Good afternoon, and welcome to 4Front Ventures' Second Quarter Financial Results Conference Call. Today's conference is being recorded. At this time, all lines have been placed on mute to prevent any background noise. After the prepared remarks, there will be a question-and-answer session. I would now like to turn the conference over to your host, 4Front Ventures' Chief Executive Officer, Leo Gontmakher. Please go ahead, sir.

Thank you. As a reminder, during the course of this conference call, management may make forward-looking statements that are based on current expectations and are subject to a number of risks and uncertainties that may cause actual results to differ materially from expectations. These results are outlined in the Risk Factors section of the Company's filings and disclosures materials. Any forward-looking statements should be considered in light of these factors. Please note a Safe Harbor, any outlook presented is as of today and management does not undertake any obligation to revise any forward-looking statements in the future. I'm joined on today's call by our Chief Investment Officer, Andrew Thut; Interim President, Karl Chowscano; CFO, Keith Adams; Executive Vice President, Brandon Mills; President of California Operations, Ray Landgraf; and our EVP of Finance, Jake Wooten. I'll begin today's call with the quick review of our thesis and strategy before providing color on the top level operational trends and milestones we achieved during the quarter. I'll then hand the call over to Andrew who will give a deeper look into our Q2 results and provide an update on our active start for the second half of the year before looking ahead, what we have in-store moving in early 2023. We will conclude with a question-and-answer session where the entire management team will be available for any follow-ups. At 4Front, we are guided by our simple thesis. After perfecting our high-quality, high-margin production capabilities in Washington State, we are replicating that operational excellence by implementing those SOPs in large cornerstone adult-use markets like California, Illinois, Massachusetts, and Michigan. Our belief is that the sweet spot in the cannabis supply chain is manufacturing low cost, high-quality production of cannabis consumer package goods at scale. As with any CPG company, 4Front stands to benefit as the cost of our ingredients, in this case, cannabis decline and margins become more . As we sit here today, we couldn't be more excited for how our company is positioned in this emerging industry. Our retail operations are performing at or above expectations across the board with additional customer counts, as we continue to raise the bar with product innovation and quality improvements. We believe we are poised to meaningfully accelerate the trajectory of our growth as we leverage our investments in the state-of-the-art automation and scaled manufacturing processing facilities in California, Illinois, and Massachusetts. Through this approach, we are poised to triple or quadruple the revenues of our company within our existing geographic footprint over the next three years. Our thesis is playing out in real-time. While we have made great strides in the second quarter, we have seen an acceleration in business trends in our growth markets as we reach the midway point of the third quarter, particularly in Massachusetts and California. The cannabis industry's unique challenges have not deterred our confidence in this enormous opportunity. In fact, the obstacles that many other companies are facing only serves to strengthen our conviction and our unique positioning in the U.S. cannabis landscape. With automation and scale in our manufacturing facilities, we can drive efficiencies and savings that nobody else can match. The existing $100 billion U.S. cannabis markets is shifting from the eliciting gray markets to state-licensed operators and despite inconsistent capital markets and an honorous state tax system and lumpy state rollouts, that trend should continue as customers demand safety and consistency in their branded products and states look to maximize tax revenues. While we are increasingly optimistic, we will see incremental cannabis reform this year. We remain focused on what we can control and perfecting what we do best. Manufacturing and cultivating high-quality products at scale and honing our strategy to significantly cut costs while enhancing product quality. This has resulted in one of the most nimble and diverse product lineups in the industry further insulating us against pricing pressures and ultimately benefiting our customers with a variety in price points they deserve. As a management team, we have been incredibly busy during Q2, overseeing the growth of our existing operations and advancing significant discussions with a number of potential partners and strategically attractive businesses. In California, confidence in our strategy continues to grow as we are seeing a ramp in sales and an expansion of the opportunity set we are seeing in the state. As a reminder, we are pursuing a four-part strategy in California: Direct sales of our award-winning and proven product suite; third-party processing and manufacturing; select brand acquisitions; and opening of retail locations. Before I address each of those individually, let me share a few observations on the California market. First, most legacy brands in the state continue to suffer as pricing for both flower and ancillary products remains challenged. Few operations have the low cost production, capabilities or the capital to compete over time. In the near-term, struggling operators are selling their products at severely discounted prices in an effort to stay alive. This is unsustainable and over time will allow us to opportunistically tuck-in the brands we desire with advantageous economics. Second, retailers are actively trying to expand the percentage of shelf space dedicated to their private label products and they need quality, third-party processing and manufacturing to achieve that goal. Not only is our facility a one-stop shop allowing customers to achieve other savings such as fuel costs, but nobody can beat us on price. Third, no capital is coming into California right now, which not only ensures that no one will replicate what we have built, but also add the sense of urgency for operators to use our services as they look to cut cost and maximize profitability. The momentum of our commerce facility continues to build. We see steady month-over-month growth in our direct sales efforts, as the quality and pricing of our products is driving deeper penetration in the existing accounts and we continue to add new accounts on a weekly basis. On the brand front, we closed our first acquisition in April of Island Cannabis Co, a California mainstay with incredibly high-quality products, including flower and both classic and infused pre-rolls. We were able to seamlessly integrate their production into our model in a matter of weeks, giving us even more confidence in our ability to buttress our growth with simple accretive acquisitions. Since introducing a folding Island into our California product suite, the brand has been well received and our sales force has loved having established branded flower in their sales bags. Island is back in growth mode and selling through flower about as fast as it hits the menu. We are very excited to bring the successful Island brand to our Massachusetts consumers this quarter, the first of many brand expansions to come. Along with Island, our popular award-winning brands are more than holding their own in California. Our Crystal Clear vape products have become the fastest growing brand in our California portfolio and nearly crossed $300,000 in revenue in monthly sales for the first time during the quarter. Our Hi-Burst fruit chews and Marmas gummy continue to gain traction and we continue to innovate with the recently added that became a top performer in its first month. We will continue to explore new ways to further diversify our product offerings. As a function of where we sit in the supply chain and the automation and scale in which we operate, we have a multitude of levers, dials and knobs, we can adjust as market conditions and preferences dictate. And we are always actively reviewing and tweaking our portfolio to optimize results and drive future growth. We are also pleased to announce this afternoon we have signed an agreement to acquire Bloom Farms, a California cannabis company, known for bringing safe and enjoyable products to consumers in the form of vapes and tinctures. We believe that by integrating Bloom suite of products under the 4Front platform, we will achieve a reduction in manufacturing costs while simultaneously increasing sales of the successful Bloom Farms brands, which include popular varieties of concentrates, flower, hemp CBD and vape products. We look forward to completing the transaction with Bloom soon and expect to announce similar acquisitions in the coming months. On the private label side, we now have active partnerships with five of the leading retailers in the state, including several large region leading operators with numerous dispensary relocations, a leading statewide delivery service and even a national publicly traded operator. We are now producing and packaging gummies, vapes, infused pre-rolls, distillate, diamonds, you name it and we are making it for these major operators, significantly cheaper and more profitable by continuing to provide competitive margins with little to no comparably scaled competitive operations in the state. We have a robust private label pipeline in California with the strategic focus on top retail partners, where we can secure shelf space within their retail footprint, large strategic partners, where there is material revenue and growth opportunity combined with other strategic alignment like toll processing. We have not yet been beaten on price for these deals and we are looking at, at least 40% gross margin lines of business in today's market. Private label partnerships in California typically start with small batch orders and test runs to establish future reorders. Over time, we believe we can move some of these partnerships to more former private label contracts, but this is not yet standard practice in California, outside of toll processing and supply contract deals. This is a solid business that the switching costs are high once partners are on the 4Front platform. So we believe we can land and expand with many of these partners to grow revenue over time while minimizing churn and maximizing the value of our assets. We have said before that we view California as the flywheel for our business. And as we progress through the end of the year and into 2023, we expect to see a steady expansion of our private label pipeline. We are also in the final stages of securing growth opportunities through new accretive cash flow positive brand and retail expansions, which we hope to announce over the coming months. Moving on to Massachusetts. We continue to capture market share in the state by implementing improvements to our product quality and bulk pricing. The quality of our flower in Massachusetts has improved dramatically due to no small part to our acquisition of NECC and its Holliston facility in Q1 of this year and our company's focus on always finding ways to offer even better products at a market-leading price point. Tweak store growing techniques and post production procedures have supplemented already industry-leading yields. In fact, we have already incorporated these meaningful methodologies from Holliston across Massachusetts and Illinois, and are currently in the process of adding them to our Washington facilities as well. When prices soften in the spring, we were able to meet the challenge head on, and we are now seeing great sell-through rates at our retail locations due to new wholesale pricing and product innovations. For example, we have been able to successfully drive a lot more sales of our popular Mini Budz line, allowing us to make room for the excellent new products coming out the shelves from our Holliston facility. It relies on 80% jump in flower sold in Massachusetts and that momentum is carried in August. In Illinois, we continue to see improved product quality and sales volume. Due to the methodologies obtained from NECC and other refinements to our production process, we have made notable improvements of the quality of our flower during Q1 and Q2 this year. After recently introducing our premium infused pre-roll Terp Stix two packs to Illinois, they have quickly become the fastest growing product line in our history and they are flying off the shelves. We continue to see strong performance from our two retail locations and we haven't even rolled out our ancillary products yet. So we are seeing tremendous unrealized upside already. Our near-term plan includes an increased focus on expanding our retail footprint in the coming months as our cultivation and production facility in Madison or Big Daddy wraps up Phase I in construction and prepares to commence operations in 2023. Lastly, I'd be remiss if I didn't mention the fabulous editions we've made to our Senior Management Team in the first half of the year. In Q2, 4Front added Keith Adams as Chief Financial Officer; Christ Wimmer as General Counsel. Island Founder, Ray Landgraf and Brandon Mills, as President of California Operations and Executive Vice President respectively, as well as new appointments to our Board, Rob Hunt and Amit Patel. These Senior Management and Board appointments strengthen our leadership team and are in line with our action centered approach to ensure that the best position for long time growth. I once again welcome our new team members and I look forward to working closely alongside. With that, I'll now hand the call over to our CIO, Andrew Thut for a deeper look into our Q2 performance. Andrew?

Thanks, Leo. As discussed, our belief is that the sweet spot in the cannabis value chain lies in the low cost high-quality production of cannabis consumer packaged goods at scale. That's precisely what we've positioned 4Front for as a company and as a result, we are now witnessing the start of a significant leg of growth that will play out over the next 12 months, augmented by strategic and accretive M&A. Our retail locations platform-wide continue to outperform, maintaining or gaining share with increased transactions and in many cases, net sales despite anticipated pricing headwinds. In California, we are demonstrating our ability to enter the market with our proven and award-winning portfolio of products priced as much as 50% lower than the leading incumbents. We are doing this while maintaining very healthy margins, which we expect to improve as fixed costs are leveraged and our competitor's product dumping comes to an inevitable end. Because we started the year with a revenue base of zero in California, the pricing pressures haven't created grow over problem for us. And in fact, we are bringing our scaled low cost production to bear on our market where commoditization has largely already happened. California is the largest cannabis market in the world and the land of brand, while other operators are shifting operations away from the state, we are leaning-in – in building brand and taking share. As our statewide groups continue to grow, there are emerging and encouraging signs that the California legal cannabis industry itself will soon find some relief. A combination of factors, including the repeal of the cultivation tax, a crackdown on illicit grows and water usage, and the significant expansion of retail licenses all proved to be tailwinds. And this is all before interstate commerce allows our regional hubs to service neighboring states at some point in the future. Recent research indicates that there are currently about 1,045 active licensed retail locations as at the end of June, that's up from 750 in June of 2021 in Cali. The pace of new license issuing in the state finished the quarter at a blistering pace with a 111 new retail licenses issued in June alone. Prior to June, the previous record for a month in California had been a mere 31. If that pace continues or even comes close, it would make a previous estimate of 1,200 locations by the end of 2022 and 1,600 locations by the end of 2023 looked quite conservative. We are already seeing more and more repeat buying from our retail customers, improving our monthly and 90-day average branded repeat customers each month since March. All the while, our 90-day average wholesale customer counts has grown 50% since the end of Q1, so 277 locations. This month, we are already seeing net sales growth of 50% over July and 39% over the prior three month average and it's already our highest month of private label in bulk biomass sales. In Massachusetts, as Leo said, we are feeling great about how our business is performing despite price softness in that market. As a management team, we acted swiftly to improve quality, freshen the product assortment and be creative with promotions. The result has been a business that rebounded nicely into the end of the second quarter and shown nice momentum into Q3. Let me throw out a few noteworthy stats from last month to help illustrate our accelerating progress. In July, we saw the highest transactions per day of 2022 so far, July also saw the highest average ticket for all of 2022 so far, and that has continued into August. And by the way, our flower sales increased 80% in July and those over June and those strong sales trends has continued into August. With the ever-improving quality of our flower that is still working itself on to the menus, we are very optimistic about our continued progress as we enter the second half of the year. I reiterate that our model is a stepwise process adopted from our success in Washington. We are always analyzing what is selling and what isn't and adjusting accordingly. For instance, we recently retired the underperforming Pebbles hard candy brand in Massachusetts. While outperforming SKUs like Mini Budz shake are proving to be a sizable component of our growth in the quarter and in the most recent months. We are adapting a real-time to the ever shifting