Vext’s Ohio expansion offsets Arizona retreat as Q2 EBITDA rises 22% sequentially

Vext Science, Inc. (CSE: VEXT; OTCQX: VEXTF) is increasingly becoming an Ohio-focused retail and vertically integrated operator after completing the wind-down of its Arizona cultivation business, opening its sixth Ohio dispensary and closing approximately US$17 million of property financing that supports further expansion in the state. Second-quarter revenue was US$12.1 million, essentially unchanged from the first quarter but down about 9.6% year over year as the company deliberately removed uneconomic Arizona wholesale activity.

Adjusted EBITDA increased 22% sequentially to US$3.4 million from a restated US$2.8 million in the first quarter, while the net loss narrowed to approximately US$315,000 from US$1.48 million a year earlier. Adjusted EBITDA margin improved to 28.3% from 23.1% sequentially, although it remained below the restated 29.8% margin recorded in the second quarter of 2025.

The results show why Vext’s revenue decline requires more context than the headline percentage alone. Wholesale revenue fell to US$1.4 million from US$2.6 million a year earlier as Arizona cultivation was wound down, while retail revenue was essentially stable at US$10.7 million compared with US$10.8 million. In other words, most of the reported revenue contraction came from an activity management had intentionally chosen to exit rather than a similar decline across the continuing retail estate.

Why did Vext shut its Arizona cultivation operation?

Management concluded that wholesale flower prices in Arizona had fallen below the company’s internal economics for producing the product at its Eloy cultivation operation. The final harvest occurred in May, and Vext’s Phoenix dispensaries are now sourcing product from third-party cultivators rather than carrying the fixed cost of producing material that could be purchased externally for less.

That decision reduces Vext’s vertical integration in Arizona but could improve capital efficiency if outsourced supply consistently remains cheaper. The company is marketing the Eloy property for sale and expects to use the net proceeds to repay debt secured against the facility, effectively turning an underperforming operating asset into a potential deleveraging source.

Vext also secured a six-month extension on its second East West Bank promissory note to January 15, 2028, with the condition that net proceeds from the Eloy property sale be applied toward the facility by January 20, 2027. The connection between the property disposal and debt repayment makes the Arizona exit as much a balance-sheet decision as an operational one.

How quickly is Vext expanding its Ohio retail footprint?

The Fairfield dispensary opened in June, taking Vext to six operating Ohio locations. A seventh store in Columbus is targeted to open by the first quarter of 2027, and the company says it remains on course to reach Ohio’s eight-dispensary cap during 2027.

Ohio also gives Vext a vertically integrated structure that it is deliberately moving away from in Arizona. The company operates a 25,000-square-foot Tier 1 cultivation facility in Jackson with the ability to expand to 50,000 square feet, alongside manufacturing operations and its retail network. Improved cultivation yields reached approximately 101 grams per plant during the second quarter, which management believes reduces the product cost flowing through its own Ohio stores.

That structure creates operating leverage if new dispensaries can absorb additional internally produced inventory without proportionately increasing overhead. It also creates execution risk because Vext must manage cultivation economics, store openings and retail pricing simultaneously while Ohio’s competitive landscape continues to develop.

What does Vext’s new US$17m financing change?

On August 19, Vext closed approximately US$17 million of real-estate financing with Wright-Patt Credit Union. The package consists of an US$11 million term loan and a US$6 million term loan, both carrying an initial or fixed rate of 8.64%, with the proceeds used to refinance approximately US$10.3 million of existing debt, acquire the Jackson property for US$6 million and support continuing Ohio development.

The transaction gives Vext full ownership of the entity holding the roughly 50-acre Jackson property containing its Ohio cultivation and manufacturing facilities. It therefore converts a strategic production site into owned real estate while simultaneously refinancing debt associated with the business.

The cost of the borrowing is not trivial. An 8.64% rate means the financing must support sufficiently profitable operations to justify its carrying cost, particularly for a company generating quarterly revenue of only about US$12 million. The attraction is that Vext is directing that capital toward the state where management believes incremental investment produces its strongest returns rather than maintaining cultivation capacity in a weaker Arizona wholesale market.

Why did operating cash flow fall despite better sequential EBITDA?

Vext generated US$1.2 million of operating cash flow in the second quarter, down from US$1.6 million sequentially and US$4.2 million a year earlier. Management attributed part of the decline to a deliberate inventory build in Ohio ahead of expected second-half retail growth, meaning the cash-flow weakness partly reflects working-capital timing rather than simply lower operating profitability.

The company also disclosed an US$11.7 million uncertain tax position liability at June 30, up from US$8.1 million at the end of 2025. Vext has said the eventual treatment could be affected by changes to federal marijuana tax rules following rescheduling developments, but no benefit has been recognized because implementing guidance remains uncertain.

That liability is significant relative to Vext’s operating scale and should remain part of the balance-sheet discussion even as adjusted EBITDA improves. The company is therefore pursuing several financial objectives simultaneously: opening Ohio stores, improving cultivation yields, disposing of Eloy, reducing secured debt and managing a potentially material tax exposure.

Vext’s second quarter does not show conventional top-line growth, but it does show a business being deliberately reshaped. Revenue has fallen because Arizona wholesale activity is disappearing, while profitability has improved sequentially and capital is being redirected toward Ohio retail and production infrastructure. The next test is whether the seventh and eighth Ohio dispensaries can convert that repositioning into sustained revenue growth and stronger cash generation rather than merely replacing the business Vext has chosen to leave behind.