What changed in this filing

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Item 9A. Controls and Procedures

2024-04-01 compared with 2023-04-14 · 1533 added, 1162 removed, 977 unchanged (73% of the section changed)

1 unchanged sentence

of Disclosure Controls and Procedures

Management is

responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act

Rules 13a-15(f) and 15d-15(f).

The Company’s internal control over financial reporting is a process designed to provide

reasonable assurance regarding the reliability of our financial reporting and the preparation of our financial statements in accordance

Under the supervision and with the participation of management, including our Chief Executive Officer and Chief

Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31,

2022, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of

Sponsoring Organizations of the Treadway Commission.

Our management has identified four (4) material weaknesses, as described

Each deficiency was concluded to be a “material weakness”, which is a deficiency, or a combination of deficiencies,

in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or

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

Based on these material weaknesses identified

in the management evaluation of internal controls over financial reporting, management has concluded that our internal control over financial

reporting was not effective as of December 31, 2022.

controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our

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

the SEC’s rules and forms.

Disclosure controls and procedures include, without limitation, controls and procedures designed to

ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is accumulated and communicated

to our management, including our Chief Executive Officer, to allow timely decisions regarding required disclosure.

is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange

Act Rules 13a-15(f) and 15d-15(f).

The Company’s internal control over financial reporting is a process designed to provide reasonable

assurance regarding the reliability of our financial reporting and the preparation of our financial statements in accordance with GAAP.

Under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, we

conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2023, based on criteria

established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway

Our management has identified three (3) material weaknesses, as described below.

Each deficiency was concluded to be a “material

weakness”, which is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there

is a reasonable possibility that a material misstatement of our annual or interim financial statements would not be prevented or detected

on a timely basis.

Based on these material weaknesses identified in the management evaluation of internal controls over financial reporting,

management has concluded that our internal control over financial reporting was not effective as of December 31, 2023.

do not expect that our disclosure controls and procedures will prevent all errors and all instances of fraud.

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Report on Internal Control over Financial Reporting

controls and procedures are designed to ensure that information required to be disclosed by us in our Exchange Act reports is recorded,

processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is

accumulated and communicated to our management, including our principal executive officer and principal financial officer or persons performing

similar functions, as appropriate to allow timely decisions regarding required disclosure.

controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our

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

the SEC’s rules and forms.

Disclosure controls and procedures include, without limitation, controls and procedures designed to

ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is accumulated and communicated

to our management, including our Chief Executive Officer, to allow timely decisions regarding required disclosure.

required by Rules 13a-15 and 15d-15 under the Exchange Act, our Chief Executive Officer and Chief Financial Officer carried out an evaluation

of the effectiveness of the design and operation of our disclosure controls and procedures.

upon their evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, solely due to the following Material Weaknesses,

the Company’s disclosure controls and procedures (as defined in Rules 13a-15 (e) and 15d-15 (e) under the Exchange Act) were not

effective as of December 31, 2022.

Based upon their evaluation, our Chief Executive

Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of December 31, 2023

due to the material weaknesses described below.

In light of these material weaknesses, we performed additional analysis as deemed necessary

to ensure that our consolidated financial statements were prepared in accordance with U.S.

generally accepted accounting principles.

Accordingly, management believes that the financial statements included in this Annual Report on Form 10-K present fairly in all material

respects our financial position, results of operations and cash flows for the periods presented.

material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a

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or detected on a timely basis.

A deferred tax asset was created as a result of the business combination occurring on September 28, 2022.

deferred tax asset was initially calculated prior to consummation of the business combination using projected amounts.

The Company had

failed to update the calculation as of September 30, 2022 using actual amounts from the business combination due to ineffective management

review controls over the income tax provision.

alleviate this material weakness, the Company has implemented a quarterly control to calculate and review the deferred tax asset, evaluate

the necessity for any valuation allowance, and reconcile it to the general ledger.

The Company proceeded to collectively perform these

tasks during the fourth quarter of 2022 by retaining a Top 50 CPA firm in the United States to assist in the preparation of the tax provision

and tax compliance work along with management’s independent review of the quarterly income tax provision and valuation of deferred

As of September 30, 2022, the Company had negative net working capital.

The working capital deficit was largely

driven by the current portion of the long-term payable owed to PCCU.

In accordance with ASC 205-40, in preparing financial statements

for each annual and interim reporting period, management must evaluate whether there are conditions and events that raise substantial

doubt about the Company’s ability to continue as a going concern within one year after the date the financial statements are issued.

Substantial doubt was raised at September 30, 2022 and the Company failed to document a going concern analysis to identify the substantial

doubt, evaluate whether the substantial doubt was alleviated by management’s plans, and disclose the going concern in the September

30, 2022 10-Q.

alleviate this material weakness, the Company has implemented a quarterly process with enhanced management review controls to perform

and review a going concern analysis and the adequacy of disclosures within the consolidated financial statements, as applicable based

on the results.

The Company proceeded to collectively perform these tasks during the fourth quarter of 2022 by continuing to retain a

CPA firm (onboarded during the latter part of the third quarter of 2022) to assist with the preparation of the analysis pursuant to the

Company’s ability to continue as a going concern and prepare applicable disclosures.

The analysis and disclosures are then assessed

by senior management of the Company performing review of the documentation and disclosures.

We consider the following material weaknesses to be outstanding as of December 31, 2023:

Recognition :

During fiscal year 2022, the Company’s revenue was primarily earned through certain related party contracts

During fiscal year 2022 and 2023, the Company’s revenue was earned through certain related party contracts

with PCCU that define contractually the revenue earned by the Company from PCCU for account servicing.

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controls over the review of revenue recognition from allocations that occurs on a monthly basis between the Company and PCCU.

alleviate this material weakness, the Company will implement a monthly process with enhanced management review controls to perform and

remediate this material weakness, the Company has implemented a monthly process with enhanced management review controls to perform and

review revenue recognition.

The analysis and disclosures are then assessed by senior management of the Company performing review of the

documentation and disclosures.

The analysis and disclosures are assessed by senior management of the Company performing review of the documentation

and disclosures.

Financial Instruments:

During fiscal year 2022, the Company had a material weakness with regard to the ineffectiveness in management

review controls of the accounting and valuation of complex financial instruments (warrants, Forward Purchase Agreement, and stock-based

compensation).

alleviate this material weakness, the Company will implement a quarterly process with enhanced management review controls to perform

During fiscal year 2022 and 2023, the Company had a material weakness with regard to the ineffectiveness

in management review controls of the accounting, disclosure and valuation of complex financial instruments (warrants, Forward Purchase

Agreement, and stock-based compensation).

remediate this material weakness, the Company has implemented a quarterly process with enhanced management review controls to perform

and review complex financial instruments.

The analysis and disclosures are then assessed by senior management of the Company performing

review of the documentation and disclosures.

The analysis and disclosures are assessed by senior management of the Company performing review

of the documentation and disclosures.

During the three months ending March 31, 2023, the Company identified a material weakness with regard to the initial

implementation of CECL.

This included initially not having supporting documentation of the model aligning to the calculations recorded,

and incorrectly applying the modified retrospective adoption through the Consolidated Statements of Operations only, as opposed to the

Consolidated Statements of Parent-Entity Net Investment and Stockholders’ Equity on January 1, 2023.

remediate this material weakness, the Company enhanced the allowance model documentation during the period from June 30, 2023, through

December 31, 2023, and has implemented a quarterly process with enhanced management review controls to perform and review CECL, however

remediation requires ensuring these controls are effective over time.

The analysis and disclosures are assessed by senior management

of the Company performing review of the documentation and disclosures.

the implementation of our remediation plans for each material weakness, we believe, in subsequent periods, these material weaknesses

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address any other matters we identify.

See also the section titled “Risk Factors — Risks Related to the Company Business

Following the Business Combination.”

of remediation does not provide assurance that our remediation or other controls will continue to operate properly.

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in the Company’s reported financial information, all of which could materially and adversely affect the Company.

Internal Control over Financial Reporting

in Internal Control over Financial Reporting

than as noted above in the December 31, 2023 material weaknesses, there was no changes in our internal control over financial reporting

that occurred during the fiscal year ended December 31, 2022 covered by this Report on Form 10-K that has materially affected, or is reasonably

likely to materially affect, our internal control over financial reporting, with the exception of the below.

During the quarter

ended September 30, 2022, the Company identified two of the four material weaknesses above pertaining to going concern and deferred tax

asset accounting.

For the quarter ended December 31, 2022, the Company changes in internal controls to address remediation of these two

material weaknesses included:

Company has implemented a quarterly process with enhanced management review controls to perform and review a going concern analysis and

the adequacy of disclosures within the consolidated financial statements, as applicable based on the results.

The Company proceeded to

collectively perform these tasks during the fourth quarter of 2022 by continuing to retain a CPA firm (onboarded during the latter part

of the third quarter of 2022) to assist with the preparation of the analysis pursuant to the Company’s ability to continue as a

going concern and prepare applicable disclosures.

The analysis and disclosures are then assessed by senior management of the Company performing

review of the documentation and disclosures.

The Company has implemented a quarterly control to calculate and review

the deferred tax asset, evaluate the necessity for any valuation allowance, and reconcile it to the general ledger.

The Company proceeded

to collectively perform these tasks during the fourth quarter of 2022 by retaining a Top 50 CPA firm in the United States to assist in

the preparation of the tax provision and tax compliance work along with management’s independent review of the quarterly income

tax provision and valuation of deferred tax assets.

that occurred during the fiscal year ended December 31, 2022 covered by this Report on Form 10-K that has materially affected, or is

reasonably likely to materially affect, our internal control over financial reporting.

Other Information.

January 10, 2023, the Company entered into executive employment agreements with James H.

Dennedy, its Chief Financial Officer, and Donnie

Emmi, its Chief Legal Officer, which memorialized the previously disclosed terms of their employment with the Company.

The agreements

are each for terms of two years and provide for annual base salaries of $285,000.

The agreements provide for benefits comparable to the

other executive officers of the Company, and for annual bonuses of up to 100% of base salary based on performance criteria established

by the Compensation Committee of the Company’s Board of Directors.

agreements provide that if the executive’s employment is terminated as a result of the executive’s death or disability, or

if terminated by the Company for cause (as defined in the agreements) or by the executive without good reason (as defined in the agreements),

he will be entitled to receive all unpaid base salary through the date of termination, reimbursement for unreimbursed business expenses

through the date of termination, and all other accrued and vested payments or benefits payable under the applicable plan or by law (collectively,

the “Accrued Benefits”).

If the executive’s employment is terminated by the Company without cause or by the executive

for good reason, the executive is entitled to receive, upon execution and delivery to the Company of a customary release, the Accrued

Benefits, severance in a lump sum payment equal to one year of base salary at the executive’s then-current annual base salary rate,

and Company-paid continued health insurance for one year.

agreements also provide for customary non-solicitation, nondisclosure and non-competition covenants applicable to each executive.

Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.

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have adopted a Code of Conduct and Ethics applicable to all officers, directors and employees.

A copy of our Code of Conduct and Ethics is filed as an exhibit to this Annual Report on Form 10-K.

Executive Compensation.

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Exhibits and Financial Statement Schedules.

List of documents filed as part of this report

Consolidated Financial Statements and 2) Consolidated Financial Statements Schedules:

consolidated financial statements required by this item are contained under the section entitled “Index to Consolidated

Financial Statements” (and the Consolidated financial statements and related notes referenced therein) included beginning on

page F-1 of this Form 10-K.

List of documents filed as part of this Annual Report on Form 10-K:

Consolidated Financial Statements

The consolidated financial statements required by this item are contained

under the section entitled “Index to Consolidated Financial Statements” (and the consolidated financial statements and related

notes referenced therein) included beginning on page F-1 of this Annual Report on Form 10-K.

Consolidated Financial Statements Schedules

All financial statement schedules are omitted because they are either not applicable, not required, or because

the information required is included in the above referenced consolidated financial statements and notes thereto.

List of Exhibits

exhibit list in the Exhibit Index is incorporated herein by reference as the list of exhibits required as part of this report.

exhibit list in the Exhibit Index is incorporated herein by reference as the list of exhibits required as part of this Annual Report on Form 10-K.

following exhibits are filed as part of, or incorporated by reference into, this Annual Report on Form 10-K.

Form of Code of Ethics and Business Conduct

Unit Purchase Agreement dated February 11, 2022 (incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed on February 14, 2022).

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Third Amendment to Unit Purchase Agreement dated September 28, 2022 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed on September 29, 2022).

Agreement and Plan of Merger, dated October 31, 2022, by and among SHF Holdings, Inc., a Delaware corporation, Merger Sub I, a Delaware corporation, Merger Sub II, a Delaware limited liability corporation, Rockview Digital Solutions, Inc., a Delaware corporation, d/b/a Abaca and Dan Roda, solely in such individual’s capacity as the representative of the Company Security Holders (incorporated by reference to Exhibit 2.1 of the Company’s Current Report on Form 8-K, filed on October 31, 2022).

Amendment to Agreement and Plan of Merger, dated November 11, 2022 (incorporated by reference to Exhibit 2.1 of the Company’s Current Report on Form 8-K, filed on November 15, 2022).

Agreement and Plan of Merger, dated October 29, 2022, by and among SHF Holdings, Inc., Merger Sub I, Merger Sub II, Rockview Digital Solutions, Inc.

d/b/a Abaca and Dan Roda, solely in such individual’s capacity as the representative of Abaca security holders (incorporated by reference to Exhibit 2.1 of the Company’s Current Report on Form 8-K, filed on October 31, 2022).

Amendment to Agreement and Plan of Merger, dated November 11, 2022, by and among SHF Holdings, Inc., Merger Sub I, Merger Sub II, Rockview Digital Solutions, Inc.

d/b/a Abaca and Dan Roda, solely in such individual’s capacity as the representative of the Abaca security holders (incorporated by reference to Exhibit 2.1 of the Company’s Current Report on Form 8-K, filed on November 15, 2022).

Second Amendment to Agreement and Plan of Merger, dated October 26, 2023, by and among SHF Holdings, Inc., Merger Sub I, Merger Sub II, Rockview Digital Solutions, Inc.

Amended and Restated - 2022 Equity Incentive Plan

Second Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K, filed on September 29, 2022).

Certificate of Designation (incorporated by reference to Exhibit 3.2 of the Company’s Current Report on Form 8-K, filed on September 29, 2022).

Form SHF Holdings, Inc.

Stock Option Agreement

Warrant Agreement, dated June 23, 2021, between the Company and Continental Stock Transfer & Trust Company (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on June 25, 2021).

Registration Rights Agreement, dated March 29, 2023, by and between the Company and Partner Colorado Credit Union (incorporated by reference to Exhibit 2 of the Company’s Quarterly Report on Form 10-Q, filed May 15, 2023).

Security Agreement, dated March 29, 2023, by and between the Company and Partner Colorado Credit Union (incorporated by reference to Exhibit 3 of the Company’s Quarterly Report on Form 10-Q, filed May 15, 2023).

Senior Secured Promissory Note, dated March 29, 2023, by and between the Company and Partner Colorado Credit Union (incorporated by reference to Exhibit 4 of the Company’s Quarterly Report on Form 10-Q, filed May 15, 2023)

Securities Issuance Agreement, dated March 29, 2023, by and among the Company and Partner Colorado Credit Union (incorporated by reference to Exhibit 5 of the Company’s Quarterly Report on Form 10-Q, filed May 15, 2023).

Warrant Agreement, dated October 26, 2023, by and among the Company and Continental Stock Transfer & Trust Company (incorporated by reference to Exhibit 2.2 of the Company’s Current Report on Form 8-K, filed on October 27, 2023).

Description of Registered Securities

Form of SHF Holdings, Inc.

Restricted Stock Unit Agreement

Letter Agreement, dated June 23, 2021, among the Company, its officers and directors and 5AK, LLC (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on June 25, 2021).

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Form of Lock-Up Agreement (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K, filed on November 15, 2022).

Executive Employment Agreement, dated January 10, 2023, by and between the Company and Donnie Emmi

Executive Employment Agreement, dated January 10, 2023, by and between the Company and Donnie Emmi (incorporated by reference to Exhibit 10.12 of the Company’s Annual Report on Form 10-K, filed on April 14, 2023).

Executive Employment Agreement, dated January 10, 2023, by and between the Company and James H.

Subsidiaries of the Company

Dennedy (incorporated by reference to Exhibit 10.13 of the Company’s Annual Report on Form 10-K, filed on April 14, 2023).

Commercial Alliance Agreement, dated March 29, 2023, between the Company and Partner Colorado Credit Unit (incorporated by reference to Exhibit 1 of the Company’s Quarterly Report on Form 10-Q, filed on May 15, 2023).

Executive Employment Agreement, dated August 16, 2023, by and between the Company and Tyler Beuerlein (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K, filed on August 22, 2023).

Subsidiaries of the Registrant

Consent of Marcum LLP, independent registered public accounting firm

Certification of Principal Executive Officer Pursuant to Securities Exchange Act Rules 13a-14(a) and 15(d)-14(a), as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

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Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Clawback policy

XBRL Instance Document

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Page Interactive Data File (embedded within the Inline XBRL document)

Employment Agreement, dated January 10, 2023, by and between the Company and James H.

of the exhibits and schedules to this exhibit have been omitted in accordance with Regulation S-K Item 601(a)(5).

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on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized.

Sundie Seefried

Executive Officer

April 01, 2024

Financial Officer

Jennifer Meyers

Jonathan Summers

April 01, 2024

Richard Carleton

April 01, 2024

/s/ John Darwin

April 01, 2024

TO CONSOLIDATED FINANCIAL STATEMENTS.

HOLDINGS, INC.

AND SUBSIDIARIES

FINANCIAL STATEMENTS

AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm (Marcum LLP) (PCAOB ID 688 )

Report of Independent Registered Public Accounting Firm (Elliott Davis, PLLC) (PCAOB ID 149 )

Consolidated Balance Sheets as of December 31, 2023 and 2022

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on the Financial Statements

have audited the accompanying consolidated balance sheet of SHF Holdings, Inc.

and subsidiary (the “Company”) as of December

31, 2022, the related consolidated statements of operations, parent-entity net investment and stockholders’ equity, and cash flows

for the year ended December 31, 2022, and the related notes (collectively referred to as the “financial statements”).

our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December

31, 2022, and the results of its operations and its cash flows for the year ended December 31, 2022, in conformity with accounting principles

generally accepted in the United States of America .

have audited the accompanying consolidated balance sheets of SHF Holdings, Inc.

and subsidiaries (the “Company”) as of

December 31, 2023 and 2022, the related consolidated statements of operations, parent-entity net investment and stockholders’

equity, and cash flows for each of the two years in the period ended December 31, 2023, and the related notes (collectively referred

to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects,

the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for

each of the two years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the

United States of America.

Paragraph – Going Concern

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Management’s plans in regard to these matters are also described in Note 2.

The financial statements do not include

any adjustments that might result from the outcome of this uncertainty.

The financial statements do not

include any adjustments that might result from the outcome of this uncertainty.

in Accounting Principle

discussed in Note 2 to the consolidated financial statements, the Company has changed its method of accounting for the recognition and

measurement of credit losses as of January 1, 2023 due to the adoption of ASC Topic 326, Financial Instruments – Credit Losses .

financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s

financial statements based on our audit.

financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board

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securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain

conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audits to obtain

reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audit

As part of our audits

we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion

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Accordingly, we express no such opinion.

audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or

fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding

the amounts and disclosures in the financial statements.

Our audit also included evaluating the accounting principles used and significant

estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audit provides

a reasonable basis for our opinion.

have served as the Company’s auditor since 2022.

Report of Independent Registered Public Accounting Firm

the Stockholders and Board of Directors of SHF Holdings, Inc.

on the Financial Statements

have audited the accompanying consolidated balance sheet of SHF Holdings, Inc.

(formerly Eagle Legacy Services, PLLC D/B/A Safeharbor

Services and Branches 52 and 53 Carved Out of Partner Colorado Credit Union) (the “Company”) as of December 31, 2021, the

related consolidated statements of operations, parent-entity net investment and stockholders’ equity, and cash flows for the year

then ended, and the related notes to the consolidated financial statements (collectively, the “financial statements”).

our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December

31, 2021, and the results of their operations and their cash flows for the year then ended, in conformity with accounting principles

generally accepted in the United States of America.

financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s

financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board

(United States) (PCAOB) and are required to be independent with respect to the Company in accordance with U.S.

federal securities laws

and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

conducted our audits in accordance with the standards of the PCAOB and in accordance with auditing standards generally accepted in the

United States of America.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the

financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were

we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits, we are required to obtain an

understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the

Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error

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provide a reasonable basis for our opinion.

Elliott Davis, PLLC

have served as the Company’s auditor from 2020 to 2021.

have served as the Company’s auditor since 2022.

Holdings, Inc.

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Accounts receivable – trade

Accounts receivable – related party

Accounts receivable

Contract assets

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Accounts payable

Accounts payable-related party

Accounts payable

Accrued expenses

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Lease liabilities – current

Senior secured promissory note – current portion

Deferred consideration – current portion

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Due to seller – long term portion

Senior secured promissory note—long term portion

Net deferred indemnified loan origination fees

Lease liabilities – long term

Deferred underwriter fee payable

Deferred underwriter fee

Indemnity liability

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Parent-Entity Net Investment and Stockholders’ Equity

Convertible preferred stock, $ .0001 par value, 1,250,000 shares authorized, 14,616 shares issued and outstanding on December 31, 2022, and no shares issued and outstanding on December 31, 2021, respectively

Class A common stock, $ .0001 par value, 130,000,000 shares authorized, 23,732,889 issued and outstanding on December 31, 2022, and no shares issued and outstanding on December 31, 2021, respectively

Convertible preferred stock, $ .0001 par value, 1,250,000 shares authorized, 1,101 and 14,616 shares issued and outstanding on December 31, 2023, and December 31, 2022, respectively

Class A common stock, $ .0001 par value, 130,000,000 shares authorized, 54,563,372 and 23,732,889 issued and outstanding on December 31, 2023, and December 31, 2022, respectively

Additional paid in capital

Retained earnings

Retained deficit

( 71,569,821 )

Parent-Entity Net Investment

( 39,695,281 )

Total Parent-Entity Net Investment and Stockholders’ Equity

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STATEMENTS OF OPERATIONS

For the year ended December 31,

the year ended December 31,

Operating Expenses

Compensation and employee benefits

General and administrative expenses

Compensation and employee

General and administrative

Professional services

Provision for loan losses

Corporate allocations

Total operating expenses

Operating (loss)/ income

Provision for credit losses

Impairment of goodwill

of long-lived intangible assets

operating expenses

Operating loss

( 20,712,319 )

( 2,197,840 )

Other (income) expenses

Interest expense

Change in fair value of warrant liability

Change in fair value of forward purchase agreement

Change in fair value of forward purchase option derivative

Total other (income) expenses

Change in fair value of

warrant liability

Change in the fair value

of deferred consideration

( 4,570,157 )

Change in fair value of

forward purchase agreement

in fair value of forward purchase option derivative

Total other (income)

$ ( 1,602,771 )

Net loss income before income tax

( 19,109,548 )

Provision for income taxes

( 44,380,976 )

Net (loss)/income

Provision for income

$ ( 1,829,701 )

$ ( 9,252,893 )

$ ( 17,279,847 )

$ ( 35,128,083 )

Weighted average shares outstanding, basic

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THE YEARS ENDED DECEMBER 31, 2023 AND 2022

Preferred Stock

Class A Common Stock

Additional Paid-in

Parent-Entity Net

Total Shareholders’

A Common Stock

Parent-Entity

Shareholders’

Balance, December 31, 2021

Contribution of loan receivable from Parent

Net change due to allocations and distributions to Parent

Issuance of shares in connection with Business

Combination and PIPE offering, net of issuance costs

( 7,339,101 )

Acquisition of Abaca

Conversion of PIPE Shares

( 2,917,000 )

Stock option conversion

( 36,778,281 )

( 35,128,083 )

Balance, December 31, 2022

Beginning balance value

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

$ ( 39,695,281 )

Acquisition of Abaca

$ ( 39,695,281 )

Cumulative effect from adoption of

Issuance of shares to Abaca shareholders

Conversion of PIPE Shares

( 14,013,375 )

Stock option conversion

Restricted stock units

Stock compensation cost

PCCU Restructuring

Reversal of deferred underwriting cost

( 17,279,847 )

Net income (loss)

( 17,279,847 )

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( 71,569,821 )

Ending balance value

( 71,569,821 )

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STATEMENTS OF CASH FLOWS

Year ended December 31,

CASH FLOWS FROM OPERATING ACTIVITIES:

Net (loss) / income

ended December 31,

CASH FLOWS FROM OPERATING

$ ( 17,279,847 )

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

Depreciation and amortization expense

$ ( 35,128,083 )

Adjustments to reconcile net income to net

cash provided by operating activities:

Depreciation and amortization

Stock compensation expense

Net deferred indemnified

loan origination fees

Interest expense

Provision for loan loss

Lease Expense

Provision for credit loss

Impairment of goodwill

Impairment of long-lived

intangible assets

Deferred tax credit

( 1,829,700 )

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

( 9,252,893 )

Change in fair value of

warrant and forward purchase

option derivative liabilities

Change in the fair value

of deferred consideration

( 4,570,157 )

Changes in operating assets and liabilities:

Accounts receivable - Trade

Accounts receivable –

Related Party

Contract assets

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Accounts payable

( 2,515,443 )

Accounts Payable –

related party

Accrued expenses

Contract Liabilities

Security deposit

Deferred revenue

Net cash provided by operating activities

CASH FLOWS USED IN INVESTING ACTIVITIES:

Purchase of property and equipment

Change in loan receivable, net

cash (used in)/provided by operating activities

$ ( 832,144 )

CASH FLOWS USED IN INVESTING

Purchase of property and

Change in loan receivable,

Payment to Abaca Shareholder

( 3,000,000 )

Loan receivable repayment

Acquisition of Abaca

( 3,041,680 )

Net cash provided by (used in) investing activities

cash used in investing activities

$ ( 2,180,448 )

CASH FLOWS USED IN FINANCING ACTIVITIES:

Proceeds from reverse capitalization, net of transaction costs

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

$ ( 2,897,429 )

Net cash provided by (used in) financing activities

CASH FLOWS USED IN FINANCING

Proceeds from reverse capitalization, net of

transaction costs

Repayment of loans

cash (used in)/provided by financing activities

$ ( 488,834 )

Net increase in cash and cash equivalents

Cash and cash equivalents - beginning of period

Cash and cash equivalents - end of period

Net (decrease)/increase in cash and cash equivalents

( 3,501,426 )

Cash and cash equivalents

- beginning of period

Cash and cash equivalents

- end of period

disclosure of cash flow information

Interest paid

Non-cash transactions:

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Operating lease liabilities recognized

Contribution of loan receivable from Parent

Shares issued for the settlement of PCCU debt

Cumulative effect from adoption of CECL

Reversal of deferred underwriting cost

Interest recognized on PCCU settlement

accompanying notes to consolidated financial statements

Organization and Business Operations

Company originated as business operations conducted through PCCU, which were transferred to SHF.

LLC (“SHF”), then an indirect

wholly owned subsidiary of PCCU.

SHF Holdings,

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”).

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.

following the closing of

the Business Combination.

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

SHF 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”).

(“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.” We use the terms “we,” “us,” “our” 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.)

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.

In conjunction with the reorganization,

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

Collectively,

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

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

In addition, effective July 1, 2021, SHF entered

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

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

Pre-Public Company, 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 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

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 43.2 % of the Company’s outstanding Class A Common Stock.

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 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.

On December 31, 2023, the 12 month period

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

For more information about the Business

Combination, refer to Note 3 to the Consolidated Financial Statements.

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

largest stockholder, owning 46.37 % of the Company’s outstanding Class A Common Stock.

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

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

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

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 of

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

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

the cannabis industry including, among other things, 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.

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.

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

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

payable in connection with the business combination.

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

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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 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

Closing Date and $ 12,600,000 (minus an outstanding note balance of $ 500,000 , plus accrued interest) in shares of Class A Common Stock

at the one-year anniversary of the Merger Closing based on a 10-day VWAP (collectively, the “Share Consideration”).

of the Company, the Merger Subs, and Abaca provided customary representations, warranties and covenants in the Agreement.

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 Closing Date and $ 12,600,000 (minus an outstanding note balance of $ 500,000 ,

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

the “Share Consideration”).

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

and covenants in the Agreement.

As on October 26, 2023, the Company and the Abaca stockholders entered into the second amendment to the

Abaca merger agreement to redefine the deferred cash consideration payable and the deferred stock consideration payable on the one-year

anniversary of the merger closing.

(Refer to Note 4 to the Consolidated Financial Statements.)

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

the cannabis industry including, among other things, the origination, onboarding, and servicing of cannabis-related deposit business

for and on behalf of those partner institutions;

Bank Secrecy Act and other regulatory compliance and reporting related to these accounts;

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

and sourcing, underwriting, and servicing, and administering

loans issued to cannabis businesses and related entities.

In addition to PCCU, the Company provides these similar services and outsourced

support to other financial institutions providing banking to the cannabis industry.

These services are provided to other financial institutions

under the Safe Harbor Master Program Agreement.

Basis of Presentation and Summary of Significant Accounting Policies

Use of Estimates

The preparation of

the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”)

requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying

Material estimates that are particularly subject to change in the near term include the determination of the allowance for loan

losses, indemnification liabilities, useful lives of intangibles and the fair value of financial instruments.

Actual results could differ

from the estimates.

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

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

financial statements and accompanying notes.

Material estimates that are particularly subject to change in the near term include the

determination of the allowance for credit losses, indemnification liabilities, valuation and useful lives of intangibles and the fair

value of financial instruments.

Actual results could differ from the estimates.

Basis of Presentation

Consolidated Financial

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

For the year ended December 31, 2021, the Consolidated financial

statements consist of the balances of SHS and SHF as prepared on a stand-alone basis and the balances of the Branches on a “carve-out”

For the year ended December 31, 2022, the consolidated financial statements represent SHF on a stand-alone basis as the period

is post reorganization, and wholly owned subsidiary Abaca.

All intercompany transactions have been eliminated for all periods presented.

These consolidated financial statements

reflect the Company’s historical financial position, results of operations and cash flows as they have been historically managed

in conformity with GAAP.

All depository asset

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

none of the cash of PCCU has been attributed to these consolidated financial statements.

Asset and liabilities maintained by SHS and SHF

have been included in these consolidated financial statements along with any specific assets and liabilities associated with the Branches.

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

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

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

administrative expenses are attributed to the Branches proportionately based on the size of the specifically identifiable

CRB’s deposit balances, deposit activity and accounts relative to the totals of the consolidated PCCU entity.

This allocation

method was consistent for all periods prior to July 2021.

Beginning in July 2021, a services agreement was entered into between SHF

LLC and PCCU (see Note 9 to the consolidated financial statements).

In exchange for services provided to PCCU via the Carved-Out

Operations, SHF LLC receives 100% of CRB related revenue.

PCCU receives (and SHF LLC pays) a monthly per account fee, split loan

servicing fees and split investment income associated with Carved-Out Operations depository accounts.

The fees are meant to

represent PCCU’s cost for hosting depository accounts and funding related loans and providing certain limited infrastructure

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

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

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

Corporate allocations were attributed for year ended December 2021.

accompanying consolidated financial statements and related notes have been prepared on the accrual basis of accounting in conformity

with accounting principles generally accepted in the United States of America (“GAAP”) and include the accounts

of the Company, and its wholly-owned subsidiaries.

The consolidated financial statements reflect all adjustments that, in the opinion

of management, are necessary for the fair presentation of the Company’s results of operations and financial condition as of and

for the periods presented.

All intercompany balances and transactions have been eliminated in consolidation.

this reporting period, we have adopted the Current Expected Credit Loss (CECL) accounting standard for the first time, marking a significant

change in our accounting policy for the recognition of credit losses.

This adoption necessitates the estimation and immediate recognition

of expected credit losses over the lifetimes of our financial assets upon their origination or acquisition, which is a departure from

the previous incurred loss approach.

The accounting method was adopted with on a modified retrospectively

basis, and the effects of this adoption were recorded as of January 1, 2023.

Company has made certain immaterial reclassifications to the 2022 balance sheet and statements of operations to conform to the

presentation of the 2023 balance sheet and statements of operations.

These included reclassifications totaling $ 1,198,781

from accounts receivable-trade and $ 32,946

from accrued interest receivable into accounts receivable - related party, $ 196,968

from accounts payable and $ 4,881,074

from accrued expenses into accounts payable - related party, $ 109,081

of net deferred loan origination fees to liabilities, and reclassification of $ 97,593 from Interest expense into change in the fair value of deferred consideration.

Corresponding adjustments have been made to the statement of cash flows and

applicable notes to the consolidated financial statements.

Liquidity and Going Concern

of December 31, 2022, the Company had $ 8,390,195

in cash and net working capital of ($ 39,340,020 ),

as compared to $ 5,495,905

in cash and net working capital of $ 5,922,023

at December 31, 2021.

Included in the working capital deficit at December 31, 2022 is $ 25,973,017 current portion of the long-term payable

owed to the seller, PCCU, from the aforementioned business combination, and $ 14,359,822 deferred consideration current portion related to the Abaca acquisition.

The Company has also incurred

a significant cumulative consolidated operating loss for the year ended December 31, 2022.

of December 31, 2023, the Company had $ 4,888,769 cash and net working capital deficit of $ 135,355 .

The Company has also incurred an operating

loss of $ 20,712,319 for the year ended December 31, 2023, and cash flows used in operating activities of $ 832,144 .

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

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

mitigated the going concern risk by renegotiating its

aforementioned payable with PCCU (refer to the “Subsequent Events” disclosure within Note 22 of the consolidated

financial statements herein), thus reducing the working capital deficit and certain other liabilities.

The Company also hired an

experienced Chief Financial Officer in October 2022, who has immediately begun to institute certain cost-cutting measures across the

Company, including expense reduction measures and negotiating reduced amounts and extended terms for certain payables.

factors, however, do not fully remove substantial doubt regarding the Company’s ability to continue as a going concern that

has been identified.

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

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

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

accompanying audited consolidated financial statements have been prepared assuming the Company will continue as a going concern, which

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

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

that may result should the Company not continue as a going concern as a result of this uncertainty.

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

the Company is not able to sustain its present level of operations, it may be forced to make reductions in spending, extend payment terms

with suppliers, liquidate assets where possible, or suspend or curtail planned expansion programs.

Any of these actions could materially

harm the Company’s business, results of operations and future prospects.

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

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

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

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

Cash and Cash Equivalents

3 unchanged sentences

Cash balances are

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

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

up to regulatory limits.

6 unchanged sentences

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

As of this time, substantially all

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

The 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.

also indemnified 5 loans as of December 31, 2022;

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

Accounts Receivable-PCCU and Allowance for Doubtful Accounts

As of this time, majority of the Company’s

revenue is generated by deposits and loans hosted by PCCU pursuant to a master service agreement.

Company had only one loan on its balance sheet as of December 31, 2023, which comprises 100 % of the total loan balance.

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.

Accounts Receivable and Allowance for Doubtful Accounts

receivable are recorded based on account fee schedules.

While fees are generated from individual CRB related accounts, amounts are

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

As of December 31, 2022, and

December 31, 2021, 85 %

of the Accounts Receivable, respectively is due from PCCU.

Effective January 2021 through June 2021, PCCU elected to transfer

account servicing from SHS to the Branches.

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

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

This policy was eliminated in conjunction with the July 2021

reorganization and execution of the Account Servicing Agreement and Support Servicing Agreement discussed at Note 9 to the

consolidated financial statements.

The Company maintains allowances for doubtful accounts for estimated losses as a result of a

customers’ inability to make required payments.

The Company estimates anticipated losses from doubtful accounts based on days

past due as measured from the contractual due date and historical collection history.

The Company also takes into consideration

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

reorganization.

While fees are generated from individual CRB related accounts, amounts are initially

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

Accounts receivable - related party represents

amounts due from PCCU under related party contracts disclosed in Note 10.

The Company maintains allowances for doubtful accounts for

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

The Company estimates anticipated losses from

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

The Company also

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

liquidation or reorganization.

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

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

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

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

1 unchanged sentence

Loans Receivable

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

Commercial CRB loans originated by the Company and

funded by PCCU are typically managed by the Company, inclusive of originated and funded loans that are on the PCCU balance sheet only.

Certain CRB Loans were contributed to the Carved-out Operations.

Such loans where the Company has the intent and ability to hold for

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

and net deferred loan origination fees and costs when applicable.

Interest income on loans is recognized over the term of the loan and

is calculated using the simple-interest method on principal amounts outstanding.

income is not reported when full loan repayment is in doubt, typically when the loan is impaired, or payments are past due ninety days

All interest accrued but not received for loans placed on nonaccrual is reversed against interest income.

Interest received

on such loans is accounted for on the cash basis or cost recovery method, until qualifying for return to accrual.

Loans are returned

to accrual status when all the principal and interest amounts are satisfied to where the loan is less than ninety days past due and future

payments are reasonably assured.

are evaluated for charge-off on a case-by-case basis and are typically charged off at the time of foreclosure.

status is based on the contractual terms of the loans.

In all cases, loans are placed on nonaccrual status or charged-off at an earlier

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

Allowance for Loan Losses

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

decreased by charge-offs less recoveries.

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

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

values, economic conditions, and other factors.

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

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

Loans that significantly support the Company’s operations are recognized as assets on the balance sheet.

These loans, intended

to be held either for the foreseeable future or until their maturity or full repayment, are recorded at their outstanding principal balance.

This amount is adjusted for any credit loss allowances and net of any deferred loan origination fees and costs, as applicable, to reflect

the net investment in these loans.

The Company recognizes interest income on CRB Loans over the loan term using the simple-interest method

based on outstanding principal amounts.

This approach ensures a systematic recognition of income, aligning with the time value of money

income recognition is suspended when there is uncertainty regarding full loan repayment, such as in cases of loan impairment or when

payments are overdue by ninety days or more.

Loans under these conditions are placed on nonaccrual status.

Any accrued interest not received

by the time a loan is placed on nonaccrual is reversed from interest income.

Subsequent interest payments on nonaccrual loans are recorded

using either the cash basis or the cost recovery method until the loan meets the criteria for reclassification to accrual status.

are returned to accrual status when they become current (less than ninety days past due) and when there is reasonable assurance of future

payment compliance, evidenced by the full satisfaction of both principal and interest payments due.

are assessed individually for potential charge-off, which typically occurs at the point of foreclosure.

Charge-offs are executed to reflect

the realizable value of loans that are deemed uncollectible.

determination of a loan’s past-due status is based on its contractual repayment terms.

Loans are either placed on nonaccrual status

or charged-off ahead of their contractual delinquency dates if the collection of principal and interest is deemed doubtful, ceasing the

recognition of interest income on such loans.

Allowance for Credit Losses (ACL)

January 1, 2023, the Company adopted Accounting Standards Codification Topic 326 – Financial Instruments – Credit Losses

(ASC Topic 326), which replaced the incurred loss methodology for estimated probable credit losses with an expected credit loss methodology

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

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

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

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

Management periodically evaluates the adequacy

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

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

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

These reserves

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

ACL consists of two components:

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

risk characteristics with other loans;

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

characteristics.

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

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

which are derived from internally developed model estimation approaches for smaller homogenous loans.

PD is quantified by analyzing historical data to determine the rate at which loans have defaulted within the portfolio, relative to the

total outstanding loans as of the end of the reporting period.

This rate is expressed as a percentage and serves as a key indicator of

the likelihood of default across the loan pool.

LGD assessments are conducted to estimate the potential loss amount in the event of a

default, considering the recoverable value from the collateral liquidation against the remaining loan balance.

This involves a detailed

analysis of two primary components:

the loss on principal, which arises from the gap between the collateral’s liquidation value

and the unpaid principal balance of the loan;

and the loss associated with various ancillary costs to recover, including, but not limited

to, foregone interest, transaction costs, legal and administrative fees, and expenses related to the maintenance and renovation of the

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

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

is the fact that these borrowers are involved in the cannabis business.

Despite being legal at the state level in certain jurisdictions,

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

As cannabis related lending is a new practice

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

Therefore, significant judgement

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

the cannabis industry.

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

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

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

expectations around the current and future macroeconomic outlook.

Expected credit losses are estimated over the contractual term of the

loans, adjusted for expected prepayments when appropriate.

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

modification under certain conditions.

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

Recoveries are credited to the ACL

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

Any amounts collected in excess

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

Allowance for Loan Losses (ALL)

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

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

Management estimates

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

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

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

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

allowance for loan losses consists of specific and general components.

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

is generally evaluated in total for smaller-balance loans of similar nature such as commercial lines of credit, but may be evaluated

on an individual loan basis if deemed necessary.

is generally evaluated in total for smaller-balance loans of similar nature such as commercial lines of credit but may be evaluated on

an individual loan basis if deemed necessary.

If a loan is impaired, a portion of the allowance is allocated so that the loan is reported,

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is expected solely from the collateral.

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

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

loans SHF originates are secured by various types of assets of the borrowers, including real property and certain personal property,

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

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

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

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

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

Where applicable, the loan origination

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

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

utilizing the interest method.

Net loan origination fees are initially deferred and presented net of loans receivable

asset for portfolio loans, or as a separate liability for indemnified loans, and recognized as interest income utilizing the interest

Indemnity Liability

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

Under the Loan Servicing Agreement, PCCU, in exchange for

a fee at an annual rate of 0.25 %

of the outstanding principal balance, funds certain loans.

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

all claims related to SHF’s cannabis-related business, including but not limited to default-related loan losses as defined in

the Loan Servicing Agreement.

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

financial statements) is accounted for in accordance with accounting standards codification (“ ASC”) 450-20 Loss

Contingencies .

In determining the applicability of ASC 450-20, we considered that the agreement outlines a broad indemnification

of all claims related to the cannabis-related business.

The most immediate and potentially significant of these are potential

default-related loan losses.

In the lending industry, it is inherently anticipated future loan losses will result from currently

SHF’s indemnity obligation is subordinate to PCCU’s and other financial institution clients’ other

means of collecting on the loans including foreclosure of the collateral, recourse against personal and/or corporate guarantors and

other default remedies available in the loan agreements.

Since borrowers are not party to the agreement between SHF and PCCU, any

indemnity payments do not relieve borrowers of their obligation to PCCU nor would such payments preclude PCCU’s right to

future recoveries from the debtor.

Therefore, as defined in ASC 450-20, the indemnification clause represents a general loss

contingency in that it is an existing condition, situation or set of circumstances involving uncertainty as to possible loss to the

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

SHF’s indemnity liability

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

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

individual loans covered by the agreement as well as economic assumptions driving the estimation model.

Individual loan risk ratings

are evaluated quarterly by SHF management based on each situation.

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

that may necessitate a loss contingency under the Loan Servicing Agreement.

A loss contingency is reported when it is both probable that

a future event will confirm that a loss had been incurred on or before the related balance sheet date and the loss is reasonably estimable.

the Loan Servicing Agreement and Commercial Alliance Agreement with PCCU, the Company had agreed to indemnify PCCU from all claims related

to Company’s cannabis-related business, including but not limited to default-related credit losses as defined in the Loan Servicing

The indemnification component of the Loan Servicing Agreement and the Commercial Alliance Agreement (refer to Note 10 to the

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

In determining the applicability of ASC 460, the Company considered that the agreement outlines a broad indemnification of all claims

related to the cannabis-related business.

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

In the lending industry, it is inherently anticipated future credit losses will result from currently issued debt.

The Company’s

indemnity obligation is subordinate to PCCU’s and other financial institution clients’ other means of collecting on the loans

including foreclosure of the collateral, recourse against personal and/or corporate guarantors and other default remedies available in

the loan agreements.

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

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

Therefore, as defined

in ASC 460, the indemnification clause represents a general loss contingency in that it is an existing condition, situation or set of

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

occur or fail to occur.

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

the agreement at the balance sheet date.

The liability is measured and recognized in accordance with our accounting polices for ACL and

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

events that may necessitate a loss contingency under the Loan Servicing Agreement.

A loss contingency is reported when it is both probable

that a future event will confirm that a loss had been incurred on or before the related balance sheet date and the loss is reasonably

Property and Equipment, net

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

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

of our technology platform.

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

enhancement of our technology platform.

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

These costs are amortized

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

of use assets and lease liability

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

Right of Use Assets and Lease Liability

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

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

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

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

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

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

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

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

Both operating and finance lease right of use assets are reviewed for

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

not be recoverable.

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

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

Impairment of Long-Lived Assets

Company evaluates the recoverability of tangible assets periodically by taking into account events or circumstances that may warrant

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

There were no impairments for the years ended December 31,

2022, and 2021.

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

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

Both operating and finance lease right of use assets are reviewed

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

may not be recoverable.

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

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

Goodwill and Other Intangible Assets

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

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

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

not to exceed the carrying amount of goodwill.

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

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

operating results of that component.

is tested for impairment at least annually, unless any events or circumstances indicate it is more likely than not that the fair value

of the goodwill is less than its carrying value.

The Company previously had elected to test goodwill for impairment as of November 15 th

annually, which was one year from the date of the Abaca acquisition.

During the year ended December 31, 2023 the Company elected

to change this accounting policy to measure goodwill impairment on December 31 st (see Note 2 (xxv) for additional information

on this accounting policy change).

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

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

that difference, not to exceed the carrying amount of goodwill.

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

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

reviews the operating results of that component.

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

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

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

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

for the purpose of stock compensation .

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

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

stock compensation.

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

Treasury rates for securities with

maturities approximating the awards’ expected lives.

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

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

The expected dividend yield is zero as the

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

Treasury rates for securities with maturities approximating

the awards’ expected lives.

The expected term of the options granted is calculated based on the simplified method by taking average

of contractual term and vesting period the awards.

The expected dividend yield is zero as the Company has never paid dividends and does

not currently anticipate paying any in the foreseeable future.

Fair Value Measurements

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income and other miscellaneous fees.

Under the terms of the Loan Servicing Agreement and the Commercial Alliance Agreement, the Company

is responsible for covering account hosting costs associated with the fees generated from deposits held at PCCU.

These costs are classified

as “General and Administrative Expenses” in the Consolidated Statements of Operations.

addition, SHF recognizes revenue from the Master Program Agreement.

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

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

recognizes revenue from interest on loans and investment income distributed by PCCU, which is determined by particular customer account

As per the Loan Servicing Agreement and the Commercial Alliance Agreement, SHF bears the expenses for hosting investments and

servicing loans related to this interest and investment income.

These expenses are allocated to “General and Administrative Expenses”

in the Consolidated Statements of Operations.

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

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

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

consist of financial institutions providing services to CRBs.

Revenues are concentrated in the United States.

Revenues are concentrated in the United States of America.

Contract Assets / Contract Liabilities

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entity’s performance.

of December 31, 2022, the Company reported contract assets and contract liabilities of $ 21,170 and $ 996 , respectively, from contracts

with customers.

of December 31, 2023, the Company reported contract assets and contract liabilities of $ 0 and $ 21,922 , respectively, from contracts with

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

the year ended December 31, 2022, the Company recognized revenue $ 8,333 related to the contract liability outstanding at December 31,

Advertising/Marketing Costs

Advertising/marketing

costs are expensed as incurred.

For the years ended December 31, 2022, and December 31, 2021, advertising/marketing costs were $ 380,669

and $ 74,282 , respectively.

Warrants Liability

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

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

recorded as derivative liabilities.

Accordingly, the Company classifies the warrants as liabilities carried at their fair value and adjusts

the warrants to fair value at each reporting period.

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

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

purchase derivative

The Company accounts for the forward purchase derivative assumed in the business

combination in accordance with the guidance contained in ASC Topic 815, “Derivatives and Hedging” (“ASC 815”).

The Company classifies the forward purchase derivative as an asset or liability carried at fair value and adjusts the forward purchase

derivative to fair value at each reporting period.

This derivative asset or liability is subject to re-measurement at each balance sheet

date until the conditions under the forward purchase agreement are exercised or expire, and any change in fair value is recognized in

the consolidated statement of operations.

Company has evaluated each of the warrant arrangements separately in accordance with ASC 480 and 815, to determine classification as

either equity instruments or liabilities based on the specific terms and features of each warrant.

Warrants are recognized as equity

if they are indexed to our own stock and meet the equity classification criteria in ASC 815-40.

These warrants are recorded within stockholders’

equity at their issuance date and are not subsequently remeasured at fair value.

Conversely, warrants that do not meet the criteria for

equity classification under ASC 815-40 are classified as liabilities.

Such warrants are initially recorded at fair value on the issuance

date and are subject to remeasurement at each balance sheet date thereafter.

Any changes in fair value are recognized in the statement

of operations.

None of our warrant contracts met criteria to be considered indexed to their own stock, as a result, have each been accounted

for as a liability financial instrument.

The fair value of warrants classified as liabilities is determined using appropriate

valuation models, such as the Black-Scholes model, which incorporates various inputs, including the current stock price, expected volatility,

risk-free interest rate, and the expected term of the warrants.

Deferred consideration

line with ASC Topic 815, “Derivatives and Hedging” (“ASC 815”), the Company treats the deferred consideration

from the Abaca acquisition as a derivative liability, since it does not fulfill the equity classification criteria.

As a result, this

obligation is recognized as a liability on the balance sheet at fair value and is adjusted to reflect its fair value at the end of each

reporting period.

The liability will be reassessed at fair value on every balance sheet date until the obligation’s term concludes.

Fluctuations in its fair value are recorded in the consolidated statements of operations.

Forward purchase derivative

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

ASC Topic 815 The Company classifies the forward purchase derivative as an asset or liability carried at fair value and adjusts

the forward purchase derivative to fair value at each reporting period.

This derivative asset or liability is subject to re-measurement

at each balance sheet date until the conditions under the forward purchase agreement are exercised or expire, and any change in fair

value is recognized in the consolidated statement of operations.

On December 31, 2022, a Monte-Carlo Simulation within a risk-neutral

framework was used to estimate the forward purchase derivative’s fair value, assuming Geometric Brownian Motion for future stock

Values from each simulation path were determined per contractual terms and discounted by a matching risk-free rate.

no FPA holder sales occurred, and no significant risk factor changes affecting FPA derivative values were noted.

Consequently, management

retained the December 31, 2022 valuation for year-end 2023.

Earnings Per Share

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

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

The Company utilizes

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

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

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

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

income taxes.

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

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

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

Valuation allowances are established, when necessary, to reduce

deferred tax assets to the amount expected to be realized.

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

However, PCCU

was subject to unrelated business income tax.

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

federal and state income taxes.

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

income taxes reported in the financial statements.

The interpretation provides criteria for assessment of individual tax positions and

a process for recognition and measurement of uncertain tax positions.

Tax positions are evaluated on whether they meet the “more

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

The Company’s Management has determined there

are no material uncertain tax positions.

to the merger, the Company was a pass-through entity for tax purposes, in which PCCU was exempt from most federal, state, and local taxes

under the provisions of the Internal Revenue Code and state tax laws, except for being subject to unrelated business income tax.

September 28, 2022, the Company became subject to income taxes as a Corporation and complies with the accounting and reporting requirements

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

Deferred income

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

will result in future taxable or deductible amounts, based on enacted tax laws and rates applicable to the periods in which the differences

are expected to affect taxable income.

Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount

expected to be realized.

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

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

The Company’s effective tax rate was 20.85 % and 0.00 % for the year ended December 31, 2022 and December 31, 2021, respectively.

The effective tax rate differs from the statutory tax rate of 21 % for the year ended December 31, 2022 and 2021 primarily due to the

aforementioned tax exemption available to PCCU.

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

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statements of operations.

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

of the Initial Public Offering.

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

Equity upon the completion of the Initial Public Offering.

Recently Issued Accounting Standards

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upon adoption.

Accounting for

Convertible Instruments and Contracts in an Entity’s Own Equity

In August 2020, the FASB issued ASU

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

which simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible

instruments and contracts in an entity’s own equity.

Among other changes, ASU 2020-06 removes from U.S.

GAAP the liability and equity

separation model for convertible instruments with a cash conversion feature, and as a result, after adoption, entities will no longer

separately present in equity an embedded conversion feature for such debt.

Similarly, the embedded conversion feature will no longer be

amortized into income as interest expense over the life of the instrument.

Instead, entities will account for a convertible debt instrument

wholly as debt unless (1) a convertible instrument contains features that require bifurcation as a derivative under ASC Topic 815, Derivatives

and Hedging, or (2) a convertible debt instrument was issued at a substantial premium.

ASU 2020-06 was effective for fiscal

years beginning after December 15, 2021, with early adoption permitted for fiscal years beginning after December 15, 2020.

The Company adopted the new standard during fiscal year 2022 with no material

Lease Accounting

FASB ASU 2016-02, Leases, (“ASC 842”) and related amendments, require lessees

to recognize a right-of-use asset and a lease liability for substantially all leases and to disclose key information about leasing arrangements

and aligns certain underlying principles of the lessor model with the revenue standard.

The Company adopted this guidance during fiscal

year 2022 using the optional transition method, which allows entities to apply the guidance at the adoption date and recognize a cumulative

effect adjustment to the opening balance of retained earnings, if any, in the period of adoption with no restatement of comparative periods.

At the January 1, 2022 adoption date, there were no leases outstanding that met criteria for recognition.

The Company has since recognized

any leases in accordance with ASC 842 by recording right-of-use assets and operating lease liabilities on the balance sheet.

Standards Pending to

Instruments—Credit Losses

the impairment test for Intangibles-Goodwill and Other

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

(“ASU 2017-04”).

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

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

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

As a result, an entity

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

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

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

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

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

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

after January 1, 2017.

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

however, the standard was applied

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

Expected Credit Losses

June 2016, the FASB issued ASU No.

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Entities apply the standard’s

provisions by recording a cumulative effect adjustment to retained earnings.

The Company has not adopted ASU 2016-13 as of December 31,

however, it has adopted this standard as of January 1, 2023 and the ASU has not had a material impact on the Company’s financial statements.

provisions by recording a cumulative effect adjustment to retained deficit.

The Company has adopted ASU 2016-13 as of January 1, 2023,

utilizing the modified retrospective method.

Transition Impact:

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

Other balance sheet lines not presented

were not affected by CECL.

Schedule of Current Expected Credit Losses Transition Impact

Loans receivable, gross

Allowance for

Indemnity liability

Retained deficit

( 39,695,281 )

( 40,276,599 )

$ ( 39,195,816 )

$ ( 39,210,796 )

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

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

lessor model with the revenue standard.

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

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

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

At January 1, 2022 adoption date,

there were no leases outstanding that met criteria for recognition.

The Company has since recognized any leases in accordance with ASC

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

Debt Restructurings and Vintage Disclosures

This Accounting Standard

Update (ASU 2022-02) eliminates the recognition and measurement guidance on troubled debt restructurings for creditors that have adopted

ASC 326 and requires them to make enhanced disclosures about loan modifications for borrowers experiencing financial difficulty.

guidance also requires public business entities to present current period gross write-offs (on a current year-to-date basis for interim-period

disclosures) by year of origination in their vintage disclosures.

For entities that have adopted ASU 2016-13, this ASU is effective for

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

The Company has not adopted ASU 2022-02

as of December 31, 2022;

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

Company’s financial statements.

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

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

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

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

For entities that have adopted ASU 2016-13,

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

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

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

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

Pending to be Adopted

Value Measurement of Equity Securities Subject to Contractual Sale Restrictions

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Deferral of the Sunset Date of Topic 848

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

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

This ASU is effective upon issuance (December 21,

2022) and generally can be applied through December 31, 2024.

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

consolidated financial statements.

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

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

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

can be applied through December 31, 2024.

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

Investments-Equity Method and Joint Ventures

March 2023, the FASB issued ASU 2023-02, Investments-Equity Method and Joint Ventures (Topic 323):

Accounting for Investments in Tax

Credit Structures using the Proportional Amortization Method.

The FASB issued final guidance allowing entities to apply the proportional

amortization method to equity investments in all tax credit programs that meet the conditions in ASC 323-740, rather than just investments

in qualified affordable projects that generate low income housing tax credits, as was required under the legacy guidance.

is effective for public business entities for fiscal years beginning after December 15, 2023 and interim periods within those fiscal

The Company is evaluating the impact of this update on its consolidated financial statements.

Combinations-Joint Venture Formations

August 2023, the FASB issued 2023-05, Business Combinations-Joint Venture Formations (Subtopic 805-60);

Recognition and Initial Measurement.

This ASU contains guidance requiring certain joint ventures to apply a new basis of accounting upon formation by recognizing and initially

measuring most of their assets and liabilities at fair value.

This guidance is effective for all joint venture formations with a formation

date on or after January 1, 2025.

Early adoption is permitted.

Joint Ventures formed before the effective date have the option to apply

it retrospectively, while those formed after the effective date are required to apply it prospectively.

The Company is evaluating the

impact of this update on its consolidated financial statements.

Improvements, “Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative.”

October 2023, the FASB issued ASU 2023-06, Disclosure Improvements, “Codification Amendments in Response to the SEC’s Disclosure

Update and Simplification Initiative.” This ASU amends the disclosure or presentation requirements related to various subtopics

in the FASB codification.

effective date for each amendment will be the date on which the SEC’s removal of that related disclosure from Regulation S-X or

Regulation S-K becomes effective, with early adoption prohibited.

For all other entities, the amendments will be effective two years

The amendments in this Update should be applied prospectively.

For all entities, if by June 30, 2027, the SEC has not removed

the applicable requirement from Regulation S-X or Regulation S-K, the pending content of the related amendment will be removed from the

Codification and will not become effective for any entity.

The Company is evaluating the impact of this update on its consolidated financial

November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280).

This ASU requires public entities to provide disclosures of

significant segment expenses and other segment items.

It also requires public entities to provide in interim periods all disclosures

about a reportable segment’s profit or loss and assets that are currently required annually.

Public entities with a single reportable

segment will have to provide all the disclosures required by ASC 280, including the significant segment expense disclosures.

This guidance

is applied retrospectively to all periods presented, unless it is impractical.

This ASU applies to all public entities and is effective

for fiscal years beginning after December 15, 2023, and for interim periods beginning after December 15, 2024.

Early adoption is permitted.

The Company is evaluating the impact of this update on its consolidated financial statements.

December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740).

This ASU requires public business entities to disclose in their

rate reconciliation table additional categories of information about income taxes paid, including certain disclosures that would be disaggregated

by jurisdiction and other categories.

This ASU is effective for public entities for fiscal years beginning after December 15, 2024, and

interim periods within fiscal years beginning after December 15, 2025.

For all other entities, this ASU is effective for fiscal years

after December 15, 2024 and for interim periods beginning after December 15, 2026.

Early adoption would be permitted.

The Company is

evaluating the impact of this update on its consolidated financial statements.

Change in annual goodwill impairment testing date

the current financial year, the Company has elected to change the annual impairment testing date for its goodwill from November 15th

to December 31st.

The change was considered by the Company to be preferable considering guidance in the December 8, 2014 “Remarks

before the 2014 AICPA Conference on Current SEC and PCAOB Developments” by Carlton E.

Tartar, Associate Chief Accountant, Office

of the Chief Accountant as follows:

This change aligns the impairment

testing process more closely with the Company’s financial year-end and facilitates a more efficient integration of the impairment

analysis with the annual financial reporting cycle.

This adjustment in timing is deemed to provide

a more relevant and timely assessment of the recoverable amounts of our assets, reflecting the operational and financial performance

for the entire financial year.

We do not believe a different result in impairment

assessment would have occurred had the measurement been conducted at November 15, 2023 vs.

December 31, 2023.

November 15 th was previously elected

because it was one year from the date, we had acquired the goodwill.

The Company had noted no goodwill impairment trigger events between

the November 15 th and December 31 st dates in 2022.

While November 15 th was the elected policy date

at that time, we could have also considered December 31 st a relevant measurement date in determining that policy in the

We conducted an impairment test at June 30,

2023 as outlined in Note 5, which allowed for less than twelve months between conducting impairment tests with this policy change.

change is applied prospectively from the current year and does not materially affect the comparability of our financial statements.

Business Combination

Business Combination detailed in Note 1 above was accounted for as a reverse recapitalization, with no goodwill or other intangible assets

recorded, in accordance with GAAP.

Under this method of accounting, NLIT is treated as the acquired company for financial reporting purposes.

Accordingly, for accounting purposes, the Business Combination is treated as the equivalent of SHF issuing shares for the net assets

of NLIT, accompanied by a recapitalization.

The net assets of NLIT are recognized at fair value (which was consistent with carrying value),

with no goodwill or other intangible assets recorded.

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

or other intangible assets recorded, in accordance with GAAP.

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

for financial reporting purposes.

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

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

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

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

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

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

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

million thereafter.

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

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

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are to be recorded in accordance with GAAP.

The Company is authorized to issue 1,250,000

preferred shares with a par value of $ 0.0001

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

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

preferred shares issued or outstanding and no

preferred shares outstanding on December 31, 2021.

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

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

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

No other dividends shall be paid on

the preferred stock.

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

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

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

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

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

to hold any preferred shares, such preferred stock holder will be entitled to receive the aggregate shares of Class A Common Stock that

would be issuable based upon its initial purchase of preferred stock at the adjusted Conversion Price .

Additionally, on January 25, 2023,

at a special meeting of the Company’s stockholders the reduction in the floor conversion price of the outstanding preferred stock

from $ 2.00 per share to $ 1.25 per share.

The approval was obtained to comply with the Nasdaq listing rules requiring stockholder

approval for issuances of voting stock exceeding 20 % of the voting stock outstanding at the time of the vote.

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

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

As of December 31, 2023,

there were 1,101 preferred shares issued and outstanding and 14,616 preferred shares issued and outstanding on December 31, 2022.

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

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

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

No other dividends shall be paid on the preferred

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

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

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

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

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

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

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

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

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

A Common Stock:

3 unchanged sentences

December 31, 2023 there were 23,732,889 and 54,563,372 shares, respectively, of Class A Common Stock issued or outstanding.

As of December

31, 2022, 3,667,377 Class A Common Stock are held by the purchasers under forward purchase agreement dated June 16, 2022, by and

among the Company and such purchasers.

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

December 31, 2023, and December 31, 2022, 3,667,377 Class A Common Stock are held by the purchasers under forward purchase agreement

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

The fair value of net assets

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

of Fair Value Net Assets

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( 1,394,453 )

Class A Common Stock subject to possible redemption

Class A Common Stock

subject to possible redemption

( 79,259,819 )

Fair value of net assets acquired

following table summarizes the total fair value of consideration:

value of net assets acquired

The following table summarizes the total fair value of

consideration:

of Fair Value Consideration

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

Company’s Class A common

stock comprises of 11,386,139 shares

$ 115,000,000

11 unchanged sentences

are maintained for SHS, SHF or the Branches.

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

$ 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 (Refer to Note 10 to the financial statements below.)

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

1 unchanged sentence

d/b/a/ ABACA (collectively “Abaca”).

This acquisition was completed

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

This acquisition was completed in

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

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

8 unchanged sentences

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

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

shares of the Company as follows:

to the Abaca merger agreement, as amended, the Company acquired Abaca in exchange for $ 30,000,000 ,

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

consideration in an amount equal to (i) $ 9,000,000 ($ 3,000,000 was payable at the closing of the Mergers (the “Merger Closing”),

3 unchanged sentences

Parent Trading Price and $ 12,600,000 (minus an outstanding note balance of $ 500,000 , plus accrued interest) in shares of Class A

Common Stock at the one-year anniversary of the Merger Closing based on a 10-day VWAP (collectively, the “Future stock consideration”).

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

received from independent valuation firm.

Common Stock at the one-year anniversary of the Merger Closing based on a 10-day VWAP (collectively, the “Deferred stock consideration”).

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

received from an independent valuation firm.

following table summarizes the purchase price allocation:

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Accrued Expense

Fair value of net assets acquired

Fair value of net assets

Other intangibles

1 unchanged sentence

( 1,758,769 )

Total purchase consideration

purchase consideration

following table summarizes the total fair value of consideration:

2 unchanged sentences

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

Settlement of pre-existing notes along with accrued interest

Future consideration settled in common stock

Settlement of pre-existing notes along with

accrued interest

Deferred consideration

settled in common stock

Fair value of consideration

8 unchanged sentences

to those future cash flows.

following table summarizes the final adjustments made to the provisional purchase price allocation.

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

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

by an independent third party.

4 unchanged sentences

weighted average cost of capital for both the company and other market participants.

The useful lives for intangible assets were determined

The useful lives of intangible assets were determined

based upon the remaining useful economic lives of the intangible assets that are expected to contribute directly or indirectly to future

The estimated fair value of intangible assets and related useful lives as included in the purchase price allocation include:

of Intangible Assets and Related Useful Lives as Included in Purchase Price Allocation

Useful life in Years

Schedule of Intangible Assets and Related Useful Lives as Included

in Purchase Price Allocation

life in Years

Market related intangible assets

3 unchanged sentences

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

Sales revenues of $ 491,149 and net losses before tax

of $ 257,967 from the acquired operations are included in the consolidated statement of operations from the date of acquisition

for the year ended December 31, 2022.

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

revenues and net earnings for the year ended December 31, 2022.

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

related costs in the consolidated statement of operations for the year ended December 31, 2022.

Supplemental Pro Forma Information

following unaudited pro forma summary presents consolidated information of the Company as if the business combination had occurred on

January 1, 2022, the earliest period presented herein:

of Proforma Information of Operations

For the Year Ended December 31,

Net Income (Loss)

Deferred consideration

per the note 4, Under the Abaca merger agreement, as amended, the Company acquired Abaca in exchange for $ 30,000,000 ,

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

consideration in an amount equal to (i) $ 9,000,000 ($ 3,000,000 was payable at the closing of the Mergers (the “Merger Closing”),

with an additional $ 3,000,000 payable at each of the one-year and two-year anniversaries of the Merger Closing), (collectively, the

“Deferred Cash Consideration”);

Stock equal to the lesser of (1) 2,100,000 shares or (2) a number of shares equal to (i) $ 8,400,000 , divided by (ii) the Closing

Parent Trading Price and $ 12,600,000 (minus an outstanding note balance of $ 500,000 , plus accrued interest) in shares of Class A

Common Stock at the one-year anniversary of the Merger Closing based on a 10-day VWAP (collectively, the “Deferred stock consideration”)

a result, there was $ 11.3 million and $ 5.6 million of liabilities for deferred stock consideration and deferred cash consideration were

recognized at the date of acquisition on November 15, 2022.

Such liabilities were marked to fair value throughout the years ended December

31, 2023, and 2022, for the change in the fair value of deferred consideration in the consolidated statements of operations.

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

the deferred consideration payable and the deferred stock consideration payable on the one-year anniversary of the merger closing.

main points of the amendment are outlined below:

The deferred stock consideration

payable on the first anniversary of the merger amounts to $ 12,600,000 minus the Closing Note Balance and the Working Capital divided

by $ 2.00 per share.

As a result, 5,835,822 shares of common stock issued as the stock consideration on the first anniversary of the

No changes were made to the

cash payments of $ 3,000,000 payable at each of the one-year (November 15, 2023) and two-year (October 5, 2024) anniversaries of the

original closing.

Added a Third Anniversary

Consideration Payment of $ 1,500,000 (due October 5, 2024) 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

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.

The Company issued stock

warrants equal to 5,000,000 shares of the Company’s common stock for an initial exercise price of $ 2.00 per share.

The Company has also granted

the Abaca Stockholders’ Representative the right to nominate 3 qualified candidates for the Company’s Board of Directors

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

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

a result of the above, under the original agreement, the Company would have been obligated to issue 16.67 million common shares to the

shareholders of Abaca, based on the fair value of the Company’s common shares on October 26, 2023, of $ 0.70 .

The second amendment

to the merger agreement revised these terms such that the Company issued 5.8 million common shares at a value of $ 2.00 .

The difference

between the fair value of the first anniversary payment liability recognized vs.

remeasured under the amended terms was $ 7.7 million

recorded as a fair value adjustment in the statement of operations.

the second amendment introduced a third-anniversary consideration, which includes a payment of $ 1.5 million, settleable in cash, stock,

or a combination of both, at the discretion of the Company and warrants of 5 million shares of the Company’s common stock at an

initial exercise price of $ 2.00 per share.

The fair value of this third-anniversary payment and warrants was determined pursuant to ASC

815, and recognized as $ 430,000 and $ 1,643,699 , respectively on October 26, 2023, also recorded as part of the fair value adjustment.

The change in the amount of deferred consideration from January 1, 2022, to December 31, 2023, is as follows:

of Change in Deferred Consideration

consideration

Anniversary Consideration Payment

January 1, 2022

Abaca acquisition

Fair value adjustment

December 31, 2022

Working capital adjustment

Issuance of shares and payment to shareholders

( 4,085,075 )

Goodwill and other intangibles

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

basis at the end of the fiscal year, or more frequently if events or circumstances indicate that impairment may be more likely than not.

During the year ended December 31, 2022, no impairment charges have been taken against the company’s goodwill.

The carrying amount

of goodwill arose from the acquisition described in Note 4, “Acquisition.”

change in the carrying amount of goodwill from December 31, 2021, to December 31, 2022, is as follows:

of Carrying Amount of Goodwill

( 3,000,000 )

Issuance of Abaca warrants

( 1,643,699 )

Issuance of third anniversary payment

consideration

Gain recognized in the consolidated statements

of operations

( 5,645,107 )

Fair value adjustment

December 31, 2023

second amendment has also led to a net gain of $ 5.6 million, which has been recorded in the Consolidated Statements of Operations.

table below outlines the effects of the transaction:

of Change in Fair Value of Deferred Consideration

Change in the fair value of stock

consideration

Fair value of third-anniversary consideration

Fair value of

Abaca warrants

( 1,643,699 )

Change in the fair value of deferred consideration

on October 26, 2023, due to Second Amendment

Adjustment to

the fair value of deferred consideration for the year 2023

( 1,074,950 )

Net impact recognized

in the Consolidated Statements of Operations

Goodwill and Finite-lived Intangible Assets

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

net identifiable assets acquired.

Goodwill is tested for impairment at least annually, or more frequently if a triggering event occurs.

July 20, 2023, the Company agreed to terminate the Master Services and Revenue Sharing Agreement between Abaca and Central Bank, effective

October 1, 2023.

Under the agreement, the Company provided expertise and intellectual property that allowed the Company and Central Bank

to jointly serve the deposit banking needs of cannabis related businesses primarily located in Arkansas.

Company engaged a third-party valuation specialist to assist in the performance of an impairment analysis of the goodwill at June 30,

2023 in conjunction with the aforementioned triggering event, and also at December 31, 2023 for the annual impairment test.

In conducting

the quantitative goodwill impairment tests as of June 30, 2023, and December 31, 2023, the Company adopted a hybrid method, allocating

one-third of the emphasis on the income approach and the remainder two-third on the market approach to assess the goodwill’s fair

The discounted cash flow models reflect company’s assumptions regarding revenue growth rates, risk-adjusted discount rate,

terminal period growth rate, economic and market trends and other expectations about the anticipated operating results of the goodwill.

Under the market approach, the Company estimates the fair value based on market multiples of revenues derived from comparable publicly

traded companies with operating characteristics similar to the Company.

the interim impairment assessment at June 30, 2023, it was found that the carrying value of goodwill exceeded its fair value, leading

to the recognition of a $ 13.21 million non-cash goodwill impairment charge in the Company’s consolidated statements of operations.

The December 31, 2023, annual impairment test resulted in no additional impairment expense recognized, as the fair value did not surpass

the carrying value.

value determination of the goodwill requires considerable judgment and is sensitive to changes in underlying assumptions and factors.

As a result, there can be no assurance that the estimates and assumptions made for purposes of the quantitative goodwill impairment tests

will prove to be an accurate prediction of future results.

Examples of events or circumstances that could reasonably be expected to negatively

affect the underlying key assumptions and ultimately impact the estimated fair value of the goodwill may include such items as:

increase in the weighted-average cost of capital due to further increases in interest rates, (ii) timing and success of estimated future

income, it is possible that an additional impairment charge may be recorded in the future, which could be material.

of December 31, 2022, there were no negative indicators in the goodwill impairment that would impact the fair value of the goodwill.

change in the carrying amount of goodwill from January 1, 2022, to December 31, 2023, is as follows:

Schedule of Carrying Amount of Goodwill

January 1, 2022

Acquisition of Abaca

December 31, 2022

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

No impairment was recognized

during the years ended December 31, 2022 and 2021.

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

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

of Finite Lived Intangible Assets

in acquisition

Finite-lived intangible assets, net

Remaining Useful life in Years

December 31, 2021

Acquired in acquisition

Impairment of Goodwill

( 13,208,276 )

December 31, 2023

of December 31, 2023, our accumulated goodwill impairment was $ 13,208,276 .

intangible assets

Company reviews its finite-lived intangible assets is tested for impairment at least annually on December 31st unless any events or circumstances

indicate it is more likely than not that the fair value of the finite-lived intangible assets is less than its carrying value.

of June 30, 2023, due to the triggering event mentioned in the analysis of Goodwill analysis above, the Company conducted an interim

Furthermore, in alignment with our policy, an annual assessment was carried out on December 31, 2023.

The finite-lived intangible

assets consist of market-related intangibles, customer relationships, and developed technologies.

interim test, conducted as of June 30, 2023, utilized the Royalty Method for market-related intangibles, the Discounted Cash Flow Method

for customer relationships, and the Cost to Re-create Method for developed technologies.

This assessment led to the recognition of an

impairment charge of $ 3,680,463 due to the market-related intangibles and customer relationships carrying values exceeding their fair

The annual evaluation on December 31, 2023, applied the Relief from Royalty Method for both market-related intangibles and developed

technologies, and the Multi-Period Excess Earnings Method for customer relationships, revealing a diminished fair value of developed

technologies below their carrying value, resulting in an additional impairment charge of $ 2,019,000 .

The total impairment charges for

the year, amounting to $ 5,699,464 , were reflected in our consolidated statements of operations for the fiscal year ended December 31,

Schedule of Finite Lived Intangible Assets

Useful life in Years

in Acquisition

Market related intangible assets

1 unchanged sentence

Developed technology

Total intangible assets

intangible assets

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

Useful life in Years

in Acquisition

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

Market related intangible assets

Customer relationships

Developed technology

intangible assets

Loans Receivable

1 unchanged sentence

of Commercial Real Estate Loans Receivable

December 31, 2022

December 31, 2021

Commercial real estate loans receivable, gross

loan origination charges

Commercial real estate loans receivable, net

Allowance for loan losses

Commercial real estate loans receivable, net

Commercial real estate loans receivable,

for credit losses

real estate loans receivable, net

Current portion

Noncurrent portion

for Loan Losses

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

for Credit Losses

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

known and inherent risks in the loan portfolio.

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

underlying the quality of the loan portfolio.

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

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

may not be assured.

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

alternative sources of repayment.

allowance may consist of specific and general components.

While the allowance may consist of general and specific components, the allowance

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

allowance for loan losses consists of the following activity for the year ended December 31, 2022 and 2021:

of Allowance For Loan Losses

Allowance for loan losses

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

accordance with the credit loss policy described in Note 2.

allowance for credit losses consists of the following activity for the year ended December 31, 2023 and 2022:

Schedule of Allowance For Loan Losses

Allowance for credit losses

Beginning balance

Cumulative effect from

adoption of CECL

Ending balance

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Individually evaluated for impairment

Collectively evaluated for impairment

Allowance for loan losses:

evaluated for impairment

Allowance for credit losses:

Individually evaluated for impairment

Collectively evaluated for impairment

Collectively evaluated

for impairment

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

Additionally, no loans

were modified during the years ended December 31, 2023, or 2022.

quality of loans:

1 unchanged sentence

based on the loan payment status on monthly basis.

All the loans outstanding on December 31,2022 are evaluated based on their payment

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

The Company continuously evaluates the credit quality of each indemnified loan by

assessing the risk factors and assigning a risk rating based on a variety of factors.

The detailed breakdown of risk factors described

carrying value, excluding the CECL Reserve, of the Company’s loans held at carrying value within each risk rating is as follows:

of Risk Rating

Indemnification Liability

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

third-party vendor.

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

outstanding loan principal.

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

loans or unsecured loans and lines of credit.

No loans were funded by PCCU prior to January 1, 2022.

discussed at Note 10 to the consolidated financial statements, and pursuant to PCCU Agreements, PCCU funds loans through a third-party

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

funded and serviced by PCCU and 0.25% of the outstanding loan principle serviced by SHF.

The below schedule details outstanding amounts

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

of Outstanding Amounts

Secured term loans

Unsecured loans and lines of credit

Total loans funded by Parent

amounts were performing at December 31, 2022.

(Refer to Note 22, “Subsequent Events,” below for loan information subsequent

to December 31, 2022.) Secured loans contained an interest rate ranging from 5.90 % to 12.00 % .

Unsecured loans and lines of credit contain

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

Unsecured lines of credit had incremental availability of $ 996,958 and

$ 225,000 at December 31, 2022 and December 31, 2021.

Unsecured loans and

lines of credit

loans funded by Parent

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

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

+1.50 % to Prime +6.00 %.

Unsecured lines of credit had incremental availability of $ 525,000 and $ 996,958 at December 31, 2023 and December

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

The indemnity liability reflects SHF management’s estimate of probable loan

losses inherent under the agreement at the balance sheet date.

Management uses a disciplined process and methodology to establish the

liability, and the estimates are sensitive to risk ratings assigned to individual loans covered by the agreement as well as economic

assumptions driving the estimation model.

Individual loan risk ratings are evaluated at least a quarterly based on each situation by

SHF management.

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

published by the US Federal Reserve.

indemnity liability activity on December 31, 2022, is as follows:

of Indemnity Liability

December 31, 2022

The indemnity liability reflects SHF management’s estimate of probable

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

The Company’s estimated indemnity liability on the reporting

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

indemnity liability activity are as follows:

Schedule of Indemnity Liability

Beginning balance

Cumulative effect from

adoption of CECL

Ending balance

loans were current and considered performing at December 31, 2022.

One loan was identified pursuant to potential default on January 5,

(Refer to Note 22, “Subsequent Events,” below.)

loans were current and considered performing at December 31, 2023 except one loan which was identified pursuant to potential default

on January 5, 2023.

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

was past due pursuant to its December 2022 payment.

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

due to business losses.

The Company is discussing workout options with the borrower.

The above-mentioned loan is now greater than 120

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

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

quality of indemnified loans:

1 unchanged sentence

indicators based on the loan payment status on monthly basis.

All the indemnified loans outstanding on December 31,2022 are evaluated

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

The Company continuously evaluates the credit quality of each indemnified

loan by assessing the risk factors and assigning a risk rating based on a variety of factors.

Risk factors include property type, geographic

and local market dynamics, physical condition, projected cash flow, loan structure and exit plan, loan-to-value ratio, fixed charge coverage

ratio, project sponsorship, and other factors deemed necessary.

Based on a 10-point scale, the Company’s loans are rated “0”

through “10,” from less risk to greater risk, which ratings are defined as follows:

of repayment risk.

The loan is fully guaranteed by the full faith and backing of the US Government or entirely secured by cash controlled

caliber loan with the lowest risk of default.

Significant excess cash flow after debt service and moderate to low leverage.

quality loan that carry’s a low risk of default.

Strong cash flow and relatively few negative individual risk factors.

with lower-than-average level of risk.

Excess cash flow and other factors contributing to the overall low level of risk in the loan.

factors may be mixed with some negative and some positive aspects, but the overall rating will indicate an average level of risk.

in this category have the maximum level of risk that can be accepted while still recommending a new loan for origination.

risk factors may contain multiple negative factors, but they are generally outweighed by the positive aspects of the loan.

is a temporary and curable condition resulting in a lower risk rating.

is a potential weakness that may result in the deterioration of the prospect of repayment that are not temporary and may require

additional collection or workout efforts.

in this category are inadequately protected by the current net worth and paying capacity of the obligors or of the collateral pledged

and have well-defined weaknesses that jeopardize the liquidation of the debt with distinct possibility of loss.

SHF may be required

to advance additional funds to manage the loan.

Escalated collection activities such as foreclosure have been scheduled with anticipated

losses up to 20% of the outstanding balance.

or liquidation in full highly questionable and improbable.

Escalated collection activities such as foreclosure have commenced with

anticipated losses from 20% to 50% of the outstanding balance.

Uncollectable

A complete write-off is imminent although a partial recovery may be affected in the future.

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

Other than potential loan losses, no other

circumstances were identified meeting the requirements of a loss contingency.

provision for loan losses on the statement of operations consists of the following activity for the year ended December 31, 2022 and

Other than potential credit losses, no

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

carrying value, excluding the CECL Reserve, of the Company’s indemnified loans held at carrying value within each risk rating is

of Indemnified Loans Risk Rating

provision for credit losses on the statement of operations consists of the following activity for the year ended December 31, 2023 and

December 31, 2022:

of Provision for Loan Losses

Commercial real estate loans

Indemnity liability

Commercial real estate loans

Indemnity liability

December 31, 2022

December 31, 2021

Commercial real estate loans

Indemnity liability

Commercial real estate loans

Indemnity liability

Provision (benefit)

real estate loans

Property and equipment, net

4 unchanged sentences

accumulated depreciation

Property and equipment, net

expense was $ 10,361 and $ 1,921 for the year ended December 31, 2022, and December 31, 2021, respectively.

Property and equipment,

expense was $ 173,828 and $ 10,361 for the years ended December 31, 2023, and 2022, respectively.

Related party transactions

Servicing Agreement

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

SHF provides services as per the agreement

to CRB accounts at PCCU.

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

These costs include

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

to service these accounts.

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

Amounts due to SHF are

due monthly in arrears and upon receipt of invoice.

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

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

The agreement was amended and restated

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

to this agreement, SHF reported revenue of $ 8,823,608 for the year ended December 31, 2022, and $ 3,168,243 for the period July 1, 2021 to December

As of December 31, 2022, and December 31, 2021, 85 % and 100 % of the Accounts Receivable, respectively is due from PCCU.

allocations in 2021 include overhead expenses such as information technology, customer support, marketing, executive compensation and

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

identifiable customer deposits to the consolidated Parent.

Company had an Account Servicing Agreement with PCCU.

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

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

These costs include employees to manage account onboarding,

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

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

Amounts due to SHF were due monthly in arrears and upon

receipt of invoice.

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

2023, between PCCU and the Company.

Services Agreement

3 unchanged sentences

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

The respective duties and obligations as per the agreement

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

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

to these agreements and as amended and restated, the Company reported expenses of $ 775,259

for the year ended December 31, 2022, and $ 190,908

for the year ended December 31, 2021.

Furthermore, the outstanding amount payable to PCCU included in “Accounts payable” in the consolidated balance sheet is $ 196,968

for the year ended December 31, 2022, and $ 43,626 for the year ended December 31, 2021.

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

Pursuant to the Account Servicing Agreement, the Company’s fees for such services will equal all cannabis-related income, including

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

investment income, interest income, account activity fees, processing fees, flat fees, and other revenue generated from cannabis and multi-state

hemp accounts that are hosted on PCCU’s core system.

The Account Servicing Agreement and Support Services Agreement are for an initial

term of three years and will renew for additional one-year terms unless a party provides 120 days’ notice of non-renewal, provided

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

The Account Servicing Agreement will also

terminate within 60 days of the Company no longer qualifying as a “credit union service organization” (a “CUSO”)

or within 60 days of the assumption by a third party of all CRB-related accounts.

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

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

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

within 60 days of the Company no longer qualifying as a “credit union service organization,” as the Company will cease to

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

to the Support Services Agreement, as amended, PCCU will continue to provide to the Company certain operational and administrative

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

for CRB depository accounts for a monthly fee equal to $ 30.96

per account in 2022 and $ 25.32

per account in 2023 and 2024.

addition, investment income from CRB-related cash and investments (excluding loans) will be shared 25% to PCCU and 75% to the

Company and the

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

Amended and Restated Support Services Agreement also sets forth certain agreements of PCCU to limit bonus distributions to its

members to $ 30,000,000

during any 12-month period following the effective date of the agreement.

Finally, under the Support Services Agreement PCCU will

continue to allow its ratio of CRB-related deposits to total assets up to 65% unless otherwise dictated by regulatory, regulator or

policy requirements.

The below schedule demonstrates unaudited PCCU’s deposit capacity at December 31, 2022 and December 31,

of Demonstrates Deposit Capacity

2021 (Unaudited)

PCCU total assets

$ 695,072,554

$ 575,170,939

Capacity at 65%

CRB related deposits

Incremental capacity

$ 290,658,185

$ 227,593,134

policy also requires they maintain an internal ratio of net worth to total assets of at least 10 %.

CRB related deposit capacity maybe

limited if PCCU ratio declines below this threshold.

This agreement was replaced and superseded in its entirety

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

Servicing Agreement

2 unchanged sentences

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

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

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

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

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

Under the Loan Servicing Agreement, SHF has agreed to indemnify

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

The agreement is for an initial

term of three years and will renew for additional one-year terms unless a party provides 120 days’ notice of non-renewal or there

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

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

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

Under PCCU’s loan policy for

loans to CRBs, PCCU’s Board of Directors has approved aggregate lending limits at the lessor of 1.3125 times PCCU’s net worth

or 65 % of total CRB deposits.

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

construction, iii) unsecured and iv) mixed collateral with each category limited to a percentage of PCCU’s net worth.

loans to any one borrower or group of associated borrowers are limited by applicable National Credit Union Association regulations to

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

below schedule demonstrates the ratio of CRB related loans funded by PCCU to the relative lending limits at December 31, 2022.

were funded prior to January 1, 2022.

of Demonstrates Deposit Capacity

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

and serviced by PCCU.

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

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

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

Under the Loan Servicing Agreement, SHF has

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

This agreement

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

Alliance Agreement

March 29, 2023, the Company and PCCU entered into the Commercial Alliance Agreement.

This Agreement sets forth the terms and conditions

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

The Commercial Alliance Agreement

replaces and supersedes, in their entirety, the following agreements entered into between the aforementioned parties:

the Amended and

Restated Loan Servicing Agreement (the “Loan Servicing Agreement”, dated September 21, 2022);

the Second Amended and Restated

Account Servicing Agreement (“the “Account Servicing Agreement,” dated May 23, 2022, effective February 11, 2022) and

the Second Amended and Restated Support Services Agreement (the “Support Agreement,” dated May 23, 2022, effective February

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

borrowers that are cannabis-related businesses and the loan servicing and monitoring responsibilities provided by the Company and PCCU.

In particular, the Commercial Alliance Agreement provides for procedures to be followed upon the default of a loan to ensure that neither

the Company nor PCCU will take title to or possession of any cannabis-related assets, including real property, that may be collateral

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

Under the Commercial Alliance agreement, the PCCU has the right to receive monthly fees

for managing loans.

For SHF-serviced loans, which are CRB loans provided by the PCCU but primarily handled by SHF, a yearly fee of 0.25 % of the remaining loan balance is applied.

On the other hand, loans

both financed and serviced by the PCCU are charged a yearly fee of 0.35 % on their outstanding balance.

These fees are calculated using

the average daily balance of each loan for the preceding month.

In addition, the Company’s is obligated by the Commercial Alliance

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

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

services to include:

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

on CRB-related loans, participation fees and servicing fees), investment income, interest income, account activity fees, processing fees,

flat fees, and other revenue generated from cannabis and multi-state hemp accounts that are hosted on PCCU’s core system for a

monthly fee equal to $30.96 per account in 2022, $25.32-$27.85 per account in 2023, and $26.08-$28.69 in 2024.

In addition, as it pertains

to CRB deposits held at PCCU, investment and interest income earned on these deposits (excluding interest income on loans funded by PCCU)

will be shared 25% to PCCU and 75% to the Company.

Finally, under the Commercial Alliance Agreement, PCCU will continue to allow its

ratio of CRB-related deposits to total assets to equal at least 60% unless otherwise dictated by regulatory, regulator or policy requirements.

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

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

fiscal 2022 and up to the third quarter of 2023, our investment earnings were solely from interest on deposits at the Federal Reserve

Bank, capped at the earnings accrued by PCCU from its reserves.

However, a strategic shift in the fourth quarter of 2023 led us to adopt

Federal Reserve’s interest rates applied to the daily average balance of SHF customer deposits, with certain exclusions.

applied retroactively from the beginning of 2023, resulted in incremental revenue of $ 549,000 recognized in the fourth quarter.

our Commercial Alliance Agreement, we are obligated to remit 25 % of the investment hosting fees to PCCU based on this income.

below schedule demonstrates the ratio of CRB related loans funded by PCCU to the relative lending limits:

of Demonstrated Deposit Capacity

CRB related deposits

6 unchanged sentences

PCCU loans funded

Amounts available under lines of credit

Incremental capacity

Amounts available under

lines of credit

$ 154,971,429

to this agreement, the Company reported expenses of $ 26,088 for the year ended December 31, 2022 and $ 0 for the year ended December 31,

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

revenue from the PCCU Agreements recognized in the statements of operations consists of the following for the year ended December 31,

2023, and December 31, 2022:

of Revenue from Operations

Account servicing agreement

Commercial alliance

operating expense from the PCCU Agreements recognized in the statements of operations consists of the following for the year ended December

31, 2023, and December 31, 2022:

of Operating Expense from Operations

Support services agreement

Loan servicing agreement

Commercial alliance

Operating expense

of shares to PCCU

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

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

rate of 4.25 % and a Security Agreement pursuant to which the Company will grant, as collateral for the Note, a first priority security

interest in substantially all of the assets of the Company.

Securities Issuance Agreement, pursuant to which the Company issued 11,200,000 shares of the Company’s Class A Common Stock

Following the issuance of the Shares, PCCU own 46.39 % of the outstanding Class A Common Stock.

In connection with the Securities

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

Registration Rights Agreement requires the Company to register the Shares for resale pursuant to the Securities Act of 1933, as amended

(the “Securities Act”);

and the Lock-Up Agreement restricts PCCU from transferring the Shares until the earlier of (i)

six (6) months after the date of the Securities Issuance Documents or (ii) the consummation of a transaction with an unaffiliated

third party in which all of the Company’s stockholders have the right to exchange their shares of Class A Common Stock for

cash, securities, or other property;

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

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

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

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

1 unchanged sentence

pursuant to ASC 842.

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

The lease was terminated on February 1, 2023.

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

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

The outstanding amount is appearing under the head “accounts payable”

in the consolidated balance sheet.

The amount outstanding on December 31, 2023, and December 31, 2022, is $ 0 and

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

outstanding balances associated with the PCCU disclosed in the balance sheet are as follows:

of Outstanding Balances from Balance Sheet

December 31, 2023

December 31, 2022

Accounts receivable

Accounts payable

Due to Seller (Refer to Note 11 to the financial

statements below)

Senior Secured Promissory Note (Refer to Note

12 to the financial statements below)

Of the $ 8.9 million and $ 8.4 million

of cash and cash equivalents at December 31, 2023 and 2022, $ 4.6 million and $ 8.3 million of the cash and cash equivalents were held

in deposit accounts at PCCU as a related party.

with Abaca shareholder

disclosed in Notes 4 and 5 to the consolidated financial statements, the merger with Abaca that occurred in October 2022 involves certain

payments either paid or payable to the former shareholders of Abaca, warrants and issuances of stock.

The former shareholders of Abaca

represent a related party to the Company based on current employment with the Company and their significant equity ownership interest

in the Company.

Due to Seller

December 31, 2022 amounts due to seller were as follows:

due to seller were as follows:

of Amounts Due to Seller

Due to Seller-Current (Unsecured)

Due to Seller-Non-Current (Unsecured)

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

in connection with the Business Combination consisted of an aggregate of $ 185,000,000 , consisting of (i) 11,386,139 shares of the Company’s

Class A Common Stock with an aggregate value equal to$ 115,000,000 and (ii) $ 70,000,000 in cash, $ 56,949,800 of which will be paid on

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

Due to Seller-long term

loans funded by PCCU

contemplated by the Unit Purchase Agreement, related to reverse acquisition of NLIT, the consideration paid to PCCU in connection with

the Business Combination consisted of an aggregate of $ 185,000,000 , consisting of (i) 11,386,139 shares of the Company’s Class

A Common Stock with an aggregate value equal to$ 115,000,000 and (ii) $ 70,000,000 in cash, $ 56,949,800 of which was to be paid on a deferred

basis (the “Deferred Cash Consideration”).

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

in six equal installments of $ 6,416,667 , payable beginning on the first business day following April 1,2023 and on the first business

in six equal instalments of $ 6,416,667 , payable beginning on the first business day following April 1,2023 and on the first business

day of each of the following five fiscal quarters, for a total of $ 38,500,002 .

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

Capital USA Inc.

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

(“Luminous”).

As per the terms of the agreement, PCCU has agreed to defer all payments owed by the Company

pursuant to the Purchase Agreement for a period of six (6) months from the date hereof while the Parties engage in good faith efforts

to renegotiate the payment terms applicable to the Deferred Obligation (the “Forbearance Period”).

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

Repayment schedule

of the amount outstanding on December 31,2022 are as follows:

of Repayment of the Amount Outstanding

Date of payment

June 13, 2023

October 1, 2023

January 1, 2024

April 1, 2024

October 1, 2024

January 1, 2025

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.

As per the terms of the agreement, PCCU has agreed to defer all payments owed by the Company pursuant

to the Purchase Agreement for a period of six (6) months from the date hereof while the Parties engage in good faith efforts to renegotiate

the payment terms applicable to the Deferred Obligation (the “Forbearance Period”).

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

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

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

at the rate of 4.25 %;

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

interest in substantially all of the assets of the Company;

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

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

The breakdown of the liabilities settled under this transaction

are as follows:

Breakdown of Liabilities Settled

Due to Seller

Cash payment obligation under business combination

Business combination expense payable to seller

Interest accrued but

Total deferred obligation

Senior secured promissory note

Change in deferred

Amount charged to Stockholders’

Equity towards issuance of common stock

Senior Secured Promissory Note

of Senior Secured Promissory Note

Senior Secured Promissory Note

Senior Secured Promissory

Note (long term)

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

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

“Note”) in the principal amount of $ 14,500,000 bearing interest at the rate of 4.25 % and a Security Agreement pursuant to

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

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

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

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

of Outstanding Amount on Debt

Year of payment

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

6 unchanged sentences

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

As of December 31, 2022, and 2021, net assets recorded under

operating leases were $ 1,016,198 on and $ 0 , respectively, and net lease liabilities were $ 1,028,233 and $ 0 , respectively.

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

recorded under operating leases were $ 859,861 and $ 1,016,198 , respectively, and net lease liabilities were $ 1,007,993 and $ 1,028,233 ,

respectively.

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

5 unchanged sentences

detailed in the table below:

of Lease Cost,Right of Use Assets Related to Lease and Future Minimum Lease Payments

December 31, 2022

December 31, 2021

of Lease Cost and Right of Use Assets Related to Lease and Future Minimum Lease Payments

Operating lease cost

Short-term lease cost

Total Lease Cost

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

ROU assets that are related to lease properties

are presented as follows:

Beginning balance

3 unchanged sentences

Ending balance

Further information related to leases is as follows:

Further information related to leases is as

Weighted-average remaining lease term

Weighted-average discount rate

Future minimum lease payments as of December 31, 2022 are as follows:

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

Schedule of Future Minimum Lease Payments

Total future minimum lease payments

2 unchanged sentences

Current portion

Non-current portion of lease liabilities

Non-current portion

of lease liabilities

Disaggregated

1 unchanged sentence

of Disaggregated Revenue

Year Ended December 31,

ended December 31

Deposit, activity, onboarding income

Safe Harbor Program income

Investment income

Loan interest income

Miscellaneous fee income

Safe Harbor Program

Total Revenue

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

schedule pursuant to deposit servicing agreement with PCCU.

Safe Harbor Program income consists of

o utsourced support to other financial institutions providing banking to the cannabis industry whose

income is recognized on the basis of usage as per the agreements.

Investment income consist of interest earned on deposits with the Federal

Reserve Bank pursuant to an investment servicing agreement with PCCU.

Loan interest income consist of interest earned on both direct and

indemnified loans pursuant to a loan servicing agreement with PCCU.

Other Current Assets

of Other Current Assets

Year Ended December 31,

Advance to capital supplier

Advance to other

schedule with financial partner institutions.

Safe Harbor Program income consists of outsourced support to other financial institutions

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

Loan interest income

consist of interest earned on both direct and indemnified loans pursuant to a commercial alliance agreement with PCCU.

Investment income

consist of interest earned on the daily deposits balance with financial institution.

fiscal 2022 and up to the third quarter of 2023, our investment earnings were solely from interest on deposits at the Federal Reserve

Bank, capped at the earnings accrued by PCCU from its reserves.

However, a strategic shift in the fourth quarter of 2023 led us to adopt

Federal Reserve’s interest rates applied to the daily average balance of SHF customer deposits, with certain exclusions.

applied retroactively from the beginning of 2023, resulted in incremental revenue of $ 549,000 recognized in the fourth quarter.

our Commercial Alliance Agreement, we are obligated to remit 25 % of the investment hosting fees to PCCU based on this income which is

classified as “General and Administrative Expenses” in the Consolidated Statements of Operations.

In 2023, PCCU’s contributions

to the Company’s revenues included $ 5,150,397 from deposits, activities, and client onboarding, $ 5,803,114 from investment income,

and $ 2,883,192 from loan interest income.

The associated expenses for these revenues were $ 529,209 for account hosting, $ 1,445,517 for

investment hosting fees, and $ 81,577 for loan servicing fees, all in accordance with the Loan Servicing Agreement and the Commercial

Alliance Agreement, classified as “General and Administrative Expenses” in the Consolidated Statements of Operations.

2022, PCCU contributed to the Company’s revenues with $ 5,554,922 from deposits, activities, and client onboarding, $ 2,110,572 from

investment income, and $ 989,642 from loan interest income.

The related expenses for these revenue streams were $ 255,853 for account hosting,

$ 519,406 for investment hosting fees, and $ 26,088 for loan servicing fees, all in compliance with the Loan Servicing Agreement, classified

as “General and Administrative Expenses” in the Consolidated Statements of Operations.

Deferred underwriter fee

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

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

(i) $ 715,750

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

Company made the payment of its first installment of $ 715,750 and defaulted on the remaining outstanding amounts.

The outstanding balance

of the note on December 31, 2022 was $ 1,450,500 .

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

to which the Company paid $ 550,000 to EF Hutton in full settlement of the amount due and the difference of $ 900,500 has been accounted

for in the “Consolidated Statements of Parent-Entity Net Investment and Stockholders’ Equity.”

Commitments and Contingencies

The Company has issued

irrevocable Letter of Credit in favor of AFCO Credit Corporation (“AFCO”), for an aggregate amount of US $ 750,000 ,

which can be drawn in the case of following events:

Company continues to be in default, after 10 days’ written notice, in the payment of any sums due to AFCO under a premium finance

agreement dated on or about October 20, 2022, or

case concerning the Company has been filed under title 11 of the United States Code and that, not more than 95 days before that case

commenced, AFCO received loan payments amounting to not less than (total of payments received in the 95-day period prior to filing

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

Company is involved in, or has been involved in, arbitrations or various other legal proceedings that arise from the normal course

of its business.

The ultimate outcome of any litigation is uncertain, and either unfavorable or favorable outcomes could have a material

impact on the Company’s results of operations, balance sheets and cash flows due to defense costs, and divert management resources.

The Company cannot predict the timing or outcome of these claims and other proceedings.

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

that arise from the normal course of its business.

The ultimate outcome of any litigation

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

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

and divert management resources.

The Company cannot predict the timing or outcome of these

claims and other proceedings.

connection with the Company’s initial public offering (“IPO”), the Company entered into a registration rights agreement

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of the Company and the IPO.

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

the underwriters a right of first refusal to act as lead-left book running manager and lead left manager for any and all future private

or public equity, convertible and debt offerings during such period.

In accordance with FINRA Rule 5110(f)(2)(E)(i), such right of

first refusal shall not have a duration of more than three years from the effective date of our Registration Statement.

connection with the issuance of common stock to Abaca shareholders, the Company commits to registering the stock upon the exercise

of Warrants if required by law or regulation to ensure the shares can be sold without restrictive legends, known as the Warrant Registration

Should this requirement arise, the Company is obliged to file a registration statement with the SEC within 45 calendar

days of notification of the Warrant Registration Requirement.

The failure to file within this timeframe constitutes an event of default.

Moreover, the Company is dedicated to making the registration statement effective as promptly as possible and maintaining its effectiveness,

along with a current prospectus, until the Warrants expire according to this Agreement’s terms.

In the event a registration

statement triggered by a Warrant Registration Requirement is not declared effective by the SEC within one year from its filing date,

Warrant holders are entitled to exercise their Warrants on a cashless basis from the 366th day post-filing until the statement becomes

Earnings Per Share

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of Earning Per Shares, Basic and Diluted

For year Ended December 31

Ended December 31

$ ( 17,279,847 )

$ ( 35,128,083 )

Weighted average shares outstanding – basic

Basic net earnings per share

Basic net loss per share

Weighted average shares outstanding – diluted

Diluted net earnings (loss) per share

Diluted net loss per share

Weighted average shares calculation

December 31, 2022

Company public shares

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Shares issued for Abaca acquisition

Conversion of Preferred stock

Weighted average shares outstanding

share-based equity awards and conversion of preferred shares were excluded from the computation of dilutive loss per share because

inclusion of these awards would have had an anti-dilutive effect.

Restricted stock units issued

Conversion of Preferred

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

had an anti-dilutive effect.

The following table reflects the awards excluded.

of Awards Excluded

December 31, 2022

of Share-based Equity Awards Excluded From Computation of Dilutive Loss

Ended December 31

Share based payments

Shares to be issued to Abaca acquisition

Conversion of Preferred stock

Shares to be issued to Abaca shareholders

Conversion of preferred

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

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

the 2021, SHF was a single member limited liability company with no shareholders hence the disclosure related to earning per share is

not applicable.

Forward Purchase Agreement

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Midtown East, Verdun and Vellar shall retain any proceeds in excess of the Reset Price that is paid to SHF.

The trading value of the common stock combined with preferred

shareholders electing to convert their preferred shares to common stock triggered a lower reset price embedded in the forward purchase

agreement, or FPA.

As of December 31, 2022, the Company had already called a special meeting to lower the make-whole price under the

preferred share purchase agreement to $ 1.25 /share.

The Company, majority common shareholders and the preferred investors had entered into a voting agreement whereby the vote to approve

the $ 1.25 /share

make-whole price was secured.

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

issuance at $ 1.25 /share

compelled the company to recognize a reset price under the terms of the FPA of $ 1.25 /share.

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

Schedule of Forward Purchase Agreeement

On the date of acquisition

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

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

purchase agreement, or FPA.

In 2022, the Company had already called a special meeting to

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

2022, an agreement was reached among the Company, its common shareholders, and preferred investors, leading to a reduction in the

make-whole price to $ 1.25 per share.

This reset resulted in a significant decrease in the FPA receivable, from $ 37.9 million as of

September 30, 2022, to $ 4.6 million.

In 2023, there were no share transactions by FPA holders, and management identified no additional

impacts on the FPA receivable’s value on December 31, 2023.

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

of Forward Purchase Agreement

December 31, 2022

ended December 31, 2023

December 31, 2023

(September 28, 2022)

Share sold during the period

September 29, 2022 to December 31, 2022

September 29, 2022

to December 31, 2022

December 31, 2022

Name of the party

Opening Shares

Warrant Liability

Warrant Liabilities

and Private Placement Warrants

of December 31, 2022, the Company has 5,750,000 Public Warrants and 264,088 Private Placement Warrants;

there are no warrants as of December

The Public and Private

Placement Warrants may only be exercised for a whole

number of shares.

The Public and Private Placement

Warrants became exercisable on September 28, 2022, the date of the Business Combination and will expire on September 28,2027, or earlier

upon redemption or liquidation .

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

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

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

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

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

22 unchanged sentences

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

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

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

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

Accordingly, the warrants may expire

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

issuable upon the exercise of the private placement warrants were not transferable, assignable or saleable until 30 days after the completion

of a Business Combination, subject to certain limited exceptions.

Additionally, the private placement warrants are exercisable on a cashless

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

If the private placement

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

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

of December 31, 2022, the Company has 1,022,500 PIPE Warrants;

there are no PIPE warrants as of December 31, 2021.

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

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

by the initial purchasers or their permitted transferees.

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

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

on the same basis as the public warrants.

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

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

8 unchanged sentences

Stock within a specified period of time.

of December 31, 2023, the Company has 5,000,000 Abaca warrants .

As of December 31, 2022, the Company has no Abaca warrants

Abaca 5,000,000 stock warrants have an exercise price of $ 2.00 per share of Class A Common stock to be paid in Cash.

A Warrant may be

exercised only during the period commencing 1 year of the Effective Date and terminating five ( 5 ) years from the effective date of the

registration statement.

The Company may, in its sole discretion, settle the Warrant when exercised, in whole or in part, in cash in lieu

of issuing shares of Common Stock underlying the Warrant.

The Company may elect to pay the Registered Holder in cash in the amount equal

to the difference between the fair market value of the Company’s Common Stock on the date of exercise and the warrant price ($ 2.00 )

multiplied by the number of shares of Common Stock.

The Company commits to promptly registering shares issued upon Warrant exercises

if required by law, ensuring these shares can be sold without restrictions.

This registration must be filed within 45 days of receiving

a notification of such a requirement, with failure to do so constituting a default.

The Company will endeavor to keep the registration

effective until the Warrants expire.

If the registration isn’t effective within one year, Warrant holders may exercise their Warrants

on a cashless basis, receiving shares based on a defined fair market value calculation.

This process aims to facilitate the straightforward

and lawful exercise of Warrants, ensuring the shares issued are readily tradable without the need for restrictive legends.

Financial Instruments

13 unchanged sentences

warrants are recorded at fair value on a recurring basis.

The Company obtains dealer quotes, of Level 1 inputs, based on observable data

to value these warrants.

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

data to value these warrants.

Placement Warrants:

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

The Company value these derivatives based on third party reports

for Level 3 inputs.

Level 3 inputs, based on observable data to value these derivatives.

In 2023, the Company internally assessed the value of these derivatives

with Level 3 inputs, which are derived from Black-Scholes model .

This is a change from 2022, when the valuation was

based on third-party reports, also utilizing Level 3 inputs for these derivatives.

Management believes that this change was necessary

to enhance the precision and control over the valuation process, allowing for a more tailored and responsive approach to the unique characteristics

of the derivatives and the evolving market conditions.

Warrants are recorded at fair value on a recurring basis.

The Company value these derivatives based on third party reports for Level

Level 3 inputs, based on observable data to value these derivatives.

In 2023, the Company internally assessed the value of these derivatives with

Level 3 inputs, which are derived from Black-Scholes model.

This is a change from 2022, when the valuation was based on third-party reports,

also utilizing Level 3 inputs for these derivatives.

Management believes that this change was necessary to enhance the precision and

control over the valuation process, allowing for a more tailored and responsive approach to the unique characteristics of the derivatives

and the evolving market conditions.

Warrants are recorded at fair value on a recurring basis.

The Company internally assessed the value of these derivatives with Level 3

Level 3 inputs, based on unobservable data derived from Black-Scholes model.

anniversary payment consideration:

anniversary payment consideration are recorded at fair value on a recurring basis.

The Company value these derivatives based on third

party reports for Level 3 inputs.

Level 3 inputs, based on unobservable data derived from Black Scholes-Merton model.

purchase option derivatives:

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

The Company values these derivatives based on third party

reports for Level 3 inputs.

Level 3 inputs, based on observable data to value these derivatives.

In 2022, the Company values these derivatives based on third

party reports for Level 3 inputs.

In 2023, no significant risk factor changes affecting FPA derivative values were noted.

Consequently,

management retained the December 31, 2022, valuation for December 31, 2023.

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

in the fair value hierarchy on December 31, 2022:

Schedule of Fair Value Assets and Liabilities Measured on Recurring Basis

Total Fair Value

Quoted Prices in Active Markets (Level 1)

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

of Fair Value Assets and Liabilities Measured on Recurring Basis

Prices in Active Markets (Level 1)

Other Unobservable Inputs (Level 3)

Prices in Active Markets (Level 1)

Unobserva ble

Quoted Prices in Active Markets

Significant Other Unobservable Inputs

Quoted Prices in Active Markets

Significant Other

PIPE warrants

Public warrants

Private placement warrants

PIPE Warrants

Forward purchase option derivative

Abaca warrant

Forward purchase derivative liability

Third anniversary payment consideration

Measured at Fair Value on a Nonrecurring Basis

were no assets or liabilities recorded at fair value on a nonrecurring basis for the periods ended December 31, 2022, and December 31,

that are measured at fair value on a nonrecurring basis primarily comprises of property, plant and equipment, right-to-use assets, finite

lived intangible assets and goodwill.

The Company does not record these at fair value on a recurring basis, however, the carrying value

of the assets may be reduced to fair value when the Company determines that impairment has occurred.

December 31, 2023, the Company’s developed technology asset were measured at fair value on a nonrecurring basis as result of annual

impairment testing.

In order to evaluate the fair value of the developed technology asset, the annual impairment test employed the Relief

from Royalty Method for accurately reflecting market conditions and asset performance (Refer to note 5 - Goodwill and Finite-lived intangible

following table presents the carrying amounts and fair values of financial instruments measured on a nonrecurring basis, by the level

of valuation inputs in the fair value hierarchy, as of the dates indicated:

of Carrying Amounts and Fair Values of Financial Instruments Measured on a Nonrecurring Basis

on December 31, 2023

value measurement using

Developed Technology

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

intangible assets as of their measurement dates:

of Finite Lived Intangible Assets Measurement

As on December

Discount rate

Estimated useful life

Fair value measurements inputs

were no assets or liabilities recorded at fair value on a nonrecurring basis for the period ended December 31, 2022.

Value of Financial Instruments

6 unchanged sentences

value hierarchy, as of the dates indicated:

of Carrying Amounts and Fair Values of Financial Instruments by the Level of Valuation Inputs in the Fair Value Hierarchy

of Carrying Amounts and Fair Values of Financial Instruments

on December 31, 2023

Carrying amount

Fair value measurement using

value measurement using

Cash and cash equivalents

1 unchanged sentence

Deferred consideration

Due to seller - current portion

Due to seller - long term position

Deferred underwriter fee payable

Indemnity liability

Senior secured promissory note

Public warrants

1 unchanged sentence

PIPE warrants

Abaca warrants

Forward purchase derivative

As on December 31, 2021

Carrying amount

Fair value measurement using

Third anniversary payment consideration

on December 31, 2022

value measurement using

Cash and cash equivalents

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

presented in the following table:

of Fair Value Assets Measured on Recurring Basis

PIPE Warrants

Forward purchase receivables

Deferred consideration

Due to seller - current portion

Due to seller - long term position

Deferred underwriter fee payable

Public warrants

Private placement warrants

Forward purchase derivative

As on December 31, 2022

PIPE warrants

Private Placement Warrants

Forward purchase derivative

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

value are presented in the following table:

of Fair Value Assets Measured on Recurring Basis

the Year ended December 31, 2023

consideration

Balance at the beginning of the

Issued to Abaca shareholders

Acquired under business combination

Fair value adjustment

Balance at the end of

the Year ended December 31, 2022

Balance at the beginning of the period

2 unchanged sentences

Fair value adjustment

Balance at the end of the period

The private placement

warrants and PIPE warrants are measured at fair value using a Black-Scholes model and Black-Scholes-Merton model, respectively.

December 31, 2022, these warrants were valued based on third party reports for Level 3 inputs.

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

of the Income Approach).

Specifically, the future stock price is simulated assuming a Geometric Brownian Motion (“GBM”).

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

risk-free rate.

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

The Company measured

the fair value of the forward purchase option derivative upon execution of the Forward Purchase Agreement and as of December 31, 2022,

with the respective fair value adjustments recorded within its Statements of Operations.

The Company will continue to monitor the fair

value of the forward option derivative each reporting period with subsequent revisions to be recorded in the Statements of Operations.

Balance at the end of

2023, the valuation of private placement warrants, PIPE warrants, and Abaca warrants was carried out using the Black-Scholes model, while

the fair value of the Abaca third anniversary payment consideration was determined using the Black Scholes Merton Option pricing model.

Contrastingly, in 2022, the fair value assessments for both the private placement warrants and PIPE warrants were conducted using the

Black-Scholes model and the Black Scholes-Merton model, respectively.

Management believes that the change in method for PIPE warrants

was necessary to enhance the precision and control over the valuation process, allowing for a more tailored and responsive approach to

the unique characteristics of the derivatives and the evolving market conditions.

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

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

2022, the fair value of the forward purchase derivative was estimated using a Monte-Carlo Simulation in a risk-neutral framework (a special

case of the Income Approach).

In 2023, no significant risk factor changes affecting FPA derivative values were noted.

Consequently, management

retained the December 31, 2022, valuation for December 31, 2023.The Company will continue to monitor the fair value of the forward option

derivative each reporting period with subsequent revisions to be recorded in the Statements of Operations.

the fiscal years 2022 and 2023, there were no changes in the classification of financial instruments within Level 2 and Level 3 of the

fair value hierarchy.

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

warrants and public warrants as of their measurement dates:

Schedule of Level 3 Fair Value Measurement Inputs

As on December 31,2022

of Level 3 Fair Value Measurement Inputs

PIPE Warrants

Private placement warrants

Private Warrants

consideration

Abaca Warrants

PIPE Warrants

Private Warrants

consideration

Abaca Warrants

PIPE Warrants

Private Warrants

consideration

Abaca Warrants

PIPE Warrants

Private Warrants

consideration

Abaca Warrants

Exercise price

1 unchanged sentence

Risk-free rate

Warrants and rights outstanding,

measurement input

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

derivatives as of their measurement dates:

December 31, 2022

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

Level 3 Fair Value Measurements Inputs

Expected term (years)

2 unchanged sentences

Risk-adjusted discount rate

major components of income tax for the year ended December 31, 2022, are as follows:

Derivative liability, measurement input

major components of income tax expense for the years ended 31 December 2023 and 31 December 2022:

of Major Components of Income Tax

2 unchanged sentences

Current tax on profits

Tax regarding prior years

Deferred tax:

Deferred taxation - current year

taxation - current year

$ ( 1,829,701 )

Deferred taxation - prior years

Income tax benefit reported in the income statement

$ ( 9,249,499 )

Income tax benefit reported

in the income statement

$ ( 1,829,701 )

$ ( 9,252,893 )

reconciliation follows between tax benefit and the product of accounting profit multiplied by the United States domestic tax rate for

the years ended December 31, 2022:

the years ended December 31, 2023 and December 31, 2022:

of Effective Income Tax Rate Reconciliation

For year ended December

Accounting loss before tax from continuing operations

Accounting loss before tax from

continuing operations

( 19,109,548 )

Accounting loss before income tax

$ ( 44,380,976 )

Accounting loss before

( 19,109,548 )

( 44,380,976 )

At federal statutory income tax rate of

( 4,013,005 )

State income tax benefit, net of federal benefit

( 9,320,005 )

Remeasurement of deferred taxes due to US tax legislative changes

State income tax benefit, net of federal

( 1,304,510 )

Permanent differences, net

UTP withholding

Valuation allowance charges affecting the provision for income taxes

( 1,829,701 )

$ ( 9,252,893 )

taxes are comprised of the following:

of Deferred Tax Assets and Liabilities

Loan loss reserve

Stock option conversion

Capital Loss Carryover

Stock Option Expense

Deferred Revenue

Transaction Costs

Change in value of forward purchase contract

Goodwill on Abaca

Change in Forward Purchase

NOL Carryforward

Lease liabilities

Deferred tax assets

Property, plant and equipment, net

Operating lease right to use assets

( 1,348,445 )

ROU Liabilities

Intangible Assets

( 2,599,617 )

Deferred tax liabilities

( 1,688,683 )

Net deferred tax assets / (liabilities)

Reflected in the statement of financial position as follows:

Net deferred tax

assets / (liabilities)

Reflected in the statement of financial

position as follows:

Deferred tax assets

2 unchanged sentences

Deferred tax assets net

Company offsets tax assets and liabilities only if it has a legally enforceable right to set off current tax assets and current tax liabilities

and the deferred tax assets and deferred tax liabilities relate to income taxes levied by the same tax authority.

The Company has US

federal tax losses totaling $ 7.5 million which have an unlimited carryover period.

Reconciliation

of deferred tax liabilities net:

of Deferred Tax Liabilities Net

on year change

Opening balance as on December

Tax Income/(expense) during the period recognized

in profit or loss

( 9,593,985 )

Closing balance as

on December 31, 2023

Company offsets tax assets and liabilities only if it has a legally enforceable right to set off current tax assets and current tax liabilities

1 unchanged sentence

The Company considers

their deferred tax assets to be realizable and has not established a valuation allowance, as it is considered more likely than not that the Company will utilize deferred tax assets in future periods through

future taxable income.

their deferred tax assets to be realizable and has not established a valuation allowance.

The Company has US federal tax loss carryovers

1 unchanged sentence

The Company has State of Colorado loss

carryovers arising in 2022 of $ 4.1 million which expire in 2042 and State of Arkansas loss carryovers arising in 2020 through 2022 of

carryovers arising in 2020 through 2023 of $ 12.8 million which expire in 2042 and State of Arkansas loss carryovers arising in 2020 through 2022 of

$ 0.2 million which expire in 2028 through 2032.

3 unchanged sentences

The Company does not have any uncertain tax positions as of December 31, 2022.

In both 2022 and 2023, the Company did not make any payments towards federal or state taxes.

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

to 4 % of a participant’s eligible compensation, The total benefits package supports the employees’ well-being to achieve

a healthy and financial lifestyle goal.

The Company’s consolidated matching contributions in the years ended December 31, 2022,

and 2021 amounting to $ 47,806 and $ 44,158 respectively.

to 4 % of a participant’s eligible compensation.

The Company’s consolidated matching contributions for the year ended December

31, 2023, amounting to $ 62,785 , and December 31, 2022, amounting to $ 47,806 , respectively.

Share based compensation

Equity Incentive Plan

compensation expense recognized for the years ended December 31, 2022, and 2021 totaled $ 2.81 million and $ 0 respectively.

compensation expense recognized for the years ended December 31, 2023, and 2022 totaled $ 3.71 million and $ 2.81 million respectively.

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

2 unchanged sentences

compensation awards.

The Company has not issued stock appreciation rights, restricted stock, restricted stock units, stock bonus awards,

and performance compensation awards in year 2022 and 2021.

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

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

In conjunction with the 2023 Plan, as of December 31, 2023, the Company had

granted stock options which are described in more detail below.

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

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

5 unchanged sentences

The Company’s stock options

generally have a 10 -year contractual term and vest over 3 - 4 years period from the grant date.

generally have a 10 -year contractual term.

assumptions used to determine the fair value of options granted in the year ended December 31, 2023, using the Black-Scholes-Merton model

3 unchanged sentences

Risk-free interest rate

3.62 % to 4.23 %

Expected volatility (weighted-average and range, if applicable)

Expected volatility (weighted-average

and range, if applicable)

Expected term

6 to 6.5 years

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

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

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

for the current year.

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

of the options at the grant date.

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

term of the option.

summary of stock option activity as of and for the year ended December 31, 2022 is presented below:

of Stock Options

Stock Options

Weighted Average Exercise Price

Weighted-Average Remaining Contractual Life (in Years)

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

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

for the current period.

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

term of the options at the grant date.

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

expected term of the option.

summary of the Company’s stock option activities and related information for the year ended December 31, 2023, is as follows:

Schedule of Stock Option and Related Information

of Stock Option

Average Exercise Price

Weighted-Average

December 31, 2022

1 unchanged sentence

December 31, 2023

December 31, 2022, the following options were outstanding at their respective exercise price:

of Exercise Price Options

Exercise price options outstanding

December 31, 2023, there were no unrecognized compensation costs related to non-vested stock options to be recognized.

Share based compensation

did not impact on Company’s cash flow in financial year ended December 31, 2022, or December 31, 2021.

Subsequent events

events are events or transactions that occur after the balance sheet date but before the consolidated financial statements are

The Company noted the following subsequent events that occurred after the balance sheet date of December 31,

January 5, 2023, the Company’s management was informed that an indemnified loan, having an outstanding balance of $ 3.1 MM was

past due pursuant to its December 2022 payment.

Management expects the subsequent payments in year 2023 to be delayed.

The guarantor

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

The guarantor noted that the borrower

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

In addition, further to the aforementioned attempt to sell, the loan is well collateralized by a building currently

listed for sale at $ 5.25 MM.

The collateral value is based on 90 % of such.

There is also a personal guarantee on this loan.

does believe that the available provision balance as of December 31, 2022 is sufficient and does not warrant revision pursuant to

the aforementioned transaction.

Furthermore, Management will continue to monitor this loan during Q2 of 2023 for any and all developments.

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

Series A Preferred Stock from $ 2.00 per share to $ 1.25 per share.

The approval was obtained to comply with the Nasdaq listing rules

requiring stockholder approval for issuances of voting stock exceeding 20% of the voting stock outstanding at the time of the vote .

As of February 6, 2023, 7,764 shares of Series A Preferred Stock have been converted into shares of Class A Common Stock, resulting

in there being 27,027,089 shares of Class A Common Stock issued and outstanding and 12,686 shares of Series A Preferred Stock issued

and outstanding.

November 2, 2022, EF Hutton, a division of Benchmark Investments, LLC (“EF Hutton”) issued a notice of default to the

Company towards a promissory note (the “Note”) entered with the company on September 28, 2022, amounting to $ 2,166,250 .

The Note provides that the Company was obligated to pay EF Hutton the principal sum of $ 2,166,250 on the following schedule:

$ 715,750 on October 14, 2022, and (ii) $ 362,625 on each of October 31, 2022, November 30, 2022, December 31, 2022, and January 31,

The legal notice indicates that the principal balance of the $ 1,450,500 (reported as “deferred underwriter fee payable”

in the balance sheet) is immediately due and payable with default interest of 24 % per annum, and that EF Hutton intended to pursue

legal action if full payment was not received by November 7, 2022.

EF Hutton claimed that SHF defaulted on the Note by failing to

pay the $ 362,625 instalment payment due on October 31, 2022.

On March 13, 2023, the Company and EF Hutton entered into a settlement

agreement pursuant to which the Company paid $ 550,000 to EF Hutton in full settlement of the amount due.

per Note 3 above, the Company entered into a forbearance agreement with PCCU and Luminous on October 26, 2022.

As per the terms of

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

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

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

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

of 4.25 % and a Security Agreement pursuant to which the Company will grant, as collateral for the Note, a first priority security interest

in substantially all of the assets of the Company.

Issuance Agreement, pursuant to which the Company will issue 11,200,000 shares of the Company’s Class A Common Stock to PCCU.

Following the issuance of the Shares, PCCU will own 54.93 % of the outstanding Class A Common Stock.

In connection with the Securities

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

The Registration Rights

Agreement requires the Company to register the Shares for resale pursuant to the Securities Act of 1933, as amended (the “Securities

and the Lock-Up Agreement restricts PCCU from transferring the Shares until the earlier of (i) six (6) months after the

date of the Securities Issuance Documents or (ii) the consummation of a transaction with an unaffiliated third party in which all of

the Company’s stockholders have the right to exchange their shares of Class A Common Stock for cash, securities, or other property;

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 from and after the date of the transactions, which agreement superseded the amended and restated support services agreement, the amended and restated account servicing agreement,

and the loan servicing agreement.

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

of Stock Option

Average Exercise Price

Weighted-Average

following options were outstanding at their respective exercise price:

of Options Outstanding

price options outstanding

Stock Units (“RSUs”)

summary of the Company’s RSU activities and related information for the year ended December 31, 2023, is as follows:

of Restricted Stock Units

Weighted-Average

December 31, 2022

( 1,266,228 )

Cancelled / Forfeited

December 31, 2023

following RSU were outstanding at their respective exercise price:

of Exercise price of Restricted Stock Units

Exercise price RSU outstanding

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

$ 1,140,648 and $ 0 .

As of December 31, 2023, there is no unrecognized share-based compensation expense related to RSU awards.

Subsequent event

For the period subsequent to the reporting date up to the date of filing this report, there have been no significant

events that would materially affect the financial position or results of operations as presented in this 10-K.

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 9A. Controls and Procedures