Good afternoon and welcome to the Leef Brands Third Quarter 2025 earnings conference call. At this time, all participants are in a listen-only mode. Following management's prepared remarks, we will open the line for questions. So if you'd like to ask a question, please press star and the number one on your telephone keypad. I will now turn the call over to Jesse Redmond, Head of Investor Relations and Business Development. Mr. Redmond, please go ahead.
Thank you, Operator, and good afternoon, everyone. Welcome to Leaf Brands Third Quarter 2025 earnings call. Joining me today are Micah Anderson, our Chief Executive Officer, and Kevin Wilson, our Chief Financial Officer. Before we begin today, please note that today's discussion will include forward-looking statements. These statements are based on current expectations and are subject to risks and uncertainties that could cause actual results to differ materially from those projected. For a full discussion of these risks, please refer to our filings on CDR Plus and on our website. Our Q3 financial results and accompanying press release are available on leafbrands.com under the Investor Relations tab. Following Micah and Kevin's prepared remarks, we'll open the line for questions. With that, I'll turn the call over to our CEO, Micah Anderson.
Thanks, Jesse, and thank you to everyone for joining today. This quarter marks an important inflection point for Leaf Brands, both financially, operationally, and strategically. When we started 2025, we set out to prove that our vertically integrated model in California, along with the expansion to New York, would meaningfully improve revenue, profitability, and cash flow while setting the stage for scalable growth. In Q3, that strategy began to yield results. Starting in California, this year is our first year planting Salisbury Canyon Ranch. This 1,900-acre trophy ranch in Santa Barbara, California, is home to our 187-acre cannabis cultivation license, as well as our 100-acre hemp cultivation permit, which is currently dormant, waiting on regulatory clarity. We planted the first 65 acres this year with plans to scale into the rest of the license over the coming years.
This project gives Leaf something rare in California: a truly integrated soil-to-oil supply chain that we own and control from seed to finished product. We completed our first harvest this summer, and the yields and quality exceeded our expectations. The material began running through our extraction lines in July, with sales starting in August. So Q3 only captured a partial quarter contribution from the farm, but even that partial contribution drove a significant jump in our gross profit and margin. So it's important to note that this quarter's improvements only reflect material processed through one of our extraction lines. We have yet to run any SDR material through our hydrocarbon or solventless lines, segments that together represent roughly half of our total revenue. So there's significant additional upside beginning in Q4 2025 and continuing into 2026. Salisbury Canyon Ranch gives an unparalleled cost advantage.
We are now producing biomass for less than $10 a pound compared to $20-$40 per pound we historically paid to source from third-party farms. We also see meaningful opportunities to drive further efficiencies in years ahead by refining our harvesting and processing techniques, which should continue to lower our production costs over time. That's a 50%-75% reduction in input costs in one type of input material. We are also seeing yield and quality improvements out of extraction from running such a large batch of consistent material, further improving the bottom line of our business. I expect these economic improvements to get better over time. Beyond cost savings, the quality of our concentrate products has seen improvement, leading to better client retention and sales momentum. This in-house material is being turned into clean, high-potency oil that meets California's strict pesticide standards.
This is an important accomplishment, as approximately half of the material we test in California fails pesticide tests when concentrated. The farm was replanted in July, and our second harvest is currently underway. For the fall, we are growing a wider variety of strains, each designed to yield well through our three extraction lines: ethanol, hydrocarbon, and solventless. Having more strains will also give our brand partners a broader range of menu options. Financially, we see an even greater impact in Q4 when we have a full quarter contribution from Salisbury Canyon Ranch. In a state where many operators still rely on inconsistent third-party biomass, our vertically integrated model ensures quality, supply reliability, and predictability for our clients. Over time, we intend to scale up to the 187-acre cannabis permit and use more of the low-cost, high-quality biomass from the farm to power our extraction business.
Now turning to New York. We acquired our Type I processing license in June. This license is the equivalent of our processing license in California and allows for us to replicate our business model in this new state. We immediately began lab build-out in upstate New York and were live with our solventless operation in September, approximately 90 days later. That turnaround speed is rare in this industry and speaks volumes about the team's ability to execute. By the end of the quarter, we were already booking high-margin sales with both established brand partners and a select group of new relationships. We expect the hydrocarbon line to be operational this quarter, enabling us to produce a full menu of fractions for the New York market. All of our 2025 output in New York is committed, and we expect this trend to continue into 2026.
New York is a market with strong fundamentals. According to the New York Office of Cannabis Management, the state generated over $1 billion in sales in 2024, and analysts expect New York to exceed $1.5 billion in 2025, with the potential to surpass $2 billion in 2026. Concentrates are used in approximately 55% of products sold in New York, making this an ideal second state for Leef. Margins are healthy today, and even as they normalize over time, we believe that this market will remain an attractive contributor to our business. This is also a model for future expansion. We plan to continue scaling methodically, entering roughly one new state every 12- 24 months, prioritizing markets with strong growth potential, reliable supply chains, and established sales channels through our brand partners.
In short, New York is just the beginning and demonstrates our model as scalable, replicable, and has a team that is able to execute. In addition to our cannabis operations, we are steadily executing on our Bitcoin strategy, adding to the company's holdings through B2B payments. We see this as a forward-thinking, uncorrelated way to build shareholder value, and are confident this approach will be validated over time. Before I turn it over to Kevin, I'd like to thank everyone on the Leef team for the resilience and drive in executing the company's two main strategic goals in 2025. Although I'm the one reporting the news today, Leef is powered by an amazing team of people who do the actual work, and the credit should go to them. From our cultivation and our extraction crews to our finance, compliance, and sales team, this quarter's success was a collective effort.
I'd also like to thank our clients for their continued support and partnership in both California and New York. Leef is lucky to have the relationships we have with many of the industry leaders. With that, I'll turn it over to Kevin Wilson, our Chief Financial Officer, to walk through the financial results in more detail.
Thanks, Micah. Q3 2025 was one of Leaf's strongest quarters to date, showing consistent progress in revenue, margins, cost controls, and cash generation. Unless otherwise noted, all figures are in U.S. dollars. Revenue for the quarter was $8.4 million, up approximately 24% year-over-year and down 4% sequentially. Q3 is seasonally soft in California, so we tend to focus on year-over-year when making comparisons. While wholesale pricing remains under pressure in California, our vertically integrated supply chain model gives us significant cost advantages and allows us to compete profitably where others struggle. Gross profit for Q3 increased to $3.8 million, representing growth of 155% year-over-year and 80% sequentially. Gross margin expanded to 45% compared to 22% in Q3 2024 and 24% in Q2 2025. To reiterate, gross margins more than doubled compared to the prior year and improved by approximately 21 percentage points sequentially.
Gross profit increased by 80% quarter- over- quarter, driven by lower input costs from our internal supply chain and early contributions from our New York operations. While we saw significant growth in revenue, gross profit, and margins, operating expenses declined by approximately 12% both year-over-year and sequentially. Despite bringing on new operations to support our growth, we're proving that Leaf can scale efficiently without adding unnecessary overhead. Adjusted EBITDA came in at a positive $736,000, an improvement of $3.1 million year-over-year and $2 million sequentially. We also achieved positive operating cash flow of $351,000 and positive free cash flow of $153,000 compared with negative cash flow figures a year ago and last quarter. The shift to positive cash flow was driven by stronger margins, disciplined cost control, and better working capital management, including improved collections and leaner inventory management.
Regionally, California remains our largest contributor, representing the majority of revenue and profits. While we are seeing stronger results for Leaf in California, the state remains challenging. A lack of retail, suffocating taxes, and a thriving black market continue to drown out all but the most competent and best-capitalized operators. New York is a very different environment. Statewide sales are growing, margins are healthy, and demand is strong. As Micah mentioned, all of our 2025 production is pre-sold, and we expect strong demand to continue. We plan to capitalize on these conditions by continuing to scale quickly in New York. We ended the quarter with $1.9 million in cash and approximately $22.3 million in total debt, of which $3.1 million is classified as current. Our cash position was supported by an oversubscribed $1.5 million private placement that was closed in September.
Finally, Leaf currently holds 4.58 Bitcoin on its balance sheet at an average cost of $103,000 per coin. We continue to evaluate opportunities to increase our Bitcoin holdings as part of a diversified, forward-looking balance sheet strategy. One of our top priorities moving forward is to improve our capital structure, reduce our borrowing costs, and increase the capital available to fuel future growth. Specifically, we're focused on expanding the Salisbury Canyon Ranch, expanding operations in New York, and adding more Bitcoin to our balance sheet. This quarter was a long-awaited step forward for Leef. Over the last year, we grew revenues by 24%, more than doubled gross margins, reduced costs, and generated cash. We also launched operations in a brand new state. It's a foundation that positions Leef for continued improvement as we enter Q4 and into 2026.
With that, I'll turn it back to Micah for some closing remarks before we move to Q&A.
Thanks, Kevin. Q3 was a transformational quarter for Leef. To recap, we successfully grew, harvested, and processed our own material in California at a fraction of historical cost, producing clean, high-potency concentrates that are being sold at never-before-seen margins. We launched our New York lab in record time, licensed in June, producing in September. We are now already booking high-margin sales, and all of our 2025 inventory is committed. We strengthened our balance sheet, turned cash flow positive, and demonstrated that our model can scale profitably and is replicable. Looking forward, New York is just the first step in our national expansion. We continue to evaluate additional states with the intent to add new markets every 12- 24 months, focusing on markets with license structures that generate healthy margins, strong demand for concentrates, established supply chains, and built-in sales channels from our established brand partners.
We are also encouraged by potential movement on federal reform. We are not in the business of political predictions, but the signs on federal reform are growing. President Biden initiated the rescheduling review on October 6, 2022. More recently, on August 11th, 2025, President Trump stated that his administration was looking at reclassification, with a decision expected within weeks. On September 28, he released a video touting the medical cannabis benefits for seniors. Rescheduling cannabis from Schedule one to Schedule three would be a meaningful step, eliminating the burdensome 280E tax and opening the door for medical research. Still, we believe descheduling is the long-term solution. Alcohol and tobacco, linked to over 10 million deaths annually, are not scheduled, while cannabis, which has never caused a fatal overdose, remains a Schedule I alongside heroin and fentanyl. Schedule three helps today, but descheduling is game-changing.
It would remove federal prohibition, enable interstate commerce, and give cannabis legal parity with other industries. Just as California produces over 80% of US wine, we expect the state to play a similar role in cannabis. With one of California's largest cultivation permits paired with our state-of-the-art extraction lab, Leef is ideally positioned for the future of a national cannabis market. As we look ahead to 2026, our priorities remain clear. Continue scaling operations in California and New York, maintain strong cost discipline and cash generation, execute our measured expansion strategy into new markets, improve our capital structure, reduce borrowing costs, and increase capital available to fuel future growth. Continue to accumulate more Bitcoin to strengthen the company's balance sheet. Last, I want to thank our shareholders for their support as we enter into this next chapter. Thank you to everyone who showed up to listen today.
Leef's team remains excited and motivated to push forward and win, and we couldn't do it without your support. I believe Leef's best days are ahead of us, and your support doesn't go unnoticed. Thank you very much. With that, I'll turn it back to Jesse to open up the lines for questions.
Thanks, Micah. Operator, please open the line for questions.
Thank you. If you'd like to ask a question, please press star and the number one on your telephone keypad. And if your question's been answered already, or if you'd like to withdraw your question, please press star and the number one again. And our first question comes from the line of Morgan Paxhia from Poseidon. Please go ahead.
All right. Hi, gentlemen. Congrats on the quarter. It's a big change for you guys. It's good to see. First question I have, I have a few questions, but I'm happy to pop back in the queue. But I'll start with this. So I noticed you guys, as you mentioned, planted 65 acres so far this year, and you got in two cycles. And I was just curious, what factors do you look at for expanding your acreage? And the second part of that question is, do you foresee that as a step function where it'll be a materially larger increase, or do you see it as more of an incremental expansion?
Yeah. Thanks, Morgan. Expanding onto the ranch, I guess the way that we've been thinking about it is just looking at what the farm produced up against what our current demand is. 65 acres, it's a big number. We did produce quite a bit of material, but it doesn't meet the total demands for the company. So. When we look at demand planning, that's kind of the way we're putting that up against how much should we scale and when. We are limited. We've got a few years to grow into the permit. And so I think phase two, we'll probably add another 25- maybe 35 acres. And then beyond that. Re-engage, just take a look at it again, like, "Okay, how much more material do we think that we need?" But.
Today, we go through close to 200 acres' worth of material between all three extraction lines, and we only grew 65 acres. So that gives you kind of an indication of how much more material we need. The rest of that comes through either contractual agreements that we have with other farms throughout the state. Or spot purchases that we do. We procure material from Mendocino all over the state of California. Which has been great. It's worked so far. But obviously, as you guys can see in the numbers, what we did with the farm is really beginning to make sense. So we need to lean into that. Hopefully, Morgan, did I answer your question? I mean, that's kind of it really just comes down to demand.
Yeah. No, that's very helpful. And understanding that it can be phased by 25-30 acres. And just matching it via demand. Are some of your supply contracts, are those longer-term, or do those just run off and so that you could add that acreage?
Yeah. We keep the supply agreements that we have as annual contracts. Pricing fluctuates pretty dramatically year-over-year. And so both us on the buying side and then the farms on the selling side typically don't like to extend the agreement beyond that. And we've been at it for so long now, we've identified who we really like working with. And so there's really when I say supply agreements, there's two main agreements that we have. The rest of them are kind of handshake deals that we do, but they're solid relationships that work for the company.
Great. Thank you.
Thank you. Again, if you'd like to ask a question, please press star and the number one on your telephone keypad. Our next question comes from the line of Josh Felker from CB1 Capital. Please go ahead.
Hey, Micah, Kevin, Jesse, congrats on the quarter and the execution of both the California and New York thesis.
Just interested in New York. Was wondering if you can give us an update on supply-demand dynamics there, given the constrained capital environment. I'm wondering what you're seeing in CapEx build-up from other operators and how you think that translates into sustainability of current New York economics and potentially where you see the New York market looking maybe 12-24 months from now?. Thanks.
Yeah. It's a good question. I think for us to predict the future, I definitely think that prices normalize in New York. It happens in every other market, and no doubt that it will happen in New York. And so then the question comes of, "Okay, how much should we put into infrastructure knowing that that's going to happen?" The demand side, and I'm going to take your question kind of in a maybe a bit of a fragmented way, but hopefully, I'll get it all. The demand side's been strong for us so far. We've been lucky. We kind of sell to the who's who of the industry in California. Many of our clients have been in New York for a few years now and are doing quite well. So we've been able to have some predictability on the sales side.
What we initially started off with was acquiring our own license and then sending out a lot of our old equipment just to keep it CapEx light. It's not as big as we want it to be, but it's working at the moment. I think the next step for us would be to let's get through the rest of this year. We're already through the cultivation cycle. We've got a few supply agreements in place there, which will meet the demand that we have in 2025. We're actively working on expanding upon those cultivation relationships just to give us a bigger supply chain network in 2026. We've got a handful of different CapEx-like options in increasing throughput and capacity, which we're actively working on as well. So we will definitely double what we're doing now for sure, if not triple in New York.
And I think back to kind of predicting the future in New York, just like with California, it's like we've made it this far, not being vertical, not owning cultivation. I think it was definitely the right move for us to go in the direction that we did. And I believe that the same thing will end up happening in New York. So I'd like to get it to where we own five, 10, 20 acres in New York over time just so we can really replicate the same business model, keep our cost of goods as low as possible so as prices do begin to fall, we're not caught off guard or flat-footed when that does happen. So yeah. And we've been very disciplined in our pricing.
When we purchased in New York initially, when we went into the market, just dealing with some of the farms, it was like they were like, "Man, you guys are." They felt as if we were undercutting in some of the conversations that we were having, when really, I don't think that we were. I think that we were just seeing the future of like, "This is what's going to happen." And so we just need to make sure that we don't contractually agree to anything that. Becomes too expensive later down the road. And I think that we were right in the handful of agreements that we had. The farms can now see that. And so, I don't know, a bit of trust on both sides has been built. And. Hopefully, I don't know, Josh, did I get everything?
You did, and you answered part of the next question on verticalization on the cultivation side. So I appreciate that color. I guess for a second part. Regarding New York, just trying to nail down economics of that specific extraction facility and the business you have today. You mentioned you're at full capacity. I'm just wondering, could you give us any view into maybe facility economics, throughput, cost per pound of input, what extracts you're selling for right now, or even just basic margin and what that looks like on that business? Any apples-to-apples comp against all of those metrics in California? Would just appreciate any narrowing down of the economics there. Thanks.
Yeah. So. Right now, we're operational with solventless. We are not with, well, as of this week, we should be operational with hydrocarbon within the next week, if not two weeks. Those will be our two main extraction lines. We're going to make distillate using our hydrocarbon line in New York, at least in the beginning. Once we expand into more cultivation, we might adjust that and do ethanol, which is what we do in California. But. In the interim. It'll be done through the hydrocarbon line. CapEx-wise. To double capacity, I don't see it costing us more than, call it, $500,000-$1 million in 2026 to double, if not triple, the current capacity. We are, rough math, we're doing about $500,000 in sales. A month. And I think that that's about the most.
We might be able to get a little bit more out of it, but that's probably the most we're going to be able to do through the rest of the year. Margins are comparable to California, roughly 50%, sometimes a little bit higher. Depending on what happens with the market. That'll trend backwards, and that's where we will offset it with bringing some cultivation in-house. And then I think over the course of 2026. It's one of those things where it's like. If it continues to be as strong in terms of demand that we're seeing, it's going to make business sense for us to invest into New York, probably quicker than what we're doing now. But I do think that the market will normalize for sure.
And so it's just going to be kind of a every quarter, we're going to be gauging it and making a decision on, "Do we put more money into New York, or do we just kind of stay at the growth rate that we're currently operating at?" And then the other question comes to mind of. I feel like New York for us was. A proof of concept. We have a use case that it's like, "Okay, we have kind of proven in a way, in a small way, that we can go outside of. Our own backyard in California and do this." Starts to raise the question of like, "Well, should we do it in another market, or should we just kind of keep doing what we're doing in California and New York and just do that for another year or two?" And so management's working.
We're constantly talking about it. On which one we should do. And. To be totally honest with you, it's like we go back and forth on it. And so I think 2026 is really just going to be about New York. Maybe start exploring some of these other states, but really just focusing. Making sure that we execute, get our hydrocarbon line completed. So we're basically selling the same array of products that we sell in California that we sell in New York.
Truly appreciate the color. Thank you.
Yeah. No problem.
Thank you. There are no further questions. I'll now pass the call back over to Jesse Redman for closing remarks. I'd like to apologize. We have another question. This one is coming back from the line of Morgan Paxhia from Poseidon. Please go ahead.
Great. Okay. Thank you. Yeah. Just wanted to follow up real quick on the balance sheet. Just hearing the remarks about the top priorities, improving the capital structure. For all of us here, understanding that capital markets for cannabis are tight. It seems to be that way until we do get some federal reform, whether it is S3 or however it might go. That timeline remains unknown. But I was just curious what you're seeing for options currently in this tight environment and what you're currently evaluating that could support this top priority?
Yeah. It's definitely a priority for us to figure out ways to clean up the balance sheet. We've been having conversations with a handful of groups, really ongoing for a year. And most of the people that we've been speaking to, for good reasons, just with the way that the cannabis industry has been for the last two or three years, as you mentioned, the capital markets have been essentially closed. It's been kind of a brutal market. That said, our goal was, "Let's prove it, and let's get through this Q3. Let's just show people that what we set out to do actually works." I think that we're on the right path. I don't want to pat ourselves too hard on the back because I do think that there's a lot of room for improvement from where we're at today. I think Q4 could be really good.
And I definitely am excited about what happens going into Q1 and Q2. So my thought is that if we put out a good couple of quarters. That hopefully some doors and conversations that we've been having with different groups become easier to get people excited about the company. And then I don't know which direction it will go, but I definitely think that we do have some opportunities in front of us that would help us just maybe restructure some debt or bring in some new money. I don't know. Kevin, I've been talking the whole time. Do you want to maybe kind of, do you have any thoughts on Morgan's question?
Yeah. I think you summarized it pretty good. I think we're keenly aware of what the balance sheet looks like. And one of our main goals in this coming quarter and into 2026 is to work with current noteholders, bondholders, to whether it's restructure, whether it's offer some sort of. Conversion feature. And so that's definitely a top priority for us. We want to be able to, when the capital markets do reopen, whether it's a rescheduling announcement or some other reason, we want to have a balance sheet in a. Point where we can go out and be able to leverage it properly.
Yeah. Morgan, just to add one more piece to that, this is Jesse speaking. One asset that we do have is Salisbury Canyon Ranch, and that's our 1,900-acre ranch not too far from me in Santa Barbara County here in California. We recently had that property appraised by CohnReznick with a $25 million valuation for the real estate and $40 million if you include the cannabis assets. Meanwhile, the market cap of our stock today is, yeah, right around $35 million, and so we have this asset where just the real estate is worth $25 billion. The stock trades at a $35 million market cap, and I bring that up in this context, Morgan, because that does give us some financial flexibility in terms of leveraging that asset. And oftentimes, with real estate, you get better rates as well.
So that's another avenue that gives us some flexibility to explore later this quarter and as we head into next year.
Yeah. That's good.
Yeah, just a little bit more context and just something I would add. When you look at, I think, the total debt the company has at the moment is right around $22 million. Half of that is through a debenture that we've had. It's due at the end of 2027. So we got a bit of time before it comes due. And then the other half of it is very, very what I would call friendly or cheap debt. So $4.5 million of it is related to the financing of the ranch. It's at 4% interest-only payments, balloon payments at the end of a five-year note. So it's very cheap. And the other $7 million is at 0%. It's just the way that we structured the deal with the investors, 0% interest. With a way to convert into the real estate itself of the ranch.
