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FEB 10 - FEB 17, 2015

Competition Expected to be Intense for Just Five Growing Slots Statewide

February 10, 2015

From vine ripe tomatoes to medical marijuana? This state of the art growing facility in Lewiston might be the site of one of five medical marijuana growing and manufacturing facilities.

New York's law, unlike medical marijuana laws in other states, requires companies to hire union workers for their dispensaries and production facilities.

Then there is the Federal challenge. Federal law prohibits the sale and possession of marijuana. A dichotomy exists where it's legal for state purposes and illegal for federal purposes.

Because banks and credit-card companies are federally regulated, the purchase and sale of cannabis has so far been a cash business. A medical marijuana patient in New York State will almost certainly have to pay for the drug with cash.

Banking institutions and credit card companies usually won't allow customers to pay for marijuana with their cards, and usually don't allow businesses to deposit marijuana revenues at their branches, because it could be prosecuted as money-laundering.

While it is viewed as unlikely, a grower could be prosecuted by the federal government.

In fact, the federal government has given conflicting statements on the matter.

In 2009, U.S. Deputy Attorney General David Ogden issued a memo to U.S. attorneys that said they didn't have to prosecute marijuana companies in states where the drug had been legalized.

In 2011, Deputy U.S. Attorney General James M. Cole issued a memorandum saying the 2009 memo was not intended to shield marijuana dispensaries from federal enforcement actions or prosecutions.

In February 2014, U.S. Attorney Eric Holder wrote a memo saying banks could work with marijuana industries, without fear of being prosecuted for money laundering.

Shortly afterward, the Justice Department's Financial Crimes Enforcement Network told banks the choice of whether or not to work with marijuana businesses was up to them, but warned them they would still be required to file "suspicious activity reports" to the federal government of any activity that could be a violation of federal law, including activity involving marijuana.

Under a new presidential administration and new attorney general, prosecutors could start aggressively coming after marijuana businesses.

In other states, like Colorado, marijuana businesses pay state and federal taxes in cash.

While New York State is levying a 7 percent excise tax on gross marijuana income, marijuana retailers are also going to have to pay taxes to the federal government.

Reportedly the Internal Revenue Service requires tax payments from marijuana businesses, but won't allow the companies to deduct their business expenses when filing returns, under tax regulations designed to prevent drug dealers from exploiting the tax code.

Medical marijuana manufacturers will have to negotiate with labor unions in New York to use organized union workers in their facilities. This raises the question of how the businesses will deal with income tax deductions and Social Security payments to the I.R.S.

The manufacturers can't go the a local I.R.S. agency branch with cash, because new rules implemented at the federal level require employers to deduct those expenses electronically.

But by degrees these issues will be worked out.

The question of the moment is who will be selected to grow and will Niagara County reap a benefit?

The state health department has a lot of leeway to pick the five companies that will end up with lucrative marijuana manufacturing licenses.

With so few licenses available for New York State manufacturers, expect fierce competition from companies hoping to do business here, despite the burden of heavy regulations.

Besides Lewiston Greenhouse LLC, companies and individuals reportedly planning on making an application or considering it, are:

Terra Tech, a California-based publicly traded agricultural company.

Dean Petkanas a chief financial officer at Stratton Oakmont who ran a penny-stock boiler room operation depicted in "The Wolf of Wall Street".

High Times Magazine, which is reportedly launching a private equity fund to invest in marijuana

Ari Hoffnung

Richard Yost, who operates Ideal 420 Soil, which sells soil and other products to marijuana growers.

Republican Assemblyman Steve Katz, a veterinarian.

Privateer Holdings Inc., a Seattle company that invests in medical marijuana.

MJ Freeway, a software company geared toward businesses who operate marijuana businesses.

Great Lakes Medicinals.

PalliaTech Inc., a marijuana manufacturer.

Fioria Franco LLC, based in Clarence.

KannaLife Sciences.

North Country Natural Solutions which plans to grow medical marijuana in a vacant 60,000-square-foor factory in the town of Bombay, a Franklin County town with a population of 1,357.

Gaia Plant-Based Medicine, which grows marijuana in Colorado. Gaia, which recently changed its name to Mindful, provided input to state legislators, helped them draft New York's medical marijuana law and lobbied for its passage.

Affinor Growers, a publicly traded Canadian company that grows medical marijuana in Washington.





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