ROC
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period endedJune 30, 20222023
OR
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number: 021-340690
TerrAscend Corp.
(Exact Name of Registrant as Specified in its Charter)
Ontario | N/A |
( State or other jurisdiction of incorporation or organization) | (I.R.S. Employer |
Suite 501 - East Tower Mississauga, Ontario |
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(Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code: (855717) 837-7295610-4165
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| N/A | N/A |
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.
Large accelerated filer | ☐ | Accelerated filer | ☐ | |||
Non-accelerated filer | ☒ | Smaller reporting company | ☐ | |||
Emerging growth company | ☒ |
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 ☒ 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 August 9, 2022,2023, the registrant had 252,907,618286,961,175 shares of common stock,shares, $0.01 par value per share, outstanding.
Table of Contents
Page | ||
PART I. | 1 | |
Item 1. | 1 | |
Unaudited Interim Condensed Consolidated Balance Sheets as of June 30, 2023 and December 31, 2022 | 1 | |
2 | ||
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5 | ||
Notes to Unaudited Interim Condensed Consolidated Financial Statements | 7 | |
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Item 3. |
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Item 4. |
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PART II. |
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Item 1. |
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Item 1A. |
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Item 2. |
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Item 3. | 42 | |
Item 4. | 42 | |
Item 5. | 42 | |
Item 6. |
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Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q contains statements that TerrAscend Corp. (“TerrAscend”("TerrAscend" or the “Company”"Company") believes are, or may be considered to be, “forward-looking statements.”statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). All statements other than statements of historical fact included in this Quarterly Report on Form 10-Q regarding the prospects of the Company’sTerrAscend’s industry or the Company’sTerrAscend’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 "can", “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:
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Certain of the forward-looking statements contained herein concerning the cannabis industry and the general expectations of the CompanyTerrAscend concerning the cannabis industry are based on estimates prepared by the CompanyTerrAscend 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 CompanyTerrAscend 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 CompanyTerrAscend operates; (iii) the output from the Company’sTerrAscend’s operations; (iv) consumer interest in the Company’sTerrAscend’s products; (v) competition; (vi) anticipated and unanticipated costs; (vii) government regulation of the Company’sTerrAscend’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’sTerrAscend’s ability to obtain qualified staff, equipment and services in a timely and cost efficient manner; (x) the Company’sTerrAscend’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,TerrAscend, 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 ("U.S.") relating to cannabis operations in the United States;U.S.; and those discussed under Item 1A – “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the Securities and Exchange Commission (the “SEC”) on March 16, 2023 and 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 CompanyTerrAscend 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 CompanyTerrAscend 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.
PART I—FINANCIAL INFORMATION
Item 1. Financial Statements.
TerrAscend Corp.
Unaudited Interim Condensed Consolidated Balance Sheets
(Amounts expressed in thousands of United States dollars, except for share and per share amounts)
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| At |
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| At |
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| At |
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| At |
| ||||
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| June 30, 2022 |
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| December 31, 2021 |
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| June 30, 2023 |
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| December 31, 2022 |
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Assets |
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Current Assets |
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Cash and cash equivalents |
| $ | 48,426 |
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| $ | 79,642 |
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| $ | 28,915 |
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| $ | 26,158 |
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Restricted cash |
|
| 605 |
|
|
| — |
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|
| 3,106 |
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|
| 605 |
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Accounts receivable, net |
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| 22,189 |
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|
| 14,920 |
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|
| 9,478 |
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| 22,443 |
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Investments |
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| 4,072 |
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|
| — |
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| 1,932 |
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|
| 3,595 |
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Inventory |
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| 54,371 |
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| 42,323 |
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| 54,015 |
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| 46,335 |
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Prepaid Expenses and other current assets |
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| 7,655 |
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| 6,336 |
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Assets held for sale |
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| — |
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| 17,349 |
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Prepaid expenses and other current assets |
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| 8,674 |
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| 4,937 |
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Current assets from discontinued operations |
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| 509 |
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| 571 |
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| 137,318 |
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| 143,221 |
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| 106,629 |
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| 121,993 |
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Non-Current Assets |
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Restricted cash - Non-current |
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| 2,500 |
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| — |
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Property and equipment, net |
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| 238,797 |
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| 140,762 |
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| 208,995 |
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| 215,812 |
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Deposits |
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| 4,698 |
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|
| — |
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|
| 406 |
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|
| 837 |
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Operating lease right of use assets |
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| 30,570 |
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| 29,561 |
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| 32,824 |
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| 29,451 |
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Intangible assets, net |
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| 351,638 |
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| 168,984 |
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| 269,594 |
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| 239,704 |
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Goodwill |
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| 240,598 |
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| 90,326 |
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| 99,952 |
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| 90,328 |
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Indemnification asset |
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| - |
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| 3,969 |
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Other non-current assets |
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| 4,998 |
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| 5,111 |
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| 848 |
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| 3,462 |
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| 871,299 |
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| 438,713 |
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| 615,119 |
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| 579,594 |
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Total Assets |
| $ | 1,008,617 |
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| $ | 581,934 |
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| $ | 721,748 |
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| $ | 701,587 |
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Liabilities and Shareholders' Equity |
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Current Liabilities |
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Accounts payable and accrued liabilities |
| $ | 57,535 |
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| $ | 30,340 |
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| $ | 50,841 |
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| $ | 44,286 |
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Deferred revenue |
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| 2,404 |
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| 1,071 |
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| 3,092 |
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| 2,935 |
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Loans payable, current |
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| 58,856 |
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| 8,837 |
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| 23,928 |
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| 48,335 |
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Contingent consideration payable, current |
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| 3,028 |
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| 9,982 |
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| 4,434 |
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| 5,184 |
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Operating lease liability, current |
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| 1,394 |
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| 1,171 |
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| 1,911 |
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| 1,857 |
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Lease obligations under finance leases, current |
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| 384 |
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| 22 |
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| 275 |
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| 521 |
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Corporate income tax payable |
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| 13,189 |
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| 9,621 |
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| 45,934 |
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| 23,077 |
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Other current liabilities |
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| 3,613 |
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| - |
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| 1,608 |
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| 2,599 |
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Current liabilities from discontinued operations |
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| 1,466 |
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| 9,111 |
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| 140,403 |
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| 61,044 |
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| 133,489 |
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| 137,905 |
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Non-Current Liabilities |
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Loans payable, non-current |
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| 180,781 |
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| 176,306 |
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| 180,400 |
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| 145,852 |
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Contingent consideration payable, non-current |
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| 2,620 |
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| 2,553 |
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Operating lease liability, non-current |
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| 31,680 |
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| 30,573 |
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| 35,207 |
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| 31,545 |
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Lease obligations under finance leases, non-current |
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| 4,794 |
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| 181 |
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| 2,139 |
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| 6,713 |
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Warrant liability |
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| 6,176 |
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| 54,986 |
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Derivative liability |
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| 5,750 |
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| 711 |
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Convertible debt |
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| 6,447 |
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|
| — |
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Deferred income tax liability |
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| 73,087 |
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| 14,269 |
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| 35,596 |
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| 30,700 |
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Financing obligations |
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| 11,606 |
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|
| — |
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| 10,754 |
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| 11,198 |
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Other long term liabilities |
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| 12,502 |
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| 13,068 |
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| 16,367 |
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| 15,792 |
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| 323,246 |
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| 291,936 |
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| 292,660 |
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|
| 242,511 |
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Total Liabilities |
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| 463,649 |
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| 352,980 |
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| 426,149 |
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| 380,416 |
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Commitments and Contingencies |
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Shareholders' Equity |
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Share Capital |
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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 |
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| — |
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| — |
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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 |
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| — |
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| — |
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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 |
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| — |
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| — |
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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 |
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| — |
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| — |
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Proportionate voting shares, no par value, unlimited shares authorized; nil and nil shares outstanding as of June 30, 2022 and December 31, 2021 respectively |
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| — |
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| — |
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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 |
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| — |
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| — |
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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 |
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| 0 |
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| 0 |
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Series A, convertible preferred stock, no par value, unlimited shares authorized; 12,350 and 12,608 shares outstanding as of June 30, 2023 and December 31, 2022, respectively |
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| — |
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| — |
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Series B, convertible preferred stock, no par value, unlimited shares authorized; 600 and 600 shares outstanding as of June 30, 2023 and December 31, 2022, respectively |
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| — |
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| — |
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Series C, convertible preferred stock, no par value, unlimited shares authorized; nil and nil shares outstanding as of June 30, 2023 and December 31, 2022, respectively |
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| — |
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| — |
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Series D, convertible preferred stock, no par value, unlimited shares authorized; nil and nil shares outstanding as of June 30, 2023 and December 31, 2022, respectively |
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| — |
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| — |
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Proportionate voting shares, no par value, unlimited shares authorized; nil and nil shares outstanding as of June 30, 2023 and December 31, 2022, respectively |
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| — |
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| — |
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Exchangeable shares, no par value, unlimited shares authorized; 63,492,038 and 76,996,538 shares outstanding as of June 30, 2023 and December 31, 2022, respectively |
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| — |
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| — |
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Common shares, no par value, unlimited shares authorized; 286,807,780 and 259,624,531 shares outstanding as of June 30, 2023 and December 31, 2022, respectively |
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| — |
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| — |
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Additional paid in capital |
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| 854,948 |
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| 535,418 |
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| 945,926 |
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| 934,972 |
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Accumulated other comprehensive income (loss) |
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| (1,063 | ) |
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| 2,823 |
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Accumulated other comprehensive income |
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| 1,330 |
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|
| 2,085 |
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Accumulated deficit |
|
| (315,132 | ) |
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| (314,654 | ) |
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| (653,623 | ) |
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| (618,260 | ) |
Non-controlling interest |
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| 6,215 |
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| 5,367 |
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| 1,966 |
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| 2,374 |
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Total Shareholders' Equity |
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| 544,968 |
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| 228,954 |
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| 295,599 |
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| 321,171 |
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Total Liabilities and Shareholders' Equity |
| $ | 1,008,617 |
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| $ | 581,934 |
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| $ | 721,748 |
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| $ | 701,587 |
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The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.
1
TerrAscend Corp.
Unaudited Interim Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income (Loss)
(Amounts expressed in thousands of United States dollars, except for share and per share amounts)
|
| For the Three Months Ended |
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| For the Six Months Ended |
| For the Three Months Ended |
|
| For the Six Months Ended |
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|
| June 30, 2022 |
|
| June 30, 2021 |
|
| June 30, 2022 |
|
| June 30, 2021 |
|
| June 30, 2023 |
|
| June 30, 2022 |
|
| June 30, 2023 |
|
| June 30, 2022 |
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Revenue |
| $ | 65,367 |
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| $ | 61,977 |
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| $ | 115,812 |
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| $ | 118,473 |
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| $ | 72,437 |
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| $ | 64,221 |
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| $ | 142,157 |
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| $ | 113,281 |
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Excise and cultivation tax |
|
| (563 | ) |
|
| (3,254 | ) |
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|
| (1,349 | ) |
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| (6,396 | ) |
|
| (313 | ) |
|
| (261 | ) |
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|
| (635 | ) |
|
| (736 | ) |
Revenue, net |
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| 64,804 |
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|
| 58,723 |
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|
| 114,463 |
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|
| 112,077 |
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|
| 72,124 |
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|
| 63,960 |
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|
| 141,522 |
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|
| 112,545 |
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Cost of Sales |
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| 41,811 |
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|
| 23,888 |
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| 76,330 |
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| 42,300 |
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|
| 35,898 |
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|
| 40,009 |
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|
| 71,396 |
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|
| 72,970 |
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Gross profit |
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| 22,993 |
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|
| 34,835 |
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|
| 38,133 |
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|
| 69,777 |
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|
| 36,226 |
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|
| 23,951 |
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|
| 70,126 |
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|
| 39,575 |
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Operating expenses: |
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General and administrative |
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| 33,981 |
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|
| 20,750 |
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|
| 56,533 |
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|
| 41,142 |
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|
| 30,476 |
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|
| 32,925 |
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|
| 58,206 |
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|
| 54,349 |
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Amortization and depreciation |
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| 3,016 |
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|
| 1,844 |
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|
| 5,634 |
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|
| 3,717 |
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|
| 2,242 |
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|
| 2,581 |
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|
| 4,271 |
|
|
| 4,756 |
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Impairment of property and equipment |
|
| 10 |
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|
| — |
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|
|
| 345 |
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|
| — |
| |||||||||||||||||
Total operating expenses |
|
| 36,997 |
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|
| 22,594 |
|
|
| 62,167 |
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|
| 44,859 |
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|
| 32,728 |
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|
| 35,506 |
|
|
| 62,822 |
|
|
| 59,105 |
| ||
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(Loss) income from operations |
|
| (14,004 | ) |
|
| 12,241 |
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|
| (24,034 | ) |
|
| 24,918 |
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Other expense (income) |
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Revaluation of contingent consideration |
|
| 34 |
|
|
| (7 | ) |
|
| 153 |
|
|
| 2,990 |
| ||||||||||||||||||
(Gain) loss on fair value of warrants and purchase option derivative asset |
|
| (47,345 | ) |
|
| 19,891 |
|
|
| (53,058 | ) |
|
| 25,301 |
| ||||||||||||||||||
Income (loss) from operations |
|
| 3,498 |
|
|
| (11,555 | ) |
|
| 7,304 |
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|
| (19,530 | ) | ||||||||||||||||||
Other (income) expense |
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Loss from revaluation of contingent consideration |
|
| — |
|
|
| 34 |
|
|
| — |
|
|
| 153 |
| ||||||||||||||||||
Gain on fair value of warrants and purchase option derivative asset |
|
| (215 | ) |
|
| (47,345 | ) |
|
| (653 | ) |
|
| (53,058 | ) | ||||||||||||||||||
Finance and other expenses |
|
| 13,902 |
|
|
| 8,919 |
|
|
| 20,758 |
|
|
| 15,309 |
|
|
| 8,171 |
|
|
| 13,663 |
|
|
| 18,258 |
|
|
| 20,318 |
| ||
Transaction and restructuring costs |
|
| 627 |
|
|
| 432 |
|
|
| 1,242 |
|
|
| 432 |
|
|
| 389 |
|
|
| 627 |
|
|
| 392 |
|
|
| 1,242 |
| ||
Impairment of goodwill |
|
| — |
|
|
| 5,007 |
|
|
| — |
|
|
| 5,007 |
| ||||||||||||||||||
Impairment of intangible assets |
|
| — |
|
|
| 3,633 |
|
|
| — |
|
|
| 3,633 |
| ||||||||||||||||||
Unrealized and realized foreign exchange loss |
|
| (306 | ) |
|
| 3,055 |
|
|
| 50 |
|
|
| 5,838 |
| ||||||||||||||||||
Unrealized and realized loss (gain) on investments |
|
| 234 |
|
|
| (5,964 | ) |
|
|
| 234 |
|
|
| (6,192 | ) | |||||||||||||||||
Income (loss) before provision from income taxes |
|
| 18,850 |
|
|
| (22,725 | ) |
|
| 6,587 |
|
|
| (27,400 | ) | ||||||||||||||||||
Unrealized and realized foreign exchange (gain) loss |
|
| (101 | ) |
|
| (315 | ) |
|
| (132 | ) |
|
| 41 |
| ||||||||||||||||||
Unrealized and realized loss on investments |
|
| 1,661 |
|
|
| 234 |
|
|
|
| 2,360 |
|
|
| 234 |
| |||||||||||||||||
(Loss) Income from continuing operations before provision from income taxes |
|
| (6,407 | ) |
|
| 21,547 |
|
|
| (12,921 | ) |
|
| 11,540 |
| ||||||||||||||||||
Provision for income taxes |
|
| 4,688 |
|
|
| 6,937 |
|
|
|
| 8,431 |
|
|
| 16,373 |
|
|
| 6,448 |
|
|
| 4,688 |
|
|
|
| 19,112 |
|
|
| 8,431 |
|
Net income (loss) |
| $ | 14,162 |
|
| $ | (29,662 | ) |
|
| $ | (1,844 | ) |
| $ | (43,773 | ) | |||||||||||||||||
Net (loss) income from continuing operations |
| $ | (12,855 | ) |
| $ | 16,859 |
|
|
| $ | (32,033 | ) |
| $ | 3,109 |
| |||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
Discontinued operations: |
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
Loss from discontinued operations, net of tax |
| $ | (621 | ) |
| $ | (2,697 | ) |
|
| $ | (4,212 | ) |
| $ | (4,953 | ) | |||||||||||||||||
Net (loss) income |
| $ | (13,476 | ) |
| $ | 14,162 |
|
|
| $ | (36,245 | ) |
| $ | (1,844 | ) | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Foreign currency translation |
|
| 280 |
|
|
| (3,025 | ) |
|
|
| 3,887 |
|
|
| (5,214 | ) |
|
| 408 |
|
|
| 280 |
|
|
|
| 755 |
|
|
| 3,887 |
|
Comprehensive income (loss) |
| $ | 13,882 |
|
| $ | (26,637 | ) |
|
| $ | (5,731 | ) |
| $ | (38,559 | ) | |||||||||||||||||
Comprehensive (loss) income |
| $ | (13,884 | ) |
| $ | 13,882 |
|
|
| $ | (37,000 | ) |
| $ | (5,731 | ) | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Net income (loss) attributable to: |
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
Net (loss) income from continuing operations attributable to: |
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
Common and proportionate Shareholders of the Company |
| $ | 13,217 |
|
| $ | (30,660 | ) |
| $ | (3,140 | ) |
| $ | (44,834 | ) |
| $ | (14,998 | ) |
| $ | 15,914 |
|
| $ | (36,362 | ) |
| $ | 1,813 |
| ||
Non-controlling interests |
|
| 945 |
|
|
| 998 |
|
|
| 1,296 |
|
|
| 1,061 |
|
| $ | 2,143 |
|
| $ | 945 |
|
| $ | 4,329 |
|
| $ | 1,296 |
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Comprehensive income (loss) attributable to: |
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
Comprehensive (loss) income from continuing operations attributable to: |
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
Common and proportionate Shareholders of the Company |
| $ | 12,937 |
|
| $ | (27,635 | ) |
| $ | (7,027 | ) |
| $ | (39,620 | ) |
| $ | (16,027 | ) |
| $ | 12,937 |
|
| $ | (41,329 | ) |
| $ | (7,027 | ) | ||
Non-controlling interests |
|
| 945 |
|
|
| 998 |
|
|
| 1,296 |
|
|
| 1,061 |
|
| $ | 2,143 |
|
| $ | 945 |
|
| $ | 4,329 |
|
| $ | 1,296 |
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Net income (loss) per share, basic and diluted |
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
Net income (loss) per share - basic |
| $ | 0.05 |
|
| $ | (0.17 | ) |
| $ | (0.01 | ) |
| $ | (0.25 | ) | ||||||||||||||||||
Net (loss) income per share |
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
Net (loss) income per share - basic: |
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
Continuing operations |
| $ | (0.05 | ) |
| $ | 0.06 |
|
| $ | (0.13 | ) |
| $ | 0.01 |
| ||||||||||||||||||
Discontinued operations |
| $ | - |
|
| $ | (0.01 | ) |
|
| $ | (0.02 | ) |
| $ | (0.02 | ) | |||||||||||||||||
Net (loss) income per share - basic |
| $ | (0.05 | ) |
| $ | 0.05 |
|
| $ | (0.15 | ) |
| $ | (0.01 | ) | ||||||||||||||||||
Weighted average number of outstanding common and proportionate voting shares |
|
| 252,305,425 |
|
|
| 182,369,839 |
|
|
| 231,829,926 |
|
|
| 176,901,119 |
|
|
| 275,186,279 |
|
|
| 252,305,425 |
|
|
| 271,223,233 |
|
|
| 231,829,926 |
| ||
Net income (loss) per share - diluted |
| $ | 0.05 |
|
| $ | (0.17 | ) |
|
| $ | (0.01 | ) |
| $ | (0.25 | ) | |||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
Net (loss) income per share - diluted: |
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
Continuing operations |
| $ | (0.05 | ) |
| $ | 0.06 |
|
| $ | (0.13 | ) |
| $ | 0.01 |
| ||||||||||||||||||
Discontinued operations |
|
| — |
|
| $ | (0.01 | ) |
|
| $ | (0.02 | ) |
| $ | (0.02 | ) | |||||||||||||||||
Net (loss) income per share - diluted |
| $ | (0.05 | ) |
| $ | 0.05 |
|
|
| $ | (0.15 | ) |
| $ | (0.01 | ) | |||||||||||||||||
Weighted average number of outstanding common and proportionate voting shares, assuming dilution |
|
| 257,883,711 |
|
|
| 182,369,839 |
|
|
|
| 231,829,926 |
|
|
| 176,901,119 |
|
|
| 275,186,279 |
|
|
| 257,883,711 |
|
|
|
| 271,223,233 |
|
|
| 231,829,926 |
|
The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.
2
TerrAscend Corp.
