were exercised for total proceeds of ~~$3,854~~$6,777 and ~~381,820~~699,009 stock options were exercised at $0.67-$~~6.34~~6.93 (C$0.85-$~~8.09)~~8.52) per unit for total gross proceeds of ~~$1,499.~~$2,385. In addition, ~~1,570~~1,900 preferred share warrants were exercised at $3,000 per unit for total gross proceeds of ~~$3,735.~~$3,759. The cash provided by financing activities was offset by payments of contingent consideration related to the acquisition of Ilera of $18,274.

Reconciliation of Non-GAAP Measures

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 Adjusted gross profit as gross profit adjusted for certain material non-cash items and Adjusted EBITDA as EBITDA adjusted for material non-cash items and certain other adjustments management believes are not reflective of the ongoing operations and performance. 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 this definition is a useful measure to assess the performance of the Company as it provides more meaningful operating results by excluding the effects of expenses that are not reflective of the Company's underlying business performance and other one-time non-recurring expenses.

The table below reconciles net loss to EBITDA and Adjusted EBITDA for the three and six months ended ~~March 31,~~June 30, 2022 and 2021.


		For the Three Months Ended								For the Three Months Ended							For the Six Months Ended
	Notes		March 31, 2022			March 31, 2021			Notes		June 30, 2022			June 30, 2021				June 30, 2022			June 30, 2021
Net loss			$	(16,006	)	$	(14,111	)
Net income (loss)											$	14,162		$	(29,662	)		$	(1,844	)	$	(43,773	)
Add (deduct) the impact of:
Provision for income taxes				3,743			9,436					4,688			6,937				8,431			16,373
Finance expenses				6,698			5,359					9,427			6,424				16,125			11,783
Amortization and depreciation				5,085			3,521					7,046			3,529				12,131			7,050
EBITDA	(a)			(480	)		4,205		(a)			35,323			(12,772	)			34,843			(8,567	)
Add (deduct) the impact of:
Relief of fair value upon acquisition	(b)			1,806			—		(b)			549			567				2,355			567
Non-cash write downs of inventory									(c)			5,894			449				5,894			449
Vape recall	(c)			1,894			—		(d)			1,071			-				2,965			—
Share-based compensation	(d)			3,356			3,567		(e)			4,463			4,648				7,819			8,215
Impairment of goodwill and intangible assets									(f)			-			8,640				-			8,640
Loss on disposal of fixed assets									(g)			929			36				929			36
Revaluation of contingent consideration	(e)			119			2,997		(h)			34			(7	)			153			2,990
Restructuring costs and executive severance									(i)			-			467				-			467
Legal settlements	(f)			—			1,381		(j)			-			740				—			2,121
Other one-time items	(g)			1,974			262		(k)			924			860				2,898			1,122
(Gain) loss on fair value of warrants and purchase option derivative asset	(h)			(5,713	)		5,410		(l)			(47,345	)		19,891				(53,058	)		25,301
Indemnification asset release	(i)			(25	)		1,197		(m)			3,998			2,599				3,973			3,796
Unrealized and realized loss (gain) on investments	(j)			-			(228	)	(n)			234			(5,964	)			234			(6,192	)
Unrealized and realized foreign exchange loss	(k)			356			2,783		(o)			(306	)		3,055				50			5,838
Adjusted EBITDA			$	3,287		$	21,574				$	5,768		$	23,209			$	9,055		$	44,783

The table below reconciles gross profit to adjusted gross profit for the three and six months ended June 30, 2022 and 2021.


		For the Three Months Ended					For the Six Months Ended
	Notes		June 30, 2022		June 30, 2021			June 30, 2022		June 30, 2021

Gross profit			$	22,993	$	34,835		$	38,133	$	69,777
Add (deduct) the impact of:
Relief of fair value upon acquisition	(b)			549		567			2,355		567
Non-cash write downs of inventory	(c)			5,894		449			5,894		449
Vape recall	(d)			1,071		-			2,965		-
Accelerated depreciation	(p)			-		-			238		-
			$	30,507	$	35,851		$	49,585	$	70,793

(a)

EBITDA is a non-GAAP measure and is calculated as earnings before interest, tax, depreciation and amortization.

(b)

In connection with the Company's acquisitions, inventory was acquired at fair value, which included a markup or markdown for profit. Recording inventory at fair value in purchase accounting has the effect of increasing or decreasing inventory and thereby increasing or decreasing cost of sales as compared to the amounts the Company would have recognized if the inventory was sold through at cost. The write-up or down of acquired inventory represents the incremental cost of sales that were recorded during purchase accounting.

(c)

Represents inventory write downs outside of the normal course of operations. These inventory write-downs were related to the the write down of aged inventory to lower of cost or market which was related to the Company's operational reconfiguration of its cultivation facility in Pennsylvania.

(d)

On February 4, 2022, more than 500 vape products were recalled by the Pennsylvania's Department of Health, including several of the Company's SKUs. As a result of the recall the Company recorded sales returns of $nil and $1,040 and ~~wrote off $854~~write-downs of ~~inventory.~~inventory of $1,071 and $1,925 for the three and six months ended June 30, 2022, respectively.

~~(d)~~(e)

Represents non-cash share-based compensation expense.

~~(e)~~(f)

Represents impairment charges taken on the Company's intangible assets and goodwill.

(g)

Represents loss taken on write-down of property and equipment.

(h)

Represents the revaluation of the Company’s contingent consideration liabilities.

~~(f)~~(i)

Represents costs associated with executive severance and restructuring of business units.

(j)

Represents one-time legal settlement charges.

~~(g)~~(k)

Includes one-time fees incurred in connection with the Company’s acquisitions, such as expenses related to professional fees, consulting, legal and accounting, that would otherwise not have been incurred. In addition, includes one-time charges for Sarbanes Oxley implementation, as well as work completed in preparation of becoming a US filer. These fees are not indicative of the Company’s ongoing costs.

~~(h)~~(l)

Represents the (gain) loss on fair value of warrants, including effects of the foreign exchange of the US denominated preferred share warrants, as well as the revaluation of the fair value of the purchase option derivative asset.

~~(i)~~(m)

Represents the reduction to the indemnification asset related to the Apothecarium tax audit settlement and statute expirations for tax years ended September 30, 2014 and September 30, 2015.

~~(j)~~(n)

Represents unrealized and realized loss (gain) on fair value changes on strategic investments.

~~(k)~~(o)

Represents the remeasurement of USD denominated cash and other assets recorded in C$ functional currency.

(p)

Represents accelerated depreciation taken in Maryland due to the move of the cultivation facility from Frederick and Hagerstown.

The decrease in Adjusted EBITDA for the three and six months ended ~~March 31,~~June 30, 2022 compared to the three and six months ended ~~March 31,~~June 30, 2021 was primarily due to lower volume and resulting gross margin compression in Pennsylvania related to the ~~reset~~Company's operational reconfiguration of ~~the~~its cultivation facility ~~and associated reduction~~ in ~~the wholesale business.~~Pennsylvania.

Pending and Subsequent Transactions

On April 8, 2022, the Company entered into a definitive agreement to acquire Allegany Medical Marijuana Dispensary ("AMMD"), a medical dispensary in Maryland from Moose Curve Holdings, LLC. Under the terms of the agreement, the Company will acquire 100% equity interest in AMMD for total consideration of $10,000 in cash, in addition to acquiring the real estate for $1,700. The transaction is subject to customary closing conditions and regulatory approvals. The Company intends to rebrand the 8,000 square foot dispensary as The Apothecarium.

On April 14, 2022, the Company entered into a definitive agreement to acquire KISA Enterprises MI, LLC and KISA Holdings, LLC ("Pinnacle"), a dispensary operator in Michigan, and related real estate, for total consideration of ~~$28,500.~~$28,500, payable in cash, two promissory notes in an aggregate amount of $10,000, and stock. The transaction includes six retail dispensary licenses, five of which are currently operational and located in the cities of Addison, ~~Buchanan,~~Buchanana, Camden, Edmore, and ~~Morenci.~~Morenci, Michigan. The Company intends to rebrand each of the dispensaries under either the Gage or Cookies retail brand. This transaction is pending approval.

Changes in or Adoption of Accounting Principles

Information regarding the Company's adoption of new accounting and reporting standards is discussed in Note 2 to the accompanying condensed consolidated financial statements.

Descriptions of the recently issued and adopted accounting principles are included in Item 1. "Financial Statements" in Note 1, Summary of Significant Accounting Policies, to the Condensed Consolidated Financial Statements.

Critical Accounting Policies and Estimates

The condensed consolidated financial statements have been prepared in accordance with GAAP. The preparation of these condensed consolidated financial statements require us 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 policies and estimates from the information provided in Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operation," included in the Annual Report on Form 10-K for the year ended December 31, 2021, which was filed on March 17, 2022.

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 opt out of the extended transition period provided in the JOBS Act. As a result, the condensed 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) the last day of the fiscal year (a) following the fifth anniversary of the completion of the IPO, (b) in which we have total annual gross revenue of $1.07 billion or more, or (c) in which the Company is deemed to be a large accelerated filer, which means the market value of our common stock that is held by non-affiliates exceeds $700.0 million as of the prior June 30th; and (ii) the date on which the Company has issued more than $1.0 billion 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 for the quarter ended June 30, 2022 from those disclosed in its Annual Report on Form 10-K for the fiscal year ended December 31, 2021.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

~~Our~~The Company's management, with the participation of ~~our Executive Chairman~~its President and Chief Financial Officer, has evaluated the effectiveness of ~~our~~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, ~~our Executive Chairman~~the President and Chief Financial Officer concluded that, as of ~~March 31,~~June 30, 2022 ~~our~~the Company's disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed by usthe Company in the reports that ~~we file~~it files 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 ~~our~~the Company's management, including ~~our Executive Chairman~~its President 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 ~~our~~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~~six months ended ~~March 31,~~June 30, 2022, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Limitations on Effectiveness of Controls and Procedures

In designing and evaluating our 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.

The Company is from time to time involved in various legal ~~proceedings. Other than as noted below,~~proceedings, including litigation related to intellectual property, product liability, employment, and commercial matters. TerrAscend believes that none of the litigation in which it is currently ~~involved, or has been~~ involved in individually or in the aggregate, is material to the Company’s consolidated financial condition or results of operations.

