What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2023-05-15 compared with 2022-11-14 · 1438 added, 947 removed, 379 unchanged (86% of the section changed)

1 unchanged sentence

Holdings, Inc.

BALANCE SHEETS

September 30,

CONSOLIDATED BALANCE SHEETS

Current Assets:

2 unchanged sentences

Contract assets

Prepaid expenses

Prepaid expenses – current portion

Accrued interest receivable

Due from PIPE investors

Short-term loans receivable

Short-term loans receivable, net

Other current assets

Total Current Assets

Long-term loans receivable, net

Property and equipment, net

Other investment

Property, plant and equipment, net

Operating lease right to use assets

Intangible assets, net

Deferred tax asset

Forward purchase derivative assets

Prepaid expenses – long term position

Forward purchase receivable

5 unchanged sentences

Contract liabilities

Lease liabilities – current

Senior secured promissory note – current portion

Deferred consideration – current portion

Due to seller - current portion

Other current liabilities

Total Current Liabilities

Warrant liability

Deferred consideration – long term portion

Forward purchase derivative liability

Due to seller – long term portion

Deferred loan origination fees

Deferred offering costs

Senior secured promissory note—long term portion

Lease liabilities – long term

Deferred underwriter fee

Indemnity liability

Total Liabilities

Commitment and Contingencies (Note 15)

Parent-Entity Net Investment and Stockholders’ Equity

Convertible preferred stock, $ .0001 par value, 1,250,000 shares authorized, 20,450 shares issued and outstanding on

September 30, 2022, and no shares issued and outstanding on December 31, 2021, respectively

Class A common stock, $ .0001 par value, 125,000,000 shares authorized, 18,715,912 issued and outstanding on September

30, 2022, and no shares issued and outstanding on December 31, 2021, respectively

Convertible preferred stock, $ .0001 par value, 1,250,000 shares authorized, 10,896 shares issued and outstanding on March 31, 2023, and Convertible preferred stock, $ .0001 par value, 1,250,000 shares authorized, 14,616 shares issued and outstanding on December 31, 2022, respectively

Class A common stock, $ .0001 par value, 130,000,000 shares authorized 40,288,817 issued and outstanding on March 31, 2023, and Class A common stock, $ .0001 par value, 130,000,000 shares authorized, 23,732,889 issued and outstanding on December 31, 2022, respectively

Additional paid in capital

Retained earnings

Parent-Entity Net Investment

( 46,695,249 )

( 39,695,281 )

Total Parent-Entity Net Investment and Stockholders’ Equity

Total Liabilities and Parent-Entity Net Investment and Stockholders’ Equity

accompanying notes are an integral part of the combined financial statements

accompanying notes are an integral part of the condensed consolidated financial statements.

Holdings, Inc.

STATEMENTS OF NET INCOME AND COMPREHENSIVE INCOME

For the three months

ended September

For the nine months

ended September 30,

CONOLDIATED STATEMENTS OF OPERATIONS

For the three months ended

Operating Expenses

Compensation and employee benefits

Professional services

Provision for loan losses

General and administrative expenses

Total operating expenses

Operating income

Professional services

Provision for credit losses

operating expenses

Operating (loss)/ income

( 1,621,669 )

Other (income) expenses

1 unchanged sentence

Change in fair value of warrant liability

Change in fair value of forward purchase option derivative liability

Total other (income)/expenses

Total other expenses

Net (loss) / income before income tax

( 2,022,724 )

Income tax benefit

$ ( 609,277 )

Net (loss)/income

( 1,413,447 )

Weighted average shares outstanding, basic

Basic net income per share

Basic net loss per share

Weighted average shares outstanding, diluted

Diluted net income per share

accompanying notes are an integral part of the combined financial statements

Holdings, Inc.

Statements of Parent-Entity Net Investment and Stockholders’ Equity

THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 2022

Class A Common

Preferred Stock

Stockholders’

Balance, December 31, 2021

Contribution of loan receivable from Parent

Balance, March 31, 2022

Contribution of loan receivable from Parent

Balance, June 30, 2022

Issuance of shares in connection with Business Combination and PIPE offering, net of issuance costs

$ ( 9,124,297 )

Balance, September 30, 2022

Diluted loss per share

accompanying notes are an integral part of the condensed consolidated financial statements.

Holdings, Inc.

Statements of Parent-Entity Net Investment and Stockholders’ Equity

THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 2021

Class A Common

Preferred Stock

Consolidated Statements of Parent-Entity Net Investment and Stockholders’ Equity

THE THREE MONTHS ENDED MARCH 31, 2023

A Common Stock

Parent-Entity

Shareholders’

Balance, December 31, 2020

Contribution of loan receivable from Parent

Net change due to allocations and distributions to Parent

December 31, 2022

$ ( 39,695,281 )

effect from adoption of CECL

of PIPE shares

( 5,005,200 )

Balance, March 31, 2021

Contribution of loan receivable from Parent

Net change due to allocations and distributions to Parent

option conversion

of shares to PCCU (net of tax)

of deferred underwriting cost

( 1,413,447 )

Balance, June 30, 2021

March 31, 2023

$ ( 46,695,249 )

Holdings, Inc.

Consolidated Statements of Parent-Entity Net Investment and Stockholders’ Equity

THE THREE MONTHS ENDED MARCH 31, 2022

Class A Common Stock

Additional Paid-in

Parent-Entity Net

Total Shareholders’

Balance, December 31, 2021

Contribution from parent

Balance, September 30, 2021

Net profit (loss)

Balance, March 31, 2022

accompanying notes are an integral part of the condensed consolidated financial statements.

Holdings, Inc.

STATEMENTS OF CASH FLOWS

For the nine months ended

September 30,

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the three months ended March 31,

CASH FLOWS FROM OPERATING ACTIVITIES:

Net (loss) / income

$ ( 1,413,447 )

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation expense

Provision for loan loss

Change in fair value of warrant and forward purchase option derivative liabilities

Depreciation and amortization expense

Stock compensation expense

Interest expense

Provision for credit losses

Lease expense

Income tax benefit

Change in fair value of warrant

Changes in operating assets and liabilities:

3 unchanged sentences

Accrued interest receivable

Deferred underwriting payable

Other current assets

Accounts payable

1 unchanged sentence

Contract liabilities

Net cash provided by operating activities

Security deposit

Net cash provided by (used in) operating activities

CASH FLOWS USED IN INVESTING ACTIVITIES:

Purchase of property and equipment

Issuance of new loans (net of payment received)

Funding of other investment

Security deposit

Net cash used in investing activities

Issuance of new loans (net of repayment)

Net cash provided by investing activities

CASH FLOWS USED IN FINANCING ACTIVITIES:

Proceeds from reverse capitalization, net of transaction costs

Net change in parent funding, allocations, and distributions to parent

Net cash provided by (used in) financing activities

Net cash provided by financing activities

Net increase in cash and cash equivalents

1 unchanged sentence

Cash and cash equivalents – end of period

accompanying notes are an integral part of the combined financial statements

Non-Cash transactions:

Shares issued for the settlement of PCCU debt obligation

Cumulative effect from adoption of CECL

accompanying notes are an integral part of the condensed consolidated financial statements.

Holdings, Inc.

NOTES TO FINANCIAL STATEMENTS

to Unaudited Condensed Consolidated Financial Statements

Organization and Business Operations

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 the Business Combination,

NLIT changed its name to “SHF Holdings, Inc.” (herein referred to as the “Company”).

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,

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”).

The reorganization effectively

occurred July 1, 2021.

In conjunction with the reorganization, all of 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 dissolved.

In addition, effective July 1, 2021, the entity entered

into an Account Servicing Agreement and Support Servicing Agreement which were subsequently amended and restated and are discussed in

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.

In 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

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.

Company originated as business operations conducted through Partner Colorado Credit Union (“PCCU”), which were transferred

to SHF LLC (“SHF”), then an indirect wholly owned subsidiary of PCCU.

Holdings, Inc.

NOTES TO FINANCIAL STATEMENTS

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.

In connection with the closing

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.

to PCCU, the Company provides these similar services and outsourced support to other financial institutions providing banking to the cannabis

These services are provided to other financial institutions under the Safe Harbor Master Program Agreement.

Pursuant to the purchase agreement, the Company entered into an amended services agreements under similar terms as

the July 2021 agreements.

In addition, in conjunction with the purchase agreement, SHF and PCCU entered into an Amended and Restated Loan Servicing Agreement.

Refer to Note 7 for additional information.

purpose of the aforementioned $ 56,949,800 deferral is to provide SHF Holdings, Inc.

with additional cash to support its post-closing

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 $3,500,002.

Furthermore, PCCU agreed to defer $ 3,143,388 ,

representing certain excess cash of SHF, LLC due to PCCU under the definitive unit purchase agreement, and the reimbursement

of certain reimbursable expenses under the definitive unit purchase agreement .

October 26, 2022, SHF Holdings, Inc., 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 by

the Company 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

(the “Company”), formerly known as Northern Lights Acquisition Corp.

(“NLIT”), acquired all of

the outstanding membership interests of SHF in a transaction that closed on September 28, 2022 (the “Business Combination”).

The Business Combination was consummated pursuant to a Unit Purchase Agreement dated February 11, 2022 (the “Business Combination

Agreement”) among SHF, SHF Holding Co., LLC (the direct parent of SHF and a wholly owned subsidiary of PCCU), PCCU, NLIT, a

special purpose acquisition company, and its sponsor, 5AK, LLC.

Subsequent to the completion of the Business Combination, NLIT changed

its name to “SHF Holdings, Inc.” In this quarterly report on Form 10-Q (the “Quarterly Report”), we use the terms

“we,” “us,” “our” and the “Company” to refer to the business and operations of SHF Holdings,

following the closing of the Business Combination.

(Refer to Note 3 to the Condensed Consolidated Financial Statements.)

was formed by PCCU following the approval of the contribution of certain assets and operating activities associated with operations from

both certain branches and Safe Harbor Services, 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, with PCCU’s investment in SHF maintained at the SHF Holding, Co., LLC

level (the “reorganization”).

The reorganization effectively occurred July 1, 2021.

In conjunction with the reorganization,

all of the employees engaged in the operations and certain PCCU employees were terminated from PCCU and hired as SHF employees.

Collectively, Oldco, the relevant operations of the PCCU branches, and SHF, represent the “Carved-Out Operations.” After

the reorganization, the entirety of the Carved-Out Operations were owned by SHF and Oldco was dissolved.

In addition, effective July

1, 2021, SHF entered into an Account Servicing Agreement and Support Services Agreement with PCCU, which memorialized the operational

relationship between SHF and PCCU and which were subsequently amended and restated and are discussed in Note 9 to the Condensed Consolidated

Financial Statements.

September 28, 2022, the parties consummated the Business Combination, resulting in NLIT acquiring 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 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.

At the closing, 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.

In 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 also paid to PCCU

at the closing.

For more information about the Business Combination, refer to Note 3 to the Condensed Consolidated Financial Statements

included elsewhere in this Form 10-Q.

As a result of the Business Combination, PCCU is the Company’s largest stockholder, owning

55.92 % of the Company’s outstanding Class A Common Stock.

Business Combination Agreement was amended to provide for the deferral of a portion of the cash due to PCCU at the closing of the Business

The purpose of this deferral was to provide the Company with additional cash to support its post-closing activities.

PCCU also agreed to defer $ 3,143,388 , representing certain excess cash of SHF due to PCCU under the Business Combination Agreement, and

the reimbursement of certain reimbursable expenses under the Business Combination Agreement.

October 26, 2022, SHF Holdings, Inc., entered into a Forbearance Agreement (the “Forbearance Agreement”) with PCCU and Luminous

Capital USA Inc.

(“Luminous”), an affiliate of the sponsor of NLIT.

Under the Forbearance Agreement, PCCU has agreed to defer

all payments owed by the Company pursuant to the Business Combination Agreement for a period of six months from the date of the Forbearance

Agreement while the parties engage in good faith efforts to renegotiate the payment terms of the deferred obligations.

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, the origination, onboarding, and servicing of cannabis-related deposit

business for and on behalf of those partner institutions;

Bank Secrecy Act and other regulatory compliance and reporting related to

these accounts;

onboarding these accounts and responding to account and customer service inquiries;

and sourcing, underwriting, and

servicing, and administering loans issued to cannabis businesses and related entities.

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.

October 31, 2022, the Company entered into an Agreement and Plan of Merger (the “Abaca Merger Agreement”) by and among the

Company, SHF Merger Sub I, a Delaware corporation and a direct wholly-owned subsidiary of the Company (“Merger Sub I”), SHF

Merger Sub II, LLC, a Delaware limited liability company and a direct wholly-owned subsidiary of the Company (“Merger Sub II”

and, together with Merger Sub I, the “Merger Subs”), Rockview Digital Solutions, Inc., a Delaware corporation, d/b/a Abaca

(“Abaca”) and Dan Roda, solely in such individual’s capacity as the representative of the security holders of Abaca

(the “Abaca Stockholders’ Representative”).

On November 11, 2022, the parties to the Abaca Merger Agreement entered

into an amendment to the Abaca Merger Agreement to modify the number of shares of the Company’s Class A Common Stock to be issued

as consideration thereunder.

On November 15, 2022, the parties consummated the transactions contemplated by the Abaca Merger Agreement,

Pursuant to the Abaca Merger Agreement, as amended, (a) Merger Sub I merged with and into Abaca, with Abaca surviving as

a direct wholly-owned subsidiary of the Company (“Merger I”) and (b) immediately following the effective time of the Merger

I, Abaca merged with and into Merger Sub II (“Merger II” and, collectively with Merger I, the “Mergers”), with

Merger Sub II surviving Merger II as a direct wholly-owned subsidiary of the Company.

to the Abaca Merger Agreement, as amended, the Company acquired Abaca together with its proprietary financial technology platform in

exchange for $ 30,000,000 ,

paid in a combination of cash and shares of the Company as follows:

(a) cash consideration in an amount equal to (i) $ 9,000,000

was payable at the closing of the Mergers (the “Merger Closing”), with an additional $ 3,000,000

payable at each of the one-year and two-year anniversaries of the Merger Closing), (collectively, the “Cash

Consideration”);

and (b) 2,100,000

shares of Class A Common Stock at the Closing Date and $ 12,600,000

(minus an outstanding note balance of $ 500,000 ,

plus accrued interest) in shares of Class A Common Stock at the one-year anniversary of the Merger Closing based on a 10-day VWAP

(collectively, the “Share Consideration”).

Each of the Company, the Merger Subs, and Abaca provided customary

representations, warranties and covenants in the Agreement.

March 29, 2023, the Company and PCCU entered into a definitive transaction to settle and restructure the deferred obligations, including

$ 56,949,800 into a five-year Senior Secured Promissory Note (the “Note”) in the principal amount of $ 14,500,000 bearing interest

at the rate of 4.25 %;

a Security Agreement pursuant to which the Company will grant, as collateral for the Note, a first priority security

interest in substantially all of the assets of the Company;

and a Securities Issuance Agreement, pursuant to which the Company will issue

11,200,000 shares of the Company’s Class A Common Stock to PCCU.

The Company and PCCU also entered into the Commercial Alliance

Agreement that sets forth the terms and conditions of the lending-related and account-related services governing the relationship between

the Company and PCCU and supersedes the Loan Servicing Agreement, as well as the Amended and Restated Support Services Agreement and

the Amended and Restated Account Servicing Agreement.

Basis of Presentation and Summary of Significant Accounting Policies

preparation of the condensed consolidated financial statements in conformity with accounting principles generally accepted in the United

States of America (“GAAP”) requires management to make estimates and assumptions that affect the amounts reported in the

condensed consolidated financial statements and accompanying notes.

Material estimates that are particularly subject to change in the

near term include the determination of the allowance for credit losses, indemnification liabilities, useful lives of intangibles and the

fair value of financial instruments.

Actual results could differ from the estimates.

of Presentation

statements have not historically been prepared for the Carved-Out Operations.

For the nine months ended September 30, 2021,

the combined financial statements consist of the balances of SHS and SHF as prepared on a stand-alone basis and the balances of the Branches

on a “carve-out” basis.

For the three and nine months ended September 30, 2022, the financial statements represent SHF on

a stand-alone basis as the period is post reorganization.

All intercompany transactions have been eliminated for all periods presented.

These combined financial statements reflect the Company’s historical financial position, results of operations and cash flows as

they have been historically managed in conformity with Generally Accepted Accounting Principles in the United States (“U.S.

depository asset accounts and liabilities are retained by PCCU as the Carved-Out Operations are not organized as a chartered financial

Accordingly, none of the cash of PCCU has been attributed to these combined financial statements.

Asset and liabilities

maintained by SHS and SHF have been included in these financial statements along with any specific assets and liabilities associated

with the Branches.

Holdings, Inc.

NOTES TO FINANCIAL STATEMENTS

and expenses for the Branches were included based on specific identification as they relate to customer deposits, professional services,

compensation and employee benefits, rent expense, provision for loan losses and other general and administrative expenses.

allocations such as information technology, customer support, marketing, executive compensation and other general and administrative

expenses are attributed to the Branches proportionately based on the size of the specifically identifiable CRB’s deposit balances,

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

This allocation method was consistent for all periods

prior to July 2021.

Beginning in July 2021, a services agreement was entered into between Newco and PCCU (see Note 7).

In exchange for

services provided to PCCU via the Carved-Out Operations, Newco receives 100% of CRB related revenue.

PCCU receives (and Newco pays) a

monthly per account fee, split loan servicing fees and split investment income associated with Carved-Out Operations depository accounts.

The fees are meant to represent PCCU’s cost for hosting depository accounts and funding related loans and providing certain limited

infrastructure support.

has considered the basis on which the expenses have been allocated to be a reasonable reflection of the utilization of services provided

to or the benefits received by the Branches during the periods presented.

revenue and expenses of SHS and SHF are specific to the entity.

allocations were attributed for the nine months ended September 30, 2021.

Liquidity and Going Concern

As 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 $ 33,616,468 .

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 its 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 PCCU.

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

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 programs.

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

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.

If the current terms of the aforementioned PCCU payable are enforced as

contemplated, 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

The Company also believes that its pending business combination transaction, which will add additional depository accounts, incremental revenue, and

additional deposits, that was agreed to on October 31, 2022 (refer to

the “Subsequent Events” section within Note 14 below) will be consistent with allowing the Company to continue as a going

Despite the going concern disclosure, we have determined not to take a

valuation allowance on the Deferred Tax Asset (“DTA”).

The Company does not have a history of operating loss or tax credit

carry forwards expiring unused;

no losses expected in early future years given that the Company is presently profitable;

circumstances that, if unfavorably resolved, would adversely affect future operations and profit levels on a continuing basis in future

no adverse carry back or carry forward periods;

and no business cyclicality concerns.

The Company also has enhanced lending capacity

pursuant to increased deposits and greater credit pools, additional interest income, and more service fees accentuate the Company’s

stance that a DTA valuation allowance is not required.

Summary of Significant Accounting Policies

preparation of the financial statements in conformity with U.S.

GAAP requires management to make estimates and assumptions that affect

the amounts reported in the financial statements and accompanying notes.

Material estimates that are particularly subject to change in

the near term include the determination of the allowance for loan losses, and the fair value of financial instruments.

Actual results

could differ from the estimates.

Cash and Cash Equivalent s

accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles

generally accepted in the United States (“U.S.

GAAP” or “GAAP”) for interim financial information and the rules

and regulations of the Securities and Exchange Commission (the “SEC”).

accompanying unaudited condensed consolidated financial statements contain all normal and recurring adjustments necessary to state fairly

the consolidated financial condition, results of operations, statements of shareholders’ equity, and cash

flows of the Company for the interim periods presented.

Except as otherwise disclosed, all such adjustments consist only of those of

a normal recurring nature.

Operating results for the three months ended March 31, 2023, are not necessarily indicative of the results

that may be expected for the current year ending December 31, 2023.

The financial data presented herein should be read in conjunction

with the audited consolidated financial statements and accompanying notes as of and for the years ended December 31, 2022, and 2021 included

in the Annual Report on Form 10-K for the year ended December 31, 2022 (the “2022 Form 10-K”).

information and footnote disclosures normally included in financial statements prepared in accordance with U.S.

GAAP have been condensed

or omitted pursuant to the rules and regulations of the SEC and the instructions to Form 10-Q.

and Going Concern

of March 31, 2023, the Company had $ 8,628,752 in

cash and net working capital deficit of $ 8,998,880 ,

as compared to $ 8,390,195 in

cash and net working capital deficit of $ 39,340,020 at December 31, 2022.

Included in the working capital deficit at March 31, 2023 and December 31, 2022 are $ 11,685,419 and

$ 11,622,831 ,

respectively, which represent the equity consideration payable towards the Abaca acquisition.

The Company has also incurred an

operating loss of $ 1,621,669 for the period ended March 31, 2023.

upon these factors, management of the Company has determined that there is a risk of substantial doubt about the Company’s ability

to continue as a going concern for a period of at least twelve months from the date these condensed consolidated financial statements

have been issued.

At December 31, 2022, a

significant component of the working capital deficit was $ 25,973,017 representing the current portion of due to PCCU.

above, the Company restructured the due to PCCU issuing equity and a long-term payable.

As a result, this risk factor that the

Company may not be able to continue as a going concern which existed at December 31, 2022 was alleviated.

Despite the restructuring

of the due to PCCU, at March 31, 2023, the working capital deficit substantially includes an equity commitment towards the Abaca

acquisition, which is a non-cash liability amounting to $ 11,685,419 .

The Company also hired an experienced Chief Financial Officer in October 2022, who has immediately begun to institute certain

cost-cutting measures across the Company, including expense reduction measures and negotiating reduced amounts and extended terms

for certain payables.

These factors, however, do not fully 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 programs.

Any of these actions could materially harm the Company’s business, results of operations

and future prospects.

accompanying condensed consolidated 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 as a result of this uncertainty.

and Cash Equivalents

and cash equivalents include cash on hand, amounts due from financial institutions, and investments with maturities of three months or

2 unchanged sentences

Cash balances are

maintained principally in accounts at PCCU which is insured by the National Credit Union Share Insurance Fund (“NCUSIF”)

maintained substantially in accounts at PCCU which is insured by the National Credit Union Share Insurance Fund (“NCUSIF”)

up to regulatory limits.

6 unchanged sentences

the Company substantially relies on PCCU to hold customer deposits and fund its originated loans.

As of this time, substantially

all of the Company’s revenue is generated by deposits and loans hosted by PCCU pursuant to various services agreements.

Holdings, Inc.

NOTES TO FINANCIAL STATEMENTS

Accounts Receivable-PCCU and Allowance for Doubtful Accounts

As of this time, substantially all

of the Company’s revenue is generated by deposits and loans hosted by its PCCU pursuant to various services agreements.

Company had only one loan on its balance sheet as of March 31, 2023, which comprises 100 %

of the total loan balance.

The Company also indemnified six loans as of March 31, 2023;

three of these indemnified loans were in

excess of 10 %

of the total balance.

Receivable-PCCU and Allowance for Doubtful Accounts

receivable are recorded based on account fee schedules.

1 unchanged sentence

collected by the financial institutional partners and remitted in the subsequent month.

As of September 30, 2022, and December 31, 2021,

100% of the Accounts Receivable, respectively is due from PCCU.

Effective January 2021 through June 2021, PCCU elected to

transfer account servicing from SHS to the Branches.

In accordance with this change, a policy was adopted wherein substantially all cash

was collected by PCCU and retained by PCCU outside of the Branches and SHS.

This policy was eliminated in conjunction with the July 2021

reorganization and execution of the Account Servicing Agreement and Support Servicing Agreement discussed at Note 7.

The Company maintains

allowances for doubtful accounts for estimated losses as a result of a customers’ inability to make required payments.

estimates anticipated losses from doubtful accounts based on days past due as measured from the contractual due date and historical collection

The Company also takes into consideration changes in economic conditions that may not be reflected in historical trends, for

example customers in bankruptcy, liquidation or reorganization.

Receivables are written-off against the allowance for doubtful accounts

when they are determined uncollectible.

Such determination includes analysis and consideration of the particular conditions of the account,

including time intervals since last collection, customer performance against agreed upon payment plans, solvency of customer and any

bankruptcy proceedings.

September 30, 2022 and December 31, 2021, there were no recorded allowances for doubtful accounts.

originates mortgage, commercial and consumer loans to members and other businesses.

As of March 31, 2023, and December 31, 2022,

81 % and 85 % of the Accounts Receivable, respectively is due from PCCU.

The Company maintains allowances for doubtful accounts for estimated

losses as a result of a customers’ inability to make required payments.

The Company estimates anticipated losses from doubtful

accounts based on days past due as measured from the contractual due date and historical collection history.

The Company also takes into

consideration changes in economic conditions that may not be reflected in historical trends, for example customers in bankruptcy, liquidation

or reorganization.

Receivables are written-off against the allowance for doubtful accounts when they are determined uncollectible.

determination includes analysis and consideration of the particular conditions of the account, including time intervals since last collection,

customer performance against agreed upon payment plans, solvency of customer and any bankruptcy proceedings.

March 31, 2023 and December 31, 2022, there were no recorded allowances for doubtful accounts on accounts receivables.

underwrites mortgage, commercial and consumer loans to members and other businesses.

Commercial CRB loans originated by the Company

3 unchanged sentences

hold for the foreseeable future or until maturity or payoff are reported at principal balance outstanding, net of an allowance for

loan losses and net deferred loan origination fees and costs when applicable.

credit losses and net deferred loan origination fees and costs when applicable.

Interest income on loans is recognized over the term

11 unchanged sentences

date if the collection of principal and interest is considered doubtful.

Allowance 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.

for Credit Losses (ACL)

2023, the Company adopted Accounting Standards Codification Topic 326 - Financial Instruments - Credit Losses (ASC Topic 326), which

replaced the incurred loss methodology for estimated probable credit losses with an expected credit loss methodology that is referred

to as the current expected credit loss (“CECL”) methodology.

ACL is a valuation account that is deducted from the amortized cost basis of financial assets carried at their amortized cost, including

loans held for investment, to present the net amount that is expected to be collected throughout the life of the financial asset.

estimated ACL is recorded through a provision for credit losses charged against operations.

Management periodically evaluates the adequacy

of the ACL to maintain it at a level it believes to be reasonable.

The Company uses the same methods used to determine the ACL to assess

any reserves needed for off-balance sheet credit risks such as unfunded loan commitments including Indemnified loans to PCCU.

These reserves

for off-balance sheet credit risks are presented in the liabilities section in the condensed consolidated balance sheets as an “Indemnity

ACL consists of two components:

an asset-specific component for estimating credit losses for individual loans that do not share similar

risk characteristics with other loans;

and a pooled component for estimating credit losses for pools of loans that share similar risk

characteristics.

The ACL for the pooled component is derived from an estimate of expected credit losses primarily using an expected loss

methodology that incorporates risk parameters such as probability of default (“PD”) and loss given default (“LGD”)

which are derived from various vendor models and/or internally developed model estimation approaches for smaller homogenous loans.

is projected in these models or estimation approaches using economic scenarios, whose outcomes are weighted based on the Company’s

economic outlook and are developed to incorporate relevant information about past events, current conditions, and reasonable and supportable

The Company considers relevant current conditions and reasonable and supportable forecasts that relate to its lending practices

and environment and the specific borrower and determines that the significant factor affecting the loan’s performance is the fact

that these borrowers are involved in the cannabis business.

Despite being legal at the state level in certain jurisdictions, cannabis

remains federally illegal in the United States as of the date of this filing.

As cannabis related lending is a new practice in the United

States, there is very little historical or industry data on which to base a loss forecast.

Therefore, significant judgement is required

in creating a reasonable loss estimate, using similar non-MRB loans as a baseline and adjusting for the inherent risks in the cannabis

While the Company considers other qualitative factors, including national macroeconomic conditions, in its overall risk analysis,

it has determined that they are not significant inputs to the overall loss estimate calculations.

ACL estimation process also applies an economic forecast scenario, or a composite of scenarios based on management’s judgment and

expectations around the current and future macroeconomic outlook.

Expected credit losses are estimated over the contractual term of the

loans, adjusted for expected prepayments when appropriate.

The contractual term of a loan excludes expected extensions, renewals, and

modification under certain conditions.

on loans represent collections received on amounts that were previously charged off against the ACL.

Recoveries are credited to the ACL

when received, to the extent of the amount previously charged off against the ACL on the related loan.

Any amounts collected in excess

of this limit are first recognized as interest income, then as a reduction of collection costs, and then as other income.

for Loan Losses

to the adoption of CECL in 2023, the Company recognized an 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.

allowance for loan losses consists of specific and general components.

3 unchanged sentences

is based on historical loss experience adjusted for current factors.

Holdings, Inc.

NOTES TO FINANCIAL STATEMENTS

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

7 unchanged sentences

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

loans SHF originates are 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.

16 unchanged sentences

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

Net Deferred Loan Origination Fees and Cost

included with a new loan origination, the Company receives loan origination fees in conjunction with new loans funded and any indemnified liabilities which are not recorded on the balance sheet from our financial institution

Where applicable, the loan origination fee is netted with loan origination costs associated with originating a specific loan.

These loan origination costs are typically incremental direct costs (non-reimbursed) paid to third parties.

Net loan origination fees

are initially deferred and recognized as interest income utilizing the interest method.

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

Under the Loan Servicing Agreement, PCCU, in exchange for a

fee at an annual rate of 0.25 % of the outstanding principal balance, funds certain loans.

Under the Loan Servicing Agreement, SHF has

agreed to indemnify PCCU from all claims related to SHF’s cannabis-related business, including but not limited to default-related

loan losses as defined in the Loan Servicing Agreement.

The indemnification component of the Loan Servicing Agreement (refer to Note

7) 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 business.

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.

SHF’s indemnity liability reflects SHF management’s

estimate of probable loan losses inherent under the agreement at the balance sheet date.

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.

Holdings, Inc.

NOTES TO FINANCIAL STATEMENTS

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.

Deferred Loan Origination Fees and Cost

included with a new loan origination, the Company receives loan origination fees in conjunction with new loans funded and any indemnified

liabilities which are not recorded on the balance sheet from our financial institution partners.

Where applicable, the loan origination

fee is netted with loan origination costs associated with originating a specific loan.

These loan origination costs are typically incremental

direct costs (non-reimbursed) paid to third parties.

Net loan origination fees are initially deferred and recognized as interest income

utilizing the interest method.

the Loan Servicing Agreement, PCCU, in exchange for a fee at an annual rate of 0.25 %

of the outstanding principal balance, funds certain loans.

Under the Loan Servicing Agreement, the Company has agreed to indemnify

PCCU from all claims related to Company’s cannabis-related business, including but not limited to default-related credit

losses as defined in the Loan Servicing Agreement.

The indemnification component of the Loan Servicing Agreement (refer to Note 9 to

the condensed consolidated financial statements) is accounted for in accordance with accounting standards codification

(“ ASC”) 460 Guarantees .

In determining the applicability of ASC 460, we considered that the agreement outlines a

broad indemnification of all claims related to the cannabis-related business.

The most immediate and potentially significant of

these are potential default-related credit losses.

In the lending industry, it is inherently anticipated future credit losses will

result from currently issued debt.

The Company’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 Company 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 460, 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

SHF’s indemnity liability reflects SHF management’s estimate of probable credit losses inherent under the

agreement at the balance sheet date.

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

addition to default-related credit losses, the Company 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.

March 29, 2023, The Company and PCCU entered into the Commercial Alliance Agreement that sets forth the terms and conditions of the lending-related

and account-related services governing the relationship between the Company and PCCU and supersedes the Loan Servicing Agreement, as

well as the Amended and Restated Support Services Agreement and the Amended and Restated Account Servicing Agreement.

and Equipment, net

and equipment is recorded at historical cost, net of accumulated depreciation.

and equipment are recorded at historical cost, net of accumulated depreciation.

Depreciation is provided over the assets’ useful

7 unchanged sentences

resulting gains and losses are included in the results of operations during the same period.

capitalize certain costs related to software developed for internal-use, primarily associated with the ongoing development and enhancement

of our technology platform.

Costs incurred in the preliminary development and post-development stages are expensed.

These costs are amortized

on a straight-line basis over the estimated useful life of the related asset, generally five years.

of use assets and lease liability

Company has entered into lease agreements for a certain facility and certain items of equipment, which provide the right to use the underlying

asset and require lease payments over the term of the lease.

At inception of the lease agreement, the Company assesses whether the agreement

conveys the right to control the use of an identified asset for a period in exchange for consideration, in which case it is classified

Each lease is further analyzed to check whether it meets the classification criteria of a finance or operating lease.

identified leases are recorded on the consolidated balance sheet with a corresponding lease right-of-use asset, net, representing the

right to use the underlying asset for the lease term and the operating lease liabilities representing the obligation to make lease payments

arising from the lease.

The Company has elected not to recognize lease assets and lease liabilities for short-term leases (leases with

a term of 12 months or less) and leases of low-value assets.

Lease right-of-use assets, net and lease liabilities are recognized at the

commencement date of the lease based on the present value of lease payments over the lease term and include options to extend or terminate

the lease when they are reasonably certain to be exercised.

The present value of lease payments is determined primarily using the incremental

borrowing rate based on the information available as of the lease commencement date.

expense for operating leases is recorded on a straight-line basis over the lease term and variable lease costs are recorded as incurred.

The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.

lease interest expense is recognized based on an effective interest method and depreciation of assets is recorded on a straight-line

basis over the shorter of the lease term and useful life of the asset.

Both operating and finance lease right of use assets are reviewed

for impairment, consistent with other long-lived assets, whenever events or changes in circumstances indicate that the carrying amount

may not be recoverable.

After a right of use asset is impaired, any remaining balance of the asset is amortized on a straight-line basis

over the shorter of the remaining lease term or the estimated useful life.

of Long-Lived Assets

1 unchanged sentence

revised estimates of useful lives or that indicate the asset may be impaired.

There were no impairments for the three and nine months

ended September 30, 2022 and the year ended December 31, 2021.

Other Investments

These investments are accounted for at cost minus impairment, if any, plus

or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment.

There were no impairments for the three months ended March

31, 2023, and the year ended December 31, 2022.

and Other Intangible Assets

Company’s methodology for allocating the purchase price of an acquisition is based on established valuation techniques that reflect

the consideration of a number of factors, including a valuation performed by a third-party appraiser.

Goodwill is measured as the excess

of the cost of an acquired business over the fair value assigned to identifiable assets acquired and liabilities assumed.

considered impaired when the estimated fair value of the reporting unit that was allocated the goodwill is less than its carrying value.

If the estimated fair value of such reporting unit is less than its carrying value, goodwill impairment is recognized based on that difference,

not to exceed the carrying amount of goodwill.

A reporting unit is an operating segment or a component of an operating segment provided

that the component constitutes a business for which discrete financial information is available and management regularly reviews the

operating results of that component.

intangible assets are amortized over their estimated useful life, which is the period over which the assets are expected to contribute

directly or indirectly to the future cash flows of the Company.

Intangible assets should be tested for impairment at the time of a triggering

event, if one were to occur.

Finite-lived intangible assets may be impaired when the estimated undiscounted future cash flows generated

from the assets are less than their carrying amounts.

Company measures all equity-based payment arrangements to employees and directors in accordance with ASC 718, Compensation–Stock

Compensation.

The Company’s stock-based compensation cost is measured based on the fair value at the grant date of the stock-based

It is recognized as expense on a straight-line basis over the requisite service period for the entire award.

Forfeitures are recognized

as they occur.

The Company estimates the fair value of each stock-based award on its measurement date using either the current market

price of the stock or Black-Scholes option valuation model, whichever is most appropriate.

The Black-Scholes valuation model incorporates

assumptions such as expected term of the instrument, volatility of the Company’s future share price, risk free rates, future dividend

yields and estimated forfeitures at the initial grant date, by reference to the underlying terms of the instrument, and the Company’s

experience with similar instruments.

Changes in assumptions used to estimate fair value could result in materially different results.

shares of the Company were listed on the Nasdaq stock exchange for a limited period of the time and also the stock price has dropped

significantly from the date of listing, based on which the Company has considered the expected volatility at 100 %

for the purpose of stock compensation.

The risk-free interest rates are based on quoted U.S.

Treasury rates for securities with

maturities approximating the awards’ expected lives.

The expected term of the options granted is calculated based on the

simplified method by taking average of contractual term and vesting period the awards.

The expected dividend yield is zero as the

Company has never paid dividends and does not currently anticipate paying any in the foreseeable future.

Value Measurements

13 unchanged sentences

3 —Valuations derived from valuation techniques in which one or more significant inputs to the valuation model are unobservable.

the exceptions of loans receivable, warrants (public and private), and the derivative liability, the Company considers the carrying amounts

of its financial instruments (cash, accounts receivable and accounts payable) in the balance sheet to approximate fair value because

of the short-term or highly liquid nature of these financial instruments.

The fair values of loans receivables, warrants, and derivative

are fully disclosed in Note 10.

Holdings, Inc.

NOTES TO FINANCIAL STATEMENTS

Company 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 the Company expects to be entitled in exchange for those goods or services.

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 previous accounting principles generally accepted in the United States of

America (“U.S.

GAAP”) including identifying performance obligations in the contract, estimating the amount of variable consideration

recognizes revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”).

The core principle

of ASC 606 requires that an entity recognize revenue to depict the transfer of promised goods or services to customers in an amount that

reflects the consideration to which SHF expects to be entitled in exchange for those goods or services.

ASC 606 defines a five-step process

to achieve this core principle including identifying performance obligations in the contract, estimating the amount of variable consideration

to include in the transaction price and allocating the transaction price to each separate performance obligation.

The Company 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 the Company’s financial statements

as of the date of adoption.

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 the Company such as bank account charges, onboarding income, account activity

fee income and other miscellaneous fees.

addition, the Company recognizes revenue from the Master Program Agreement.

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

3 unchanged sentences

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

the Company 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.

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 consolidated balance sheets.

Typical 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.

Contract Assets / Contract Liabilities

A contract asset is the Company’s right to consideration

in exchange for goods or services that the Company has transferred to a customer.

Conversely, the Company recognizes a contract liability

if the customer’s payment of consideration precedes the reporting entity’s performance.

of September 30, 2022, the Company reported contract assets and contract liabilities of $ 7,676 and $ 14,583 , respectively, from contracts

Revenues are concentrated in the United States of America.

Assets / Contract Liabilities

contract asset is the Company’s right to consideration in exchange for goods or services that the Company has transferred to a

Conversely, the Company recognizes a contract liability if the customer’s payment of consideration precedes the reporting

entity’s performance.

of March 31, 2023, the Company reported contract assets and contract liabilities of $ 34,189 and $ 79,612 , respectively, from contracts

with customers.

As of December 31, 2022, the Company reported a contract asset and liability of $ 21,170 and $ 996 , respectively.

the three and nine months ended September 30, 2022, the Company recognized revenue $ 18,987 and $ 59,081 , respectively related to the contract

liability outstanding at December 31, 2021.

Advertising/Marketing

Advertising/marketing

costs are expensed as incurred.

For the three and nine months ended September 30, 2022, advertising/marketing costs were $ 81,130 and

$ 231,970 , respectively.

For the three and nine months ended September 30, 2021, advertising/marketing costs were $ 21,327 and $ 48,730 , respectively.

Development Cost

Company applied agile development methodologies to their software development projects, which are characterized by a more dynamic development

process with more frequent and iterative revisions to the product features and functions as the software is being developed.

shorter development cycle and focus on rapid production associated with agile development, the costs incurred to get to, and have incurred

after the achievement of technological feasibility, have been expensed as incurred.

development costs amounted to $ 35,880 and $ 88,550 for the three and nine months ended September 30, 2022, respectively.

Software development

costs amounted to $ 30,973 and $ 88,499 for the three and nine months ended September 30, 2021, respectively.

Holdings, Inc.

NOTES TO FINANCIAL STATEMENTS

Company accounts for the warrants assumed in the business combination in accordance with the guidance contained in ASC Topic 815, “Derivatives

and Hedging” (“ASC 815”), under which warrants that do not meet the criteria for equity classification and must be

and Hedging” (“ASC 815”), under which warrants that do not meet the criteria for equity classification must be

recorded as derivative liabilities.

2 unchanged sentences

This liability is subject to re-measurement at each balance sheet date until the

warrants are exercised or expire, and any change in fair value is recognized in the consolidated statement of operations

and diluted earnings per share are computed and disclosed in accordance with FASB ASC Topic 260, Earnings Per Share.

warrants are exercised or expire, and any change in fair value is recognized in the condensed consolidated statement of operations.

purchase derivative

Company accounts for the forward purchase derivative assumed in the business combination in accordance with the guidance contained in

ASC Topic 815, “Derivatives and Hedging” (“ASC 815”).

The Company classifies the forward purchase derivatives

as liabilities carried at their fair value and adjusts the forward purchase derivatives to fair value at each reporting period.

derivative asset or liability is subject to re-measurement at each balance sheet date until the conditions under the forward purchase

agreement are exercised or expire, and any change in fair value is recognized in the condensed consolidated statement of operations.

and diluted earnings per share are computed and disclosed in accordance with ASC Topic 260, Earnings Per Shares.

The Company utilizes

11 unchanged sentences

awards that contain a non-forfeitable right to receive dividends and therefore are considered to participate in undistributed earnings

with common shareholders.

Basic earnings per common share excludes dilution and is calculated by dividing net earnings allocated to common

shares by the weighted-average number of common shares outstanding for the period.

Diluted earnings per common share is calculated by

dividing net earnings allocable to common shares by the weighted-average number of common shares outstanding for the period, as adjusted

for the potential dilutive effect of non-participating share-based awards.

Deferred tax assets and liabilities are recognized

for the estimated future tax consequences attributable to differences between the tax bases of assets and liabilities and their carrying

amounts for financial reporting purposes.

Deferred tax assets and liabilities are adjusted through the provision for income taxes as changes

in tax laws or rates are enacted.

Effective September 28, 2022, the

Company complies with the accounting and reporting requirements of ASC Topic 740, which requires an asset

and liability approach to financial accounting and reporting for income taxes.

Deferred income tax assets and liabilities are computed

for differences between the financial statement and tax bases of assets and liabilities that will result in future taxable or deductible

amounts, based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income.

Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.

PCCU was exempt from most federal, state, and local taxes under the provisions

of the Internal Revenue Code and state tax laws.

However, PCCU was subject to unrelated business income tax.

The Carved-Out Operations

were wholly owned by PCCU and therefore, were exempt from most federal and state income taxes.

The ASC Topic 740, “Income Taxes,”

under US GAAP clarifies accounting for uncertainty in income taxes reported in the financial statements.

The interpretation provides criteria

for assessment of individual tax positions and a process for recognition and measurement of uncertain tax positions.

Tax positions are

evaluated on whether they meet the “more likely than not” standard for sustainability on examination by tax authorities.

Company’s Management has determined there are no material uncertain tax positions.

740-270-25-2 requires that an annual effective tax rate be determined and such annual effective rate applied to year to date income

in interim periods.

If management is unable to estimate a portion of its ordinary income, but is otherwise able to reliably estimate

the remainder, ASC 740-270-25-3 provides that the tax applicable to that item be reported in the interim period in which the item

The tax (or benefit) related to ordinary income (or loss) shall be computed at an estimated annual effective tax rate and

the tax (or benefit) related to all other items shall be individually computed and recognized when the items occur.

Management is

unable to estimate a portion of its ordinary income and as a result had computed the company’s tax provision in accordance

with ASC 740-270-25-3.

with common shareholders (Refer to Note 17).

Basic earnings per common share excludes dilution and is calculated by dividing net earnings

allocated to common shares by the weighted-average number of common shares outstanding for the period.

Diluted earnings per common share

is calculated by dividing net earnings allocable to common shares by the weighted-average number of common shares outstanding for the

period, as adjusted for the potential dilutive effect of non-participating share-based awards.

tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the tax bases

of assets and liabilities and their carrying amounts for financial reporting purposes.

Deferred tax assets and liabilities are adjusted

through the provision for income taxes as changes in tax laws or rates are enacted.

to the merger, the Company was a pass-through entity for tax purposes.

Effective September 28, 2022, the Company complies with the accounting

and reporting requirements of ASC Topic 740, which requires an asset and liability approach to financial accounting and reporting for

income taxes.

Deferred income tax assets and liabilities are computed for differences between the financial statement and tax bases of

assets and liabilities that will result in future taxable or deductible amounts, based on enacted tax laws and rates applicable to the

periods in which the differences are expected to affect taxable income.

Valuation allowances are established, when necessary, to reduce

deferred tax assets to the amount expected to be realized.

was exempt from most federal, state, and local taxes under the provisions of the Internal Revenue Code and state tax laws.

However, PCCU

was subject to unrelated business income tax.

The Carved-Out Operations were wholly owned by PCCU and therefore, were exempt from most

federal and state income taxes.

ASC Topic 740, “Income Taxes,” under US GAAP clarifies accounting for uncertainty in

income taxes reported in the financial statements.

The interpretation provides criteria for assessment of individual tax positions and

a process for recognition and measurement of uncertain tax positions.

Tax positions are evaluated on whether they meet the “more

likely than not” standard for sustainability on examination by tax authorities.

The Company’s Management has determined there

are no material uncertain tax positions.

740-270-25-2 requires that an annual effective tax rate be determined and such annual effective rate applied to year to date income in

interim periods.

If management is unable to estimate a portion of its ordinary income, but is otherwise able to reliably estimate the

remainder, ASC 740-270-25-3 provides that the tax applicable to that item be reported in the interim period in which the item occurs.

The tax (or benefit) related to ordinary income (or loss) shall be computed at an estimated annual effective tax rate and the tax (or

benefit) related to all other items shall be individually computed and recognized when the items occur.

Management is unable to estimate

a portion of its ordinary income and as a result had computed the company’s tax provision in accordance with ASC 740-270-25-3.

The Company’s effective tax rate was 30.13 %

for the three months ended September 30, 2022, and 2021, respectively, and 0.00 %

for the nine months ended September 30, 2022 and September 30, 2021, respectively.

The effective tax rate differs from the statutory

tax rate of 21 %

for the three months and nine months ended September 30, 2022 and 2021 primarily due to the aforementioned tax exemption available to PCCU.

Holdings, Inc.

NOTES TO FINANCIAL STATEMENTS

for the three months ended March 31, 2023 and March 31, 2022, respectively.

The effective tax rate differs from the statutory tax rate

of 21 % for the three months ended March 31, 2023 and March 31, 2022 primarily due to the aforementioned tax exemption available to PCCU.

Topic 740 also prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement

5 unchanged sentences

There were no unrecognized tax benefits and no amounts accrued for interest and penalties

as of September 30, 2022 and December 31, 2021.

as of March 31, 2023 and December 31, 2022.

The Company is currently not aware of any issues under review that could result in significant

payments, accruals or material deviation from its position.

Costs Associated with the Initial Public Offering and PIPE Offering

costs consisted of legal, accounting, underwriting fees and other costs incurred that were directly related to the Initial Public Offering.

Offering costs are allocated to the separable financial instruments issued in the Initial Public Offering based on a relative fair value

basis, compared to total proceeds received.

Offering costs associated with warrant liabilities are expensed as incurred, presented as

offering costs allocated to warrants in the statements of operations.

Offering costs associated with the Public Shares were

charged to stockholders’ equity upon the completion of the Initial Public Offering.

offering costs as of September 30, 2022 consisted of legal, accounting, underwriting fees and other costs incurred that were directly

related to the PIPE Offering.

costs consisted of legal, accounting, underwriting fees and other costs incurred that were directly related to the PIPE offering.

costs are allocated to the separable financial instruments issued based on a relative fair value basis, compared to total proceeds received.

Offering costs associated with warrant liabilities are expensed as incurred, presented as offering costs allocated to warrants in the

statements of operations.

Offering costs associated with the Public Shares were charged to Parent-Entity Net Investment and Stockholders’

Equity upon the completion of the Initial Public Offering.

Issued Accounting Standards

2 unchanged sentences

Unless otherwise discussed, the impact of recently issued standards

that are not yet effective and are not expected to have a material impact on the Company’s financial position or results of operations

that are not yet effective are not expected to have a material impact on the Company’s financial position or results of operations

upon adoption.

Instruments—Credit Losses

for Convertible Instruments and Contracts in an Entity’s Own Equity

August 2020, the FASB issued ASU No.

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

(“ASU 2020-06”), which simplifies the accounting for certain financial instruments with characteristics of liabilities and

equity, including convertible instruments and contracts in an entity’s own equity.

Among other changes, ASU 2020-06 removes from

GAAP the liability and equity separation model for convertible instruments with a cash conversion feature, and as a result, after

adoption, entities will no longer separately present in equity an embedded conversion feature for such debt.

Similarly, the embedded

conversion feature will no longer be amortized into income as interest expense over the life of the instrument.

Instead, entities will

account for a convertible debt instrument wholly as debt unless (1) a convertible instrument contains features that require bifurcation

as a derivative under ASC Topic 815, Derivatives and Hedging, or (2) a convertible debt instrument was issued at a substantial premium.

2020-06 was effective for fiscal years beginning after December 15, 2021, with early adoption permitted for fiscal years beginning after

December 15, 2020.

The Company early adopted the new standard during fiscal year 2021.

Expected Credit Losses

June 2016, the FASB issued ASU No.

11 unchanged sentences

Entities apply the standard’s

provisions by recording a cumulative effect adjustment to retained earnings.

The Company has not yet adopted ASU 2016-13 and is currently

assessing the impact of this new standard on its financial statements.

Collaborative

November 2018, the FASB issued ASU 2018-18, Collaborative Arrangements (Topic 808).

This update clarifies the interaction between ASC

808, Collaborative Arrangements and ASC 606, Revenue from Contracts with Customers (“ASU 2018-18”).

The update clarifies

that certain transactions between participants in a collaborative arrangement should be accounted for under ASC 606 when the counterparty

is a customer.

In addition, the update precludes an entity from presenting consideration from a transaction in a collaborative arrangement

as revenue if the counterparty is not a customer for that transaction.

ASU 2018-18 should be applied retrospectively to the date of initial

application of ASC 606 and early adoption is permitted.

Holdings, Inc.

NOTES TO FINANCIAL STATEMENTS

ASU’s amendments were effective for public business entities for fiscal years beginning after December 15, 2019, including interim

periods therein.

The adoption of this standard did not have a material impact on the Company’s financial statements as the Company

does not have any collaborative agreements.

However, there is a potential for the Company to enter into collaborative agreements in the

future, as it expands into additional markets.

February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-02,

Leases (Topic 842) .

FASB issued ASU 2016-02 to increase transparency and comparability among organizations by recognizing lease

assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements.

Certain qualitative and

quantitative disclosures are required, as well as a retrospective recognition and measurement of impacted leases.

In June 2020, FASB

issued ASU 2020-05, Revenue from Contracts with Customers (Topic 606) and Leases (Topic 842):

Deferral of the Effective Dates for

Certain Entities , which deferred the effective date of ASU 2016-02 to annual reporting periods beginning after December 15, 2021,

and interim periods within fiscal years beginning after December 15, 2022.

Early adoption is permitted.

Management is currently evaluating

this standard but anticipates the adoption of the new lease standard to be immaterial.

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.

Business Combination detailed in Note 1 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.

provisions by recording a cumulative effect adjustment to retained deficit.

The Company has adopted ASU 2016-13 as of January 1, 2023, utilizing the modified retrospective method.

Transition Impact:

The table below provides details on the transition impacts of adopting CECL.

Other balance sheet lines not presented

were not affected by CECL.

Transition Impact:

Schedule of Current

Expected Credit Losses Transition Impact

Transition Adjustment

Loans receivable, gross

Allowance for credit loss

Liabilities & Equity

Transition Adjustment

Indemnity liability

Retained deficit

( 39,695,281 )

( 40,276,602 )

$ ( 39,195,816 )

$ ( 39,210,796 )

ASU 2016-02, Leases, (“ASC 842”) and related amendments, require lessees to recognize a right-of-use asset and a lease liability

for substantially all leases and to disclose key information about leasing arrangements and aligns certain underlying principles of the

lessor model with the revenue standard.

The Company adopted this guidance during fiscal year 2022 using the optional transition method,

which allows entities to apply the guidance at the adoption date and recognize a cumulative effect adjustment to the opening balance

of retained earnings, if any, in the period of adoption with no restatement of comparative periods.

At January 1, 2022 adoption date,

there were no leases outstanding that met criteria for recognition.

The Company has since recognized any leases in accordance with ASC

842 by recording right-of-use assets and operating lease liabilities on the balance sheet.

Debt Restructurings and Vintage Disclosures

Accounting Standard Update (ASU 2022-02) eliminates the recognition and measurement guidance on troubled debt restructurings for creditors

that have adopted ASC 326 and requires them to make enhanced disclosures about loan modifications for borrowers experiencing financial

The new guidance also requires public business entities to present current period gross write-offs (on a current year-to-date

basis for interim-period disclosures) by year of origination in their vintage disclosures.

For entities that have adopted ASU 2016-13,

this ASU is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years.

did not adopt ASU 2022-02 as of December 31, 2022;

however, it has adopted this standard as of January 1, 2023 and the ASU has not had

a material impact on the Company’s condensed consolidated financial statements.

Standards Pending to be

Value Measurement of Equity Securities Subject to Contractual Sale Restrictions

Accounting Standard Update (ASU 2022-03) clarifies that a contractual restriction on the sale of an equity security is not considered

part of the unit of account of the equity security and, therefore, is not considered when measuring fair value.

Recognizing a contractual

restriction on the sale of an equity security as a separate unit of account is not permitted.

This ASU is effective for fiscal years

beginning after December 15, 2023, including interim periods within those fiscal years.

The Company does not expect this ASU to have

a material impact on its condensed consolidated financial statements.

Rate Reform (Topic 848):

Deferral of the Sunset Date of Topic 848

Accounting Standard Update (ASU 2022-06) defers the Sunset Date of ASC Topic 848, Reference Rate Reform (Topic 848), which provides temporary

optional relief in accounting for the impact of Reference Rate Reform.

This ASU is effective upon issuance (December 21, 2022) and generally

can be applied through December 31, 2024.

The Company does not expect this ASU to have a material impact on its condensed consolidated

financial statements.

Business Combination

the year 2022, the Business Combination detailed in Note 1 above was accounted for as a reverse recapitalization, with no goodwill or

other intangible assets recorded, in accordance with GAAP.

Under this method of accounting, NLIT was treated as the acquired company

for financial reporting purposes.

Accordingly, for accounting purposes, the Business Combination was treated as the equivalent of SHF

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

The net assets of NLIT were recognized at fair value (which

was consistent with carrying value), with no goodwill or other intangible assets recorded.

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

7 unchanged sentences

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

Holdings, Inc.

NOTES TO FINANCIAL STATEMENTS

costs consisted of legal, accounting, underwriting fees and other costs incurred that were

directly related to the business combination was approximately $ 10.85 million.

● Approximately

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

Approximately $ 21.9 million of the amount is payable to PCCU beginning December

Approximately $ 21.9 million of the amount was due to PCCU beginning December

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

1 unchanged sentence

1,200,000 founder shares were escrowed until the amount is paid in full.

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

business combination was transferred to additional paid in capital.

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.

● Immediately

2 unchanged sentences

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.

The shares of Series A Convertible Preferred were converted into 2,045,000

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

(20) percent of the aggregate value was deposited into a third party escrow account for purposes

1 unchanged sentence

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.

For 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.

Company is authorized to issue 1,250,000 preferred shares with a par value of $ 0.0001 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.

registration statement 10 calendar days subsequent to closing, 17.5% of the escrow amount

was released with the remaining amount once all securities are included in an effective registration

tax purposes, the transaction is treated as a taxable asset acquisition, resulting in an

estimated tax basis Goodwill balance of $ 44,102,572 , 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 be recorded in accordance with GAAP.

The Company is authorized to issue 1,250,000

preferred shares with a par value of $ 0.0001

per share with such designation rights and preferences as may be determined from time to time by the Company’s Board of

As of December 31, 2022, there were 14,616

preferred shares issued or outstanding.

The holders of preferred stock shall be entitled to receive, and the Company shall pay,

dividends on shares of preferred stock equal(on an as-if-converted-to-Class-A-Common-Stock basis) to and in the same form as

dividends actually paid on shares of the Class A Common Stock when, as and if such dividends are paid on shares of the Class A

Common Stock.

No other dividends shall be paid on the preferred stock.

The terms of the preferred stock provide for an initial

conversion price of $ 10.00

per share of Class A Common Stock, which conversion price is subject to downward adjustment on each of the dates that are 10 days,

55 days, 100days, 145 days and 190 days after the effectiveness of a registration statement registering the shares of Class A Common

Stock issuable upon conversion of the preferred stock to the lower of the Conversion Price and the greater of (i)

80% of the volume weighted average price of the Class A Common Stock for the prior five trading days and (ii) $2.00 (the

“Floor Price”), provided that, so long as a preferred stock holders continues to hold any preferred shares, such

preferred stock holder will be entitled to receive the aggregate shares of Class A Common Stock that would be issuable based upon

its initial purchase of preferred stock at the adjusted Conversion Price .

Additionally, on January 25, 2023, at a special

meeting of the Company’s stockholders the reduction in the floor conversion price of the outstanding preferred stock from $ 2.00

per share to $ 1.25

A Common Stock:

Company is authorized to issue up to 125,000,000 shares of Class A Common Stock with a par value of $ 0.0001 per share.

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.

The Company is authorized to issue up to 130,000,000 shares of Class A Common

Stock with a par value of $ 0.0001 per share.

Holders of the Company’s Class A Common

Stock are entitled to one vote for each share.

As of December 31, 2022, there were 23,732,889

shares, respectively, of Class A Common Stock issued or outstanding.

As of December 31,2022,

3,667,377 Class A Common Stock are held by the purchasers under forward purchase agreement

dated June 16, 2022, by and among the Company and such purchasers.

fair value of net assets on September 28, 2022 in the books of NLIT are as follows:

of Fair Value Net Assets

Cash & Cash Equivalents

Prepaid Expense

Cash held in Trust

Deferred offering cost

Accounts Payable

( 1,374,021 )

Accrued Expense

( 1,202,164 )

Advance from sponsor

( 1,150,000 )

Deferred underwriter payable

( 4,025,000 )

Forward purchase derivative

Warrant Liability

( 1,394,453 )

Class A Common Stock subject to possible redemption

( 79,259,819 )

Fair value of net assets acquired

following table summarizes the total fair value of consideration:

of Fair Value Consideration

Company’s Class A common stock comprises of 11,386,139 shares

Cash consideration

Deferred cash consideration

Total fair value of consideration

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

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

in the Carved-Out Operations.

For purposes of these condensed consolidated financial statements, investing requirements have been summarized

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

No separate equity accounts

are maintained for SHS, SHF or the Branches.

On March 29, 2023, the Company and PCCU entered into

a definitive transaction to settle and restructure the deferred obligations, including $ 56,949,800 into a five-year Senior Secured Promissory

Note (the “Note”) in the principal amount of $ 14,500,000 bearing interest at the rate of 4.25 %;

a Security Agreement pursuant

to which the Company will grant, as collateral for the Note, a first priority security interest in substantially all of the assets of

and a Securities Issuance Agreement, pursuant to which the Company will issue 11,200,000 shares of the Company’s Class

A Common Stock to PCCU.

(Refer to Note 9 to the financial statements below.)

November 15, 2022, the Company and its subsidiary entered into a series of merger and acquisition transactions resulting in the acquisition

of 100.00 % control of Rockview Digital Solutions Inc.

d/b/a/ ABACA (collectively “Abaca”).

This acquisition was completed

in exchange for a combination of cash and the Company’s shares.

As part of the acquisition, the Company’s Notes of $ 500,000

along with interest accrued until the date of acquisition were redeemed.

acquisition increases the Company’s customer base to include more than 1,000 unique depository accounts across 40 states and U.S.

adds Abaca’s fintech platform to the Company’s existing technology;

increases the Company’s financial

institution client relationships and access to balance sheet capacity to five unique financial institutions strategically located across

the United States;

increases the Company’s lending capacity;

and nearly doubles the Company’s team, adding to the existing

talent pool of the cannabis industry’s foremost financial services and financial technology experts.

to the Abaca merger agreement, as amended, the Company acquired Abaca in exchange for $ 30,000,000 , paid in a combination of cash and

shares of the Company as follows:

consideration in an amount equal to (i) $ 9,000,000 ($ 3,000,000 was payable at the closing

of the Mergers (the “Merger Closing”), with an additional $ 3,000,000 payable

at each of the one-year and two-year anniversaries of the Merger Closing), (collectively,

the “Deferred Cash Consideration”);

Stock equal to the lesser of (1) 2,100,000 shares or (2) a number of shares equal to (i)

$8,400,000, divided by (ii) the Closing Parent Trading Price and $ 12,600,000 (minus an outstanding

note balance of $ 500,000 , plus accrued interest) in shares of Class A Common Stock at the

one-year anniversary of the Merger Closing based on a 10-day VWAP (collectively, the “Future

stock consideration”).

Company measures the deferred cash consideration and future stock consideration at fair value on the acquisition date based on a

report received from an independent valuation firm.

following table summarizes the purchase price allocation:

Schedule of Purchase Price Allocation

Property, plant & equipment

Cash & cash equivalents

Prepaid expense

Security deposit

Accounts receivables

Accounts Payable

Accrued Expense

Fair value of net assets acquired

Other intangibles

Deferred tax liabilities

( 1,758,769 )

Total purchase consideration

following table summarizes the total fair value of consideration:

Schedule of Fair Value Consideration

Deferred cash payment

Share issued – common stock ( 2,099,977 shares)

Settlement of pre-existing notes along with accrued interest

Future consideration settled in common stock

Fair value of consideration

the date of acquisition, management allocated the initial purchase price based on the estimated fair value of the identifiable assets

and liabilities assumed on the acquisition date.

The pre-existing relationships settled were the Company’s notes and related accrued

interest with Abaca.

Subsequently, the Company finalized the purchase price allocation and has adjusted the provisional values retrospectively

to reflect changes to the assets and liabilities at the acquisition date.

For the fair value of the identifiable intangible assets acquired,

the Company used an income-based approach, which involves estimating the future net cash flows and applies an appropriate discount rate

to those future cash flows.

assets were recorded at estimated fair value, as determined by management based on available information which includes a valuation

prepared by an independent third party.

The fair values assigned to identifiable intangible assets were determined through the use

of the income approach and multi-period excess earnings methods.

The major assumptions used in arriving at the estimated

identifiable intangible asset values included management’s estimates of future cash flows, discounted at an appropriate rate

of return which is based on the weighted average cost of capital for both the company and other market participants.

lives of intangible assets were determined based upon the remaining useful economic lives of the intangible assets that are expected

to contribute directly or indirectly to future cash flows.

The estimated fair value of intangible assets and related useful lives as

included in the purchase price allocation include:

Schedule of Intangible Assets and Related Useful Lives as Included

in Purchase Price Allocation

Useful life in

Market related intangible assets

Customer relationships

Developed technology

Fair value of consideration

has been recognized as a result of the specialized assembled workforce at Abaca.

the acquisition of Abaca occurred on January 1, 2022, there would not have been a significant impact on the consolidated operating sales

revenues and net earnings for the three months ended March 31, 2022.

Acquisition costs of $ 236,200 were incurred and recognized in acquisition

related costs in the year of acquisition.

Goodwill and other intangibles

acquired in connection with the acquisition on November 16, 2022, is not amortized, but instead evaluated for impairment on an

annual basis at the end of the fiscal year, or more frequently if events or circumstances indicate that impairment may be more

likely than not.

During the year ended December 31, 2022, no

impairment charges were taken against the company’s goodwill.

The carrying amount of goodwill arose from the acquisition

described in Note 4, “Acquisition.”

change in the carrying amount of goodwill from December 31, 2022, to March 31, 2023, is as follows:

Schedule of Carrying Amount of Goodwill

December 31, 2022

Acquisition of Abaca

March 31, 2023

Company has elected November 15 as the date for annual impairment testing or as necessary for triggering events.

The management believes

that there has been no change in the circumstances which could cause any indicators to impairment hence no impairment was recognized

during the three months ended March 31, 2023.

Company’s finite lived intangible assets are amortized on a straight-line basis over their estimated useful lives.

following is a summary of the Company’s finite-lived intangible assets as of March 31, 2023:

Schedule of Finite Lived Intangible Assets

Finite-lived intangible assets, net

Market related intangible assets

Customer relationships

Developed technology

Total intangible assets

is a summary of the Company’s finite-lived intangible assets as of December 31, 2022.

Acquired in acquisition

Finite-lived intangible assets, net

Market related intangible assets

Customer relationships

Developed technology

Total intangible assets

Loans Receivable

real estate loans receivable, net consist of the following:

of Commercial Real Estate Loans Receivable

Schedule of Commercial Real Estate Loans Receivable

Commercial real estate loans receivable, gross

Allowance for loan losses

loan origination charges

Commercial real estate loans receivable, net

Allowance for credit losses

Commercial real estate loans receivable, net

Current portion

Noncurrent portion

Holdings, Inc.

NOTES TO FINANCIAL STATEMENTS

Other Investment

At September 30, 2022, the Company had a $ 500,000

unsecured loan receivable amount that contained a conversion feature.

The Company had the right to convert the outstanding balance

of the loan, including all accrued but unpaid interest, into equity of the borrower.

In the event that no agreement for acquisition

is reached, the Company, in its sole and subjective discretion, may elect to proceed under the existing repayment schedule or

convert the loan to equity.

Given this conversion feature, the amount receivable from the borrower is thus classified as an

“Other Investment” as of September 30, 2022.

Allowance for Loan Losses

allowance for loan losses is maintained at a level believed to be sufficient to provide for estimated loan losses based on evaluating

known and inherent risks in the loan portfolio.

The allowance is provided based upon management’s analysis of the pertinent factors

underlying the quality of the loan portfolio.

These factors include changes in the amount and composition of the loan portfolio, delinquency

levels, actual loss experience, current economic conditions, and detailed analysis of individual loans for which the full collectability

may not be assured.

The detailed analysis includes methods to estimate the fair value of loan collateral and the existence of potential

alternative sources of repayment.

for Credit Losses

allowance for credit losses is maintained at a level believed to be sufficient to provide for estimated credit losses based on

evaluating known and inherent risks in the loan portfolio.

The allowance is provided based upon management’s analysis of the

pertinent factors underlying the quality of the loan portfolio.

These factors include changes in the amount and composition of the

loan portfolio, delinquency levels, actual loss experience, current economic conditions, and detailed analysis of individual loans

for which the full collectability may not be assured.

The detailed analysis includes methods to estimate the fair value of loan

collateral and the existence of potential alternative sources of repayment.

allowance may consist of specific and general components.

1 unchanged sentence

is general in nature and is available for the loan portfolio in its entirety.

allowance for loan losses consists of the following activity for the three and nine months ended September 30, 2022 and 2021:

allowance for credit losses consist of the following activity for the three months ended March 31, 2023 and year ended March 31,

Schedule of Allowance For Loan Losses

Nine Months ended September 30, 2022:

Allowance for loan losses:

Beginning balance

Ending balance

Three Months ended September 30, 2022:

Allowance for loan losses:

Beginning balance

Provision (benefit)

Ending balance

Loans receivable at September 30, 2022

Individually evaluated for impairment

Collectively evaluated for impairment

Total loans receivable

Allowance for loan losses at September 30, 2022

Individually evaluated for impairment

Collectively evaluated for impairment

Total allowance for loan losses

Holdings, Inc.

NOTES TO FINANCIAL STATEMENTS

Nine Months ended September 30, 2021:

Allowance for loan losses:

Beginning balance

Ending balance

Three Months ended September 30, 2021:

Allowance for loan losses:

Allowance for credit losses

Beginning balance

Cumulative effect from adoption of CECL

Ending balance

Loans receivable at September 30, 2021

Loans receivable:

Individually evaluated for impairment

Collectively evaluated for impairment

Total loans receivable

Allowance for loan losses at September 30, 2021

Allowance for credit losses:

Individually evaluated for impairment

Collectively evaluated for impairment

Total allowance for loan losses

September 30, 2022 and September 30, 2021, no loans were past due, classified as non-accrual or considered impaired.

Indemnity Liability

As discussed at Note 7, and pursuant to PCCU Agreements,

PCCU funds loans originated and serviced by SHF either directly or through a third-party vendor.

SHF retains the associated interest and

pays PCCU a fee at an annual rate of 0.25 % of the outstanding loan principal.

The below schedule details outstanding amounts funded by

PCCU and categorized as either collateralized loans or unsecured loans and lines of credit.

No loans were funded by PCCU prior to January

of Outstanding Amounts

September 30,

March 31, 2023 and December 31, 2022, no loans were past due, classified as non-accrual or considered impaired.

quality of loans:

part of the on-going monitoring of the credit quality of the Company’s loan portfolio, management tracks credit quality indicators

based on the loan payment status on monthly basis.

All the loans outstanding on March 31, 2023, are evaluated based on their payment status,

which is considered as the most meaningful indicator of credit quality.

Indemnification liability

discussed at Note 9 to the condensed consolidated financial statements, and pursuant to PCCU Agreements, PCCU funds loans through a third-party

SHF earns the associated interest and pays PCCU a loan hosting payment at an annual rate of 0.25 % of the outstanding loan principal.

The below schedule details outstanding amounts funded by PCCU and categorized as either collateralized loans or unsecured loans and lines

Schedule of Outstanding Amounts

Secured term loans

1 unchanged sentence

Total loans funded by Parent

All amounts were performing at September 30, 2022.

Secured loans contained an interest rate ranging from 5.90 % to 12.00 %.

Unsecured loans and lines of credit contain variable rates ranging

from Prime + 1.5% to Prime + 6%.

Unsecured lines of credit had incremental availability of $ 996,958 and $ 225,000 at September 30, 2022

and December 31, 2021.

SHF’s indemnity liability reflects SHF management’s

estimate of probable loan losses inherent under the agreement at the balance sheet date.

Unsecured loans and lines of credit contain

variable rates ranging from Prime + 1.50 % to Prime + 6.00 %.

Unsecured lines of credit had incremental availability of $ 875,000 and

$ 996,958 at March 31, 2023 and December 31, 2022.

has agreed to indemnify PCCU for losses on certain PCCU loans.

The indemnity liability reflects SHF management’s estimate of

probable credit losses inherent under the agreement at the balance sheet date.

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 at least a quarterly based on each situation

by SHF management.

Given the Company’s limited lending history, the estimate is based on risk adjusted national charge off rates

as published by the US Federal Reserve.

The indemnity liability activity on September 30,

2022 are as follows:

of Indemnity Liability

Three months ended September 30, 2022

Nine months ended September 30, 2022

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 at least a quarterly based on

each situation by SHF management.

Given the Company’s limited lending history, the estimate is based on risk adjusted national

charge off rates as published by the US Federal Reserve.

indemnity liability activity are as follows:

Schedule of Indemnity Liability

March 31, 2023

March 31, 2022

Beginning balance

Cumulative effect from adoption of CECL

Ending balance

All loans were current and considered performing at

September 30, 2022

SHF has agreed to indemnify PCCU from all claims related

to SHF’s cannabis-related business.

Other than potential loan losses, no other circumstances were identified meeting the requirements

of a loss contingency.

Holdings, Inc.

NOTES TO FINANCIAL STATEMENTS

The provision for loan losses on the statement

of operations consists of the following activity for the three and nine months ended September 30, 2022:

Commercial real estate loans

Indemnity liability

Commercial real estate loans

Indemnity liability

Three months ended

Nine months ended

Commercial real estate loans

Indemnity liability

Commercial real estate loans

Indemnity liability

March 31, 2023 except one loan which was identified pursuant to potential default on January 5, 2023.

The Company’s management was

informed that an indemnified loan, having an outstanding balance of $3.1MM, was past due pursuant to its December 2022 payment.

The guarantor

on the loan stated to management that the borrower is out of money due to business losses.

The guarantor noted that the borrower is attempting

to sell the building prior to the end of Q2 of 2023.

The Company is discussing workout options with the borrower.

In addition, further

to the aforementioned attempt to sell, the loan has sufficient collateral.

The above-mentioned loan is now greater than 120 days

delinquent and considered impaired.

The Company’s CECL methodology has reserved management’s best estimate of credit losses

in relation to this loan and the overall loan portfolio on a collective basis.

quality of indemnified loans:

part of the on-going monitoring of the credit quality of the Company’s indemnified loan portfolio, management tracks credit quality

indicators based on the loan payment status on monthly basis.

All the indemnified loans outstanding on March 31,2023 are evaluated based

on their payment status, which is considered as the most meaningful indicator of credit quality.

has agreed to indemnify PCCU from all claims related to SHF’s cannabis-related business.

Other than potential credit losses,

no other circumstances were identified meeting the requirements of a loss contingency.

provision for credit losses on the statement of operations consists of the following activity for the three months ended March 31,

2023 and year ended December 31, 2022:

Schedule of Provision for Loan Losses

Provision (benefit)

1 unchanged sentence

and equipment consist of the following:

of Property and Equipment, Net

Schedule of Property and Equipment, Net

Office furniture

2 unchanged sentences

Property and equipment, net

expense was $ 3,576 and $ 1,264 for the nine months ended September 30, 2022 and September 30, 2021, respectively.

Related party transactions

Servicing Agreement

July 1, 2021, SHF, LLC (“SHF”) entered into an Account Servicing Agreement with PCCU.

SHF provides services as per the agreement

to CRB accounts at PCCU.

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.

Company had an Account Servicing Agreement with PCCU.

SHF provides services as per the agreement to CRB accounts at PCCU.

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.

renew thereafter for 1-year terms until either SHF or PCCU provide sixty days prior written notice.

The agreement was amended and restated

in conjunction with the contemplated Business Combination with substantially similar terms.

to this agreement, as amended and restated, the Company 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.

Amounts due to SHF are due

monthly in arrears and upon receipt of invoice.

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

It shall renew thereafter for 1-year terms until either SHF or

PCCU provide sixty days prior written notice.

The agreement was amended and restated in conjunction with the Business

Combination with substantially similar terms.

to this agreement, SHF reported revenue of $ 3,261,284 and $ 1,628,091 for the three months ended March 31, 2023 and March 31, 2022, respectively.

Services Agreement

6 unchanged sentences

agreement was amended and restated in conjunction with the contemplated Business Combination with substantially similar terms.

Holdings, Inc.

NOTES TO FINANCIAL STATEMENTS

to these agreements and as amended and restated, the Company reported expense 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.

to these agreements and as amended and restated, the Company reported expenses of $ 378,730 and $ 83,807 for the three months ended March

31, 2023 and March 31, 2022, respectively.

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

to the 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 Account Servicing Agreement and Support Services Agreement are 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 Account Servicing Agreement will

also 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.

On May 23, 2022, SHF and PCCU entered into the

Second Amended and Restated Account Servicing Agreement and Support Services Agreement, which agreement amended and restated the

Amended and Restated Account Servicing and Support Services Agreements to remove the provision providing for the termination of the

agreements 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.

to the Support Services Agreement, as amended, 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.

In addition, investment

income from CRB-related cash and investments (excluding loans) will be shared 25% to PCCU and 75% to SHF and SHF will 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.

Finally, under the 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 below schedule demonstrates PCCU’s deposit capacity at September 30, 2022 and December 31, 2021.

of Demonstrates Deposit Capacity

September 30,

Pursuant to the Account Servicing Agreement, the Company’s fees for such services 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 Account Servicing Agreement and Support

Services Agreement are 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

The Account Servicing Agreement will also terminate within 60 days of the Company 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

On May 23, 2022, the Company and PCCU entered into the Second Amended and Restated Account Servicing Agreement and Support

Services Agreement, which agreement amended and restated the Amended and Restated Account Servicing and Support Services Agreements

to remove the provision providing for the termination of the agreements within 60 days of the Company no longer qualifying as a

“credit union service organization,” as the Company will cease to qualify as a CUSO following the closing of the

Business Combination.

Pursuant to the Support Services Agreement, as amended, PCCU will continue to provide to the Company 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.

In addition, investment income from CRB-related cash and investments (excluding loans) will be shared 25% to PCCU and

75% to the Company and the Company will reimburse PCCU for any of its out-of-pocket expenses relating to the services provided to

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.

Finally, under

the Support Services Agreement PCCU will continue to allow its ratio of CRB-related deposits to total assets up to 65% unless

otherwise dictated by regulatory, regulator or policy requirements.

The below schedule demonstrates unaudited PCCU’s deposit

capacity at March 31, 2023 and December 31, 2022.

of Demonstrated Deposit Capacity

PCCU total assets

9 unchanged sentences

limited if PCCU ratio declines below this threshold.

Holdings, Inc.

NOTES TO FINANCIAL STATEMENTS

Servicing Agreement

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

February 11, 2022, SHF entered into a 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.

agreement was amended and restated in conjunction with the contemplated Business Combination with substantially similar terms.

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

PCCU receives a monthly servicing fee at the annual rate of 0.25 %

of the then-outstanding principal balance of each loan funded by PCCU.

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 credit 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.

The agreement was

amended and restated in conjunction with the Business Combination with substantially similar terms.

loan program currently depends on PCCU as SHF’s largest funding source for new loans to CRBs.

6 unchanged sentences

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

below schedule demonstrates the ratio of CRB related loans funded by PCCU to the relative lending limits at September 30, 2022.

were funded prior to January 1, 2022.

of Demonstrates Deposit Capacity

below schedule demonstrates the ratio of CRB related loans funded by PCCU to the relative lending limits at March 31, 2023 and December

of Demonstrated Deposit Capacity

CRB related deposits

5 unchanged sentences

Limiting capacity

$ 128,174,148

PCCU loans funded

2 unchanged sentences

$ 100,352,270

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-month and nine-month periods ended September 30, 2021.

the Account Servicing Agreement, Support Servicing Agreement and Loan Servicing Agreement are referred to as the “Parent Agreements.”

$ 154,971,429

to this agreement, the Company reported expenses of $ 11,929 and $ 1,373 for the three months ended March 31, 2023 and March 31, 2022.

of shares to PCCU

March 29, 2023, the Company and PCCU entered into the following definitive transaction documents to settle and restructure the deferred

five -year Senior Secured Promissory Note (the “Note”) in the principal amount

of $ 14,500,000 bearing interest at the rate of 4.25 % and a Security Agreement pursuant to

which the Company will grant, as collateral for the Note, a first priority security interest

in substantially all of the assets of the Company.

Securities Issuance Agreement, pursuant to which the Company issued 11,200,000 shares

of the Company’s Class A Common Stock to PCCU.

Following the issuance of the Shares,

PCCU will own 54.93 % of the outstanding Class A Common Stock.

In connection with the Securities

Issuance Agreement, the parties also entered into a Registration Rights Agreement and a Lock-Up

Registration Rights Agreement requires the Company to register the Shares for resale pursuant

to the Securities Act of 1933, as amended (the “Securities Act”);

and the Lock-Up

Agreement restricts PCCU from transferring the Shares until the earlier of (i) six (6) months

after the date of the Securities Issuance Documents or (ii) the consummation of a transaction

with an unaffiliated third party in which all of the Company’s stockholders have the

right to exchange their shares of Class A Common Stock for cash, securities, or other property;

Commercial Alliance Agreement that sets forth the terms and conditions of the lending-related and account-related services governing

the relationship between the Company and PCCU which supersedes the Loan Servicing Agreement, as well as the Amended and Restated

Support Services Agreement and the Amended and Restated Account Servicing Agreement.

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

1 unchanged sentence

pursuant to ASC 842.

Holdings, Inc.

NOTES TO FINANCIAL STATEMENTS

June 27, 2022, Luminous Capital Inc., an affiliate of the Sponsor provided a non-interest-bearing advance (the

“Advance”) amounting to $ 1,150,000

to fund the operation of NLIT.

The amount remains outstanding at March 31, 2023 and December 31, 2022 and is presented within “accounts payable” in

the condensed consolidated balance sheets.

Due to Seller

Amounts due to seller were as follows:

of Amounts Due to Seller

Due to Seller-Current (Unsecured)

Due to Seller-long term (Unsecured)

Total loans funded by Parent

contemplated by the Unit Purchase Agreement, related to reverse acquisition of NLIT, the consideration paid to the seller parent (PCCU)

in connection with the Business Combination consisted of 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, $ 56,949,800 of which was to be paid on

a deferred basis (the “Deferred Cash Consideration”).

Deferred Cash Consideration was to be paid in one payment of $ 21,949,800 on or before December 15, 2022, and the $ 35,000,000 balance

in six equal instalments 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 .

October 26, 2022, SHF Holdings, Inc., 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 by the Company

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”).

loan included 5 % interest annualized using the simple interest method and an approximate 4.71 % effective interest rate.

March 29, 2023, the Company and PCCU entered into a definitive transaction to settle and restructure the deferred obligations,

including $ 56,949,800 into a

five-year Senior Secured Promissory Note (the “Note”) in the principal amount of $ 14,500,000

bearing interest at the rate of 4.25 %;

a Security Agreement pursuant to which the Company will grant, as collateral for the Note, a first priority security interest in

substantially all of the assets of the Company;

and a Securities Issuance Agreement, pursuant to which the Company issued 11,200,000

shares of the Company’s Class A Common Stock to PCCU.

The breakdown of the liabilities settled under this transaction are as follows:

Breakdown of Liabilities Settled

Due to Seller

Cash payment obligation under business combination

Business combination expense payable to seller

Interest accrued but not paid

Total deferred obligation

Senior secured promissory note

Change in deferred tax

Amount charged to Stockholders’ Equity towards issuance of common stock

Senior Secured Promissory Note

of Senior Secured Promissory Note

Senior Secured Promissory Note (Current)

Senior Secured Promissory Note (long term)

March 29, 2023, the Company and PCCU entered into definitive transaction documents to settle and restructure the deferred

obligation related to business Combination (Refer to Note 3) under which the Company has issued the five- year

Senior Secured Promissory Note (the “Note”) in the principal amount of $ 14,500,000 bearing interest at the rate of 4.25 % and

a Security Agreement pursuant to which the Company will grant, as collateral for the Note, a first priority security interest in substantially

all of the assets of the Company.

The Note amount will be paid in 54 equal installments

of $ 295,487 each starting from November 5, 2023 and for the period between March 29, 2023, to October 05, 2023, the Company is expected

to pay only interest portion.

repayment schedule of the outstanding amount on March 31, 2023 is as follows:

of Outstanding Amount on Debt

Year of payment

Company has non-cancellable operating leases for facility space with varying terms.

All of the active leases for facility space qualified

for capitalization under FASB ASC 842, Leases.

These leases have remaining lease terms between one to 7 years and may include options

to extend the leases for up to ten years .

The extension terms are not recognized as part of the right-of-use assets.

The Company has

elected not to capitalize leases with terms equal to, or less than, one year.

As of March 31, 2023, and December 31, 2022, net assets

recorded under operating leases were $ 977,113 and $ 1,016,198 on, respectively, and net lease liabilities were $ 1,045,995 and $ 1,028,233 ,

respectively.

Company analyzes contracts above certain thresholds to identify leases and lease components.

Lease and non-lease components are not separated

for facility space leases.

The Company uses its contractual borrowing rate to determine lease discount rates when an implicit rate is

not available.

Total lease cost for the three months ended March 31, 2023 and for the year ended December 31, 2022, included in Condensed

Consolidated Statements of Operations, is detailed in the table below:

of Lease Cost

Three months ended

March 31, 2023

December 31, 2022

Three months ended

Operating lease cost

Short-term lease cost

Total Lease Cost

Schedule of Right Of Use Assets

ROU assets that are related to lease properties are presented as follows:

Beginning balance

Additions to right-of-use assets

Amortization charge for the period

Lease modifications

Ending balance

Further information related to leases is as follows:

Weighted-average remaining lease term

Weighted-average discount rate

Future minimum lease

payments as of March 31, 2023, and December 31, 2022, are as follows:

Schedule of Future Minimum Lease Payments

Total future minimum lease payments

Imputed interest

Operating lease liabilities

Current portion

Non-current portion of lease liabilities

Disaggregated

1 unchanged sentence

of Disaggregated Revenue

For the three-month period ended September 30,

Deposit, activity, onboarding income

Safe Harbor Program income

Investment income

Loan interest income

Total Revenue

For the nine-month period ended September 30,

Three months ended

Deposit, activity, onboarding income

3 unchanged sentences

Total Revenue

fee income consists of deposit account fees, activity fees and onboarding income, which are recognized on periodic basis as per the fee

schedule pursuant to deposit servicing agreement with PCCU.

Safe Harbor Program income consists of outsourced support to other financial

institutions providing banking to the cannabis industry whose income is recognized on the basis of usage as per the agreements.

income consist of interest earned on deposits with the Federal Reserve Bank pursuant to an investment servicing agreement with PCCU.

Loan interest income consist of interest earned on both direct and indemnified loans pursuant to a Commercial Alliance Agreement with

Deferred underwriter fee

connection with the business combination (refer to Note 3), the Company executed a note on September 28, 2022 with EF Hutton related to

PIPE financing under which the Company was obligated to pay the principal sum of $ 2,166,250 on the following schedule:

(i) $ 715,750 on

October 14, 2022, and (ii) $ 362,625 on each of October 31, 2022, November 30, 2022, December 31, 2022, and January 31, 2023.

The Company made the payment of its first

installment of $ 715,750 and defaulted on the remaining outstanding amounts.

The outstanding balance of the note on December 31, 2022

was $ 1,450,500 .

On March 13, 2023, the Company and EF Hutton entered into a settlement agreement pursuant to which the Company paid

EF Hutton in full settlement of the amount due and the difference of $ 900,500 has

been accounted for in the “Condensed Consolidated Statements of Parent-Entity Net Investment and Stockholders’

Commitments and contingencies

time to time, the Company is subject to claims in legal proceedings arising in the normal course of business.

The Company does not believe

that it is currently party to any pending legal action that could reasonably be expected to have a material adverse effect on our business

or operating results.

Company has issued an irrevocable Letter of Credit in favor of AFCO Credit Corporation (“AFCO”),

for an aggregate amount of US $ 750,000 , which can be drawn in the case of following events:

Company continues to be in default, after 10 days’ written notice, in the payment of

any sums due to AFCO under a premium finance agreement dated on or about October 20, 2022,

case concerning the Company has been filed under title 11 of the United States Code and that,

not more than 95 days before that case commenced, AFCO received loan payments amounting to

not less than (total of payments received in the 95-day period prior to filing of the bankruptcy

case), and AFCO is drawing an amount equal to the stated sum of the loan payments so received.

Company is involved in, or has been involved in, arbitrations or various other legal proceedings

that arise from the normal course of its business.

The ultimate outcome of any litigation

is uncertain, and either unfavorable or favorable outcomes could have a material impact on

the Company’s results of operations, balance sheets and cash flows due to defense costs,

and divert management resources.

The Company cannot predict the timing or outcome of these

claims and other proceedings.

connection with the Company’s initial public offering (“IPO”), the Company

entered into a registration rights agreement dated June 23, 2021 with the Sponsor and the

individuals serving as directors and executive officers of the Company at the time of the

Pursuant to this registration rights agreement, the Company has agreed to register for

resale upon the expiration of the applicable lock-up period the Company securities acquired

by the Sponsor and such individuals in connection with the organization of the Company and

a period beginning on June 28, 2021 and ending 12 months from the closing of the Business

Combination, the Company has granted the underwriters a right of first refusal to act as

lead-left book running manager and lead left manager for any and all future private or public

equity, convertible and debt offerings during such period.

In accordance with FINRA Rule

5110(f)(2)I(i), such right of first refusal shall not have a duration of more than three

years from the effective date of our Registration Statement.

Earnings Per Share

net income (loss) per common share is calculated by dividing the net income (loss) attributable to common stockholders by the weighted-average

number of common shares outstanding during the period, without consideration for potentially dilutive securities.

Diluted net income

(loss) per share is computed by dividing the net income (loss) attributable to common stockholders by the weighted average number of

common shares and potentially dilutive securities outstanding for the period.

For the Company’s diluted earnings per share calculation,

the Company uses the “if-converted” method for preferred stock and convertible debt and the “treasury stock”

method for Warrants and Options.

the Business Combination and related transactions are being reflected as if they had occurred at the beginning of the period presented,

the calculation of weighted average shares outstanding for basic and diluted net income per share assumes that the shares issued in connection

with the Business Combination have been outstanding for the entire period presented.

of Earning Per Shares, Basic and Diluted

$ ( 1,413,447 )

Weighted average shares outstanding – basic

Basic net loss per share

Weighted average shares outstanding – diluted

Diluted net loss per share

Weighted average shares calculation

Company public shares

Company initial stockholders

PCCU stockholders

Shares issued for abaca acquisition

Restricted stock units issued

Conversion of preferred stock

Weighted average shares outstanding

share-based equity awards were excluded from the computation of dilutive loss per share because inclusion of these awards would have

had an anti-dilutive effect.

The following table reflects the awards excluded.

of Awards Excluded

Share based payments

Shares to be issued to Abaca acquisition

Conversion of preferred stock

holders of Series A Convertible Preferred Stock shall be entitled to receive, and the Company shall pay, dividends on shares of Series

A Convertible Preferred Stock equal (on an as-if-converted-to-Class-A-Common-Stock basis) to and in the same form as dividends actually

paid on shares of the Class A Common Stock when, as and if such dividends are paid on shares of the Class A Common Stock.

No other dividends

shall be paid on shares of Series A Convertible Preferred Stock

the 2022, before the date of business combination, SHF was a single member limited liability company with no shareholders hence the disclosure

related to earning per share is not applicable.

Forward 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.

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.

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 Volume Weighted Average Share Price (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.

trading value of the common stock combined with preferred shareholders electing to convert

their preferred shares to common stock triggered a lower reset price embedded in the forward

purchase agreement, or FPA.

As of December 31, 2022, the Company had already called a special

meeting to lower the make-whole price under the preferred share purchase agreement to $ 1.25 /share.

The Company, majority common shareholders and the preferred investors had entered into a

voting agreement whereby the vote to approve the $ 1.25 /share make-whole price was secured.

Knowing the Company would ultimately be issuing shares to the preferred stockholders with

a make whole issuance at $ 1.25 /share compelled the company has recognized a reset price under

the terms of the FPA of $ 1.25 /share.

These events significantly reduced the FPA receivable

to approximately $ 4.6 million, from approximately $ 37.9 million reported at the end of the

September 2022 quarter.

The loss in value resulted not only in a compression of the balance

sheet, but also $ 42.3 million charge to other expense on the statement of operations in the

fourth quarter of 2022.

reconciliation statement of the common stock held by the parties are as follows:

of Forward Purchase Agreement

On the date of

(September 28, 2022)

Share sold during

September 29, 2022

to December 31, 2022

December 31, 2022

Share sold during the three months

March 31, 2023

Opening Shares

Name of the party

Warrant Liability

and Private Placement Warrants

of March 31, 2023, and December 31, 2022, the Company has 5,750,000 Public warrants and 264,088 Private Placement Warrants.

Public and Private Placement Warrants may only be exercised for a whole number of shares.

Public and Private Placement Warrants became exercisable on September 28, 2022, the date of the Business Combination and will expire

on September 28,2027, or earlier upon redemption or liquidation.

warrant will be exercisable for cash or on a cashless basis, and the Company will not be obligated to issue any shares to holders seeking

to exercise their warrants, unless the issuance of the shares upon such exercise is registered or qualified under the securities laws

of the state of the exercising holder, or an exemption from registration is available.

of warrants become exercisable when the price per Class A Common Stock equals or exceeds $ 18.00 .

Once the warrants become exercisable,

the Company may redeem the warrants:

whole and not in part;

a price of $ 0.01 per warrant;

not less than 30 days’ prior written notice of redemption to each warrant holder;

and only if, the reported last sale price of the Class A Common Stock equals or exceeds $ 18.00

per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations

and the like and certain issuances of Class A Common Stock and equity-linked securities)

for any 20 trading days within a 30-trading day period commencing no earlier than the date

the warrants become exercisable and ending on the third business day before the date on which

the Company sends the notice of redemption to the warrant holders.

and when the warrants become redeemable by the Company, the Company may exercise its redemption rights;

this is also the case if the

Company is unable to register or qualify the underlying securities for sale under all applicable state securities laws.

the Company calls the warrants for redemption, management will have the option to require all holders that wish to exercise the Warrants

to do so on a “cashless basis,” as described in the warrant agreement.

The exercise price and number of shares of Class A

Common Stock issuable upon exercise of the warrants may be adjusted in certain circumstances including in the event of a stock dividend,

or recapitalization, reorganization, merger or consolidation.

However, the warrants will not be adjusted for issuance of Class A Common

Stock at a price below its exercise price.

Additionally, in no event will the Company be required to net cash settle the warrants.

the Company is unable to complete a Business Combination within the Combination Window and the Company liquidates the funds held in the

Trust Account, holders of warrants will not receive any of such funds with respect to their warrants, nor will they receive any distribution

from the Company’s assets held outside of the Trust Account with the respect to such warrants.

Accordingly, the warrants may expire

private placement warrants are identical to the public warrants, except that the private placement warrants and the Class A Common Stock

issuable upon the exercise of the private placement warrants were not transferable, assignable or saleable until 30 days after the completion

of a Business Combination, subject to certain limited exceptions.

Additionally, the private placement warrants are exercisable on a cashless

basis and non-redeemable so long as they are held by the initial purchasers or their permitted transferees.

If the private placement

warrants are held by someone other than the initial purchasers or their permitted transferees, the private placement warrants will be

redeemable by the Company and exercisable by such holders on the same basis as the public warrants.

of March 31, 2023 and December 31, 2022, the Company has 1,022,500 PIPE Warrants.

PIPE Warrants have an exercise price of $ 11.50 per share of Class A Common 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 to a price equal to the greater of (i)125% of the conversion price if at any time

there is an adjustment to the Conversion Price and the exercise price after such adjustment is greater than 125% of the Conversion Price

as adjusted and (ii) $5.00.

The PIPE Warrants are also subject to adjustment for other customary adjustments for stock dividends, stock

splits and similar corporate actions.

The PIPE Warrants are exercisable for a period of five years following the Closing, or September

After exercise of a PIPE Warrant, the Company may be required to pay certain penalties if it fails to deliver the Class A Common

Stock within a specified period of time.

Financial Instruments

3 unchanged sentences

1 – Observable, unadjusted quoted prices in active markets

Level 2 – Inputs

other than quoted prices included in Level 1 that are directly or indirectly observable for the asset or liability

Level 3 – Unobservable

inputs with little or no market activity that require the Company to use reasonable inputs and assumptions

2 – Inputs other than quoted prices included in Level 1 that are directly or indirectly

observable for the asset or liability

3 – Unobservable inputs with little or no market activity that require the Company

to use reasonable inputs and assumptions

Company uses fair value measurements to record adjustments to certain financial assets and liabilities on a recurring basis.

4 unchanged sentences

reporting period.

Holdings, Inc.

NOTES TO FINANCIAL STATEMENTS

and Liabilities Reported at Fair Value on a Recurring Basis

Public and Private Placement Warrants:

Public and private placement warrants are recorded

at fair value on a recurring basis.

The Company obtains dealer quotes, Level 1 and Level 3 inputs, based on observable data to value these

warrants are recorded at fair value on a recurring basis.

The Company obtains dealer quotes, of Level 1 inputs, based on observable data

to value these warrants.

Placement Warrants

Placement Warrants are recorded at fair value on a recurring basis.

The Company value these derivatives based on third party reports

for Level 3 inputs.

Level 3 inputs, based on observable data to value these derivatives.

Warrants are recorded at fair value on a recurring basis.

The Company value these derivatives based on third party reports for Level

Level 3 inputs, based on observable data to value these derivatives.

purchase option derivatives:

purchase option derivatives are recorded at fair value on a recurring basis.

The Company values these derivatives based on third party

reports for Level 3 inputs.

Level 3 inputs, based on observable data to value these derivatives.

following tables summarize financial assets and liabilities recorded at fair value on a recurring basis, by the level of valuation inputs

in the fair value hierarchy on March 31, 2023 and December 31,2022:

of Fair Value Assets and Liabilities Measured on Recurring Basis

Quoted Prices

Public warrants

Private placement warrants

PIPE Warrants

Forward purchase option derivative

Forward purchase option derivative are recorded at

fair value on a recurring basis.

The Company obtains dealer quotes, Level 3 inputs, based on observable data to value these warrants.

The following tables summarize financial assets and liabilities recorded

at fair value on a recurring basis, by the level of valuation inputs in the fair value hierarchy on September 30, 2022:

Schedule of Fair Value Assets and Liabilities Measured on Recurring Basis

Liabilities,fair value

December 31, 2022:

Total Fair Value

Quoted Prices in Active Markets

Significant Other Unobservable Inputs

Public warrants

Private placement warrants

PIPE Warrants

Forward purchase option derivative

Liabilities, fair value

Measured at Fair Value on a Nonrecurring Basis

were no assets or liabilities recorded at fair value on a nonrecurring basis for the periods ended September 30, 2022, and December 31,

were no assets or liabilities recorded at fair value on a nonrecurring basis for the three months periods ended March 31, 2023 and for

the year ended as on December 31, 2022, respectively.

Value of Financial Instruments

7 unchanged sentences

of Carrying Amounts and Fair Values of Financial Instruments by the Level of Valuation Inputs in the Fair Value Hierarchy

As on September 30, 2022

on March 31, 2023

Fair value measurement using

Carrying amount

Cash and cash equivalents

Accounts receivable – trade

Contract assets

Prepaid expenses

Accrued interest receivable

Forward purchase derivative assets

Accounts payable

Accrued expenses

Contract liabilities

Forward purchase receivables

Deferred consideration

Senior Secured Promissory note

Indemnity liability

Public warrants

Private placement warrants

Holdings, Inc.

NOTES TO FINANCIAL STATEMENTS

As on December 31, 2021

PIPE Warrants

Forward purchase derivative

on December 31, 2022

Fair value measurement using

Carrying amount

Cash and cash equivalents

Accounts receivable – trade

Contract assets

Prepaid expenses

Accrued interest receivable

Accounts payable

Accrued expenses

Contract liabilities

Forward purchase receivables

Deferred consideration

Due to seller - current portion

Due to seller - long term position

Deferred underwriter fee payable

Indemnity liability

Public warrants

Private placement warrants

PIPE Warrants

Forward purchase derivative

change in the assets measured at fair value on a recurring basis for which we have utilized Level 3 inputs to determine fair value are

presented in the following table:

As on September 30, 2022

Forward purchase

derivative assets

of Fair Value Assets Measured on Recurring Basis

For the three months ended

March 31, 2023

Balance at the beginning of the period

Acquired under business combination

Fair value adjustment

Balance at the end of the period

to/from Levels 1, 2 and 3 are recognized at the end of the reporting period in which a change in valuation technique or methodology occurs.

The Warrants are measured at fair value on a recurring basis.

The Warrants were initially valued using a Modified Monte Carlo

As of September 30, 2022, the warrants were valued using the instrument’s publicly listed trading price as of

the balance sheet date, which is a Level 1 measurement due to the use of an observable market quote in an active market.

fair value of the forward purchase option derivative was estimated using a Monte-Carlo Simulation in a risk-neutral framework (a special

case of the Income Approach).

private placement warrants and PIPE warrants are measured at fair value using a Black-Scholes model and Black-Scholes-Merton model, respectively.

As of March 31, 2023, these warrants were valued based on third party reports for Level 3 inputs.

Level 3 inputs, based on observable

data to value these derivatives.

fair value of the forward purchase derivative was estimated using a Monte-Carlo Simulation in a risk-neutral framework (a special case

of the Income Approach).

Specifically, the future stock price is simulated assuming a Geometric Brownian Motion (“GBM”).

3 unchanged sentences

The Company measured

the fair value of the forward purchase option derivative upon execution of the Forward Purchase Agreement and as of September 30, 2022,

the fair value of the forward purchase option derivative upon execution of the Forward Purchase Agreement and as of December 31, 2022,

with the respective fair value adjustments recorded within its Statements of Operations.

The Company will continue to monitor

the fair value of the forward option derivative each reporting period with subsequent revisions to be recorded in the Statements

of Operations.

following table provides quantitative information regarding Level 3 fair value measurements inputs as it relates to the warrants as of

their measurement dates:

Schedule of Level 3 Fair Value Measurement Inputs

September 30,

The Company will continue to monitor the fair

value of the forward option derivative each reporting period with subsequent revisions to be recorded in the Statements of Operations.

following table provides quantitative information regarding Level 3 fair value measurements inputs as it relates to the private placement

warrants and public warrants as of their measurement dates:

of Level 3 Fair Value Measurement Inputs

on March 31, 2023

PIPE Warrants

Private placement

Exercise price

Expected term (years)

Probability of Acquisition

Risk-free rate

Dividend yield (per share)

As on December 31,2022

PIPE Warrants

Private placement warrants

Exercise price

Expected term (years)

Risk-free rate

following table provides quantitative information regarding Level 3 fair value measurements inputs as it relates to the forward purchase

agreement as of their measurement dates:

of Level 3 Fair Value Measurement Inputs

September 30,

derivatives as of their measurement dates on March 31,2023 and December 31,2022:

Level 3 Fair Value Measurements Inputs

Expected term (years)

Probability of Acquisition

Additional maturity consideration per share

Risk-free rate

Fair value measurement input

Holdings, Inc.

NOTES TO FINANCIAL STATEMENTS

Earnings Per Share

net income (loss) per common share is calculated by dividing the net income (loss) attributable to common stockholders’ by the

weighted-average number of common shares outstanding during the period, without consideration for potentially dilutive securities.

net income (loss) per share is computed by dividing the net income (loss) attributable to common stockholders’ by the weighted

average number of common shares and potentially dilutive securities outstanding for the period.

For the Company’s diluted earnings

per share calculation, the Company uses the “if-converted” method for preferred stock and convertible debt and the “treasury

stock” method for Warrants and Options.

the Business Combination and related transactions are being reflected as if they had occurred at the beginning of the period presented,

the calculation of weighted average shares outstanding for basic and diluted net income per share assumes that the shares issued in connection

with the Business Combination have been outstanding for the entire period presented.

Of Earning Per Shares, Basic And Diluted

the Nine Months Ended

September 30,

Weighted average shares outstanding – basic

Basic net earnings per share

Weighted average shares outstanding – diluted ** **

Diluted net earnings per share

the Three Months Ended

September 30,

Weighted average shares outstanding – basic

Basic net earnings per share

Weighted average shares outstanding – diluted** **

Diluted net earnings per share

Weighted average share calculations, basic

September 30,

Company public shares

Company initial stockholders’

SHF stockholders’

Weighted average shares outstanding – basic

Weighted average shares calculations, diluted

September 30,

Company public shares

Company initial stockholders’

PIPE Investors **

SHF stockholders’

Weighted average shares outstanding – diluted

investors initial shares represent preferred stock without voting rights.

Preferred stock initially converts at $ 10

per share which would result in an additional 2,045,000

shares of Class A Stock.

Holdings, Inc.

NOTES TO FINANCIAL STATEMENTS

Forward 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 Volume Weighted Average Share Price (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.

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 .

Warrant Liability

of September 30, 2022, the Company has 5,750,000 Warrants and 264,088 Private Placement Warrants;

there are no warrants as of December

may only be exercised for a whole number of shares.

No fractional warrants will be issued upon separation of the units and only whole

warrants will trade.

Warrants will become exercisable on the later of (i) the date of the completion of a Business Combination and (ii) 12 months from the

closing of the Initial Public Offering, and will expire five years after the completion of a Business Combination or earlier upon redemption

or liquidation.

Company will not be obligated to deliver any shares of Class A Common Stock pursuant to the exercise of a warrant and will have no obligation

to settle such warrant exercise unless a registration statement under the Securities Act covering the issuance of the shares of Class

A common issuable upon exercise of the warrants is then effective and a current prospectus relating to those shares of Class A Common

Stock is available, subject to the Company satisfying its obligations with respect to registration.

No warrant will be exercisable for

cash or on a cashless basis, and the Company will not be obligated to issue any shares to holders seeking to exercise their warrants,

unless the issuance of the shares upon such exercise is registered or qualified under the securities laws of the state of the exercising

holder, or an exemption from registration is available.

of warrants become exercisable when the price per Class A Common Stock equals or exceeds $18.00.

Once the warrants become exercisable,

the Company may redeem the Warrants:

in whole and not in part;

at a price of $ 0.01 per Warrant;

upon not less than 30 days’ prior written notice

of redemption to each warrant holder;

if, and only if, the reported

last sale price of the Class A Common Stock equals or exceeds $ 18.00 per share (as adjusted for stock splits, stock dividends, reorganizations,

recapitalizations and the like and certain issuances of Class A Common Stock and equity-linked securities) for any 20 trading days

within a 30-trading day period commencing no earlier than the date the warrants become exercisable and ending on the third business

day before the date on which the Company sends the notice of redemption to the warrant holders.

and when the warrants become redeemable by the Company, the Company may exercise its redemption rights;

this is also the case if the

Company is unable to register or qualify the underlying securities for sale under all applicable state securities laws.

the Company calls the Warrants for redemption, management will have the option to require all holders that wish to exercise the Warrants

to do so on a “cashless basis,” as described in the warrant agreement.

The exercise price and number of shares of Class A

Common Stock issuable upon exercise of the warrants may be adjusted in certain circumstances including in the event of a stock dividend,

or recapitalization, reorganization, merger or consolidation.

However, the warrants will not be adjusted for issuance of Class A Common

Stock at a price below its exercise price.

Additionally, in no event will the Company be required to net cash settle the warrants.

the Company is unable to complete a Business Combination within the Combination Window and the Company liquidates the funds held in the

Trust Account, holders of warrants will not receive any of such funds with respect to their warrants, nor will they receive any distribution

from the Company’s assets held outside of the Trust Account with the respect to such warrants.

Accordingly, the warrants may expire

Placement Warrants are identical to the Warrants underlying the Units sold in the Initial Public Offering, except that the Placement

Warrants and the Class A Common Stock issuable upon the exercise of the Placement Warrants are not transferable, assignable or saleable

until 30 days after the completion of a Business Combination, subject to certain limited exceptions.

Additionally, the Placement Warrants

are exercisable on a cashless basis and non-redeemable so long as they are held by the initial purchasers or their permitted transferees.

If the Placement Warrants are held by someone other than the initial purchasers or their permitted transferees, the Placement Warrants

will be redeemable by the Company and exercisable by such holders on the same basis as the Warrants.

Holdings, Inc.

NOTES TO FINANCIAL STATEMENTS

Risk-adjusted discount rate

December 31, 2022

Expected term (years)

Additional maturity consideration per share

Risk-free rate

Risk-adjusted discount rate

For the three months ended March

31, 2023, the Company recorded income tax benefit of $ 609,277 for continuing operations.

The effective tax rate of 30.12 % for the three

months ended March 31, 2023, varied from the statutory United States federal income tax rate of 21.0 % primarily because of state

income taxes, net of the federal benefit, and adjustments to the fair market value of warrant liabilities.

The Company has net deferred tax assets of $ 51,593,302 and $ 42,608,596 as of December 31, 2022, and March 31, 2023,

respectively.

The Company considers their deferred tax assets to be realizable and has not established a valuation allowance, as it is

considered more likely than not that the Company will utilize deferred tax assets in future periods through future taxable income.

The Company recognizes income tax benefits

from uncertain tax positions where the realization of the ultimate benefit is uncertain.

As of both March 31, 2023, and December 31,

2022, the Company has no unrecognized income tax benefits.

Company offers to all employees a tax-qualified retirement contribution plan, with the Company’s 100 %

matching contribution up to 4 %

of a participant’s eligible compensation, The total benefits package supports the employees’ well-being to achieve a

healthy and financial lifestyle goal.

The Company’s consolidated matching contributions for the three months ended on March

31, 2023, and March 31, 2022, amounting to $ 20,663

and $ 3,942 ,

respectively.

Share based compensation

Equity Incentive Plan

compensation expense recognized for the three months ended March 31, 2023 and March 31, 2022 totaled $ 1.6 million and $ 0 respectively.

2022 Plan was approved by the Company’s stockholders on June 28, 2022.

The 2022 Plan permits the grant of incentive stock

options, non-qualified stock options, stock appreciation rights, restricted stock, restricted stock units, stock bonus awards, and

performance compensation awards.

The Company has not issued stock appreciation rights, restricted stock, stock bonus awards, or

performance compensation awards in the three months ended March 31, 2023 and March 31, 2022.

In conjunction with the 2023 Plan, as

of March 31, 2023, the Company had granted stock options and restricted stock units which are described in more detail

options are awarded to encourage ownership of the Company’s common stock by employees and to provide increased incentive for employees

to render services and to exert maximum effort for the success of the Company.

The Company’s incentive stock options generally

permit net-share settlement upon exercise.

The option exercise price, vesting schedule and exercise period are determined for each grant

by the administrator (person appointed by board to administer the stock plans) of the applicable plan.

The Company’s stock options

generally have a 10 -year contractual term.

assumptions used to determine the fair value of options granted in the three months ended March 31, 2023, using the Black-Scholes-Merton

model are as follows:

of Fair Value of Options Granted Black-Scholes-Merton Model

interest rate

volatility (weighted-average and range, if applicable)

expected term of the options granted is calculated based on the simplified method by taking average of contractual term and vesting period

The shares of the Company were listed on the stock exchange for a limited period of the time and the share price has also

dropped significantly from the date of listing, based on these factors the Management has considered the expected volatility at 100 %

for the current period.

The risk-free interest rate used is the current yield on US Treasury notes with a term equal to the expected

term of the options at the grant date.

The expected dividend yield is based on annualized dividends on the underlying share during the

expected term of the option.

A summary of the Company’s stock option activities

and related information for the three months ended March 31, 2023 is as follows:

Schedule of Stock Option and Related Information

of Stock Option

Average Grant

Date Fair Value

Per Stock Option

December 31, 2022

Cancelled / Forfeited

March 31, 2023

March 31, 2023, there were no unrecognized compensation costs related to non-vested stock options to be recognized.

Share based compensation

did not impact on Company’s cash flow in three months ended March 31, 2023 or year ended December 31, 2022.

Stock Units (“RSUs”)

summary of the Company’s RSU activities and related information for the three months ended March 31, 2023 is as follows:

of Restricted Stock Units

Restricted Stock Units

Average Grant

Date Fair Value

December 31, 2022

Cancelled / Forfeited

March 31, 2023

fair value as of the respective vesting dates of RSUs that vested during the three months ended March 31, 2023 and 2022 was $ 857,530

As of March 31, 2023, there is $ 404,692 of unrecognized share-based compensation expense related to RSU awards.

Subsequent events

Subsequent events are events or transactions that occur after the balance

sheet date but before the financial statements are issued.

The Company noted the following subsequent events that occurred after the balance

sheet date of September 30, 2022:

On October 26, 2022, SHF

Holdings, Inc., entered into a Forbearance Agreement (the “Forbearance Agreement”) with PCCU and Luminous Capital USA

(“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”).

On October 29, 2022, SHF

Holdings, Inc., entered into an Agreement and Plan of Merger (the “Merger Agreement”) by and among the PCCU, SHF Merger

Sub I and a direct wholly-owned subsidiary of Parent (“Merger Sub I”), SHF Merger Sub II, LLC, and a direct wholly-owned

subsidiary of Parent (“Merger Sub II” and, together with Merger Sub I, the “Merger Subs”), Rockview Digital

Solutions, Inc., d/b/a Abaca (the “Company”) and Dan Roda, solely in such individual’s capacity as the representative

of the Company Security Holders (the “Company Stockholders’ Representative”).

The Merger Agreement provides that

the Parent will acquire the Company in exchange for (a) cash consideration in an amount equal to (i) $ 9,000,000 ($ 3,000,000 is payable

at closing, with an additional $ 3,000,000 payable at each of the one-year and two-year anniversaries of the closing);

and (b) $ 21,000,000

of validly issued, fully paid and non-assessable shares of the Parent’s common stock, $ 0.0001 par value per share, payable

in two installments of $ 8,400,000 on the closing date of merger and $ 12,600,000 on the first anniversary of the closing year.

transaction is expected to close in the fourth quarter of 2022.

November 2, 2022, EF Hutton, a division of Benchmark Investments, LLC (“EF Hutton”) issued a notice of default to the

Company towards a promissory note (the “Note”) entered with the company on September 28, 2022, amounting to $ 2,166,250 .

The Note provides that the Company was obligated to pay EF Hutton the principal sum of $ 2,166,250

on the following schedule:

(i) $ 715,750

on October 14, 2022 and (ii) $ 362,625 on

each of October 31, 2022, November 30, 2022, December 31, 2022, and January 31, 2023.

The legal notice indicates that the principal

balance of the $ 1,450,500

is immediately due and payable with default interest of 24 %

per annum, and that EF Hutton intended to pursue legal action if full payment was not received by November 7, 2022.

claimed that SHF defaulted on the Note by failing to pay the $ 362,625

instalment payment due on October 31, 2022.

The Company is currently investigating available remedies and intends to defend itself

against any claims.

As noted in Note 12 above,

on June 16, 2022, NLIT entered into a Forward Purchase Agreement with Midtown East.

Subsequent to entering into the Forward Purchase

Agreement, the Company, NLIT, and Midtown East entered into assignment and novation agreements with Verdun and 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, should the Volume Weighted Average

share Price (VWAP) Price for 20 Scheduled Trading Days be less than $ 3.00 prior to the maturity date, 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.

The Company will continue to monitor the aforementioned VWAP during the fourth

quarter of 2022.

There were not any material subsequent events that

occurred after the balance sheet date of March 31, 2023 through the date of this report.

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 1. Financial Statements