This week Acreage Holdings, one of the world’s largest vertically integrated international marijuana companies, said it was buying “100% of the equity interests” in Compassionate Care Foundation in Egg Harbor in anticipation of the New Jersey’s intention to legalize cannabis for adult recreational use. Compassionate Care Foundation’s vertically integrated operations include licenses for cultivation, manufacturing & processing, and three regional retail dispensaries.
Acreage Holdings already bought a 135,000-square-foot orchid greenhouse in Sewell last year to convert it into the largest cannabis cultivation facility on the East Coast. The company is formed in Canada, with shares traded on the Canadian stock exchange, and has its headquarters in New York City. The company’s chairman announced “This reorganization will result in increased access to affordable medical cannabis for New Jersey’s existing patients in short order. Moreover, we have long believed that upon adult-use legalization, the New England and Mid-Atlantic regions will be the preeminent cannabis market in the U.S. and Acreage is best positioned of any U.S. cannabis company to benefit.”
Acreage Holdings is one of the most politically connected companies in the U.S. It’s board members include former Speaker of the House John Boehner and former Massachusetts Governor and presidential candidate William Weld. Last year the company retained the services of Philip Norcross’ lobbying firm, Optimus Partners, for consulting services. Norcross is the strongest Democratic power broker in south Jersey politics.
Closing of the new purchase agreement is subject to New Jersey state approval. It is unclear how the deal will work, since Compassionate Care Foundation is a nonprofit. Nonprofit businesses do not have shareholders but typically have a provision that remaining equity interests revert to public benefit.
@potCPA is a brand of Tony Novak CPA that supports smaller independent companies and individuals related to the cannabis industry. While we have no opinion of this specific proposed consolidation deal with Acreage Holdings, we generally believe that it is better to keep local marijuana businesses independent for the benefit of the south Jersey community.
Last night I finished the messiest and most stressful small business accounting job ever encountered in a 30+ year career. They will keep their bank financing, but at enormous personal cost to all of us.
I just finished billing a bad stress-filled accounting job that took most of my time for the past two weeks. Preparing the invoice took more than four hours yesterday on a Sunday; I finish halfway through the Eagles game. There were many hours of computer works, dozens of emails, long phone calls, and text messages at all hours.
In the end, nobody was happy. My wife is upset that I charged so little and was unavailable all of this time. The client is upset that I charged so much and acted startled by my summary and invoice despite our many communications on the topic. Other clients are upset that I delayed their work projects for two weeks. My sub-contractor accountants are upset that I dismissed them midway through the project for not having the skills necessary for this difficult job. I’m upset that I violated several of my own business practices in an effort to help a client caught in a difficult situation. I haven’t been to the gym for weeks. My own business marketing plan is decimated this month; my business coach is frustrated and the money already invested there to build momentum is wasted. There are likely to be other “fallout” negative effects including being unprepared for legal cases this coming week. I don’t know yet, but my lack of faster action might have triggered complications in another client’s tax penalty.
I agreed to take the job only to support the company’s treasurer. I like him as a person and empathize with his business goals. He had his back against the wall facing pressure from his board and his bank. I see the loyalty and the “get ‘r done” aptitude that I bring as keys to the success of my practice. In the end, we will meet the primary goal: the business will keep its bank financing. We will both survive to battle another day. But what a tortuous way to accomplish what could have been a routine business process. Now, in the post-analysis, it is easy to identify ways we could have done better.
This was a learning experience for sure. It hammers home one idea: hourly rates are not workable for small business accounting! Short term accounting function by a treasurer are not a substitute for a stable long term controller. I am making changes to my practice to avoid a repeat of this stress ever again.
Another earlier blog post on this topic: https://tonynovak.com/why-hourly-billing-rates-are-a-bad-idea-in-small-business-accounting/
This coming week our federal legislature will take up a bill to decriminalize cannabis. Most states, including ours, are attempting similar measures. But my form’s focus isn’t on these proceedings. In fact, we have little confidence in the near term outcome. That timeline really doesn’t matter in the big picture.
What we know is that eventually cannabis will be decriminalized. What then? That will be a beginning, not an end to huge numbers of civil prosecutions of growers, sellers and their supporters. Many entrepreneurs will make mistakes that will cost them small fortunes in payments to the government. My firm is specifically focused on representing the tens of thousands of local entrepreneurs who will face civil tax prosecutions and business license penalty cases to follow that will require an adviser to offer tax expertise, representation before authorities and large picture financial coaching for recovery.
Some call the situation “Prohibition 2.0”. Others see it quite differently. See my short video “Eight Inconvenient Truths About the Cannabis Industry (that nobody is talking about)” for discussion on the current situation.
The news coming from California gives us some insight in what will come here on the east coast. Cannabis is already decriminalized in California. Yet government prosecutions are on the rise. Now it’s all about collecting the money. Approximately 85% of the entire industry remains unlicensed and untaxed. The risk of raids on growers’ events like farmers markets, arrests for selling without a license, and tax prosecutions are a part of daily life for more than a million people in that state alone. The cost of those prosecutions will be devastating to many. Yet it isn’t the end of the world*.
My work focuses on dealing with these post-decriminalization issues that leaves millions exposed to new types of business and financial problems. I’ve always been useful in representing those accused of violating government rules.
*I don’t mean to belittle the several tragic cases starting with cannabis and ending in suicide or police shootings. Rather, I’m focused on the majority of civil prosecution cases that will be life-altering but not insurmountable.
Here’s where we are with the insanity and injustice of cannabis law in our part of New Jersey right now.
The state’s next dispensary will open in about a month here in Vineland. Initially the facility will be open for training; its locally grown cannabis supply won’t be available until next year. The facility is financed and supported by some of the area’s most well-connected community leaders.
The state legislature in Trenton is again trying to decriminalize cannabis this month. The effort seems doomed to fail. Some legislators want to delay the decision until after the question is addressed in the 2020 election. New Jersey voters overwhelmingly support decriminalization but have not yet actually voted on the issue.
Meanwhile someone is arrested on cannabis charges every 14 minutes in New Jersey, according to a new analysis by the American Civil Liberties Union of New Jersey. Most of those arrested are minorities. Local police activity reports show that cannabis possession arrests are still common and Cumberland County Prosecutor’s Office continues to prosecute cannabis cases as crimes. Legislation to end the 30,000 annual cannabis arrests is eventually expected to also expunge the records of those convicted in the past.