What changed in this filing

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Item 1. Business

2024-04-01 compared with 2023-04-14 · 789 added, 993 removed, 175 unchanged (91% of the section changed)

Company and Our History

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

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

Holdings, Inc.

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

(“NLIT”), acquired all of

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

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

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

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

Subsequent to the completion of the Business Combination, NLIT changed

its name to “SHF Holdings, Inc.” In this Annual Report on Form 10-K (the “Annual Report”), we use the terms “we,”

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

the closing of the Business Combination.

(Refer to Note 3 to the Consolidated Financial Statements of the Company included elsewhere

in this Annual Report on Form 10-K (the “Form 10-K”) for more information regarding the Business Combination.)

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

both certain branches and Safe Harbor Services, a wholly-owned subsidiary of PCCU, to SHF Holding, Co., LLC.

SHF Holding, Co., LLC then

contributed the same assets and related operations to SHF, with PCCU’s investment in SHF maintained at the SHF Holding, Co., LLC

level (the “reorganization”).

The reorganization effectively occurred July 1, 2021.

In conjunction with the reorganization,

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

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

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

In addition, effective July

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

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

Statements included elsewhere in this Form 10-K.

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

interests of SHF in exchange for an aggregate of $185,000,000, consisting of (i) 11,386,139 shares of the Company’s Class A common

stock with an aggregate value equal to $115,000,000 and (ii) $70,000,000 in cash, $56,949,801 of which will be paid on a deferred basis.

At the closing, 1,831,683 shares of the Class A Common Stock were deposited with an escrow agent to be held in escrow for a period of

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

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

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

at the closing.

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

elsewhere in this Form 10-K.

As a result of the Business Combination, PCCU is now the Company’s largest stockholder, owning 43.20%

of the Company’s outstanding Class A Common Stock.

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

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

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

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

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

Capital USA Inc.

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

Under the Forbearance Agreement, PCCU has agreed to defer

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

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

29, 2023, the Company and PCCU entered into a definitive transaction (Refer to Note 22, “Subsequent Events,” of the consolidated

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

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

a Security Agreement pursuant

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

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

A Common Stock to PCCU.

Company generates both interest income and fee income through providing a variety of services to financial institutions desiring to service

the cannabis industry including, among other things, Bank Secrecy Act and other regulatory compliance and reporting, onboarding, responding

to account inquiries, responding to customer service inquiries relating to CRB depository accounts held at PCCU, and sourcing and managing

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

banking to the cannabis industry.

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

connection with the Business Combination Agreement, the Company entered into amended and restated support services and account

servicing agreements the PCCU, under similar terms as the July 2021 agreements (the “Amended and Restated Support Services Agreement” and the “Amended and Restated Account Servicing Agreement,”

respectively).

In addition, in conjunction with the Business

Combination Agreement, the Company and PCCU entered into a loan servicing agreement (the “Loan Servicing Agreement”).

(Refer to Note 9 to the Consolidated Financial

Statements included elsewhere in this Form 10-K for additional information.)

Marketing Efforts

Historically,

the Company has grown almost entirely through word of mouth and organic growth.

While still robust, growth was constrained by to the

cannabis client concentration limits and other balance sheet constraints applicable to PCCU while it owned 100% of SHF.

Thus, marketing

was not necessary.

As the market has evolved and with increased competition, marketing will be leveraged at a higher level than in the

We have accomplished great success without marketing, and we are confident that allocating marketing dollars to our activities

in conjunction with our business development activities will prove fruitful.

2022, we formally produced our first marketing plan for the next level of success and will be focusing on the following activities to

ensure greater exposure and brand awareness:

utilization of a well-known

public relations and investor relations firm,

new website to optimize

search engine optimization,

referral relationships

and success fees,

multiple conference participation

and speaking engagements,

customer retention promotions,

email and e-blast campaigns

along with more traditional direct mail marketing activities.

build out our marketing team, we have added a very high level, well networked individual to continue to expand our national

Our team has networked at multiple levels, establishing a high level of credibility with financial institutions, regulators

and the cannabis industry and has personally assisted numerous cannabis entities with securing banking across the country and is now

bringing that talent and network to the Company.

on October 29, 2022, the Company entered into an Agreement and Plan of Merger (the “Abaca Merger Agreement”) with SHF Merger

Sub I, , SHF Merger Sub II, LLC, Rockview Digital Solutions, Inc., a Delaware corporation, d/b/a Abaca (“Abaca”), and Dan

Roda, solely in such individual’s capacity as the representative of the Abaca security holders.

to the Merger Agreement, the Company acquired Abaca through mergers with the merger subsidiaries (the “Abaca Acquisition”),

in exchange for (a) cash consideration in an amount equal to (i) $9,000,000 ($3,000,000 is payable

at closing, with an additional $3,000,000 payable at each of the one-year and two-year anniversaries of the closing);

and (b) $21,000,000

of validly issued, fully paid and non-assessable shares of the Company’s Class A Common Stock, $0.0001 par value per share, payable

in two installments.

The stock consideration consists of 2,100,000 shares of SHF’s Class A Common Stock to certain Abaca

stockholders at the closing and $12,600,000 (minus the note balance of $500,000 , plus accrued interest) of shares of the

Company’s Class A Common Stock at the 1-year anniversary of the Closing Date based on a 10-day VWAP.

Company entered into lock-up agreements with those persons receiving shares of the Company’s Class A Common Stock (the “Lock-Up

Agreements”) pursuant to which such persons agreed, subject to certain customary exceptions, not to sell, transfer or dispose of

any Class A Common Stock for a period of 180 days from the closing of the Abaca Transaction.

Company also entered into voting agreements with certain stockholders of Abaca (the “Voting Agreements”) representing 70.1%

of the pre-transaction issued and outstanding Company’s Class A Common Stock pursuant to which such Persons agreed to vote all

shares of the Company’s Class A Common Stock owned by them in favor of the transactions contemplated by the Abaca Merger Agreement,

including the issuance of stock consideration in excess of 19.99% of the issued and outstanding Class A Common Stock, and any other action

reasonably requested by the Company in furtherance thereof.

in connection with the closing of the Abaca Transaction, the Company entered into employment agreements with certain key members of the

Abaca’s management.

loan production, generally, is subject to seasonality, with the lowest volume typically in the first quarter of each year.

not necessarily apply to the Company as we serve the ever expanding cannabis industry with demand for access to capital at reasonable

We expect, based upon our pipeline of demand, a methodical and consistent growth in the lending portfolio.

are extended to cannabis related businesses, both cannabis licensed and unlicensed ancillary service providers to the cannabis industry.

While credit markets are generally tightening due to market conditions, the cannabis industry continue to grow and expand at a rapid

pace in light of rampant legalization at the state level.

This provides an opportunity for lending, unlike the normal commercial market.

to the federally illegal status of cannabis, most cannabis related businesses, licensed or unlicensed, have faced years of inability

to access capital at reasonable rates;

this forces them to purchase properties and fund their businesses from personal investment of

operational cash, again strapping their own growth.

This provides for a robust opportunity to lend to established entities with real

estate assets free of debt.

Businesses are taking the opportunity to leverage out such assets to expand and grow their operations while

Safe Harbor builds a senior secured portfolio with a solid real estate base.

the industry has been subject to ‘hard money’ lending with annual rates available between 18-36%.

This is yet another opportunity

for Safe Harbor to offer refinancing of real estate debts at more favorable interest rates;

since the depository relationship is necessary

as part of the compliance monitoring for credit, Safe Harbor benefits from servicing, monitoring, and validating compliance of depository

relationships, earning fees on deposits.

This results in a lower cost of capital when considering that we earn on both the depository

and lending relationships.

provide services to a variety of cannabis-industry participants in 41 states, including financial institutions desiring to provide business

banking, private banking and commercial banking services to their customers, particularly those customers conducting business in or adjacent

to the cannabis industry.

Our services include, among other things:

compliance consulting and software for maintaining “Know Your Customer” (“KYC”)

and Bank Secrecy Act (“BSA”) compliance to financial institutions, principally

conducted vis-à-vis our proprietary financial services platform;

origination, onboarding, verification, and servicing of cannabis-related deposit business

for and on behalf of our partner financial institutions;

underwriting, servicing, and administering loans issued to cannabis businesses and related

entities, which are often also our customers, as well as being customers of our partner financial

institutions.

Services Platform

Company has developed and commercialized a fully compliant financial services platform for financial institutions providing banking services

to cannabis-related businesses (“CRBs”) to access and maintain reliable financial services as long as both the financial

institution client and the CRB meet regulatory requirements.

Our platform has been streamlined and finetuned for the past nine years

which enables the Company’s staff to efficiently guide financial institution clients and the CRBs desiring banking services through

the onboarding, validation and monitoring process.

Our automated platform provides for an efficient and effective management tool allowing

our employees to provide continuity of service while enabling compliance staff to monitor BSA activities.

the Company’s platform, our financial institution clients have the ability to provide CRBs with access to traditional financial

services including wires, debit, ACH, remote deposit capture, business checking and savings accounts, courier and vaulting services,

cash management accounts and commercial lending.

We believe our services have been implemented consistent with applicable law and regulations,

ensuring our financial institution clients will be able to provide CRBs with reliable access to these services.

We feel our history of

developing processes that satisfy regulatory standards has resulted in a solid reputation with related authorities and solidifies our

ability to continue to grow existing services and reduces barriers in expanding into new service offerings.

Company maintains relationships with Partner Colorado Credit Union (“PCCU”) and other financial institutions in which the

CRB funds are deposited and monetary transactions are performed.

The Company’s agreements with the financial institution allow

the Company’s platform to interface with the financial institution’s core banking systems and extract data necessary to monitor

the deposit accounts onboarded by the Company’s transactions, such as funds transmissions to or from the accounts, occur through

PCCU’s and other financial institution client’s infrastructure.

a CRB or ancillary service provider approaches PCCU or other financial institution for which the Company provides its onboarding services,

an initial onboarding fee is assessed based on the type and complexity of the business.

Onboarding is an important part of the KYC requirements

set forth in federal guidance.

The onboarding process can require a great deal of time depending on the business complexity and the fee

we assess is based upon the complexity and required time to complete the process.

Additionally, the Company assesses monthly deposit

and activity fees, which have historically been the majority of our revenue.

These fees are also based on business type and size.

and validating deposit activity is paramount to the success of the Company’s platform.

We believe our compliance-first focus reassures

regulators and law enforcement that the Company continues to focus on the safety and soundness of the financial system.

Investment income is also generated when PCCU or other financial institution

clients invest CRB deposits.

Under our Commercial Alliance Agreement with PCCU, the Company pays 25% of the investment income as a hosting

fee to PCCU based on this income.

Through its relationship with PCCU, depository amounts invested are typically restricted to low-risk

assets with high liquidity and low returns.

The investment income is significantly influenced by the levels of CRB deposits and the prevailing

interest rate environment for cash and similar assets.

We believe that fees based on deposits that we onboard and interest on the daily

balance less cash used to collateralize our loan portfolios maintained with financial institutions will represent a significant portion

of our revenue by 2024.

Lending Program

level of CRB deposits onboarded by the Company and held at PCCU allows for robust lending capacity.

During 2020, the Company implemented

a commercial lending program, which will be a strong pillar for future revenue and profit growth.

The focus will primarily include senior

secured lending with smaller loans considered for unsecured lending.

Collateral types would include real estate, equipment, and other

business assets.

The Company’s commercial lending program is built on:

stringent collateral package requirements with ample loan to value coverage;

strong underwriting of collateral and creditworthiness of borrower;

a deep knowledge and understanding of the industry, borrowers’ operations and the cannabis industry business cycle.

lending is primarily funded through PCCU using the funds from CRB deposit accounts onboarded by the Company.

The Company is currently

seeking relationships with additional financial institutions that would fund the Company’s loans and other sources of working capital

with which the Company could fund the loans directly.

The Company has created a lending program tailored specifically to the unique needs

of CRBs while also achieving strong returns on quality loans.

While third parties are presently used to provide loan underwriting and

servicing, the Company plans on building out a full-service internal lending function to improve the efficiency of our lending process

and to increase future profitability.

feel we have taken a creative and methodical approach in building the Company’s platform, which has allowed us to nationally scale

our business.

The platform’s policies, training, monitoring and other processes are well established with talented and expert level

We also plan to further expand the officer level suite with talent that we believe will further our success.

We anticipate

this combination will provide a competitive advantage for us as we focus on continued growth.

mission is to become the United States cannabis industry’s leading financial services provider, by creating a one-stop financial

service center upon which cannabis businesses can rely.

intend to support our mission by providing unparalleled customer service while offering a unique array of innovative technology-based

products and services.

offer products and services to financial institutions that we believe are attractively priced with a focus on convenience and accessibility

to the financial institutions’ customers.

We offer to our financial institutions clients a means to offer its CRB customers a full

suite of online banking services, including access to account balances, statements and other documents, online transfers, online bill

payment and electronic delivery of customer statements, as well as automated teller machines (“ATMs”), and banking by mobile

devices, telephone and mail.

We continuously look for ways for improving our products, services and delivery channels;

we accomplish

this by upgrading our offerings and technology as the market expands and demands more sophisticated products and services.

