TSNDF 10-K & 10-Q changes, risk factors and insider trading

The Company has taken the position that it does not owe taxes attributable to the application of Section 280E of the Code, including amending its U.S. federal income tax returns related to 2020,tax 2021,years 2021 and 2022 based on legal interpretations that challenge its tax liability under Section 280E of the Code. Because the Company’s tax positions could be (and, as discussed below, has been) challenged by the IRS and other taxing authorities and the Company may not be wholly successful in defending its tax positions, the Company records reserves for unrecognized tax benefits based on its assessment of the probability of successfully sustaining its tax filing positions. Management exercises significant judgment when assessing the probability of successfully sustaining the Company’s tax filing positions, and in determining whether a contingent tax liability should be recorded and, if so, estimating the amount. During the yearyears ended December 31, 2024,2024 the Company received refunds related primarily to the Company's amended U.S. federal income tax return for 2020. During the year endedand December 31, 2024,2025, certain of the Company’s amended and originally filed federal income tax returns were selected for routine examinations by the IRS.IRS, which is still in process.

If cannabis is moved to Schedule III from Schedule I under the Controlled Substances Act, it could end the effect of Section 280E of the Code on some or all of the Company’s operations. However, any such change from Schedule I to Schedule III is beyond the control of the Company and its timing, occurrence and potential impact cannot be predicted. In addition, legislation has been introduced in the U.S. Congress that would make Section 280E of the Code applicable to any trade or business involved in cannabis, even if cannabis is rescheduled to Schedule III under the Controlled Substances Act. It is not clear whether these bills have a high likelihood of passage.

Cannabis remains illegal under U.S. federal law, and enforcement of cannabis laws could change. The Company may be subject to action by the U.S. federal government due to its involvement with cannabis in the United States, and such action could materially adversely affect the Company’s business.States.

While some states in the United States. have legalized the use and sale of cannabis in some form, it remains illegal under U.S. federal law. On January 4, 2018, then-U.S. Attorney General Jeff Sessions issued a memorandum to U.S. Attorneys which rescinded previous guidance from the DOJ specific to cannabis enforcement in the United States, including the Cole Memorandum, which stated that the DOJ would not prioritize the prosecution of cannabis-related violations of U.S. federal law in jurisdictions that had enacted laws legalizing medical cannabis in some form and had implemented strong and effective regulatory and enforcement systems. With the Cole Memorandum rescinded, U.S. federal prosecutors have greater discretion in determining whether to prosecute medical cannabis-related violations of U.S. federal law, though there was never such a policy statement in relation to United States and its territories with adult-use cannabis programs. ThereOn canDecember be18, no2025, assurancePresident asTrump signed an executive order (EO) entitled "Increasing Medical Marijuana and Cannabidiol Research," which directs the Attorney General to thetake positionnecessary steps to complete the Trumprulemaking administrationprocess orto anymove administrationmarijuana mayfrom takeSchedule onI cannabis,to Schedule III under the Controlled Substances Act (CSA). The order does not legalize marijuana for recreational use, and it remains a newfederally administrationcontrolled couldsubstance. decideThe toorder enforceis federalnot lawsself-executing againstand state-regulatedrequires cannabisa companies.formal administrative rulemaking process. Because TerrAscend engages in cannabis-related activities in the United States, an increase in federal enforcement efforts with respect to current U.S. federal laws applicable to cannabis could cause financial damage to the Company. Further, the Company is at risk of being prosecuted under U.S. federal law and having its assets seized.

Unlike in CanadaCanada, which has federal legislation uniformly governing the cultivation, distribution, sale and possession of cannabis under the Cannabis Act, investors are cautioned that in the United States, cannabis is largely regulated at the state level. Notwithstanding the permissive regulatory environment of cannabis at the state level, cannabis continues to be categorized as a controlled substance under the Controlled Substances Act andand, as such, is in violation of federal law in the United States. Further, there can be no assurance that state laws legalizing and regulating the sale and use of cannabis will not be repealed or overturned, or that local governmental authorities will not limit the applicability of state laws within their respective jurisdictions. It is also important to note thatAdditionally, local and city ordinances may strictly limit and/or restrict the retailing of cannabis in a manner that will make it extremely difficult or impossible to transact business in the cannabis industry.

As stated above, Congress has passed appropriations bills in each fiscal year since FY2015,2015, that prevents the federal government from using congressionally appropriated funds to enforce federal cannabis laws against regulated medical cannabis actors operating in compliance with state and local law. The continuing resolution contains, among other things, the RBA, which prevents the federal government from using congressionally appropriated funds to enforce federal cannabis laws against regulated medical cannabis actors operating in compliance with state medical cannabis laws. However, the appropriations protections only apply to medical cannabis operations and provide no protection against businesses operating in compliance with a state’s adult-use cannabis laws.

