Andy Joseph is the founder and CEO of Apeks Supercritical. Apeks makes high quality CO2 extraction machines. These machines allow cannabis leaves and flowers to be broken down into the super valuable cannabis oil the market is demanding. In this podcast we’ll explore the technology and promise of cannabis extraction.
Learn more at: http://www.apekssupercritical.com/
[2:05] – What is Apeks Supercritical
[4:00] – Andy talks about how he got into the supercritical machines business
[5:49] – Andy explains different extraction techniques
[15:09] – Andy gives his opinion about the “art and science” of extraction
[17:11] – The most popular infused extracted products right now
[25:45] – How much oil can be derived from 10 pounds of sugar leaf
[29:45] – How long does it take to process the 10 pounds of sugar leaf
[32:14] – Andy discusses how long customer run their machines
[34:27] – How easy is it to operate Apeks Supercritical machine
[36:33] – Andy talks about the pricing of the different machines
[40:37] – Andy discusses the future of the extractions
[42:23] – Mistakes made when purchasing an extraction machine
[47:13] – Contact details for Apeks Supercritical
Matthew: Hi, I’m Matthew Kind. Every Monday look for a fresh new episode where I’ll take you behind the scenes and interview the insiders that are shaping the rapidly evolving cannabis industry. Learn more at www.cannainsider.com. That’s www.cannainsider.com. Are you an accredited investor looking to get access to the best cannabis investing opportunities? Join me at the next ArcView Group event. The ArcView is the premier angel investor network focused exclusively on the cannabis industry. There is simply no other place where you can find this quality and diversity of cannabis industry investment opportunities months or even years before the general public. If that’s not enough, you will also be networking with the top investors, entrepreneurs and thought leaders in the cannabis space. I have personally made many of my best connections and lifelong friendships at ArcView events. If you are an accredited investor and would like to join me as an ArcView member, please email me at feedback at cannainsider.com to get started. Now here’s your program.
We’ve all heard of the 80/20 principle. Applying the 80/20 principle to the cannabis industry one might say that 80 percent of the profits are attained by sales of 20 percent of the products. But Vilfredo Pareto who created the 80/20 Principle also said that the 80/20 principle can be taken further and that 4 percent of the products in a market can make up 64 percent of profit. I believe that extracted cannabis oil is the 4 percent of the cannabis marketplace that will make up 64 percent of the profit of that marketplace. Today we’re going to hear why from the founder of Apeks Supercritical Andy Joseph. Welcome to CannaInsider Andy.
Andy: Thanks Matt. Thanks for having me on. I appreciate the opportunity to speak to you and your audience.
Matthew: Sure thing. To give us a sense of geography can you tell us where you are in the world today?
Andy: We are in Johnstown, Ohio which is a suburb just outside of Columbus, Ohio.
Matthew: Okay. And what does Apeks Supercritical do?
Andy: We manufacture supercritical CO2 botanical oil extractions systems. And what that means is we use liquid carbon dioxide or sometimes called supercritical carbon dioxide as a solvent to extract oils from botanical plant materials.
Matthew: So supercritical has to do with the state of the carbon dioxide. Is that what that term means?
Andy: That’s right. Most people are familiar with kind of the three states of matter; liquid, solid and gas that a lot of materials, you know water obviously is probably the most common one that can be in CO2 at normal atmospheric temperature and pressure and basically in the environment around us as a gas. It wants to be in gassiest form. And if you take the pressure up high enough and control the temperature in a certain way, you can convert that CO2 either into a liquid, so you can have liquid carbon dioxide. You can also convert it into a solid. Most people are familiar with dry ice, and it’s basically a solid form of CO2. But if you convert the pressure and temperature up high enough, specifically above approximate 1100 psi and 90 degrees Fahrenheit, CO2 will become what’s called supercritical.
Basically that’s a combination of liquid and gas properties that in the extraction world is favorable because it allows the CO2 to diffuse in deeply into materials. So it can get into deep nooks and crannies to allow it to extract oil out of plant material. But it also acts like a gas in that it expands to fill the entire volume of a container so it can get good exposure throughout the volume without being affected by things like gravity.
Matthew: How did you get into the supercritical machines business?
Andy: You know I kind of fell into it. I actually started as a broke college student after I got out of the Navy. And I was looking for a few extra dollars to help pay for college, so I started a fabrication business. And you know found a couple of customers that were interested in extraction devices. The applications at the time were flavorings and natural products, natural nutriceuticals, things like that. But then in about, about the same time that California legalized or started having a lot of activity in the legalized marijuana industry, that’s when we started seeing activity with the extraction systems more geared towards marijuana rather than flavorings where we got started.
