Business
Cannabis MSO MariMed CEO’s sudden death shows need for succession plan
Mere months before Robert Fireman died suddenly in December, the co-founder and former CEO of Massachusetts-based MariMed shook up the cannabis company’s management team and created a succession plan.
Doing so would prove to be prescient.
After MariMed hired Susan Villare as chief financial officer in May 2022, former CFO and co-founder Jon Levine briefly moved to the role of chief administration officer.
“Then we decided that I would be better off as president of the company, which put me in a position where I can help prepare for any type of succession plan if necessary – not based on Bob’s health,” Levine said in an interview with MJBizDaily, “but based upon the fact that we had to look at all roles in the company and what succession plan would be at all times so that you’re not caught off guard.”
Fireman, who had served as board chair and CEO of the multistate operator since 2017, died on Dec. 11 from complications of a respiratory illness. He was 74.
Levine, who turns 58 on March 21, was appointed interim CEO of MariMed, which has operations in Illinois, Maryland, Massachusetts, Missouri and Ohio.
In March, Levine accepted the role on a full-time basis, and Edward Gildea was appointed board chair.
“It actually worked to our advantage because we took that initiative,” Levine said.
“We were fully prepared to make a smooth transition from Bob’s leadership to mine.”
MariMed’s story serves as a lesson to the cannabis industry about the importance of having a succession plan in place.
A 2021 survey by the Society for Human Resource Management showed that 56% of the members surveyed said their organization didn’t have a succession plan.
In addition, 24% of those surveyed said their organization’s succession plan was an informal one.
Startups and succession planning
MariMed, which trades as MRMD on the Canadian Securities Exchange and over-the-counter markets, isn’t the first cannabis company to experience tragedy.
Brett Roper, the co-founder and interim CEO of Denver-based Medicine Man Technologies (which now operates as Schwazze), died suddenly at the end of 2018.
Co-founder Andy Williams was appointed interim CEO in Roper’s place.
Roper had asked the board to start looking for a new CEO in June 2018 because he was planning to transition to a semiretired role.
Justin Dye took over as chair and CEO in 2019, and Williams departed the company in 2020. (A Schwazze spokesperson declined to comment because new management has since taken over.)
In early 2021, Keegan Peterson, the 33-year-old founder and then-CEO of Denver-based payroll and human resources software company Wurk, died suddenly.
Scott Kenyon, formerly the executive chair and a board member of the privately owned company, took the helm of Wurk shortly after.
A 2020 Harvard Business Review story highlighting the need for succession plans at the height of the COVID-19 pandemic notes that smaller companies and startups are particularly vulnerable to losing key leaders.
The thought processes and strategies of founders as well as the niche expertise and skills of management can be crucially valuable and irreplaceable.
“Moreover, when the pool of internal executives is small, boards need to think creatively about back-up plans and ways to divvy up critical responsibilities to ensure business continuity,” one director told the authors.
MariMed reports strong results
While it was a surprise to have to implement its succession plan so quickly after creating it, MariMed’s leadership transition has gone as well as can be expected.
“We’re one of the most profitable and well-managed companies in the cannabis industry,” Levine said.
“We continually have positive cash flow and income. It’s not common in this industry to be able to do that, and that’s because we ran everything lean and mean.”
Last week, the company reported that its revenue grew from $121.5 million in 2021 to $134 million in 2022.
Gross margin was down to 44% in the fourth quarter compared with 50% in the same period in 2021.
In 2022, MariMed’s net income was more than $13.6 million, up from $7.6 million in 2021.
Levine was already intimately familiar with the operations and strategy of the company, having co-created it with Fireman.
The business plan – which included expanding operations in Maryland and negotiating a $35 million loan – was already in place.
Levine describes the late Fireman as his “brother” and said the two business partners and friends balanced each other out, bringing different skills to the table.
Fireman, a former attorney, brought a sharp eye to reviewing documents and legal negotiations.
Levine, who overcame dyslexia growing up, is now working to bring the same level of diligence Fireman would have.
In his closing remarks during MariMed’s latest earnings call, Levine said he’ll honor Fireman’s legacy by staying committed to the family-like culture of the company.
He even compared MariMed to a “Cinderella team” in the NCAA basketball tournament – that is, an underdog that could ultimately rise above the competition.
“I watch our team every day, and I know that we have what it takes to win the championship,” he said.
“In all seriousness,” Levine said, “assuming no delays, 2023 should be another year of accelerating revenue growth, with 2024 reflecting the full impact of all investments we made over the past two years.
As Bob always said, I would encourage you to continue watching the MariMed story.”
Source: https://mjbizdaily.com/marijuana-mso-marimed-ceos-sudden-death-shows-need-for-succession-plan/
Business
New Mexico cannabis operator fined, loses license for alleged BioTrack fraud
New Mexico regulators fined a cannabis operator nearly $300,000 and revoked its license after the company allegedly created fake reports in the state’s traceability software.
The New Mexico Cannabis Control Division (CCD) accused marijuana manufacturer and retailer Golden Roots of 11 violations, according to Albuquerque Business First.
Golden Roots operates the The Cannabis Revolution Dispensary.
The majority of the violations are related to the Albuquerque company’s improper use of BioTrack, which has been New Mexico’s track-and-trace vendor since 2015.
The CCD alleges Golden Roots reported marijuana production only two months after it had received its vertically integrated license, according to Albuquerque Business First.
Because cannabis takes longer than two months to be cultivated, the CCD was suspicious of the report.
After inspecting the company’s premises, the CCD alleged Golden Roots reported cultivation, transportation and sales in BioTrack but wasn’t able to provide officers who inspected the site evidence that the operator was cultivating cannabis.
In April, the CCD revoked Golden Roots’ license and issued a $10,000 fine, according to the news outlet.
The company requested a hearing, which the regulator scheduled for Sept. 1.
At the hearing, the CCD testified that the company’s dried-cannabis weights in BioTrack were suspicious because they didn’t seem to accurately reflect how much weight marijuana loses as it dries.
Company employees also poorly accounted for why they were making adjustments in the system of up to 24 pounds of cannabis, making comments such as “bad” or “mistake” in the software, Albuquerque Business First reported.
Golden Roots was fined $298,972.05 – the amount regulators allege the company made selling products that weren’t properly accounted for in BioTrack.
The CCD has been cracking down on cannabis operators accused of selling products procured from out-of-state or not grown legally:
- Regulators alleged in August that Albuquerque dispensary Sawmill Sweet Leaf sold out-of-state products and didn’t have a license for extraction.
- Paradise Exotics Distro lost its license in July after regulators alleged the company sold products made in California.
Golden Roots was the first alleged rulebreaker in New Mexico to be asked to pay a large fine.
Source: https://mjbizdaily.com/new-mexico-cannabis-operator-fined-loses-license-for-alleged-biotrack-fraud/
Business
Marijuana companies suing US attorney general in federal prohibition challenge
Four marijuana companies, including a multistate operator, have filed a lawsuit against U.S. Attorney General Merrick Garland in which they allege the federal MJ prohibition under the Controlled Substances Act is no longer constitutional.
According to the complaint, filed Thursday in U.S. District Court in Massachusetts, retailer Canna Provisions, Treevit delivery service CEO Gyasi Sellers, cultivator Wiseacre Farm and MSO Verano Holdings Corp. are all harmed by “the federal government’s unconstitutional ban on cultivating, manufacturing, distributing, or possessing intrastate marijuana.”
Verano is headquartered in Chicago but has operations in Massachusetts; the other three operators are based in Massachusetts.
The lawsuit seeks a ruling that the “Controlled Substances Act is unconstitutional as applied to the intrastate cultivation, manufacture, possession, and distribution of marijuana pursuant to state law.”
The companies want the case to go before the U.S. Supreme Court.
They hired prominent law firm Boies Schiller Flexner to represent them.
The New York-based firm’s principal is David Boies, whose former clients include Microsoft, former presidential candidate Al Gore and Elizabeth Holmes’ disgraced startup Theranos.
Similar challenges to the federal Controlled Substances Act (CSA) have failed.
One such challenge led to a landmark Supreme Court decision in 2005.
In Gonzalez vs. Raich, the highest court in the United States ruled in a 6-3 decision that the commerce clause of the U.S. Constitution gave Congress the power to outlaw marijuana federally, even though state laws allow the cultivation and sale of cannabis.
In the 18 years since that ruling, 23 states and the District of Columbia have legalized adult-use marijuana and the federal government has allowed a multibillion-dollar cannabis industry to thrive.
Since both Congress and the U.S. Department of Justice, currently headed by Garland, have declined to intervene in state-licensed marijuana markets, the key facts that led to the Supreme Court’s 2005 ruling “no longer apply,” Boies said in a statement Thursday.
“The Supreme Court has since made clear that the federal government lacks the authority to regulate purely intrastate commerce,” Boies said.
“Moreover, the facts on which those precedents are based are no longer true.”
Verano President Darren Weiss said in a statement the company is “prepared to bring this case all the way to the Supreme Court in order to align federal law with how Congress has acted for years.”
While the Biden administration’s push to reschedule marijuana would help solve marijuana operators’ federal tax woes, neither rescheduling nor modest Congressional reforms such as the SAFER Banking Act “solve the fundamental issue,” Weiss added.
“The application of the CSA to lawful state-run cannabis business is an unconstitutional overreach on state sovereignty that has led to decades of harm, failed businesses, lost jobs, and unsafe working conditions.”
Business
Alabama to make another attempt Dec. 1 to award medical cannabis licenses
Alabama regulators are targeting Dec. 1 to award the first batch of medical cannabis business licenses after the agency’s first two attempts were scrapped because of scoring errors and litigation.
The first licenses will be awarded to individual cultivators, delivery providers, processors, dispensaries and state testing labs, according to the Alabama Medical Cannabis Commission (AMCC).
Then, on Dec. 12, the AMCC will award licenses for vertically integrated operations, a designation set primarily for multistate operators.
Licenses are expected to be handed out 28 days after they have been awarded, so MMJ production could begin in early January, according to the Alabama Daily News.
That means MMJ products could be available for patients around early March, an AMCC spokesperson told the media outlet.
Regulators initially awarded 21 business licenses in June, only to void them after applicants alleged inconsistencies with how the applications were scored.
Then, in August, the state awarded 24 different licenses – 19 went to June recipients – only to reverse themselves again and scratch those licenses after spurned applicants filed lawsuits.
A state judge dismissed a lawsuit filed by Chicago-based MSO Verano Holdings Corp., but another lawsuit is pending.
Source: https://mjbizdaily.com/alabama-plans-to-award-medical-cannabis-licenses-dec-1/
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