Prop 64 Fine Print, Pesticide Drift, The Economics Behind Concentrates ft. Micah Anderson

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Micah Anderson: It took regulatory changes and clarity for cannabis to become something that was investable. Prior to that, you were a drug dealer. Bryan Fields: Micah, I want to start somewhere a little different. California voters approved legalization, yet cannabis is heavily regulated and most of the state still doesn't even allow legal access. Taxes are unconstitutional at their current levels. For years, the industry has largely played defense — the strategy feels like: cooperate, regulate, push politically, and hope that things gradually improve. But almost a decade after Prop 64, the legal market is struggling. So, Micah, was this a mistake? Micah Anderson: Yeah, Prop 64 was very poorly done. It needs a rewrite, probably through the form of a ballot initiative. It's the largest cannabis market in the world, and it has seen nothing but decline since the inception of it. Voters voted for it overwhelmingly, but then they did this funky thing where municipalities, cities, and counties could either approve it or disapprove it, even though it was approved statewide. To give local politicians a little credit — it's hard for me to even say that — but you've got local politicians getting an earful from constituents saying 'we don't want this,' and others saying 'we do want it, it was voted on, so it should happen.' They have no idea about the industry, and now they're forced to write an ordinance that somehow captures the complexity of how the industry is structured, with all these license types and taxes. Everyone was thinking the same thing in the beginning — that everyone's getting rich, that this was going to save bankrupt cities and counties, that cannabis was going to be the savior. So let's just hit it hard with all these taxes. There have been a bunch of rewrites since the beginning of Prop 64 until where we are now, where people have seen that none of that worked — on the investment side, the capital markets side, all the way down to local and state politics. Bryan Fields: So how do you fix it from here? I guess we're talking California-specific. Micah Anderson: Fix it all — I don't know the answer to that. I've been spending more time in Sacramento with some of the trade associations. I hate when people complain about something and don't bring a solution. So I'm trying to practice what I preach, show up and listen. I'm not a politician by any means, and a lot of these companies hire people trained in government affairs — Leaf doesn't do that, I do it myself. So I'm sitting in the room with lobbyists and government affairs people who speak the language and understand the process. I just want to listen, figure out what the right move is for Leaf, and weigh in with context and feedback where I can. It's unfortunate — 70% of the state has said no to it, there's not enough retail, and as a result the unlicensed side of the industry continues to do very well, because you've got counties and cities with no legal place to purchase products. Bryan Fields: Do you think if it was on the ballot today, given everything we know about taxes, regulation, and bans, the industry would structure it differently, or do you think they'd structure it the same? Micah Anderson: I would think it would be different, I would hope it would be different. Again, I'm not a politician, so I don't know the answer. But I'll be honest, I voted no on Prop 64. I was a 215 legacy guy since the inception of Prop 215 in 1996 all the way to the end. It was more of a free market than what we currently have. Did it have its problems? Yes, of course — it wasn't perfect, but the industry did very well back then. Then you get too much government regulation and taxes involved, and it starts to break down how a free market should work. Politics is crazy, California is crazy, there are so many outside influences, everyone's trying to get a piece of the pie. Hopefully we can fix it through a ballot initiative — I think that's what the industry is leaning towards. Even the DCC, when we've met with them, says the same thing — they realize there's only so much they can do. There's a new DCC director; seems like a smart guy, has a finance background, seems more interested in listening to the problems. In the one meeting I sat in with him, he acknowledged, 'some of this stuff I can have an impact on, a lot of it I can't.' I think what he's really saying is that we need a rewrite, a reset button on the way this was rolled out. Bryan Fields: Is that playing more offense, or is that more of a slow, gradual approach — hoping that with generational die-off the population becomes more open to the concept of freedom of choice as an adult to consume these products, understanding there are tax implications if it's opened up, and that people aren't dying from cannabis, they're choosing to use it — maybe slowly over time people's opinions will allow for that rewrite and rebalancing? Is that the perspective you think it's leaning towards? Micah Anderson: Yeah, I think the offense-versus-defense part of it for sure — I think the industry should have been more on offense. In the beginning, coming out of 215 into 64, the people who were for it were fatigued from being arrested and going through all these stressful things. So the operators of the industry — not necessarily the constituents of California, but the people in it — were just excited about the idea of finally getting legitimized, no longer doing something wrong, being able to talk about it at Christmas dinner with the family. But I don't think the industry read the fine print, because the fine print clearly said we are going to tax the hell out of you and use that money to come back and raid you — not the illicit market. And in large part, that's what has happened. I have to look in the mirror on this too — I'm guilty of being more passive instead of being louder about the taxes being egregious and unconstitutional, the red tape and regulation. In the early days, a lot of the trade associations felt like you had to go along to get along, not ruffle feathers, and honestly some of that's still true today. You start getting too contrarian and too loud... Elliot from Catalyst is a great example — the guy's super loud, and whether you like him or not, a lot of what he says is accurate about how the taxes are out of whack and there's too much red tape. He's not wrong. I think we probably need a bit more of that, but in a way where we can work with the governing bodies to come to some agreement that works for both sides. Bryan Fields: But early on, the opportunity was here — 'here's the path, don't screw it up, maybe it's not perfect but it's better than being illegal.' It's easy now, in hindsight, to think it could have been different. But change is hard, you're changing massive perspectives, and it takes a long time. Even if you'd been louder back then, there was a chance the whole thing could have been taken away, which nobody wanted. So it's easy in hindsight, but it was also really difficult to envision pushing through and saying, 'this is nonsensical, you're taxing us more than everyone else, too bad.' Micah Anderson: Yeah, in hindsight — if you'd been louder, would it have worked or not? I don't know. Maybe more at the local level, as cities were writing ordinances, being more involved. That's one of the things that irritated me a little — most of the legacy operators, I'll use Northern California as an example, are typically not the type who want to get involved with government. They chose this lifestyle and industry partly to not be part of that whole system, and then all of a sudden they're forced to participate. No one was showing up to these city council meetings. I showed up to as many as I could, all over the state of California, and it's brutal — you're getting yelled at, called a drug dealer, told to get out. There weren't a lot of people showing up to push common sense, and as a result you get five people who have no idea what they're talking about writing the law that governs your industry. And the industry isn't straightforward — from the cannabinoid standpoint, hemp versus cannabis, it's layered in complications, which makes it even harder for those same five people, even with the best educators laying it out on a whiteboard: same plant, different cannabinoid content, these are psychoactive, these aren't, but you can also make these delta compounds. People get confused quickly, and they're thinking, 'Micah, how do I make sensible legislation?' Bryan Fields: So, taking that one step forward — the CBD/hemp executive order Trump spoke about — does that change strategically the way you think about Leaf? Was that something you'd already thought about? How does that announcement influence how you're restructuring Leaf going forward? Micah Anderson: Yeah, I didn't see that one coming, full transparency. But I can see it from a political standpoint — I think they need to dip a toe into this versus just coming out and legalizing cannabis outright, because there's a big part of the constituency that doesn't want to see that happen. I'm a big proponent of it, I think it's great, and I definitely want to get Leaf involved — we're working on it right now. When we originally started the company as Leaf Holdings, before it became Leaf Brands, the first thing we started with was a CPG brand called Leaf Organics, focused more on the medicinal wellness side than high-potency recreational products — topicals, tinctures, lotions, and vape carts. Then Nordstrom approached us when they were launching their CBD program shortly after the Farm Bill made CBD legal. They loved the brand but didn't like that it was comingled with the recreational side, and asked if we'd focus just on wellness. We agreed, got into Nordstrom stores all over the country, then got picked up by Marriott, Four Seasons, all these cool chains. Then COVID happened, and we got caught flat-footed — we weren't set up correctly on e-commerce, and the industry shifted hard toward the recreational side. Cannabis was considered essential, there was stimulus money, people staying inside, alcohol and weed consumption went up. So we did what everyone else did and focused on that side of the business, even though Leaf the brand was a passion project for us. It went a bit by the wayside, kept limping along, and then Nordstrom pulled the program. Then Trump made this announcement, and we thought, okay, how do we look into this? We're absolutely looking into it — dusting off the cGMP work and NSF certification work we'd started. We've got a handful of athletes on our cap table who are passionate about the brand and the wellness side — recovery products and the rest. I've been working with Jimmy Butler, who recently got hurt — the Golden State Warriors guy, who lives here in San Diego, like me. He and I meet pretty regularly now, trying to get the brand back into position to be part of this Medicare program Trump's talking about, get it into NBA locker rooms and all the rest. We're fully back on board with it, and we've got some cool PR stuff we're working on with Jimmy right now. Bryan Fields: Is that collaborative, where he's got ideas too on how he wants to take it — kicking it around in the locker room, saying it'd be helpful for recovery, for muscles — sparking that understanding that these products don't have to just be psychoactive, that they can be used for recovery or relaxation in different ways? Micah Anderson: Yeah. One of the things we're talking about right now is an education campaign for the people in his network — educating people on the difference between hemp, cannabis, psychoactive, non-psychoactive, CBD, THC. For people like us who are in it every day, it's common knowledge, but for a lot of people it's still this taboo thing that's changing. So we're going to work on an education campaign and a new set of products — kind of a Jimmy Butler recovery line. He's got a documentary he's been working on for a while, and with his new injury, this will be part of it — kind of a 'road to recovery' story. For a good year we'll be shooting content, working through formulations, figuring out what he likes and doesn't like. He's fired up, and it's great for us because we're super passionate about the brand and want to see it come back. So on the CBD side, that's what we're working on. We also have a couple of doctors on our cap table. We did an actual clinical study on CBN with UCSD here in San Diego, through a spin-off company we created called IA Biosciences. We're going to use some of the IP generated from that study and the sleep-focused formulation work we've done. And on the cultivation side, we've got a huge ranch in Santa Barbara — we already have a hemp permit, so we can cultivate, and we have the know-how to make full-spectrum CBD, which is right in our wheelhouse for the way they're talking about it. There are some regulation changes that need to happen in California if we're to do it under the same roof as cannabis; if not, we'll build a wall and apply for a separate hemp permit. That's one of the things I've been pushing at the state level — allow us to do both under the same roof. Bryan Fields: That's what I was going to ask — do you have to portion off part of your facility, adult-use on one side, CBD on the other? Does that work, and from a cGMP standpoint, where are the limitations and barriers? Micah Anderson: Yeah, at the moment, yes — you have to have different site maps, different premises, different licenses, they can't be comingled. You have to show chain of custody, make sure everything is clearly separated. In my opinion it makes no sense — I think these two industries should be merged into one, maybe separated between medical, recreational, and low-dose-through-potency categories. There's complexity around that — you'd have to standardize what that even means across all the testing labs across the entire country, and I don't know who's going to tackle that, but it would need to happen. Bryan Fields: What about personnel — can personnel be interchanged between the two? Because if they can't, it layers into making it even harder. Micah Anderson: I think so, yeah — if you're doing similar processes, you should be able to share the know-how across the same organization, just in different parts of the house. Bryan Fields: It's like asking, can I run both companies? Micah Anderson: You'd think the answer is yes — they'd be like, 'not Micah Anderson and Micah Anderson.' [laughter] This is where the level of complexity gets really interesting — if you're doing the same process and the outcome is only slightly different, maybe there should be different rules for formulations, but the alignment should ultimately be the same — clean, safe, same north star, same advocacy, under the same process as adult-use. The other thing I've noticed right now is that I think medical cannabis is going to come back. Everyone's been so focused on which state is going recreational — is Florida going recreational — but I have a feeling that medical is going to become a thing again. There was actually a bill in California — I heard it got shut down yesterday — that said if you have a specific type of license, you'd be able to sell medical cannabis products direct-to-consumer using UPS to get products to medical patients. I thought, wow, that would be very cool. It got shut down, but I keep hearing about these kinds of things, so I think medical ends up being a thing again. When that happens, one of the things we've really been focused on is making sure our supply chain matches what the future of the industry will look like versus the past ten years — everything being overly clean, non-detect at all times, with processes in place to maintain that throughout the supply chain. That's been the focus of the farm we've been working on for a long time — we maybe paid more than we should have, but it's big, and it's located in an area where we don't deal with pesticide drift. If the industry goes the route I think it could go, consumer safety and lawsuits will become more of a thing than we've seen so far — you start selling vape products that end up contaminated, and there could be blowback under new rules and regulations. So that's something we've been thinking through. Bryan Fields: Do you think other new entrants might get into the space — the people producing direct-to-consumer medicinal products, some of these supplement-type brands — do you think they'll say cannabis is just another API for us to produce, we already do this, we can just add it to our products? Micah Anderson: It really depends on how the rules and regs are written. If there's an opportunity for them to get involved and make money without putting their other licenses in jeopardy, I bet the answer is yes. But if it puts their other business at risk in any way, the answer is no — it might take de-scheduling or something further down the road for guys like that to actually get involved. This is where the game of chess gets interesting — adjustments to some of these rules and regs might be very beneficial for organizations, but it also might welcome new participants who say, 'we need more revenue, we've got the experience producing products, this is just an additional vertical for us, diversifying our current business.' Alcohol's got to be thinking about it too — alcohol is losing market share, and we just went through a two-to-three-year experiment with hemp beverages that clearly shows consumers want these products and they will eat into alcohol sales. There are huge, powerful lobbying groups fighting for their side, and I'm sure other industries are having the same conversations. In a weird way, I think one of the best things to come out of poorly written regulations like Prop 64 was the pesticide scrutiny — I think that's actually good for our industry because it blocks other industries from getting in easily. When Big Ag really wants to get involved with something, there's no way these legacy fields riddled with glyphosate and everything else are going to be able to uproot that, put in a bioaccumulating plant like hemp or cannabis, and hit the pesticide standards, especially in California. I'm hoping that stays the course, because I think it gives us a bit of a moat from outside players competing with us too soon. I also think, from a moral and U.S. agriculture standpoint, if the cannabis industry can shine a light on how bad that issue is throughout the country, especially in California, that's a good thing. Everything in the grocery store with an organic label would fail under cannabis testing scrutiny. I know because my daughter, to her credit, did a science project last year where we used a testing lab here in California to test ten different organic products from Whole Foods in San Diego — every single one of them failed for mycotoxins and other things. It's in everything. Bryan Fields: So where's the disconnect then from the everyday user? My mom's going to hear that and be horrified. Is it that cannabis testing has really extreme thresholds, or that the organic guys have more wiggle room and it's just accepted as part of the process? Micah Anderson: It's a bit of both. Our definition of organic in cannabis is different from their version of organic. In California I think it's something like 60-plus pesticides tested — someone will correct me if I've got that wrong. Elliot Lewis made a big deal, to his credit, about an article that came out highlighting that a lot of products being sold in California weren't even passing the state's own guidelines — the state wasn't policing it the way it was supposed to. That's changed, and they've even added more pesticides to the testing list to be extra careful about consumer safety. But wine, strawberries, and other products grown in California don't have to go through that. For our business — Leaf, a concentrate company — we're literally concentrating what we do. We'll take a 100-acre field and concentrate it down into jars, so every bit of impurity in that field comes out magnified, and we have to pass parts-per-billion standards. The ag industry doesn't have to do that at all. Bryan Fields: So the material doesn't fail for pests initially, but when you concentrate it down, it fails for pesticides? Micah Anderson: When we're buying from third-party farms in California, I'd say 99% of licensed cannabis farms have their SOPs down to where they're not intentionally growing something that would fail. The problem is pesticide drift blowing in from elsewhere — a vineyard down the road spraying myclobutanil or something else, it gets picked up in the wind and dropped onto their crop, and then they fail. Sometimes it's bad enough to fail at the flower level, sometimes it only fails at the concentrate level, and depending on which, some of it can go to market and some can't. That was part of the reason we decided we needed our own farm — we needed to build a mega-farm, because the amount of material we need is huge, and we kept running into issues where a farm would be clean for two years and then have a drift issue and we'd lose that material. Supply chain inconsistency was super problematic, so we brought cultivation in-house and picked a location where we're not going to run into the same drift issues. Bryan Fields: Well, supply chain is one problem, but there's also the operational cost that went into that batch — you've already consumed the cost, the labor, the process, and you weren't running other material during that time. So can you give a ballpark, financially or size-wise, of how much fails for pesticides, and what the reverse-course analysis looks like? Micah Anderson: Over the course of the company's history, we've lost millions of dollars to this issue. It's super inefficient and problematic — we have to send vans all over the state of California. Bryan Fields: Right, logistically you're all over the place, bagging and tagging. Micah Anderson: There's a very extensive SOP we've put in place on testing. We test on the farm, we do micro-extractions on everything — take material that typically comes in contractor bags or large totes, dig inside, take a ten-pound sample representing maybe a thousand-pound batch, cook that down into a concentrate, send it to the lab. There's the timing and cost of that, and the hope that the lab got it right — because sometimes they don't. Then you make the purchase, send the van out to pick up the material, bring it back, and somehow the wrong bag ended up on the truck and you've got a problem. You're also hoping that tiny sample is representative of that massive batch. Some of these fields are pretty large, so on a 50-acre field one side might have the issue and the other side doesn't, depending on which way the wind predominantly drifts. It took years for us to figure that out and develop SOPs to mitigate these issues, and to build a master list of every farm in the state — historically, we know where the issues are, this region's no good, that region's good. Unfortunately, a lot of the historically clean areas — Mendocino, Humboldt County, where you've got legacy guys who've been doing it forever and are just good at their practice, plus natural buffers from being surrounded by pine trees — are different from the Central Valley, Salinas area, where there's no buffer, just wind and flat ground, and that's where the biggest problems are. But that's also where the biggest permits are, so it's a trade-off. Bryan Fields: Is this a California-specific problem? With the new expansion into New York and getting operations up and running, have you already started being selective with vendors, bringing that California-learned SOP knowledge over to make sure this doesn't hurt you going forward? Micah Anderson: Yeah, it's everywhere. Each state has different regulations — California is much stricter than New York on what they test for. So far it seems less problematic in New York than California, but there are still issues. We still run the same strict SOPs. California is the breadbasket — it provides food for the entire country and a lot of the world — so the issues are a little worse here than in New York. I'd bet any state with a lot of agriculture is going to have this issue. Bryan Fields: I'd imagine as you think about the roadmap for expanding Leaf, you're aware this is a major problem in California, so if you're going to another state, you want to know the ag situation, who the neighbors are, so you're not stuck in a supply chain situation where you can't get product, or you get it and it fails down the road. Micah Anderson: Yeah, our business model is really based on treating cannabis cultivation like row-cropping — no different than any other crop. We're not spending a ton of money on fancy lighting and greenhouses. We need to be outdoors, in a climate that lets us grow two crops a year in the same footprint without dealing with frost issues. A lot of other areas of the country can't provide what California provides. In a perfect world, where else would you go? It depends on when we're able to ship products out of California into other states or countries — I think the cultivation should still happen in California, because there's a reason all the food's grown here. We don't produce oranges in all 50 states. If we ever expand, I'll look for wherever has the most pine trees — [laughter] that's the sign we're looking in the right spot. Bryan Fields: From a concentrates perspective, a lot of people think producing concentrates is simple — go to the plant, extract the oil, sell the product. What are people misunderstanding about how complicated the production process is? Micah Anderson: We actually get that question from people inside the industry too — 'your margins look great on X, why wouldn't you just do more of that?' Our business is largely client-driven — it's about what our clients want and how we provide a product and service that benefits their business. Strain diversification is one way we do that — we sell a lot of oil to vape companies, and how do they differentiate from each other? Hardware, packaging, marketing, and also strain — everyone wants something proprietary to their business. So we work with clients on providing that. Having a large cultivation footprint and nursery/livestock capability is really beneficial — we can take their strains, bring in their evergreens, and work with them on why yields make such a big difference. There are yields out of the farm — pounds per acre — but then there's also extraction yield. Take a hypothetical: one strain does 10,000 pounds an acre, another does 6,000 — obviously your cost of goods is higher on the 6,000-pound strain. But then in extraction, the one that does 10,000 pounds an acre yields 2% to concentrate, and the other yields 6%. So it's not as simple as 'you grow it and it always yields 5% every year' — you are farming at the end of the day, some years are good, some are bad. Another misconception is how much material it takes to make a hundred jars of something — it takes a lot. California's not a problem for that anymore, especially now that we have our own farm — we have a big enough footprint to grow enough material to support a large part of our business, not all of it. We were awarded a 180-acre land use permit, we grew roughly 65 of those acres, which equates to 49 DCC state licenses — to make it even more confusing — and our goal is to grow into the rest of it this year and next. But we still go through about 200 to 225 acres a year that we purchase from other farms, and I think that will continue, because it's great to have strain diversification — sometimes a client's working with another farm that's got a proprietary strain they want us to run. Bryan Fields: When a customer comes to you wanting to grow a strain, and you work through the estimated yields, and then during extraction you find it's yielding differently than forecasted — what's the time period from when you start extracting to getting that yield, so you can tell the customer it's coming in different than expected? Micah Anderson: From the time we harvest, freeze or dry, and get it to our facility to start running it, it's probably three weeks. We'll run an initial R&D run to get a baseline, or go straight into production and share results. Typically it's two to three weeks through extraction and post-processing, then we send everything to the lab — depending on how busy the lab is, that's another week or two. Then we review the data — yields, margins, what sale prices should be. So it's about a month total from starting extraction to the end. Bryan Fields: And during that time, if the numbers are different than expected, do you have to go back to the customer and renegotiate? Is it more of a ranged conversation, or is it more finite? Micah Anderson: A bit of both. The larger, more sophisticated groups forecasting 12 months out with evergreen strains — if we run into a situation where the math doesn't work, we come back to them and find a way to adjust, maybe on one side because a batch didn't perform the way we thought, and there's room for a win somewhere else, or vice versa. We're pretty flexible — customer service is core value number one for our company. Bryan Fields: And I'd imagine during that month, you're still running that material, and the customer downstream is already planning around getting X grams to push to sales and marketing. Then you have to go back and say the material came in a little different — since it's a plant with natural variability, plus extraction process variability, it leads to real downstream complications where you need flexibility. Micah Anderson: Yeah, it's definitely not easy, a lot of moving parts. The other thing we've gotten much better at over the years is — say a client brings us something they want grown expecting it to be a live-resin product for a cart, but it doesn't do well as live resin — it does great as a cured product or solventless product instead. We'll introduce those different form factors and say, 'what about this, it does well over here, it washes well, but it just doesn't perform through the hydrocarbon line' — sometimes it's flipped the other way. There's usually common ground and we find a way to work it out. Bryan Fields: That's the value-add — your team has an enormous amount of data and experience, and can pivot to a different product line with a different margin when something doesn't perform for its intended use. Micah Anderson: Yep, all of that. And I've got a fantastic partner, Emily Heman — shout out Emily — who's a black belt at all of that. I can talk about it, but she can physically Tetris every single nuanced issue into a solution, which is fantastic. Bryan Fields: Micah, what about from an investor standpoint — when they say, 'hey, this strain yields the best, why not do more of that,' given all these variables, and they're asking about efficiency and operational performance, how do you make that digestible for them? Micah Anderson: It happens sometimes — someone will say live resin margins are great, it's only 40% of your business, why isn't it 100%? It comes down to the market only being able to consume so much of it. One of the things we're big on at Leaf is providing not every concentrate under the sun, but a lot of them — some competitors only do distillate, or only hydrocarbon, or only solventless. We do all three because it keeps us sticky with the client. If you're buying distillate from a distillate-only provider but you're a vape company, you have to call someone else for your terpenes, especially live terpenes, which come from a hydrocarbon producer. Our thought is we want to create a seamless one-stop shop for clients. So back to the question — a lot of that comes down to loss leaders, where margins aren't great but you need to grow an acre of some terpene profile that everyone wants even though it's a low yielder and sucks coming out of the field. My honest response to shareholders sometimes is, trust that we've thought all this through. Bryan Fields: I can imagine you understand the margins aren't there, but from a business standpoint, it's utilized — you're not growing a low-yielding product for no reason. And that relationship-driven approach is probably what's helped pull you into New York — brands needed a provider they could trust, who could deliver a consistent product, so they don't need to source from four different vendors when expanding into a new state. Micah Anderson: That's exactly how New York became a thing for us. Our team built an impressive rolodex of clients in California — we work with the who's who of the state. Most of those brands do very well in other markets throughout the country. New York came by way of a handful of those brands basically saying, 'look, we're really struggling with the processing licenses out there, have you guys ever thought about moving into this market? We'll basically guarantee we'll work with you if you move in.' So we took New York on as step one — five solid clients doing really well there, asking us to come. It's been almost a year now, and it's a big deal for us. I think New York's going to be fantastic, but it's been kind of a pop-up approach — send out smaller equipment, get a license, crawl-walk-run into it, to make sure we're successful, because the last thing I want is for home base California to start getting worse. One of our founding partners, Gary Vandenberg, committed to going out there and recreating what he helped build in California, building the team out there. We're limited in capacity at the moment — on the good side we're committed and oversold, but we can't make that much stuff, so we're addressing that right now, figuring out how to push harder on it. Bryan Fields: That's the exciting part — going back to investors and saying we're oversold and under capacity for where we want to be, here's the financial upside if we expand capacity, and given how early New York still is, you could raise your presence to be the same market leader there as in California. I also think, eventually, if we get interstate commerce, having two core assets on opposite sides of the country is beneficial because you're not competing with yourself — you've got both ends of the spectrum dialed in, and you're just missing that middle asset. Micah Anderson: Yeah, I know — we've looked at a few middle assets, but one thing at a time. Bryan Fields: I want to slightly switch gears — I know you've publicly talked about your Bitcoin thesis over the last 12 months. Has it evolved or strengthened? Micah Anderson: I'm a huge Bitcoin believer, as you and I have discussed. At the moment the company still holds Bitcoin — I think we have roughly five coins. I gave it my all trying to raise money specifically to purchase Bitcoin, and I was unsuccessful, even though I thought I had it done a couple different times. Capital markets in cannabis have been very tough — anyone in this industry knows there's no money, no one's coming to save you at this point. So I started looking at Bitcoin as a potential way to drive excitement and bring in new shareholders, pairing the two — not a departure from cannabis, we're still a cannabis company that implemented a Bitcoin strategy, I've just been unsuccessful raising for it. I think part of the reason is that Bitcoin itself is a complex thing with a lot of public scrutiny around it, similar to cannabis — people giving up fiat money for this new digital thing is highly debated, and there's a lot of complexity around the laws. As I got into conversations with funds interested in putting Bitcoin onto public company balance sheets, once they layered on the complexity of cannabis, they'd say, 'wow, you guys have more issues than we do,' and the conversations fell flat. So at the moment, my focus is on building out the rest of the farm, getting the company profitable, putting out good quarters. We're still taking B2B payments in Bitcoin when someone wants to pay us that way — that's how we've accumulated our Bitcoin so far, we have Lightning payments set up. If it ever makes sense to revisit a bigger Bitcoin strategy conversation, we will, but at the moment we're focused on operating the business. Bryan Fields: I think that's a smart approach — the world evolves fast, and you're always thinking about what you can do better, where the alpha is. With AI taking center stage now, and crypto potentially being the currency for agent-to-agent communication, it could just be a matter of time before people come back and say, 'Micah, six months ago I said no, but the world's changed fast, I'd like to revisit that.' Micah Anderson: Yeah, I wholeheartedly believe that — even with Bitcoin being down to whatever it is today, I believe over time the thesis will be proven correct. Bryan Fields: Agreed. Micah Anderson: It's just going to take time. Cannabis is going through the same thing — for all the investors out there, it took regulatory changes and clarity for cannabis to become something investable; prior to that, you were a drug dealer. It takes time to get through these things, and I think Bitcoin will do the same. One of our shareholders reached out, kind of on the fence, saying he was fine with it personally but felt it was a bit of a departure. I told him what I tell my 16-year-old daughter — I'd be more upset if you weren't trying things in life to get better and be successful, and then failing and learning from it, than trying nothing at all. I'm 100% committed to making this company work, even with nothing but tailwinds and knife fights over the past ten years that we've been doing this. I'm not going to violate my own core values, but I'm going to do what it takes to make this company successful. That's how I look at it. Bryan Fields: I think that's a great quote and a great perspective. All right, two more last ones — five years out, will you have fully autonomous robots in the lab? Yes or no? Micah Anderson: Oh, man — I hope not. Bryan Fields: Why not? Micah Anderson: [laughter] I think efficiency and getting your cost of goods down is a beautiful thing, and we're going to figure that out. But I also think there's a human element with employees that matters a lot to me, so I'm conflicted there. Bryan Fields: Sure — are they there helping out, filling jars, doing things like that? Micah Anderson: Yeah, we'll see — that would be crazy. I'll tell you what, if I had one cleaning my house like a maid, I'd probably sign up for that. Ten years ago there's no way I'd say yes to that, but if Optimus comes out in the next 12 months for like $60,000 to $70,000 and it can do basic tasks, you can do the math in your head and figure out how much time that saves you. Bryan Fields: Will this make a big difference? Moving it into the manufacturing space, sure, it's hard to envision, but are there minute tasks now that fall to the wayside, that employees don't want to handle, that a robot could take on, freeing up employees to do more human-style tasks? Micah Anderson: Yeah, 100%, that's going to happen. I'll be clear, it's coming — driverless cars, all of that, I'm not in denial on any of it. There are things no one wants to do, and you'll just tell the robot to go do it. Bryan Fields: So Micah, for our listeners who want to get in touch and learn more, where can they find you? Micah Anderson: Follow us on X, Leaf Brands. We have an X account, LinkedIn, and our website, leafbrands.com. That's it. Bryan Fields: Thanks for taking the time, this was a lot of fun. Micah Anderson: Thanks, Bryan, I appreciate it. See you.