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Item 2. Management’s Discussion and Analysis

2022-11-14 compared with 2022-08-22 · 773 added, 349 removed, 1 unchanged (100% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Operations

to the “Company,” “us,” “our” or “we” refer Northern Lights Acquisition Corp.

The following

discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited Condensed

financial statements and related notes included herein.

Note Regarding Forward-Looking Statements

statements other than statements of historical fact included in this Form 10-Q including, without limitation, statements under “Management’s

Discussion and Analysis of Financial Condition and Results of Operations” regarding the Company’s financial position, business

strategy and the plans and objectives of management for future operations, are forward- looking statements.

When used in this Form 10-Q,

words such as “anticipate,” “believe,” “estimate,” “expect,” “intend” and

similar expressions, as they relate to us or the Company’s management, identify forward-looking statements.

Such forward-looking

statements are based on the beliefs of management, as well as assumptions made by, and information currently available to, the Company’s

Actual results may differ materially due to various factors, including, but not limited to:

ability to complete our initial business combination with SHF or an alternative business combination;

success in retaining or recruiting, or changes required in, our officers, key employees or directors following our initial business

officers and directors allocating their time to other businesses and potentially having conflicts of interest with our business or

in approving our initial business combination, as a result of which they would then receive expense reimbursements;

ability to close the PIPE Financing (as defined below) which is intended to provide the financing to complete our initial business

the event the Business Combination (as defined below) is consummated, our ability to implement business plans, forecasts, and other

expectations regarding SHF after the completion of the proposed transactions and optimize SHF’s business;

the event the Business Combination is not consummated, the ability of our officers and directors to generate a number of potential

alternative acquisition opportunities;

pool of prospective target businesses;

ability of our officers and directors to generate a number of potential acquisition opportunities;

public securities’ potential liquidity and trading;

lack of a market for our securities;

continued liquidity and our ability to continue as a going concern;

use of proceeds not held in the trust account or available to us from interest income on the trust account balance;

financial performance.

subsequent written or oral forward-looking statements attributable to us or persons acting on the Company’s behalf are qualified

in their entirety by this paragraph.

following discussion and analysis of our financial condition and results of operations should be read in conjunction with the financial

statements and the notes thereto contained elsewhere in this Form 10-Q.

Certain information contained in the discussion and analysis

set forth below includes forward-looking statements that involve risks and uncertainties.

Company is a blank check company formed under the laws of the State of Delaware on February 26, 2021 for the purpose of effecting a merger,

share exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses.

intends to effectuate its initial Business Combination using cash from the proceeds of our Initial Public Offering and the Private Placement,

the proceeds of the sale of our securities in connection with our initial Business Combination, our shares issued to the owners of the

target, debt issued to the bank or other lenders or the owners of the target, or a combination of the foregoing.

issuance of additional shares in connection with an initial Business Combination to the owners of the target or other investors:

significantly dilute the equity interest of investors, which dilution would increase if the anti-dilution provisions in the Class

B common stock resulted in the issuance of Class A Common Stock on a greater than one -to-one basis upon conversion of the Class

B common stock;

subordinate the rights of holders of our common stock if preferred stock is issued with rights senior to those afforded our common

cause a change in control if a substantial number of shares of our common stock is issued, which may affect, among other things,

our ability to use our net operating loss carry forwards, if any, and could result in the resignation or removal of our present officers

and directors;

have the effect of delaying or preventing a change of control of us by diluting the stock ownership or voting rights of a person

seeking to obtain control of us;

adversely affect prevailing market prices for our Class A Common Stock and/or warrants.

if we issue debt securities or otherwise incur significant debt to bank or other lenders or the owners of a target, it could result in:

and foreclosure on our assets if our operating revenues after an initial Business Combination are insufficient to repay our debt

of our obligations to repay the indebtedness even if we make all principal and interest payments when due if we breach certain covenants

that require the maintenance of certain financial ratios or reserves without a waiver or renegotiation of that covenant;

immediate payment of all principal and accrued interest, if any, if the debt security is payable on demand;

inability to obtain necessary additional financing if the debt security contains covenants restricting our ability to obtain such

financing while the debt security is outstanding;

inability to pay dividends on our common stock;

a substantial portion of our cash flow to pay principal and interest on our debt, which will reduce the funds available for dividends

on our common stock if declared, our ability to pay expenses, make capital expenditures and acquisitions, and fund other general

corporate purposes;

on our flexibility in planning for and reacting to changes in our business and in the industry in which we operate;

vulnerability to adverse changes in general economic, industry and competitive conditions and adverse changes in government regulation;

on our ability to borrow additional amounts for expenses, capital expenditures, acquisitions, debt service requirements, and execution

of our strategy;

purposes and other disadvantages compared to our competitors who have less debt.

expect to continue to incur significant costs in the pursuit of our initial Business Combination.

We cannot assure you that our plans

to complete our initial Business Combination will be successful.

Unit Purchase Agreement

February 11, 2022, we and our sponsor entered into the Unit Purchase Agreement with SHF, Seller, and PCCU.

Pursuant to the Unit Purchase

Agreement, upon the Closing of the Business Combination, we will purchase all of the issued and outstanding membership interests of SHF

in exchange for an aggregate of $185,000,000, consisting of (i) 11,386,139 shares of Class A Common Stock with an aggregate value equal

to $115,000,000 and (b) $70,000,000 in cash.

The obligations of the parties to consummate the Business Combination are subject to the

satisfaction or waiver of certain customary closing conditions of the respective parties, including, without limitation:

(a) the representations

and warranties of the respective parties being true and correct subject to the materiality standards contained in the Unit Purchase Agreement;

(b) material compliance by the parties of their respective pre-closing covenants and agreements, subject to the standards contained in

the Unit Purchase Agreement;

(d) the approval by the Seller’s

manager of the Business Combination;

(e) the approval by SHF’s managers of the Business Combination;

(f) the absence of any Material

Adverse Effect (as defined in the Unit Purchase Agreement) with respect to us or with respect to SHF since the effective date of the

Unit Purchase Agreement that is continuing and uncured;

(g) us having at least $5,000,001 in tangible net assets upon the Closing;

the election of the members of the post-Closing board of directors consistent with the provisions of the Unit Purchase Agreement, a majority

of which are to be independent in accordance with the Nasdaq rules;

(i) the entry into certain ancillary agreements as of the Closing;

(j) the lack of any notice or communication from, or position of, the SEC requiring us to amend or supplement the proxy statement on

Schedule 14A to be delivered to our stockholders in connection with the approval of the Business Combination and related matters;

(k) the receipt of certain closing deliverables.

On June 30, 2022, the Company, the Sponsor, SHF, the Seller, and PCCU agreed to amend

the Unit Purchase Agreement to extend the Outside Date until July 29, 2022, with the ability for the deadline to be extended through

September 28, 2022, to provide the Company with additional time to complete the Business Combination as it awaits regulatory approval.

with entering into the Unit Purchase Agreement, we entered into a Securities Purchase Agreement with the PIPE Investors, pursuant to

which, among other things, the PIPE Investors agreed to subscribe for and purchase, and we agreed to issue and sell to the PIPE Investors,

an aggregate of 60,000 shares of our Series A Convertible Preferred Stock and warrants to purchase up to a number of shares of Class

A Common Stock equal to 50% of shares of the Class A Common Stock issuable upon conversion of the PIPE Shares for gross proceeds of $60.0

million the PIPE Financing.

The closing of the PIPE Financing is contingent upon, among other things, the substantially concurrent consummation

of the Business Combination.

The Securities Purchase Agreement provides that it will terminate upon the earlier to occur of (i) termination

of the Unit Purchase Agreement and (ii) the mutual written agreement of each of the parties.

The Securities Purchase Agreement could

also be terminated under certain customary and limited circumstances at any time prior to the closing of the PIPE Financing, including,

among others, if the closing had not occurred by June 30, 2022.

The Company is currently completing satisfaction of its remaining closing conditions, including

regulatory approvals, and is discussing with the PIPE Investors their continuing interest in the investment

contemplated by the Securities Purchase Agreement.

Unit Purchase Agreement, the PIPE Financing, and related agreements thereto are further described in the Form 8 K/A, filed by us on February

of Operations

have neither engaged in any operations nor generated any revenues to date.

Our only activities from inception to June 30, 2022, were

organizational activities, those necessary to prepare for the Initial Public Offering and identifying a target company for a business

We do not expect to generate any operating revenues until after the completion of our initial Business Combination.

non-operating income in the form of interest income on marketable securities held in the Trust Accounts.

We incur expenses as a result

of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses.

For the three months ended June

30, 2021, we had a net loss of $1,743,727, which consisted of $10,105 in operating and formation costs, $9,495 in unrealized loss from

marketable securities held on the Trust Account, change in fair value of warrant derivative liabilities of $1,462,306 and offering costs

allocated to warrants of $261,838.

For the three months ended June

30, 2022, we had a net loss of $1,827,245 which consisted of $1,874,043 in operating costs including $781,070 in costs associated with

the initial fair value of the forward purchase option at contract inception, $60,969 in franchise tax expense, a change in fair value

of warrant derivative liabilities of $70,796, a change in fair value of the forward purchase option derivative liability of $14,872 and

income tax expense of $13,526 offset by $145,992 in interest earned on marketable securities held in the Trust Account.

For the period from February

26, 2021 (inception) through June 30, 2021, we had a net loss of $1,744,522, which consisted of $10,900 in operating and formation costs,

$9,495 in unrealized loss from marketable securities held on the Trust Account, change in fair value of warrant liabilities of $1,462,306

and offering costs allocated to warrants of $261,838.

For the six months ended June 30, 2022, we had a net loss of $1,042,697

which consisted of $2,593,830 in operating and formation costs including $781,070 in costs associated with the initial fair value of the

forward purchase option at contract inception, $110,969 in franchise tax expense, a $14,872 change in fair value of the forward purchase

option derivative liability and $13,526 in income tax expense offset by a change in fair value of warrant derivative liabilities of $1,432,423

and $147,108 in interest earned on marketable securities held in the Trust Account.

and Capital Resources

June 28, 2021, we consummated the Initial Public Offering of 11,500,000 Units, which includes the full exercise by the underwriter of

the over-allotment option to purchase 1,500,000 Units at $10.00 per Unit, generation gross proceeds of $115,000,000.

Simultaneously with

the closing of the Initial Public Offering, we consummated the sale of 528,175 Private Placement Units at $10.00 per Private Placement

Unit to our Sponsor, generating gross proceeds of $5,281,750.

the six months ended June 30, 2022, cash used in operating activities was $250,699.

costs of the Initial Public Offering amounted to $6,263,677 consisting of $1,725,000 of underwriting fees, $4,025,000 of deferred underwriting

fees (see Note 6) and $513,677 of other costs.

of June 30, 2022, we had available to us $172,441 of cash on our balance sheet and a working capital deficit of $1,810,112.

to use the funds held outside of the Trust Account for identifying and evaluating prospective acquisition candidates, performing business

due diligence on prospective target businesses, traveling to and from the offices, plants or similar locations of prospective target

businesses, reviewing corporate documents and material agreements of prospective target businesses, selecting the target business to

acquire and structuring, negotiating and consummating the Business Combination.

The interest income earned on the investments in the

Trust Account are unavailable to fund operating expenses.

Company initially had until June 28, 2022 to consummate a Business Combination.

If the Company was unable to complete a Business Combination

within 12 months from the closing of the Initial Public Offering, such period could (i) be extended by the Company’s stockholders

in accordance with the Company’s amended and restated certificate of incorporation or (ii) at the election of the Company subject

to satisfaction of certain conditions, including the deposit of up to $2,300,000 into the Trust Account, be extended up to six additional

months to December 28, 2022.

On June 27, 2022, the Company, with proceeds advanced from an affiliate of the Sponsor, deposited $1,150,000

in the Trust Account extending operations for three months from June 28, 2022 to September 28, 2022.

If the Company is unable to complete

a Business Combination by September 28, 2022, such period could (i) be extended by the Company’s stockholders in accordance with

the Company’s amended and restated certificate of incorporation or (ii) at the election of the Company subject to satisfaction

of certain conditions, including the deposit of up to $1,150,000 into the Trust Account, be extended an additional three months to December

If the Company is unable to complete a Business Combination by December 28, 2022 and such period is not extended by the Company’s

stockholders in accordance with the Company’s amended and restated certificate of incorporation, the Company will (i) cease all

operations except for the purpose of winding up, (ii) as promptly as reasonably possible but no more than ten business days thereafter,

redeem the public shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account,

including interest earned on the funds held in the Trust Account and not previously released to the Company to pay taxes (less up to

$100,000 of interest to pay dissolution expenses), divided by the number of then outstanding public shares, which redemption will completely

extinguish public stockholders’ rights as stockholders (including the right to receive further liquidation distributions, if any),

subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the remaining

stockholders and the Company’s board of directors, proceed to commence a voluntary liquidation and thereby a formal dissolution

of the Company, subject in each case to its obligations under Delaware law to provide for claims of creditors and the requirements of

applicable law.

order to fund working capital deficiencies or finance transaction costs in connection with our initial Business Combination, our Sponsor

or an affiliate of our Sponsor or certain of our officers and directors may, but are not obligated to, loan us funds as may be required.

If we complete our initial Business Combination, we would repay such loaned amounts.

In the event that our initial Business Combination

does not close, we may use a portion of the working capital held outside the Trust Accounts to repay such loaned amounts but no proceeds

from our Trust Accounts would be used for such repayment.

Up to $1,500,000 of such loans may be convertible into units identical to the

Placement Units, at a price of $10.00 per unit at the option of the lender.

we will need to obtain additional financing either to complete our initial Business Combination or because we become obligated to redeem

a significant number of our Public Shares upon consummation of our initial Business Combination, in which case we have entered into the

Securities Purchase Agreements for the additional financing in connection with such Business Combination.

Subject to compliance with

applicable securities laws, we expect to complete such financing simultaneously with the completion of our initial Business Combination.

If we are unable to complete our initial Business Combination because we do not have sufficient funds available to us, we will be forced

to cease operations and liquidate the Trust Accounts.

In addition, following our initial Business Combination, if cash on hand is insufficient,

we may need to obtain additional financing in order to meet our obligations.

the Company is unable to raise additional capital, the Company may be required to take additional measures to conserve liquidity, which

could include, but not necessarily be limited to, curtailing operations, suspending the pursuit of a potential transaction, and reducing

overhead expenses.

The Company cannot provide any assurance that new financing will be available to it on commercially acceptable terms,

Company intends to complete the proposed Business Combination before September 28, 2022, and we believe we have sufficient

arrangements with our vendors to continue to operate until we complete our initial Business Combination.

However, there can be no

assurance that the Company will be able to consummate the Business Combination by then.

In the event that we are unable to

consummate the Business Combination before September 28, 2022 we anticipate identifying and accessing additional capital resources

in order to extend the Business Combination period to December 28, 2022.

As a result, in connection with the Company’s

assessment of going concern considerations in accordance with Financial Accounting Standard Board’s Accounting Standards

Update (“ASU”) 2014-15, “Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going

Concern,” it is uncertain that the Company will have sufficient liquidity to fund the working capital needs of the Company

beyond September 28, 2022.

Should a Business Combination not occur by September 28, 2022, Management has determined that given the

liquidity condition of the Company as well as the uncertainty regarding the Company’s ability to obtain capital to extend the

deadline to consummate the Business Combination, there is substantial doubt about the Company’s ability to continue as a going

No adjustments have

been made to the carrying amounts of assets or liabilities should the Company be required to liquidate.

Sheet Financing Arrangements

have no obligations, assets or liabilities which would be considered off-balance sheet arrangements as of June 30, 2022.

We do not participate

in transactions that create relationships with unconsolidated entities or financial partnerships, often referred to as variable interest

entities, which would have been established for the purpose of facilitating off-balance sheet arrangements.

have not entered any off-balance sheet financing arrangements, established any special purpose entities, guaranteed any debt or commitments

of other entities, or purchased any non-financial assets.

do not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities, other than an

agreement to pay an affiliate of the Sponsor a monthly fee up to $10,000 for office space, utilities and secretarial and

administrative support services.

We began incurring these fees on June 24, 2021 and will continue to incur these fees monthly until

the earlier of the completion of the Business Combination and our liquidation.

For the three and six months ending June 30, 2022,

$30,000 and $60,000 in support fees was incurred, respectively.

$10,000 in support fees was incurred for both the period from

February 26, 2021 (inception) through June 30, 2021 and the three months ending June 30, 2021.

$10,000 and $0 in support fees was

due to Luminous Capital Inc., an affiliate of our Sponsor, at June 30, 2022 and December 31, 2021, respectively.

underwriter was paid a cash underwriting fee of 1.5% of gross proceeds of the Public Offering, or $1,725,000.

In addition, the Underwriter

is entitled to aggregate deferred underwriting commissions of $4,025,000 consisting of 3.5% of the gross proceeds of the Public Offering.

The deferred underwriting commissions will become payable to the Underwriter from the amounts held in the Trust Account solely in the

event that the Company completes an initial Business Combination, subject to the terms of the underwriting agreement.

In order to finance a portion

of the Purchase Agreement consideration and the costs and expenses incurred in connection therewith, we entered into the PIPE Securities

Purchase Agreements with the PIPE Investors concurrently with the execution of the Purchase Agreement (the “PIPE Financing”),

pursuant to which such PIPE Investors committed to purchase the aggregate 60,000 PIPE Shares and PIPE Warrants to purchase up to a number

of shares of the Class A Stock equal to 50% of shares of the Class A Stock issuable upon conversion of the PIPE Shares.

The PIPE Shares

were to be purchased at a purchase price of $1,000.00 per share for an aggregate purchase price of $60,000,000.

The PIPE Shares will convert

into shares of Class A Stock at a price of $10.00 per share of Class A Stock, which conversion price is subject to downward adjustment

pursuant to the PIPE Certificate of Designation.

The PIPE Warrants will have an exercise price of $11.50 per share of Class A Stock to

be paid in cash (except if the shares underlying the warrants are not covered by an effective registration statement after the six-month

anniversary of the closing date, in which case cashless exercise is permitted), subject to adjustment pursuant to the terms thereof.

to the PIPE Securities Purchase Agreements, the PIPE Investors have the right to terminate their commitments to purchase the PIPE Shares

and PIPE Warrants because the closing of the Business Combination did not occur by June 30, 2022.

The placement agent for the PIPE Financing

is currently contacting the investors to confirm their continued interest in investing in the PIPE Financing.

The closing of the transactions

contemplated by the PIPE Securities Purchase Agreements will occur immediately prior to the closing of the Business Combination, subject

to the satisfaction or the waiver of the closing conditions therein.

The placement agent’s fee for the PIPE Financing is currently

being negotiated.

Accounting Policies

preparation of financial statements and related disclosures in conformity with GAAP requires the Company’s management to make estimates

and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date

of the financial statements, and income and expenses during the periods reported.

Actual results could materially differ from those estimates.

The Company has identified the following as its critical accounting policies:

preparation of condensed financial statements in conformity with GAAP requires the Company’s management to make estimates and assumptions

that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial

statements and the reported amounts of revenues and expenses during the reporting periods.

estimates requires management to exercise significant judgment.

It is at least reasonably possible that the estimate of the effect of

a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating

its estimate, could change in the near term due to one or more future confirming events.

Accordingly, the actual results could differ

significantly from those estimates.

Company determines fair value based on assumptions that market participants would use in pricing an asset or liability in the principal

or most advantageous market.

When considering market participant assumptions in fair value measurements, the following fair value hierarchy

distinguishes between observable and unobservable inputs, which are categorized in one of the following levels:

Unadjusted quoted prices for identical assets or instruments in active markets.

Quoted prices for similar instruments in active markets and quoted prices for identical or similar instruments in markets

that are not active and model derived valuations whose inputs are observable or whose significant value drivers are observable.

Significant inputs into the valuation model are unobservable.

Company does not have any recurring Level 2 or Level 3 assets or liabilities.

The carrying value of the Company’s financial instruments

including its cash and accrued liabilities approximate their fair values principally because of their short-term nature.

Net Loss Per Share of Common Stock

Net loss per share is computed by dividing net loss by the weighted average number of common stock shares outstanding for

The calculation of diluted loss per share does not consider the effect of the warrants issued in connection with

the Initial Public Offering and warrants issued as components of the Private Placement Units (the “Placement Warrants”) since

the exercise of the warrants are contingent upon the occurrence of future events and the inclusion of such warrants would be anti-dilutive.

Company applies the two-class method in calculating earnings per share.

The contractual formula utilized to calculate the redemption

amount approximates fair value.

The Class feature to redeem at fair value means that there is effectively only one class of stock.

in fair value are not considered a dividend of the purposes of the numerator in the earnings per share calculation.

Net loss per common

share is computed by dividing the pro rata net loss between the redeemable shares and the non-redeemable shares by the weighted average

number of common shares outstanding for each of the periods.

The calculation of diluted loss per common stock does not consider the

effect of the warrants issued in connection with the IPO since the exercise of the warrants are contingent upon the occurrence of future

events and the inclusion of such warrants would be anti-dilutive.

The warrants are exercisable for 6,014,088 shares of common stock in

the aggregate.

Financial Instruments

Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded

derivatives in accordance with ASC Topic 815, “Derivatives and Hedging”.

For derivative financial instruments that are accounted

for as liabilities, the derivative instrument is initially recorded at its fair value on the grant date and is then re-valued at each

reporting date, with changes in the fair value reported in the statements of operations.

The classification of derivative instruments,

including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period.

Derivative liabilities are classified in the balance sheet as current or non-current based on whether net-cash settlement or conversion

of the instrument could be required within 12 months of the balance sheet date.

Class A Common Stock Subject to Possible Redemption

The Company accounts for its

common stock subject to possible redemption in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic

480 “Distinguishing Liabilities from Equity.” Common stock subject to mandatory redemption (if any) is classified as a liability

instrument and is measured at fair value.

Conditionally redeemable common stock (including common stock that features redemption rights

that are either within the control of the holder or subject to redemption upon the occurrence of events not solely within the Company’s

control) is classified as temporary equity.

At all other times, common stock is classified as stockholders’ equity.

The Company’s

common stock features certain redemption rights that are outside of the Company’s control and subject to occurrence of uncertain

future events.

As of December 31, 2021, there were 12,028,175 shares of Class A Common Stock outstanding, for which 11,500,000 shares

of Class A Common Stock were subject to possible redemption.

As of June 30, 2022, there were 12,028,175 shares of Class A Common Stock

outstanding with 7,695,128 shares of Class A Common Stock subject to possible redemption with 3,804,872 shares held by purchasers subject

to the forward purchase agreement who have waived their redemption rights.

Accounting Pronouncements

August 2020, the FASB issued Accounting Standards Update (“ASU”) No.

2020-06, “Debt—Debt with Conversion and

Other Options (Subtopic 470- 0) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40):

Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity” (“ASU 2020-06”), which

simplifies accounting for convertible instruments by removing major separation models required under current U.S.

removes certain settlement conditions that are required for equity-linked contracts to qualify for the derivative scope exception,

and it simplifies the diluted earnings per share calculation in certain areas.

ASU 2020-06 is effective January 1, 2022 and should

be applied on a full or modified retrospective basis, with early adoption permitted beginning on January 1, 2021.

The Company is

currently assessing the impact, if any, that ASU 2020-06 would have on its financial position, results of operations or cash

does not believe that any other recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a

material effect on the Company’s financial statements.

References in this section to “we,” “us,” or “our”

refer to SHF Holdings, Inc.

(herein referred to as the “Company”).

References to “management” refer to our officers

and board of directors.

The following discussion and analysis of our financial performance and results of operations should be read in

conjunction with our condensed consolidated financial statements.

Looking Statements

statements other than statements of historical facts contained in this report, including statements regarding future operations, are

forward-looking statements.

In some cases, forward-looking statements may be identified by words such as “believe,” “may,”

“will,” “estimate,” “continue,” “anticipate,” “intend,” “could,”

“would,” “expect,” “objective,” “plan,” “potential,” “seek,”

“grow,” “target,” “if,” and similar expressions intended to identify forward-looking statements.

We have based these forward-looking statements largely on our current expectations and projections about future events and trends that

we believe may affect our financial condition, results of operations, business strategy, short-term and long-term business operations,

objectives, and financial needs.

in 2015 by PCCU (please see “Business Reorganization” below for a description of SHF’s organization), SHF’s mission

is to provide access to reliable and compliant financial services for the legal cannabis industry.

Through that mission and as an early

leader with over seven years of experience, SHF is a leading provider of access to reliable and compliance driven banking, lending and

other financial services to financial institutions desiring to provide those services to the cannabis industry.

our proprietary platform and on a multi-state level, SHF provides access to the following banking related services through PCCU and other

financial institutions:

checking and savings accounts

management accounts

and investment options

services (via third party relationships)

deposit services

Clearing House (ACH) payments and origination

services allow Cannabis Related Businesses (herein referred to as “CRBs”) to obtain services from financial institutions

that allow them to run their business more efficiently and effectively with improved financial insight into their business and access

to resources to help them grow.

Due to limited availability of payment and other banking solutions for the cannabis industry, most businesses

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 deposits of cash receipts 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.

Because SHF is not a financial institution, SHF does not hold customer deposits.

All deposit accounts

are held by SHF’s financial institution clients 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 less punitive terms than the current industry average.

Our financial institution clients offer

loan options including senior secured debt and operating lines of debt.

Collateral types include real estate, equipment, and other business

We also provide access to lending options for ancillary service providers serving the cannabis industry as these businesses also

can have difficulty finding reliable financial services.

ensure access to consistent and dependable banking access to CRBs, we provide our compliance, validation and monitoring services to financial

institutions in a compliance driven environment ensuring strict adherence to the Bank Secrecy Act/FinCEN guidance and related anti money

laundering provisions.

