NOTE 6 – 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:

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.