(Amounts expressed in thousands of United States dollars, except for share and per share amounts)
|
| Number of Shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
|
|
|
|
|
| Convertible Preferred Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
|
| Common Shares |
| Exchangeable Shares |
| Series A |
| Series B |
|
|
| Common Shares Equivalent |
|
|
| Additional paid in capital |
|
| Accumulated other comprehensive income (loss) |
|
|
| Accumulated deficit |
|
|
| Non-controlling interest |
|
|
| Total |
| |||||||||||||||
Balance at March 31, 2023 |
|
| 274,653,743 |
|
| 63,492,038 |
|
| 12,350 |
|
| 600 |
|
|
|
| 351,095,985 |
|
|
| $ | 936,404 |
|
| $ | 1,738 |
|
|
| $ | (641,517 | ) |
|
| $ | 2,676 |
|
|
| $ | 299,301 |
| |||||
Shares issued - stock options, warrant and RSU exercises |
|
| 1,078 |
|
| — |
|
| — |
|
| — |
|
|
|
| 1,078 |
|
|
|
| — |
|
|
| — |
|
|
|
| — |
|
|
|
| — |
|
|
|
| — |
| |||||
Shares, options and warrants issued - acquisitions |
|
| 5,442,282 |
|
| — |
|
| — |
|
| — |
|
|
|
| 5,442,282 |
|
|
|
| 9,524 |
|
|
| — |
|
|
|
| — |
|
|
|
| — |
|
|
|
| 9,524 |
| |||||
Shares, options and warrants issued - legal settlement |
|
| 130,000 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 130,000 |
|
| — |
|
| 201 |
|
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 201 |
|
Shares issued - conversion |
|
| — |
|
| — |
|
| — |
|
| — |
|
|
|
| — |
|
|
|
| — |
|
|
| — |
|
|
|
| — |
|
|
|
| — |
|
|
|
| — |
| |||||
Private placement net of share issuance costs |
|
| 6,580,677 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 6,580,677 |
|
| — |
|
| 7,507 |
|
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 7,507 |
|
Share-based compensation expense |
|
| — |
|
| — |
|
| — |
|
| — |
|
|
|
| — |
|
|
|
| 1,981 |
|
|
| — |
|
|
|
| — |
|
|
|
| — |
|
|
|
| 1,981 |
| |||||
Options and warrants expired/forfeited |
|
| — |
|
| — |
|
| — |
|
| — |
|
|
|
| — |
|
|
|
| (3,514 | ) |
|
| — |
|
|
|
| 3,514 |
|
|
|
| — |
|
|
|
| — |
| |||||
Capital distributions |
|
| — |
|
| — |
|
| — |
|
| — |
|
|
|
| — |
|
|
|
| — |
|
|
| — |
|
|
|
| — |
|
|
|
| (1,531 | ) |
|
|
| (1,531 | ) | |||||
Acquisition of non-controlling interest |
|
| — |
|
| — |
|
| — |
|
| — |
|
|
|
| — |
|
|
|
| (6,177 | ) |
|
| — |
|
|
|
| — |
|
|
|
| (1,323 | ) |
|
|
| (7,500 | ) | |||||
Net (loss) income for the period |
|
| — |
|
| — |
|
| — |
|
| — |
|
|
|
| — |
|
|
|
| — |
|
|
| — |
|
|
|
| (15,620 | ) |
|
|
| 2,144 |
|
|
|
| (13,476 | ) | |||||
Foreign currency translation |
|
| — |
|
| — |
|
| — |
|
| — |
|
|
|
| — |
|
|
|
| — |
|
|
| (408 | ) |
|
|
| — |
|
|
|
| — |
|
|
|
| (408 | ) | |||||
Balance at June 30, 2023 |
|
| 286,807,780 |
|
| 63,492,038 |
|
| 12,350 |
|
| 600 |
|
| — |
|
| 363,250,022 |
|
| — |
|
| 945,926 |
|
|
| 1,330 |
|
| — |
|
| (653,623 | ) |
| — |
|
| 1,966 |
|
| — |
|
| 295,599 |
|
|
| Number of Shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||
|
|
|
|
|
|
|
| Convertible Preferred Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
|
| Common Shares |
|
| Exchangeable Shares |
|
| Series A |
|
| Series B |
|
| Common Shares Equivalent |
|
| Additional paid in capital |
|
| Accumulated other comprehensive income (loss) |
|
| Accumulated deficit |
|
| Non-controlling interest |
|
| Total |
| ||||||||||
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 |
|
| 36,099 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 36,099 |
|
|
| 1,041 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1,041 |
|
Shares issued - conversion |
|
| 700,000 |
|
|
| — |
|
|
| (700 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Shares issued - liability settlement |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Share-based compensation expense |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 4,463 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 4,463 |
|
Options expired/forfeited |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (1,506 | ) |
|
| — |
|
|
| 1,506 |
|
|
| — |
|
|
| — |
|
Capital contribution |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 564 |
|
|
| — |
|
|
| — |
|
|
| (221 | ) |
|
| 343 |
|
Net income for the period |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 13,217 |
|
|
| 945 |
|
|
| 14,162 |
|
Foreign currency translation |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (280 | ) |
|
| — |
|
|
| — |
|
|
| (280 | ) |
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 |
|
3
TerrAscend Corp.
Unaudited Interim Condensed Consolidated Statements of Changes in Shareholders’ Equity (Deficit)(Continued)
(Amounts expressed in thousands of United States dollars, except for share and per share amounts)
|
| Number of Shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
|
|
|
|
|
| Convertible Preferred Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
|
| Common Shares |
| Exchangeable Shares |
| Series A |
| Series B |
|
| Common Shares Equivalent |
|
| Additional paid in capital |
|
| Accumulated other comprehensive income (loss) |
|
| Accumulated deficit |
|
| Non-controlling interest |
|
| Total |
| ||||||||||
Balance at December 31, 2022 |
|
| 259,624,531 |
|
| 76,996,538 |
|
| 12,608 |
|
| 600 |
|
|
| 349,829,273 |
|
| $ | 934,972 |
|
| $ | 2,085 |
|
| $ | (618,260 | ) |
| $ | 2,374 |
|
| $ | 321,171 |
|
Shares issued - stock options, warrant and RSU exercises |
|
| 393,924 |
|
| — |
|
| — |
|
| — |
|
|
| 393,924 |
|
|
| 81 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 81 |
|
Shares, options and warrants issued - acquisitions |
|
| 5,913,963 |
|
| — |
|
| — |
|
| — |
|
|
| 5,913,963 |
|
|
| 10,267 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 10,267 |
|
Shares, options and warrants issued - legal settlement |
|
| 532,185 |
|
| — |
|
| — |
|
| — |
|
|
| 532,185 |
|
|
| 794 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 794 |
|
Shares issued - conversion |
|
| 13,762,500 |
|
| (13,504,500 | ) |
| (258 | ) |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Private placement net of share issuance costs |
|
| 6,580,677 |
|
| — |
|
| — |
|
| — |
|
|
| 6,580,677 |
|
|
| 7,507 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 7,507 |
|
Share-based compensation expense |
|
| — |
|
| — |
|
| — |
|
| — |
|
|
| — |
|
|
| 3,694 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 3,694 |
|
Options and warrants expired/forfeited |
|
| — |
|
| — |
|
| — |
|
| — |
|
|
| — |
|
|
| (5,212 | ) |
|
| — |
|
|
| 5,212 |
|
|
| — |
|
|
| — |
|
Capital distributions |
|
| — |
|
| — |
|
| — |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (3,415 | ) |
|
| (3,415 | ) |
Acquisition of non-controlling interest |
|
| — |
|
| — |
|
| — |
|
| — |
|
|
| — |
|
|
| (6,177 | ) |
|
| — |
|
|
| — |
|
|
| (1,323 | ) |
|
| (7,500 | ) |
Net (loss) income for the period |
|
| — |
|
| — |
|
| — |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (40,575 | ) |
|
| 4,330 |
|
|
| (36,245 | ) |
Foreign currency translation |
|
| — |
|
| — |
|
| — |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (755 | ) |
|
| — |
|
|
| — |
|
|
| (755 | ) |
Balance at June 30, 2023 |
|
| 286,807,780 |
|
| 63,492,038 |
|
| 12,350 |
|
| 600 |
|
|
| 363,250,022 |
|
| $ | 945,926 |
|
| $ | 1,330 |
|
| $ | (653,623 | ) |
| $ | 1,966 |
|
| $ | 295,599 |
|
Three months ended
|
| Number of Shares |
|
|
|
|
|
|
|
|
|
|
|
|
| Number of Shares |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
| Convertible Preferred Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Convertible Preferred Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||||||||||||||
|
| 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 |
|
| Common Shares |
| Exchangeable Shares |
| Series A |
| Series B |
| Common Shares Equivalent |
| Additional paid in capital |
| Accumulated other comprehensive income (loss) |
| Accumulated deficit |
| Non-controlling interest |
| Total |
| ||||||||||||||||||||||||||||||||||||||||||
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 |
| ||||||||||||||||||||||||||||||||||||||||
Balance at December 31, 2021 |
|
| 190,930,800 |
|
|
| 38,890,571 |
|
|
| 13,708 |
|
|
| 610 |
|
|
| 244,175,394 |
|
| $ | 535,418 |
|
| $ | 2,823 |
|
|
| (314,654 | ) |
|
| 5,367 |
|
| $ | 228,954 |
| ||||||||||||||||||||||||||||||||||||||||||||||||
Shares issued - stock option, warrant and RSU exercises |
|
| 36,099 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 36,099 |
|
|
| 1,041 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1,041 |
|
|
| 9,336,728 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 9,336,728 |
|
|
| 25,743 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 25,743 |
|
Shares issued - acquisitions |
|
| 51,349,978 |
|
|
| 13,504,500 |
|
|
| — |
|
|
| — |
|
|
| 64,854,478 |
|
|
| 288,044 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 288,044 |
| ||||||||||||||||||||||||||||||||||||||||||||||||
Shares issued - liability settlement |
|
| 4,000 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 4,000 |
|
|
| 22 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 22 |
| ||||||||||||||||||||||||||||||||||||||||||||||||
Shares issued- conversion |
|
| 700,000 |
|
|
| — |
|
|
| (700 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1,085,819 |
|
|
| — |
|
|
| (1,050 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Share-based compensation expense |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 4,463 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 4,463 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 7,819 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 7,819 |
|
Options expired/forfeited |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (1,506 | ) |
|
| — |
|
|
| 1,506 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (2,662 | ) |
|
| — |
|
|
| 2,662 |
|
|
| — |
|
|
| — |
|
Capital Contribution |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 564 |
|
|
| — |
|
|
| — |
|
|
| (221 | ) |
|
| 343 |
| ||||||||||||||||||||||||||||||||||||||||
Net income for the period |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 13,217 |
|
|
| 945 |
|
|
| 14,162 |
| ||||||||||||||||||||||||||||||||||||||||
Conversion of convertible debt |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 564 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 564 |
| ||||||||||||||||||||||||||||||||||||||||||||||||
Capital contribution |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (448 | ) |
|
| (448 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||
Net (loss) income for the period |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (3,140 | ) |
|
| 1,296 |
|
|
| (1,844 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||
Foreign currency translation |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (280 | ) |
|
| — |
|
|
| — |
|
|
| (280 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (3,886 | ) |
|
| — |
|
|
| — |
|
|
| (3,886 | ) |
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 |
|
|
| 252,707,325 |
|
|
| 52,395,071 |
|
|
| 12,658 |
|
|
| 610 |
|
|
| 318,370,600 |
|
| $ | 854,948 |
|
| $ | (1,063 | ) |
| $ | (315,132 | ) |
| $ | 6,215 |
|
| $ | 544,968 |
|
|
| Number of Shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
| 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 |
| |||||||||||||
Balance at March 31, 2021 |
|
| 178,956,366 |
|
|
| 38,890,571 |
|
|
| — |
|
|
| 14,008 |
|
|
| 610 |
|
|
| — |
|
|
| — |
|
|
| 232,464,485 |
|
| $ | 513,643 |
|
| $ | (1,473 | ) |
|
| (332,715 | ) |
|
| 3,705 |
|
| $ | 183,160 |
|
Shares issued - stock option, warrant and RSU exercises |
|
| 1,676,567 |
|
|
|
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1,676,567 |
|
|
| 7,310 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 7,310 |
| |
Shares issued - acquisitions |
|
| 3,464,870 |
|
|
|
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 3,464,870 |
|
|
| 34,427 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 34,427 |
| |
Shares issued - liability settlement |
|
| 5,000 |
|
|
|
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 5,000 |
|
|
| 57 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 57 |
| |
Shares issued- conversion |
|
| 300,000 |
|
|
|
|
|
| — |
|
|
| (300 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
| |
Share-based compensation expense |
|
| — |
|
|
|
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 4,648 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 4,648 |
| |
Return of capital |
|
| — |
|
|
|
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (223 | ) |
|
| (223 | ) | |
Net loss for the period |
|
| — |
|
|
|
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (30,660 | ) |
|
| 998 |
|
|
| (29,662 | ) | |
Foreign currency translation |
|
| — |
|
|
|
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 3,025 |
|
|
| — |
|
|
| — |
|
|
| 3,025 |
| |
Balance at June 30, 2021 |
|
| 184,402,803 |
|
|
| 38,890,571 |
|
|
| — |
|
|
| 13,708 |
|
|
| 610 |
|
|
| — |
|
|
| — |
|
|
| 237,610,922 |
|
| $ | 560,085 |
|
| $ | 1,552 |
|
| $ | (363,375 | ) |
| $ | 4,480 |
|
| $ | 202,742 |
|
Six months ended
|
| Number of Shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
| Convertible Preferred Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
|
| 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, 2021 |
|
| 190,930,800 |
|
|
| 38,890,571 |
|
|
| 13,708 |
|
|
| 610 |
|
|
| 36 |
|
|
| — |
|
|
| 244,175,394 |
|
| $ | 535,418 |
|
| $ | 2,823 |
|
|
| (314,654 | ) |
|
| 5,367 |
|
| $ | 228,954 |
|
Shares issued - stock option, warrant and RSU exercises |
|
| 9,336,728 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 9,336,728 |
|
|
| 25,743 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 25,743 |
|
Shares, options and warrants issued- acquisitions |
|
| 51,349,978 |
|
|
| 13,504,500 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 64,854,478 |
|
|
| 288,044 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 288,044 |
|
Shares issued- liability settlement |
|
| 4,000 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 4,000 |
|
|
| 22 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 22 |
|
Shares issued- conversion |
|
| 1,085,819 |
|
|
| — |
|
|
| (1,050 | ) |
|
| — |
|
|
| (36 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Share-based compensation expense |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 7,819 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 7,819 |
|
Options expired/forfeited |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (2,662 | ) |
|
| — |
|
|
| 2,662 |
|
|
| — |
|
|
| — |
|
Capital Contribution |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 564 |
|
|
| — |
|
|
| — |
|
|
| (448 | ) |
|
| 116 |
|
Net loss for the period |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (3,140 | ) |
|
| 1,296 |
|
|
| (1,844 | ) |
Foreign currency translation |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (3,886 | ) |
|
| — |
|
|
| — |
|
|
| (3,886 | ) |
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 |
|
3
|
| Number of Shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
| 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 |
| |||||||||||||
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 | ) |
Shares issued - stock option, warrant and RSU exercises |
|
| 3,647,503 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 87 |
|
|
| 1,315 |
|
|
| 5,048,796 |
|
|
| 33,168 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 33,168 |
|
Shares issued - acquisitions |
|
| 3,464,870 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 3,464,870 |
|
|
| 34,427 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 34,427 |
|
Shares issued - liability settlement |
|
| 5,000 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 5,000 |
|
|
| 57 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 57 |
|
Private placement net of share issuance costs |
|
| 18,115,656 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 18,115,656 |
|
|
| 173,477 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 173,477 |
|
Shares issued- conversion |
|
| 78,358,768 |
|
|
| — |
|
|
| (76,307 | ) |
|
| (550 | ) |
|
| (100 | ) |
|
| (87 | ) |
|
| (1,315 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Share-based compensation expense |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 8,215 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 8,215 |
|
Options expired/forfeited |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (53 | ) |
|
| — |
|
|
| 53 |
|
|
| — |
|
|
| — |
|
Conversion of convertible debt |
|
| 1,284,221 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1,284,221 |
|
|
| 5,656 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 5,656 |
|
Return of capital |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (383 | ) |
|
| (383 | ) |
Net loss for the period |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (44,834 | ) |
|
| 1,061 |
|
|
| (43,773 | ) |
Foreign currency translation |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 5,214 |
|
|
| — |
|
|
| — |
|
|
| 5,214 |
|
Balance at June 30, 2021 |
|
| 184,402,803 |
|
|
| 38,890,571 |
|
|
| — |
|
|
| 13,708 |
|
|
| 610 |
|
|
| — |
|
|
| — |
|
|
| 237,610,922 |
|
| $ | 560,085 |
|
| $ | 1,552 |
|
| $ | (363,375 | ) |
| $ | 4,480 |
|
| $ | 202,742 |
|
The accompanying notes are an integral part of these unaudited condensed consolidated interim financial statements
4
TerrAscend Corp.
Unaudited Interim Condensed Consolidated Statements of Cash Flows
(Amounts expressed in thousands of United States dollars, except for share and per share amounts)
| 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 |
|
5
| For the Six Months Ended |
| ||||||
|
| June 30, 2023 |
|
| June 30, 2022 |
| ||
Operating activities |
|
|
|
|
|
| ||
Net (loss) income from continuing operations |
| $ | (32,033 | ) |
| $ | 3,109 |
|
Adjustments to reconcile net (loss) income to net cash used in operating activities |
|
|
|
|
|
| ||
Non-cash write downs of inventory |
|
| 1,081 |
|
|
| 8,495 |
|
Accretion expense |
|
| 5,673 |
|
|
| 1,708 |
|
Depreciation of property and equipment and amortization of intangible assets |
|
| 9,761 |
|
|
| 11,253 |
|
Amortization of operating right-of-use assets |
|
| 932 |
|
|
| 1,074 |
|
Share-based compensation |
|
| 3,694 |
|
|
| 7,819 |
|
Deferred income tax expense |
|
| 815 |
|
|
| (787 | ) |
Gain on fair value of warrants and purchase option derivative |
|
| (653 | ) |
|
| (53,058 | ) |
Loss on disposal of fixed assets |
|
| 345 |
|
|
| — |
|
Revaluation of contingent consideration |
|
| — |
|
|
| 153 |
|
Loss on disposal of fixed assets |
|
| — |
|
|
| 929 |
|
Release of indemnification asset |
|
| — |
|
|
| 3,973 |
|
Unrealized and realized foreign exchange (gain) loss |
|
| (132 | ) |
|
| 41 |
|
Unrealized and realized loss on investments / derivatives |
|
| 2,410 |
|
|
| 234 |
|
Changes in operating assets and liabilities |
|
|
|
|
|
| ||
Receivables |
|
| 295 |
|
|
| (445 | ) |
Inventory |
|
| (7,851 | ) |
|
| 208 |
|
Prepaid expense and other current assets |
|
| (319 | ) |
|
| 1,434 |
|
Deposits |
|
| 431 |
|
|
| 206 |
|
Other assets |
|
| 714 |
|
|
| 461 |
|
Accounts payable and accrued liabilities and other payables |
|
| 4,089 |
|
|
| (7,840 | ) |
Operating lease liability |
|
| (337 | ) |
|
| (614 | ) |
Other liability |
|
| 1,085 |
|
|
| (10,353 | ) |
Contingent consideration payable |
|
| — |
|
|
| (410 | ) |
Corporate income tax payable |
|
| 22,127 |
|
|
| 5 |
|
Deferred revenue |
|
| 157 |
|
|
| 766 |
|
Net cash provided by (used in) operating activities- continuing operations |
|
| 12,284 |
|
|
| (31,639 | ) |
Net cash (used in) operating activities- discontinued operations |
|
| (3,164 | ) |
|
| (3,337 | ) |
Net cash provided by (used in) operating activities |
|
| 9,120 |
|
|
| (34,976 | ) |
|
|
|
|
|
|
| ||
Investing activities |
|
|
|
|
|
| ||
Investment in property and equipment |
|
| (4,504 | ) |
|
| (12,500 | ) |
Investment in intangible assets |
|
| (262 | ) |
|
| (1,330 | ) |
Principal payments received on lease receivable |
|
| 104 |
|
|
| 392 |
|
Receipt of convertible debenture payment |
|
| 738 |
|
|
| — |
|
Deposits for property and equipment |
|
| — |
|
|
| (10,036 | ) |
Deposits for business acquisition |
|
| — |
|
|
| (852 | ) |
Payment for land contracts |
|
| (769 | ) |
|
| (429 | ) |
Cash portion of consideration paid in acquisitions, net of cash of acquired |
|
| (14,469 | ) |
|
| 24,716 |
|
Net cash (used in) investing activities- continuing operations |
|
| (19,162 | ) |
|
| (39 | ) |
Net cash provided by investing activities- discontinued operations |
|
| 14,285 |
|
|
| — |
|
Net cash (used in) investing activities |
|
| (4,877 | ) |
|
| (39 | ) |
|
|
|
|
|
|
| ||
Financing activities |
|
|
|
|
|
| ||
Transfer of Employee Retention Credit |
|
| 12,677 |
|
|
| — |
|
Proceeds from loan payable, net of transaction costs |
|
| 23,872 |
|
|
| — |
|
Proceeds from options and warrants exercised |
|
| 81 |
|
|
| 24,158 |
|
Loan principal paid |
|
| (40,359 | ) |
|
| (4,968 | ) |
Loan amendment fee paid and prepayment premium paid |
|
| (1,178 | ) |
|
| (1,200 | ) |
Cash distributions to partners |
|
| (3,415 | ) |
|
| (1,436 | ) |
Capital contributions paid to non-controlling interests |
|
| — |
|
|
| (448 | ) |
Payments of contingent consideration |
|
| — |
|
|
| (6,630 | ) |
Proceeds from private placement, net of share issuance costs |
|
| 19,218 |
|
|
| — |
|
Payments made for financing obligations and finance lease |
|
| (941 | ) |
|
| (460 | ) |
Net cash provided by financing activities- continuing operations |
|
| 9,955 |
|
|
| 9,016 |
|
Net cash (used in) financing activities- discontinued operations |
|
| (5,539 | ) |
|
| (235 | ) |
Net cash provided by financing activities |
|
| 4,416 |
|
|
| 8,781 |
|
|
|
|
|
|
|
| ||
Net increase in cash and cash equivalents and restricted cash during the period |
|
| 8,659 |
|
|
| (26,234 | ) |
Net effects of foreign exchange |
|
| (901 | ) |
|
| (4,377 | ) |
Cash and cash equivalents and restricted cash, beginning of the period |
|
| 26,763 |
|
|
| 79,642 |
|
Cash and cash equivalents and restricted cash, end of the period |
| $ | 34,521 |
|
| $ | 49,031 |
|
|
|
|
|
|
|
| ||
Supplemental disclosure with respect to cash flows |
|
|
|
|
|
| ||
Income taxes (refund received) paid |
| $ | (4,582 | ) |
| $ | 9,213 |
|
Interest paid |
| $ | 9,259 |
|
| $ | 14,641 |
|
Lease termination fee paid |
| $ | - |
|
| $ | 3,300 |
|
Non-cash transactions |
|
|
|
|
|
| ||
Equity and warrant liability issued as consideration for acquisition |
| $ | 10,267 |
|
| $ | 294,800 |
|
Shares issued for legal and liability settlement |
| $ | 794 |
|
| $ | 22 |
|
Accrued capital purchases |
| $ | 529 |
|
| $ | 9,776 |
|
The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.
6
TerrAscend Corp.
Notes to the Unaudited Interim Condensed Consolidated Financial Statements
(Amounts expressed in thousands of United States dollars, except for share and 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 into the United States ("US"(“U.S.”) and CanadaCanadian cannabinoid markets 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 retailer in Michigan,Michigan; KISA Enterprises MI, LLC and KISA Holdings LLC (collectively "Pinnacle"); 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,Jersey; Ilera Healthcare (“Ilera”), Pennsylvania’s medical cannabis cultivator, processor and dispenser; vertically integrated operations in Maryland which include HMS Health, LLC and HMS Processing, LLC (collectively “HMS”), a medical cannabis cultivator and processor, based in Maryland;Allegany Medical Marijuana Dispensary ("AMMD"), Peninsula Alternative Health ("Peninsula"), Blue Ridge Wellness ("Blue Ridge"), and Herbiculture Inc. ("Herbiculture"); Valhalla Confections, a manufacturer of cannabis-infused edibles;edibles brand; and State Flower, a California-based cannabis producer operating a licensed cultivation facility in San Francisco; and Arise Bioscience Inc., a manufacturer and distributorFrancisco. Notwithstanding various states in the U.S. which have implemented medical marijuana laws, or which have otherwise legalized the use of hemp-derived products.cannabis, the use of cannabis remains illegal under U.S. federal law for any purpose, by way of the Controlled Substances Act of 1970.
The
Effective July 4, 2023, the Company was listedcommenced trading of its common shares on the Toronto Stock Exchange ("TSX"), under the ticker symbol "TSND". Previously from May 3, 2017 to June 30, 2023, common shares of the Company were traded on the Canadian StockSecurities Exchange effective May 3, 2017, having theunder ticker symbol TER and effective October 22, 2018,"TER". The common shares of the Company began trading on OTCQX on October 22, 2018 under the ticker symbol TRSSF."TRSSF" and changed its ticker symbol to "TSNDF" effective July 6, 2023. The Company’s registered office is located at 3610 Mavis Road,77 City Centre Drive, Suite 501, Mississauga, Ontario, L5C 1W2.L5B 1M5.
