Andy and Kristen Joseph have found themselves immersed in the Wild West that is the cannabis industry. The Johnstown entrepreneurs just keep saying yes.
Inside Apeks Supercritical’s new 30,000-square-foot Johnstown facility, 45 employees bustle, building CO2-powered botanical oil extraction machines and all their components from, basically, the ground up. Welders hunched over metal tubes, sparks spraying, connect and smooth the parts. Employees make sense of tangled colored wires to power the machine. An R&D area is used to find innovations that will keep making Apeks extractors even better. Large wooden crates are built in-house and stored on towering shelves waiting to hold the precious cargo.
Two German Shepherds, Nela and Gero, trot through the building at Andy Joseph’s heels.
Apeks this summer moved from a 17,000-square-foot facility, but its beginning was far more humble—in a pole barn on founder and CEO Andy Joseph’s property back when he still thought the California clients contacting him actually wanted to extract “lavender” oil. Fast forward and Apeks is projected to generate $24 million in sales this year, doubling its 2018 revenue, which comes primarily from cannabis companies. It is known as a company that has built and distributed more CO2 extraction systems than any other company in the world. Joseph also launched Ohio Grown Therapies LLC, which is a grow operation that soon will be housed in the 17,000-square-foot space, and a cannabis dispensary in Newark.
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Before Joseph, 47, became one of the biggest players in the extraction manufacturing industry, he was a nuclear submarine mechanic in the U.S. Navy, and then an Ohio State University welding and engineering student in the late 1990s. There, he met Fritz Chess, who has since started his own extraction company called Eden Labs. Chess asked Joseph to build a stainless steel ethanol botanical oil extractor to replace a smaller glass version he already had.
As Joseph was constructing the machine, he was beginning a foray into the Wild West of the cannabis industry. His enterprise eventually would become a multimillion dollar company. He just didn’t know it yet.
By 2001, the pole barn venture was an official company called Apeks Fabrication. Joseph, a New Albany native who moved to Johnstown when his hometown became too expensive, worked on the fabrication side of the business, partnering with Chess who sold the extractors. Joseph also worked at Edison Welding Institute (as did his wife and now business partner, Kristen), where he quickly moved into management. “I liked getting my hands dirty so I kept doing this side job while I was in a management position working full-time,” Joseph says. He wasn’t into making extractors that use ethanol, butane or propane to extract oils, instead building machines that relied on CO2 to extract—considered a cleaner, albeit more expensive, solvent method.
Cannabis extraction itself is currently getting media attention as a way to make a killing in the budding cannabis industry. CO2 extraction works by using the compound in a variety of pressures, temperatures and phases (liquid and gas) to take the oils out of dried plants. In addition to being cleaner, it is considered more versatile than other methods because temperatures and pressures can be fine-tuned for different outcomes. Now, Apeks offers different sizes of extractors ranging from The Bambino to The Force. Each takes about two weeks to make.
Early applications for extractors were for botanical oils such as vanilla, rose and other essential oils for fragrances and flavorings—high-volume, low-value products. Besides extremely large-scale coffee decaffeination operations, the CO2 method didn’t make the most financial sense for botanical extraction because those products didn’t justify the expense. And there isn’t a great demand for cleanliness with botanicals.
So, prior to cannabis, CO2 really hadn’t found its niche as an extraction solvent.
“Cannabis comes along and it’s very high value, very low volume and really fit the bill. On top of that, the need and or demand for cleanliness, and the two things start to come together really nicely,” says Joseph.
In 2008, the cannabis industry was gaining steam, especially in California, which also happened to be where much of Joseph’s business was coming from. Something strange was happening: Joseph was receiving a coincidentally high number of inquiries from people who wanted to extract lavender. Many calls from West Coast lavender oil purveyors later, Joseph remembers thinking, “There’s just an awful lot of lavender out there in the world.”
Eventually, he asked a customer about the high demand for CO2 extractors in the lavender business. “The guy’s like, ‘This is weed man, c’mon,’ ” he recalls. “I had a suspicion. I just didn’t realize that every single one of the people that were telling me it was lavender—it wasn’t lavender, it was cannabis. I was just a little bit naive, or maybe a lot naive.”