~~PharmHouse and 261 Matter~~

On October 15, 2018, the Company’s wholly owned subsidiary TerrAscend Canada entered into a multi-year cultivation agreement (the “PharmHouse Agreement”) with PharmHouse Inc. (“PharmHouse”), a joint venture between RIV Capital and 2615975 Ontario Inc., the operators of a leading North American greenhouse produce company (“261”). Under the terms of the PharmHouse Agreement, it was expected that PharmHouse would grow and supply cannabis to TerrAscend Canada from its existing 1.3 million square foot greenhouse located in Leamington, Ontario. Once fully licensed, the production of flower, trim and clones from up to 20% of the dedicated flowering space planted at the greenhouse was expected to be made available to TerrAscend Canada. To date, PharmHouse has not yet delivered product in accordance with the terms of the PharmHouse Agreement.

On September 11, 2020, the Company and TerrAscend Canada were informed that a statement of claim was issued on August 31, 2020 in the Ontario Superior Court of Justice by 261 against RIV Capital, Canopy Growth, the Company and TerrAscend Canada (the “261 Claim”). In the 261 Claim, 261 alleged the Company worked with the other defendants to bankrupt PharmHouse in order to avoid having to purchase certain products to be provided by PharmHouse under the PharmHouse Agreement. 261 sought damages from the defendants in the amount of C$500 million and alleged certain causes of action, including bad faith, fraud, civil conspiracy, breach of the duty of honesty and good faith in contractual relations and breach of fiduciary duty.

On September 16, 2020, PharmHouse obtained an order from the Ontario Superior Court of Justice granting PharmHouse creditor protection under the Companies’ Creditors Arrangement Act (“CCAA”). Pursuant There have been no material changes to the ~~CCAA order,~~Company's legal proceedings as previously disclosed in its Quarterly Report on Form 10-Q for the 261 Claim has been stayed. During a CCAA hearing in November, 261 objected to the stay of the 261 Claim. The judge presiding over the CCAA process agreed to allow 261 to discontinue the 261 Claim against the defendants “without prejudice” to its right to recommence the 261 Claim against all parties except PharmHouse Inc., provided that such recommenced claim can only be brought after January 1, 2021. This does not affect any of the defendants’ ability to move for a stay of the recommenced 261 Claim. On February 10, 2021, 261 served the Company and TerrAscend Canada with the recommenced 261 Claim. The recommenced 261 Claim contains the same factual allegations as the 261 Claim, the same legal claims and the same relief sought.

~~On May 1, 2022, the Company received a full and final release from the 261 Claim. As a result, the Company will not accrue any contingencies with respect to the 261 Claim.~~period ended March 31, 2022.

Item 1A. Risk Factors.

Investing in ~~our~~the Company's common stock involves a high degree of risk. For a detailed discussion of the risks that affect ~~our~~the Company's business, please refer to the section titled “Risk Factors” in ~~our~~the Company's Annual Report on Form 10-K for the year ended December 31, 2021, which was filed with the SEC on March 17, 2022. There have been no material changes to ~~our~~the Company's risk factors as previously disclosed in ~~our~~its Annual Report on Form 10-K for the year ended December 31, 2021.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

The following information describes securities sold by the Company during the fiscal quarter ending ~~March 31,~~June 30, 2022, which were not registered under the Securities Act. Included are securities issued in exchange other securities. The Company sold all of the securities listed below pursuant to the exemption from registration provided by Section 4(a)(2) of the Securities Act, or Regulation D or Regulation S promulgated thereunder.

Recent Sales of Unregistered Securities

During the year ended December 31, 2021, the Company did not issue or sell any unregistered securities as previously disclosed in its Current Report on Form 8-K, as originally filed with the SEC on March 14, 2022.

Item 6. Exhibits.

Exhibit

Description of Exhibit Incorporated Herein by Reference
Filed
Number

Description

Form
File No.
Exhibit
Filing Date
Herewith

��

10.1

Second Amendment to Membership Interest Purchase Agreement, dated March 8, 2022, by and between WDB Holdings MI, Inc. and 3 State Park, LLC, AEY Holdings, LLC, AEY Capital, LLC, AEY Thrive, LLC, Seller* and Gage Growth Corp.

8-K
000-56363
10.1
3/14/2022

10.2

Second Amendment to Arrangement Agreement, dated March 8, 2022, by and between TerrAscend Corp. and Gage Growth Corp.