These unaudited interim condensed consolidated financial statements as of and for the three and six months ended June 30, 2022 and 2021included herein (the “Consolidated Financial Statements”) of the Company and its subsidiaries were prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”U.S. Generally Accepted Accounting Principles ("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 June 30, 2022 and 20212023 are not necessarily indicative of the operating results for the year ended December 31, 2022,2023, or any other interim or future periods.
The accompanying unaudited interim condensed consolidated financial statements have been prepared on the going concern basis, under the historical cost convention, except for certain financial instruments that are measured at fair value as described herein. At June 30, 2023, TerrAscend had an accumulated deficit of $653,623. During the three and six months ended June 30, 2023, TerrAscend incurred a net loss from continuing operations of $12,855 and $32,033, respectively. Additionally, as of June 30, 2023 the Company’s current liabilities exceed its current assets. Therefore, the Company expects that it will need additional capital to continue to fund its operations.
The aforementioned indicators raise substantial doubt about TerrAscend's ability to continue as a going concern for at least one year from the issuance of these financial statements. The Company believes this concern is mitigated by steps to improve its operations and cash position, including: (i) identifying access to future capital required to meet the Company’s on-going obligations, (ii) improved cashflow growth from the Company's consolidated operations, particularly in New Jersey and most recently Maryland with conversion to adult use sales, and (iii) various cost and efficiency improvements.
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, 20212022 contained in the Company's 20212022 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, 20212022 in the Company's 20212022 Form 10-K.10-K other than the new estimate disclosed in Note 3 of the financial statements.
|
| June 30, 2022 |
|
| December 31, 2021 |
| ||
Trade receivables |
| $ | 22,341 |
|
| $ | 14,684 |
|
Sales tax receivable |
|
| 559 |
|
|
| 358 |
|
Other receivables |
|
| 437 |
|
|
| 370 |
|
Provision for sales returns |
|
| (316 | ) |
|
| (157 | ) |
Expected credit losses |
|
| (832 | ) |
|
| (335 | ) |
Total receivables, net |
| $ | 22,189 |
|
| $ | 14,920 |
|
7
TerrAscend Corp.
Notes to the Unaudited Interim Condensed Consolidated Financial Statements
(Amounts expressed in thousands of United States dollars, except for share and per share amounts)
Sales tax receivable represents input tax credits arisingThe Company consolidates entities in which it has a controlling financial interest by evaluating whether the entity is a voting interest entity (“VOE”) or a variable interest entity (“VIE”).
As a part of the TSX listing, the Company reorganized its ownership in subsidiaries to segregate the Company’s Canadian cannabis operations from sales tax leviedits operations in the United States (the "Reorganization"). After the Reorganization, the Company owns 95% of its Canadian business. The Company continues to consolidate both its Canadian and its U.S. cannabis operation under two different consolidation models.
Voting Interest Entities
A VOE is an entity in which (1) the total equity investment at risk is deemed sufficient to absorb the expected losses of the entity, (2) the at-risk equity holders, as a group, have all of the characteristics of a controlling financial interest and (3) the entity is structured with substantive voting rights. The Company consolidates the Canadian operations under a VOE model based on the supplycontrolling financial interest obtained through common shares with substantive voting rights.
Variable Interest Entities
A VIE is an entity that lacks one or more characteristics of goods purchaseda controlling financial interest defined under the voting interest model. The Company consolidates VIE when it has a variable interest that provide it with (1) the power to direct the activities of a VIE that most significantly impact the VIE’s economic performance (power) and (2) the obligation to absorb losses of the VIE that potentially could be significant to the VIE or servicesthe right to receive benefits from the VIE that potentially could be significant to the VIE (benefits).
As a result of the Company's TSX listing effort, TerrAscend Growth Corp., a wholly owned subsidiary of the Company, has issued $1 million of Class A shares to an investor. See Note 10 for accounting treatment of Class A shares. The Company’s ownership in Class B shares, representing 100% of the issued and outstanding shares of TerrAscend Growth Corp., were exchanged for non-voting, non-participating exchangeable shares of TerrAscend Growth Corp. Simultaneously, the Company entered into a protection agreement with TerrAscend Growth Corp. that contains certain negative covenants that are designed to preserve the value of the non-voting shares until such time as they are converted into common shares. The Company determined TerrAscend Growth Corp. is a VIE as all the Company’s US activities continue to be conducted on behalf of the Company which has disproportionately few voting rights. After conducting an analysis of the following VIE factors; purpose and design of the VIE, the protection agreement in place, the board structure of TerrAscend Growth Corp., and substantive kick-out rights of the Class A shareholders, it was determined that the Company has the power to direct the activities of TerrAscend Growth Corp. In addition, given the structure of the Class A shares where all of the losses and substantially all of the benefits of TerrAscend Growth Corp. are absorbed by the Company, the Company consolidates as the primary beneficiary in accordance with ASC 810 Consolidation. Management has applied significant judgment on the decision to consolidate its VIE's based on the facts and circumstances noted above.
The Company's U.S. operations are consolidated through the VIE model. Therefore, substantially all of the Company's current assets, non-current assets, current liabilities and non-current liabilities are consolidated through the VIE model. The Company's assets and liabilities that are not consolidated through the VIE model include convertible debt, derivative liability and assets and liabilities from discontinued operations. The Company also consolidates a minimal amount of assets and liabilities within Canada, see Note 21 for more information.
|
| June 30, 2023 |
|
| December 31, 2022 |
| ||
Trade receivables |
| $ | 19,213 |
|
| $ | 14,786 |
|
Sales tax receivable |
|
| 120 |
|
|
| 277 |
|
Other receivables |
|
| 994 |
|
|
| 17,936 |
|
Expected credit losses |
|
| (10,849 | ) |
|
| (10,556 | ) |
Total receivables, net |
| $ | 9,478 |
|
| $ | 22,443 |
|
For the year ended December 31, 2022, the Company has an Employee Retention Credit ("ERC") for qualified wages of $14,903 which was included in other receivables in the table above at December 31, 2022. During January 2023, the Company received $12,667, pursuant to a financing agreement with a third-party lender. In exchange, the Company assigned to the lender its interests in Canada. Other receivables atthe $14,903 ERC claim that was submitted during December 2022. The difference between the amount of the claim and the amount received from the lender is the employee retention credits transfer fee which is equal to 15% of the total claim amount. The framework prescribed in
8
TerrAscend Corp.
Notes to the Unaudited Interim Condensed Consolidated Financial Statements
(Amounts expressed in thousands of United States dollars, except for share and per share amounts)
ASC 860 Transfers and Servicing was reviewed and management has concluded that this should be accounted for as an asset transfer with recourse. This fee is included in finance and other expenses. If the Company does not receive the ERC claim, in whole or in part, the Company is required to repay the related portion of the funds received plus interest of 10% accrued from the date of the financing agreement through the repayment date. The Company’s obligation under the financing agreement will be satisfied upon receipt of the ERC claim or other full repayment. As of June 30, 20222023, the lender has received refunds in the amount of $10,059 and December 31, 2021 mainly include amounts due from the sellersis awaiting receipt of the Apothecarium.remaining refunds. Management has concluded that collection remains probable and no additional recourse obligation was recorded for the six months ended June 30, 2023.
|
| June 30, 2022 |
| December 31, 2021 |
|
| June 30, 2023 |
| December 31, 2022 |
| ||||||
Trade receivables |
| $ | 22,341 |
|
| $ | 14,684 |
|
| $ | 19,213 |
|
| $ | 14,786 |
|
Less: provision for sales returns and expected credit losses |
|
| (1,148 | ) |
|
| (492 | ) |
|
| (10,849 | ) |
|
| (10,556 | ) |
Total trade receivables, net |
| $ | 21,193 |
|
| $ | 14,192 |
|
| $ | 8,364 |
|
| $ | 4,230 |
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Of which |
|
|
|
|
|
|
|
|
|
| ||||||
Current |
|
| 8,173 |
|
|
| 13,282 |
|
|
| 7,393 |
|
|
| 4,045 |
|
31-90 days |
|
| 711 |
|
|
| 569 |
|
|
| 1,108 |
|
|
| 614 |
|
Over 90 days |
|
| 13,457 |
|
|
| 833 |
|
|
| 10,712 |
|
|
| 10,127 |
|
Less: provision for sales returns and expected credit losses |
|
| (1,148 | ) |
|
| (492 | ) |
|
| (10,849 | ) |
|
| (10,556 | ) |
Total trade receivables, net |
| $ | 21,193 |
|
|
| 14,192 |
|
| $ | 8,364 |
|
| $ | 4,230 |
|
The over 90 days aged balance relates mainly to 1one 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.which was deemed uncollectible.
The following is a roll-forward of the provision for sales returns and allowances related to trade accounts receivable:
|
| June 30, 2022 |
|
| December 31, 2021 |
| ||
Beginning of period |
| $ | 492 |
|
|
| 1,782 |
|
Provision for sales returns |
|
| 255 |
|
|
| 1,125 |
|
Expected credit losses |
|
| 859 |
|
|
| 357 |
|
Write-offs charged against provision |
|
| (431 | ) |
|
| (2,772 | ) |
Foreign currency translation adjustments |
|
| (27 | ) |
|
| - |
|
Total provision for sales returns and allowances |
| $ | 1,148 |
|
|
| 492 |
|
AMMD
On April 8, 2022,January 27, 2023, TerrAscend closed the Company entered intoacquisition of AMMD, a definitive agreement to acquire Allegany Medical Marijuana Dispensary ("AMMD"), a medical dispensary in Maryland from Moose Curve Holdings, LLC.Cumberland, Maryland. Under the terms of the agreement, the Company will acquireTerrAscend acquired a 100% equity interest in AMMD for total consideration of $10,000 in cash, in addition to acquiring related 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.
Pinnacle
On April 14, 2022, the Company enteredentering into a definitive agreementlong-term lease with the option to acquire KISA Enterprises MI, LLCpurchase the real estate. The cash consideration paid included repayments of indebtedness and KISA Holdings, LLC (collectively, "Pinnacle"), a dispensary operator in Michigan, and related real estate, for total considerationtransaction expenses on behalf of AMMD of $28,500160 and $29, payable in cash, two promissory notes in an aggregate amount of $respectively.10,000, and stock. The transaction includes 6 retail dispensary licenses, 5 of which are currently operational and located in the cities of Addison, Buchanan, Camden, Edmore, and Morenci, Michigan. The Company intends to rebrand each of the dispensaries under either the Gage or Cookies retail brand. This transaction is pending approval.
Gage
On March 10, 2022, in order to expand its footprint in key markets, the Company acquired all of the issued and outstanding subordinate voting shares (or equivalent) of Gage, a cultivator and processor with operations in the Michigan market. Pursuant to the terms of the arrangement agreement, for each Gage subordinate voting share and other equity instruments, including outstanding stock options and warrants, each holder received a 0.3001 equivalent replacement award of the Company's respective security at the time of closing based on the closing price of the Common Shares on the Canadian Stock Exchange ("CSE") on March 10, 2022. On the acquisition date there was consideration in the form of 51,349,978 Common Shares valued at $207,871, 13,504,500 exchangeable units valued at $66,591, 4,940,364 replacement stock options with a fair value of $13,147, and 282,023 replacement warrants with a fair value of $435. Each of the directors, officers and 10% shareholders of Gage entered into voting support and lock-up agreements in which the shares issued to
8
TerrAscend Corp.
Notes to the Unaudited Condensed Consolidated Financial Statements
(Amounts expressed in thousands of United States dollars, except for per share amounts)
these individuals are subject to various vesting periods. As such, a restriction discount of $45,336 has been placed over the shares subject to lock-up. The fair value of the replacement options and warrants was calculated using the Black Scholes Option Pricing Model combined with the percentage of the vesting period that was completed prior to the acquisition. Additionally, total consideration included warrant liabilities convertible into equity with a fair value of $6,756.
The following table presents the fair value of assets acquired and liabilities assumed as of the March 10, 2022January 27, 2023 acquisition date and allocation of the consideration to net assets acquired:
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Cash and cash equivalents |
| $ | 20 |
|
Inventory |
|
| 303 |
|
Prepaid expense |
|
| 4 |
|
Operating right of use asset |
|
| 781 |
|
Fixed assets |
|
| 416 |
|
Intangible asset |
|
| 5,330 |
|
Goodwill |
|
| 6,005 |
|
Accounts payable and accrued liabilities |
|
| (135 | ) |
Deferred tax liability |
|
| (2,021 | ) |
Corporate income taxes payable |
|
| (291 | ) |
Operating lease liability |
|
| (781 | ) |
Net assets acquired |
| $ | 9,631 |
|
|
|
|
| |
Cash |
|
| 10,000 |
|
Working capital adjustment |
|
| (369 | ) |
Total consideration |
| $ | 9,631 |
|
The acquired intangible assets include cultivation and processing licenses, as well as retail licenses,a medical license, which areis treated as a definite-lived intangible assets which areasset and amortized over a 15 year30-year period. The fair value
9
TerrAscend Corp.
Notes to the Unaudited Interim Condensed Consolidated Financial Statements
(Amounts expressed in thousands of the cultivationUnited States dollars, except for share and processing and the retail licenses are $77,198 and $53,321, respectively. In addition, the intangible assets include brand intangibles which are treated as indefinite lived intangible assets. The fair value of the brand intangibles is $57,435.per share amounts)
The consideration paid reflected the synergies, economies of scale, and workforce. These benefits were not recognized separately from goodwill because they do not meet the recognition criteria for identifiable intangible assets. None of the goodwill recognized is expected to be deductible for income tax purposes.
The accounting for this acquisition has been provisionally determined at June 30, 2022.2023. The fair value of net assets acquired, specifically with respect to inventory, intangible assets, deferred revenue, property and equipment, operating right of use assets, lease liabilities, investments, corporate income taxes payable, deferred tax liability, and goodwill have been determined provisionally and are subject to adjustment. Upon completion of a comprehensive valuation and finalization of the purchase price allocation, the amounts above may be adjusted retrospectively to the acquisition date in future reporting periods. During the 3 months ended June 30, 2023, an adjustment was made to decrease intangible assets by $620 due to new information regarding the fair value at January 27, 2023. This resulted in an increase to goodwill of the same amount.
Costs related to this transaction were $3,949191, including legal, accounting, due diligence, and other transaction-related expenses. Of the total amount of transaction costs, $1,30936 wasand $99 were recorded during the six months ended June 30, 2023 and June 30, 2022, respectively.
On a standalone basis, had the Company acquired the business on January 1, 2023, sales estimates would have been $3,736 for the six months ended June 30, 2023 and net income estimates would have been $1,141. Actual sales and net income for the six months ended June 30, 2023 since the date of acquisition are $3,057 and $897, respectively.
Peninsula
On June 28, 2023, the Company closed the acquisition of Peninsula, a dispensary located in Salisbury, Maryland. Under the terms of the agreement, the Company acquired 100% of the equity interest in Peninsula for total consideration of $14,362 exclusive of assumed financing obligations of $7,698. The consideration was comprised of 5,442,282 common shares of the Company ("Common Shares"), valued at $9,524, a $3,927 secured promissory note at an interest rate of 7.25% maturing on June 28, 2026, and $1,500 in cash, less a working capital adjustment of $589. The cash consideration paid included transaction expenses and repayments of indebtedness on behalf of Peninsula of $290 and $33, respectively. As part of the stock consideration, the Company guaranteed the value of the stock consideration as of the transaction date for a period up to 24 months from the transaction date. This guarantee in transactionvalue is accounted for as a derivative in accordance with ASC 815, Derivatives and restructuring costs inHedging.
The following table presents the consolidated statementfair value of operationsassets acquired and comprehensive income.liabilities assumed as of the June 28, 2023 acquisition date and allocation of the consideration to net assets acquired:
Inventory |
| $ | 370 |
|
Prepaid expense |
|
| 371 |
|
Operating right of use asset |
|
| 1,168 |
|
Fixed assets |
|
| 68 |
|
Intangible asset |
|
| 21,800 |
|
Goodwill |
|
| 683 |
|
Accounts payable and accrued liabilities |
|
| (1,123 | ) |
Loans payable |
|
| (7,807 | ) |
Operating lease liability |
|
| (1,168 | ) |
Net assets acquired |
| $ | 14,362 |
|
|
|
|
| |
Cash |
|
| 1,500 |
|
Common shares of TerrAscend |
|
| 9,524 |
|
Loans payable |
|
| 3,927 |
|
Working capital adjustment |
|
| (589 | ) |
Total consideration |
| $ | 14,362 |
|
The acquired intangible assets include a medical license, which is treated as a definite-lived intangible asset and amortized over a 30-year period.
The consideration paid reflected the synergies, economies of scale, and workforce. These benefits were not recognized separately from goodwill because they do not meet the recognition criteria for identifiable intangible assets. None of the goodwill recognized is expected to be deductible for income tax purposes.
910
TerrAscend Corp.
Notes to the Unaudited Interim Condensed Consolidated Financial Statements
(Amounts expressed in thousands of United States dollars, except for share and per share amounts)
The accounting for this acquisition has been provisionally determined at June 30, 2023. The fair value of net assets acquired, specifically with respect to inventory, intangible assets, property and equipment, operating right of use assets, lease liabilities, deferred tax liability, and goodwill have been determined provisionally and are subject to adjustment. Upon completion of a comprehensive valuation and finalization of the purchase price allocation, the amounts above may be adjusted retrospectively to the acquisition date in future reporting periods.
Costs related to this transaction were $445, including legal, accounting, due diligence, and other transaction-related expenses and were recorded during the six months ended June 30, 2023.
On a standalone basis, had the Company acquired the business on January 1, 2022,2023, sales estimates would have been $41,4446,987 for the six months ended June 30, 20222023 and net lossincome estimates would have been $($16,9591,168). Actual sales and net loss for the six months ended June 30, 20222023 since the date of acquisition are $28,928200 and $($7,748129), respectively.
Blue Ridge
On June 30, 2023, the Company closed the acquisition of Blue Ridge, a dispensary located in Parkville, Maryland. The Company has plans to relocate Blue Ridge in the next six months to a new, high-traffic retail center. Under the terms of the agreement, the Company acquired a 100% equity interest in Blue Ridge for total consideration of $6,188, comprised of a promissory note of $3,750 at an interest rate of 7.0% maturing on June 30, 2027 and $3,000 in cash, less a working capital adjustment of $562. The cash consideration paid included repayments of indebtedness and transaction expenses on behalf of Blue Ridge of $707 and $281, respectively.
The following table presents the fair value of assets acquired and liabilities assumed as of the June 30, 2023 acquisition date and allocation of the consideration to net assets acquired:
Inventory |
| $ | 234 |
|
Prepaid expense |
|
| 192 |
|
Operating right of use asset |
|
| 2,325 |
|
Intangible asset |
|
| 6,410 |
|
Goodwill |
|
| 2,936 |
|
Deferred tax liability |
|
| (2,653 | ) |
Accounts payable and accrued liabilities |
|
| (931 | ) |
Operating lease liability |
|
| (2,325 | ) |
Net assets acquired |
| $ | 6,188 |
|
|
|
|
| |
Cash |
|
| 3,000 |
|
Loans payable |
|
| 3,750 |
|
Working capital adjustment |
|
| (562 | ) |
Total consideration |
| $ | 6,188 |
|
The acquired intangible assets include a medical license, which is treated as a definite-lived intangible asset and amortized over a 30-year period.
The consideration paid reflected the synergies, economies of scale, and workforce. These benefits were not recognized separately from goodwill because they do not meet the recognition criteria for identifiable intangible assets. None of the goodwill recognized is expected to be deductible for income tax purposes.
The accounting for this acquisition has been provisionally determined at June 30, 2023. The fair value of net assets acquired, specifically with respect to inventory, intangible assets, operating right of use assets, lease liabilities, deferred tax liability, and goodwill have been determined provisionally and are subject to adjustment. Upon completion of a comprehensive valuation and finalization of the purchase price allocation, the amounts above may be adjusted retrospectively to the acquisition date in future reporting periods.
Costs related to this transaction were $163, including legal, accounting, due diligence, and other transaction-related expenses and were recorded during the six months ended June 30, 2023.
On a standalone basis, had the Company acquired the business on January 1, 2023, sales estimates would have been $2,018 for the six months ended June 30, 2023 and net income estimates would have been $383. Actual sales and net loss for the six months ended June 30, 2023 since the date of acquisition are $21 and $84, respectively.
11
TerrAscend Corp.
Notes to the Unaudited Interim Condensed Consolidated Financial Statements
(Amounts expressed in thousands of United States dollars, except for share and per share amounts)
Contingent consideration
Contingent consideration recorded relates to the Company’s business acquisitions. Contingent consideration is based upon the potential earnout of the underlying business unit and is measured at fair value using a projection model for the business and the formulaic structure for determining the consideration under the terms of the agreement.
The balance of contingent consideration is as follows:
|
| State Flower |
| Apothecarium |
| KCR |
| Total |
|
| State Flower |
| Apothecarium |
| Pinnacle |
| Total |
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Carrying amount, December 31, 2021 |
| $ | 8,360 |
|
| $ | 3,028 |
|
| $ | 1,147 |
|
| $ | 12,535 |
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Carrying amount, December 31, 2022 |
| $ | 1,406 |
|
| $ | 3,028 |
|
| $ | 750 |
|
| $ | 5,184 |
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Payments of contingent consideration |
|
| (7,040 | ) |
|
| — |
|
|
| — |
|
|
| (7,040 | ) |
|
| — |
|
|
| — |
|
|
| (750 | ) |
|
| (750 | ) |
Revaluation of contingent consideration |
|
| 86 |
|
|
| — |
|
|
| 67 |
|
|
| 153 |
| ||||||||||||||||
Carrying amount, June 30, 2022 |
| $ | 1,406 |
|
| $ | 3,028 |
|
| $ | 1,214 |
|
| $ | 5,648 |
| ||||||||||||||||
Carrying amount, June 30, 2023 |
| $ | 1,406 |
|
| $ | 3,028 |
|
|
| — |
|
| $ | 4,434 |
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Less: current portion |
|
| — |
|
|
| (3,028 | ) |
|
| — |
|
|
| (3,028 | ) |
|
| (1,406 | ) |
|
| (3,028 | ) |
|
| — |
|
|
| (4,434 | ) |
Non-current contingent consideration |
| $ | 1,406 |
|
| $ | - |
|
| $ | 1,214 |
|
| $ | 2,620 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
During the six months ended June 30, 2022,2023, the Company made paymentsissued 471,681 shares of $7,040common stock to the sellers of its previously acquired State FlowerPinnacle business. The remaining amount will be paid toissuance of shares fully settles the sellers of State Flower upon$750 earn out consideration provision in the Company's acquisition of the remaining 50.1% of State Flower, which is subject to regulatory approval.
Refer to Note 20 for discussion ofvaluation methods used when determining the fair value of the contingent consideration liability at June 30, 2022, and the changes in fair value during the six months ended June 30, 2022.stock purchase agreement.
