Financial Instruments and Risk Management

3 Months Ended

Mar. 31, 2025

Financial Instruments and Risk Management

21.

Financial instruments and risk management

Assets and liabilities measured at fair value

Financial instruments recorded at fair value are estimated by applying a fair value hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement. The hierarchy is summarized as follows:

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Level 1 - quoted prices (unadjusted) in active markets for identical assets and liabilities

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

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

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


	At March 31, 2025							At December 31, 2024
		Level 1		Level 2		Level 3			Level 1		Level 2		Level 3
Assets
Cash and cash equivalents		$	29,248		—		—		$	26,381		—		—
Restricted cash			110		—		—			606		—		—
Total Assets		$	29,358		—		—		$	26,987		—	$	—
Liabilities
Contingent consideration payable			—		3,288		—			—		3,293		—
Detachable warrants			—		353		—			—		451		—
Bifurcated conversion options			—		93		—			—		92		—
Total Liabilities		$	—	$	3,734	$	—		$	—	$	3,836	$	—

There were no transfers between the levels of fair value hierarchy during the three months ended March 31, 2025.

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

Level 1

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

Level 2

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

Detachable Warrants

The detachable warrants have been measured at fair value as of March 31, 2025. Key inputs and assumptions used in the Black-Scholes Model were as follows:


	March 31, 2025			December 31, 2024
Common Stock Price of TerrAscend Corp.	$	0.48		$	0.65
Option exercise price	$	1.95		$	1.95
Annual volatility		111.5	%		107.5	%
Annual risk-free rate		4.32	%		4.24	%
Expected term (in years)		0.23			0.48

Bifurcated conversion options

The conversion options have been measured at fair value as of March 31, 2025. Key inputs and assumptions used in the Black-Scholes Model were as follows:


	March 31, 2025			December 31, 2024
Common Stock Price of TerrAscend Corp.	$	0.48		$	0.65
Option exercise price	$	2.01		$	2.01
Annual volatility		99.0	%		86.9	%
Annual risk-free rate		4.03	%		4.25	%
Expected term (in years)	1.23 - 1.34			1.48 - 1.59

The following table summarizes the changes in the detachable warrants and bifurcated conversion options:


Balance at December 31, 2024	$	543
Fair value gain on revaluation of warrants and conversion option		(97	)
Effects of movements in foreign exchange		—
Balance at March 31, 2025	$	446

Contingent Consideration Payable

The contingent consideration has been measured at fair value as of March 31, 2025. Key inputs and assumptions used in the Black-Scholes Model were as follows:


	March 31, 2025			December 31, 2024
Common Stock Price of TerrAscend Corp.	$	0.48		$	0.65
Option exercise price	$	1.33		$	1.33
Annual volatility		115.4	%		106.6	%
Annual risk-free rate		4.23	%		4.24	%
Expected term (in years)		0.81			1.05