Matthew: Did you have some sort of skill set in fabrication or did you just say hey I’m going to jump into this?
Andy: Well in the Navy I ran nuclear submarines. I was a mechanical operator and a mechanic on nuclear submarines. So I had a decent amount of mechanical aptitude to begin with, but in college I was going, I was studying welding engineering. And so you know I had a couple of part time jobs while I was starting school and working in machine shops and welding shops. So kind of between the exposure that I had in the military and some of the exposure that I had as a machine shop operator, machinist and you now a welder, those kind of things combine together to give me the base experience that I needed to start the fabrication business.
Matthew: Can you help us understand at a high level the different types of extraction processes there are including CO2 that we talked about a little bit; ethanol, BHO and any others that might be out there?
Andy: Sure yeah, I like to break the different extraction categories up into kind of the different topical areas. One, and these are all specific to marijuana but they are used in other industries as well. You know kind of the first category of extraction is really mechanical, and there’s two probably commonly used mechanical extraction methods that you’ll see in the marijuana industry. One of them is going to be, you know, using just a standard sieve method or making kief where people will take either dry ice, usually it’s some kind of dry ice block and put it into a bucket with sacks that have different layers of micron ratings on them. The dry ice effectively does two things. It makes the trichomes on the marijuana plant very brittle. So it freezes them, and then the mechanical force of shaking the block around will break those trichomes off and they will get sorted out based on their particle size through these different bags and that’s how you make kief.
A similar method is another one called Bubble Hash. Some people will call it ice water, and it’s a very similar process except for instead of using dry ice, you use water ice and regular ice and water and the same thing happens. Basically the cold water causes the trichomes to freeze and become very brittle. And so another common method that can be used is called Bubble Hash or sometimes ice water extraction method. Basically that’s where people will take something that looks a lot like a washing machine and they’ll put the marijuana in ice water, you know, water with ice in it. And it functions very similar. It will freeze the trichomes causing them to be brittle. They will break off and then they’re generally filtered through some kind of a mesh system to get a similar product. It’s a little bit more automated because you can use things like a washing machine. There’s more complicated equipment out there to do it now, but both methods are mechanical in nature in that they really just freeze the trichomes, break them off and then filter them out. Bubble Hash method has the obvious drawback that you have to get the water out of the product once you’ve done the separation and extraction portion. Whereas the kief method doesn’t, but kief is a lot more labor intensive.
So those are two very common mechanical extraction methods that you will find in the marijuana industry. Both are very inexpensive. They’re very easy to do. They’re clean, you know, you’re only using water or a solid form of carbon dioxide being dry ice. So there’s no residual solvents or anything like that, but they’re not very efficient from the standpoint that they do nothing more than break the outer layer of available oils off of the plant. So you aren’t doing an extraction. You can’t run it on kief for instance, or I’m sorry you can’t run it on trim because it has no solvency power. It can’t get inside of the plant and start to dissolve the oils out of the plant material. And so the yields tend to be pretty low and you tend to not get complete extractions.
Moving to the next level of extraction that a lot of people will see, I call them solvent based methods. These are going to be things that use some kind of a solvent, some kind of a solvating liquid to be able to do it. There’s really kind of two categories of this. One’s going to be using alcohol or ethanol as an extraction. This is referred to, a lot of people call this Rick Simpson oil. It’s one of the methods that people will make. Rick Simpson oil is basically performing in an alcohol or an ethanol extraction. And it’s basically a two step process where you immerse your material in alcohol or ethanol, let it sit there for some period of time and there’s different things you can do. You can apply some heat or you can keep it cold depending on what you’re trying to do.
There’s quick wash methods where you run the alcohol through it and only allow the exposure time to be very short, maybe a few minutes. But basically you expose the material to alcohol. The alcohol leeches out or dissolves the oil from the plant and then you subsequently filter any particles or any material out of the alcohol and distill it off. Distilling it off can be as simple as literally evaporating the alcohol or going to something more complicated like a rotary evaporator. But the end result is the extracted oil that once all the alcohol has been distilled out or evaporated out, then you’re left with a alcohol free solvent. Some people will leave a little bit of alcohol in it and that’s generally referred to as a tincture, but that’s a typical solvent method that’s been around for a long time. Again used widely in the food processing industry as well. Most of vanilla extract is processed exactly the same way.
Another solvent process that’s typically found in the extraction world, again particular to marijuana is going to be using some kind of a hydrocarbon, and that can be butane, sometimes referred to as butane hash oil or BHO. Propane is commonly used or is becoming more common and hexane can also be used. Hexane is a little bit more similar to an alcohol extraction, whereas hydrocarbons like butane and propane tend to be a little bit more similar to CO2 from the standpoint that they tend to operate under pressure or at least close to pressure. Is if we look at propane and butane kind of as a similar animal, you know both of those methods are very commonly used primarily because two things. One, it’s cheap. You know the equipment tends to be fairly inexpensive. Even the closed-loop systems are you know can be 10 or maybe even 20 percent of the cost of a CO2 system. But it also is pretty effective. Butane and propane is a very strong, very powerful solvent. So the extraction efficiencies tend to be very high.
There’s drawbacks to using a strong solvent like that in that you don’t have any selectivity. It tends to want to extract out all of the available oils, waxes, paraffins available in the plant. And so there generally has to be some kind of a separation process within the extraction in order to keep the oils separate from the waxes. Particularly if you’re going to go and do something that’s going to vaporize it. Vaporizing the waxes can cause issues with, lung issues where you’re basically ingesting those waxes that have been vaporized as opposed to just the oil. So again butane and propane extraction methods are very popular, very common. The obvious drawback to both of those is the fact that they’re compressed, flammable gases. And so the explosion hazard can be a significant concern and can also be a significant cost.
I think a lot of people tend to underestimate the cost of a true hydrocarbon extraction facility and look at just the cost of the equipment and not the cost of the facility to operate it within. In order to be safe and legal it has to be an explosion proof facility that has monitoring, explosion proof switches and exhaust systems that are capable of being deenergized for switches and things like that. Also the evacuation system has to be able to evacuate the room in a certain amount of time. It has to all be integrated in there. It has to have alarming systems. All of these things are costs that have to be accounted for when you’re considering doing a butane or a propane operation.
Matthew: So doing a butane or a propane operation, do you think the costs are comparable once you take into effect that you have to make a blast proof room and create all these safeguards.
Andy: Yeah exactly and that’s moving on to the CO2 kind of comparison. When you look at the cost of a CO2 operation versus the cost of a butane or propane operation they start to become very similar if not the same depending on the size of the operation especially because of the fact that carbon dioxide is nonflammable. You don’t have to have the same explosion proof or blast room, as you said there, type of facility for a carbon dioxide operation. You really only have two safety concerns when you’re running the CO2 extraction system. The first is safe operation which is generally revolving around the pressure. So you have to make sure the operators are trained and understand and have the ability to see if there is pressure in the system and make sure the pressure is relieved properly before they try to open up vessels. Most of that is in design and training. But as far as the facility goes, you know the facility really just has to have a CO2 monitor in it. Basically it’s monitoring the level of CO2 in the room and it has to be able to alert or alarm any people or any operators who might be in the room to essentially exit the facility until the CO2 has gone away. So you know you don’t have to have an evacuation system. You don’t have to have explosion proof switches and all that kind of stuff. It’s much less expensive and much less complicated facility.
Matthew: Switching gears a little bit to the art and science question of extraction. There’s many people that say there’s an art and a science to extracting cannabis into concentrates. Do you agree with this statement and why or why not?
Andy: Well so I understand a lot of people refer to themselves as artisans or extraction artists. It’s great, but the reality of the situation is extracting is science. There is no art. There’s just science, and you know the application of temperatures, pressures, flow rates, time, pre-processing, post-processing, you know all of these things are all scientific in nature. They’re all application, you know, going through and making sure that you’re processing parameters are consistent. They’re being monitored, all of these things are just science. They’re engineering, they’re science. It’s not art. You know I tend to disagree with people who claim that they’re extraction artists because that would imply that they have some inherent ability to do an extraction, to perform some kind of an extraction that comes naturally to them, as though they’re an artist painting an art, you know, making a painting. Their inherent ability to see different things and create something on a canvas. That’s not necessarily even repeatable, that’s art right, and that’s not what an extraction process is, it’s certainly not what it should be.
To be a little bit harsh I think some people who refer to themselves as artisans or extraction artists are really just not being good scientists. You know they’re not tracking their parameters. They’re not paying attention. If they produce something that was by accident, then that’s great. I mean some of the best products in the world have been produced by accident. But turning that into a repeatable event is science. That’s not art.
Matthew: Okay. And maybe perhaps they’re referring to bringing products to market that people really want. In which case what do you see people using the Apeks Supercritical machine for the most in the cannabis industry to create what kind of products that eventually go to retail dispensaries?
Andy: Well so there’s really three products that the oil that comes from the Apeks Extraction Systems will be used in in kind of the marijuana marketplace. The first one is vaporizing pens. You know electronic cigarettes is kind of the public (17.27 unclear) the marijuana industry calls them vape pens or vaporizing pens. Oil that comes out of an extraction system, particularly a CO2 extraction system can come in a lot of different forms. One of the things we didn’t discuss as we were talking about CO2, supercritical CO2 before is the fact that CO2 is tunable. It has the ability to change its solvency power based simply on temperature and pressure. Competitive extraction methods like butane or propane don’t have that ability. They’re just on or off.
CO2 is unique because of the fact it can change it solvency power. What that means is you can actually extract out different portions or different molecular weights from the plant material. For instance you know there’s a range of molecular weights. People say oil kind of is, you know, what’s in the plant material, but the reality is there are light oils. There’s volatiles. There’s heavier oils. There’s light waxes, there’s heavy waxes. There’s paraffins. There’s a lot of different fats and lipids. There’s a whole range of molecular weights available inside of a plant. And each one of those molecular weights makes up the “total oil” or wax as sometimes people will call it. Using CO2 selectively changing the temperatures and pressures can allow you to bring out just the lighter oils or just the heavier waxes, depending on what your parameters are.
In the application of a vape pen generally people want to have the lighter oils. So you know there’s kind of two approaches that people will take with the CO2. One is to run parameters that produce just the lighter oils. You know those tend to be pretty lower pressures, colder temperatures. And the lighter oils that come out tend to be very fragrant, aromatic because they also have a lot of the volatiles intact. Those are all great things for a vaporizing pen. You need a oil that’s flowable. You need something that has a lot of flavor and taste which is generally the volatiles. The drawback to operating on that condition is that it’s generally slower. The solvency power is less, and so it takes a longer time to do the extraction, but the positive is you don’t have to do any secondary processing.
So you know a flipside or an alternate method that a lot of people will use with systems that don’t have the ability to run colder temperatures and pressures is they use a secondary process called winterization. And so they will take the extracted oil that generally has a lot more waxes and lipids present, they’ll winterize which is a secondary alcohol extraction to remove those fats and waxes. Then they’re left with just the oil. So the vape pens is kind of its own animal. It’s a very very popular product right now. Again our extraction systems can produce oil that is used directly in vape pens without any secondary processing at all. It’s also used sometimes in conjunction with the winterization process to produce a vapable oil.
Secondary or a second product that the marijuana industry sees a lot is what I would refer to as kind of the infused products market. These are going to be your edibles, your topicals, your lotions, things along those lines, cookies, elixirs, suckers, cakes, whatever, any kind of infused product. There’s really kind of two categories of infused products that people need to consider. And that really is it going to be activated or nonactivated meaning you know if you’re doing a chocolate for instance and you want to be able to have an activated THC content within the chocolate, generally the chocolate making process is at a low temperature. And so what you’ll have to do with your cannabis oil is you have to activate it before you put it into your chocolate. And when I say activate I mean decarboxylate or converting the THC acid into THC which is psychoactive.
And so the activation process is an important thing to consider especially if you’re not going to be baking or exposing your infused product to any kind of heat. Chocolate is a good example. And so activating the product prior to extraction is actually more useful because of the fact it will increase the yields with a CO2 extraction system. So a lot of our folks who have a topical or a lotion that doesn’t see any heat but they want an activated product or a chocolate or something like that, they’ll actually perform a prebaking process or decarboxylation process on the raw plant material prior to doing an extraction. Whereas materials like cookies or brownies that are going to be baked, they can use a nonactivated or nondecarboxylated extracted product in the cooking prior to baking and then the baking will actually do decarboxylation.
So you know it can get very complex and I guess kind of the point I’m trying to make here is that you know depending on what kind of product you’re going for, there’s a number of steps before the extraction and after the extraction that have to be considered in order to get the total product. I like to kind of say the corollary would be if you were going to go bake a cookie in your kitchen, you know, you wouldn’t just take the flour and expect a cookie to come out. You have to have the flour and the sugar and the vanilla extract and chocolate chips and all that kind of stuff in order to get the final cookie. Extraction is generally just one piece of the total process.
Now a bit of a corollary, a bit of a flipside I guess is a better way to say it is the third products category that people are using our CO2 extraction systems for and that’s the dabbing market. You know dabs are very very popular. It’s kind of a different form of vaporizing, generally very concentrated form. And the product types have many different names; Honeycomb, Crumble. I’ve seen muffins, you know, there’s just vaping oils, there’s waxes, there’s shatter. You know lots of different nicknames for what is all kind of this one product category called dabbing. One of the unique things about the Apeks CO2 system is the fact that it can run very very cold. We designed it originally to extract oils from botanical plant materials and you know plants aren’t designed to be, by mother nature they’re not designed to see temperatures above 100 or 110 degrees Fahrenheit. They start to have thermal degradation when they see that just because they weren’t designed that way if you want to call it that.
So we built our systems and we designed our systems to maintain very very low temperature exposure to the material. And you know the oil never sees a temperature above the extraction temperature in our systems which is an important concept because you know you can extract at a cold temperature, but if the separation vessel where the oil collects during the extraction process is heated, that if it sees a lot of heat during the extraction process, you can see thermal degradation even after the extraction has actually happened inside the machine. So we designed our systems around cold. One of the benefits that we found in the marijuana industry of being able to run cold like that is our systems can make a product that is referred to as crumble. It’s a very hard, very crumbly product that can be subsequently converted in a vacuum oven into a shatter or even a honeycomb type of product in a very very short amount of time; 10 to 15 minutes in a vacuum oven straight out of the extraction system.
The shatter that comes out is solvent free. You know the competitive process is going to be with butane or propane, and they’re have to do what they call a vacuum oven treatment of evacuate the propane and butane out of the extracted material. And sometime that can take three to four days in a vacuum oven and they have to flip the material over and it’s a lot of work. CO2 extracted crumble right out of our systems can go straight into a vacuum oven and be converted into a shatter product within a few minutes. And that product has become very popular here in the last three to four months.
Matthew: Now putting on the business owner hat or operations manager hat trying to understand how much oil or how much extraction I could do, let’s say I have 10 pounds of sugar leaf, which is not the flower but has the resinous THC sacs, trichomes on there. Is there a ballpark of how much oil I can get from that and how long it would take?
Andy: Sure so on a very very high level, 30,000 foot view a good rough number is 10 percent on trim. So you can expect to get about 10 percent yield of 10 pounds. So from your 10 pounds of sugar leaf you can expect to get about 1 pound of oil. Now here’s the problem with that statement. Number one, you’ll find that anyone who is familiar with a butane or a propane extraction will tell you that that’s ridiculous and they can get 15, 20 or even 25 percent yields from their butane process. So why would they ever use CO2? Well things you got to remember. Number one, if they’re pulling 25 percent from plant material using butane or propane, it’s going to have a lot of waxes in it. And so once those waxes have been removed, then the yield starts to become more in line. Number two it depends a lot on the parameters. Right so as we discussed before CO2 is tunable. So if you’re using subcritical or liquid, low pressure, low temperature CO2 extraction, you’re going to get a lower yield because you’re not bring out those waxes and resins. From a business standpoint that’s not good because you’re not maximizing the potential of the material. From a product standpoint it’s good because you’re getting oil out that you need for the vape pens.
The beauty of CO2 is you can actually do a two-step process. We call it fractional extraction where you can actually extract at a lower temperature and lower pressure to get the oil that would be preferable for a vape pen. And then you can come back and raise the temperature and pressure on the same material and subsequently extract out the heavier waxes and resins to get a complete extraction. So we generally will tell people that 10 percent is what you can expect, but the reality is the opportunity to get a much higher yield is there. And there’s two methods to do it. One is higher pressure, higher temperature going into the stronger solvency power of the supercritical CO2, realizing that the product you get is generally a very waxy material that’s not going to be desirable for vape pens, but is very desirable for an infused product. And in that scenario you can get 15, maybe even 17 percent yields if you’re doing a true supercritical extraction. Whereas you know 10 percent is more applicable to what you’re going to get that’s going to be useable for a vape pen application.
So it’ gets a little complex. We generally tell people 10 percent because it’s a conservative number that they can use in calculations and be confident that that’s what they’re going to get, but there are ways to get much higher extractions. One of those as I just said, a supercritical. Another method that a lot of people are using with our systems is they’re prebaking the material. And so they’ll bake the material, decarboxylate the material as we were talking about before in the activation process. And it does two things. One obviously it activates to convert the THC acid into the THC which is psychoactive, but it will also cause the yield to go up. It soften the waxes or converts some of the waxes into an oil that’s more soluble in lower pressure and lower pressure CO2, subsequently getting a higher yield and even in a shorter time. And so we see a lot of customers who will perform extractions subcritical extractions, low pressure, low temperature on decarboxylated or baked material getting extraction yields in the 15 to 18 percent range. Whereas the same material that’s been extracted under the same parameters that’s not decarboxylated will only give a 10 percent yield. So there’s a couple of different ways you can kind of manipulate the product even before the extraction that can produce either higher yields or a more favorable product if that meets all of your demands.
