What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-05-15 compared with 2022-11-14 · 531 added, 556 removed, 218 unchanged (83% of the section changed)

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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

refer to SHF Holdings, Inc.

(herein referred to as the “Company”).

References to “management” refer to our officers

and board of directors.

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

conjunction with our condensed consolidated financial statements.

in this section to “we,” “us,” or “our” refer to SHF Holdings, Inc (herein referred to as the “Company”).

References to “management” refer to our officers and board of managers.

The following discussion and analysis of our financial

performance and results of operations should be read in conjunction with our condensed consolidated financial statements.

Looking Statements

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Reorganization

On February 11, 2022, SHF, LLC and SHF

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

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

Northern Lights Acquisition Corp.

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

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

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

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

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

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

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

reorganization effectively occurred July 1, 2021.

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

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

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

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

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

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

Pursuant to the purchase agreement,

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

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

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

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

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

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

were paid to PCCU at the final transaction close.

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

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

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

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

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

Board of Directors approved the contribution of certain assets and operating activities associated with operations from both the Branches

and Safe Harbor Services (“SHS” or “Oldco”), a wholly-owned subsidiary of PCCU, to SHF Holding, Co., LLC.

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

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.

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 Unit Purchase Agreement (herein referred to as the “Business

Combination”) with Northern Lights Acquisition Corp.

(“NLIT”), a special purpose acquisition company, and its sponsor,

Subsequent to the completion of the transaction, NLIT changed its name to “SHF Holdings, Inc.” (herein referred

to as the “Company”).

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

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

On September 28, 2022,

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

due at the closing.

On September 28, 2022, the

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

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

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

of which will be paid on a deferred basis.

Subsequent to the completion

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

of 60.8% of the Company.

The Company generates both interest income and fee income through providing

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

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

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

In addition to PCCU, the Company provides these similar

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

These services are provided

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

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

agreements under similar terms as the July 2021 agreements.

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

entered into an Amended and Restated Loan Servicing Agreement.

The purpose of the $56,949,800

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

Pursuant to the third amendment

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

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

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

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

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

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

(“Luminous”).

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

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

Obligation (the “Forbearance Period”).

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

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

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

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

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

The Amended and Restated Account Servicing

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

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

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

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

of all CRB-related accounts;

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

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

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

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

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

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

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

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

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

relating to the services provided to SHF.

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

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

or policy requirements.

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

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

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

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

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

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

The agreement sets forth the application, underwriting and

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

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

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

third-party vendors necessary to perform these services.

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

principal balance of each loan funded by PCCU.

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

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

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

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

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

Pursuant to this agreement, the

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

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

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

Under PCCU’s loan policy

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

worth or 65% of total CRB deposits.

the parties entered into the third amendment to the Unit Purchase Agreement to provide for the deferral of a total of $56,949,800 of

the $70,000,000 due at the closing.

to the Unit 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 close.

February 11, 2022, the Company 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 the Company.

For the loans subject to this agreement, the Company underwrites the loans and performs all

compliance analysis, credit analysis of the potential borrower, due diligence and underwriting and all administration, including

hiring and incurring the costs of all related personnel or third-party vendors necessary to perform these services.

PCCU receives a

monthly servicing fee at an annual rate of 0.25% of the then-outstanding principal balance of each loan funded by PCCU.

Loan Servicing Agreement, the Company 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.

Pursuant to this agreement, the Company reported expenses

of $378,730 for the three months ended March 31, 2023, and $83,807 for the three months ended March 31, 2022.

On 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.

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

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

net worth or 60% of total CRB deposits.

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

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

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 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.

to the completion of the business combination, the status of PCCU has changed from Parent to majority shareholder of the Company pursuant

to its ownership of 60.8% of the Company.

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

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.

to the Unit Purchase Agreement, the Company entered into the Amended and Restated Support Services Agreement and the Amended and Restated

Account Servicing Agreement under similar terms as the July 2021 agreements.

In addition, in conjunction with the Unit Purchase Agreement,

the Company and PCCU entered into a Loan Servicing Agreement.

On 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 Amended and Restated Support Services Agreement, the Amended and Restated Account Servicing Agreement,

and the Loan Servicing Agreement.

purpose of the $56,949,800 deferral is to provide the Company with additional cash to support its post-closing activities.

the third amendment to the Unit Purchase Agreement, the deferred consideration shall be paid 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 the Seller under the

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

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

(“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”).

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 has granted, 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 has issued

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

Agreement and Public Company Costs

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

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

Under this method of accounting, NLIT is

treated as the acquired company for financial reporting purposes.

Accordingly, for accounting purposes, the Business Combination is treated

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

The net assets of NLIT are recognized

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

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 is treated as the equivalent of SHF issuing shares for the net assets

of NLIT, accompanied by a recapitalization.

The net assets of NLIT are recognized at fair value (which is expected to be consistent with

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

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

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

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

the terms of the Purchase Agreement.

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

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

In addition, pursuant to the terms of the purchase

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

2,875,000 of Class B Common Stock converted at the closing to an equal number of shares of

Class A Common stock.

closing of the Business Combination, 11,386,139 shares of Class A Common Stock were issued

to PCCU as set forth in and pursuant to the terms of the Purchase Agreement.

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

cash on hand at July 31, 2021, less accrued but unpaid liabilities.

In addition, pursuant to the terms of the purchase agreement, the

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

● Approximately

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

Approximately $21.9 million

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

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

million thereafter.

$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 was due to PCCU beginning December

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

Interest accrues at an effective annual rate of approximately 4.71%.

A sum of 1,200,000 founder shares

were escrowed until the amount is paid in full.

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

transferred to additional paid in capital.

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

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

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

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

Twenty (20) percent of the aggregate value

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

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

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

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

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

of the date of the business combination.

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

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

The Company is authorized to issue 1,250,000 preferred shares with a par value of $0.00001 per share with such designation,

rights and preferences as may be determined from time to time by the Company’s Board of Directors.

As of September 30, 2022,

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

1,200,000 shares of Class A Common Stock were escrowed until the amount is paid in full.

Parent-Entity Net Investment appearing in the balance sheet of the Company amounting to $9,124,297

on the date of business combination was transferred to additional paid in capital.

● Immediately

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

PIPE Investors pursuant to the PIPE Securities Purchase Agreements for an aggregate value

of $20,450,000.

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

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

Twenty (20) percent of the aggregate value was deposited into a third party escrow

account for purposes of paying the PIPE Investors any required Registration Delay Payments.

Upon the filing of the registration statement 10 calendar days subsequent to closing, 17.5%

of the escrow amount was released with the remaining amount once all securities were included

in an effective registration statement.

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

$0.00001 per share with such designation rights and preferences as may be determined from

time to time by the Company’s Board of Directors.

As of March 31, 2023, there were

10,896 preferred shares issued or outstanding and 14,616 preferred shares issued or outstanding

on December 31, 2022.

A Common Stock:

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

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

As of September 30, 2022

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

As of September

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

2022 by and among the Company and such purchasers

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

Stock with a par value of $0.00001 per share.

Holders of the Company’s Class A Common

Stock are entitled to one vote for each share.

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

there were 39,659,089 and 20,815,912 shares, respectively, of Class A Common Stock issued

or outstanding.

As of March 31, 2023, and December 31, 2022, 3,669,504 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.

● Parent-Entity

Net Investment:

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

in the Carved-Out Operations.

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

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

No separate equity

accounts are maintained for SHS, SHF or the Branches.

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

operation of our business.

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.

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

in the operation of our business.

These key metrics are discussed below.

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Some of these limitations are as follows:

depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the

future, and both EBITDA and Adjusted EBITDA do not reflect cash capital expenditure requirements for such replacements or for new

capital expenditure requirements;

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

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

depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future,

and both EBITDA and Adjusted EBITDA do not reflect cash capital expenditure requirements for such replacements or for new capital

expenditure requirements;

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

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

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

1 unchanged sentence

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

Three Months Ended

September 30,

Interest expense

Depreciation and amortization expense

Other adjustments –

Loan loss provision

Loan origination

fees and costs

Adjusted EBITDA

Nine Months Ended

September 30,

Interest expense

Depreciation and amortization expense

Months Ended March 31,

(loss)/income

$ (1,413,447 )

and amortization

adjustments –

Provision for credit losses

in the fair value of warrants

option conversion

origination fees and costs

decrease in our income on an EBITDA and Adjusted EBITDA basis for the three months ended March 31, 2023, is due to increase in

professional fees on account increase in compliances as well as increases in compensation, employee benefits, marketing, insurance,

and additional items, as discussed under “ Discussion of our Results of Operations ” below.

Other adjustments

Loan loss provision

Deferred loan origination fees and costs

Adjusted EBITDA

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

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

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

funded by them.

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

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

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

When included with a

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

partners and incur costs associated with originating a specific loan.

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

income utilizing the interest method.

include estimated future credit losses not yet realized, including amounts indemnified to PCCU for loans funded by them.

had entered into a Loan Servicing Agreement with PCCU, pursuant to which the Company agreed to indemnify PCCU for claims associated

with CRB activities including any loan default related losses for loans funded by PCCU;

the Loan Servicing Agreement has since been

superseded by the Commercial Alliance Agreement.

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

origination fees and costs.

When included with a new loan origination, we receive an upfront loan origination fee in conjunction

with new loans funded by our financial institution partners and incur costs associated with originating a specific loan.

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

utilizing the interest method.

our business operations, we monitor the following key metrics.

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fees and therefore review account fees per average number of active accounts managed.

Nine Months Ended September 30,

Average monthly ending deposit balance

$ 148,191,118

(33,882,155 )

Average active accounts

Average account balance

Average fees per account

Three Months Ended September 30,

months Ended March 31

Average monthly ending deposit balance

$ 222,857,256

(34,029,689 )

Average active accounts

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

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

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

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

institutions with which we have relationships.

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

We are focused on enhancing

and growing our lending platform.

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

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

the average number of accounts increased for the three months ended March 31, 2023 as compared to the three months ended March 31, 2022,

the average account size and account fees decreased as we experienced some churn of larger clients replaced by smaller business.

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

which we have relationships.

are focused on enhancing and growing our lending platform.

Incremental lending key metrics will be monitored as this portion of our business

grows in volume.

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

amongst others.

of our Results of Operations

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

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

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

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

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

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

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

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

to the cannabis industry.

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

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

other general and administrative expenses.

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

and other general and administrative expenses.

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

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

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

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

These allocations were discontinued effective

July 1, 2021 in conjunction with the reorganization.

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

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

SHF anticipates comparable arrangements with

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

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

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

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

Three Months Ended September 30,

Company reports a provision for credit losses both as it relates to loans funded internally and those carried by PCCU or other

financial institutions.

The Company indemnifies PCCU for losses on loans to borrowers sourced by the Company and funded by PCCU.

Company anticipates comparable arrangements with other financial institutions that fund loans to borrowers sourced by the

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

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

of our Results of Operations —2023 Compared to 2022 (Three Months Ended March 31)

Three Months Ended March 31,

Deposit, activity, onboarding income

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

Historically, SHF has received from PCCU fees based

on cannabis related deposit account activity.

Historically, the Company has charged fees based on

cannabis related deposit account activity.

During 2023, we reduced our fee percentage for cannabis specific accounts in order to ensure

we were competitive with the market.

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

anticipated deposit levels.

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

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

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

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

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

Revenue from the licensing of this program has intentionally

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

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

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

At the end of 2020, SHF serviced two loans as

compared to four at the end of 2021.

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

by PCCU under the Loan Servicing Agreement.

SHF anticipates significantly increasing its loan services during 2022 with approximately

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

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

into both an account servicing agreement and support service agreement.

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

Three Months Ended September 30,

Compensation and employee benefits

Professional services

Provision for loan losses

General and administrative expenses

Total Operating Expenses

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

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

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

would have been included in the corporate allocations.

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

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

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

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

section above.

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

and administrative expenses increased across various categories including:

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

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

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

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

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

Nine Months Ended September 30,

Deposit, activity, onboarding income

Safe Harbor Program income

Investment income

Loan interest income

Total Revenue

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

Historically, SHF has charged fees based on cannabis

related deposit account activity.

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

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

deposit levels.

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

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

The ratio of ancillary

accounts to cannabis specific accounts increased during 2022.

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

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

and anticipated deposit levels.

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

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

of ancillary accounts to cannabis specific accounts increased during 2023.

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

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

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

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

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

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

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

have an investment servicing agreement with PCCU (related party) where our financial institution clients invest their customer deposits

into short term US treasury instruments.

The investment income in our income statement reflects our share of that investment income.

Investment income earned on deposits with the Federal Reserve Bank increased as a result of recent interest rate increases.

have a Loan Servicing Agreement with PCCU (related party) where our financial institution carries the loan balances on their financial

the Loan Servicing Agreement has since been superseded by the Commercial Alliance Agreement.

The loan interest income reflects

our share of loan interest on issued credit.

Loan interest earned on the Company’s direct loans and the indemnified loans increased

as the Company increases its focus on lending.

For the three months ended March 31, 2023, SHF serviced eight loans, as compared to seven

loans in the three months ended March 31, 2022.

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

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

Nine Months Ended Sep 30,

Three months Ended March 31,

Compensation and employee benefits

Professional services

Provision for loan losses

General and administrative expenses

Professional services

Provision for credit losses

Total operating expenses

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

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

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

costs would have been included in the Parent allocations.

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

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

prepare to become a public company.

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

section above.

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

and employee benefits increased on account of stock-based compensation and also the increase in the head count in anticipation of growth.

services expense increased primarily due to the increase in the legal fees, audit fees, and consulting fees towards SEC filing and other

ancillary reporting’s.

for credit losses has increased due to increase in the loss rate and with increase in the absolute value of the loans.

and administrative expenses increased across various categories including:

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result of the reorganization, ii) approximately $76,879 in increased advertising and marketing as we focus on growth, iii) $387,132 in

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

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

cash equivalents, and restricted cash

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

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

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

operating assets and liabilities.

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

more information.

amortization and depreciation, and iv) $208,813 in business insurance.

and cash equivalents

and cash equivalents totaled $8,628,752 and $8,390,195 as of March 31, 2023, December 31, 2022, respectively.

the three months ended March 31, 2023, the Company’s cash used in operations was ($210,737) compared to cash provided by $506,455,

for the three months ended March 31, 2022.

This was mainly due to reduced net income from operations with an additional amount resulting

from changes across operating assets and liabilities.

See discussion under “ Discussion of our Results of Operations ”

above for more information.

assets and liabilities

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

As of December 31, 2021, SHF reported a

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

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

liability of $14,583.

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

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

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

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

To permit the business combination

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

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

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

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

Furthermore, PCCU has agreed to

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

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

As of September

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

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

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

The Company also has the potential ability to renegotiate its aforementioned

payable with PCCU, thus eliminating any working deficit.

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

ability to continue as a going concern.

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

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

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

The accompanying

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

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

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

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

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

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

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

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

purchase agreement

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

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

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

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

Purchase Agreement to each of Verdun and Vellar.

As contemplated by the Forward Purchase Agreement:

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

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

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

acquired shares.

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

in its trust account to Midtown East;

Verdun and Vellar for the shares purchased and approximately

$0.3 million in related expense amounts.

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

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

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

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

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

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

of Class A Stock in the open market.

If Midtown East, Verdun and Vellar sell any shares prior

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

account and paid to SHF.

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

of the Reset Price that is paid to SHF.

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

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

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

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

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

revenue is primarily related to contract liabilities associated with the Company agreements.

As of March 31, 2023, SHF reported a contract

asset and liability of $34,189 and $79,612 and on December 31, 2022, SHF reported a contract asset and liability of $21,170 and $996,

respectively.

and going concern

of March 31, 2023, the Company had $8,628,752 in cash and net working capital of 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.

At December 31, 2022, a significant component of the working capital deficit was $25,973,017 as current portion of

As outlined 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.

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

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

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.

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 that has been identified.

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.

Accounting Policies and Estimates

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

Preparing consolidated financial statements

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

as well as disclosure of contingent assets and liabilities.

An appreciation of our critical accounting policies is necessary to understand

our financial results.

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

are reasonably likely to occur from period to period.

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

financial condition or results of operations could be affected.

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

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

We refer to accounting estimates of this type as critical

accounting policies and estimates, which we discuss further below.

adopted Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“ASC 606”).

The core principle of ASC 606 requires that an entity recognize revenue to depict the transfer of promised goods or services to customers

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

ASC 606 defines

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

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

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

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

SHF adopted ASC 606

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

as of the date of adoption.

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

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

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

Preparing condensed consolidated

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

and expenses, as well as disclosure of contingent assets and liabilities.

An appreciation of our critical accounting policies is necessary

to understand our financial results.

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

in our estimates are reasonably likely to occur from period to period.

Accordingly, actual results could differ materially from our estimates,

and our financial condition or results of operations could be affected.

We base our estimates on our experience and other assumptions

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

We refer to accounting estimates of this type as

critical accounting policies and estimates, which we discuss further below.

recognized revenue in accordance with Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers

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

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.

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

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

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

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

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.

for loan losses

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

decreased by charge-offs less recoveries.

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

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

values, economic conditions, and other factors.

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

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

Loan losses are charged against

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

allowance for loan losses consists of specific and general components.

The specific component relates to loans that are individually

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

The general component covers non-classified loans and

is based on historical loss experience adjusted for current factors.

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

may change in the near term.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

The sale of a license or other

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

A defaulted loan may also

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

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

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

administrative agent.

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

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

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

indemnification component of the Loan Servicing Agreement is accounted for in accordance with 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

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

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

In the lending industry,

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

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

SHF’s indemnity obligation is subordinate

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

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

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

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

2 unchanged sentences

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

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

addition to default-related credit 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.

1 unchanged sentence

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.

2022 Plan (“Equity Incentive 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 years 2023 and 2022.

In conjunction with the 2022 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.

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 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

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.

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 business combination, 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.

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 to recognize 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.

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.

The 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”).

For each simulated path, the forward purchase value is calculated based on the contractual terms and then discounted at the term-matched

risk-free rate.

Lastly, the value of the forward is calculated as the average present value over all simulated paths.

The Company measured

the fair value of the forward purchase option derivative upon execution of the Forward Purchase Agreement and as of March 31, 2023, 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.

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 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 memorandum.

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 industry.

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 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.

Growth Company Status

7 unchanged sentences

As a result of the elected JOBS

Act relief, these combined and consolidated financial statements may not be comparable to companies that do not elect JOBS Act relief

or choose to early adopt different accounting pronouncements than SHF.

Act relief, these combined and condensed consolidated financial statements may not be comparable to companies that do not elect JOBS

Act relief or choose to early adopt different accounting pronouncements than SHF.

Control Over Financial Reporting

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

our internal controls over financial reporting.

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

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

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

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

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

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

identifiable expenses from corporate allocations.

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

that include the following:

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

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

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

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

SHF’s principal

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

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

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

SEC’s rules and forms.

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

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

connection with our management assessment of internal control over financial reporting as of and for the three months ended March

31, 2023, the Company has identified Four (4) material weaknesses within our internal controls over financial reporting related to

its Deferred Tax Asset, Revenue Recognition, Complex Financial Instruments and Credit Losses.

Refer to Item 9A of this document for additional

Party Relationships

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

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

customer deposits to the consolidated PCCU.

Servicing Agreement

10 unchanged sentences

It shall renew thereafter

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

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

Pursuant to this agreement, SHF reported revenue of

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

three and nine month periods ended September 30, 2021.

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

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

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

businesses (“CRBs”).

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

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

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

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

The Amended and

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

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

signing date.

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

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

of all CRB-related accounts;

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

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

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

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

$3,261,284 for the three months ended March 31, 2023, and $1,628,091 for the three months ended March 31, 2022.

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

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

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

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

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

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

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

The Amended and Restated Account

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

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

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

as a “credit union service organization” or within 60 days of the assumption by a third party of all CRB-related accounts;

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

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

within 60 days of SHF no longer qualifying as a “credit union service organization,” as SHF will cease to qualify as a CUSO

following the closing of the Business Combination.

Services Agreement

5 unchanged sentences

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

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

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

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

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

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

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

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

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

SHF will also

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

The Amended and Restated Support Services

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

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

otherwise dictated by regulatory, regulator or policy requirements.

The Amended and Restated Support Services Agreement has the same

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

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

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

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

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

Business Combination.

to these agreements and as amended and restated on February 11, 2022, the Company reported expenses of $378,730 for the three months

ended March 31, 2023, and $83,807 for the three months ended March 31, 2022.

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

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

human resources, employee benefits, IT and systems, accounting and marketing for a monthly fee equal to $30.96 per account in 2022 and

$25.32 per account in 2023 and 2024.

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

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

SHF will also reimburse

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

The Amended and Restated Support Services Agreement

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

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

dictated by regulatory, regulator or policy requirements.

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

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

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

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

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

as a “credit union service organization,” as SHF will cease to qualify as a CUSO following the closing of the Business Combination.

Servicing Agreement

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

February 11, 2022, SHF entered into a Loan Servicing Agreement with PCCU.

The agreement sets forth the application, underwriting and

5 unchanged sentences

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.

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

The agreement is for an initial

1 unchanged sentence

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

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

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

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

ended March 31, 2022.

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.

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

1 unchanged sentence

are reported pursuant to ASC 842.

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 will issue 11,200,000 shares of the Company’s Class A Common Stock

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 Agreement.

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.

Quantitative and Qualitative Disclosures About Market Risk

The Company is a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and is not required to provide the information

Holdings, Inc.

is a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and is not required to provide the information

otherwise required with respect to market risk.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis