What changed in this filing

/stocks — the workspaceLOADING

Item 1. Business

2026-04-15 compared with 2025-04-10 · 837 added, 937 removed, 24 unchanged (99% of the section changed)

provide compliance and loan origination services to financial institutions desiring to provide business banking, private banking and

commercial banking services to their customers, particularly those customers conducting business in or adjacent to the state legal cannabis

Our services include, among other things:

compliance consulting and software for maintaining “Know Your Customer” (“KYC”) and Bank Secrecy Act (“BSA”)

compliance to financial institutions, principally conducted vis-à-vis our proprietary financial services platform;

origination, onboarding, verification, and servicing of cannabis-related deposit business for and on behalf of our partner financial

institutions;

underwriting, servicing, and administering loans issued to cannabis businesses and related entities, which are often also our customers,

as well as being customers of our partner financial institutions.

Company is based in Golden, Colorado.

Founded in 2015 by Partner Colorado Credit Union (“PCCU”), SHF was among the first

companies to provide compliant banking and lending services to cannabis related businesses (“CRBs”).

Our mission is to provide

reliable, compliant financial services to the legal cannabis, hemp, and related industries by enabling financial institution customers

to offer compliant banking, lending, and other financial services to CRBs.

provide compliance and loan origination services to financial institutions that wish to offer business banking, private banking, and

commercial banking services to clients operating in or adjacent to the state-legal cannabis industry.

Through our proprietary technology

platform, which currently operates across 41 states and territories, we enable our financial institution customers to compliantly provide

the following services to CRBs:

checking and savings accounts;

management accounts;

and investment options;

services (via third-party relationships);

deposit services;

Clearing House (“ACH”) payments and origination;

core service offerings include:

compliance consulting and technology:

We provide our financial institution customers with the tools and support needed

to maintain “Know Your Customer” (“KYC”), Anti-Money Laundering (“ AML ”) and Bank Secrecy Act (“BSA”) compliance, principally

delivered through our proprietary financial services platform.

Specific compliance services include initial customer due diligence,

customer application management, program management support, compliance monitoring, and regulatory examination assistance.

Cannabis-related

deposit services:

We originate, onboard, verify, and service cannabis-related deposit business for and on behalf of our

financial institutions, primarily PCCU, and constitute obligations solely of those institutions;

the Company is not a financial institution

and does not hold customer deposits on its consolidated balance sheet.

Because most CRBs transact with high volumes of cash due to the limited availability of traditional banking

services, our platform benefits both CRBs and financial institutions by providing CRBs access to compliant banking and giving

financial institutions access to increased, compliantly monitored deposits.

We source, underwrite, service, and administer loans issued to cannabis businesses and related entities, many

of which are also clients of our partner financial institutions.

generate revenue through fee income, investment income, and loan program income earned by providing these compliance and lending services

to financial institutions serving the cannabis industry.

Services Platform

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

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

institution client and the CRB meet regulatory requirements.

Our platform enables the Company’s staff to efficiently guide financial

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

Our automated platform

provides for an efficient and effective management tool allowing our employees to provide continuity of service while enabling compliance

staff to monitor BSA activities.

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

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

cash management accounts and commercial lending.

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

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

We feel our history of

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

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

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

CRB funds are deposited and monetary transactions are performed.

The Company’s agreements with the financial institution allow

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

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

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

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

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

Onboarding is an important part of the KYC requirements

set forth in federal guidance.

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

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

Additionally, the Company assesses monthly deposit

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

These fees are also based on business type and size.

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

We believe our compliance-first focus reassures

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

income is also generated our financial institution clients invest CRB deposits.

Under our Commercial Alliance Agreement (“PCCU

CAA”) with PCCU, the Company paid 25% of the investment income as a hosting fee to PCCU based on this income.

relationship with PCCU, depository amounts invested are typically restricted to low-risk assets with high liquidity and low returns.

The investment income is significantly influenced by the levels of CRB deposits and the prevailing interest rate environment for

cash and similar assets.

Fees based on deposits we onboard, along with interest on the daily balance (less cash used to

collateralize our loan portfolios maintained with financial institutions), represent a significant portion of our revenue in

December 31, 2024, the Company and PCCU entered into an Amended and Restated Commercial Alliance Agreement (“Amended CAA”), extending the

term through December 31, 2028, with automatic renewals every two years unless terminated with 12 months’ notice.

Key changes in

the Amended CAA include the elimination of the Company’s indemnification obligations for loan-related losses and the removal of

prior fees, such as per-account servicing, investment hosting, and loan servicing fees.

These are replaced by a fixed asset hosting fee,

calculated based on the average daily balance of account relationships.

The Amended CAA also entitles the Company to all investment income

earned on CRB funds invested on its behalf by PCCU.

Additionally, the interest income is now determined using a loan yield allocation

formula, and penalties are introduced for non-compliance with the Loan-to-Share Ratio, including adjustments to the asset hosting fee

and interest charges if certain thresholds are exceeded.

Please refer to the ‘Amended and Restated CAA with PCCU’ section

in the Recent Updates below.

have developed and commercialized a proprietary financial services platform, known as the Safe Harbor Program (the “Program”),

which enables financial institutions to provide compliant banking services to CRBs.

Our platform is currently deployed across 41 states

and territories and is designed to guide financial institution customers and CRBs through the full lifecycle of account onboarding, validation,

and ongoing compliance monitoring in a manner consistent with applicable banking regulations and regulatory guidance.

platform serves as an automated management tool that allows our employees to deliver continuity of service while enabling compliance

staff to efficiently monitor BSA and AML activities.

It is intended to satisfy the compliance standards

required by state and federal banking regulators, and since inception, we have assisted in the processing of approximately $35.4 billion

in cannabis-related depository funds and successfully supported our financial institution clients through more than 25 state and federal

banking examinations.

It is important to note that the Company is not a financial institution and does not include loans or customer deposits,

which are associated with financial institutions, on its consolidated balance sheet.

All deposit accounts are held by our financial institution

customers, and all funds transmitted to and from those accounts are handled directly by those institutions.

Our role is to provide the

compliance infrastructure, technology, and CRB client relationships that enable our financial institution partners to serve the cannabis

also license the Program to financial institutions that wish to independently provide compliant cannabis banking services.

licensing arrangements, we provide:

customer due diligence (e.g., KYC);

management support;

examination assistance;

application management;

examination assistance.

believe our platform and processes have been implemented in a manner that is consistent with applicable laws and regulations.

record in developing compliance processes that satisfy regulatory standards has established a strong reputation with relevant regulatory

authorities, which we believe positions us well to continue growing our existing service offerings and to expand into new ones.

maintain relationships with PCCU and other financial institution partners in which CRB funds are deposited and monetary transactions

are processed.

Our proprietary platform connects with the core banking systems of these institutions, enabling us to monitor deposit

accounts we have onboarded and to extract the data necessary to help ongoing compliance.

All fund transmissions including wires, ACH

transactions, and other transfers are processed directly through our financial institution partners’ infrastructure.

itself is not a financial institution and does not hold customer deposits.

We Generate Revenue from Deposit Maintained at Financial Institutions?

generate revenue from deposit maintained at financial institutions in three primary ways.

First, we may assess an initial

onboarding fee when a CRB or ancillary service provider begins banking through one of our financial institution partners.

reflects the time and complexity involved in completing the KYC and BSA due diligence that is required before an account can be

Second, we earn monthly deposit and account activity fees that are based on business type, account size, and transaction

Third, we earn investment income when our financial institution partners invest CRB deposits in low-risk, liquid assets.

The amount of investment income we earn is directly influenced by the level of deposits under their management and the prevailing

interest rate environment.

Relationship with PCCU

is our primary financial institution partner and the holder of the majority of CRB deposit accounts we service, and this relationship

is governed by the Second Amended CAA.

Under the Second Amended CAA, we provide PCCU with the compliance infrastructure, technology, and

CRB client relationships needed to serve the cannabis industry, and in return we earn account servicing fees, investment income on CRB

deposits, and a share of loan program income on CRB loans originated through PCCU.

We also pay PCCU a monthly asset hosting fee for

access to its regulated banking platform and infrastructure.

The Second Amended CAA will expire on December 31, 2031, afterwards the

agreement will automatically renew for periods of two years unless we or PCCU provides a non-renewal notice twelve months prior to the

expiration of the then-current period.

PCCU accounts for a significant portion of our revenue, the loss of or a material change to this relationship could have a material adverse

impact on our results of operations and financial condition.

See Part 1, Item 1A., “Risk Factors––Risks Related to

the Second Amended CAA,” Part II, Item 7., “Management’s Discussion and Analysis of Financial Condition and Results

of Operations for the Years ended December 31, 2025 and 2024––Relationship with PCCU,” “Management’s Discussion

and Analysis of Financial Condition and Results of Operations for the Years ended December 31, 2025 and 2024––Related Party

Relationship with PCCU” and Note 10 to the Company’s consolidated financial statements in this Form 10-K for additional detail

on our relationship with PCCU and the terms of the Second Amended CAA.

Lending Program

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

The Company’s commercial lending

program serves as a key pillar for future revenue and profit growth.

The primary focus will be on senior secured lending, with smaller

loans also considered for unsecured lending opportunities.

Collateral types would include real estate, equipment, and other business

The Company’s commercial lending program is built on:

stringent collateral package requirements with ample loan to value coverage;

strong underwriting of collateral and creditworthiness of borrower;

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

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

The Company is currently

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

with which the Company could fund the loans directly.

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

of CRBs while also achieving strong returns on quality loans.

While third parties are presently used to provide loan underwriting and

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

and to increase future profitability.

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

our business.

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

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

We anticipate

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

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

service center upon which cannabis businesses can rely.

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

products and services.

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

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

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

to bank cannabis industry participants.

Since 2015, we have facilitated more than $24.9 billion in deposit activity across a footprint

of 41states and territories of the United States of America.

Throughout 2024, we facilitated an average of $280 million in deposit activities on a monthly basis.

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

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

Cannabis industry has been unfavorably impacted by the convergence of open borders allowing competitive illicit alternatives into the

market, high inflation unfavorably impacting consumer spending, a challenging tax environment that limits federal deductibility of certain

operating costs and high interest rates unfavorably impacting the ability of industry participants to find affordable capital.

industry is one of the fastest emerging consumer packaged goods markets in the United States, employing nearly 500,000 people and experts

predict a total available market in excess of $75 billion.

We expect this rapid growth to favorably impact our total available market

offset in part by increased competition from financial institutions that choose to build rather than outsource their compliance programs.

The Company is well positioned to assist growing markets;

having created a reliable reputation and network over the past ten years.

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

experience and knowledge on navigating access to financial services.

We believe this expertise garners trust that will allow us to enter

new markets with greater ease.

is a great deal of discussion regarding Safe Banking, the de-scheduling of cannabis, and even federal legalization of intoxicating cannabis

We monitor these matters closely through our affiliation with various lobbying groups.

Each of these matters while separate

could individually and collectively materially and favorably impact the Cannabis Industry.

Management believes that anything that favorably

impacts the Cannabis Industry will in turn favorably impact the Company.

Today, there are several federally legal businesses that are

debanked or otherwise deemed too risky for most financial institutions.

The Cannabis industry will likely be similarly deemed too risky

for most financial institutions.

It will take time, money, and reputational tolerance for competing financial institutions to build for

themselves a compliance solution.

Rather we offer financial institutions the ability to leverage the regulatorily tested and refined

platform that Safe Harbor operates today.

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

to CRBs and these providers are extremely fragmented.

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

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

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

access to financial services focused on the cannabis industry.

the past nine years, we have been a front runner pioneer in enabling modern compliant cannabis banking.

As a result, we have developed

comprehensive and strong relationships with our customers offering them a wide range of bank products and services, delivering unparalleled

customer service, and enabling the efficient flow of business transactions.

Our platform supports over 600 customers that trust us with

their financial stewardship.

We believe that long term growth and profitability is a function of:

our core business, by entering new legal cannabis markets, more effectively marketing into existing legal cannabis markets, enabling

personal employee banking solutions, adding financial institutions onto our platform and exploring the ability to expand our core

business into other debanked industries or even internationally;

our lending capabilities by becoming the center for loan origination and syndications for private equity, family offices, financial

institutions and others willing in loan into the CRB space;

to our offering’s enablement services creating low costs centers of excellences across a variety of corporate and operational

competencies that can lower a cannabis operators’ cost per pound;

an industry leading consortium.

We believe our CRB clients should have access to a value proposition that far outweighs their account

fees and their expectations.

This will position Safe Harbors’ financial institutions to compete for CRB business in a way that

no other competitor can.

Leveraging our core platform, we believe we can build a collaborative group of multiple independent CRBs

that pool resources to achieve common objectives such as increased bargaining power with vetted cannabis friendly vendors, cooperative

and advanced marketing solutions, access to best practices, data insights, and an ability to share employment opportunities or to

resell equipment.

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

by offering a wide range of products and services, delivering unparalleled customer service, maintaining trust and building out service

components across other service providers now serving the cannabis industry with similar reliability.

strategy is designed to help us gain greater market share by increasing the number of users on our fintech platform, responsibly growing

our partner loan portfolio, effective management of our deposit sources, and judicious investment in new products and services to fund

the growth of our assets.

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

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

As such, we enter into an agreement, with each

partner financial institution that sets forth the terms and conditions of the lending-related and account-related services governing

the relationship between the Company and each partner financial institution with regard to the CRB deposit accounts.

example, we entered into the PCCU CAA, which sets forth the application, underwriting, and approval process for loans from PCCU

to their CRB customers, as well as the loan servicing and monitoring responsibilities provided by both PCCU and us.

the year ended December 31, 2024, the PCCU CAA governed the application, underwriting, loan approval, and foreclosure processes for loans

issued by PCCU to cannabis-related businesses.

It also outlined the loan servicing and monitoring responsibilities shared between the

Company and PCCU.

Specifically, the agreement established procedures to be followed in the event of a loan default to ensure that neither

the Company nor PCCU would assume ownership or possession of any cannabis-related assets, including real property used as collateral.

the terms of the PCCU CAA, PCCU was entitled to monthly management fees for overseeing loans.

For SHF-serviced loans—CRB loans

funded by PCCU but primarily managed by SHF—a yearly fee of 0.25% was applied to the remaining loan balance.

Loans both financed

and serviced by PCCU were subject to a 0.35% annual fee on the outstanding balance.

These fees were calculated based on the average daily

balance of each loan for the preceding month.

Additionally, the Company was required to indemnify PCCU against certain loan losses related

agreement also specified fees payable to the Company for various account-related services, including cannabis-related income streams

such as loan origination fees, interest income on CRB loans, participation fees, servicing fees, investment income, account activity

fees, processing fees, and other revenue from cannabis and multi-state hemp accounts hosted on PCCU’s core system.

account service fees were $30.96 per account in 2022, $25.32-$27.85 in 2023, and $26.08-$28.69 in 2024.

Furthermore, for CRB deposits

held at PCCU, investment and interest income (excluding interest from loans funded by PCCU) was shared, with PCCU receiving 25% and the

Company receiving 75%.

PCCU also committed to maintaining a minimum ratio of CRB-related deposits to total assets at 60%, unless regulatory

or policy changes dictated otherwise.

initial term of the PCCU CAA was set for two years, with automatic one-year renewals unless either party provided 120 days’ written

notice prior to the end of the term.

December 31, 2024, the Company and PCCU entered into an Amended CAA, extending the term through December 31, 2028, with automatic renewals

every two years unless terminated with 12 months’ notice.

Key changes in the Amended CAA include the elimination of the Company’s

indemnification obligations for loan-related losses and the removal of prior fees, such as per-account servicing, investment hosting,

and loan servicing fees.

These are replaced by a fixed asset hosting fee, calculated based on the average daily balance of account relationships.

The Amended CAA also entitles the Company to all investment income earned on CRB funds invested on its behalf by PCCU.

Additionally,

the interest income is now determined using a loan yield allocation formula, and penalties are introduced for non-compliance with the

Loan-to-Share Ratio, including adjustments to the asset hosting fee and interest charges if certain thresholds are exceeded.

to the ‘Amended and Restated CAA with PCCU’ section in the Recent Updates below.

key priorities include:

Due to the fact that we are providing services on behalf of our financial institutions that desire to provide banking

services to CRBs, thereby allowing funds derived from cannabis-related businesses to flow through the financial system, we must ensure

the system is protected from illicit activities by monitoring and validating funds along with “knowing our customer.”

Our close partnerships with financial institutions demand that we understand the regulatory pressure they face with high risk, cash

intensive businesses.

Products and Services .

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

with a focus on convenience and accessibility.

For example, we offer to our financial institutions clients a means to offer their

CRB customers a full suite of online banking services, including access to account balances, statements and other documents, online

transfers, online bill payment and electronic delivery of customer statements, as well as automated teller machines (“ATMs”),

and banking by mobile devices, telephone and mail.

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

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

and services.

We have built the present business by listening to the needs of the cannabis industry and rising to the occasion to

expand our business model with their needs in mind.

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

a Primary Focus upon which to grow relationships.

Our focus on growing deposits is twofold on a strategic level.

First, we must

KYC in order to assist with facilitating the movement of their funds into the financial system with safe and sound practices.

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

this secures a great understanding of the

business, operations, cashflow, and continuity.

The second most strategic factor of growing deposits is that it is critical to our

near and long-term success on our lending strategy.

Utilizing the deposit balances domiciled with our FI partners on which to lend

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

this, in turn, will

improve our mix of deposits and enable us to achieve a lower cost of funds.

to solidify a long-term relationship:

The loans issued by our partner financial institutions provides us not only increased profit

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

this ensures reduced client attrition.

relationship we will strive for from the KYC competitive advantage we presently hold, with over 800 accounts from which to select

the most credit worthy opportunities and understand the business to whom our partner financial institutions lend.

Institution Relationships to scale:

It will be important to have the right financial institutions partnering with the Company

as we scale our business nationally.

So often, financial institutions wish to enter the market only to exit due to the complexities

of serving the cannabis industry.

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

and balance sheet access for growth.

We narrow our partnerships to those providing optimal financial positioning for both our clients

and the Company;

willing to build as we build.

Superior Customer Experience to Make Banking with Us Easy.

We have already taken steps to better target and attract core deposits

and accelerate our digital transformation by making investments in technology and developing fintech partnerships.

We have been focused

on evaluating digital solutions in a number of areas.

This includes investments made to automate our process for opening accounts,

small business lending, and the ability to offer our wealth management customers a leading digital platform.

Furthermore, our business

model allows us to cultivate close relationships between service representatives and clients;

this ensures that we know their needs

while increasing our knowledge of their operations.

Existing and Evaluate New Lines of Businesses.

Our strategy and expectations for growth also includes rationalizing existing

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

Our plan includes the expansion

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

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

market trying to compete.

Significantly

Improve Operational Efficiency.

Our goal is to enhance efficiency by identifying opportunities to reduce costs and automating

manual processes.

With advancements in machine learning, artificial intelligence, and robotic process automation, we aim to streamline

operations while leveraging international capabilities in regions with lower human capital costs.

Brand Awareness.

Building brand awareness in the communities we serve will be key for both growing our presence in these markets

as well as laying a strong foundation for future expansion.

Recently we have placed a significant focus on marketing and business

development as we work toward building a greater national brand awareness.

Many initiatives are underway including improved signage

and promotions, evaluating affinity relationships, and greater community involvement.

We will continue to work with state officials,

regulators, and legislators to familiarize them with the manner financial services can be available in a safe and sound way for their

this will ensure their community safety.

This multi-prong approach utilizing internal expertise and networks forged over the

past ten years will allow us to dominate the financial arena moving forward.

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

We believe that one of our primary differentiator is

our culture and the quality of our people delivering our products and services in such a manner that customers receive the best knowledge,

expertise, advice, and service when and where they need it.

We will continue to attract, retain, develop, and reward the best team

members to execute our strategy.

We are aligning performance incentives with the organization’s overall success by expanding

the use of stock-based compensation options.

Additionally, we will implement structured development programs to support employees

in achieving their career aspirations, expanding their expertise, and enhancing their skill sets.

NASDAQ Listing Compliance

On April 8, 2024, the Company received a notification letter

from the listing qualifications department staff of Nasdaq (the “Staff”) 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, and thus, the Company

no longer met Nasdaq’s minimum bid price requirement for continued listing on The Nasdaq Capital Market under Nasdaq Marketplace

Rule 5550(a)(2), requiring a minimum bid price of $1.00 per share (the “Minimum Bid Price Requirement”).

October 3, 2024, the Company received notice from the Staff advising that the Staff determined the Company is eligible for an additional

180 calendar day period, or until March 31, 2025, to regain compliance with the Minimum Bid Price Requirement based on the Company meeting

the continued listing requirement for market value of publicly held shares and all other applicable requirements for initial listing

on The Nasdaq Capital Market with the exception of the bid price requirement, and the Company’s written notice of its intention

to cure the deficiency during the second compliance period by effecting a reverse stock split, if necessary.

at any time before March 31, 2025, the bid price of our common stock closes at $1.00 per share or more for a minimum of 10 consecutive

business days, the Staff will provide written confirmation that the Company has achieved compliance.

If the Company does not regain compliance

with the Minimum Bid Price Requirement by the end of the second compliance period, our common stock will become subject to delisting.

In the event that the Company receives notice that our common stock is being delisted, the Nasdaq listing rules permit the Company to

appeal a delisting determination by the Staff to a hearings panel.

In an effort to comply with the $1.00 Minimum Bid Requirement, on March

4, 2025, we filed an amendment to our Second Amended and Restated Certificate of Incorporation with the Secretary of State of the State

of Delaware to effect a reverse split of our issued and outstanding Class A Common Stock at a ratio of one for twenty.

On April 7, 2025, the Company was informed by the staff that they had determined

the minimum closing bid price for the Company’s Class A common stock was at least $1.00 per share for 10 consecutive business days,

from March 24, 2025, to April 4, 2025.

Accordingly, the Staff has determined that the Company has regained compliance

with Minimum Bid Price Requirement, and, as such, the Staff has indicated that the matter of the Company’s compliance with Minimum

Bid Price Requirement is now closed.

On April 7, 2025, the Company received a notice from Nasdaq

indicating that it no longer meets the continued listing requirements for the Nasdaq Capital Market.

Specifically, the Company’s

stockholders’ equity as of December 31, 2024, was a deficit of $12,288,014, which is below the minimum required stockholders' equity

of $2.5 million as stipulated by Nasdaq’s Listing Rule 5550(b)(1).

As a result, the Company does not comply with the Nasdaq Capital

Market continued listing standards.

Furthermore, the Company does not meet the alternative criteria for continued listing, which are

based on the market value of listed securities or net income from continuing operations.

The Company has been granted 45 calendar days, until May 22, 2025, to submit

a plan to regain compliance with Nasdaq’s listing requirements.

If the plan is accepted, Nasdaq may grant an extension of up to

180 calendar days from the date of this letter for the Company to meet the continued listing standards.

The Company intends to timely

submit a Compliance Plan to Nasdaq to regain compliance with the Shareholders’ Equity Requirement.

There can be no assurance that

Nasdaq will accept the Company’s plan or that the Company will be able to regain compliance with Listing Rule 5550(b)(1) or maintain

compliance with any other Nasdaq requirement in the future.

and restated CAA with PCCU

December 31, 2024, the Amended CAA,

extending the term set forth in the Original CAA through and including December 31, 2028, with an automatic renewal for subsequent periods

of two years each, unless notice of non-renewal is provided no later than twelve (12) calendar months prior to the expiration of the

then-current term.

modifications under the Amended CAA include:

of Indemnification Obligations:

The Company is no longer required to indemnify PCCU for any loan-related losses under either

the original or future agreements.

of Prior Fees and Implementation of Asset Hosting Fee Structure:

Under the previous agreement, the Company was required to pay

various fees to PCCU, including per-account servicing fees, investment hosting fees, and loan servicing fees.

