Item 1. Business
Item 1. Business
Company Overview
We are a multi-state cannabis operator in the United States, headquartered in Norwood, Massachusetts, dedicated to improving lives every day through our high-quality products, our actions and our values. We develop, own, and manage seed to sale state-licensed, state-of-the-art, regulatory-compliant facilities for the cultivation, production, and dispensing of medicinal and adult-use cannabis. We have created and continue to develop our own brands of premium cannabis flower, concentrates, edibles, and other precision-dosed products utilizing our proprietary strains and formulations. We also license our proprietary brands, along with other top cannabis products, in domestic markets.
Our common stock trades on both the OTCQX and the Canadian Securities Exchange under the ticker symbol MRMD.
Company History
In 2014, we entered the cannabis industry as an advisory and real estate management firm that procured state-issued cannabis licenses on behalf of our clients, developed cannabis facilities that we leased to these newly licensed companies, and provided industry-leading expertise and oversight in all aspects of their cannabis operations.
In 2018, we made the strategic decision to transition from an advisory business to a direct owner and operator of cannabis licenses in high-growth states. Key to this transition was the acquisition and consolidation of our clients for whom we had played a key role in the success of such clients, including securing their cannabis licenses, developing facilities that are models of excellence, funding their operations and providing operational and corporate guidance. We have successfully acquired and integrated certain client businesses in several states and believe that our prior experience in managing these businesses has provided us with the skills and expertise required to manage the continuing growth of these operations.
Throughout our history, we have created our own brands of craft-quality cannabis flower, concentrates, edibles, and other precision-dosed products, which have been award winners and top sellers in multiple states. Applying proprietary cultivation and processing procedures and following the strictest quality standards, our portfolio of brands was developed to fill gaps in the marketplace and meet specific effects desired by today’s cannabis consumer. We invest in ongoing research and development and intend to continue to introduce new and innovative products in the future.
Today, we operate state-of-art, regulatory compliant cannabis cultivation and processing facilities that grow and manufacture our proprietary, high-quality, branded cannabis consumer products. We distribute our products via the wholesale market to hundreds of dispensaries operated by other cannabis license holders. We also operate our own dispensaries, which are recognized for their excellent customer service and product selection. Revenue is generated at these dispensaries through the sales of our own products and those marketed by other cannabis license holders.
We utilize dedicated sales teams to sell our products to wholesale buyers representing the dispensaries operated by other cannabis license holders. Customers at our own dispensaries purchase cannabis for, among other reasons, the relief of pain and stress, promote better sleep and to address other health and wellness needs. We deploy a variety of marketing strategies to drive the sales of our products, including customer loyalty programs, digital advertising, in-store displays, public relations, and more.
We generate additional revenue from licensing, management fees, and real-estate income. For the years ended December 31, 2022 and 2021, these revenues comprised approximately 6% and 11% of our total revenue, respectively. This revenue has declined as we have acquired and consolidated the client businesses that had been paying us licensing, management, and facility rental fees.
Our Strategic Growth Plan
We continue to focus on executing our strategic growth plan, with priority on activities that include the following:
• increasing revenue organically in states where we currently do business by growing our product offerings, bolstering awareness via marketing campaigns, and developing additional assets within those states;
• expanding our footprint into high-growth legal cannabis states through new license applications and/or acquisitions of existing cannabis businesses; and
• increasing revenue by producing and distributing our award-winning brands to qualified strategic partners or by acquiring production and distribution licenses.
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Our Competitive Strengths
We believe that our strengths in the following areas provide us with certain competitive advantages and the tools necessary to successfully implement our strategic plans:
Experienced Management
Our management is one of the most experienced and longest tenured in the cannabis industry. Several of our executive team members, including our President and Chief Executive Officer, Chief Operating Officer, and Chief Revenue Officer, have worked in the industry for nearly a decade or more. Our leadership team has achieved considerable success creating and growing businesses in the industry by successfully applying for cannabis licenses, overseeing the development of cannabis operations and facilities, raising capital to purchase and develop facilities, and conducting operations in adherence to regulations established by individual state governments, including all environmental and social governance requirements. Additionally, we have substantially increased the depth and breadth of our executive team with the addition of a new Chief Financial Officer, a new Vice President of Retail Sales, and a new Vice President of Marketing and Research & Development. These new executives have significant experience and expertise and increase the strength of our executive team and the overall company.
Craft Cannabis at Scale
We own an expansive library of world-class genetics and utilize a hands-on “craft cultivation” approach, blended with the latest technologies, to grow high-quality cannabis flower and create premium infused cannabis products. Every one of our plants is individually cared for by our trained staff and grown in dedicated rooms featuring customized HVAC, lighting, and nutrients that are designed for growing particular flower strains consistently. Our proprietary approach to cultivation, curing, and processing has enabled us to sell our products at higher price points than most wholesale competitors.
Exceptional Retail Customer Service
We believe today’s cannabis consumer seeks a shopping experience that is comfortable, educational, and easy. Our dispensaries are models of excellence in this regard. We carefully curate a menu of the highest quality brands and products, and merchandise them in beautifully designed, upscale environments. We invest in budtender and retail personnel training, as well as product programming displayed on in-store monitors to help deliver exceptional customer service throughout the shopping experience. In Massachusetts, we complement our in-store operations with a home delivery option. We intend to do the same in other markets once permitted by state regulations.
Technological and Scientific Innovation
We are diligent in identifying and reviewing the latest science and processes applicable to the cultivation, distillation, production, packaging, securing, and distribution of cannabis and cannabis-infused products. We have obtained the highest quality cannabis strains and genetics. We utilize proven consumer products goods (“CPG”) research and development methodologies and proprietary processing techniques to create innovative products that fill gaps in the marketplace and ensure consistency from market to market.
Portfolio of Proprietary, Premium Brands
We have developed unique, premium brands of precision-dosed, cannabis-infused products, which are currently distributed in cannabis-legal states. Our products are available in the most popular consumption formats, including whole flower, pre-rolled flower, vape cartridges, concentrates, and edibles. We intend to continue expanding our brand portfolio to meet the effects that today’s cannabis consumers seek.
Our portfolio includes several award-winning brands that are among the top sellers in markets where they are available. They include:
• Nature’s Heritage , a premium brand of cannabis flower and concentrates;
• Betty’s Eddies , cannabis-, supplement-, and nutrient-infused fruit chews that deliver better sleep, pain relief, stress relief, and more. The Betty’s Eddies line also includes a limited collection of cannabis infused ice creams created in partnership with ice cream brand Emack & Bolio’s®;
• Bubby’s Baked , soft and chewy baked goods and a hot chocolate mix;
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• Vibations: High + Energy , a cannabis-infused energy powder drink mix for discrete, on-the-go consumption;
• Kalm Fusion and K Fusion , chewable cannabis-infused mint tablets; and
• InHouse , a value-priced brand of flower, vapes, and edibles.
Current and Pending Operations
During the past several years, we have invested in our own operating facilities, applied for and secured new licenses, and acquired new assets to strengthen and expand our brand portfolio and our retail and wholesale networks. We currently hold a total of 20 cannabis licenses in six states. We believe our investment and expansion initiatives will enable us to capture additional market share and provide us with a stronger presence in the states where we conduct business.
We believe that operating as a fully vertical, seed-to-sale cannabis company provides us the greatest opportunity to maximize revenue and profits in each state where we operate. To date, we are fully vertical through businesses either owned or managed by us in Maryland, Massachusetts, and Delaware. We plan to be fully vertical in Illinois with the opening of a new cultivation and processing facility in 2023.
Our current and pending operations are as follows:
Massachusetts
Massachusetts operates both adult-use and medical cannabis programs. According to the Massachusetts Cannabis Control Commission (the "CCC"), the state’s cannabis market was expected to total over $1.8 billion in sales in 2022, a number that is expected to increase to $2.6 billion by 2025 (source: MJ Biz Factbook).
We operate a 10,000 square foot Panacea Wellness -branded dispensary in Middleborough and a 70,000 square foot cultivation and production facility in New Bedford.
We intend to expand our New Bedford facility to increase our production capacity to meet the high demand for our products. Our Nature’s Heritage flower and concentrates brand, for example, is the #1-selling brand in the state, and we regularly sell all of our available inventory.
We hope to commence adult-use operations of our new dispensary in Beverly, on Boston’s north shore, during the first half of 2023. This dispensary was the result of a 2022 asset purchase. In February 2023, we announced our intention to acquire the operating assets of Ermont, Inc. ("Ermont"), a medical-licensed vertical cannabis operator, located in Quincy, MA. This acquisition, which is subject to approval by the CCC, will provide us with our third dispensary in Massachusetts, substantially completing our buildout to the maximum allowable by state regulations. We also intend to apply for an adult-use license for this dispensary.
Once fully operational, we expect our retail stores will be easily accessible to all cannabis consumers in eastern Massachusetts. Additionally, we intend to offer home delivery as the result of an early 2023 acquisition (see Recent Developments below).
Illinois
Illinois operates both adult-use and medical cannabis programs. According to the Illinois Department of Financial and Professional Regulation, the state reported $1.8 billion in total legal cannabis sales in 2021, which was up more than 100% compared to 2020, when adult-use cannabis was first legalized in the state. With a population of nearly 13 million, Illinois is one of the largest, fastest-growing cannabis markets in the U.S.
We operate four Thrive -branded dispensaries in the state, including an adult-use dispensary in Metropolis, near the Kentucky border; an adult-use dispensary in Mt. Vernon; and dispensaries in Anna and Harrisburg that each serve both medical and adult-use customers. These four locations provide easy access for most residents in Southern Illinois and surrounding states, including Missouri, Kentucky, Indiana and Tennessee. Our fifth dispensary, located in Casey near the Indiana border, is projected to open in 2023, the result of an August 2022 acquisition.
In May 2022, we took an important step toward becoming fully vertical in Illinois when we completed the acquisition of a craft cultivation” wholesale license. We subsequently acquired a 40,000-square foot building in Mt. Vernon that will house a cultivation and processing facility. We intend to sell our award-winning branded products throughout the state when the facility commences operations, which we expect to occur in 2023, and grow, produce, and wholesale our branded products throughout the state beginning in 2024.
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Maryland
We became fully vertical in Maryland in 2022. First, we completed the acquisition and consolidation of our client, Kind Therapeutics USA Inc. (“Kind”), in April 2022. The acquired cultivation, production, and wholesale business sells our premium branded cannabis flower, concentrates, vapes, and edibles from a 180,000-square foot facility in Hagerstown. That business was subsequently augmented by the opening of our Panacea Wellness -branded medical dispensary in Annapolis, which commenced operations in October 2022.
Maryland operates a successful medical cannabis program, which will expand to include adult-use sales in 2023 following a November 2022 ballot referendum. According to the Maryland Medical Cannabis Commission, the state generated more than $511 million in medical cannabis sales in 2022, with nearly 150,000 registered medical cannabis patients. With a population of 6.2 million, Maryland’s cannabis program has some of the highest rates of registered medical consumers, incidence use and spending, on a per capita basis, among all legal medical cannabis programs in the U.S.
Delaware
Delaware’s medical cannabis program has grown to over 20,000 licensed patients, according to the Delaware Department of Health and Social Services. The program generated approximately $37 million in sales in 2022, according to third-party industry data.
We provide comprehensive management and real estate services to First State Compassion Center (“FSCC”), our longstanding client in Delaware. We were instrumental in helping FSCC obtain Delaware’s first ever seed to sale medical cannabis license.2014. Today, FSCC operates under two of only eleven cannabis licenses in the state.
We developed and currently lease to FSCC a number of facilities in the state, including:
• a 47,000-square foot cultivation facility and dispensary in Wilmington;
• an 8,000-square foot production kitchen, also located in Wilmington, that opened in 2022;
• a 100,000-square foot cultivation facility in Milford that commenced operations in 2022; and
• a 4,000-square foot dispensary in Lewes.
FSCC began licensing and distributing a selection of our top-selling edibles brands in the state in 2022.
Missouri
Missouri operates a successful medical cannabis program, which expanded to include adult-use sales in February 2023 following a November 2022 ballot referendum. According to the Missouri Department of Health and Senior Services (“DHSS”), $210 million in cannabis sales were generated during 2021, the first full year of the state’s medical cannabis program. With a population of more than six million, Missouri’s medical cannabis program has more than 160,000 registered medical cannabis patients. First-year adult-use sales are expected to reach $550 million, according to MJBizDaily estimates.
As the result of a management contract we announced in September 2022, we expect to distribute our award-winning portfolio of cannabis-infused edibles in Missouri beginning mid-2023, which we plan to produce at a new production kitchen near Kansas City that we are developing and intend to manage. In addition, we have entered into an agreement to obtain the license of a Missouri wholesaler and cultivator, contingent upon obtaining all requisite approvals from the State of Missouri, which we expect to occur in 2023.
Ohio
Ohio operates a successful medical cannabis program, with more than 159,000 actively registered patients in a state with a population of nearly 12 million. According to the Ohio Department of Commerce, 2022 medical cannabis sales were approximately $479 million.
As the result of being awarded a provisional dispensary license by the Ohio Board of Pharmacy in May 2022, we expect to commence operations of a new dispensary in Tiffin, located south of Toledo and home to Tiffin University, in 2023.
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Recent Developments
We have had several recent developments that we believe are critical to the implementation of our strategic growth plan:
• On January 17, 2023, we announced that two executives had joined the Company to help drive retail and wholesale revenue and product innovations: Matt Truppo joined us as Vice President of Retail Sales and Jay O’Malley joined us as Vice President of Marketing and Research & Development.
• On January 24, 2023, we entered into a Loan and Security Agreement (the “Credit Agreement”) with Chicago Atlantic Admin, LLC as administrative agent for the lenders. Proceeds from the Credit Agreement are designated to complete the build-out of a new cultivation and processing facility in Illinois, complete the buildout of a new processing kitchen in Missouri, expand existing cultivation and processing facilities in Massachusetts and Maryland, fund certain capital expenditures, and to repay in full the Kind Therapeutics seller notes incurred in connection with the Kind acquisition in April 2022. The remaining balance, if any, is expected to be used to fund acquisitions, including, among others, the acquisitions in Quincy, MA;, Casey, IL; and Tiffin, OH.
• On February 21, 2023, we announced our intention to acquire the operating assets of Ermont in Quincy, MA, as previously described.
Competition
In the markets where we currently operate, we compete against other fully vertical multi-state operators (“MSOs”). We believe that our experience in building our business organically from the ground up is a key factor that differentiates us from the majority of other MSOs. We successfully developed and managed our clients' businesses, which we subsequently acquired and consolidated, created our own brands and branded products, and have retained the core management team since inception. While other MSOs have raised significantly more capital, they have generally acquired licensed businesses from sellers with whom they had no prior direct operating relationship. We believe our approach is significantly more cost-efficient, carries less risks, and results in a more seamless integration of processes, personnel, operating philosophies, and culture.
In addition to MSOs, we face competition from companies of varying sizes and geographic reach. Some, called Single State Operators, are fully vertical in just one state, others focus solely on producing and selling similar products and others solely operate dispensaries and sell the goods of other businesses. Some of our competitors that create and sell their own products are able to produce products that are on par with those we offer. We believe that by utilizing our own best practices and operational expertise, we are able to produce premium cannabis products at one of the lowest cost structures in the industry, which enables us to remain competitive in our markets. However, our sales could decline significantly if our competitors develop and market products that are more effective, more convenient, or less expensive than our products.
As cannabis products become more mainstream and gain greater acceptance, it is likely that larger and more established companies with greater available resources, including name recognition and national distribution networks, will enter the market. However, we believe that there are many barriers to entry, and to duplicate our licenses, knowledge, and facilities would be costly and time-consuming. We have upgraded our marketing efforts to expand branding and distribution, as well as implemented home delivery, where permissible, and other business strategies developed by more conventional industries. As a result, we have had success in increasing both the number of retail transactions and the average amount of sales underlying those transactions. We have also developed a loyal customer base at our retail locations and improved product visibility and sales of our proprietary portfolio of cannabis products.
Intellectual Property
We own registered trademarks for Betty’s Eddies, Kalm Fusion, Mari Melts and Nature’s Heritage , and have filed to register the Bubby’s Baked and Vibations: High + Energy trademarks with the U.S. Patent and Trademark Office.
Our proprietary processing and manufacturing techniques and technologies, while not patented, are kept strictly confidential. We enter into and enforce confidentiality agreements with key employees and consultants to protect our intellectual property, trade secrets, and general know-how.
Our Employees
As of December 31, 2022, we had a total of 681 employees, of which 592 were full-time.
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Website Access to Company Reports
Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to those reports are available free of charge on the Company’s website at www.marimedinc.com as soon as reasonably practicable after such material is electronically filed with, or furnished to, the Securities and Exchange Commission, or as filed with the Canadian securities regulatory authorities on the SEDAR website.
In addition, copies of our annual report will be made available, free of charge, on written request.