Matthew: Now back to the getting a pound of oil for 10 pounds of trim. How long would that process take, ballpark, to you know put all the trim in there and have it come out the other side as well. I guess it depends on the size of the machine that’s being used, but what can you tell us there?
Andy: Yeah again I’m going throw out some kind of ballpark numbers or rough numbers that people can use in their calculations. So you know a pound every one to two hours is pretty typical. Now again there are ways to speed that up and there are ways to make it longer. You know when you’re playing with a solvent that has tuneability you can change its solvency power. You can start to play a lot with those extraction times. You want to choose an extraction time that meets your production process. And what I mean by that is if there’s a diminishing return that comes from extraction times. And so as the process runs longer, you get less and less material for each hour that the material is exposed. And so there’s a point of diminishing returns, and that point is going to be different for everyone.
Some examples would be if you have an application or you have a situation where you’ve got unlimited material, you’re probably not going to want to try to squeeze the lemon as hard as you can, right, because the harder you squeeze it you get a lot of lemon juice first. But you know as you get to the point where the lemon juice is all gone, you have to squeeze harder and harder and harder just to get a little bit. It’s a very similar process here in that there’s diminishing returns depending on how hard you squeeze and your run time is effectively the squeeze. And so if you have unlimited material it may not make sense to run a full two hours or even three hours on the material because that additional hour, that third hour of extraction you’re going to get just a little bit of oil out of material as opposed to if you used that same hour for new material, you’re going to get a lot more the same amount of time.
Now if conversely you’re limited on the amount of material that you have available to, it makes a ton of sense to extend the extraction time even longer and squeeze that lemon as hard as you can so you can get the maximum return from your material. So again we generally will tell people a pound every one to two hours realizing that the times can be very flexible and you know tuned to match your actual operation.
Matthew: So back to the lemon analogy it makes sense to have fresh lemons all lined up, but sometimes you can’t have all those leaves or buds or everything you need right lined up as you need them, but that’s a great analogy to help us understand there. And it seems like in your experience most people are trying to keep the machines running 24/7, is that accurate?
Andy: You know it varies. We’ve really got quite a range of customers. You know some folks are definitely high production you know the thing runs, our systems will run literally 24/7. You know they’ve got contracts with you know as much material as they can get. These tend to be more the Northern California kind of guys and they’ve just got more material than they know what to do with, and they run the systems literally 24/7. And keeping that think running is very very important to them. And so you know just like any other good manufacturing process, an automotive supplier or whatever, they’ll have spare parts. They’ll have spare you know consumables laying around waiting so that if they do run into some kind of a hiccup or any kind of an issue, they can immediately get the system back up and running.
On the exact opposite end of the spectrum, and those tend to be our larger CO2 production systems that get used in those applications. Completely on the opposite end of the spectrum you know our smaller bench top systems get used a lot by what we call “club use”. It’s not so much personal use, but it’s usually a group of folks in a collective or a club that will get the system and they’ll have their small group of people kind of collaborate and you know put their material together, process it and use the oil specifically for the club. Those systems tend to run a few hours a day or maybe even a few hours a week, but allow the clubs to serve their patients with a clean, safe extracted oil that doesn’t have to be consumed. And you know they get a lot of control over the process in areas that aren’t as heavily regulated as California and, I’m sorry, as Colorado and Washington. You know there tends to be not as much testing and not as much scrutiny on the final product. And so there’s some concern especially from people who are using marijuana in medical applications that they want to know what is in their product, and the only way to really be sure is to do it their selves. So we will see a lot of people use our bench top systems to kind of get control of the medicine that they’re using for their patients.
Matthew: So the machines are pretty easy to use it sounds like if you can just get a bench top one for a collective and kind of figure it out or what kind of training is involved?
Andy: Yeah so all of our systems are all fully automated. Our bench top system does have a couple of manual valves so we tend to refer to it more as a semi-automated system in that the operator has to manipulate a couple of valves before the process is started, then it’s automatic from that point. Our larger production systems are fully automated in that they’ve got a touch screen where the user basically goes through and the machine will, once you push start, the machine will walk you through a series of prompts asking you for your temperature, your pressure, your time, and then it will do a couple of safety checks to make sure that the vessels are prepared to receive pressure, make sure that all of the vessels are closed properly, the hoses are connected. And from that point the system will take over and be fully automated.
That being said they are simple to operate from the standpoint that the CO2 system does all the work. However the operator still has to have some mechanical inclination. You know these are industrial pieces of equipment that are being used. They’re under high pressure. And the operator has to have some basic mechanical aptitude to be able to open a vessel, close a vessel, you know, to some degree even perform maintenance on the system; changing pump seals, changing o-rings, changing gaskets, things along those lines. So I wouldn’t say that you know just any, my mom will kill me for saying this, but I wouldn’t want my mom to operate the system because you know she’s not the most mechanically inclined. So you know it’s not for everyone, but the full automation and the automation of the system makes it much easier to operate compared to some of the other systems that you will see out there like the butane and propane systems that are all manually operated and even some CO2 systems that are out there today are still manually operated as well. The operator has to be significantly more skilled in order to know when to open this valve, when to open that valve, what pressure gauge to look at, when to do this, when to do that. All of those things go away for a fully automated system.
Matthew: Okay and what are the costs, the price points to get into different size machines?
Andy: Prices for our systems start at about $36,000. Our bench top system is $36,000, and that price includes training. Again it’s the full system. There’s no additional components you need for the extraction. Any secondary processing stuff would be additional obviously, but the extraction process is all inclusive there. And again training at your facility would be included in that price as well. That’s our bench top system. Our smallest production systems starts at about $86,000 and prices from the production systems go from $86,000 all the way up to about $190,000.
Matthew: Okay. Now there’s some young businesses out there that might have trim and they know they can get a positive ROI if they could just afford a system. So when they’re in that position what do you say?
Andy: We actually have a leasing program. We’ve developed a leasing program about three years ago, and it was in response to this exact problem. You know everybody in the cannabis industry was a startup three years ago. And so there was a lot of opportunity from a return on investment standpoint but not everybody had the cash. And so you know we developed a leasing program to basically allow folks to do exactly what you’re saying. You know our terms are generally 25 to 35 percent as a down payment and then the subsequent lease terms are going to be 10 to 20 percent interest rate over the course of 12 months for payments. You know it’s interesting we’ve had this program in place for about three years and you know depending on the credit worthiness that’s what’s really going to determine the down payment and the interest rate that we apply.
But I’ve had just about every one of the folks who’ve engaged us from a leasing standpoint or a financing standpoint, at some point in time during the process of the application they say yeah I intend to pay this thing off in a couple of months. And the reality is they can’t. You know the return on investment for these CO2 extraction systems, you know, it can absolutely be a matter of weeks. You know three to four weeks is very very reasonable number for return on investment. However, where people will generally get themselves in trouble is that assumes that you have a couple of things in place. Number one you’ve got a supply chain set. Right so you’ve got access to material and that material can come to you on a regular basis and you know you have the supply of material to be able to feed the extraction system. You also have to have some place for the oil to go, right, and this is where a lot of people get kind of hung up in the process. You know they’ll procure some material, they’ll have access to material, they’ll get an extraction system from us. They get the extraction complete and then they say well what am I going to do with this goopy peanut buttery looking stuff.
Three or four years ago people would just take that and they would smoke it and they would be happy with it, but nowadays you have to have a product. You have to have marketing. You have to have all the things that every business needs to have. You know you have to have an accounting system. You have to be able to pay your employees. You have to have a marketing and a brand that people can recognize and people are going to associate with. All of these things start to come into play in order to make that three to four week ROI on an extraction system actually reasonable and it happen. And so just about all those folks who’ve asked us for you know financing and taking on our leasing program say well I plan on paying this thing off in two months, and while it’s functionally possible I’ve had only one customer actually pay it off early. All of the rest of them have found that they need the cash to support the other portions of the operation or the other portions of the business in order to make the entire thing viable.
Matthew: Great points. Great points. Now looking to the future, 3, 5, 7, 10 years ahead where do you see the extraction and concentrate business heading and changing?
Andy: Well we’re already seeing concentrates. Again in the marijuana industry, we’re already seeing concentrates start to take over sale of flower. You know in some dispensaries it’s already taken over and in other ones it’s on its way to taking over from a percentage standpoint. So you know concentrates are very popular for a number of reasons. You know they’re just that. They’re concentrated so there’s higher potency levels for folks who have been consuming for a long time and have built up a tolerance level. You know they can start to actually get high again or be able to benefit from the medicine again. But there’s also a digression element to it. Vape pens in particular really help people be more digression, have more…
Andy: Discreet thank you, that’s the word I’m looking for. It allows people to be more discreet in their consumption. You know the soccer mom kind of is always the quintessential example. You know she doesn’t necessarily want her kids to know that she’s medicating or enjoying marijuana recreationally, and vape pens allow her to do that. But the edibles I think that’s really the area where I think there’s going to be a ton of activity in the future. Vape pens have already become very popular, but I think the edibles are going to become even more popular. Just because one it’s obviously discreet, but there’s also the element of it’s so much easier to use. You know you don’t have to carry this product around. Once you’ve got like a vape pen, you don’t have to have a dabbing apparatus. You don’t have to have your electronic nail and all that kind of stuff. Cookies are really easy. You know you put it in your purse or put it in your cooler and you take it and then you enjoy it and it’s gone. You know it’s very simple. It’s very easy to use. It’s very inexpensive, and you know I really think that that’s where the big push in the industry is going to go.
Matthew: Now I’ve asked you a bunch of questions Andy. Is there any questions that I didn’t ask you that I should’ve that people should be thinking about when they’re evaluating extractions and concentrates for cannabis?
Andy: Yeah, you know, probably the one… I guess I will reword your question in a slightly different way which is what mistakes do people make when purchasing an extraction system. You know and it all comes down to common sense. It’s research. Make sure you do your research. You know unfortunately in an industry that’s developed itself from an underground position still has some unscrupulous players out there. And you know it’s really important when you’re doing any kind of research that you ask all the right questions and you know get the details behind the answers. Don’t just take a sales guy’s word that you know this system or the thing it’s going to do whatever it says it does. Make them show you the details. Make them show you the data to support it.
We talked a lot about yields. We talked a lot about the throughput and the return on investment. Get the numbers. Show proof. I had a professor in college who told me once said, “In God We Trust, all others bring data.” And you know I think that’s the way people need to consider, the things that people need to consider when purchasing an extraction system. The other thing is do your homework on all parts of the business.
Back a few years ago, I like this story because it’s applicable to my welding days, you know a few years ago the West Coast Choppers and Orange County Choppers TV show were very popular. And you know I was working in the welding industry as a consultant effectively. And so I would get a lot of people who would say hey I’m going to start a motorcycle business. What kind of welder should I buy? And you know the welder was the first thing that they were going to buy because it tends to be the biggest purchase and it’s also kind of the coolest thing. Well the welder is just one piece of a very large puzzle of building a motorcycle right. There’s not just building the motorcycle itself there’s also who are you going to sell it to, how are you going to sell it and who is going to design it, where are you going to get all your parts.
And so I would encourage people to you know reconsider before going and buying a welder how they’re going to do the rest of the business. And you know very very similar corollary comes from the extraction side of things. People who want to start a marijuana business tend to go extraction first. They tend to think that top of mind because it’s the most expensive piece of equipment and it’s kind of got a wow factor to it. But you have to realize when you’re considering this that it’s a much bigger puzzle not only from a business standpoint of who’s going to do the finances, who’s going to do the marketing. You know what’s your plan for branding, but there’s also the actual process of getting the oil out of the plant and into a saleable product. Right, and that into a saleable product is an important piece. How are you going to take the extracted oil and put it into a vape pen right? Are you going to winterize it? Are you going to cut it? What kind of vape pen are you going to get? Where are you going to get your vape pens from? Most of them are coming from China right now and I’ve heard some horror stories about importing vape pens from China and basically holding people hostage to get their vape pens. If you’re going to do an edible product, you know, what’s the product going to be like? How are you going to make sure that you homogenized, meaning that you get an equal distribution of your extracted oil throughout the entire baked product. The chocolate chips don’t necessarily evenly distribute themselves in a cookie, but you have to make sure that the THC is evenly distributed. That’s an important aspect.
Testing, especially with the more regulated states like Colorado and Washington, testing is extremely important in making sure that you have the proper dosing, especially on the infused products. Where are you going to get your testing? Is the testing provider reputable. You know there’s still some states that are pretty new and in their infancy and the testing houses don’t have a ton of experience. You know so there’s a number of things that go in there. We get a lot of, I’m going to call them, early stage players or people who have an expressed interest in the cannabis industry and they really kind of start with the extraction process. And you know it sounds a little bit harsh, but you know we tell people go back and do your homework before you’re ready to pull the trigger on this thing because we don’t want you to make $100,000 mistake.
Matthew: Right, great point. Now are you still looking for investors?
Andy: No, no. We are not looking for investors at the moment.
Matthew: Good, good for you.
Andy: We’re fortunate enough to be in a position where we don’t need funding.
Matthew: Great. And Andy in closing how can listeners learn more about Apeks Supercritical?
Andy: Our website has a wealth of information on it. It’s www.apekssupercritical.com and that’s www.apekssupercritical.com.
Matthew: Great. Andy thanks so much for being on CannaInsider today, we really appreciate it.
Andy: You’re welcome. Thank you Matt, appreciate it.
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