“It was a little strange,” says Kristen. “Andy was doing stuff with cannabis, it wasn’t a huge deal—everybody was doing weed in college. But I didn’t really know what people were doing with oils.”
“Here we are in Johnstown, Ohio; a cleancut Midwestern guy, and they all seemed to just be so surprised,” Andy says about the public’s reaction in those early days. “What I found, that was accidental. I mean, it truly was accidental that I ended up here. But embracing it and continuing with it seemed to be unique and surprising back in those days.”
In the eye of the perfect cannabis storm, Andy found that by 2012 (the year he and Chess parted ways), he didn’t have a job and a side hustle anymore—he was working two full-time jobs, and had four kids with a fifth on the way. So he took the entrepreneurial leap. Andy has always had “entrepreneurial tendencies.” At EWI, conveniently, he was working in an entrepreneurial space and learning exactly what he’d need to know to take Apeks higher. “That’s where I got the confidence I suppose—in the training, exposure and experience,” he says. Kristen says she knew if he didn’t try it, Andy would regret it. “Ten years down the line, and he’d still be going, ‘What if I would have done that?’ ”
“I was at the director level with EWI and I was stepping into being a janitor and a welder and a CFO and a CEO and, you know, everything. That was a little scary,” says Andy. “But between the Navy training on the engineering side, the business training at EWI, the engineering degree from Ohio State—put it all together and it created this perfect little environment for me to be able to make it successful.”
Kristen didn’t join Apeks right away, instead opting to keep her job at EWI for some financial stability. “There were reasons like, we still have all these kids,” she says. But by the fall of 2013, Andy needed her help.
“Andy was getting to the point where he needed more help administratively,” Kristen says. “He was almost a one-man show, from the standpoint of the trainings and selling and all of that he was doing.”
Initially, she did tasks such as paying bills, doing QuickBooks or answering the phone. It wasn’t easy for her to make the switch from a successful engineering job to administrative assistant—and not knowing the technology Andy had built very well. But at EWI, Kristen had discovered she was interested in committee work. She found that passion also applied to the cannabis industry, which is in great need of discussions and decisions about standards. Now, she belongs to a committee formed in 2017 by the American Society for Testing and Materials called D37.
“It’s looking at everything from cultivation to packaging and labeling to processing to terms,” she explains. “They’re really trying to cover everything on that front and get this to be a more standardized industry so that, let’s face it, the consumers can feel better about what they’re picking up and what’s in it.” It has direct applications to Apeks because Kristen has a firsthand look at the new things that may affect Apeks customers and because the committee can have a say in how extractor equipment gets standardized.
One-two punch Kristen and Andy make a good team. But what is it like working with your spouse?
Kristen says Andy’s entrepreneurship is contagious. What she brings to the table is a complementary conservatism. “He’s like, ‘Why not try it?’ ”she says. “And I’m like, ‘Because you can’t.’ I’d like to think that’s helped grow the company—our ability to take each of our strengths and weaknesses and work together.”
Just like anything else, says Andy, there are pros and cons. Pro, you can be together all the time (“is that a pro?” asks Kristen), and share something big with one another. They both love to work. Andy says they chat about work on their morning walk and manage to accomplish a lot just in that time. But, “You’re always there and it means you’re going to fight the night before and the next morning is a little tough sometimes,” he says. What’s more, you can’t complain about one another to your coworkers. Kristen jokes that in Andy’s case they would be asking him, “Why were you such an ass?” anyway.***
Right now, there are about 30 other CO2 extractor manufacturers in the market. None of them are near Apeks’ Johnstown home. Of those 30, only one or two have the same fabrication capabilities as Apeks, Andy says. According to website Manufacturing News 24, the company is considered a “key player” in the global array of industrial extraction equipment manufacturers. Recently, Apeks celebrated the sale of its 600th extractor, which it sold to a fledgling North Carolina company called Southern Extraction Labs LLC, launched in May 2019. The president of the “craft” cannabis company, Jeff Smith, says Apeks is one of the oldest CO2 extraction manufacturers in existence that has been directing sales toward cannabis companies. He also chose Apeks as his extractor supplier because it offers so many training videos and guides on its website, and it sells a product that is the right size to obtain a return on investment for a new company. “I think they’ve got a lot of room in the future to grow,” says Smith, because CO2 extraction is gaining popularity as cannabis companies cater to the consumer’s desire for a clean product. For instance, Canada, a place where recreational marijuana use is legal across the country, has outlawed the use of butane and propane solvents completely.
As Apeks finds ways to innovate for cannabis and also to make CO2 extraction cheaper, Andy hopes to cultivate a base of regular customers harvesting other botanical oils while the company grows in the cannabis industry.
There are the headaches, though. Most of them started when Andy and Kristen branched out into businesses that “touch” the plant directly.
With new firsthand knowledge of what Apeks clients go through, Kristen thinks it’s terrible. “We’re all getting treated like we’re selling crack cocaine to kids on the street,” she explains. “In my personal opinion, that’s not what this is. It feels like you can go into a pharmacy and steal some medication that no one should be touching easier than you could [obtain] medical marijuana.”
Of all the tedious aspects of working in an industry that is not yet federally legal, dealing with banks has got to cause the biggest headache. Especially as one of the only marijuana industry companies in Ohio. To date, Apeks has gone through upwards of 10 different banks—mostly the big ones—and gotten kicked out of each one because it was depositing money from cannabis companies. Sometimes the banks will hang on to the money in the account for so long prior to shutting down the account that it actually affects the company.
“This is the one that scarred me the most,” says Kristen. One day she came back from making a deposit at the bank and a coworker told her there was no money in the account that previously held six figures. A couple of unsuccessful 1-800 calls later, she was told she’d receive a check with Apeks’ crucial operating cash in seven days. Another time, a smaller community bank invited Apeks to bank there and then it, too, kicked them out. It’s just part of doing business in the cannabis industry in Ohio—at least for now.
One thing that’s worked out well for Apeks is being able to draw employees from the C-TEC program for high schoolers at the Career and Technology Education Centers of Licking County. Offered within the program is a welding and metal fabrication course of study, among others. Many Apeks employees went through the program, interned at Apeks and were then hired. It’s a good system that ensures new employees are not only skilled but are also familiar with Apeks. Much of the workforce is young for that reason, and there are relatively few women. That’s not Andy’s preference—he wishes to hire more women to manufacture, but they are rare.
In building his workforce, Andy uses a guiding principle. “I’ve always tried to hire people who are probably more talented than the position that I’m putting them in,” he says. “Because I know we’ll eventually be able to utilize the rest of their talent.”
Right now is a busy time. The Josephs went up against some very stiff competition to obtain a dispensary license and they managed to snag one in Newark. They learned after that they had come in as close as fourth in some areas where they applied, but that other companies beat them out in certain counties, including Franklin County.
In addition to preparing the Newark dispensary for opening in the fall of 2019 (pending Ohio Board of Pharmacy approval), they obtained a grow license and are turning their old building into a cultivation and processing facility. Both are under Ohio Grown Therapies, which was started with the Hawaiian company Maui Grown Therapies (an Apeks customer). When the cultivation facility is complete, they will promptly sell their license to Wakefield, Massachusetts-based Curaleaf Holdings Inc., a U.S. cannabis company with 2018 revenue of $77.1 million. It is currently operating in 12 states. This acquisition will add to Curaleaf’s 14 cultivation sites and 13 processing sites. It also has 48 dispensaries in the states.
But the cultivation facility will still be useful once it’s sold. Actually, the main reason Apeks delved into the cultivation space was not to operate a grow facility, but to continue innovating the technology of Apeks extractors. For that, the company needs marijuana to use in tests. There isn’t a good alternative for this since cannabis is a very expensive commodity. So, access to the plant will be part of the Curaleaf deal. Apeks also will continue to own the building and keep the Newark dispensary in tandem with Maui Grown.
“Our initial desire to get into the cannabis space was more to really continue to promote the innovation engine that we had here and make [our machines] more efficient and better at extracting,” Andy says.
