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

Vext's second quarter 26 financial results were released earlier today. The press release, financial statements and MD&A are available on SEDAR+ as well as on the 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 development, circumstances or results contained therein will materialize.

Risks and uncertainties that could affect future development 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 development or results predicted in forward looking statements may differ materially from 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 and 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 J.

Offenberger, Chief Executive Officer of VEXT.

Thanks, Priyam. Good evening, everybody, and thank you for joining our second quarter 26 financial results conference call.

I am joined today by Trevor Smith, Vext's 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 am 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. The 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 all know those assets outright. The balance sheet stays under our control, we can sell an asset on our own timing which is exactly what we are doing with the Eloy property in Arizona.

Now the 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. So 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 is 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 has ramped nicely.

Cultivation yields improved again, And because we stock our own shells, higher yields, lower cost of goods, and fund our everyday price position that helps keep customers coming through the door. We also pulled 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.

So 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 27.

We also made a misstep in Ohio this quarter and we will 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 accounts recovered. Most notable 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% in the first 5 months of the year according to state data. And wholesale flower prices hit their lowest level on record.

Flower was planned in the wholesale market for less than a process to grow. There is no strategic reason to continue carrying the cost to grow, and to operate a cultivation facility when we could transition to a third party purchasing model at substantially lower prices.

So we wound down cultivation and repositioned Arizona around what made money there. 2 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 result of this strategy are showing up where we look first.

Customer accounts. Central Phoenix traffic in June was the strongest since October 2023, nearly 3 years prior.

And that store continues to outperform the state average. So it is a tale of 2 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 3 next quarter. With that, I will turn it over to Trevor for a closer look at financials.

Trevor?

Thanks, Eric, and good evening, everyone. As Eric said, the quarter played out as planned.

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 flow 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 lower wholesale activity, weighed on the comparison.

1 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.

So Q1 adjusted EBITDA is now shown at 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 does not change our reported revenue, gross profit, net loss, or any cash metric for the quarter. Turning back to Q2.

Net loss narrowed to $300 thousand compared to $1.5 million a year ago. A roughly $1.2 million, a 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 cost 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. 2 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 are required to classify that $1 million as operating cash flow.

Rather than investing cash flow. As an illustrative normalization, adjusting for those 2 items would have put our cash flow margin in the upper 20%.

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 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.

The capital comes out of Arizona cultivation, 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 $900 thousand 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 retroactive Section 280E release.

And if that comes through, could bring this liability down materially over time. We have not adjusted the Q2 financial statements for it.

We will recognize any effects from this once they become probable and reliably measurable. And 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 noncash item, our working capital at Q2 would have been positive.

We ended the quarter with about $4.5 million in cash. We remain in compliance with our debt covenants.

The covenants are tested annually as of December 31. 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 6 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. Strengthening the balance sheet, pay down debt, and fund Ohio's growth from our own cash flow.

Thank you everyone for joining us today. I will turn it back to the operator now for questions.

Can you just maybe stepping back give a broader an overview of the higher market? What I mean by this we are 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. it is difficult to split out the 2.

Right? But just trying to get a gauge on that.

And 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? So maybe you can provide some context with that.

Let's start with that. Thank you.

Alright. On the first on the first question, Pablo, what I would say is I think that the pricing move and 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 started to clear that. And we are starting to move that through.

And you know, you see pricing back up a little bit, you know, or soften a little. As we go forward with that.

So I think that is part of it. Also, I think you are going to start seeing more stores come online So, you know, on a per store basis, just pure math, you know, your stores will do a little bit less, you know, on that.

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

Other thing I would approach on Ohio on your second question is I am not really sure. On, you know, what is causing that or how that is gonna shake out.

I mean, is there some more that you have that you have been thinking of that you are looking for specifically? But I had not really thought about the medical versus recreational.

I notice it stays pretty good. And that they are changing the dosing and stuff like that comes out this September.

To match things up a little bit better like other states have done. So I do not know if we will see how that plays out.

You know, whether it is gonna drop off and switch or what it is gonna do. I do not know.

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

Right.

Thank you. And then terms of what you have been shared, where is the Fairfield store relative to your other 5 stores?

Maybe you can rank where the 6 are right now. Terms of sales.

And which are the ones that still have a lot of room to grow on a comparative basis. Thanks.

Okay. So from our perspective, we will not give you a per store.

At this point in time. You know, we are not prepared to do that of course not.

Because we do not think We do not think it is good market wise. So with that said, Fairfield you know, I owned it a little bit on the pricing and the comments that I made, you know, 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 1 I own is on Fairfield. So the Fairfield store is sitting in that property of Jungle Jim's, which has tremendous traffic.

The part I had not recognized correctly was that it is part of his new development he is developing on that, and its traffic flow is not 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 is obviously doing very well but I thought it would hit a lot harder, a lot faster. So with the Ohio changes, we can get some signage.

And since we are on that property and we lease it, we will be able to be on the monument sign within Jungle Jim's. I should have done that before open.

So I own that mistake and we fix it. Same thing I said before.

We are going to make missteps. it is how fast you fix them and how fast you recognize them.

We recognize that fast and started to adjust it. So Fairfield's got the most growth.

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

And for the last 3 months, Columbus has done a really good job recovering because we have got the pricing right. And it is 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 people back in the door. And not lose them.

The 1 tough part about Ohio is they have currently Pablo, they have this name where you can buy anonymously. So tracking customers and getting customer trends is a lot more tricky there.

In determining what you are doing on a retention basis and return visits and time frames between customers and standard consumer demographics. it is really a challenge to do that.

That said, we watch headcount. Times people are in the door, feet traffic, and stuff along those lines.

So we really feel good about what they are doing, and that team's doing a really good job executing out there, I anticipate adding the drive through and Athens open in the next 2 or 3 weeks. That Jeffersonville store has its drive through, and you are seeing it So really, we really feel good about Ohio and that team.

And I really feel good about where we are at in Arizona. You know, the store accounts 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 do not set the market.

We participate. And that is really working well now.

So happy with everything. The results are good from my perspective.

that is good.

Good color. If I may just a couple more So in the case of in the case of Arizona, I know you said that people are selling for prices below what it cost them to grow.

Right? But so that is very clear.

But I still wonder whether the larger retail networks, right, call it the Trulieves of the world. They have so many stores there and are vertical where they can end up having a very strong price advantage relative to you.

Or not really?

Again, you know, I do not think so. The reason I say that is there is a lot of intros that are not affiliated with the dispensary out here.

And there is an overcapacity situation. So when I say that excuse me.

Hey, Pablo.

This is Trevor. I am gonna jump in while Eric takes a drink of water.

Yeah. The I your concerns are valid in normal markets where there is constraints on the supply side, but Arizona its only constraint is 1 parcel of land.

So every light every dispensary has the cultivation, know, the number of cultivation licenses is way out of whack. And then each license has no physiological limit on how big it can go.

So as a result, we, you know, we hope 2 years ago on these calls, we would start to see normalization. And I think we mentioned 2 calls ago, we still do not see normalization on supply side.

So we think that is gonna continue for the foreseeable future, and there, frankly, will not be a major cost advantage to producing versus purchasing. Right.

And when we say cost, Pablo, thanks for covering Trevor. But when we also say cost, we are talking about a fully absorbed cost.

I think a lot of people do cost in this business is what is your cash cost? From our perspective, our cash cost, we could still do grow and sell at a cash cost, but I was not deploying a return on assets to the shareholders.

And 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 take and pay down the debt and structure yourself so you can do something else with your balance sheet. So that is kind of how we measure it.

So when I say it was selling below our cost or at our cost, that is fully absorbed cost. that is how we look at it.

Okay. Thank you.

1 very last 1. You know, most companies and even some of the mortgage REITs out there are still leaseback operators that survey industry.

Are talking that they are seeing a lot more M&A activity on the private side and public side. But you know, from my perspective, I have not seen that much in terms of M&A pick-up.

I do not know if you wanna talk about that in terms of are you seeing more inbound outbounds, pricing? Any comments you can give on that?

Is this piece of more M&A activity really playing out? Or is still something yet to come?

I think there is a lot of tire kicking. A lot of inbounds, you know, people talking and stuff along those lines.

And you are seeing some deals, obviously, out in the marketplace and stuff like that. It looks like there is a lot of a lot of paper deals And you know, what is gonna happen on the comm side of it and a lot of that I think there is a lot of people that are still trying to get their hands around what their debt structures are looking like.

And how do these assets, you know, that have problems, you know, run. I read an interesting article yesterday.

Somebody's put out there about indoor cultivations possibly when they are going dormant, going into data centers and stuff along those lines. You know?

So I think people are starting to look at, you know, what how does that start to happen? That said, you know, we are obviously stewards of a public entity, and we have a shareholder responsibility.

So we are 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 along those lines?

Well, right now, it is all tire kicking is far as I am 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 is hard for me to tell you what the structure is on those.

My guess is that a lot of it is you know, a lot of vendor carryback and earn out and stuff along those lines. And you know, I do not know how that is gonna play out.

Thank you. that is all for me.

Great. Thank you.

Hey, Eric. Hey, Trevor.

Hey, Pablo. A couple of questions.

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

Hey, Paul. How are you?

Yeah. So, look, I think on a cash basis, the decision in from our 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 where the depreciation and the interest gets you.

You know, I think it would be tough for us to go below $700. So either way, you are looking at it.

If you can source product sub-$400, in some real distressed cases, $250 or less, mm-hmm. there is no reason to take us.

4.5 month cycle risk of the agricultural process when you could pay net 30.

Yes. Makes sense.

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

We really like our decision to exit UI.

Fair enough. Understood.

And then switching gears to Ohio, you know, with the 6 open stores, can you maybe just bookend, like, what is been the biggest upside surprise positive on the positive side? what is been the biggest challenge when you think about the market today versus your expectations?

Well, I covered it. I thought Fairfield was gonna go gangbusters, and it went well.

Do not get me wrong. I-- yep.

You know, not like it did not jump. But, you know, I thought it was gonna, like, you know, Ferrari type it down the road, and I was wrong.

So, you know, it did not do that. So you can bet that, you can bet that I know what I am doing on the next 2.

And how I am doing it. So, you know, I learn.

On the other ones, I have been surprised with how well we just execute. I mean, we have really got good management out there and good staff, and we execute.

You know, you are dealing with a retail situation, so, you know, generally, you have a high turnover rates and stuff like that. We have not experienced that there or in Arizona.

So that is always been a 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.

So we have got, like, a store in Athens, and we are gearing that up for the students returning. You know?

So we look at them individually, not I am in a market to Ohio or merchandise in Ohio. We look at I am in a merchandise in Jackson.

I am gonna merchandise in Jeffersonville. You know?

So I think we kind of are really do a good job of not 1 size fits all. We look at what is going on in that market and how the customers are interacting with us.

So that is great.

Makes sense. And just 2 quick housekeeping questions.

The inventory builds, you know, noticeable uptick. I am sure that is intentional with Ohio growing.

But what kind of inventory level should we expect once the once you have all 8 stores open and what kind of steady state inventory? And then second question is on the CapEx side, what is left to spend dollar wise for the remainder of 2026 in Ohio.

Let me start with the first 1. The other thing I will echo on Eric's prior answer on things that we are pleased about Yield per plant is up 68% in the last 2.5 years.

And this is coming from right off the bio asset notes in all of our public Filings, not even the most recent data, which we are excited to share in Q3. So that massive jump up was the big driver in terms of yield.

You know, with the state delays that Eric had mentioned on compliance label approvals, you know, there was some bottling or some traffic flow on that, but you know, we feel really good about selling into that market today at the current prices versus, you know, selling hand to mouth along the way or along in Q1. So backing into your real answer, it is about a $2 million excess inventory level at Q2.

it is already started to convert into cash in Q3. And I would expect to try to have that number kind of where we land the plane at year end.

You know, Arizona's turning really, really fast. Do not 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, you know, we would look to convert that into cash in 2026.

Paul, 1 piece of color I would give you on that is as a general rule, I have always watched inventory. I have just learned over the 40-plus years of doing this.

That if you have inventory screw ups, it is pretty hard to do in a commodity business and retail distribution. That said, I really watch it somewhere around 45 days in that wholesale channel.

Because, you know, once it starts building beyond that, you start getting yourself into trouble.

Sure. And then, rather, on CapEx spend?

Trevor?

We have got a lot more options than we did coming into the year, at least what we thought we would have coming into the year. So that previously mentioned yield jump has basically allowed us to supply our internal retail rates in a way that was not initially thought possible.

So we will be kind of strategic on the CapEx build and the timing of which you know, major mechanical purchases are made to expand further capacity. I will say we are actively under construction for our seventh location as we previously disclosed.

You will have some CapEx there, but that is a retail facility. You know, it is we are 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.

Great next to you guys. Great quarter.

Thank you.

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

When is the specific flip to third party sourced? Also, in Victoria?

Hey, Josh. You will have a little bit of a-- had the last sell-through already occurring Q3, so you will have just a little bit of tail off.

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

But, you know, we are expecting Arizona to no longer be a laggard on cash flow margin or adjusted EBITDA margin the way it is been particularly the last 6 months, if not the last 18. It will not be as good as Ohio, but it will be, you know, more in line with a capital light retail oriented business.

Super. And you have mentioned the pre roll category in Ohio in the past, but I have not heard much recently.

So could you just give us an update on what your strategy is, the pre roll category within Ohio. Is that a primary focus?

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

Yeah. I think there is an opportunity there, and I think especially from the standpoint of the fact that, like, we talked about that we have capacity.

We our yields are doing well. Then our flower gives us an opportunity to sell some in bulk some as packaged, and pre-rolls.

And pre-rolls are starting to move up as a category and stuff along those lines, and we think that is a market that, a, we can do a good job with on retail, and, b, we think it is a value add, if you would, Josh, into the wholesale market. You know, that you are putting a little more value into it.

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

So from our perspective, it is gonna be a good market. it is gonna grow for us.

And we are really focused on cost control. that is what, you know, we pride ourselves on is watching that cost making darn sure if you approach the businesses as a commodity, the only thing we are really gonna watch is our cost in order to maintain that margin, and that is why we made the decisions that we did in Arizona.

Alright. Appreciate that.

And maybe I will sneak a third 1 in. Trevor, I can kind of read between the lines on your CapEx answer, but I am going to try to push you to get an explicit answer here.

How much surplus wholesale capacity is there for your 25 thousand-square-foot facility in Ohio? Beyond what you think is needed to service your 8 doors I know that you have spoken about expanding this facility in the past.

Do you still foresee an opportunity in expanding this facility? Or do you think that the recent yield increase does not make that an immediate focus?

Sorry for that.

Yeah. We see it as an opportunity for 2027 as opposed to a necessity for 2026.

And that is the change over the last 2 quarters. Where we went into the year thinking we are going to have a shortage.

We are gonna need to source. But, you know, the big step up in yield and unfortunately, some of the delays on, you know, permitting and other things like getting more stores open.

Pushed into an opportunity for 2027 for us.

Love it. Appreciate the clarity.

Thanks, guys.