New Jersey’s $12 Million Funding to 48 Cannabis Businesses
By David Mugwe, CPA, Manager, Kenneth Sumsky, CPA, Senior Manager and Lazaro Hernandez, CPA, Partner
Earlier this month the New Jersey Economic Development Authority (NJEDA) and the New Jersey Cannabis Regulatory Commission (NJCRC) jointly announced the awarding of $12 million in grant funding to 48 cannabis businesses, an increase from the originally 24 planned awards. These funds are expected to provide startup cannabis businesses with a $250,000 grant to negate market entry barriers and help them expand operations during the first three years of operation.
The first phase of the Cannabis Equity Grant Program, known as the Joint Ventures Grant, was launched earlier this year primarily to assist recreational cannabis startups with funding needed to navigate their way to an annual license from a conditional license. Fundamental points of the Joint Ventures Grant are:
- Entity must have site control and municipal approval.
- $100,000 is dispersed upon proof of obtaining site control (as evidenced by documentation showing the control of a property for use as a cannabis facility, i.e., a deed, fully executed lease, etc.).
- $150,000 will be dispersed upon approval of an annual license.
- Applicants must show receipts of eligible expenses to be eligible for the next disbursement.
Second Phase: Seed Equity Grant
The announcement of additional funding precedes Phase II’s Seed Equity Grant which will also benefit from this funding when it launches later this year Seed equity will provide grants of $150,000 and will require a conditional license.
Phase II is designated 100% to social equity applicants and was designed to ensure the communities most adversely impacted by the War on Drugs have equitable access to the cannabis industry. The following summarizes key details of the Seed Equity Grant:
- $37,500 will be dispersed upon completion of the fourth week of the technical assistance program.
- $37,500 will be dispersed upon completion of the technical assistance program.
- $37,500 will be dispersed upon proof of obtaining site control (see criteria above under Joint Ventures Grant) and municipal approval.
- $37,500 will be dispersed upon approval of an annual license.
Authorized Uses of Funds and Timing
Eligible uses of these grants may include, but are not limited to, start-up costs associated with a cannabis industry business. All expenses must occur after a conditional license is granted and during the first 36 months from the start of the business.
According to the New Jersey Cannabis Regulatory Commission (NJCRC), conditional licenses have 120 days, beginning on the day the conditional license is issued to the license applicant among other conditions, before they need to apply to convert to an annual license. There are more than 300 cultivators, manufacturers, dispensaries and testing laboratories that have received initial approval to move toward becoming operational. There are currently 1,568 conditional and annual licenses that have been awarded with more making their way through the application process.
Meeting Your Needs
The cannabis industry requires complex accounting needs due to the regulatory environment. Additionally, systems and controls are required by the regulators. These include systems needed to provide proof of eligible expenses for the grants. Startup and continuing cannabis businesses will typically struggle to complete these tasks in an efficient and effective manner due to a combination of monetary constraints and lack of training. Contact us if you need an analysis of eligible costs and further assistance.
PKF O’Connor Davies continues to be a leader providing accounting, auditing, tax and business advisory services to the cannabis industry. For more information, please contact your PKF O’Connor Davies client engagement partner or:
David Mugwe, CPA
Manager, Cannabis Services Group
Kenneth Sumsky, CPA
Senior Manager, Cannabis Services Group
Lazaro Hernandez, CPA
Partner, Cannabis Services Group
Jeffrey Gittler, CPA
Partner, Cannabis Co-Practice Leader