Las Vegas-based Medifarm LLC, a newly created subsidiary of the national agricultural company Terra Tech, is looking to become the first publicly traded company in the country to hold a medical marijuana license.
Terra Tech CEO Derek Peterson knows cannabis is a risky industry, but he sees potential for a reward that could more than double the value of his company.
Medifarm applied for four separate medical marijuana licenses in Clark County: two for dispensaries, one for a cultivation facility and one for a production facility.
A total of 109 companies have submitted 206 applications in the county. Commissioners are expected to decided on the applications June 5.
With green houses planted across the country, Terra Tech focuses its current business on fruits and vegetables.
The Southern California-based company is forecast to pull in about $7 million this year in produce sales, Peterson said. Shares of Terra Tech, an over-the-counter stock, fell less than a penny, or 1.1 percent, closing at 62 cents Friday.
A marijuana dispensary operating at full force could earn upward of $15 to $20 million a year in revenue.
“We think it’s going to become a majority of our business,” Peterson said. “There really isn’t another industry that’s growing at this pace.”
Alan Brochstein, a cannabis industry analyst in Houston and founder of 420 Investor, said he knows of no other publicly traded companies that have even applied for a medical marijuana license in the United States.
He believes Medifarm’s agricultural parent, which built a team of industry accomplished professionals for the Nevada application, adds credibility to the company’s licensing process.
“I haven’t seen other companies even take those steps,” Brochstein said.
Entering the medical marijuana market could be risky because the potential growth is somewhat unknown, considering the federal government still considers marijuana use illegal, and it’s unclear how federal agencies will respond to state-level legalization.
“(Terra Tech) has said they’re going to navigate this carefully,” Brochstein said. “I would suspect that they’ll be very careful in how they approach the market.”
Terra Tech has built cultivation facilities for marijuana companies in Colorado, Michigan, Washington and Massachusetts. Peterson privately owns dispensaries in California.
Nevada first legalized medical marijuana in 2000, but patients were required to grow their own cannabis. Last year, the state Legislature approved a bill that allowed for 66 medical marijuana business licenses, including 40 in Clark County.
“It’s actually nice that Nevada waited,” Peterson said, “because they have had a chance to learn from the mistakes in California, Colorado and Massachusetts.”
If Medifarm is granted all four licenses, that would allow for streamlined production and sales.
“The odds are better that we end up with just a cultivation facility,” Peterson said. “That’s where we think we have a strategic advantage.”
Peterson envisions a 30,000 square-feet to 50,000 square-feet cultivation plant, for which the company budgeted $3 million. A production facility could cost about $1 million, he said, while a retail store could cost between $500,000 and $700,0000, plus another $100,000 for security.
The company picked out real estate for a dispensary near Desert Inn Road and Decatur Boulevard, in order to be close to the local population and a short distance from the Strip and downtown Las Vegas.
Here’s how Peterson breaks down the figures: a 50,000 square foot cultivation facility, with a staggered growth schedule, could produce 50 to 75 pounds of marijuana a week.
In other markets where marijuana is legal, the plant sells for $2,500 to $3,000 per pound at wholesale. That’s upward of $225,000 per week for a cultivation facility. Dispensaries then sell at about $5,000 to $7,000 per pound to the public, which means the dispensary would have to sell about 4,000 pounds a year at $5,000 per pound to earn $20 million.
Brochstein expected Nevada’s medical marijuana market, particularly Las Vegas, to be one of the strongest in the nation.
Nevada’s law allows people with medical marijuana cards from other states to purchase cannabis within the borders.
And while recreational use of marijuana remains illegal, Brochstein said medical marijuana is often “procured for non-medical reasons, but legally, as a way to legally consume cannabis.”
Contact reporter David Ferrara at 702-387-5290 or firstname.lastname@example.org. Follow @randompoker on Twitter.