We have built

the present business over the past 8 years listening to the needs of the cannabis industry and rising to the occasion to expand our business

model with their needs in mind.

We will continue to evolve with the industry and lead on this level.

investment policy requires that investment decisions be made based on, but not limited to, the following four principles:

quality, liquidity requirements, interest-rate risk sensitivity and estimated return on investment.

These characteristics are pillars

of our investment decision-making process, which seeks to minimize exposure to risks while providing a reasonable yield and liquidity.

Technology Systems

continue to make significant investments in our information technology systems for our deposit, lending, treasury services, and compliance

We believe that these investments, including additional technology changes to implement our strategic plan, are essential

to enhance our overall customer experience, to support our compliance, internal controls and efficiency initiatives, to expand our capabilities

to offer new products, and to provide scale for future growth and acquisitions.

Our program, being built under financial institution

regulatory scrutiny, has allowed us to build a state of the art compliance monitoring program to ensure we not only operate with greater

efficiency, but fulfill anti-money laundering and BSA (the “Bank Secrecy Act”) regulatory obligations.

Company is actively engaged in identifying and managing cybersecurity risks.

Protecting company data, non-public customer and employee

data, and the systems that collect, process, and maintain this information is deemed critical.

The Company has an enterprise-wide Information

Security Program, or Security Program, which is designed to protect the confidentiality, integrity and availability of customer non-public

information and bank data.

The Security Program was also designed to protect our operations and assets through a continuous and comprehensive

cybersecurity detection, protection and prevention program.

This program includes an information security governance structure and related

policies and procedures, security controls, protocols governing data and systems, monitoring processes, and processes to ensure that

the information security programs of third-party service providers are adequate.

Our Security Program also continuously promotes cybersecurity

awareness and culture across the organization.

Company also has a business continuity/disaster recovery plan, or BCP, which it actively manages to prepare for any business continuity

challenges it may face.

Our BCP provides for the resiliency and recovery of our operations and services to our customers.

supported and complemented by a robust business continuity governance framework, a life safety program as well as an enterprise-wide

annual exercise and training to keep the program and strategies effective, scalable and understood by all employees.

We believe both

the Security Program and BCP adhere to industry best practices and comply with the guidelines of the Federal Financial Institutions Examination

Council, or FFIEC, and are subject to periodic testing and independent audits.

banking and financial services industry has become highly competitive in just the past couple years due to a couple facts.

of the frontrunner financial service providers have faced prosecution for serving the industry and, with 8 years of historical evidence,

other financial service providers feel more comfortable venturing into serving the cannabis industry.

Second, those of us serving the

industry for the past several years are expanding and solidifying relationships with the industry, gaining market share, and other financial

institutions are realizing this as a missed opportunity.

We will now find ourselves competing with a wide range of lenders and other

financial institutions entering the cannabis market, mostly composed of local and regional banks or credit unions.

also have limited competition with brokerage firms, trust service providers, consumer finance companies, mutual funds, securities firms,

insurance companies, third-party payment processors, and other financial intermediaries on various elements of our products and services.

While many enter the market with rigor, they find themselves exiting the market due to the complexity and demands of serving the cannabis

Some of our competitors are not subject to the regulatory restrictions and the level of regulatory supervision applicable to

Interest rates on loans and deposits, as well as prices on fee-based services, are typically significant competitive factors within

the banking and financial services industry.

of our competitors are much larger financial institutions that have greater financial resources than we do and compete aggressively for

market share.

These competitors attempt to gain market share through their financial product mix, pricing strategies, and larger banking

center networks.

However, due to the high risk nature of providing cannabis services, they find they must create specialized compliance

programs to meet the expectations of their regulators;

this puts the entire financial institution at risk for enforcement actions.

are realizing that a specialized external program that separates and monitors cannabis activities is a much safer approach;

Safe Harbor another opportunity to work side by side with larger banks.

fintech platform we have created at a national level allows us to compete with other financial institutions entering the market as the

cannabis companies are often doing business in multiple states and desiring only one reliable financial service provider.

Harbor has incorporated remote financial services for years, this is already a strong competitive advantage for us.

we seek to remain competitive with respect to fees charged, interest rates, and pricing, we believe that our broad and sophisticated

suite of services relating to commercial banking, our high-quality customer service culture, our positive reputation, and long-standing

community relationships enable us to compete successfully within our markets and enhance our ability to attract and retain customers.

Business Strategy

strategic plan is primarily focused on providing onboarding, monitoring and compliance services to financial institutions desiring to

provide business banking, and commercial banking services to their customers.

Our strategy aims to achieve significant

growth in domestic onboarded deposits and relationships while simultaneously retaining and growing our international markets and customer

Our primary strategy, now that we have access to public markets, is to focus on creating a one-stop financial service center upon

which cannabis businesses can rely;

we accomplish this using our reliable reputation and building out service components with other single

service providers now serving the cannabis industry with similar reliability.

We believe that our unique banking relationships, reputation of reliability in the cannabis industry, as well

as our deep expertise and experience in the industry will position us to serve a broad range of cannabis industry participants, including

cannabis cultivators, cannabis processors, dispensaries, multi-state operators, as well as the financial institutions that wish to bank

cannabis industry participants.

Since 2015, we have facilitated more than $21.5 billion in deposit activity across a footprint of 41

a combination of organic growth, increased commercial lending, and further development of our fintech platform, we believe we are all

well-positioned to service the cannabis industry, including through the industry’s recent spate of large-scale consolidations.

The Company provides a variety of onboarding, compliance, and monitoring

services to financial institutions and other financial services providers to the large and quickly expanding U.S.

cannabis industry.

cannabis industry is one of the fastest emerging consumer end markets in the U.S.

According to the 2023 MjBizDaily Research the industry

is expected to grow from a $33.6 billion in 2023 to $56.9 billion in 2028 Presently, 38 states plus the District of Columbia and Puerto

Rico have legalized medical cannabis, and 24 states plus the District of Columbia, the Virgin Islands, Guam and the Northern Mariana Islands

have legalized adult-use cannabis.

Company’s management is well positioned to assist growing markets;

having created a reliable reputation and network over the past

The team is often called upon to work with state and federal officials, regulators, law enforcement and financial service

providers to share experience and knowledge on navigating access to financial services.

We believe this expertise will allow us to enter

new markets with greater ease.

believe there is currently a small subset of the financial services industry willing to provide a full suite of financial services

to CRBs and these providers are extremely fragmented.

The Company has been a front runner in assisting financial institutions that desire

to provide reliable financial services to the cannabis industry and is well known amongst the leaders in the cannabis financial services

Going forward, we feel this positions the Company well to further optimize market position and become the leading provider of

access to financial services focused on the cannabis industry.

believe that stable long-term growth and profitability are the result of developing comprehensive, strong relationships with our customers

by offering a wide range of products and services, delivering unparalleled customer service, maintaining disciplined credit evaluation

and building out service components with other single service providers now serving the cannabis industry with similar reliability.

The Company’s strategy is to be a first-mover in future new legal

markets through its platform offering CRBs in multiple states access to financial services, through financial institutions that already

offer their services to such CRBs.

We are primarily focused on providing onboarding, monitoring and compliance services to financial institutions

through our fintech platform.

Secondarily, we aim to achieve significant growth in domestic onboarded deposits, which we believe will

also lead to increases our loan-related activity.

Finally, we intend to expand our customer base, both domestically and internationally.

We believe that this approach will assist us in gaining greater market share in terms of users of our fintech platform, growing our partner

loan portfolio responsibly, and managing our deposit sources to appropriately fund growth in our earning assets, maintaining favorable

asset quality compared to industry averages, all of which we intend to sustain our reliable profitability.

we are not an insured depository institution, nor are we subject to regulation by any state or federal banking regulator, we rely on

our partner financial institutions to carry out a significant portion of our operating activities.

As such, we enter into a Commercial

Alliance Agreement (“CAA”) with each partner financial institution that sets forth the terms and conditions of the lending-related

and account-related services governing the relationship between the Company and each partner financial institution with regard to the

CRB deposit accounts.

For example, we entered into a Commercial Alliance Agreement with PCCU, which sets forth the application,

underwriting and approval process for loans from PCCU to their CRB customers, as well as the loan servicing and monitoring responsibilities

provided by both PCCU and us.

For the loans subject to our CAA with PCCU, we perform a significant portion of the underwriting activities

for each loan, including all compliance analysis, credit analysis of the potential borrower, due diligence, and all administration, including

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

We receive all interest

income on such loans, minus a monthly fee at an annual rate of 0.25% of the then-outstanding principal balance of each loan (0.35% for

loans funded and serviced by PCCU).

Under the CAA, we agree to indemnify PCCU from all claims related to default-related credit losses

as defined in the CAA.

The CAA is presently set to expire on March 29, 2025, which may automatically be renewed for additional one-year

terms unless a party provides 120 days’ notice of non-renewal or there is a termination for cause, provided that a notice of non-renewal

is not provided until 30 months following the signing date.

key strategic initiatives include:

Due to the fact that we are providing services to financial institutions that

desire to provide banking services to CRBs, thereby allowing funds derived from cannabis-related

First Philosophy:

Due to the fact that we are providing services to financial institutions

that desire to provide banking services to CRBs, thereby allowing funds derived from cannabis-related

businesses to flow through the financial system, we must ensure the system is protected from

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pressure they face with high risk, cash intensive businesses.

Products and Services .

We offer products and services to financial institutions that we believe are

attractively priced with a focus on convenience and accessibility to the financial institutions’ customers.

We offer to our financial

institutions clients a means to offer their CRB customers a full suite of online banking services, including access to account balances,

statements and other documents, online transfers, online bill payment and electronic delivery of customer statements, as well as automated

teller machines (“ATMs”), and banking by mobile devices, telephone and mail.

We continuously look for ways of improving our

products, services and delivery channels;

we accomplish this by upgrading our offerings and technology as the market expands and demands

more sophisticated products and services.

We have built the present business over the past nine years listening to the needs of the cannabis

industry and rising to the occasion to expand our business model with their needs in mind.

We will continue to evolve with the industry

and lead on this level.

A Primary Focus upon which to grow relationships.

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on a strategic level.

First, we must Know our Customer (KYC) in order to assist with facilitating

the movement of their funds into the financial system with safe and sound practices.

the benefit of knowing every operational dollar moving in and out of the accounts;

a great understanding of the business, operations, cashflow, and continuity.

The second most

strategic factor of growing deposits is that it is critical to our near and long-term success

on our lending strategy.

Utilizing our deposit balances on which to lend will allow us to

reduce our use of alternative funding sources and the use of core deposits to fund our growth;

this, in turn, will improve our mix of deposits and enable us to achieve a lower cost of

First, we must KYC in order to assist with facilitating the movement

of their funds into the financial system with safe and sound practices.

We have the benefit

of knowing every operational dollar moving in and out of the accounts;

this secures a great

understanding of the business, operations, cashflow, and continuity.

The second most strategic

factor of growing deposits is that it is critical to our near and long-term success on our

lending strategy.

Utilizing our deposit balances on which to lend will allow us to reduce

our use of alternative funding sources and the use of core deposits to fund our growth;

in turn, will improve our mix of deposits and enable us to achieve a lower cost of funds.

to solidify a long-term relationship:

Lending provides us not only increased profit margins

over the long term, but a solid long term relationship with the client;

this ensures reduced

client attrition.

This is the relationship we will strive for from the KYC competitive advantage

we presently hold, with over 1000 accounts from which to select the most credit worthy opportunities

and understand the business to whom we lend at a very intimate level.

The loans issued by our partner financial institutions

provides us not only increased profit margins over the long term, but a solid long-term relationship

with the client;

this ensures reduced client attrition.

This is the relationship we will

strive for from the KYC competitive advantage we presently hold, with over 720 accounts from

which to select the most credit worthy opportunities and understand the business to whom

our partner financial institutions lend.

Lending Function:

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grow a participation network of financial institutions interested in securing portions of

larger loans, we will build out the function in 2023.

This will enable us to speed up our

processes and scale the lending portfolio in line with our depository growth.

larger loans.

This has enabled us to speed up our processes and scale the lending portfolio

in line with our depository growth.

Institution Relationships to scale:

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institutions wish to enter the market only to exit due to the complexities of serving the

We will seek out financial institutions that can provide reliable access to additional

functionality and balance sheet access for growth.

We will narrow our partnerships to those

providing optimal financial positioning for both our clients and the Company;

build as we build.

cannabis industry.

We seek out financial institutions that can provide reliable access to

additional functionality and balance sheet access for growth.

We narrow our partnerships

to those providing optimal financial positioning for both our clients and the Company;

to build as we build.

Superior Customer Experience to Make Banking with Us Easy.

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Existing and Evaluate New Lines of Businesses.

Key to our strategy and expectations for growth also includes rationalizing

existing and evaluating new lines of businesses, to further grow our revenue streams and fee income opportunities.

Our plan includes

the expansion of our treasury management and wealth management functions, as well as to build specialty finance capabilities.

initiative will incorporate a robust merger and acquisition strategy that allows us to expand more rapidly than new entrants into

the market trying to compete.

Our strategy and expectations for

growth also includes rationalizing existing and evaluating new lines of businesses, to further

grow our revenue streams and fee income opportunities.

