Inventory/Unearned Revenue From Related Party
|9 Months Ended|
Sep. 30, 2019
|Inventory Disclosure [Abstract]|
|Inventory/Unearned Revenue From Related Party||
NOTE 8 – INVENTORY/UNEARNED REVENUE FROM RELATED PARTY
During the nine months ended September 30, 2019, MariMed Hemp purchased $21.6 million of hemp seeds for its wholesale hemp distribution business and to develop hemp-derived CBD products. The seeds meet the U.S. government’s definition of federally legal industrial hemp, which was descheduled as a controlled substance and classified as an agricultural commodity upon the signing of the 2018 U.S. Farm Bill. As previously disclosed in Note 1 – Organization and Description of Business, as of September 30, 2019, MariMed Hemp sold a majority of these seeds to GenCanna, a related party, at market value which generated $33.2 million of receipts. The Company provided GenCanna with extended payment terms through December 2019, to coincide with the completion of the seeds’ harvest, although the payment by GenCanna is not contingent upon the success of such harvest or its yield.
As required by the relevant accounting guidance, the Company classified the $33.2 million of billings to GenCanna as a receivable from a related party, with approximately $29,0 million recognized as revenue from a related party for the nine months ended September 30, 2019, and approximately $4.2 million recorded under Unearned Revenue From Related Party on the balance sheet. Upon payment of the receivable balance by GenCanna, the amount in Unearned Revenue From Related Party will be recognized as revenue.
At September 30, 2019, inventory was comprised of $850,000 of hemp seeds, and approximately $681,000 of hemp oil extract and CBD products. At December 31, 2018, inventory was comprised of product packaging and other collateral.