Ohio businesses set to cash in on pot

Companies see big growth potential in expanding industry.


By the Numbers

$200 million to $400 million: Possible size of medical marijuana market in Ohio.

200,000: Number of patients anticipated.

6,900: Number of prescribing doctors anticipated.

21: Number of conditions for which medical marijuana can be perscribed

Sources: Ohioans for Medical Marijuana; Marijuana Business Daily

Business bans

Local jurisdictions have approved or introduced moratoriums or bans on medical marijuana businesses, including these cities: Akron, Avon Lake, Beavercreek, Brooklyn, Clayton, Cleveland, Dover, Lakewood, Lancaster, Lima, Miamisburg, New Philadelphia, North Canton, Parma, Piqua, Rocky River, Springfield and Troy.

Jurisdictions that opted against a ban include Huber Heights, Johnstown and Yellow Springs.

Source: News reports

Ohio Legal Marijuana Timeline

November 2015: Voters reject a constitutional amendment that would have legalized marijuana for medical and recreational use and granted exclusive growing rights to the investors who bankrolled the campaign.

November 2015: Voters approve a constitutional amendment to make it more difficult for business interests to change the constitution.

June 2016: Gov. John Kasich signs a medical marijuana bill into law. It authorizes a state regulated system that allows patients with 22 conditions, including cancer and chronic pain, to use doctor-recommended cannabis in the form of vapors, oils, edibles and other forms. Homegrow and smoking marijuana is banned.

September 2016: The new law takes effect and state regulators start working on rules.

October 8, 2016: The 14-member advisory committee must be appointed by Kasich and legislative leaders. It must hold its first meeting within 30 days.

September 2018: The program must be fully operational.

Now that Ohio has legalized medical marijuana, dozens of businesses in the state are lining up to cash in.

Andy Joseph’s Apeks Supercritical is one of them. The Licking County company, which sells fully automated machines that extract oils from plants — including from cannabis — gets a bump each time a state legalizes marijuana. A big bump.

Apeks Supercritical has seen its revenues climb from $700,000 in 2012 to $12 million last year. Apeks sells about 150 of its oil-extracting machines each year – all outside Ohio.

That may change now that the Ohio General Assembly has given a green light to medical marijuana. State officials say it will still be about two years before Ohioans with serious medical conditions can begin buying the product, but they’re not the only ones counting the days.

Ohio-based manufacturers of growing lights, greenhouses, plant oil extraction systems, packaging, trans-dermal patches and more are awaiting state regulators to write rules, certify doctors and patients and license growers and dispensaries for medical marijuana.

Gary Johnson Jr., owner of Pelican Technologies in Dayton, a software development firm founded in 2006, is lobbying state regulators to require RFID – Radio Frequency Identification — tracking of medical marijuana seedlings to final sales. Pelican Technologies’ hand-held RFID readers and its Agracount software program are sold in the legal marijuana market in Colorado, he said.

Johnson said he wants to sell his system to state regulators as well as growers, processors and dispensaries.

“Certainly, we see that as a growth opportunity. We want to provide not just the growers but the state with the technology to make sure the product is accurately tracked,” Johnson said.

Cincinnati-based Rough Brothers Inc., which designs and sells commercial greenhouses, already sells medical marijuana greenhouses to growers in other states and expects to add Ohio to its list once the program is underway.

“It’s a good business. It’s probably about 15 percent, something like that,” said Tom Vezdos, the company’s vice president of commercial greenhouses. The medical marijuana greenhouses run from $20,000 to $8 million and can be anywhere from 3,000 square feet to 200,0000 square feet, he said.

Vezdos and Joseph both said there is about a two-year lag between when a state legalizes marijuana and when customers in that state start seeking their goods.

Apeks Supercritical’s Joseph has plans to sell his extraction systems in Ohio, but he also wants to expand into the processing side of the marijuana industry.

Joseph has been working with Johnstown officials to roll out the red carpet for the legal marijuana industry, arguing that being among the first local jurisdictions to do so will give the village a competitive advantage.

As part of that effort, he is pitching a plan to turn a long-underused Johnstown industrial park into a medical marijuana business hub with grow operations, processing facilities and manufacturers.

“It is a tremendous economic development opportunity for any municipality,” he said.

While Johnstown and Yellow Springs are putting out the welcome mat for medical marijuana businesses, other jurisdictions are voting for moratoriums to block pot businesses from setting up shop — at least for now. Beavercreek, Clayton, Miamisburg, Piqua, Springfield and Troy are among the local cities that have approved or introduced moratoriums.

Apeks Supercritical is evidence of how legal marijuana can lead to jobs and economic development. Joseph has expanded the company to 26 employees in the front office and on the manufacturing floor.

Joseph has already learned important lessons from working in the legal weed industry. Here is his advice to newcomers: use top-notch accountants to file tax returns so as to avoid questions from the IRS, hire a good lawyer and line up accounts with national banks so out of state customers can deposit cash into your account.

That last bit of advice might sound basic, but in a budding industry that doesn’t have federal approval and is still illegal in many states, cash sales have long been the standard.

“Those initial sales, it was all cash, especially four years ago,” Joseph said. “It was still pretty risky. They would want to drive cash here, fly cash here, ship cash here in a box. We had an instance here where a guy showed up with $100,000 in cash. It fits into a Twinkie box perfect. It’s like a Twinkie box was designed to fit a block of cash.”

Counting out $100,000 in cash was “extremely uncomfortable,” Joseph admitted, adding: “Hindsight being 20/20, it was probably one of the dumbest things I ever did.”

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