Organization and Description of Business
|3 Months Ended|
Mar. 31, 2020
|Accounting Policies [Abstract]|
|Organization and Description of Business||
NOTE 1 – ORGANIZATION AND DESCRIPTION OF BUSINESS
MariMed Inc. (the “Company”) is a leader in the emerging cannabis industry. The Company is an expert in the development, operation, management, and optimization of facilities for the cultivation, production and dispensing of medicinal and recreational cannabis and cannabis-infused products. To date, the Company has developed in excess of 300,000 square feet of state-of-the-art, regulatory-compliant facilities in five states – Delaware, Illinois, Maryland, Massachusetts, and Nevada.
At the outset of the Company’s entrance into the cannabis industry, the Company provided advisory services and assistance to its clients in the procurement of state-issued cannabis licenses, leased its aforementioned cannabis facilities to these newly-licensed clients, and provided industry-leading expertise and oversight in all aspects of their cannabis operations, as well as ongoing regulatory, accounting, human resources, and administrative services. During this time, the Company successfully secured, on behalf of its clients, 13 cannabis licenses across six states – two in Delaware, three in Illinois, one in Nevada, one in Rhode Island, three in Maryland, and three in Massachusetts.
Since entering the cannabis industry, the Company has demonstrated an excellent track record developing and operating licensed cannabis facilities, implementing its proprietary operating procedures, and industry best practices. In 2018, the Company commenced a strategic plan to transition from an advisory firm that provides cannabis licensing, operational consulting and real estate services, to a direct owner of cannabis licenses and operator of seed-to-sale operations, dedicated to the improvement of health and wellness through the use of cannabinoids and cannabis products.
The Company’s strategic plan consists of the acquisition of its cannabis-licensed clients who currently lease the Company’s facilities, and the consolidation of these entities under the MariMed banner. The Company has played a key role in the successes of these entities, from the securing of their cannabis licenses, to the development of facilities that are models of excellence, to providing operational and corporate guidance. Accordingly, the Company believes it is well suited to own these facilities and manage the continuing growth of their operations.
A goal in completing this transition is to present a simpler, more transparent financial picture to the investor community. Once the consolidation is complete, the Company’s financial statements will provide a clearer representation of the revenues, earnings, and other financial metrics that the Company is generating, rather than a fee-for-service revenue model that reports only consulting and management fees, and does not reflect the full breadth of the Company’s overall business.
To date, acquisitions of the licensed businesses in Massachusetts and Illinois have been state-approved and completed, with the remaining entities located in Maryland, Nevada, and Rhode Island at various stages of completion and state approvals as further discussed below. When implemented, all of the Company’s cannabis-licensed clients will be fully consolidated into the Company, establishing it as a fully integrated seed-to-sale multistate operator of licensed cannabis businesses.
Each of the remaining potential acquisitions is subject to the respective state’s approval under its laws governing the ownership and transfer of cannabis licenses. The completion of the entire plan requires a modification of current cannabis license ownership laws in in Delaware and Rhode Island, and therefore there is no assurance that the Company will be successful in fully implementing its plan. However, the Company continues to develop additional revenue and business in the states in which it operates and plans to leverage its success in these markets to expand into other states where cannabis is and becomes legal.
The Company has also created its own brands of precision-dosed, cannabis-infused products designed to treat specific health conditions, alleviate medical symptoms, or achieve a certain effect. These products are developed by the Company in cooperation with state-licensed facilities and operators who meet the Company’s strict standards, including all natural—not artificial or synthetic—ingredients. The Company licenses its product formulations only to knowledgeable manufacturing professionals who agree to adhere to the Company’s precise scientific formulations using its trademarked product recipes.
The Company’s branded products are licensed under brand names including Kalm Fusion™, Nature’s Heritage™, and Betty’s Eddies™, and are distributed in the form of dissolvable strips, tablets, powders, microwaveable popcorn, fruit chews, and with more varieties in development. The Company also has exclusive sublicensing rights in certain states to distribute DabTabs™ vaporization tablets infused with cannabis concentrates, the Binske® line of cannabis products made from premium artisan ingredients, and the clinically tested medicinal cannabis strains developed in Israel by Tikun Olam™. The Company intends to continue licensing and distributing its brands as well as other top brands in the Company’s current markets and in partnerships in other states markets across the country where product sale is legal.
In anticipation of the growing demand for hemp-derived cannabidiol (“CBD”) following the adoption of the U.S Farm Bill in late 2018—which descheduled industrial hemp and hemp-derived CBD as controlled substances and classified such natural resources as agricultural commodities, thereby enabling a new emerging industry of CBD oils, isolates, and infused products within the United States—the Company established a wholly owned subsidiary, MariMed Hemp Inc. (“MariMed Hemp”), to market and distribute hemp-derived CBD products across several vertical markets. Prior to this, as a means of expanding into the global CBD market, the Company (i) acquired a majority interest of MediTaurus LLC (“MediTaurus”), an entity operating in the United States and Europe that has developed proprietary CBD formulations under its Florance™ brand, and (ii) invested $30.0 million in GenCanna Global Inc. (“GenCanna”), a Kentucky-based cultivator, producer, and distributor of hemp and GMP-quality CBD oils and isolates, although GenCanna has since filed voluntary petitions under Chapter 11 with the U.S. Bankruptcy Court in the Eastern District of Kentucky as further described in Note 4 – Investments.
In March 2020, the World Health Organization declared the outbreak of COVID-19 a global pandemic, and governmental authorities around the world have implemented measures to reduce its spread. The spread of COVID-19 in the United States and the measures to contain it have negatively impacted the economy and have created significant volatility and disruption in financial markets. Business shutdowns in certain states in response to stay-at-home orders and related measures have delayed the Company’s expansion and consolidation efforts, and have materially and adversely affected the Company’s business, operations, financial condition, and liquidity.
In particular, as disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019, due to the anticipated adverse effects of COVID-19, the Company (i) recorded bad debt reserves against receivables and working capital balances of approximately $3.8 million in the aggregate, as described in Note 16 – Bad Debts, and (ii) wrote off approximately $3.2 million in the aggregate of goodwill and carrying value of certain investments, as described in Note 4 – Investments.
Volatility in the financial markets and investor uncertainty from COVID-19 have also delayed the Company’s ability to consummate debt financings to raise working capital to support its operations and expansion plans. Continued disruption to the global economy may materially and adversely affect the future carrying values of certain of the Company’s assets, including inventories, accounts receivables, and intangibles. The full extent to which COVID-19 and the measures to contain it will impact our business, operations financial condition, and liquidity will depend on the severity and duration of the COVID-19 outbreak and other future developments related to the response to the virus, all of which are highly uncertain at this time. As a result, the Company cannot predict the ultimate impact of COVID-19 on its operational and financial performance.
The Company’s stock is quoted on the OTCQX market under the ticker symbol MRMD.
The Company was incorporated in Delaware in January 2011 under the name Worlds Online Inc. Initially, the Company developed and managed online virtual worlds. By early 2014, this line of business effectively ceased operating and the Company pivoted into the legal cannabis industry.
The entire disclosure for the general note to the financial statements for the reporting entity which may include, descriptions of the basis of presentation, business description, significant accounting policies, consolidations, reclassifications, new pronouncements not yet adopted and changes in accounting principles.
Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef