Cannabis businesses have been excluded from any national legislated business support program, including the major stimulus package approved March – despite an industry appeal to authorities to put aside restrictions on federal aid and allow industry workers and businesses to apply for federal assistance. However, cannabis cultivators, processors, and retailers should have access to the same relief as other businesses in the states where they are based. Industry-wide Issues Conducting business in the COVID-19 environment and emerging from the crisis alive and well requires cannabis businesses of all types to be aware of and attend to key financial management issues:

• Cash management. As COVID-19 disrupts business as usual, companies will need to pay particular attention to cash management. Access to capital will be even more difficult for industry firms in the coming months, perhaps even years. The impact on collections is unclear, so it is imperative to assess your cash position, including as to what it means to the makeup of your workforce.If you have a banking relationship, you should meet with your banker to discuss your immediate and long-term capital needs. Many institutions are not lending cannabis businesses working capital; if your working capital is coming from cash flow you will need to make sure you can support your projections without your bank as a safety net. If you have a line of credit, it might be time to take draws to ensure you have sufficient working capital to get you through at least the next three to four months.
• M&A. With the environment growing more challenging, we are likely to see an increase in the number of mergers and acquisitions. On one hand, the crisis might serve to reduce some of the unrealistic pricing for businesses in our markets; it could make acquisitions more attractive. On the other hand, a slower economy could force additional bankruptcies.
• Accounting. In any time of income peaks and valleys, the timeliness of accounting information is important. If you have to wait to understand where you are until you close your books a month or more down the road, it could be too late to react to your financial needs. Cash will be tight coming out of the crisis, and most of the support programs will be first-come-first-served, so take the opportunity now to tighten your accounting practices so you can present credible financial statements when you need to apply for any available loans or other support. The better prepared you are, the easier it will be to get necessary and immediate assistance.
• Sanitation. In light of the current virus crisis, you must ensure that you have procedures in place that protect your crop as well as adhere to the directives of the CDC. If a worker tests positive for the virus, an entire season’s crop could be lost. As well, check your inventory of supplies. It could be increasingly difficult to acquire the clothing, masks and gloves you need to harvest your product safely.
• Taxes. The federal tax filing extension and payment deferral periods are available to industrial businesses and their owners and operators. The deadline for both relative to 2019 income has been moved to July 15, 2020.
• FMLA. As our businesses withhold and submit payroll taxes, the provisions of the Family and Medical Leave Act continue to apply.

  State-by-State Rules and Programs The HBK Cannabis Industry Group has compiled information from industry states on operations and programs specific to the COVID-19 crisis.

• Oregon. Marijuana businesses and liquor stores can remain open for business as long as they comply with Executive Order 20-12. Effective immediately, marijuana and liquor businesses must designate an employee or officer to establish, implement, and enforce social distancing policies consistent with guidance from the Oregon Health Authority. Retailers are not mandated but currently allowed to deliver on-site within certain parameters, essentially curbside pick-up. A temporary rule increases the amount of flower OMMP cardholders and caregivers can purchase to 24 ounces per day but no more than 32 ounces per month.
• Illinois. Both medical and adult-use are considered essential under Illinois’ COVID-related executive order. Industry businesses must adhere to social distancing and other requirements applicable to all businesses. The state has granted a variance for curbside pick-up to medical patients under certain conditions but not to adult-use purchasers.
• Missouri. The state is currently in the process of establishing its medical marijuana program. Expectations are for dispensaries to open this summer and the state has announced there will be no delays to the program as a result of COVID-19.
• Ohio. The governor’s stay-at-home order designates medical marijuana dispensaries healthcare and public health operations. As a result, they are permitted to stay open and patients are permitted to leave their homes to seek medical treatment at the dispensaries. The number of caregivers a patient can have at any time has been expanded to three. In addition, telephone orders for cannabis products are temporarily permitted. Cultivators, processors and labs are considered essential businesses. Social distancing and increased sanitation requirements apply to all businesses.
• Michigan. The governor’s stay-at-home order allows marijuana businesses to stay open as essential businesses. The state allows home delivery in compliance with certain guidelines. The state is encouraging provisioning centers and adult-use retailers to use home delivery when applicable. They have also expedited an approval process for delivery with 24 to 48 hours and will allow delivery to medical patients whose address is now different from that on their medical card. Michigan will temporarily allow curbside pick-up in compliance with certain parameters.
• Pennsylvania. The governor has temporarily suspended regulations that require all dispensing to occur inside a dispensary. Pennsylvania will temporarily allow curbside pick-up at dispensaries. It also permits approved caregivers to deliver medical marijuana to an unlimited number of patients.
• New Jersey. Medical dispensaries are considered an essential business and allowed to remain open. Curbside delivery is allowed.
• New York. Medical dispensaries are considered an essential business and can remain open. New York will also allow for the expansion of delivery services without government approval, as well as sales through doors and windows at a dispensary as long as they comply with all other laws.
• Maryland. Medical dispensaries are considered an essential business and allowed to remain open. Under Maryland’s temporarily modified rules, dispensaries may deliver products to patients in their cars, outside of the licensed premises. Maryland officials have also suspended current sales practices that involve communal gathering and the use of shared “sniff jars” to encourage social distancing and reduce infections.
• Massachusetts. The state has deemed medical cannabis essential. Adult-use retailers have been deemed non-essential and were forced to close March 24th at noon.
• Florida. Medical dispensaries remain open as of March 24th. The state health department is now allowing existing Florida medical marijuana patients to re-certify their recommendations without having to physically see a doctor. It can be done via telemedicine.