So we're having conversations with all of these groups, I'd say. And I guess I get a little kind of, I don't know what I'm allowed to say and what I'm not allowed to say. So sorry if I'm stumbling and I sound vague. But yeah, we're definitely having conversations to try and figure out what's the smartest way for us to go into 2026 or into 2027 with a very clean-looking balance sheet.
Great. Okay. Thank you. That's very good clarity.
No problem.
Thank you. And our next question comes back from the line of Josh Felker from CB1 Capital. Please go ahead.
Yeah. Thanks. I'll take the time to ask it. I was a little surprised for you to execute on the Salisbury Grow as well that you did. That was a gigantic effort. I'm just wondering. How many takeaways from that crop first season and interested in how that impacts your strategy at that location going forward? Thanks.
Yeah. I can answer that one. Yeah. I can't tell you how many times I was told that we're insane or that I'm insane for wanting to do that. But I think that we really understood that. We've been at it for close to nine years, and the writing is on the wall in California. It's really unfortunate. It's like the small legacy farmers that have been in the state, which really built the industry, have unfortunately, in my opinion, been given a very challenging environment to survive in. So our extraction business is located up in Mendocino County. If you guys aren't familiar with California, it's way up at the northern end of California. And at one point in time, this was the birthplace. This was the hub for cultivation. And so I had a long-time history growing in Mendocino County.
And so when Proposition 64 came around and we transitioned from Prop 215 into 64, being this nonprofit into a profit industry, I thought, and I was wrong on this, that that would be the hub for cannabis. So of course, let's build this extraction business right in the middle of where all this material is going to be grown. And the exact opposite kind of happened. Mendocino took a very limited cultivation footprint approach. Humboldt essentially did the same thing. And what we've seen over since the inception of the company is that our supply chain slowly moved south. You had other areas, Santa Barbara County being one of them, where we're issuing large cultivation footprints. And our backyard, where we knew everyone, one by one, people were going under. And so it was obvious. And we should have done this earlier, quite frankly.
And it's not that we didn't. It took us five years to get through the process. So we started this SCR project five years ago. And that's how hard it is to get one of these big ones up and operational. You got environmental and all these different roadblocks that you got to get through. And thank God that we did. So I guess to come back to your question. What are some of the learnings? Definitely some learnings to go from. I have a background in cultivation, as do some of the other people in the company. There's definitely a difference in growing the way that we're growing now, which is really treating it like ag. It looks like tomatoes or corn or something. So there's been learnings from that. Getting to know any piece of land. There's always learning curves.
Things that, in hindsight, as we look at the field now, it's like, "Oh, we should have done this," or, "We should have done that." I think one comes to mind that is just, and this is a positive in my opinion, is that there's a couple of efficiencies within the existing fenced 65 acres that we have, or there's probably about 10 acres that we could have picked up by just doing things a little bit differently, laying out the fields differently, and not putting this tank there and making this road go that direction. So for going into next year, that's kind of a free pickup. We got to pay for state licenses, but all the CapEx has been done, so the irrigation, fertigation, fencing, cameras have all been ran to it. So I don't know. That's a long-winded way of answering your question.
I think if you were in our position and you were reading the tea leaves and kind of predicting the future, it was an obvious, easy answer or easy direction for us to take, even though I think a lot of people thought that we were crazy, and Jesse does a great job of always pointing this out, and this is something when he joined the team that he kind of had an aha moment, and even when he was asking the question, was that over 50% of the product that we test in California and keep in mind, we are literally on 90% of the farms in California procuring material. Fails when it comes to concentrate production. It's not because the farmers don't know what they're doing or that they have nefarious farming practices.
It's that California has a massive pesticide problem, and you've got drift happening all over the state from other ag industries, and so to find a farm that sits the way that SCR does, tucked back in its own mountain range, it's an insurance policy. It's like that we've got this non-corruptible piece of ground to grow non-detect product is a huge advantage. So that was the reason why we did it. It took time. It took a lot of money, but it looks like it's working.
Super. Appreciate the color. Thanks, everyone.
Yeah.
Thank you. There are no further questions. I'll now pass the call back over to Jesse Redman for closing remarks.
Thanks, operator. And thank you to everyone for joining today's call. A replay will be available on our website at leafbrands.com. We appreciate your continued interest and support. And we look forward to sharing further progress when we report our fourth quarter results. A great evening.
The meeting is now concluded. Thank you all for joining. You may now.