What changed in this filing

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Item 1. Financial Statements

2023-11-14 compared with 2023-08-14 · 451 added, 509 removed, 1398 unchanged (41% of the section changed)

2 unchanged sentences

CONSOLIDATED BALANCE SHEETS

June 30, 2023

December 31, 2022

September 30,

Current Assets:

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Parent-Entity Net Investment and Stockholders’ Equity

Convertible preferred stock, $ .0001 par value, 1,250,000 shares authorized, 4,221 shares issued and outstanding on June 30, 2023, and Convertible preferred stock, $ .0001 par value, 1,250,000 shares authorized, 14,616 shares issued and outstanding on December 31, 2022, respectively

Class A common stock, $ .0001 par value, 130,000,000 shares authorized 46,265,317 issued and outstanding on June 30, 2023, and Class A common stock, $ .0001 par value, 130,000,000 shares authorized, 23,732,889 issued and outstanding on December 31, 2022, respectively

Convertible preferred stock, $ .0001 par value, 1,250,000 shares authorized, 3,811 and 14,616 shares issued and outstanding on September 30, 2023 and December 31, 2022, respectively

Class A common stock, $ .0001 par value, 130,000,000 shares authorized, 46,593,317 and 23,732,889 issued and outstanding on September 30, 2023 and December 31, 2022, respectively

Additional paid in capital

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

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

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

Holdings, Inc.

CONOLDIATED STATEMENTS OF OPERATIONS

For the three months ended

For the six months ended

CONSOLIDATED STATEMENTS OF OPERATIONS

the three months ended

the nine months ended

Operating Expenses

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Professional services

Provision for credit losses

Provision (benefit) for credit losses

Total operating expenses

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( 19,002,987 )

( 19,534,436 )

Other (income) expenses

Other expenses (income)

Interest expense

( 1,187,939 )

Change in fair value of forward purchase option derivative liability

Change in fair value of warrant liability

Total other expenses

$ ( 343,947 )

$ ( 745,002 )

Net (loss) income before income tax

( 20,965,564 )

( 20,279,438 )

Income tax benefit

Income tax (benefit) expense

( 1,199,483 )

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Weighted average shares outstanding, basic

Basic net loss per share

Basic net (loss) income per share

Weighted average shares outstanding, diluted

Diluted loss per share

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

Diluted (loss) income per share

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

Holdings, Inc.

CONSOLIDATED STATEMENTS OF PARENT-ENTITY NET INVESTMENT AND STOCKHOLDERS’ EQUITY

THE THREE MONTHS ENDED JUNE 30, 2023

THE THREE MONTHS ENDED SEPTEMBER 30, 2023

Preferred Stock

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Total Shareholders’

Balance, March 31, 2023

Balance, June 30, 2023

$ ( 70,577,990 )

Conversion of PIPE shares

( 6,278,174 )

Restricted stock units

Stock option conversion

( 17,604,567 )

Balance, June 30, 2023

Balance, September 30, 2023

$ ( 71,684,807 )

THE THREE MONTHS ENDED JUNE 30, 2022

THE THREE MONTHS ENDED SEPTEMBER 30, 2022

Preferred Stock

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Total Shareholders’

Balance, March 31, 2022

Contribution from parent

Balance, June 30, 2022

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

( 9,124,297 )

Balance, September 30, 2022

Holdings, Inc.

CONSOLIDATED STATEMENTS OF PARENT-ENTITY NET INVESTMENT AND STOCKHOLDERS’ EQUITY

THE SIX MONTHS ENDED JUNE 30, 2023

THE NINE MONTHS ENDED SEPTEMBER 30, 2023

Preferred Stock

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( 19,766,081 )

Balance, June 30, 2023

Balance, September 30, 2023

$ ( 71,684,807 )

THE SIX MONTHS ENDED JUNE 30, 2022

THE NINE MONTHS ENDED SEPTEMBER 30, 2022

Preferred Stock

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Contribution from parent

Net profit (loss)

Balance, June 30, 2022

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

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

( 9,124,297 )

Net income (loss)

Balance, September 30, 2022

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

Holdings, Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the six months ended June 30,

For the nine months ended September 30,

CASH FLOWS FROM OPERATING ACTIVITIES:

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Security deposit

Net cash (used in) provided by operating

Net cash (used in) provided by operating activities

CASH FLOWS USED IN INVESTING ACTIVITIES:

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Funding of other investment

Repayment of loans, net

Repayment of loans receivable, net

Net cash provided by (used in) investing activities

CASH FLOWS USED IN FINANCING ACTIVITIES:

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

Proceeds from reverse capitalization, net of transaction costs

Net cash provided by financing activities

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Reversal of deferred underwriting cost

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

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

Holdings, Inc.

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the closing of the Business Combination.

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

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

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

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into an Account Servicing Agreement and Support Services Agreement with PCCU, which memorialized the operational relationship between

SHF and PCCU and which were subsequently amended and restated and are discussed in Note 9 to the Condensed Consolidated Financial Statements.

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

September 28, 2022, the parties consummated the Business Combination, resulting in NLIT acquiring all of the issued and outstanding membership

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12 months following the closing date to satisfy potential indemnification claims of the parties.

In addition, $ 3,143,388 in cash and

cash equivalents representing the amount of cash on hand at July 31, 2021, less accrued but unpaid liabilities, were also paid to PCCU

at the closing.

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

included elsewhere in this Form 10-Q.

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

46.37 % of the Company’s outstanding Class A Common Stock.

On September 30, 2023, the 12 month

period has expired, and the Company is in discussion with the escrow agent for the release those shares.

For more information about the

Business Combination, refer to Note 3 to the Unaudited Condensed Consolidated Financial Statements included elsewhere in this Form 10-Q.

As a result of the Business Combination, PCCU is the Company’s largest stockholder, owning 46.37 % of the Company’s outstanding

Class A Common Stock.

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

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and covenants in the Agreement.

The Abaca Merger Agreement has been subsequently amended.

Please see Note 23 (Subsequent Events) to the financial

statements below for additional information.

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

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Use of Estimates

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

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

in the condensed consolidated financial statements and accompanying notes.

Material estimates that are particularly subject to

change in the near term include the determination of the allowance for credit losses, indemnification liabilities, valuation and

useful lives of intangibles and the fair value of financial instruments.

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

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

in the unaudited condensed consolidated financial statements and accompanying notes.

Material estimates that are particularly subject

to change in the near term include the determination of the allowance for credit losses, indemnification liabilities, valuation and useful

lives of intangibles and the fair value of financial instruments.

Actual results could differ from the estimates.

Basis of Presentation

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

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

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

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

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

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

GAAP” or “GAAP”) for interim financial information

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

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

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Except as otherwise disclosed, all such adjustments consist only of those of a normal recurring nature.

Operating results for the three and six months ended June 30, 2023, are not necessarily indicative of the results that may be expected

Operating results for the three and nine months ended September 30, 2023, are not necessarily indicative of the results that may be expected

for the current year ending December 31, 2023.

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Liquidity and Going Concern

of June 30, 2023, the Company had $ 8,239,095 in cash and net working capital deficit of $ 9,423,796 , 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 June 30, 2023 and December

31, 2022 are $ 11,880,296 and $ 11,622,831 , respectively, which represent the equity consideration payable towards the Abaca acquisition.

The Company has also incurred an operating loss of $ 17,912,767 and $ 19,534,436 for the three and six months ended June 30, 2023.

of September 30, 2023, the Company had $ 8,948,644 in cash and net working capital deficit of $ 9,381,113 , 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 September 30, 2023

and December 31, 2022 are $ 12,011,163 and $ 11,622,831 , respectively, which represent the equity consideration payable towards the Abaca

The Company has also earned an operating profit of $ 531,449 for the three months ended September 30, 2023 and incurred an

operating loss of $ 19,002,987 for the nine months ended September 30, 2023.

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

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

have been issued.

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

statements have been issued.

December 31, 2022, a significant component of the working capital deficit was $ 25,973,017 representing the current portion of due to

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Despite the restructuring

of the due to PCCU, at June 30, 2023, the working capital deficit substantially includes an equity commitment towards the Abaca acquisition,

which is a non-cash liability amounting to $ 11,880,296 .

These factors, however, do not fully remove substantial doubt regarding the

Company’s ability to continue as a going concern.

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

be forced to make reductions in spending, extend payment terms with suppliers, liquidate assets where possible, or suspend or curtail

planned expansion programs.

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

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.

of the due to PCCU, at September 30, 2023, the working capital deficit includes an equity commitment towards the Abaca acquisition, which

is a non-cash liability amounting to $ 12,011,163 .

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

ability to continue as a going concern.

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

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

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

accompanying unaudited 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.

Cash and Cash Equivalents

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of the Company’s revenue is generated by deposits and loans hosted by PCCU pursuant to a master service agreement.

Company had only one loan on its balance sheet as of June 30, 2023, which comprises 100 % of the total loan balance.

The Company also

indemnified 12 loans as of June 30, 2023;

three of these indemnified loans were in excess of 10 % of the total balance.

Company had only one loan on its balance sheet as of September 30, 2023, which comprises 100 % of the total loan balance.

also indemnified 11 loans as of September 30, 2023;

one of these indemnified loans constitute 16 % of the total balance.

Accounts Receivable-PCCU and Allowance for Doubtful Accounts

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

As of June 30, 2023, and December 31, 2022, 78 %

As of September 30, 2023, and December 31, 2022,

77 % and 85 % of the Accounts Receivable, respectively, is due from PCCU.

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

June 30, 2023 and December 31, 2022, there were no recorded allowances for doubtful accounts on accounts receivables.

September 30, 2023 and December 31, 2022, there were no recorded allowances for doubtful accounts on accounts receivables.

Loans Receivable

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

Interest income is not

recognized by the Company in such cases.

Allowance for Credit Losses (ACL)

January 1, 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.

January 1, 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

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Allowance for Loan Losses

to the adoption of CECL on January 1, 2023, the Company recognized an allowance for loan losses is a valuation allowance for probable incurred credit

losses, increased by the provision for loan losses and decreased by charge-offs less recoveries.

Management estimates the required allowance

for loan losses balance using past loan loss experience, known and inherent risks in the nature and volume of the portfolio, information

about specific borrower situations and estimated collateral values, economic conditions, and other factors.

Allocations of the allowance

for loan losses may be made for specific loans, but the entire allowance is available for any loan that, in management’s judgment,

should be charged-off.

to the adoption of CECL on January 1, 2023, the Company recognized an allowance for loan losses is a valuation allowance for probable

incurred credit losses, increased by the provision for loan losses and decreased by charge-offs less recoveries.

Management estimates

the required allowance for loan losses balance using past loan loss experience, known and inherent risks in the nature and volume of

the portfolio, information about specific borrower situations and estimated collateral values, economic conditions, and other factors.

Allocations of the allowance for loan losses may be made for specific loans, but the entire allowance is available for any loan that,

in management’s judgment, should be charged-off.

allowance for loan losses consists of specific and general components.

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

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

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

Where applicable, the loan origination

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Indemnity Liability

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

of the outstanding principal balance, funds certain loans.

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

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

losses as defined in the Loan Servicing Agreement.

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

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

(“ ASC”) 460 Guarantees .

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

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

The most immediate and potentially significant of

these are potential default-related credit losses.

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

result from currently issued debt.

The Company’s indemnity obligation is subordinate to PCCU’s and other financial

institution clients’ other means of collecting on the loans including foreclosure of the collateral, recourse against personal

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

Since borrowers are not party to the

agreement between Company and PCCU, any indemnity payments do not relieve borrowers of their obligation to PCCU nor would such

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

Therefore, as defined in ASC 460, the indemnification

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

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

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

agreement at the balance sheet date.

the prior Loan Servicing Agreement, PCCU, in exchange for a fee at an annual rate of 0.25 % of the outstanding principal balance, funds

certain loans.

Under the Loan Servicing Agreement, the Company had agreed to indemnify PCCU from all claims related to Company’s

cannabis-related business, including but not limited to default-related credit losses as defined in the Loan Servicing Agreement.

indemnification component of the Loan Servicing Agreement (refer to Note 9 to the unaudited condensed consolidated financial statements)

is accounted for in accordance with accounting standards codification (“ ASC”) 460 Guarantees .

In determining the applicability

of ASC 460, the Company 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 credit losses.

In the lending industry,

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

The Company’s indemnity obligation is

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

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

Since borrowers are not party to the agreement between Company and PCCU, any indemnity payments do not relieve borrowers of their obligation

to PCCU nor would such payments preclude PCCU’s right to future recoveries from the debtor.

Therefore, as defined in ASC 460, the

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

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

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

balance sheet date.

addition to default-related credit losses, the Company continuously monitors all other circumstances pursuant to the agreement and identifies

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

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

of our technology platform.

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

enhancement of our technology platform.

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

These costs are amortized

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

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

Right of Use Assets and Lease Liability

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entity’s performance.

of June 30, 2023, the Company reported contract assets and contract liabilities of $ 1,980 and $ 60,382 , respectively, from contracts with

of September 30, 2023, the Company reported contract assets and contract liabilities of $ 2,115 and $ 63,402 , respectively, from contracts

with customers.

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

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

as of June 30, 2023 and December 31, 2022.

as of September 30, 2023 and December 31, 2022.

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

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upon adoption.

Simplifying the impairment test for Intangibles-Goodwill

In January 2017, the FASB issued

ASU 2017-04, Intangibles—Goodwill and Other (Topic 350)—Simplifying the Test for Goodwill Impairment (“ASU 2017-04”).

ASU 2017-04 simplifies the accounting for goodwill impairments by eliminating the requirement to compare the implied fair value of goodwill

with its carrying amount as part of step two of the goodwill impairment test referenced in Accounting Standards Codification (“ASC”)

350, Intangibles - Goodwill and Other (“ASC 350”).

As a result, an entity should perform its annual, or interim, goodwill

impairment test by comparing the fair value of a reporting unit with its carrying amount.

An impairment charge should be recognized for

the amount by which the carrying amount exceeds the reporting unit’s fair value.

However, the impairment loss recognized should

not exceed the total amount of goodwill allocated to that reporting unit.

ASU 2017-04, as amended, is effective for annual reporting periods

beginning after December 15, 2019, for SEC filers, excluding entities eligible to be smaller reporting companies (for whom the effective

periods begin after December 15, 2022), including any interim impairment tests within those annual periods, with early application permitted

for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017.

The Company adopted ASU 2017-04 on January

1, 2023, with no material impact;

however, the standard was applied to the impairment analyses noted in Note 5 of the financial statements

the impairment test for Intangibles-Goodwill and Other

January 2017, the FASB issued ASU 2017-04, Intangibles—Goodwill and Other (Topic 350)—Simplifying the Test for Goodwill Impairment

(“ASU 2017-04”).

ASU 2017-04 simplifies the accounting for goodwill impairments by eliminating the requirement to compare

the implied fair value of goodwill with its carrying amount as part of step two of the goodwill impairment test referenced in Accounting

Standards Codification (“ASC”) 350, Intangibles – Goodwill and Other (“ASC 350”).

As a result, an entity

should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount.

An impairment charge should be recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value.

However, the impairment loss recognized should not exceed the total amount of goodwill allocated to that reporting unit.

as amended, is effective for annual reporting periods beginning after December 15, 2019, for SEC filers, excluding entities eligible

to be smaller reporting companies (for whom the effective periods begin after December 15, 2022), including any interim impairment tests

within those annual periods, with early application permitted for interim or annual goodwill impairment tests performed on testing dates

after January 1, 2017.

The Company adopted ASU 2017-04 on January 1, 2023, with no material impact;

however, the standard was applied

to the impairment analyses noted in Note 5 of the financial statements below.

Expected Credit Losses

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Transition Adjustment

January 1, 2023

Loans receivable, gross

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Transition Adjustment

January 1, 2023

Indemnity liability

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

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

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

Pending to be Adopted

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The Company does not expect this ASU to have

a material impact on its condensed consolidated financial statements.

a material impact on its unaudited condensed consolidated financial statements.

Rate Reform (Topic 848):

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can be applied through December 31, 2024.

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

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

financial statements.

Business Combination

On September 28, 2022, the Business Combination detailed in Note 1 above was accounted for as a reverse recapitalization, with no goodwill or

other intangible assets recorded, in accordance with GAAP.

September 28, 2022, the Business Combination detailed in Note 1 above was accounted for as a reverse recapitalization, with no goodwill

or other intangible assets recorded, in accordance with GAAP.

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

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of the amount was due to PCCU beginning December 15, 2022.

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

million thereafter.

The residual $ 35 million is due in six quarterly instalments of $ 6.4 million

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

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are to be recorded in accordance with GAAP.

The Company is authorized to issue 1,250,000

preferred shares with a par value of $ 0.0001

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

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

preferred shares issued or outstanding.

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

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

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

Common Stock.

No other dividends shall be paid on the preferred stock.

The terms of the preferred stock provide for an initial

conversion price of $ 10.00

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

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

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

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

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

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

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

Additionally, on January 25, 2023, at a special

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

per share to $ 1.25

The Company is authorized to issue 1,250,000 preferred shares with a par value of $ 0.0001 per share with such designation

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

As of September 30, 2023,

there were 3,811 preferred shares issued and outstanding and 14,616 preferred shares issued and outstanding on December 31, 2022.

The holders of preferred stock shall be entitled to receive, and the Company shall pay, dividends on shares of preferred stock equal(on

an as-if-converted-to-Class-A-Common-Stock basis) to and in the same form as dividends actually paid on shares of the Class A Common

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

No other dividends shall be paid on the preferred

The terms of the preferred stock provide for an initial conversion price of $ 10.00 per share of Class A Common Stock, which

conversion price is subject to downward adjustment on each of the dates that are 10 days, 55 days, 100 days, 145 days and 190 days

after the effectiveness of a registration statement registering the shares of Class A Common Stock issuable upon conversion of the

preferred stock to the lower of the Conversion Price and the greater of (i) 80% of the volume weighted average price of the Class

A Common Stock for the prior five trading days and (ii) $2.00 (the “Floor Price”), provided that, so long as a preferred

stock holders continues to hold any preferred shares, such preferred stock holder will be entitled to receive the aggregate shares

of Class A Common Stock that would be issuable based upon its initial purchase of preferred stock at the adjusted Conversion Price .

Additionally, on January 25, 2023, at a special meeting of the Company’s stockholders the reduction in the floor conversion

price of the outstanding preferred stock from $ 2.00 per share to $ 1.25 per share.

A Common Stock:

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

As of December 31, 2022, there

were 23,732,889 shares, respectively, of Class A Common Stock issued or outstanding.

As of December 31,2022, 3,667,377 Class A Common

Stock are held by the purchasers under forward purchase agreement dated June 16, 2022, by and among the Company and such purchasers.

The fair value of net assets

on September 28, 2022 in the books of NLIT are as follows:

As of December 31, 2022, and

September 30, 2023 there were 23,732,889 and 46,593,317 shares, respectively, of Class A Common Stock issued or outstanding.

September 30, 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.

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

of Fair Value Net Assets

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Fair value of net assets acquired

The following table summarizes

the total fair value of consideration:

following table summarizes the total fair value of consideration:

of Fair Value Consideration

9 unchanged sentences

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.

For purposes of these unaudited 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.

equity accounts are maintained for SHS, SHF or the Branches.

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

72 unchanged sentences

in Purchase Price Allocation

Useful life in

Useful life in Years

Market related intangible assets

4 unchanged sentences

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

revenues and net earnings for the three months ended June 30, 2022.

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

related costs in the year of acquisition.

revenues and net earnings for the three months and nine months ended September 30, 2022.

Acquisition costs of $ 236,200 were incurred

and recognized in acquisition related costs in the year of acquisition.

October 26, 2023, the Company and the Abaca stockholders entered into the second amendment to the Abaca merger agreement to redefine the

deferred cash consideration payable on the one-year and two-year anniversaries of the merger closing and the future stock consideration

payable on the one-year anniversary of the merger closing (refer to footnote 23 “Subsequent Event”).

Goodwill and Finite-lived Intangible Assets

The Company’s goodwill was derived from the

transaction discussed in note 4, where the purchase price exceeded the fair value of the net identifiable assets acquired.

tested for impairment at least annually on November 15 th unless any events or circumstances indicate it is more likely than

not that the fair value of the goodwill is less than its carrying value.

