What changed in this filing

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Item 1. Financial Statements

2024-05-13 compared with 2023-11-14 · 951 added, 1139 removed, 710 unchanged (75% of the section changed)

2 unchanged sentences

CONSOLIDATED BALANCE SHEETS

September 30,

March 31, 2024

December 31, 2023

Current Assets:

1 unchanged sentence

Accounts receivable – trade

Contract assets

Accounts receivable – related party

Accounts receivable

Prepaid expenses – current portion

11 unchanged sentences

Security deposit

LIABILITIES AND PARENT-ENTITY NET INVESTMENT AND STOCKHOLDERS’ EQUITY

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current Liabilities:

Accounts payable

Accounts payable-related party

Accounts payable

Accrued expenses

3 unchanged sentences

Deferred consideration – current portion

Due to seller - current portion

Other current liabilities

Total Current Liabilities

Warrant liability

Warrant liabilities

Deferred consideration – long term portion

Forward purchase derivative liability

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

Indemnity liability

1 unchanged sentence

Commitment and Contingencies (Note 13)

Parent-Entity Net Investment and Stockholders’ Equity

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

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

Stockholders’ Equity

Convertible preferred stock, $ .0001 par value, 1,250,000 shares authorized, 111 and 1,101 shares issued

and outstanding on March 31, 2024, and December 31, 2023, respectively

Class A common stock, $ .0001 par value, 130,000,000 shares authorized, 55,431,001 and 54,563,372 issued

and outstanding on March 31, 2024, and December 31, 2023, respectively

Additional paid in capital

2 unchanged sentences

( 71,569,821 )

Total Parent-Entity Net Investment and Stockholders’ Equity

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

Total Stockholders’ Equity

Total Liabilities and Stockholders’ Equity

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

1 unchanged sentence

CONSOLIDATED STATEMENTS OF OPERATIONS

the three months ended

the nine months ended

For the three months ended

Operating Expenses

1 unchanged sentence

General and administrative expenses

Impairment of goodwill

Impairment of finite-lived intangible assets

Professional services

1 unchanged sentence

Total operating expenses

Operating (loss) income

Operating income/ (loss)

( 1,621,669 )

Other expenses (income)

Other (income) expenses

Change in the fair value of deferred consideration

Interest expense

Change in fair value of forward purchase option derivative liability

Change in fair value of warrant liability

Total other expenses

Net (loss) income before income tax

Change in fair value of warrant liabilities

( 1,255,487 )

Income tax (benefit) expense

Total other (income)/ expenses

$ ( 1,285,850 )

Net (loss) income

Net income/ (loss) before income tax

( 2,022,724 )

Income tax benefit

Net income/ (loss)

( 1,413,447 )

Weighted average shares outstanding, basic

Basic net (loss) income per share

Basic net income/ (loss) per share

Weighted average shares outstanding, diluted

Diluted (loss) income per share

Diluted income/ (loss) per share

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

Holdings, Inc.

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

THE THREE MONTHS ENDED SEPTEMBER 30, 2023

Consolidated Statements of Stockholders’ Equity

THE THREE MONTHS ENDED MARCH 31, 2024

Preferred Stock

Class A Common Stock

Additional Paid-in

Total Shareholders’

Balance, June 30, 2023

Balance, December 31, 2023

$ 105,919,674

Conversion of PIPE shares

Restricted stock units

Stock option conversion

Balance, September 30, 2023

$ ( 71,569,821 )

THE THREE MONTHS ENDED SEPTEMBER 30, 2022

Preferred Stock

Class A Common Stock

Total Shareholders’

Balance, June 30, 2022

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

Conversion of PIPE shares

Restricted stock units (net of tax)

Stock compensation cost

Balance, March 31, 2024

( 70,386,394 )

Balance, September 30, 2022

Holdings, Inc.

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

THE NINE MONTHS ENDED SEPTEMBER 30, 2023

Consolidated Statements of Stockholders’ Equity

THE THREE MONTHS ENDED MARCH 31, 2023

Preferred Stock

Class A Common Stock

Additional Paid-in

Total Shareholders’

1 unchanged sentence

$ ( 39,695,281 )

Reversal of deferred underwriting cost

$ ( 39,695,281 )

Cumulative effect from adoption of CECL

1 unchanged sentence

( 5,005,200 )

Restricted stock units

Stock option conversion

Issuance of shares to PCCU (net of tax)

Reversal of deferred underwriting cost

( 1,413,447 )

Balance, September 30, 2023

Balance, March 31, 2023

$ ( 46,695,249 )

THE NINE MONTHS ENDED SEPTEMBER 30, 2022

Preferred Stock

Class A Common Stock

Additional Paid-in

Total Shareholders’

Balance, December 31, 2021

Contribution from parent

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

$ ( 46,695,249 )

Net income (loss)

Balance, September 30, 2022

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

1 unchanged sentence

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the nine months ended September 30,

For the three months ended

CASH FLOWS FROM OPERATING ACTIVITIES:

Net (loss) income

Net income/ (loss)

$ ( 1,413,447 )

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

Adjustments to reconcile net income/ (loss) to net cash provided by/ (used in) operating activities:

Depreciation and amortization expense

Stock compensation expense

Amortization of deferred origination fees

Interest expense

Provision for credit losses

Lease expense

Impairment of goodwill

Impairment of finite-lived intangible assets

Deferred tax benefit

( 1,199,483 )

(Benefit)/ provision for credit losses

Amortization of right of use assets

Income tax benefit

Change in the fair value of deferred consideration

Change in fair value of warrant

( 1,255,487 )

Changes in operating assets and liabilities:

Accounts receivable

Accounts receivable – Trade

Accounts receivable – related party

Contract assets

3 unchanged sentences

Other current assets

Other current liabilities

Accounts payable

( 1,856,117 )

Accounts Payable – related party

Accrued expenses

Deferred loan origination fees

Contract liabilities

Net deferred indemnified loan origination fees

Security deposit

Net cash (used in) provided by operating activities

CASH FLOWS USED IN INVESTING ACTIVITIES:

Net cash provided by (used in) operating activities

CASH FLOWS PROVIDED BY INVESTING ACTIVITIES:

Purchase of property and equipment

Funding of other investment

Repayment of loans receivable, net

Net cash provided by (used in) investing activities

Net repayment of loans

Net cash provided by investing activities

CASH FLOWS USED IN FINANCING ACTIVITIES:

Proceeds from reverse capitalization, net of transaction costs

Net cash provided by financing activities

Repayment of senior secured promissory note

Net cash used in financing activities

Net increase in cash and cash equivalents

1 unchanged sentence

Cash and cash equivalents – end of period

Supplemental disclosure

Supplemental disclosure of cash flow information

Interest paid

Non-Cash transactions:

Shares issued for the settlement of PCCU debt obligation

Cumulative effect from adoption of CECL

Interest payment on senior secured promissory note

Reversal of deferred underwriting cost

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

2 unchanged sentences

Organization and Business Operations

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

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

Holdings, Inc.

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

(“NLIT”), acquired all of

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

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

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

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

Subsequent to the completion of the Business Combination, NLIT changed its name

to “SHF Holdings, Inc.” In this quarterly report on Form 10-Q (the “Quarterly Report”), we use the terms “we,”

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

the closing of the Business Combination.

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

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

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 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 Unaudited Condensed 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 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 September 30, 2023, the 12 month

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

For more information about the

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

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

Class A Common Stock.

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

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

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

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

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

Capital USA Inc.

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

Under the Forbearance Agreement, PCCU agreed to defer

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

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.

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;

(the “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.

The Company completed a strategic

reorganization on July 1, 2021.

This involved transferring select assets and operational activities from Partner Colorado Credit Union

(“PCCU”) and its wholly owned subsidiary, Safe Harbor Services, to SHF Holding Co., LLC.

Subsequently, these were consolidated

into SHF, LLC (“SHF”), with PCCU’s investment managed at the SHF Holding Co., LLC level.

September 28, 2022, the Company concluded a transaction wherein NLIT (“Northern Lights Acquisition Corp.”) acquired all outstanding

membership interests of SHF.

This acquisition prompted the renaming of NLIT to SHF Holdings, Inc.

As a result, PCCU emerged as the largest

shareholder of the Company.

Company executed the Abaca Merger Agreement on October 31, 2022, facilitating a two-step merger through which Rockview Digital

Solutions, Inc.

(“Abaca”) became a direct wholly-owned subsidiary.

The transaction expanded the Company’s fintech

capabilities and market reach.

Company generates fee income, investment income and loan interest 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.

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

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

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

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

(“Abaca”) and Dan Roda, solely in such individual’s capacity as the representative of the security holders of Abaca

(the “Abaca Stockholders’ Representative”).

On November 11, 2022, the parties to the Abaca Merger Agreement entered

into an amendment to the Abaca Merger Agreement to modify the number of shares of the Company’s Class A Common Stock to be issued

as consideration thereunder.

On November 15, 2022, the parties consummated the transactions contemplated by the Abaca Merger Agreement,

Pursuant to the Abaca Merger Agreement, as amended, (a) Merger Sub I merged with and into Abaca, with Abaca surviving as

a direct wholly-owned subsidiary of the Company (“Merger I”) and (b) immediately following the effective time of the Merger

I, Abaca merged with and into Merger Sub II (“Merger II” and, collectively with Merger I, the “Mergers”), with

Merger Sub II surviving Merger II as a direct wholly-owned subsidiary of the Company.

to the Abaca Merger Agreement, as amended, the Company acquired Abaca together with its proprietary financial technology platform in

exchange for $ 30,000,000 , paid in a combination of cash and shares of the Company as follows:

(a) cash consideration in an amount equal

to (i) $ 9,000,000 ($ 3,000,000 was payable at the closing of the Mergers (the “Merger Closing”), with an additional $ 3,000,000

payable at each of the one-year and two-year anniversaries of the Merger Closing), (collectively, the “Cash Consideration”);

and (b) 2,100,000 shares of Class A Common Stock at the 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.

The Abaca Merger Agreement has been subsequently amended.

Please see Note 23 (Subsequent Events) to the financial

statements below for additional information.

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

$ 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.

and sourcing, underwriting, and

servicing, and administering loans issued to cannabis businesses and related entities.

In addition, the Company provides these services

to financial institutions under a Safe Harbor Master Program Agreement.

Basis of Presentation and Summary of Significant Accounting Policies

Use of Estimates

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

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

in the unaudited condensed consolidated financial statements and accompanying notes.

Material estimates that are particularly subject

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

lives of intangibles and the fair value of financial instruments.

Actual results could differ from the estimates.

Basis of Presentation

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

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

GAAP” or “GAAP”) for interim financial information

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

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

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

GAAP”) for interim financial information and the rules

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

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

2 unchanged sentences

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

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

for the current year ending December 31, 2023.

Operating results for the three months ended March 31, 2024, are not necessarily indicative of the results that may be expected for the

current year ending December 31, 2024.

The financial data presented herein should be read in conjunction with the audited consolidated

financial statements and accompanying notes as of and for the years ended December 31, 2022, and 2021 included in the Annual Report on

Form 10-K for the year ended December 31, 2022 (the “2022 Form 10-K”).

financial statements and accompanying notes as of and for the years ended December 31, 2023, included in the Annual Report on Form 10-K

for the year ended December 31, 2023 (the “2023 Form 10-K”).

company has made certain immaterial reclassifications to the statements of operations for the three months ended March 31, 2023, to conform

to the presentation for the three months ended March 31, 2024.

These reclassifications, totaling $ 190,943 , were moved from ‘Interest

Expense’ to ‘Change in the Fair Value of Deferred Consideration’.

Corresponding adjustments have been made to the statement

of cash flows and the applicable notes to the unaudited condensed consolidated financial statements.

condensed consolidated financial statements include the accounts of SHF Holdings, Inc., its subsidiaries where we have controlling financial

All intercompany balances and transactions have been eliminated.

information and footnote disclosures normally included in financial statements prepared in accordance with U.S.

1 unchanged sentence

or omitted pursuant to the rules and regulations of the SEC and the instructions to Form 10-Q.

Use of Estimates

preparation of the unaudited condensed consolidated financial statements in conformity with US GAAP requires management to make

estimates and assumptions that affect the amounts reported in the unaudited condensed consolidated financial statements and

accompanying notes.

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

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

Actual results could differ from the estimates.

Liquidity and Going Concern

of September 30, 2023, the Company had $ 8,948,644 in cash and net working capital deficit of $ 9,381,113 , as compared to $ 8,390,195 in

cash and net working capital deficit of $ 39,340,020 at December 31, 2022.

Included in the working capital deficit at September 30, 2023

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

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

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

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

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

statements have been issued.

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

As outlined above, the Company restructured the due to PCCU issuing equity and a long-term payable.

As a result, this risk factor

that the Company may not be able to continue as a going concern which existed at December 31, 2022 was alleviated.

Despite the restructuring

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

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

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

ability to continue as a going concern.

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

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

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

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

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

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

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

of March 31, 2024, the Company had $ 5,626,362 in cash and net working capital of $ 318,825 , as compared to $ 4,888,769 in cash and net

working capital deficit of $ 135,355 as of December 31, 2023.

The retained deficit was $ 70,386,394 on March 31, 2024, and $ 71,569,821

on December 31, 2023.

The Company has also generated operating income of $ 324,941 for the period ended March 31, 2024.

the period ending March 31, 2024, the Company reported positive operating income and net working capital.

However, considering the historical

data, where the Company experienced negative operating income and negative net working capital, management acknowledges the need to closely

evaluate the financial performance in upcoming quarters to mitigate any going concern risks.

As of March 31, 2024, due to these historical

trends, there is substantial doubt about the Company’s ability to continue as a going concern for at least twelve months from the

date these condensed unaudited consolidated financial statements were issued.

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

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

Any of these actions could materially

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

accompanying condensed unaudited 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

Cash and Cash Equivalents

3 unchanged sentences

Cash balances are

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

up to regulatory limits.

From time to time, cash balances may exceed the NCUSIF insurance limit.

The Company has not experienced any

credit losses associated with its cash balances in the past.

maintained substantially in accounts at Partner Colorado Credit Union (“PCCU”) which is insured by the National Credit Union

Share Insurance Fund (“NCUSIF”) up to regulatory limits.

From time to time, cash balances may exceed the NCUSIF insurance

The Company has not experienced any credit losses associated with its cash balances in the past.

the Company only services the cannabis industry.

2 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 PCCU pursuant to a master service agreement.

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

also indemnified 11 loans as of September 30, 2023;

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

Accounts Receivable-PCCU and Allowance for Doubtful Accounts

As of this time, majority all of the

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

Company had only one loan on its balance sheet as of March 31, 2024, which comprises 100 % of the total loan balance.

The Company also indemnified

21 loans as of March 31, 2024;

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

Accounts Receivable

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 September 30, 2023, and December 31, 2022,

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

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 collection,

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

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

While fees are generated from accounts for individual cannabis-related

businesses (“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 8 to the unaudited condensed consolidated financial statements.

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 Company’s 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 credit

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.

Interest income is not

recognized by the Company in such cases.

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 condensed consolidated balance sheets as an “Indemnity

Company has adopted Accounting Standards Codification Topic 326 - Financial Instruments - Credit Losses (ASC Topic 326), for estimation

of probable credit losses with an expected credit loss methodology that is referred to as the current expected credit loss (“CECL”)

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

The 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

unaudited condensed consolidated balance sheets as an “Indemnity liability.”

ACL consists of two components:

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which are derived from various vendor models and/or internally developed model estimation approaches for smaller homogenous loans.

is projected in these models or estimation approaches using economic scenarios, whose outcomes are weighted based on the Company’s

economic outlook and are developed to incorporate relevant information about past events, current conditions, and reasonable and supportable

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

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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

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.

The specific component relates to loans that are individually

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

The general component covers non-classified loans and

is based on historical loss experience adjusted for current factors.

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

may change in the near term.

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

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

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

on an individual loan basis if deemed necessary.

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

net, at the present value of estimated future cash flows using the loan’s existing rate or at the fair value of collateral if repayment

is expected solely from the collateral.

loans SHF 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

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

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

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

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

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

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

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

The sale of a license or other

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

A defaulted loan may also

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

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

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

administrative agent.

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

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

Net Deferred Loan Origination Fees and Cost

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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

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

certain loans.

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

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

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

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

In determining the applicability

of ASC 460, the Company considered that the agreement outlines a broad indemnification of all claims related to the cannabis-related

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

In the lending industry,

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

The Company’s indemnity obligation is

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

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

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

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

Therefore, as defined in ASC 460, the

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

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

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

balance sheet date.

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 Agreement.

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

to Note 8 to the unaudited condensed consolidated financial statements) is accounted for in accordance with accounting standards

codification (“ ASC”) 460 Guarantees .

In determining the applicability of ASC 460, the Company considered that the

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

The most immediate and

potentially significant of these are potential default-related credit losses.

In the lending industry, it is inherently anticipated

future credit losses will result from currently issued debt.

The Company’s indemnity obligation is subordinate to financial

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

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

Since borrowers are not party to the

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

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

Therefore, as defined in ASC 460, the indemnification

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

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

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

agreement at the balance sheet date.

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

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

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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

March 29, 2023, the Company and PCCU entered into the Commercial Alliance Agreement that sets forth the terms and conditions of the lending-related

and account-related services governing the relationship between the Company and PCCU and supersedes the Loan Servicing Agreement, as

well as the Amended and Restated Support Services Agreement and the Amended and Restated Account Servicing Agreement.

Property and Equipment, net

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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

Right of Use Assets and Lease Liabilities

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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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 on the elected impairment test date of December 31 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.

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

Revenue consists primarily of

fees earned on deposit accounts held at PCCU but serviced by SHF such as bank account charges, onboarding income, account activity fee

income and other miscellaneous fees.

Majority of the revenue consists

of fees earned on deposit accounts held at PCCU but serviced by SHF such as bank account charges, onboarding income, account activity

fee 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.

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Revenues are concentrated in the United States of America.

Contract Assets / Contract Liabilities

contract asset is the Company’s right to consideration in exchange for goods or services that the Company has transferred to a

Conversely, the Company recognizes a contract liability if the customer’s payment of consideration precedes the reporting

entity’s performance.

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

with customers.

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

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 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 condensed consolidated statement of operations.

Contract Liabilities

Company recognizes a contract liability if the customer’s payment of consideration precedes the reporting entity’s performance.

As of March 31, 2024, the Company recorded contract liabilities amounting to $ 2,692 from contracts with customers.

This compares to contract

liabilities of $ 21,922 as reported on December 31, 2023.

Warrants Liabilities

Company has evaluated each of the warrant arrangements separately in accordance with “Distinguishing Liabilities from Equity”

(“ASC 480”) and “Derivatives and Hedging” (“ASC 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

None of our warrant contracts met criteria to be considered indexed to their own stock, and 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, 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, “Derivatives and Hedging” (“ASC 815”).

The Company classifies the forward purchase derivatives

as liabilities carried at their fair value and adjusts the forward purchase derivatives to fair value at each reporting period.

derivative asset or liability is subject to re-measurement at each balance sheet date until the conditions under the forward purchase

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

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

in ASC Topic 815, “Derivatives and Hedging” (“ASC 815”).

The Company classifies the forward purchase

derivatives as an assets or liabilities carried at their fair value and adjusts the forward purchase derivatives 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 unaudited

condensed consolidated statement of operations.

In December 2023, the company calculated its valuation using a Monte Carlo

Simulation set within a risk-neutral environment.

Initiated in December 2022, this strategy was applied to assess the fair value of

the forward purchase agreement (FPA) derivatives, with an underlying assumption that future stock prices would adhere to a Geometric

Brownian Motion trajectory.

Throughout the first quarter of 2024, there were no transactions by FPA holders, and no considerable

shifts in risk factors that could influence the valuation of FPA derivatives were observed.

Earnings Per Share

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

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

The Company utilizes

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awards that contain a non-forfeitable right to receive dividends and therefore are considered to participate in undistributed earnings

with common shareholders (Refer to Note 16).

Basic earnings per common share excludes dilution and is calculated by dividing net earnings

allocated to common shares by the weighted-average number of common shares outstanding for the period.

Diluted earnings per common share

is calculated by dividing net earnings allocable to common shares by the weighted-average number of common shares outstanding for the

period, as adjusted for the potential dilutive effect of non-participating share-based awards.

with common shareholders.

Basic earnings per common share excludes dilution and is calculated by dividing net earnings allocated to common

shares by the weighted-average number of common shares outstanding for the period.

Diluted earnings per common share is calculated by

dividing net earnings allocable to common shares by the weighted-average number of common shares outstanding for the period, as adjusted

for the potential dilutive effect of non-participating share-based awards.

tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the tax bases

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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.

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.

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

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

as of March 31, 2024 and December 31, 2023.

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

payments, accruals or material deviation from its position.

Offering Costs

costs consisted of legal, accounting, underwriting fees and other costs incurred that were directly related to the PIPE offering.

costs are allocated to the separable financial instruments issued based on a relative fair value basis, compared to total proceeds received.

Offering costs associated with warrant liabilities are expensed as incurred, presented as offering costs allocated to warrants in the

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.

Recently Issued Accounting Standards

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upon adoption.

the impairment test for Intangibles-Goodwill and Other

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

(“ASU 2017-04”).

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

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

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

As a result, an entity

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

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

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

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

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

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

after January 1, 2017.

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

however, the standard was applied

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

Expected Credit Losses

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Expected Credit Losses Transition Impact

Transition Adjustment

January 1, 2023

Loans receivable, gross

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Liabilities & Equity

Transition Adjustment

January 1, 2023

Indemnity liability

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$ ( 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 balance sheet.

Debt Restructurings and Vintage Disclosures

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 unaudited condensed consolidated financial statements.

Pending to be Adopted

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.

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.

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

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

Value Measurement of Equity Securities Subject to Contractual Sale Restrictions

Accounting Standard Update (ASU 2022-03) clarifies that a contractual restriction on the sale of an equity security is not considered

part of the unit of account of the equity security and, therefore, is not considered when measuring fair value.

Recognizing a contractual

restriction on the sale of an equity security as a separate unit of account is not permitted.

This ASU is effective for fiscal years

beginning after December 15, 2023, including interim periods within those fiscal years.

The Company does not expect this ASU to have

a material impact on its unaudited condensed consolidated financial statements.

Accounting Standard Update (ASU 2022-03) clarifies that a contractual restriction on the sale of an equity security is not

considered part of the unit of account of the equity security and, therefore, is not considered when measuring fair value.

Recognizing a contractual restriction on the sale of an equity security as a separate unit of account is not permitted.

effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years.

The Company has

adopted this standard as of January 1, 2024 and the ASU has not had a material impact on the Company’s unaudited condensed

consolidated financial statements.

Rate Reform (Topic 848):

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 unaudited condensed consolidated

financial statements.

Business Combination

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:

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

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

the terms of the Purchase Agreement.

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

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

In addition, pursuant to the terms of the purchase

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

costs consisted of legal, accounting, underwriting fees and other costs incurred that were directly related to the business combination

was approximately $ 10.85 million.

Approximately

$ 56.9 million of the $ 70 million of cash proceeds due to PCCU was deferred and is due to the Seller.

Approximately $ 21.9 million

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

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%.

A sum of 1,200,000 founder shares were escrowed

until the amount is paid in full.

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

transferred to additional paid in capital.

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

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

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

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

Twenty (20) percent of the aggregate value was

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

the filing of registration statement 10 calendar days subsequent to closing, 17.5% of the escrow amount was released with the remaining

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

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

$ 44,102,572 , creating a deferred tax asset reported as Additional Paid-in Capital in the equity section of the balance sheet as of

the date of the business combination.

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

are to be recorded in accordance with GAAP.

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

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

As of September 30, 2023,

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

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

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

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

No other dividends shall be paid on the preferred

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

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

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

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

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

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

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

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

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

A Common Stock:

The Company is authorized to issue up to 130,000,000 shares of Class A Common Stock with a par value of $ 0.0001 per

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

As of December 31, 2022, and

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

September 30, 2023, and December 31, 2022, 3,669,504 Class A Common Stock are held by the purchasers under forward purchase agreement

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

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

of Fair Value Net Assets

Cash & Cash Equivalents

Prepaid Expense

Cash held in Trust

Deferred offering cost

Accounts Payable

( 1,374,021 )

Accrued Expense

( 1,202,164 )

Advance from sponsor

( 1,150,000 )

Deferred underwriter payable

( 4,025,000 )

Forward purchase derivative

Warrant Liability

( 1,394,453 )

Class A Common Stock subject to possible redemption

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.This ASU has not had a material impact on the Company’s unaudited

condensed consolidated financial statements.

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.

The guidance is effective for public business entities for fiscal years beginning after December 15, 2023 and

interim periods within those fiscal years.

This ASU has not had a material impact on the Company’s unaudited condensed

consolidated financial statements.

Pending to be Adopted

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 does not expect this

ASU to have a material impact on its unaudited condensed 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

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 does not expect this ASU to have a material

impact on its unaudited condensed consolidated financial statements.

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

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

condensed 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 fiscal years after December 15, 2024.

Early adoption would be permitted.

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

Compensation—Stock Compensation (Topic 718):

Scope Application of Profits Interest and Similar Awards

2024-01 clarifies the scope applications of profits interest awards by adding illustrative guidance to ASC 718 “Compensation-Stock

Compensation.” The amendments in the ASU apply to all reporting entities that account for profits interest awards as compensation

to employees or non-employees in return for goods or services.

term “profits interest” is not explicitly defined in US GAAP.

Rather, an IRS Revenue Procedure (Rev Proc 93-27) defines a

“Profits Interest” as a “partnership interest other than a capital interest.” Unlike a capital interest, which

provides rights to existing net assets of an entity, a profits interest only provides rights to future profits and/or equity appreciation

of an entity.

This distinction, along with other terms, conditions and characteristics of profits interests often complicates accounting

decisions for profits interests, leading to diversity in practice whether to account for profits interests under ASC 718 or other US

ASU introduces four (4) illustrative examples of fact patterns that demonstrate how an entity would apply the scope guidance in paragraph

718-10-15-3 to a profits interest or similar award with certain features.

ASUs are effective for public entities for fiscal years beginning after December 15, 2024, including interim periods within those years.

For all other entities, adoption is required for fiscal years beginning after December 15, 2025.

Early adoption is permitted.

does not expect this ASU to have a material impact on its unaudited condensed consolidated financial statements.

Codification Improvements—Amendments to Remove References to the Concepts Statements

ASU contains amendments to the Codification that remove references to various FASB Concepts Statements.

The Board has a standing project

on its agenda to address suggestions received from stakeholders on the Accounting Standards Codification and other incremental improvements

This effort facilitates Codification updates for technical corrections such as conforming amendments, clarifications to guidance,

simplifications to wording or the structure of guidance and other minor improvements.

In the Board’s view, removing all references

to Concept Statements in the guidance will simplify the codification and draw a distinction between authoritative and non-authoritative

amendments in the Update are effective for public business entities for fiscal years beginning after December 15, 2024.

For all other

entities, the amendments are effective for fiscal years beginning after December 15, 2025.

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

Deferred Consideration

the revised Abaca Merger Agreement, the Company compensated Abaca with $ 30

million through a mix of cash and stock.

The payment structure included $ 9

million in cash, distributed in three equal installments, with the first installment occurring at the merger closing and the other

installments being paid on the first and second anniversaries of the merger closing.

Additionally, the common stock consideration

was settled through 2,100,000

shares which represented a monetary equivalent calculated against the closing trading price, alongside deferred stock consideration calculated with

a 10-day VWAP formula.

Adjustments were made via amendments to redefine the terms and conditions of the deferred stock and cash

considerations.

revised terms, as of the second amendment on October 26, 2023, stipulated new deferred stock consideration of 5,835,822

shares of Class A common stock issued at the first anniversary based on a recalculated value of $ 2.00 per

No changes affected the scheduled cash payments.

Furthermore, a third-anniversary consideration of $ 1.5

million was introduced, payable in cash or stock at the Company’s discretion, alongside an issue of 5

million stock warrants at an exercise price of $ 2.00

The adjustments and additional considerations have been valued and recorded according to ASC 815, reflecting changes in the

fair value of deferred consideration in the consolidated statements of operations for the periods ending December 31,

change in the amount of deferred consideration from January 1, 2023, to March 31, 2024, is as follows:

of Change in Deferred Consideration

consideration

Third Anniversary

Consideration Payment

January 1, 2023

Working capital adjustment

Issuance of shares and payment to shareholders

( 4,085,075 )

Fair value of net assets acquired

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

( 3,000,000 )

Cash consideration

Deferred cash consideration

Total fair value of consideration

Issuance of Abaca warrants

( 1,643,699 )

Parent-Entity

Net Investment:

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

in the Carved-Out Operations.

For purposes of these unaudited condensed consolidated financial statements, investing requirements have

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

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

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

$ 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 9 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

of 100 % control of Rockview Digital Solutions Inc.

d/b/a/ ABACA (collectively “Abaca”).

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

along with interest accrued until the date of acquisition were redeemed.

acquisition increases the Company’s customer base to include more than 1,000 unique depository accounts across 40 states and U.S.

adds Abaca’s fintech platform to the Company’s existing technology;

increases the Company’s financial

institution client relationships and access to balance sheet capacity to five unique financial institutions strategically located across

the United States;

increases the Company’s lending capacity;

and nearly doubles the Company’s team, adding to the existing

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:

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 “Future stock consideration”).

Company measures the deferred cash consideration and future 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:

Schedule of Purchase Price Allocation

Property, plant & equipment

Cash & cash equivalents

Prepaid expense

Security deposit

Accounts receivables

Accounts Payable

Accrued Expense

Fair value of net assets acquired

Other intangibles

Deferred tax liabilities

Issuance of third anniversary payment consideration

Gain recognized in the consolidated statements of operations

( 5,645,107 )

Total purchase consideration

following table summarizes the total fair value of consideration:

Schedule of Fair Value Consideration

Deferred cash payment

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

Settlement of pre-existing notes along with accrued interest

Future consideration settled in common stock

Fair value of consideration

the date of acquisition, management allocated the initial purchase price based on the estimated fair value of the identifiable assets

and liabilities assumed on the acquisition date.

The pre-existing relationships settled were the Company’s notes and related accrued

interest with Abaca.

Subsequently, the Company finalized the purchase price allocation and has adjusted the provisional values retrospectively

to reflect changes to the assets and liabilities at the acquisition date.

For the fair value of the identifiable intangible assets acquired,

the Company used an income-based approach, which involves estimating the future net cash flows and applies an appropriate discount rate

to those future cash flows.

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.

The fair values assigned to identifiable intangible assets were determined through the use of the income

approach and multi-period excess earnings methods.

The major assumptions used in arriving at the estimated identifiable intangible asset

values included management’s estimates of future cash flows, discounted at an appropriate rate of return which is based on the

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

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:

Schedule of Intangible Assets and Related Useful Lives as Included

in Purchase Price Allocation

Useful life in Years

Market related intangible assets

Customer relationships

Developed technology

Fair value of consideration

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

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

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

Acquisition costs of $ 236,200 were incurred

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

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

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

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

Goodwill and Finite-lived Intangible Assets

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

net identifiable assets acquired.

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

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

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

Under the agreement,

the Company provided expertise and intellectual property that allowed the Company and Central Bank to jointly serve the deposit banking

needs of cannabis related businesses primarily located in Arkansas.

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

have agreed that termination will be effective as of October 1, 2023, allowing for an orderly transition that will have minimal impact

on customer operations.

The agreement, originally executed in 2018, was renewable on an annual basis and did not include any material

early termination penalties.

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

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

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

and sustainability.

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

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

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

For the interim

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

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

The income approach utilizes a discounted cash flow method

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

The discounted cash flow models reflect company’s assumptions regarding

revenue growth rates, risk-adjusted discount rate, terminal period growth rate, economic and market trends and other expectations about

the anticipated operating results of the Company.

Under the market approach, the Company estimates the fair value based on market multiples

of revenues derived from comparable publicly traded companies with operating characteristics similar to the Company.

As a result of the

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

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

operations for the nine months ended September 30, 2023.

value determination of the goodwill requires considerable judgment and is sensitive to changes in underlying assumptions and factors.

As a result, there can be no assurance that the estimates and assumptions made for purposes of the quantitative goodwill impairment tests

will prove to be an accurate prediction of future results.

Examples of events or circumstances that could reasonably be expected to negatively

affect the underlying key assumptions and ultimately impact the estimated fair value of the goodwill may include such items as:

increase in the weighted-average cost of capital due to further increases in interest rates, (ii) timing and success of estimated future

income, it is possible that an additional impairment charge may be recorded in the future, which could be material.

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

value of the goodwill.

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

Schedule of Carrying Amount of Goodwill

Fair value adjustment

December 31, 2023

Goodwill impairment

( 13,208,276 )

September 30, 2023

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

Fair value adjustment

March 31, 2024

Goodwill and Finite-lived Intangible Assets

Company’s goodwill was derived from the Abaca acquisition transaction executed on November 15, 2022, 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.

2023, the Company conducted an interim impairment assessment on June 30, 2023, and 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 change recognized, as the

fair value did not surpass the carrying value.

As of March 31, 2024, and December 31, 2023, the carrying value of the company’s

goodwill was $ 6,058,000 .

of March 31, 2024, the Company has not conducted an interim impairment assessment of its assets, due to the absence of any triggering

Therefore, no additional impairment charges have been recognized in this reporting period.

of March 31, 2024, and December 31, 2023, the Company’s accumulated goodwill impairment was $ 13,208,276 .

intangible assets

Company reviews its finite-lived intangible assets when there is a triggering event.

The Company performs impairment test by comparing

the fair value of finite lived intangible assets to the carrying value.

In the event the carrying value exceeds the fair value of the

assets, the assets are written down to their fair value.

of June 30, 2023, on account of the triggering event discussed in the goodwill analysis above, the Company performed a quantitative assessment

of finite-lived intangible assets comprised of market related intangible, customer relationships and developed technologies.

order to evaluate the fair value of the finite-lived intangible assets, a royalty method was applied for market related intangibles,

a discounted cash flow method applied for customer relationships and a cost to re-create method for developed technologies.

the Company determined that the fair value of market related intangibles and customer relationships were less than the carrying value

on the reporting date.

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

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

There was no impairment recognized for developed technologies as the fair

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

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

Company reviews its finite-lived intangible assets for impairment at least annually on December 31 st 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

2023, following a triggering event in the second quarter, the Company performed an interim goodwill analysis.

In accordance with our

established policy, an annual review was also conducted on December 31, 2023.

The finite-lived intangible assets evaluated include market-related

intangibles, customer relationships, and developed technologies.

The interim analysis resulted in an impairment charge of $ 3,680,463 ,

attributed to the carrying values of market-related intangibles and customer relationships surpassing their fair values.

The annual review

further identified an impairment charge of $ 2,019,000 related to developed technologies.

of March 31, 2024, the Company has not conducted an interim impairment assessment of its assets, due to the absence of any triggering

Therefore, no additional impairment changes have been recognized in this reporting period.

is a summary of the Company’s finite-lived intangible assets as of March 31, 2024 and December 31, 2023:

Schedule of Finite Lived Intangible Assets

Remaining Useful life in Years

in Acquisition

September 30,

Useful life in

December 31, 2023

March 31, 2024

Market related intangible assets

2 unchanged sentences

Total intangible assets

is a summary of the Company’s finite-lived intangible assets as of December 31, 2022:

Remaining Useful life in Years

Useful life in

December 31, 2022

Acquired in Acquisition

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

December 31, 2023

Market related intangible assets

2 unchanged sentences

Total intangible assets

the three months ended March 31, 2023, amortization expense and impairment of finite lived intangible assets were $ 354,911 and $ 0 respectively.

Loans Receivable

real estate loans receivable, net consist of the following:

Schedule of Commercial Real Estate Loans Receivable

September 30, 2023

of Commercial Real Estate Loans Receivable

March 31, 2024

December 31, 2023

Commercial real estate loans receivable, gross

loan origination charges

Commercial real estate loans receivable, net

Allowance for credit losses

6 unchanged sentences

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

accordance with the credit loss policy described in Note 2.

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

accordance with the credit loss policy described in Note 2 to the unaudited condensed consolidated financial statements.

allowance for credit losses consists of the following activity for the three months ended March 31, 2024 and three months ended March

Schedule of Allowance For Loan Losses

Nine months ended September 30,

September 30, 2023

September 30, 2022

Allowance for credit losses

Beginning balance

Cumulative effect from adoption of CECL

(Benefits) Provision

Ending balance

Three months ended September 30,

September 30, 2023

September 30, 2022

March 31, 2024

March 31, 2023

Allowance for credit losses

3 unchanged sentences

Loans receivable:

Individually evaluated for impairment

Collectively evaluated for impairment

Individually evaluated for an allowance for credit loss

Collectively evaluated for an allowance for credit loss

Allowance for credit losses:

Individually evaluated for impairment

Collectively evaluated for impairment

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

Individually evaluated for an allowance for credit loss

Collectively evaluated for an allowance for credit loss

March 31, 2024 and December 31, 2023, no loans were past due or classified as non-accrual.

quality of loans:

1 unchanged sentence

based on the loan payment status on monthly basis.

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

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

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

in Note 6 to the unaudited condensed consolidated financial statements.

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

March 31, 2024

December 31, 2023

Indemnification Liability

As discussed at Note 9 to the unaudited condensed consolidated financial

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

Under the Commercial Alliance Agreement, PCCU’s

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

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

Company and both funded and serviced by PCCU.

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

collateralized loans or unsecured loans and lines of credit.

Schedule of Outstanding Amounts

September 30, 2023

discussed at Note 8 to the unaudited condensed consolidated financial statements, and pursuant to the Commercial Alliance Agreement with PCCU, 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 0.35% of

the outstanding loan principal funded and serviced by PCCU and 0.25% of the outstanding loan principle serviced by SHF.

schedule details outstanding amounts funded by PCCU and categorized as either collateralized loans or unsecured loans and lines of

of Outstanding Amounts

March 31, 2024

December 31, 2023

1 unchanged sentence

Unsecured loans and lines of credit

Total loans funded by Parent

Total loans funded by PCCU

loans contained an interest rate ranging from 7.35 % to 15.25 %.

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

+1.50 % to Prime +6.00 % .

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

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 on March 31, 2024 and December

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

2 unchanged sentences

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.

date was calculated in accordance with the allowance for credit loss policy described in Note 2 to the unaudited condensed consolidated financial statements.

indemnity liability activity are as follows:

Schedule of Indemnity Liability

September 30, 2023

September 30, 2022

Three Months ended

March 31, 2024

Three Months ended

March 31, 2023

Beginning balance

Cumulative effect from adoption of CECL

(Benefit)/ Provision

Ending balance

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

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

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

was past due pursuant to its December 2022 payment.

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

due to business losses.

The Company is discussing workout options with the borrower.

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.

of March 31, 2024, all loans within the Company’s portfolio were current and performing.

This is in contrast to the situation as

of December 31, 2023, when one loan was under nonaccrual status.

The Company successfully negotiated an amendment agreement on December

29, 2023, which brought this loan back to current status through the payment of all overdue amounts.

Under the terms of the amendment,

the loan’s maturity date was extended to November 1, 2024.

Interest income from this loan is now recognized on a cash basis.

that the loan was delinquent for over 300 days, it has been incorporated into the Company’s Current Expected Credit Losses (CECL)

methodology, which aids in estimating credit losses for this particular loan and the overall loan portfolio collectively.

quality of indemnified loans:

1 unchanged sentence

indicators based on the loan payment status on monthly basis.

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

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

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.

1 unchanged sentence

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

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

2023 and September 30, 2022:

Schedule of Provision for Loan Losses

September 30, 2023

September 30, 2022

Provision (benefit)

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

2023 and September 30, 2022:

September 30, 2023

September 30, 2022

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

March 31, 2024

December 31, 2023

provision for credit losses on the statement of operations consists of the following activity for the period ended March 31, 2024 and

March 31, 2023:

of Provision for Loan Losses

March 31, 2024

March 31, 2023

Provision (benefit)

2 unchanged sentences

Schedule of Property and Equipment

September 30, 2023

March 31, 2024

December 31, 2023

4 unchanged sentences

Related Party Transactions

Servicing Agreement

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

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

In connection with PCCU hosting the depository accounts and the

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

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

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

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

The agreement sets forth the application, underwriting and

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

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

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

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

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

Under the Loan Servicing Agreement, SHF has agreed to indemnify

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

This agreement was replaced

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

Alliance Agreement

On March 29, 2023, the Company and PCCU entered into the Commercial

Alliance Agreement that sets forth the terms and conditions of the lending-related and account-related services governing the relationship

between the Company and PCCU.

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

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

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

effective February 11, 2022);

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

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

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

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, PCCU receives a servicing

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

A servicing fee at the annual rate

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

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

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

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

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 120 days’ written notice prior to the end of the term .

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

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

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

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

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.

below schedule demonstrates the ratio of CRB related loans funded by PCCU to the relative lending limits:

of Demonstrated Deposit Capacity

September 30, 2023

March 31, 2024

December 31, 2023

CRB related balance

CRB related deposits

$ 106,692,488

7 unchanged sentences

Incremental capacity

$ 154,971,429

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

and September 30, 2022, are as follows:

revenue from the PCCU Agreements recognized in the statements of operations consists of the following for the three months ended March

31, 2024, and March 31, 2023:

of Revenue from Operations

Three months ended

March 31, 2024

Three months ended

March 31, 2023

Account servicing agreement

Commercial alliance agreement

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

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

operating expense from the PCCU Agreements recognized in the statements of operations consists of the following for the three months

ended March 31, 2024, and March 31, 2023:

of Operating Expense from Operations

Three months ended

March 31, 2024

Three months ended

March 31, 2023

Support services agreement

1 unchanged sentence

Commercial alliance agreement

Operating expense

of shares to PCCU

4 unchanged sentences

Securities Issuance Agreement, pursuant to which the Company issued 11,200,000 shares of the Company’s Class A Common Stock

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

9 unchanged sentences

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 .

July 1, 2022, the Company amended its existing lease to a month-to-month lease and therefore no asset or liability amounts are reported

pursuant to ASC 842.

The lease was terminated on February 1, 2023.

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

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

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

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

Due to Seller

due to seller were as follows:

of Amounts Due to Seller

September 30, 2023

outstanding balances associated with the PCCU disclosed in the balance sheet are as follows:

of Outstanding Balances from Balance Sheet

March 31, 2024

December 31, 2023

Due to Seller-Current (Unsecured)

Due to Seller-long term (Unsecured)

Total loans funded by Parent

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 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 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.

(“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 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 not paid

Total deferred obligation

Senior secured promissory note

Change in deferred tax

Amount charged to Stockholders’ Equity towards issuance of common stock

Accounts receivable

Accounts payable

Senior Secured Promissory Note (Refer to Note 9 to the unaudited condensed consolidated financial

the $ 5.6 million and $ 8.6 million of cash and cash equivalents on March 31, 2024 and December 31, 2023, $ 5 million and $ 4.6 million of

the cash and cash equivalents were held in deposit accounts at PCCU as a related party.

Senior Secured Promissory Note

of Senior Secured Promissory Note

September 30, 2023

March 31, 2024

December 31, 2023

2 unchanged sentences

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

related to business Combination 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 Company.

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

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

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

between March 29, 2023, to October 05, 2023, the Company has paid the interest portion.

repayment schedule of the outstanding principal amount on March 31, 2024, is as follows:

of Outstanding Amount on Debt

3 unchanged sentences

for capitalization under FASB ASC 842, Leases.

These leases have remaining lease terms between one to 7 years and may include options

These leases have remaining lease terms between one to seven years and may include options

to extend the leases for up to ten years.

2 unchanged sentences

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

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

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

As of March 31, 2024, and December 31, 2023, net assets

recorded under operating leases were $ 820,777 and $ 859,861 on, respectively, and net lease liabilities were $ 978,461 and $ 1,007,993 ,

respectively.

Company analyzes contracts above certain thresholds to identify leases and lease components.

Lease and non-lease components are not separated

for facility space leases.

The Company uses its contractual borrowing rate to determine lease discount rates when an implicit rate is

not available.

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

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

Lease and non-lease components are not

separated for facility space leases.

The Company uses its contractual borrowing rate to determine lease discount rates when an

implicit rate is not available.

Total lease cost for the three months ended March 31, 2024 and March 31, 2023, included in Unaudited

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

of Lease Cost

Three months ended

March 31, 2024

Three months ended

March 31, 2023

Operating lease cost

1 unchanged sentence

Total Lease Cost

Schedule of Right Of Use Assets

September 30, 2023

of Right Of Use Assets

March 31, 2024

December 31, 2023

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

7 unchanged sentences

Weighted-average discount rate

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

minimum lease payments as of March 31, 2024, and December 31, 2023, are as follows:

Schedule of Future Minimum Lease Payments

Total future minimum lease payments

Total future minimum lease

Imputed interest

1 unchanged sentence

Current portion

Non-current portion of lease liabilities

Non-current portion of

lease liabilities

Disaggregated

1 unchanged sentence

of Disaggregated Revenue

Nine months ended

Deposit, activity, onboarding income

Safe Harbor Program income

Investment income

Loan interest income

Total Revenue

Three months ended

5 unchanged sentences

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 commercial alliance agreement with PCCU.

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.

income consist of interest earned on deposits with the Federal Reserve Bank pursuant to the commercial alliance agreement with PCCU.

Loan interest income consist of interest earned on both direct and indemnified loans pursuant to a commercial alliance agreement with

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.

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 2024, PCCU’s contributions

to the Company’s revenues included $ 1,217,675 from deposits, activities, and client onboarding, $ 731,425 from investment income,

and $ 1,636,756 from loan interest income.

The associated expenses for these revenues were $ 104,259 for account hosting, $ 160,101 for

investment hosting fees, and $ 35,901 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.

first quarter March 2023, contributed to the Company’s revenues with $ 2,245,831 from deposits, activities, and client onboarding,

$ 1,417,152 from investment income, and $ 466,293 from loan interest income.

The related expenses for these revenue streams were $ 55,425

for account hosting, $ 323,305 for investment hosting fees, and $ 11,929 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.

connection with the business combination, 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.

3 unchanged sentences

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 “Condensed Consolidated Statements of Parent-Entity Net Investment and Stockholders’ Equity.”

for in the “Unaudited Condensed Consolidated Statements of Stockholders’ Equity.”

Commitments and contingencies

Company has issued an 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

8 unchanged sentences

of the Company and the IPO.

a period beginning on June 28, 2021 and ending 12 months from the closing of 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)I(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

10 unchanged sentences

with the Business Combination have been outstanding for the entire period presented.

of Earning Per Shares, Basic and Diluted

September 30, 2023

Schedule of Earning Per Shares, Basic and Diluted

For the three month period ended March 31

Net Income/ (loss)

$ ( 1,413,447 )

Weighted average shares outstanding – basic

Basic net (loss) income per share

Basic net income/ (loss) per share

Weighted average shares outstanding – diluted

Diluted net (loss) income per share

Three months ended

September 30, 2023

Diluted net income/ (loss) per share

Schedule of Weighted Average Shares Outstanding - Basic And Diluted

Weighted average shares calculation - basic

Three months ended

September 30, 2022

$ ( 748,067 )

Weighted average shares calculation - basic

Company public shares

Company initial stockholders

PCCU stockholders

Shares issued for abaca acquisition

Restricted stock units issued

Conversion of preferred stock

Weighted average shares outstanding - basic

Basic net (loss) income share

Weighted average shares outstanding – diluted

Diluted net (loss)income per share

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

had an anti-dilutive effect.

Weighted average shares calculation - diluted

Three months ended

Weighted average shares calculation - diluted

Shares used in computation of basic earnings per share

Shares to be issued to Abaca shareholders

Share based payments

Conversion of preferred stock

share-based equity awards and warrants were excluded from the computation of dilutive earnings/ (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

September 30, 2023

of Share-based equity awards and Warrants Excluded from Computation of Earnings

March 31, 2024

March 31, 2023

Share based payments

Shares to be issued to Abaca acquisition

Shares to be issued to Abaca shareholders

Conversion of preferred stock

holders of Series A Convertible Preferred Stock shall be entitled to receive, and the Company shall pay, dividends on shares of Series

A Convertible 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 shares of Series A Convertible Preferred Stock.

holders of Series A Convertible preferred stock shall be entitled to receive,

and the Company shall pay, dividends on shares of Series A Convertible 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 shares of Series A convertible preferred stock.

Forward Purchase Agreement

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

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

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

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

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

2 unchanged sentences

As contemplated by the Forward Purchase Agreement:

to the closing, Midtown East, Verdun and Vellar purchased approximately 3.8 million shares of NLIT Class A common stock directly

from investors at market price in the public market.

to the closing, Midtown East, Verdun and Vellar purchased approximately 3.8 million shares of Class A common stock directly from

investors at market price in the public market.

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

to the acquired shares;

business day following the closing, NLIT paid approximately $ 39.3 million from the cash held in its trust account to Midtown East;

business day following the closing, the Company paid approximately $ 39.3 million from the cash held in its trust account to Midtown

Verdun and Vellar for the shares purchased and approximately $ 0.3 million in related expense amounts.

the Maturity Date, Midtown East, Verdun and Vellar shall be entitled to (1) the product of the shares then held by them multiplied

by the Forward Price, and (2) an amount, in cash or shares at the sole discretion of NLIT, equal to (a) in the case of cash, the

product of (i)(x) 3.8 million shares less (y) the number of Terminated Shares and (ii) $2.00 (the “Maturity Cash Consideration”)

by the Forward Price, and (2) an amount, in cash or shares at the sole discretion of the Company, equal to (a) in the case of cash,

the product of (i)(x) 3.8 million shares less (y) the number of Terminated Shares and (ii) $2.00 (the “Maturity Cash Consideration”)

and (b) in the case of shares, (i) the Maturity Cash Consideration divided by (ii) the VWAP Price for the 30 Scheduled Trading Days

9 unchanged sentences

Midtown East, Verdun and Vellar shall retain any proceeds in excess of the Reset Price that is paid to SHF.

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.

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 has recognized a reset price under the terms of the FPA of $ 1.25 /share.

significantly reduced the FPA receivable to approximately $ 4.6 million, from approximately $ 37.9 million reported at the end of the

September 2022 quarter.

The loss in value resulted not only in a compression of the balance sheet, but also $ 42.3 million charge

to other expense on the statement of operations in the fourth quarter of 2022.

reconciliation statement of the common stock held by the parties are as follows:

of Forward Purchase Agreement

On the date of

(September 28, 2022)

Shares sold during

September 29, 2022

to December 31, 2022

December 31, 2022

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.

During the year 2023 and the first quarter of 2024, there were no share transactions by FPA

holders, and management identified no additional impacts on the FPA receivable’s value on December 31, 2023 and March 31, 2024.

reconciliation statement of the Class A common stock held by the parties are as follows:

Schedule of Forward Purchase Agreement

December 31, 2023

Shares sold during

the nine months

ended September 30, 2023

September 30, 2023

March 31, 2024

Name of the party

Opening Shares

Warrant Liability

Warrant Liabilities

and Private Placement Warrants

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

of March 31, 2024, and December 31, 2023, 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.

32 unchanged sentences

on the same basis as the public warrants.

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

of March 31, 2024 and December 31, 2023, 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 March 31,2024, and December 31, 2023, the Company has 5,000,000 Abaca warrants.

Abaca 5,000,000

warrants have an exercise price of $ 2.00

per share of Class A common stock to be paid in cash.

An Abaca 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 Abaca 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 Class A

common stock on the date of exercise and the warrant price ($ 2.00 )

multiplied by the number of shares of Class A common stock.

The Company commits to promptly registering shares of Class A common

stock issued upon Abaca Warrant exercises if required by law, ensuring these shares can be sold without restrictions.

registration must be filed within 45 days of receiving a notification of such a requirement, with failure to do so constituting a

The Company will endeavor to keep the registration effective until the Warrants expire.

If the registration isn’t

effective within one year, Abaca 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 the Abaca

Warrants, ensuring the shares issued are readily tradable without the need for restrictive legends.

Financial Instruments

17 unchanged sentences

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

The Company values these Level 3 derivatives using observable data

(Black-Scholes model).

In the first quarter of 2024, 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 the first quarter of

2023, 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 values these Level 3 derivatives using observable data (Black-Scholes

In the first quarter of 2024, the Company internally assessed the value of

these derivatives with Level 3 inputs, which are derived from Black-Scholes model.

This is a change the first quarter of 2023, 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 Level 3 derivatives using observable

data (Black-Scholes model).

In 2022, the Company values these derivatives based on third

party reports for Level 3 inputs.

In 2023 and 2024, no significant risk factor changes affecting FPA derivative values were noted.

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 September 30, 2023 and December 31,2022:

of Fair Value Assets and Liabilities Measured on Recurring Basis

Quoted Prices

Public warrants

Private placement warrants

in the fair value hierarchy on March 31, 2024 and December 31, 2023:

Schedule of Fair Value Assets and Liabilities Measured on Recurring Basis

March 31, 2024

December 31, 2023

PIPE warrants

Forward purchase option derivative

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

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

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.

were no assets or liabilities recorded at fair value on a nonrecurring basis for the period ended March 31, 2024 and March 31, 2023.

Value of Financial Instruments

6 unchanged sentences

value hierarchy, as of the dates indicated:

of Carrying Amounts and Fair Values of Financial Instruments

As on September 30, 2023

Schedule of Carrying Amounts and Fair Values of Financial Instruments

As on March 31, 2024

Fair value measurement using

7 unchanged sentences

PIPE Warrants

Abaca Warrants

Third anniversary payment consideration

Forward purchase derivative

4 unchanged sentences

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

Third anniversary payment consideration

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

value are presented in the following table:

of Fair Value Assets Measured on Recurring Basis

For the nine months ended

September 30, 2023

Schedule of Fair Value Assets Measured on Recurring Basis

Consideration

For the period ended March 31, 2024

Consideration

Balance at the beginning of the period

Issued to Abaca shareholders

Fair value adjustment

( 1,115,653 )

Balance at the end of the period

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

As of September 30, 2023, these

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

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

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.

Consideration

For the period ended March 31, 2023

Consideration

Balance at the beginning of the period

Fair value adjustment

Balance at the end of the period

of March 31, 2024 and on December 31, 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 the first quarter of 2023, 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.

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.

March 31, 2024 and December 31, 2023, these warrants were valued for Level 3 inputs, which are based on observable data to value these

of December 31, 2023, the Company assessed the fair value of its forward purchase agreement (FPA) derivative utilizing a Monte Carlo

Simulation within a risk-neutral setting, which is a particular instance of the Income Approach, based on calculations from December

Throughout the first quarters of both 2023 and 2024, there were no notable alterations in risk factors that would impact the

valuation of the FPA derivative.

Consequently, management retained the December 31, 2022, valuation for December 31, 2023 and March 31,

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 first quarters of both 2023 and 2024, 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:

of Level 3 Fair Value Measurement Inputs

As on September 30, 2023

PIPE Warrants

Exercise price

Expected term (years)

Risk-free rate

As on December 31, 2022

PIPE Warrants

Schedule of Level 3 Fair Value Measurement Inputs

Consideration

March 31, 2024

December 31, 2023

Consideration

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 on September 30, 2023 and December 31, 2022:

Level 3 Fair Value Measurements Inputs

September 30, 2023

Expected term (years)

Additional maturity consideration per share

Risk-free rate

Risk-adjusted discount rate

derivatives as of their measurement dates on March 31, 2024 and December 31, 2023:

Schedule of Level 3 Fair Value Measurements Inputs

March 31, 2024

December 31, 2023

3 unchanged sentences

Risk-adjusted discount rate

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

The effective

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

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

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

The Company has

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

The Company has

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

The Company considers their remaining deferred tax

assets to be realizable.

Derivative liability, measurement input

the three months ended March 31, 2024, the Company recorded income tax benefit of $ 438,885 for continuing operations.

The effective tax

rate of 28.14 % for the three months ended March 31, 2024, varied from the statutory United States federal income tax rate of 21.0 % primarily

because of state income taxes, net of the federal benefit, and adjustments to the fair market value of warrant liabilities.

has net deferred tax assets of $ 44,278,374 and $ 43,829,019 as of March 31, 2024, and December 31, 2023, respectively.

The Company considers

their deferred tax assets to be realizable and has not established a valuation allowance, as it is considered more likely than not that

the Company will utilize deferred tax assets in future periods through future taxable income.

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

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

both March 31, 2024, and December 31, 2023, the Company has no unrecognized income tax benefits.

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

to 4 % of a participant’s eligible compensation.

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

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

Share based compensation

The Company’s consolidated matching contributions for the three months ended

March 31, 2024, amounting to $ 35,233 , and March 31, 2023, amounting to $ 20,663 , respectively.

Stockholders’ Equity

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 March 31, 2024, there were 111

Class A preferred shares issued and outstanding and 1,101

preferred shares issued and outstanding on December 31, 2023.

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

Company shall pay, dividends on shares of preferred stock equal(on an as-if-converted-to-Class-A-Common-Stock basis) to and in the

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

Class A Common Stock.

No other dividends shall be paid on the preferred stock.

The terms of the preferred stock provide for an

initial conversion price of $ 10.00

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

55 days, 100days, 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 stockholders approved a reduction in the floor conversion price of the outstanding preferred stock

per share to $ 1.25

Company is authorized to issue up to 130,000,000 shares of Class A Common Stock with a par value of $ .0001 per share.

Holders of the

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

As of March 31, 2024 and December 31, 2023, there were

55,431,001 and 54,563,372 shares of Class A Common Stock issued or outstanding.

As of March 31, 2024 and December 31, 2023, 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

Equity Incentive Plan

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

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

compensation expense recognized for the three months ended March 31, 2024 and March 31, 2023 totaled $ 0.6 million and $ 1.6 million, respectively.

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

3 unchanged sentences

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

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

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

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

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

to render services and to exert maximum effort for the success of the Company.

The Company’s incentive stock options generally

permit net-share settlement upon exercise.

The option exercise price, vesting schedule and exercise period are determined for each grant

by the administrator (person appointed by board to administer the stock plans) of the applicable plan.

The Company’s stock options

generally have a 10 -year contractual term.

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

awards in the three months ended March 31, 2024 and March 31, 2023.

In conjunction with the 2024 Plan, as of March 31, 2024, the Company

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

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

incentive for employees to render services and to exert maximum effort for the success of the Company.

The Company’s incentive

stock options generally permit net-share settlement upon exercise.

The option exercise price, vesting schedule and exercise period

are determined for each grant by the administrator (person appointed by board to administer the stock plans) of the applicable plan.

The Company’s stock options generally have a 10 -year

contractual term.

assumptions used to determine the fair value of options granted in the three months ended March 31, 2024, using the Black-Scholes-Merton

model are as follows:

2 unchanged sentences

Risk-free interest rate

3.62 % to 4.23 %

Expected volatility (weighted-average and range, if applicable)

Expected term

5.75 to 6.00 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 have been listed on the stock exchange for a limited period of the time and the share price has

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

for the current period.

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

term of the options at the grant date.

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

expected term of the option.

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

Schedule of Stock Option and Related Information

of Stock Option

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 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 three months ended March 31, 2024 is as follows:

of Stock Option and Related Information

Average Grant

Date Fair Value

Contractual Life

December 31, 2023

Cancelled / Forfeited

September 30, 2023

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

Share based compensation

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

March 31, 2024

summary of the Company’s stock option activities and related information for the three months ended March 31, 2023 is as follows:

Average Grant

Date Fair Value

Per Stock Option

Contractual Life

December 31, 2022

Cancelled / Forfeited

March 31, 2023

following options were outstanding at their respective exercise price:

of Options Outstanding

Exercise price options outstanding

March 31, 2024

March 31, 2023

Stock Units (“RSUs”)

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

summary of the Company’s RSU activities and related information for the three months ended March 31, 2024 is as follows:

of Restricted Stock Units

Restricted Stock Units

Average Grant

1 unchanged sentence

December 31, 2023

Cancelled / Forfeited

September 30, 2023

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

was $ 1,246,850 and $ 0 .

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

March 31, 2024

Average Grant

Date Fair Value

December 31, 2022

following RSU were outstanding at their respective vest price:

of Exercise Price of Restricted Stock Units

price RSU outstanding

Subsequent events

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

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

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

and the future stock consideration are rescheduled as follows:

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

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

As a result, 5,835,822

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

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

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

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

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

$ 2.00 per share.

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

registering the resale of all Registrable Securities.

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

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

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

April 5, 2024, the Company received a letter from the listing qualifications department staff of The Nasdaq Stock Market

(“Nasdaq”) notifying the Company that for the last 30 consecutive business days, the Company did not maintain a minimum

closing bid price of $ 1.00

per share for its common stock, as required by Nasdaq Marketplace Rule 5550(a)(2).

The Company has been granted a period of 180

days, ending on October 2, 2024, to regain compliance with this requirement.

If the Company does not regain compliance by October 2,

2024, the Company may be eligible for second compliance period for up to an additional 180 days.

In connection with any extension

periods, if it appears that the Company will not be able to regain compliance with Nasdaq Marketplace Rule 5550(a)(2), or if the

Company is not otherwise eligible, the Nasdaq staff will provide notice to the Company that its securities will be subject to

At that time, the Company may appeal any such delisting determination to a Hearings Panel.

the Company’s Class A common stock maintains a closing bid price of at least $ 1.00

for 10 consecutive business days at any point before the deadline, Nasdaq will confirm compliance, and the matter will be resolved.

The Company’s Class A common stock will continue to be listed and traded on The Nasdaq Capital Market under the symbol

“SHFS” during this period.

There is no assurance that the Company will achieve compliance within

the given timeframe or maintain compliance with other Nasdaq Listing Rules thereafter.

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

What changed 10-Q

Item 1. Financial Statements