The Company’s business is subject to applicable anti-money laundering laws and regulations and, therefore, the Company has restricted access to capital markets, banking and other financial services, which may adversely affect the Company's business.services.

Since the use of cannabis is currently illegal under U.S. federal law, and in light of considerations related to money laundering and other cannabis related criminality in the U.S. banking industry, U.S. banks have been reluctant to accept or deposit funds from businesses involved with the cannabis industry. Consequently, businesses involved in the cannabis industry often have difficulty finding banks willing to accept its business. Likewise, cannabis businesses have limited access, if any, to credit card processing services. As a result, cannabis businesses in the United States are largely cash-based. This complicates the implementation of financial controls and increases security issues. Furthermore, the Company maintains domestic cash deposits in Federal Deposit Insurance Corporation (“FDIC”) insured banks that exceed the FDIC insurance limits. Bank failures, events involving limited liquidity, defaults, non-performance, or other adverse developments that affect financial institutions, or concerns or rumors about such events, may lead to liquidity constraints. There can be no assurance that ourthe Company's deposits in excess of the FDIC or other comparable insurance limits will be backstopped by the United States government, or that any bank or financial institution with which wethe doCompany does business will be able to obtain needed liquidity from other banks, government institutions, or by acquisition in the event of a failure or liquidity crisis.

While the Company is not able tocannot obtain financing in the United States from traditional banks or other certain federally regulated entities, the Company has been able to access equity financing through private markets in both the United States and Canada. Commercial banks, private equity firms, and venture capital firms have approached the cannabis industry cautiouslycautiously. to date. However, there areWhile increasing numbers of high-net-worth individuals and family offices that have made meaningful investments in companies and businesses similar to the Company.Company, Therethere is neither a broad nor deep pool of institutional capital that is available to cannabis license holders and license applicants. There can be no assurance that additional financing, if raised privately, will be available to the Company when needed or on terms which are acceptable to the Company. The Companyʼs inability to raise financing or limitations on such financings to fund its operations, capital expenditures or acquisitions could limit its growth and may have a material adverse effect upon future profitability.

Under the U.S. federal law, financial transactions in the United States involving proceeds generated by cannabis-related conduct can form the basis for prosecution. The FinCEN division of the U.S. Department of Treasury has provided guidance for how financial institutions can provide services to the cannabis-related businesses consistent with the obligations under the Bank Secrecy Act.

Previously, the DOJ directed its federal prosecutors to consider the federal enforcement priorities enumerated in the Cole Memorandum when determining whether to charge institutions or individuals with any of the financial crimes described above based upon cannabis-related activity. In January 2018, the DOJ revoked the Cole Memorandum and related memorandum. While the impact remains unclear, the revocation has created uncertainty. For instance, federal prosecutors may increase enforcement activities against institutions or individuals who are engaged in financial transactions related to cannabis activities, or there may be a negative impact to the continuation of financial services in the United States with regard to cannabis-related activities. Consequently, businesses involved in the regulated cannabis industry may experience difficulties establishing banking relationships, and such difficulties may increase over time. If the Company were to experience any inability to access financial services in the United States, or have its existing financial services impacted, including its current bank accounts, this would have a direct impact on the ability for the Company to operate its businesses. This impact would increase the Companyʼs operating costs, and pose additional operational, logistical, and security challenges that could impede its inability to implement its business plans.

The U.S. federal prohibitions on the sale of cannabis may result in the Company and its partners being restricted from accessing the U.S. banking system and they may be unable to deposit funds in federally insured and licensed banking institutions. Banking restrictions could be imposed due to the Companyʼs banking institutions not accepting payments and deposits. The Company is at risk that any bank accounts it has could be closed at any time and result in increased costs for the Company. The Companyʼs activities in the United States, and any proceeds thereof, may be considered proceeds of crime due to the fact that cannabis remains federally illegal in the United States. This may restrict the ability of the Company to declare or pay dividends, effect other distributions or subsequently repatriate such funds back to Canada. Furthermore, while the Company has no current intention to declare or pay dividends on the Common Shares inor make other distributions for the foreseeable future, the Company may decide or be required to suspend declaring or paying dividends or making other distributions without advance notice and for an indefinite period of time. The guidance provided in the FinCEN Memorandum as described above may change depending on the position of the U.S. government administration at any given time and is subject to revision or retraction in the future, which may restrict the Companyʼs access to banking services.

