The Rise of AgTech in the Cannabis Industry: Interview with Bradley Nattrass

Bradley Nattrass: Applying AgTech Sensors for Automation & Efficiency, The Future Is Now

Bradley Nattrass: They're doing an autopsy on that situation, trying to figure out what went wrong and what they can not do next time. So from a technology standpoint, it's about putting measures in place that allow them to proactively stay ahead of it. Bryan Fields: What's up, guys? Welcome back to another episode of The Dime. I'm Bryan Fields, and with me as always is Kellan Finney. This week we've got a very special guest, Bradley Nattrass, Chairman and CEO of Urban-gro. Brad, thanks for taking the time. How are you doing today? Bradley Nattrass: Thanks for having me, gentlemen. Doing great, thanks. How are you doing? Bryan Fields: Great. Kellan, how are you doing? Kellan Finney: Doing really well, excited to talk to Brad and learn about technology in the agricultural space, especially as it pertains to cannabis. We were chatting earlier on the show, and Brad is in Colorado as well, so I just assumed his loyalties lied on the West Coast, but I think he might be in a different place. Bradley Nattrass: Yeah, well first of all I'd say I'm North Coast, because I'm an American-Canadian dual citizen. But then I'd say East Coast, because that's where our business is strongest right now. Kellan Finney: I love it. Let the record show — I think AgTech is really exciting, something that's near and dear to both of our hearts, specifically CEA. I'm excited to get Brad's perspective on where cannabis today can benefit from it, and where the diversification efforts of Urban-gro have gone. So Brad, before we dive in, for our listeners can you give a little background about yourself and the beginnings of Urban-gro? Bradley Nattrass: Yeah, sure, you bet. As I started with, I'm American-Canadian, I've been in the US for 27 years now. I started Urban-gro with a business partner about a decade ago — almost a 10-year relationship — so we got into the industry pretty early. Prior to Urban-gro, we had a lighting company together, retrofitting convention centers, healthcare facilities, and small cities with more energy-efficient LED lighting. That carried right over into the cannabis space, which in Colorado was just starting to grow in our backyard, and hence we formed Urban-gro. In the early stage, Urban-gro was really a value-added reseller predominantly focused on the lighting industry. We partnered with some large brands out of Europe, and our value-add was the expertise and the culture we had on the team, taking those lighting solutions into the industry back when there were only about three options, which has since changed. We grew by adding the services our clients wanted and desired, and evolved into designing cultivation, integrating airflow, benching systems, lighting, and environmental controls into the solutions. It all really took off for us in February 2021, when we listed on the NASDAQ right at the height of the cannabis industry. We raised $62.1 million at the time and set out with the vision of being the leading turnkey design-build provider in the cannabis space. We also diversified at the time into vertical farming — when I say controlled environment ag, or CEA, that's really crop-agnostic: cannabis, leafy greens, berries, we put all of that in one category as CEA. We set off on that journey, which included a variety of acquisitions, building up the team, and diving deeper into the space both in the US and in Europe. Bryan Fields: I can only imagine going from a lighting reseller to a high-end turnkey solution — there's a bunch of evolutions along the way. Looking back on it now, were there single steps where you said, "okay, this is clearly how we ended up here," or was it surprising that you ended up as a full turnkey solution, because that's a ton of assets, personnel, and really skilled expertise all under one umbrella? Bradley Nattrass: No, it definitely is, and it's really that expertise — we have over 140 employees today: architects, interior designers, all different types of engineers, horticulturists, and construction management personnel. It's really the strength and knowledge of those individuals. We had horticulturists on our team early, and they had the knowhow of working in hundreds of facilities, so they brought that value-add to our clients. Then by adding these other experts in their individual areas, that's what brought the credibility and knowhow to our clients and really built the respect for Urban-gro — we earned that respect by bringing solutions to them. So when we set out with these acquisitions, that was the plan — we've really executed on it by acquiring architecture, engineering, and construction firms. But what we didn't know at the time was how we would eventually diversify outside of CEA. That was a pivot we made as a senior management team, and in retrospect, thank goodness we did. Bryan Fields: Before we get into that pivot, I have a couple more questions. You're selling lighting, and then all of a sudden the company naturally morphs into taking other environmental conditions and feeding that data to operators so they can do a better job. Can you talk us through how this hardware provides value, and how you guys help communicate those values from sensors to create a controlled environment that's all synchronous and working together? Bradley Nattrass: Yeah. About three or four years ago, we invested heavily in AgTech. We invested in a company with some very smart PhDs, software scientists as well, and we were building out a sensor platform that would, every minute, gather information on temperature, airflow, and humidity within a facility. It was really an insurance policy for cultivators — if something was going wrong in a specific area, maybe a clogged or blocked emitter, our sensors would send that data back, and the algorithms built around it would alert the grower to a potential issue so they could stop it in its tracks before it became a large outbreak of powdery mildew or something else. But we were a little bit ahead of ourselves. There was a lot of money to invest at the time, but the market wasn't ready. It's one thing to get that data over to the growers, but it's another to make sure you have the right individuals ready to act on that data. There was one MSO that eventually put in data scientists, but we were just out too early. We've been able to repurpose some of that — for example, we have an incredible project management portal, both vendor-facing and client-facing, that helps from a service-level standpoint and allows us to complete projects according to our schedules. But we were a little ahead of ourselves. Today, in this industry, it's still about gathering the data — from sensors and from environmental control systems — and then humans acting on that data. The future of CEA, both cannabis and other crops, is going to be data fed into a system that then acts, and AI makes decisions based upon that data. So although that evolution has paused, or the growth has been stunted over the last couple of years for a variety of reasons, in the years and the decade ahead it's going to be autonomous. It's pretty exciting, but right now everyone's just focused on growing as efficiently as they can in the cannabis space, lowering their cost of production, maximizing their branding and sales price, and holding on until the next wave in the space. Kellan Finney: I think we're all in agreement that the autonomous, AI-based, sensor-driven future is hopefully sooner rather than later, but you're right that there are a multitude of factors limiting that. I want to stay with the early conversations with MSOs — is it a collaborative environment, where your team presents solutions saying "hey, would this be helpful for you," or is it more the reverse, where the customer says, "we've got a pain point, can your team help us find a technology solution?" Bradley Nattrass: It's more proactive — our team approaching the client with solutions to their problem. Clients typically make their best efforts to solve the issue themselves, putting employees on it to observe and track the data. But from what we've seen, it's finding out after the fact — they've had an outbreak or an issue, so then they're doing an autopsy on that situation, trying to figure out what went wrong and what they can do differently next time. So from a technology standpoint, it's putting measures in place that allow them to proactively stay ahead of it. And it's not just sensors — where you place one every hundred square feet — environmental control systems are very strong today, and it's also about putting processes and procedures in place for employees to consistently check specific areas or pain points. Bryan Fields: How do you balance that proactive approach with your company's vision? If your 12-month plan is to develop more HVAC controls for these applications, but a big client has a huge pain point right now, are there internal conversations about where to allocate resources? Bradley Nattrass: Yeah, we do. When we look out front, we want to be the leading design-build partner from end to end — laying out the concept of a facility all the way through to post-operation, where our team, through our GrowCare program, works with clients with our horticulturists, continually training staff since there's higher turnover in this space, so these systems are used to their maximum potential and are as efficient as possible, maintaining equipment to prevent downtime. So the vision three or four years ago with the sensors was much more grandiose, and now it's contained to the least amount of dollars to execute. But we have a team of horticulturists, head architects, and head engineers who've worked on over 1,200 projects together, so we've seen a lot. Our clients like to tap into that knowledge and ask a lot of questions — consulting is a piece of it that's growing within the organization. But it all comes back to setup: if you proactively set up a facility thinking ahead about what you want the end result to be, and work with a design-build partner like Urban-gro, we maintain that we can get clients to market about a harvest early, because we have that single point of responsibility. Along the way we're making decisions that fit the overall goal of the facility, driving cost down and operating as efficiently as possible with minimal outbreaks. Bryan Fields: Is that a catch-22 specifically in the cannabis industry — because good