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:
|
| June 30, 2022 |
| December 31, 2021 |
|
| June 30, 2023 |
| December 31, 2022 |
| ||||||
Raw materials |
| $ | 7,161 |
|
| $ | 3,185 |
|
| $ | 1,406 |
|
| $ | 1,181 |
|
Finished goods |
|
| 16,520 |
|
|
| 8,721 |
|
|
| 20,691 |
|
|
| 15,280 |
|
Work in process |
|
| 27,842 |
|
|
| 26,852 |
|
|
| 26,891 |
|
|
| 26,406 |
|
Accessories, supplies and consumables |
|
| 2,848 |
|
|
| 3,565 |
|
|
| 5,027 |
|
|
| 3,468 |
|
|
| $ | 54,371 |
|
| $ | 42,323 |
|
| $ | 54,015 |
|
| $ | 46,335 |
|
The Company wrote down $1,081 of packaging inventory due primarily to defective cartridges during the six months ended June 30, 2023.
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 $1,071 and $1,925 of inventory during the three and six months ended June 30, 2022, respectively.
In addition, management wrote down its inventory by $6,351 and $6,570 for the three and six months ended June 30, 2022, respectively, and $115 and $699 for the three and six months ended June 30, 2021.respectively. The inventory write-downs in the currentprior year period were mainly due to the write down of inventory to lower of cost or market which was related to the Company's operationaloperations 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 the Company deemed unsaleable.
Property and equipment consisted of:
The Company determined to make available for sale the asset groups related to TerrAscend Canada's Licensed Producer business. Therefore, the results of operations have been reclassified as discontinued operations on a retrospective basis for all periods presented.
The major classes of assets and liabilities from discontinued operations included the following:
10
12
TerrAscend Corp.
Notes to the Unaudited Interim Condensed Consolidated Financial Statements
(Amounts expressed in thousands of United States dollars, except for share and 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 |
|
| June 30, 2023 |
|
| December 31, 2022 |
| ||
Land |
| — |
|
| $ | 734 |
|
Buildings & improvements |
| — |
|
|
| 16,529 |
|
Office furniture & equipment |
| — |
|
|
| 86 |
|
Total assets held for sale |
| — |
|
| $ | 17,349 |
|
|
|
|
|
|
| ||
Prepaid expenses and other current assets |
| 509 |
|
|
| 571 |
|
Current assets from discontinued operations | $ | 509 |
|
| $ | 571 |
|
|
|
|
|
|
| ||
Accounts payable and accrued liabilities | $ | 1,466 |
|
| $ | 3,747 |
|
Loans payable |
| — |
|
|
| 5,364 |
|
Current liabilities from discontinued operations | $ | 1,466 |
|
| $ | 9,111 |
|
The results of operations for the discontinued operations includes revenues and expenses directly attributable to the operations disposed. Corporate and administrative expenses, including interest expense, not directly attributable to the operations were not allocated to TerrAscend Canada's Licensed Producer business. The results of discontinued operations were as follows:
| For the Three Months Ended |
| For the Six Months Ended |
| ||||||||||||
| June 30, 2023 |
|
| June 30, 2022 |
|
|
| June 30, 2023 |
|
| June 30, 2022 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Revenue |
| — |
|
| $ | 1,146 |
|
|
|
| — |
|
| $ | 2,531 |
|
Excise and cultivation tax |
| — |
|
|
| (302 | ) |
|
|
| — |
|
|
| (613 | ) |
Revenue, net |
| — |
|
|
| 844 |
|
|
|
| — |
|
|
| 1,918 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Cost of Sales |
| — |
|
|
| 1,802 |
|
|
|
| — |
|
|
| 3,360 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Gross profit |
| — |
|
|
| (958 | ) |
|
|
| — |
|
|
| (1,442 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
General and administrative |
| 455 |
|
|
| 1,056 |
|
|
|
| 756 |
|
|
| 2,184 |
|
Amortization and depreciation |
| — |
|
|
| 435 |
|
|
|
| 48 |
|
|
| 878 |
|
Impairment of property and equipment |
| — |
|
|
| — |
|
|
|
| 3,064 |
|
|
| — |
|
Total operating expenses |
| 455 |
|
|
| 1,491 |
|
|
|
| 3,868 |
|
|
| 3,062 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Loss from discontinued operations |
| (455 | ) |
|
| (2,449 | ) |
|
|
| (3,868 | ) |
|
| (4,504 | ) |
Other expense |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Finance and other expenses |
| 166 |
|
|
| 248 |
|
|
|
| 344 |
|
|
| 449 |
|
Net loss from discontinued operations | $ | (621 | ) |
| $ | (2,697 | ) |
|
| $ | (4,212 | ) |
| $ | (4,953 | ) |
Asset Specific Impairment
Certain assets of TerrAscend Canada were determined to be held for sale as they met the criteria under ASC 360 Property, Plant and Equipment. TerrAscend Canada operated out of a 67,300 square foot facility located in Mississauga, Ontario. Assets held for sale are reported at the lower of its carrying value or fair value less cost to sell. On May 23, 2023, the Mississauga, Ontario facility was sold for CAD $19,700 (U.S. $14,285). Net proceeds have been applied to pay down existing Company debt.
Property and equipment consisted of:
13
TerrAscend Corp.
Notes to the Unaudited Interim Condensed Consolidated Financial Statements
(Amounts expressed in thousands of United States dollars, except for share and per share amounts)
|
| June 30, 2023 |
|
| December 31, 2022 |
| ||
Land |
| $ | 6,713 |
|
| $ | 6,512 |
|
Assets in process |
|
| 26,181 |
|
|
| 28,416 |
|
Buildings & improvements |
|
| 159,356 |
|
|
| 154,742 |
|
Machinery & equipment |
|
| 33,337 |
|
|
| 30,973 |
|
Office furniture & equipment |
|
| 8,727 |
|
|
| 7,576 |
|
Assets under finance leases |
|
| 2,530 |
|
|
| 7,277 |
|
Total cost |
|
| 236,844 |
|
|
| 235,496 |
|
Less: accumulated depreciation |
|
| (27,849 | ) |
|
| (19,684 | ) |
Property and equipment, net |
| $ | 208,995 |
|
| $ | 215,812 |
|
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 six months endedAs of June 30, 20222023 and the twelve months ended December 31, 2021,2022, borrowing costs were 0not capitalized because the assets in process did not meet the criteria of a qualifying asset.
Depreciation expense was $3,395 and $6,652 for the three and six months ended June 30, 2023, respectively ($2,023 and $4,040 included in cost of sales) and $3,027 and $5,5134,684 for the three and six months ended June 30, 2022, respectively ($1,670 and $3,406, respectively included in cost of sales) and $1,805 and $3,771 for the three and six months ended June 30, 2021, respectively ($1,127 and $2,2253,171 included in cost of sales).
Intangible assets consisted of the following:
At June 30, 2022 |
| Gross Carrying Amount |
|
| Accumulated Amortization |
|
| Net Carrying Amount |
| |||||||||||||||
At June 30, 2023 |
| Gross Carrying Amount |
|
| Accumulated Amortization |
|
| Net Carrying Amount |
| |||||||||||||||
Finite lived intangible assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Software |
| $ | 2,926 |
|
| $ | (1,819 | ) |
| $ | 1,107 |
|
| $ | 1,286 |
|
| $ | (817 | ) |
| $ | 469 |
|
Licenses |
|
| 284,818 |
|
|
| (17,301 | ) |
|
| 267,517 |
|
|
| 208,384 |
|
|
| (22,016 | ) |
|
| 186,368 |
|
Brand intangibles |
|
| 1,144 |
|
|
| (568 | ) |
|
| 576 |
|
|
| 1,144 |
|
|
| (1,144 | ) |
|
| - |
|
Non-compete agreements |
|
| 280 |
|
|
| (48 | ) |
|
| 232 |
|
|
| 280 |
|
|
| (280 | ) |
|
| - |
|
Total finite lived intangible assets |
|
| 289,168 |
|
|
| (19,736 | ) |
|
| 269,432 |
|
|
| 211,094 |
|
|
| (24,257 | ) |
|
| 186,837 |
|
Indefinite lived intangible assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Brand intangibles |
|
| 82,206 |
|
|
| — |
|
|
| 82,206 |
|
|
| 82,757 |
|
|
| — |
|
|
| 82,757 |
|
Total indefinite lived intangible assets |
|
| 82,206 |
|
|
| — |
|
|
| 82,206 |
|
|
| 82,757 |
|
|
| — |
|
|
| 82,757 |
|
Intangible assets, net |
| $ | 371,374 |
|
| $ | (19,736 | ) |
| $ | 351,638 |
|
| $ | 293,851 |
|
| $ | (24,257 | ) |
| $ | 269,594 |
|
At December 31, 2021 |
| Gross Carrying Amount |
|
| Accumulated Amortization |
|
| Net Carrying Amount |
| |||||||||||||||
At December 31, 2022 |
| Gross Carrying Amount |
|
| Accumulated Amortization |
|
| Net Carrying Amount |
| |||||||||||||||
Finite lived intangible assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Software |
| $ | 2,626 |
|
| $ | (1,353 | ) |
| $ | 1,273 |
|
| $ | 1,169 |
|
| $ | (569 | ) |
| $ | 600 |
|
Licenses |
|
| 153,300 |
|
|
| (11,311 | ) |
|
| 141,989 |
|
|
| 178,929 |
|
|
| (22,590 | ) |
|
| 156,339 |
|
Brand intangibles |
|
| 1,144 |
|
|
| (254 | ) |
|
| 890 |
|
|
| 1,144 |
|
|
| (1,144 | ) |
|
| - |
|
Non-compete agreements |
|
| 280 |
|
|
| (221 | ) |
|
| 59 |
|
|
| 280 |
|
|
| (272 | ) |
|
| 8 |
|
Total finite lived intangible assets |
|
| 157,350 |
|
|
| (13,139 | ) |
|
| 144,211 |
|
|
| 181,522 |
|
|
| (24,575 | ) |
|
| 156,947 |
|
Indefinite lived intangible assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Brand intangibles |
|
| 24,773 |
|
|
| — |
|
|
| 24,773 |
|
|
| 82,757 |
|
|
| — |
|
|
| 82,757 |
|
Total indefinite lived intangible assets |
|
| 24,773 |
|
|
| — |
|
|
| 24,773 |
|
|
| 82,757 |
|
|
| — |
|
|
| 82,757 |
|
Intangible assets, net |
| $ | 182,123 |
|
| $ | (13,139 | ) |
| $ | 168,984 |
|
| $ | 264,279 |
|
| $ | (24,575 | ) |
| $ | 239,704 |
|
1114
TerrAscend Corp.
Notes to the Unaudited Interim Condensed Consolidated Financial Statements
(Amounts expressed in thousands of United States dollars, except for share and per share amounts)
Amortization expense was $4,0191,595 and $6,6183,109 for the three and six months ended June 30, 2023, respectively ($725 and $1,450 included in cost of sales) and $3,871 and $6,333 for the three and six months ended June 30, 2022, respectively ($2,345 and $3,076, respectively included in cost of sales) and $1,787 and $3,279 for the three and six months ended June 30, 2021, respectively ($621 and $1,108, respectively included in cost of sales).
Estimated future amortization expense for finite lived intangible assets for the next five years is as follows:
2022 |
| $ | 8,236 |
| ||||
2023 |
| $ | 15,661 |
| ||||
Remainder of 2023 |
| $ | 4,501 |
| ||||
2024 |
| $ | 15,234 |
|
|
| 8,662 |
|
2025 |
| $ | 14,797 |
|
|
| 8,396 |
|
2026 |
| $ | 14,748 |
|
|
| 8,381 |
|
2027 |
|
| 8,301 |
|
The Company's goodwill is allocated to one reportable segment. The following table summarizes the activity in the Company’s goodwill balance:
Balance at December 31, 2021 |
| $ | 90,326 |
|
Acquisitions (see Note 4) |
|
| 150,272 |
|
Balance at June 30, 2022 |
| $ | 240,598 |
|
Impairment of Intangible Assets
| For the Three Months Ended |
| For the Six Months Ended |
| ||||||||||||
|
| June 30, 2022 |
|
| June 30, 2021 |
|
| June 30, 2022 |
|
| June 30, 2021 |
| ||||
Finite lived intangible assets |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Software |
| $ | - |
|
| $ | 9 |
|
| $ | - |
|
| $ | 9 |
|
Licenses |
|
| — |
|
|
| — |
|
|
| — |
|
|
| - |
|
Customer Relationships |
|
| — |
|
|
| 2,000 |
|
|
| — |
|
|
| 2,000 |
|
Non-compete agreements |
|
| — |
|
|
| 224 |
|
|
| — |
|
|
| 224 |
|
Total impairment of finite lived intangible assets |
|
| — |
|
|
| 2,233 |
|
|
| — |
|
|
| 2,233 |
|
Indefinite lived intangible assets |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Brand intangibles |
|
| — |
|
|
| 1,400 |
|
|
| — |
|
|
| 1,400 |
|
Total impairment of indefinite lived intangible assets |
|
| — |
|
|
| 1,400 |
|
|
| — |
|
|
| 1,400 |
|
Total impairment of intangible assets |
| $ | - |
|
| $ | 3,633 |
|
| $ | - |
|
| $ | 3,633 |
|
Balance at December 31, 2022 |
| $ | 90,328 |
|
Acquisitions (see Note 5) |
|
| 9,004 |
|
Measurement period adjustment |
|
| 620 |
|
Balance at June 30, 2023 |
| $ | 99,952 |
|
|
| Ilera Term Loan |
|
| Stearns Loan |
|
| Gage Loans |
|
| Pinnacle Loans |
|
| Pelorus Term Loan |
|
| Maryland Acquisition Loans |
|
| Class A Share Gage Growth Corp |
|
| IHC Note Payable |
|
| Total |
| |||||||||
Balance at December 31, 2022 |
| $ | 110,850 |
|
| $ | - |
|
| $ | 29,976 |
|
| $ | 9,333 |
|
| $ | 44,028 |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | 194,187 |
|
Loan principal, net of transaction costs |
|
|
|
|
| 23,872 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 15,485 |
|
|
| 1,000 |
|
|
| 7,500 |
|
|
| 47,857 |
| |
Loan amendment fee / Prepayment penalty |
|
| (2,328 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (2,328 | ) |
Interest and accretion |
|
| 8,405 |
|
|
| 38 |
|
|
| 2,189 |
|
|
| 266 |
|
|
| 3,332 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 14,230 |
|
Principal and interest paid |
|
| (40,469 | ) |
|
| — |
|
|
| (3,132 | ) |
|
| (1,266 | ) |
|
| (3,251 | ) |
|
| — |
|
|
| — |
|
|
| (1,500 | ) |
|
| (49,618 | ) |
Effects of movements in foreign exchange |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| - |
|
Ending carrying amount at June 30, 2023 |
|
| 76,458 |
|
|
| 23,910 |
|
|
| 29,033 |
|
|
| 8,333 |
|
|
| 44,109 |
|
|
| 15,485 |
|
|
| 1,000 |
|
|
| 6,000 |
|
|
| 204,328 |
|
Less: current portion |
|
| (3,461 | ) |
|
| (405 | ) |
|
| (3,214 | ) |
|
| (8,333 | ) |
|
| (551 | ) |
|
| (1,964 | ) |
|
| — |
|
|
| (6,000 | ) |
|
| (23,928 | ) |
Non-current loans payable |
| $ | 72,997 |
|
| $ | 23,505 |
|
| $ | 25,819 |
|
|
| — |
|
| $ | 43,558 |
|
| $ | 13,521 |
|
| $ | 1,000 |
|
| $ | - |
|
| $ | 180,400 |
|
In August 2021, the Company made the decision to undertake a strategic review process to explore, review and evaluate potential alternatives for its Arise business focusedTotal interest paid on maximizing shareholder value. As a result of this review, the Company recorded impairment of intangible assets ofall loan payables was $3,6336,803 and $9,259 for the three and six months ended June 30, 2021.2023, respectively, and $6,370 and $14,406 for the three and six months ended June 30, 2022, respectively.
|
| 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 |
|
Ilera Term Loan
12On April 14, 2023, WDB Holding PA agreed to an amendment to the Ilera Term Loan among other things, to (i) permit changes necessary for the TSX Transaction (as defined therein), and (ii) to waive certain tax provisions. On June 22, 2023, WDB Holding PA further agreed to an amendment among other things, to (i) extend the next test date for the interest coverage ratio from June 30, 2023 until September 30, 2023, and (ii) amend the terms for which WDB Holding PA may incur certain indebtedness and liens.
In accordance with ASC 470, Debt, the amendments above were not considered extinguishment of debt.
Stearns Loan
On June 26, 2023, the Company closed on a $25,000 commercial loan with Stearns Bank, secured by the Company's cultivation facility in Pennsylvania and its AMMD dispensary in Cumberland, Maryland ("Stearns Loan"). The loan carries an interest rate of prime plus 2.25% and matures on December 26, 2024. The Company is required to hold $2,500 on deposit in a restricted account.
Gage Loans
15
TerrAscend Corp.
Notes to the Unaudited Interim Condensed Consolidated Financial Statements
(Amounts expressed in thousands of United States dollars, except for share and per share amounts)
Total interest paid on all loan payables was $6,370 and $14,641On June 9, 2023, TerrAscend Growth Corp. agreed to an amendment among other things, to (i) permit changes necessary for the threeTSX Transaction (as defined therein) and six months ended June 30, 2022, respectively,(ii) to permit certain indebtedness and $4,150 and $13,290 for the three and six months ended June 30, 2021, respectively.waive certain tax provisions.
Pinnacle Loan
Gage loans
The GagePinnacle Acquisition (refer to Note 4)purchase price included a senior secured term loan withtwo promissory notes in an acquisition date fair valueaggregate amount of $53,35710,000. to pay down all Pinnacle liabilities and encumbrances. The Credit Agreement bearspromissory notes carry an interest at a rate equal to the greater of the Prime Rate plus 7% or 10.25%. The term loan is payable monthly and matures on November 30, 2022. The term loan is secured by a first lien on all Gage assets.
Additionally, the Gage Acquisition included a loan payable to a former owner of a licensed entity with an acquisition date fair value of $2,683, and a Promissory Note with an acquisition date fair value of $4,065. The loan payable to the former owner bears interest at a rate of 0.2%. The Promissory Note bears interest at a fixed rate of 6%. On June 27, 2023, Spartan Partners Properties, LLC agreed to an amendment among other things, to extend the obligation date of the loan until December 1, 2023.
In accordance with ASC 470, Debt, the amendments above were not considered extinguishment of debt.
Pelorus Term Loan
On April 17, 2023, TerrAscend NJ, LLC agreed to an amendment among other things, to (i) permit changes necessary for the TSX Transaction (as defined therein), and (ii) to waive certain tax provisions. On June 22, 2023, TerrAscend NJ, LLC further agreed to an amendment to permit certain indebtedness.
In accordance with ASC 470, Debt, the amendments above were not considered extinguishment of debt.
Maryland Acquisition Loans
On June 28, 2023, related to the acquisition of Peninsula, the Company assumed financing obligations in the amount of $7,698, which matures on June 28, 2025. The promissory note carries an interest rate of 8.25%. The Company will make monthly payments of principal and interest totaling $157 beginning on July 28, 2023. The Company is required to make a mandatory prepayment of 50% of the outstanding principal balance on January 28, 2025. The consideration also included a promissory note in the amount of $3,927. The promissory note carries an interest of 7.25% and is payable in twelve quarterly installments, maturing on June 28, 2026.
One June 30, 2023, related to the acquisition of Blue Ridge, the Company agreed to a promissory note in the amount of $3,750 payable in four quarterly installments of accrued interest commencing on September 30, 2023 and twelve equal quarterly installments of principal and accrued interest commencing on September 30, 2024. The remaining amount of the principal and accrued interest is due on June 30, 2027, the maturity date. The promissory note carries an interest rate of 7.0%.
Class A Share of TerrAscend Growth
As a part of the Reorganization (See Note 3), TerrAscend Growth Corp. issued $1,000 of Class A shares with a 20% guaranteed annual dividend. Under the Subscription Agreement, TerrAscend Growth Corp holds a call right to repurchase all of the Class A Shares, at any point in time, issuable to the holder of Class A Shares and the holder of Class A shares is granted a put right that is exercisable at any time following the five-year anniversary of the closing of the investment. The instrument is considered as a debt due to the economic characteristics and risks. The repurchase / put price is defined as the sum of: (a) the Repurchase/Put Price; plus (b) the amount equal to 40% of the Subscription Amount less the aggregate Dividend Amounts paid to the Subscriber as of the date of the Exercise Notice.
IHC Real Estate LP Loan
On June 26, 2023, the Company bought out the minority interest in IHC Real Estate LP and entered into a promissory note of $7,500. The promissory note carries an interest rate of 15% and matures on January 15, 2024. On June 28, 2023, the Company made a payment of $1,500.
Maturities of loans payable
Stated maturities of loans payable over the next five years are as follows:
|
| June 30, 2022 |
| |
2022 |
| $ | 56,589 |
|
2023 |
|
| 9,187 |
|
2024 |
|
| 131,869 |
|
2025 |
|
| — |
|
2026 |
|
| — |
|
Thereafter |
|
| 82,491 |
|
Total principal payments |
| $ | 280,136 |
|
16
TerrAscend Corp.
Notes to the Unaudited Interim Condensed Consolidated Financial Statements
(Amounts expressed in thousands of United States dollars, except for share and per share amounts)
|
| June 30, 2023 |
| |
Remainder of 2023 |
| $ | 13,845 |
|
2024 |
|
| 137,216 |
|
2025 |
|
| 8,466 |
|
2026 |
|
| 3,649 |
|
2027 |
|
| 43,219 |
|
Thereafter |
|
| 2,264 |
|
Total principal payments |
| $ | 208,659 |
|
The majority of the Company’s leases are operating leases used primarily for corporate offices, retail, cultivation and manufacturing. The operating lease periods generally range from 1 to 28 years. The Company had 3two and three finance leases at June 30, 20222023 and1 finance lease at December 31, 2021.2022, respectively.
Amounts recognized in the consolidated balance sheet arewere as follows:
|
| June 30, 2022 |
| December 31, 2021 |
|
| June 30, 2023 |
| December 31, 2022 |
| ||||||
Operating leases: |
|
|
|
|
|
|
|
|
|
| ||||||
Operating lease right-of-use assets |
| $ | 30,570 |
|
| $ | 29,561 |
|
| $ | 32,824 |
|
| $ | 29,451 |
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Operating lease liability classified as current |
|
| 1,394 |
|
|
| 1,171 |
|
|
| 1,911 |
|
|
| 1,857 |
|
Operating lease liability classified as non-current |
|
| 31,680 |
|
|
| 30,573 |
|
|
| 35,207 |
|
|
| 31,545 |
|
Total operating lease liabilities |
| $ | 33,074 |
|
| $ | 31,744 |
|
| $ | 37,118 |
|
| $ | 33,402 |
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Finance leases: |
|
|
|
|
|
|
|
|
|
| ||||||
Property and equipment, net |
| $ | 4,724 |
|
| $ | 168 |
|
| $ | 2,374 |
|
| $ | 6,673 |
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Lease obligations under finance leases classified as current |
|
| 384 |
|
|
| 22 |
|
|
| 275 |
|
|
| 521 |
|
Lease obligations under finance leases classified as non-current |
|
| 4,794 |
|
|
| 181 |
|
|
| 2,139 |
|
|
| 6,713 |
|
Total finance lease obligations |
| $ | 5,178 |
|
| $ | 203 |
|
| $ | 2,414 |
|
| $ | 7,234 |
|
The Company recognized operating lease expense of $1,254 and $2,451 for the three and six months ended June 30, 2023, respectively. and 2022, respectively and $1,173 and $2,355 for the three and six months ended June 30, 2022, respectively and $2022.1,231
and $
2,109 for the three and six months endedOther information related to operating leases at June 30, 2021, respectively.2023 and December 31, 2022 consisted of the following:
|
| June 30, 2023 |
|
| December 31, 2022 |
| ||
Weighted-average remaining lease term (years) |
|
|
|
|
|
| ||
Operating leases |
|
| 12.9 |
|
|
| 12.8 |
|
Finance leases |
|
| 0.7 |
|
|
| 6.8 |
|
|
|
|
|
|
|
| ||
Weighted-average discount rate |
|
|
|
|
|
| ||
Operating leases |
|
| 11.04 | % |
|
| 10.69 | % |
Finance leases |
|
| 9.47 | % |
|
| 9.89 | % |
On January 27, 2022, the Company made a payment of $
3,300Supplemental cash flow information related to the Lease Termination at its Hagerstown location which enables the Company to terminate its building lease at a later date. The lease termination fee was expensed during the year ended December 31, 2021.leases are as follows:
13
|
| June 30, 2023 |
|
| December 31, 2022 |
| ||
Cash paid for amounts included in measurement of operating lease liabilities |
| $ | 2,451 |
|
| $ | 5,053 |
|
Right-of-use assets obtained in exchange for operating lease obligations |
|
| 3,764 |
|
|
| 3,097 |
|
Cash paid for amounts included in measurement of finance lease liabilities |
|
| 254 |
|
|
| 220 |
|
Assets under finance leases obtained in exchange for finance lease obligations |
|
| - |
|
|
| 6,913 |
|
17
TerrAscend Corp.
Notes to the Unaudited Interim Condensed Consolidated Financial Statements
(Amounts expressed in thousands of United States dollars, except for share and per share amounts)
Other information related to operating leases at June 30, 2022 and December 31, 2021 consist of the following:
|
| June 30, 2022 |
|
| December 31, 2021 |
| ||
Weighted-average remaining lease term (years) |
|
|
|
|
|
| ||
Operating leases |
|
| 12.9 |
|
|
| 14.2 |
|
Finance leases |
|
| 9.9 |
|
|
| 5.5 |
|
|
|
|
|
|
|
| ||
Weighted-average discount rate |
|
|
|
|
|
| ||
Operating leases |
|
| 10.69 | % |
|
| 10.72 | % |
Supplemental cash flow information related to leases are as follows:
|
| June 30, 2022 |
|
| December 31, 2021 |
| ||
Cash paid for amounts included in measurement of operating lease liabilities |
| $ | 2,434 |
|
| $ | 3,987 |
|
Right-of-use assets obtained in exchange for lease obligations |
| $ | 6,641 |
|
| $ | 9,773 |
|
Cash paid for amounts included in measurement of finance lease liabilities |
| $ | 67 |
|
| $ | 40 |
|
Undiscounted lease obligations are as follows:
|
| Operating |
|
| Finance |
|
| Total |
| |||
2022 |
| $ | 2,448 |
|
| $ | 264 |
|
| $ | 2,712 |
|
2023 |
|
| 4,975 |
|
|
| 824 |
|
|
| 5,799 |
|
2024 |
|
| 4,966 |
|
|
| 757 |
|
|
| 5,723 |
|
2025 |
|
| 4,950 |
|
|
| 775 |
|
|
| 5,725 |
|
2026 |
|
| 4,672 |
|
|
| 794 |
|
|
| 5,466 |
|
Thereafter |
|
| 43,887 |
|
|
| 4,608 |
|
|
| 48,495 |
|
Total lease payments |
|
| 65,898 |
|
|
| 8,022 |
|
|
| 73,920 |
|
Less: interest |
|
| (32,824 | ) |
|
| (2,844 | ) |
|
| (35,668 | ) |
Total lease liabilities |
| $ | 33,074 |
|
| $ | 5,178 |
|
| $ | 38,252 |
|
|
| Operating |
|
| Finance |
|
| Total |
| |||
Remainder of 2023 |
|
| 4,326 |
|
|
| 96 |
|
| $ | 4,422 |
|
2024 |
|
| 6,054 |
|
|
| 2,130 |
|
|
| 8,184 |
|
2025 |
|
| 6,045 |
|
|
| 132 |
|
|
| 6,177 |
|
2026 |
|
| 5,570 |
|
|
| 134 |
|
|
| 5,704 |
|
2027 |
|
| 5,080 |
|
|
| 136 |
|
|
| 5,216 |
|
Thereafter |
|
| 48,419 |
|
|
| 81 |
|
|
| 48,500 |
|
Total lease payments |
|
| 75,494 |
|
|
| 2,709 |
|
|
| 78,203 |
|
Less: interest |
|
| (38,376 | ) |
|
| (295 | ) |
|
| (38,671 | ) |
Total lease liabilities |
| $ | 37,118 |
|
| $ | 2,414 |
|
| $ | 39,532 |
|
Under the terms of these operating sublease agreements, future rental income from such third-party leases is expected to be as follows:
|
|
|
|
|
|
| ||
2022 |
| $ | 243 |
| ||||
2023 |
|
| 435 |
| ||||
Remainder of 2023 |
| $ | 313 |
| ||||
2024 |
|
| 434 |
|
|
| 551 |
|
2025 |
|
| 448 |
|
|
| 445 |
|
2026 |
|
| 263 |
|
|
| 262 |
|
2027 |
|
| — |
| ||||
Thereafter |
|
| - |
|
|
| — |
|
Total rental payments |
| $ | 1,823 |
|
| $ | 1,571 |
|
A sale-leaseback transaction occurs when an entity sells an asset it owns and then immediately leases the asset back from the buyer. The seller then becomes the lessee and the buyer becomes the lessor. Under ASC 842, Leases, both parties must assess whether the buyer-lessor has obtained control of the asset and a sale has occurred. The Company's subsidiaryThrough the Gage Acquisition, the Company entered into leaseback transactions on 5six properties of owned real estate. The Company has determined that these transactions do not qualify as a sale because control was not transferred to the buyer-lessor. Therefore, the Company has classified the lease portion of the transaction as a finance lease and continues to depreciate the asset. The Gage Acquisition (refer to Note 4)acquisition included financing obligations. The balance at June 30, 20222023 was $12,35211,614. Of this amount, $746860 is included in other current liabilities and $11,60610,754 is included in financing obligations in the unaudited consolidated balance sheets. The financing obligations had a weighted average term and weighted average discount rate of 7.2 years and 9.6%, respectively, at June 30, 2023.
Undiscounted financing obligations as of June 30, 2023 are as follows:
|
|
|
| |
Remainder of 2023 |
|
| 974 |
|
2024 |
|
| 1,940 |
|
2025 |
|
| 1,986 |
|
2026 |
|
| 2,032 |
|
2027 |
|
| 2,079 |
|
Thereafter |
|
| 5,680 |
|
Total payments |
|
| 14,691 |
|
Less: interest |
|
| (3,077 | ) |
Total financing obligations |
| $ | 11,614 |
|
14
On June 23, 28, and 30, 2023, the Company closed the private placements of 10,105 senior unsecured convertible debentures at a price of $1,000 per debenture for total gross proceeds of $10,105. Unless repaid or converted earlier, the outstanding principal and accrued and unpaid interest on the debentures will be due and payable 36 months following the closing of the debenture Offering (the “Maturity Date”). Each debenture will bear interest at a rate of 9.9% per annum from the date of issuance, calculated and compounded semi-annually, and payable on the Maturity Date. Each holder may, at the option of the holder upon signing of the subscription agreement, elect to receive up to 4.95% per annum of such interest payable in cash on a semi-annual basis. Each debenture will be convertible into
18
TerrAscend Corp.
Notes to the Unaudited Interim Condensed Consolidated Financial Statements
(Amounts expressed in thousands of United States dollars, except for share and per share amounts)
common shares, at the option of the holder, at any time or times prior to the close of business on the last business day immediately preceding the Maturity Date, at a conversion price of $2.01. Holders converting their debentures will receive accrued and unpaid interest for the period from and including the date of the last interest payment date, to and including, the date of conversion.
In accordance with ASC 815 Derivatives and Hedging, the conversion option was bifurcated from the host instrument as the instrument's strike price is denominated in a currency other than the functional currency of the issuer. It was recorded at fair value, using the Black-Scholes option model (Note 23). The proceeds are allocated first to the conversion option based on its fair value of $3,533, and the residual was allocated to the host instrument and recorded as convertible debt at a fair value of $6,572.
Warrants
The following is a summary of the outstanding warrants for Common Shares:common shares:
|
| 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 |
|
Exercised |
|
| (7,989,436 | ) |
|
|
|
|
|
|
|
|
| |||
Replacement warrants granted on acquisition of Gage |
|
| 282,023 |
|
|
|
|
|
|
|
|
|
| |||
Outstanding, June 30, 2022 |
|
| 23,288,060 |
|
|
| 1,110,168 |
|
| $ | 4.71 |
|
|
| 7.06 |
|
|
| Number of Common Share Warrants Outstanding |
|
| Number of Common Share Warrants Exercisable |
|
| Weighted Average Exercise Price $ |
|
| Weighted Average Remaining Life (years) |
| ||||
Outstanding, December 31, 2022 |
|
| 23,240,330 |
|
|
| 728,715 |
|
| $ | 4.49 |
|
|
| 9.72 |
|
Expired |
|
| (320,000 | ) |
|
| (320,000 | ) |
|
| 3.50 |
|
|
| — |
|
Outstanding, June 30, 2023 |
|
| 22,920,330 |
|
|
| 408,715 |
|
| $ | 4.61 |
|
|
| 9.35 |
|
Pursuant to the terms of the Gage Acquisition, each holder of a Gage warrant received a 0.3001 equivalent replacement warrant. Each warrant is exercisable into common share purchase warrants. The warrants range in exercise price from $3.83 to $7.00 and expire at various dates from October 6, 2022 to July 2, 2025. Refer to Note 4 for the determination of fair value of warrants acquired.
The Gage Acquisition also included warrant liabilities that are exchangeable into Common Shares. Refer to Note 4 for the determination of the fair value of the warrant liability.common shares.
|
| 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 |
|
| - |
|
|
| - |
|
| $ | - |
|
|
| - |
|
Granted on acquisition of Gage |
|
| 7,129,517 |
|
|
|
|
|
|
|
|
|
| |||
Outstanding, June 30, 2022 |
|
| 7,129,517 |
|
|
| 7,129,517 |
|
| $ | 8.66 |
|
|
| 1.49 |
|
|
| Number of Common Share Warrants Outstanding |
|
| Number of Common Share Warrants Exercisable |
|
| Weighted Average Exercise Price $ |
|
| Weighted Average Remaining Life (years) |
| ||||
Outstanding, December 31, 2022 |
|
| 7,129,517 |
|
|
| 7,129,517 |
|
| $ | 8.66 |
|
|
| 0.99 |
|
Granted |
|
| 3,590,334 |
|
|
| — |
|
| $ | 1.95 |
|
|
| 1.98 |
|
Exercised |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Outstanding, June 30, 2023 |
|
| 10,719,851 |
|
|
| 7,129,517 |
|
| $ | 6.41 |
|
|
| 0.99 |
|
The following is a summary of the outstanding warrants for Proportionate Voting Shares at June 30, 2022. These warrants are exercisable for 0.001 of a Proportionate Voting Share. The Proportionate Voting Shares are exchangeable into Common Shares on a basis of 1,000 Common Shares per Proportionate Voting Share.
|
| 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 |
|
The following is a summary of the outstanding Preferred Sharepreferred share warrants at June 30, 2022.2023. Each warrant is exercisable into 1one preferred share:
|
| 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 Preferred Share Warrants Outstanding |
|
| Number of Preferred Share Warrants Exercisable |
|
| Weighted Average Exercise Price $ |
|
| Weighted Average Remaining Life (years) |
| ||||
Outstanding, December 31, 2022 |
|
| 15,106 |
|
|
| 15,106 |
|
| $ | 3,000 |
|
|
| 0.39 |
|
Expired |
|
| (15,106 | ) |
|
| (15,106 | ) |
|
| 3,000 |
|
|
| — |
|
Outstanding, June 30, 2023 |
|
| - |
|
|
| - |
|
| $ | - |
|
|
| - |
|
Private Placement Financing
Concurrently with convertible debenture placements (Note 12), on June 23, 2023, June 28, 2023, and June 30, 2023, the Company closed three tranches of private placements of equity securities at a price of $1.50 per unit for aggregate gross proceeds of $9,871. Each unit is comprised of one common share of the Company and one-half warrant to purchase one common share. Each warrant entitles the holder to acquire one common share at a price of $1.95 per common share for a period of 24 months following the date of issuance.
15Detachable warrants issued in a bundled transaction are accounted for separately. Under ASC 815 Derivatives and Hedging, the detachable warrants meet the definition of derivative because the exercise price is denominated in a currency that is different from the
19
TerrAscend Corp.
Notes to the Unaudited Interim Condensed Consolidated Financial Statements
(Amounts expressed in thousands of United States dollars, except for share and per share amounts)
functional currency of the Company. It was recorded at a fair value of $2,216, using the Black-Scholes option model. The proceeds are allocated first to the warrants based on their fair value, and the residual of $7,655 was allocated to the equity (Note 23).
Share-based payments expense
Total share-based payments expense was as follows:
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
| For the Three Months Ended |
| For the Six Months Ended |
| For the Three Months Ended |
| For the Six Months Ended |
|
| ||||||||||||||||||||||||
|
| June 30, 2022 |
| June 30, 2021 |
|
| June 30, 2022 |
| June 30, 2021 |
|
| June 30, 2023 |
| June 30, 2022 |
|
| June 30, 2023 |
| June 30, 2022 |
|
| ||||||||||||
Stock options |
| $ | 3,500 |
|
| $ | 4,316 |
|
| $ | 6,090 |
|
| $ | 7,766 |
|
| $ | 1,437 |
|
| $ | 3,500 |
|
| $ | 2,697 |
|
| $ | 6,090 |
|
|
Restricted share units |
|
| 963 |
|
|
| 332 |
|
|
| 1,729 |
|
|
| 449 |
|
| $ | 544 |
|
| $ | 963 |
|
|
| 997 |
|
|
| 1,729 |
|
|
Total share-based payments |
| $ | 4,463 |
|
| $ | 4,648 |
|
| $ | 7,819 |
|
| $ | 8,215 |
|
| $ | 1,981 |
|
| $ | 4,463 |
|
| $ | 3,694 |
|
| $ | 7,819 |
|
|
Stock Options
The following table summarizes the stock option activity for the six months ended June 30, 2022:2023:
|
| 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 |
|
Granted |
|
| 4,182,590 |
|
|
|
|
|
| 5.16 |
|
|
|
|
|
|
| |||
Replacement options granted on acquisition of Gage |
|
| 4,940,364 |
|
|
|
|
|
| 2.99 |
|
|
|
|
|
|
| |||
Exercised |
|
| (88,015 | ) |
|
|
|
|
| 4.04 |
|
|
|
|
|
|
| |||
Forfeited (1) |
|
| (649,376 | ) |
|
|
|
|
| 8.65 |
|
|
|
|
|
|
| |||
Expired |
|
| (396,441 | ) |
|
|
|
|
| 8.08 |
|
|
|
|
|
|
| |||
Outstanding, June 30, 2022 |
|
| 20,843,641 |
|
|
| 4.94 |
|
| $ | 4.24 |
|
|
| 3,615 |
|
| $ | - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Exercisable, June 30, 2022 |
|
| 12,396,267 |
|
|
| 3.07 |
|
| $ | 3.11 |
|
|
| 3,615 |
|
| N/A |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Nonvested, June 30, 2022 |
|
| 8,447,374 |
|
|
| 7.69 |
|
| $ | 5.89 |
|
|
| - |
|
| N/A |
|
|
| 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, 2022 |
|
| 20,111,246 |
|
|
| 4.86 |
|
| $ | 3.63 |
|
| $ | 320 |
|
| N/A |
| |
Granted |
|
| 706,627 |
|
|
| — |
|
|
| 1.75 |
|
|
| — |
|
|
| — |
|
Exercised |
|
| (405,134 | ) |
|
| — |
|
|
| 0.19 |
|
|
| — |
|
|
| — |
|
Forfeited |
|
| (1,386,353 | ) |
|
| — |
|
|
| 5.38 |
|
|
| — |
|
|
| — |
|
Expired |
|
| (1,507,019 | ) |
|
| — |
|
|
| 4.20 |
|
|
| — |
|
|
| — |
|
Outstanding, June 30, 2023 |
|
| 17,519,367 |
|
|
| 4.73 |
|
| $ | 3.65 |
|
|
| 1,047 |
|
|
| — |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Exercisable, June 30, 2023 |
|
| 11,633,165 |
|
|
| 2.98 |
|
| $ | 3.58 |
|
|
| 202 |
|
|
| — |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Nonvested, June 30, 2023 |
|
| 5,886,199 |
|
|
| 8.22 |
|
| $ | 3.81 |
|
| $ | 845 |
|
|
| — |
|
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, 20222023 and December 31, 2021,2022, 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 holdersthey exercised their in-the-money options on June 30, 20222023 and December 31, 2021,2022, respectively.
The total pre-tax intrinsic value (the difference between the market price of the Company’s Common Stockcommon shares on the exercise date and the price paid by the option holder to the exercise the option) related to stock options exercised is presented below:
| 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 |
|
| For the Three Months Ended |
| For the Six Months Ended |
|
| ||||||||||||
|
| June 30, 2023 |
|
| June 30, 2022 |
|
| June 30, 2023 |
|
| June 30, 2022 |
|
| ||||
Exercised |
|
| — |
|
| $ | 79 |
|
| $ | 551 |
|
| $ | 140 |
|
|
The Gage 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 are estimated using the Black-Scholes Option Pricing Model with the following assumptions:
1620
TerrAscend Corp.
Notes to the Unaudited Interim Condensed Consolidated Financial Statements
(Amounts expressed in thousands of United States dollars, except for share and per share amounts)
| ||||
|
| |||
|
| |||
|
| |||
|
|
|
The fair value of the various stock options granted waswere estimated using the Black-Scholes Option Pricing Modeloption pricing model with the following assumptions:
|
| June 30, 2022 |
|
| December 31, 2021 |
|
| June 30, 2023 |
|
| December 31, 2022 |
| ||||
Volatility |
| 77.55% - 79.04% |
|
| 79.05% - 81.51% |
|
| 80.04% - 80.16% |
|
| 77.55% - 77.89% |
| ||||
Risk-free interest rate |
| 1.63% - 3.02% |
|
| 0.90% - 1.72% |
|
| 2.85% - 3.21% |
|
| 1.63% - 3.51% |
| ||||
Expected life (years) |
| 9.62 - 10.01 |
|
| 4.57 - 10.05 |
|
| 10.01 |
|
| 9.62 - 10.01 |
| ||||
Dividend yield |
|
| 0 | % |
|
| 0 | % |
|
| 0.00 | % |
|
| 0.00 | % |
Forfeiture rate |
|
| 23.73 | % |
| 23.21% - 27.73% |
|
|
| 26.11 | % |
|
| 26.11 | % |
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 USU.S. treasury bond issues with a remaining term approximately equal to the expected life of the options. Dividend yield is zero sincebased on the fact that the Company has never paid cash dividends and does not expect to pay cash dividends in the foreseeable future.
The total estimated fair value of stock options that vested during the six months ended June 30, 20222023 and 20212022 was $4,9215,563 and $9,140, respectively. As of June 30, 2022,2023, there was $30,80623,572 of total unrecognized compensation cost related to unvested options.
Restricted Share Units
The following table summarizes the activities for the unvested RSUs for the three and six months ended June 30, 2022:2023:
|
| 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 | ||||||||||||
Outstanding, December 31, 2022 |
|
| 415,640 |
|
|
| 13,050 |
|
| N/A |
| |||||||||||
Granted |
|
| 573,716 |
|
|
|
|
|
|
| 1,785,092 |
|
|
| — |
|
|
| — |
| ||
Vested |
|
| (58,825 | ) |
|
|
|
|
|
| (113,640 | ) |
|
| — |
|
|
| — |
| ||
Forfeited |
|
| (23,250 | ) |
|
|
|
|
| (78,634 | ) |
|
| — |
|
|
| — |
| |||
Outstanding, June 30, 2022 |
|
| 683,812 |
|
|
| 13,050 |
|
| N/A | ||||||||||||
Outstanding, June 30, 2023 |
|
| 2,008,458 |
|
|
| 14,564 |
|
| N/A |
|
As of June 30, 2022,2023, there was $3,9163,129 of total unrecognized compensation cost related to unvested RSUs.
Non-controlling interest consists mainly of the Company’s ownership minority interest in its New Jersey operations andoperations.
On June 26, 2023, the Company reduced its non-controlling interest through a buy out of the minority interest in IHC Real Estate operations and consistsLP (Note 10).
The following table summarizes the non-controlling interest activity for the six months ended June 30, 2023:
|
| June 30, 2023 |
|
| December 31, 2022 |
| ||
Opening carrying amount |
| $ | 2,374 |
|
| $ | 5,367 |
|
Capital distributions |
|
| (3,415 | ) |
|
| (7,550 | ) |
Transfer of minority interest |
|
| (1,323 | ) |
|
| - |
|
Net income attributable to non-controlling interest |
|
| 4,330 |
|
|
| 4,557 |
|
Ending carrying amount |
| $ | 1,966 |
|
| $ | 2,374 |
|
This transaction was accounted for as an equity transaction. The carrying amount of the following amounts:non-controlling interest was adjusted by $1,323 to reflect the change in the net book value ownership interest. The difference from the consideration paid of $7,500 is recognized in additional paid in capital and attributed to the parent’s equity holders.
|
| June 30, 2022 |
|
| December 31, 2021 |
| ||
Opening carrying amount |
| $ | 5,367 |
|
| $ | 3,802 |
|
Capital distributions |
|
| (448 | ) |
|
| (53 | ) |
Investment in NJ partnership |
|
| — |
|
|
| (1,406 | ) |
Net income attributable to non-controlling interest |
|
| 1,296 |
|
|
| 3,024 |
|
Ending carrying amount |
| $ | 6,215 |
|
| $ | 5,367 |
|
1721
TerrAscend Corp.
Notes to the Unaudited Interim Condensed Consolidated Financial Statements
(Amounts expressed in thousands of United States dollars, except for share and per share amounts)
Parties are related if one party has the ability to control or exercise significant influence over the other party in making financing and operating decisions. At June 30, 20222023 amounts due to/from related parties consisted of:
The Company's effective tax rate was (101%) and (148%) for the three and six months ended June 30, 2022, the Company had the following transactions related to shareholders’ equity:
The effective tax rate was 25% and 128% for the three and six months ended June 30, 2022, respectively and -31% and -60%respectively. The effective tax rate for the three and six months ended June 30, 2021, respectively.2023 differed from the federal statutory tax rate primarily due to the disallowed tax deductions for business expenses pursuant to Section 280E of the Internal Revenue Code of 1986, as amended (the "Code"), and a return to provision adjustment primarily related to the Company's New Jersey tax return filings. The effective tax rate for the three and six months ended June 30, 2022 differed from the federal statutory tax rate primarily due to the disallowed tax deductions for business expenses pursuant to Section 280E of the Code.
UnrecognizedThe Company's effective tax benefitsrate can vary each reporting period depending on, among other factors, 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 recognitiongeographic and business mix of the benefits.Company's earnings, changes to the valuation allowance, and permanently non-deductible expenses. Certain of these and other factors, including the Company's history and projections of pre-tax earnings, are considered in assessing the Company's ability to realize any deferred tax assets including net operating losses.
The Company’s general and administrative expenses were as follows:
| For the Three Months Ended |
| For the Six Months Ended |
| For the Three Months Ended |
| For the Six Months Ended |
| ||||||||||||||||||||||||
|
| June 30, 2022 |
| June 30, 2021 |
|
| June 30, 2022 |
| June 30, 2021 |
|
| June 30, 2023 |
| June 30, 2022 |
| June 30, 2023 |
| June 30, 2022 |
| |||||||||||||
Office and general |
| $ | 6,042 |
|
| $ | 3,369 |
|
| $ | 9,608 |
|
| $ | 7,224 |
|
| $ | 3,801 |
|
| $ | 5,821 |
|
|
| 7,805 |
|
|
| 9,101 |
|
Professional fees |
|
| 3,564 |
|
|
| 3,070 |
|
|
| 6,492 |
|
|
| 5,749 |
|
|
| 5,103 |
|
|
| 3,373 |
|
|
| 8,476 |
|
|
| 6,093 |
|
Lease expense |
|
| 1,105 |
|
|
| 1,109 |
|
|
| 2,355 |
|
|
| 2,109 |
|
|
| 1,294 |
|
|
| 1,099 |
|
|
| 2,538 |
|
|
| 2,345 |
|
Facility and maintenance |
|
| 813 |
|
|
| 597 |
|
|
| 1,450 |
|
|
| 1,315 |
|
|
| 1,364 |
|
|
| 813 |
|
|
| 2,608 |
|
|
| 1,450 |
|
Salaries and wages |
|
| 13,629 |
|
|
| 7,451 |
|
|
| 22,917 |
|
|
| 15,102 |
|
|
| 14,334 |
|
|
| 13,147 |
|
|
| 27,830 |
|
|
| 21,945 |
|
Share-based compensation |
|
| 4,463 |
|
|
| 4,648 |
|
|
| 7,819 |
|
|
| 8,215 |
|
|
| 1,981 |
|
|
| 4,463 |
|
|
| 3,694 |
|
|
| 7,819 |
|
Sales and marketing |
|
| 4,365 |
|
|
| 506 |
|
|
| 5,892 |
|
|
| 1,428 |
|
|
| 2,599 |
|
|
| 4,209 |
|
|
| 5,255 |
|
|
| 5,596 |
|
Total |
| $ | 33,981 |
|
| $ | 20,750 |
|
| $ | 56,533 |
|
| $ | 41,142 |
|
| $ | 30,476 |
|
| $ | 32,925 |
|
| $ | 58,206 |
|
| $ | 54,349 |
|
The Company’s disaggregated net revenue by source, primarily due to the Company’s contracts with its external customers werewas as follows:
| For the Three Months Ended |
| For the Six Months Ended |
|
|
|
|
|
|
|
| |||||||||||||||||||||
|
| June 30, 2022 |
| June 30, 2021 |
|
| June 30, 2022 |
| June 30, 2021 |
| For the Three Months Ended |
| For the Six Months Ended |
| ||||||||||||||||||
|
| June 30, 2023 |
| June 30, 2022 |
|
| June 30, 2023 |
| June 30, 2022 |
| ||||||||||||||||||||||
Retail |
| $ | 58,254 |
|
| $ | 47,979 |
|
| $ | 113,676 |
|
| $ | 73,697 |
| ||||||||||||||||
Wholesale |
| $ | 16,825 |
|
| $ | 36,330 |
|
| $ | 40,766 |
|
| $ | 74,714 |
|
|
| 13,870 |
|
|
| 15,981 |
|
|
| 27,846 |
|
|
| 38,848 |
|
Retail |
|
| 47,979 |
|
|
| 22,393 |
|
|
| 73,697 |
|
|
| 37,363 |
| ||||||||||||||||
Total |
| $ | 64,804 |
|
| $ | 58,723 |
|
| $ | 114,463 |
|
| $ | 112,077 |
|
| $ | 72,124 |
|
| $ | 63,960 |
|
| $ | 141,522 |
|
| $ | 112,545 |
|
1822
TerrAscend Corp.
Notes to the Unaudited Interim Condensed Consolidated Financial Statements
(Amounts expressed in thousands of United States dollars, except for share and per share amounts)
For the three and six months ended June 30, 20222023 and 20212022, the Company did 0not 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 noteNote 5), the Company recorded sales returns of $nil and $1,040 during the three and six months ended June 30, 2022, respectively.2022.
The Company’s finance and other expenses included the following:
| 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 |
|
|
|
|
|
| |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
| For the Three Months Ended |
| For the Six Months Ended | ||||||||||||||
|
| June 30, 2023 |
|
| June 30, 2022 |
|
| June 30, 2023 |
|
| June 30, 2022 |
|
| ||||
Interest and accretion |
| $ | 7,965 |
|
| $ | 8,515 |
|
| $ | 15,840 |
|
| $ | 15,412 |
|
|
Indemnification asset release |
|
| — |
|
|
| 3,998 |
|
|
| — |
|
|
| 3,973 |
|
|
Employee retention credits transfer with recourse |
|
| — |
|
|
| — |
|
|
| 2,235 |
|
|
| — |
|
|
Other (income) expense |
|
| 206 |
|
|
| 1,150 |
|
|
| 183 |
|
|
| 933 |
|
|
Total |
| $ | 8,171 |
|
| $ | 13,663 |
|
| $ | 18,258 |
|
| $ | 20,318 |
|
|
The indemnification asset release is the reduction of the indemnification asset relatedRefer to the expiration of the escrow agreement related to the acquisition of The Apothecarium.Note 4, for further explanation about employee retention credits transfer with recourse.
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 1one operating segment, being the cultivation, production and sale of cannabis products.
Geography
The Company operates withhas subsidiaries located in Canada and the US.
The Company hadUnited States. For each of the followingsix months ended June 30, 2023 and 2022, net revenue by geography of:was primarily generated from sales in the United States. As a result of the Reorganization (Note 3) the Company consolidates its retail location in Canada and generated net revenue of $290 for the three months and six months ended June 30, 2023.
| 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 |
|
| June 30, 2023 |
| December 31, 2022 |
| ||||||
United States |
| $ | 842,569 |
|
| $ | 409,150 |
|
| $ | 614,277 |
|
| $ | 577,750 |
|
Canada |
|
| 28,730 |
|
|
| 29,563 |
|
|
| 842 |
|
|
| 1,844 |
|
Total |
| $ | 871,299 |
|
| $ | 438,713 |
|
| $ | 615,119 |
|
| $ | 579,594 |
|
19
TerrAscend Corp.
Notes to the Unaudited Condensed Consolidated Financial Statements
(Amounts expressed in thousands of United States dollars, except for per share amounts)
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.and debt. The equity issuances are outlined in Note 11 and13, debt issuancesmodification are outlined in Note 8.10, and debt financing are outline in Note 12.
23
TerrAscend Corp.
Notes to the Unaudited Interim Condensed Consolidated Financial Statements
(Amounts expressed in thousands of United States dollars, except for share and per share amounts)
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 June 30, 2022. Other than these items related to loans payable as of June 30, 2022 and December 31, 2021, the Company is not subject to externally imposed capital requirements.2023.
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 asAs a result of the corporate restructure in conjunctionReorganization, the Company has agreed to implement certain equity and capital management restrictions to comply with the Gage Acquisition. The amendmentsrules and policies of the TSX. As such, the Company has agreed to limitations on the utilization of any proceeds raised through the sale of Company equity, including restrictions on funding of its US operations with such proceeds.
Additionally, the Company is prohibited from converting the exchangeable shares of TerrAscend Growth Corp. into common shares so long as the common shares are listed on the TSX or until the exchange of shares is permitted by TSX rules and policies. Until such time that the Company is permitted to convert its exchangeable shares for common shares, TerrAscend Growth Corp. may not issue dividends 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.Company.
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.
The following table represents the fair value amounts of financial assets and financial liabilities measured at estimated fair value on a recurring basis:
| At June 30, 2022 |
| At December 31, 2021 |
| At June 30, 2023 |
| At December 31, 2022 |
| ||||||||||||||||||||||||||||||||||||||||||||
|
| 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 |
| $ | 48,426 |
|
| $ | - |
| — |
| $ | - |
|
| $ | 79,642 |
|
| $ | - |
| — |
| $ | - |
|
| $ | 28,915 |
|
|
| — |
|
|
| — |
|
| $ | 26,158 |
|
|
| — |
|
|
| — |
| ||
Restricted cash |
|
| 605 |
|
|
| — |
|
|
|
| — |
|
|
| — |
|
|
| — |
|
|
|
| — |
|
|
| 5,606 |
|
|
| — |
|
|
| — |
|
|
| 605 |
|
|
| — |
|
|
| — |
| ||
Purchase option derivative asset |
|
| — |
|
|
| — |
|
|
|
| 50 |
|
|
| — |
|
|
| — |
|
|
|
| 868 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 50 |
| ||
Total Assets |
| $ | 49,031 |
|
| $ | - |
|
|
| $ | 50 |
|
| $ | 79,642 |
|
| $ | - |
|
|
| $ | 868 |
|
| $ | 34,521 |
|
|
| — |
|
|
| — |
|
| $ | 26,763 |
|
|
| — |
|
| $ | 50 |
| ||
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||
Contingent consideration payable |
|
| — |
|
| $ | - |
|
|
| $ | 5,648 |
|
| $ | - |
|
| $ | - |
|
|
| $ | 12,535 |
|
|
| — |
|
| $ | 4,434 |
|
|
| — |
|
|
| — |
|
| $ | 5,184 |
|
|
| — |
| ||
Warrant liability |
|
| — |
|
|
| 6,176 |
|
|
|
| — |
|
|
| — |
|
|
| 54,986 |
|
|
|
| — |
| ||||||||||||||||||||||||||
Derivative liability |
|
| — |
|
|
| 5,750 |
|
|
| — |
|
|
| — |
|
|
| 711 |
|
|
| — |
| ||||||||||||||||||||||||||||
Total Liabilities |
| $ | - |
|
| $ | 6,176 |
|
|
| $ | 5,648 |
|
| $ | - |
|
| $ | 54,986 |
|
|
| $ | 12,535 |
|
|
| — |
|
| $ | 10,184 |
|
|
| — |
|
|
| — |
|
| $ | 5,895 |
|
|
| — |
|
There were 0no transfers between the levels of fair value hierarchy during the three and six months ended June 30, 2022.2023.
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
Cash, and cash equivalents, and restricted cash, 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.
Level 2
Warrant liability
The following table summarizes the changes in the warrantderivative liability for the three and six months ended June 30, 2022:2023:
Balance at December 31, 2022 |
| $ | 711 |
|
Included in gain on fair value of warrants |
|
| (703 | ) |
Conversion Option issued in 2023 private placement |
|
| 3,533 |
|
Detachable warrants issued in 2023 private placement |
|
| 2,216 |
|
Effects of movements in foreign exchange |
|
| (7 | ) |
Balance at June 30, 2023 |
| $ | 5,750 |
|
Warrant liability and conversion option
2024
TerrAscend Corp.
Notes to the Unaudited Interim Condensed Consolidated Financial Statements
(Amounts expressed in thousands of United States dollars, except for share and per share amounts)
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 the warrant liability acquired through its Gage Acquisition ("Gage Warrant Liability"), a detachable warrant liability issued through the private placement (Note 13), and a conversion option related to the convertible debenture offering (Note 12). 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:
|
| June 30, 2022 |
|
| December 31, 2021 |
| ||
Term (in years) |
|
| 0.8 |
|
|
| 1.3 |
|
Risk-free rate |
|
| 2.5 | % |
|
| 0.4 | % |
EBITDA discount rate |
|
| 15.5 | % |
|
| 15.0 | % |
EBITDA volatility |
|
| 37.1 | % |
|
| 44.0 | % |
Contingent Consideration Payable
21
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 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% (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 $34 and $153 forhave expired during the three and six months ended June 30, 2022, respectively (June 30, 2021 - ($2023.7
)
The Gage Warrant Liability has been remeasured to fair value. Key inputs and $assumptions used in the Black-Scholes model were as follows:
2,990
|
| June 30, 2023 |
|
| December 31, 2022 |
| ||
Common Stock Price of TerrAscend Corp. |
| $ | 1.52 |
|
| $ | 1.13 |
|
Warrant exercise price |
| $ | 8.66 |
|
| $ | 8.66 |
|
Annual volatility |
|
| 56.3 | % |
| 97.1%-98.4% |
| |
Annual risk-free rate |
|
| 5.5 | % |
|
| 4.8 | % |
Expected term (in years) |
|
| 0.5 |
|
|
| 1.0 |
|
, respectively).
Detachable Warrants
The fair value of the detachable warrants as a part of June 2023 private placement (Note 13) was estimated using the Black-Scholes option pricing model with the following assumptions:
|
| June 30, 2023 |
| |
Common Stock Price of TerrAscend Corp. |
| $1.65-$1.81 |
| |
Option exercise price |
| $ | 1.95 |
|
Annual volatility |
| 71.0%-71.1% |
| |
Annual risk-free rate |
| 4.58%-4.66% |
| |
Expected term (in years) |
| 1.98-2.00 |
|
Bifurcated conversion options
The illustrative varianceconversion option issued as a part of the total contingent considerationJune 2023 private placement (Note 12) has been measured at fair value as of June 30, 2022 based on reasonably possible changes to one of2023. Key inputs and assumptions used in the significant unobservable inputs, holding other inputs constant, would have the following effects:Black-Scholes valuation were as follows:
Discount rate sensitivity |
| KCR |
| |
Increase 100 basis points |
| $ | 1,175 |
|
Increase 50 basis points |
| $ | 1,195 |
|
Decrease 50 basis points |
| $ | 1,236 |
|
Decrease 100 basis points |
| $ | 1,258 |
|
|
| June 30, 2023 |
| |
Common Stock Price of TerrAscend Corp. |
| $1.65-$1.81 |
| |
Option exercise price |
| $ | 2.01 |
|
Annual volatility |
| 68.2%-68.3% |
| |
Annual risk-free rate |
| 4.13%-4.25% |
| |
Expected term (in years) |
| 2.98-3.00 |
|
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. At June 30, 2022,2023, there were no pending lawsuits that could reasonably be expected to have a material effect on the results of the Company’s consolidated financial statements.
2225
TerrAscend Corp.
Notes to the Unaudited Interim Condensed Consolidated Financial Statements
(Amounts expressed in thousands of United States dollars, except for share and per share amounts)
i)
On July 26, 2022,10, 2023, the Company received approval for Adult Use sales at this location.
ii)
2326
ItemITEM 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsMANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of the Company'sTerrAscend's financial condition and results of operations should be read in conjunction with the Company'sTerrAscend'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 the Company'sCompany’s Annual Report on Form 10-K for the year ended December 31, 2021,2022, which was filed with the Securities and Exchange Commission, or SEC, on March 17, 2022.16, 2023, or the Annual Report. Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report on Form 10-Q including information with respect to the Company'sTerrAscend's plans and strategy for its business, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth under "Risk Factors" in the Company'sour Annual Report, on Form 10-K, its actual results could differ materially from the results described in or implied by the "Cautionary Note Regarding Forward-Looking Statements" contained in this Quarterly Report on Form 10-Q and in the following discussion and analysis.
Unless otherwise noted, dollar amounts in this Item 2 are in thousands of U.S. dollars.
This Management’s Discussion and Analysis (“MD&A”) of the financial condition and results of operations of TerrAscend is for the three and six months ended June 30, 20222023 and 20212022 and the accompanying notes for each respective period.
Business Overview
TerrAscend is a leading North American cannabis operator with vertically integrated licensed operations in Pennsylvania, New Jersey, Michigan, Maryland and California, licensed cultivation and processing operationsis a cannabis retailer in Michigan and Maryland, and licensed processing operationsOntario, Canada with a majority-owned dispensary in Toronto, Ontario, 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 and high-quality cannabis, providing industry-leading product selection to both the medical and legal adult-use market.markets. Notwithstanding the fact that various states in the US whichU.S. have implemented medical marijuana laws or whichthat have otherwise legalized the use of cannabis, the use of cannabis remains illegal under USU.S. federal law for any purpose, by way of the CSA.Controlled Substances Act of 1970.
TerrAscend operates under one operating segment, which is the cultivation, production and sale of cannabis products.
TerrAscend’sTerrAscend owns a portfolio of operating businesses and several synergistic brands include:including:
Objective
TerrAscend's MD&A is designed to provide information aboutCanada. TerrAscend ceased operations at 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.
24
Results from Operations- Three months ended June 30, 2022 and June 30, 2021
The following tables represent the Company’s results from operations for the three months ended June 30, 2022 and 2021.
