Secrets Behind World-Class Extraction: How 1% Add Millions ft. Micah Anderson

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Bryan Fields: What's up, guys? Welcome back to another episode of The Dime. I'm Bryan Fields, and with me as always is Kellen Finney. This week we've got a very special guest, Micah Anderson, CEO of Leef Brands. Micah, thanks for taking the time — how are you doing today? Excited to have you here. Kellen's excited too — we're grateful to finally get a West Coaster on the podcast. Micah, if you had to choose a coast, which one are you taking? Micah Anderson: It would have to be West Coast. The best. Bryan Fields: Perfect, let it be said. Before we dive in, can you give our listeners a little background on yourself and how you got into cannabis? Micah Anderson: Yeah, so my name is Micah Anderson. I'm the CEO of a company called Leef Brands, an extraction company based out of California. I got into the industry at a young age — I grew up in San Diego and surfed professionally as a kid, did a lot of traveling around the world. I say "professionally," but I didn't make much money, so I had this little side cannabis hustle — grew a little weed in the backyard with my dad, sold some weed. I was traveling a lot trying to do this surf tour called the WQS, and while I was traveling I ran into some guys on a little island called Taveuni in Fiji — this was early, like 1994 or so. They were weed growers in Mendocino County, and they suggested I come up and check it out, so on one of my trips back into the States I did. I went up there and fell in love with the place immediately. Actually, I got busted my very first time ever in Mendocino — kind of an embarrassing story, but I got arrested with 30 pounds in the trunk and a few plants, and sat in the Ukiah jail for a couple of days. When I got out, my dad came up and bailed me out, and we went straight to the real estate agent in town. I was like, "Dad, I'm buying property up here. I love this, it's amazing." So that's kind of how, on the professional side, I got into it. It's been a long 25-plus years since then. Long story short, I built a bunch of farms up in Northern California and did a bit of everything — I had retail locations in San Diego and LA, some delivery operations, and had my whole family involved in the business. Once Prop 64 came around, I shifted everything I was doing from the nonprofit world of Prop 215 into the licensed structure — figured out how to win licenses, talk to city council members, go through that whole process. I wanted to set up a license in Mendocino County, in a little town called Willits, and built a fairly elaborate extraction facility, which is really the core of our business today. Over the roughly eight years we've been running the business, I think we did what everyone did in the very beginning — everyone thought they were going to get rich and do it all. We're going to have brands, we're going to have this, that, and the other, and it's all going to work out perfectly. We learned through bumps, challenges, and mistakes that it's really better to be laser-focused on what you're actually good at. We found that for us, that's scaled extraction. That's our core focus. Bryan Fields: I think that's really well said. There are a lot of companies out there that could take a page out of that book — recognizing that focusing and doubling down on what you do best is sometimes a humbling challenge to figure out on your own. So let's start there — why did you choose extraction in the beginning, and how did you figure out that was your core focus? Micah Anderson: Yeah, I wish I had a better answer than this, but it really came down to myself and the other partners I started the company with. Our backgrounds were really in cultivation — we had farms, did distribution and sales, but really we were farmers, and we all had a bunch of farms at the moment. Back then, concentrates were early — oil was $20,000 a liter, and that quickly slid backwards — but we wanted to try something new and exciting. One of my partners, Gary, who you guys have met, had more extraction background than any of us. I had a little closet room in Mendocino where we messed around with some things, but never anything that was a core focus. We were just excited by it — let's go do this totally different thing. We figured we knew all the farmers, so it'd be easy to find material and rely on everyone we knew — bring it all over here, turn it into extracts, sell oil for $20,000 for the rest of our lives, and it'll be easy. That's the real reason we got into it. It wasn't some big strategic bet that the industry was eventually going to shift this way, and we didn't do a deep study on alcohol or anything like that — it really was just gut instinct. We won the licenses, found the money to build the facility, and it's worked out to our benefit, honestly. It was the right move — it just wasn't some grand strategy. That's the real reason why. Bryan Fields: Those first partners, though — was it relationship-based, like, "Hey, we've got this facility now, give us some product and we'll turn it into oil"? Is that how it started early on, just to get your feet wet and get the building rolling? Micah Anderson: Yeah, we leveraged a lot of the relationships we had. When we first started, trim was selling for anywhere from $100 to $150 — frozen pounds weren't even really a thing yet, not the way they are now. The rosin category hadn't really started to grow, live resin hadn't really started to grow. So in the beginning it was distillate — that's what we started with, and then we started adding different extraction lines to what we do. We were leaning on the farms — some of it was our own material, stuff we grew. One thing about extraction that I don't think people really understand or put enough thought into is that it requires a ton of material to end up with a small handful of jars. You think you know all these farms, but really — today we'd need every single farm in Humboldt, Mendocino, Trinity to sell us 100% of everything they grow, and it still wouldn't be enough. That's how much material we run. So you end up having to build a procurement team and be all over the state of California looking for enough material to run. But in the very beginning, it was literally