My friend Andy Williams, CEO of Medicine Man and Medicine Man Technologies (MDCL; OTC), and I were chatting at a conference about a year ago. He said that he discovered the path to growing his family owned and operated company into a billion dollar company.
CBE did a story on his company and he projected $18 million for 2015 revenues. That qualified Medicine Man (MM) to be positioned as number 13 in the rankings for companies on the 2015 CBE 100 PPRs list—which includes the top 100 licensees that made the list; plus GW Pharmaceutical, who represented nearly $1 billion in 2015 revenues. I listened intently as one of the industry’s most closely covered “Pot Barons of Colorado” laid out a vision that we recently revisited to see the progress that he and his team were making toward such a lofty goal. The court is still out as they ply their trade and strategy to grow the company and its subsidiaries and investments, but I have to say, they are truly making great progress.
One of the interesting things about the Cannabis industry is the barriers of entry that most licensees face in expanding their footprints to capitalize on the cannabis consumer market and demand. One-by-one, states are establishing regulatory structures to allow (in most cases) medical marijuana programs first, and then (in 4 states so far) adult use regulations that make cannabis available to the consuming public like alcohol.
Some of us believe (including CBE) that once the federal government finally ends prohibition, the medical market that has led the industry’s development will become an afterthought. It may fall under the realm of the FDA and require clinical testing in order to be prescribed as medicine to address the myriad of maladies that legal medical states currently allow cannabis to be prescribed. CBE also believes that the industry will eventually follow state run regulatory formats that mirror alcohol availability and consumption on the adult-use side of the industry. We may face a two-tiered regulatory and distribution system to meet the needs of the medical and adult-use markets.
As one of the early industry pioneers, Williams has also been following the developing trends and creating a multi-tiered organization and network of companies that can share synergies and expertise. This is to not only capture revenue from the core licensee side of the market, but it also shows great promise through the ancillary business side of the market. The 2016 CBE 100 Ancillary Businesses represented somewhere between a half a billion and three-fourths of a billion in 2015 revenue.
The core company, Medicine Man, operates a vertically integrated cultivation and two dispensaries in Colorado. It was founded in 2009, and is owned by Williams and other members of the clan. The $18 million in revenue that they generated in 2015 was derived from retail operations that exclusively sell Medicine Man grown products.
According to SEC filings, Medicine Man Technologies is an innovative provider of consulting services related to cultivation, production, and dispensary operations nationally. They currently serve 29 clients in 14 states 
and have successfully supported license applications (cultivation and dispensary) in Illinois, Colorado, and Nevada most recently supporting competitive applications in Maryland and Hawaii. The company is actively engaging clients in Pennsylvania, Ohio, and California. They are also closely following the 2016 elections since several states have new or expanding medical and adult-use ballot initiatives. More information about Medicine Man Technologies Inc. (MDCL) can be found in their S1 and 10Q & K filings. MDCL was incorporated in Nevada in 2014, and Williams runs it with his partner Brett Roper.
Recent Developments & MDCL’s Expanding Footprint
To take advantage of the rapidly growing ancillary business (AB) opportunities that the industry presents, MDCL made two all stock purchases of companies operating in two of the high growth AB segments.
First, on August 1 of this year, MDCL announced that it had agreed in principle to acquire Capital G LTD, the holding company for the FunkSac, Odorno, and Commodigy brands. If the acquisition completes as intended, MDCL will have a footprint in the packaging side of the cannabis business with one of the better known brands, FunkSac, listed as 30th on the 2016 CBE AB 100, as well as ownership of the IP of the other brands that hold potential for significant revenue outside of the cannabis industry. It also provides Medicine Man with access and relationships with licensed cannabis retailers nationwide.
On August 15, 2016, MDCL announced it had agreed in principle to acquire Pono Publications Inc. and Success Nutrients Inc., both Colorado corporations. The combination of these two new businesses is expected to allow MDCL to establish a cultivation improvement offering to existing cultivation facility owners not yet able to achieve these performance levels. Adoption of this new methodology is expected to allow most business owners the ability to improve their existing cultivation performance metrics while maintaining the highest quality product. And according to Andy, he expects that this acquisition will bring valuable IP and knowledge that Medicine Man can benefit from. They could double current production levels, with the same cost, and open the door for additional licensed retailer acquisitions in Colorado to sell the expanded inventory that they expect to achieve.
Cultivation management supplies and equipment are byfar the largest AB segment in the industry. Now, MDCL has a stake in that game as well.
They also expect to achieve greater efficiency with the new acquisitions for back-end marketing services currently performed by Medicine Man.
There are potentially other synergistic opportunities in the Ancillary Business space. Think about technology and licensing management systems at the state and local level, as we see developing in California, learning management, etc.
The Third Leg
The recent announcement by the Obama Administration and the DEA would expand research opportunities for cannabis and the need to compete the processing portfolio currently lacking in the Colorado operation. It also plays nicely into the third primary area of investments made by MM.
Williams partnered with Chris Nelson from Kemin Industries and TJ Johnsrud of Nucara Pharmacy to create MedPharm Holdings—a phytopharmaceutical company created to develop innovative cannabis products using accepted pharmaceutical formulation techniques to reliably produce identifiable and replicable dosage forms for human use.
Nelson is CEO of Kemin Industries, described on its website as “more than a worldwide ingredient manufacturer; we’re a laboratory, a researcher, a resource and a partner to our customers. From animal health to human nutrition, customers come to us for answers and solutions” They bring horticultural extraction expertise and deep pockets to the venture.
As a pharmacist by training, Johnsrud adds Big Pharma expertise to the partnership. Together, the partnership is well positioned to create its own line of cannabis extracts and oils under the Mx brand, nutraceuticals, and dosing that will meet DEA guidelines for cannabis research. 
CBE reads this as MM’s way of preparing to play on a level field with Big Pharma as the industry transitions to a medical model regulated by the FDA. Williams explained to me that the goal with MedPharm is to take cannabis from a therapeutic state, to a truly medicinal state where scientific research is leveraged to back up claims and to help people understand how they can relieve or cure their symptoms with the proper cannabinoid formulations (in the proper dosage forms and the proper dosage).
International Positioning
No strategy would be complete without preparing to enter the international market, and Medicine Man’s investment isn’t limited domestically
. Medicine Man formed a joint venture with Medically Correct and a local partner in Jamaica to pursue a vertically integrated license. The implications here are terrific and if they succeed. Jamaica will not only represent a lucrative revenue opportunity, but conceivably an export market opportunity as well.
MDCL is also working with potential applicants in Puerto Rico and has a bid out to potential clients in Germany, Australia, and Canada.
Even if the title of this piece is a little bit of a stretch at this stage of the rapidly expanding Cannabis Industry, it will take a lot of execution and moving parts to make the future of this vision come true. But Medicine Man and its affiliated companies and partners have already put several wheels in motion to claim their piece of the pie. As usual, CBE is looking forward to following their journey to the Promised Land!
