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Loans Receivable
 6 Months Ended
Jun. 30, 2024
Loans Receivable [Abstract]  
Loans Receivable

Note 5 — Loans Receivable

 

A portion of the capital raised from the Company’s IPO was allocated to launch the Company’s TTK Solution program. The TTK Solution is the industry’s first-of-its-kind program in which the Company engages with qualified cannabis operators in the early phases of their business plans and provides critical support, typically over a 10-year period, which includes: access to capital for construction costs, the design and build-out of their cultivation and extraction facilities, state-of-the-art cultivation and extraction equipment, subscription to the Company’s Agrify Insights™, process design, training, implementation, proven grow recipes, product formulations, data analytics, and consumer branding.

 

The breakdown of loans receivable by customer as of June 30, 2024 and December 31, 2023 were as follows:

 

(In thousands)  June 30,
2024		   December 31,
2023		 
Customer 139  $14,361   $14,691 
Customer 125   9,297    9,297 
Customer 24096   6,810    6,810 
Allowance for credit losses   (18,885)   (19,215)
Total loan receivable, net of allowance for credit losses   11,583    11,583 
Less: current portion   (1,295)   
—
 
Total loan receivable, net of current  $10,288   $11,583 

 

Bud & Mary’s Cultivation, Inc. (“Bud & Mary’s”) - Customer 139

 

The initial payment date on the loan receivable from Bud & Mary’s is the first business day of the first full month following the commencement of commercial products sales and the maturity date is 24 months from the initial payment date. The interest rate is 16% per annum.

 

In Q3 2022, the Company became aware that Bud & Mary’s was not in compliance with all debt covenants as defined in the loan agreement which resulted in the Company issuing a loan acceleration letter to Bud & Mary’s on September 15, 2022, demanding full repayment of the construction loan under the loan agreement dated May 12, 2021. Consequently, the Company established a reserve of $14.7 million specifically related to Bud & Mary’s. As of June 30, 2024 the allowance related to Bud & Mary’s was reduced to $14.4 million, reflecting a recovery of allowance for credit losses resulting from a loan repayment of $330 thousand that was previously included in the allowance.

 

Hannah Industries (“Hannah”) - Customer 125

 

As of December 31, 2022, the Company was unable to provide additional financing to Hannah Industries under the TTK Solution program to complete the build out and development of Hannah’s cultivation business. As a result, the Company concluded that the existing receivable due from Hannah was impaired as of this date. Given the uncertainty around the customer’s ability to repay the outstanding balance of the loan as well as the absence of value attributed to any collateral from Hannah, an allowance for credit losses was recognized for 50% of the total outstanding receivable balance as of December 31, 2022. The Company recognized an allowance for credit losses related to the Hannah loan receivable in the amount of $4.5 million as of December 31, 2022. In October 2023, the Company remitted an additional $250 thousand to Hannah under the TTK Solution program, on which an allowance was not recorded. Therefore the allowance on the Hannah loan remains at $4.5 million as of June 30, 2024.

 

Once the project is completed, the customer will begin making monthly payments based on the harvest.

 

Nevada Holistics (“Tree house”) - Customer 24096

 

As of June 2024, Nevada Holistics has a current balance of $1,295 due in relation to the TTK loan. The project went live in Q2 2023. After the 90 day period for the first harvest, the customer was given an additional 6-month grace period which ended in Q1 2024. Upon completion of this grace period, the Company began invoicing the customer each month for a portion of the outstanding loan balance. The borrower began making monthly payments in Q2 2024 based on what is produced through harvests. Monthly payments are calculated based off of the Production Success Fees (‘PSF”) generated from each harvest. Upon issuance of each invoice, that portion of the loan is reclassified into loan receivable, current on the unaudited condensed consolidated balance sheets.