Q2 2026 Vext Science Inc Earnings Call

Speaker #1: Thank you for standing by. This is the Vext Science Q2 2026 financial results conference call. As a reminder, all participants are in listen-only mode and the conference is being recorded.

Operator: Thank you for standing by. This is the conference operator. Welcome to the VEXT SCIENCE Q2 2026 financial results conference call. As a reminder, all participants are in listen-only mode, and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. To join the question queue, you may press star, then 1 on your telephone keypad. Should you need assistance during the conference call, you may reach an operator by pressing star then 0. I would now like to turn the conference over to Priyam Chapagain. Please go ahead.

Operator: Thank you for standing by. This is the conference operator. Welcome to the VEXT SCIENCE Q2 2026 financial results conference call. As a reminder, all participants are in listen-only mode, and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. To join the question queue, you may press star, then one on your telephone keypad. Should you need assistance during the conference call, you may reach an operator by pressing star then zero. I would now like to turn the conference over to Priyam Chakraborty. Please go ahead.

Speaker #1: After the presentation, there will be an opportunity to ask questions. To join the question queue, you may press star, then 1 on your telephone keypad.

Speaker #1: Should you need assistance during the conference call, you may reach an operator by pressing star, then zero. I would now like to turn the conference over to Priam Chakraborty.

Speaker #1: Please go ahead.

Speaker #2: Thanks, operator. Good evening, everyone, and thank you for joining us today. VEXT Q2 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.

Priyam Chapagain: Thanks, operator. Good evening, everyone, and thank you for joining us today. VEXT Q2 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 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+. We encourage listeners to read those risk factors in conjunction with today's call.

Priyam Chakraborty: Thanks, operator. Good evening, everyone, and thank you for joining us today. VEXT Q2 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 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+. We encourage listeners to read those risk factors in conjunction with today's call.

Speaker #2: 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.

Speaker #2: 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+.

Speaker #2: 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 circumstances or results predicted in forward-looking statements may differ materially from actual development circumstances or results.

Priyam Chapagain: 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 financial statements are presented in USD, and the results discussed during this call are in USD. I will now pass the call over to Eric Offenberger, Chief Executive Officer of VEXT.

Priyam Chakraborty: 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 financial statements are presented in USD, and the results discussed during this call are in USD. I will now pass the call over to Eric Offenberger, Chief Executive Officer of VEXT.

Speaker #2: 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.

Speaker #2: 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.

Speaker #2: VEXT financial statements are presented in US dollars, and the results discussed during this call are in US dollars. I will now pass the call over to Eric Offenberger, Chief Executive Officer of VEXT.

Speaker #3: Thanks, Priam. Good evening, everybody, and thank you for joining our Q2 2026 financial results conference call. I'm joined today by Trevor Smith, VEXT CFO.

Eric Offenberger: Thanks, Priyam. Good evening, everybody, and thank you for joining our Q2 2026 financial results conference call. I am joined today by Trevor Smith, VEXT CFO. The Q2 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.

Eric Offenberger: Thanks, Priyam. Good evening, everybody, and thank you for joining our Q2 2026 financial results conference call. I am joined today by Trevor Smith, VEXT CFO. The Q2 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.

Speaker #3: Q2 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.

Speaker #3: 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. I'll start with what we own.

Speaker #3: 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.

Speaker #3: 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.

Eric Offenberger: 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 are 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. 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. 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.

Eric Offenberger: 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 are 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. 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. 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.

Speaker #3: 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.

Speaker #3: 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.

Speaker #3: 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.

Speaker #3: 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.

Eric Offenberger: 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 H1 of the year, according to state data. 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 shelves, higher yields, lower costs of goods, and fund our everyday price position that helps keep customers coming through the door. We also build 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.

Eric Offenberger: 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 H1 of the year, according to state data. 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 shelves, higher yields, lower costs of goods, and fund our everyday price position that helps keep customers coming through the door. We also build 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.

Speaker #3: 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—a high-volume location—and it has ramped nicely.

Speaker #3: Cultivation yields improved again, and because we stock our own shelves, higher yields and lower costs of goods fund our everyday price position that helps keep customers coming through the door.

Speaker #3: 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.

Speaker #3: So, that build is finished. The product was ready but waiting on approval, not slow-moving inventory. That process has improved significantly, and we are selling through.

Eric Offenberger: 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 Q1 2027. 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.

Eric Offenberger: 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 Q1 2027. 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.

Speaker #3: Our seventh dispensary in Columbus is being built.

Speaker #1: 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 .

Speaker #1: 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 .

Speaker #1: That cost us some volume . We caught it in the numbers , corrected it in May , and customer accounts recovered , most notably at the existing dispensary in Columbus , where weekly traffic came back to the strongest levels of the period .

Speaker #1: We measure it, we fix it, and we move on. Arizona is a different market. State 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 cost us to grow.

Eric Offenberger: 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 flying on the wholesale market for less than it costs us 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 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 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 three years prior, and that store continues to outperform the state average.

Eric Offenberger: 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 flying on the wholesale market for less than it costs us 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 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 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 three years prior, and that store continues to outperform the state average.