If there is one thing about 2020 that we can be certain about, it is that every day has brought new challenges. We started the year off concerned about tariffs and labor shortages, and now we have moved on to the biggest challenge most of us have faced in our lifetime, COVID-19. The fallout from this pandemic is widespread. No matter where your company is located or how big you are, the effects of this crisis has and will continue to drive how you are making decisions for the future.

Our Construction Solutions Group at HBK understands that during these times of uncertainty, you have many questions. Below is a list of common questions and answers that our clients have asked us over the last few days.

When will the construction industry feel pressure from a potential downturn?
The construction industry can feel this pressure right away or it can lag up to 18 months from the onset of any economic downturn. The timing will depend on your specific customers and the makeup of your backlog.

Do I need to talk to my customers now? What should I be talking with them about?
It is critical to work together with your customers, when possible, to ensure success in the future. Talking with your customers to ensure they have the funds to support the projects is key to forecasting your upcoming workload. For jobs that will be moving forward you should consider discussing timelines and completion date forecasts. Will these be changing? What if your workforce is hit hard by the virus or there is a mandatory national quarantine? You need to ensure how you will handle things like liquidated damages on contracts if these issues affect your company. Getting an understanding of that issue can single-handedly help your company to avoid a potential financial disaster.

What do I do with my employees?
Companies in many industries will be faced with this same question. However, in construction it may be more critical than in any other industry. Your most important asset is your workforce. The talent pool to find suitable replacements is very, very shallow and the market to attract and retain key talent is very cut-throat right now. While the specific details of how you will choose to handle this may be a case by case basis, I can tell you for sure that every contractor should focus a lot of their attention to ensuring they will retain their top talent through this downturn.

Do I talk to my bank and surety now? I am afraid I will make them nervous if I tell them we might have some trouble going forward Absolutely the time to talk with your creditors is now. You will need their support through this downturn even more than ever. Being upfront and showing your creditors that you recognize the issues you will face and, more importantly, you have a plan to ensure that you can weather the storm is absolutely critical to your success. No one likes to give the bank or your surety bad news, but I can guarantee that surprising them with bad news is a recipe for losing the lifeline of support that they provide your company.

Ok, I will talk to the bank and the surety. What do I need to be able to tell them?
You need to work with financial professionals who can help you prepare cash flow forecasts and projected financial statements that will help you show your creditors that you have the situation under control. This will show them that you understand your business and are prepared to get through a difficult time with their support. Providing forecasts and projections that the creditors can rely on is imperative when meeting with them to request their continued support of your company. They are the absolute lifeblood of your business and without them, many times, it is impossible to perform work due to the cash flow constraints you face in your industry. The more prepared you are to show them what your credit needs will be, the more likely they are to support them.

We understand that you may have additional questions, and we want to talk to you about them. Please give us call at 330-758-8613 or shoot us an email at construction@HBKCPA.com to schedule a time to discuss.