Thanks, operator. Good evening, everyone, and thank you for joining us today.

Vext's second quarter 2026 financial results were released earlier today. The press release, financial statements, and MD&A are available on SEDAR+ as well as on the Vext website at vextscience.com.

We would like to remind listeners that portions of today's discussion include forward-looking statements, and that forward-looking statements are included in today's filings. There can be no assurance that these forward-looking statements will prove to be accurate or that management's expectations or estimates of future developments, circumstances, or results contained therein will materialize.

Risks and uncertainties that could affect future developments, circumstances, or results are detailed in the MD&A and Vext's other public filings that are made available on SEDAR+, and we encourage listeners to read those risk factors in conjunction with today's call. As a result of these risks and uncertainties, the developments, circumstances, or results predicted in forward-looking statements may differ materially from actual developments, circumstances, or results.

This call also includes non-IFRS financial information, and such non-IFRS financial measures are subject to disclosure and reconciliation included in our press release disseminated earlier today as well as the MD&A. Forward-looking statements made during this conference call are made as of the date of this call.

Vext disclaims any intention or obligation to update or revise such information, except as required by applicable law. Vext's financial statements are presented in U.S.

dollars, and the results discussed during this call are in U.S. dollars.

I will now pass the call over to Eric Offenberger, Chief Executive Officer of Vext.

Thanks, Priyam. Good evening, everybody, and thank you for joining our second quarter 2026 financial results conference call.

I am joined today by Trevor Smith, Vext CFO. The second quarter largely played out the way we told you it would.

We completed the Arizona cultivation wind-down on schedule. We said we would continue to scale our Ohio footprint.

Fairfield opened in June, and adjusted EBITDA grew for a second consecutive quarter. I'm very proud of how the team executed.

Before Trevor gets into the numbers, let me frame how we run the business, because this quarter makes a lot more sense in that context. Start with what we own: Herbal Wellness Center retail brand, our house products, and the majority of the real estate underneath the business.

We have never done a sale-leaseback. Because we own those assets outright, the balance sheet stays under our control, and we can sell an asset on our own timing, which is exactly what we're doing with the Eloy property in Arizona now that cultivation there has ceased.

Expected proceeds are earmarked to reduce our secured debt. Second, how we operate: this is a commodity business, and in a commodity business, you have to watch both sides of the equation, what it costs to put product on the shelf and what the customer will pay for it.

That consumer buys on price and potency, we compete on sourcing, pricing, and merchandising, not brand marketing, and we view the retail channel as the core of Vext. Cultivation and manufacturing earn their place only if they make our retail stronger.

Trevor will show you what that discipline did to margins this quarter. Ohio is where the model is working hardest, and it remains our growth engine.

The state market is growing. Statewide sales were up about 28% in the first half of the year, according to state data, but it's also getting more competitive as new dispensaries come online.

Against that backdrop, our stores are performing well. We opened our sixth dispensary in Fairfield in June in a high-volume location, and it is ramped nicely.

Cultivation yields improved again, and because we stock our own shelves, higher yields lower costs of goods and fund our everyday price position that helps keep customers coming through the door. We also built inventory deliberately during the quarter to supply our growing retail base.

Part of that build also reflected timing. Ohio implemented new naming and product standards, and the approval process created delays in getting product cleared for sale.

That build is finished product that was ready but waiting on approval, not slow-moving inventory. That process has improved significantly, and we are selling through.

Our seventh dispensary in Columbus is being built under a dual-use license, allowing us to serve both medical and adult-use customers, and we anticipate to open in the first quarter of 2027. We also made a misstep in Ohio this quarter, and we'll own it.

The state allowed a change in product sizes. We elected to make that change, and we priced retail flower higher than the market would bear.

That cost us some volume. We caught it in the numbers, corrected in May, and customer counts recovered, most notably at the existing dispensary in Columbus, where weekly traffic came back to the strongest levels of the period.

We measure it, we fix it, and we move on. Arizona is a different market.

Statewide sales were down about 6% the first five months of the year, according to state data, and wholesale flower prices hit their lowest level on record. Flower was selling on the wholesale market for less than it costs us to grow.

There was no strategic reason to continue carrying the costs to grow and to operate a cultivation facility when we could transition to a third-party purchasing model at substantially lower prices. We wound down cultivation and repositioned Arizona around what makes money there: two dispensaries in the Phoenix metro and a light manufacturing footprint, free to source and price to the market instead of absorbing our own production.

The results of this strategy are showing up where we look first, customer counts. Central Phoenix traffic in June was the strongest since October 2023, nearly three years prior, and that store continues to outperform the state average.

It's a tale of two markets, and the capital follows the returns. Arizona cultivation capital comes out and gets redeployed.

Going forward, the priorities for our business remain unchanged: grow Ohio, finish the Arizona repositioning, and pay down debt. Measure us against those three next quarter.

With that, I'll turn it over Trevor for a closer look at financials. Trevor?

Thanks, Eric, and good evening, everyone. As Eric said, the quarter played out as planned, and you can see it in the numbers.

Revenue was roughly flat sequentially, margins improved, adjusted EBITDA improved again, and real progress on the balance sheet. Let me walk through the pieces.

Revenue came in at $12.1 million, down about 10% from a year ago, but essentially flat versus the first quarter. Most of the decline came from Arizona with a planned reduction in Arizona wholesale activity as part of the cultivation wind-down.

Gains in Ohio retail revenue were essentially offset by declines in Arizona retail, while wholesale revenue declined from $2.6 million to $1.4 million. While the top line declined, profitability improved across the board.

Gross profit was $6.7 million, up from $4.9 million a year ago, and gross margin came in at 55% versus 36% last year. Even before fair value adjustments, margin improved to 44% from about 39%.

The improvement came from a higher percentage of retail sales in the sales mix, improving cultivation yields, which are now eclipsing 100 grams per plant for the first time, along with a favorable biological asset adjustment from higher Ohio market pricing. Those improvements flowed through to adjusted EBITDA of $3.4 million, up 22% from $2.8 million in the first quarter, with adjusted EBITDA margins improving to 28% from 23% as Ohio profitability improved.

Against the $4 million we generated a year ago, the Arizona transition and lower wholesale activity weighed on the comparison. One item on that comparison: after we reported Q1, we corrected the adjusted EBITDA reconciliation for how we were treating the sign of the change in the fair value of debt.

Q1 adjusted EBITDA is now shown as $2.8 million rather than the $3.6 million we originally reported. I want to emphasize that this correction affects the non-IFRS reconciliation only.

It doesn't change our reported revenue, gross profit, net loss, or any cash metric for the quarter. Turning back to Q2, net loss narrowed to $0.3 million compared to $1.5 million a year ago, a roughly $1.2 million or nearly 80% improvement.

The stronger gross margin and a lower tax expense in the period drove the improvement, which was partially offset by the higher operating costs that come with a bigger Ohio retail platform, including our Fairfield store. On cash, we generated $1.2 million from operations, or about a 10% cash flow margin.

The gap between adjusted EBITDA and operating cash flow is timing, not trend. Two items drove the difference.

First, a deliberate $2 million inventory build in Ohio from continued improvement in cultivation yields. That inventory is already converting to cash as internal preliminary data shows Ohio wholesale setting a new monthly record in July, and we expect it to continue to convert to cash through the second half of this year.

Second, over $1 million of payables were assumed as part of last year's acquisition, and were fully paid off by the end of Q2. Under IFRS, we were required to classify that $1 million as operating cash flow rather than investing cash flow.

As an illustrative normalization, adjusting for those two items would have put our cash flow margin in the upper 20% margin, more in line with our adjusted EBITDA margin. Please note this is not a substitute for reported operating cash flow.

On the balance sheet, we completed the Arizona cultivation wind-down and moved the Eloy property to held-for-sale classification for $7.8 million. We expect to use the net proceeds from that sale to pay down our secured debt.

Capital comes out of Arizona cultivation and goes straight against debt. Primarily driven by the Eloy reclassification and previously mentioned increased Ohio inventory, net working capital improved from negative $11.7 million at year-end to approximately negative $0.9 million at Q2.