Speaker #1: There was no strategic reason to continue carrying, growing, and operating a cultivation facility when we could transition to a third-party purchasing model at substantially lower prices.

Speaker #1: So 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.

Speaker #1: Instead of absorbing our own production, the results of this strategy are showing up where we look first. Customer accounts: Central Phoenix traffic in June was the strongest since October 2023.

Speaker #1: Nearly three years prior, and that store continues to outperform the state average. So, it's a tale of two markets, and the capital follows the returns.

Eric Offenberger: So it is 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 will turn it over to Trevor for a closer look at the financials. Trevor?

Eric Offenberger: So it is 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 will turn it over to Trevor for a closer look at the financials. Trevor?

Speaker #1: 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 .

Speaker #1: Next quarter. With that, I'll turn it over to Trevor for a closer look at the financials. Trevor?

Speaker #2: Thanks , Eric , and good evening everyone As Eric said , the quarter played out as planned . And you can see it in the numbers .

Trevor Smith: 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.

Trevor Smith: 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.

Speaker #2: Revenue was roughly flat sequentially. Margins improved, adjusted EBITDA improved again, and there was real progress on the balance sheet. Let me walk through the pieces.

Speaker #2: 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 .

Speaker #2: 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.

Speaker #2: 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 100g per plant for the first time , along with a favorable biological asset adjustment from Higher Ohio market pricing .

Trevor Smith: 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 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.

Trevor Smith: 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 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.

Speaker #2: 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%.

Speaker #2: 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 .

Speaker #2: 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 .

Trevor Smith: So 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 does not change our reported revenue, gross profit, net loss, or any cash metrics 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.

Trevor Smith: So 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 does not change our reported revenue, gross profit, net loss, or any cash metrics 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.

Speaker #2: 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.

Speaker #2: 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 .

Speaker #2: 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.

Trevor Smith: 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. We expect it to continue to convert to cash through the H2 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 two 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.

Trevor Smith: 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. We expect it to continue to convert to cash through the H2 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 two 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.

Speaker #2: 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 .

Speaker #2: Under IFRS, we are required to classify that $1 million as operating cash flow rather than investing cash flow as an illustrative normalization.

Speaker #2: Adjusting for those two 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 and moved the Eloy property to held for sale classification for 7.8 million .

Trevor Smith: 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. The 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.

Trevor Smith: 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. The 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.

Speaker #2: 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 the previously mentioned increased Ohio inventory.

Speaker #2: 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.

Speaker #2: As a reminder , the DEA's final order includes a recommendation for retroactive section 280 relief . And if that comes through , it could bring this liability down materially over time .

Speaker #2: 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 , noncash 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 .

Trevor Smith: 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 31 December, 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 non-compliance. Subsequent to quarter end, we extended the maturity of our East West Bank note by six months, out to January 2028.

Trevor Smith: 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 31 December, 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 non-compliance. Subsequent to quarter end, we extended the maturity of our East West Bank note by six months, out to January 2028.

Speaker #2: 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 non-compliance Subsequent to quarter end , we extended the maturity of our East West Bank note by six months out to January 20th , 28 .

Speaker #2: The net proceeds from the planned Eloy sale will go toward paying this down. Additionally, we completed a financing with Wright-Patt Credit Union.

Trevor Smith: 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, one, refinance approximately $10.5 million of existing WPCU debt. Two, acquire our Jackson, Ohio, cultivation and manufacturing facility for $6 million. Three, 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.

Trevor Smith: 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, one, refinance approximately $10.5 million of existing WPCU debt. Two, acquire our Jackson, Ohio, cultivation and manufacturing facility for $6 million. Three, 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.

Speaker #2: With aggregate gross proceeds of approximately $17 million. Those proceeds were used to: one, refinance approximately $10.5 million of existing debt; two, acquire our Jackson, Ohio cultivation and manufacturing facility for $6 million; and three, 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.

Speaker #2: 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 .

Speaker #2: I'll turn it back to the operator now for questions.

Speaker #3: We will now begin the question and answer session. To join the question queue, you may press star, then one on your telephone keypad.

Operator: We will now begin the question and answer session. To join the question queue, you may press star, then one on your telephone keypad. You will hear a tone acknowledging your request. If you are using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star, then two. First question comes from Pablo Zuanic with Zuanic & Associates. Please go ahead.

Operator: We will now begin the question and answer session. To join the question queue, you may press star, then one on your telephone keypad. You will hear a tone acknowledging your request. If you are using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star, then two. First question comes from Pablo Zuanic with Zuanic & Associates. Please go ahead.

Speaker #3: You will hear a tone acknowledging your request. If you are using a speakerphone, please pick up your handset before pressing any keys.

Speaker #3: To withdraw your question, please press star, then two. The first question comes from Pablo Zuanic with Zuanic and Associates. Please go ahead.

Speaker #4: Thank you and good afternoon , everyone Eric , can you just maybe stepping back ? Give us a broader an overview of the Ohio market and what I mean by this .

Pablo Zuanic: Thank you, and good afternoon, everyone. Eric, can you just maybe stepping back, give a broader, an overview of the Ohio 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? Maybe it is difficult to split out the two, right? Just trying to get a gauge on that. 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 us start with that. Thank you.

Pablo Zuanic: Thank you, and good afternoon, everyone. Eric, can you just maybe stepping back, give a broader, an overview of the Ohio 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? Maybe it is difficult to split out the two, right? Just trying to get a gauge on that. 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 us start with that. Thank you.

Speaker #4: We're seeing very strong . But is it because of the hemp ban and the restrictions on derivatives . Or is it , you know , because of the changes that were implemented last September ?

Speaker #4: Maybe it's difficult to split out the two , 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 .

Speaker #4: But in the case of Ohio , medical has remained remain quite strong . Right . So maybe you can provide some context with that .

Speaker #4: Let's start with that. Thank you.

Speaker #1: 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 states change for packaging and getting product authorized to be able to put on the shelf .

Eric Offenberger: 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 started to clear that, and we are 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 is part of it. I also think you are 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.

Eric Offenberger: 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 started to clear that, and we are 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 is part of it. I also think you are 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.

Speaker #1: They had a tremendous backlog, a tremendous fluctuation, and the state was a little slower. They started to clear that, and we're starting to move that through.

Speaker #1: And , you know , you see pricing back up a little bit . You know , or soften a little as we go forward with that .

Speaker #1: So I think that's part of it . I also think you're 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 .

Speaker #1: So I think we all know my , my philosophy and our philosophy is we're merchandisers and we're working on conversion , not , not stimulating demand as much as we're converting the demand that exists .

Trevor Smith: 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 like that in the market. The other thing I would approach on Ohio on your second question is

Eric Offenberger: 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 like that in the market. The other thing I would approach on Ohio on your second question is

Speaker #1: So I think that's a good thing for us . And we think that in the market . The other thing I'd approach on Ohio , on your second question is I'm not really sure on , you know , what's causing that or how that's going to shake out .

Eric Offenberger: 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 have 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 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 a medical or a recreational at the time of delivery like most people are doing.

Eric Offenberger: 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 have 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 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 a medical or a recreational at the time of delivery like most people are doing.

Speaker #1: I mean, is there something more that you have that you've been thinking of, that you're looking for specifically? But I hadn't really thought about the medical versus recreational.

Speaker #1: 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.

Speaker #1: Like other states have done . So I don't know if we'll see how that that that plays out . You know , whether it's going to drop off and switch or what it's going to do .

Speaker #1: I don't know . I know from our perspective , you know , we service both ends of that market and we're adjusting our packaging sizes to correspond more to the universal , you know , so that we're really determining a medical or a , a recreational at the time of delivery , like most people are doing .

Speaker #1: And we'll also , depending on how the rescheduling goes , we'll , we'll adapt our , our process and procedures based upon that to

Eric Offenberger: We'll also, depending on how the rescheduling goes, adapt our process and procedures based upon that too.

Eric Offenberger: We'll also, depending on how the rescheduling goes, adapt our process and procedures based upon that too.

Speaker #4: Right Thank you . And then in terms of what you can share , you know , where where is the Fairfield store relative to your other five stores ?

Pablo Zuanic: 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. Which are the ones that still have a lot of room to grow on a comparative basis. Thanks.

Pablo Zuanic: 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. Which are the ones that still have a lot of room to grow on a comparative basis. Thanks.

Speaker #4: 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.

Speaker #4: On a comparative basis. Thanks.

Speaker #1: Okay . So from our perspective , we won't give you a per store at this point in time . You know , we're not prepared to do that .

Eric Offenberger: Okay. So from our perspective, we won't give you a per store at this point in time. We're not prepared to do that.

Eric Offenberger: Okay. So from our perspective, we won't give you a per store at this point in time. We're not prepared to do that.

Pablo Zuanic: Of course not.

Pablo Zuanic: Of course not.

Speaker #1: Just we don't think yeah , we don't think it's good market wise , but that said , Fairfield , you know , I , I owned it a little bit on the pricing in the comments that I made .

Eric Offenberger: Just we don't think it's good market-wise.

Eric Offenberger: Just we don't think it's good market-wise.

Pablo Zuanic: Yeah.

Pablo Zuanic: Yeah.

Eric Offenberger: But that said, Fairfield, I owned it a little bit on the pricing and 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. So 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 a 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.

Eric Offenberger: But that said, Fairfield, I owned it a little bit on the pricing and 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. So 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 a 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.

Speaker #1: 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.

Speaker #1: Another one I own is on Fairfield, so the Fairfield store is sitting in that property of Jungle Jim's, which has tremendous traffic.

Speaker #1: The part I hadn't recognized correctly was that it's part of a 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.

Speaker #1: 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 .

Speaker #1: So 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.

Eric Offenberger: So 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. So I own that mistake, and we fixed 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. So Fairfield's got the most growth. Our Jackson store performs well, our Jeffersonville store's gaining shares back and everything. And for the last 3 months, Columbus has done a really good job recovering because we got the pricing right.

Eric Offenberger: So 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. So I own that mistake, and we fixed 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. So Fairfield's got the most growth. Our Jackson store performs well, our Jeffersonville store's gaining shares back and everything. And for the last 3 months, Columbus has done a really good job recovering because we got the pricing right.