decisions upfront save problems later, but capital restraints mean a customer says, "Brad, that's a good idea, but it's too expensive right now," and then six or eight months later calls you back saying they went down the wrong road? Is it an early-market challenge where operators don't recognize that these tools will be critical separators to get off the ground successfully? Bradley Nattrass: You're 100% right — budget constraints drive a lot of decisions. Usually when it comes to equipment, we give a good-better-best option for each solution. One area that's typically under-specified is mechanical, and if you under-specify mechanical, then once you start growing, it's not going to be strong enough to respond, and that results in a lot of issues within the facility. In the past we would build according to what the client wanted; now we have a larger voice and speak up — hey, I don't think you should cut back in this area, maybe downgrade a different equipment system instead, because this is the basis of successfully growing in your facility. That's definitely helped, but it's tough, because a lot of manufacturers in horticulture, let alone those focused specifically on cannabis, are having significant issues right now, because clients — single-state or multi-state operators — aren't putting the capex out. In the past we could optimize and recommend what a client should do, but today the funds aren't there. There are some big moves that have to be taken at the 50,000-foot level — rescheduling, getting rid of 280E — that will turn the tables and bring capital flowing back into the industry. That's the key to the future. Who knows when that's going to happen — we'd all be wealthy if we had a crystal ball. Bryan Fields: Unfortunately that hasn't happened yet. But in the early days, from 2016 to 2021, there was a decent amount of cash flow in the industry, and cannabis is probably the highest-value cash crop in terms of gram of weight, so there was money that allowed Urban-gro to develop a lot of this environmental control tech. Is there one specific piece of technology you developed in those early days that's been applied to other horticultural industries, that you might not have had the resources to develop otherwise? Bradley Nattrass: Tech, no — knowhow, yes. Our IP is our people and their knowledge base, and we've built some really phenomenal databases that help make specific design decisions based on a variety of inputs and conditions. From a tech standpoint, technology changes so fast — there are sensor companies in the marketplace, and any company that was just focused on sensors, a lot of them have fallen by the wayside. Those that remain are burning through a lot of cash and downsizing because it's harder to access capital. I think the next wave, when some of those larger decisions are made — like abolishing 280E and allowing money to flow back in — that's when you'll see more new startups. Look back three years ago at how many startups there were in the space — it was phenomenal, and competition drives innovation, and that will happen again, just not in the near future. It'll be the companies that are strong in the space that help fund some of those startups and be on that cutting edge. There's a lot less competition now, and I feel like everybody's cheering for each other because we all want joint success — there's not as much secrecy anymore. Bryan Fields: Let's dive a little deeper, because I imagine some operators listening are intrigued by sensors, have had many pain points and losses, but aren't sure where to start. How does it work — does a member of the Urban-gro team come out, walk the facility, provide IoT hardware? Is it upfront hardware cost, or a variety of SaaS models? Bradley Nattrass: The horticulturists, lead architects, and engineers — the ones who've been involved with our combined 1,200 projects — those are the key individuals operators want to speak with, not me, not our senior executive team. It's tapping into that knowledge, not just in cannabis — a lot of these horticulturists have been growing a variety of crops for decades. It's bringing them out to an existing facility, walking it, sharing the issues they're encountering, and getting feedback on capex they could put in from an optimization standpoint. For new or expanding facilities, we come out before architecture, engineering, and construction plans are put together, looking at how people, plants, and processes work together — designing the facility according to that flow, looking at things like wastewater treatment requirements ahead of time. During the design stage, the goal is to move into a build stage once licenses are awarded and funding is in place. During the build stage we're also working on equipment setup, and that's where technology really comes in — we discuss it early on, always looking at new technology. We have an office in the Netherlands, so those engineers are also looking at the newest technologies in the marketplace for our clients. I want clients to rely on us to know what's latest and greatest, and then we put an equipment plan together based on budget. Often, if we can properly control temperature and the environment, a lot of other issues will never show up in the first place, and