The Company’s business relies heavily on its ability to obtain and maintain required licenses,licenses and failure to do so may adversely affect its business.permits.

The Company and its subsidiaries, as applicable, will apply for, as the need arises, all necessary licenses and permits for the activities it expects to conduct in the future. However, the ability of the Company or its subsidiaries to obtain, maintain or renew any such licenses and permits in a timely manner, on acceptable terms or at all is subject to changes in regulations and policies, and at the discretion of the applicable authorities or other governmental agencies in each jurisdictions.

In certain jurisdictions, the cannabis laws and regulations limit, not only the number of cannabis licenses issued, but also the type or number of cannabis licenses that onea single company may own. TheAs a result, the Company believes that, where such restrictions apply, it may stillbe capturerestricted significantfrom share of revenueparticipating in thecertain marketcannabis throughbusinesses wholesalein sales,specific exclusivemarkets marketingas relations,a provision of management or support services, franchising and similar arrangement with other operators. Nevertheless, limitations on the acquisitionresult of ownership or control of additionalother licensescannabis withinlicenses, certain states or enforcement by regulators in certain states against such services arrangementswhich may limit the Companyʼs ability to grow organically or increase its market share in such states. As an example, certain markets may limit the size of a company's cultivation space, limit the number of dispensaries a single-company may own, or may obligate a company to offer certain products, like medical cannabis, to consumers.

Compliance with regulations regarding cannabis is difficult, because the regulation of cannabis is uncertain and frequently changes.changes, particularly during the early phases of the cannabis industry being introduced into a particular market. The Company'sCompany failuremay fail to comply with applicable laws regarding cannabis may adversely affect the Company's business.cannabis.

Achievement of the Companyʼs business objectives is contingent, in part, upon compliance with regulatory requirements enacted by governmental authorities and obtaining all regulatory approvals, where necessary, for the production and sale of its products. The Company cannot predict the impact of the compliance regime that the applicable regulatory bodies in the United States and Canada are implementing that may affect the business of the Company.Company, particularly during the early phases of the cannabis industry being introduced into a particular market, and changes could require the Company to incur substantial costs associated with compliance or alter its business plan. Similarly, the Company cannot predict the time required to secure all appropriate regulatory approvals for its products, or the extent of testing and documentation that may be required by governmental authorities. The impact of governmental compliance regimes, any delays in obtaining, or failure to obtain regulatory approvals may significantly delay or impact the development of markets, products and sales initiatives and could have a material adverse effect on the business, results of operations and financial condition of the Company.

The Companyʼs continued compliance with regulatory requirements enacted by government authorities and its ability to obtain all required regulatory approvals, for the sale of its products, including maintaining and renewing all applicable licenses, is crucial to the successful execution of the Companyʼs strategies. The cannabis industry is an emerging industry in the United States, and the Company cannot forecast the impact of each compliance regime to which they will be subject. Similarly, the Company cannot predict its ability to secure all appropriate regulatory approvals for any of its products, or the extent of testing or related documentation that may be required by governmental authorities. Delays in obtaining, or failure to obtain, regulatory approvals may significantly delay or impact the development of markets, products and sales initiatives and could have adverse effect on the business, financial condition, and operating results of the Company. Without limiting the foregoing, the Companyʼs failure to comply with the requirements of any underlying licenses or any failure to maintain any underlying licenses would have a material adverse impact on its business, financial condition, and operating results. It is uncertain whether any required licenses for the operation of the Companyʼs business will be extended or renewed in a timely manner, if at all, or that if they are extended or renewed, the licenses will be extended or renewed on the same or similar terms.

The CompanyCompany's is subjectfailure to thecomply ruleswith andTSX policiesrequirements could result in a delisting of the TSX.Common Shares.

The Common Shares are currently listed on the TSX, and accordingly, so long as the Company chooses to continue to be listed on such stock exchange, it must comply with the TSX requirements or guidelines when conducting business, especially when pursuing opportunities in the United States. On October 16, 2017, the TSX provided clarity regarding the application of Sections 306 (Minimum Listing Requirements) and 325 (Management) and Part VII (Halting of Trading, Suspension and Delisting of Securities) of the TSX Company Manual (collectively, the "TSX Requirements") to TSX-listed issuers with business activities in the cannabis sector. In TSX Staff Notice 2017-0009, the TSX notesnoted that issuers with ongoing business activities that violate U.S. federal law regarding cannabis are not in compliance with the TSX Requirements. The TSX reminded issuers that, among other things, shouldif the TSX findfinds that a listed issuer is engaging in activities contrary to the TSX Requirements, the TSX has the discretion to initiate a delisting review. Although the Company believes that it currently complies with the TSX Requirements there is a risk thatRequirements, the Company’s interpretation may differ from the TSX and failure to comply with the TSX Requirements could result in a delisting of the Common Shares from the TSX or the denial of an application for certain approvals, such as to have additional securities listed on the TSX, which could have a material adverse effect on the trading price of the Common Shares and could have a material adverse effect on the Company’s business, financial condition, results of operations and growth prospects.Shares.

There is a substantial risk of regulatory or political change with respect to cannabis, which could have a material adverse effect on the Company and its business.cannabis.

In the United States, the operations of TerrAscend and its subsidiaries are subject to a variety of laws, including, among other things, state and local regulations and guidelines relating to the cultivation, manufacture, management, transportation, distribution, sale, storage and disposal of cannabis. Changes to such laws, regulations and guidelines due to matters beyond the control of the Company may cause adverse effects to the Company’s business, financial condition and results of operations. Local, state and federal laws and regulations governing cannabis for medicinal and adult-use purposes are broad in control and are subject to evolving interpretations, which could require the Company to incur substantial costs associated with bringing the Companyʼs operations into compliance. In addition, violations of these laws, or allegations of such violations, could disrupt the Companyʼs operations and result in a material adverse effect on its financial performance. It is beyond the Companyʼs scope to predict the nature of any future change to the existing laws, regulations, policies, interpretations or applications, nor can the Company determine what effect such changes, when and if promulgated, could have on the Companyʼs business.

Furthermore, should the United States federal government legalize cannabis, it is possible that the FDA would seek to regulate it under the Uniform State Food, Drug and Cosmetic Act. Additionally, the FDA may issue rules and regulations, including good manufacturing practices related to the growth, cultivation, harvesting and processing of medical and adult-use cannabis. Clinical trials may be needed to verify efficacy and safety of medical cannabis products. It is also possible that the FDA would require that facilities where cannabis is grown or manufactured register with the agency and comply with certain federally prescribed regulations. In the event that some or all of these regulations are imposed, the impact on the cannabis industry is uncertain and could include the imposition of new costs, requirements, and prohibitions. If the Company is unable to comply with the regulations or registration as prescribed by the FDA, it may have an adverse effect on our business, operating results, and financial condition.

The Company may encounter increasingly strict environmental health and safety regulations in connection with its operations, which may harm the Company’s business.operations.

The Company faces an inherent risk of product liability claims and other consumer protection claims as a manufacturer, processor and producer of products that are meant to be ingested by people. Addressing such claims could cause the Company to incur substantial expenses and have a material adverse effect on its business.

In Canada, the Personal Information Protection and Electronics Documents Act (Canada) (“PIPEDA”) and comparablesubstantially similar legislation at the provincial level, governs the treatment of privatepersonal information held by a corporation. The Office of the Privacy Commissioner of Canada has stated that it considers the personal information of cannabis users to be considered sensitive. Canadian privacy jurisprudence regarding the obligations that private sector organizations have to individual data subjects is constantly evolving. Privacy laws in Canada are also changingevolving at both the legislative level.and Onregulatory Novemberlevels, 17,including 2020, the Canadian Federal Government introduced Bill C-11, An Act to enact the Consumer Privacy Protection Actproposed and theenacted Personalreforms Informationthat would impose enhanced obligations and Datarestrictions Protection Tribunal and to make consequential amendments to other Acts, for consideration in the House of Commons. Should Bill C-11 come into force, allon private organizations that collect, use, and disclose personal informationinformation. willThese becomedevelopments subjectmay toinclude newexpanded obligationsindividual rights, heightened transparency and restrictions,consent including,requirements, withoutincreased limitation,regulatory in connection with obtaining consent, accessoversight, and controlmaterially overhigher personaladministrative information, deletion of personal information, data portability, de-identification of personal information, and transparency requirements. Themonetary penalties and enforcement measures available to Canadian regulators for non-compliance that are contemplated under Bill C-11 and Bill-64 are more significant than those that are available under current privacy and data protection legislation in Canada. For example, it is anticipated that the Canadian federal government will introduce reforms to PIPEDA sometime this year, which will be similar to those that were tabled by the previous Canadian federal government under Bill C-11.

In addition, with respect to consumer health information, there are a number of federal, statefederal and provincialstate laws protecting the confidentiality of certain patient health information, including patient records, and restricting the use and disclosure of that protected information. For example, the privacy rules under PIPEDA and other applicable privacy laws protect medical records and other personal health information by limiting their use and disclosure of health information to the minimum level reasonably necessary to accomplish the intended purpose, and may apply to its operations globally. In Canada, we may also be required to retain certain customer personal information for prescribed periods of time pursuant to the Cannabis Act.

The Companyʼs future investments, joint venturesinvestments and operations in the United States may become the subject of heightened scrutiny by regulators, stock exchanges and other authorities in Canada, including placing certain restrictions on the Company’s ability to operate or acquire other cannabis businesses in the United States. As a result, the Company may be subject to significant direct and indirect interaction with public officials. There can be no assurance that this heightened scrutiny will not in turn lead to the imposition of certain restrictions on the Companyʼs ability to invest in the United States or any other jurisdiction, in addition to those described herein.

The Company’s outstanding indebtedness may adversely affect the Company’s business, results of operations and financial condition. As of December 31, 2024,2025, the Company had approximately $204,545$244,807 in aggregative principal amount of totaldebts debtoutstanding, principal$217,682 amountsof outstanding.which is outstanding under the FG Loan (as defined below). See the section titled "Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources" of this Annual Report for more information regarding the Company's indebtedness. As a result of its indebtedness, a portion of the Company's cash flow will be required to pay interest and principal on its outstanding loans. The Company's indebtedness could have important consequences. For example, it could:

The Company expects to use cash flow from operations and additional outside financings to meet its current and future financial obligations, including funding its operations, debt service and capital expenditures. The Company’s ability to make these payments depends on its future performance, which will be affected by financial, business, economic and other factors, many of which the Company cannot control. The Company’s business may not generate sufficient cash flow from operations in the future, which could result in the Company being unable to repay indebtedness, or to fund other liquidity needs. If the Company does not generate sufficient cash from operations, it may be forced to reduce or delay its business activities and capital expenditures, sell assets, obtain additional debt or equity capital or restructure or refinance all or a portion of its debt on or before maturity. The Company cannot make any assurances that it will be able to accomplish any of these alternatives on terms acceptable to it, or at all. In addition, the terms of existing or future indebtedness may limit the Company’s ability to pursue any of these alternatives.

Furthermore, the instruments governing the Company’s indebtedness include obligations and covenants that limit the Company’s discretion with respect to certain business matters and require the Company to satisfy certain financial requirements. For example, the FG Loan (as defined below) includes covenants that limit the borrowers’ ability to, among, other things, (i) incur additional indebtedness or guarantee indebtedness; (ii) create liens; (iii) pay dividends; (iv) make investments; (v) enter into transactions with affiliates; and (vi) consolidate, merge, sell or otherwise dispose of all or substantially all of their respective assets. The Company may not receive consent from lenders to take certain actions such as divest assets or enter into material agreements. The Company can make no assurances that it will be able to comply with such obligations and covenants and any failure to comply could result in a default, which, if not amended, cured or waived, could permit acceleration of the indebtedness and the exercise of other remedies available to lenders. In such event, there can be no assurance that the Company would be able to obtain any amendment, cure, waiver or other relief on terms acceptable to the Company. If the Company is unable to obtain relief from an event, the relevant indebtedness may be accelerated and the related collateral may be foreclosed upon. In additionaddition, such circumstances may result in the cross-default or cross-acceleration of other debt, any of which would materially adversely affect the Company's business, results of operations, and financial condition.

The building and operation of the Companyʼs business, including its facilities, are capital intensive. The Company expects that significant additional capital may be needed in the future to continue its planned operations.operations, undertake capital expenditures, undertake acquisitions, or other business combination transactions. The Company expects to finance its cash needs through cash flow from ongoing operations and a combination of equity offerings, debt financings and other strategies. The Company cannot guarantee that future financing will be available in sufficient amounts or on terms acceptable to the Company, if at all. If the Company raises additional equity financing, its shareholders may experience significant dilution of their ownership interests, the terms of these securities may include liquidation or other preferences that could adversely affect the rights of a common shareholder, and the per-share value of the Common Shares could decline. If the Company engages in debt financing, it may be required to accept terms that restrict or limit the Company’s ability to take specific actions, such as incurring additional indebtedness, making capital expenditures or declaring dividends, and other restrictive covenants that could adversely impact the Company’s ability to conduct its business. In addition, weakness and volatility in the capital markets and the economy in general could limit the Company's access to the capital markets and increase its cost of borrowing.

