Jushi Holdings Inc., a multi-state cannabis operator, has converted $6 million worth of Employee Retention Credit (ERC) refund claims into immediate liquidity by selling them to a third party. This move provided the company with $5.1 million in cash upfront, enhancing its financial flexibility.
The ERC was introduced as part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act in 2020 to help businesses retain their workforce during the pandemic. The program allows eligible employers, including those in the cannabis industry, to claim tax credits for wages paid during specific qualifying periods.
Jushi opted to offload its ERC claims primarily due to ongoing IRS processing delays. The federal agency has been grappling with a high volume of claims, leading to significant backlogs. By selling the claims, Jushi eliminates the uncertainty of waiting for government reimbursement and can immediately deploy the funds into its operations. The company still retains the right to a share of any interest accrued on these claims up to the date of the transaction.
In addition to the claims that were sold, Jushi has an additional $3 million in ERC refund claims still pending with the IRS. These were not included in the current deal and could potentially yield further liquidity in the future.
Alongside the ERC transaction, Jushi has also secured commitments for a separate $5.1 million capital raise through second lien notes maturing in 2026. Issued at a 10% original discount, these notes carry a 12% interest rate and come with detached five-year warrants at 75% coverage. Among the key investors in this financing round is Jushi’s CEO, James Cacioppo, who has committed $3.7 million, while prominent cannabis investor Denis Arsenault has subscribed for an additional C$2 million.
The company’s latest financial strategies are geared toward reinforcing its liquidity position, ensuring it can continue expanding its operations and strengthening its overall financial standing.
Although the ERC program has not been widely leveraged in the cannabis sector—largely due to regulatory complexities and IRS scrutiny—Jushi’s success in monetizing these credits highlights the potential advantages for cannabis businesses that qualify.
By proactively managing its financial resources and securing additional funding, Jushi is positioning itself for long-term sustainability amid the evolving landscape of the cannabis industry.