The hope is for the grow facility to be up and running by December.
Innovation is a constant focus for Andy. “It’s our core. It’s our passion,” he says. And being one of the only CO2 extractor companies that manufactures its parts in-house is the perfect set-up. CO2 extractors are by no means perfect. Catering them to cannabis extraction is a new undertaking that is sometimes clunky and constantly ripe for innovation. Smith of Southern Extraction Labs says if there was one thing on his extractor wish list, it would be the ability to better control the pressures and temperatures to extract specific products from the plant, such as terpenes (the aromatic oils that give cannabis plants distinct smells and flavors). Right now, he starts and stops the machine during extraction several times to check the product that is being extracted.
Firelands Scientific (another Apeks customer) is an Ohio-based cannabis company that has licenses for dispensaries, processing and cultivating, meaning it grows plants in its 25,000 square feet of greenhouses, processes the plants and creates products for its dispensaries such as edibles and tinctures. Alisia Ratliff, director of processing at Firelands, thinks the level of automation provided by Apeks is something other CO2 extraction systems should emulate. Her wish for the technology is a lot like Smith’s. She wants the equipment to be more flexible to accommodate the extraction of different products in one “run.” For example, to have the ability to extract a product high in cannabidiol, or CBD, while also extracting a product high in THC at one time (when different pressures are needed). This uncharted territory is all part of what it means to work in the cannabis industry.
“I would say Apeks is a really great partner for us in extraction because they have a very similar vision and mission with their business as we do,” says Ratliff. “They care about moving the industry forward.”
Although nothing is set in stone, Firelands and Apeks may work together in the future as R&D partners.***
Some things about Apeks’ trajectory are clear as a pioneering company in the cannabis industry (at this point, every cannabis company is). Andy knows what he wants his manufacturing company to be: an industry-leading CO2 extractor manufacturer that is known for innovation. Other things about the future remain nebulous. Like the fact that marijuana isn’t federally legal yet in the U.S., although both Andy and Kristen believe it should be. Kristen thinks weed is really no better or worse than alcohol. She knows it can be abused, but recognizes that it will be, even by young people, regardless of its legality. “I’d rather have them go get it in a safe place,” she says. “You hear about horror stories of like, so and so got it from someone on the street. I think it was New York City, they got like a laced shipment and it was laced with fentanyl and killed tons of people.”
Andy thinks there’s really no choice but to legalize. “Nowadays the toothpaste is so far out of the tube,” he says. And from a business standpoint, early adopters have huge handicaps in a space with federal illegality. He mentions that now at least 30 states have legalized the use of medical marijuana and around 12 have OK’d recreational use.
“The problems that are created from not being legalized are so significant that our lawmakers are doing us a disservice by not legalizing—the banking problems, the cash, the robberies and the crimes that are committed,” he says. “Fortunately, no senator’s daughter has been killed yet hauling cash around from a dispensary to a bank. But if that ever happens, it’ll be like, ‘Oh my God, I can’t believe this is happening,’ right? It’s absolutely creating hardships.”
Even something as simple as not having access to lines of credit makes things incredibly difficult. It’s going to cost Apeks $10 million to build out the cultivation facility and it all has to come from investors at higher interest rates because there is no credit to be accessed.
As far as Apeks’ most imminent innovation, it’s still in “trade secret stage.”
“It’s really going to increase our customers’ ability to utilize the software that comes on the system and to create their end products,” says Kristen. Maybe it will grant some customer wishes. We’ll find out in December.
Five years down the road, Andy and Kristen envision a company with a global reach and a customer base that includes those who develop natural products, since technological advances also mean cheaper equipment.
“That’s what’s going to carry us through the future—we’re always pushing ourselves to innovate,” says Andy. “Whether we’re having great sales years or we’re having not so great sales years, we’re always coming up with a new piece of equipment—that next greatest thing. So in five years, I’m really excited to see what we’ll do. I don’t know what it will be, I really don’t, but it’s gonna be cool. Everything that we’ve done up to this point has been cool. I think it’s gonna be even cooler.”