Speaker #1: I should have done that before open . So I own that mistake . And we fix it . The same thing I said before , you're going to make missteps .

Speaker #1: It's how fast you fix them and how fast you recognize them. And we recognized that fast and started to adjust it. So, Fairfield's got the most growth.

Speaker #1: Our Jackson store performs well. Our Jeffersonville stores are gaining share back and everything. And for the last three months, Columbus has done a really good job recovering because we got the pricing right.

Speaker #1: And 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.

Eric Offenberger: 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 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. 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 head count. Times people are in the door, feet traffic and stuff along those lines. We really feel good about what they are doing. And that team is doing a really good job executing out there.

Eric Offenberger: 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 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. 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 head count. Times people are in the door, feet traffic and stuff along those lines. We really feel good about what they are doing. And that team is doing a really good job executing out there.

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

Speaker #1: They're 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.

Speaker #1: That said , we watch head count , you know , times people are in the door or feet , traffic and stuff along those lines .

Speaker #1: So we really feel good about what they're doing, and that team's doing a really good job executing out there. I anticipate having the drive-thru in Athens open in the next two or three weeks.

Eric Offenberger: I anticipate having the drive-through in Athens open in the next two or three 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. 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 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.

Eric Offenberger: I anticipate having the drive-through in Athens open in the next two or three 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. 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 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.

Speaker #1: That Jeffersonville store has its drive-thru, and you're seeing it, so really, we really feel good about Ohio and that team.

Speaker #1: And I really feel good about where we're at in Arizona . You know , the , the store counts are coming back there again in the traffic and stuff .

Speaker #1: And they can price competitively, and they can participate in the market. We always say we don't set the market, we participate.

Speaker #1: And that's really working well now. So, I'm happy with everything. The results are good from my perspective.

Speaker #4: Well that's good , good call . 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 for prices below what it cost them to grow , right .

Pablo Zuanic: No, that is good. Good color. If I may, just a couple more.

Pablo Zuanic: No, that is good. Good color. If I may, just a couple more.

Eric Offenberger: Yeah.

Pablo Zuanic: In the case of Arizona, I know you said that people are selling for prices below what it costs them to grow. So that is very clear. But I still wonder whether the larger retail networks. Call it the Trulieve's, the Curaleaf's 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.

Eric Offenberger: Yeah.

Pablo Zuanic: In the case of Arizona, I know you said that people are selling for prices below what it costs them to grow. So that is very clear. But I still wonder whether the larger retail networks. Call it the Trulieve's, the Curaleaf's 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.

Speaker #4: But so that's very clear . But I still wonder whether the larger retail networks , right . Call it the Leafs of the world .

Speaker #4: They have so many stores there and are vertical. Whether it can end up having a very strong price advantage relative to you or not, really.

Speaker #1: Again, you know, 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.

Eric Offenberger: 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. When I say that, excuse me.

Eric Offenberger: 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. When I say that, excuse me.

Speaker #1: And there's an overcapacity situation. So when I say that—excuse me.

Speaker #2: Pablo , this is Trevor . I'm going to jump in while Eric takes a drink of water . Yeah . Your concerns are valid and normal markets where there's constraints on the supply side .

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

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

Eric Offenberger: Yeah.

Eric Offenberger: Yeah.

Eric Offenberger: Yeah. 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. So every dispensary has the 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 two years ago on these calls, we'd start to see normalization. I think we mentioned two calls ago, we still don't see normalization on supply side. So 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.

Trevor Smith: Yeah. 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. So every dispensary has the 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 two years ago on these calls, we'd start to see normalization. I think we mentioned two calls ago, we still don't see normalization on supply side. So 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.

Speaker #2: But Arizona , it's only constrained as one parcel of land . So every every dispensary has a cultivation , you know , the number of cultivation licenses is way out of whack .

Speaker #2: And then each license has no physiological limit on how big it can grow . So as a result , we , you know , we hoped two years ago on these calls we'd start to see normalization .

Speaker #2: And I think we mentioned two calls ago, we still don't see normalization on the supply side. So we think that's going to continue for the foreseeable future.

Speaker #2: And there frankly won't be a major cost advantage to producing versus purchasing.

Speaker #1: Right . And 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 is what's their cash cost from our perspective , our cash costs , we could still do grow and sell at a cash cost .

Pablo Zuanic: Right.

Pablo Zuanic: Right.

Eric Offenberger: 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 is 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 take and pay down the debt and structure yourself so that you can do something else with your balance sheet.

Eric Offenberger: 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 is 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 take and pay down the debt and structure yourself so that you can do something else with your balance sheet.

Speaker #1: But I wasn't deploying a return on assets to the shareholders. And by the way, the way we structure ourselves and own the properties, and how we bought them and how we build them, and stuff like that.

Speaker #1: I can liquidate them and take that capital and pay down the debt, and structure yourself so that you can do something else with your balance sheet.

Speaker #1: So that's kind of how we measure it. So when I say it was selling below our cost or at our cost, that's a fully absorbed cost.

Eric Offenberger: That's kind of how we measure it. So 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.

Eric Offenberger: That's kind of how we measure it. So 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.

Speaker #1: That's how we look at it, right.

Pablo Zuanic: Right.

Pablo Zuanic: Right.

Speaker #4: Okay . Thank you One very last one . You know , most companies and even some of the 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 , you know , from my perspective , I haven't seen that much in terms of M&A pick up .

Trevor Smith: Okay.

Trevor Smith: Okay.

Trevor Smith: Thank you. One very last one. Most companies and even some of the mortgage REITs, how they sell leaseback operators that serve the industry, are talking that they are seeing a lot more M&A activity on the private side than public side. From my perspective, I haven't seen that much in terms of M&A pickup. I do not 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 still something yet to come?

Pablo Zuanic: Thank you. One very last one. Most companies and even some of the mortgage REITs, how they sell leaseback operators that serve the industry, are talking that they are seeing a lot more M&A activity on the private side than public side. From my perspective, I haven't seen that much in terms of M&A pickup. I do not 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 still something yet to come?

Speaker #4: I don't know if you want to talk about that, in terms of are you seeing more inbound or outbound pricing? You know, any comments you can give on that?

Speaker #4: Is this thesis of more M&A activity really playing out, or is it still something yet to come?

Speaker #1: I think there's a lot of tire kicking , a lot of inbounds , you know , people talking and stuff along those lines and you're seeing some deals obviously out in the marketplace and stuff like that .

Eric Offenberger: I think there's a lot of tire kicking, a lot of inbounds, people talking and stuff along those lines. I think 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 looking like and how do these assets that have problems run. I read an interesting article yesterday somebody's put out there about indoor cultivations, possibly when they're going dormant, going into data centers and stuff along those lines. So I think people are starting to look at how does that start to happen.

Eric Offenberger: I think there's a lot of tire kicking, a lot of inbounds, people talking and stuff along those lines. I think 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 looking like and how do these assets that have problems run. I read an interesting article yesterday somebody's put out there about indoor cultivations, possibly when they're going dormant, going into data centers and stuff along those lines. So I think people are starting to look at how does that start to happen.

Speaker #1: It looks like there are a lot of paper deals, and you know what's going to happen on the come side of it.

Speaker #1: 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 looking like , and how do these assets , you know , that have problems , you know , run .

Speaker #1: 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.

Speaker #1: You know , so I think people are starting to look at , you know , what , how does that start to happen ?

Speaker #1: That said , you know , we're we're obviously stewards of a public entity and we have a shareholder responsibility . So we're looking at it from both standpoints of where does it make sense to expand and where does it make sense ?

Eric Offenberger: That said, we're obviously stewards of a public entity, and we have a shareholder responsibility, so 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. But 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 a lot of vendor carry back and earn-outs and stuff along those lines. I do not know how that's going to play out.

Eric Offenberger: That said, we're obviously stewards of a public entity, and we have a shareholder responsibility, so 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. But 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 a lot of vendor carry back and earn-outs and stuff along those lines. I do not know how that's going to play out.

Speaker #1: If somebody's got an inbound or something along those lines , but right , right now it's all tire kicking as far as I'm concerned .

Speaker #1: 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.

Speaker #1: How that looks , it's hard for me to tell you what what the structure is on those . My guess is that a lot of it's , you know , a lot of vendor carryback and earnouts and stuff along those lines .

Speaker #1: And, you know, I don't know how that's going to play out.

Speaker #4: Thank me . Thank you

Pablo Zuanic: Thank you. That's all from me. Thank you.

Pablo Zuanic: Thank you. That's all from me. Thank you.

Speaker #3: The next question comes from Paul Penny with Partner Capital Group. Please go ahead.

Operator: The next question comes from Paul Penny with Partner Capital Group. Please go ahead.

Operator: The next question comes from Paul Penny with Partner Capital Group. Please go ahead.

Speaker #5: Great . Thank you . Hey , Eric . Hey , Trevor . Hey , Paul . A couple questions , a couple questions in Arizona .

Paul Penny: Great. Thank you. Hey, Eric. Hey, Trevor.

Paul Penney: Great. Thank you. Hey, Eric. Hey, Trevor.

Trevor Smith: Hey, Paul.

Trevor Smith: Hey, Paul.

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

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

Speaker #5: Can you give me a ballpark for the variance between your all-in cost per pound to produce in Eloy versus what you can buy today on the open market?

Speaker #2: Hey , Paul , how are you ? Yeah . So 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 .

Trevor Smith: Hey, Paul, how are you? Yeah. 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 gets you. 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.

Trevor Smith: Hey, Paul, how are you? Yeah. 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 gets you. 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.

Speaker #2: 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 gets you.

Speaker #2: You know , I think it'd be tough for us to go below seven . So either way you're looking at it . If you can source product sub 400 and some real distressed cases , 250 or less , there's no reason to take us four and a half months cycle risk of agricultural process when you could , you know , pay net 30 .

Trevor Smith: There is no reason to take a 4 and a half month cycle risk of the agricultural process when you could pay net 30.

Trevor Smith: There is no reason to take a 4 and a half month cycle risk of the agricultural process when you could pay net 30.

Speaker #5: Yes. Any recent trends there on the supply-demand side in Arizona in terms of wholesale flower prices? Anything major or notable?

Paul Penny: Yeah. 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?

Paul Penney: Yeah. 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?

Speaker #5: Worth worth talking about ?

Speaker #2: We really like our decision to exit Eloy.

Trevor Smith: We really like our decision to exit Eloy.

Trevor Smith: We really like our decision to exit Eloy.

Speaker #5: Fair enough . Understood . And then switching gears to Ohio with the six open stores . Can you maybe just bookend , like what's been the biggest upside surprise positive .

Paul Penny: Fair enough. Understood. Then switching gears to Ohio, with the 6 open stores, can you maybe just bookend what has been the biggest upside surprise on the positive side, and what has been the biggest challenge when you think about the market today versus your expectations?

Paul Penney: Fair enough. Understood. Then switching gears to Ohio, with the 6 open stores, can you maybe just bookend what has been the biggest upside surprise on the positive side, and what has been the biggest challenge when you think about the market today versus your expectations?

Speaker #5: On the positive side, what's been the biggest challenge when you think about the market today versus your expectations?

Speaker #1: Well , I covered it . I thought Fairfield was going to go gangbusters and it went good . Don't get me wrong . I it , you know , not like it didn't jump .

Eric Offenberger: Well, I covered it. I thought Fairfield was going to go gangbusters. It went good, don't get me wrong.

Eric Offenberger: Well, I covered it. I thought Fairfield was going to go gangbusters. It went good, don't get me wrong.

Paul Penny: Yep.

Paul Penney: Yep.

Eric Offenberger: It is not like it did not jump, but I thought it was going to Ferrari type of down the road, and I was wrong. So it did not do that. So you can bet that I know what I am doing on the next 2 and how I am doing it, so I learn. On the other ones, I have been surprised with how well we just execute. We have really gotten good management out there and good staff, and we execute. You are dealing with a retail situation, so generally, you have high turnover rates and stuff like that. We have not experienced that there or in Arizona. So that has always been a pleasant surprise to me. I like how we go to market and merchandise, getting everybody focused on that we look at the different stores. So we have got a store in Athens, and we are gearing that up for the students returning.

Eric Offenberger: It is not like it did not jump, but I thought it was going to Ferrari type of down the road, and I was wrong. So it did not do that. So you can bet that I know what I am doing on the next 2 and how I am doing it, so I learn. On the other ones, I have been surprised with how well we just execute. We have really gotten good management out there and good staff, and we execute. You are dealing with a retail situation, so generally, you have high turnover rates and stuff like that. We have not experienced that there or in Arizona. So that has always been a pleasant surprise to me. I like how we go to market and merchandise, getting everybody focused on that we look at the different stores. So we have got a store in Athens, and we are gearing that up for the students returning.

Speaker #1: But , you know , I thought it was going to like , you know , Ferrari type of down the road . And I was wrong .

Speaker #1: So, you know, it didn't do that. But you know, you can bet that I know what I'm doing on the next two.

Speaker #1: And how I'm doing it . So , you know , I learned on the other ones . I've been surprised with how well we just execute .

Speaker #1: I mean , we've really gotten good management out there and good staff . And we execute , you know , you're dealing with a retail situation .

Speaker #1: So , you know , generally you have a high turnover rates and stuff like that . We haven't experienced that there or in Arizona .

Speaker #1: So that's always been a pleasant surprise to me. I like how we go to market and merchandise, getting everybody focused on that. We look at the different stores.

Speaker #1: So we've got like a store in Athens and we're gearing that up for the students returning , you know , so we look at them individually , not I'm in a market to Ohio or merchandise in Ohio .

Eric Offenberger: 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 in a merchandise in Jeffersonville. I think we kind of are really doing a good job of not one size fits all. We look at what is going on in that market and how the customers are interacting with us.

Eric Offenberger: 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 in a merchandise in Jeffersonville. I think we kind of are really doing a good job of not one size fits all. We look at what is going on in that market and how the customers are interacting with us.

Speaker #1: We look at I'm going to merchandise and Jackson , I'm in a merchandise in Jeffersonville , you know . So I think we kind of are really do a good job of not one size fits all .

Speaker #1: We look at what's going on in that market and how the customers are interacting with us. So,

Paul Penny: That is great. Makes sense. A couple of, just two quick housekeeping questions. The inventory builds, noticeable uptick. I am sure that is intentional with Ohio growing. But what kind of inventory level should we expect once you have all eight stores open, and what kind of steady state inventory? Then second question is, on the CapEx side, what is left to spend dollar-wise for the remainder of 2026 in Ohio?

Paul Penney: That is great. Makes sense. A couple of, just two quick housekeeping questions. The inventory builds, noticeable uptick. I am sure that is intentional with Ohio growing. But what kind of inventory level should we expect once you have all eight stores open, and what kind of steady state inventory? Then second question is, on the CapEx side, what is left to spend dollar-wise for the remainder of 2026 in Ohio?