The following discussion and analysis of the financial condition and results of operations of TerrAscend Corp., its subsidiaries, including TerrAscend Growth Corp. and its subsidiaries should be read in conjunction with the Company's audited consolidated financial statements as of December 31, 20242025 and December 31, 20232024 and for the years ended December 31, 2024,2025, December 31, 2023,2024, and December 31, 20222023 (the "Consolidated Financial Statements") appearing elsewhere in this Annual Report. Some of the information contained in this discussion and analysis or set forth elsewhere in this Annual Report, including information with respect to the Company's plans and strategy for its business, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth under "Risk Factors" appearing elsewhere in this Annual Report, the Company's actual results could differ materially from the results described in or implied by the forward-looking information contained in this Annual Report and in the following discussion and analysis.

Unless otherwise noted, dollar amounts in this Item 7 are in thousands of U.S. dollars.dollars, except per share information.

The Company is a leading North American cannabis company. The Company has vertically-integrated licensed operations in Pennsylvania, New Jersey, Michigan, Maryland and California. In addition, the Company has retail operations in Ohio and Ontario, Canada with a majority-owned dispensary in Toronto, Ontario, Canada. Notwithstanding the fact that various states in the U.S. have implemented medical marijuana laws or have otherwise legalized the use of cannabis, the use of cannabis remains illegal under U.S. federal law for any purpose, by way of the Controlled Substances Act.

TerrAscend NJ, a majority-owned operation with threefour dispensaries, and a cultivation/processing facility;

TerrAscend CA, a wholly-owned operation with four dispensaries, and a cultivation facility; and;

On August 20, 2024,2025, the Company's Board approved the Share Repurchase Program, which replaces the Company’s Original Program. The Share Repurchase Program (as defined below), pursuant to whichauthorizes the Company is authorized to repurchase up to 10 million10,000,000 Common Shares of the Company at any time, or from time to time, over a 12-month period commencing onfrom August 22, 20242025 and ending onuntil August 21, 2025.2026.

On July 19,15, 2024,2025, the Company madedrew a prepayment$3,105 of the Chicago AtlanticUncommitted Term Loan Facility (as defined below) of $1,500 at par..

The following discussion sets forth certain components of ourthe Company's Consolidated Statements of Comprehensive Income (Loss) as well as factors that impact those items.

General and administrative ("G&A") expenses consist primarily of personnel costs related to finance, human resources, legal, certain royalties, and other administrative functions. Additionally, G&A expenses include professional fees to third parties, as well as marketing expenses. Moreover, G&A expenses include share-based compensation on options, restricted share units and warrants. The Company expects that G&A expenses will increase in absolute dollars as the business grows.

TheDerivative Companyliabilities issuesconsist warrantsof convertible options, that contains embedded derivative features, that are remeasured to fair value at the end of each reporting period using the Black-Scholes Option Pricing Model (the "Black-Scholes Model"). A gain or loss is recognized as a result of the revaluation.

Unrealized and realized foreign exchange loss (gain) loss represents the loss recognized on the remeasurement of U.S. dollar ("USD") denominated cash and other assets recorded in the Canadian dollars ("CAD") functional currency at the Company's Canadian operations.

The Company 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 StatementStatements of Operations and Comprehensive Loss.

Loss (gain) on extinguishment of debt represents the Company's debt that was retired prior to its scheduled maturity at a different amount than the book value and the amount paid.

CostThe of$1,584 salesincrease wasin $156,717 or 51% ofretail revenue for the year ended December 31, 2024, remaining relatively flat2025 compared to $156,645 or 50% of revenue for the year ended December 31, 2023.2024, was primarily driven by acquisitive growth in Ohio.

The increasedecrease of $7,977, in cost of sales for the year ended December 31, 20232025 as compared to the year ended December 31, 20222024 iswas mainly due to increaseda decrease in sales asvolume. noted above. The reduction in costCost of sales as a percentage of revenue is drivendecreased by increased1% yieldsdue into Newreduced Jersey,unit costs and improved utilizationcost in Maryland, lower costs in Pennsylvania as a result of scaling back the cultivation facility, and reduced discounting combined with improved verticalization in Michigan.absorption.

The decreaseincrease of $3,593$7,081 in general and administrativeG&A expenses for the year ended December 31, 2024 as compared to the year ended December 31, 2023 was primarily relateddriven toby aan badincrease debtin recoverysalaries ofand $4,188wages as well as an insuranceincrease recoveryin stock-based compensation due to a modification of $871.stock option terms extending the expiration period from five years to ten years.

During the year ended December 31, 2024,2025, the Company recognized impairment of $39,334 consistingcharges of $17,134 related to Michigan licenses and $22,200$2,606 related to the Gage (as defined below)wholesale brand name and retaillicense banner.in California. The impairment was primarily driven by declining wholesale revenue expectations in MichiganCalifornia as a result of increased competition.competition Asthat awas result,not reasonably foreseeable based on available data and trends at the Company no longer has any remaining intangible assets associated with its Michigan reporting unit as of December 31, 2024.time.