me, Kellen — sorry, Gary — and Kellen driving around to farms we knew, sticking our arms in bags, trying to figure out how to test this stuff for pesticides. Fun, exciting times. Bryan Fields: Was the plan always to be a wholesale processor, or did you guys have aspirations to start your own brand? Walk us through the early-day vision and how it shifted as the market changed. Micah Anderson: Yeah, no — in the beginning we were going to do it all. We thought we'd eventually grow everything, bring it all in here, trim it, sell the flower to whoever we could sell it to, have a portfolio of brands, get into all the retailers. We really thought we were going to do it all. Actually, prior to us winning the extraction license, we started with a brand called Leef Organics, and we got it into a handful of stores — relationships we had, guys we knew who'd won retail licenses. This was the very, very first days of Prop 64. We leveraged some of those relationships, got the brand in, did about $700,000 in sales, and then we won the extraction license and started building that. For the first four or five years of running the business, we really tried to do it all and have all these brands and different things going. For a while we did, and we ran into the challenges everyone else runs into — stores not paying, your supply chain not shored up on the back end, how are you going to be consistent with pricing and quality. It's really hard to focus on that many things at once and be successful at any of them. We ran a business where we were like 40, 45% efficient at any given thing. Eventually we got to the point where we had to make this really painful decision — guys, we've got to decide, are we brands, or are we an extraction business? After we all sat around the table and talked about it for a couple of days, we decided we're an extraction business. That's what we're good at, let's focus on that. So we divested some of the brands, wound them down, pulled out of all the stores. It was brutally painful — we were in like 700 stores, so we had a good distribution network, but it was killing our business at the same time. Growing up, I learned the hard way that in the early days of my cannabis career, you could afford to make mistakes because there was enough money in it that it didn't really feel like something went wrong — it's like, doesn't matter, we'll just grow more. That's not the environment we're in today. Since the inception of the industry, when it was easy to raise money, to where it is now, you have to be very, very careful, and all your decisions need to be calculated. You really have to monitor everything you do. Over the course of those eight years, we've seen the decline of California — the market has definitely trended backwards, and we've had to make adjustments and moves to make sure we survive. They were all painful, but they were all done for the right reasons, and I think they were the right call. Bryan Fields: Those elements are so important, right? Because ego gets involved, the feelings, the time invested, the allure of the brand, and being so close to the customer — it's a really difficult step back to internalize. But then the extraction side, I think, gets overlooked, because one thing your team has going for it is you're loaded with incredibly talented people in a very, very hard space. People don't recognize how complicated and challenging it is to run some of these machines, and then having an organized data-processing operation that tracks all of it is extremely layered and complicated — because as California compresses, you need a good grasp of your numbers so you can make sound decisions rooted in data. Micah Anderson: Yeah, 100%. The data piece is a big one for sure — something we've been pretty focused on. We're still working on how we use this data to the best of our ability and try to stay focused on innovative practices to stay ahead of the curve, because we're not the only group doing this. There are a bunch of other competitors doing the same thing, and it's gotten to the point where it's about who can be the leanest and meanest, preserve margins, not make mistakes, and be innovative in an environment where it's genuinely challenging to afford to be innovative — R&D costs money and time, and when you don't have a lot of that, we're still trying to find creative ways to stay ahead of the curve. When you run an efficient business, I think you do end up getting rewarded with the right types of clients. We've been fortunate — we've attracted a lot of the bigger brands in California, a lot of the bigger retail clients that rely on us for a significant amount of their concentrate needs, not exclusively, but a lot of it — and we've gotten ourselves into the position of being one of the biggest extraction companies in the state now. Being able to hand someone a data set — here's all the yield data, the potency data, anything pertaining to quality — on a consistent basis as they're building their brands helps them with predictability and production planning. So it's something we definitely try to prioritize. If we're going to be solely focused on extraction, let's try our very best to be the absolute best at it. Bryan Fields: I think it's really amazing what your team has accomplished balancing both sides — because if you're not cultivating, but you're also working with brands, the brands may have certain expectations around strains. From a procurement perspective, you guys have to be ahead of the curve managing both sides of that relationship. Walk us through those dynamics. Micah Anderson: Yeah, that's a full-time job. We've got a guy, Evan — very smart, works for us — who heads up our procurement department. That's one of the things on the data side we've focused on collecting: we've got eight years of data, everything from micro-extraction results off dry or frozen material across all these different strains, which farms perform well, which farms typically have pesticide issues. Once it gets into the extraction process, and post-extraction, we collect data along every part of that process, so we have this massive data set we're actively working with — how do we turn this into an internal tool, whether it's for a client or for us internally, on what to plant and what not to plant. "This one performs well, don't