Since inception, SHF has assisted PCCU in processing more than $12 billion in cannabis related funds and, through

its relationship with PCCU and other financial institutions, SHF has successfully navigated 16 state and federal banking exams.

strategically selected geographic areas, SHF licenses to other financial institutions its proprietary software and Safe Harbor Program

(the “Program”) 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:

customer due diligence – Know Your Customer

application management

management support

exam assistance

Reorganization

On February 11, 2022, SHF, LLC and SHF

Holding Co., LLC, the sole member of SHF, LLC, and Partner Colorado Credit Union (“PCCU”), the sole member of SHF

Holding, Co., LLC, entered into a definitive purchase agreement (herein referred to as the “Business Combination”) with

Northern Lights Acquisition Corp.

(“NLIT”), a special purpose acquisition company, and its sponsor, 5AK, LLC.

In connection with the closing of this transaction, NLIT changed its name to “SHF Holdings, Inc.” (herein referred to as the

PCCU’s Board of Directors approved the contribution of certain assets and operating activities

associated with operations from both the Branches and Safe Harbor Services (“SHS” or “Oldco”), a wholly-owned

subsidiary of PCCU, to SHF Holding, Co., LLC.

SHF Holding, Co., LLC then contributed the same assets and related

operations to SHF, LLC with PCCU’s investment in SHF, LLC maintained at the SHF Holding, Co., LLC level (the “reorganization”).

reorganization effectively occurred July 1, 2021.

In conjunction with the reorganization, all Branches’ employees and certain

PCCU employees were terminated from PCCU and hired as SHF, LLC employees.

Collectively, Oldco, the Branches and SHF, LLC represent the

“Carved-Out Operations.” After the reorganization, SHF, LLC contains the entirety of the Carved-Out Operations and Oldco was

In addition, effective July 1, 2021, the entity entered into an Account

Servicing Agreement and Support Servicing Agreement which were subsequently amended and restated.

Pursuant to the purchase agreement,

upon the closing of the transaction, NLIT purchased all of the issued and outstanding membership interests of SHF in exchange for an aggregate

of $185,000,000, consisting of (i) 11,386,139 shares of the entity’s Class A common stock with an aggregate value equal to $115,000,000

and (ii) $70,000,000 in cash.

At transaction close, 1,831,683 shares of the Class A Common Stock were deposited with an escrow agent to

be held in escrow for a period of 12 months following the closing date to satisfy potential indemnification claims of the parties.

addition, $3,143,388 in cash and cash equivalents representing the amount of cash on hand at July 31, 2021, less accrued but unpaid liabilities,

were paid to PCCU at the final transaction close.

On September 19, 2022, the parties entered into the first amendment to the purchase

agreement to extend the date by which the closing had to occur from August 31, 2022 until September 28, 2022 and provide for the deferral

of $30 million of the $70 million in cash due at the closing.

On September 22, 2022, the parties entered into the second amendment to

the purchase agreement to provide for the deferral of a total of $50 million of the $70 million due at the closing.

On September 28, 2022,

the parties entered into the third amendment to the purchase agreement to provide for the deferral of a total of $56,949,800 of the $70,000,000

due at the closing.

On September 28, 2022, the

parties consummated the Business Combination, resulting in NLIT, consistent with the aforementioned parameters, purchasing all of the

issued and outstanding membership interests of the SHF, LLC in exchange for an aggregate of $185,000,000, consisting of (i) 11,386,139

shares of the Company’s Class A common stock with an aggregate value equal to $115,000,000 and (ii) $70,000,000 in cash, $56,949,801

of which will be paid on a deferred basis.

Subsequent to the completion

of the Business Combination, the status of PCCU has changed from Parent to majority shareholder of the Company pursuant to its ownership

of 60.8% of the Company.

The Company generates both interest income and fee income through providing

a variety of services to financial institutions desiring to service the cannabis industry including, among other things, Bank Secrecy

Act and other regulatory compliance and reporting, onboarding, responding to account inquiries, responding to customer service inquiries

relating to CRB depository accounts held at PCCU, and sourcing and managing loans.

In addition to PCCU, the Company provides these similar

services and outsourced support to other financial institutions providing banking to the cannabis industry.

These services are provided

to other financial institutions under the Safe Harbor Master Program Agreement.

Pursuant to the purchase agreement, the Company entered into amended services

agreements under similar terms as the July 2021 agreements.

In addition, in conjunction with the purchase agreement, SHF, LLC and PCCU

entered into an Amended and Restated Loan Servicing Agreement.

The purpose of the $56,949,800

deferral is to provide the Company with additional cash to support its post-closing activities.

Pursuant to the third amendment

to the unit purchase agreement, the Company will pay the deferred consideration in one payment of $21,949,801 on or before December 15,

2022, and the $35,000,000 balance in six equal installments of $6,416,667, payable beginning on the first business day following April

1, 2023 and on the first business day of each of the following five fiscal quarters, for a total of $38,500,002, including interest of

Furthermore, PCCU agreed to defer $3,143,388, representing certain excess cash of SHF, LLC due to the Seller under the definitive

unit purchase agreement, and the reimbursement of certain reimbursable expenses under the definitive unit purchase agreement.

On October 26, 2022, the Company, entered into a Forbearance Agreement (the “Forbearance Agreement”) with PCCU and Luminous Capital USA Inc.

(“Luminous”).

As per the terms of the agreement, PCCU has agreed to defer all payments owed pursuant to the Purchase Agreement for a period of six (6)

months from the date hereof while the Parties engage in good faith efforts to renegotiate the payment terms applicable to the Deferred

Obligation (the “Forbearance Period”).

terms of the Amended and Restated Account Servicing Agreement and Amended and Restated Support Services Agreement are as follows:

to the Amended and Restated Account Servicing Agreement, SHF’s fees for such services will equal all cannabis-related income,

including all lending-related income (such as loan origination fees, interest income on CRB-related loans, participation fees and

servicing fees), investment income, interest income, account activity fees, processing fees, flat fees, and other revenue generated

from cannabis and multi-state hemp accounts that are hosted on PCCU’s core system.

The Amended and Restated Account Servicing

Agreement is for an initial term of three years and will renew for additional one-year terms unless a party provides 120 days’

notice of non-renewal, provided that PCCU may not provide notice of non-renewal until 30 months following the signing date.

and Restated Account Servicing Agreement initially provided that the agreement would terminate within 60 days of SHF no longer qualifying

as a “credit union service organization” (a “CUSO”) or within 60 days of the assumption by a third party

of all CRB-related accounts;

however, on May 23, 2022, SHF and PCCU entered into the Second Amended and Restated Account Servicing

Agreement, which removed the provision providing for the termination of the agreement within 60 days of SHF no longer qualifying

as CUSO, as SHF ceased to qualify as a CUSO following the closing of the Business Combination.

to the Amended and Restated Support Services Agreement, PCCU will continue to provide to SHF certain operational and administrative

services relating to, among other things, human resources, employee benefits, IT and systems, accounting and marketing and capacity

for CRB depository accounts for a monthly fee equal to $30.96 per account in 2022 and $25.32 per account in 2023 and 2024.

as it pertains to CRB deposits held at PCCU, investment and interest income earned on these deposits (excluding interest income on

loans funded by PCCU) will be shared 25% to PCCU and 75% to SHF.

SHF will also reimburse PCCU for any of its out-of-pocket expenses

relating to the services provided to SHF.

Finally, under the Amended and Restated Support Services Agreement, PCCU will continue

to allow its ratio of CRB-related deposits to total assets to equal at least 65% unless otherwise dictated by regulatory, regulator

or policy requirements.

The Amended and Restated Support Services Agreement has the same term and termination provisions as the Amended

and Restated Account Servicing Agreement, including a provision providing for the termination of the agreement within 60 days of

SHF no longer qualifying as a “credit union service organization.” On May 23, 2022, SHF and PCCU entered into the Second

Amended and Restated Support Services Agreement, which removed the provision providing for the termination of the agreement within

60 days of SHF no longer qualifying as a CUSO, as SHF ceased to qualify as a CUSO following the closing of the Business Combination.

February 11, 2022, SHF entered into an Amended and Restated Loan Servicing Agreement with PCCU.

The agreement sets forth the application, underwriting and

approval process for loans from PCCU to CRB customers and the loan servicing and monitoring responsibilities provided by both PCCU and

For the loans subject to this agreement, SHF originates the loans and performs all compliance analysis, credit analysis of the potential

borrower, due diligence and underwriting and all administration, including hiring and incurring the costs of all related personnel or

third-party vendors necessary to perform these services.

PCCU receives a monthly servicing fee at an annual rate of 0.25% of the then-outstanding

principal balance of each loan funded by PCCU.

Under the Loan Servicing Agreement, SHF has agreed to indemnify PCCU from all claims related

to default-related loan losses as defined in the Loan Servicing Agreement.

The agreement is for an initial term of three years and will

renew for additional one-year terms unless a party provides 120 days’ notice of non-renewal or there is a termination for cause,

provided that PCCU may not provide notice of non-renewal until 30 months following the signing date.

Pursuant to this agreement, the

Company reported expenses of $ 204,535 and $ 420,085 for the three-month and nine-month periods ended September 30, 2022 and $93,285

and $261,496 for the three-month and nine-month periods ended September 30, 2021.

SHF lending services program currently depends on PCCU as its largest funding source for new loans to CRBs.

Under PCCU’s loan policy

for loans to CRBs, PCCU’s board of directors has approved aggregate lending limits at the lessor of 1.3125 times PCCU’s net

worth or 65% of total CRB deposits.

Concentration limits for the deployment of loans are further categorized as (i) real estate secured,

(ii) construction, (iii) unsecured and (iv) mixed collateral with each category limited to a percentage of PCCU’s net worth.

addition, loans to any one borrower or group of associated borrowers are limited by applicable National Credit Union Association regulations

to the greater of $100,000 or 15% of PCCU’s net worth.

Agreement and Public Company Costs

Business Combination detailed above was accounted for as a reverse recapitalization, with no goodwill or other intangible assets recorded,

in accordance with accounting principles generally accepted in the United States of America.

Under this method of accounting, NLIT is

treated as the acquired company for financial reporting purposes.

Accordingly, for accounting purposes, the Business Combination is treated

as the equivalent of SHF issuing shares for the net assets of NLIT, accompanied by a recapitalization.

The net assets of NLIT are recognized

at fair value (which is expected to be consistent with carrying value), with no goodwill or other intangible assets recorded.

related events in connection with the Business Combination are summarized below:

2,875,000 of Founder Class B Stock converted at the closing to an equal number of shares of Class A stock.

closing of the Business Combination, 11,386,139 shares of Class A Stock were issued to the Seller as set forth in and pursuant to

the terms of the Purchase Agreement.

Seller was due to receive a cash payment of $3.1 million at the consummation of the Business Combination, which represented the amount

of SHF’s cash on hand at July 31, 2021, less accrued but unpaid liabilities.

In addition, pursuant to the terms of the purchase

agreement, the Company is responsible for reimbursing the Seller for its transaction expenses.

Approximately

$56.9 million of the $70.0 million of cash proceeds due to PCCU was deferred and is due to the Seller.

Approximately $21.9 million

of the amount is payable to PCCU beginning December 15, 2022.

The residual $35.0 million is due in six quarterly instalments of $6.4

million thereafter.

Interest accrues at an effective annual rate of approximately 7.7%.

A sum of 1,200,000 founder shares

were escrowed until the amount is paid in full.

Parent-Entity Net Investment appearing in the balance sheet of SHF amounting to $9,124,297 on the date of business combination was

transferred to additional paid in capital.

prior to the Closing, 20,450 shares of Series A Convertible Preferred were purchased by the PIPE Investors pursuant to the PIPE Securities

Purchase Agreements for an aggregate value of $20,450,000.

The shares of Series A Convertible Preferred are convertible into 2,045,000

shares of Class A Stock assuming a purchase price of $10.00 per share of Class A Stock.

Twenty (20) percent of the aggregate value

was deposited into a third party escrow account for purposes of paying the PIPE Investors any required Registration Delay Payments.

Upon the filing of a registration statement 10 calendar days subsequent to closing, 17.5% of the escrow amount will be released with

the remaining amount released once all securities are included in an effective registration statement.

tax purposes, the transaction will be treated as a taxable asset acquisition, resulting in an estimated tax basis Goodwill balance

of $43,411,985, creating a deferred tax asset reported as Additional Paid-in Capital in the equity section of the balance sheet as

of the date of the business combination.

There is not any goodwill for book reporting purposes as no goodwill or other intangible

assets are to recorded in accordance with accounting principles generally accepted in the United States of America.

The Company is authorized to issue 1,250,000 preferred shares with a par value of $0.00001 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, 2022,

there were 20,450 preferred shares issued or outstanding and no preferred shares outstanding on December 31, 2021.

A Common Stock:

The Company is authorized to issue up to 125,000,000 shares of Class A Common Stock with a par value of $0.00001

Holders of the Company’s Class A Common Stock are entitled to one vote for each share.

As of September 30, 2022

and December 31, 2021, there were 18,715,912 and 0 shares, respectively, of Class A Common Stock issued or outstanding.

As of September

30, 2022, 3,804,872 Class A Common Stock are held by the purchasers under that certain forward purchase agreement dated June 16,

2022 by and among the Company and such purchasers

Parent-Entity

Net Investment:

Parent-Entity Net Investment balance in the combined balance sheets represents PCCU’s historical net investment

in the Carved-Out Operations.

For purposes of these combined financial statements, investing requirements have been summarized as

“Parent-Entity Net Investment” and represents equity as no cash settlement with PCCU is required.

No separate equity

accounts are maintained for SHS, SHF or the Branches.

addition to the measures presented in our consolidated financial statements, our management regularly monitors certain measures in the

operation of our business.

These key metrics are discussed below.

Before Interest Taxes Depreciation and Amortization (EBITDA) and Adjusted EBITDA

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 income 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 income (the most directly comparable GAAP financial measure) to EBITDA and from EBITDA to Adjusted EBITDA.

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.

and Adjusted EBITDA have limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis

of our results as reported under GAAP.

Some of these limitations are as follows:

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;

and Adjusted EBITDA do not reflect changes in, or cash requirements for, our working capital needs;

and Adjusted EBITDA do not reflect tax payments that may represent a reduction in cash available to us.

of these limitations, you should consider EBITDA and Adjusted EBITDA alongside other financial performance measures, including net loss

and our other GAAP results.

reconciliation of net income to non-GAAP EBITDA and Adjusted EBITDA is as follows:

Three Months Ended

September 30,

Interest expense

Depreciation and amortization expense

Other adjustments –

Loan loss provision

Loan origination

fees and costs

Adjusted EBITDA

Nine Months Ended

September 30,

Interest expense

Depreciation and amortization expense

Other adjustments –

Loan loss provision

Deferred loan origination fees and costs

Adjusted EBITDA

decrease in our income on an EBITDA and Adjusted EBITDA basis for the nine months ended September 30, 2022 is due to decreased

revenue and increased operating expenses, as discussed under “— Discussion of our Results of Operations ”

Other adjustments include estimated future loan losses not yet realized including amounts indemnified to PCCU for loans

funded by them.

Effective February 2022, SHF entered into an Amended and Restated Loan Servicing Agreement with PCCU, pursuant to which SHF has agreed to

indemnify PCCU for claims associated with CRB activities including any loan default related losses for loans funded by PCCU.

Deferred loan origination fees and costs represent the change in net deferred loan origination fees and costs.

When included with a

new loan origination, we receive an upfront loan origination fee in conjunction with new loans funded by our financial institution

partners and incur costs associated with originating a specific loan.

For accounting purposes, the cash received for loan origination fees and costs are initially deferred and recognized as interest

income utilizing the interest method.

our business operations, we monitor the following key metrics.

account balances, number of accounts and average account balances

lending capacity 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.

fees per average active accounts managed

a significant amount of our fees is generated from account openings, 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.

Nine Months Ended September 30,

Average monthly ending deposit balance

$ 148,191,118

(33,882,155 )

Average active accounts

Average account balance

Average fees per account

Three Months Ended September 30,

Average monthly ending deposit balance

$ 158,906,481

(34,029,689 )

Average active accounts

Average account balance

Average fees per account

the average of monthly ending account balances

account activity fee revenue

the average of monthly ending active accounts

to the below section – Discussion of Results of our Operations for additional discussion of trends.

the average number of accounts increased for the three and nine months ended September 30, 2022 as compared to the three months ended

September 30, 2021, the average account size and account fees decreased as we experienced some churn of larger clients replaced by smaller

We expect this trend to shift as we lead with our lending program typically requiring borrowers to place deposits with financial

institutions with which we have relationships.

lending operations are considered early stage, as it began its focused efforts on expanding its lending in 2021.

We are focused on enhancing

and growing our lending platform.

Incremental lending key metrics will be monitored as this portion of our business grows in volume.

Metrics will include average loan balance, average life to repayment, average effective interest rate and loan status, amongst others.

of our Results of Operations

generates interest and fee income through providing a variety of services to PCCU to facilitate its banking services to CRBs including,

among other things, Bank Secrecy Act and other regulatory compliance and reporting, onboarding, responding to account inquiries, responding

to customer service inquiries relating to CRB deposit accounts held at financial institution clients, and sourcing and originating loans.

In addition, SHF provides these similar services and outsourced support to other financial institutions providing banking to the cannabis

These services are provided under the Safe Harbor Master Program Agreement.

expenses consist of compensation and benefits, professional services, rent expense, parent allocations, provisions for loan losses and

other general and administrative expenses.

and benefits consist of employee wages and associated benefits while professional services consist of legal, general consulting and accounting

allocations include corporate allocations such as information technology, customer support, marketing, executive compensation and other

general and administrative expenses attributed to the Carved-Out Operations based on the size of the specifically identifiable CRB’s

deposit balances, deposit activity and accounts relative to the totals of consolidated PCCU.

These allocations were discontinued effective

July 1, 2021 in conjunction with the reorganization.

reports a provision for loan losses both as it relates to loans funded internally and those carried by PCCU or other financial institutions.

SHF indemnifies PCCU for losses on loans to borrowers sourced by SHF and funded by PCCU.

SHF anticipates comparable arrangements with

other financial institutions that fund loans to borrowers sourced by SHF.

general and administrative expenses consist of various miscellaneous items including account hosting fees, insurance expense,

advertising and marketing, travel meals and entertainment and other office and operating expense.

of our Results of Operations —2022 Compared to 2021 (Three Months Ended September 30)

Three Months Ended September 30,

Deposit, activity, onboarding income

Safe Harbor Program income

Investment income

Loan interest income

Total Revenue

fee income consists of deposit account fees, activity fees and onboarding income.

Historically, SHF has received from PCCU fees based

on cannabis related deposit account activity.

During 2021, we reduced our fee percentage for cannabis specific accounts in order to ensure

we were competitive with the market.

During January 2022, we implemented a flat fee for certain CRB accounts based on historical and

anticipated deposit levels.

In addition, we receive a flat fee and lower rates for ancillary accounts, which are accounts are provided

to businesses servicing the cannabis industry in general but that do not manufacture, possess, distribute or transport cannabis.

ratio of ancillary accounts to cannabis specific accounts increased during 2021.

licenses similar account services and outsourced support to other financial institutions providing banking to the cannabis industry.

These services are provided under the Safe Harbor Master Program Agreement.

Revenue from the licensing of this program has intentionally

decreased as we strategically narrow the financial institutions permitted to license the program.

income increased as a result of recent Federal Reserve interest rate increases.

interest income has increased as SHF increases its focus on providing lending services.

At the end of 2020, SHF serviced two loans as

compared to four at the end of 2021.

In addition, for the period ending September 30, 2022, SHF sourced six incremental loans funded

by PCCU under the Loan Servicing Agreement.

SHF anticipates significantly increasing its loan services during 2022 with approximately

$24.40 million of SHF originated loans in underwriting as of November 2, 2022.

discussed in the Business Reorganization section above, PCCU allocations were discontinued effective July 1, 2021 and SHF entered

into both an account servicing agreement and support service agreement.

There is no impact on revenue as a result of implementing these

Three Months Ended September 30,

Compensation and employee benefits

Professional services

Provision for loan losses

General and administrative expenses

Total Operating Expenses

and employee benefits increased primarily as a result of Sundie Seefried, our CEO, and one of our Vice Presidents resigning from PCCU

effective July 1, 2021 and beginning employment at SHF the same date.

Prior to the July 1, 2021 reorganization a portion of their costs

would have been included in the corporate allocations.

Amounts also increased as SHF increased head count in conjunction with anticipated

services expense increased primarily due to audit fees incurred and increased consulting fees as we increased our lending activity and

prepared for the reverse recapitalization transaction and becoming a public company.

allocations decreased to zero as they were discontinued in conjunction with the reorganization discussed in the Business Reorganization

section above.

for loan losses has increased as SHF focuses on increasing lending activity.

and administrative expenses increased across various categories including:

i) approximately $111,251 in account and investment fees hosting

fees as a result of the reorganization, ii) approximately $59,803 in increased advertising and marketing as we focus on growth, iii)

$15,118 in travel, meals, and entertainment, iv) $7,846 in dues and subscriptions, and v) $9,160 in loan servicing fees, and vi) $13,030

in other operating expenses due to a legal settlement during the three months ending September 30, 2021.

of our Results of Operations —2022 Compared to 2021 (Nine Months Ended September 30)

Nine Months Ended September 30,

Deposit, activity, onboarding income

Safe Harbor Program income

Investment income

Loan interest income

Total Revenue

fee income consists of deposit account fees, activity fees and onboarding income.

Historically, SHF has charged fees based on cannabis

related deposit account activity.

During 2022, we reduced our fee percentage for cannabis specific accounts in order to ensure we were

competitive with the market and for many accounts implemented a flat fee structure for certain CRB accounts based on historical and anticipated

deposit levels.

In addition, we receive 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.

The ratio of ancillary

accounts to cannabis specific accounts increased during 2022.

provides similar account services and outsourced support to other financial institutions providing banking to the cannabis industry.

These services are provided under the Safe Harbor Master Program Agreement.

Revenue has decreased as we narrow the financial institutions

and states we allow under this program and instead focus on servicing CRBs directly.

income increased as a result of recent Federal Reserve interest rate increases.

interest income has increased as SHF increases its focus on lending.

For the nine months ended September 30, 2021, SHF serviced 4 loans

as compared to 10 loans for the nine months ended September 30, 2022.

discussed in the reverse recapitalization section above, PCCU allocations were discontinued effective July 1, 2022 and SHF entered

into both an account servicing agreement and support service agreement.

There is no impact on revenue as a result of implementing these

Nine Months Ended Sep 30,

Compensation and employee benefits

Professional services

Provision for loan losses

General and administrative expenses

Total Operating Expenses

and employee benefits increased partially as a result of Sundie Seefried, our CEO, and one of our Vice President’s resigning from

PCCU effective July 1, 2021, and beginning employment at SHF the same date.

Prior to the July 1, 2021 reorganization a portion of their

costs would have been included in the Parent allocations.

Amounts also increased as SHF increased head count in conjunction with anticipated

services expense increased primarily due to audit fees incurred and increased consulting fees as we increase our lending activity and

prepare to become a public company.

allocations decreased to zero as they were discontinued in conjunction with the reorganization discussed in the Business Reorganization

section above.

for loan losses has increased as SHF focuses on increasing lending activity.

and administrative expenses increased across various categories including:

i) approximately $158,589 in account and hosting fees as a

result of the reorganization, ii) approximately $183,239 in increased advertising and marketing as we focus on growth, iii) $42,815 in

travel, meals, and entertainment, iv) $17,682 in dues and subscriptions, v) $14,264 in loan servicing fees, and vi) $6,068 in business

insurance, offset by a decrease of $155,874 in other operating expenses.

cash equivalents, and restricted cash

cash equivalents, and restricted cash totaled $7,273,012 and $5,495,905 as of September 30, 2022, December 31, 2021, respectively.

compared to the nine months ended September 30, 2021, cash provided by operations decreased from $1,972,803 to $2,349,763 for the nine

months ended September 30, 2022, mainly due to reduced net income from operations with an additional amount resulting from changes across

operating assets and liabilities.

See discussion under “— Discussion of our Results of Operations ” above for

more information.

assets and liabilities

revenue is primarily related to contract liabilities associated with Safe Harbor agreements.

As of December 31, 2021, SHF reported a

contract asset and liability of $18,317 and $8,333, respectively.

As of September 30, 2022, SHF reported a contract asset of $7,676 and contract

liability of $14,583.

of September 30, 2022, the Company had $7,273,012 in cash and net working capital of ($28,241,810), as compared to $5,495,905 in

cash and net working capital of $5,922,023 at December 31, 2021.

The driver of the working capital deficit is the current portion of

the long-term payable owed to the Seller, PCCU, from the aforementioned business combination.

To permit the business combination

transaction to be completed, PCCU agreed to an unsecured future payment obligation of $56,949,800, the current portion of which is

This large payment is offset by $4,090,000 in proceeds the Company expects pursuant to the PIPE offering currently held

in escrow to be released when the Company’s currently pending registration statement on Form S-1 becomes effective, as well as

proceeds from the Forward Purchase Agreement subsequent to the effectiveness of the pending Form S-1.

Furthermore, PCCU has agreed to

a six-month deferral while the Company and PCCU negotiate a solution regarding the Company’s payment obligation to

Company has not incurred significant cumulative consolidated operating losses and does not have negative cash flows.

As of September

30, 2022, the Company has retained earnings of $243,981;

furthermore, for the nine months ended September 30, 2022, the Company generated

$1,894,179 in net income and $1,972,803 in operating cash flows.

The Company also has the potential ability to renegotiate its aforementioned

payable with PCCU, thus eliminating any working deficit.

These factors, however, do not remove substantial doubt regarding the Company’s

ability to continue as a going concern.

If the Company is not able to sustain its present level of operations, it may be forced to make

reductions in spending, extend payment terms with suppliers, liquidate assets where possible, or suspend or curtail planned expansion

Any of these actions could materially harm the Company’s business, results of operations and future prospects.

The accompanying

unaudited combined financial statements have been prepared assuming the Company will continue as a going concern, which contemplates

the realization of assets and the satisfaction of liabilities in the normal course of business, and do not include any adjustments to

reflect the possible future effects on the recoverability and classification of assets or amounts and classification of liabilities that

may result should the Company not continue as a going concern.

Management does not believe they have sufficient cash for the next twelve

months from the date of this report to continue as a going concern without maintaining its present level of business activity.

also believes that its pending business combination transaction that was agreed to on October 31, 2022 (refer to the “Subsequent

Events” section within Form 10-Q) will be consistent with allowing the Company to continue as a going concern.

purchase agreement

June 16, 2022, NLIT entered into a Forward Purchase Agreement with Midtown East Management NL, LLC (“Midtown East”).

to entering into the Forward Purchase Agreement, the Company, NLIT, and Midtown East entered into assignment and novation agreements

with Verdun Investments LLC (“Verdun”) and Vellar Opportunity Fund SPV LLC – Series 1 (“Vellar”), pursuant

to which Midtown East assigned its obligations as to 1,666,666 shares of the shares of Class A Stock to be purchased under the Forward

Purchase Agreement to each of Verdun and Vellar.

As contemplated by the Forward Purchase Agreement:

to the closing, Midtown East, Verdun and Vellar purchased approximately 3.8 million shares

of NLIT Class A common stock directly from investors at market price in the public market.

Midtown East and other counter parties waived their redemption rights with respect to the

acquired shares.

business day following the closing, NLIT paid approximately $39.3 million from the cash held

in its trust account to Midtown East;

Verdun and Vellar for the shares purchased and approximately

$0.3 million in related expense amounts.

any time prior to the Maturity Date (defined as the earlier of i) the third anniversary of

the closing of the Business Combination, ii) the shares are delisted from The Nasdaq Stock

Market or (iii) during any 30 consecutive Scheduled Trading Day-period following the closing

of the Business Combination, the VWAP Price for 20 Scheduled Trading Days during such period

shall be less than $3.00 per share), Midtown East, Verdun and Vellar may elect an optional

early termination to sell some or all of the shares (the “Terminated Shares”)

of Class A Stock in the open market.

If Midtown East, Verdun and Vellar sell any shares prior

to the Maturity Date, the pro-rata portion of the Reset Price will be released from the escrow

account and paid to SHF.

Midtown East, Verdun and Vellar shall retain any proceeds in excess

of the Reset Price that is paid to SHF.

● At the Maturity Date, Midtown East, Verdun and Vellar shall be entitled

to (1) the product of the shares then held by them multiplied by the Forward Price, and (2) an amount, in cash or shares at the sole discretion

of NLIT, equal to (a) in the case of cash, the product of(i)(x) 3.8 million shares less (y) the number of Terminated Shares and (ii) $2.00

(the “Maturity Cash Consideration”) and (b) in the case of shares, (i) the Maturity Cash Consideration divided by (ii) the

VWAP Price for the 30 Scheduled Trading Days prior to the Maturity Date.

Accounting Policies and Estimates

consolidated financial statements and accompanying notes are prepared in accordance with GAAP.

Preparing consolidated financial statements

requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses,

as well as disclosure of contingent assets and liabilities.

An appreciation of our critical accounting policies is necessary to understand

our financial results.

In some cases, we could reasonably use different accounting policies and estimates, and changes in our estimates

are reasonably likely to occur from period to period.

Accordingly, actual results could differ materially from our estimates, and our

financial condition or results of operations could be affected.

We base our estimates on our experience and other assumptions that we

believe are reasonable, and we evaluate these estimates on an ongoing basis.

We refer to accounting estimates of this type as critical

accounting policies and estimates, which we discuss further below.

adopted Accounting Standards Codification (“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 SHF expects to be entitled in exchange for those goods or services.

ASC 606 defines

a five-step process to achieve this core principle and, in doing so, it is possible more judgment and estimates may be required within

the revenue recognition process than required under existing accounting principles generally accepted in the United States of America

GAAP”) 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.

SHF adopted ASC 606

for all applicable contracts using the modified retrospective method, which would have required a cumulative-effect adjustment, if any,

as of the date of adoption.

The adoption of ASC 606 did not have a material impact on SHF’s financial statements as of the date

As a result, a cumulative-effect adjustment was not required.

is recorded at a point in time when the performance obligation is satisfied, and no contingencies exist.

Revenue consists primarily of

fees earned on deposit accounts held at PCCU but serviced by SHF such as bank account charges, onboarding income, account activity fee

income and other miscellaneous fees.

addition, SHF recognizes revenue from the Master Program Agreement.

The Master Program Agreement is a non-exclusive and non-transferable

right to implement and utilize the Safe Harbor Program.

The Safe Harbor Program has two performance obligations;

an implementation fee

recognized when the contract is effective and a service fee recognized ratable over the contract term as the compliance program is executed.

SHF also records revenue for interest on loans and investment income allocated by PCCU based on specific customer balances.

received in advance of the service being provided is recorded as a liability under deferred revenue on the combined balance sheets.

Safe Harbor Program contracts are three-year contracts with amounts due monthly, quarterly or annually based on contract terms.

consist of financial institutions providing services to CRBs.

Revenues are concentrated in the United States.

for loan losses

allowance for loan losses is a valuation allowance for probable incurred credit losses, increased by the provision for loan losses and

decreased by charge-offs less recoveries.

Management estimates the required allowance for loan losses balance using past loan loss experience,

known and inherent risks in the nature and volume of the portfolio, information about specific borrower situations and estimated collateral

values, economic conditions, and other factors.

Allocations of the allowance for loan losses may be made for specific loans, but the

entire allowance is available for any loan that, in management’s judgment, should be charged-off.

Loan losses are charged against

the allowance for loan losses when management believes the uncollectibility of a loan balance is confirmed.

allowance for loan losses consists of specific and general components.

The specific component relates to loans that are individually

classified as impaired or loans otherwise classified as substandard or doubtful.

The general component covers non-classified loans and

is based on historical loss experience adjusted for current factors.

to the nature of uncertainties related to any estimation process, Management’s estimate of loan losses inherent in the loan portfolio

may change in the near term.

However, the amount of the change that is reasonably possible cannot be estimated.

loan is considered impaired when, based on current information and events, full payment under the loan terms is not expected.

is generally evaluated in total for smaller-balance loans of similar nature such as a commercial loan and commercial lines of credit,

but may be evaluated on an individual loan basis if deemed necessary.

If a loan is impaired, a portion of the allowance is allocated

so that the loan is reported, net, at the present value of estimated future cash flows using the loan’s existing rate or at the

fair value of collateral if repayment is expected solely from the collateral.

loans SHF intends to originate will be secured by various types of assets of the borrowers, including real property and certain personal

property, including value associated with other assets to the extent permitted by applicable laws and the regulations governing the borrowers.

The documents governing the loans also include a variety of provisions intended to provide remedies against the value associated with

Collection procedures are designed to ensure that neither SHF nor its financial institution clients who provide funding for

a loan, nor a third-party agent engaged to assist with the liquidation or foreclosure process, will take possession of cannabis inventory,

cannabis paraphernalia, or other cannabis-related assets, nor will they take title to real estate used in cannabis-related businesses.

Upon default of a loan, a third-party agent will be engaged to work with the borrower to have the borrower sell collateral securing the

loan to a third party or to institute a foreclosure proceeding to have such collateral sold to generate funds towards the payoff of the

Applicable regulations under state law that govern CRBs generally do not permit the taking of title to real estate involved in

commercial sales of cannabis, whether through foreclosure or otherwise, without prior regulatory approval.

The sale of a license or other

realization of the value of licenses also requires the approval of state and local regulatory authorities.

A defaulted loan may also

be sold if such a sale would yield higher proceeds or that a sale could be accomplished more quickly than a foreclosure proceeding while

yielding proceeds comparable to what would be expected from a foreclosure sale.

Such sale of the loan would be conducted through a third-party

administrative agent.

However, SHF can provide no assurances that a sale of such loans would be possible or that the sales price of such

loans would be sufficient to recover the outstanding principal balance, accrued interest, and fees.

indemnification component of the Loan Servicing Agreement is accounted for in accordance with ASC 450-20 Loss Contingencies.

In determining

the applicability of ASC 450-20, we considered that the agreement outlines a broad indemnification of all claims related to the cannabis-related

The most immediate and potentially significant of these are potential default-related loan losses.

In the lending industry,

it is inherently anticipated future loan losses will result from currently issued debt.

SHF’s indemnity obligation is subordinate

to PCCU’s and other financial institution clients’ other means of collecting on the loans including foreclosure of the collateral,

recourse against personal and/or corporate guarantors and other default remedies available in the loan agreements.

Since borrowers are

not party to the agreement between SHF and PCCU, any indemnity payments do not relieve borrowers of their obligation to PCCU nor would

such payments preclude PCCU’s right to future recoveries from the debtor.