Our plan includes the expansion of

our treasury management and wealth management functions, as well as to build our private

banking and specialty finance capabilities.

This initiative will incorporate a merger and

acquisition strategy that allows us to expand more rapidly than new entrants into the market

trying to compete.

● Significantly

Improve Operational Efficiency.

Our goal is to improve our efficiency ratio.

Our goal is to improve our efficiency.

believe there are opportunities to reduce our costs, we also need to identify and automate

1 unchanged sentence

The additional technology expertise

resulting from our last acquisition will enable us to assess and automate faster.

resulting from our acquisition of Rockview Digital Solutions, Inc., a Delaware corporation,

d/b/a Abaca will enable us to assess and automate faster.

Brand Awareness.

Building brand awareness in the communities we serve will be key for

both growing our presence in these markets as well as laying a strong foundation for future

With a major focus on marketing and business development has been put into place

and funded, we will build out a greater national brand awareness;

efforts pursuant to this

did not exist in the past.

Many initiatives are underway including improved signage and promotions,

evaluating affinity relationships, and greater community involvement.

We will continue to

work with state officials, regulators, and legislators to familiarize them with the manner

financial services can be available in a safe and sound way for their state;

this will ensure

their community safety.

This multi-prong approach utilizing internal expertise and networks

forged over the past 8 years will allow us to dominate the financial arena moving forward.

Building brand awareness in the communities

we serve will be key for both growing our presence in these markets as well as laying a strong foundation for future expansion.

we have placed a significant focus on marketing and business development as we work toward building a greater national brand awareness.

Many initiatives are underway including improved signage and promotions, evaluating affinity relationships, and greater community involvement.

We will continue to work with state officials, regulators, and legislators to familiarize them with the manner financial services can

be available in a safe and sound way for their state;

this will ensure their community safety.

This multi-prong approach utilizing internal

expertise and networks forged over the past nine years will allow us to dominate the financial arena moving forward .

Retain, Develop and Reward the Best Team Members to Execute our Strategy.

We believe that one of o ur primary

differentiator is our culture and the quality of our people delivering our products and services

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their skill set.

and Release of EF Hutton Note

November 2, 2022, EF Hutton, division of Benchmark Investments, LLC (“EF Hutton”), notified the Company that it was in default

on a promissory note in the total amount of $2,166,250 executed on September 28, 2022.

On March 10, 2023, the Company and EF Hutton agreed

to fully resolve the balance due, as well as all obligations set forth in the promissory note, for the total sum of $550,000, which was

paid on March 10, 2023.

On March 13, 2023, the Company was provided with a fully executed Satisfaction and Release of Promissory Note.

Bid Price Compliance

On March 16, 2023, the Company received

a letter from the listing qualifications department staff of The Nasdaq Stock Market (“Nasdaq”) notifying the Company that

for a period 30 consecutive business days, the Company did not maintain a minimum closing bid price of $1 per share for its common stock,

as required by Nasdaq listing rule 5550(a)(2).

The compliance deadline was extended by Nasdaq on September 13, 2023 for an additional

180-day period, expiring on March 11, 2024.

On January 5, 2024, prior to the expiration, Nasdaq notified the Company that it has regained

compliance with Listing Rule 5550(a)(2) and closed the matter.

As of March 28 th , 2024,

the Company’s closing bid price was $0.96.

If the Company does not maintain a minimum closing bid price above $1 per share for its

Common Stock for a period of 30 consecutive business days, Nasdaq may re-open this matter.

Note and Commercial Alliance Agreement

On March 29, 2023, the Company and PCCU entered into a definitive transaction

to settle and restructure the deferred obligations stemming from the September 28, 2022 business combination, including $56,949,800 into

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

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

all of the assets of the Company;

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

Company’s Class A Common Stock to PCCU.

The Company and PCCU also entered into the CAA that sets forth the terms and conditions

of the lending-related and account-related services governing the relationship between the Company and PCCU.

Bank Agreement Termination

July 20, 2023, we agreed to terminate the Master Services and Revenue Sharing Agreement with Central Bank.

Under the agreement, Company

provided expertise and intellectual property that allowed 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 termination was effective as of October 1, 2023, allowing for an orderly transition and

reduced 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.

Amendment to Agreement and Plan of Merger

October 26, 2023, we entered into:

(1) a Second Amendment to Agreement and Plan of Merger (the “Second Amendment”) with SHF

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

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

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

and Dan Roda, solely in such individual’s capacity as the representative of the Company Securityholders (the “Abaca Stockholders’

Representative”), and (2) a Warrant Agreement with Continental Stock Transfer & Trust Company (solely as warrant agent to the

Warrant Agreement).

First Amendment modified, among other things, the First Anniversary Parent Shares to be issued as consideration so that the First Anniversary

Parent Shares equal $12,600,000 minus the note balance of $500,000, plus accrued interest, divided by the 10-day VWAP of the Parent Common

Stock for the 10 days immediately preceding the first anniversary of the Closing Date.

The Second Amendment modified, among other things,

the First Anniversary Parent Shares to be issued as consideration so that the First Anniversary Parent Shares equal $12,600,000 less

the Closing Note Balance and Working Capital Adjustment, collectively in the amount of $928,356.16, divided by $2.00 per share.

result, 5,835,822 shares of Parent Common Stock will be issued as the First Anniversary Parent Shares.

The Second Amendment also 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

If the Company decides to pay with shares, their value will be determined by the 10-day NASDAQ average before

the anniversary, with prices ranging between $2.00 and $4.36.

Shares given purely for payment won’t be restricted by the Lock-Up

However, if the Lock-Up Agreement is in effect, the payment will be split into $750,000 cash and an equivalent $750,000 in

The lock-up duration for any shares will adhere to the legal minimum.

In the event of a company stock consolidation or similar

activity, the number of shares to be issued for the payment will be adjusted to reflect the decreased total of outstanding shares.

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 closing.

The Company has also granted the Abaca Stockholders’ Representative the right to nominate three 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 recommend one candidate for service on the Company’s Board of Directors in the Company’s 2024

annual proxy statement.

addition, pursuant to the Warrant Agreement the Company agreed to deliver the Company Securityholders warrants to purchase up to an aggregate

of 5,000,000 shares of Parent Common Stock at an initial exercise price of $2.00 per share.

February 27, 2024, The Company and the Abaca Stockholders’ Representative entered into the First Amendment to Second Amendment

to Agreement and Plan of Merger Warrant Agreement and Lock-up Agreement, revising the Second Amendment to their Merger Agreement.

This revision modifies the Common Stock’s registration requirements and timelines, updates the warrant agreement by changing

warrant durations and eliminating the redemption clause, and adjusts the Lock-Up Agreement to shorten the lock-up period to match

the amendment’s effective date.

These modifications were mutually agreed upon to ensure both compliance and clarity in the

ongoing agreements.

Board has unanimously determined that the Second Amendment, First Amendment to Second Amendment and Warrant Agreement are advisable and

in the best interests of the Company’s Stockholders.

The Board has approved the Second Amendment and Warrant Agreement on the terms

and subject to the conditions set forth therein.

The foregoing description of the Second Amendment, First Amendment to Second Amendment

and the Warrant Agreement, along with the supporting documents, and the transactions contemplated thereby does not purport to be complete

and is subject to, and qualified in its entirety by, the full text of the Second Amendment, First Amendment to Second Amendment and the

Warrant Agreement, copies of which are attached hereto as ( Exhibits 2.1 and 2.2) and are incorporated herein by reference.

and Marketing

2023, we formally produced our first marketing plan and will be focusing on the following activities to ensure greater exposure and brand

of a well-known public relations and investor relations firm,

website to optimize search engine optimization,

relationships and success fees,

conference participation and speaking engagements,

retention promotions, and

and e-blast campaigns along with more traditional direct mail marketing activities.

banking and financial services industry is highly competitive, and we compete with a wide range of lenders and other financial institutions

entering the cannabis market, mostly composed of local and regional banks or credit unions.

However, a number of our competitors are

much larger financial institutions that have greater financial resources than we do and compete aggressively for market share.

competitors attempt to gain market share through their financial product mix, pricing strategies, and larger banking center networks.

However, due to the high-risk nature of providing cannabis services, they find they must create specialized compliance programs to meet

the expectations of their regulators, which puts the entire financial institution at risk for enforcement actions.

They are realizing

that a specialized external program that separates and monitors cannabis activities is a much safer approach;

providing the Company another

opportunity to work side by side with larger banks.

also have limited competition with brokerage firms, trust service providers, consumer finance companies, mutual funds, securities firms,

insurance companies, third-party payment processors, and other financial intermediaries on various elements of our products and services.

While many initially enter the market with rigor, they find themselves exiting the market due to the complexity and demands of serving

the cannabis industry.

Some of our competitors are not subject to the regulatory restrictions and the level of regulatory supervision

applicable to us.

Interest rates on loans and deposits, as well as prices on fee-based services, are typically significant competitive

factors within the banking and financial services industry.

we seek to remain competitive with respect to fees charged, interest rates, and pricing, we believe that our broad and sophisticated

suite of services relating to commercial banking, our high-quality customer service culture, our positive reputation, and long-standing

community relationships enable us to compete successfully within our markets and enhance our ability to attract and retain customers.

we do not have any registered intellectual property, we currently rely on confidentiality, and non-disclosure agreements with our

employees and others to protect our proprietary rights.

Despite these efforts to protect ourselves from infringement or misappropriation

of our intellectual property rights, unauthorized parties may attempt to copy or otherwise obtain and use our intellectual property in

violation of our rights.

In the event of a successful claim of infringement against us, or our failure or inability to develop non-infringing intellectual

property or license the infringed or similar intellectual property on a timely basis, our business could be harmed.

loan production, generally, is subject to seasonality, with the lowest volume typically in the first quarter of each year.

not necessarily apply to us as we serve the cannabis industry with demand for access to capital at reasonable rates.

We expect, based

upon our pipeline of demand, a methodical and consistent growth in the lending portfolio.

are extended to cannabis related businesses, including both cannabis licensed and unlicensed ancillary service providers to the cannabis

While credit markets are generally tightening due to market conditions, the cannabis industry continues to grow and expand

at a rapid pace in light of on-going opening of legalized cannabis markets at the state level.

This provides an opportunity for lending,

unlike the normal commercial market.

to the federally illegal status of cannabis, most cannabis-related businesses, licensed or unlicensed, have faced years of inability

to access capital at reasonable rates;

these circumstances force them to purchase properties and fund their businesses from personal

investment of operational cash, potentially limiting their own growth.

This provides for a robust opportunity to lend to established

entities with real estate assets free of debt.

Businesses are taking the opportunity to leverage such assets to expand and grow their

operations while we build a senior secured portfolio ostensibly collateralized with a real estate base.

the industry has been subject to ‘hard money’ lending with annual rates available between 18-36%.

This is yet another opportunity

for us to offer refinancing of real estate debts at more favorable interest rates;

since the depository relationship is necessary as

part of the compliance monitoring for credit, we benefit from servicing, monitoring, and validating compliance of depository relationships,

earning fees on deposits.

This results in a lower cost of capital when considering that we earn on both the depository and lending relationships.

investment policy requires that investment decisions be made based on, but not limited to, the following four principles:

quality, liquidity requirements, interest-rate risk sensitivity and estimated return on investment.

These characteristics are pillars

of our investment decision-making process, which seeks to minimize exposure to risks while providing a reasonable yield and liquidity.

and Legislation

Company has capitalized on the opportunity to do what financial institutions would not do directly – provide access to financial

services to the underserved cannabis industry.

Among the factors preventing most financial institutions from providing similar services

conflicting state and federal laws regarding legalization;

the high-risk nature of cannabis due to its black-market history and undocumented, illegally earned legacy funds;

the high risk of an existing black-market operating among legal entities;

creating additional compliance pressures;

FinCEN guidance issued in 2014 (the “2014 FinCen Guidance”) explaining how financial institutions might serve the cannabis

industry, creating potential for differing interpretations and inconsistent standards;

under-the-radar operations of CRBs and the complex nature of the corporate structures created to separate and protect assets, which creates

steep learning curves necessitating the specialized cannabis sector training, onboarding, monitoring and funds validation;

BSA obligations to which few financial institutions are willing to dedicate the significant necessary resources, and fear of non-compliance,

which can result in millions of dollars in fines assessed against the financial institution.

the lack of a “safe harbor” regulatory provision that would protect officers and directors from prosecution for providing

financial services to companies that produce and sell cannabis products provides the business opportunity that we have sought to fulfill.

April 2021, the United States House of Representatives passed the SAFE Banking Act of 2021 (the “SAFE Act”).

would prohibit federal regulators from fining and penalizing financial institutions and their management/executive team who service legitimate

businesses including those in the cannabis industry (i.e.

those legal operating in states that have approved cannabis for medicinal and/or

More recently, the SAFER Banking Act updates the Secure and Fair Enforcement (SAFE) Banking Act and has successfully passed

the Senate Banking Committee as of September 2023.

Neither Act has been brought to or passed by the Senate and therefore is not law.

Even with the passage of the SAFE Act, we do not believe the above barriers to entry would be significantly reduced.

We feel due to the

high cash nature of the business, which we believe will persist in the near and mid-term, and the illicit history of cannabis, many potential

competitors will remain hesitant to serve the industry, resulting in an outsized opportunity for the Company.

significant changes involve the Department of Health and Human Services recommendation to reschedule cannabis from a ‘schedule

1’ drug to a ‘schedule 3’ drug classification.

This recommendation has been provided to the Drug Enforcement Administration

(the “DEA”) and is pending further comment or action from the DEA, if any.

The rescheduling of cannabis could impact 280E

IRS Tax code presently applied to cannabis licensees;

increasing the potential for greater cash flow, increase deposit activity and balances,

and ability to service debt.

inception (including as a wholly owned subsidiary asset of PCCU), the Company has onboarded over $21.5 billion in cannabis related funds

into the financial system with what we believe to be the highest level of monitoring and validation.

In conjunction with its financial

institution clients, the Company has successfully completed 16 state and federal exams without interruption resulting in reliable financial

The Company’s onboarded deposits currently consist of over 720 accounts that were onboarded and validated in a methodical

manner to ensure continuity of service while under significant regulatory scrutiny.

The Company’s services started with only 10

test CRBs resulting in current onboarded accounts representing approximately 70 times growth since the Company began operations.

Company has successfully grown its onboarded deposits at a rapid pace, with a compound annual growth rate (“CAGR”) of 53%

from 2015 to 2023.

Onboarded deposits processed in 2022 were approximately $3.6 billion and grew to approximately $4.2 billion in 2023.

Company’s onboarding process for CRBs desiring banking services through PCCU or another financial institution is a multi-step process

that is designed to fulfill the financial institution’s “know your customer” requirements and the diligence expectations

set forth in the 2014 FinCEN Guidance related to providing services to CRBs, particularly developing an understanding of the normal and

expected activity for the business.

The account opening process begins with an application and supporting documentation provided by the CRB, which are uploaded and logged

so that, following a quality control review, open items and questions are flagged for follow up.

All account-related documentation is

stored in a secure database that allows the Company’s oversight, audit and exam functions to have access to all of the CRB’s

As part of the Company’s diligence process, background checks are performed on all business owners, with the need for additional

background checks of indirect owners or investors determined in the application review stage.

Other diligence includes, among other things, as applicable, confirmation of licensure, on-site visits and regular audits to review business

processes and inspect business locations, verification of sources of funds, review of business and inventory records, and review of other

information necessary for a full understanding of the prospective customer’s business and historical operations.

The account opening process is completed with the assistance of a financial institution staff member.

substantially all deposits are maintained at PCCU, and all transmissions of funds to or from these deposit accounts are handled directly

We have expanded, and intend to continue to expand, our relationships with other financial institutions that similarly hold

the CRB deposit accounts and handle transmissions of funds to and from the accounts.

Although we do not directly hold the deposit accounts,

we believe that account retention is a measure of our ability to efficiently and compliantly onboard, validate and monitor CRB accounts.

The largest 10 CRB accounts held at PCCU for the period ended December 31, 2023 represented less than 5% of fee income from onboarded

deposits, which is currently our largest source of revenue.

Building upon the existing foundation, we believe the Company has the ability

to continue to grow the financial institution clients for which it onboards deposits and related fee income at a strong pace.

we plan to add access to additional financial services to the Company’s platform, such as merchant processing, custodial relationships,

insurance products, broker/dealer services, payment processing services and investment services, although in each case these services

would be provided by a third party holding necessary licenses.

Company had one loan on its balance sheet as of December 31, 2023.

The Company also indemnified twenty loans as of December 31, 2023;

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

Regulatory Challenges

remains a controlled substance under the CSA.

The conflict between federal and state laws allows for prosecution at the federal level,

assets remain subject to seizure, and there are potential punitive actions by third parties (including regulated) against financial institutions

and financial services providers for entering the business.

The uncertainty of the legal landscape has increased with the previous Attorney

General’s January 2018 rescission of the Cole Memorandum, which was guidance issued in August 2013 from then Deputy Attorney General

Cole to federal prosecutors that de-prioritized the enforcement of federal marijuana prohibitions.

Although, in our opinion,

the authority to prosecute cannabis related violations appears to remain vested in each state’s Attorney General, we believe that

the 2014 FinCEN Guidance provide an important framework for compliance to parties providing services to CRBs.

We also believe that the

successful completion of 16 regulatory examinations of PCCU, our largest financial institutional client, for which we provide onboarding

services demonstrates that it is possible to structure onboarding, validation and monitoring services in a compliant manner.

pending at the federal level such as the SAFER Banking Act described above will provide limited protection to financial institutions

banking the industry and other financial services providers in as much as the companies and their officers will not be prosecuted or

fined simply for servicing the cannabis industry.

However, legislation will not protect financial institutions from breaches of BSA regulations,

which may lead to significant penalties, often resulting in substantial fines assessed by FinCEN.

Given inherent risks associated with

the cannabis industry such as the remaining illicit market and illegal past, the need to bank the industry at an elevated level of compliance

will not change if the legislation passes at the federal level unless BSA changes, which is unlikely.

nature of the cannabis business is such that businesses utilize sophisticated business structures for asset protection and to create

ways to maximize tax efficiencies.

This makes for very complex business structures with some companies having many related entities that

financial institutions must monitor for adherence to anti-money laundering (“AML”)/BSA regulations.

This understanding, diligence

and underwriting is labor-intensive work requiring significant hands-on resources.

to the divergence between cannabis-related state and federal law, we believe venturing into providing access to banking and financial

services for CRBs remains “cutting edge.” We feel that the scrutiny and pressure under which financial institutions and financial

services providers must operate to maintain compliant while servicing CRBs, coupled with the pending status of further federal legislation,

causes most financial institutions and financial services providers to shy away from the industry.

We, however, view this as an opportunity.

While the Company is not regulated as a subsidiary of a regulated financial institution, our agreements with our financial institution

partners and the nature of our services typically require we provide these services in a compliant manner.

This primarily relates to

offering services that are compliant with the 2014 FinCEN Guidance and the BSA.

In addition, given our history working with credit unions,

our services historically have been subject to regulatory oversight from the National Credit Union Administration (“NCUA”).

The Company will nevertheless continue to be subject to a range of laws, rules, and regulations, including those applicable to the Company

that is an SEC registrant.

In order to ensure we provide our services in an appropriate manner, we maintain policies and procedures we

believe to be aligned with the requirements of 2014 FinCEN Guidance and the BSA.

These policies and procedures are continuously assessed

by management and formally reviewed at least annually.

All employees are provided ongoing and annual training to ensure our services

are delivered in an appropriate manner.

An external audit firm is engaged to audit our compliance with certain policies on a quarterly

and annual basis.

Regulations and Ramifications

penalties for non-compliance are significant.

For example, during March 2022, FinCEN issued a consent order issuing a $140 million civil

penalty to a financial institution for failing to address previously identified AML program issues and other BSA compliance issues.

fine was unrelated to CRBs, which we believe provides a higher risk industry.

We believe that most institutions cannot withstand such

a penalty and will not take that risk.

BSA experienced talent, particularly experience with cannabis businesses, is difficult to find

and delegating such legal risk to BSA staff takes a great deal of trust, training, and additional resources to monitor activities and

protect the financial institution.

We believe our history and experience of providing compliant financial services and in conjunction

with our financial institution clients successfully completing regulatory examinations reduces our risk in this area and provides us

with a competitive advantage.

We are committed to providing services in a compliance first fashion.

Focused Fintech Competition

regulators have created a real or perceived barrier to entry for most financial institutions.

This has created the utilization of fintech

models to provided financial services to the cannabis industry.

Unregulated fintechs, i.e., those not formally regulated by federal agencies,

are not subject to the same restrictions as chartered financial institutions (i.e., concentration limits on the percentage of balance

sheet composed of higher risk cannabis deposits).

Fintechs may enjoy this less restricted environment for a period of time, but we anticipate

these companies will become subject to increasing regulatory requirements.

We believe competition at the fintech level remains limited,

as the emerging cannabis market requires the creation of sustainable fintech models that understand the regulatory environment, combining

technology and regulation.

While not fully regulated, fintech models are responsible for moving funds through the financial system via

banking partners and must therefore be aware of regulations surrounding the movement of funds and implement BSA programs themselves.

the Company Addresses Regulatory Challenges

Company’s solutions are designed to address the key challenges faced by financial institutions desiring to provide banking services

Today’s industry participants lack sufficient and reliable access to traditional financial services.

We believe our solutions

offer valuable services making communities safer, drive growth in local economies and foster long term partnerships.

Company serves financial institutions desiring to provide banking services to the regulated cannabis industry and maintains a high standard

of accountability, transparency, monitoring, reporting and risk mitigation measures while meeting BSA obligations in-line with the 2014

FinCEN Guidance relating to CRBs.

BSA obligations vary depending on the growth and complexity of the CRB banking customers’ business,

resulting in financial service providers constantly adjusting activities to meet expectations as well as the size of the cannabis portfolio

The Company’s program has actual “hands-on” experience in the market since January 2015.

We have increased

BSA activities every year to manage emerging market risks and growth of the portfolio.

This experience has allowed for the formulation

of best practices and standardized processes that provide for a better understanding of these risks in order to mitigate them.

that the Company’s brand has been optimized on a national level to include sound and recognized exposure with financial institutions,

legislators, governing officials, attorneys’ generals, regulators and the overall cannabis industry.

have developed proprietary software built specifically for the cannabis industry from input gathered from our experience handling the

onboarding of CRB accounts for PCCU.

Our software enables our financial institution clients to manage the customer onboarding process,

including applications and intake, “know your customer” diligence, and ongoing compliance monitoring, coupled with financial

services relationship monitoring.

Our software is continuously improved based on our experience and is updated to include new options

and functions associated with the emerging cannabis market.

Our software is able to run on multiple core banking systems, so as a result

we are able to offer this software to financial institution clients who desire to use our software for diligence and monitoring purposes

for their own CRB customers without our assistance.

Ultimately, we believe that our software can be updated to accommodate new industries

and to enhance existing processes for increased efficiencies.

institutions continue to shy away from banking the cannabis market due to cannabis remaining a Schedule 1 drug, thus illegal under federal

Because there is no “safe harbor” for financial institutions seeking to provide banking services to CRBs, it provides

us the opportunity to capitalize on our knowledge and position as a market leader.

We believe most financial institutions will not enter

the market until federal legalization occurs — especially the large, multi-state financial institutions.

Even then, the industry

will still be considered a higher-risk banking sector needing strong experience and vetted programs.

The 2014 FinCEN Guidance issued

in February 2014 detailed the regulatory agency’s compliance and monitoring expectations for financial institutions servicing the

cannabis industry.

In our opinion, this created a window of opportunity allowing for the ability to serve the cannabis industry.

this window of opportunity, along with our proven track record, reduces the risk of negative consequences as a result of servicing the

cannabis industry.

is our opinion that many competitors will attempt to enter the financial services market without understanding the complexity or regulatory

demands and we believe many will quit once they assess required resources to maintain a compliant program.

We have seen several financial

institutions divest their balance sheet of cannabis risk in the last year due to regulatory pressures and demands on BSA dedicated resources.

or the lack of banking provided to the cannabis industry, remains a national issue due to the conflict in federal and state laws, reputational

risk, and AML/BSA regulatory requirements.

CRBs have been unbanked or even banked secretly.

Many financial institutions start serving

the industry only to quickly close down their cannabis focused operations due to i) lack of industry knowledge, ii) regulatory pressure,

iii) cash management volume, and iv) the labor-intensive monitoring and reporting requirements.

fintech operations typically have difficulty obtaining banking relationships in which to conduct business as the financial institution

still remains liable for BSA obligations and yet the fintech retains control of all safety and soundness processes - a high and potentially

expensive financial institution risk without direct control.

The Company, under the umbrella of our partner financial institution, PCCU,

methodically built its platform in a regulated manner under the supervision of financial regulators.

This allows the Company to continue

to operate with attention and activities based upon required regulations and provide financial institution partners with whom we work

confidence in our ability to manage the higher-risk cannabis industry.

Going forward, the Company will continue to operate in a manner

to ensure a smooth transition once regulations are standardized for businesses providing financial services under a fintech model.

Legislative Developments

may enact legislation from time to time that affects the regulation of the financial services industry, and state legislatures may enact

legislation from time to time affecting the regulation of financial institutions chartered by or operating in their states.

state regulatory agencies also periodically propose and adopt changes to their regulations or change the manner in which existing regulations

The substance or impact of pending or future legislation or regulation, or the application thereof, cannot be predicted,

although any change could impact the regulatory structure under which we or our competitors operate and may significantly increase costs,

impede the efficiency of internal business processes, require an increase in regulatory capital, require modifications to our business

strategy, and limit our ability to pursue business opportunities in an efficient manner.

It could also affect our competitors differently

than us, including in a manner that would make them more competitive.

A change in statutes, regulations or regulatory policies applicable

to us or any of our affiliates could have a material, adverse effect on our business, financial condition and results of operations.

of December 31, 2023, we had forty three full time employees, and two part time employees.

None of our employees are represented by a

union or parties to a Collective Bargaining Agreement.

Capital Management

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Attracting, developing, and retaining the best talent with the right skills is central to our long-term strategy to drive our success.

workforce composition is aligned with our business needs.

Management trusts it has adequate human capital to operate its business successfully.

The Company had 65 full-time equivalent employees, or FTEs, at the end of 2022.

Approximately 45% of our workforce is in Colorado and

another 35% in Arkansas, with an expanding remote workforce to cultivate new and existing cannabis relationships in multiple states.

Our workforce composition is aligned with our business needs.

trusts it has adequate human capital to operate its business successfully.

The Company had 43 full-time equivalent employees, or FTEs,

at the end of 2023.

Approximately 70% of our workforce is in Colorado and another 16% in Arkansas, with an expanding remote workforce

to cultivate new and existing cannabis relationships in multiple states.

The others are spread around to six other states.

acquisition efforts focused on sales, business development and income generator roles.

In 2022 we expanded our cash management team and

brought on board a sales team to focus on offering access banking services and products.

Our talent acquisition team uses

internal and external resources to recruit highly skilled and talented workers, and we encourage and reward employee referrals for open

We hire the best person for the job without regard to gender, ethnicity or other protected traits and it is our policy to

comply fully with all federal and state laws relating to discrimination in the workplace.

Our talent acquisition team uses internal and

external resources to recruit highly skilled and talented workers, and we encourage and reward employee referrals for open positions.

We hire the best person for the job without regard to gender, ethnicity or other protected traits and it is our policy to comply fully

with all federal and state laws relating to discrimination in the workplace.

and Consistent Practices.

3 unchanged sentences

and are able to trust that the company will ensure fair and consistent treatment.

Performance evaluations done on an annual basis provide

for competitive pay increases and access to the equity incentive plan.

We work to make them feel part of the team no matter what role

Performance evaluations done on a quarterly and annual

basis provide for competitive pay increases and access to the equity incentive plan.

We work to make them feel part of the team no matter

what role they fill.

Evaluations are used to build staff expertise, efficiencies and competencies;

utilizing objective criteria on which to base

utilizing objective criteria on which

to base rewards.

and Development.

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so they can more safely and effectively perform their work.

We implemented remote work options that have enabled employees a combination

We implemented remote work options that have granted employees a combination

of working at the office or from home.

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well-being to achieve a healthy and financial lifestyle goal.

Employees enjoy a solid PTO plan that allows for 4 weeks of personal time off their first year, working up to a maximum of

7 weeks of PTO depending on tenure.

Employees are also allowed to sell back PTO weeks based upon their tenure, allowing for a benefit

many take advantage of to fund vacations, family situations, and even holiday shopping.

They are allowed to carry over 80 hours into

a new year and excess hours are paid to the employee at that time.

GROWTH COMPANY STATUS

are an “emerging growth company,” or “EGC”, as defined in the Jumpstart Our Business Startups Act of 2012 (the

As such, we are eligible to take advantage of certain exemptions from various reporting requirements that are

applicable to other public companies that are not “emerging growth companies,” including, but not limited to, not being required

to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding

executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a non-binding advisory

vote on executive compensation and shareholder approval of any golden parachute payments not previously approved.

addition, Section 107 of the JOBS Act also provides that an EGC can take advantage of the extended transition period provided in Section

7(a)(2)(B) of the Securities Act of 1933, as amended (the “Securities Act”), for complying with new or revised accounting

In other words, an EGC can delay the adoption of certain accounting standards until those standards would otherwise apply

to private companies.

We intend to take advantage of the benefits of this extended transition period, for as long as it is available.

We will remain an EGC until the earlier of (1) the last day of the fiscal year (a) following the fifth anniversary of the date of the

first sale of our common equity securities pursuant to an effective registration statement under the Securities Act and (b) in which

we have total annual gross revenue of at least $1.07 billion, (2) the date on which we are deemed to be a large accelerated filer, which

means the market value of our common stock that is held by non-affiliates exceeds $700 million as of the last business day of our most

recently completed second fiscal quarter, and (3) the date on which we have issued more than $1.0 billion in non-convertible debt during

the prior three-year period.

References herein to “emerging growth company” have the meaning provided in the JOBS Act.

BUSINESS OF THE COMPANY

of the Company’s Business

Company is a market-leading service provider to financial institutions for the legal U.S.

cannabis marketplace and has been successful

in doing so since its inception, through its predecessor, in 2015.

We believe the Company is a marketplace leader in:

● Onboarding, verification and monitoring of customer accounts maintained at our client financial institutions;

building a national presence by providing services to financial institutions who have CRB customers in 20 states, with the foundation

to scale and expand our services to financial institutions in all state-legal cannabis markets across the United States and its territories;

developing proprietary onboarding and compliance software maintaining the highest standard of “Know Your Customer” (“KYC”)

and Bank Secrecy Act (“BSA”) compliance;

compliant lending services and assisting in underwriting for loans to CRBs and ancillary service providers to CRBs;

successfully navigating the high scrutiny that comes with 16 state and federal examinations in its more than seven-year operating history.

Company was conceived in 2015 as a solution to a major problem that plagued the nascent legalized cannabis industry in Colorado - access

Employees enjoy a solid paid time off (“PTO”) plan that allows for four weeks of personal time off their first

Employees are also allowed to sell back PTO weeks based upon their tenure, allowing for a benefit many take advantage of to fund

vacations, family situations, and even holiday shopping.

They are allowed to carry over 80 hours into a new year and excess hours are

paid to the employee at that time.

Company was founded in 2015 as a solution to a major problem that plagued the nascent legalized cannabis industry in Colorado - access

to reliable and compliant financial services.

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to financial institutions that provide banking services in 41 states where cannabis is either legal medicinally or for full adult use.

Company has capitalized on the opportunity to do what financial institutions would not do directly – provide access to financial

services to the underserved cannabis industry.

Among the factors preventing most financial institutions from providing similar services

conflicting state and federal laws regarding legalization;

the high-risk nature of cannabis due to its black market history and undocumented, illegally earned legacy funds;

FinCEN guidance issued in 2014 (the “2014 FinCen Guidance”) explaining how financial institutions might serve the cannabis

industry, creating potential for differing interpretations and inconsistent standards;

under-the-radar operations of CRBs and the complex nature of the corporate structures created to separate and protect assets, which creates

steep learning curves necessitating the specialized cannabis sector training, onboarding, monitoring and funds validation;

BSA obligations to which few financial institutions are willing to dedicate the significant necessary resources, and fear of non-compliance,

which can result in millions of dollars in fines assessed against the financial institution.

lack of a “safe harbor” regulatory provision that would protect officers and directors from prosecution for providing financial

services to companies that produce and sell cannabis products provides the business opportunity that we have sought to fulfill.

April 2021, the United States House of Representatives passed the SAFE Banking Act of 2021 (the “SAFE Act”).

would prohibit federal regulators from fining and penalizing financial institutions and their management/executive team who service legitimate

businesses including those in the cannabis industry (i.e.

those legal operating in states that have approved cannabis for medicinal and/or

The SAFE Act has not been brought to or passed by the Senate and therefore is not law.

Even with the passage of the SAFE

Act, we do not believe the above barriers to entry would be significantly reduced.

We feel due to the high cash nature of the business,

which we believe will persist in the near and mid term, and the illicit history of cannabis, many potential competitors will remain hesitant

to serve the industry, resulting in an outsized opportunity for the Company.

inception (including its predecessor, Eagle Legacy Services, LLC, a subsidiary of PCCU), the Company has onboarded over $12 billion in

cannabis related funds into the financial system with what we believe to be the highest level of monitoring and validation.

In conjunction

with its financial institution clients, the Company has successfully completed 16 state and federal exams without interruption resulting

in reliable financial services.

The Company’s onboarded deposits currently consist of nearly 600 accounts that were onboarded and

validated in a methodical manner to ensure continuity of service while under significant regulator scrutiny.

The Company’s services

started with only 10 test CRBs resulting in current onboarded accounts representing approximately 60 times growth since the Company began

The Company has successfully grown its onboarded deposits at a rapid pace, with a compound annual growth rate (“CAGR”)

of 69% from 2015 to 2021.

Onboarded deposits processed in 2021 were approximately $3.6 billion.

Company’s onboarding process for CRBs desiring banking services through PCCU or another financial institution is a multi-step process

that is designed to fulfill the financial institution’s “know your customer” requirements and the diligence expectations

set forth in the 2014 FinCEN Guidance related to providing services to CRBs, particularly developing an understanding of the normal and

expected activity for the business.

The account opening process begins with an application and supporting documentation provided by the CRB, which are uploaded and logged

so that, following a quality control review, open items and questions are flagged for follow up.

All account-related documentation is

stored in a secure database that allows the Company’s oversight, audit and exam functions to have access to all of the CRB’s

As part of the Company’s diligence process, background checks are performed on all business owners, with the need for additional

background checks of indirect owners or investors determined in the application review stage.

Other diligence includes, among other things, as applicable, confirmation of licensure, on-site visits to review business processes and

inspect business locations, verification of sources of funds, review of business and inventory records, and review of other information

necessary for a full understanding of the prospective customer’s business and historical operations.

The account opening process is completed with the assistance of a financial institution staff member.

substantially all deposits are maintained by PCCU, and all transmissions of funds to or from these deposit

accounts are handled directly by PCCU.

We have expanded, and intend to continue to expand, our relationships with other financial institutions

that similarly hold the CRB deposit accounts and handle transmissions of funds to and from the accounts.

Although we do not hold the

deposit accounts, we believe that account retention is a measure of our ability to efficiently and compliantly onboard, validate and

monitor CRB accounts.

For the year ended December 31, 2022, our account retention rate, representing onboarded accounts active at the

end of the year as compared to onboarded accounts open at January 1, 2022, is 93.0%.

The largest 10 CRB accounts held at PCCU for the

period ended December 31, 2022 represented less than 5% of fee income from onboarded deposits, which is currently our largest source

Building upon the existing foundation, we believe the Company has the ability to continue to grow the financial institution

clients for which it onboards deposits and related fee income at a strong pace.

In addition, we plan to add access to additional financial

services to the Company’s platform, such as merchant processing, custodial relationships, insurance products, broker/dealer services,

payment processing services and investment services, although in each case these services would be provided by a third party holding

necessary licenses.

Company had 4 loans on its balance sheet as of December 31, 2022;

each of these loans is in excess of 10% of the total loan balance.

The Company also indemnified 5 loans as of December 31, 2022;

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

Safe Harbor Does

Company has developed and commercialized a fully compliant financial services platform for financial institutions providing banking services

to CRBs to access and maintain reliable financial services as long as both the financial institution client and the CRB meet regulatory

requirements.

Our platform has been streamlined and finetuned for the past 7 years which enables the Company’s staff to efficiently

guide financial institution clients and the CRBs desiring banking services through the onboarding, validation and monitoring process.

Our automated platform provides for an efficient and effective management tool allowing our employees to provide continuity of service

while enabling compliance staff to monitor BSA activities.

the Company’s platform, our financial institution clients have the ability to provide CRBs with access to traditional financial

services including wires, debit, ACH, remote deposit capture, business checking and savings accounts, courier and vaulting services,

cash management accounts and commercial lending.

We believe our services have been implemented consistent with applicable law and regulations,

ensuring our financial institution clients will be able to provide CRBs with reliable access to these services.

We feel our history of

developing processes that satisfy regulatory standards has resulted in a solid reputation with related authorities and solidifies our

ability to continue to grow existing services and reduces barriers in expanding into new service offerings.

Company maintains relationships with PCCU, and other financial institutions in which the CRB funds are deposited

and monetary transactions are performed.

The Company’s agreements with the financial institution allow the Company’s platform

to interface with the financial institution’s core banking systems and extract data necessary to monitor the deposit accounts onboarded

by the Company’s transactions, such as funds transmissions to or from the accounts, occur through PCCU’s and other financial

institution client’s infrastructure.

a CRB or ancillary service provider approaches PCCU or other financial institution for which the Company provides its onboarding services,

an initial onboarding fee is assessed based on the type and complexity of the business.

Onboarding is an important part of the KYC requirements

set forth in federal guidance.

The onboarding process can require a great deal of time depending on the business complexity and the fee

we assess is based upon the complexity and required time to complete the process.

Additionally, the Company assesses monthly deposit

and activity fees, which have historically been the majority of our revenue.

These fees are also based on business type and size.

and validating deposit activity is paramount to the success of the Company’s platform.

We believe our compliance-first focus reassures

regulators and law enforcement that the Company continues to focus on the safety and soundness of the financial system.

income is also generated when PCCU or other financial institution clients invest CRB deposits.

Under the Account Servicing Agreement

with PCCU, PCCU retains 25% of this related investment income.

Through its relationship with PCCU, depository amounts invested are typically

restricted to low-risk assets with high liquidity and low returns.

Amounts invested are regulatorily restricted depending on the regulating

authorities of the financial institutions with whom we contract.

level of CRB deposits onboarded by the Company and held at PCCU allows for robust lending capacity.

During 2020, the Company implemented

a commercial lending program, which will be a strong pillar for future revenue and profit growth.

The focus will primarily include senior

secured lending with smaller loans considered for unsecured lending.

Collateral types would include real estate, equipment, and other

business assets.

The commercial lending program is built on:

stringent collateral package requirements with ample loan to value coverage;

strong underwriting of collateral and creditworthiness of borrower;

a deep knowledge and understanding of the industry, borrowers’ operations and the cannabis industry business cycle.

lending is primarily funded through PCCU using the funds from CRB deposit accounts onboarded by the Company.

The Company is currently

seeking relationships with additional financial institutions that would fund the Company’s loans and other sources of working capital

with which the Company could fund the loans directly.

The Company has created a lending program tailored specifically to the unique needs

of CRBs while also achieving strong returns on quality loans.

We believe that fees based on deposits that we onboard and interest on

Federal Reserve Bank will represent the most significant portion of our revenue by 2023.

While third parties are presently used to provide

loan underwriting and servicing, the Company plans on building out a full-service internal lending function to improve the efficiency

of our lending process and to increase future profitability.

feel we have taken a creative and methodical approach in building the Company’s platform, which has allowed us to nationally scale

our business.

The platform’s policies, training, monitoring and other processes are well established with talented and expert level

We also plan to further expand the officer level suite with talent that we believe will further our success.

We anticipate

this combination will provide a competitive advantage for us as we focus on continued growth.

Company provides a variety of onboarding, compliance, and monitoring services to financial institutions and other financial services

providers to the large and quickly expanding U.S.

cannabis industry.

The cannabis industry is one of the fastest emerging consumer end

markets in the U.S.

According to the 2021 Annual Marijuana Business Factbook, the industry is expected to grow from a $20 billion market

in 2020 to $46 billion by 2025, representing a 14% and 20% CAGR in medicinal and adult use respectively.

As of November 2022, 38 states

plus the District of Columbia have legalized medical cannabis, and 18 states plus the District of Columbia have legalized adult-use cannabis.

Additional states that have recently enacted efforts to legalize, such as New York and New Jersey, are expected to contribute significantly

to the 2025 market size, which is when they are expected to be fully operational and supported by proper infrastructure.

Company’s management is well positioned to assist growing markets;

having created a reliable reputation and network over the past

The team is often called upon to work with state and federal officials, regulators, law enforcement and financial service

providers to share experience and knowledge on navigating access to financial services.

We believe this expertise will allow us to enter

new markets with greater ease.

momentum with pending legislative and regulatory changes is expected to drive expansion of the total addressable market as more states

continue to legalize cannabis for adult-use and medical use.

According to a 2022 report from New Frontier Data, an expected 52 million

adults will consume cannabis at least once in 2022 across both legal and unregulated markets.

That number is projected to grow by

roughly 4% per year over the next eight years, reaching an estimated 71 million U.S.

consumers by 2030.

89 million Americans (26% of the U.S.

population) live in states where possession and use of cannabis remain illegal.

Currently, approximately

adults say marijuana should be legal for medical use only or medical and adult-use.

This would greatly increase potential

end users and we believe reduce stigma around the use of cannabis and cannabis related products.

Company’s strategy is to be a first-mover in future new legal markets through its platform offering access to financial services,

which already allows financial institutions to offer their services to CRBs in multiple states.

believe there is currently a very small subset of the financial services industry willing to provide a full suite of financial services

to CRBs and these providers are extremely fragmented.

The Company has been a front runner in assisting financial institutions that desire

to provide reliable financial services to the industry and is well known amongst the leaders in the cannabis financial services arena.

Going forward, we feel this positions the Company well to further optimize market position and become the leading provider of access

to financial services focused on the cannabis industry.

remains a controlled substance under the CSA.

The conflict between federal and state laws allows for prosecution at the federal level,

assets remain subject to seizure, and there are potential punitive actions by third parties (including regulated) against financial institutions

and financial services providers for entering the business.

The only quasi-protective measure in place is the Rohrabacher-Blumenauer

Amendment to the Appropriations Budget.

However, this amendment is not specifically for financial institutions and is only for the general

purpose of prohibiting the use of federal funds to prosecute CRBs in states that have created a regulatory framework for medical cannabis

The uncertainty of the legal landscape has increased with the previous Attorney General’s January 2018 rescission of the

Cole Memorandum, which was guidance issued in August 2013 from then Deputy Attorney General James M.

Cole to federal prosecutors that

de-prioritized the enforcement of federal marijuana prohibitions.

Although, in our opinion, the authority to prosecute cannabis related

violations appears to remain vested in each state’s Attorney General, we believe that the 2014 FinCEN Guidance provide an important

framework for compliance to parties providing services to CRBs.

We also believe that the successful completion of 16 regulatory examinations

of our financial institution clients for which we provide onboarding services demonstrates that it is possible to structure onboarding,

validation and monitoring services in a compliant manner.

pending at the federal level such as the SAFE Banking Act described above will provide limited protection to financial institutions banking

the industry and other financial services providers in as much as the companies and their officers will not be prosecuted or fined simply

for servicing the cannabis industry.

However, legislation will not protect financial institutions from breaches of Bank Secrecy Act (“BSA”)

regulations, which may lead to significant penalties, often resulting in substantial fines assessed by FinCEN.

Given inherent risks associated

with the cannabis industry such as the remaining illicit market and illegal past, the need to bank the industry at an elevated level

of compliance will not change if the legislation passes at the federal level unless BSA changes, which is unlikely.

nature of the cannabis business is such that businesses utilize sophisticated business structures for asset protection and to create

ways to maximize tax efficiencies.

This makes for very complex business structures with some companies having twenty plus related entities

that financial institutions must monitor for adherence to anti-money laundering (“AML”)/BSA regulations.

This understanding,

diligence and underwriting is labor-intensive work requiring significant hands-on resources.

to the divergence between cannabis-related state and federal law, we believe venturing into providing access to banking and financial

services for CRBs remains “cutting edge.” We feel that the scrutiny and pressure under which financial institutions and financial

services providers must operate to maintain compliant while servicing CRBs, coupled with the pending status of further federal legislation,

causes most financial institutions and financial services providers to shy away from the industry.

We, however, view this as an opportunity.

While the Company is not regulated as a subsidiary of a regulated financial institution, our agreements with our financial institution

partners and the nature of our services typically require we provide these services in a compliant manner.

This primarily relates to

offering services that are compliant with the 2014 FinCEN Guidance and the BSA.

In addition, given our history of being born from a credit

union, our services historically have been subject to regulatory oversight from the National Credit Union Administration (“NCUA”).

As we are no longer a credit union service organization post-Business Combination, this is no longer the case.

The Company will nevertheless

continue to be subject to a range of laws, rules, and regulations, including those applicable to the Company as a wholly owned subsidiary

of an SEC registrant.

In order to ensure we provide our services in an appropriate manner, we maintain policies and procedures we believe

to be aligned with the requirements of 2014 FinCEN Guidance and the BSA.

These policies and procedures are continuously assessed by management

and formally reviewed at least annually.

All employees are provided ongoing and annual training to ensure our services are delivered

in an appropriate manner.

An external audit firm is engaged to audit our compliance with certain policies on a quarterly and annual basis.

Regulations and Ramifications

penalties for non-compliance are significant.

For example, during March 2022, FinCEN issued a consent order issuing a $140 million civil

penalty to a financial institution for failing to address previously identified AML program issues and other BSA compliance issues.

fine was unrelated to CRBs, which we believe provides a higher risk industry.

We believe that most institutions cannot withstand such

a penalty and will not take that risk.

BSA talent is difficult to find and delegating such legal risk to BSA staff takes a great deal

of trust, training, and additional resources to monitor activities and protect the financial institution.

We believe our history and

experience of providing compliant financial services and in conjunction with our financial institution clients successfully completing

16 regulatory examinations reduces our risk in this area and provides us with a competitive advantage.

We are committed to providing

services in a compliance first fashion.

Certification

Program for Financial Institutions

Standardization

between financial service providers and various regulating agencies (FDIC/OCC/NCUA) has created a difficult situation for law enforcement

when determining which entities are protecting the financial system.

The Company has worked with state attorneys general to build comfort

and understanding on what constitutes a safe and sound program, ensuring no illicit funds enter the financial system.

An example of this

collaboration led to the development of a New Mexico cannabis banking certification program upon which financial institutions can obtain

certification and law enforcement can rely on these certifications to make better assumptions with regards to those financial service

providers truly assisting with their priorities.

The Company’s test certifications for Hemp/Cannabis/Testing and financial institutions

have been successfully completed and presented to law enforcement for their review.

At this point, they have supported the efforts and

the program will move forward to include annual certification requirements with minimum standards.

The Company will continue to work

with law enforcement to complete a certification program for cannabis banking financial institutions;

setting a standard upon which law

enforcement can rely.

Focused Fintech Competition

regulators have created a real or perceived barrier to entry for most financial institutions.

This has created the utilization of fintech

models to provided financial services to the cannabis industry.

Unregulated fintechs, i.e., those not formally regulated by federal agencies,

are not subject to the same restrictions as chartered financial institutions (i.e., concentration limits on the percentage of balance

sheet composed of higher risk cannabis deposits).

Fintechs may enjoy this less restricted environment for a period of time but we anticipate

these companies will become subject to increasing regulatory requirements.

We believe competition at the fintech level remains limited,

as the emerging cannabis market requires the creation of sustainable fintech models that understand the regulatory environment, combining

technology and regulation.

While not fully regulated, fintech models are responsible for moving funds through the financial system via

banking partners and must therefore be aware of regulations surrounding the movement of funds and implement BSA programs themselves.

the Company Addresses These Challenges

Company’s solutions are designed to address the key challenges faced by financial institutions desiring to provide banking services

Today’s industry participants lack sufficient and reliable access to traditional financial services.

We believe our solutions

offer valuable services making communities safer, drive growth in local economies and foster long term partnerships.

Company serves financial institutions desiring to provide banking services to the regulated cannabis industry and maintains a high standard

of accountability, transparency, monitoring, reporting and risk mitigation measures while meeting BSA obligations in-line with the 2014

FinCEN Guidance relating to CRBs.

BSA obligations vary depending on the growth and complexity of the CRB banking customers’ business,

resulting in financial service providers constantly adjusting activities to meet expectations.

The Company’s program has actual

“hands-on” experience in the market since January 2015.

We have increased BSA activities every year to manage to the emerging

market risks and growth of the portfolio.

This experience has allowed for the formulation of best practices and standardized processes

that provide for a better understanding of these risks in order to mitigate them.

We believe that the Company’s brand has been

optimized on a national level to include sound and recognized exposure with financial institutions, legislators, governing officials,

attorneys’ generals, regulators and the overall cannabis industry.

have developed proprietary software built specifically for the cannabis industry from input gathered from our experience handling the

onboarding of CRB accounts for PCCU.

Our software enables our financial institution clients to manage the customer onboarding process,

including applications and intake, “know your customer” diligence, and ongoing compliance monitoring, coupled with financial

services relationship monitoring.

Our software is continuously improved based on our experience and is updated to include new options

and functions associated with the emerging cannabis market.

Our software is able to run on different core banking systems, so as a result

we are able to offer this software to financial institution clients who desire to use our software for diligence and monitoring purposes

for their own CRB customers without our assistance.

Ultimately, we believe that our software can be updated to accommodate new industries

and to enhance existing processes for increased efficiencies.

institutions continue to shy away from banking the cannabis market due to cannabis remaining a Schedule 1 drug, thus illegal under federal

Because there is no “safe harbor” for financial institutions seeking to provide banking services to CRBs, it provides

us the opportunity to capitalize on our knowledge and position as a market leader.

We believe most financial institutions will not enter

the market until federal legalization occurs — especially the large, multi-state financial institutions.

Even then, the industry

will still be considered a higher-risk banking sector needing strong experience and vetted programs.

The 2014 FinCEN Guidance issued

in February 2014 detailed the regulatory agency’s compliance and monitoring expectations for financial institutions servicing the

cannabis industry.

In our opinion, this created a window of opportunity allowing for the ability to serve the cannabis industry.

this window of opportunity, along with our proven track record, reduces the risk of any negative consequences as a result of servicing

the cannabis industry.

is our opinion that many competitors will attempt to enter the financial services market without understanding the complexity or regulatory

demands and we believe many will quit once they assess required resources to maintain a compliant program.

We have seen several financial

institutions divest their balance sheet of cannabis risk in the last year due to regulatory pressures and demands on BSA dedicated resources.

or the lack of banking provided to the cannabis industry, remains a national issue due to the conflict in federal and state laws, reputational

risk, and AML/BSA regulatory requirements.

CRBs have been unbanked or even banked secretly.

Many financial institutions start serving

the industry only to quickly close down their cannabis focused operations due to i) lack of industry knowledge, ii) regulatory pressure,

iii) cash management volume, and iv) the labor-intensive monitoring and reporting requirements.

fintech operations typically have difficulty obtaining banking relationships in which to conduct business as the financial institution

still remains liable for BSA obligations and yet the fintech retains control of all safety and soundness processes - a high and potentially

expensive financial institution risk without direct control.

The Company, under the umbrella of our parent financial institution, PCCU,

methodically built its platform in a regulated manner under the supervision of financial regulators.

This allows the Company to continue

to operate with attention and activities based upon required regulations and provide financial institution partners with whom we work

confidence in our ability to manage the higher-risk cannabis industry.

Going forward, the Company will continue to operate in a manner

to ensure a smooth transition once regulations are standardized for businesses providing financial services under a fintech model.

Cybersecurity

federal banking regulators regularly issue new guidance and standards, and update existing guidance and standards, regarding cybersecurity,

which are intended to enhance cyber risk management by financial institutions.

Financial institutions are expected to comply with such

guidance and standards and to accordingly develop appropriate security controls and risk management processes.

In 2018, the SEC also

published interpretive guidance to assist public companies in preparing disclosures about cybersecurity risks and incidents.

guidelines, and any other regulatory guidance, are in addition to notification and disclosure requirements under state and federal banking

law and regulations.

If we fail to observe this regulatory guidance or standards, we could be subject to various regulatory sanctions,

including financial penalties.

November 2021, the federal banking agencies adopted a Final Rule, with compliance required by May 1, 2022, that requires banking organizations

to notify their primary banking regulator within 36 hours of determining that a “computer-security incident” has materially

disrupted or degraded, or is reasonably likely to materially disrupt or degrade, the banking organization’s ability to carry out

banking operations or deliver banking products and services to a material portion of its customer base, its businesses and operations

that would result in material loss, or its operations that would impact the stability of the United States.

regulators have also been increasingly active in implementing privacy and cybersecurity standards and regulations.

Recently, several

states have adopted regulations requiring certain financial institutions to implement cybersecurity programs and providing detailed requirements

with respect to these programs, including data encryption requirements.

Many states have also recently implemented or modified their

data breach notification, information security and data privacy requirements.

We expect this trend of state-level activity in those areas

to continue and are continually monitoring developments where our customers are located.

and exposures related to cybersecurity attacks, including litigation and enforcement risks, are expected to be elevated for the foreseeable

future due to the rapidly evolving nature and sophistication of these threats, as well as due to the expanding use of Internet banking,

mobile banking and other technology-based products and services by us and the customers of our financial institution clients.

Risk Factors for a further discussion of risks related to cybersecurity.

Legislative Developments

may enact legislation from time to time that affects the regulation of the financial services industry, and state legislatures may enact

legislation from time to time affecting the regulation of financial institutions chartered by or operating in their states.

state regulatory agencies also periodically propose and adopt changes to their regulations or change the manner in which existing regulations

The substance or impact of pending or future legislation or regulation, or the application thereof, cannot be predicted,

although any change could impact the regulatory structure under which we or our competitors operate and may significantly increase costs,

impede the efficiency of internal business processes, require an increase in regulatory capital, require modifications to our business

strategy, and limit our ability to pursue business opportunities in an efficient manner.

It could also affect our competitors differently

than us, including in a manner that would make them more competitive.

A change in statutes, regulations or regulatory policies applicable

to us or any of our affiliates could have a material, adverse effect on our business, financial condition and results of operations.

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

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

Holdings, Inc.

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

(“NLIT”), acquired all of

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

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

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

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

Subsequent to the completion of the Business Combination, NLIT changed its name

to “SHF Holdings, Inc.” In this Annual Report on Form 10-K (the “Form 10-K”), we use the terms “we,”

“us,” “our,” “Safe Harbor” and the “Company” to refer to the business and operations

of SHF Holdings, Inc.

following the closing of the Business Combination.

(Refer to Note 3 to the Consolidated Financial Statements included

elsewhere in this Form 10-K for more information regarding the Business Combination.)

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

both certain branches and Safe Harbor Services, a wholly-owned subsidiary of PCCU, to SHF Holding, Co., LLC.

SHF Holding, Co., LLC then

contributed the same assets and related operations to SHF, with PCCU’s investment in SHF maintained at the SHF Holding, Co., LLC

level (collectively the “Pre-Public Company”).

The reorganization effectively occurred July 1, 2021.

In conjunction with

the reorganization, all of the employees engaged in the operations and certain PCCU employees were terminated from PCCU and hired as

SHF employees.

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

the entirety of the Carved-Out Operations were owned by SHF and the Pre-Public Company was dissolved.

In addition, effective July 1,

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

between SHF and PCCU and which were subsequently amended and restated and are discussed in Note 10 to the Consolidated Financial Statements

included elsewhere in this Form 10-K.

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

interests of SHF upon exchange for an aggregate of $185,000,000, consisting of (i) 11,386,139 shares of the Company’s Class A Common

Stock with an aggregate value equal to $115,000,000 and (ii) $70,000,000 in cash, $56,949,801 of which will be paid on a deferred basis.

At the closing, 1,831,683 shares of the Class A Common Stock (the “Escrow Shares”) were deposited with an escrow agent to

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

December 31, 2023, the 12-month period has expired, and the Company is in discussion with the escrow agent for the release of the Escrow

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

in this Form 10-K.

As a result of the Business Combination, PCCU is the Company’s largest stockholder, owning 39.62% of the Company’s

outstanding Class A Common Stock as of December 31, 2023.

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

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

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

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

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

Capital USA Inc.

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

Under the Forbearance Agreement, PCCU agreed to defer

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

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

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

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

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

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

(the “Abaca Stockholders’ Representative”).

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

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

as consideration thereunder.

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

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

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

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

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

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

exchange for $30,000,000, paid in a combination of cash and shares of the Company as follows:

(a) cash consideration in an amount equal

to (i) $9,000,000 ($3,000,000 was payable at the closing of the Mergers (the “Merger Closing”), with an additional $3,000,000

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

and (b) 2,100,000 shares of Class A Common Stock at the Merger Closing and $12,600,000 (minus an outstanding note balance of $500,000,

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

the “Share Consideration”).

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

and covenants in the Abaca Merger Agreement.

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

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

at the rate of 4.25%;

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

interest in substantially all of the assets of the Company;

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

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

The Company and PCCU also entered into the Commercial Alliance

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

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

the Amended and Restated Account Servicing Agreement.

October 26, 2023, we entered into:

(1) a Second Amendment to Agreement and Plan of Merger (the “Second Amendment”) with SHF

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

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

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

and Dan Roda, solely in such individual’s capacity as the representative of the Company Securityholders (the “Abaca Stockholders’

Representative”), and (2) a Warrant Agreement with Continental Stock Transfer & Trust Company (solely as warrant agent to the

Warrant Agreement).

First Amendment modified, among other things, the First Anniversary Parent Shares to be issued as consideration so that the First Anniversary

Parent Shares equal $12,600,000 minus the note balance of $500,000, plus accrued interest, divided by the 10-day VWAP of the Parent Common

Stock for the 10 days immediately preceding the first anniversary of the Closing Date.

The Second Amendment modified, among other things,

the First Anniversary Parent Shares to be issued as consideration so that the First Anniversary Parent Shares equal $12,600,000 less

the Closing Note Balance and Working Capital Adjustment, collectively in the amount of $928,356.16, divided by $2.00 per share.

result, 5,835,822 shares of Parent Common Stock will be issued as the First Anniversary Parent Shares.

The Second Amendment also added

a Third Anniversary Consideration Payment of $1,500,000 which will be payable in cash, stock, or a combination of both at Company’s

If the Company decides to pay with shares, their value will be determined by the 10-day NASDAQ average before the anniversary,

with prices ranging between $2.00 and $4.36.

Shares given purely for payment won’t be restricted by the Lock-Up Agreement.

if the Lock-Up Agreement is in effect, the payment will be split into $750,000 cash and an equivalent $750,000 in shares.

duration for any shares will adhere to the legal minimum.

In the event of a company stock consolidation or similar activity, the number

of shares to be issued for the payment will be adjusted to reflect the decreased total of outstanding shares.

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 closing.

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 three

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 recommend one candidate for service on the Company’s

Board of Directors in the Company’s 2024 annual proxy statement.

addition, pursuant to the Warrant Agreement the Company agreed to deliver the Company Securityholders warrants to purchase up to an aggregate

of 5,000,000 shares of Parent Common Stock at an initial exercise price of $2.00 per share.

February 27, 2024, The Company and the Abaca Stockholders’ Representative entered into First Amendment to Second Amendment to Agreement

and Plan of Merger Warrant Agreement and Lock-up Agreement, revising the Second Amendment to their Merger Agreement.

This revision modifies

the Common Stock’s registration requirements and timelines, updates the warrant agreement by changing warrant durations and eliminating

the redemption clause, and adjusts the Lock-Up Agreement to shorten the lock-up period to match the amendment’s effective date.

These modifications were mutually agreed upon to ensure both compliance and clarity in the ongoing agreements.

Board has unanimously determined that the Second Amendment, First Amendment to Second Amendment and Warrant Agreement are advisable and

in the best interests of the Company’s stockholders, has approved the Second Amendment and Warrant Agreement on the terms and subject

to the conditions set forth therein.

The foregoing description of the Second Amendment, First Amendment to Second Amendment and the Warrant

Agreement, along with the supporting documents, and the transactions contemplated thereby does not purport to be complete and is subject

to, and qualified in its entirety by, the full text of the Second Amendment, First Amendment to Second Amendment and the Warrant Agreement,

copies of which are attached hereto as Exhibits 2.1 and 2.2 and are incorporated herein by reference

mailing address is 1526 Cole Blvd., Suite 250, Golden, Colorado 80401.

Our telephone number is (303) 431-3435.

maintain a website at the address https://shfinancial.org/.

On our website, you can access, free of charge, our reports on Forms 10-K,

10-Q and 8-K, as well as proxy statements on Schedule 14A and amendments to the materials.

Materials are available online as soon as

practicable after we file them with the SEC.

Additionally, the SEC maintains a website at the address www.sec.gov that contains the information

we file or furnish electronically with the SEC.

The information contained on our website is not incorporated by reference in, or considered

part of, this Form 10-K.

Supplementary

Information about our Executive Officers

Seefried currently serves as the Chief Executive Officer of the Company, a position she has held since September 2022.

to joining the Company, Ms.

Seefried served as the Chief Executive Officer of PCCU from 2001 until June 2021 and as the Chief Executive

Officer of Eagle Legacy Services, LLC from January 2020 until March 2021.

Seefried previously served as a board member of the Colorado

Division of Financial Services from 2019 until 2021, and as a board member of the Credit Union Association from 2007 until 2015.

Seefried received her Bachelor of Science in Business Management from the University of Maryland and her Master of Business Administration

from Regis University, Colorado.

Emmi currently serves as Chief Legal Officer for the Company, a position he has held since September 2022.

Before this role, Mr.

Emmi was Managing Partner of Hunsaker

| Emmi, P.C., a position he has held since December 2004.

Emmi was a partner of Hoban Law Group, P.C.

from September 2019 until July

2021 when it was merged with Clark Hill, PLC.

Following the merger, Mr.

Emmi serves in an of counsel capacity to Clark Hill, PLC.

Emmi previously served as an officer and director of Test Kitchen, Inc., a product manufacturer, from December 2020 until April 2021;

and as a director of Pure Harvest Corporate Group, Inc.

from December 2020 until December 2021.

Emmi is also the former Chair of

the National Cannabis Industry Association Banking and Financial Services Committee 2020 (Vice Chair 2019).

Emmi received his undergraduate

degree from East Stroudsburg University of Pennsylvania and his Juris Doctor from the University of Denver Sturm College of Law.

to practicing law, Mr.

Emmi was a licensed Series 7 and 63 securities dealer and served in the United States Air Force from 1999 until

Dennedy currently serves as Chief Financial Officer for the Company, a position he has held since October 2022.

Before this role, Mr.

Dennedy most recently

served in various positions for urban-gro, Inc.

a Nasdaq-listed engineering design and services company focused on the commercial horticulture

market, including as President and Chief Operating Officer from February 2021 to August 2022, and a board member from August 2018 to

Prior to that, from April 2018 to August 2019, he served as Chief Financial Officer of Interurban Capital Group, a privately

held provider of site development, lease management, branding, licensing and other consulting services, acquired in March 2020 by Harvest

Health & Recreation Inc.;

from January 2017 to April 2018, he operated as an entrepreneur and private investor;

from May 2011 to

January 2017 served as President, Chief Executive Officer, and a board member of Nasdaq-listed hospitality software company Agilysys

and from April 2008 to May 2011 served as Chief Investment Officer of Arcadia Capital Advisors, a privately held capital management

Dennedy earned his B.S.

from the United States Air Force Academy, an MBA from The Ohio State University, and an M.A.

Economics from the University of Colorado, Boulder, Colorado.

Beuerlein currently serves as the Chief Strategic Business Development Officer of the Company, a position he has held

since September 2022.

Prior to his employment with the Company, from February 2015 to April 2022, he served as the Chief Revenue Officer

and Chief Business Development Officer for Hypur Ventures, a venture capital fund dedicated strategic investments in businesses that

operate in the legal cannabis industry.

Beuerlein was the former Chairman of the National Cannabis Industry Association Banking and

Financial Services Committee (2020).

Additionally, he has been appointed to be on both the Marijuana Business Daily’s Advisory

Board and ATACH Cannabis Beverage Council.

He is also a member of the Forbes Business Development Council.

Formerly, Mr.

Beuerlein founded

and managed a large beverage company and was a professional athlete in the New York Mets organization.

Summers has served as the chairman of 3 Billion Pairs Genetic Corporation, an artificial intelligence company, since

January 2022.

Summers has also been serving as the chairman of EXMceuticals Inc., a Canadian-listed medical cannabis company since

Summers has also served as a director of Pathfinder Minerals, a mineral exploration company, since March 2021 and also

serves as a member of the audit committee thereof.

He also serves on the advisory board for Mocha Holdings LLC, a data privacy company.

From May 1996 until May 2011, Mr.

Summers served in various roles at Goldman Sachs, most recently serving as a Managing Director.

Summers served as the Founding Partner and the Head of Business Development for Everett Capital Advisors, a $700.0 million London-based

investment fund from October 2015 to October 2019, and served as the Founding Principal and Head of Business Development for Myriad Asset

Management, a $5.0 billion Hong Kong-based multi-strategy asset management firm, from September 2011 to December 2014.

Summers holds

a Master in Modern History (1st class) from Oxford University.

We believe Mr.

Summers is well-qualified to serve as a member of our board

of directors due to his experience in investment banking and in strategically growing businesses, and his contacts and relationships.

Niehaus currently serves as the Managing Partner of Interactive Global Solutions, a consulting company, a position

he has held since January 2011.

Niehaus also currently serves as a manager of SHF, a position he has held since February 2022.

2003 until 2011, Mr.

Niehaus serves as a Global SVP for First Data Corporation and the Western Union Company.

Niehaus received his

Bachelor of Science in Journalism and Communications from the University of Iowa.

Meyers currently serves as the Chief Financial Officer of PCCU, a position she has held since October 2021.

previously served as the Chief Financial Officer of Clean Energy Credit Union from July 2020 until October 2021.

Prior to joining Clean

Energy Credit Union, Ms.

Meyers served as a Finance Executive and Strategist for DaLand LLC, a credit union service organization, from

May 2019 until May 2020.

Meyers also previously served as the Chief Financial Officer of Westerra Credit Union from April 2009 until

February 2019.

Meyers received her Bachelor of Science in Accounting and her Master of Accountancy from the University of Denver.

Carleton currently serves as the Chief Executive Officer of the Canadian Securities Exchange, a position he has held

since July 2011.

Carleton also currently serves as a director of Tetra Trust, a licensed trust company, and of Blue Oceans ATS, a

registered alternative trading system, positions he has held since June 2021 and April 2021, respectively.

Carleton also serves

as a board member of the Empire Club of Canada and of the Private Capital Markets Association of Canada, positions he has held since

2018 and 2017, respectively.

Carleton received his Bachelor of Arts in History from the University of Ottawa and his LLB from the

University of Toronto.

Darwin previously served as the Co-Chief Executive Officer of Northern Lights Acquisition Corp.

co-founder and Managing Partner of Luminous Capital Inc., where he identifies engagements, guides debt and equity investment

strategy, and manages operations of private and public portfolio companies.

Previously, Mr.

Darwin was co-founder and President of

(ONE Cannabis), a United States-based cannabis dispensary franchisor.

While at OCG, Inc., Mr.

Darwin grew the franchise

business from inception to operations across multiple states and negotiated a sale to Item 9 Labs Corp.

INLB), a publicly

traded cannabis company.

Darwin has over eight years of vertically integrated cannabis operational and venture capital

experience, with experience managing large scale cultivation, vertically integrated operations, and multi-national brand strategies.

Prior to the cannabis industry, Mr.

Darwin held various roles in private equity and corporate finance and has a decade of

professional finance and transaction experience.

Darwin received his BBA in Finance from Southern Methodist University Cox

School of Business.

OF RISK FACTORS

business is subject to a number of risks that could cause actual results to differ materially from those indicated by forward- looking

statements made in this Form 10-K or presented elsewhere from time to time.

These risks are discussed more fully under “Item 1A.

Risk Factors” and include, but are not limited to the following:

Related to Our Business and Operations

● Substantially

all of the Company’s CRB customers’ deposits are currently held at PCCU, which

means that our growth will be restricted until we can enter into agreements with additional

financial institutions.

Company has only recently begun its loan program, which may make it more difficult for the

Company to compete with other lenders, brokers and servicers.

Company’s loan program is currently substantially dependent on PCCU, currently the

largest funding source for the Company’s loans, which may limit the types, terms and

amounts of loans that we may offer.

Company may face competition from traditional financial institutions and other lenders and

service providers for its lending and other services, which may adversely affect the Company’s

ability to achieve our business goals and its results of operations.

soundness of our financial institution clients could adversely affect us.

Company intends to focus its lending to CRBs on commercial loans, which could increase the

risk in the Company’s loan portfolio, resulting in higher provisions for loan losses

and adversely affecting the Company’s results of operations.

to CRBs secured by properties and assets that are, and will be, subject to extensive regulations,

such that if such collateral was foreclosed upon those regulations may result in significant

costs and materially and adversely affect the Company’s business, financial condition,

liquidity and results of operations.

Company is obligated to indemnify PCCU for all losses resulting from defaults of the CRB

loans made by PCCU to the Company’s customers.

the Company’s allowance for loan losses is not sufficient to cover actual loan losses

for loans held in the Company’s portfolio or for which it was otherwise responsible,

the Company’s results of operations and financial condition will be negatively affected.

assets of CRB borrowers may not be used as collateral or transferred due to applicable state

laws and regulations governing the cannabis industry, and such restrictions could negatively

impact our profitability.

● Foreclosure

of security interests on loans to CRBs that are in default could result in losses.

rate volatility could significantly reduce our profitability, business, financial condition,

results of operations and liquidity.

Company may become subject to regulation in additional states as it expands its operations.

Company is dependent on PCCU for certain administrative services.

or threatened public health crises, epidemics, or outbreaks, such as the outbreak of COVID-19,

may have a material adverse effect on the Company’s business, financial condition,

and results of operations.

information systems interruption or breach in security of the Company’s systems could

adversely affect us.

Company may suffer uninsured losses or suffer material losses in excess of insurance limits.

adverse outcome in litigation to which the Company is or becomes a party could materially

and adversely affect us.

Company identified material weaknesses in its internal control over financial reporting for

the year ended December 31, 2022.

Such material weaknesses could adversely affect the Company’s

ability to report its results of operations and financial condition accurately and in a timely

Related to the Cannabis Industry, including:

Company provides services to financial institutions that provide banking services to businesses

in or ancillary to the state licensed cannabis industry, which could expose us to additional

liabilities and regulatory compliance cost and adversely impact our business, operations,

financial condition, brand and reputation.

Company, its financial institution clients and their CRB customers are subject to a variety

of laws regarding financial transactions related to cannabis, which could subject their CRB

customers to legal claims or otherwise adversely affect our business.

may have difficulty using bankruptcy courts due to our involvement in the regulated cannabis

conduct of third parties may jeopardize our business and regulatory compliance.

may be subject to constraints on marketing our services, which could adversely impact our

results of operations and our growth opportunities.

providers to cannabis businesses may be subject to unfavorable U.S.

tax treatment.

businesses may be subject to civil asset forfeiture.

we provide services to companies that provide services to CRBs, we may have a difficult time

obtaining the various insurances that are desired to operate our business, which may expose

us to additional risk and financial liability.

may be difficulty enforcing certain of our commercial agreements and contracts.

of our directors, officers, employees and investors who are not U.S.

citizens may face constraints

on cross-border travel into the United States.

Related to SHF’s Organization and Structure, including :

● Concentration

of ownership among our existing executive officers, directors and their respective affiliates

may prevent new investors from influencing significant corporate decisions.

Company depends on key management personnel and other experienced employees.

by the Company’s directors, officers or employees to comply with applicable policies,

regulations and rules could materially and adversely affect us.

in accounting rules, assumptions or judgments could materially and adversely affect the Company.

● The accounting for the forward purchase derivative could cause material impacts to our balance sheet and statement of operations.

the Company fails to implement and maintain an effective system of internal controls, it

may not be able to accurately determine its financial results or prevent fraud.

investors could lose confidence in the Company’s financial results, which could materially

and adversely affect the Company.

Related to an Investment in Our Securities

failure to continue to meet Nasdaq’s continued listing standards could have an adverse

impact on our stock price.

of our Class A Common Stock, or the perception of such sales, by us or the holders of such

shares in the public market or otherwise could cause the market price for our Class A Common

Stock to decline.

may not receive any proceeds from the exercise of Warrants, and if we do we may be unable

to invest the portion of the net proceeds from this offering on acceptable terms.

is no guarantee that the Warrants will be in the money, and they may expire worthless.

market for our securities has been volatile and may continue to be volatile, which would

adversely affect the liquidity and price of our securities.

the Business Combination’s benefits do not meet the expectations of investors, stockholders

or financial analysts, the market price of our securities may decline.

Company is a “controlled company” within the meaning of the applicable rules

of Nasdaq and, as a result, may qualify for exemptions from certain corporate governance

requirements.

If the Company relies on these exemptions, its stockholders will not have the

same protections afforded to stockholders of companies that are subject to such requirements.

may be required to take write-downs or write-offs, restructuring and impairment or other

charges that could have a significant negative effect on our financial condition, results

of operations and our stock price, which could cause you to lose some or all of your investment.

significant portion of our total outstanding shares are restricted from immediate resale

but may be sold into the market in the near future.

This could cause the market price of

our Class A Common Stock or public warrants to drop significantly, even if the Company’s

business is doing well.

terms of our PIPE financing completed in conjunction with the Business Combination has had,

and could continue to have an adverse impact of the trading prices of the Class A Common

grant of registration rights to PCCU and the seller in connection with the Business Combination

pursuant to the Unit Purchase Agreement, and to the PIPE Investors in connection with the

Amended and Restated Securities Purchase Agreement, may adversely affect the market price

of our Class A Common Stock.

Company may issue additional shares of common or preferred stock under the Equity Incentive

Plan or otherwise, any one of which would dilute the interest of the Company’s stockholders

and likely present other risks.

operating results may fluctuate significantly and could fall below the expectations of securities

analysts and investors due to seasonality and other factors, some of which are beyond our

control, resulting in a decline in our stock price.

securities or industry analysts do not publish or cease publishing research or reports about

the post-combination company, its business, or its market, or if they change their recommendations

regarding the Class A Common Stock of the post-combination company adversely, then the price

and trading volume of the Class A Common Stock of the post-combination company could decline.

may be unable to obtain additional financing to fund our operations and growth.

in laws, regulations or rules, or a failure to comply with any laws, regulations or rules,

may adversely affect our business, investments and results of operations.

have not registered the shares of Class A Common Stock issuable upon exercise of the warrants

under the Securities Act or any state securities laws at this time, and such registration

may not be in place when an investor desires to exercise warrants, thus precluding such investor

from being able to exercise its warrants except on a cashless basis and potentially causing

such warrants to expire worthless.

are exercisable for Class A Common Stock, and the exercise of such Warrants would increase

the number of shares eligible for resale in the public market and result in dilution to our

stockholders.

● Anti-takeover

provisions contained in our Second Amended and Restated Certificate of Incorporation and

bylaws, as well as provisions of Delaware law, could impair a takeover attempt, which could

limit the price investors might be willing to pay in the future for our common stock.

Second Amended and Restated Certificate of Incorporation provides that the Court of Chancery

of the State of Delaware will be the sole and exclusive forum for certain stockholder litigation

matters, which could limit our stockholder’s ability to obtain a favorable judicial

forum for disputes with us or our directors, officers, employees or stockholders.

JOBS Act permits “emerging growth companies” like us to take advantage of certain

exemptions from various reporting requirements applicable to other public companies that

are not emerging growth companies.

internal controls over financial reporting may not be effective and our independent registered

public accounting firm may not be able to certify as to their effectiveness, which could

have a significant and adverse effect on our business and reputation.

On our website, you can access, free of charge, our Annual Report on Form

10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, our annual proxy statement on Schedule 14A, and amendments to those

materials filed or furnished pursuant to Sections 13(a) and 15(d) of the Exchange Act.

Materials are available online as soon as reasonably

practicable after we electronically file such material with, or furnish it to, the SEC.

In addition, the SEC maintains a website at the

address www.sec.gov that contains the information we file or furnish electronically with the SEC.

The information contained on our website

or on the SEC’s website is not incorporated by reference in, or considered part of, this Annual Report on Form 10-K.

Growth Company Status

are an “emerging growth company,” or “EGC”, as defined in the Jumpstart Our Business Startups Act of 2012 (the

As such, we are eligible to take advantage of certain exemptions from various reporting requirements that are

applicable to other public companies that are not “emerging growth companies,” including, but not limited to, not being required

to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding

executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a non-binding advisory

vote on executive compensation and shareholder approval of any golden parachute payments not previously approved.

addition, Section 107 of the JOBS Act also provides that an EGC can take advantage of the extended transition period provided in Section

7(a)(2)(B) of the Securities Act, for complying with new or revised accounting standards.

In other words, an EGC can delay the adoption

of certain accounting standards until those standards would otherwise apply to private companies.

We intend to take advantage of the

benefits of this extended transition period, for as long as it is available.

We will remain an EGC until the earlier of (1) the last

day of the fiscal year (a) following the fifth anniversary of the date of the first sale of our common equity securities pursuant to

an effective registration statement under the Securities Act and (b) in which we have total annual gross revenue of at least $1.07 billion,

(2) the date on which we are deemed to be a large accelerated filer, which means the market value of our common stock that is held by

non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter, and (3) the date

on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period.

References herein to “emerging

growth company” have the meaning provided in the JOBS Act.

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-K

Item 1. Business