Good afternoon. My name is Joanna, and I will be your conference operator today. At this time, I would like to welcome everyone to TerrAscend's Second Quarter 2022 Earnings Call. Joining us for today's call is Jason Wild, Executive Chairman, Ziad Ghanem, President and Chief Operating Officer, and Keith Stauffer, Chief Financial Officer. Today's presentation includes forward-looking statements about the business outlook in the states in which the company operates. Each forward-looking statement discussed in today's call is subject to risks and uncertainties that could cause actual results to differ materially from those projected in such statements. Additional information regarding these factors appears under the heading Risk Factors in the company's 10-K and 10-Q that was filed with the Securities and Exchange Commission and available at www.sec.gov and on the company's website at www.terrascend.com. The forward-looking statements in this presentation speak only as of the original date of this presentation, and management undertakes no obligation to update or revise any of these statements. I would now like to introduce Mr. Jason Wild. Please go ahead, Mr. Wild. Good afternoon, everybody. Thank you for joining us this afternoon. Today, we are among the leaders in each of our four key markets, New Jersey, Maryland, Pennsylvania, and Michigan, with the first three states having either recently been approved for adult use or expected to be over the next 18-24 months. Scale is very important to meet the growing demand in each market, particularly as each approaches adult use. We built scale in the early days when New Jersey was medical only. While awaiting the launch of adult use, we invested and built a leadership position in both presence and capability, which had us well prepared for the April launch. In addition to New Jersey, we have expansion programs nearing completion or already completed in both Maryland and Pennsylvania, where we expect to have leading capabilities and capacity, preparing us for adult use in each of these key markets. With Maryland adult use on the November ballot and Pennsylvania widely considered to be not that far behind, we cannot be more excited about the future growth, runway ahead of us. The macro environment has created challenges this year, which has impacted the consumer. While growth rates across the cannabis sector have slowed, we anticipate a return to significant growth over time, mainly driven by the unfolding state-by-state growth story, particularly concentrated on the East Coast. We are in the ideal markets that are a key part of that growth story. The recent slowdown in growth is not all bad. The current market environment is presenting some extremely attractive opportunities. The benefit of our deep and not wide strategy provides opportunities that are not available to other multi-state operators who are capped in many of the most attractive states. With fewer bidders for best-in-class assets, we are optimistic about our ability to acquire great businesses in excellent states at historically low multiples. Speaking of attractive states, let's talk about New Jersey. Following the launch of adult use in late April, our two stores in Maplewood and Phillipsburg are performing as well or better than we expected. Additionally, our third location in Lodi just opened a few weeks ago. We believe for many reasons that Lodi will be our best-performing dispensary. Lodi finally opening, combined with the performance to date in Maplewood and Phillipsburg, bolsters our confidence that each of these stores can achieve at least a $40 million run rate in their first full year of rec sales. In Pennsylvania, our sales grew sequentially amid a challenging and competitive environment. We have completed the transition from old genetics to new, which is resonating well with patients. We were ahead of the curve last summer when we took the necessary actions to better position the company to navigate these more competitive market dynamics. Today, we have a higher quality product that appeals to an increasingly sophisticated patient base. Pennsylvania is a key market for us long term. With our CapEx spending complete, our library of new strains now hitting the market, and several upcoming new product and brand launches, we are well prepared to succeed in the current environment and to flourish upon the launch of adult use. In Maryland, adult use is on the November ballot, with early polls indicating that it will pass. As we did in New Jersey, we are preparing now for this reality and are on schedule with the Hagerstown expansion and the closing of the Allegany Dispensary acquisition. These preparations, along with our continued pursuit of additional dispensaries up to the four dispensary limit, will position us as a leading vertically integrated operator in another key Northeast market. In Michigan, the integration of the Gage acquisition is nearly complete. Within a market that has become very challenging, we have adjusted our cost structure accordingly. Additionally, to complement our retail presence, during the quarter, we launched our branded wholesale initiative and opened our manufacturing and extraction lab. On the retail front, we expect to have 20 dispensaries open in Michigan by the end of the year. In a quarter with many moving parts, we have demonstrated agility by adapting to an increasingly competitive environment and volatile economic backdrop, while also maintaining discipline and focus on executing our long-term growth strategy. I'd like to now turn the call over to Ziad to provide an update on our key markets. Ziad? Thank you, Jason, for laying out the macro overview and higher level aspects of our business. Next, I would like to take us through more details on our operations state by state. This is my second full quarter with TerrAscend. On my first week on the job, I promised the team and committed to spend serious time with them in the field in every business unit to learn their day-to-day operation and their challenges so I can more effectively support them. To date, I have spent more than 75% of my time in the field, rolling up my sleeves and working side by side with our team members. I witnessed passion, commitment, and work ethic from team members across all functions that I have not seen in my 20+ years career in pharma. I witnessed customers celebrating and welcoming our colleagues in the communities and appreciating what they do every day. I witnessed patients sharing their emotional stories on how cannabis changed their lives and got them off multiple opioids. As a pharmacist, that makes me more determined to work harder every day for that cause. During the travel, I spent nine nights at The Wild residence, thank you, JW, going deep into the night with Jason discussing our exciting and fast-moving industry and planning our expansion and our next moves. Today, I'm pleased with the progress that we have made over this period of time and even more excited about the opportunities ahead. In Q2, we delivered solid financial results with revenue for the second quarter growing 30% sequentially and led by New Jersey. Let's start with New Jersey. Adult use sales began on April 21st, so our second quarter financial results reflect a partial quarter of adult use sales at two of our three locations. Our Phillipsburg and Maplewood stores are performing well, with revenue, foot traffic, basket size, and other key metrics exceeding our expectations. Although later than we expected, we are pleased to have recently opened our latest store in Lodi. We had our soft opening over the past two weeks, with the grand opening planned for this weekend. We believe Lodi will be our best-performing dispensary. This location features the state's first drive-through and off of Route 17 and I-80, one of the busiest traffic locations in the country. The Apothecarium Lodi is located in one of the most populous regions of northern New Jersey, 14 miles outside of Manhattan and adjacent to the iconic Satin Dolls Bada Bing club featured on The Sopranos. We are also among the operators with the longest store hours in northern New Jersey, seven days a week. Today, we are one of the only two operators with all three dispensaries open for recreational sales. As we have mentioned before, we are confident that we can achieve at least a $40 million annual run rate in each of the three stores within their first year of operation under adult-use. In our Boonton cultivation facility, we are doing an excellent job of maintaining an efficient and top-quality process, from growth to processing to packaging and shipment. At retail, we are really proud of our customer experience with minimal wait time amidst high throughput. Next, our product and brand selection in New Jersey is unparalleled, and we recently expanded with the introduction of Gage and Cookies branded products. Following the launch, we had our highest grossing day ever as sales increased 40% for the first full weekend versus the prior weekend. Since these launches, we have seen continued momentum and growth. Although subsequent to the quarter, we opened our first Cookies Corner in our Maplewood store, and early signs indicate that it's performing very well. Our hydrocarbon extraction facility is up and running, enabling us to produce multiple form factors of concentrate. Based on what we have seen in other markets, we expect this segment to account for 20%-30% of sales over time. As the only operator in the state with the capability to sell concentrate, carrying these products exclusively in our store has helped us to develop the reputation as the destination that caters to the most sophisticated cannabis customers in the state. This, in turn, is attracting consumers from a wider geographic radius. Moving next to wholesale, we are in the enviable position to have the ability to supply both the medical and recreational needs in our stores while also supplying the wholesale market with our brands. We have one of the largest cultivation and manufacturing footprints in the state. Furthermore, as mentioned on our prior call, we signed a lease on a large facility and have begun the expansion process, which will eventually take us up to the 150,000 sq ft canopy limit over time. With this ability to scale up, we expect to continue to be both a retail and wholesale leader in New Jersey, a market that is estimated to grow to $2.5 billion by 2026. We believe the New Jersey adult-use launch set the stage for other states in the Northeast to similarly approve adult use sales over the next 12-24 months. Most notably, Pennsylvania and Maryland, where we have established leadership positions as well. Moving next to Pennsylvania, revenue grew sequentially in the quarter. The improvements we made to our cultivation facility and our genetic library have significantly upgraded our product quality and selection. We have fully transitioned from our old genetics to our popular new strains. As a result, wholesale customers and retail patients are responding positively. Retail in the state has become more competitive, with a flattening of patient count combined with an increasing dispensary count. Today, we have six dispensaries open and are seeing attractive acquisition opportunities to position us with a larger retail footprint as adult use approaches. Wholesale in the state has become more challenging as many retail operators have begun carrying a greater mix of their own products. Within that environment, we are encouraged by the sequential increase of our realized sales price per pound of flower. This is a strong indicator that our new higher quality products and strains are resonating with patients in this increasingly competitive environment. Over the past year, we have completed our investment in our PA facility, which has resulted in a higher quality product as well as additional capacity. We are now prepared to meet increased demand in an expected adult use market without significant further investment. Staying in the Northeast, we entered Maryland last year with cultivation and processing, with the intention to become vertically integrated in the future. With adult use on the ballot for November, we are taking the steps now to prepare ourselves to be vertically integrated with ample capacity and strategically located dispensaries for the anticipated increased demand. The build-out of our new facility in Hagerstown will be complete and operational this quarter. This is a large facility at 150,000 sq ft, a fully functioning processing area, and a kitchen. Our initial cultivation space doubles our existing capacity with room for further expansion. On the manufactured product side, our new capabilities enable us to expand our product offering. We are excited to replace an older facility that presented operational challenges with a new state-of-the-art facility. To date, Maryland is a wholesale market for us. We expect to close on our previously announced acquisition of Allegany Medical in the coming weeks, subject to regulatory approval. Allegany is an 8,000 sq ft dispensary situated within six miles of West Virginia and Pennsylvania. We plan to rebrand the dispensary as The Apothecarium and introduce our leading brand and form factors upon closing. Allegany is the first step for us. We continue to actively look for other retail locations to reach the four dispensary limit and to better position us for the anticipated strong adult use demand. Similar to my comments on Pennsylvania, the current competitive environment in Maryland is offering very attractive acquisition opportunities. In Michigan, the second quarter was our first full quarter of contribution from the Gage acquisition. Although not up to our expectations in our first full quarter, we have continued our integration to best position us for efficiency, profitability, and positive cash flow. At the end of the second quarter, we launched our branded wholesale business, leveraging our popular Cookies and Gage brands. With over 500 dispensaries in Michigan, more than half of which are not vertically integrated and only sell third-party products, we continue to see branded wholesale as an important growth driver going forward. Today, our retail footprint in Michigan is comprised of 12 dispensaries, all branded either Gage or Cookies, with our newest Cookies dispensary having opened during the quarter in Ann Arbor. We also introduced Khalifa Kush into our Gage dispensaries during the quarter, a premium cannabis brand founded by Grammy Award-nominated recording artist Wiz Khalifa. With the pending closing of our previously announced Pinnacle acquisition, we will add another five dispensaries, and we also have plans to open three additional locations in the coming months, amounting to an expected 20 locations in total in Michigan. At our Monitor facility, we recently opened our extraction lab and are making progress on our cultivation expansion. Between our state lineup and the open map that will allow us to be selective on where we go next, TerrAscend is set up for strong growth for years to come. Additionally, by focusing on the team members. By listening to our customers and by delivering quality product and achieving operational excellence, we will achieve that growth while improving margin and driving profitability. I would like now to turn the call over to Keith to provide a financial update. Thanks, Ziad. Good afternoon, everyone. The results that I'll be going over today have already been filed on both SEDAR and EDGAR. I'd also like to remind everyone that effective with our previous 2021 10-K filing in March 2022, we became a U.S. filer with the SEC and report our results in accordance with U.S. GAAP. All of the results that I will reference today are stated in U.S. dollars. Net sales for the second quarter totaled $64.8 million, an increase of 30.5% sequentially, and 10.4% year-over-year. The sequential growth was driven by the start of adult use sales in New Jersey and by a full quarter's worth of sales in Michigan. Regarding sales by channel, wholesale revenue for the quarter was $16.8 million, a decline of 30% sequentially. This decline was driven by our decision to discontinue lower-margin, non-branded wholesale business in Michigan while focusing on our higher-margin branded wholesale business in the state. Wholesale sales were up 11% in Pennsylvania, driven by the continued recovery of the business following our proactive intervention in the second half of 2021, the introduction of new higher-quality strains, as well as the introduction of new vape and concentrate products. Wholesale sales in Maryland were down quarter-over-quarter, driven by operational challenges at our legacy Frederick facility, along with the planned transition to our new Hagerstown facility in Q3. Retail revenue for the quarter was $48 million, an increase of 87% sequentially, driven by a full quarter of retail sales in Michigan, combined with the beginning of adult use sales in New Jersey. Retail sales in Pennsylvania and California were both stable quarter-over-quarter. Gross margin for the quarter was 35.5%. Adjusted gross margin for the quarter was 47.1% as compared to 38.4% in the previous quarter, an improvement of 870 basis points sequentially. Adjusted gross margin excludes one-time impacts, including reserves and write-downs for aged inventory in Pennsylvania, dating back to our revamp of that facility in the second half of 2021. The sequential adjusted gross margin expansion was driven by strong improvements across all of our core businesses. In Pennsylvania, we experienced a nearly 1,000 basis point expansion, driven by volume improvement in both flower and vapes. In New Jersey, margin improved by over 800 basis points as the business scaled with the beginning of adult use sales in late April. Even more encouragingly, we saw margins improve sequentially each month of the quarter. In Michigan, margins recovered back to nearly 40% as we focused on profitable revenue by discontinuing non-branded wholesale sales. Also, we opened our extraction facility at the end of Q2, and we expect margin to benefit from this capability in Q3. The sequential improvement in adjusted gross margin was partially offset by operational challenges and transition planning at our legacy facility in Maryland. This was a slight drag on our Q2 margins, which we expect to normalize as we transition to and ramp up at our new state-of-the-art facility in Hagerstown. G&A expenses excluding stock-based compensation were up $10 million versus the previous quarter, driven by the full quarter addition of the Gage acquisition. Excluding Michigan, G&A expenses were up $1.1 million quarter over quarter due to additional staffing and other pre-opening expenses in preparation for the start of adult use sales in New Jersey. As a percentage of revenue, G&A increased to 45.5% in Q2 from 38.7% in the previous quarter. The increase as a percentage of revenue was impacted by the addition of Gage for a full quarter, as well as staffing for all three stores in New Jersey, despite the delayed opening of our Lodi store, which has since opened subsequent to the end of the quarter. Adjusted EBITDA for the quarter was $5.8 million, versus $3.3 million in the previous quarter. Adjusted EBITDA margin improved to 8.9% in Q2 from 6.6% in Q1. The improvement was driven by higher sales and improved gross margin, offset by higher G&A expenses with the addition of Gage for a full quarter and costs associated with the launch of adult use in New Jersey. GAAP net income for the quarter was a positive $14.2 million, compared to a net loss of $16 million in the previous quarter. Looking ahead, we expect sequential revenue growth in both quarters of the second half, driven by the continued ramp-up of adult use sales in New Jersey, the closing of the Pinnacle and AMMD acquisitions in Michigan and Maryland, respectively. Growth of our branded wholesale business in Michigan, as well as additional store openings in Michigan. We also expect continued sequential growth in Adjusted EBITDA as well as Adjusted EBITDA margin expansion in Q3 and Q4, mainly driven by operating expense leverage. Turning to the balance sheet, we ended the quarter with a cash and cash equivalents balance of $49 million versus $88 million at the end of March. During the quarter, we used $16 million in cash from operations, mainly driven by tax payments of approximately $9.2 million and interest payments of $6.4 million. Our taxes payable balance at the end of the quarter was $13 million. Capital expenditures, including deposits, were $12.3 million in the quarter, primarily relating to the ongoing expansion work at our Hagerstown, Maryland, and Monitor Township, Michigan, facilities. We also made final note payments of $5 million related to our 2021 acquisitions of HMS Health in Maryland and KCR Dispensaries in Pennsylvania. Our CapEx spending plans for the rest of the year mainly relate to final payments for our near-completed Hagerstown project, as well as our expansion plans for cultivation in New Jersey at our recently leased Harmony facility. We have ample liquidity and access to capital as a result of our strong creditworthiness based on the attractiveness of our business. We have capacity for additional borrowing due to our unencumbered owned assets and minimal usage of sale leasebacks. This concludes our prepared remarks. I'd now like to turn it over to the operator for questions. Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. Should you have a question, please press the star followed by the one on your touch-tone phone. You will hear a three-tone prompt acknowledging your request. If you are using a speakerphone, please lift the handset before pressing any keys. First question comes from Andrew Bond at Jefferies. Please go ahead. Hi. Good evening, everyone. This is Andrew on the line for Owen Bennett. Thank you for taking our questions. First one for me on margins, maybe for you, Keith. Obviously, a very substantial improvement in the quarter, but this was largely expected, and we know there was kind of a lot of factors going into this, like optimization of production in Michigan, discontinuation of non-branded wholesale, New Jersey coming online, plus I'd imagine a greater mix of branded sales via retail also helped. Could you quantify or help differentiate the magnitude of those various benefits and any impacts other than that to call out? And related to that, how should we think about margin trends for the rest of the year? Thank you. Sure. Hi, Andrew. Yeah, so I think you highlighted a lot of the key drivers and I pretty much in the way I talked about it in my prepared remarks, that was the order of magnitude in terms of priority order of the drivers on the impact in our sequential margin gain. I think as we look forward, there's gonna be a balance of headwinds and tailwinds. I'll start with tailwinds because we have a lot of actions underway. We have continued ramp-up of our business in New Jersey. That's first and foremost really gonna continue to drive our margins upwards because, as I said, we've seen month-on-month improvements in our gross margin in New Jersey. As I mentioned, the extraction lab in Michigan, that's gonna really start to kick in, and we believe that's gonna get us from the thirty or so percent mark that I mentioned, well up into the 40s as we can start to manufacture and fill our own vapes, branded vapes in Michigan. That's another key driver. We also have one thing I didn't mention in my prepared remarks, but it's good to provide color on, is we have a number of other COGS initiatives that we have underway to continue to drive down the cost per pound across all of our facilities. We have some plans with boosting from internal talent and resources, boosting our activities there. That's a lot of the runway on the positive side. We also just need to be mindful that we need to continue to provide the fuel to combat any continued pricing pressures that we do see across our markets. Great. Super helpful. Second one, on the hydrocarbon extraction facility in New Jersey and just generally that market, maybe for you, Ziad. I wanted to get a sense of your production levels relative to the demand you are seeing in your own stores. Is production of these products still ramping? Are you putting any purchasing limits on any of these products, like limiting a rec customer to one live vape cartridge per transaction? Just trying to get a sense on your outlook for this production versus anticipated demand for these products. Yeah. Thank you, Andrew. At this point, we do not have any limitation on the production, and we don't have any limitation on the customers on the pace and the patients on what they get. We have a robust plan of innovation that is coming down the pipe here, both in Q3 and Q4, under different brands that cater to different segments of our customers. To answer your question, there is no limitation. Fantastic. Thanks. I'll pass it on. Thank you. Next question comes from Kenric Tyghe at ATB Capital Markets. Please go ahead. Thank you, and good afternoon. I appreciate the color on Maryland, obviously a market that is increasingly in focus, for the majority of players in the space here. Could you provide a little bit more color around the issues you ran into and what it is about Hagerstown that will be that much better, that much different? I get the scale piece of the equation, but I'd like to just better understand the evolution of the model. Second to that, in Maryland, you know, you called out the fact that there's obviously increasing opportunity or acquisition opportunity to get to that four dispensary cap. But if you could, you know, perhaps try and help us handicap timelines around that or the urgency that you're bringing to getting to that four dispensary cap. Thank you. Yeah, Kenric, thank you very much. From a Maryland perspective, the simple reason, it's an old facility that had old equipment that start going down during the summer season, and the manufacturer of those GrowPods is no longer in business. Fixing and replacing those equipment have caused a tremendous pressure on the production volume and the production quality. That is why we're very excited to transition into the new facility where that would be part of the past. That is from a Maryland perspective. As far as the opportunities, from a buyout perspective or M&A, Kenric, we're seeing opportunities that are coming in that are extremely attractive and at multiples that are magnifying. The macro environment that is putting the pressure on small businesses from a... The interest rate to the capital market to inflation has really pushed some of those smaller businesses to look at their cannabis business different than how it was three or five years ago, and that is what we are looking at. Not only in Maryland, across the board, Keith, Jason, and I are being presented almost on a weekly basis with opportunities of different sizes of potential partners who are talking to us for those M&As. Thank you. Well, that's really useful. I I mean, just a quick one on Pennsylvania, if I could as well. Obviously encouraged to hear the sort of, you know, the just how strong the performance was in the context of that market. But you know, also mindful that you called out sort of a flattening of that patient count growth and how much more challenging wholesale is becoming. Can you sort of frame up for us how you intend navigating that? You obviously have, you know, managed to increase your flower prices on the new strains. But you know, just how challenging is that wholesale environment today? Do you think it's going to get more challenging in the back half? Or do you think that you have the tools necessary to help mitigate some of those challenges? How do we think about the evolution of Pennsylvania through the second half after what appears to have been a good second quarter, again, in the context of the market? Kenric Tyghe, I think it's a great question. From a wholesale perspective, there are some decisions that are made today by operators to increase their vertical shelves. It's a short-term move, and it's a reaction to pressure that is caused by the environment, by the recession, by the inflation, by the pricing in the state. In my opinion, could it work or not? The only group that will decide this is the patients in Pennsylvania. We know very well, and Keith and I have done the modeling, for every 10% improvement on your shelf space of your own vertical product, you can increase your gross margin by around 3%. But the real question is, at what cost of revenue? We believe from a both retail and wholesale perspective, the right mix of having the right quality on your shelf in retail and presenting that right quality to wholesale while keeping the drug, the medication for that patient of something that they have relationship with will be the winning combination at the end of the day. How will the next, or the second half of the year work from wholesale? We're happy with the 11% increase, sequential increase we saw in wholesale. We're happy with the price that we are seeing on our new quality, and then we're expecting the patients to keep their standards high as far as the product portfolio that they expect to see on their menus. Very interesting math and appreciate that. Yeah. A quick final one for me, and probably a long shot, but Keith, you know, you called out expected margin, you know, sequential revenue growth, sequential margin expansion and some of the drivers. You know, the long shot part of the question here is, are you willing or able to give us some sort of target margin or at least a target range exiting the year? I mean, what is the quantum of the improvement we can potentially look for here? Even just direction would be useful. Yeah. Yeah. Kenric Tyghe, it's. Again, we're really trying to highlight that what's really difficult to predict are the headwinds on pricing. What we can control is everything else we're doing about it internally to provide the fuel. That's where it's hard to give too much of a guardrail there. We're confident in everything we're doing and everything I outlined to Andrew earlier. That's really gonna give us if pricing pressures subside at some point, which actually we believe they should at some point, and that's a market by market thing. There are different cycles, but we're doing everything we can internally with all the initiatives that we have underway to continue to drive our costs down at our facilities, and all the other things that I outlined earlier. Great. Thanks, Keith. I'll leave it there and get back in queue. Thank you. Next question comes from Andrew Partheniou at Stifel GMP. Please go ahead. Hi. Good evening. Thanks for taking my questions. Maybe starting off with your balance sheet. You know, correct me if my math is wrong, but I think you have $240 million in debt, $60 million due in November from the Gage acquisition. Cash position is $48 million. Could you talk a little bit about your cash management plans over the next few quarters, the potential for refinancing of that maturing debt? What kind of debt you're targeting given this quarter may not be fully representative of your normalized leverage ratio. Yeah. Hi, Andrew. Yeah, you've read it right in terms of the facts of our debt levels. As I mentioned, we have $49 million in cash on our balance sheet. We have, for example, if you look out over the runway, we have New Jersey generating really strong cash flows for us on a weekly basis. Projecting forward we have that coming in. We do have the Gage loan that matures in November, and we are looking to refinance that loan. We've been actively out in the market talking with various lenders and are very encouraged by the interest and responses that we're getting and the kind of rates and terms that we're hearing in the midst of a difficult environment for borrowing that we're in. That's our intention there. As I mentioned in my part earlier, we feel like we have additional capacity to borrow against other assets that we own in other states that are unencumbered. That's kind of our game plan for our balance sheet. Yeah, Andrew, the only thing I wanna add, Keith, is the reaction we're seeing during our conversation is really anchored around the available assets that we have, the creditworthiness that we earned in the market, but also the partnership versus the lendership that those groups are expressing to us because of the JW investment in this business and the stakeholder that they have—the interest that they have in the business. They're coming into a partnership more than a lendership. Thanks for that. Maybe continuing a little bit on that theme, considering that you are looking at acquisitions, you know, just coming back to that leverage ratio, if you're thinking about raising debt to pay for or fund those acquisitions. As well, I think in the press release, there was a little bit of talk about raising equity. What kind of share price improvement would you like to see to justify raising equity? Hi. It's Jason here. I would say that the comments on raising equity was you know for some point in the future where our stock is appreciably better than it is today. We're not considering that at these levels. In terms of acquisition opportunities, there is a broad range of opportunities that we're looking at. Some of them are very cash light, or many of them are very cash light. Some of them are structured, some of them have the ability to use part cash, part stock, and then you know further payments or earn-outs at some point down the road. We think that there's lots of arrangements that would be very balance sheet friendly, that would, you know, and would bring in excellent assets to the company. In terms of what we're seeing out there, I would say that, you know, first of all, we have no FOMO. We think that the current assets that we have are excellent and are gonna provide a really nice glide path of growth over the next two or three years. What I would say that it has changed versus just a quarter ago is that, while we are seeing a similar, if not larger amount of incoming traffic, potential deals, the assets are getting better and the multiples, the expected multiples are going down. That's something that we've been getting more and more excited about. We think that we are still not quite to the point where we're seeing, you know, I've used this term internally, where we think, you know, sort of, the whites of their eyes or where we're getting to the point where a deal is just so attractive that we, you know, would sort of be crazy if we turned it away. We're getting a whole lot closer to that. I think that we will be seeing in the coming months. That will end up taking advantage of at least one or two of those opportunities. Thanks for the color. I'll get back in the queue. Thank you. Next question comes from Vivien Azer at Cowen. Please go ahead. Hi. Thanks. Good afternoon. Appreciate all the questions around M&A critically, you know, with Keith pointing out the sequential margin improvement will be driven by operating leverage. That's clearly a component of that. Keith, I wanna just follow up on that. You know, with the full integration of Gage, a clear step up in terms of SG&A dollars sequentially, like, what opportunities are there for increased cost synergies as you continue to look at, you know, a somewhat expanded business, you know, recognizing that you guys have a more narrow geographic footprint than some of your peers? Thanks. Yeah. Hi, Vivien. Yeah, we just like the COGS initiatives, we have a pretty long list of operating expense initiatives as well. I don't know if your question was targeted specifically at Michigan, but we've taken some pretty notable actions already in Michigan, and there's more opportunity to come. More broadly, there's opportunities to continue to drive savings and productivity across the board that we're pursuing pretty aggressively. We believe that combined with continued growth in our revenue is gonna give us better operating leverage. We see this quarter being a peak because really absorbing that full quarter impact of the operating expenses in Michigan was quite an impact in Q2. In fact, some of the actions that we took in Michigan at the end of the second quarter that didn't have much of an impact in the second quarter, but will already start to have an impact in the third quarter and beyond. Hopefully that provides a bit more context there. Yeah. That's helpful, and that seems prudent. If I could just follow up with you, Keith. You know, I'm sure you're certainly aware of what external expectations, you know, were for the quarter and what they are for the year. You know, we've tried to be conservative, but you came in below our expectations. Just, do you care to comment on external expectations for revenues in the back half? Thanks. Look, we've been focused internally on our business. We stopped giving guidance. I know that makes it tricky for everybody's estimates to come in line with how the business is trending. We do have a lot of moving parts with bringing Gage on board, with the revamp in Pennsylvania and the shift in the entire operating environment in Pennsylvania. There's a lot of moving parts, so I understand it's difficult to model all that. The New Jersey ramp up. I don't really have a comment on the back half of the year consensus numbers. I assume everyone will re-look at those numbers in light of what we reported this quarter and some of this commentary on what we expect, broadly speaking in the back half of the year. Thank you. Next question comes from Eric Des Lauriers at Craig-Hallum Capital Group. Please go ahead. Thank you for taking my question. Could you quantify the CapEx that you're expecting, for Maryland, and the New Jersey expansion? Perhaps touch on timing expectations. Hi, Eric, Keith. The CapEx project for Maryland is pretty much complete at this point. There's still payments that'll be made according to the terms, but the project's complete. New Jersey, without getting into specific detail on exactly New Jersey is now underway. If I could frame it for you, the way I'd frame it is that our CapEx plans in the back half of the year, which are essentially New Jersey, will be slightly below the CapEx spending in the first half of the year. That's about maybe that gives you an idea what to expect there. Sorry, just to clarify, does that include the pending payments from Maryland? Layering that on top. The new CapEx spending in the back half plus pending payments from Maryland will be the back half spending. Okay. I mean, just, you know, with, I appreciate the color on, you know, some of these margin and cost improvements that you guys are focused on. Do you expect to generate positive cash flow from ops in the second half? We're not giving a specific timeframe on that, but we're focused on the initiatives that I described, continued sequential progression across the line items and with an eye towards positive operating cash flow, if not by the end of the second half, by the first quarter of 2023. Thank you. I appreciate the color, Keith. Thank you. Next question comes from Matt McGinley at Needham. Please go ahead. Thank you. I have a more specific follow-up question on Michigan. Your revenue slipped to $17.5 million, but even at a 40% gross margin rate, it sounded like based on your comments, the G&A was probably around $12 million in the quarter, which would imply you're really moving in the wrong direction in terms of profitability in the state. My question is, you mentioned some of the cost cutting, but what turns for you in Michigan to get that to profitable? Is there that much corporate overhead in the state that you need M&A to get, you know, to get back to profitability? Or is there just a four-wall profitability problem with the stores that, you know, might be harder to fix? Yeah, Matt, this is Ziad. Thank you for the question. It's not. We have some synergy that we already started exploring here between Michigan and the remaining of the businesses, starting with our marketing and our user experience team. Some of the initiatives that we took out of Michigan and then created a shared service with a market like New Jersey. Instead of bringing in additional talent and headcount, we created that shared service to be spread across the enterprise. In Michigan itself, while it does not show in this quarter, what you'll see in the next quarter, we've had specific initiatives. One of them is around the COGS, specifically from an automation perspective and from a labor perspective, as it comes to the cost of production. We have reduced the cost per pound by around 10%-12% with a plan by next quarter for the cumulative reduction to be around 30% on that cost of production per pound. The second area that the team has done an outstanding job in Michigan immediately sprinting into action is both at a mid-level management, but also on the labor model piece in retail. When you look at our retail labor model in general in the industry, it sits somewhere around two to three transactions per man-hour. We believe that across the board, not only in Michigan, that labor model needs to look more like four to six transactions per man-hour. Also the stores needs to be tiered with a slower labor model and additional model that goes in with transaction. Those initiatives have already taken place in Michigan, and we're already seeing the benefit of this. To recap, it's on the COGS, it is on the OpEx side from a labor model perspective, and it is on the overhead by leveraging the team that was built for the future to fit for the present across the entire enterprise. Okay, thanks for that. Then my follow-up is on New Jersey. When do you believe that you'll be sufficiently supplied to begin selling more wholesale product to other dispensaries in the state? You noted the $40 million run rate for the dispensaries. I'm just wondering how we should think about the wholesale opportunity in the first year, not just the retail opportunity. Yeah. In New Jersey, we already have started our wholesale efforts. It's an exciting wholesale market. We waited, we carefully planned to make sure that Lodi is set up well, Maplewood and Phillipsburg are set up well, and the wholesale team has done an outstanding job. We consider ourselves in the last quarter to be top two wholesale supplier to the market. In addition to the current sale we're seeing, as more applications are granted and more licenses are coming online, the team is already engaging six to nine months prior to the opening of retail to make sure they establish that relationship, offer the tours, let the potential wholesale customers learn about the product, see the quality in order to become a customer down the line and a loyal customers. Thank you. Thank you. Next question comes from Glenn Mattson at Ladenburg Thalmann. Please go ahead. Just on the M&A strategy, I'm curious about just the thought process in terms of, you know, historically you've done well by trying to get into states before legalization happens, get in there early, wait it out until adult rec comes along. Is that your goal to look for more states on that side of the equation, or is it more just a financial transaction whereby if you get a deal that's just too hard to pass up, no matter the market, you know, it's just you would jump on a deal like that? Which of those two is more accurate? Yeah, I would say it's more looking for acquisitions in markets, in medical markets that are gonna go rec, you know, the whole sort of eat while you dream approach. There's lots of places or ways to go in Pennsylvania and in Maryland, where we can buy more assets there, benefit by the scale, you know, eat while we dream, and then when it goes rec, then it's off to the races. In terms of new markets, there are certainly multiples are certainly less in states that have already gone rec. We are still more focused on the also attractive valuations of assets in medical states that are looking like they're gonna go rec in the coming years. Thanks. One quick one also. On Maryland, do you have a sense of, like, if the vote were to pass, like how ready is that state to turn on? You know, have they learned from some of the mistakes made in other markets or, you know, just the sense of have you talked to the powers that be there and have a feel for the appetite once the vote happens? Here's the fact today. We know. This is Ziad. It's on the ballot for November. The other fact is the governor said they will not interfere in the signature, and they will let it go. Those are all great signs. All the surveys show that it will pass the ballot. Those are the facts that we know today. As we all know, it could be an Arizona, it could be a Illinois, or it could be a New Jersey approach. We hope it's an Arizona, and you know, few opinions lead us to believe and few government affair lobbyists lead us to believe that it is a 2023 launch. Maybe just to add that it's a more developed medical program than New Jersey was. New Jersey had a lot more to work through, not giving any excuses. Yeah. Stayed there, but that may be why it took longer. One thing I would add to that is I believe, and this might not be still true, but I believe that the question as it was written to be on the ballot said something to the effect of, do you think that adult use should be approved for people that are over the age of 21, on I think it was like July 30th of 2023 or something to that effect, which would, you know, if we're reading the tea leaves right, and it doesn't mean that they'll execute it and get it open on time or as they planned. That also leads us to believe that it will hopefully be implemented sometime in the summer of next year if it passes the vote. Okay, great. Thanks for the color. Sure. Thank you. Next question comes from Noel Atkinson at Clarus Securities. Please go ahead. Good evening, guys. This is George dialing in on behalf of Noel. Most of our questions have been addressed. Just a quick one here. Are you guys still targeting to have 40 or more retail stores in your portfolio by the end of the year? George, we're being very agile, and we're not being stubborn, and we're being stingy, and we're letting the environment guide us on where to go. Michigan, for example, as the state adjusted quickly in its challenging environment, and arguably it's one of the fastest switch we've seen anywhere, including Colorado and California. We reviewed our plan, and we felt that 3 stores plus the 5 stores that we are acquiring with Pinnacle would be the best fit for that next quarter, and we will continue to evaluate, and we will continue to see what the next moves are. Now, pricing is one factor that will help us decide on that retail versus wholesale. The other factor here is, we're seeing in every state, and publicly, the names are published, of cultivation assets that are shutting down or reducing their production by 80% or 90%. That is going to bring in some balance between the supply and the demand. That's where Keith was referring earlier to expect the price to balance at some point. If that dynamic continues, then getting back to more aggressive on retail or increasing our retail fleet will be at the center of our attention. Now, also what we have decided is we're being very thoughtful, and we put big efforts to think on the ROI of every dollar we spend from a CapEx perspective. We believe in today's environment, buying an operational store that is established, like we are doing within Maryland and in Pinnacle, is a smarter and a better decision than building a store from the ground up. All those balances is what will determine where we will be from our counts. Got it. That's helpful. That's it for me. Thank you, guys. Thank you, George. Thank you. Next question comes from Andrew Semple at Echelon Capital Markets. Please go ahead. Hi there. Good evening. Thanks for taking my question. You know, just want to return to the pressures faced in Michigan, and I appreciate the color provided so far on the wholesale dynamics in that state. I guess, as Matt already pointed out, there's some disclosures made in the financial statements that would suggest that sales in that state were down about 27% quarter-over-quarter. Just given the retail and wholesale mix, that's been typical in that market, you know, that magnitude of decline would appear to suggest there's also some fairly significant pressure on retail, in Michigan within that quarter. If that is the case, could you maybe spend some time on the retail dynamics in Michigan, for the second quarter and what your expectations are for, sales per store and, for the second half of this year? Yeah. Hi, Andrew. This is Keith. I'll start, and then Ziad will pick it up. I think it's just worth clarifying that $7 million came out quarter-over-quarter related to our decision to no longer do bulk wholesale, which was a very low margin business. That's gonna make us healthier going forward, and that distorts maybe what you're seeing or picking up in what's been disclosed there. Ziad will take the retail question. Yeah. From a retail perspective, you know, we mentioned that retail is flat. No matter how you slice it, retail is flat in Pennsylvania and Michigan. Obviously, New Jersey is a happy story, a honeymoon story. It's a great story for us, and we're super excited because we see a future in it in Pennsylvania and New Jersey. Past the sales, what we look at through really excellent dashboards and data-driven platforms on the loyalty and the acquisition and the retention of patients and customers in each state. For example, in Michigan, from Q1 - Q2, we have seen a 20% increase in customer count in our retail stores. New customers were accounted for 50% in Michigan. So we're still acquiring customers in Michigan in a very attractive way. The retention piece is where the sensitivity for pricing comes in. The story in Pennsylvania is even brighter. We look at our loyalty in six tiers. The best three tiers are the loyal customers, the super loyal customers, and the super loyal customers. The super loyal customers visit us more than 10 times every 90 days. The one below visit us five to 10 times every 90 days, and the loyal visit us more than four to five times every 90 days. In Pennsylvania, 80% of our customers are in those pockets, the three I described, and 70% are in super loyal and super loyal. In addition, on the other hand, we look at the customers that are new to us, that have not used us in the previous six months, and we see that acquisition is getting much better in retail for us. I think the combination of that retention and that acquisition is what allowed us to be flat in an environment that is that challenging or in an environment where the state itself is, has flattened or has gone down. You know, you look at Pennsylvania, for example, since March, the market sales has gone down from $104 million-$95 million. Similar story in Michigan from market sales. In that environment, with sales plateauing in the state, cultivation increasing, retail doors increasing, for us to be flat when we dissect the data, we feel that it's working as well as we can make it work today. Okay. Appreciate the additional color there. One more quick one, if I may. You know, I know you don't typically comment on state-by-state data, but maybe just directionally here, how is the gross margin profile of New Jersey shaping up to some of your other limited license markets, where you are vertically integrated, I guess, namely Pennsylvania? Yeah. It's fantastic. The picture in New Jersey is probably as good as you can get in a market given the dynamics there. We're seeing our healthiest by far gross margin profile and like I said, getting better month-over-month. We're still not at a point where we're far enough along in the adult use program to say that we've topped out with getting scale and cost leverage for gross margins. We're really encouraged with where we are, April through May through June, and continually encouraged to see where we can go from here. That's also without even adding in the additional COGS initiatives that we keep talking about because we don't want to just rest on our laurels even in a state like New Jersey. We wanna continue to drive optimization across all the lines. Great. Thank you. Thank you. Next question comes from Pablo Zuanic at Cantor Fitzgerald. Please go ahead. This is Matthew Baker on for Pablo Zuanic. Thank you for taking our questions. Can you comment on the New Jersey market cadence after the first month sales of $24 million? Was that pent-up demand and the market has dropped or are sales much more now? Just any color there would help. Can you comment on whether your two rec stores excluding Lodi, which just opened, are above the market average per store of $2 million? Thank you. Hi, Matthew. Keith again, and Ziad, I'm sure, will chime in. It's difficult to say because that first month's information that came out. I think everybody in the state kind of felt like so-so about the accuracy of that information. I'll set that aside for a minute and maybe just comment on how we're doing, and we're really positive. I think we shared it in our opening remarks and reinforced our belief that we can reach $40 million at each of our stores. It's hard to say because the data is not published across the market, but one would think from that piece of information that would be over-indexing versus the market. It makes sense to us because we believed all along way before the adult-use program even started that our advantage store locations in Northern New Jersey and our operational capabilities would get us above average. Yeah, I think that's it. Ziad, anything to add? Yeah, yeah. The only thing I wanna add from a data perspective, I know it's a short period, but we take that first-month data of $24 million, and then we know factually that 17% of the door share that we own in the state deliver 20% share of the revenue of that number. That was prior to launching Cookies, that was prior to launching Gage, that was prior to launching concentrates. That's prior to opening the Cookies Corner. All those are events that have created record foot traffic and revenue for us, and that is what is making giving us the confidence around the $40 million that we talk about in each store. I can tell you how excited we are, Matthew, about Lodi grand opening on Saturday. I'll be there remembering my pharmacy days and working the drive-thru in the first drive-thru in the state. Those are the facts anecdotally, but confidently, we feel that we are doing better than average and better than many. Okay. Thank you for the color on that. Just one more question, also on New Jersey. Can you comment on your retail versus wholesale split? How much of your New Jersey retail sales come from your own branded products? Thank you. Yeah. New Jersey is acting almost like fully vertical. 90+ is totally vertical, but that's by design, and because it's early and because we're selective and because of our product. We don't think we will stay there. Similar to my color on Pennsylvania, the customer and the patients, as the state and the customers gain more experience with cannabis, their expectation and their excitement goes up and foot traffic improves and basket size increases when your product portfolio and your menu is vaster and bigger. It will not. It will take some time, but we will thoughtfully, through the right partnership of other wholesale providers that we believe in the quality that fit our vision and our strategy, we will increase that dynamic between own brand and third party. As far as the question around wholesale versus retail, we're still in early days. We were extremely conservative, first to make sure that Maplewood and Phillipsburg throughput are supported with everything we produce, and that's factually happening. Lodi was our biggest wait. Even though we're excited about this Saturday or about two weeks ago during the soft opening, it took longer than what we expected. Knowing that it's doing busier than the other store, we managed inventory in a conservative way. Once Lodi kicks in, we will be able to unlock and have a better understanding of that mix between wholesale and retail. Matthew, what I can assure you is New Jersey will be to us a demand market, not a supply market. Anything that we produce, we will be able to sell and we'll decide that mixture between the two, that is most beneficial to us. Thank you. There are no further questions. You may proceed. Thank you for joining us today, and we look forward to speaking with you next quarter. Ladies and gentlemen, this concludes your conference call for today. We thank you for participating, and we ask that you please disconnect.