Annual report pursuant to Section 13 and 15(d)

Due from Third Parties

Due from Third Parties
12 Months Ended
Dec. 31, 2019
Due From Third Parties  
Due from Third Parties



At December 31, 2019 and 2018, the following table reflects amounts that were advanced by the Company to its cannabis-licensed clients primarily for working capital purposes, and the carrying amount of such advances after write-offs:


    2019     2018  
Kind Therapeutics USA Inc. (Maryland licensee)   $ 1,475,675     $ 2,679,496  
Harvest Foundation LLC (Nevada licensee)     1,938,787       248,796  
KPG of Anna LLC (Illinois licensee acquired Oct. 2019)     -       482,700  
KPG of Harrisburg LLC (Illinois licensee acquired Oct. 2019)     -       449,385  
Total working capital advances to third parties     3,414,462       3,860,377  
Reserves against working capital advances     (3,414,462 )     -  
Due from third parties, net   -     3,860,377  


When a client is able to organically fund its ongoing operations, such client will issue a promissory note to the Company for the cumulative advances made up to that point, which will then be paid down monthly over a specified period of time. The Company has successfully employed this strategy in the past, and accordingly, in January 2019, KPG of Anna LLC and KPG of Harrisburg LLC issued promissory notes to the Company as further described in Note 7 – Notes Receivable.


In December 2019, the Company recorded bad debt reserves against the working capital advance balances due from (i) Kind of approximately $1.5 million in light of the ongoing litigation between the Company and Kind, and (ii) Harvest of approximately $1.9 million because of the anticipated effect on Harvest’s operations from a weakened local economy due to the coronavirus pandemic.