Revenue, net
| For the Three Months Ended |
| ||||||
|
| June 30, 2022 |
|
| June 30, 2021 |
| ||
Revenue |
| $ | 65,367 |
|
| $ | 61,977 |
|
Excise and cultivation taxes |
|
| (563 | ) |
|
| (3,254 | ) |
Revenue, net |
| $ | 64,804 |
|
| $ | 58,723 |
|
$ change |
| $ | 6,081 |
|
|
|
| |
% change |
|
| 10 | % |
|
|
|
27 TerrAscend’s head office and registered office is located at 77 City Centre Drive, Suite 501 – East Tower, Mississauga, Ontario, Canada, L5B 1M5. TerrAscend’s telephone number is 1.717.610.4165 and its website is www.terrascend.com. Information contained on or accessible through TerrAscend’s website is not a part of this Quarterly Report, and the inclusion of TerrAscend’s website address in this Quarterly Report on Form 10-Q is an inactive textual reference only. Recent Developments Subsequent Transactions 28 Components of Results of Operations The following discussion sets forth certain components of our Unaudited Condensed Consolidated Statements of Comprehensive Loss as well as Revenue TerrAscend generates revenue from Cost of 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 % General and administrative General and administrative ("G&A") consists primarily of personnel costs related to Amortization and depreciation includes the amortization of intangible assets. Amortization is calculated on a straight line basis over the following terms: Brand intangibles- indefinite lives Indefinite useful lives Brand intangibles- definite lives 3 years Software 5 years Licenses 5-30 years Customer relationships 5 years Non-compete agreements 3 years Depreciation of property and equipment is calculated on a straight-line basis over the estimated useful life of the asset using the following terms: Buildings and improvements Lesser of useful life or 30 years Land Not depreciated Machinery & equipment 5-15 years Office furniture & production equipment 3-5 years Right of use assets Lease term Assets in process Not depreciated Impairment of intangible assets and goodwill Goodwill and indefinite lived intangible assets are reviewed for 29 its carrying value, additional quantitative impairment test is performed which compares the carrying value of the Definite lived intangible assets are tested for impairment when there are indications that an asset may be impaired. When indicators of impairment exist, TerrAscend performs a quantitative impairment test which compares the carrying value of the assets for intangible assets to their estimated fair values. If the carrying value exceeds the estimated fair value, an impairment is recorded. (Gain) loss from revaluation of contingent consideration As a result of some of its acquisitions, TerrAscend recognizes a contingent consideration payable, which is an obligation to transfer additional assets to the For the Three Months Ended June 30, 2022 June 30, 2021 General and administrative expense $ 33,981 $ 20,750 $ change $ 13,231 % change 64 % G&A excluding share-based compensation $ 29,518 $ 16,102 G&A excluding share-based compensation as a % of revenue 46 % 27 % For the Three Months Ended June 30, 2022 June 30, 2021 Amortization and depreciation $ 3,016 $ 1,844 $ change $ 1,172 % change 64 % (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 Company's warrant liability Finance and other expenses Finance and other expenses consists primarily of interest expense on TerrAscend's outstanding debt obligations. Transaction and restructuring costs Transaction costs include costs incurred in connection with TerrAscend's acquisitions, such as expenses related to professional fees, consulting, legal and accounting. Restructuring costs are those costs associated with severance and restructuring of business units. Impairment of property and equipment TerrAscend evaluates the recoverability of property and equipment whenever events or changes in circumstances indicate that the carrying value of the asset, or asset group, may not be recoverable. When TerrAscend determines that the carrying value of the long-lived asset may not be recoverable based upon the existence of one or more indicators, the assets are assessed for impairment based on the estimate of future undiscounted cash flows expected to result from the use of the asset and its eventual disposition. If the carrying value of an asset exceeds its estimated future undiscounted cash flows, an impairment loss is recorded for the excess of the asset’s carrying value over its fair value. Unrealized and realized foreign exchange loss Unrealized and realized foreign exchange loss represents the loss recognized on the remeasurement of USD denominated cash and other assets recorded in the Canadian dollars functional currency at TerrAscend's Canadian operations. Unrealized and realized gain on investments TerrAscend accounts for its investment in equity securities without readily determinable fair values using a valuation technique which maximizes the use of relevant observable inputs, with subsequent holding changes in fair value recognized in unrealized gain or loss on investments in the consolidated statement of loss. Provision for income taxes Provision for income taxes consists of U.S. federal and state income taxes in certain jurisdictions in which TerrAscend conducts business. Results from Operations- Three Months Ended June 30, 2023 and June 30, 2022 The following tables represent the Company’s results from operations for the six months ended June 30, 2023 and 2022. Revenue, net 30 For the Three Months Ended June 30, 2023 June 30, 2022 Revenue $ 72,437 $ 64,221 Excise and cultivation taxes (313 ) (261 ) Revenue, net $ 72,124 $ 63,960 $ change $ 8,164 % change 13 % Revenue increased from $63,960 to $72,124 driven by growth in retail offset by a decline in wholesale. Retail revenue increased from $47,979 during the three months ended June 30, 2022 to $58,254 during the three months ended June 30, 2023. The increase is primarily a result of adult use coming online in New Jersey in April 2022 and the acquisition of AMMD in Maryland in January 2023. The increase in retail revenue is partially offset by a $2,111 decrease in wholesale revenue related to declines in wholesale in the Pennsylvania market offset by growth in the wholesale market in New Jersey related to adult use sales in the state. Cost of Sales For the Three Months Ended June 30, 2023 June 30, 2022 Cost of sales $ 34,817 $ 32,587 Impairment and write downs of inventory 1,081 7,422 Total cost of sales $ 35,898 $ 40,009 $ change $ (4,111 ) % change -10 % Cost of sales as a % of revenue 50 % 63 % The reduction of $4,111 in cost of sales for the three months ended June 30, 2023 as compared to the three months ended June 30, 2022 is mainly a result of impairments and write-downs of inventory in Pennsylvania of $7,422 in the prior period. General and Administrative Expense For the Three Months Ended June 30, 2023 June 30, 2022 General and administrative expense $ 30,476 $ 32,925 $ change $ (2,449 ) % change -7 % The decline in G&A expense of $2,449 for the three months ended June 30, 2023 as compared to the three months ended June 30, 2022 was primarily a result of actions the Company undertook in the latter part of 2022 to reduce expenses and reduce its workforce in order to strengthen the position for the Company to generate positive cashflow from operations. Amortization and Depreciation Expense For the Three Months Ended June 30, 2023 June 30, 2022 Amortization and depreciation $ 2,242 $ 2,581 $ change $ (339 ) % change -13 % The decrease of $339 in amortization and depreciation expense for the three months ended June 30, 2023 as compared to the three months ended June 30, 2022 is primarily due to a brand intangible asset that was fully amortized during 2022. Gain on fair value of warrants and purchase option derivative asset For the Three Months Ended June 30, 2023 June 30, 2022 Gain on fair value of warrants and purchase option derivative asset $ (215 ) $ (47,345 ) $ change $ 47,130 % change -100 % The Preferred Share warrant liability was remeasured to fair value at June 30, 2022 using the 31 The Preferred Share warrant liability expired during the three months ended June 30, 2023. 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. Finance and other expenses For the Three Months Ended For the Three Months Ended June 30, 2022 June 30, 2021 June 30, 2023 June 30, 2022 Finance and other expenses $ 13,902 $ 8,919 $ 8,171 $ 13,663 $ change $ 4,983 $ (5,492 ) % change 56 % -40 % The Transaction and restructuring costs For the Three Months Ended For the Three Months Ended June 30, 2022 June 30, 2021 June 30, 2023 June 30, 2022 Transaction and restructuring costs $ 627 $ 432 $ 389 $ 627 $ change $ 195 $ (238 ) % change 45 % -38 % The For the Three Months Ended For the Three Months Ended June 30, 2022 June 30, 2021 June 30, 2023 June 30, 2022 Impairment of goodwill $ - $ 5,007 Unrealized and realized foreign exchange (gain) loss $ (101 ) $ (315 ) $ change $ (5,007 ) $ 214 % change -100 % -68 % The For the Three Months Ended June 30, 2022 June 30, 2021 Impairment of intangible assets $ - $ 3,633 $ change $ (3,633 ) % change -100 % 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 % 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 % Provision for income taxes For the Three Months Ended For the Three Months Ended June 30, 2022 June 30, 2021 June 30, 2023 June 30, 2022 Provision for income taxes $ 4,688 $ 6,937 $ 6,448 $ 4,688 $ change $ (2,249 ) $ 1,760 % change -32 % 38 % The Results from Operations- Six The following tables represent the Company’s results from operations for the six months ended June 30, Revenue, net For the Six Months Ended For the Six Months Ended June 30, 2022 June 30, 2021 June 30, 2023 June 30, 2022 Revenue $ 115,812 $ 118,473 $ 142,157 $ 113,281 Excise and cultivation taxes (1,349 ) (6,396 ) (635 ) (736 ) Revenue, net $ 114,463 $ 112,077 $ 141,522 $ 112,545 $ change $ 2,386 $ 28,977 % change 2 % 26 % Revenue increased from $112,281 to Cost of Sales For the Six Months Ended For the Six Months Ended June 30, 2022 June 30, 2021 June 30, 2023 June 30, 2022 Cost of sales $ 67,835 $ 41,601 $ 70,315 $ 65,663 Impairment and write downs of inventory 8,495 699 1,081 7,307 Total cost of sales $ 76,330 $ 42,300 $ 71,396 $ 72,970 $ change $ 34,030 $ (1,574 ) % change 80 % -2 % Cost of sales as a % of revenue 67 % 38 % 50 % 65 % The General and Administrative Expense For the Six Months Ended June 30, 2023 June 30, 2022 General and administrative expense $ 58,206 $ 54,349 $ change $ 3,857 % change 7 % The increase in 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 % 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 % For the Six Months Ended June 30, 2023 June 30, 2022 Amortization and depreciation $ 4,271 $ 4,756 $ change $ (485 ) % change -10 % The For the Six Months Ended June 30, 2022 June 30, 2021 Revaluation of contingent consideration $ 153 $ 2,990 $ change $ (2,837 ) % change -95 % For the Six Months Ended For the Six Months Ended June 30, 2022 June 30, 2021 June 30, 2023 June 30, 2022 (Gain) loss on fair value of warrants and purchase option derivative asset $ (53,058 ) $ 25,301 Gain on fair value of warrants and purchase option derivative asset $ (653 ) $ (53,058 ) $ change $ (78,359 ) $ 52,405 % change -310 % -99 % The Preferred Share warrant 33 The Preferred Share warrant liability expired during the six months ended June 30, For the six 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 $818. Finance and other expenses For the Six Months Ended For the Six Months Ended June 30, 2022 June 30, 2021 June 30, 2023 June 30, 2022 Finance and other expenses $ 20,758 $ 15,309 $ 18,258 $ 20,318 $ change $ 5,449 $ (2,060 ) % change 36 % -10 % The Transaction and restructuring costs For the Six Months Ended For the Six Months Ended June 30, 2022 June 30, 2021 June 30, 2023 June 30, 2022 Transaction and restructuring costs $ 1,242 $ 432 $ 392 $ 1,242 $ change $ 810 $ (850 ) % change 188 % -68 % The For the Six Months Ended June 30, 2022 June 30, 2021 Impairment of goodwill $ - $ 5,007 $ change $ (5,007 ) % change -100 % For the Six Months Ended June 30, 2022 June 30, 2021 Impairment of intangible assets $ - $ 3,633 $ change $ (3,633 ) % change -100 % Unrealized and realized foreign exchange loss For the Six Months Ended For the Six Months Ended June 30, 2022 June 30, 2021 June 30, 2023 June 30, 2022 Unrealized and realized foreign exchange loss $ 50 $ 5,838 Unrealized and realized foreign exchange loss (gain) $ (132 ) $ 41 $ change $ (5,788 ) $ (173 ) % change -99 % -422 % The decrease of $173 in unrealized foreign exchange loss for the six months ended June 30, 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 % Provision for income taxes For the Six Months Ended For the Six Months Ended June 30, 2022 June 30, 2021 June 30, 2023 June 30, 2022 Provision for income taxes $ 8,431 $ 16,373 $ 19,112 $ 8,431 $ change $ (7,942 ) $ 10,681 % change -49 % 127 % The Liquidity and Capital Resources June 30, 2023 December 31, 2022 $ $ Cash and cash equivalents 28,915 26,158 Restricted Cash 3,106 605 Current assets 106,629 121,993 Non-current assets 615,119 579,594 Current liabilities 133,489 137,905 Non-current liabilities 292,660 242,511 Working capital (26,860 ) (15,912 ) Total shareholders' equity 295,599 321,171 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. Liquidity and going concern At June 30, The aforementioned indicators raise substantial doubt about TerrAscend's ability to continue as a going concern for at least one year from the issuance of these financial statements. The Company believes this concern is mitigated by steps to improve its operations and cash Since its inception, TerrAscend's primary sources of TerrAscend expects to fund Capital requirements The Company has $208,659 in principal amounts of loans payable at June 30, 2023. Of this amount, $22,336 are due within the TerrAscend has entered into leases for certain premises and offices for which it owes monthly lease payments. TerrAscend has $78,204 in lease obligations. Of this amount, $6,151 are due in the TerrAscend's undiscounted contingent consideration payable is $4,434 at June 30, 2023. The contingent consideration payable relates to TerrAscend's business acquisitions of the Apothecarium and State Flower and is due in the next twelve months. During the year ended December 31, 2020, TerrAscend expensed $7,500 related to amounts payable to an entity controlled by the minority shareholders of TerrAscend NJ pursuant to services surrounding the granting of certain licenses. The final payment of $3,750 was made in July 2023. At June 30, 2023, the Company had accounts payable and accrued liabilities of $50,841 and corporate income taxes payable of $45,934. TerrAscend does not have any off-balance sheet arrangements that have, or are TerrAscend intends to meet its capital commitments through any or all of the sources of capital noted above. TerrAscend's objective with respect to its capital management is to ensure it has sufficient cash resources to maintain its ongoing operations and finance Debt facilities 35 Ilera Term Loan On December 18, 2020, WDB Holding PA, a subsidiary of On April 28, 2022, the On November 11, 2022, WDB Holding PA, TerrAscend, TerrAscend USA Inc. and the subsidiary guarantors party to the Ilera Term Loan and the PA Agent (on behalf of the required lenders) entered into an amendment to the PA Credit Agreement, pursuant to which PA Agent and the required lenders agreed that WDB Holding PA's obligation to maintain the consolidated interest coverage ratio as set forth in the PA Credit Agreement for the period ended September 30, 2022, shall not apply, subject to certain conditions, including (but not limited to) an obligation to enter into a subsequent amendment agreement on or before December 15, 2022, documenting certain enhancements and amendments to the PA Credit Agreement to be agreed. In addition, WDB Holding PA offered a prepayment of $5,000 pro rata to all lenders holding outstanding loans thereunder at a price equal to 103.22% of the principal amount prepaid, plus accrued and unpaid interest. On December 21, 2022, WDB Holding PA completed an amendment to reduce TerrAscend's principal debt by $35,000 and annual interest expense by $5,000. TerrAscend agreed to make a $35,000 payment at the original prepayment price of 103.22% to par, and agreed to use commercially reasonable efforts to add certain collateral to Ilera Term Loan, collectively by March 15, 2023. The amendment further provided that should WDB Holding PA not maintain the prescribed interest coverage ratio, the Company shall be required to deposit funds, as outlined in the amendment, into a restricted account, and no event of default shall occur. This amendment was not considered extinguishment of debt under ASC 470 Debt. On March 15, 2023, WDB Holding PA, in exchange for a fee in the amount of 1% of the then outstanding principal loan balance, agreed to an amendment among other things, to (i) extend the obligation date to prepay TerrAscend's debt from March 15, 2023 to June 30, 2023 in which WDB Holding PA must use commercially reasonable efforts to add additional collateral to the Ilera Term Loan, (ii) increase the amount of debt to be reduced by up to $37,000, subject to certain reductions in amount based on meeting certain time based milestones, at a prepayment price of 103.22% to par, and (iii) extend the next test date in respect of the interest coverage ratio until June 30, 2023. This amendment was not considered extinguishment of debt under ASC 470 Debt. There is $115,000 of principal amounts outstanding at March 31, 2023. On April 14, 2023, WDB Holding PA agreed to an amendment to the Ilera Term Loan to, among other things, to (i) permit changes necessary for the TSX Transaction (as defined therein), and (ii) to waive certain tax provisions. On June 22, 2023, WDB Holding PA further agreed to an amendment among other things, to (i) extend the next test date for the interest coverage ratio from June 30, 2023to September 30, 2023, and (ii) amend the terms for which WDB Holding PA may incur certain indebtedness and liens. Gage Loans The Gage Acquisition included a senior secured term loan (the "Original Gage Term Loan") with an acquisition date fair value of $53,857. The credit agreement bears interest at a rate equal to the greater of (i) the Prime Rate plus 7% or (ii) 10.25%. The term loan is payable monthly and matures on November 30, 2022. The term loan is secured by a first lien on all Gage assets. On August 10, 2022, the Original Gage Term Loan was amended as a result of the corporate restructure in conjunction with the Gage Acquisition. The amendment to the Original Gage Term Loan includes 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. This amendment was not considered extinguishment of debt under ASC 470 Debt. 36 On November 29, 2022, TerrAscend repaid $30,000 outstanding principal amount on the Original Gage Term Loan. On November 30, 2022, the remaining loan principal amount of $25,000 on the Original Gage Term Loan was amended (the "Amended Gage Term Loan"). The Amended Gage Term Loan bears interest on $25,000 at a per annum rate equal to the greater of (i) the U.S. "prime rate" plus 6.00%, and (ii) 13.0% and matures on November 1, 2024. Commencing on May 31, 2023, TerrAscend will make monthly principal repayments of 0.40% of the aggregate principal amount outstanding. Additionally, the unpaid principal amount of the loan shall bear paid in kind interest at a rate of 1.50% per annum. No prepayment fees are owed if TerrAscend voluntarily prepays the loan after 18 months. If such prepayment occurs prior to 18 months, a prepayment fee equal to all of the interest on the loans that would be due after the date of such prepayment, is owed. Under the Amended Gage Term Loan, TerrAscend has the ability to borrow incremental term loans of $30,000 at the option of TerrAscend and subject to consents from the required lenders. The additional $30,000 incremental term loans available under the amendment have not been drawn as of December 31, 2022. This loan represents a loan syndication, and therefore TerrAscend assessed each of the lenders separately under ASC 470 Debt to determine if this represents a modification, or an extinguishment of debt. For three of the four remaining lenders, it was determined that this was a modification. For the remaining lender, it was determined that this represented an extinguishment of debt and therefore the fees paid to the lenders on modification were expensed. As a result of this transaction, TerrAscend expensed $1,907 of fees paid to the lenders and third parties as they did not meet the criteria for capitalization under ASC 470 Debt. Additionally, the Gage Acquisition included a loan payable to a former owner of a licensed entity with an acquisition date fair value of $2,683, and a promissory note with an acquisition date fair value of $4,065. The loan payable to the former owner bears interest at a rate of 0.2%. The promissory note bears interest at a rate of 6%. There is $4,583 of principal amounts outstanding at June 30, 2023 on the loan payable and promissory note. On June 9, 2023, TerrAscend Growth Corp. agreed to an amendment among other things, to (i) permit changes necessary for the TSX Transaction (as defined therein) and (ii) to permit certain indebtedness and waive certain tax provisions. This amendment was not considered extinguishment of debt under ASC 470 Debt. Pinnacle Loans The Pinnacle Acquisition purchase price included two promissory notes in an aggregate amount of $10,000 to pay down all Pinnacle liabilities and encumbrances. The promissory note matures on June 30, 2023 and bears interest rates of 6%. On June 27, 2023, Spartan Partners Properties, LLC, agreed to an amendment among other things, to extend the obligation date of the loan until December 1, 2023. There is $8,833 of principal amounts outstanding at March 31, 2023 on the two promissory notes. Pelorus Term Loan On October 11, 2022, subsidiaries of TerrAscend, among others, entered into a loan agreement with Pelorus Fund REIT, LLC ("Pelorus") for a single-draw senior secured term loan ("Pelorus Term Loan") in an aggregate principal amount of $45,478. The Pelorus Term Loan bears interest at a variable rate tied to the one month secured overnight financing rate (SOFR), subject to a base rate, plus 9.5%, with interest-only payments for the first 36 months. The base rate is defined as, on any day, the greatest of (i) 2.5%, (b) the effective federal funds rate in effect on such day plus 0.5%, and (c) one month SOFR in effect on such day. The obligations of the borrowers under the Pelorus Term Loan are guaranteed by TerrAscend, TerrAscend USA Inc. and certain other subsidiaries of TerrAscend and secured by all of the assets of TerrAscend's Maryland and New Jersey businesses, including certain real estate in Maryland and New Jersey, but excludes all MD dispensaries. The Pelorus Term Loan matures on October 11, 2027. There is $45,478 of principal amounts outstanding at June 30, 2023. On April 17, 2023, TerrAscend NJ, LLC agreed to an amendment among other things, to (i) permit changes necessary for the TSX Transaction (as defined therein), and (ii) to waive certain tax provisions. On June 22, 2023, TerrAscend NJ, LLC further agreed to an amendment to permit certain indebtedness. This amendment was not considered extinguishment of debt under ASC 470 Debt. Stearns Loan On June 26, 2023, the Company closed on a $25,000 commercial loan with Stearns Bank, secured by the Company's cultivation facility in Pennsylvania and its AMMD dispensary in Cumberland, Maryland. The Company 37 Class A Share of TerrAscend Growth As a part of the Reorganization (Note 3), TerrAscend Growth Corp. issued $ 1 million of Class A shares with a 20% guaranteed annual dividend. Under the Subscription Agreement, TerrAscend Growth Corp holds a call right to repurchase all of the Class A Shares, at any point in time, issuable to the holder of Class A shares and the holder of Class A shares is granted a put right that IHC Real Estate LP Loan On June 26, 2023, the Company bought out the minority interest in IHC Real Estate LP and entered into a promissory note of $7,500. The promissory note carries an interest rate of 15% and matures on Cash Flows Cash For the Six Months Ended June 30, 2022 June 30, 2021 Net cash used in operating activities $ (34,976 ) $ (10,076 ) For the Six Months Ended June 30, 2023 June 30, 2022 Net cash (used in) / provided by operating activities $ 9,120 $ (34,976 ) The increase of $44,096 in net cash Cash flows For the Six Months Ended June 30, 2023 June 30, 2022 Net cash (used in) investing activities $ (4,877 ) $ (39 ) For the Six Months Ended June 30, 2022 June 30, 2021 Net cash provided used in investing activities $ (39 ) $ (63,387 ) For the Six Months Ended June 30, 2023 June 30, 2022 Net cash provided by financing activities $ 4,416 $ 8,781 Net cash For the Six Months Ended June 30, 2022 June 30, 2021 Net cash provided by financing activities $ 8,781 $ 168,507 During the six months ended June 30, 2022, 7,989,436 Common Share warrants were exercised for total proceeds of $23,797 and 88,015 stock options were exercised for total gross proceeds of $361. The cash provided by financing activities was offset by payments of contingent consideration related to the acquisition of State Flower of $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. Reconciliation of Non-GAAP Measures In addition to reporting the financial results in accordance with GAAP, TerrAscend believes The table below reconciles net loss to EBITDA from continuing operations and Adjusted EBITDA from continuing operations for the three and six months ended June 30, For the Three Months Ended For the Six Months Ended Notes June 30, 2022 June 30, 2021 June 30, 2022 June 30, 2021 Net income (loss) $ 14,162 $ (29,662 ) $ (1,844 ) $ (43,773 ) Add (deduct) the impact of: Provision for income taxes 4,688 6,937 8,431 16,373 Finance expenses 9,427 6,424 16,125 11,783 Amortization and depreciation 7,046 3,529 12,131 7,050 EBITDA (a) 35,323 (12,772 ) 34,843 (8,567 ) 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 — Share-based compensation (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 (h) 34 (7 ) 153 2,990 Restructuring costs and executive severance (i) - 467 - 467 Legal settlements (j) - 740 — 2,121 Other one-time items (k) 924 860 2,898 1,122 (Gain) loss on fair value of warrants and purchase option derivative asset (l) (47,345 ) 19,891 (53,058 ) 25,301 Indemnification asset release (m) 3,998 2,599 3,973 3,796 Unrealized and realized loss (gain) on investments (n) 234 (5,964 ) 234 (6,192 ) Unrealized and realized foreign exchange loss (o) (306 ) 3,055 50 5,838 Adjusted EBITDA $ 5,768 $ 23,209 $ 9,055 $ 44,783 For the Three Months Ended For the Six Months Ended Notes June 30, 2023 June 30, 2022 June 30, 2023 June 30, 2022 Net loss $ (13,476 ) $ 14,162 $ (36,245 ) $ (1,844 ) Loss from discontinued operations 621 2,697 4,212 4,953 Loss from continuing operations (12,855 ) 16,859 (32,033 ) 3,109 Add (deduct) the impact of: Provision for income taxes 6,448 4,688 19,112 8,431 Finance expenses 7,963 10,315 15,838 16,920 Amortization and depreciation 4,991 6,493 9,762 11,018 EBITDA from continuing operations (a) 6,547 38,355 12,679 39,478 Add (deduct) the impact of: Relief of fair value upon acquisition (b) — 549 — 2,355 Non-cash write downs of inventory (c) — 5,894 — 5,894 Vape recall (d) — 1,071 — 2,965 Share-based compensation (e) 1,981 4,463 3,694 7,819 Loss from revaluation of contingent consideration (f) 34 0 153 Other one-time items (g) 2,932 924 4,290 2,898 Employee Retention Credits Transfer Fee (h) — — 2,235 — Loss on lease termination and derecognition of ROU asset (i) — — 205 — Gain on fair value of warrants and purchase option derivative asset (j) (215 ) (47,345 ) (653 ) (53,058 ) Indemnification asset release (k) — 3,998 — 3,973 Impairment of property and equipment and loss on disposal of fixed assets (l) 10 929 345 929 Unrealized and realized loss on investments (m) 1,661 234 2,360 234 Unrealized and realized foreign exchange loss (n) (101 ) (315 ) (132 ) 41 Adjusted EBITDA from continuing operations $ 12,815 $ 8,791 $ 25,023 $ 13,681 TerrAscend calculates adjusted gross profit by adjusting gross profit for the one-time relief of fair value of inventory upon acquisition, non-cash write downs of inventory, vape recall, and other one time adjustments to gross profit as TerrAscend does not believe that these impacts are reflective of ongoing operations. The table below reconciles gross profit to adjusted gross profit for the three and six months ended June 30, 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 39 For the Three Months Ended For the Six Months Ended Notes June 30, 2023 June 30, 2022 June 30, 2023 June 30, 2022 Gross profit $ 36,226 $ 23,951 $ 70,126 $ 39,575 Add (deduct) the impact of: Relief of fair value upon acquisition (b) — 549 — 2,355 Non-cash write downs of inventory (c) — 5,894 — 5,894 Vape recall (d) — 1,071 — 2,965 Other one time adjustments to gross profit (g) — — 94 238 Adjusted gross profit $ 36,226 $ 31,465 $ 70,220 $ 51,027 The increase in net revenue at June 30, 2022 as compared to June 30, 2021 was due to an increase in retail revenue of $25,586 from $22,393 for the three months ended June 30, 2021 to $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 commencedmanufacturing facility during the three months ended December 31, 2022 and increased its ownership interest in Cookies Retail Canada Corp. to 95% of the issued and outstanding shares effective April 14, 2023;2022,2023, WDB Holding PA, Inc., a subsidiary of the Company, completed the paydown of $37,000 of its senior secured term loan in Pennsylvania.the acquisition of Gage (the "Gage Acquisition") in Michigan in March 2022. Retail dispensaries increased from thirteen at June 30, 2021 to twenty-six at June 30, 2022.factors that impact those items.The increase is partially offset by the decrease of $19,505 in wholesale$36,330 at June 30, 2021 to $16,825 for the three months ended June 30, 2022 which was mainly relatedsale of cannabis products, brands, and services to the operational reconfigurationUnited States and Canadian markets. Revenues consist of wholesale and retail sales in the Company's cultivation facilitymedical and legal adult use market across Canada and in Pennsylvania.several U.S. states where cannabis has been legalized for medical or adult use.SalessalesThe increase in costCost of sales forprimarily consists of expenses related to providing cannabis products and services to TerrAscend's customers, including personnel-related expenses, the three months ended June 30, 2022 as compareddepreciation of property and equipment, amortization of acquired intangible assets, and other overhead costs.the three months ended June 30, 2021 was driven mainly by the Gage Acquisition,finance, human resources, legal, and other administrative functions. Additionally G&A expense includes professional fees to third parties, as well as anmarketing expenses. In addition, G&A expense includes share-based compensation on options, restricted stock units and warrants. TerrAscend expects that G&A expense will 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, Marylandabsolute dollars as the Company transitions to its Hagerstown location.business grows.In addition, management wrote down its inventory by $7,422Amortization and $115depreciationthe three months ended June 30, 2022impairment annually and 2021, respectively. The inventory write-downswhenever there are events or changes 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, as well as inventory in Canadacircumstances that indicate that the Company deemed unsaleable. On February 4, 2022,carrying amount has been impaired. TerrAscend first performs a qualitative assessment. If based on the results of a qualitative assessment it has been determined that it is more likely than 500 vape products were recalled bynot that the Pennsylvania's Departmentfair value of Health, including severala reporting unit exceedsCompany's SKUs. reporting unit to its estimated fair value. If the carrying value exceeds the estimated fair value, an impairment is recorded.recall,seller if future events occur. The liability is revalued at the Company wrote off $1,071end of inventory during the three months ended June 30, 2022. The inventory write-downseach reporting period to determine its fair value. A gain or loss is recognized in the prior year period were related to inventory thatother (income) expense in the Company deemed unsaleable.GeneralConsolidated Statements of Operations and Administrative Expense (G&A)25The increase in G&A expenses was primarily a result of increased salaries and wages of $6,178, sales and marketing expense of $3,859, and office and general expense of $2,673, which is primarilyComprehensive Loss as a result of the Gage Acquisition in March 2022.revaluation.Amortization and Depreciation ExpenseThe increase in amortization and depreciation expense for the three months ended June 30, 2022 as compared to the three months ended 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.has beenconsists of the warrant liability acquired through its Gage Acquisition, a detachable warrant liability issued through the private placement (Note 13), and a conversion option related to the convertible debenture offering (Note 12). These warrants were recorded as a warrant liability and are remeasured to fair value at the end of each reporting unit using the Black-Scholes model. A gain or loss is recognized in the other (income) expense in the Consolidated Statements of Operations and Comprehensive Loss as a result of the revaluation.Black ScholesBlack-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, 20212022 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.$47,345.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.increasedecrease of $5,492 in finance expenseand other expenses for the three months ended June 30, 20222023 as compared to the three months ended June 30, 20212022 is primarily due to interest expense recognized on the loans acquiredindemnification of asset release as parta result of the Gage Acquisition, as well as a loss recognized on disposalexpiration of fixed assets of $981escrow agreement related to lights at the Pennsylvania cultivation facility which were discardedacquisition of Apothecarium during the three months ended June 30, 2022.increasedecrease of $238 in transaction and restructuringrestricting costs for the three months ended June 30, 20222023 as compared to the three months ended June 30, 2021 was2022 relates primarily due to work done for Sarbanes Oxley implementation during the three months ended June 30, 2022.Impairment of goodwill26Unrealized and realized foreign exchange (gain) lossimpairmentincrease of goodwill$214 in unrealized foreign exchange gain for the three 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 $nil.Impairment of intangible assetsThe impairment recorded during the three months ended June 30, 2021 relates to the write-off of intellectual property at the Company's Arise business.Unrealized and realized foreign exchange lossThe decrease in unrealized foreign exchange loss for the three months ended June 30, 20222023 as compared to the three months ended June 30, 20212022 is a result of the remeasurement of USDU.S. dollar denominated cash and other assets recorded in C$Canadian dollar functional currency at the Company’s Canadian operations.Unrealized and realized gain on investmentsThe 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.decreaseincrease in provision for income taxes for the three months ended June 30, 20222023 as compared to the three months ended June 30, 20212022 was due toprimarily driven by the decline in revenue and associated declineincrease in gross profit mainly related to the operational reconfigurationas a result of the Company's cultivation facilitygrowth in Pennsylvania.new jurisdictions.months endedMonths Ended June 30, 20222023 and June 30, 2021202220222023 and 2021.2022.2732The increase in net revenue at June 30, 2022 as comparedJune 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$141,522 during the six months ended June 30, 2022,2023 as well as the Gage Acquisition. Retail dispensaries increased from thirteen at June 30, 2021compared 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 todriven by growth in retail offset by a decline in wholesale. The growth in retail was driven by the Canada business, as well asconversion to adult use in New Jersey, the operational reconfigurationacquisition of Gage in March 2022, and the Company's cultivation facilityacquisition of AMMD in January 2023. The decline in wholesale was driven by market dynamics in Pennsylvania as well asand the aforementioned vape recall. As a result of the recall,decision the Company recorded sales returns of $1,040 during the six months ended June 30, 2022.made to discontinue bulk wholesale in Michigan, partially offset by an increase in New Jersey driven by adult use implementation.increasereduction of $1,574 in cost of sales for the six months ended June 30, 20222023 as compared to the six months ended June 30, 2021 was driven2022 is mainly bya result of impairments and write downs of inventory in Pennsylvania of $7,422 in 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. prior year.costG&A expense 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$3,857 for the six months ended June 30, 2022 and 2021, respectively. The inventory write-downs in the current year period were mainly due2023 as compared 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)The increase in G&A expenses2022 was primarily a result of increased salariesexpenses related to implementation of adult use in New Jersey in April 2022 and wagesthe acquisition of $7,815, sales and marketingGage in March 2022, partially offset by expense reductions the Company undertook during the second half of $4,464, and office and general expense of $2,384, which is primarily a result2022 across all areas of the Gage Acquisition.Company as part of its plan to streamline operations and drive positive cashflow.28increasedecrease of $485 in amortization and depreciation expense for the six months ended June 30, 20222023 as compared to the six months ended June 30, 20212022 is primarily due to the Gage Acquisition. The Company acquireda brand intangible assets including cultivation and processing licenses, as well as retail licenses, which areasset that was fully 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.during 2022.Revaluation of contingent considerationThe decrease in the revaluation of contingent consideration for the six months ended June 30, 2022 as compared to the six months ended June 30, 2021 is a result of a reduction in the liability as compared to June 30, 2021 due to payments for the earnout of Ilera of $29,668, and State Flower of $7,040 made subsequent to 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) lossGain on fair value of warrants and purchase option derivative assetliabilities have beenliability was remeasured to fair value at June 30, 2022 using the Black ScholesBlack-Scholes model. The Company recognized a gainloss during the six months ended June 30, 2022 as a result of the reduction of the Company's share price from December 31, 2021June 30, 2022 as compared to June 30, 2022, as well as from warrants exercised2022.2022. The combined impact resulted in a gain on fair value of warrants of $53,876.2023.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.increasedecrease of $2,060 in finance expenseand other expenses for the six months ended June 30, 20222023 as compared to the six months ended June 30, 20212022 is primarily due to interest expense recognized on the loans acquired as part of the Gage Acquisition.acquisition which closed on March 10, 2022.increasedecrease of $850 in transaction and restructuringrestricting costs for the sixthree months ended June 30, 20222023 as compared to the six months ended June 30, 2021 was2022 relates primarily due to the Gage Acquisition, as well as work done for Sarbanes Oxley implementation.Impairment of goodwill29The 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 $nil.Impairment of intangible assetsThe impairment recorded during the six months ended June 30, 2021 relates to the write-off of intellectual property at the Company's Arise business.which closed on March 10, 2022.20222023 as compared to the six months ended June 30, 20212022 is a result of the remeasurement of USDU.S. dollar denominated cash and other assets recorded in C$Canadian dollar functional currency at the Company’s Canadian operations.Unrealized and realized gain on investmentsThe 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.decreaseincrease in provision for the income taxes for the six months ended June 30, 20222023 as compared to the six months ended June 30, 20212022 was due toprimarily driven by the decline in revenue and associated declineincrease in gross profit mainly related to the operational reconfigurationas a result of the Company's cultivation facilitygrowth in Pennsylvania, as well as the vape recall by the Pennsylvania Department of Health.new jurisdictions.3034The CompanyTerrAscend 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.2022,2023, TerrAscend had cashan accumulated deficit of $653,623. During the three and six months ended June 30, 2023, TerrAscend incurred a net loss from continuing operations of $12,855 and $32,033, respectively. Additionally, as of June 30, 2023 the Company’s current liabilities exceed its current assets. Therefore, it is possible that the Company may need additional capital to continue to fund its operations.equivalentsposition, including: (i) identifying access to future capital required to meet the Company’s on-going obligations, (ii) improved cashflow growth from TerrAscend's consolidated operations, particularly in New Jersey and most recently Maryland with conversion to adult use sales, and (iii) various cost and efficiency improvements.$48,426, which is sufficientcapital have been through the issuance of equity securities or debt facilities, and TerrAscend has received aggregate net proceeds from such transactions totaling $654,000 as of June 30, 2023.the Company’s ongoing operations. Anyany additional future requirements will be funded through the following sources of capital:Cashcash from ongoing operations.Marketmarket 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.sale of real property.Exercise of options and warrants - the Company would receive funds from sale leaseback transactions.warrants fromwarrants.holders of such securitiesnext twelve months.event theynext twelve months. Additionally, TerrAscend makes monthly payments on financing obligations on six of its real estate properties with $14,691 payable, $1,944 of which is due in the next twelve months.exercised.reasonably likely to have, a current or future effect on TerrAscend's results of operations or financial condition, including and without limitation, such consideration as liquidity and capital resources.The Company’sits 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.future obligations.The Company has $280,136 in principal amountsloans payable at June 30, 2022. Of this amount, $68,955 are due within the next twelve months. The Company hasTerrAscend, entered into operating leases fora senior secured term loan with a syndicate of lenders in the amount of $120,000 ("Ilera Term Loan"). The term loan bears interest at 12.875% per annum and matures on December 17, 2024. TerrAscend has the ability to increase the facility by up to $30,000. WDB Holding PA's obligation under the Ilera Term Loan and related transaction documents are guaranteed by TerrAscend, TerrAscend USA, Inc., and certain premisessubsidiaries of WDB Holding PA, and offices for which it owes monthly leasesecured by TerrAscend USA Inc.'s equity interest in WDB Holding PA and substantially all of the assets of WDB Holding PA and the subsidiary guarantors party thereto. The loan can be refinanced at the option of the borrower after 18 months from the closing date subject to a premium payment due. Of the total proceeds received, $105,767 was used to satisfy the remaining Ilera earn-out payments.In addition,Company's undiscounted contingent consideration payable is $10,734 at June 30, 2022. The contingent consideration payable relatesIlera Term Loan was amended to provide WDB Holding PA with greater flexibility by resetting 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 revaluedminimum consolidated interest coverage ratio levels that must be satisfied at the end of each reporting period.measurement period and extending the date in which WDB Holding PA is required to deliver its budget for the fiscal year ending December 31, 2021. In addition, the no-call period was extended from 18 months to 30 months, subject to a premium payment. This modification was not considered extinguishment of debt under ASC 470 Debt.expectsis required to hold $2,500 on deposit in a restricted account. The loan carries an interest rate of prime plus 2.25% and matures in December 2024. The proceeds from the loan were used to pay down the Company's higher interest rate debt, thereby lowering the Company's overall interest expense.its cashis exercisable at any time following the five-year anniversary of the closing of the investment. The instrument is considered as a debt due to the economic characteristics and risks.hand and cash flows from operations, along with financing transactions, will be adequate to meet its capital requirements and operational needs for at leastJanuary 15, 2024. On June 28, 2023, the next 12 months.Company made a payment of $1,500.FlowsCash flows from(used in) / provided by operating activitiesused inprovided by operating activities for the six months ended June 30, 2023 as compared to June 30, 2022 is due primarily due to lower interest of $5,832, reduced taxes of $22,127, and an increase in loss from operationsaccounts payable and accrued liabilities and other payables of $11,929 due to $24,034 from a profittiming of $24,918those payments, offset by an increase in the prior year period, as well as changes in working capital itemsinventory of $16,081.$8,059.fromused in investing activities31The net cash used in investing activities for the six months ended June 30, 2023 primarily relates to the cash paid for the acquisition of three dispensaries in Maryland. Additionally, TerrAscend increased the investment in property and equipment by $5,426 during the six months ended June 30, 2023.TheIn comparison, the net cash used in investing activities for the six months ended June 30, 2022 primarily relates to investments in property and equipment of $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 netCash flows provided by financing activitiesused in investingprovided by financing activities for the six months ended June 30, 20212023 was primarily relatesdue to cash considerationinflow as a result of transfer with recourse of Employee Retention Credit of $12,677, net proceeds from the commercial loan with Stearns bank of $23,872, and net proceeds from private placements of $19,218, offset by loan principal paid for the acquisitions of KCR$40,359 and HMS totaling $42,736. Additionally, the Company had investments in property and equipmentdistributions to minority partners of $10,856 primarily related to the buildout of the New Jersey operations and expansions in Pennsylvania cultivation and $10,583 related to deposits paid for expansion of the cultivation premises in Pennsylvania.$3,415.Cash flows from financing activitiesNet cash provided by financing activities for the six months ended 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 six months ended June 30, 2021, 2,590,178 Common Share warrants were exercised for total proceeds of $6,777 and 699,009 stock options were exercised at $0.67-$6.93 (C$0.85-$8.52) per unit for total gross proceeds of $2,385. In addition, 1,900 preferred share warrants were exercised at $3,000 per unit for total gross proceeds of $3,759. The cash provided by financing activities was offset by payments of contingent consideration related to the acquisition of Ilera of $18,274.38the CompanyTerrAscend 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 CompanyTerrAscend believes that certain investors and analysts use these measuresmetrics to measure a company'scompany’s ability to meet other payment obligations or as a common measurement to value companies in the cannabis industry, and the CompanyTerrAscend calculates (i) Adjusted gross profit as gross profit from continuing operations adjusted for certain material non-cash items, and (ii) Adjusted EBITDA from continuing operations as EBITDA from continuing operations adjusted for certain material non-cash items and certain other adjustments which 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 Companythis definitionAdjusted EBITDA from continuing operations is a useful performance measure to assess the performance of the CompanyTerrAscend as it provides more meaningful ongoing operating results by excluding the effects of expenses that are not reflective of the Company'sTerrAscend’s underlying business performance and other one-time or non-recurring expenses.3220222023 and 2021.2022:20222023 and 2021.2022:(a)a)(b)b)the Company'sTerrAscend'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 CompanyTerrAscend 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)c)(d)d)Company'sTerrAscend's SKUs. As a result of the recall the CompanyTerrAscend recorded sales returns of $nil and $1,040 and write-downs of inventory of $1,071 and $1,925$854 for the three and six months ended June 30, 2022, respectively.March 31, 2022.(e)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)f)the Company’sTerrAscend’s contingent consideration liabilities.(i)Represents costs associated with executive severance and restructuring of business units.(j)Represents one-time legal settlement charges.(k)g)the Company’sTerrAscend’s acquisitions, such as expenses related to professional fees, consulting, legal, settlements, 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 preparationAct of becoming a US filer.2022 implementation. These fees are not indicative of the Company’sTerrAscend’s ongoing costs.33(l)h)USU.S. denominated preferred share warrants, as well as the revaluation of the fair value of the purchase option derivative asset.(m)k)(n)l)loss (gain)gain on fair value changes on strategic investments.(o)n)(p)Represents accelerated depreciation taken in Maryland due to the move of the cultivation facility from Frederick and Hagerstown.
The decreaseincrease in Adjusted EBITDA from continuing operations for the three and six months ended June 30, 20222023 compared to the three and six months ended June 30, 20212022 was primarily due to lower volume and resulting gross margin compressionimplementation of adult use sales in Pennsylvania related to the Company's operational reconfiguration of its cultivation facility in Pennsylvania.New Jersey.
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, 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, Buchanana, Camden, Edmore, and 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 requirerequires 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
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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," includedother than the significant judgment relating to variable interest entities.
Variable interest entities
Management has applied significant judgment on the decision to consolidate its variable interest entity (“VIE”), TerrAscend Growth Corp.. The Company consolidates VIE when it has a variable interest that provide it with (1) the power to direct the activities of a VIE that most significantly impact the VIE’s economic performance (power) and (2) the obligation to absorb losses of the VIE that potentially could be significant to the VIE or the right to receive benefits from the VIE that potentially could be significant to the VIE (benefits). Key areas of judgment related to the assessment of the purpose and design of the VIE, the protection agreement in place, the Annual Report on Form 10-K forboard structure of TerrAscend Growth Corp., and substantive kick-out rights of the year ended December 31, 2021, which was filed on March 17, 2022.Class A shareholders.
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,its initial public offering, (b) in which we have total annual gross revenue of $1.07$1.235 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 stockCommon Stock that is held by non-affiliates exceeds $700.0 million$700,000 as of the prior June 30th;30th; and (ii) the date on which the Company has issued more than $1.0 billion$1,000,000 in non-convertible debt during the prior three-year period.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
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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, 2021.2022.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
The Company'sOur management, with the participation of its Presidentour Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company'sour disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act), as of the end of the period covered by this Quarterly Report on Form 10-Q. Based upon that evaluation, the Presidentour Chief Executive Officer and Chief Financial Officer concluded that, as of June 30, 2022 the Company's2023 our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed by the Companyus in the reports that it fileswe file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms and to provide reasonable assurance that such information is accumulated and communicated to the Company'sour management, including its Presidentour Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
There were no changes in the Company'sour internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the six monthsquarter ended June 30, 2022,2023, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Limitations on Effectiveness of Controls and Procedures
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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
In the ordinary course of business, TerrAscend is from time to time involved in various legal proceedings,a number of lawsuits incidental to its business, including litigation related to intellectual property, product liability, employment, and commercial matters. TerrAscendAlthough it is difficult to predict the ultimate outcome of these cases, management believes that none of the litigation in which it is currently involved in individually or in the aggregate, isany ultimate liability would not have a material to the Company’sadverse effect on TerrAscend's consolidated financial conditionbalance sheets or results of operations. ThereAt June 30, 2023, there were no pending lawsuits that could reasonably be expected to have been noa material changes toeffect on the Company's legal proceedings as previously disclosed in its Quarterly Report on Form 10-Q for the period ended March 31, 2022.results of TerrAscend's consolidated financial statements.
Item 1A. Risk Factors.
Investing in the Company'sour common stockshares involves a high degree of risk. For a detailed discussion of the risks that affect the Company's business, please referIn addition to the section titledother information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the factors described in Part I, Item 1.A. “Risk Factors” in 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 the Company's risk factors as previously disclosed in itsour Annual Report on Form 10-K forReport. We may disclose changes to risk factors or disclose additional factors from time to time in our future filings with the year ended December 31, 2021.SEC. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may impair our business operations.
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 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.None.
Recent Sales of Unregistered
Item 3. Defaults Upon Senior 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.
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
None.
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Item 6. Exhibits.
Exhibit |
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| Description of Exhibit Incorporated Herein by Reference | Filed | |||
Number |
| Description |
| Form | File No. | Exhibit | Filing Date | Herewith |
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2.1* |
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| 10-12G | 000-56363 | 2.1 | 11/2/2021 |
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2.2* |
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| 10-12G | 000-56363 | 2.2 | 11/2/2021 |
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2.3* |
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| 10-12G | 000-56363 | 2.3 | 11/2/2021 |
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2.4* |
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| 10-12G | 000-56363 | 2.4 | 11/2/2021 |
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2.5* |
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| 10-12G | 000-56363 | 2.5 | 11/2/2021 |
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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 |
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2.7* |
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| 10-12G | 000-56363 | 2.7 | 11/2/2021 |
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2.8* |
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| 10-12G/A | 000-56363 | 2.8 | 12/22/2021 |
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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 |
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3.1 |
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| 10-12G | 000-56363 | 3.1 | 11/2/2021 |
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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 |
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Exhibit | Description of Exhibit Incorporated Herein by Reference | Filed | ||||||
Number | Description | Form | File No. | Exhibit | Filing Date | Herewith | ||
3.1 | 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 |
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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 |
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3.4 |
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| 10-12G | 000-56363 | 3.4 | 11/2/2021 |
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10.1 |
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| 8-K | 000-56363 | 10.1 | 3/14/2022 |
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10.2 |
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| 8-K | 000-56363 | 10.2 | 3/14/2022 |
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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 |
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10.4 |
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| 10-K | 000-56363 | 10.3 | 3/17/2022 |
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110.5 |
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| 10-K | 000-56363 | 10.21 | 3/17/2022 |
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10.6* |
| Employment Agreement, dated May 23, 2022, by and between TerrAscend Corp. and Lynn Gefen |
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10.7 |
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31.1* |
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31.2* |
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32.1* |
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32.2* |
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101.INS |
| Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document. |
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101.SCH |
| Inline XBRL Taxonomy Extension Schema Document |
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101.CAL |
| Inline XBRL Taxonomy Extension Calculation Linkbase Document |
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101.DEF |
| Inline XBRL Taxonomy Extension Definition Linkbase Document |
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101.LAB |
| Inline XBRL Taxonomy Extension Label Linkbase Document |
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3.4 | 10-12G | 000-56363 | 3.3 | 11/2/2021 | ||||
4.1 | 8-K | 000-56363 | 4.1 | 6/29/2023 | ||||
10.1# | 8-K/A | 000-56363 | 10.1 | 4/26/2023 | ||||
10.2# | 8-K/A | 000-56363 | 10.2 | 4/26/2023 | ||||
10.3 | 8-K | 000-56363 | 10.1 | 6/29/2023 | ||||
10.4 | Form of Subscription Agreement for Equity Offering with Registered Broker-Dealer. | 8-K | 000-56363 | 10.2 | 6/29/2023 | |||
10.5 | 8-K | 000-56363 | 10.3 | 6/29/2023 | ||||
10.6 | 8-K | 000-56363 | 10.4 | 6/29/2023 | ||||
10.7 | X | |||||||
10.8 | X | |||||||
10.9 | X | |||||||
10.10 | X | |||||||
10.11 | X | |||||||
31.1 | X | |||||||
31.2 | X |
3743
32.1* | X | |||||||
32.2* | X | |||||||
101.INS | Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document. | X | ||||||
101.SCH | Inline XBRL Taxonomy Extension Schema Document | X | ||||||
101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | X | ||||||
101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | X | ||||||
101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | X | ||||||
101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | X | ||||||
104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) | X |
* This certification accompanies the Form 10-Q to which it relates, is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by reference into any filing of TerrAscend Corp. under the Securities Exchange Act of 1934, as amended (whether made before or after the date of the Form 10-Q), irrespective of any general incorporation language contained in such filing.
# Certain confidential information has been excluded fromportions of this exhibit have been omitted because it isthey are both (i) not material and (ii) would be competitively harmful if publicly disclosed.the type of information the Company treats as private or confidential.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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Date: August | By: | /s/ Ziad Ghanem | |
Ziad Ghanem | |||
President and Chief (Principal Executive Officer) |
Date: August 10, 2023 | By: | /s/ Keith Stauffer | |
Keith Stauffer | |||
Chief Financial Officer (Principal Financial Officer) |
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