SHF Holdings, Inc. 10-Q

Item 5. Other Information On July 20, 2023, the Company agreed to terminate the Master Services and Revenue Sharing Agreement with Central Bank. Under the agreement, the Company provided expertise and intellectual property that allowed the Company and Central Bank to jointly serve the deposit banking needs of cannabis related businesses primarily located in Arkansas. The agreement was originally executed by Rockview Digital Solutions, LLC, which was acquired by the Company in October 2022. The parties have agreed that termination will be effective as of October 1, 2023, allowing for an orderly transition that will have minimal impact on customer operations. The agreement, originally executed in 2018, was renewable on an annual basis and did not include any material early termination penalties. On June 30, 2023, the Company’s goodwill and finite lived intangible assets were measured at fair value as result of impairment triggered due to termination of the Master Services and Revenue Sharing Agreement with Central Bank. The fair value of goodwill was measured using third-party valuation models with an equally weighted combination of both an income and market approach. The income approach consists of a discounted cash flow model which is based on the present value of projected cash flows. The discounted cash flow model reflects the Company’s assumptions regarding revenue growth rates, risk-adjusted discount rate, terminal period growth rate, economic and market trends and other expectations about the anticipated operating results of the Company. Under the market approach, the Company estimates the fair value based on market multiples of revenues derived from comparable publicly traded companies with operating characteristics similar to the Company. In order to evaluate the fair value of the finite-lived intangible assets, a royalty method was applied for market related intangibles, a discounted cash flow method applied for customer relationships and a cost to re-create method for developed technologies. (Refer to note 5 - Goodwill and Finite-lived intangible assets.) As a result of the interim impairment analysis, the goodwill, market related intangible assets and customer relationships was determined to have a carrying value that exceeded its fair value and therefore, a $13.21 million, $1.87 million and $1.82 million, respectively were recognized as impairment expense in the Company’s unaudited condensed consolidated statements of operations for the three and six months ended June 30, 2023. Fair value determination of the goodwill, market related intangible assets and customer relationships requires considerable judgment and is sensitive to changes in underlying assumptions and factors. As a result, there can be no assurance that the estimates and assumptions made for purposes of the quantitative goodwill impairment tests will prove to be an accurate prediction of future results. Examples of events or circumstances that could reasonably be expected to negatively affect the underlying key assumptions and ultimately impact the estimated fair value of these assets may include such items as: (i) an increase in the weighted-average cost of capital due to further increases in interest rates, (ii) timing and success of estimated future income, it is possible that an additional impairment charge may be recorded in the future, which could be material. The expense accounted for in relation to impairment will be non-cash and the Company does not anticipate any cash expenditure in relation to the impairment loss which would need to be incurred in the future. 63 Item 6. Exhibits The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q. No. Description of Exhibit 2.1 † Unit Purchase Agreement dated February 11, 2022 (incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed on February 14, 2022). 2.2 First Amendment to Unit Purchase Agreement dated September 19, 2022 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on September 19, 2022). 2.3 Second Amendment to Unit Purchase Agreement dated September 22, 2022 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on September 23, 2022). 2.4 Third Amendment to Unit Purchase Agreement dated September 28, 2022 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed on September 29, 2022). 2.5† Agreement and Plan of Merger, dated October 31, 2022, by and among SHF Holdings, Inc., a Delaware corporation, Merger Sub I, a Delaware corporation, Merger Sub II, a Delaware limited liability corporation, Rockview Digital Solutions, Inc., a Delaware corporation, d/b/a Abaca and Dan Roda, solely in such individual’s capacity as the representative of the Company Security Holders (incorporated by reference to Exhibit 2.1 of the Company’s Current Report on Form 8-K, filed on October 31, 2022). 3.1 Second Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K, filed on September 29, 2022). 3.2 Certificate of Designation (incorporated by reference to Exhibit 3.2 of the Company’s Current Report on Form 8-K, filed on September 29, 2022). 10.1 Registration Rights Agreement dated September 28, 2022 (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K, filed on October 4, 2022). 10.2 † Lock-Up Agreement dated September 28, 2022 (incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K, filed on October 4, 2022). 10.3 Non-Competition Agreement dated September 28, 2022 (incorporated by reference to Exhibit 10.3 of the Company’s Current Report on Form 8-K, filed on October 4, 2022). 10.4 SHF Holdings, Inc. 2022 Stock Incentive Plan (incorporated by reference to Exhibit 10.4 of the Company’s Current Report on Form 8-K, filed on October 4, 2022). 10.5 Forbearance Agreement, dated as of October 27, 2022 by and between SHF Holdings, Inc., Partner Colorado Credit Union and Luminous Capital USA Inc. (incorporated by reference to Exhibit 99.1 of the Company’s Current Report on Form 8-K, filed on November 1, 2022). 31.1* Certification of Principal Executive Officer Pursuant to Securities Exchange Act Rules 13a-14(a) and 15(d)-14(a), as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 31.2* Certification of Principal Financial Officer Pursuant to Securities Exchange Act Rules 13a-14(a) and 15(d)-14(a), as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 32.1** Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 32.2** Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 101.INS* Inline XBRL Instance Document 101.CAL* Inline XBRL Taxonomy Extension Calculation Linkbase Document 101.SCH* Inline XBRL Taxonomy Extension Schema Document 101.DEF* Inline XBRL Taxonomy Extension Definition Linkbase Document 101.LAB* Inline XBRL Taxonomy Extension Labels Linkbase Document 101.PRE* Inline XBRL Taxonomy Extension Presentation Linkbase Document 104 Cover Page Interactive Data File (embedded within the Inline XBRL document) * Filed herewith. ** Furnished. † Certain of the exhibits and schedules to this exhibit have been omitted in accordance with Regulation S-K Item 601(a)(5). The Company agrees to furnish supplementally a copy of all omitted exhibits and schedules to the SEC upon its request. 64 SIGNATURES Pursuant to the requirements of Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Signature Title Date Chief Executive Officer August 14, 2023 Sundie Seefried Chief Financial Officer August 14, 2023 James H. Dennedy 65