consumer demand and at each iteration, we further improve our efficiency in our bottom line. In Illinois, construction of our Madison cultivation and production facility remains on schedule. As we approach the final stages of construction of Phase I, we are experiencing some nominal challenges regarding the timing of electrical supply to the facility, but our teams there have identified contingency options for temporary power and scope phasing in the event that we needed. These challenges are not expected to influence the on-time completion of Phase I construction still expected in Q4 of this year. Meanwhile, we have great market penetration as it is, and are already selling into 90% of the retailers in Illinois. With a recent 185 new retail licenses coming on board, we are excited to expand those wholesale relationships even further. We project about 80 or so of those 185 licenses to come online within the next year, which is great growth for the market and holds promise that the growth can be sustained over the coming years. On Illinois, let me reiterate a point I made on last quarter's call. With only two open dispensaries out of an allowable 10, we have enormous room for growth. We expand our retail footprint in addition to expanding our wholesale presence. Let me take a minute to underscore the growth that Illinois can be to our story. In Q2, we run rated about 42 million out of Illinois between two retail locations and a small 9,000 square foot grow. Quickly eyeballing some of the other MSOs in Illinois, with large cultivation and production capacity and a full complement of 10 retail locations, I estimate that they were doing about $275 million to $300 million in revenue. With Madison coming online, the first box for achieving this kind of scale will be checked. The second box is buttressing our wholesale capabilities and capturing the upside by adding additional retail. So stay tuned there as we have a lot of unrealized potential in the state and we're just getting started. Now let me review the numbers for Q2. Systemwide pro forma revenue for Q2 2022 was $34.5 million, up 6% from the prior quarter and flat year-over-year. GAAP revenue for Q2 was $28.4 million, up 5% over last year and 9% sequentially. The increase is due to the increased revenue of the California's wholesale revenue as it ramps and portions of wholesale growth in Massachusetts as well. Q2 2022 adjusted EBITDA was $9.2 million, up 23% from last year, representing an adjusted margin of 27%. Continued growth of adjusted EBITDA and margins expected to persist through 2023 as the company's operations drive increased productions and higher sales volume without material increases to overhead. Our balance sheet leaving the quarters in solid shape. As of June 30, 2022, we had $6 million of cash on hand and $49.5 million of related party long-term debt, which doesn't come due until May of 2024. Cash balance was down about 2.5 sequentially due to anticipated closing, and integration costs associated with Island and an investment inventories, we looked – as we set the stage for our next phase of growth here. We continue to feel very good about our access to additional capital, given our longstanding partners, unique market position, and ability to produce results. As we execute on our strategy, our thesis continues to flex. We are continuously improving and actively introducing our brands, products and best-in-class SOPs into markets and growing skills successfully. We are adding new SKUs on a monthly basis, having developed and launched more than a dozen new products and product varieties in Q2 alone, which brings me to my final point. Our goal has always been to become a larger company. By design, it's how our model operates best, while we are of course, open to the right opportunity to be part of a larger enterprise, we will not compromise to do so. We will remain heavily invested in the continued creation of shareholder value by perfecting our low-cost production and manufacturing and proving our thesis time again. Everything we are doing today builds our company and grows our value in the marketplace while also position us to be the ideal merger partner as a standard barriers of automation and efficiency of scale. With that, I'll turn it back to Leo for some final commentary before we turn it over to Q&A.

Thanks, Andrew. If something is up, we believe we found the sweet spot for outsized value creation via the low-cost, high-quality production of cannabis consumer packaged goods. We reiterate our belief that our current assets represent an opportunity for $650 million in revenue and $250 million in adjusted EBITDA, and we are confident we can drive sustained growth and capture a significant share of every market we earn. We are proving ourselves to be a major piece of the cannabis landscape and some of the most exciting cannabis markets in the country and we can't wait to share in our continued success as we move forward. We are excited about our brands and as always, I'm incredibly proud of our team and their dedication to providing consumers with a terrific user experience at a great price. I'm convinced that the next 12 months will demonstrate the power of our model at scale, paving the way for robust sustained growth in the long-term and value for our shareholders. With that, I'll now turn the call over to the operator to open the lines for Q&A.

Thank you, sir. Ladies and gentlemen, we will now begin the question-and-answer session. Your first question will come from Shaan Mir of Canaccord. Please go ahead.

Hey, Shaan. How are you doing?

Good. How are you guys doing?

I'm doing well. Dog days of summer.

Yes. Congratulations on the quarter and thank you for taking my question. I'll be quick here, but the first one, I was just hoping you could unpack the gross margin movement this quarter a bit. It looks as though it was down sequentially by quite a notable amount. So I'd assume this at least in part due to the onboarding of the California facility, which isn't as that scale yet. So there's likely some growing pains there. So if there's just anything that you could provide on what impacted the margin this quarter and how we should be thinking about it going from here? Is this kind of the new baseline or do you anticipate sequential increases?

Perfect. Yes. I'll turn this over to our new CFO, Keith Adams and Jake Wooten, our EVP of Finance can tag team this one. Keith, are you on?

Sorry. I was on mute. Hi, Shaan, Keith Adams. As you stated, part of the margin pressure was bringing on the acquisition of Island, but also pricing pressure across the states, but we see margin improving back to where it was before with increased spending on automation, higher yields that we talked about, and as we start to get operations at higher scale, we'll absorb more of the fixed cost overhead. And so again, we expect the margins to resume to what you've seen previously or better.

Okay. Thank you. And then just my next question. It's on the Illinois operation. So in Illinois, they announced the 185 new dispensary licenses a few weeks back. I was just wondering what you think or anticipate for the cadence of the new store opening and how that timing will compare to you bringing on the Madison facility? And then if you could just add, if you already started reaching out to some of those licensees to establish relationships or any sort of efforts that are underway to kind of get your brands in front of those new store operators. Just anything that you could provide on how you're preparing for this new wave of store openings in Illinois?

Leo and Karl, do you want to take that one? Leo, you just want to start?

Sure. Absolutely. I'll take a first kick at the can here. It's been a slow process getting these retail locations open in Illinois. We're doing the best we can to keep our ear to the ground on a local and on a national level to try to gauge when some of these stores will be opening. Our sales team, wholesale on the ground there is constantly in contact with new potential locations as they come up and contact information comes available and we feel very confident that we're going to grow significant wholesale, once Big Daddy comes online, as far as how many stores are going to open this year or next, it's just really hard to tell with the regulatory, but I can definitely say with confidence that we're all over the stores that are open and as things come around, we have full new packages to provide to the retailers, the buyers of the bud tenders to make sure that we get the full product suite on the shelf as quick as possible. Karl missed anything there?

Yes. Not really. I'll just add to it. We are actively pursuing not only arrangements where we can have a fair amount of shelf space for the new to open facilities, but we are also actively looking to acquire our own retail outlets plus the way in which Madison has been designed, we have built in the infrastructure so that we have great flexibility in order to turn on or turn off canopy depending upon what the wholesale market looks like. But at this point in time, as we look towards the end of the year, we're very confident we're going to be able to have relationships and/or through acquisitions in terms of Illinois region – with the Madison.

Thank you. Appreciate the color there. And again, congrats on the quarter. I'll pass it on now.

Thank you.

Thank you.

Your next question will come from Colin George of Haywood Securities. Please go ahead.

Hey, Colin. How are you doing?

Good. How are you guys?

I'm doing well. We're doing well. Busy summer.

Yes. It's a busy week in the earnings period. I'm asking the questions on behalf of Neal since it's a busy post market here. Yes. I just want to dive back into the gross profit and gross margin for a second here. If I'm looking at it on a dollar basis, it looks like the gross profit came down by roughly about a $1 million during the quarter, EBITDA was relatively flat and SG&A was relatively flat. Are there some one-time items that might have been in that the cost of sales that would've been backed out of EBITDA that could be a bit of a drag on it during the quarter? Or is it coming out of OpEx? Just trying to get a better idea of what the normalized levels were in this quarter.

Keith?

Yes. I'll jump in. Yes, as you said, we had one-time both transaction and integration costs with the Island acquisition and just some of the other financing and M&A activity that we're doing. So when you back those out of the spending, we'll normalize back out to again where we think where we were before in gross margin and hopefully start to increase the EBITDA – the adjusted EBITDA also.

Okay. So some of those one-time costs would've been in the cost of goods on impacting gross margin in the quarter, and then the SG&A level right now with flat quarter-over-quarter is pretty much the normalized level?

Yes. And the gross margin getting the scale in the operation specifically in California and getting the higher yields will help us significantly too. So…

Yes. Makes sense. Just trying to reconcile back down to that EBITDA number. That's helpful. Thank you.

Sure.

And then maybe just one more for me, I’m diving a bit more into the Bloom acquisition. It sounds like another nice good brand add to your portfolio there. Is it essentially just the brand and the IP that you guys are acquiring? Do they have some facilities in outdoor cultivation or anything like that in the state already?

I'll turn it over to Ray Landgraf and Leo to answer that question. Ray, you want to start?

Sure. Hi, Colin. Great to meet you.

Good to meet you as well.

The Bloom acquisition is an asset deal. And in addition to the assets of Bloom, we're picking on some equipment, some staff, some team and look forward to folding that into the portfolio here in the next coming months.

Okay. Thanks. Yes. So there is some sort of facility attached to that. And then I guess maybe just one last for me before I pass the line.

There are no facilities or fixed overhead attached to it.

There are no facilities attached to it?

No facilities or fixed overhead, no.

Okay. Thank you. Sorry, I broke up there. Okay. And then the last one for me just has been pretty topical in the sector over the last little bit. Was there any cashes or taxes paid during the quarter there that might impact the cash flow or that was just kind of getting deferred out into further periods right now.

This is Keith. We made a payment against one of the – we made a payment against a Q1 tax liability and the rest is being deferred at this time.

Okay.

And just to quantify that yes, a $1 million cash being federal tax liability and a little over $1.1 million in Massachusetts taxes as well, so a little over $2 million in cash taxes paid out in the quarter.

Okay. Thanks. That's all the questions for me. Congrats on the quarter and thanks again for taking my questions here. I'll pass the line.

Thanks a lot. Appreciate it.

Your next question comes from Howard Penney of Hedgeye. Please go ahead.

Hey, Howard.

Hey, Andrew. How are you?

I'm good man. How are you?

I'm doing well. I was hoping maybe you could speak to – I know you said you have access to capital. I was wondering if you could speak to what your needs are in Illinois that complete the manufacturing facility. And then what you think it might take for you to get – how much capital do you think it might take for you to get to the full suite of dispensaries? Thanks.

Well, so Karl, on the – well, on the Madison dispensary, on the Madison build-out, we are – that is fully financed by IIP and we will have some equipment financing here as we move into the end of the year. So that is all accounted for. In terms of new retail locations that we're looking at Howard, a lot of those are likely to be stock deals or small license or license acquisitions, where we use a small amount of cash and maybe a little bit of stock. So our stock is something that people are – acquisition partners are very interested in given our level of operational capabilities and what they view is the upside in the industry and our company given our growth opportunities. So when we think of the main currency for all M&A is going to be stock. And we are highly confident that we can do accretive acquisitions here as we move into the end of the year.

Okay. If I can ask this…

Did I answer your question, Howard?

Yes. You did. Thank you.

Okay.

And if I could actually ask the like kind of the same question again, I guess, but in a different way. I think, Leo, you said you could triple or quadruple your revenue is under the existing asset base. If I've got those words correctly, I didn't write them down. And that doesn't require any capital to get there, so you could triple or quadruple your revenues with no additional – so could you clarify that now.

Did someone jump in there? No. We are looking at – Howard, our feet are always moving. We've been very vocal about our desire to be acquiring, getting involved in retail and in Illinois. And we're very desirous to be in California as a retailer. And so to the extent that we do need any additional capital, we are feeling very good about the ability of our capital partners to expand our cash available through some debt instruments, but we don't think we need very much. And we also are at a point in our business where California is ready to flip cash flow positive this fall. And we think that we're going to be free cash flow generative as we leave Q4. So we have a lot of stuff that we want to do in this business. I think that our capital partners are very on board with what we're trying to achieve and level we're trying to achieve, and they're there to be supportive and opportunistic as needed.

Perfect, Andrew. Thank you so much.

Sure.

There are no further questions at this time. I'll turn the conference back to Leo Gontmakher for closing remarks.

Thanks, everyone for joining, and we look forward to keeping you up-to-date on the progress of our growing business. Take care.

All right. Thanks, everyone.

Thanks all.

Ladies and gentlemen, this concludes your conference call for this afternoon. We would like to thank everyone for participating and ask you to please disconnect your lines.