SHF Holdings, Inc 10-Q for FY2025 Q3
SHF Holdings, Inc. (SHFS)
About this 10-Q
SHF Holdings, Inc filed this 10-Q on November 12, 2025, covering the quarter ended September 30, 2025 (FY2025 Q3).
Headline figures
Quarter ended September 30, 2025, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $1.83M
- down 47.3% from $3.48M a year earlier
- Net income
- $179.51K
- down 49.3% from net income of $353.82K a year earlier
- Diluted EPS
- $0.06
- down 53.8% from $0.13 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For
the quarterly period ended
OR
For the transition period from _________to _________
Commission
File Number
(Exact name of registrant as specified in Its charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification Number) |
| (Address of principal executive offices) | (Zip Code) |
Registrant’s
telephone number, including area code:
(Former name or former address, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Indicate
by check mark whether the registrant has submitted electronically, if any, every Interactive Date File required to be submitted pursuant
to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit and post such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| ☒ | Smaller reporting company | ||
| Emerging growth company |
If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
As of November 10, 2025, there were shares of the Company’s Class A Common Stock, par value $ per share, outstanding.
SHF HOLDINGS, INC.
TABLE OF CONTENTS
| 1 |
OTHER INFORMATION
Unless the context otherwise indicates, when used in this Quarterly Report on Form 10-Q, the terms “SHF Holdings,” “Safe Harbor,” “we,” “us,” “our,” the “Company” and similar terms refer to the Company, a Delaware corporation and its wholly-owned subsidiaries, SHF, LLC and SHFxAbaca, LLC.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Various of the statements made in this Quarterly Report on Form 10-Q (the “Form 10-Q”), including information incorporated herein by reference to other documents, are “forward-looking statements” within the meaning of, and subject to the protections of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
Forward-looking statements include statements with respect to the Company beliefs, plans, objectives, goals, expectations, anticipations, assumptions, estimates, intentions and future performance and condition, and involve known and unknown risks, uncertainties and other factors, which may be beyond the Company’s control, and which may cause the actual results, performance, achievements, or financial condition of the Company to be materially different from future results, performance, achievements, or financial condition expressed or implied by such forward-looking statements. You should not expect us to update any forward-looking statements. These forward-looking statements should be read together with the discussion of the Company’s risks and uncertainties included under the caption “Risk Factors” in the Company’s Annual Report on Form 10-K and Form 10-K/A for the year ended December 31, 2024, filed with the Securities and Exchange Commission (“SEC”) on April 10, 2025 and April 30, 2025, respectively.
All statements other than statements of historical fact are statements that could be forward-looking statements. You can identify these forward-looking statements through our use of words such as “may,” “will,” “anticipate,” “assume,” “seek,” “should,” “indicate,” “would,” “believe,” “contemplate,” “consider,” “expect,” “estimate,” “continue,” “plan,” “point to,” “project,” “could,” “intend,” “target” and other similar words and expressions of the future. These forward-looking statements may not be realized due to a variety of factors, including, without limitation:
The foregoing factors should not be construed as exhaustive and should be read together with the other cautionary statements included in this Form 10-Q. Because of these risks and other uncertainties, our actual future financial condition, results, performance or achievements, or industry results, may be materially different from the results indicated by the forward-looking statements in this Form 10-Q. In addition, our past results of operations are not necessarily indicative of our future results of operations. You should not rely on any forward-looking statements as predictions of future events.
All written or oral forward-looking statements that are made by us or are attributable to us are expressly qualified in their entirety by this cautionary note. Any forward-looking statement speaks only as of the date on which it is made, and we do not undertake any obligation to update, revise or correct any forward-looking statement, whether as a result of new information, future developments or otherwise, except as required by law.
| 2 |
PART I – FINANCIAL INFORMATION
SHF Holdings, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
September 30, 2025 | December 31, 2024 | |||||||
| ASSETS | ||||||||
| Current Assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Series B Convertible Preferred Stock proceeds receivable (Note 18 and 20) | ||||||||
| Accounts receivable – trade | ||||||||
| Accounts receivable – related party (Note 9) | ||||||||
| Accounts receivable | ||||||||
| Prepaid expenses (Note 18) | ||||||||
| Accrued interest receivable | ||||||||
| Forward purchase receivable | ||||||||
| Short-term loans receivable | ||||||||
| Other current assets | ||||||||
| Total Current Assets | ||||||||
| Loan receivable | ||||||||
| Investment in preferred securities (Note 6) | ||||||||
| Operating lease right-to-use asset (Note 12) | ||||||||
| Prepaid expenses (Note 18) | ||||||||
| Other assets | ||||||||
| Total Assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | ||||||||
| Current Liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Accounts payable-related party (Note 9) | ||||||||
| Accounts payable | ||||||||
| Accrued expenses | ||||||||
| Contract liabilities | ||||||||
| Operating lease liability ( Note 12) | ||||||||
| Senior secured promissory note- related party (Note 9 and 10) | ||||||||
| Deferred consideration (Note 3) | ||||||||
| Forward purchase derivative liability (Note 14) | ||||||||
| Other current liabilities | ||||||||
| Total Current Liabilities | ||||||||
| Warrant liabilities | ||||||||
| Senior secured promissory note – related party (Note 9 and 10) | ||||||||
| Operating lease liability (Note 12) | ||||||||
| Total Liabilities | $ | |||||||
| Commitment and Contingencies (Note 19) | ||||||||
| Stockholders’ Equity (Deficit) | ||||||||
| Convertible preferred stock, $ par value, shares authorized, and shares issued and outstanding on September 30, 2025, and December 31, 2024, respectively | ||||||||
| Series B Convertible Preferred Stock, authorized, shares, par value $, and shares issued and outstanding as of September 30, 2025 and December 31, 2024 | ||||||||
| Convertible preferred stock, value | ||||||||
| Class A Common Stock, $ par value, shares authorized, and issued and outstanding on September 30, 2025, and December 31, 2024, respectively | ||||||||
| Additional paid-in-capital (Note 18) | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total Stockholders’ Equity (Deficit) | ( | ) | ||||||
| Total Liabilities and Stockholders’ Deficit | $ | $ | ||||||
See accompanying notes to unaudited condensed consolidated financial statements.
| F-1 |
SHF Holdings, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| For The Three Months Ended | For The Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Revenue | $ | $ | $ | $ | ||||||||||||
| Operating Expenses: | ||||||||||||||||
| Compensation and employee benefits | ||||||||||||||||
| General and administrative expenses | ||||||||||||||||
| Professional services | ||||||||||||||||
| Rent expense | ||||||||||||||||
| Provision (benefit) for credit losses | ( | ) | ||||||||||||||
| Total operating expenses | ||||||||||||||||
| Operating income/ (loss) income | ( | ) | ( | ) | ||||||||||||
| Other Income (Expenses) | ||||||||||||||||
| Change in the fair value of deferred consideration | ( | ) | ( | ) | ||||||||||||
| Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Gain on extinguishment of debt (Note 11 and 14) | ||||||||||||||||
| Other issuance costs | ( | ) | ( | ) | ||||||||||||
| Change in fair value of warrant liabilities | ( | ) | ||||||||||||||
| Total other income (expenses) | ||||||||||||||||
| Net income (loss) before income tax | ( | ) | ||||||||||||||
| Income tax benefit (expense) | ( | ) | ( | ) | ||||||||||||
| Net income (loss) | $ | $ | $ | ( | ) | $ | ||||||||||
| Weighted average shares outstanding, basic (Note 13) | ||||||||||||||||
| Basic net income (loss) income per share (Note 13) | $ | $ | $ | ( | ) | $ | ||||||||||
| Weighted average shares outstanding, diluted | ||||||||||||||||
| Diluted income (loss) per share | $ | $ | $ | ( | ) | $ | ||||||||||
See accompanying notes to unaudited condensed consolidated financial statements.
| F-2 |
SHF Holdings, Inc.
Condensed Consolidated Statements of Stockholders’ Equity (Deficit)
(Unaudited)
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2025
| Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | (deficit) | ||||||||||||||||||||||||||||
| Preferred Stock | Series
B Convertible Preferred stock Series | Class
A Common Stock | Additional Paid-in | Accumulated | Total Shareholders’ | |||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | (Deficit) | ||||||||||||||||||||||||||||
| Balance June 30 2025 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||
| Stock issuance for legal settlement | - | - | ||||||||||||||||||||||||||||||||||
| Issuance of Series B Convertible Preferred Stock and Series B Warrants, net of offering costs (Note 18) | - | - | ||||||||||||||||||||||||||||||||||
| Stock compensation cost (Note 18) | - | - | - | |||||||||||||||||||||||||||||||||
| Net income | - | - | - | |||||||||||||||||||||||||||||||||
| Balance September 30 2025 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||||||
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2024
| Shares | Amount | Shares | Amount | Capital | Deficit | (deficit) | ||||||||||||||||||||||
| Preferred Stock | Class A Common Stock | Additional Paid-in | Accumulated | Total Shareholders’ | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | (deficit) | ||||||||||||||||||||||
| Balance, June 30, 2024 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
| Issuance of common stock for marketing services | - | |||||||||||||||||||||||||||
| Issuance of restricted stock, net of tax | - | |||||||||||||||||||||||||||
| Stock compensation expense (Note 18) | - | - | ||||||||||||||||||||||||||
| Net income | - | - | ||||||||||||||||||||||||||
| Balance, September 30, 2024 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
See accompanying notes to unaudited condensed consolidated financial statements.
| F-3 |
SHF Holdings, Inc.
Condensed Consolidated Statements of Stockholders ‘Equity (Deficit)
(Unaudited)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2025
| Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | (deficit) | ||||||||||||||||||||||||||||
| Preferred Stock | Series B Convertible Preferred Stock | Class A Common Stock | Additional Paid-in | Accumulated | Total Shareholders’ | |||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | (Deficit) | ||||||||||||||||||||||||||||
| Balance, December 31, 2024 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||
| Reclassification of forward purchase receivable | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Issuance of restricted stock, net of tax (Note 18) | - | - | ||||||||||||||||||||||||||||||||||
| Stock issuance for legal settlement | - | - | ||||||||||||||||||||||||||||||||||
| Shares withheld for net share settlement | - | - | ( | ) | ||||||||||||||||||||||||||||||||
| Issuance of Series B Convertible Preferred Stock and Series B Warrants, net of offering costs (Note 18) | - | - | ||||||||||||||||||||||||||||||||||
| Issuance of shares due to reverse stock split | - | - | ( | ) | ||||||||||||||||||||||||||||||||
| Stock compensation expense (Note 18) | - | - | - | |||||||||||||||||||||||||||||||||
| Net loss | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Balance September 30 2025 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||||||
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2024
| Shares | Amount | Shares | Amount | Capital | Deficit | (deficit) | ||||||||||||||||||||||
| Preferred Stock | Class A Common Stock | Additional Paid-in | Accumulated | Total Shareholders’ | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | (deficit) | ||||||||||||||||||||||
| Balance, December 31, 2023 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
| Balance | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
| Conversion of PIPE shares | ( | ) | ( | ) | ||||||||||||||||||||||||
| Issuance of common stock for marketing services | - | |||||||||||||||||||||||||||
| Issuance of restricted stock, net of tax, net of share settlement | - | |||||||||||||||||||||||||||
| Stock compensation expense (Note 18) | - | |||||||||||||||||||||||||||
| Net income | - | - | ||||||||||||||||||||||||||
| Net income (loss) | - | - | ||||||||||||||||||||||||||
| Balance, September 30, 2024 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
| Balance | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
See accompanying notes to unaudited condensed consolidated financial statements.
| F-4 |
SHF Holdings, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| 2025 | 2024 | |||||||
For The Nine Months Ended September 30, | ||||||||
| 2025 | 2024 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net (loss) income | $ | ( | ) | $ | ||||
| Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities: | ||||||||
| Depreciation and amortization expense | ||||||||
| Stock compensation expense | ||||||||
| Amortization of deferred origination fees | ( | ) | ||||||
| Non-cash interest on issuance of convertible notes | ||||||||
| Operating lease | ( | ) | ||||||
| Gain on extinguishment of debt | ( | ) | ||||||
| Other non-cash issuance costs | ||||||||
| Provision (benefit) for credit losses | ( | ) | ||||||
Shares issued in settlement of a legal dispute | ||||||||
| Income tax expense | ||||||||
| Amortization of marketing expense issued with common stock | ||||||||
| Change in the fair value of deferred consideration | ( | ) | ( | ) | ||||
| Change in fair value of warrant | ( | ) | ( | ) | ||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable – trade | ( | ) | ||||||
| Accounts receivable – related party | ||||||||
| Prepaid expenses | ||||||||
| Accrued interest receivable | ( | ) | ||||||
| Other assets | ( | ) | ||||||
| Other current liabilities | ( | ) | ||||||
| Accounts payable | ( | ) | ||||||
| Accounts payable – related party | ( | ) | ||||||
| Accrued expenses | ( | ) | ( | ) | ||||
| Contract liabilities | ( | ) | ||||||
| Net deferred indemnified loan origination fees | ||||||||
| Net cash (used in) provided by operating activities | ( | ) | ||||||
| CASH FLOWS PROVIDED BY INVESTING ACTIVITIES: | ||||||||
| Proceeds from loan repayments and sales | ||||||||
| Net cash provided by investing activities | ||||||||
| CASH FLOWS USED IN FINANCING ACTIVITIES: | ||||||||
| Net share settlement for stock compensation expense | ( | ) | ||||||
| Proceeds from convertible debt | ||||||||
| Proceeds from issuance of Series B Convertible Preferred Stock and Series B Warrants | ||||||||
| Repayment of senior secured promissory note | ( | ) | ( | ) | ||||
| Net cash provided by (used in) financing activities | ( | ) | ||||||
| Net increase (decrease) in cash, cash equivalents | ( | ) | ||||||
| Cash and cash equivalents – beginning of period | ||||||||
| Cash and cash equivalents – end of period | $ | $ | ||||||
| Supplemental disclosure of cash flow information | ||||||||
| Interest paid | $ | $ | ||||||
| Supplemental disclosure of non-cash investing and financial activities: | ||||||||
| Reclassification of forward purchase receivable | $ | ( | ) | $ | ||||
| Marketing expense settled by the issuance of common stock | $ | $ | ||||||
Proceeds from the issuance of Series B Convertible Preferred Stock and Series B Warrants | $ | |||||||
| Shares issued in settlement of a legal dispute | $ | $ | ||||||
| Investment in Preferred Securities (Note 6) | $ | $ | ||||||
| Prepaid Consulting Contracts (Note 18) | $ | $ | ||||||
| Extinguishment of debt for equity (Note 10) | $ | $ | ||||||
| Equity issued to settle forward purchase derivative liability, (Note 18) | $ | $ | ||||||
| Exchange of convertible notes for Series B Convertible Preferred stock and Series B warrants, (Note 18) | $ | $ | ||||||
Offering costs, associated with issuance of Series B Convertible Preferred Stocks and Series B Warrants (Note 18) | $ | $ | ||||||
See accompanying notes to unaudited condensed consolidated financial statements.
| F-5 |
SHF Holdings, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
Note 1 - Organization and Business Operations
Business Description
SHF Holdings, Inc., the “Company” or “SHF” is based in Golden, Colorado and specializes in providing financial solutions designed to facilitate compliant banking and lending service on behalf of the financial institutions and cannabis related businesses “CRB” involved in the marijuana industry.
The Company facilitates a range of financial services through its financial institutions, customers using a proprietary technology platform for deposits and ongoing deposit activity compliance with banking regulations and regulators. These include access to business checking and savings accounts, cash management, commercial lending, courier services, remote deposit services, ACH payments, lending and wire payments. These services enable CRB’s to manage their finances effectively. The Company generates fee income, investment income, loan interest income by offering compliance services and lending to certain financial institutions serving the cannabis industry.
Note 2 - Basis of Presentation and Summary of Significant Accounting Policies
Significant Accounting Policies
The accompanying interim unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and results of operations included in the Company’s Annual Report on Form 10-K and Form 10-K/A for the year ended December 31, 2024, filed with the SEC.
Refer to Note 2 to the Company’s financial statements contained in its Annual Report on Form 10-K and Form 10-K/A for a description of the Company’s significant accounting policies. The Company has included disclosures below regarding basis of presentation and other accounting policies that (i) are required to be disclosed quarterly, (ii) have material changes or (iii) the Company views as critical as of the date of these financial statements.
Basis of Presentation
The accompanying notes to the Company’s condensed unaudited interim financial statements have been prepared in accordance with the requirements of Accounting Standard Codification “ASC” ASC 270, Interim Reporting and Article 8 of Regulation S-X. To that extent, footnote disclosure which would substantially duplicate the disclosures contained in the Company’s latest audited financial statements has been omitted.
In the opinion of management, these condensed unaudited interim consolidated financial statements include all adjustments and accruals, consisting only of normal, recurring adjustments that are necessary for a fair statement of the results of all interim periods reported herein. The results of the interim periods are not necessarily indicative of the results expected for the year ended December 31, 2025.
| F-6 |
Consolidation
The condensed unaudited condensed consolidated financial statements include the accounts of SHF Holdings, Inc. and its subsidiaries. All significant intercompany balances and transactions have been eliminated.
Use of Estimates
The preparation of the unaudited condensed consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the amounts reported in the unaudited condensed consolidated financial statements and accompanying notes. Material estimates that are particularly subject to change in the near term include the determination of the allowance for credit losses, allowance for deferred taxes, useful lives of intangibles and the fair value of financial instruments. Actual results could differ from the estimates.
Cash and Cash Equivalents
Cash and cash equivalents consist of cash on hand, balances due from financial institutions, and investments with original maturities of three months or less.
Series B Proceeds Receivable (Note 20)
In
connection with the issuance of Series B Convertible Preferred Stock on September 30, 2025, the Company raised gross proceeds of
$
| F-7 |
Revenue Recognition
The Company recognizes revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”). The core principle of ASC 606 requires that an entity recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services. ASC 606 defines a five-step process to achieve this core principle including identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation.
Revenue from investment income consists primarily of fees earned on deposit accounts such as bank account charges, onboarding income, account activity fee income and other miscellaneous fees. Revenue is recorded at a point in time when the performance obligation is satisfied, and no contingencies exist
Revenue from account fee income is recognized when the Company fulfills its service obligations, and include fees charged for financial services such as account maintenance, transaction processing, and other related services.
Revenue from interest on loans is recognized over the loan period as earned. Partner Colorado Credit Union (“PCCU”) utilizes a fixed percentage fee structure, under which the Company receives a share of interest income from CRB-related loans.
Revenue from investment income is generated based on interest earned on daily deposit balances maintained with financial institutions. In addition, revenue is recognized from the Company’s Master Program Agreement. The Master Program Agreement is a non-exclusive and non-transferable right to implement and utilize the Safe Harbor Program.
The Company measures all equity-based payment arrangements to employees and directors in accordance with ASC 718, Compensation–Stock Compensation. The Company’s stock compensation cost is measured based on the fair value at the grant date of the stock-based award.
Compensation cost for service-based awards is recognized on a straight-line basis over the requisite service period. For performance-based awards, compensation cost is recognized only when it becomes probable that the performance condition will be achieved. The amount of compensation cost recognized reflects the Company’s best estimate of the number of awards expected to vest and is adjusted prospectively for changes in those estimates. Forfeitures are recognized as they occur. The Company estimates the fair value of each stock-based award on its measurement date using either the current market price of the stock or the Black-Scholes option valuation model, whichever is most appropriate. The Black-Scholes valuation model incorporates assumptions such as expected term of the instrument, volatility of the Company’s future share price, risk-free interest rate, future dividend yields, by reference to the underlying terms of the instrument, and the Company’s experience with similar instruments. Changes in assumptions used to estimate fair value could result in materially different results.
| F-8 |
The expected volatility is based upon the Company’s historical stock price. The risk-free interest rates are based on quoted U.S. Treasury rates for securities with maturities approximating the awards’ expected lives. The expected term of the options granted is calculated based on the simplified method by taking the average of contractual term and vesting period of the awards. The expected dividend yield is zero as the Company has never paid dividends and does not currently anticipate paying any in the foreseeable future.
Fair Value Measurements
The Company utilizes the fair value hierarchy to apply fair value measurements. The fair value hierarchy is based on inputs to valuation techniques that are used to measure fair values that are either observable or unobservable. Observable inputs reflect assumptions market participants would use in pricing an asset or liability based on market data obtained from independent sources, while unobservable inputs reflect a reporting entity’s pricing based upon its own market assumptions. The basis for fair value measurements for each level within the hierarchy is described below:
Level 1 — Quoted prices for identical assets or liabilities in active markets.
Level 2 — Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; or model-derived valuations whose inputs are observable or whose significant value drivers are observable.
Level 3 —Valuations derived from valuation techniques in which one or more significant inputs to the valuation model are unobservable.
Segment Reporting
The
Company operates as
Concentration of Risk
Customers consist of financial institutions providing services to CRBs. Revenues are concentrated in the United States of America and with our largest customer PCCU, see Note 9..
Substantially all client deposits are maintained at PCCU, and all transmissions of funds to or from these deposit accounts are handled directly by PCCU.
| F-9 |
Recently Issued Accounting Standards
Accounting Standards Adopted Standards Income Taxes
In December 2023, the Financial Accounting Standards Board “FASB” issued Accounting Standards Update “ASU” ASU 2023-09, Income Taxes (Topic 740). This ASU requires public business entities to disclose in their annual rate reconciliation table additional categories of information about income taxes paid, including certain disclosures that would be disaggregated by jurisdiction and other categories. This ASU is effective for the year after December 15, 2024. Early adoption would be permitted. The Company has prospectively adopted this standard as of January 1, 2025, and the ASU has not had a material impact on the Company’s unaudited condensed consolidated financial statements.
In March 2024, the FASB issued ASU 2024-02, Codification Improvements: Amendments to Remove References to the Concepts Statements. Since the Concept Statements are not considered authoritative and do not establish GAAP, the ASU eliminates references to these statements from the codification. The amendments are effective for public entities for the years beginning after December 15, 2024, and for all other entities for the year beginning after December 15, 2025, with early adoption permitted. The Company has prospectively adopted this standard as of January 1, 2025, and the ASU has not had a material impact on the Company’s unaudited condensed consolidated financial statements.
In March 2024, the FASB issued ASU 2024-01 - Compensation—Stock Compensation (Topic 718): Scope Application of Profits Interest and Similar Awards. This standard clarifies whether profits interests and similar awards fall within the scope of stock-based compensation guidance as defined in ASC Topic 718, introducing examples to demonstrate this. The ASU includes scenarios where profits interest awards are classified as equity instruments or liability awards and situations where they fall outside ASC Topic 718, being accounted for under ASC Topic 710. The ASU is effective for years beginning after December 15, 2024, but early adoption is permitted. The Company has prospectively adopted this standard as of January 1, 2025, and the ASU has not had a material impact on the Company’s unaudited condensed consolidated financial statements.
Standards Pending to be Adopted
In November 2024, ASU 2024-03, Disaggregation of Income Statement Expenses, was issued and requires business entities to disaggregate certain income statement expense captions in the footnotes of the financial statements. Specifically, entities must provide disclosures that separately present expenses related to purchases of inventory, employee compensation, depreciation, intangible asset amortization, and depletion (including depreciation, depletion, and amortization for oil and gas producing activities). While this ASU does not change the presentation of expense captions on the face of the unaudited condensed consolidated statements of operations, it requires detailed disclosures in the notes to the financial statements. The amendments are effective for the year beginning after December 15, 2026, and for interim periods within years beginning after December 15, 2027, with early adoption permitted. The Company will adopt this ASU prospectively and does not anticipate a material impact on its financial reporting as a result of adopting this ASU.
In November 2024, ASU 2024-04 — Debt — Debt with Conversion and Other Options (Subtopic 470-20): Induced Conversions of Convertible Debt Instrument. The amendments in this ASU are effective for all entities for annual reporting periods beginning after December 15, 2025, and interim periods within those annual reporting periods. Early adoption is permitted for all entities that have adopted the amendments in ASU 2020-06. If an entity early adopts in an interim reporting period, it must adopt as of the beginning of the annual reporting period that includes that interim reporting period. The Company will adopt this ASU prospectively and does not anticipate a material impact on its financial reporting as a result of adopting this ASU.
In January 2025, the FASB issued ASU 2025-01, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40). FASB issued this update to clarify the effective date of Accounting Standards Update No. 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. The amendment in this update applies to all public business entities but only potentially affects non-calendar year-end entities. The amendment in this update amends the effective date of Update 2024-03 to clarify that all public business entities are required to adopt the guidance in annual reporting periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027. Early adoption of update is permitted. The Company will adopt this ASU prospectively and does not anticipate a material impact on its financial reporting as a result of adopting this ASU.
In July 2025, the FASB issued Accounting Standards Update 2025-05, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets (“ASU 2025-05”). ASU 2025-05 provides a practical expedient that all entities can use when estimating expected credit losses for current accounts receivable and current contract assets arising from transactions accounted for under ASC 606, Revenue from Contracts with Customers. Under this practical expedient, an entity is allowed to assume that the current conditions it has applied in determining credit loss allowances for current accounts receivable and current contract assets remain unchanged for the remaining life of those assets. ASU 2025-05 is effective for years beginning after December 15, 2025, and interim reporting periods in those years. Entities that elect the practical expedient and, if applicable, make the accounting policy election are required to apply the amendments prospectively. The Company is currently evaluating the potential impact of this guidance on its condensed consolidated financial statements and disclosures.
The Company will continue to monitor the development of these standards and intends to adopt them in accordance with their respective effective dates. Additional disclosures will be provided in future filings as the Company finalizes its assessment of these standards’ impacts.
| F-10 |
Note 3 - Deferred Consideration
On
November 11, 2022, the Company entered into the first Amendment to the Merger Agreement with Rockview Digital Solutions, Inc. (“Abaca”)
and other parties. The Merger Agreement included a $
A
Second Amendment to the Merger Agreement, dated October 26, 2023, introduced deferred stock consideration of
shares of Common Stock at a recalculated value of $
per share. No changes were made to the cash payments. Additionally,
The
second annual payment of $
The adjustments and changes to deferred consideration have been valued and recorded according to ASC 815 in the Company’s unaudited condensed consolidated financial statements.
The change in the amount of deferred consideration from January 1, 2024, to September 30, 2025.
Schedule of Change in Deferred Consideration
| Cash Considerations | Third Anniversary Consideration Payment | Total | ||||||||||
| Balance, January 1, 2024 | $ | $ | $ | |||||||||
| Fair value adjustment | ( | ) | ( | ) | ||||||||
| Balance, December 31, 2024 | ||||||||||||
| Fair value adjustment | ( | ) | ( | ) | ( | ) | ||||||
| Balance, September 30, 2025 | $ | $ | $ | |||||||||
The fair value of the third anniversary payment consideration is determined using the Monte Carlo Simulation. model.
The following table provides quantitative information regarding Level 3 fair value measurements inputs for the third anniversary payment consideration as of their measurement dates:
| September 30, 2025 | December 31, 2024 | |||||||
| Stock price | $ | $ | ||||||
| Payment date | ||||||||
| Third anniversary consideration | $ | $ | ||||||
| Risk free interest rate | % | % | ||||||
| Market discount rate | % | % | ||||||
| Remaining term in years | ||||||||
| Expected volatility | % | % | ||||||
On October 3, 2025, the Company issued shares of Class A Common Stock to settle the liability with third anniversary payment consideration.
| F-11 |
Note 4 - Goodwill and Finite-lived Intangible Assets
Goodwill
The
Company recorded a full impairment of its goodwill and Finite-lived intangible assets, derived predominately from the Abaca Merger, as
of December 31, 2024. As a result,
Finite-lived intangible assets
The Company reviews its finite-lived intangible assets for impairment at least annually on December 31 unless any events or circumstances indicate it is more likely than not that the fair value of the finite-lived intangible assets is less than its carrying value.
As
of September 30, 2024, the Company did not perform an interim impairment assessment of its assets, as no triggering events were
identified. Accordingly, no additional impairment charges were recognized during the reporting period. During the year ended
December 31, 2024, amortization expense and impairment of finite-lived intangible assets were $
In
accordance with the Company’s established policy, an annual impairment review of finite-lived intangible assets was conducted on
December 31, 2024. The recoverability test compared the sum of estimated undiscounted future cash flows of the asset group to its carrying
amount. As the undiscounted cash flows were determined to be lower than the carrying amount, the Company performed a fair value assessment
using a Discounted Cash Flow analysis. The results indicated that the fair value of the asset group was below its carrying amount, leading
to full impairment charges of $
As
a result,
Note 5 - Loans Receivable
The following table summarizes the commercial real estate loans receivable balances:
Schedule of Commercial Real Estate Loans Receivable
| September 30, 2025 | December 31, 2024 | |||||||
| Commercial real estate loans receivable, gross | $ | $ | ||||||
| Payment | ( | ) | ||||||
| Sale of loans | ( | ) | ||||||
| Allowance for credit losses | ||||||||
| Transferred to held for sale | ||||||||
| Commercial real estate loans receivable, net | ||||||||
| Current portion | ( | ) | ||||||
| Non-current portion | $ | $ | ||||||
Note 6 - Investment in Preferred Securities
On September 30, 2025, the Company
issued
shares of Series B Convertible Preferred Stock and Series B Warrants to purchase Class A Common Stock in exchange for preferred
shares of Aditxt, Inc. (“ADTX”), is a publicly traded company. These ADTX ’s preferred securities had an estimated
fair value and carrying value of $
| F-12 |
Note 7 - Indemnification Liability
Pursuant to the Amended PCCU CAA, see Note 9 Related Party, effective December 31, 2024, the Company no longer indemnifies
credit losses on CRB loans made on behalf of PCCU, accordingly the indemnity liability was reduced to $
Prior
to the Amended PCCA CAA, PCCU funded loans through a third-party vendor. SHF earned the associated interest and paid PCCU a loan hosting
fee at an annual rate of
The provision for loan losses (benefit) consists of the following activity for the three months ended September 30, 2025 and September 30, 2024:
Schedule of Provision for Loan Losses
| Commercial real estate loans | Indemnity liability | Total | Commercial real estate loans | Indemnity liability | Total | |||||||||||||||||||
Three Months Ended September 30, 2025 | Three Months Ended September 30, 2024 | |||||||||||||||||||||||
| Commercial real estate loans | Indemnity liability | Total | Commercial real estate loans | Indemnity liability | Total | |||||||||||||||||||
| Credit loss (benefit) | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
The provision for loan losses (benefit) consists of the following activity for the nine months ended September 30, 2025 and September 30, 2024:
| Commercial real estate loans | Indemnity liability | Total | Commercial real estate loans | Indemnity liability | Total | |||||||||||||||||||
Nine Months Ended September 30, 2025 | Nine Months Ended September 30, 2024 | |||||||||||||||||||||||
| Commercial real estate loans | Indemnity liability | Total | Commercial real estate loans | Indemnity liability | Total | |||||||||||||||||||
| Credit loss (benefit) | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||||||
Note 8 - Revenue
The Company disaggregated revenue by type for the three and nine months ended September 30, 2025 and September 30, 2024 is as follows:
Schedule of Disaggregated Revenue
| 2025 | 2024 | |||||||
Three Months Ended September 30 | ||||||||
| 2025 | 2024 | |||||||
| Account fee income | $ | $ | ||||||
| Loan interest income | ||||||||
| Investment income | ||||||||
| Safe Harbor Program income | ||||||||
| Total | $ | $ | ||||||
| F-13 |
| 2025 | 2024 | |||||||
Nine Months Ended September 30 | ||||||||
| 2025 | 2024 | |||||||
| Account fee income | $ | $ | ||||||
| Loan interest income | ||||||||
| Investment income | ||||||||
| Safe Harbor Program income | ||||||||
| Total | $ | $ | ||||||
Account fee income is generated from businesses maintaining accounts with the Company’s financial institution partners and includes deposit account fees, account activity fees, and onboarding income. These fees are recognized periodically in accordance with the fee schedule established with financial institution partners. The Company also earns income from outsourced support services provided to financial institutions offering banking solutions to the cannabis industry, with revenue recognized based on usage as specified in the agreements.
Loan interest income includes interest earned on both direct loans and loans under the PCCU CAA, which the Company had agreed to indemnify PCCU against loan losses until December 31, 2024. Under the Amended PCCU CAA, the Company’s interest income on all loans with PCCU are calculated using a loan yield allocation formula that incorporates the Constant Maturity US Treasury Rate from the Federal Reserve’s website, along with a proprietary risk rating formula to determine the fee split between the Company and PCCU.
Investment income is derived from interest earned on the daily deposit balances of cannabis businesses held with the Company’s financial institution partners and is recognized monthly based on the average net daily deposit balance.
Note 9 - Related Party Transactions
For purposes of these consolidated financial statements and related disclosures, the Company applies the definition of “related party” as set forth in Rule 1-02(u) of Regulation S-X and ASC 850, Related Party Disclosures. Related parties include (i) affiliates of the Company; (ii) entities for which investments would be accounted for under the equity method; (iii) trusts for the benefit of employees that are managed by or under the trusteeship of management; (iv) principal owners of the Company; (v) members of management; (vi) members of their immediate families; and (vii) any other party that can control, is controlled by, or can significantly influence the management or operating policies of the Company such that one of the transacting parties might be prevented from fully pursuing its own separate interests.
PCCU
is considered a related party as of September 30, 2025 and December 31, 2024, because it held approximately
| F-14 |
On
September 30, 2025, PCCU agreed to cancel the Senior Secured Promissory Note, see Note 10, with an outstanding principal
balance of approximately $
The Company continues to maintain a significant commercial relationship with PCCU under the Commercial Alliance Agreement (“CAA”), see below.
Major Customer Concentration with PCCU
The
Company derives substantially all of its revenue from services provided to PCCU under the Commercial Alliance Agreement (the
“PCCU CAA”) dated March 29, 2023, as amended and restated on December 31, 2024 (the “Amended PCCU CAA.”) For
the three months ended September 30, 2025 and September 30, 2024, revenues generated under the PCCU CAA represented approximately
The PCCU CAA
On March 29, 2023, the Company and PCCU entered into the PCCU CAA, which was subsequently amended and restated on December 31, 2024. This agreement sets forth the terms and conditions of lending and account-related services, governing the relationship between the Company and PCCU. The PCCU CAA outlined the application, underwriting, loan approval, and foreclosure processes for loans issued by PCCU to CRBs (as defined below), as well as the loan servicing and monitoring responsibilities of both parties.
The PCCU CAA includes procedures to be followed in the event of a loan default to ensure that neither the Company nor PCCU takes title to, or possession of, any cannabis-related assets, including real property that may have served as collateral for loans funded by PCCU under the agreement. A default by either the Company or PCCU occurs in the event of bankruptcy, insolvency, or an inability to pay debts in the ordinary course of business. If a default occurs, no services will be provided under the agreement.
Under
the PCCU CAA, PCCU had the right to receive monthly fees for managing loans. For SHF-serviced loans (CRB loans provided by PCCU but primarily
handled by SHF), a yearly fee of
Additionally, until December 31, 2024, the Company was obligated under the PCCU CAA to indemnify PCCU from certain default-related loan losses, as fully defined in the agreement.
| F-15 |
The Amended PCCU CAA
The Amended PCCU CAA extends the term through December 31, 2028, with automatic renewals every two years unless terminated with 12 months’ notice.
The key changes under the Amended PCCU CAA compared to the CAA include:
| ● | The indemnification obligations have been eliminated, meaning the Company is no longer required to indemnify PCCU for any loan-related losses under either the original or future agreements. | |
| ● | The
prior fee structure has been replaced by an asset hosting fee structure. Previously, the Company paid various fees to PCCU, including
per-account servicing, investment hosting, and loan servicing fees. Under the new structure, the Company will pay a fixed asset hosting
fee calculated as | |
| ● | Provides the Company with all investment income earned on CRB funds invested on its behalf by PCCU, effectively eliminating the investment hosting fees that were previously payable. | |
| ● | The
Company’s interest income on all loans with PCCU are now calculated using a loan yield allocation formula that incorporates
the Constant Maturity US Treasury Rate from the Federal Reserve’s website, along with a proprietary risk rating formula to
determine the fee split between the Company and PCCU. Before the amendment, the Company received the entire interest income from
the loan and was responsible for paying loan servicing fees of | |
| ● | Investment hosting and loan services fees were eliminated in the amendment to the PCCU Commercial Alliance Agreement, dated December 31, 2024. | |
| ● | The
Amended PCCU CAA provides that the Company can arrange loans to CRB’s up to a regulatorily stipulated percentage. The lending
capacity limit is based on the average level of CRB deposits measured over 30 days. The incremental loan capacity represents the
difference between the regulatorily stipulated percentage and the gross amount of loans currently outstanding. As of September 30,
2025, the Company’s incremental loan capacity was approximately $ |
The following represents balances due from and owed with PCCU that are on the condensed consolidated balance sheets are as follows, see (Note 10):
Schedule of Related Party Balances from Balance Sheet
September 30, 2025 | December 31, 2024 | |||||||
| Accounts receivable | $ | $ | ||||||
| Accounts payable | ||||||||
| Senior Secured | ||||||||
| Promissory Notes | ||||||||
| F-16 |
As
of September 30, 2025 and December 31, 2024, the Company held $
The Company evaluates its relationships with shareholders, affiliates, and key management personnel at each reporting date to identify and disclose any transactions or arrangements that meet the definition of a related party under ASC 850 or SEC Regulation S-X.
Note 10- Senior Secured Promissory Note and Debt Cancellation Agreement
The outstanding amounts under the Senior Secured Promissory Note are as follows:
Schedule of Outstanding Amounts under Senior Secured Promissory Note
| September 30, 2025 | December 31, 2024 | |||||||
| Senior Secured Promissory Note -current | $ | $ | ||||||
| Senior Secured Promissory Note -long-term | ||||||||
| Total | $ | $ | ||||||
The
Company and PCCU entered into a Senior Secured Promissory Note and Security Agreement (together, the “PCCU Note”) on March
29, 2023, under which PCCU agreed to lend $
| ● | shares of the Company’s Series B Convertible Preferred Stock, and | |
| ● | a warrant (the “Series B warrant”) to purchase shares of the Company’s Class A Common Stock, subject to adjustment as provided in the warrant agreement. |
The
transaction was accounted for under ASC 470-50, Debt – Modifications and Extinguishments. The fair value of the Series B
Convertible Preferred Stock and Series B Warrants to
purchase Class A Common Stock issued was estimated at $
Note 11- Convertible Debt
On
August 27 and September 9, 2025, the Company issued unsecured Convertible Promissory Notes (the “Notes”) in the
aggregate principal amount of $
On
September 30, 2025, the Notes were exchanged for Series B Convertible Preferred Stock and Series B Warrants to purchase Class A
Common Stock at a price of $
Accordingly,
the total financing cost consisted of (i) the
| F-17 |
Note 12 - Leases
The
Company has a non-cancellable operating lease for its corporate office space in Golden, Colorado which qualifies for capitalization under
ASC 842 Leases. As of September 30, 2025, the Golden, Colorado lease has a remaining term of approximately three-and-three-quarter years
and includes an option to extend for up to ten additional years; however, the extension option is not recognized as part of the right-of-use
asset as it is not reasonably certain to be exercised. As of September 30, 2025, and December 31, 2024, the net right-of-use asset “ROU”
recorded under the operating lease was $
During the quarter ended September 30, 2025, the property owner of the Golden, Colorado facility became subject to a court-appointed receivership. The Company continues to occupy the premises and make rental payments in accordance with the existing lease terms. However, the receivership introduces uncertainty regarding the future ownership, management, or disposition of the property, which could result in a modification, reassignment, or early termination of the lease.
As of September 30, 2025, management has not identified any impairment indicators related to the ROU asset, and no changes to the lease term or measurement have been recorded. The Company will continue to monitor the status of the receivership and evaluate whether the event results in a lease modification, remeasurement, or impairment in future periods in accordance with ASC 842-10-35.
The Company did not renew the lease for its Little Rock, Arkansas location.
The Company analyzes contracts above certain thresholds to identify leases and lease components. Lease and non-lease components are not separated for facility space leases. The Company uses its contractual borrowing rate to determine lease discount rates when an implicit rate is not available. Lease cost for the three and nine months ended September 30, 2025, and September 30, 2024, included in unaudited condensed consolidated statements of operations, is as follows:
Schedule of Lease Cost
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Operating lease cost | $ | $ | $ | $ | ||||||||||||
The following represents the activity for the Company’s operating lease:
Schedule of Right of Use Assets
September 30, 2025 | December 31, 2024 | |||||||
| ROU assets that are related to lease properties are presented as follows: | ||||||||
| Beginning balance | $ | $ | ||||||
| Amortization charge for the period | ( | ) | ( | ) | ||||
| Ending balance | $ | $ | ||||||
| Other information relating to the operating lease is as follows: | ||||||||
| Weighted average remaining lease term in years | ||||||||
| Weighted average discount rate | % | % | ||||||
Future minimum lease payments as of September 30, 2025 is as follows:
Schedule of Future Minimum Lease Payments
| Year | September 30, 2025 | |||
| 2025 (remaining though the end of year) | $ | |||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| 2029 | ||||
| Total future minimum lease payments | ||||
| Less: Imputed interest | ||||
| Operating lease liability | ||||
| Less: current portion | ||||
| Non-current portion of lease liability | $ | |||
| F-18 |
Basic net income (loss) per common share is calculated by dividing the net income attributable to common stockholders by the weighted-average number of common shares outstanding during the period, without consideration for potentially dilutive securities. Diluted net income per share is computed by dividing the net income (attributable to common stockholders) by the weighted average number of common shares and potentially dilutive securities outstanding for the period. For the Company’s diluted income per share calculation, the Company uses the “if-converted method” method for the Series B Convertible Preferred Stock and the “treasury stock method” method for warrants and options. If the Company has a net loss, dilutive securities have been excluded from the computation of diluted net loss per share.
The schedule of earning per shares, basic and diluted is as follows:
| For The Three Months Ended September 30. | 2025 | 2024 | ||||||
| Net income | $ | $ | ||||||
| Weighted average shares outstanding – basic | ||||||||
| Basic net income per share | $ | $ | ||||||
| Net income | $ | $ | ||||||
| Weighted average shares outstanding – diluted | ||||||||
| Diluted net income per share | $ | $ | ||||||
| For the Nine Months Ended September 30, | 2025 | 2024 | ||||||
| Net (loss) income | $ | ( | ) | $ | ||||
| Weighted average shares outstanding – basic | ||||||||
| Basic net (loss) income per share | $ | ( | ) | $ | ||||
| Net (loss) income | $ | ( | ) | $ | ||||
| Weighted average shares outstanding – diluted | ||||||||
| Diluted net (loss) income per share | $ | ( | ) | $ | ||||
The following is a schedule of the weighted average shares outstanding - basic and diluted, for the three and nine months September 30, 2025 and December 31, 2024.
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Weighted Average Shares Calculation – Basic | Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Weighted average shares | ||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Weighted Average Shares Calculation – Diluted | Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Shares used in computation of basic (loss) income per share | ||||||||||||||||
| Shares to be issued to Abaca shareholders | ||||||||||||||||
| Restricted stock | ||||||||||||||||
| Stock options | ||||||||||||||||
| Conversion of preferred stock | ||||||||||||||||
| Total | ||||||||||||||||
Certain share-based equity awards and warrants were excluded from the computation of dilutive earnings per share because inclusion of these awards would have had an anti-dilutive effect. The following table reflects the awards that were excluded.
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Shares to be issued to Abaca shareholders | ||||||||||||||||
| Stock options | ||||||||||||||||
| Restricted stock | ||||||||||||||||
| Conversion of Series B Convertible Preferred Stock | ||||||||||||||||
| Conversion of preferred stock | ||||||||||||||||
| Warrants | ||||||||||||||||
| Total | ||||||||||||||||
Earnings per share was calculated using the two-class
method to allocate net income between Class A Common and Series B Convertible Preferred Stock based on their respective participation
rights. For the three months ended September 30, 2025, net income of $
| F-19 |
Note 14 - Forward Purchase Agreement
During the three months ended March 31, 2025, the Company reclassified the forward purchase receivable balance to additional paid-in capital after determining the arrangement met the conditions for equity classification under ASC 815-40, Derivatives and Hedging – Contracts in an Entity’s Own Equity, and ASC 480, Distinguishing Liabilities from Equity.
As previously disclosed, on June 16, 2022, the Company and Midtown East Management NL, LLC (“Midtown”) entered into a Forward Purchase Agreement (“FPA”), which Midtown subsequently assigned in part to Verdun Investments LLC (“Verdun”) and Vellar Opportunity Fund SPV LLC Series 1 (“Vellar”).
On September 28, 2025, the Company was required to either (a) make a cash payment or (b) issue Class A Common Stock sufficient to satisfy the FPA derivative liability of $7.3M. However, in September 2025, each of the holders of the FPA agreed to Exchange and Cancellation agreements. Under the Exchange and Cancellation agreements each of the holders agreed to irrevocable cancel, waive and terminate all of its rights under the FPA extinguishing the Company’s FPA derivative liability. In return, the holders received Series B Preferred Stock and Series B Warrants. On September 30, 2025, the Company issued the following securities in full satisfaction of its FPA derivative liability:
| Seller | Series B Convertible Preferred Stock (shares) | Series B Warrants | ||||||
| Verdun | ||||||||
| Midtown | ||||||||
| Vellar | ||||||||
| Total | ||||||||
The Series B Warrants to purchase Class A Common Stock have an exercise price of $
The exchange of the FPA obligation for the Series B Convertible Preferred Stock and Series B Warrants to purchase Class A Common Stock was accounted for as an extinguishment of a liability under ASC 405-20, Liabilities – Extinguishments of Liabilities. The equity instruments issued were measured at their fair value of $ per unit, consistent with the cash price paid by unaffiliated third-party investors for identical securities on the same date, in accordance with ASC 820-10-35-37.
The
carrying amount of the FPA liability exceeded the aggregate fair value of the equity instruments issued, resulting in recognition of
a gain on extinguishment of $
Under
the terms of the Series B Convertible Preferred Stock Purchase Agreement, each holder’s conversion rights are subject to a
Note 15 -Warrants
Public and Private Placement Warrants
As
of September 30, 2025, and December 31, 2024, the Company had
The public and private placement warrants may only be exercised for a whole number of Common Stock.
| F-20 |
No warrant will be exercisable for cash or on a cashless basis, and the Company will not be obligated to issue any shares to holders seeking to exercise their warrants, unless the issuance of the shares upon such exercise is registered or qualified under the securities laws of the state of the exercising holder, or an exemption from registration is available.
Redemption of warrants will become effective when the price per share of Common Stock equals or exceeds $, per share. Once the warrants become redeemable, the Company may redeem the warrants:
| ● | in whole and not in part; |
| ● | at
a price of $ |
| ● | upon not less than 30 days’ prior written notice of redemption to each warrant holder; and |
| ● | if, and only if, the reported last sale price of the Common Stock equals or exceeds $ per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like and certain issuances of Common Stock and equity-linked securities) for any 20 trading days within a 30-trading day period commencing no earlier than the date the warrants become exercisable and ending on the third business day before the date on which the Company sends the notice of redemption to the warrant holders. |
If and when the warrant becomes redeemable by the Company, the Company may exercise its redemption rights; this is also the case if the Company is unable to register or qualify the underlying securities for sale under all applicable state securities laws.
If the Company calls the warrants for redemption, management will have the option to require all holders that wish to exercise the Warrants to do so on a “cashless basis,” as described in the warrant agreement. The exercise price and number of shares of Common Stock issuable upon exercise of the warrants may be adjusted in certain circumstances including in the event of a stock dividend, or recapitalization, reorganization, merger or consolidation. However, the warrants will not be adjusted for the issuance of Common Stock at a price below its exercise price. Additionally, in no event will the Company be required to net cash settle the warrants.
The private placement warrants are identical to the public warrants, except that the private placement warrants and the Common Stock issuable upon the exercise of the private placement warrants were not transferable, assignable or saleable, subject to certain limited exceptions. Additionally, the private placement warrants are exercisable on a cashless basis and non-redeemable so long as they are held by the initial purchasers or their permitted transferees. If the private placement warrants are held by someone other than the initial purchasers or their permitted transferees, the private placement warrants will be redeemable by the Company and exercisable by such holders on the same basis as the public warrants.
| F-21 |
PIPE Warrants
As
of September 30, 2025 and December 31, 2024, there were
The
PIPE warrants have an adjusted exercise price of $
Abaca Warrants
As
of September 30, 2025, and December 31, 2024, the Company had
The
Company may, at its sole discretion, settle exercises of the Abaca Warrants in either (i) shares of Common Stock or (ii) cash equal to
the intrinsic value of the Warrants (the difference between the fair market value of the Common Stock on the date of exercise and the
$
On November 10, 2025, the registration statement on Form S-1 covering the shares issuable upon exercise of the Abaca Warrants became effective, thereby satisfying the Company’s commitment to register such shares for resale. Following effectiveness, the underlying shares will be freely tradable upon exercise of the Warrants, subject to applicable securities laws.
If the registration statement were not to become effective within one year of the original issuance date, the Warrants would have become exercisable on a cashless basis pursuant to their terms; however, management expects this contingency will not apply.
Series B Warrants
In
connection with the issuance of the Company’s Series B Convertible Preferred Stock on September 30, 2025, the Company also
issued Series
B Warrants to purchase
The Series B Warrants include down-round and anti-dilution adjustment provisions whereby the exercise price is subject to reduction if the Company issues or sells common stock (or common-stock equivalents) at a price below the then-current exercise price. Specifically, the warrant exercise price and/or the number of shares issuable are subject to automatic resets at 60, 90, and 180 days following the applicable date and upon the occurrence of certain other events, including stock splits, combinations, dividends, or subsequent dilutive issuances, as defined in the warrant agreement. The automatic resets occur prior to the warrant becoming exercisable by the holders. These provisions are customary and were evaluated under ASC 815-40 and ASC 480. Management concluded that, despite the reset features, the warrants are indexed solely to the Company’s own stock and therefore qualify for equity classification.
The Company determined the relative fair values of the Series B Convertible Preferred Stock and the accompanying Series B Warrants using a Monte Carlo simulation model, which produced estimated standalone fair values of approximately $ per Series B share and $ per Series B Warrant to purchase Class A Common Stock. The Series B Convertible Preferred Stock and Series B Warrants were each determined to meet the conditions for equity classification under ASC 815-40 and ASC 480. The fair value of the instruments will not be subsequently remeasured as they are classified in equity.
| F-22 |
Note 16 - Financial Instruments
The Company uses fair value measurements to record adjustments to certain financial assets and liabilities on a recurring basis. The Company may be required to record certain assets at fair value on a nonrecurring basis in specific circumstances, such as evidence of impairment. Methodologies used to determine fair value might highly be subjective and judgmental in nature; therefore, valuations may not be precise. If the Company determines that a valuation technique change is necessary, the change is assumed to have occurred at the end of the respective reporting period.
There were no assets or liabilities recorded at fair value on a nonrecurring as of September 30, 2025 and December 31,2024.
The following tables present the carrying amounts and fair values of financial instruments on a non-recurring basis, by the level of valuation inputs in the fair value hierarchy, as of September 30, 2025 and December 31, 2024:
Schedule of Carrying Amounts and Fair Values of Financial Instruments
| Level 1 | Level 2 | Level 3 | ||||||||||||||||||
| September 30, 2025 | ||||||||||||||||||||
Carrying
amount | Fair
value $ | Fair value measurement using | ||||||||||||||||||
| Level
1 $ | Level
2 $ | Level
3 $ | ||||||||||||||||||
| Assets | ||||||||||||||||||||
| Cash and cash equivalents | $ | $ | $ | $ | $ | |||||||||||||||
| Forward purchase agreement | ||||||||||||||||||||
| Loans | ||||||||||||||||||||
| Liabilities | ||||||||||||||||||||
| Deferred consideration | ||||||||||||||||||||
| Public warrants | ||||||||||||||||||||
| Private placement warrants | ||||||||||||||||||||
| PIPE warrants | ||||||||||||||||||||
| Abaca warrants | ||||||||||||||||||||
| Third anniversary payment consideration | ||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | ||||||||||||||||||
| December 31, 2024 | ||||||||||||||||||||
Carrying
amount | Fair
value $ | Fair value measurement using | ||||||||||||||||||
| Level
1 $ | Level
2 $ | Level
3 $ | ||||||||||||||||||
| Assets | ||||||||||||||||||||
| Cash | $ | $ | $ | $ | $ | |||||||||||||||
| Cash and cash equivalents | $ | $ | $ | $ | $ | |||||||||||||||
| Forward purchase agreement | ||||||||||||||||||||
| Loans | ||||||||||||||||||||
| Liabilities | ||||||||||||||||||||
| Deferred consideration | ||||||||||||||||||||
| Senior Secured Promissory note | ||||||||||||||||||||
| Public warrants | ||||||||||||||||||||
| Private placement warrants | ||||||||||||||||||||
| PIPE warrants | ||||||||||||||||||||
| Abaca warrants | ||||||||||||||||||||
| Third anniversary payment consideration | ||||||||||||||||||||
| Forward purchase derivative | ||||||||||||||||||||
The change in the liability measured at fair value on a recurring basis for which the Company has utilized Level 3 inputs to determine fair value are presented in the following table:
Schedule of Fair Value Assets Measured on Recurring Basis
PIPE Warrants | Abaca Warrant | Private Placement Warrants | Third anniversary payment consideration | Forward Purchase Derivative | ||||||||||||||||
| For the Nine Months Ended September 30, 2025 | ||||||||||||||||||||
PIPE Warrants | Abaca Warrant | Private Placement Warrants | Third anniversary payment consideration | Forward Purchase Derivative | ||||||||||||||||
| Balance, January 1, 2025 | $ | $ | $ | $ | $ | |||||||||||||||
| Fair value adjustment | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||
| Exchanged for Series B Convertible Preferred Stock and Series B Warrants | ( | ) | ||||||||||||||||||
| Balance, September 30, 2025 | $ | $ | $ | $ | $ | |||||||||||||||
PIPE Warrants | Abaca Warrant | Private Placement Warrants | Third anniversary payment consideration | Forward Purchase Derivative | ||||||||||||||||
| For the Year ended December 31, 2024 | ||||||||||||||||||||
PIPE Warrants | Abaca Warrant | Private Placement Warrants | Third anniversary payment consideration | Forward Purchase Derivative | ||||||||||||||||
| Balance, January 1, 2024 | $ | $ | $ | $ | $ | |||||||||||||||
| Fair value adjustment | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||
| Balance, December 31, 2024 | $ | $ | $ | $ | ||||||||||||||||
| F-23 |
As of September 30, 2025 and on December 31, 2024, the fair market of the private placement warrants, and PIPE warrants, were based on Black-Scholes Merton option pricing model. As of September 30, 2025, the fair market value of the Abaca third anniversary payment consideration was determined using a Monte Carlo Simulation method. The valuation was performed by the Company as of September 30, 2025, and by a third-party prior for prior periods.
During the three and nine months ended September 30, 2025, and September 30, 2024, there were no changes in the classification of financial instruments within Level 2 and Level 3 of the fair value hierarchy.
The following table provides quantitative information regarding Level 3 fair value measurements inputs as it relates to the private placement warrants, public warrants, third anniversary payment consideration and Abaca warrants as of their measurement dates:
Schedule of Level 3 Fair Value Measurements Inputs
PIPE Warrants | Private Warrants | Third Anniversary Payment Consideration | Abaca Warrants | PIPE Warrants | Private Warrants | Third Anniversary Payment Consideration | Abaca Warrants | |||||||||||||||||||||||||
| As on September 30, 2025 | As on December 31, 2024 | |||||||||||||||||||||||||||||||
PIPE Warrants | Private Warrants | Third Anniversary Payment Consideration | Abaca Warrants | PIPE Warrants | Private Warrants | Third Anniversary Payment Consideration | Abaca Warrants | |||||||||||||||||||||||||
| Exercise price | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Share Price | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Expected term (years) | ||||||||||||||||||||||||||||||||
| Volatility | % | % | % | % | % | % | % | % | ||||||||||||||||||||||||
| Risk-free rate | % | % | % | % | % | % | % | % | ||||||||||||||||||||||||
| Measurement input | % | % | % | % | % | % | % | % | ||||||||||||||||||||||||
On October 3, 2025, the Company issued shares of common stock to
the Abaca shareholders as part of the third anniversary consideration payment under the acquisition agreement (see Note 3), valued at
$
Note 17 - Income Taxes
The Company has fully reserved its
deferred tax assets of $
In addition, the Company has other deferred tax assets for
temporary differences of $
Pursuant to Section 382 of the Internal Revenue Code, changes in the Company’s ownership may limit the amount of its NOL carryforwards that could be utilized annually to offset future taxable income, if any. This limitation would generally apply in the event of a cumulative change in ownership of the Company of more than 50% within a three-year period. The Company has not performed a NOL limitation study. All of the Company’s income tax returns are subject to examination by the taxing authorities.
The Company recognizes income tax benefits from uncertain tax positions where the realization of the ultimate benefit is uncertain. As of September 30, 2025 and December 31, 2024 the Company has no unrecognized income tax benefits.
| F-24 |
Note 18 - Stockholders’ Equity (Deficit)
The
Board of Directors of the Company approved a reverse stock split of the Company’s Common Stock at a ratio of
Preferred Stock
The
Company is authorized to issue shares of preferred stock, with a par value of $ per share, with such designation rights
and preferences as may be determined from time to time by the Company’s Board of Directors. As of September 30, 2025, there were
shares of convertible preferred stock issued and outstanding, and there were shares of convertible preferred stock issued and
outstanding on December 31, 2024. The holders of preferred stock shall be entitled to receive, and the Company shall pay, dividends on
shares of preferred stock equal (on an as-if-converted-to-Class-A-Common-Stock basis) to and in the same form as dividends actually paid
on shares of the Common Stock when, as and if such dividends are paid on shares of the Common Stock. No other dividends shall be paid
on the preferred stock. The terms of the preferred stock provide for an initial conversion price of $
Series B Convertible Preferred Stock
On September 30, 2025, the Company entered into the SPA with certain institutional
and accredited investors (the “Buyers”), under which the Company issued shares
( authorized)
of series B Convertible Preferred Stock and accompanying Series B Warrants to purchase
The
Series B Convertible Preferred Stock has a stated value of $
The
Series B Convertible Preferred Stock includes reset and anti-dilution provisions substantially similar to those in the Series B
Warrants to purchase Class A Common Stock. Specifically, (i) the conversion price automatically resets at 60, 90, and 180 days after the applicable date to the
lower of the then-current market price or the prior conversion price (subject to a floor of $
The Company determined stand-alone fair values for the Series B Convertible Preferred Stock and Series B Warrants using a Monte Carlo simulation model, which produced estimated values of approximately $ per Series B Convertible Preferred share and $ per Series B Warrant to purchase Class A Common Stock. Both instruments were classified within stockholders’ equity under ASC 815-40 and ASC 480; no subsequent re-measurement will occur.
Included
in the September 30, 2025 issuance described above, the Company issued
shares of Series B Convertible Preferred Stock and accompanying Series B warrants to purchase in aggregate
The Company held a special meeting of stockholders on November 6, 2025, the shareholders approved the issuance of common stock upon conversion of the Series B Convertible Preferred Stock and upon exercise of the related Series B Warrants to purchase Class A Common Stock, including participation by certain members of management and the Board of Directors.
The Company filed registration statements on Form S-1 on October 17 and 21, 2025 to register the resale of Series B conversion shares and shares issuable under its equity line of credit. The registration statement for the equity line of credit became effective on November 7, 2025, and the registration for the Series B Preferred Stock and Series B Warrants is expected to become effective in November 2025.
| F-25 |
Common Stock
As of September 30, 2025, the Company is authorized to issue up to shares of Common Stock, with a par value of $ per share. Holders of the Company’s Common Stock are entitled to one vote for each share. As of September 30, 2025 and December 31, 2024, there were and shares of Common Stock issued and outstanding, respectively.
Included
in additional paid-in-capital is $
Equity Line of Credit and Related Series B Redemption Obligation
On
September 17, 2025, the Company entered into a Common Stock Purchase Agreement (the “ELOC Agreement”) with CREO Investments
LLC, pursuant to which the Company, in its sole discretion, may issue and sell up to $
If the Company elects to utilize the ELOC, the Class A Common Stock sold will be priced at a 10% discount to the lowest stock price of the day, and this discount will be reduced from the proceeds received by the Company. The discount will be recognized as an expense in the Company’s statement of operations.
As
consideration for establishing the facility, the Company issued shares
of Series B Convertible Preferred Stock and a Series B Warrant to purchase
shares of Class A Common Stock to the investor on September 30, 2025. The fair value of the shares
issued was measured at $ per
share. The Company recorded the $
The
ELOC Agreement further provides that, with mutual consent of the Company and the Investor, the facility may be expanded up to a total
commitment of $
On
September 30, 2025, the Company and the investor executed an Amendment No. 1 to the ELOC Agreement. The amendment altered the use of
proceeds to require the Company to apply 25% of the net cash proceeds received under the ELOC Agreement to redeem outstanding shares
of the Company’s Series B Convertible Preferred Stock. Under the Certificate of Designation for the Series B Convertible
Preferred Stock, redemptions are permitted only at 120% of the stated value of $
The mandatory-use-of-proceeds clause represents a contractual earmark of future equity proceeds but does not create a separate liability at issuance because no redemption obligation exists until the Company receives proceeds and elects to draw under the facility. Consistent with ASC 480-10-25-4 through 25-14, the Series B Convertible Preferred Stock continues to be classified in permanent equity, as redemption remains conditional on the Company’s discretion to utilize the ELOC and is not an unconditional obligation.
2022 Equity Incentive Plan
The Amended and Restated - 2022 Equity Incentive Plan (the “Plan”) was approved by the Company’s stockholders on June 28, 2022. On April 30, 205, the Plan was amended to provide that the total number of shares of Common Stock that may be issued, under the Plan will automatically increase upon the occurrence of a Dilution Event (as defined in the Plan) and on the first trading day of each calendar year, beginning with calendar year 2026, by such number of shares of Common Stock necessary to make the total shares of Common Stock authorized under the Plan equal to fifteen percent (15%) of the total outstanding shares of Common Stock on the last day of the prior calendar year (subject to a maximum annual increase of shares of Common Stock). The Plan permits the grant of incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock units, stock bonus awards, and performance compensation awards. The Company has not issued stock appreciation rights, restricted stock, stock bonus awards, or performance compensation awards in the nine months ended September 30, 2025 and September 30, 2024. As of September 30, 2025, a total of shares of common stock were authorized for issuance under the Plan, of which shares remained available for future issuances.
| F-26 |
Stock Options
Stock options are awarded to encourage ownership of the Company’s Common Stock by employees and to provide incentives for employees to render services and to exert maximum effort for the success of the Company. The Company’s incentive stock options generally permit net-share settlement upon exercise. The option exercise price, vesting schedule and exercise period are determined for each grant by the administrator (person appointed by board to administer the stock plans) of the applicable plan. The Company’s stock options generally have a -year contractual term.
Schedule of Fair Value of Options Granted Black-Scholes-Merton Model
| Stock price | $ to $ | |||
| Risk-free interest rate | % to | % | ||
| Expected volatility | % to | % | ||
| Expected term in years | to |
The assumptions used to determine the fair value of options granted in the nine months ended September 30, 2024 using the Black-Scholes-Merton model are as follows:
| Dividend yield | % | |||
| Risk-free interest rate | to | % | ||
| Expected volatility | % | |||
| Expected term in years | to |
Schedule of Stock Option and Related Information
| Stock Option | No. of Stock Option | Weighted-Average Grant Date Fair Value Per Stock Option | Weighted-Average Remaining Contractual Life (in Years) | |||||||||
| Balance, January 1, 2025 | $ | |||||||||||
| Granted | ||||||||||||
| Forfeited | ( | ) | - | - | ||||||||
| Balance, September 30, 2025 | $ | |||||||||||
| Vested and expected to vest September 30, 2025 | $ | |||||||||||
The options forfeited during the period were associated with awards previously granted to former officers and employees whose service with the Company terminated prior to vesting or exercise.
On
August 7, 2025, the Company granted performance-based stock option awards to certain executive officers, including the Chief
Executive Officer, Chief Investment and Strategic Officer, and Principal Accounting Officer. These options were issued under the
2022 Stock Option and Incentive Plan and are performance-based awards that vest only upon the Company’s successful completion
of an equity transaction resulting in proceeds in excess of $
As of September 30, 2025, the performance condition is satisfied, and $million stock-based compensation expense has been recognized.
| F-27 |
Schedule of Options Outstanding
| Exercise Price Options Outstanding | September 30, 2025 | |||
| $2.22 | ||||
| $2.40 | ||||
| $5.06 | ||||
| $6.02 | ||||
| $8.00 | ||||
| $9.68 | ||||
| $31.20 | ||||
| $62.54 | ||||
| $133.40 | ||||
| Total | ||||
Stock compensation expense recognized for stock options for the three and nine months ended September 30, 2025 was $ million and $ million. Stock compensation expense recognized for stock options for the three and nine months ended September 30, 2024 was $ million and $ million respectively.
Schedule of Stock Compensation Expenses
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Compensation and employee benefits | $ | $ | $ | $ | ||||||||||||
| Professional services | ||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
As of September 30, 2025, there was $ recognized stock compensation expense related to stock options. The unrecognized compensation expense is expected to be recognized over a weighted-average period of approximately years based on vesting under the award service conditions. As of September 30, 2025, the intrinsic value was $ million. The fair value of the stock options granted for the three months and nine months ended September 30, 2025 was $ per share and $ per share, respectively. There were no stocks options granted for the three months and nine months ended September 30, 2024.
Restricted Stock Units (“RSUs”)
Schedule of Restricted Stock Units
| Restricted Stock Units | No. of RSU | Weighted-Average Grant Date Fair Value Per RSU | Weighted-Average Remaining Contractual Life (in Years) | |||||||||
| Balance, January 1, 2025 | $ | |||||||||||
| Exercised | ( | ) | - | |||||||||
| Forfeited | ( | ) | - | |||||||||
| Balance, September 30, 2025 | $ | |||||||||||
Stock compensation expense for RSU for the three and nine months ended September 30, 2025 was $ million and $ million, respectively. Stock compensation expense for RSU for the three and nine months ended September 30, 2024, was $ million and $ million, respectively.
All RSU awards recognized during the three and nine months ended September 30, 2025, and 2024 relate to employee stock awards.
For
the nine months ended September 30, 2025 and September 30, 2024, the Company completed a net share settlement for
and ,
restricted shares on behalf of certain employees that participate in the Plan upon the vesting of the restricted shares pursuant to the
terms of the Plan, respectively. The net share settlement was in connection with payroll taxes incurred on restricted shares that vested
and were transferred to the employees during the nine months ended September 30, 2025 and September 30, 2024 which created taxable income
for the employees. At the employees’ request, the Company has paid these taxes on behalf of the employees in exchange for the employees
returning an equivalent value of restricted shares to the Company. These transactions resulted in a decrease of $
As of September 30, 2025, there was $ million of unrecognized stock compensation expense related to RSU. This unrecognized compensation expense is expected to be recognized over a weighted-average period of approximately based on vesting under the award service conditions.
Note 19- Commitments and Contingencies
Contractual Commitments
The
Company has an employment agreement with its Chief Executive Officer.
The Company is party to contractual obligations, including lease liabilities related to operating leases, and stipulated cash bonus arrangements with employees. These obligations are time-based and are reflected in the accompanying unaudited condensed consolidated financial statements. The Company expects to meet these commitments in the ordinary course of business.
| F-28 |
Nasdaq Listing Compliance
On
April 7, 2025, the Company received a notice from Nasdaq indicating that it no longer met the continued listing requirements under Listing
Rule 5550(b)(1), which requires a minimum of $
On September 30, 2025, the Company issued Series B Convertible Preferred
Stock and Series B Warrants to purchase Class A Common Stock, net of offering
costs that contributed $
As
a result of the equity financing, the Company’s stockholders’ equity increased to approximately $
Legal and Related Matters
The Company is involved in, or has been involved in, arbitrations or various other legal proceedings that arise from the normal course of its business. The ultimate outcome of any litigation is uncertain, and either unfavorable or favorable outcomes could have a material impact on the Company’s results of operations, balance sheets and cash flows due to defense costs, and divert management resources. The Company cannot predict the timing or outcome of these claims and other proceedings. With respect to the cases described below, the Company evaluates the associated developments on a regular basis and accrues a liability when the Company believes a loss is probable and the amount can be reasonably estimated.
Abaca legal case in Denver
On
October 17, 2024, the Company filed a declaratory judgment action in the Denver County District Court, Case No. 2024CV33187, against
Daniel Roda, Gregory W. Ellis, and James R. Carroll (the “Defendants”), each of whom is a former shareholder of Rockview
Digital Solutions, Inc. (d/b/a Abaca), which the Company acquired in October 2022. The action relates to a $
On
November 21, 2024, the Company deposited the $
On December 19, 2024, the Defendants filed a counterclaim against the Company alleging breach of contract and related causes of action, and a third-party claim was asserted against a member of the Company’s board of directors. As of the date of these financial statements, no trial date has been set, and the case remains in the pleading stage.
On January 16, 2025, the Company filed a motion to dismiss all counterclaims filed against the Company.
On April 18, 2025, the District Court for the City and County of Denver, Colorado (i) dismissed Gregory W. Ellis as a counter-plaintiff and third-party plaintiff because Mr. Ellis lacked standing to bring any claim, and (ii) denied a third-party’s request to intervene in the litigation. The remainder of the case will proceed to the discovery phase of litigation.
The Company is vigorously defending against the counterclaims and continues to monitor the proceedings and potential financial exposure. Based on the current status of the litigation, and in consultation with legal counsel, the Company has determined that no accrual for loss is required under ASC 450-20 as of September 30, 2025.
Note 20 - Subsequent Events
The Company has evaluated events and transactions subsequent to September 30, 2025, through the date the unaudited condensed consolidated financial statements were issued and has determined no other material events or transactions occurred that would require adjustment or disclosure in the financial statement, except as disclosed below:
On
October 3, 2025, the Company issued
shares of common stock to the Abaca shareholders in accordance
with the acquisition agreement for the third anniversary consideration payment (Note 3) approximately $
As of October 8, 2025, the Company received $
On October 31, 2025, ADTX redeemed approximately
shares of its preferred stock held by the Company for cash proceeds of $
Subsequent to September 30, 2025, the Company issued shares of common stock under its ELOC, receiving gross proceeds of $0.2 million.
On November 6, 2025, the Company’s shareholders approved several actions at a special meeting:
| 1 | Authorized Share Increase – |
| 2 | Series B Preferred and Warrant Conversions – Shareholders approved the issuance of common stock upon conversion of the Series B Convertible Preferred Stock and upon exercise of the related Series B Warrants to purchase Class A Common Stock, including participation by certain members of management and the Board of Directors, as described in Note 18. |
| 3 | Equity Line of Credit (ELOC) Shares – Shareholders approved the issuance of shares of Class A Common Stock to CREO Investments LLC pursuant to the Company’s Common Stock Purchase Agreement (ELOC). |
| 4. | Reverse
Stock Split Authorization – Shareholders authorized the Board of Directors, in
its sole discretion, to effect a reverse stock split of the Company’s outstanding common
stock at any ratio between |
The Company filed registration statements on Form S-1 on October 17 and 21, 2025 to register the resale of Series B Convertible Preferred Stock and shares issuable under its equity line of credit. The registration statement for the equity line of credit became effective on November 7, 2025, and the registration for the Series B Convertible Preferred Stock and Series B Warrant is expected to become effective in November 2025.
| F-29 |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
References in this section to “we,” “us,” “our,” “SHF” or the “Company” refer to SHF Holdings, Inc. References to “management” refer to our officers and board of managers. The following discussion and analysis of our financial performance and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and the notes to those financial statements included elsewhere in this Form 10-Q. This discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties. See “Cautionary Note Regarding Forward-Looking Statements.” Our actual results may differ materially from those contained in or implied by any forward-looking statements.
Overview
Founded in 2015 by Partner Colorado Credit Union (“PCCU”) (please see “Business Reorganization” below for a description of SHF’s organization), SHF was among the first financial institutions to provide banking services to Cannabis Related Businesses “CRB.” SHF’s mission is to provide access to reliable and compliant financial services for the legal cannabis, hemp, and related industries by enabling our Financial Institution (“FI”) customers to provide compliance driven banking, lending and other financial services to our CRB clients.
Through our proprietary platform operating in 41 states and territories, SHF ensures our Financial Institution customers can compliantly provide the following banking related services to CRBs:
| ● | Business and checking and savings accounts; | |
| ● | Cash management accounts; | |
| ● | Savings and investment options; | |
| ● | Commercial lending; | |
| ● | Courier services (via third-party relationships); | |
| ● | Remote deposit services; | |
| ● | Automated Clearing House (ACH) payments and origination; and | |
| ● | Wire payments. |
Due to limited availability of payment and other banking solutions for the cannabis industry, most CRBs transact with high volumes of cash. Our fintech platform benefits CRBs and financial institutions by providing CRBs with access to financial institutions and financial institutions access to increased deposits with the comfort of knowing that those deposits have been compliantly monitored and validated. By facilitating the daily movement of cash between CRBs and financial institutions, the risks associated with high cash on hand are mitigated, creating a safer atmosphere for the CRB’s employees and the financial institutions at which the deposit accounts are held.
The Company is not a financial institution, and as such it does not hold customer deposits. All deposit accounts are held by the Company’s financial institution customers and all transmissions of funds to and from deposit accounts are handled directly by the financial institutions. In an industry with limited capital and financing options, we offer access to loan options at what we believe to be competitive rates, often with more attractive terms than the current industry average. Our financial institution customers and strategic partners offer CRB’s loan options including senior secured and operating lines of debt. Collateral types include real estate, equipment, and other business assets.
To ensure CRB’s have access to consistent and dependable banking, we provide our compliance, validation and monitoring services to financial institutions ensuring strict adherence to the Bank Secrecy Act/FinCEN guidance and related anti money laundering provisions. Since inception, the Company has assisted in the processing of approximately $26 billion in cannabis related depository funds. Through its relationship with its financial institution clients, the Company has successfully navigated over 16 state and federal banking exams.
The Company has licensed its proprietary software or Safe Harbor Program (the “Program”) to other financial institutions to provide compliance-related services to CRBs. As part of the Program, we provide the following to financial institutions interested in licensing the Program to assist in compliant cannabis banking:
| ● | Initial customer due diligence – Know Your Customer; | |
| ● | Customer application management; | |
| ● | Program management support; | |
| ● | Compliance monitoring; and | |
| ● | Regulatory exam assistance. |
| 3 |
Results of Operations
Revenue
The Company generates interest and fee income by providing a variety of services to our financial institution customers to facilitate their banking services to CRBs including, among other things, maintaining compliance with the Bank Secrecy Act (“BSA”) and other regulatory compliance and reporting requirements, marketing and onboarding support, responding to customer service inquiries, and sourcing and originating loans. In addition, the Company provides outsourced support to financial institutions providing banking to the cannabis industry.
Operating Expenses
Operating expenses consist of compensation and benefits, professional services, rent expense, account hosting fees, advertising and marketing, and other general and administrative expenses.
Compensation and benefits consist of employee wages, stock-based compensation and associated benefits, while professional services consist of legal, board fees including stock-based compensation, general consulting and accounting fees.
The Company previously reported provisions for credit losses on indemnified loans. Prior to December 31, 2024, the Company indemnified PCCU against losses on sourced loans. The indemnification obligation ceased on December 31, 2024, when the Amended PCCU CAA took effect.
Three and Nine Months September 30, 2025 As Compared To September 30, 2024
Revenue
The following is the revenue for the three and nine months ended September 30, 2025 and September 30, 2024.
| Three Months Ended September 30, | 2025 | 2024 | Change ($) | Change (%) | ||||||||||||
| Account fee income | $ | 963,098 | $ | 1,646,888 | $ | (683,790 | ) | (41.5 | )% | |||||||
| Loan interest income | 510,754 | 1,341,501 | (830,747 | ) | (61.9 | )% | ||||||||||
| Investment income | 340,688 | 475,011 | (134,323 | ) | (28.3 | )% | ||||||||||
| Safe Harbor Program income | 19,230 | 19,230 | - | - | % | |||||||||||
| Total | $ | 1,833,770 | $ | 3,482,630 | $ | (1,648,860 | ) | (47.3 | )% | |||||||
| Nine Months Ended September 30, | 2025 | 2024 | Change ($) | Change (%) | ||||||||||||
| Account fee income | $ | 3,045,292 | $ | 4,949,478 | $ | (1,904,186 | ) | (38.5 | )% | |||||||
| Loan interest income | 1,606,947 | 4,814,349 | (3,207,402 | ) | (66.6 | )% | ||||||||||
| Investment income | 901,527 | 1,749,447 | (847,920 | ) | (48.5 | )% | ||||||||||
| Safe Harbor Program income | 57,690 | 57,690 | - | - | % | |||||||||||
| Total | $ | 5,611,456 | $ | 11,570,964 | $ | (5,959,508 | ) | (51.5 | )% | |||||||
Account fee income consists of (a) fees earned from banking services such as deposit account fees, activity fees and onboarding income and (b) merchant income earned through referral arrangements with third-party payment processors, under which the Company receives a percentage of the net revenue generated by referred merchants. The Company receives a flat fee and lower rates for ancillary accounts, which are accounts provided to businesses servicing the cannabis industry in general but do not manufacture, possess, distribute or transport cannabis.
| 4 |
The decrease in the account fee income was primarily attributable to a decrease in the comparative average monthly ending deposit balance, a revised revenue-sharing arrangement between a large merchant and a participating third-party payment processor, and a promotion geared to retaining and expanding our average monthly deposit balance. Under the updated revenue-sharing arrangement, the merchant’s retainage increased, which in turn reduces both the total revenue available to the payment processor and the Company’s corresponding share of that revenue compared with the prior year.
The following is the account fee income by financial institutions for the three and nine months ended September 30, 2025 and September 30, 2024.
| Three Months Ended September 30, | 2025 | 2024 | Change ($) | Change (%) | ||||||||||||
| PCCU | $ | 763,999 | $ | 1,106,139 | $ | (342,140 | ) | (30.9 | )% | |||||||
| Pacific Valley Bank | 15,145 | 8,472 | 6,673 | 78.8 | % | |||||||||||
| Five Star Bank | - | 156,577 | (156,577 | ) | (100.0 | )% | ||||||||||
| Others | 183,954 | 375,700 | (191,746 | ) | (51.0 | )% | ||||||||||
| Total | $ | 963,098 | $ | 1,646,888 | $ | (683,790 | ) | (41.5 | )% | |||||||
| Nine Months Ended September 30, | 2025 | 2024 | Change ($) | Change (%) | ||||||||||||
| PCCU | $ | 2,341,954 | $ | 3,459,224 | $ | (1,117,270 | ) | (32.3 | )% | |||||||
| Pacific Valley Bank | 53,157 | 28,845 | 24,312 | 84.3 | % | |||||||||||
| Five Star Bank | (16,389 | ) | 419,965 | (436,354 | ) | (103.9 | )% | |||||||||
| Other | 666,570 | 1,041,445 | (374,875 | ) | (36.0 | )% | ||||||||||
| Total | $ | 3,045,292 | $ | 4,949,479 | $ | (1,904,187 | ) | (38.5 | )% | |||||||
Investment Income
Certain financial institutions pay us interest on daily account balances as per the rates outlined in the customer agreement. The decrease in investment income was primarily attributable to a reduction in average daily deposit balances, the launch of interest-bearing money market accounts in the first quarter of 2025, and federal rate cuts enacted in the fourth quarter of 2024 and in September 2025.
Loan Interest Income
Loan interest income is generated from loans issued predominantly under the Company’s Commercial Alliance Agreement (the “PCCU CAA”) with PCCU, as amended.
| 5 |
The majority of the Company’s loan portfolio consists of CRB loans originated by PCCU and primarily serviced by SHF. Under the original PCCU CAA in 2024, the Company received 100% of the loan interest income associated with these loans and was obligated to pay PCCU a servicing fee equal to 0.25-0.35% of the outstanding loan balance.
Effective December 31, 2024, the method for calculating loan interest income was revised. The new loan yield allocation formula factors in the Constant Maturity U.S. Treasury Rate and a proprietary risk rating to determine the interest income split for each loan.
The reduction in loan interest income for the period is mainly attributed to the implementation of the new formula. Under the Amended PCCU CAA, the Company’s interest income on all loans is now calculated using a loan yield allocation formula that considers the Constant Maturity US Treasury Rate from the Federal Reserve’s website, along with a proprietary risk rating formula to determine the fee split between the Company and PCCU. The amendment introduced a new interest income split between the Company and PCCU. The interest income split under the new loan yield allocation formula is approximately 39% to the Company, with the remainder retained by PCCU. The interest income split will vary depending on changes to the loan portfolio.
For the three months and nine months ended September 30, 2025, the Company recognized $0.5 million and $1.6 million in loan interest income attributable to PCCU activities. In comparison, for the three months and nine months ended September 30, 2024, the Company recognized $1.3 million and $4.8 million in loan interest income from the same activities.
Operating Expenses
| Three Months Ended September 30, | 2025 | 2024 | Change ($) | Change (%) | ||||||||||||
| Compensation and employee benefits | $ | 1,695,786 | $ | 1,839,244 | $ | (143,458 | ) | (7.8 | )% | |||||||
| General and administrative expenses | 856,389 | 929,406 | (73,017 | ) | (7.9 | )% | ||||||||||
| Professional services | 442,312 | 463,452 | (21,140 | ) | (4.6 | )% | ||||||||||
| Rent expense | 56,529 | 66,170 | (9,641 | ) | (14.6 | )% | ||||||||||
| Provision (benefit) for credit losses | - | 7,449 | (7,449 | ) | (100.0 | )% | ||||||||||
| Total | $ | 3,051,016 | $ | 3,305,721 | $ | (254,705 | ) | (7.7 | )% | |||||||
| Nine months Ended September 30, | 2025 | 2024 | Change ($) | Change (%) | ||||||||||||
| Compensation and employee benefits | $ | 4,651,318 | $ | 6,384,213 | $ | (1,732,895 | ) | (27.1 | )% | |||||||
| General and administrative expenses | 2,305,018 | 2,915,390 | (610,372 | ) | (20.9 | )% | ||||||||||
| Professional services | 2,654,183 | 1,428,129 | 1,226,054 | 85.9 | % | |||||||||||
| Rent expense | 180,720 | 199,805 | (19,085 | ) | (9.6 | )% | ||||||||||
| Provision (benefit) for credit losses | - | (158,586 | ) | 158,586 | (100.0 | )% | ||||||||||
| Total | $ | 9,791,239 | $ | 10,768,951 | $ | (977,712 | ) | (9.1 | )% | |||||||
For the three months ended September 30, 2025, compared to September 30, 2024, the Company reduced operating expenses by $0.26 million, or 7.7%. For the nine months ended September 30, 2025, compared to the same period in 2024, operating expenses decreased by $1.0 million, or 9.1%.
The Company has been implementing cost-reduction measures since the prior year, including workforce realignments, vendor consolidation, and tighter discretionary spending controls. The benefits of these cost actions were partially offset by expenses incurred to implement certain of these initiatives. In addition, reported operating expenses include higher one-time non-cash stock-based compensation associated with new executive and consultant equity awards granted in 2025, which increased by approximately $1.0 million year over year. Management is using stock-based compensation awards to reduce the cash component of employee compensation and align incentives with the performance of the Company’s Class A Common Stock.
| 6 |
Excluding these non-recurring transition costs and non-cash compensation, total operating costs would have shown a more significant year-over-year decline. The Company believes these results demonstrate that its cost-containment initiatives are generating sustainable reductions in ongoing cash expenditures, the full effect of which is expected to become more evident in 2026.
Compensation and employee benefits
During the three months ended September 30, 2025, compensation and employee benefits decreased by $0.1 million or 7.8%, primarily due to a reduction in headcount. The reduction in headcount resulted in a cost savings of approximately $0.4 million offset in part by an increase of non-cash stock-based compensation of approximately $0.3 million.
For the nine month period ended September 30, 2025, these expenses declined by $1.7 million, or 27.1%, reflecting $1.0 million in decrease from headcount reductions and $0.9 million decrease in stock compensation expense partially offset by $0.1 million expense to a former employee.
General and administrative expenses
For the three months ended September 30, 2025, general and administrative expenses decreased by $0.07 million, or 7.9%, compared to the three months ended September 30, 2024. This decrease was primarily due to a $0.2 million reduction in intangible asset amortization as certain assets became fully amortized.
Beginning in 2025, investment hosting fees and loan servicing fees were combined into the account hosting fees following the Amended PCCU CAA. On a combined basis, total hosting-related fees increased by $0.04 million ($0.18 million increases in account hosting fees less $0.10 million of investment hosting fees and $0.04 million of loan servicing fees incurred in the prior period), reflecting the impact of the Amended PCCU CAA offset by the termination of the Company’s customer relationship with Five Star Bank.
For the nine months ended September 30, 2025, general and administrative expenses decreased by $0.6 million, or 20.9%, compared to the same period in 2024. This decrease was primarily due to a $0.5 million reductions in intangible asset amortization as certain assets became fully amortized.
Beginning in 2025, investment hosting fees and loan servicing fees were combined into account hosting fees following the Amended PCCU CAA. On a combined basis, total hosting-related fees increased by $0.03 million ($0.5 million increase in account hosting fees less $0.4 million of investment hosting fees and $0.1 million of loan servicing fees incurred in the prior period), reflecting the impact of the Amended PCCU CAA offset by the termination of the Company’s customer relationship with Five Star Bank.
Account hosting fees
The account hosting fees increased for both periods primarily due to the Amended PCCU CAA, which became effective on December 31, 2024. Under the prior CAA, PCCU charged a monthly per-account fee ranging from $26.08 to $28.69 for accounts hosted on its platform. Under the Amended PCCU CAA, the Company now pays PCCU a fixed asset hosting fee calculated as 0.01 multiplied by the average daily balance of account relationships generated by the Company, divided by the number of days in the year, and multiplied by the number of days in the applicable month. This new structure incorporated the investment hosting fee and loan hosting fee that existed under the prior agreement and has resulted in higher total account hosting costs compared to the prior fee schedule.
Beginning in 2025, investment hosting fees and loan servicing fees are reported within account hosting fees following the Amended PCCU CAA. The following is the account hosting fee by financial institutions for the three and nine months ended September 30, 2025 and September 30, 2024:
| Three Months Ended September 30, | 2025 | 2024 | Change ($) | Change (%) | ||||||||||||
| PCCU | $ | 322,795 | $ | 131,002 | $ | 191,793 | 146.4 | % | ||||||||
| Pacific Valley Bank | 8,091 | 5,466 | 2,625 | 48.0 | % | |||||||||||
| Five Star Bank | - | 18,782 | (18,782 | ) | (100.00 | )% | ||||||||||
| Total | $ | 330,886 | $ | 155,250 | $ | 175,636 | 113.1 | % | ||||||||
| Nine Months Ended September 30, | 2025 | 2024 | Change ($) | Change (%) | ||||||||||||
| PCCU | $ | 914,539 | $ | 356,369 | $ | 558,170 | 156.6 | % | ||||||||
| Pacific Valley Bank | 20,357 | 10,748 | 9,609 | 89.4 | % | |||||||||||
| Five Star Bank | (2,795 | ) | 52,483 | (55,278 | ) | (105.3 | )% | |||||||||
| Total | $ | 932,101 | $ | 419,600 | $ | 512,501 | 122.1 | % | ||||||||
| 7 |
Professional services
For the three months ended September 30, 2025, professional services expense decreased by $0.03 million or 4.6% compared to the same period in 2024, primarily reflecting lower negotiated rates with several service providers and reduced audit and accounting fees following completion of the Company’s auditor transition earlier in the year.
For the nine months ended September 30, 2025, professional services expense increased by $1.2 million or 85.9% compared to September 30, 2024. The increase was driven primarily by transition-related legal and advisory costs incurred as the Company outsourced its internal legal and compliance functions to external counsel, as well as other non-recurring professional fees primarily related to shareholder litigation. Key components of the increase include:
| ● | External legal and compliance transition costs, including migration of SEC reporting, governance, and regulatory matters previously handled internally; | |
| ● | Fees related to the resolution of a former-employee matter; | |
| ● | Fees associated with shareholder-related litigation; | |
| ● | Fees associated with the transition of auditors and the restatement of our Quarterly Report for the quarter ended March 31, 2025, and | |
| ● | Higher non-cash stock-based compensation for directors, who agreed to reduce cash compensation in exchange for additional equity awards under the Company’s 2022 Stock Option and Incentive Plan. |
These increases were partially offset by the elimination of prior-year external counsel retainers, lower recurring audit and accounting fees after the auditor transition, and rate reductions achieved through vendor consolidation. The Company expects that, following completion of the legal and auditor transitions, annualized professional service costs will decline compared with maintaining both internal and multiple external service providers.
Provision (benefit) for credit losses
For both the three- and nine-month periods ended September 30, 2025, there was no credit loss (benefit) expense, compared to an expense of $0.0 million and a benefit of $0.2 million, respectively, in the comparable 2024 periods. Effective with the Amended PCCU Commercial Alliance Agreement, the Company is no longer indemnifying loans issued by PCCU, thereby eliminating the prior credit-loss exposure.
Other Income / (Expenses)
| Three Months Ended September 30, | 2025 | 2024 | Change ($) | Change (%) | ||||||||||||
| Change in the fair value of deferred consideration | $ | (40,565 | ) | $ | (68,811 | ) | $ | 28,246 | (41.0 | )% | ||||||
| Interest expense | (252,640 | ) | (161,716 | ) | (90,924 | ) | 56.2 | % | ||||||||
| Gain on extinguishment of debt | 3,336,213 | - | 3,336,213 | - | % | |||||||||||
| Other issuance costs | (988,837 | ) | - | (988,837 | ) | - | % | |||||||||
| Change in fair value of warrant liabilities | (657,417 | ) | 414,272 | (1,071,689 | ) | (258.7 | )% | |||||||||
| $ | 1,396,754 | $ | 183,745 | $ | 1,213,009 | 660.2 | % | |||||||||
| Nine Months Ended September 30, | 2025 | 2024 | Change ($) | Change (%) | ||||||||||||
| Change in the fair value of deferred consideration | $ | 79,475 | $ | 327,259 | $ | (247,784 | ) | (75.7 | )% | |||||||
| Interest expense | (480,767 | ) | (484,718 | ) | 3,951 | (0.8 | )% | |||||||||
| Gain on extinguishment of debt | 3,336,213 | - | 3,336,213 | - | % | |||||||||||
| Other issuance costs | (988,837 | ) | - | (988,837 | ) | - | % | |||||||||
| Change in fair value of warrant liabilities | 596,823 | 2,756,045 | (2,159,222 | ) | (78.3 | )% | ||||||||||
| $ | 2,542,907 | $ | 2,598,586 | $ | (55,679 | ) | (2.1 | )% | ||||||||
For the three and nine months ended September 30, 2025, other income (expenses) primarily reflects the impact of financing-related transactions and fair-value adjustments associated with the Company’s capital restructuring completed in connection with the Series B Convertible Preferred Stock and Series B Warrant issuance.
| 8 |
Deferred Consideration (Abaca Acquisition)
During the three and nine months ended September 30, 2025, we recorded a loss of $0.04 million and a gain of $0.08 million, respectively, related to changes in the fair value of the contingent consideration liability associated with our 2022 acquisition of Abaca. The decrease in the liability was primarily due to the elimination of the interest component from the deferred consideration arrangement, which more than offset the impact of the increase in our stock price during the period. The third anniversary payment was made on October 3, 2025 through the issuance of 37,517 shares of our Class A Common Stock.
Interest Expense
Interest expense for the three months ended September 30, 2025, increased by $0.1 million compared to the same period in 2024. The increase was primarily due to $0.1 million of non-cash interest expense related to the original issue discount on convertible notes issued in September 2025. This increase was partially offset by a decrease in interest expense on the Senior Secured Promissory Note.
Interest expense for the nine months ended September 30, 2025, decreased by $0.004 million compared to the same period in 2024. While the interest rate on the Senior Secured Promissory Note remained unchanged, interest expense decreased due to a lower average principal balance following $2.2 million in principal repayments in 2024. This decrease of approximately $0.1 million was substantially offset by $0.1 million of non-cash interest expense related to the original issue discount on convertible notes issued in September 2025.
Gain on Extinguishment of Debt
The Company recognized a $3.2 million gain on extinguishment of debt predominately related to the settlement of its FPA obligations. The Company settled its FPA obligation of $7.3 million by issuance of 5,002 shares of Series B Convertible Preferred Stock and Series B Warrants to purchase 322,111 shares of Class A Common Stock, whose aggregate fair value of $4.0 million was lower than the carrying amount of the liability, producing the gain.
Expenses incurred to secure financing
During the three months ended September 30, 2025, the Company incurred $1.0 million of costs related to establishing its equity line of credit or ELOC, of which $0.8 million was non-cash. These costs were expensed during the three and nine months ended September 30, 205 in accordance with ASC 505-10-45-2.
Change in Fair Value of Warrant Liabilities
The Company’s Public, Private Placement, and PIPE warrants are recorded as liabilities and remeasured at fair value each period using the Black-Scholes-Merton model. The Company’s Abaca warrants are recorded as liabilities and remeasured at fair value using a Monte Carlo simulation model. As of September 30, 2025, all outstanding warrants were out of the money. Changes in the Company’s stock price and related volatility during the period were the primary drivers of the fair-value adjustments.
Income Taxes
Income tax (benefit) expense for the three months ended September 30, 2025 was $0 as compared to income tax of $0.007 million for the three months ended September 30, 2024. Income tax (benefit) expense for the nine months ended September 30, 2025 was $0.06 million as compared to an income tax credit of $0.05 million for the nine months ended September 30, 2024. The change in income tax (benefit) resulted from a reversal of estimated accrual.
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Key Metrics
In addition to the measures presented in our unaudited condensed consolidated financial statements, our management regularly monitors certain measures in the operation of our business. These key metrics are discussed below.
Non-GAAP Financial Measures
In addition to financial measures presented in accordance with accounting principles generally accepted in the United States of America (GAAP), this document contains non-GAAP financial measures where management believes it to be helpful in understanding our results of operations or financial position. Where non-GAAP financial measures are used, the comparable GAAP financial measure, as well as the reconciliation to the comparable GAAP financial measure, can be found herein.
Earnings Before Interest Taxes Depreciation and Amortization (EBITDA) and Adjusted EBITDA
To provide investors with additional information regarding our financial results, we have disclosed EBITDA and Adjusted EBITDA, both of which are non-GAAP financial measures that we calculate as net profit before taxes and depreciation and amortization expense in the case of EBITDA and further adjusted to exclude non-cash, unusual and/or infrequent costs in the case of Adjusted EBITDA. Below we have provided a reconciliation of net profit (the most directly comparable GAAP financial measure) to EBITDA and from EBITDA to Adjusted EBITDA.
We present EBITDA and Adjusted EBITDA because these metrics are a key measure used by our management to evaluate our operating performance, generate future operating plans, and make strategic decisions regarding the allocation of investment capacity. Accordingly, we believe that EBITDA and Adjusted EBITDA provide useful information to investors and others in understanding and evaluating our operating results in the same manner as our management.
EBITDA and Adjusted EBITDA have limitations as an analytical tool, and it should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are as follows:
| ● | although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and both EBITDA and Adjusted EBITDA do not reflect cash capital expenditure requirements for such replacements or for new capital expenditure requirements; | |
| ● | EBITDA and Adjusted EBITDA do not reflect changes in our cash requirements for our working capital needs; and | |
| ● | EBITDA and Adjusted EBITDA do not reflect tax payments that may represent a reduction in cash available to us. |
Because of these limitations, you should consider EBITDA and Adjusted EBITDA alongside other financial performance measures, including net profit and our other GAAP results.
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A reconciliation of net profit to non-GAAP EBITDA and Adjusted EBITDA is as follows:
|
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Net (loss) income | $ | 179,508 | $ | 353,817 | $ | (1,578,406 | ) | $ | 3,345,020 | |||||||
| Interest expense | 252,640 | 161,716 | 480,767 | 484,718 | ||||||||||||
| Depreciation and amortization | 637 | 160,857 | 3,155 | 551,356 | ||||||||||||
| Provision (benefit) for income taxes | - | 6,837 | (58,470 | ) | 55,579 | |||||||||||
| EBITDA | 432,785 | $ | 683,227 | (1,152,954 | ) | 4,436,673 | ||||||||||
| Other adjustments – | ||||||||||||||||
| Credit loss (benefit) expense | - | 7,449 | - | (158,586 | ) | |||||||||||
| Change in the fair value of warrants and forward purchase derivatives | 657,417 | (414,272 | ) | (596,823 | ) | (2,756,045 | ) | |||||||||
| Change in the fair value of deferred consideration | 40,565 | 68,811 | (79,475 | ) | (327,259 | ) | ||||||||||
| Gain on extinguishment of debt | (3,336,213 | ) | - | (3,336,213 | ) | - | ||||||||||
| Other issuance costs | 988,837 | - | 988,837 | - | ||||||||||||
| Stock compensation expense | 596,131 | 387,662 | 1,379,880 | 1,551,923 | ||||||||||||
| Deferred loan origination fees and costs | - | 31,408 | - | 78,581 | ||||||||||||
| Adjusted EBITDA | $ | (620,478 | ) | $ | 764,285 | $ | (2,796,748 | ) | $ | 2,825,287 | ||||||
Other Metrics
The Company monitors the following key metrics for its business operations.
Total account balances, number of accounts and average account balances
Our ability to originate loans for PCCU is dependent on the size of our managed deposit base and number of active accounts. In addition, fees are generated based on open accounts and account activity. We monitor account activity including deposits, withdrawals and ending account balance daily. Total account balances represent the balance of onboarded and monitored deposits on hand at financial institution clients at period end. Average account balance represents the total account balance divided by the number of accounts at the period end.
Account Fees Per Average Active Accounts Managed
Currently a significant amount of our fees is generated from active accounts and account activity. As a result, we monitor account openings and closings on a daily, weekly and monthly basis. We strive to meet the appropriate balance between depository balances and fees and therefore review account fees per average number of active accounts managed.
| Three Months Ended September 30, | 2025 | 2024 | Change | Change (%) | ||||||||||||||
| Average monthly deposit balance | (1) | $ | 107,976,219 | $ | 111,202,938 | $ | (3,226,719 | ) | (2.9 | )% | ||||||||
| Average Account fees | (2) | 270,501 | 410,776 | (140,275 | ) | (34.1 | )% | |||||||||||
| Average active accounts | (3) | 774 | 745 | 29 | 3.9 | % | ||||||||||||
| Average account balance | 139,444 | 149,199 | (9,755 | ) | (6.5 | )% | ||||||||||||
| Average fees per account | 349 | 551 | (202 | ) | (36.7 | )% | ||||||||||||
| Nine Months Ended September 30, | 2025 | 2024 | Change | Change (%) | ||||||||||||||
| Average monthly deposit balance | (1) | $ | 105,178,610 | $ | 120,969,270 | $ | (15,790,660 | ) | (13.1 | )% | ||||||||
| Average Account fees | (2) | 280,456 | 425,517 | (145,061 | ) | (34.1 | )% | |||||||||||
| Average active accounts | (3) | 773 | 750 | 23 | 3.1 | % | ||||||||||||
| Average account balance | 136,105 | 161,292 | (25,187 | ) | (15.6 | )% | ||||||||||||
| Average fees per account | 363 | 567 | (204 | ) | (36.0 | )% | ||||||||||||
| 11 |
| (1) | 2025 represents the average of the daily account balance for the three and nine months therein; 2024 represents the average of the ending account balances for each of the three and nine months therein. | |
| (2) | Reported account activity fee revenue per month. | |
| (3) | Represents the average of ending active accounts for each of the three and nine months therein. |
Average monthly deposit balances declined 13.1% year-over-year for the nine months to date, but declined 2.9% year over year for the third quarter as deposit outflows have begun to stabilize. Despite lower balances, active accounts increased 3.9% for the quarter and 3.0% for the nine months to date, demonstrating continued client retention and modest new-account growth. The decline in average fees per account of 34% year over year for both the three- and nine-months end September 30th was driven primarily by the loss of higher-performing accounts that generated greater transaction-based activity, such as ACH and wire services. Average account balances also declined as a result of broader economic pressures within the U.S. cannabis industry, including reduced wholesale pricing and constrained operator liquidity. Looking ahead, the Company believes that improvement in overall U.S. economic conditions, particularly increased discretionary spending, and potential regulatory easing, including federal rescheduling of cannabis, could contribute to higher account balances and transaction activity over time. The current depositor mix remains more diversified, reducing concentration risk and positioning the Company to benefit from any industry recovery.
Liquidity, Capital Resources and Capital Resources.
Liquidity refers to the Company’s ability to meet expected cash obligations, including operating costs and general business expenditures.
As of June 30, 2025, the Company had a working-capital deficit of $7.4 million, cash and cash equivalents of $0.2 million and limited access to external funding sources. During the third quarter ended September 30, 2025, the Company completed its Series B Convertible Preferred Stock and Series B Warrant financing, raising gross proceeds of $6.3 million, excluding money received from management and a board member. The Company received $5.9 million shortly after the closing. As a result, on September 30, 2025, the Company held cash and cash equivalent $0.9 million, had no material debt outstanding, and no longer reported a working-capital deficit. The improvement in liquidity was primarily driven by the equity raise and repayment or conversion of substantially all debt obligations.
The Company also entered into an Equity Line of Credit (“ELOC”) with an investor, providing the ability, once the related registration statement becomes effective and to an extent pending shareholder approval, to sell up to $150 million of newly issued common stock, with potential expansion to $500 million upon mutual agreement. These arrangements, together with lower ongoing debt service obligations, substantially strengthen the Company’s short-term liquidity position.
While deposit and fee revenue remain below prior-year levels, management expects continued cost reductions and improved cash generation as operational efficiencies take hold. Based on current forecasts, existing cash resources, combined with potential access to the ELOC, are expected to be sufficient to fund operations for at least 12 months beyond the issuance date of these unaudited condensed consolidated financial statements.
| 12 |
Cash Flows
For the nine months ended September 30, 2025, the Company used $2.4 million of cash in operating activities to fund its net loss of $1.6 million. Operating cash flows benefited from positive working capital changes of $0.7 million and offset by $1.5 million for non-cash income. For the nine months ended September 30, 2024, the Company generated $3.2 million of cash from operating activities, primarily driven by net income of $3.3 million and favorable changes in operating assets and liabilities of $1 million, partially offset by non-cash income of $1.1 million.
For the nine months ended September 30, 2025, and September 30, 2024, the Company generated cash from investing activities was $0.4 million and $0.008 million from the proceeds of loan, respectively.
For the nine months ended September 30, 2025, the Company generated $0.5 million of net cash from financing activities. This amount primarily reflects proceeds of $0.55 million raised through the issuance of a convertible notes and $0.22 million in gross proceeds from Series B Convertible Preferred Stock and Series B Warrants to purchase Class A Common Stock. This is offset by the repayment of a senior secured promissory note totaling $0.3 million. For the nine months ended September 30, 2024, the Company used $2.2 million in financing activities resulting from the repayment of Senior Security Promissory Note PCCU.
Critical Accounting Estimates
As of September 30, 2025, there were no significant changes in the application or the nature of accounting estimates that are considered critical in nature from those presented in our Annual Report on Form 10-K and Form 10-K/A.
Emerging Growth Company Status
The Company is an emerging growth company (“EGC”), as defined in the JOBS Act. Under the JOBS Act, EGCs can delay adopting new or revised accounting standards issued until such time as those standards apply to private companies. In electing this relief, the JOBS Act does not preclude an EGC from adopting a new or revised accounting standard earlier than the time that such standard applies to private companies. SHF has elected to use this relief and will do so until the earlier of the date that it (a) is no longer an emerging growth company or (b) affirmatively and irrevocably opts out of the extended transition period provided in the JOBS Act. As a result of the elected JOBS Act relief, these combined and unaudited condensed consolidated financial statements may not be comparable to companies that do not elect JOBS Act relief or choose to early adopt different accounting pronouncements than SHF.
Internal Control Over Financial Reporting
In connection with our management assessment of internal control over financial reporting as of and for the nine months ended September 30, 2025, the Company has identified material weaknesses within our internal controls over financial reporting. Refer to Item 4A of this document for additional details.
Related Party Relationships
PCCU is considered a related party as it holds a significant ownership interest in the Company, is our most significant financial institution customer, and is where we maintain the majority of the Company’s deposits. Refer to Note 9 Related Party Transactions, to the accompanying unaudited condensed consolidated financial statements that describe the related party transactions.
Item 3A. Quantitative and Qualitative Disclosures About Market Risk.
The Company is a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and is not required to provide the information otherwise required with respect to market risk.
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Item 4A. Controls and Procedures.
Management’s Report On Internal Control Over Financial Reporting
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer, to allow timely decisions regarding required disclosure.
As required by Rules 13a-15 and 15d-15 under the Exchange Act, our Chief Executive Officer and Chief Financial Officer carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures. Based upon this evaluation, it was concluded that the Company’s disclosure controls and procedures were not effective as of September 30, 2025, due to the material weaknesses described below. Considering these material weaknesses, we performed additional analysis as deemed necessary to ensure that our interim financial statements were prepared in accordance with U.S. generally accepted accounting principles. Accordingly, management believes that the unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q present fairly in all material respects our financial position, results of operations and cash flows for the periods presented.
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are designed to ensure that information required to be disclosed by us in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
The Company does not expect that our disclosure controls and procedures will prevent all errors and all instances of fraud. Disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Further, the design of disclosure controls and procedures must reflect the fact that there are resource constraints, and the benefits must be considered relative to their costs. Because of the inherent limitations in all disclosure controls and procedures, no evaluation of disclosure controls and procedures can provide absolute assurance that we have detected all our control deficiencies and instances of fraud, if any. The design of disclosure controls and procedures also is based partly on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.
As required by Rules 13a-15 and 15d-15 under the Exchange Act, our Chief Executive Officer and Interim Chief Financial Officer carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures. Based upon this evaluation, our Chief Executive Officer and Interim Chief Financial Officer concluded that, solely due to the below-mentioned material weaknesses, the Company’s disclosure controls and procedures (as defined in Rules 13a-15 (e) and 15d-15 (e) under the Exchange Act) were not effective as of September 30, 2025.
Material Weaknesses
A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.
As previously reported, management identified several material weaknesses in the Company’s internal control over financial reporting. These weaknesses primarily related to the Company’s ability to appropriately apply U.S. GAAP and SEC reporting requirements to complex transactions, including revenue recognition, accounting for financial instruments, forward-purchase arrangements, and stock-based compensation. Additional weaknesses existed in management’s going-concern evaluation process and information-technology access controls.
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During 2025, the Company implemented a comprehensive remediation plan focused on strengthening technical accounting expertise, enhancing review controls, and improving documentation and segregation of duties. Key remediation actions included:
| ● | Hiring a Chief Executive who is also the named Chief Financial Officer, and a Senior Vice President of Finance and Controller, who is the named Principal Accounting Officer both with extensive SEC-registrant experience to oversee technical accounting, financial reporting, and internal controls; |
| ● | Engaging a financial advisory firm that has expertise in financial reporting expertise to assist management in evaluating and accounting for complex and non-routine transactions, including the Series B Convertible Preferred Stock and related Series B warrant issuances; |
| ● | Implementing enhanced review procedures over financial statement preparation, including secondary reviews of all complex accounting analyses; and |
| ● | Upgrading IT access controls and removing unnecessary privileged user access within key financial systems. |
Management believes the design of these remediation efforts adequately addresses the previously identified material weaknesses. However, the remediated controls have not been in operation for a sufficient period of time to allow management to conclude, through testing, that these material weaknesses have been fully remediated. Management will continue to test the operating effectiveness of these controls and monitor their performance on an ongoing basis. A material weakness is considered remediated only after the remediated controls operate for a sufficient period of time and management has concluded, through testing, that the controls are operating effectively. Management expects to complete its assessment of operating effectiveness during the fourth quarter of 2025 and will provide an update in future filings.
The following material weakness over financial reporting identified by management remains in the process of being remediated:
Revenue Recognition: The Company is unable to support the completeness and accuracy of its activity fee income generated from deposits held at PCCU, as such activity fees are compiled from a system from which the Company does not have the ability to fully rely upon. As such, there is a potential that revenues recognized could have been misstated.
A failure to maintain effective internal controls over financial reporting could result in errors in its financial statements that could require the Company to restate past financial statements, cause the Company to fail to meet its reporting obligations and cause investors to lose confidence in the Company’s reported financial information, all of which could materially and adversely affect the Company.
Changes in Internal Control over Financial Reporting
Other than as noted above in the September 30, 2025 material weaknesses, there were no changes in our internal control over financial reporting that occurred during nine months ended September 30, 2025 covered by this Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
The Company’s management has expended, and will continue to expend, a substantial amount of effort and resources for the remediation of the material weaknesses and improvement of our internal control over financial reporting. While we have processes to properly identify and evaluate the appropriate accounting technical pronouncements and other literature for all significant or unusual transactions, we have expanded and will continue to improve these processes to ensure that the nuances of such transactions are effectively evaluated in the context of the increasingly complex accounting standards.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings
From time to time, we may be subject to various other legal proceedings and claims that are routine and incidental to our business. Although some of the legal proceedings set forth herein may result in adverse decisions or settlements, Management believes that the final disposition of such matters will not have a material adverse effect on our business, financial position, results of operations or cash flows See Note 19, Commitment and Contingencies for legal matters to the accompanying Company’s condensed consolidated financial statements in this Form 10-Q.
Item 1A. Risk Factors
The Company is a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and is not required to provide the information otherwise required by this Item 1A.
Item 2. Unregistered Sale of Equity Securities and Use of Proceeds
On August 27, 2025, the Company closed an offering of Convertible Promissory Notes (the “Notes”) that were issued to certain accredited investors with a maturity date of September 9, 2026, a 20% original issue discount and an aggregate principal sum of $562,500. On September 9, 2025, the Company issued an additional Note to an accredited investor (the “Investor”) in the principal sum of $0.1 million (the “September Note”). The September Note is identical to the Notes.
On September 30, 2025, the Company entered into a Securities Purchase Agreement (the “Series B SPA”) with the investors party thereto (the “Buyers”), pursuant to which, subject to the terms and conditions set forth therein, the Company agreed to issue and sell to the Buyers an aggregate of 31,052 shares of the Company’s Series B Convertible Preferred Stock, $0.0001 par value per share (the “Series B Preferred Stock”) and related Series B Warrants initially to acquire an aggregate of 1,999,544 shares of the Company’s Common Stock, subject to adjustment for stock splits, stock dividends, recapitalizations, reorganizations, reclassifications, combinations, subdivisions or other similar events. The exercise price per Series B Warrant to purchase Class A Common Stock share is $7.7644, subject to adjustment as provided therein. Subject to the terms of the Series B Warrant, each Series B Warrant to purchase Class A Common Stock is exercisable at any time on or after the six month and one day anniversary of the Applicable Date (as defined in the Series B SPA). The Series B Warrants expire upon the third anniversary of such Initial Exercisability Date. Subject to the terms and conditions of the Certificate of Designation (as defined below), the Series B Preferred Stock is convertible immediately upon issuance, and the conversion price is $7.7644 per share, subject to adjustment as provided therein. The aggregate purchase price paid by the Buyers to the Company pursuant to the Series B SPA was approximately $28.8 million, resulting in approximately $6.3 million in additional cash to the Company. This purchase price includes certain Buyers that paid for the securities acquired pursuant to the Series B SPA, in whole or in part, by (i) cancelling outstanding Indebtedness (as defined in the Series B SPA) or securities of the Company, (ii) cancelling amounts owed to such Buyer by the Company, and/or (iii) transferring assets, including third-party securities, to the Company. Certain members of the Company’s management and board participated in the transaction as Buyers, however the issuance to such members of management of the shares of Common Stock underlying the Series B Preferred Stock and Series B Warrants is subject to stockholder approval under Nasdaq Listing Rule 5635(c). On November 6, 2025, the stockholders approved the investment of certain members of the company’s Board of Directors and management. The Company received net proceeds of approximately $6.3 million in connection with the transactions contemplated by the Series B SPA.
On September 30, 2025, the Company entered into a Debt Cancellation Agreement (the “Debt Cancellation Agreement”) with Partner Colorado Credit Union (“PCCU”). As previously disclosed, the Company and PCCU entered into a Senior Secured Promissory Note and Security Agreement (the “Loan Agreements”) on March 29, 2023 whereby PCCU agreed to make loans to the Company in the aggregate principal amount of $14.5 million. Pursuant to the terms of the Debt Cancellation Agreement, the outstanding principal amount of all loans made to the Company under the Loan Agreements, or approximately $10.7 million, was deemed repaid and the obligations of the Company represented thereby with respect to such principal amount was deemed to be satisfied in full and cancelled in exchange for 13,436 shares of Company’s Series B Preferred Stock and a Series B warrant to purchase 865,200 shares of Stock, subject to adjustment as provided in the Series B warrant.
On September 30, 2025, the Company entered into Exchange and Cancellation Agreements (each, an “Exchange and Cancellation Agreement”) with each of Verdun Investments LLC (“Verdun”), Vellar Opportunity Fund SPV LLC – Series 1 (“Vellar”), and Midtown East Management NL,LLC (“Midtown” and, together with Verdun and Vellar, the “Sellers”). As previously disclosed, on June 16, 2022 the Company and Midtown entered into a Forward Purchase Agreement (the “FPA”), which was subsequently assigned by Midtown to each of Vellar and Verdun. Pursuant to the terms of the Exchange and Cancellation Agreement, the Company issued a certain number of shares of Series B Preferred Stock and Series B Warrants to the Sellers in exchange for each Seller agreeing to irrevocably cancel, waive and forego all of its rights under the FPA and to terminate the FPA. The Company issued (i) 1,607 shares of Series B Preferred Stock and a Series B Warrant to purchase 103,485 shares of Common Stock to Verdun, (ii) 2,070 shares of Series B Preferred Stock and a warrant to purchase 133,301 shares of Common Stock to Midtown, and (iii) 1,325 shares of Series B Preferred Stock and a Series B Warrant to purchase 85,325 shares of Common Stock to Vellar. The number of shares of Common Stock purchasable under the Series B Warrants is subject to adjustment as provided therein.
On September 30, 2025, the Notes were exchanged for an aggregate of 825 shares of Series B Preferred Stock and Series B Warrants to purchase an aggregate of 53,127 shares of Class A Common Stock, subject to adjustment as provided in the Series B Warrant.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
During
the nine months ended September 30, 2025, no director or “officer” (as defined in Rule 16a-1(f) under the Exchange Act) of
the Company
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Item 6. Exhibits
The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q.
| * | Filed herewith. |
| † | Certain of the exhibits and schedules to this exhibit have been omitted in accordance with Regulation S-K Item 601(a)(5). The Company agrees to furnish supplementally a copy of all omitted exhibits and schedules to the SEC upon its request. |
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SIGNATURES
Pursuant to the requirements of Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Signature | Title | Date | ||
| /s/ Terrance E. Mendez | Chief Executive Officer and Chief Financial Officer | November 12, 2025 | ||
| Terrance E. Mendez | (Principal Executive Officer) | |||
| /s/ Douglas Beck | Senior Vice President of Finance, Controller | November 12, 2025 | ||
| Douglas Beck | (Principal Accounting Officer) |
| 18 |
Exhibit 31.1
CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Terrance E. Mendez, certify that:
| 1. | I have reviewed this Quarterly Report on Form 10-Q for the period ended September 30, 2025 of SHF Holdings, Inc.; | |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; | |
| 4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 1 5d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
|
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |
| c. | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |
| d. | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and | |
| b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Date: November 12, 2025 | |
| /s/ Terrance E. Mendez | |
| Terrance E. Mendez | |
| Chief Executive Officer and Chief Financial Officer | |
| (Principal Executive Officer) |
Exhibit 31.2
CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Douglas Beck, certify that:
| 1. | I have reviewed this Quarterly Report on Form 10-Q for the period ended September 30, 2025 of SHF Holdings, Inc.; | |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; | |
| 4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | |
| b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |
| c. | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |
| d. | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and | |
| b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Date: November 12, 2025 | /s/ Douglas Beck |
| Douglas Beck | |
Senior Vice President of Finance, Controller | |
| (Principal Accounting Officer) |
Exhibit 32.1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of SHF Holdings, Inc. on Form 10-Q for the annual period ended September 30, 2025, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Terrance E. Mendez, Chief Executive and Financial Officer of SHF Holdings, Inc., certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:
| 1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and | |
| 2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
| Date: November 12, 2025 | /s/ Terrance E. Mendez |
| Terrance E. Mendez | |
| Chief Executive Officer and Chief Financial Officer | |
| (Principal Executive Officer) |
Exhibit 32.2
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of SHF Holdings, Inc. on Form 10-Q for the annual period ended September 30, 2025, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Douglas Beck, Principal Accounting Officer of SHF Holdings, Inc., certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:
| 1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and | |
| 2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
| Date: November 12, 2025 | /s/ Douglas Beck |
| Douglas Beck | |
| Senior Vice President of Finance, Controller | |
| (Principal Accounting Officer) |