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.

The Company assessed several events and circumstances

that could affect the significant inputs used to determine the fair value of the goodwill, including the significance of the amount of

excess fair value over carrying value, consistency of operating margins and cash flows, budgeted-to-actual performance from prior year,

overall change in economic climate, changes in the industry and competitive environment, and earnings quality and sustainability.

Company considered the decline in the operating margins and cash flow being goodwill impairment indicators and determined it appropriate

to perform a quantitative assessment of the goodwill as of June 30, 2023.

The Company engaged a third-party valuation specialist

to assist in the performance of the impairment analysis of the goodwill.

For the interim quantitative goodwill impairment analysis performed

as of June 30, 2023, the Company utilized an equally weighted combination of both an income and market approach to determine the fair

Company’s goodwill was derived from the transaction discussed in note 4, where the purchase price exceeded the fair value of the

net identifiable assets acquired.

Goodwill is tested for impairment at least annually on November 15 th unless any events or

circumstances indicate it is more likely than not that the fair value of the goodwill is less than its carrying value.

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.

agreement was originally executed by Rockview Digital Solutions, LLC, which was acquired by the Company in October 2022.

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.

Company assessed several events and circumstances that could affect the significant inputs used to determine the fair value of the goodwill,

including the significance of the amount of excess fair value over carrying value, consistency of operating margins and cash flows, budgeted-to-actual

performance from prior year, overall change in economic climate, changes in the industry and competitive environment, and earnings quality

and sustainability.

The Company considered the decline in the operating margins and cash flow being goodwill impairment indicators and

determined it appropriate to perform a quantitative assessment of the goodwill as of June 30, 2023.

Company engaged a third-party valuation specialist to assist in the performance of the impairment analysis of the goodwill.

For the interim

quantitative goodwill impairment analysis performed as of June 30, 2023, the Company utilized an equally weighted combination of both

an income and market approach to determine the fair value of the goodwill.

The income approach utilizes a discounted cash flow method

which is based on the present value of projected cash flows.

The discounted cash flow models reflect 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.

As a result of the

interim goodwill impairment analysis, the goodwill was determined to have a carrying value that exceeded its fair value and therefore,

$ 13.21 million noncash goodwill impairment charge was recognized in the Company’s unaudited condensed consolidated statements of

operations for the nine months ended September 30, 2023.

value determination of the goodwill 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 the goodwill may include such items as:

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.

of December 31, 2022, and September 30, 2023, there were no negative indicators in the goodwill impairment that would impact the fair

value of the goodwill.

The income approach utilizes a discounted cash flow method which is based on the present value of projected cash

The discounted cash flow models reflect 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.

As a result of the interim goodwill impairment analysis, the goodwill

was determined to have a carrying value that exceeded its fair value and therefore, a $ 13.21 million noncash goodwill impairment charge

was recognized in the Company’s unaudited condensed consolidated statements of operations for the three and six months ended June

Fair value determination of the goodwill 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

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 the goodwill 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.

As of December 31, 2022, there were no negative indicators

in the goodwill impairment that would impact the fair value of the goodwill.

change in the carrying amount of goodwill from December 31, 2022, to June 30, 2023, is as follows:

change in the carrying amount of goodwill from December 31, 2022, to September 30, 2023, is as follows:

Schedule of Carrying Amount of Goodwill

2 unchanged sentences

( 13,208,276 )

June 30, 2023

of June 30, 2023, the Company’s accumulated goodwill impairment was $ 13,208,276 .

September 30, 2023

of September 30, 2023, the Company’s accumulated goodwill impairment was $ 13,208,276 .

intangible assets

11 unchanged sentences

The Company recognized an impairment charge of $ 3.68 million in the unaudited condensed consolidated statements

of operations for the three and six months ended June 30, 2023.

There was no impairment recognized for developed technologies as the

fair value was in excess of the carrying value on the June 30, 2023, reporting date.

is the summary of the Company’s finite-lived intangible assets as of June 30, 2023:

of operations for the nine months ended September 30, 2023.

There was no impairment recognized for developed technologies as the fair

value was in excess of the carrying value on the September 30, 2023, reporting date.

is the summary of the Company’s finite-lived intangible assets as of September 30, 2023:

Schedule of Finite Lived Intangible Assets

Remaining Useful life in Years

in Acquisition

September 30,

Market related intangible assets

4 unchanged sentences

Remaining Useful life in Years

December 31, 2021 (A)

Acquired in Acquisition (B)

December 31, 2021

Acquired in Acquisition

December 31, 2022 (A+B-C-D)

6 unchanged sentences

Schedule of Commercial Real Estate Loans Receivable

September 30, 2023

December 31, 2022

7 unchanged sentences

for Credit Losses

The allowance for credit losses

is maintained at a level believed to be sufficient to provide for estimated credit losses based on evaluating known and inherent risks

in the loan portfolio.

The Company’s estimated the allowance for credit losses on the reporting date in accordance with the credit

loss policy described in Note 2.

allowance for credit losses consists of the following activity for the three and six months ended June 30, 2023 and June 30, 2022:

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

known and inherent risks in the loan portfolio.

The Company’s estimated the allowance for credit losses on the reporting date in

accordance with the credit loss policy described in Note 2.

allowance for credit losses consists of the following activity for the three and nine months ended September 30, 2023 and September 30,

Schedule of Allowance For Loan Losses

Six months ended June 30,

June 30, 2023

June 30, 2022

Nine months ended September 30,

September 30, 2023

September 30, 2022

Allowance for credit losses

1 unchanged sentence

Cumulative effect from adoption of CECL

Provision/(Benefits)

(Benefits) Provision

Ending balance

Three months ended June 30,

June 30, 2023

June 30, 2022

Three months ended September 30,

September 30, 2023

September 30, 2022

Allowance for credit losses

8 unchanged sentences

Collectively evaluated for impairment

June 30, 2023 and December 31, 2022, no loans were past due, classified as non-accrual or considered impaired.

September 30, 2023 and December 31, 2022, no loans were past due, classified as non-accrual or considered impaired.

quality of loans:

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

indicators based on the loan payment status on monthly basis.

All the loans outstanding on June 30, 2023 and December 31, 2022, are evaluated based on

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

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

based on the loan payment status on monthly basis.

All the loans outstanding on September 30, 2023 and December 31, 2022, are evaluated

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

Indemnification liability

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

SHF earns the associated interest and pays PCCU a loan hosting payment at an annual rate of 0.25 % of the outstanding loan principal serviced by PCCU and 0.35 % of the outstanding loan principle serviced by SHF.

The below schedule details outstanding amounts funded by PCCU and categorized

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

As discussed at Note 9 to the unaudited condensed consolidated financial

statements, and pursuant to PCCU Agreements, PCCU funds loans through a third-party vendor.

Under the Commercial Alliance Agreement, PCCU’s

receives a servicing fee at the annual rate of 0.25% of the then-outstanding principal balance of each loan funded by PCCU and serviced

by the Company, and a servicing fee at the annual rate of 0.35% of the then outstanding principal balance of each loan presented by the

Company and both funded and serviced by PCCU.

The below schedule details outstanding amounts funded by PCCU and categorized as either

collateralized loans or unsecured loans and lines of credit.

Schedule of Outstanding Amounts

June 30, 2023

September 30, 2023

December 31, 2022

3 unchanged sentences

loans contained an interest rate ranging from 7 % to 12 %.

Unsecured loans and lines of credit contain variable rates ranging from

Prime + 1.50 % to Prime + 6.00 % .

Unsecured lines of credit had incremental availability of $ 725,000 and $ 996,958 at June 30, 2023 and

December 31, 2022.

Unsecured loans and lines of credit contain variable rates ranging from Prime

+1.50 % to Prime +6.00 % .

Unsecured lines of credit had incremental availability of $ 525,000 and $ 996,958 at September 30, 2023 and December

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

1 unchanged sentence

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

The Company’s estimated indemnity liability on the reporting date was calculated in accordance with the allowance

for credit loss policy described in Note 2.

The Company’s estimated indemnity liability on the reporting

date was calculated in accordance with the allowance for credit loss policy described in Note 2.

indemnity liability activity are as follows:

Schedule of Indemnity Liability

June 30, 2023

June 30, 2022

September 30, 2023

September 30, 2022

Beginning balance

1 unchanged sentence

Ending balance

loans were current and considered performing at June 30, 2023 except one loan which was identified pursuant to potential default on January

The Company’s management was informed that an indemnified loan, having an outstanding balance of $ 3.1 million, was past

due pursuant to its December 2022 payment.

The guarantor on the loan stated to management that the borrower is out of money due to business

loans were current and considered performing at September 30, 2023 except one loan which was identified pursuant to potential default

on January 5, 2023, and placed on non-accrual status.

The Company’s management was informed that an indemnified loan, having an outstanding balance of $ 3.1 million,

was past due pursuant to its December 2022 payment.

The guarantor on the loan stated to management that the borrower is out of money

due to business losses.

The Company is discussing workout options with the borrower.

The above-mentioned loan is now greater than 120 days

delinquent and is included in the Company’s CECL methodology to calculate management’s best estimate of credit losses in relation

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

above-mentioned loan is now greater than 120 days delinquent and is included in the Company’s CECL methodology to calculate management’s

best estimate of credit losses in relation to this loan and the overall loan portfolio on a collective basis.

quality of indemnified loans:

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

quality indicators based on the loan payment status on monthly basis.

All the indemnified loans outstanding on June 30, 2023 and

December 31, 2022 are evaluated based on their payment status, which is considered as the most meaningful indicator of credit

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

indicators based on the loan payment status on monthly basis.

All the indemnified loans outstanding on September 30, 2023 and December

31, 2022 are evaluated based on their payment status, which is considered as the most meaningful indicator of credit quality.

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

1 unchanged sentence

other circumstances were identified meeting the requirements of a loss contingency.

provision for credit losses on the statement of operations consists of the following activity for the three months ended June 30, 2023

and June 30, 2022:

provision for credit losses on the statement of operations consists of the following activity for the three months ended September 30,

2023 and September 30, 2022:

Schedule of Provision for Loan Losses

June 30, 2023

June 30, 2022

September 30, 2023

September 30, 2022

Provision (benefit)

provision for credit losses on the statement of operations consists of the following activity for the six months ended June 30, 2023

and June 30, 2022:

June 30, 2023

June 30, 2022

provision for credit losses on the statement of operations consists of the following activity for the nine months ended September 30,

2023 and September 30, 2022:

September 30, 2023

September 30, 2022

Provision (benefit)

2 unchanged sentences

Schedule of Property and Equipment

September 30, 2023

December 31, 2022

7 unchanged sentences

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

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

These costs include employees to manage

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

these accounts.

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

Amounts due to SHF were due

monthly in arrears and upon receipt of invoice.

This agreement was replaced and superseded in its entirety by Commercial Alliance

Agreement entered on March 29, 2023, between PCCU and the Company.

to providing the services, SHF assumed the costs associated with the CRB accounts.

These costs include employees to manage account onboarding,

monitoring and compliance, rent and office expense, insurance and other operating expenses necessary to service these accounts.

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

Amounts due to SHF were due monthly in arrears and upon

receipt of invoice.

This agreement was replaced and superseded in its entirety by Commercial Alliance Agreement entered on March 29,

2023, between PCCU and the Company.

Services Agreement

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

In connection with PCCU hosting the depository accounts and

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

In addition, 25 %

In connection with PCCU hosting the depository accounts and the

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

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

4 unchanged sentences

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

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

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

For the loans that are subject to this agreement, SHF

originates the loans and performs all compliance analysis, credit analysis of the potential borrower, due diligence and underwriting

and all administration, including hiring and incurring the costs of all related personnel or third-party vendors necessary to

perform these services.

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

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

This agreement was replaced and superseded in its

entirety by Commercial Alliance Agreement entered on March 29, 2023, between PCCU and the Company.

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

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

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

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

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

Under the Loan Servicing Agreement, SHF has agreed to indemnify

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

This agreement was replaced

and superseded in its entirety by Commercial Alliance Agreement entered on March 29, 2023, between PCCU and the Company.

Alliance 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.

The Commercial Alliance Agreement replaces and supersedes in their entirety

the following agreements entered:

the Amended and Restated Loan Servicing Agreement dated September 21, 2022 between the Company and PCCU

(the “Loan Servicing Agreement”);

the Second Amended and Restated Account Servicing Agreement dated May 23, 2022, effective

February 11, 2022 (“the “Account Servicing Agreement”);

and the Second Amended and Restated Support Services Agreement

dated May 23, 2022, effective February 11, 2022 (the “Support 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.

The Commercial Alliance Agreement replaces and supersedes in their entirety the following agreements entered:

the Amended and Restated Loan Servicing Agreement (dated September 21, 2022) between the Company and PCCU (the “Loan Servicing Agreement”);

the Second Amended and Restated Account Servicing Agreement (“the “Account Servicing Agreement”, dated May 23, 2022,

effective February 11, 2022);

and the Second Amended and Restated Support Services Agreement (the “Support Agreement”, dated

May 23, 2022, effective February 11, 2022).

Commercial Alliance Agreement sets forth the application, underwriting, loan approval, and foreclosure process for loans from PCCU to

3 unchanged sentences

for a loan funded by PCCU pursuant to the Commercial Alliance Agreement.

Under the Commercial Alliance Agreement, PCCU receives

a servicing fee at the annual rate of 0.25 % of the then-outstanding principal balance of each loan funded by PCCU and serviced by the

Company, and a servicing fee at the annual rate of 0.35 % of the then outstanding principal balance of each loan presented by the Company

and both funded and serviced by PCCU.

In addition, the Company is obligated by the Commercial Alliance Agreement to indemnify

PCCU from certain default-related loan losses (as fully defined in the Commercial Alliance Agreement).

Under the Commercial Alliance Agreement, PCCU receives a servicing

fee at the annual rate of 0.25 % of the then-outstanding principal balance of each loan funded by PCCU and serviced by the Company.

A servicing fee at the annual rate

of 0.35% of the then-outstanding principal balance of each loan presented by the Company is also added, and both are funded and serviced

In addition, the Company is obligated by the Commercial Alliance Agreement to indemnify PCCU from certain default-related loan

losses (as fully defined in the Commercial Alliance Agreement).

addition, the Commercial Alliance Agreement provides for certain fees to be paid to the Company’s for certain identified account

11 unchanged sentences

The initial term of the Commercial Alliance Agreement is for a period of two years, with a one-year automatic renewal

unless a party provides one hundred twenty days’ written notice prior to the end of the term.

below schedule demonstrates the ratio of CRB related loans funded by PCCU to the relative lending limits at June 30, 2023 and December

unless a party provides 120 days’ written notice prior to the end of the term .

below schedule demonstrates the ratio of CRB related loans funded by PCCU to the relative lending limits at September 30, 2023 and December

of Demonstrated Deposit Capacity

June 30, 2023

September 30, 2023

December 31, 2022

CRB related deposits

CRB related balance

$ 149,214,676

8 unchanged sentences

$ 154,971,429

revenue from operation on the statement of operations consists of the following agreements mentioned above for the three months ended

June 30, 2023, and June 30, 2022:

revenue from the following agreements appearing in the statement of operations for the three and nine months ended September 30, 2023,

and September 30, 2022, are as follows:

of Revenue from Operations

June 30, 2023

June 30, 2022

June 30, 2023

June 30, 2022

Account servicing agreement

Commercial alliance agreement

operating expense on the statement of operations consists of the following agreements mentioned above for the three months ended June

30, 2023, and June 30, 2022:

operating expense from the following agreements appearing in the statement of operations for the three and nine months ended September

30, 2023, and September 30, 2022, are as follows:

of Operating Expense from Operations

June 30, 2023

June 30, 2022

June 30, 2023

June 30, 2022

Support services agreement

7 unchanged sentences

Securities Issuance Agreement, pursuant to which the Company issued 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.

Following the issuance of the Shares, PCCU owns approximately 46 % 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

10 unchanged sentences

pursuant to ASC 842.

The lease was terminated on February 1, 2023.

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

amounting to $ 1,150,000 to fund the operation of NLIT.

The amount outstanding on June 30, 2023, and December 31, 2022, is $ 700,000 and $ 1,150,000 , respectively and is

presented within “accounts payable” in the condensed consolidated balance sheets.

The amount outstanding on September 30, 2023, and December 31, 2022, is $ 950,000

and $ 1,150,000 , respectively and is presented within “accounts payable” in the condensed consolidated balance sheets.

Due to Seller

1 unchanged sentence

of Amounts Due to Seller

June 30, 2023

September 30, 2023

December 31, 2022

37 unchanged sentences

of Senior Secured Promissory Note

June 30, 2023

September 30, 2023

December 31, 2022

5 unchanged sentences

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

Note amount will be paid in 54 equal installments of $ 295,487 each starting from November 5, 2023, and for the period between March 29,

2023, to October 05, 2023, the Company is expected to pay only interest portion.

repayment schedule of the outstanding amount on June 30, 2023, is as follows:

Note amount will be paid in 54 installments of principal and interest of $ 295,487 each starting from November 5, 2023, and for the period

between March 29, 2023, to October 5, 2023, the Company has paid only interest portion.

repayment schedule of the outstanding principal amount on September 30, 2023, is as follows:

of Outstanding Amount on Debt

8 unchanged sentences

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

As of June 30, 2023, and December 31, 2022, net assets

recorded under operating leases were $ 938,029 and $ 1,016,198 on, respectively, and net lease liabilities were $ 1,058,006 and $ 1,028,233 ,

As of September 30, 2023, and December 31, 2022, net assets

recorded under operating leases were $ 898,945 and $ 1,016,198 , respectively, and net lease liabilities were $ 1,021,253 and $ 1,028,233 ,

respectively.

4 unchanged sentences

not available.

Total lease cost for the three and six months ended June 30, 2023 and for the three and six months ended June 30, 2022

Total lease cost for the three and nine months ended September 30, 2023 and for the three and nine months ended September

30, 2022 included in Condensed Consolidated Statements of Operations, is detailed in the table below:

of Lease Cost

June 30, 2023

June 30, 2022

June 30, 2023

June 30, 2022

Operating lease cost

2 unchanged sentences

Schedule of Right Of Use Assets

June 30, 2023

December 31, 2022

September 30, 2023

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

7 unchanged sentences

Weighted-average discount rate

minimum lease payments as of June 30, 2023, and December 31, 2022, are as follows:

minimum lease payments as of September 30, 2023, and December 31, 2022, are as follows:

Schedule of Future Minimum Lease Payments

7 unchanged sentences

of Disaggregated Revenue

Six months ended

Nine months ended

Deposit, activity, onboarding income

62 unchanged sentences

of Earning Per Shares, Basic and Diluted

June 30, 2023

September 30, 2023

$ ( 19,766,081 )

Weighted average shares outstanding – basic

Basic net (loss) income per share

Weighted average shares outstanding – diluted

Diluted net (loss) income per share

Three months ended

September 30, 2023

Three months ended

September 30, 2022

$ ( 748,067 )

Weighted average shares outstanding – basic

Basic net loss per share

Basic net (loss) income share

Weighted average shares outstanding – diluted

Diluted net loss per share

Diluted net (loss)income per share

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

2 unchanged sentences

of Awards Excluded

June 30, 2023

September 30, 2023

Share based payments

6 unchanged sentences

shall be paid on shares of Series A Convertible Preferred Stock.

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

related to earning per share is not applicable.

Forward Purchase Agreement

46 unchanged sentences

December 31, 2022

Shares sold during the six months.

Ended June 30, 2023

June 30, 2023

Opening Shares

Shares sold during

the nine months

ended September 30, 2023

September 30, 2023

Name of the party

Opening Shares

Warrant Liability

and Private Placement Warrants

of June 30, 2023, and December 31, 2022, the Company has 5,750,000 Public warrants and 264,088 Private Placement Warrants.

of September 30, 2023, and December 31, 2022, the Company has 5,750,000 Public warrants and 264,088 Private Placement Warrants.

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

26 unchanged sentences

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

issuable upon the exercise of the private placement warrants were not transferable, assignable or saleable, subject to certain limited exceptions.

Additionally, the private placement warrants are exercisable on a cashless

basis and non-redeemable so long as they are held by the initial purchasers or their permitted transferees.

If the private placement

warrants are held by someone other than the initial purchasers or their permitted transferees, the private placement warrants will be

redeemable by the Company and exercisable by such holders on the same basis as the public warrants.

of June 30, 2023 and December 31, 2022, the Company has 1,022,500 PIPE Warrants.

issuable upon the exercise of the private placement warrants were not transferable, assignable or saleable, subject to certain limited

Additionally, the private placement warrants are exercisable on a cashless basis and non-redeemable so long as they are held

by the initial purchasers or their permitted transferees.

If the private placement warrants are held by someone other than the initial

purchasers or their permitted transferees, the private placement warrants will be redeemable by the Company and exercisable by such holders

on the same basis as the public warrants.

of September 30, 2023 and December 31, 2022, the Company has 1,022,500 PIPE Warrants.

PIPE Warrants have an exercise price of $ 11.50 per share of Class A Common Stock to be paid in cash (except if the shares underlying

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and Liabilities Reported at Fair Value on a Recurring Basis

Public warrants are recorded

at fair value on a recurring basis.

The Company obtains exchange traded price, of Level 1 inputs, based on observable data to value these

Private Placement Warrants:

Private Placement Warrants are

recorded at fair value on a recurring basis.

The Company values these Level 3 derivatives using observable data (Black-Scholes model).

PIPE Warrants:

PIPE Warrants are recorded at

fair value on a recurring basis.

The Company values these Level 3 derivatives using observable data (Black-Scholes model).

warrants are recorded at fair value on a recurring basis.

The Company obtains exchange traded price, of Level 1 inputs, based on observable

data to value these warrants.

Placement Warrants:

Placement Warrants are recorded at fair value on a recurring basis.

The Company values these Level 3 derivatives using observable data

(Black-Scholes model).

Warrants are recorded at fair value on a recurring basis.

The Company values these Level 3 derivatives using observable data (Black-Scholes

purchase option derivatives:

Forward purchase option derivatives

are recorded at fair value on a recurring basis.

The Company values these Level 3 derivatives using observable data (Black-Scholes model).

purchase option derivatives are recorded at fair value on a recurring basis.

The Company values these Level 3 derivatives using observable

data (Black-Scholes model).

following tables summarize financial assets and liabilities recorded at fair value on a recurring basis, by the level of valuation inputs

in the fair value hierarchy on June 30, 2023 and December 31,2022:

in the fair value hierarchy on September 30, 2023 and December 31,2022:

of Fair Value Assets and Liabilities Measured on Recurring Basis

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Forward purchase option derivative

Liabilities,fair value

Total Fair Value

Quoted Prices in Active Markets

Significant Other Unobservable Inputs

Public warrants

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Forward purchase option derivative

Liabilities,fair value

Measured at Fair Value on a Nonrecurring Basis

Assets that are measured at fair value on a nonrecurring

basis primarily comprises of property, plant and equipment, right-to-use assets, finite lived intangible assets and goodwill.

does not record these at fair value on a recurring basis, however, the carrying value of the assets may be reduced to fair value when

the Company determines that impairment has occurred.

At June 30, 2023, The Company’s goodwill and

finite lived intangible assets were measured at fair value on a nonrecurring basis 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.

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).

The following table presents the carrying amounts

and fair values of financial instruments measured on a nonrecurring basis, by the level of valuation inputs in the fair value hierarchy,

as of the dates indicated:

As on June 30, 2023

Fair value measurement using

Market related intangible assets

Customer relationships

The following table provides quantitative information

regarding Level 3 fair value measurements inputs as it relates to the finite lived intangible assets as of their measurement dates:

As on June 30, 2023

Market related

intangible assets

relationships

Discount rate

Estimated useful life

were no assets or liabilities recorded at fair value on a nonrecurring basis for the six months ended June 30, 2022.

were no assets or liabilities recorded at fair value on a nonrecurring basis for the

period ended September 30, 2023 and for the year ended as on December 31, 2022, respectively.

Value of Financial Instruments

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of Carrying Amounts and Fair Values of Financial Instruments

As on June 30, 2023

As on September 30, 2023

Fair value measurement using

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Forward purchase derivative

change in the assets measured at fair value on a recurring basis for which the Company have utilized Level 3 inputs to determine fair value are

presented in the following table:

change in the assets measured at fair value on a recurring basis for which the Company have utilized Level 3 inputs to determine fair

value are presented in the following table:

of Fair Value Assets Measured on Recurring Basis

For the six months ended

June 30, 2023

For the nine months ended

September 30, 2023

Balance at the beginning of the period

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private placement warrants and PIPE warrants are measured at fair value using a Black-Scholes model.

As of June 30, 2023, these warrants

were valued for Level 3 inputs, which are based on observable data to value these derivatives.

As of September 30, 2023, these

warrants were valued for Level 3 inputs, which are based on observable data to value these derivatives.

fair value of the forward purchase derivative was estimated using a Monte-Carlo Simulation in a risk-neutral framework (a special case

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of Level 3 Fair Value Measurement Inputs

As on June 30, 2023

As on September 30, 2023

PIPE Warrants

Private Placement

Exercise price

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PIPE Warrants

Private Placement

Exercise price

2 unchanged sentences

following table provides quantitative information regarding Level 3 fair value measurements inputs as it relates to the forward purchase

derivatives as of their measurement dates on June 30,2023 and December 31,2022:

derivatives as of their measurement dates on September 30, 2023 and December 31, 2022:

Level 3 Fair Value Measurements Inputs

June 30, 2023

September 30, 2023

Expected term (years)

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Risk-adjusted discount rate

the six months ended June 30, 2023, the Company recorded income tax benefit of $ 1,261,424 for continuing operations.

The effective tax

rate of 6.22 % for the six months ended June 30, 2023 varied from the statutory United States federal income tax rate of 21.0 % primarily

due to the effect of state income taxes, net of the federal benefit, goodwill impairment for book purposes and adjustments to the fair

market value of warrant liabilities.

The Company has net deferred tax assets of $ 51,593,302 and $ 43,260,743 as of December 31, 2022 and

June 30, 2023, respectively.

The Company considers their deferred tax assets to be realizable and has not established a valuation allowance,

as it is considered more likely than not that the Company will utilize deferred tax assets in future periods through future taxable income.

the nine months ended September 30, 2023, the Company recorded income tax benefit of $ 1,199,483 for continuing operations.

The effective

tax rate of ( 5.72 %) for the nine months ended September 30, 2023 varied from the statutory United States federal income tax rate of 21.0 %

primarily due to the effect of state income taxes, net of the federal benefit, goodwill impairment for book purposes, adjustments to

the fair market value of warrant liabilities and the establishment of a valuation allowance on capital loss carryovers.

The Company has

net deferred tax assets of $ 51,593,302 and $ 43,198,800 as of December 31, 2022, and September 30, 2023, respectively.

The Company has

established a valuation allowance of $ 72,914 against their capital loss carryovers.

The Company considers their remaining deferred tax

assets to be realizable.

Company recognizes income tax benefits from uncertain tax positions where the realization of the ultimate benefit is uncertain.

both December 31, 2022 and June 30, 2023, the Company has no unrecognized income tax benefits.

both December 31, 2022 and September 30, 2023, the Company has no unrecognized income tax benefits.

Company offers to all employees a tax-qualified retirement contribution plan, with the Company’s 100 % matching contribution up

to 4 % of a participant’s eligible compensation.

The Company’s consolidated matching contributions for the three and six months

ended June 30, 2023, amounting to $ 13,426 and $ 34,089 , and June 30, 2022, amounting to $ 13,640 and $ 25,430 , respectively.

The Company’s consolidated matching contributions for the three and nine

months ended September 30, 2023, amounting to $ 14,866 and $ 48,955 , and September 30, 2022, amounting to $ 13,517 and $ 38,947 , respectively.

Share based compensation

Equity Incentive Plan

compensation expense recognized for the three months ended June 30, 2023, and June 30, 2022, are $ 958,261 and $ 0 respectively and six

months ended June 30, 2023 and June 30, 2022 totaled $ 2,529,042 and $ 0 respectively.

compensation expense recognized for the three months ended September 30, 2023, and September 30, 2022, are $ 422,294 and $ 0 respectively

and nine months ended September 30, 2023 and September 30, 2022 totaled $ 2,951,336 and $ 0 respectively.

2022 Plan was approved by the Company’s stockholders on June 28, 2022.

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The Company has not issued stock appreciation rights, restricted stock, stock bonus awards, or performance compensation

awards in the six months ended June 30, 2023, and June 30, 2022.

In conjunction with the 2023 Plan, as of June 30, 2023, the Company

had granted stock options and restricted stock units which are described in more detail below.

awards in the nine months ended September 30, 2023, and September 30, 2022.

In conjunction with the 2023 Plan, as of September 30, 2023,

the Company had granted stock options and restricted stock units which are described in more detail below.

options are awarded to encourage ownership of the Company’s common stock by employees and to provide increased incentive for employees

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generally have a 10 -year contractual term.

assumptions used to determine the fair value of options granted in the six months ended June 30, 2023, using the Black-Scholes-Merton

assumptions used to determine the fair value of options granted in the nine months ended September 30, 2023, using the Black-Scholes-Merton

model are as follows:

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expected term of the options granted is calculated based on the simplified method by taking average of contractual term and vesting period

The shares of the Company have been listed on the stock exchange for a limited period of the time and the share price has also

dropped significantly from the date of listing, based on these factors, Management has considered the expected volatility at 100 % for

the current period.

The risk-free interest rate used is the current yield on US Treasury notes, with a term equal to the expected term

of the options at the grant date.

The expected dividend yield is based on annualized dividends on the underlying share during the expected

term of the option.

summary of the Company’s stock option activities and related information for the six months ended June 30, 2023, is as follows:

The shares of the Company have been listed on the stock exchange for a limited period of the time and the share price has

also dropped significantly from the date of listing, based on these factors, Management has considered the expected volatility at 100 %

for the current period.

The risk-free interest rate used is the current yield on US Treasury notes, with a term equal to the expected

term of the options at the grant date.

The expected dividend yield is based on annualized dividends on the underlying share during the

expected term of the option.

summary of the Company’s stock option activities and related information for the nine months ended September 30, 2023, is as follows:

Schedule of Stock Option and Related Information

Average Grant

Date Fair Value

Per Stock Option

of Stock Option

December 31, 2022

Cancelled / Forfeited

June 30, 2023

June 30, 2023, there were no unrecognized compensation costs related to non-vested stock options to be recognized.

September 30, 2023

September 30, 2023, there were no unrecognized compensation costs related to non-vested stock options to be recognized.

Share based compensation

did not impact on Company’s cash flow in six months ended June 30, 2023 or year ended December 31, 2022.

did not impact on Company’s cash flow in nine months ended September 30, 2023 or year ended December 31, 2022.

Stock Units (“RSUs”)

summary of the Company’s RSU activities and related information for the six months ended June 30, 2023, is as follows:

summary of the Company’s RSU activities and related information for the nine months ended September 30, 2023, is as follows:

of Restricted Stock Units

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Cancelled / Forfeited

June 30, 2023

fair value as of the respective vesting dates of RSUs that vested during the six months ended June 30, 2023 and December 31, 2022 was

$ 1,209,838 and $ 0 .

As of June 30, 2023, there is $ 368,088 of unrecognized share-based compensation expense related to RSU awards.

September 30, 2023

fair value as of the respective vesting dates of RSUs that vested during the nine months ended September 30, 2023 and December 31, 2022

was $ 1,246,850 and $ 0 .

As of September 30, 2023, there is $ 317,583 of unrecognized share-based compensation expense related to RSU awards.

Subsequent events

There were no material subsequent events that occurred

after the balance sheet date of June 30, 2023, through the date of this report, except for the following:

July 20, 2023, Central Bank and the Company agreed that the Master Services and Revenue Sharing Agreement will terminate, effective

October 1, 2023.

Under the agreement, Company provides expertise and intellectual property that allows 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.

This is the event that triggered the impairment analyses at Note 5.

October 26, 2023, the Company and the Abaca stockholders entered into the second amendment to the Abaca merger agreement (refer to footnote

4) to redefine the deferred consideration payable and the future stock consideration payable on the one-year anniversary of the merger

to the second amendment to the agreement and plan of merger agreed to with the stockholders of Abaca, the deferred purchase consideration

and the future stock consideration are rescheduled as follows:

The future stock consideration payable on the first anniversary of the merger amounts to $ 12,600,000

minus the Closing Note Balance and the Working Capital divided by $2.00 per share.

As a result, 5,835,822

shares of common stock shall be issued as the stock consideration on the first anniversary of the merger.

No changes were made to the cash payments of $3,000,000 payable at each of the one-year and two-year anniversaries of the original

The second amended added a Third Anniversary Consideration Payment of $ 1,500,000

which will be payable in cash, stock, or a combination of both at the Company’s discretion.

The Company shall issue stock warrants equal to 5,000,000 shares of the Company’s common stock for an initial exercise price of

$ 2.00 per share.

The Company has agreed to prepare and file a Registration Statement within 45 calendar days of the execution of the Second Amendment

registering the resale of all Registrable Securities.

The Company has also granted the Abaca Stockholders’ Representative the right to nominate 3 qualified candidates for the Company’s

Board of Directors to the Company’s Nominating and Corporate Governance Committee (“NCG Committee”) of which the NCG

Committee shall select and nominate 1 candidate to the Company’s Board of Directors in the Company’s 2024 annual proxy statement.

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

What changed 10-Q

Item 1. Financial Statements