Therefore, as defined in ASC 450-20, the indemnification

clause represents a general loss contingency in that it is an existing condition, situation or set of circumstances involving uncertainty

as to possible loss to the Company that will ultimately be resolved when one or more future events occur or fail to occur.

indemnity liability reflects SHF management’s estimate of probable loan losses inherent under the agreement at the balance sheet

Management uses a disciplined process and methodology to establish the liability, and the estimates are sensitive to risk ratings

assigned to individual loans covered by the agreement as well as economic assumptions driving the estimation model.

Individual loan risk

ratings are evaluated quarterly by SHF management based on each situation.

addition to default-related loan losses, SHF continuously monitors all other circumstances pursuant to the agreement and identifies events

that may necessitate a loss contingency under the Loan Servicing Agreement.

A loss contingency is reported when it is both probable that

a future event will confirm that a loss had been incurred on or before the related balance sheet date and the loss is reasonably estimable.

Growth Company Status

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 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.

Control Over Financial Reporting

connection with the audit of our financial statements for the year ended December 31, 2020, two material weaknesses were identified in

our internal controls over financial reporting.

A material weakness is a deficiency, or a combination of deficiencies, in internal controls

over financial reporting such that there is a reasonable possibility that a material misstatement of SHF’s annual or interim consolidated

financial statements will not be prevented or detected on a timely basis.

material weakness was identified related to a failure to complete an analysis of the accounting impact of ASC Topic 606, Revenue from

Contracts with Customers particularly as it related to revenue recognition associated with our Safe Harbor Program revenue, and one material

weakness was identified associated with our application of carve out accounting guidance and our failure to exclude certain specifically

identifiable expenses from corporate allocations.

We have implemented a plan to remediate these material weaknesses, through measures

that include the following:

have hired a Chief Financial Officer with previous experience as a public company executive.

are utilizing third-party consultants and specialists, to supplement our internal resources.

have enhanced our reconciliation and review controls including review by our parent CFO.

the implementation of this plan, the material weaknesses have been remediated for the year ended December 31, 2021.

SHF’s principal

financial and accounting officer has concluded that during the period covered by this report, our disclosure controls and procedures

were effective at a reasonable assurance level and, accordingly, provided reasonable assurance that the information required to be disclosed

by us in reports filed under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the

SEC’s rules and forms.

have begun our implementation of Sarbanes-Oxley and we plan to continue to assess our internal controls and procedures and to take further

action as necessary or appropriate to address any other matters we identify.

Party Relationships

allocations include overhead expenses such as information technology, customer support, marketing, executive compensation and other general

and administrative expenses that are attributed to the Branches proportionately based on the relative size of the specific identifiable

customer deposits to the consolidated PCCU.

Servicing Agreement

July 1, 2021, SHF entered into an Account Servicing Agreement with PCCU.

SHF provides services as per the agreement to CRB accounts at

In addition to providing the services, SHF assumes the costs associated with the CRB accounts.

These costs include employees to

manage account onboarding, monitoring and compliance, rent and office expense, insurance and other operating expenses necessary to service

these accounts.

Under the agreement, PCCU agrees to pay SHF all revenue generated from CRB accounts.

Amounts due to SHF are due monthly

in arrears and upon receipt of invoice.

The agreement is for an initial term of 3 years from the effective date.

It shall renew thereafter

for one-year terms until either SHF or PCCU provide sixty days prior written notice.

Pursuant to this agreement, SHF reported revenue of

$ 2,340,716 and $ 5,777,446 for the three month and nine month periods ended September 30, 2022 and $ 1,633,667 and $ 4,938,413 for the

three and nine month periods ended September 30, 2021.

described elsewhere in this document, on February 11, 2022, SHF and PCCU entered into the Amended and Restated Account Servicing

Agreement, pursuant to which SHF provides services including, among other things, Bank Secrecy Act compliance and reporting, onboarding,

responding to account inquiries, and responding to customer service inquiries relating to accounts at PCCU held for cannabis-related

businesses (“CRBs”).

Pursuant to the Amended and Restated Account Servicing Agreement, SHF’s fees for such services

will equal all cannabis-related income, including all lending-related income (such as loan origination fees, interest income on CRB-related

loans, participation fees and servicing fees), investment income, interest income, account activity fees, processing fees, flat fees,

and other revenue generated from cannabis and multi-state hemp accounts that are hosted on PCCU’s core system.

The Amended and

Restated Account Servicing Agreement is for an initial term of three years and will renew for additional one-year terms unless a party

provides 120 days’ notice of non-renewal, provided that PCCU may not provide notice of non-renewal until 30 months following the

signing date.

The Amended and Restated Account Servicing Agreement initially provided that the agreement would terminate within 60 days

of SHF no longer qualifying as a “credit union service organization” or within 60 days of the assumption by a third party

of all CRB-related accounts;

however, on May 23, 2022, SHF and PCCU entered into the Second Amended and Restated Account Servicing Agreement,

which agreement amended and restated the Amended and Restated Account Servicing Agreement to remove the provision providing for the termination

of the agreement within 60 days of SHF no longer qualifying as a “credit union service organization,” as SHF ceased to

qualify as a CUSO following the closing of the Business Combination.

Services Agreement

July 1, 2021, SHF entered into a Support Services Agreement with PCCU.

In connection with PCCU hosting the depository accounts and the

related loans and providing certain infrastructure support, PCCU receives (and SHF pays) a monthly fee per depository account.

25% of any investment income associated with CRB deposits is paid to PCCU.

The respective duties and obligations as per the agreement

commenced on the effective date and continue unless terminated by either SHF or PCCU upon giving sixty days prior written notice.

to these agreements and as amended and restated on February 11, 2022, the Company reported expenses of $204,535 and $420,085 for the

three month and nine month periods ended September 30, 2022 and $93,285 and $261,496 for the three and nine month periods ended September

described elsewhere in this document, on February 11, 2022, SHF and PCCU entered into the Amended and Restated Support Services

Agreement, pursuant to which PCCU will continue to provide to SHF certain operational and administrative services relating to, among

other things, human resources, employee benefits, IT and systems, accounting and marketing for a monthly fee equal to $30.96 per account

in 2022 and $25.32 per account in 2023 and 2024.

In addition, as it pertains to CRB deposits held at PCCU, investment and interest income

earned on these deposits (excluding interest income on loans funded by PCCU) will be shared 25% to PCCU and 75% to SHF.

SHF will also

reimburse PCCU for any of its out-of-pocket expenses relating to the services provided to SHF.

The Amended and Restated Support Services

Agreement also sets forth certain agreements of PCCU to limit bonus distributions to its members to $30,000,000 during any 12-month period

following the effective date of the agreement and to allow its ratio of CRB-related deposits to total assets to equal at least 65% unless

otherwise dictated by regulatory, regulator or policy requirements.

The Amended and Restated Support Services Agreement has the same

term and termination provisions as the Amended and Restated Account Servicing Agreement, including a provision providing for the termination

of the agreement within 60 days of SHF no longer qualifying as a “credit union service organization.” On May 23, 2022, SHF

and PCCU entered into the Second Amended and Restated Support Services Agreement, which agreement amended and restated the Amended and

Restated Support Services Agreement to remove the provision providing for the termination of the agreement within 60 days of SHF no longer

qualifying as a “credit union service organization,” as SHF ceased to qualify as a CUSO following the closing of the

Business Combination.

Servicing Agreement

February 11, 2022, SHF entered into an Amended and Restated Loan Servicing Agreement with PCCU.

The agreement sets forth the application, underwriting and

approval process for loans from PCCU to CRB customers and the loan servicing and monitoring responsibilities provided by both PCCU and

PCCU will receive a monthly servicing fee at the annual rate of 0.25% of the then-outstanding principal balance of each loan funded

For the loans that are subject to this agreement, SHF originates the loans and performs all compliance analysis, credit analysis

of the potential borrower, due diligence and underwriting and all administration, including hiring and incurring the costs of all related

personnel or third-party vendors necessary to perform these services.

Under the Loan Servicing Agreement, SHF has agreed to indemnify

PCCU from all claims related to default-related loan losses as defined in the Loan Servicing Agreement.

The agreement is for an initial

term of three years and will renew for additional one-year terms unless a party provides 120 days’ notice of non-renewal or there

is a termination for cause, provided that PCCU may not provide notice of non-renewal until 30 months following the signing date.

to this agreement, the Company reported expenses of $ 9,160 and $ 14.264 for the three month and nine month periods ended September 30,

2022 and $0 for the three and nine month periods ended September 30, 2021.

July 1, 2021, SHF entered into a one-year gross lease with the Parent to lease space in its existing office at a monthly rent of $5,400.

Effective July 1, 2022, the Company amended its existing lease to a month-to-month lease and therefore no asset or liability amounts

are reported pursuant to ASC 842.

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.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis