Provision for Credit Losses	9 Months Ended
Sep. 30, 2024
Provision For Credit Losses
Provision for Credit Losses	7. Provision for Credit Losses Effective January 1, 2022, the Company adopted amended accounting guidance “ASU No.2016-13 – Credit Losses” for the measurement of credit losses on financial instruments and other financial assets. That guidance requires an allowance for credit losses to be deducted from the amortized cost basis of financial assets to present the net carrying value that is expected to be collected over the contractual term of the assets considering relevant information about past events, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. The guidance replaced the previous incurred loss model for determining the allowance for credit losses. Accounts receivable are stated at the amount owed by the customer. The Company maintains an allowance for credit losses for accounts receivable and unbilled receivables, based on expected credit losses resulting from the inability of our customers to make required payments. The allowance for credit losses is estimated based on historical experience, current economic conditions and the creditworthiness of customers. Receivables are charged to the allowance when determined to be no longer collectible. The Company regularly monitors and assesses its risk of not collecting amounts owed by customers and records its allowance for credit losses based on the results of this analysis. As of September 30, 2024 and December 31, 2023, we have reviewed the entire loan portfolio as well as all financial assets of the Company for the purpose of evaluating the loan portfolio and the loan balances, including a review of individual and collective portfolio loan quality, loan(s) performance, including past due status and covenant defaults, assessment of the ability of the borrower to repay the loan on the loan terms, whether any loans should be placed on nonaccrual or returned to accrual, any concentrations in any single borrower and/or industry that we might need to further manage, and if any specific or general loan loss reserve should be established for the entire loan portfolio or for any specific loan. We analyzed the loan loss reserve from three basis: general loan portfolio reserves; industry portfolio reserves, and specific loan loss reserves. For the nine months ended September 30, 2024, and 2023, the Company recorded a Loan loss reserve of approximately $1,627,000 and $1,179,000, respectively. General Loan Portfolio Reserve - Based upon the review of our loan portfolio, we do not believe that a substantial general loan portfolio reserve is due at this time. However, we do recognize that some inherent risks are in all loan portfolios, thus we recorded a general contingent portfolio reserve of $192,000 and $194,000 of the loan portfolio loan balance as of September 30, 2024 and December 31, 2023, respectively. Industry Portfolio Reserves - Given the relatively young loan portfolio and a diversification of the portfolio over several different loan products, the risk is reduced. Accordingly, we have not recorded a discretionary reserve as of September 30, 2024 and December 31, 2023. Specific Loan Reserves - Previously, we had identified credit weaknesses and borrower repayment weakness with Asili, which has a current principal and interest balance of $884,000 and have recorded a loan loss reserve for the full balance due the Company as of December 31, 2023 and September 30, 2024. The Company had also previously identified credit weakness in Puradigm and has placed a reserve approximating $2,884,000 and $3,461,000 against the outstanding principal and interest as of December 31, 2023 and September 30, 2024, respectively. Previously, the Company identified credit weakness in Stemtech and has placed a reserve approximating $1,045,000 against the outstanding principal and interest as of December 31, 2023 and September 30, 2024. During the first quarter of 2024, the Company identified credit weakness in VEII and an individual and has placed a reserve approximating $479,000 and $135,000, respectively, against the outstanding principal and interest as of March 31, 2024. Also during the first quarter of 2024, the Company identified credit weakness in BMIC, a related party, and has placed a reserve approximating $211,000 against the outstanding principal and interest as of March 31, 2024, later adjusted to $196,000 as of September 30, 2024. No additional reserves were deemed necessary as of September 30, 2024.

Provision for Credit Losses

9 Months Ended

Sep. 30, 2024

7. Provision for Credit Losses

Effective January 1, 2022, the Company adopted amended accounting guidance “ASU No.2016-13 – Credit Losses” for the measurement of credit losses on financial instruments and other financial assets. That guidance requires an allowance for credit losses to be deducted from the amortized cost basis of financial assets to present the net carrying value that is expected to be collected over the contractual term of the assets considering relevant information about past events, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. The guidance replaced the previous incurred loss model for determining the allowance for credit losses.

Accounts receivable are stated at the amount owed by the customer. The Company maintains an allowance for credit losses for accounts receivable and unbilled receivables, based on expected credit losses resulting from the inability of our customers to make required payments. The allowance for credit losses is estimated based on historical experience, current economic conditions and the creditworthiness of customers. Receivables are charged to the allowance when determined to be no longer collectible. The Company regularly monitors and assesses its risk of not collecting amounts owed by customers and records its allowance for credit losses based on the results of this analysis.

As of September 30, 2024 and December 31, 2023, we have reviewed the entire loan portfolio as well as all financial assets of the Company for the purpose of evaluating the loan portfolio and the loan balances, including a review of individual and collective portfolio loan quality, loan(s) performance, including past due status and covenant defaults, assessment of the ability of the borrower to repay the loan on the loan terms, whether any loans should be placed on nonaccrual or returned to accrual, any concentrations in any single borrower and/or industry that we might need to further manage, and if any specific or general loan loss reserve should be established for the entire loan portfolio or for any specific loan.

We analyzed the loan loss reserve from three basis: general loan portfolio reserves; industry portfolio reserves, and specific loan loss reserves. For the nine months ended September 30, 2024, and 2023, the Company recorded a Loan loss reserve of approximately $1,627,000 and $1,179,000, respectively.

General Loan Portfolio Reserve - Based upon the review of our loan portfolio, we do not believe that a substantial general loan portfolio reserve is due at this time. However, we do recognize that some inherent risks are in all loan portfolios, thus we recorded a general contingent portfolio reserve of $192,000 and $194,000 of the loan portfolio loan balance as of September 30, 2024 and December 31, 2023, respectively.

Industry Portfolio Reserves - Given the relatively young loan portfolio and a diversification of the portfolio over several different loan products, the risk is reduced. Accordingly, we have not recorded a discretionary reserve as of September 30, 2024 and December 31, 2023.

Specific Loan Reserves - Previously, we had identified credit weaknesses and borrower repayment weakness with Asili, which has a current principal and interest balance of $884,000 and have recorded a loan loss reserve for the full balance due the Company as of December 31, 2023 and September 30, 2024. The Company had also previously identified credit weakness in Puradigm and has placed a reserve approximating $2,884,000 and $3,461,000 against the outstanding principal and interest as of December 31, 2023 and September 30, 2024, respectively. Previously, the Company identified credit weakness in Stemtech and has placed a reserve approximating $1,045,000 against the outstanding principal and interest as of December 31, 2023 and September 30, 2024. During the first quarter of 2024, the Company identified credit weakness in VEII and an individual and has placed a reserve approximating $479,000 and $135,000, respectively, against the outstanding principal and interest as of March 31, 2024. Also during the first quarter of 2024, the Company identified credit weakness in BMIC, a related party, and has placed a reserve approximating $211,000 against the outstanding principal and interest as of March 31, 2024, later adjusted to $196,000 as of September 30, 2024. No additional reserves were deemed necessary as of September 30, 2024.