operators can use biologicals to manage their pest program. In terms of placing sensors throughout a facility as an upfront investment, that vision we had three years ago didn't play out — the market wasn't ready for that across all of CEA. I think you'll see more evolution there in the years and decade ahead. Bryan Fields: I think that's well said, because looking at outside industries — oil and gas, food and beverage, pharmaceutical — they use this technology as a mainstay internally because it lets them make better decisions and sleep better at night. Unfortunately in cannabis, it seems like people often have to face a batch loss to recognize that a one-time upfront cost would have saved them tremendously down the road. What's the best way to convince someone on the fence — is it ROI, showing that spending X prevents Y — the cleanest way to get someone in the cannabis industry, who's more touchy-feely, to recognize that protection could be a massive saver down the road? Bradley Nattrass: Brian, you're absolutely right, but look at those other industries — they're generating a lot of cash and profit right now, so they're able to reinvest and work on the future. Right now our industry is tight, so the funds aren't there to put back into R&D. If I could speak to operators before they build their next facility or do a retrofit — it doesn't hurt to reach out to a consultative group like Urban-gro, single point of responsibility, where we do everything, and listen and hear what they have to say. You want to pick a partner that's going to be around, because when there are problems in the future, you want to rely on that partner from a warranty standpoint — you've got to look at the strength of that company. But it doesn't hurt to listen, because I believe when operators talk to our lead engineers, architects, and horticulturists, they'll realize the wealth of knowledge they can tap into. Our goal is to make the COO or head grower look really good proactively, because if the facility is operating efficiently with small outbreaks, they're doing their job well. Kellan Finney: After you guys set up a facility, is it kind of like you wipe your hands clean? How does the ongoing relationship work, given sensors and technology are always evolving? Bradley Nattrass: Great question — we want to stay sticky with the client, we don't want to be one-and-done. I look at some of the other ancillary companies in the space, like Hydrofarm or GrowGeneration — they've got great recurring revenue on the back end with nutrient programs, real-time delivery every week with everything an operator needs. I love those programs, but we're not set up for that — we're a professional services design-build firm. What we do is lean on consulting, which is taking a larger role within our company. Our GrowCare program has individuals working maybe a day a month, or a little more, going on-site — they were there during the build or optimization stage, so they've built relationships with operators, and they walk through making sure clients are utilizing the systems they've put into the facility to their highest and best use, so they keep operating efficiently. If we sign a one-year contract on the back end, it's to be that big brother watching, helping them avoid mistakes. The technology from the past, where we'd place sensors all over — that's expensive, and not a lot of clients today are willing to make that upfront investment; they're relying on environmental control systems to put out warning signs. From a consulting standpoint, we stay in touch and front of mind, and when it's time to optimize or build another facility, we're there. We invested in AgTech in the past — it didn't work out because we were too early — but we've reused some of that investment in the portal I mentioned that elevates our service levels. I've maintained for years that acquiring a technology company isn't in the near future for us — right now we're laser-focused on getting back to generating cash flow and growing across our segments. But when a technology company has the right technology, I think that would be a smart addition to Urban-gro's offering in the future, especially given our deep client relationships and focus on efficiency, since that technology can pay for itself sometimes within a month for large-scale facilities. Bryan Fields: That makes sense — if you're the trusted professional services and design-build partner, and clients trust you to always have knowledge of what's latest and greatest, you'll have that relationship, and when you say "we'd like to show you something we think will be beneficial," they'll say come on in. If you're a technology company just selling one solution, it's a lot harder. Bradley Nattrass: Exactly — our business development team, we don't even call them a sales team, sells a variety of solutions, so it's a lot easier; we spread costs over all these solutions versus a one-product company. We used to be a value-added reseller; today we're partners with probably a few dozen manufacturers, and we always want to present at least the top three, sometimes top five, to our clients. As long as we don't get greedy and use a cost-plus model, clients don't feel they need to go price-check us elsewhere and waste their valuable time. Not getting greedy builds a lot of trust and allows us to bring in systems much earlier. It's actually why we don't list client names in our press releases anymore — they were getting inundated by dozens of groups pitching a cheaper light. Bryan Fields: That's a smart way to look at it — the one area that separates you is trust, building that relationship and pulling on skill sets, exactly like agtech. I want to lean into diversification — I know about a year ago that was a crucial decision for your team. Can you talk through the origin of that decision, and what the first steps were internally? Bradley Nattrass: I'd like to add one thing to the last point first — we have to do what we say and stand behind our solutions; that's been key. About a year ago, in our public filings, we had a $3 million business development expense tied to a large multi-state operator client that had issues with a lighting solution that came through us. We stood up and took accountability, because it was a manufacturer that wasn't accessible, and we fixed the problem. Earning trust in a bad situation, and stepping up to do the right thing, builds long-term relationships. Now, to your question — about a year and a half ago the industry started to weaken. We, like many others, saw that a quarter or two before, and as optimists said, "it'll be fine, it's coming back, don't act on it." But it became pretty clear about five quarters ago that it was going to be decreasing for a sustained period. What would bring it out of a decreasing market? Rescheduling, abolishing 280E, maybe federal legalization — there were a lot of expectations after the last election, but it didn't come back. So we focused on diversification. When we made these acquisitions, about two-thirds of these firms' business was outside of cannabis, and we had enough knowledge to train their other architects and engineers on the controlled environment ag space. It's also exciting for an architect to design a hotel or a hospital in addition to a cultivation "box." These firms had a lot of past relationships and clients, so we looked at their key contracts and said, look, we can do what we do in these other segments too, as a professional services consulting firm. None of this happens overnight — you've got to build relationships and trust that you're not just a cannabis company but a design-build firm. It took about $12 million of losses over five quarters, maintaining and keeping most of our team intact while building out new contracts with existing clients. Now we're at a point where we're not reliant on cannabis to be profitable — we're very loyal to the cannabis space and want to be strong when the industry turns, and now more than two-thirds of our business is outside of cannabis. We design-build manufacturing facilities, aircraft hangars, work with a large hotel group on engineering for each of their properties, build self-storage facilities, small manufacturing operations within a distribution center for a global CPG company, and even a golf resort's outer buildings. That's allowed us to keep our team strong, so when the cannabis market opens up, Urban-gro will be strong and ready to tackle what the industry needs with a very quick turnaround. Bryan Fields: Is there one of those diversification industries your team enjoys working in more than the others? Bradley Nattrass: You'd think the golf course, right? But so far there hasn't been another one. Airplane hangars are cool too. The engineering firm we acquired, based in Houston, does laboratories — a growing, exciting area, whether oil-and-gas labs or tissue culture laboratories, which we hope to close soon in the CEA space, so there are a lot of synergies. One example I love — when we acquired a construction firm, they were doing a couple of smaller contracts a year with a light industrial firm, a consumer packaged goods and beverage company that operates globally. We were a little worried they'd see we're in the cannabis space, since we still can't bank with a mainstream bank and don't touch the plant, but that wasn't why we made the acquisition. Sure enough, they loved that our balance sheet was strong on the NASDAQ with no bank debt. It's turned into about five projects in operation with this client, and within their larger corporation we're moving into different divisions — average project size of $7 to $14 million and growing. At the start it was just construction; today it's construction, architecture, and engineering, and we've successfully integrated equipment and mechanical systems we use in the cannabis space because of the purchasing power we've built with that national relationship. So it's cross-pollinating — getting in the door with one solution, earning trust, then integrating more. We're not looking for new acquisitions right now — we're focused on getting back to generating cash — but future acquisitions could include additional services firms to get into a specific new sector, or on the energy services side, where good relationships could let us earn our way into new opportunities. Bryan Fields: I want to highlight that, because I don't think people recognize how challenging — and important — that is. You expanded your total addressable market, added expertise for access to outside industries, and diversified so you're not solely dependent on cannabis. Was there a company outside the industry you looked to, like Google or Amazon, saying "eventually we could get to that spot"? Bradley Nattrass: Internally there were a lot of relationships — our first acquisition came through an introduction from our EVP of Ops at the time, and that group had relationships that led to another acquisition. We handled outside law firms and internal legal, our GC and his team, but we brought those in based on existing relationships. Looking at the bigger picture, the big names are firms like AECOM, Bowman, and Stantec — professional services consulting firms in the $400 million to $15 billion revenue range, some working on infrastructure in Eastern Europe or the Middle East. We found a niche at $25 to $50 million, where a turnkey solution with everything under one company, nothing outsourced, single point of responsibility, was in demand. The golf course project, for example, would have required them to hire their own site supers and project managers and find separate architecture and engineering firms — instead it started as just an architecture bid and turned into an $11 million design-build deal. It's about demonstrating confidence in our solutions and doing what we say. We built an in-house project management office that keeps everyone on task and on agenda, so we hit our deliverables and stay aligned internally. Bryan Fields: I'm curious how that initial conversation went with the board — "hey, I know we went public for cannabis, but check this out." Were they receptive? Bradley Nattrass: It was an evolution. Three of our board members come from the cannabis space — the former COO of Cronos Group up in Canada, and a strong Colorado extraction, dispensary, and cultivation owner who's still around and strengthening in the industry, even though it's a tough market in Colorado, because he's invested in his facilities and efficiencies to separate himself. My board acts as mentors to me — they've never forced a direction one way or another; we've been very unified as a team. There were two options: a lot of people started laying off staff a year and a half ago and hunkered down and waited, or you utilize the services you already offer in markets you've already operated in. It was eye-opening — it wasn't a heavy lift, just building customer relationships and convincing other divisions or sectors that we're a good partner. We have quarterly board meetings, but touch base every couple of weeks, and I'm getting guidance along the way. The $12 million of losses was a painful path, but it had to work. Now we've guided to $30 million in Q4 revenue and generating cash for the first time — that will be a great celebration, because we pulled it off. It would have been terrible if it hadn't worked, or if we'd just had to wait. Bryan Fields: One of the exciting parts is that with the backlog hopefully about to be unlocked, your team can accelerate even further with this whole new set of internal skill sets — maybe the new challenge is adding team members as you grow in both verticals at once. Bradley Nattrass: Yeah, this is pretty cool. In the cannabis sector, we're not just waiting for rescheduling or for 280E to be abolished — that's the ultimate goal — but what's not talked about a lot is that the biggest problem we face is that there are now about seven key states that have legalized cannabis where regulatory and legal delays have stopped them from awarding licenses. Alabama, for example, just awarded licenses for the third time. We have more than 20 clients where we're in design, architecture, and engineering right now, but until they're awarded a license, their funding sources won't release funds. For us it's as simple as New Jersey opening now, New York supposedly coming in Q1, Florida adding more licenses in the first half of next year — once clients are awarded licenses, they move to the build stage with us, which leads to equipment orders about six months after they start. Watch our releases — we signed two deals in early Q4 that had waited a year and then just freed up and moved forward quickly, both retrofits. That's important for our momentum. But while we focus on efficiency and getting back to generating cash, we'll also make good strategic moves adding to the team. One MSO used to do all their design-build in-house with a team of ten, and when they stopped spending capex, they had to part ways with most of that team. One of the CEOs recommended I talk to an individual they let go, who oversaw the build-out of close to three dozen cultivation facilities, dispensaries, and extraction facilities — we added him as our SVP of Operations. Even though we're waiting for cannabis to come back, which for us just means licenses being released, we now have someone who brings enormous expertise to our offering and builds confidence and trust with operators. Bryan Fields: Is it frustrating internally, knowing your team is taking all the right steps and landing contracts, but regulatory challenges and other nonsense are holding up the explosion of Urban-gro? Bradley Nattrass: It sure is, and it's more than frustrating. We trade publicly on the NASDAQ; our market cap has decreased 95%, and we're forecasting a $30 million quarter and generating cash again, and our market cap is $14 million. That's the frustrating part — when I'm driving this ship, I need to show the market that my team knows how to run a company that makes money, balancing investment spending for the future against executing today and generating cash flow. That's been the most challenging piece. My life is judged in 90-day increments, three-month quarters, and then I'm reporting to the public market. I think people in the industry understand the challenges and respect that it just takes time, but investors put money into public entities to make a return, and I take it personally when I can't provide a stronger return. When we listed on the NASDAQ it was $10 a share, $100 million market cap; today it's where I mentioned. I internalize that — I feel bad that people trusted me and my leadership, and that return hasn't been there. It's what motivates me to come to work every day and show the public markets, just like we show our clients, that we're the perfect partner for their investment for the long run — UGRO on the NASDAQ. Bryan Fields: Hopefully this message gets out to more retail investors who now become aware that Urban-gro isn't just cannabis-focused in terms of where revenue is generated, because I think that's one of the most frustrating aspects — your board and main investors know, but a lot of retail investors driving the cannabis space right now are probably unaware you've made all these significant moves. Bradley Nattrass: A hundred percent, thank you — that's why I'm here, to share that story with the investing world. More importantly, it all starts with our clients, though — without business you're not growing and you're not attracting investors, so it starts with clients, then investors. Bryan Fields: Amen. What question do you wish more retail investors asked you? Bradley Nattrass: I'd say the biggest issue is just getting the message out about how diversified we are, since over 90% of our business was tied to cannabis when we listed on the NASDAQ, and how that diversification will provide huge upside when the cannabis industry recovers. Just asking, "what do you do apart from cannabis, and how does that help your overall mission?" When you look at the first nine months of 2023 versus 2022, our equipment revenues were down $20 million at an 18% margin at the time — that's a big hit. We're set up now to deliver not only $30 million but $40-50 million-plus quarters without needing to hire any more senior management or equipment — we've got the processes in place. It's just about getting money into our clients' hands, and the best way to do that is abolishing 280E through rescheduling, hopefully in the very near future. Bryan Fields: From a macro perspective, over the next 50 years the human race is going to need a lot more urban growing, especially if we go to Mars or other places — a lot of these skill sets and environmental controls are the infrastructure needed for providing food. There's a massive market opportunity here. Bradley Nattrass: It's tremendous, and that's just starting — the very beginning. When you look at urban vertical farms — not the large multi-hectare vertical farms being built right now, but urban vertical farms in remote locations like Alaska, or near food service distribution centers — when we opened our European office, we had a contract to design-build a $25 million urban vertical farm near a bunch of hotels and restaurants. About three weeks to a couple months after we opened that office, the war in Eastern Europe broke out, the contract went nowhere, and horticulture, due to rising energy prices in Europe, crashed at the same time. I'd say the largest focus on that side of our business right now is indoor vertical farming of berries, mainly strawberries — it's a highly contested area for pesticide usage in fields, which is going to drive strawberries indoors. There are companies effectively doing that right now with 18-foot ceilings and 12 different layers. We're working with clients on expanding that vision from one facility with an off-take agreement with a large retail chain to many facilities across the US near distribution centers, where we can be that design-build partner. That sector's also having funding issues — hard to access capital there too. From a public markets perspective, if people are putting money into the Magnificent Seven and doubling their money, they're not taking risks on small caps or micro caps. I believe that as that wave settles down, people will take some profits and look again at small-cap public market space, higher-risk stocks with much higher multiple returns — they've been very suppressed the last couple of years. That's where you get a lot of smaller emerging technology companies trying to make a difference in a new space. Food indoors, with the growing population, is essential for long-term viability, and we're just starting. Kellan Finney: The one area I was leading into is that Elon Musk should call you, Brad. Bradley Nattrass: When we set up Mars, one-stop shop — ha. Kellan Finney: I was just trying to get you a contract! If someone asked me in an interview who I'd want to spend an hour with, definitely Elon Musk — as an entrepreneur, my God, the guy is so wired. Bryan Fields: Pitch him on the contract for Mars. Bradley Nattrass: Yeah, that's what I'm saying — it doesn't hurt, right? Just need to meet him the first time. Bryan Fields: That's literally how it works — we'll tag him, it's all networking. Bryan Fields: Brad, when you started your journey in the cannabis space, what did you get right, and most importantly, what did you get wrong? Bradley Nattrass: What I got right was the people — I've got an incredible team, and that's the initial value clients look for. We got the right team, the right partners, which led to making some acquisitions of other companies too. What we got wrong — investing in technology four or five years ago. It was the right idea, just the wrong time, in the wild-wild-west days of the space, where the mentality was just spend money, it'll be available if you need it. When we were done spending, the money wasn't available when we needed it, so working capital has been tough all along. The one thing I got wrong early is you should never assume money will be there — running a profitable business is absolutely key. For a while, not just me but a lot of leaders were investment-spending heavily into the future. If I could do it again over the last two years, I would have been more focused and not invested so heavily into the long run, and I wish we'd started diversifying about two quarters earlier than we did. But that's it — you live and learn, and it's not just us who missed it, the entire industry missed it. Who would have thought that two and three-quarter years ago we were at the all-time high for the cannabis sector, and now we're coming off the all-time lows? Bryan Fields: Wow — 10 years of Colorado legal cannabis, and New York, six years ago people were saying it'd be legal by 2024, and now it's more like 2030. Look how mature the industry has become. Bradley Nattrass: Right, these multi-state operators and leaders of these companies are so professional — it's what was needed, though. These are mainstream leaders who've really professionalized an industry. I think that's key — the operators and MSOs, they're the cool ones, they're running the operations; we're ancillary, which is smart, but the cool leaders are running the operations, and all the outside expertise they're building in from many different sectors brings credibility that's essential for long-term investment from institutional funds. Once institutions can invest in these entities, when operators can be on the big boards like the New York Stock Exchange and NASDAQ, that opens the door for a lot of investment, and you'll see tremendous growth within our space. Bryan Fields: Perfectly said. All right, let's do a quick prediction, Brad — looking ahead two to five years, where do you predict technology and data analytics will deliver the most significant value in the cannabis industry? Bradley Nattrass: I believe it'll be where we were focused four years ago — sensors recording data that's utilized by machines, AI, or individuals to make decisions to grow at the most efficient levels possible and get the highest-yielding cannabis possible. Kellan Finney: I'm going to agree with Brad but extend it a little more — I think in five years there'll be companies with the capability to track every carbon molecule, from nutrients through the entire extraction process, monitoring every THC molecule as it's converted metabolically all the way into extraction, in-line. I think you'll see a full, buttoned-up system with the capability of everything Brad said, but also operating at the molecular level. What do you think, Bryan? Bryan Fields: I mean, you both kind of nailed it. I think any industry that's guessing on the most important molecule, whether in cultivation or extraction, is leaving money on the table. In an industry starved for capital, we should be digging into efficiencies and measuring everything we can, because these technologies can potentially pay for themselves sooner rather than later — that's the right kind of investment, especially given high turnover and the challenges of unknowns and batch losses. Understanding things at the molecular level, like Kellan said, would make a massive difference going forward. Bradley Nattrass: I'll add one more — for controlled environment ag overall, for horticulture, genetics will play a huge role. One of our board members was the CEO of Sensei Ag, backed by Larry Ellison, and before that Crop One Holdings, and then recently CEO of Unfold, the genetics company — I bend her ear a lot at board meetings. Whether it's genetics so tomatoes grow horizontal instead of tall with as little waste as possible, more fruit and less green, genetics is going to play a key role. There's a lot of knowledge to come out of there, but it takes a long time — the R&D for that isn't overnight, it's years. Bryan Fields: For our listeners who want to get in touch or buy Urban-gro stock, where can they find you? Bradley Nattrass: NASDAQ symbol UGRO, or you can reach out to investors@urban-gro.com. Bryan Fields: Thank you, we'll link it up in the show notes. Thanks for taking the time, this was a lot of fun. Bradley Nattrass: Thanks, gentlemen, I really appreciate it. Bryan Fields: We'll see you again.