There waswere no impairment of goodwillintangible assets recognized during the year ended December 3131, ,2024.2024.

During the year ended December 31, 2023, it was determined during the annual impairment analysis that it was more likely than not that the California reporting unit's fair value was less than its carrying value. As a result of this quantitative test, the Company recorded impairment of goodwill of $4,690 related to the State Flower Acquisition,$4,690, reducing the carrying value of goodwill within the California reporting unit,unit to $nil.

During the year ended December 31, 2024, the Company recognized impairment of $8,511.$2,438 The increase of $6,432 for the year ended December 31, 2024, compareddue to the year ended December 31, 2023 was primarily driven by the impairmentclosure of certainone ownedof Michigan andits California properties.retail stores.

This Management’s Discussion and Analysis (“MD&A”) of the financial condition and results of operations of the Company is for the periodthree and six months ended MarchJune 31,30, 2026 and 2025 and the accompanying notes for each respective period.

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

Amortization and depreciation includes the amortization of intangible assets.assets and the depreciation of property and equipment, in each case to the extent not included in the cost of sales. Amortization is calculated on a straight-line basis over the following terms:

Derivative liabilities consist of convertible options, that containscontain embedded derivative features, thatwhich are remeasured to fair value at the end of each reporting period using the Black-Scholes Option Pricing Model (the "Black-Scholes Model"). A gain or loss is recognized as a result of the revaluation.

Results of Operations - Three Months Ended MarchJune 31,30, 2026 and MarchJune 31,30, 2025

The following tables represent the Company’s results of operations for the three months ended MarchJune 31,30, 2026 and 2025.

Revenue increased by $1,236,$2,113, from $64,303$65,006 for the three months ended MarchJune 31,30, 2025 to $65,539$67,119 for the three months ended MarchJune 31,30, 2026. The increase was primarily attributable to Pennsylvania, where revenue increased $1,627 due to a $5,575 increase inhigher retail revenue,sales driven by increased customer foot traffic. In both New Jersey and Maryland, retail sales were substantially offset by awholesale $4,339sales, decreaseresulting in wholesalerelatively revenue.consistent revenue compared to the prior-year period. The remaining increase was attributable to all other segments.

The increase of $348$1,872 in general and administrative expense for the three months ended MarchJune 31,30, 2026 as compared to the three months ended MarchJune 31,30, 2025, was primarily due to operational expenses related to theCompany's Ratioacquisition of Union Chill Cannabis Company LLC ("Union Chill") and Unionan acquisitions, slightly offset by a reductionincrease in share-basedthe compensation.provision for expected credit losses.

The increase of $992 in financeFinance and other expenses for the three months ended MarchJune 31,30, 2026 as compared to the three months ended MarchJune 31,30, 2025, was primarilyrelatively due to an increase of interest and accretion related the FG Loan.flat.

The gainloss on derivative liabilities of $1,403$1,171 for the three months ended MarchJune 31,30, 2026 compared with a gain of $97$279 for the three months ended MarchJune 31,30, 2025, was primarily driven by changes in the Company’sCommon stockShare price remaining belowduring the exerciserespective priceperiods, forwhich resulted in changes in the Privatefair Placementvalue Convertible Debentures asof the conversionCompany's optionoutstanding approachesderivative expiration this year.liabilities.

LossIncome from discontinued operations for the three months ended MarchJune 31,30, 2026 primarily relatesreflects tothe disposalgain andrecognized exitin activities, including costs associatedconnection with the dispositiondeconsolidation of certainthe assetsMichigan andReceivership liabilities.Entities following the appointment of the Receiver. In contrast, the loss from discontinued operations for the three months ended MarchJune 31,30, 2025 primarily reflects impairment charges and operating losses incurred prior to the classification of the Company's Michigan operations as discontinued operations.

The calculation of working capital provides additional information and is not defined under GAAP. The Company defines working capital as current assets less current liabilities. Management believes that working capital provides useful information to investors because it reflects the Company’s short-term financial health and its ability to meet current obligations with current assets. This measure should not be considered in isolation or as a substitute for any standardized measure under GAAP.

Management assesses the Company's liquidity in terms of its ability to generate cash to fund its operating, investing, and financing activities. The Company remains in a strong financial position, with resources available for reinvesting in existing businesses, conducting acquisitions, and managing its capital structure on a short and long-term basis. The Company believes its existing cash balances will be sufficient to meet its anticipated cash requirements from the date of this AnnualQuarterly Report on Form 10-Q through at least the next 12 months Since its inception, the Company's primary sources of capital have been through the issuance of equity securities or debt facilities, and the Company has received aggregate net proceeds from such transactions totaling $861,332$880,299 as of MarchJune 31,30, 2026.

As of MarchJune 31,30, 2026, the Company had $219,950$209,682 in principal outstanding under its loans payable, excluding any prepayment or exit fees, of which $916$6,570 is due in the next twelve months. The Company also had $19,355$31,085 in principal outstanding under its convertible debt, none of which $10,355 is due within the next twelve months. In addition, accrued interest in the aggregate amount of $2,406 related to the Company's convertible debt is due in the next twelve months.

As of March 31, 2026, the Company had accounts payable and accrued liabilities of $39,979 and corporate income taxes payable of $4,075 The Company intends to meet its capital commitments through any or all of the sources of capital noted above. The Company's objective with respect to its capital management is to ensure it has sufficient cash resources to maintain its ongoing operations and finance future obligations.

The Company is subject to a financial covenant as a result of its loan payable with its primary lender. The Company was in compliance with its debt covenant as of MarchJune 31,30, 2026. In the event that, in future periods, the Company’s financial results are below levels required to maintain compliance with itits covenant, the Company will assess and undertake appropriate corrective initiatives with a view to allowing it to continue to comply with its covenant. Other than the covenant related to loans payable, the Company is not subject to externally imposed capital requirements.

On August 1, 2024, the Issuer and TerrAscend USA, Inc., as guarantors, and eachcertain subsidiaries and affiliates of WDBthe Holding CA, Inc., WDB Holding PA, Inc., Moose Curve Holdings, LLC, Hempaid, LLC and pursuant to a joinder agreement dated September 30, 2024, WDB Holding MI, Inc., including certain of each of their respective subsidiaries,Company, as borrowers (collectively, the “Borrowers”), and FG Agency Lending LLC, as the Administrativeadministrative Agentagent for the lenders (the "Agent"), entered into a Loan Agreement (the “Initial FG Loan Agreement”) for a four-year, $140,000 senior-secured term loan.

On July 8, 2025, TerrAscend,additional TerrAscend USA, Inc., TerrAscend NJ LLC, TER Holding MD, Inc., and WDB Holding MD, Inc., including certain of each of their respective subsidiaries, and other borrowers, all of which are entities that are consolidated in the financial statementssubsidiaries of the Company (the "Incremental Amendment Borrowers"), became parties to the Initial FG Loan Agreement as borrowers pursuant to a joinder agreement (the "FG Loan Amendment") and, together with the Initial FG Loan Agreement and such other amendments to the Initial FG Loan Agreement, the “FG Loan Agreement”), which provided for a $79,000 upsize to the existingInitial FG Loan.Loan Agreement, and following which TerrAscend USA, Inc. no longer served as guarantor. Funds fromreceived pursuant to the FG Loan and FG Loan AmendmentAgreement were used to retire certain Company indebtedness, in addition to being used for future growth initiatives.

The FG Loan bears interest at 12.75% per annum with a maturity date of August 1, 2028 (the "FG Loan Maturity Date"). The FG Loan is guaranteed by the Issuer and TerrAscend USA, Inc. and is secured by substantially all of the assets of the Borrowers and the Incremental Amendment Borrowers. Depending on the timing of repayment, an exit fee of between 2.0% and 4.0% of the FG Loan (the "Exit Fee") will be due upon either the prepayment, in part or in full, of the FG Loan or the FG Loan Maturity Date.

The FG Loan includes negative covenants that are usual for facilities and transactions of this type. The FG LoanAgreement contains covenants that limit the Borrowers’ and the Incremental Amendment Borrowers' ability to, among other things: (i) incur additional indebtedness or guarantee indebtedness; (ii) create liens; (iii) pay dividends; (iv) make investments; (v) enter into transactions with affiliates; and (vi) consolidate, merge, sell or otherwise dispose of all or substantially all of their respective assets. The FG Loan Agreement also includes a minimum liquidity covenant with respect to the Borrowers and the Incremental Amendment Borrowers. If an event of default occurs and is not cured within an applicable grace period or waived, the principal amount, any accrued interest and any other obligations outstanding under the FG Loan Agreement may become immediately due and payable.

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

InDuring the firstsix quartermonths ofended June 30, 2026, the Company made aggregate prepayments in aggregate of $5,500$15,590 on the FG Loan, including aapplicable 3% prepayment fee.fees.

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