run that particular strain because it doesn't yield at all," and so on. When you work with as many brands as we do, one thing we have to be mindful of is helping them separate their menus from their competitors — and sometimes their competitor is also a client of ours. So there's a level of trust that has to exist between clients, where we're not sharing formulations or whatever we're doing for the next guy. We're very strict about that — we try to keep it close to the chest between the client and us, and then help them based on the data we're seeing: "you guys should use these six strains as your evergreens," and we can help spot-purchase material from different farms around the state if they need that service. Some of the more sophisticated, bigger brands that do a good job on production planning have farms and relationships of their own, and we'll bring material in from those relationships and switch the style of the agreement — we might toll for them versus selling bulk concentrate. Procurement in California is a full-time job. It's a huge state — hundreds of farms, big and small, pesticide problems all over the place. As an extraction business, it's almost the most important part of the business before you even get to extraction, because if you run a bunch of material that doesn't yield well or has pesticide issues, you can quickly put your business in a bad position. On the other side, if you do a really good job of that and have good SOPs — a way to raise the red flag when you bring in a thousand pounds and it's not yielding the way you thought — that's one thing we've learned over the years: someone needs to raise their hand immediately. Now we do it digitally — it's in the system, so it sends an alert like, "Houston, you've got a problem here, pick up the phone, work something out with the farm that works on both sides." Bryan Fields: It's such a delicate balance, right? These brands need a consistent product that customers can feel good about and trust, and your team is the backbone of ensuring that happens on a regular basis. That trust — making sure they're getting a good quality product that meets their needs — starts with procurement, which is part of the pipeline challenge people forget about, how complicated the whole supply chain really is. Micah Anderson: True — it all starts with cultivation. How you harvest, how you freeze, all of that impacts our business. Bryan Fields: Give us an inside look at the different extraction modalities you run, and if a brand is interested in experimenting, is it more like a one-on-one consultation where you recommend something, or how does that work? Micah Anderson: Yeah, so we have three main extraction lines we focus on. We have an ethanol line that's primarily used for distillate production. We have two different hydrocarbon lines used for all the various fractions that come off the hydrocarbon side. And then we have a pretty large solventless line as well — fresh press, cold cure, vape-ready, all the different rosin products that are popular. Those are the three main things we focus on. Gary and the team do spend some time on R&D — messing around with isolating things, minor-cannabinoid type stuff. But truth be told, we spent more time on that back when there was a better economic environment, like I mentioned earlier. As things have gotten tighter and tighter, we've spent less time on it, and honestly our clients are less interested in that type of stuff too — they're more focused on what's actually selling. Those other things are cool, and we'll do a little bit of it, but it's not a core focus for a lot of the different brands. Bryan Fields: You think that's just based on the overall health of the California market? Micah Anderson: I think if California were in a better spot and people were making better money, that would change. It's not that people don't want to do R&D and be innovative — I think the industry absolutely wants to. It's more, how do you do that in an environment where you're just trying to figure out how to make payroll and get paid by all these stores? So yeah, we're seeing a little bit less of it. Bryan Fields: To follow up — if a well-known brand comes to you wanting to experiment, say they've got a strain idea they want to bring into an edible, is it a one-on-one process where you're leaning them toward a different extraction modality, or do they tell you what they want and you produce the product and show them what it looks like? Micah Anderson: It's a bit of both. We've had companies come to us with ideas — like, "I want to do a rosin vape product, but I don't like the potency being so low, is there a way to increase potency?" And we'll work with them: yeah, there are a few things you can do that don't require mixing it with a lighter distillate, and we'll help get there and create that product for them. Then it's on them, based on the cost of goods — because anytime you do that, you're often increasing costs — and they test it in the market to see if it resonates with consumers, then come back and say, "this is working, let's do it," or not. So it's a bit of both — we help on the formulation side, tinctures and that kind of thing, we've done a lot of that in the past. And sometimes it's, "I've got a brand idea, I don't want to think about it, I want you guys to tell me what you think the top hits are and how to do the formulations," and we'll do that for them too. Bryan Fields: The thing I think about is brands that come to you and say, "we really want to do this Blue Dream," but your team knows it yields terrible, and then having to produce the product when the numbers just don't make sense. It's such a delicate balance, because I don't think people recognize how complicated and challenging extraction is from an efficiency standpoint. Micah Anderson: Yeah, our clients get educated along the way to where they understand how we see it from our lens. Using that example — they'll ask, why is this Blue Dream $350 a gram when everything else is $275? And it's because the yield is terrible. If you want us to do that, that's what you're going to have to pay to make it viable for both sides. A lot of times that quickly adjusts the decision-making process. I guess I don't like that answer, but it's the truth. Bryan Fields: You're basically