Our uncertain tax position was $11.7 million at quarter-end, up from $8.1 million at year-end, reflecting continued progress in finalizing our 2025 tax filings. As a reminder, the DEA's final order includes a recommendation for retroactive Section 280E relief, and if that comes through, it could bring this liability down materially over time.

We haven't adjusted the Q2 financial statements for it. We'll recognize any effects from this once they become probable and reliably measurable.

It's important to note that IFRS accounting rules require us to classify the uncertain tax position as a current liability, even though the timing of any settlement is genuinely uncertain and many periods are not under audit. Excluding this non-cash item, our working capital at Q2 would have been positive.

We ended the quarter with about $4.5 million in cash, and we remain in compliance with our debt covenants. The covenants are tested annually as of December 31st, and we were in compliance at the last test.

No interim testing is required, and we are not aware of any subsequent event that would cause noncompliance. Subsequent to quarter-end, we extended the maturity of our East West Bank note by six months out to January 2028.

The net proceeds from the planned Eloy sale will go towards paying this down. Additionally, we completed a financing with Wright-Patt Credit Union, with aggregate gross proceeds of approximately $17 million.

Those proceeds were used to: 1, refinance approximately $10.5 million of existing WPCU debt; 2, acquire our Jackson, Ohio cultivation and manufacturing facility for $6 million; and 3, fund continued development and expansion of our Ohio operations. Looking to the back half of the year, we expect improved performance as the Arizona repositioning takes hold, the Ohio inventory converts to cash, our sixth Ohio store in Fairfield continues to ramp, and we continue to scale our Ohio footprint.

Our capital priorities are unchanged: strengthen the balance sheet, pay down debt, and fund Ohio's growth from our own cash flow. Thank you everyone for joining us today.

I'll turn it back to the operator now for questions.

Thank you and good afternoon, everyone. Eric, can you just maybe, stepping back, give an overview of the Ohio market?

What I mean by this, we're seeing very strong growth, but is it because of the hemp ban and the restrictions on hemp derivatives, or is it because of the changes that were implemented last September? Maybe it's difficult to split out the two, right, but just trying to get a gauge on that.

Then the second point, in other markets, when recreational sales start, typically medical begins to fall off, but in the case of Ohio, medical has remained quite strong, right? Maybe you can provide some context with that.

Let's start with that. Thank you.

On the first question, Pablo, what I would say is I think that the pricing move in that has a lot to do right now with the state's change for packaging and getting product authorized to be able to put on the shelf. They had a tremendous backlog, a tremendous fluctuation, and the state was a little slower.

They've started to clear that, and we're starting to move that through, and you see pricing back up a little bit or soften a little as we go forward with that. I think that's part of it.

I also think you're going to start seeing more stores come online. On a per-store basis, just pure math, your stores will do a little bit less on that.

I think we all know my philosophy and our philosophy is we're merchandisers and we're working on conversion, not stimulating demand as much as we're converting the demand that exists. We think that's a good thing for us, and we'd like that in the market.

The other thing I'd approach on Ohio on your second question is I'm not really sure on what's causing that or how that's going to shake out. Is there some more that you have that you've been thinking of that you're looking for specifically?

I hadn't really thought about the medical versus recreational. I noticed it stays pretty good and that they're changing the dosing and stuff like that that comes out this September to match things up a little bit better like other states have done.

I don't know if we'll see how that plays out, whether it's going to drop off and switch or what it's going to do. I don't know.

I know from our perspective, we service both ends of that market, and we're adjusting our packaging sizes to correspond more to the universal, so that we're really determining medical or a recreational at the time of delivery like most people are doing, and we'll also, depending on how the rescheduling goes, we'll adapt our process and procedures based upon that, too.

Right. Thank you.

Then in terms of what you can share, where is the Fairfield store relative to your other five stores? Maybe you can rank where the six are right now in terms of sales, and which are the ones that still have a lot of room to grow on a comparative basis.

Thanks.

Okay. From our perspective, we won't give you a per-store at this point in time, we're not prepared to do that,

Yeah,

we don't think it's good market-wise. That said, Fairfield, I owned it a little bit on the pricing in the comments that I made about when the packaging changed, we went a little bit higher on pricing than the market would bear, and we saw it in foot traffic.

Another one I own is on Fairfield. The Fairfield store is sitting in that property of Jungle Jim's, which has tremendous traffic.

The part I hadn't recognized correctly was that it's part of the new development he's developing on that, and its traffic flow isn't as direct as I anticipated it would be at this point in time. It continues to grow, so that store has the most room for growth.

It's obviously doing very well, but I thought it would hit a lot harder, a lot faster. With the Ohio changes, we can get some signage, and since we're on that property and we lease it, we'll be able to be on the monument sign within Jungle Jim's.

I should have done that before open. I own that mistake, and we fix it.

The same thing I said before: you're going to make missteps, it's how fast you fix them and how fast you recognize them, and we recognized that fast and started to adjust it. Fairfield's got the most growth.

Our Jackson store performs well. Our Jeffersonville store's gaining shares back and everything.

For the last three months, Columbus has done a really good job recovering because we got the pricing right. It's a pricing game and you have to watch it on a weekly basis, a daily basis, and start to make those adjustments and then get the people back in the door and not lose them.

The one tough part about Ohio is they have currently, Pablo, they have this thing where you can buy anonymously, tracking customers and getting customer trends is a lot more tricky there in determining what you're doing on a retention basis and return visits and time frames between customers and standard consumer demographics. It's really a challenge to do that.

That said, we watch head count, times people are in the door, feet traffic, and stuff along those lines. We really feel good about what they're doing, and that team's doing a really good job executing out there.

I anticipate in the drive-through and Athens open in the next two or three weeks. That Jeffersonville store has its drive-through and you're seeing it.

We really feel good about Ohio and that team. I really feel good about where we're at in Arizona.

The store counts are coming back there again and the traffic and stuff, and they can price competitively and they can participate in the market. We always say we don't set the market, we participate, and that's really working well now.

Happy with everything. The results are good from my perspective.

That's good color. If I may just a couple more.

In the case of Arizona, I know you said that people are selling for prices below what it costs them to grow, right? That's very clear.

I still wonder whether the larger retail networks, right, call it the Trulieves and Curaleafs of the world that have so many stores there and are vertical, whether they can end up having a very strong price advantage relative to you, or not really?

Again, I don't think so. The reason I say that is there's a lot of grows that are not affiliated with the dispensary out here, and there's an overcapacity situation.

Hey, Pablo, this is Trevor. I'm going to jump in while Eric takes a drink of water.

Your concerns are valid in normal markets where there's constraints on the supply side, but Arizona, its only constraint is one parcel of land. Every dispensary has a cultivation, the number of cultivation licenses is way out of whack, and then each license has no physiological limit on how big it can go.

As a result, we hoped 2 years ago on these calls we'd start to see normalization, and I think we mentioned two calls ago we still don't see normalization on supply side. We think that's going to continue for the foreseeable future, and there frankly won't be a major cost advantage to producing versus purchasing.

Right. When we say cost, Pablo, thanks for covering, Trevor, but when we also say cost, we're talking about a fully absorbed cost.

I think a lot of people do cost in this business as what's their cash cost. From our perspective, our cash cost, we could still do grow and sell at a cash cost, but I wasn't deploying a return on assets to the shareholders.

By the way we structure ourselves and own the properties and how we bought them and how we build them and stuff like that, I can liquidate them and take that capital and pay down the debt and structure yourself so you can do something else with your balance sheet. That's kind of how we measure it.

When I say it was selling below our cost or at our cost, that's a fully absorbed cost. That's how we look at it.

Right. Okay.

Thank you. One very last one.

Most companies and even some of the mortgage REITs out there, sale-leaseback operators that serve the industry, are talking that they are seeing a lot more M&A activity on the private side and public side, but from my perspective, I haven't seen that much in terms of M&A pickup. I don't know if you want to talk about that in terms of are you seeing more inbounds, outbounds, pricing, any comments you can give on that.

Is this thesis of more M&A activity really playing out, or is it still something yet to come?

I think there's a lot of tire kicking, a lot of inbounds, people talking and stuff along those lines. You're seeing some deals, obviously, out in the marketplace and stuff like that.

It looks like it's a lot of paper deals and what's going to happen on the come side of it and a lot of that. I think there's a lot of people that are still trying to get their hands around what their debt structures are, what they like, and how do these assets that have problems run.

I read an interesting article yesterday somebody put out there about indoor cultivations, possibly when they're going dormant going into data centers and stuff along those lines. I think people are starting to look at how does that start to happen.

That said, we're obviously stewards of a public entity and we have a shareholder responsibility. We're looking at it from both standpoints of where does it make sense to expand and where does it make sense if somebody's got an inbound or something along those lines.

Right now, it's all tire kicking as far as I'm concerned. Now, that said, on the private side, I have seen some private deals where people are consolidating and putting some stuff together or doing different things.

How that looks, it's hard for me to tell you what the structure is on those. My guess is that a lot of it's vendor carryback and earn-outs and stuff along those lines.

I don't know how that's going to play out.

Thank you. That's all for me.

Thank you.

Great. Thank you.

Hey, Eric. Hey, Trevor.

Hey, Paul.

A couple questions. In Arizona, can you give me a ballpark for the variance between kind of your all-in cost per pound to produce in Eloy versus what you can buy today in the open market?

Hey, Paul. How are you?

Look, I think on a cash basis, the decision from our seat was whether we continued making some minor investments and improvements the way we did in Ohio to push yield up further. I think on a cash basis, we probably would be sub-$300.

On a fully absorbed basis, though, this is where the depreciation and the interest get you, I think it'd be tough for us to go below $700. Either way you're looking at it, if you can source product sub-$400, in some real distressed cases, $250 or less, there's no reason to take a 4.5-month cycle risk of agricultural process when you can pay net 30.

Yeah. Makes sense.

Any recent trends there on supply-demand side in Arizona in terms of wholesale flower, prices, anything major, notable, worth talking about?

We really like our decision to exit Eloy.

Fair enough. Understood.

Switching gears to Ohio, with the six open stores, could you maybe just bookend what's been the biggest upside surprise on the positive side, and what's been the biggest challenge when you think about the market today versus your expectations?

I covered it. I thought Fairfield was going to go gangbusters, and it went good.

Don't get me wrong. Not like it didn't jump, but I thought it was going to Ferrari type it down the road, and I was wrong.

It didn't do that. You can bet that I know what I'm doing on the next two and how I'm doing it.

I learned. On the other ones, I've been surprised with how well we just execute.

We've really gotten good management out there and good staff and we execute. You're dealing with a retail situation, generally you have high turnover rates and stuff like that.

We haven't experienced that there or in Arizona. That's always been pleasant surprise to me.

I like how we go to market and merchandise, getting everybody focused on that, that we look at the different stores. We've got a store in Athens and we're gearing that up for the students returning.

We look at them individually, not I'm in a market to Ohio or merchandise in Ohio. We look at I'm going to merchandise in Jackson, I'm going to merchandise in Jeffersonville.

I think we kind of really do a good job of not one size fits all. We look at what's going on in that market and how the customers are interacting with us.

So...

That's great. Makes sense.

Just two quick housekeeping questions. The inventory build, noticeable uptick.

I'm sure that's intentional with Ohio growing. What kind of inventory level should we expect, once you have all eight stores open and kind of steady-state inventory?

Then second question is on the capex side, what's left to spend dollar-wise for the remainder of '26 in Ohio?

Let me start with the first one. The other thing I'll echo on Eric's prior answer on things that we're pleased about: yield per plant is up 68% in the last 2.5 years.

This is coming from right off the bio-asset notes in all of our public filings, not even the most recent data, which we're excited to share in Q3. That massive jump up was the big driver in terms of yield.

With the state delays that Eric had mentioned on compliance label approvals, there was some bottling or some traffic flow in that, but we feel really good about selling into that market today at the current prices versus selling hand to mouth along the way or on Q1. Backing into your real answer, it's about a $2 million excess inventory level at Q2 that's already started to convert into cash in Q3, and I'd expect to try to have that number kind of where we land the plane at year-end.

Arizona is turning really, really fast. We don't have any inventory carry there from our own cultivation now.

On the Ohio side, short of a major jump up again in yield, which would be great, we would look to convert that into cash into '26.

Paul, one piece of color I'd give you on that is, as a general rule, I've always watched inventory. I've just learned over the 40-plus years of doing this that if you have inventory screw-ups, it's pretty hard to do in a commodity business in retail distribution.

That said, I really watch it somewhere around 45 days in that wholesale channel, because once it starts building beyond that, you start getting yourself into trouble.

Fair. Then on capex spend, Trevor?

We've got a lot more options than we did coming into the year, at least what we thought we'd have coming into the year. That previously mentioned yield jump is basically allowed us to supply our internal retail rates in a way that wasn't initially thought possible.

We'll be kind of strategic on the capex builds and the timing of which major mechanical purchases are made to expand further capacity. I will say we are actively under construction for our seventh location, as we've previously disclosed.

We'll have some capex there, but that's a retail facility. We're expecting kind of in line on that.

Probably have some more news for you on Q3 as well as another development on that project.

Super. Way to execute, guys.

Great quarter. Thank you.

Hey, guys. Congrats on the quarter.

I guess considering a big part of the forward narrative is that margins step up in Arizona, I believe you harvested the last from Eloy in May. I'm just interested, when will you sell the last kind of Eloy inventory into that market?

When is the specific flip to third-party sourced wholesale inventory there?

Hey, Josh. You had the last sell-through already occur in Q3, you'll have just a little bit of tail-off.

IFRS inventory capitalization, all that noise and nonsense ends in Q3. Q4 will be your first clean quarter.

We're expecting Arizona to no longer be a laggard on cash flow margin or adjusted EBITDA margin the way it's been, particularly the last six months if not the last 18. It won't be as good as Ohio, but it'll be more in line with a capital-light, retail-oriented business.

Super. You've mentioned the pre-roll category in Ohio in the past, but haven't heard much recently.

Could you just give us an update on kind of what your strategy is for pre-roll category within Ohio? Is that a primary focus?

Is there an opportunity there anywhere? I just wanted to hear your thoughts.

I think there's an opportunity there, and I think especially from the standpoint of the fact that, like we talked about, that we have capacity, our yields are doing well, that our flower gives us an opportunity to sell some in bulk, some is packaged, and pre-rolls. Pre-rolls are starting to move up as a category and stuff along those lines, and we think that that's a market that, a, we can do a good job with on retail, and, b, we think it's a value-add, if you would, Josh, into the wholesale market that you're putting a little more value into it.

Since we've been operating the space for a long time out in Arizona, we realize how inexpensive that product can get. We've been invested in automation, and we always do, in our things.

From our perspective, it's going to be a good market. It's going to grow for us, and we are really focused on cost control.

That's what we pride ourselves on is watching that cost and making darn sure, if you approach the business as it's a commodity, the only thing we're really going to watch is our cost in order to maintain that margin, and that's why we made the decisions we did in Arizona.

Got it. Appreciate that.

Maybe to sneak a third one in. Trevor, I can kind of read between the lines on your capex answer, but I'm going to try to push you to get an explicit answer here.

How much surplus wholesale capacity exists at your 25,000-square-foot facility in Ohio beyond what you think is needed to service your eight doors? I know you've spoken about expanding this facility in the past.

Do you still see an opportunity in expanding this facility, or do you think that kind of the recent yield increase doesn't make that an immediate focus? Sorry to push.

We see it as an opportunity for 2027 as opposed to a necessity for 2026. That's the change over the last two quarters, where we went into the year thinking we're going to have a shortage, we're going to need to source, but the big step up in yield and unfortunately some of the delays on permitting and other things, getting more stores open, pushed it into an opportunity for '27 for us.

Love it. Appreciate the clarity.

Thanks, guys.