8-K
000-56363
10.2
3/14/2022

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

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Exhibit		Description of Exhibit Incorporated Herein by Reference				Filed
Number	Description	Form	File No.	Exhibit	Filing Date	Herewith

2.1*	Arrangement Agreement, dated October 8, 2018, by and among TerrAscend Corp., Canopy Growth Corporation, Canopy Rivers Corporation, JW Opportunities Master Fund, Ltd., JW Partners, LP and Pharmaceutical Opportunities Fund, LP.	10-12G	000-56363	2.1	11/2/2021

2.2*	Securities Purchase Agreement, dated February 10, 2019 by and among BTHHM Berkeley, LLC, PNB Noriega, LLC, V Products, LLC, certain limited liability company interest holders of each of the forgoing entities, Michael Thomsen and TerrAscend Corp. and WDB Holding CA, Inc.	10-12G	000-56363	2.2	11/2/2021

2.3*	Securities Purchase Agreement, dated February 10, 2019, by and among RHMT, LLC, Deep Thought, LLC, Howard Street Partners, LLC, certain limited liability company interest holders of each of the forgoing entities, Michael Thomsen, and TerrAscend Corp. and WDB Holding CA, Inc.	10-12G	000-56363	2.3	11/2/2021

2.4*	Securities Purchase and Exchange Agreement, dated August 1, 2019, by and among Ilera Holdings LLC, Mera I LLC, Mera II LLC, TerrAscend Corp., WDB Holding PA, Inc. and Osagie Imasogie.	10-12G	000-56363	2.4	11/2/2021

2.5*	Securities Purchase Agreement, dated February 10, 2019, by and among Gravitas Nevada Ltd, Verdant Nevada LLC, Green Achers Consulting Limited, TerrAscend Corp. and WDB Holding, NV, Inc.	10-12G	000-56363	2.5	11/2/2021

2.6*	Arrangement Agreement, dated August 31, 2021, by and between TerrAscend Corp. and Gage Growth Corp.	10-12G	000-56363	2.6	11/2/2021
2.7*	Membership Interest Purchase Agreement, dated August 31, 2021, by and between WDB Holdings MI, Inc. and 3 State Park, LLC, AEY Holdings, LLC, AEY Capital, LLC, AEY Thrive, LLC and Seller.	10-12G	000-56363	2.7	11/2/2021

2.8*	First Amendment to Membership Purchase Agreement, dated November 9, 2021, by and between WDB Holdings MI, Inc. and 3 State Park, LLC, AEY Holdings, LLC, AEY Capital, LLC, AEY Thrive, LLC and Seller.	10-12G/A	000-56363	2.8	12/22/2021

2.9	Amending Agreement, dated October 4, 2021, by and between TerrAscend Corp. and Gage Growth Corp.	10-12G	000-56363	2.9	11/2/2021

3.1	Articles of TerrAscend Corp., dated March 7, 2017	10-12G	000-56363	3.1	11/2/2021

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	3.4	11/2/2021

10.1	Second Amendment to Membership Interest Purchase Agreement, dated March 8, 2022, by and between WDB Holdings MI, Inc. and 3 State Park, LLC, AEY Holdings, LLC, AEY Capital, LLC, AEY Thrive, LLC, Seller* and Gage Growth Corp.	8-K	000-56363	10.1	3/14/2022

10.2	Second Amendment to Arrangement Agreement, dated March 8, 2022, by and between TerrAscend Corp. and Gage Growth Corp.	8-K	000-56363	10.2	3/14/2022

10.3*	Debenture Agreement, dated March 10, 2020 by and between Canopy Growth and TerrAscend Canada, Inc.	10-K	000-56363	10.2	3/17/2022

10.4	Credit Agreement, dated December 18, 2020, by and among WDB Holding PA, Inc., the lenders party thereto and Acquiom Agency Services LLC, as Administrative Agent.	10-K	000-56363	10.3	3/17/2022

110.5	Credit Agreement, dated November 2, 2021, by and among Gage Growth Corp. and its subsidiaries, as Borrowers, and Chicago Atlantic Admin, LLC, as Administrative Agent and Collateral Agent	10-K	000-56363	10.21	3/17/2022

10.6*	Employment Agreement, dated May 23, 2022, by and between TerrAscend Corp. and Lynn Gefen					X

10.7	First Amendment to Credit Agreement, dated December 18, 2020, by and among WDB Holding PA, Inc., the lenders party thereto and Acquiom Agency Services LLC, as Administrative Agent					X

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

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* Certain confidential information has been excluded from this exhibit because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed.

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.


	Company Name

Date: ~~May 12,~~August 11, 2022	By:	/s/ Ziad Ghanem
		Ziad Ghanem
		President and Chief Operating Officer


Ontario	N/A
( State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
3610 Mavis Road Mississauga, Ontario	L5C 1W2
(Address of principal executive offices)	(Zip Code)


		Page

PART I.	FINANCIAL INFORMATION	i1

Item 1.	Financial Statements (Unaudited)	i1
	Condensed Consolidated Balance Sheets	i1
	Condensed Consolidated Statements of Operations	ii2
	Condensed Consolidated Statements of Operations and Comprehensive Loss	ii2
	Condensed Consolidated Statements of Cash Flows	45
	Notes to Unaudited Condensed Consolidated Financial Statements	57
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2124
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	2734
Item 4.	Controls and Procedures	2735

PART II.	OTHER INFORMATION	2835

Item 1.	Legal Proceedings	2835
Item 1A.	Risk Factors	2835
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	2835
Item 6.	Exhibits	2936
Signatures		3039


	At			At			At			At
	March 31, 2022			December 31, 2021			June 30, 2022			December 31, 2021
Assets
Current Assets
Cash and cash equivalents	$	88,407		$	79,642		$	48,426		$	79,642
Restricted cash								605			—
Accounts receivable, net		23,097			14,920			22,189			14,920
Investments		4,121			-			4,072			—
Inventory		64,058			42,323			54,371			42,323
Prepaid Expenses and other current assets		7,452			6,336			7,655			6,336
		187,135			143,221			137,318			143,221
Non-Current Assets
Property and equipment, net		211,717			140,762			238,797			140,762
Deposits		7,798			-			4,698			—
Operating lease right of use assets		30,801			29,561			30,570			29,561
Intangible assets, net		354,452			168,984			351,638			168,984
Goodwill		235,681			90,326			240,598			90,326
Indemnification asset		3,994			3,969			-			3,969
Other non-current assets		4,823			5,111			4,998			5,111
		849,266			438,713			871,299			438,713
Total Assets	$	1,036,401		$	581,934		$	1,008,617		$	581,934

Liabilities and Shareholders' Equity
Current Liabilities
Accounts payable and accrued liabilities	$	49,214		$	30,340		$	57,535		$	30,340
Deferred revenue		2,029			1,071			2,404			1,071
Loans payable, current		60,108			8,837			58,856			8,837
Contingent consideration payable, current		3,114			9,982			3,028			9,982
Lease liability, current		1,688			1,193
Operating lease liability, current								1,394			1,171
Lease obligations under finance leases, current								384			22
Corporate income tax payable		28,808			18,939			13,189			9,621
Other current liabilities		3,305			-			3,613			-
		148,266			70,362			140,403			61,044
Non-Current Liabilities
Loans payable, non-current		184,558			176,306			180,781			176,306
Contingent consideration payable, non-current		2,586			2,553			2,620			2,553
Lease liability, non-current		32,450			30,754
Operating lease liability, non-current								31,680			30,573
Lease obligations under finance leases, non-current								4,794			181
Warrant liability		55,021			54,986			6,176			54,986
Deferred income tax liability		72,740			14,269			73,087			14,269
Financing obligations		12,142			-			11,606			—
Other long term liabilities		3,399			3,750			12,502			13,068
		362,896			282,618			323,246			291,936
Total Liabilities		511,162			352,980			463,649			352,980
Commitments and Contingencies
Shareholders' Equity
Share Capital
Series A, convertible preferred stock, no par value, unlimited shares authorized; 13,358 and 13,708 shares outstanding as of March 31, 2022 and December 31, 2021 respectively		—			—
Series B, convertible preferred stock, no par value, unlimited shares authorized; 610 and 610 shares outstanding as of March 31, 2022 and December 31, 2021 respectively		—			—
Series C, convertible preferred stock, no par value, unlimited shares authorized; nil and 36 shares outstanding as of March 31, 2022 and December 31, 2021 respectively		—			—
Series D, convertible preferred stock, no par value, unlimited shares authorized; nil and nil shares outstanding as of March 31, 2022 and December 31, 2021 respectively		—			—
Proportionate voting shares, no par value, unlimited shares authorized; nil and nil shares outstanding as of March 31, 2022 and December 31, 2021 respectively		—			—
Exchangeable shares, no par value, unlimited shares authorized; 52,395,071 and 38,890,571 shares outstanding as of March 31, 2022 and December 31, 2021 respectively		—			—
Common stock, no par value, unlimited shares authorized; 251,971,226 and 190,930,800 shares outstanding as of March 31, 2022 and December 31, 2021 respectively		0			0
Series A, convertible preferred stock, no par value, unlimited shares authorized; 12,658 and 13,708 shares outstanding as of June 30, 2022 and December 31, 2021 respectively								—			—
Series B, convertible preferred stock, no par value, unlimited shares authorized; 610 and 610 shares outstanding as of June 30, 2022 and December 31, 2021 respectively								—			—
Series C, convertible preferred stock, no par value, unlimited shares authorized; nil and 36 shares outstanding as of June 30, 2022 and December 31, 2021 respectively								—			—
Series D, convertible preferred stock, no par value, unlimited shares authorized; nil and nil shares outstanding as of June 30, 2022 and December 31, 2021 respectively								—			—
Proportionate voting shares, no par value, unlimited shares authorized; nil and nil shares outstanding as of June 30, 2022 and December 31, 2021 respectively								—			—
Exchangeable shares, no par value, unlimited shares authorized; 52,395,071 and 38,890,571 shares outstanding as of June 30, 2022 and December 31, 2021 respectively								—			—
Common stock, no par value, unlimited shares authorized; 252,707,325 and 190,930,800 shares outstanding as of June 30, 2022 and December 31, 2021 respectively								0			0
Additional paid in capital		850,386			535,418			854,948			535,418
Accumulated other comprehensive income (loss)		(783	)		2,823			(1,063	)		2,823
Accumulated deficit		(329,855	)		(314,654	)		(315,132	)		(314,654	)
Non-controlling interest		5,491			5,367			6,215			5,367
Total Shareholders' Equity		525,239			228,954			544,968			228,954
Total Liabilities and Shareholders' Equity	$	1,036,401		$	581,934		$	1,008,617		$	581,934


	For the Six Months Ended
		June 30, 2022				June 30, 2021
Operating activities
Net loss	$		(1,844	)	$		(43,773	)
Adjustments to reconcile net income to net cash provided by (used in) operating activities
Non-cash write downs of inventory			8,495				699
Accretion expense			1,936				(544	)
Depreciation of property and equipment and amortization of intangible assets			12,131				7,050
Amortization of operating right-of-use assets			1,074				2,269
Share-based compensation			7,819				8,215
Deferred income tax (recovery) expense			(787	)			285
(Gain) loss on fair value of warrants and purchase option derivative			(53,058	)			25,301
Revaluation of contingent consideration			153				2,990
Impairment of intangible assets			—				3,633
Impairment of goodwill			—				5,007
Loss on disposal of fixed assets			929				—
Release of indemnification asset			3,973				3,796
Forgiveness of loan principal and interest			—				(766	)
Unrealized and realized foreign exchange loss			50				5,838
Unrealized and realized loss (gain) on investments			234				(6,192	)
Changes in operating assets and liabilities
Receivables			475				(950	)
Inventory			208				(9,879	)
Prepaid expense and deposits			1,474				(507	)
Deposits			206				—
Other assets			461				389
Accounts payable and accrued liabilities and other payables			(8,299	)			639
Operating lease liability			(614	)			(1,889	)
Other liability			(10,353	)			—
Contingent consideration payable			(410	)			(11,394	)
Corporate income tax payable			5				(293	)
Deferred revenue			766				—
Net cash used in operating activities			(34,976	)			(10,076	)
Investing activities
Investment in property and equipment			(12,500	)			(10,856	)
Investment in intangible assets			(1,330	)			(40	)
Principal payments received on lease receivable			392				359
Distributions of earnings from associates			—				469
Deposits for property and equipment			(10,036	)			(10,583	)
Deposits for business acquisition			(852	)			—
Payments made for land contracts			(429	)			—
Cash received on acquisition			24,716				—
Cash portion of consideration paid in acquisitions, net of cash acquired			—				(42,736	)
Net cash used in investing activities			(39	)			(63,387	)
Financing activities
Proceeds from options and warrants exercised			24,158				12,921
Loan principal paid			(5,203	)			—
Loan amendment fee paid			(1,200	)			—
Proceeds from loans payable			—				766
Cash distributions to NJ partners			(1,436	)			—
Capital contributions received (paid) from (to) non-controlling interests			(448	)			(383	)
Payments of contingent consideration			(6,630	)			(18,274	)
Payments made for financing obligations			(460	)			—
Proceeds from private placement, net of share issuance costs			—				173,477
Net cash provided by financing activities			8,781				168,507
Net (decrease) increase in cash and cash equivalents and restricted cash during the period			(26,234	)			95,044
Net effects of foreign exchange			(4,377	)			(89	)
Cash and cash equivalents and restricted cash, beginning of period			79,642				59,226
Cash and cash equivalents and restricted cash, end of period	$		49,031		$		154,181

Supplemental disclosure with respect to cash flows
Income taxes paid	$		9,213		$		16,381
Interest paid	$		14,641		$		13,290
Lease termination fee paid	$		3,300				-
Non-cash transactions
Equity and warrant liability issued as consideration for acquisition	$		294,800		$		34,427
Promissory note issued as consideration for acquisitions	$		-		$		6,750
Shares issued for liability settlement	$		22		$		57
Accrued capital purchases	$		9,776		$		336


	For the Three Months Ended
		March 31, 2022				March 31, 2021
Operating activities
Net loss	$		(16,006	)	$		(14,111	)
Adjustments to reconcile net income to net cash provided by (used in) operating activities
Non-cash write downs of inventory			1,073				584
Accretion expense			(1,169	)			(1,937	)
Depreciation of property and equipment and amortization of intangible assets			5,085				3,521
Amortization of operating right-of-use assets			487				343
Share-based compensation			3,356				3,567
Deferred income tax (recovery) expense			(1,134	)			224
(Gain) loss on fair value of warrants and purchase option derivative			(5,713	)			5,410
Revaluation of contingent consideration			119				2,997
Release of indemnification asset			(25	)			1,197
Forgiveness of loan principal and interest			-				(766	)
Unrealized and realized foreign exchange loss			356				2,783
Unrealized and realized loss (gain) on investments			-				(228	)
Changes in operating assets and liabilities
Receivables			(1,399	)			511
Inventory			3,706				(4,161	)
Prepaid expense and deposits			682				294
Deposits			(593	)			-
Other assets			571				(189	)
Accounts payable and accrued liabilities and other payables			(12,475	)			1,439
Operating lease liability			(271	)			(81	)
Other liability			(437	)			-
Contingent consideration payable			(324	)			-
Corporate income tax payable			4,869				4,713
Deferred revenue			395				102
Net cash (used in) provided by operating activities			(18,847	)			6,212
Investing activities
Investment in property and equipment			(4,193	)			(8,311	)
Investment in intangible assets			(106	)			(40	)
Principal payments received on lease receivable			156				193
Distributions of earnings from associates			-				99
Deposits for property and equipment			(6,058	)			(4,826	)
Deposits for business acquisition			(602	)			-
Cash received on acquisition of Gage			24,716				-
Net cash provided by (used in) investing activities			13,913				(12,885	)
Financing activities
Proceeds from options and warrants exercised			23,925				9,170
Proceeds from loans payable			-				766
Capital contributions paid to non-controlling interests			(227	)			(161	)
Payments of contingent consideration			(6,630	)			-
Proceeds from private placement, net of share issuance costs			-				173,477
Net cash provided by financing activities			17,068				183,252
Net (decrease) increase in cash and cash equivalents during the period			12,134				176,579
Net effects of foreign exchange			(3,369	)			(1,568	)
Cash and cash equivalents, beginning of period			79,642				59,226
Cash and cash equivalents, end of period	$		88,407		$		234,237

Supplemental disclosure with respect to cash flows
Income taxes paid	$		8		$		4,499
Interest paid	$		8,271		$		9,140
Lease termination fee paid	$		3,300				-
Non-cash transactions
Equity and warrant liability issued as consideration for acquisition	$		294,800				-
Shares issued for liability settlement	$		22				-
Accrued capital purchases	$		56				-


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☐
Emerging growth company	☒


•	the performance of the Company’s business and operations;


•	the Company’s expectations regarding revenues, expenses and anticipated cash needs;


•	federal, state, provincial, territorial, local and foreign government laws, rules and regulations, including federal and state laws in the US relating to cannabis operations in the US;


•	the legalization of the use of cannabis for medical and/or recreational use in the US and the related timing and impact thereof;


•	laws and regulations and any amendments thereto applicable to the business and the impact thereof;


•	the competitive advantages and business strategies of the Company;


•	the Company’s ability to source and operate facilities in the US;


At March 31, 2022	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
At June 30, 2022								Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Finite lived intangible assets
Software	$	2,758	$	(1,624	)	$	1,134	$	2,926	$	(1,819	)	$	1,107
Licenses		283,819		(13,735	)		270,084		284,818		(17,301	)		267,517
Brand intangibles		1,144		(350	)		794		1,144		(568	)		576
Non-compete agreements		280		(48	)		232		280		(48	)		232
Total finite lived intangible assets		288,001	��	(15,757	)		272,244		289,168		(19,736	)		269,432
Indefinite lived intangible assets
Brand intangibles		82,208		-			82,208		82,206		—			82,206
Total indefinite lived intangible assets		82,208		-			82,208		82,206		—			82,206
Intangible assets, net	$	370,209	$	(15,757	)	$	354,452	$	371,374	$	(19,736	)	$	351,638


At December 31, 2021	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Finite lived intangible assets
Software	$	2,626	$	(1,353	)	$	1,273	$	2,626	$	(1,353	)	$	1,273
Licenses		153,300		(11,311	)		141,989		153,300		(11,311	)		141,989
Brand intangibles		1,144		(254	)		890		1,144		(254	)		890
Non-compete agreements		280		(221	)		59		280		(221	)		59
Total finite lived intangible assets		157,350		(13,139	)		144,211		157,350		(13,139	)		144,211
Indefinite lived intangible assets
Brand intangibles		24,773		-			24,773		24,773		—			24,773
Total indefinite lived intangible assets		24,773		-			24,773		24,773		—			24,773
Intangible assets, net	$	182,123	$	(13,139	)	$	168,984	$	182,123	$	(13,139	)	$	168,984


2022	$	13,972	$	8,236
2023	$	15,586	$	15,661
2024	$	15,149	$	15,234
2025	$	14,718	$	14,797
2026	$	14,684	$	14,748


•	the Company’s ability to integrate and operate the assets acquired from Arise Bioscience Inc. (“Arise”), the Apothecarium Dispensaries (“The Apothecarium”), Valhalla Confections (“Valhalla”), Ilera Healthcare (“Ilera”), State Flower or ABI SF LLC (“State Flower”), HMS Health, LLC, KCR Holdings LLC, and Gage;
•	any benefits expected from the Gage Acquisition; and


•	Gage’s plans to continue building a diverse portfolio of branded cannabis assets and business arrangements through investments, strategic business relationships and the pursuit of licenses in attractive retail locations in Michigan.


	$
Cash and cash equivalents		24,716
Accounts receivable		8,996		~~6,620~~
Inventory		20,852		~~26,475~~
Prepaid expenses and other current assets		1,855
Property and equipment		69,595		~~69,465~~
Operating right of use asset		1,948		~~1,709~~
Deposits		1,147
Intangible assets		187,953
Goodwill		150,272		~~145,355~~
Investments		4,121
Accounts payable and accrued liabilities		(~~28,619~~29,871	)
Corporate income taxes payable		(5,000	)
~~Lease~~Operating lease liability		(~~1,960~~1,948	)
Finance lease liability		(308	)
Deferred revenue		(562	)
Loans payable		(~~60,105~~60,605	)
Deferred tax liability		(~~59,612~~59,603	)
Financing obligations		(12,184	)
Other liabilities		(6,574	)
Net assets acquired		294,800

Common shares of TerrAscend		274,462
Fair value of other equity instruments		13,582
Fair value of warrants classified as liabilities		6,756
Total consideration		294,800


	State Flower			Apothecarium			KCR		Total			State Flower			Apothecarium			KCR		Total
Carrying amount, December 31, 2021	$	8,360		$	3,028		$	1,147	$	12,535		$	8,360		$	3,028		$	1,147	$	12,535
Payments of contingent consideration		(6,954	)		—			—		(6,954	)		(7,040	)		—			—		(7,040	)
Revaluation of contingent consideration		86			—			33		119			86			—			67		153
Carrying amount, March 31, 2022	$	1,492		$	3,028		$	1,180	$	5,700
Carrying amount, June 30, 2022												$	1,406		$	3,028		$	1,214	$	5,648
Less: current portion		(86	)		(3,028	)				(3,114	)		—			(3,028	)		—		(3,028	)
Non-current contingent consideration	$	1,406		$	-		$	1,180	$	2,586		$	1,406		$	-		$	1,214	$	2,620


Balance at December 31, 2021	$	90,326
Acquisitions (see Note 4)		150,272
Balance at June 30, 2022	$	240,598


	March 31, 2022			December 31, 2021
Weighted-average remaining lease term (years)
Operating leases		13.4			14.2
Finance leases		5.3			5.5

Weighted-average discount rate
Operating leases		10.71	%		10.72	%


	March 31, 2022		December 31, 2021
Cash paid for amounts included in measurement of operating lease liabilities	$	1,182	$	3,987
Right-of-use assets obtained in exchange for lease obligations	$	2,190	$	9,773
Cash paid for amounts included in measurement of finance lease liabilities	$	17	$	40


	Operating			Finance			Total
2022	$	3,691		$	126		$	3,817
2023		4,973			127			5,100
2024		4,965			44			5,009
2025		4,952			45			4,997
2026		4,673			46			4,719
Thereafter		44,092			53			44,145
Total lease payments		67,346			441			67,787
Less: interest		(33,572	)		(77	)		(33,649	)
Total lease liabilities	$	33,774		$	364		$	34,138


	Number of Common Share Warrants Outstanding			Number of Common Share Warrants Exercisable		Weighted Average Exercise Price $		Weighted Average Remaining Life (years)		Number of Common Share Warrants Outstanding			Number of Common Share Warrants Exercisable		Weighted Average Exercise Price $		Weighted Average Remaining Life (years)
Outstanding, December 31, 2021		30,995,473			8,855,066	$	4.20		5.66		30,995,473			8,855,066	$	4.20		5.66
Exercised		(7,989,436	)								(7,989,436	)
Replacement warrants granted on acquisition of Gage		282,023									282,023
Outstanding, March 31, 2022		23,288,060			1,110,168	$	4.75		7.31
Outstanding, June 30, 2022											23,288,060			1,110,168	$	4.71		7.06


	Number of Proportionate Share Warrants Outstanding		Number of Proportionate Share Warrants Exercisable		Weighted Average Exercise Price $		Weighted Average Remaining Life (years)
Outstanding, December 31, 2021		8,590,908		8,590,908	$	5.69		0.64
Exercised		—
Outstanding, June 30, 2022		8,590,908		8,590,908	$	5.60		0.15


	Number of Preferred Share Warrants Outstanding			Number of Preferred Share Warrants Exercisable		Weighted Average Exercise Price $		Weighted Average Remaining Life (years)
Outstanding, December 31, 2021		16,056			16,056	$	3,000		1.39
Exercised		(950	)
Outstanding, June 30, 2022		15,106			15,106	$	3,000		0.90


	Number of Stock Options			Weighted average remaining contractual life (in years)		Weighted Average Exercise Price (per share) $		Aggregate intrinsic value		Weighted average fair value of nonvested options (per share) $		Number of Stock Options			Weighted average remaining contractual life (in years)		Weighted Average Exercise Price (per share) $		Aggregate intrinsic value		Weighted average fair value of nonvested options (per share) $
Outstanding, December 31, 2021		12,854,519			4.84	$	4.85	$	27,557	$	4.22		12,854,519			4.84	$	4.85	$	27,557	$	4.22
Granted		470,021					5.55						4,182,590					5.16
Replacement options granted on acquisition of Gage		4,940,364					2.99						4,940,364					2.99
Exercised		(68,215	)				4.68						(88,015	)				4.04
Forfeited (1)		(206,218	)				7.11						(649,376	)				8.65
Expired		(141,733	)				8.70						(396,441	)				8.08
Outstanding, March 31, 2022		17,848,738			4.16	$	4.37		36,952		4.43
Outstanding, June 30, 2022													20,843,641			4.94	$	4.24		3,615	$	-

Exercisable, March 31, 2022		11,928,817			3.21	$	3.22		32,642	N/A
Exercisable, June 30, 2022													12,396,267			3.07	$	3.11		3,615	N/A

Nonvested, March 31, 2022		5,919,921			6.09	$	6.68		4,309	N/A
Nonvested, June 30, 2022													8,447,374			7.69	$	5.89		-	N/A


	March 10, 2022
Volatility	55.0%-80.0%
Risk-free interest rate	1.22%-1.94%
Expected life (years)	~~2.00~~1.00-5.00
Dividend yield		0	%


Balance at December 31, 2021	$	868
Revaluation of purchase option derivative asset		(318	)
Balance at March 31, 2022	$	550