NOTE 8 – INVENTORY

In 2019, the Company 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, the Company sold a majority of these seeds to GenCanna, generating a related party receivable of $33.2 million which was written off as of December 31, 2019.

At December 31, 2019, inventory was comprised of approximately $226,000 of CBD isolate and hemp extract; approximately $476,000 of work-in-process; and approximately $518,000 of finished cannabis and CBD products. At December 31, 2018, inventory was comprised of product packaging and other collateral.