saying, "listen, we ran the numbers, we did the best we can, this is what it is, we wish we could get more out, but that's pretty much all it is." So take us through the investment in expanding into farming — obviously that ties back to extraction, but walk us through that process and why it's so critical for the advancement of the business. Micah Anderson: So we purchased a farm. I spent four years in Santa Barbara working through the licensing process. Prior to that, I really tried to get Mendocino to allow us to do this there, and I was just banging my head against the wall with the board of supervisors. It is what it is — we found that in Mendocino, as an extraction company, the size of the supply chain doesn't support our business, so we decided to go outside the county and spend our dollars elsewhere. Santa Barbara has probably handed out the largest permits of any county, and we found ourselves sourcing there all the time. So long story short, I found this ranch — very unique, a big ranch, a pocket listing that wasn't even for sale. When I saw it, I thought, we could turn this into a cultivation site purposed for our business, for extraction — it'll make our lives a lot easier. Today we drive all over the state of California; we source from about 250 different farms. It's challenging, a whole bunch of headaches and inefficiencies come with that — about 200 to 225 acres worth of product a year. So we applied for one of the larger permits and ended up winning one — it's a 187-acre LUP in Santa Barbara. This year is our first year — four years later, that's how long it took to get through the licensing process. We've got roughly 65 acres going in right now, actually — I'm looking out the window at the tractor driving by. Why are we doing it? To help streamline our business, to help simplify things. We're still going to have to rely on a lot of the farming relationships we currently have — that's not going away. 65 to 70 acres puts a dent in it, but it doesn't meet the total demand. We'll expand into this over the next three years, get our cost of goods down, and it gives us the opportunity to offer better service to clients — go to a brand like Kiva that has a portfolio, hand them the strain list, and say, you tell us what you want us to grow, and that's what we'll grow, and we'll help them with the data too — "I wouldn't pick that one, and here's why, but if you want us to, we will." The ranch itself is considered a trophy ranch — it's got five houses, a bunch of infrastructure. What I'd like to do is offer it as an event space for clients — bring your team, get them excited, take them through the field, show them all our stuff, do some fun horseback-riding type stuff. Bryan Fields: It's a major milestone — four years in the making, I can imagine how difficult that process was. But taking a step back, before you even started the investment, your team ran the numbers on the total input needed to run the business successfully, right? Because one of the challenges you face is that if you don't have enough product running through the system, you're not operating at full capacity, which means there are opportunities for improvement. So I'm assuming those were some of the numbers you ran through to say, okay, we can supplement this part of the business to help these numbers. Micah Anderson: Yeah, just reading the tea leaves and seeing the value of these products decline year over year. It's not rocket science — we're not geniuses — it's that we have to figure out how to get this product cheaper. If we're running around buying pounds for anywhere from $20 to $50, depending on what it is, and we can cultivate those same pounds for $5 to $10, there's a real economic reason to do that. It's as simple as that. There are a lot of other efficiencies we get out of it too. When you buy material from so many different farms, it's really hard to dial in your equipment to squeeze the lemon correctly and get the right amount of juice out of each extraction line. By having larger blocks of material coming from the same spot, it's going to help us with yields beyond just knowing the genetics — and, to give you guys a shout-out, we've been working with you on some of the tech you're building too, just to help us do that. Anywhere we can get a little bit of an efficiency, whether it's through what you guys are working on, something else we're working on, or the field itself — it all adds up, it's all important, it's all dollars being left on the table, and we've got to plug holes anywhere we can. Bryan Fields: Yeah, what's so surprising is that there are inefficiencies, and if your team isn't proactively looking to plug those leaks as margin compression continues — which we all recognize we don't want, but it likely will keep happening — where can you defend and protect yourself? Sure, you could sell more product, you could raise your price as customers want that, but lowering your COGS and getting a better understanding of what those true numbers are, and really locking in on them, helps the decision-making — okay, our margins are here, we know anything more or less than that and we've got issues, but this is where we really want to be. Micah Anderson: I'm a firm believer that you have to look at the bottom-line numbers versus the top line. You can't just say, "well, we're selling oil at a dollar fifty a gram, we need to be at a dollar seventy-five, so sales team, go out and get that new number" — because the market is what the market is. If it's at a dollar fifty, there's nothing you can do about that, it is what it is. So you have to look underneath and figure out how to get more efficient, rather than raising pricing — because as the market goes down, and Jesse was sharing some of the California market figures, it's going backwards, the state's raising taxes, whatever angle you look at it from. So you have to look at it from that perspective versus just raising prices. Bryan Fields: Yeah, the sales team would love to sell it for a little more — they'd die for that opportunity — but that's just not the factual case. I think the lemon example is perfect: if you already bought the lemon and you're squeezing it and getting some juice out, is there more juice in the lemon to squeeze, or can you get the lemon a little cheaper so the juice