What changed in this filing

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Item 1. Financial Statements

2024-08-14 compared with 2024-05-13 · 700 added, 1154 removed, 507 unchanged (79% of the section changed)

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CONSOLIDATED BALANCE SHEETS

March 31, 2024

December 31, 2023

and cash equivalents

receivable – trade

receivable – related party

expenses – current portion

interest receivable

loans receivable, net

current assets

Cash and cash equivalents

Accounts receivable – trade

Accounts receivable – related party

Accounts receivable

Prepaid expenses – current portion

Accrued interest receivable

Short-term loans receivable, net

Other current assets

Total Current Assets

Long-term loans receivable, net

Property, plant and equipment, net

Operating lease right to use assets

Intangible assets, net

Deferred tax asset

Prepaid expenses – long term position

Forward purchase receivable

Security deposit

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current Assets

loans receivable, net

plant and equipment, net

lease right to use assets

expenses – long term position

purchase receivable

AND STOCKHOLDERS’ EQUITY

payable-related party

liabilities – current

secured promissory note – current portion

consideration – current portion

current liabilities

Accounts payable

Accounts payable-related party

Accounts payable

Accrued expenses

Contract liabilities

Lease liabilities – current

Senior secured promissory note – current portion

Deferred consideration – current portion

Other current liabilities

Total Current Liabilities

Warrant liabilities

Deferred consideration – long term portion

Forward purchase derivative liability

Senior secured promissory note—long term portion

Net deferred indemnified loan origination fees

Lease liabilities – long term

Indemnity liability

Total Liabilities

Commitment and Contingencies (Note 13)

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

Retained deficit

Current Liabilities

consideration – long term portion

purchase derivative liability

secured promissory note—long term portion

deferred indemnified loan origination fees

liabilities – long term

and Contingencies (Note 13)

Stockholders’

preferred stock, $ .0001 par value, 1,250,000 shares authorized, 111 and 1,101 shares issued and outstanding on June 30, 2024, and

December 31, 2023, respectively

A common stock, $ .0001 par value, 130,000,000 shares authorized, 55,431,001 and 54,563,372 issued and outstanding on June 30, 2024,

and December 31, 2023, respectively

paid in capital

( 69,444,867 )

( 71,569,821 )

Total Stockholders’ Equity

Total Liabilities and Stockholders’ Equity

Stockholders’ Equity

Liabilities and Stockholders’ Equity

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

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CONSOLIDATED STATEMENTS OF OPERATIONS

For the three months ended

the three months ended

the six months ended

and employee benefits

and administrative expenses

of finite-lived intangible assets

(benefit) for credit losses

operating expenses

Compensation and employee benefits

General and administrative expenses

Professional services

Provision (benefit) for credit losses

Total operating expenses

Operating income/ (loss)

income/ (loss)

$ ( 17,912,767 )

$ ( 19,534,436 )

income /(expenses)

in the fair value of deferred consideration

in fair value of warrant liabilities

other income/ (expenses)

Change in the fair value of deferred consideration

Interest expense

Change in fair value of warrant liabilities

$ ( 343,947 )

Total other (income)/ expenses

$ ( 745,002 )

Net income/ (loss) before income tax

income/ (loss) before income tax

( 18,256,714 )

Income tax benefit

Net income/ (loss)

( 20,279,438 )

Weighted average shares outstanding, basic

Basic net income/ (loss) per share

Weighted average shares outstanding, diluted

Diluted income/ (loss) per share

tax benefit/ (expense), net

income/ (loss)

$ ( 17,604,567 )

$ ( 19,018,014 )

average shares outstanding, basic

net income/ (loss) per share

average shares outstanding, diluted

income / (loss) per share

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

Holdings, Inc.

Consolidated Statements of Stockholders’ Equity

THE THREE MONTHS ENDED MARCH 31, 2024

Preferred Stock

Total Shareholders’

Balance, December 31, 2023

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

THE THREE MONTHS ENDED JUNE 30, 2024

Shareholders’

March 31, 2024

$ 107,348,166

$ ( 70,386,394 )

Conversion of PIPE shares

Restricted stock units (net of tax)

Stock compensation cost

Balance, March 31, 2024

of PIPE shares

stock units (net of tax)

compensation cost

June 30, 2024

$ 107,900,303

$ ( 69,444,867 )

THE THREE MONTHS ENDED JUNE 30, 2023

Shareholders’

March 31, 2023

$ ( 46,695,249 )

of PIPE shares

( 6,278,174 )

option conversion

( 17,604,567 )

June 30, 2023

$ ( 70,577,990 )

Holdings, Inc.

Consolidated Statements of Stockholders’ Equity

THE THREE MONTHS ENDED MARCH 31, 2023

Preferred Stock

Total Shareholders’

Balance, December 31, 2022

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

THE SIX MONTHS ENDED JUNE 30, 2024

Shareholders’

December 31, 2023

$ 105,919,674

$ ( 71,569,821 )

Cumulative effect from adoption of CECL

Conversion of PIPE shares

of PIPE shares

stock units (net of tax)

compensation cost

June 30, 2024

( 69,444,867 )

Stock option conversion

Issuance of shares to PCCU (net of tax)

Reversal of deferred underwriting cost

THE SIX MONTHS ENDED JUNE 30, 2023

Shareholders’

December 31, 2022

$ ( 39,695,281 )

Balance, March 31, 2023

effect from adoption of CECL

of PIPE shares

( 11,283,374 )

option conversion

of deferred underwriting cost

of shares to PCCU (net of tax)

( 19,018,014 )

income (loss)

( 19,018,014 )

June 30, 2023

$ ( 70,577,990 )

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

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CONSOLIDATED STATEMENTS OF CASH FLOWS

For the three months ended

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income/ (loss)

the six months ended

FLOWS FROM OPERATING ACTIVITIES:

income/ (loss)

$ ( 19,018,014 )

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

(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

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

and amortization expense

compensation expense (net of RSU tax adjustment)

of net deferred indemnified loan origination fees

provision for credit losses

of finite-lived intangible assets

tax expense/(benefit), net

( 1,261,424 )

Changes in operating assets and liabilities:

Accounts receivable – Trade

Accounts receivable – related party

Contract assets

Prepaid expenses

Accrued interest receivable

Deferred underwriting payable

Other current assets

Other current liabilities

Accounts payable

Accounts Payable – related party

Accrued expenses

Contract liabilities

Net deferred indemnified loan origination fees

Security deposit

Net cash provided by (used in) operating activities

CASH FLOWS PROVIDED BY INVESTING ACTIVITIES:

Purchase of property and equipment

Net repayment of loans

Net cash provided by investing activities

CASH FLOWS USED IN FINANCING ACTIVITIES:

Repayment of senior secured promissory note

Net cash used in financing activities

Net increase in cash and cash equivalents

Cash and cash equivalents – beginning of period

Cash and cash equivalents – end of period

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

in the fair value of deferred consideration

in fair value of warrant

( 2,341,773 )

in operating assets and liabilities:

receivable – trade

receivable – related party

interest receivable

underwriting payable

current assets

current liabilities

( 1,597,740 )

payable – related party

deferred indemnified loan origination fees

cash provided by (used in) operating activities

FLOWS PROVIDED BY INVESTING ACTIVITIES:

of property and equipment

repayment of loans

cash provided by investing activities

FLOWS USED IN FINANCING ACTIVITIES:

of senior secured promissory note

( 1,487,507 )

cash used in financing activities

( 1,487,507 )

increase in cash and cash equivalents

and cash equivalents – beginning of period

and cash equivalents – end of period

disclosure of cash flow information

transactions:

issued for the settlement of PCCU debt obligation

effect from adoption of CECL

of deferred underwriting cost

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

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Holdings, Inc.

(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, the Company provides these services

to financial institutions under a Safe Harbor Master Program Agreement.

(the “Company”), based in Golden, Colorado, specializes in financial technology designed to facilitate banking

service solutions tailored to the cannabis industry.

Initially, the Company’s operations were developed as a credit union service

organization, and asset of Partner Colorado Credit Union (“PCCU”).

A strategic reorganization on July 1, 2021 consolidated

select assets and activities from PCCU into SHF LLC (“SHF”) under SHF Holding Co., LLC.

On September 28, 2022, Northern Lights

Acquisition Corp.

(“NLIT”) acquired SHF, changing its name from Northern Lights Acquisition Corp.

to SHF Holdings, Inc.,

(the “Business Combination”).

The Business Combination aimed to enhance the Company’s financial services and market

footprint in the cannabis sector.

expanding its capabilities, the Company acquired Rockview Digital Solutions, Inc.

d/b/a Abaca (“Abaca”) on October 31, 2022.

This merger, executed in two steps, positioned Abaca as a wholly-owned subsidiary, bolstering the Company’s fintech offerings and

market reach.

Company facilitates a range of financial services through its financial institution partners using a proprietary technology platform

for deposit compliance and ongoing deposit activity compliance with banking regulations and regulators.

These include access to business

checking and savings accounts, cash management, commercial lending, courier services, remote deposit services, ACH payments, and wire

These services enable cannabis businesses to manage their finances effectively while ensuring regulatory compliance.

generates revenue from fee income, investment income, loan interest income and by offering compliance services to certain financial institutions

serving the cannabis industry.

Basis of Presentation and Summary of Significant Accounting Policies

Significant Accounting Policies

accompanying unaudited interim condensed consolidated financial statements should be read in conjunction with the audited consolidated

financial statements and results of operations included in the Company’s Annual Report on Form 10-K for the fiscal year ended December

31, 2023, filed with the Securities and Exchange Commission (the “SEC”).

to Note 2 to the Company’s Annual Report on Form 10-K for a description of the Company’s significant accounting policies.

The Company has included disclosures below regarding basis of presentation and other accounting policies that (i) are required to be

disclosed quarterly, (ii) have material changes or (iii) the Company views as critical as of the date of this report.

Basis of Presentation

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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”).

GAAP”) for interim financial information and the rules and regulations of

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

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

Operating results for the three 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, 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

Operating results for the three and six months ended June 30, 2024, are not necessarily indicative of the results that may be expected

for the current year ending December 31, 2024 or other interim periods.

The financial data presented herein should be read in conjunction

with the audited consolidated financial statements and accompanying notes as of and for the year 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 and six months ended June 30, 2023,

to conform to the presentation for the three and six months ended June 30, 2024.

These reclassifications, totaling $ 193,065 and $ 384,008

for the three and six months ended June 30, 2023 respectively, 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 the Company have controlling

financial interests.

All intercompany balances and transactions have been eliminated.

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

Concentrations of Risk

Company’s financial instruments that are exposed to concentrations of credit risk consist primarily of cash.

Cash balances are

maintained substantially in accounts at PCCU, which are 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.

addition to providing compliance and related services for its financial institution partners, the Company offers services to businesses

operating primarily in the cannabis industry as well as businesses offering cannabis adjacent services.

Cannabis remains illegal under

federal law, and therefore, strict enforcement of federal laws regarding cannabis would likely result in our inability to execute our

business plan.

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

The majority of the Company’s

revenue is generated by deposits and loans hosted by PCCU pursuant to a commercial alliance agreement dated March 29, 2023 between PCCU

and the Company, as previously disclosed as an exhibit to the Form 10-K for the fiscal year ended December 31, 2023 (the “Commercial

Alliance Agreement”).

Company had only one loan on its balance sheet as of June 30, 2024, which comprises 100 % of the total loan balance.

The Company also

indemnified twenty-four loans as of June 30, 2024;

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

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.

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 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.

of June 30, 2024, the Company had $ 6,111,982 in cash and net working capital of $ 301,738 , 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 $ 69,444,867 on June 30, 2024, and $ 71,569,821 on December

The Company has also generated operating income of $ 300,163 and $ 625,104 for the three and six months ended June 30, 2024 respectively.

the six months ended June 30, 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 June 30, 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 unaudited condensed 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

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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

and cash equivalents include cash on hand, amounts due from financial institutions, and investments with maturities of three months or

Concentrations of Risk

Company’s financial instruments that are exposed to concentrations of credit risk consist primarily of cash.

Cash balances are

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.

Cannabis remains illegal under federal law, and therefore, strict enforcement of federal

laws regarding cannabis would likely result in our inability to execute our business plan.

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

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 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

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)

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:

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

risk characteristics with other loans;

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

characteristics.

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

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

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

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

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

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

the likelihood of default across the loan pool.

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

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

This involves a detailed

analysis of two primary components:

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

and the unpaid principal balance of the loan;

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

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

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

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

that these borrowers are involved in the cannabis business.

Despite being legal at the state level in certain jurisdictions, cannabis

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

As cannabis related lending is a new practice in the United

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

Therefore, significant judgement is required

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

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

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

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

expectations around the current and future macroeconomic outlook.

Expected credit losses are estimated over the contractual term of the

loans, adjusted for expected prepayments when appropriate.

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

modification under certain conditions.

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

Recoveries are credited to the ACL

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

Any amounts collected in excess

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

Net Deferred Loan Origination Fees and Cost

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

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

Where applicable, the loan origination

fee is netted with loan origination costs associated with originating a specific loan.

These loan origination costs are typically incremental

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

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 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

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

A loss contingency is reported when it is both probable

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

Property and Equipment, net

and equipment are recorded at historical cost, net of accumulated depreciation.

Depreciation is provided over the assets’ useful

lives on a straight-line basis 3 - 5 years for equipment and furniture and fixtures.

Repairs and maintenance costs are expensed as incurred.

periodically assesses the estimated useful life over which assets are depreciated or amortized.

If the analysis warrants a change in

the estimated useful life of property and equipment, management will reduce the estimated useful life and depreciate or amortize the

carrying value prospectively over the shorter remaining useful life.

carrying amounts of assets sold or retired and the related accumulated depreciation are eliminated in the period of disposal and the

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

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

enhancement of our technology platform.

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

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 Liabilities

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

asset and require lease payments over the term of the lease.

At inception of the lease agreement, the Company assesses whether the agreement

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

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

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

right to use the underlying asset for the lease term and the operating lease liabilities representing the obligation to make lease payments

arising from the lease.

The Company has elected not to recognize lease assets and lease liabilities for short-term leases (leases with

a term of 12 months or less) and leases of low-value assets.

Lease right-of-use assets, net and lease liabilities are recognized at the

commencement date of the lease based on the present value of lease payments over the lease term and include options to extend or terminate

the lease when they are reasonably certain to be exercised.

The present value of lease payments is determined primarily using the incremental

borrowing rate based on the information available as of the lease commencement date.

expense for operating leases is recorded on a straight-line basis over the lease term and variable lease costs are recorded as incurred.

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

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

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

Both operating and finance lease right of use assets are reviewed

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

may not be recoverable.

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

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

Goodwill and Other Intangible Assets

Company’s methodology for allocating the purchase price of an acquisition is based on established valuation techniques that reflect

the consideration of a number of factors, including a valuation performed by a third-party appraiser.

Goodwill is measured as the excess

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

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

directly or indirectly to the future cash flows of the Company.

Intangible assets should be tested for impairment at the time of a triggering

event, if one were to occur.

Finite-lived intangible assets may be impaired when the estimated undiscounted future cash flows generated

from the assets are less than their carrying amounts.

Stock-based Compensation

Company measures all equity-based payment arrangements to employees and directors in accordance with ASC 718, Compensation–Stock

Compensation.

The Company’s stock-based compensation cost is measured based on the fair value at the grant date of the stock-based

It is recognized as expense on a straight-line basis over the requisite service period for the entire award.

Forfeitures are recognized

as they occur.

The Company estimates the fair value of each stock-based award on its measurement date using either the current market

price of the stock or Black-Scholes option valuation model, whichever is most appropriate.

The Black-Scholes valuation model incorporates

assumptions such as expected term of the instrument, volatility of the Company’s future share price, risk free rates, future dividend

yields and estimated forfeitures at the initial grant date, by reference to the underlying terms of the instrument, and the Company’s

experience with similar instruments.

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

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

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

stock compensation.

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

Treasury rates for securities with maturities approximating

the awards’ expected lives.

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

of contractual term and vesting period the awards.

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

not currently anticipate paying any in the foreseeable future.

Fair Value Measurements

Company utilizes the fair value hierarchy to apply fair value measurements.

The fair value hierarchy is based on inputs to valuation

techniques that are used to measure fair values that are either observable or unobservable.

Observable inputs reflect assumptions market

participants would use in pricing an asset or liability based on market data obtained from independent sources, while unobservable inputs

reflect a reporting entity’s pricing based upon its own market assumptions.

The basis for fair value measurements for each level

within the hierarchy is described below:

1 — Quoted prices for identical assets or liabilities in active markets.

2 — Quoted prices for similar assets or liabilities in active markets;

quoted prices for identical or similar assets or liabilities

in markets that are not active;

or model-derived valuations whose inputs are observable or whose significant value drivers are observable.

3 —Valuations derived from valuation techniques in which one or more significant inputs to the valuation model are unobservable.

Revenue Recognition

recognizes revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”).

The core principle

of ASC 606 requires that an entity recognize revenue to depict the transfer of promised goods or services to customers in an amount that

reflects the consideration to which SHF expects to be entitled in exchange for those goods or services.

ASC 606 defines a five-step process

to achieve this core principle including identifying performance obligations in the contract, estimating the amount of variable consideration

to include in the transaction price and allocating the transaction price to each separate performance obligation.

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

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.

The Master Program Agreement is a non-exclusive and non-transferable

right to implement and utilize the Safe Harbor Program.

The Safe Harbor Program has two performance obligations;

an implementation fee

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

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.

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

consist of financial institutions providing services to CRBs.

Revenues are concentrated in the United States of America.

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 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 Shares.

The Company utilizes

the two-class method to compute earnings available to common shareholders.

Under the two-class method, earnings are adjusted by accretion

amounts to redeemable noncontrolling interests recorded at redemption value.

The adjustments represent dividend distributions, in substance,

to the noncontrolling interest holder as the holders have contractual rights to receive an amount upon redemption other than the fair

value of the applicable shares.

As a result, earnings are adjusted to reflect this in substance distribution that is different from other

common shareholders.

In addition, the Company allocates net earnings to each class of common stock and participating security as if all

of the net earnings for the period had been distributed.

The Company’s participating securities consist of share-based payment

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

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

of assets and liabilities and their carrying amounts for financial reporting purposes.

Deferred tax assets and liabilities are adjusted

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

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

interim periods.

If management is unable to estimate a portion of its ordinary income, but is otherwise able to reliably estimate the

remainder, ASC 740-270-25-3 provides that the tax applicable to that item be reported in the interim period in which the item occurs.

The tax (or benefit) related to ordinary income (or loss) shall be computed at an estimated annual effective tax rate and the tax (or

benefit) related to all other items shall be individually computed and recognized when the items occur.

Management is unable to estimate

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

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

of tax positions taken or expected to be taken in a tax return.

For those benefits to be recognized, a tax position must be more-likely-than-not

to be sustained upon examination by taxing authorities.

The Company recognizes accrued interest and penalties related to unrecognized

tax benefits, if any, as income tax expense.

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

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.

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.

Recently Issued Accounting Standards

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upon adoption.

Expected Credit Losses

Expected Credit Losses (“CECL”)

June 2016, the FASB issued ASU No.

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Expected Credit Losses Transition Impact

Loans receivable, gross

receivable, gross

Allowance for credit loss

Liabilities & Equity

Indemnity liability

Retained deficit

( 39,695,281 )

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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 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.

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

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.

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

condensed consolidated financial statements.

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

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

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

can be applied through December 31, 2024.

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

financial statements.

Investments-Equity

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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.

The FASB issued final guidance allowing entities to apply the proportional

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

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

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

This ASU has not had a material impact on the Company’s unaudited condensed consolidated financial statements.

Pending to be Adopted

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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

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

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

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

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

The amendments in this Update should be applied prospectively.

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

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

removed from the Codification and will not become effective for any entity.

The Company 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.

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 disclosures.

This guidance

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

This ASU applies to all public entities and is effective

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

Early adoption is permitted.

The Company 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).

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Early adoption would be permitted.

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

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

Compensation—Stock Compensation (Topic 718):

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

The Board has a standing project

The FASB has a standing project

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

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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:

November 11, 2022, as provided in Exhibit 2.1 of the Current Report of Form 8-K on November 14, 2022, the Company entered into the first

Amendment to the Merger Agreement and Plan of Merger to that certain Agreement and Plan of Merger, dated as of October 29, 2022, by and

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

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

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

and Dan Roda, solely in such individual’s capacity as the representative of the Company Security Holders (collectively with the

“Merger Agreement”).

The Merger Agreement provided for payment of $ 30 million through a mix of cash and stock.

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 Class A Common Stock

consideration was settled through 2,100,000 Class A Common Stock 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.

The foregoing description of the Merger Agreement does

not purport to be complete and is qualified in its entirety by the Merger Agreement attached as Exhibit 2.1 to the Current Report on

the Second Amendment to Agreement and Plan of Merger, dated October 26, 2023, by and among SHF Holdings, Inc., a Delaware corporation,

Merger Sub I, a Delaware corporation, [Merger Sub II], a Delaware limited liability corporation, Rockview Digital Solutions, Inc., a

Delaware corporation, d/b/a Abaca and Dan Roda, solely in such individual’s capacity as the representative of the Abaca security

holders as referenced in Exhibit 2.1 of the Company’s Current Report on Form 8-K, filed on October 27, 2023 (the “Amended

Abaca Merger Agreement”)The revised terms, provides for deferred stock consideration of 5,835,822 shares of Class A Common Stock

issued at the first anniversary of the Abaca Merger Agreement based on a recalculated value of $ 2.00 per share.

No changes affected the

scheduled cash payments.

Furthermore, a third-anniversary consideration of $ 1.5 million was introduced, payable in cash or Class A Common

Stock at the Company’s discretion, alongside an issue of 5,000,000 stock warrants at an exercise price of $ 2.00 per share of Class

A Common Stock.

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 year ended December 31, 2023.

change in the amount of deferred consideration from January 1, 2023, to June 30, 2024, is as follows:

of Change in Deferred Consideration

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consideration

Third Anniversary

Consideration Payment

January 1, 2023

Working capital adjustment

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Fair value adjustment

December 31, 2023

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

Company’s goodwill was derived from the Abaca Merger , 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 goodwill and intangible impairment assessment on June 30, 2023, and found that the carrying value

of goodwill exceeded its fair value, leading to the recognition of a $ 13,208,276 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 June 30, 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

of June 30, 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 .

of June 30, 2024, and December 31, 2023, the Company’s accumulated goodwill impairment was $ 13,208,276 .

intangible assets

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

Company reviews its finite-lived intangible assets for impairment at least annually on December 31 unless any events or circumstances

indicate it is more likely than not that the fair value of the finite-lived intangible assets is less than its carrying value.

2023, following a triggering event in the second quarter, the Company performed an interim goodwill and intangible asset impairment assessment.

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 June 30, 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:

is a summary of the Company’s finite-lived intangible assets as of June 30, 2024 and December 31, 2023:

Schedule of Finite Lived Intangible Assets

Useful life in

December 31, 2023

March 31, 2024

Market related intangible assets

Customer relationships

Developed technology

Total intangible assets

Useful life in

December 31, 2022

related intangible assets

relationships

intangible assets

December 31, 2023

Market related intangible assets

Customer relationships

Developed technology

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.

related intangible assets

relationships

intangible assets

the six months ended June 30, 2024, amortization expense and impairment of finite-lived intangible assets were $ 313,708 and $ 0 , respectively,

compared to $ 709,882 and $ 3,680,463 , respectively, for the six months ended June 30, 2023.

Loans Receivable

1 unchanged sentence

of Commercial Real Estate Loans Receivable

March 31, 2024

December 31, 2023

Commercial real estate loans receivable, gross

Allowance for credit losses

Commercial real estate loans receivable, net

Current portion

Noncurrent portion

real estate loans receivable, gross

for credit losses

real estate loans receivable, net

for Credit Losses

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

1 unchanged sentence

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

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

accordance with the credit loss policy described in Note 2 to the 2023 Form 10-K.

allowance for credit losses consists of the following activity for the three and six months ended June 30, 2024 and June 30, 2023:

Schedule of Allowance For Loan Losses

March 31, 2024

March 31, 2023

Allowance for credit losses

Beginning balance

Cumulative effect from adoption of CECL

Ending balance

Loans receivable:

Individually evaluated for an allowance for credit loss

Collectively evaluated for an allowance for credit loss

Allowance for credit losses:

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.

months ended June 30,

for credit losses

months ended June 30,

for credit losses

effect from adoption of CECL

evaluated for an allowance for credit loss

for credit losses:

evaluated for an allowance for credit loss

June 30, 2024 and December 31, 2023, no loans were past due or classified as non-accrual.

quality of loans:

3 unchanged sentences

assessing the risk factors and assigning a risk rating based on a variety of factors.

The detailed breakdown of risk factors described

The detailed breakdown of risk factors are described

in Note 6 to the unaudited condensed consolidated financial statements.

1 unchanged sentence

of Risk Rating

March 31, 2024

December 31, 2023

Indemnification Liability

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

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.

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

of Outstanding Amounts

March 31, 2024

December 31, 2023

Secured term loans

Unsecured loans and lines of credit

Total loans funded by PCCU

loans and lines of credit

loans funded by PCCU

loans contained an interest rate ranging from 8.00 % to 13.00 %.

Unsecured loans and lines of credit contain variable rates ranging from

Prime +1.50% to Prime +6.00%.

Unsecured lines of credit had incremental availability of $ 525,000 and $ 996,958 on March 31, 2024 and December

Unsecured loans and lines of credit contain an interest rate ranging from

10.00% to 12.50%.

Unsecured lines of credit had incremental availability of $ 231,052 and $ 996,958 on June 30, 2024 and December 31, 2023,

respectively.

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 to the unaudited condensed consolidated financial statements.

date was calculated in accordance with the allowance for credit loss and indemnity liability policies described in Note 2 to the Company’s

2023 Form 10-K.

indemnity liability activity are as follows:

Schedule of Indemnity Liability

Three Months ended

March 31, 2024

Three Months ended

March 31, 2023

Beginning balance

Cumulative effect from adoption of CECL

(Benefit)/ Provision

Ending balance

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.

of Indemnity Liability

effect from adoption of CECL

of June 30, 2024, the company’s entire loan portfolio was current and performing.

However, as of December 31, 2023, one loan had

been classified as nonaccrual.

On December 29, 2023, the company successfully negotiated an amendment agreement to the nonaccrual loan

agreement, resulting in the payment of all overdue amounts and restoring the loan to current status.

During the second quarter of 2024,

the company received the full principal amount of the loan, along with all accrued interest.

quality of indemnified loans:

38 unchanged sentences

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:

provision (benefit) for credit losses on the statement of operations consists of the following activity for the three months ended June

30, 2024 and June 30, 2023:

of Provision for Loan Losses

March 31, 2024

March 31, 2023

Provision (benefit)

provision (benefit) for credit losses on the statement of operations consists of the following activity for the six months ended June

30, 2024 and June 30, 2023:

Property and Equipment, Net

and equipment consist of the following:

Schedule of Property and Equipment

March 31, 2024

December 31, 2023

Office furniture

Property and equipment, gross

of Property and Equipment

and equipment, gross

accumulated depreciation

Property and equipment, net

and equipment, net

Related Party Transactions

2 unchanged sentences

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).

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.

the Commercial Alliance agreement, PCCU has the right to receive monthly fees for managing loans.

For CRB loans, which are funded by

PCCU but primarily managed by the Company, a yearly fee of 0.25 % of the remaining loan balance is applied.

On the other hand, loans both

funded and serviced by the PCCU are charged a yearly fee of 0.35 % on their outstanding balance.

These fees are calculated using the average

daily balance of each loan for the preceding month.

In addition, the Company’s is obligated by the Commercial Alliance Agreement

to indemnify PCCU from certain default-related loan losses (as 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

13 unchanged sentences

of Demonstrated Deposit Capacity

March 31, 2024

December 31, 2023

CRB related deposits

related deposits

$ 129,350,998

available under lines of credit

$ ( 622,670 )

Capacity at 60%

PCCU net worth

Capacity at 1.3125

Limiting capacity

PCCU loans funded

Amounts available under lines of credit

Incremental capacity

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:

* If the loans funded

by PCCU exceed the limiting capacity, the Commercial Alliance Agreement specifies that PCCU will be unable to fund additional loans until

the incremental capacity is positive.

revenue from the Commercial Alliance Agreement recognized in the statements of operations consists of the following for the periods ended

June 30, 2024, and June 30, 2023:

of Revenue from Operations

Three months ended

March 31, 2024

Three months ended

March 31, 2023

Six months ended

Account servicing agreement

Commercial Alliance Agreement

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:

operating expenses from the Commercial Alliance Agreement recognized in the statements of operations consists of the following for the

periods ended June 30, 2024, and June 30, 2023:

of Operating Expense from Operations

Three months ended

March 31, 2024

Three months ended

March 31, 2023

Support services agreement

Loan servicing agreement

Commercial alliance agreement

Operating expense

of shares to PCCU

March 29, 2023, the Company and PCCU entered into the following definitive transaction documents to settle and restructure the deferred

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

rate of 4.25 % and a Security Agreement pursuant to which the Company will grant, as collateral for the Note, a first priority security

interest in substantially all of the assets of the Company.

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

Following the issuance of the Shares, PCCU own 46.39 % of the outstanding Class A Common Stock.

In connection with the Securities

Issuance Agreement, the parties also entered into a Registration Rights Agreement and a Lock-Up Agreement.

Registration Rights Agreement requires the Company to register the Shares for resale pursuant to the Securities Act of 1933, as amended

(the “Securities Act”);

and the Lock-Up Agreement restricts PCCU from transferring the Shares until the earlier of (i)

six (6) months after the date of the Securities Issuance Documents or (ii) the consummation of a transaction with an unaffiliated

third party in which all of the Company’s stockholders have the right to exchange their shares of Class A Common Stock for

cash, securities, or other property;

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

the relationship between the Company and PCCU which supersedes the Loan Servicing Agreement, as well as the Amended and Restated

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

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

services agreement

servicing agreement

Alliance Agreement

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

of Outstanding Balances from Balance Sheet

March 31, 2024

December 31, 2023

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.

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

the $ 6.1 million and $ 4.89 million of cash and cash equivalents on June 30, 2024 and December 31, 2023, respectively, $ 5.1 million and

$ 4.6 million of the cash and cash equivalents, respectively, were held in deposit accounts at PCCU as a related party.

Senior Secured Promissory Note

of Senior Secured Promissory Note

March 31, 2024

December 31, 2023

Senior Secured Promissory Note (Current)

Senior Secured Promissory Note (long term)

Secured Promissory Note (current)

Secured Promissory Note (long term)

March 29, 2023, the Company and PCCU entered into definitive transaction documents to settle and restructure the deferred obligation

related to business Combination 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 05, 2023, the Company has paid the interest portion.

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

following the Business Combination under which the Company has issued the five-year Senior Secured Promissory Note (the “PCCU Note”)

in the principal amount of $ 14,500,000 bearing interest at the rate of 4.25 % and a Security Agreement, as referenced in Exhibit 3 of

the Company’s Quarterly Report on Form 10-Q, filed May 15, 2023, pursuant to which the Company will grant, as collateral for the

PCCU Note, a first priority security interest in substantially all of the assets of the Company.

PCCU 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 the interest portion.

repayment schedule of the outstanding principal amount of the PCCU Note as of June 30, 2024, is as follows:

of Outstanding Amount on Debt

Year of payment

Company has non-cancellable operating leases for facility space with varying terms.

6 unchanged sentences

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

As of 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.

As of June 30, 2024, and December 31, 2023, net assets

recorded under operating leases were $ 781,693 and $ 859,861 respectively, and net lease liabilities were $ 948,419 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 months ended March 31, 2024 and March 31, 2023, included in Unaudited

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 and six months ended June 30, 2024 and June 30, 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

Short-term lease cost

Total Lease Cost

of Right Of Use Assets

March 31, 2024

December 31, 2023

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

Beginning balance

Additions to right-of-use assets

Amortization charge for the period

Lease modifications

Ending balance

Further information related to leases is as follows:

Weighted-average remaining lease term

Weighted-average discount rate

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

Schedule of Right of Use Assets

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

to right-of-use assets

charge for the period

modifications

information related to leases is as follows:

Weighted-average

remaining lease term

Weighted-average

discount rate

minimum lease payments as of June 30, 2024, and December 31, 2023, are as follows:

of Future Minimum Lease Payments

future minimum lease payments

Imputed interest

Operating lease liabilities

Current portion

Non-current portion of

lease liabilities

Current portion

portion of lease liabilities

Disaggregated

1 unchanged sentence

of Disaggregated Revenue

Three months ended

Deposit, activity, onboarding income

Safe Harbor Program income

Investment income

Loan interest income

Total Revenue

fee income consists of deposit account fees, activity fees and onboarding income, which are recognized on periodic basis as per the fee

schedule 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, the Company executed a note on September 28, 2022 with EF Hutton related to PIPE financing

under which the Company was obligated to pay the principal sum of $ 2,166,250 on the following schedule:

(i) $ 715,750 on October 14, 2022,

and (ii) $ 362,625 on each of October 31, 2022, November 30, 2022, December 31, 2022, and January 31, 2023.

Company made the payment of its first installment of $ 715,750 and defaulted on the remaining outstanding amounts.

The outstanding balance

of the note on December 31, 2022 was $ 1,450,500 .

On March 13, 2023, the Company and EF Hutton entered into a settlement agreement pursuant

to which the Company paid $ 550,000 to EF Hutton in full settlement of the amount due and the difference of $ 900,500 has been accounted

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

activity, onboarding income

Harbor Program income (expense)

interest income

activity, onboarding income

Harbor Program income

interest income

fee income to the Company are derived from the businesses holding accounts with our financial institution partners and consists of deposit

account fees, account activity fees, and onboarding income, each of which is recognized on a periodic basis as per the fee schedule with

financial institution partners.

The Company also receives income related to outsourced support of 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 the Commercial Alliance Agreement.

Investment income consists of interest earned

on the daily deposits balances of the cannabis businesses held with the Company’s financial institution partners.

the Company’s Commercial Alliance Agreement, the Company is obligated to remit 25 % of the investment hosting fees to PCCU based

on income which is classified as “General and Administrative Expenses” in the Consolidated Statements of Operations.

the three and six months ended June 30, 2024, PCCU’s contributions to the Company’s revenues included $ 1,206,922 and $ 2,424,598 ,

respectively from deposits, activities, and client onboarding, $ 435,238 and $ 1,166,663 , respectively, from investment income, and $ 1,836,092

and $ 3,472,848 , respectively, from loan interest income.

The associated expenses for these revenues were $ 121,108 and $ 225,367 , respectively,

for account hosting, $ 117,620 and $ 277,721 , respectively, for investment hosting fees, and $ 36,156 and $ 72,057 , respectively, for loan

servicing fees, all in accordance with the Commercial Alliance Agreement, classified as “General and Administrative Expenses”

in the Consolidated Statements of Operations.

During the three and six month ended June 30, 2023, PCCU’s contributions to the Company’s

revenues included $ 1,385,845 and $ 2,763,684 , respectively, from deposits, activities, and client onboarding, $ 1,420,542 and $ 2,837,694 ,

respectively, from investment income, and $ 604,831 and $ 1,071,124 , respectively, from loan interest income.

The related expenses for

these revenue streams were $ 60,833 and $ 116,258 , respectively, for account hosting, $ 381,427 and $ 704,732 , respectively, for investment

hosting fees, and $ 16,741 and $ 28,670 , respectively, for loan servicing fees, all in compliance with the Loan Servicing Agreement, classified

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

Commitments and contingencies

4 unchanged sentences

The Company cannot predict the timing or outcome of these claims and other proceedings.

connection with the Company’s initial public offering (“IPO”), the Company entered into a registration rights agreement

dated June 23, 2021 with the Sponsor and the individuals serving as directors and executive officers of the Company at the time of

Pursuant to this registration rights agreement, the Company has agreed to register for resale upon the expiration of the

applicable lock-up period the Company securities acquired by the Sponsor and such individuals in connection with the organization

of the Company and the IPO.

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

connection with the issuance of Class A Common Stock to Abaca shareholders, the Company commits to registering the stock upon the

exercise of Abaca Warrants if required by law or regulation to ensure the shares can be sold without restrictive legends, known as

the Warrant Registration Requirement.

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

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 effective.

Earnings Per Share

7 unchanged sentences

method for Warrants and Options.

the Business Combination and related transactions are being reflected as if they had occurred at the beginning of the period presented,

the calculation of weighted average shares outstanding for basic and diluted net income per share assumes that the shares issued in connection

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

Schedule of Earning Per Shares, Basic and Diluted

For the three month period ended March 31

Net Income/ (loss)

the three month period ended June 30,

Income/ (loss)

$ ( 17,604,567 )

Weighted average shares outstanding – basic

Basic net income/ (loss) per share

Weighted average shares outstanding – diluted

Diluted net income/ (loss) per share

average shares outstanding – basic

net income/ (loss) per share

average shares outstanding – diluted

net income/ (loss) per share

the six month period ended June 30,

Income/ (loss)

$ ( 19,018,014 )

average shares outstanding – basic

net income/ (loss) per share

average shares outstanding – diluted

net income/ (loss) per share

Schedule of Weighted Average Shares Outstanding - Basic And Diluted

Weighted average shares calculation - basic

Three months ended

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

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

average shares calculation – basic

public shares

initial stockholders

issued for abaca acquisition

stock units issued

of preferred stock

average shares outstanding - basic

average shares calculation - diluted

used in computation of basic earnings per share

to be issued to Abaca shareholders

of preferred stock

share-based equity awards and warrants were excluded from the computation of dilutive earnings/ (loss) per share because inclusion of

2 unchanged sentences

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 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.

based payments

to be issued to Abaca shareholders

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.

Forward Purchase Agreement

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

to which Midtown East assigned its obligations as to 1,666,666 shares of the shares of Class A Stock to be purchased under the Forward

Purchase Agreement to each of Verdun and Vellar.

As contemplated by the Forward Purchase Agreement:

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, 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 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

prior to the Maturity Date.

any time prior to the Maturity Date (defined as the earlier of i) the third anniversary of the Closing of the Business Combination,

ii) the shares are delisted from The Nasdaq Stock Market or (iii) during any 30 consecutive Scheduled Trading Day-period following

the closing of the Business Combination, the Volume Weighted Average Share Price (VWAP) Price for 20 Scheduled Trading Days during

such period shall be less than $ 3.00 per share), Midtown East, Verdun and Vellar may elect an optional early termination to sell

some or all of the shares (the “Terminated Shares”) of Class A Stock in the open market.

If Midtown East, Verdun and

Vellar sell any shares prior to the Maturity Date, the pro-rata portion of the Reset Price will be released from the escrow account

and paid to SHF.

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

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.

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

East”), which subsequently assigned obligations to purchase 1,666,666 shares of Class A Stock each to Verdun Investments LLC (“Verdun”)

and Vellar Opportunity Fund SPV LLC – Series 1 (“Vellar”) through assignment and novation agreements.

The collective

acquisition involved 3.8 million Class A shares, with Midtown East, Verdun, and Vellar waiving their redemption rights.

The Company incurred

costs totaling $ 39.6 million, comprising $ 39.3 million for the shares and an additional $ 0.3 million in related expenses post-closing.

At the maturity of the FPA, the parties will receive the value of their shares multiplied by the Forward Price, as referenced in Exhibit

10.1 of the Company’s Report on Form 8-K filed on June 17, 2022.

They will also receive an additional amount in cash or shares,

at the Company’s discretion.

An early termination clause allows for the shares to be sold on the open market, with any proceeds

exceeding the Reset Price, as referenced in Exhibit 10.1 of the Company’s Report on Form 8-K filed on June 17, 2022, retained by

Following a price reset in 2022 to $ 1.25 per share, the FPA receivable was reduced from $ 37.9 million to $ 4.6 million.

of June 30, 2024, there have been no transactions by the FPA holders, and the value of the FPA receivable has remained unchanged.

reconciliation statement of the Class A Common Stock held by the parties are as follows:

1 unchanged sentence

December 31, 2023

Shares sold during

March 31, 2024

Name of the party

the six months ended

June 30, 2024

15 Warrant Liabilities

and 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.

of June 30, 2024 and December 31, 2023, the Company had 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 Class A Common Stock.

Public and Private Placement Warrants became exercisable on September 28, 2022, the date of the Business Combination and will expire

31 unchanged sentences

on the same basis as the public 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

of June 30, 2024 and December 31, 2023, the Company had 1,022,500 PIPE Warrants, as referenced in Exhibit 4.1 of the Company’s

Current Report on Form 8-K, filed on October 4, 2022.

PIPE Warrants have an adjusted exercise price of $ 5.00 per share of Class A Common Stock to be paid in cash (except if the shares underlying

the warrants are not covered by an effective registration statement after the six-month anniversary of the closing date, in which case

cashless exercise is permitted), subject to adjustment to a price equal to the greater of (i)125% of the conversion price if at any time

there is an adjustment to the Conversion Price and the exercise price after such adjustment is greater than 125% of the Conversion Price

as adjusted and (ii) $5.00.

The PIPE Warrants are also subject to adjustment for other customary adjustments for stock dividends, stock

splits and similar corporate actions.

cashless exercise is permitted.

The PIPE Warrants are also subject to adjustment for other customary adjustments for stock dividends,

stock splits and similar corporate actions .

The PIPE Warrants are exercisable for a period of five years following the Closing, or September

1 unchanged sentence

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.

of June 30, 2024, and December 31, 2023, the Company issued 5,000,000 Abaca warrants, as referenced in Exhibit 2.2 of the Company’s

Current Report on Form 8-K, filed on October 27, 2023.

5,000,000 Abaca 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.

This registration

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

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

16 unchanged sentences

Placement Warrants:

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

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.

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.

Placement Warrants are recorded at fair value on a recurring basis based upon an internal Company assessed value of these derivatives

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

Warrants are recorded at fair value on a recurring basis based upon an internal Company assessed value of these derivatives with Level

3 inputs, which are derived from the Black-Scholes model.

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.

The Company assessed the value of these derivatives with Level 3 inputs.

3 inputs, based on unobservable data derived from the 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

The Company values these derivatives based on third

party reports for Level 3 inputs.

Level 3 inputs, based on unobservable data derived from Black Scholes-Merton model.

Level 3 inputs are based on unobservable data derived from the Black Scholes-Merton model.

Purchase Option Derivatives:

2 unchanged sentences

party reports for Level 3 inputs.

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

In 2023 and 2024, no significant risk factor changes affecting forward purchase option derivative values

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 March 31, 2024 and December 31, 2023:

in the fair value hierarchy on June 30, 2024 and December 31, 2023:

Schedule of Fair Value Assets and Liabilities Measured on Recurring Basis

March 31, 2024

June 30, 2024

December 31, 2023

10 unchanged sentences

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.

December 31, 2023, the Company’s developed technology asset were measured at fair value on a nonrecurring basis as result of annual

impairment testing.

In order to evaluate the fair value of the developed technology asset, the annual impairment test employed the Relief

from Royalty Method for accurately reflecting market conditions and asset performance.

following table presents the carrying amounts and fair values of financial instruments measured on a nonrecurring basis, by the level

of valuation inputs in the fair value hierarchy, as of the dates indicated:

of Carrying Amounts and Fair Values of Financial Instruments Measured on a Nonrecurring Basis

As on December 31, 2023

Fair value measurement using

Developed Technology

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

intangible assets as of their measurement dates:

of Finite Lived Intangible Assets Measurement

As on December 31, 2023

Developed technology

Discount rate

Estimated useful life

Fair value measurements inputs

were no assets or liabilities recorded at fair value on a nonrecurring basis for the period ended June 30, 2024.

Value of Financial Instruments

7 unchanged sentences

Schedule of Carrying Amounts and Fair Values of Financial Instruments

As on March 31, 2024

As on June 30, 2024

Fair value measurement using

3 unchanged sentences

Senior Secured Promissory note

Indemnity liability

Public warrants

20 unchanged sentences

Consideration

For the period ended March 31, 2024

For the period ended June 30, 2024

Consideration

Balance at the beginning of the period

Issued to Abaca shareholders

Balance as at December 31, 2023

Fair value adjustment

( 1,115,653 )

Balance at the end of the period

Balance as at the March 31, 2024

Fair value adjustment

Balance at the June 30, 2024

Consideration

For the period ended March 31, 2023

For the period ended June 30, 2023

Consideration

Balance at the beginning of the period

Balance as at December 31, 2022

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

Balance as at the March 31, 2023

Fair value adjustment

Balance at the June 30, 2023

of June 30, 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

As of June 30, 2024 and December 31, 2023, these warrants were valued using Level 3 inputs.

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

Throughout the periods ended June 30, of 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 June

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 period ended June 30, of 2023 and 2024, there were no changes in the classification of financial instruments within Level 2 and Level

3 of the fair value hierarchy.

4 unchanged sentences

Consideration

March 31, 2024

June 30, 2024

December 31, 2023

6 unchanged sentences

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

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

derivatives as of their measurement dates on June 30, 2024 and December 31, 2023:

Schedule of Level 3 Fair Value Measurements Inputs

March 31, 2024

December 31, 2023

4 unchanged sentences

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.

the six months ended June 30, 2024, the Company recorded income tax expense of $ 48,742 for continuing operations.

The effective tax rate

of 1.6 % for the six months ended June 30, 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 The Company has net

deferred tax assets of $ 43,793,536 and $ 43,829,019 as of June 30, 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 March 31, 2024, and December 31, 2023, the Company has no unrecognized income tax benefits.

both June 30, 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 months ended

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

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

ended June 30, 2024, amounted to $ 28,714 and $ 63,947 , respectively, and for the three and six months ended June 30, 2023 amounted to

$ 13,426 and $ 34,089 , 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.

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 June 30, 2024, there were 111 Class A preferred

shares issued and outstanding, and 1,101 Class A 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

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 stockholders approved a reduction in the floor conversion price of the outstanding preferred stock from $ 2.00 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.

1 unchanged sentence

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

As of June 30, 2024 and December 31, 2023, there were 55,431,001

and 54,563,372 shares of Class A Common Stock issued and outstanding, respectively.

As of June 30, 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 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.

The 2022 Plan permits the grant of incentive stock options,

non-qualified stock options, stock appreciation rights, restricted stock, restricted stock units, stock bonus awards, and performance

compensation awards.

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

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

compensation expense recognized six months ended June 30, 2024 and June 30, 2023 totaled $ 1,164,261 and $ 2,529,042 , respectively.

compensation expense recognized three months ended June 30, 2024 and June 30, 2023 totaled $ 552,137 and $ 958,260 , respectively.

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

The 2022 Plan permits the grant of incentive

stock options, non-qualified stock options, stock appreciation rights, restricted stock, restricted stock units, stock bonus awards,

and performance compensation awards.

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

compensation awards in the six months ended June 30, 2024 and June 30, 2023.

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 six months ended June 30, 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

6.00 to 6.50 years

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

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

dropped significantly from the date of listing.

Based on these factors 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:

The shares and the redeemable warrants 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 six months ended June 30, 2024 is as follows:

of Stock Option and Related Information

4 unchanged sentences

Cancelled / Forfeited

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:

June 30, 2024

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

Average Grant

4 unchanged sentences

Cancelled / Forfeited

March 31, 2023

June 30, 2023

following options were outstanding at their respective exercise price:

1 unchanged sentence

Exercise price options outstanding

March 31, 2024

March 31, 2023

June 30, 2024

June 30, 2023

Stock Units (“RSUs”)

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

summary of the Company’s RSU activities and related information for the six months ended June 30, 2024 is as follows:

of Restricted Stock Units

Restricted Stock Units

Average Grant

1 unchanged sentence

December 31, 2023

March 31, 2024

Cancelled / Forfeited

June 30, 2024

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

Restricted Stock Units

Average Grant

1 unchanged sentence

December 31, 2022

Cancelled / Forfeited

June 30, 2023

following RSU were outstanding at their respective vest price:

of Exercise Price of Restricted Stock Units

price RSU outstanding

Vest price RSU outstanding

June 30, 2024

June 30, 2023

Subsequent events

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.

were not any material subsequent events that occurred after the balance sheet date of June 30, 2024 through the date of this report.

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