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0:49 Thanks Colin. Good morning, everyone, and thanks for joining us today.

Vext’s third quarter twenty twenty one financial results were released earlier this morning. The press release, financial statements and MD&A are available on SEDAR, as well as on the Vext’s website at vextscience.com.

00:53 We would like to remind listeners the portions of today's discussion include forward looking statements and the forward-looking statements are included in today’s press release. 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 made available on SEDAR, and we encourage listeners to read those risk factors in conjunction with today's call. 01:39 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 presentation also includes non-IFRS financial information and such non-IFRS financial measures are subject to the disclosure and reconciliation included in our press release disseminate earlier today. 02:01 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'm joined on the call today by Eric Offenberger, Chief Executive Officer of Vext; and Vahan Ajamian, Chief Financial Officer. 02:27 I will now pass call over to Eric.

02:31 Thanks, John. Good morning, everybody, and thank you for joining our quarter three twenty twenty one financial results conference call.

I am very pleased with our performance in the quarter. During quarter three, our team worked diligently to drive results at the dispensary level in Arizona, as well as to continue building the presence of Vapen brand on third party dispensary shelves.

We also made continued progress towards a vertically integrated footprint in Ohio which we view as the company's second leg of growth. 03:06 During quarter three, Vext generated nine point four million dollars in revenue, we've gross margins of forty three point six percent.

Revenue was roughly flat with last quarter. Summer is a forward period in Phoenix and the lifting of COVID related restrictions allowed residents to take vacations away from the city.

As we progress in quarter four, we are seeing more winter visitors and our expecting that sales growth will continue with added visitors and the continued growth of Arizona population. 03:39 We continue to grow adjusted EBITDA in the quarter generating three point six million dollars compared to three point five million dollars last quarter and two point six million dollars in the same period last year.

Adjusted EBITDA margins were thirty eight percent in quarter three, up one hundred and forty basis points compared to quarter two of twenty twenty one. Vext continued to translate revenue into profitability during quarter three, something we have done since twenty sixteen.

During the quarter, we began to realize efficiencies from the expanded manufacturing facility we completed in May, twenty twenty one and combined with the team that is focused on minimizing controllable expenses, we expect to be able to continue to deliver profitability as we grow. 04:27 For the nine months through September thirtieth, cash flow from operations was six point nine million dollars.

Our fully diluted earnings per share was zero point zero one dollars in quarter three. Arizona continues to be one of the most attractive cannabis markets in the U.

S. In October had said, a cannabis data and analytics service release a report detailing that Arizona had surpassed Colorado as a second largest cannabis market in the U.

S. With one point six billion dollars in sales from January through September.

This is higher than many of the estimates that have been out in the market and we believe the state will continue to offer solid long term returns for shareholders with fifty five billion dollars committed semiconductor manufacturing capacity and the lifting of COVID related restrictions. The Arizona economy and population will likely continue to grow and be a long-term opportunity for vertical operators.

05:28 Last quarter, I discussed our recent deals to bring link THC seltzers and major cannabis infused beverages to Arizona. These deals accomplished two main objectives, the first is to fill gap in Vext’s product portfolio to add beverages, which are a key growth segment.

Additionally, we get to cover both ends of the consumer value spectrum with these two brands. 05:51 We launched both Wynk and MAJOR in the market during quarter three supported by strong marketing campaigns, and they are selling well.

While this early in the release, we have received good feedback at our dispensaries and from wholesale customers. With the holidays coming up, we are developing special promotions and marketing around the beverages as an alcohol alternative.

Within in house retail distribution in the key Phoenix market and access to most third party dispensary shelves in the state. Vext is uniquely positioned to be a partner of choice for brands looking dinners at the Arizona market and we expect to sign more deals like this in the future.

06:31 I'd like to turn to some commentary on what we see for Arizona in the shorter term, which will feed into a discussion regarding our ongoing cultivation build out in Eloy. Cannabis sales do appear to be recession resistant, given the experience of the entire industry in the U.S.

During COVID-19. However, the state license industry has yet to experience an inflationary environment, which is while we were all facing right now at least for a short period of time.

Reduction of unemployment supplements from the Federal Government combined with increased gasoline and food prices will directly impact consumer disposable income, which are likely to translate into some higher price sensitivity, particularly in retail locations skewed to lower, or lower middle income demographics, such as our West Phoenix location. 07:23 Phoenix currently has the third highest level of inflation in the U.

S. At seven point two percent year-to-date through October.

So we won't be the only operators experiencing these pressures. While we have an experienced inflation at these levels for thirty years in the United States, Vext is well-positioned as taking steps to continue focusing on executing its growth and profitability plans in Arizona.

First, we have opted to divide our Eloy expansion to the two phases. With the expectation that higher construction prices will normalize in to twenty twenty three.

Phase I is expected to bring us to seventeen thousand square feet under canopy and we expect that will be completed by the third quarter of twenty twenty two. The second phase is expect to be finished by the third quarter twenty twenty three bringing us to the full fifty eight thousand square feet canopy.

System wide in Arizona. Both phases remain fully funded.

08:25 This two phase approach will also enable us to take advantage of the current pressure on average flower prices in Arizona by sourcing from cultivators without downstream distribution and employing that volume through our retail locations while phasing our own expansion into the market and continuing to lower our costs of retail. Vertical integration is an important competitive advantage.

Also offsetting some of the short-term market pressure, we anticipate that the remainder of the year will bring an influx of winter visitors and tourists state with the easing of COVID restrictions globally. 09:03 From a cost perspective, as I mentioned earlier in my comments, we have begun to recognize efficiencies from our recent manufacturing build out and we anticipate continued benefits as we grow volumes through this facility.

Our team has a proven track record in maintaining and improving control of costs that drive profitability. 09:25 According to MJBiz, Arizona will be roughly three billion dollars revenue market by twenty twenty five and that number was based on a lower twenty twenty one number than Arizona has already generated year-to-date through September.

With our two operating dispensaries in the Phoenix Metro area, our investment to improve efficiency that reduced costs, the strength of the Vapen brand and recently announced expansion to both our upstream and midstream footprints. Vext disposition to continue to solidify a leadership position in the state of Arizona.

10:02 Let's turn to Ohio for a moment. As discussed on previous quarterly calls, Ohio is a large limited licensed state that is currently medical only but has the potential per significant adult use upside.

Ohio reminds us of Arizona in many ways and has the return on capital characteristics we look for. In twenty twenty, we struck an LOI with partner in the state for a processing license to get the Vapen brand in the market.

Currently, Vapen is being stocked on most dispensary shelves in Ohio. Is selling well and we continue to expand the product offer.

10:39 We currently have an LOI in place that will enable us to the joint Venture to transfer and operating retail license to the joint venture. We can apply for the transfer in July of twenty twenty two.

On October eighteenth, we announced it through another joint venture partner, we had received approval from the state of Ohio and have been granted ownership of an operating manufacturing facility in Jackson, Ohio. 11:05 Yesterday morning, we announced an affiliate of our Joint venture partner, Appalachian Farm Processing, had received the level one cultivate in provisional license in Ohio.

This license enables Appalachian farms to build out an initial cultivation area of up to twenty five thousand square feet with the potential to expand up to fifty thousand square feet following further application and approval. 11:30 The receipt of a cultivation lifes since represents the final step toward achieving near term vertical integration in Ohio.

In our experience, building cultivation capacity in limited license states with large populations and adult use upside is a clear path to generating solid returns on capital for shareholders. And we continue to look at opportunities in Ohio and expect to take the steps required to make this second core state for Vext next to Arizona over the next twelve months.

12:03 For the remainder of Q4 and into Q1, we will remain focused on generating organic growth through both our operated dispensaries and continued penetration and share of shelf space with the Vapen brands through the wholesale channel. We'll also remain focused on building out our upstream and midstream operations, which will support our organic growth objectives, build an additional high margin revenue stream and give us the option to accretively add to our retail footprint when it makes sense to do so.

12:37 Q1 will be the first period of where we will be able to report on a four profit basis, which we will expect to make it clear for the broader market to understand our story and make Vext more comparable to other players in the space. Thanks for your time today.

I look forward to continuing to update you when we report Q4 early next year. I'll pass the call to Vahan for a review of our financial results.

Vahan?

13:07 Thanks, Eric, and good morning, everyone. As Eric noted, Vext continued to generate solid financial performance in the third quarter of twenty twenty one.

Revenue during the quarter was nine point four million dollars flat with Q2 of twenty twenty one and up compared to eight million dollars in Q3 of twenty twenty. 13:28 As a reminder, Vext provides and charges for services provided to two Phoenix dispensaries and cultivation and production operations that in accordance with current regulations are structured as not for profits.

As a result, our revenue is segmented between management fees, professional services, product sales, equipment leasing and property leasing. 13:56 Given these distinct levers, we have as to when and for what we can charge dispensaries.

The revenue Vext reports in its financials may not perfectly match the underlying operations of our two primary customers than not for profit license holders. From a big picture perspective, Q3 was a solid quarter for both our results as well as for the actual dispensaries and wholesale businesses we manage.

14:27 Similar to Vext consolidated revenue, the operations of the two licenses we manage also saw a moderate increase in revenue during what is a seasonally slower quarter. Management fees were up modestly versus the prior year, but lower than the prior two quarters.

We recall that this is a function of the not for profit model. The higher management fees generated in earlier quarters were related to the real estate activity in purchasing the Cultivation buildings in Phoenix, Prescott Valley, and Eloy.

Those items were no longer applicable in Q3. 15:07 However, equipment leasing revenue was significantly higher in Q3 due to additional equipment coming online in our expanded manufacturing and processing facility.

As Eric mentioned, our Q4 will be the last quarter we report under the current structure in Arizona. As a result, Q1 twenty twenty two should be far cleaner as we report under a more typical for profit structure.

15:36 As I outlined when we reported Q2, we have received tax guidance, which was a very favorable and as it stands now, we expect to be in a position to transition to an owned four profit structure beginning in January twenty twenty two. We will aim for a clean break from not for profit to ownership on January one to keep our quarterly reporting as clean as possible.

16:03 This shift will make it easier to understand our financial results reduced quarter-to-quarter fluctuations and make all results easier to compare with those of operators in other states. Gross profit in Q3 was four point one million dollars compared to three point one million dollars in the prior period and four point two million in Q2 of twenty twenty one.

16:27 Gross margin in the quarter was forty three point six percent compared to thirty nine point four percent in the same period last year and forty five percent in Q2 of twenty twenty one. Gross profit grew year over year as a result of the new manufacturing facility coming into operation and growth in both our cultivation and retail operations.

Gross margins came down slightly on a sequential basis due to the mix of revenue as management fees have no associated direct cost. 17:03 Adjusted EBITDA margins were strong at thirty eight percent up one hundred and forty basis points on a sequential basis and the highest percentage we have achieved.

Vext generated ten point one million dollars of adjusted EBITDA in the first nine months of this year, which compares to six point seven million dollars during all of twenty twenty. 17:25 I would like to highlight that during the quarter, we took a non-cash write down of just over two hundred thousand dollars, which represents fifty percent of the company's legacy investment in a hemp cultivation and production operation in Hawaii.

We have maintained their ownership position and we'll continue to evaluate it as COVID restrictions received, but this remains a non-core position for Vext. 17:51 Turning back to our operating results, we generated positive fully diluted EPS of zero point zero one dollars in the quarter and cash flow from operations of two point four million dollars.

Vext ended the quarter with a solid balance sheet. We had seven point four million dollars in cash at September 30th, and the expansion plans we have outlined for the next twelve months are fully funded between that cash balance as well as internal cash generation.

18:21 Thanks for joining us for our Q3 Financial results conference call. I'll now turn it over to the operator for your questions.

19:05 Good morning and thanks for taking my question. First around Eloy and the decision divide the construction phases.

Eric, I know you mentioned Phoenix is inflation rate, I guess, Can you give us sense as to what kind of cost inflation you were seeing specific to the project and the centralized that inflation was broad based or was it specific or is it specific to certain items and I guess a final question on that or are you seeing any signs of that inflation using yet?

19:39 Excuse me. Ross, on the – to answer the question first when we started the project back in February of last year, or earlier this year, February versus when we actually got to the engineering and final, the cost was up about thirty five percent, at the same time, you were seeing more flower capacity coming into the market and softening of the flower.

Panels, supply chain was beginning to impact of how many freezer panels you could get and the availability and so it became an economic decision that said, look, as we talked earlier, we are going to use that capacity to feed our stores and support us to get into other potential acquisitions to support that and then go into the wholesale market. So we made the decision let's regroup, make sure we can supply our stores if we did an acquisition could supply that.

Let's wait there is the wholesale market why we see if inflationary pressure and supply chain starts to ease, and things become more available. So, it's across the board.

20:50 I haven't seen any easing, yet we are getting our supplies into to do the first build out the first phase, it's a little bit easier to get some of the electrical switching gear now than it was four months ago, and that's continuing to happen. So, we think strategically, it's the best and best move for the shareholder value and to not be sitting on a bunch of flower that we have to try to figure out an outlet for if the price would soften.

You've got the pricing from October harvest. That's said.

We also then think it positions us from the dispensary level that we can take advantages of some excess capacity in the marketplace while we bring ours in and maintain a higher margin in the stores than we would have traditionally done for something we were buying in wholesale. We'll still be able to grow cheaper than the wholesale, but we won't be impacted as negatively as in the past when you couldn't produce everything yourself.

So the vertical integrated model continues to work for us. Is that, could be answered or?

22:01 No, that was excellent. Very helpful especially around the dynamics with current pricing.

Maybe just a follow-up, you mentioned that both phases remain fully financed does dividing the project up impact the cash commitments, the timing there, does it free up cash for other uses?

22:29 Yes, obviously it will free up cash for other uses. It takes cost – it takes the cost of the project down significantly.

The way the buildings laid out in the Eloy, which is always what made it, so attracted to us and for my past life of doing these types of build out projects, it was – it's nice because it's going to be a mirror. So when you do it in two phases it mirrors, so the risk also gets greatly minimized and the shared impact isn't that great, but you end up, we always plan to have fertigation systems, so he had redundancy to it.

It didn't really add any cost, but that you add redundancy, so you automatically have backups. The way the power will divide out will give you that redundancy too.

23:20 So you end up with a facility that's – that – like I said, you can mirror them and flip them and they're basically the same on each side of the operation. So, as technology changes too, which it's changing greatly, we can take some advantage of that too and then if I can putting a period in that, yes, it frees up capital and as we announced yesterday, we now have the operation in Ohio where we get to do a cultivation build out.

So from a resource standpoint, it gives us a better opportunity to spread our human capital a little bit better too or we're not trying to do two of them at once that are large scale.

24:06 Got it. If I could just sneak one last question.

You mentioned Ohio, the states open other application around for retail licenses. I think if I'm not mistaken it closes today, the extent you can say are you participating in that?

Do you have any color on when those awards those licenses might be announced and a secondary item around that is given you just took ownership manufacturing operation? The expansion retail, obviously, expand to the addressable market, do you have capacity to serve those additional licenses?

24:41 Yes. Excuse me, yes, both questions.

So, we are flying for licenses in Ohio. Those have actively been done and are being submitted.

Where we are ready to go. They're ready to get off the table.

We're not sure if Ohio was going to grant an extension we heard room where they might. But from the Vext standpoint, they're all done, the license will be in Vapen Ohio.

As Vapen Ohio with our partners out there at this point. And we're optimistic.

So that said, with the cultivation, yes, we think we can support given the way that the cultivation going out in Ohio, at least an additional a total of three to four stores in that market with the twenty five thousand cultivation square footage because you can double stack and get more canopy out of it, and you can also automatically apply for an additional twenty five thousand under Ohio rule based upon operating through a year. We feel that since we had to get through an appeal process to get this with the state, we'll give us that as operated for years, think once we hit the occupation on the first twenty five thousand and the facility will support up to one hundred thousand canopy in that building that it's been, with the manufacturing.

So, yes, we're very optimistic and hopeful that we can pick up a couple more licenses and continue to grow in Ohio.

26:20 That's excellent color. I'll be back in the queue.

Thank you.

26:36 Hi there. Good morning.

Congrats the Q3 results and on yesterday's news on the how cultivation license more period.

26:44 Thank you.

26:46 Yeah. No problem.

First question for me, just to stay on Ohio and cultivation license there. I just wanted – I'm just looking for some additional color on what Vext would pay in consideration to be able to exercise your letter of intent for thirty seven and half percent interest into that affiliates.

And then I'd also be curious if you could expand on the CapEx costs associated with that build out and what proportion of that might be funded buybacks?

27:25 All right. So the way the agreements are ready, is Vext will be responsible for the tables, the humidification, basically the non-structural items.

So like HVAC is not our doesn't come out of our piece of that. So, basically thirty seven point five percent of the expense we had estimate that build out somewhere around twelve million dollars range to do that, the benefit of Vext relationship there is our partner that's in that in this JV is a construction company in Ohio and without disclosing too much they do a lot of cannabis companies, other ones than just us is in construction.

So they have good experience. We have good experience in providing the genetics and stuff along those lines that will come through the existing Vext genetic streams.

28:24 So that's part of what actual supply and then we'll take over the hiring training of the cultivation in Our SOP will be used our protocols to that facility. So I'll total year in somewhere in the four million dollars range is what Vext this capital will be on that.

We anticipate that going over five to six months is where we're waiting right now where we're going through engine nearing in all that design. So technically we based upon what we've done historically, we can fund this from cash flow from operations on Vext standpoint.

29:09 Great. That's good color.

Appreciate that. Switching over to Arizona now.

I just wanted get an update on the supply situation there. I believe earlier this year, you spoke to some tightness in the supply dried flower, particularly premium dry flower.

Could you comment on whether you've seen any improvement there or whether you're still awaiting your own capacity to helpful that gap at your retail stores?

29:39 No, there's been significant movement on that front in the last five months. More capacities come on in the marketplace.

You've had some additional greenhouse capacity, these events and people do some additional outdoor grows. So right now, flowers pretty abundant.

Our outdoor grow was very good this year from the dispensaries we manage. That capacity was very good.

So that's all fairly abundant fairly easy as you saw, and headset come out on October thirteenth. Their indications are twenty one percent decrease on flower year-over-year.

That said, we're well positioned fourth quarter majority of the flower that's going into our retail like is ours that we're able to supply it, we're able to do some things that gives us some distinct cost savings that's really come into market. So I think that's going to go up through the first quarter of next year that flower OBM, you won't have an issue with flower supply, and it didn't have an issue before, it was just higher priced and you're on the wholesale market.

And I think the timing of the capacity coming on in Eloy will be perfect as you start to get through the October and the other capacity, and the demand continues to pick up in the market and it gets absorbed into the supply. 31:14 So in the summer months, part of the reason you had some abundance is the majority of the sales are in the Phoenix metro which is not a surprise to everybody.

And it gets hot here and we start seeing a little bit slower demand, our slower customer base coming in. So, I'm going put period in that and then I'll tell you the other piece that I think you're going to see on this one Andrew, and I'm still trying to figure out how this one works through is how inflation is going to impact it because there's not as much federal dollars coming in on unemployment supplement and stuff.

That people are getting to be a little bit – are going to be more price sensitive, they're still going to buy the product, but it gas up a dollar and zero point two five for today of less disposable income. So I think that's all good timing for us.

32:04 Great. That's helpful.

And if I can see another one is [Indiscernible] just on those inflationary pressures, I'm curious to whether you're seeing any shift in the skew mix with the inflationary pressures generally speaking. In Arizona.

Are you seeing any shift in demand away from the higher end value added concentrate derivative products back into the product flower category or are you not really seeing that movement as of yet?

32:37 We're not really seeing that, and I don't anticipate to see that. I think what you see is you've always had the phenomenon that most of the as you look at a typical retail model where customers shop relatively close to where they live or where they work is they're not going to drive?

I think you see that that's going to continue to be the case as people, it costs more to drive. I mean so, they'll stay closer to home.

That also means you need to be a wary of wise on your pricing, we will probably see more sales in the eight quarters than you'll see in the ounces. So they might be buying more frequently more consistently, but they'll be more special conscious.

We haven't seen a big shift from like concentrates, but as I've always told everybody, we've done the Vapen brand as to be very cost, is not priced at the bottom, but not trying to price at the high end of the marketplace and make our margin and be consistent and do it to a broader market and control the costs on the backside so that we can do that. 33:52 And we're really starting to see that through all the capital we've spent for the manufacturing build out and all those things.

They're coming to fruition. Our overall cost where units are going down.

But that's fine as the retail pricing goes down in the marketplace too. We're able to hold our margin, which is what we, I hate to use the old term, but it's all about price control, price discipline and cost control and that's really what we're focused on.

We've always ran the business that way and we haven't a lot focus of it.

34:32 Great to hear and thanks for taking my questions.

34:47 Thanks for taking my questions and I'll say that congratulations on the Ohio license win. I just wanted to ask a question I think it's been touched a little bit about inflationary pressures.

I wanted to specifically drill down on supply chain challenges, whether you're bumping into any supply chain issues or anticipate to in the near future?

35:15 Well, Jason, fortunate and I've got really good team players and we saw some of this going and some of the people we started partnering with last year as we started redoing the packaging lines and stuff for the child resistance. So, we diversified a little bit.

And we've got right now we're sitting on good supply. We've got some stuff being done domestically that gives us an option.

We're sitting on plenty of cartridges throughout the chain. Which is good.

The anticipation of Chinese New Year and we aren't sure how that's going to play, but we're like everybody else. We do have some stuff that out in the portal on beach without a doubt that we're wondering it's going to get off of a boat when it's going to show up and all that.

It's not critical at this point where it is, but four or five months down the road it'd be more critical. And if you look at the back statement, and Vahan talked about this a couple of times on calls in the past.

If you look at the Vext statement, you'll see how our pre-page change, and you can get a feel for where we're at. 36:28 But if you also look at second quarter, you saw a lot of product sales and you're seeing that into the third quarter too that you are seeing in those product sales.

So that was us anticipating that the supply chain was going to continue to be, not a blip up and not a transitionary thing, but it was a real real real deal. We think it's going to go through the first quarter, everything I'm hearing in every industry I talked to – people I talk to in the old steel days and stuff like that, they anticipate run through the first quarter, tracking the challenge coming off the board.

37:04 Okay. No that's great color.

Just also wanted to ask a question on sort of beverages. I know the top of the call, you said that the major and Wynk seltzers were going well.

Just wondering, I know it's totally early days but is there anything qualitative that you can share with?

37:26 Quantitatively, I really don't have a give you at this point in time because it's early in the cycle. I can tell you major cells better, the higher THC as you would anticipate cells better than the cells or product at this point in time.

I think as people see them in the shelves and start to pick them up and you get into the holiday season, I think the shelves are going to sell really well because it's kind you get the idea the shelves or the alcohol beverages. 37:58 And I think as you start to promote that more and we continue to get that out in social media get it out into the stores that helps.

The biggest challenging in phoenix as we've always said is shelve space, right? So that was one of the reasons we looked at it from Vapen to say, okay, we can control more of a JIT inventory delivery out in the Vapen brand to, somebody in the wholesale chain and more frequent delivery to them so that they have, they can have a broader product line in their star and we're seeing some of that impact too.

So, wait till after the holidays first quarter then I'll be able to give you a better feel for it.

38:41 That's great. Thanks for the color.