is worth less? That's such an important thought process that sometimes gets overlooked given the chaos of the whole environment. Micah Anderson: I think the answer is yes to both. There is more juice in the lemon, and our industry — I mean, it's been around for decades, but at the scale companies like Leef and others are operating at now, it's still relatively new within a decade. As innovative practices get better and better, we're finding we're able to squeeze this thing a little harder and get more juice out of it. But it's really got to be stacked multiple ways — through data, through tech, through innovation, through genetics. If you do that, you might see a one or two percent increase in yield, and over the course of a couple hundred acres worth of material, that ends up being millions of dollars. Bryan Fields: It's a crazy difference. I've got to give Gary a lot of credit for the type of expertise that comes in there, because that's one of the areas that's really, really difficult. Some of the operators you have — Marnine, Mac, Adam — they're incredible, really skilled people, and I think that makes a big difference, because that margin you're squeezing out only really happens when you have skilled individuals who understand what they're doing. Micah Anderson: Definitely. Bryan Fields: All right, let's talk New York — walk us through the plans to expand there. Micah Anderson: Yeah, so we've been in California doing this for going on nine years now, and we definitely feel like we're in a position where it's time to take the show on the road. The conversations originally started around clients we were talking to in California — a lot of our brand partners have already moved out of California, or they're in every single medical or recreational market out there. A lot of these guys are newer operators than we were eight years ago, and they were telling us, "man, you need a good extraction partner with the skill set you guys have in these other markets." We had a bunch of conversations, circled up five of these clients, and asked, if we were to move into this market, can we rely on you guys to be clients? The answer was yes. So we started looking at New York and New Jersey, and I started spending time out there about two years ago getting a better understanding of the market. We're at the point now where we're in the acquisition process — we found a group doing cultivation that had a processing license, and they realized processing wasn't the area of the business they wanted to focus on. So we came in and said, look, we'll buy this license, lease some space from you, and you guys can rely on us to run whatever products you need — they've got a cultivation operation and a gummy brand, and we'll help them with what we know about doing those types of products. We also started reaching out to some of the cultivation groups we already had relationships with in California who are already out there, just to preemptively get started on the supply chain — because if you're going to be a Leef and focus on extraction, you don't want to move into a market with no supply chain and no relationships. That's a death blow. So we made sure we could get the acreage we needed to replicate the same model — yes, we can, let's buy this license. We're close to closing on it, going through the licensing process, and we've preemptively moved a bunch of our extraction equipment into New York. Over the past eight years we'd collected a boneyard of old equipment sitting in storage, so we just sent it all out there to do this as cheaply as possible. We're not trying to go in and replicate the size of what we're doing in California — it's going to be much smaller, very selective and disciplined. We're going to make this many products and sell it to these five guys, and that's it — call that a win for the first year, then look at expanding from there. It's a mitigated way of taking on risk in a new market. Long-term, going back to what Kellen asked about the original vision — we're going to do it all, we're going to be everywhere — I think the vision now is that Leef is in a lot of these different markets, and if New York goes well, the goal is to move into one more state every year, with roughly the same five clients, so they've got predictability, and so do we as we move into these different markets. Bryan Fields: The predictability aspect is such a critical one, right? Because there's so much chaos in this industry, and the ability to have those trusted partners, those trusted relationships, and say, we know your numbers are consistent, we know you're usually within this range, we know if we hit these numbers we can feel good about our decision-making — that's a nice breath of fresh air, because I can only imagine some of these other companies that dove into the industry headfirst thinking, "we're going to make all these relationships, figure out extraction, then figure out how to sell all these things." It's pretty much chaos. Micah Anderson: And I've noticed — this isn't me shit-talking anyone, because I understand it, I've actually tried to give a couple of people some advice — there are groups out in New York right now where we were eight years ago, thinking they're going to do it all. So they've got brands, and they're doing co-packing, and they're doing extraction. A lot of the California brands that have moved out there are relying on those types of relationships, and what they're realizing is that when it comes down to it, if you've got twenty people rolling pre-rolls and they've got their own brand and a co-pack brand, guess which one's getting picked and packed and put into the market first. We made that same mistake — we've been there, I know exactly what that feels like. So we try not to compete with our brands. That's an important part of our business — we're not putting our own vape product into the market with a better product than yours. I think that's something clients we work with appreciate. Bryan Fields: How did you guys choose New York? Were other states on the menu, or is it just because I'm there? Micah Anderson: It really came down to the relationships we had there — it felt like the path of least resistance for us. There are clients there, there's demand, concentrates are doing quite well in New York, even better than California in some ways. New York has outdoor cultivation, and for our business model, outdoor cultivation pairs well with the extraction practices we use. If a client wants their product to be as close to the California product as possible in a new market, you've got to be able to replicate the same genetics, the same cultivation SOPs, the same freezing and extraction process. So that's part of it — the pricing out there is higher than California right now, but that'll change, it'll do what every other market does and slide backwards over time. So it's less about the pricing and really just comes down to where we have relationships — that's the quickest way to success, and we felt like New York was the right move. Bryan Fields: Reducing the unknown variables, like you said — but the one variable I want to ask about is input cost, which is likely higher in New York. How does that work through the model? Are your California partners saying, "hey Micah, usually you give it to us for this price, and here in New York it's this plus fifty percent," and is that just an understood transparency, or is it more of a "hey, we've got to figure out a better price" conversation? Micah Anderson: No, it's the former — there's just an understanding that all of this will slide backwards eventually. Products are selling for X, the dispensary is buying live resin or distillate for Y, which means we need to go procure at Z, and it's relative. Our revenue numbers are higher, but our margins are the same, and that'll all get adjusted as the market plays out the same way it did in California. Bryan Fields: Do you guys handle it all the way to finished packaging for the brand, where they just come pick up boxes of vape pens ready to go? Micah Anderson: We do for certain clients, but it's not a big focus of our business. It's one of those things where in the beginning we said, "we're going to do everything," and we were co-packing for all these different brands. What we found is that co-packing is a thankless job — it's very hard, you've got different SOPs for every different box, different touches, different stickers. We originally thought it was a great way to keep clients sticky to us — if they land all their packaging with us, the chances of them going to a competing extraction company are smaller. What we found was kind of the opposite — because if we mess up on the co-packing side, we can knock the concentrate itself out of the park, load it into their hardware, but say they have a hardware issue with their vendor in China — well, now all of our product is loaded into their thing and you've got a problem. If we screw up on the co-packing side and someone mislabels something, we're slowing down their process of getting product to market. So we found it to be more harmful to our business than beneficial. Co-packing is this big unmet need in the industry — someone needs to knock that piece of the supply chain out of the park. What we do now is a little bit of it for a couple of brands that do a good job ordering their packaging on time — because that's the other thing, if the brand doesn't manage their own supply chain and get packaging to us on time, we've made the product, it's sitting in our inventory, supposed to go into theirs, and it's not because they messed up on their end, but it slows down the whole process of getting our products out. So, long story short, we do it on a very small scale — it's not a big focus of ours. Moving into New York, everybody's asked us to do it, and I think we're going to stay disciplined and not. We are having conversations around, since we've got a license and space, maybe we give a brand a thousand square feet in our facility, they bring in their own staff and make their own product, and we just hand them the jars they need. I think that works well in a partnership relationship with a bunch of these brands. Ultimately I think a lot of brands are finding out the hard way that there's an element of the business you don't want to outsource — if you've got momentum and you're doing a million dollars a month, and someone screws up on the co-packing side, you're throwing sand in the gears of your sales momentum. So owning that piece, I think, is important, even for brands moving market to market on an asset-light model — I'm seeing more of them want to hold onto that piece of the business. Bryan Fields: Sticking with New York — when you're expanding out there, how do you feel comfortable with the personnel going out to run the machines and hit your efficiency numbers, given all the expertise on the West Coast? How do you transfer that and get the visibility so the team continues to operate successfully without you having to lean on them constantly? Micah Anderson: A couple of years ago we started this process internally — we just called it our "franchise Bible," probably not the right term for what we were doing, but basically we documented every single aspect of everything we do, from production — all the SOPs around production — to accounting, to procurement. Literally, how do you do every facet of our business? Gary and the team did a good job piecing that together and training our team in California on it. We actually tagged a lot of our employees to participate in the process so there's buy-in and they understand how to read through all of it. Part of it is replicating it through our SOPs, but also deploying a manager who's trained in California, and putting employees we want to hire in New York through a training program in California first — bring them out, put them up in a hotel, they spend 30, 60, however many days it takes, and we sign them off, like, "okay, you're now Leef-certified," so to speak, so we have the trust that they're going to go run the business — not just making the product, but how you interact with clients, how you do everything. That's what's going to be challenging for us — one of the challenges in my mind is keeping the culture, the service, and the customer service aspect the same in each market as you're growing, because the company's bandwidth gets diluted as you move into these different markets. We've thought a lot about it — that's our short-winded way of saying, let's send out one of our best guys to graduate into that role. We've got some very smart guys who really know what they're doing, and honestly they're getting to the point where they're so qualified they're ready to graduate onto the next thing. Bryan Fields: You've got a really, really impressive team, but it's a difficult balance, right — that's the challenging aspect, taking people and saying, "this is how it goes in California," but in New York it's going to operate a little differently, so there has to be some autonomy and trust, while making sure decisions are still being made well, the relationship is still being held, and there's enough visibility as state lines get crossed that everyone feels comfortable with how things are performing. Micah Anderson: Yeah, and the other way we're going to handle some of that, so there's continuity, is we're using the same, small client Rolodex we're going to work with in New York — we already have that relationship. We have a salesperson, a strategic account manager, who works closely with those clients already, so we're keeping that the same, it's not a new relationship. What we've found is that most of the bigger brands have one procurement person covering many of these different markets, so it's a lot of the same relationships — there's certain things we're not having to recreate the wheel on, and we're able to bring in the internal team in California to help with sales, finance, and HR in this new market too. Bryan Fields: Slightly switching gears — Bitcoin. Talk to us about that choice, and I guess the question the internet really wants to know: are you a long-term holder? Micah Anderson: HODLer — hold on for dear life, especially right now. Yeah, I'm a big fan of Bitcoin, personally. I'm a big fan of sound money in general — I'm kind of a nerd about it, I like reading monetary policy, books about the Federal Reserve. I have since I was a kid — my dad kind of turned me on to it. When I started making money in the cannabis industry, one bit of advice he gave me was, "son, buy gold, it's sound money, don't just waste your money, this stuff's going to evaporate over time." And he was proven right — gold was $700, $800 when I first started buying it, and it's somewhere around $3,000 today, and it should probably be a lot higher than that. Gold markets are manipulated pretty heavily, but based on the M2 money supply and how many dollars have been printed since I got involved, it should be much, much higher than it is. For people who don't know, Bitcoin isn't quite the same thing as "crypto" broadly — there's a difference between Bitcoin and all the other crypto coins and assets, the shitcoins and meme coins. That's different, and I think that gets conflated, and people don't understand there's a difference. I think Bitcoin is this new technology, and based on where we're at with the internet and cryptography, it's a new asset class that's going to continue to grow, and it might end up being part of the new monetary policy moving forward as well. I started paying attention to it for about a year before I started buying it personally — not that long ago, honestly, even though Bitcoin was brought to me many times over the years and I always said no. I thought Bitcoin was some nerd thing that people who collect Pokemon cards were into — and I might have been right in the very beginning — but I came around to seeing it as just a newer form of gold. It's sound money at the end of the day, a way to preserve some wealth. It is volatile, it's all over the place. Do I personally hold Bitcoin? Yes, I do. Do I sell it? No — I haven't sold any Bitcoin at all. Maybe transferred a little to a partner or two, but I don't plan on selling, and I don't plan on it going forward either. I think Bitcoin is going to end up being worth a lot more than it is today, and at some point we won't talk about money in terms of dollars, we'll talk about it in terms of Bitcoin. As for what that has to do with Leef — we're running a public company now, and I'm trying to figure out a way to shore up and improve our balance sheet. There have been a lot of other public companies that have done this before us, and as I started paying attention to and reading about those companies, I noticed that the strategy of buying Bitcoin and putting it on your balance sheet is popular — Bitcoiners are really into it, and you can get a better return on your Bitcoin through public vehicles than by purchasing it directly. Before you even get to that, though, the cannabis industry has been marginalized by the banking industry — asset forfeiture has been a thing, moving cash around the state in vans, there's a danger element to it — and Bitcoin solves a lot of those issues. It's a lot easier to make payments to one another. So we started off acquiring Bitcoin, at least through B2B payments, and we've got roughly four coins so far. We put it out there to the world that we're into this Bitcoin thing, we're going to start accepting some payments, and what I'd like to do is take it a step further — through some sort of raise, probably a convertible note — and purchase more Bitcoin to put on the balance sheet. The cannabis industry is challenging — anyone who's been in this industry for a long time knows legalization state by state has been brutal on it, the easy days are over, and everyone's balance sheet is taking hits and writedowns left and right. I think Bitcoin might not look like the answer today, sitting where it is, down from its all-time high, but if you look at it as a long-term asset on your balance sheet, it's a way to strengthen it. You've got your P&L strategy, which we've talked about — we're going to grow, we're going to extract, we're going to sell that product, we'll do $30 million and have our margins, that's your P&L strategy. But how do you also have two shots on goal and grow your balance sheet? That's through Bitcoin, and it's never really been available as a strategy before. Now that it does exist, I think you're going to see a lot of companies go this direction. Leef was just the first in the cannabis industry, that I'm aware of, to take a step toward it, and we'll see — there are no guarantees. I want to do it, I believe it's the right thing for our company, but if the market doesn't agree with me and we're unable to raise the money, it is what it is, and I think we'd continue to hold the coins we have and find another way, as we get into more profitable days, to take some of the profits and put that into Bitcoin and hunker down. Bryan Fields: Is that part of the core mindset from your perspective — we're going to continuously look for ways to improve the growth-mindset element, like, listen, there might be an opportunity to squeeze here, we're getting hit here, but maybe if we try this approach it could be beneficial? Micah Anderson: Yeah — how can you be an innovative company in a very challenging market, what are your options, what can you do? The other thing I like about Bitcoin is that it's an uncorrelated asset that doesn't require any management. When you acquire a company, you're hoping the deal is what they said it was, that your new partner doesn't develop a problem, that M&A doesn't implode — there are so many things that can go wrong. With Bitcoin, you buy it, you put it on your balance sheet, and if you're a believer like I am, it goes up — every five years it'll be more valuable than it is today. Historically it's had a much higher chance of a positive impact on your balance sheet than M&A in this environment, when M&A is damn near impossible for us, when your share price is down and everyone's got toxic debt and all the rest that comes with it. So it really comes down to the same thing I was talking about with the extraction practices — every little thing we can do to get a bit of an edge. Bitcoin is just another one of those edges for us. Bryan Fields: I love it. Hard pivot — favorite book? Micah Anderson: I just finished a book everyone should read called The Big Print. It's about exactly what I've been talking about — the history of money, what's going on with the Federal Reserve. It's by a guy named Lawrence Lepard. I think it's important stuff to know, and in our industry right now we've got challenging days ahead of us — I think it gets worse before it gets better. The more you understand this type of stuff, understand what happens when the Fed implements QE and prints more money, the more you understand it impacts your business — tariffs on China, all these things impact your business. The more you understand it and can see the train coming instead of being reactive on the back end of it, the better chance you have of survival. I'd recommend that one. There's another book I think is fascinating called The Creature from Jekyll Island, by G. Edward Griffin. It's really old — I think he wrote it in the '70s, maybe early '80s. It's about the creation of the Federal Reserve, and kind of the conspiracy theory around how five families met on an island on the East Coast and came up with the plan for how to get centralized banking into the United States. I think it was the worst decision we've ever made, and a lot of the issues we have globally, in our country, and in our industry stem from the Federal Reserve. If you're into a very long, dry book, I'd recommend that one too. Bryan Fields: Any plans to get the Daredevil Jane band back together? Micah Anderson: No short answer — negative. It was fun, I played in a band, we did a bunch of traveling, got to play some rad shows and tour with other bands. My brother was in the band too — he's in Missouri now. Our bass player is a banker now, which is wild — he's in San Francisco. Adrian, the singer, still plays music — he's got a band called Crashing Wayward, he's in Nevada, if anyone wants to check that out. Bryan Fields: Dream smoking session — three people, dead or alive. Micah Anderson: My dad, honestly. I used to smoke weed with my dad when I was young, and he helped me out in the industry quite a bit. He passed away a couple years ago after he'd moved out to Missouri, so I'd put him on the list for sure — there are a few conversations I wish we'd had before he passed. There's a guy I worked with when I was a kid in San Diego — he was shot and killed in this industry a long time ago, just a good friend of mine who isn't with us anymore, so I'd pick him too. And then Marcus Aurelius — I'll throw a wildcard out there, I like the whole stoicism thing, I've read some of his writing, so I'd put him on the list. Bryan Fields: One year from now, what's changed? Micah Anderson: Bitcoin's at $200,000. Bryan Fields: Calling it! Tell me something that's true that nobody agrees with you on. Micah Anderson: Bitcoin's going to be $200,000. Bryan Fields: I mean, there are a few people who believe that. Micah Anderson: No, yeah, you're right — I think when we first started going the Bitcoin route in the industry, people were like, "what are you doing?" So I believe I'm right, but not everyone agrees with me. Bryan Fields: Last question — what single thing would you do to fix the California cannabis market if you were in charge? Micah Anderson: If I had to pick one thing, I'd drastically reduce taxes and licensing fees. There are so many issues that it's hard to pick just one, but let me give you an example: our cultivation license this year cost $720,000 — that's annual, you have to pay it every single year. The same permit on the hemp side, for the same footprint, the same plant, same everything, costs $900. If California doesn't start treating this industry like agriculture, or like any other industry, the continuous decline we're seeing isn't going away — it's just going to get worse and worse, and not because the market isn't there. I don't think people are smoking less, they're just not going into retail stores to buy their products. So that'd be a start — a drastic reduction in taxes and licensing fees. And I've got a whole other laundry list of things I'd do after that. Bryan Fields: That's a wild number. Micah Anderson: And that's not even the whole permit. Bryan Fields: So Micah, for anyone who wants to get in touch or learn more, where can they find you? Micah Anderson: We're on X, we're on LinkedIn — Leef Brands, spelled L-E-E-F. IR at leefbrands, or our website, leefbrands.com, would be a good one. I'm terrible on LinkedIn, so if you reach out there and think, "man, this guy doesn't respond" — I don't. I'm better on email, shoot me an email there. Jesse's here too and he handles a lot of that — Jesse, what am I forgetting? Bryan Fields: We'll link it all up in the show notes. Thanks for taking the time — this was a lot of fun. Micah Anderson: Thanks, guys, I appreciate it.