Speaker #5: That's great . Makes sense Just two quick housekeeping questions The inventory build , you know , noticeable uptick . I'm sure that's intentional with Ohio growing .

Speaker #5: But what kind of inventory level should we expect once you have all eight stores open, and what kind of steady state inventory?

Speaker #5: And then the second question is on the CapEx side. What's left to spend, dollar-wise, for the remainder of '26 in Ohio?

Speaker #2: 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 two and a half years.

Trevor Smith: Let me start with the first one. The other thing I will echo on Eric Offenberger's prior answer on things that we are pleased about, yield per plant is up 68% in the last two and a half years. This is coming from right off the biological asset notes in all of our public filings, not even the most recent data, which we are excited to share in Q3.

Trevor Smith: Let me start with the first one. The other thing I will echo on Eric Offenberger's prior answer on things that we are pleased about, yield per plant is up 68% in the last two and a half years. This is coming from right off the biological asset notes in all of our public filings, not even the most recent data, which we are excited to share in Q3.

Speaker #2: And this is coming from right off the bio asset notes . And all of our public filings , not even the most recent data , which we're 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 .

Paul Penny: Okay.

Paul Penney: Okay.

Trevor Smith: That massive jump up was the big driver in terms of yield. With the state delays that Eric Offenberger 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 along Q1. Backing into your real answer, it is about a $2 million excess inventory level at Q2.

Trevor Smith: That massive jump up was the big driver in terms of yield. With the state delays that Eric Offenberger 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 along Q1. Backing into your real answer, it is about a $2 million excess inventory level at Q2.

Speaker #2: 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 along Q1 .

Speaker #2: So 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 , land the plane at year end , you know , Arizona is turning really , really fast .

Paul Penny: Okay.

Paul Penney: Okay.

Trevor Smith: It'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's 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 2026.

Trevor Smith: It'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's 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 2026.

Speaker #2: We don't have any inventory carry there from our own cultivation . Now . And on the Ohio side , short of a major jump up again in yield , which would be great .

Speaker #2: You know, we would look to convert that into cash in '26.

Speaker #1: 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 , pretty hard to do in a commodity business .

Eric Offenberger: 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.

Eric Offenberger: 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.

Speaker #1: 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.

Paul Penny: Yep

Paul Penney: Yep

Eric Offenberger: 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.

Eric Offenberger: 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.

Speaker #5: There. And then on CapEx spend, Trevor.

Paul Penny: Fair. On CapEx spend, Trevor?

Paul Penney: Fair. On CapEx spend, Trevor?

Speaker #2: We've got a lot more options than we did coming into the year, or at least what we thought we'd have coming into the year.

Trevor Smith: 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. The previously mentioned yield jump has 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 build 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 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.

Trevor Smith: 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. The previously mentioned yield jump has 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 build 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 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.

Speaker #2: So, that previously mentioned yield jump has basically allowed us to supply our internal retail rates in a way that wasn't initially thought possible.

Speaker #2: So, we'll be kind of strategic on the CapEx builds and the timing of which, you know, major mechanical purchases are made to expand further capacity.

Speaker #2: I will say we are actively under construction for our seventh location, as we've previously disclosed. You'll have some CapEx there, but that's a retail facility.

Speaker #2: You know, 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.

Paul Penny: Super. Way to execute, guys. Great quarter. Thank you.

Paul Penney: Super. Way to execute, guys. Great quarter. Thank you.

Speaker #5: Great execution, guys. Great quarter. Thank you.

Speaker #3: Once again , if you have a question , please press star . Then one , the next question comes from Josh Felker with CB one capital .

Operator: Once again, if you have a question, please press star then 1. The next question comes from Josh Felker with CB1 Capital. Please go ahead.

Operator: Once again, if you have a question, please press star then 1. The next question comes from Josh Felker with CB1 Capital. Please go ahead.

Speaker #3: Please go ahead .

Josh Felker: Hey, guys. Congrats on the quarter. I guess considering a big part of the forward narrative is that margin 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?

Josh Felker: Hey, guys. Congrats on the quarter. I guess considering a big part of the forward narrative is that margin 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?

Speaker #6: Congrats on the quarter. I guess considering a big part of the forward narrative is that margins step up in Arizona. I know you, I believe you harvested the last from Eloy in May.

Speaker #6: So I'm just interested . When will you sell the last Eloy inventory into that market ? When is this specific ? Flip to a third party sourced wholesale .

Speaker #6: The

Speaker #2: Hey , Josh , you'll have a little bit of . You had the last sell through already occur in Q3 , so you'll have just a little bit of tail off .

Trevor Smith: Hey, Josh. You will have a little bit of, we had the last sell-through already occur in Q3, so we have just a little bit of tail-off. IFRS inventory capitalization, all that noise and nonsense ends in Q3, so Q4 will be your first clean quarter. We are expecting Arizona to no longer be a laggard on cash flow margin or adjusted EBITDA margin the way it has been particularly the last six months, if not the last 18. It will not be as good as Ohio, but it will be more in line with a capital light retail-oriented business.

Trevor Smith: Hey, Josh. You will have a little bit of, we had the last sell-through already occur in Q3, so we have just a little bit of tail-off. IFRS inventory capitalization, all that noise and nonsense ends in Q3, so Q4 will be your first clean quarter. We are expecting Arizona to no longer be a laggard on cash flow margin or adjusted EBITDA margin the way it has been particularly the last six months, if not the last 18. It will not be as good as Ohio, but it will be more in line with a capital light retail-oriented business.

Speaker #2: I guess inventory capitalization . You know , all that noise and nonsense ends in Q3 . So Q4 will be your first clean quarter .

Speaker #2: But you know , we're expecting Arizona to no longer be a laggard on cash flow margin or adjusted EBITDA margin , the way it's been , you know , particularly the last six months , if not the last 18 , it won't be as good as Ohio , but it'll be , you know , more in line with a capital light , retail oriented business

Speaker #6: Super . And you've mentioned the pre-roll category in Ohio in the past , but I haven't heard much recently . So could you just give us an update on kind of what your strategy is for pre-roll category within Ohio ?

Josh Felker: Super. You have mentioned the pre-roll category in Ohio in the past, but I have not heard much recently. Could you just give us an update on what your strategy is for pre-roll category within Ohio? Is that a primary focus? Is there an opportunity there anywhere? I would just love to hear your thoughts.

Josh Felker: Super. You have mentioned the pre-roll category in Ohio in the past, but I have not heard much recently. Could you just give us an update on what your strategy is for pre-roll category within Ohio? Is that a primary focus? Is there an opportunity there anywhere? I would just love to hear your thoughts.

Speaker #6: Is that a primary focus? Is there an opportunity there, anywhere? I'd just love to hear your thoughts.

Speaker #1: Yeah , 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 , we our yields are doing well , that our flower gives us an opportunity to sell some in bulk , some as packaged in pre-rolls and pre-rolls are starting to move up as a category and stuff along those lines .

Eric Offenberger: Yeah, I think there is an opportunity there. 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 some opportunity to sell some in bulk, some as packaged, and pre-rolls. Pre-rolls are starting to move up as a category and stuff along those lines. We think that 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, 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 realize how inexpensive that product can get. So we have invested in automation, and we always do in our things.

Eric Offenberger: Yeah, I think there is an opportunity there. 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 some opportunity to sell some in bulk, some as packaged, and pre-rolls. Pre-rolls are starting to move up as a category and stuff along those lines. We think that 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, 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 realize how inexpensive that product can get. So we have invested in automation, and we always do in our things.

Speaker #1: 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 a value add .

Speaker #1: If you would , Josh , into the wholesale market , you know , that you're putting a little more value into it . And since we've been operating in the space for a long time out in Arizona , we realize how inexpensive that product can get .

Speaker #1: So we've invested in automation and we always do . And our , our , our things . So from our perspective , it's going to be a good market .

Eric Offenberger: From our perspective, it is going to be a good market. It is going to grow for us, and we are really focused on cost control. That is what we pride ourselves on is watching that cost and making darn sure if you approach the business as it is a commodity, the only thing we are really going to watch is our cost in order to maintain that margin. That is why we made the decisions that we did in Arizona.

Eric Offenberger: From our perspective, it is going to be a good market. It is going to grow for us, and we are really focused on cost control. That is what we pride ourselves on is watching that cost and making darn sure if you approach the business as it is a commodity, the only thing we are really going to watch is our cost in order to maintain that margin. That is why we made the decisions that we did in Arizona.

Speaker #1: It's going to grow for us . And we are really focused on cost control . That's what , you know , 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 costs in order to maintain that margin .

Speaker #1: And that's why we made the decisions we did in Arizona.

Josh Felker: All right. Appreciate that, and 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 you have at your 25,000 square foot facility in Ohio beyond what you think is needed to service your eight doors? I know that 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.

Josh Felker: All right. Appreciate that, and 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 you have at your 25,000 square foot facility in Ohio beyond what you think is needed to service your eight doors? I know that 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.

Speaker #6: Appreciate that . And maybe just make 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 .

Speaker #6: 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?

Speaker #6: I know that 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 ?

Speaker #6: Sorry to push .

Speaker #2: Yeah , we we see it as an opportunity for 2027 as opposed to a necessity for 2026 . And that's the change over the last two , two quarters where we went into the year thinking we're going to have a shortage , we're going to need a source .

Trevor Smith: Yeah. 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 of getting more stores open pushed it into an opportunity for 2027 for us.

Trevor Smith: Yeah. 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 of getting more stores open pushed it into an opportunity for 2027 for us.

Speaker #2: But you know , the big step up in yield and . Unfortunately , some of the delays on , you know , permitting and other things of getting more stores open pushed it into an opportunity for 27 for us

Speaker #6: Love it. Appreciate the clarity. Thanks, guys.

Josh Felker: Love it. Appreciate the clarity. Thanks, guys.

Josh Felker: Love it. Appreciate the clarity. Thanks, guys.

Operator: This concludes-

Operator: This concludes-

Eric Offenberger: Thanks, Josh.

Eric Offenberger: Thanks, Josh.

Operator: The question and answer session and today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.

Operator: The question and answer session and today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.