The Amended CAA eliminates

all these charges and replaces them with a fixed account servicing fee.

Under the new structure, the Company will pay a single asset

hosting fees which is calculated as 0.01 multiplied by the average daily balance of account relationships generated by the Company,

divided by the number of days in the year, and multiplied by the number of days in the applicable month.

This revised model aligns

servicing costs with account balances rather than a flat per-account charge, offering a more scalable and efficient fee structure.

Income Entitlement:

Under the Amended CAA, the Company received all investment income earned on CRB funds invested on its behalf

by PCCU, effectively eliminating the investment hosting fees that were previously payable to PCCU.

Yield Allocation Formula:

The Company’s interest income will be determined using a loan yield allocation formula incorporating

the Constant Maturity US Treasury Rate and a proprietary risk rating formula for determining the fee split.

Loan-to-Share

Ratio Compliance:

The Amended CAA introduces penalties for the Company if it fails to maintain the agreed Loan-to-Share (LTS)

If the LTS Maximum (60%) is exceeded for over 90 days, the Asset Hosting Fee increases from 1.00% to 1.10% of the average

daily balance (ADB) until compliance is restored.

If the LTS Minimum (27.5%) is breached, SHF must pay a quarterly adjustment fee

based on the shortfall.

Additionally, if the LTS Ratio exceeds 100% for 90 days, SHF incurs an interest charge at the Federal Funds

Rate + 120 bps, calculated daily and paid monthly.

to Senior Secured Promissory Note and Deferral Agreement with PCCU

On January 29, 2025, the Company and PCCU entered into a letter agreement to defer principal payments on the Note for February and March 2025 (the “Deferral Period”).

During this period, the Company will continue to be responsible for interest payments, and the Note’s repayment period will be extended by two months.

On March 1, 2025, the Company executed an Amended and Restated Senior Secured Promissory Note (the “Amended PCCU Note”) with PCCU, replacing the original senior secured promissory note dated March 29, 2023.

Under the terms of the Amended PCCU Note, the principal balance stands at $10,748,408, accruing interest at an annual rate of 4.25%.

The Company will make interest-only payments until January 5, 2027, followed by principal and interest payments through the maturity date of October 5, 2030.

The Amended PCCU Note includes provisions for early repayment and prepayment fees, including a yield maintenance fee in the event of prepayment or acceleration.

PCCU will retain its first-priority security interest in the Company’s assets as established in the security agreement dated March 29, 2023.

Additionally, the Amended PCCU Note upholds a debt service coverage ratio (DSCR) requirement of 1.4 to 1.0, assessed annually.

The Company executed this Amended PCCU Note to restructure its financial obligations and extend its repayment timeline.

legal case in Denver

reported on its Current Report on Form 8-K filed with the SEC on October 18, 2024, the Company caused a declaratory judgment complaint

(the “Complaint”) to be filed in the District Court for the City and County of Denver, Colorado, captioned SHF Holdings,

Daniel Roda, Gregory W.

Ellis, and James R.

Carroll , Case No.

2024CV33187 (Denver County District Court).

The Complaint was

filed in connection with concerns surrounding the payment of the $3,000,000 (the “Merger Payment”) to the former stockholders

of Rockview Digital Solutions, a Delaware corporation, d/b/a Abaca (“Abaca”), to be made by the Company on or about October

5, 2024, pursuant to that certain Agreement and Plan of Merger dated October 29, 2022, by

and among SHF Holdings, Inc., Merger Sub I, Merger Sub II, Rockview Digital Solutions, Inc.

d/b/a Abaca and Dan Roda, solely in such

individual’s capacity as the representative of Abaca security holders (the “Original Agreement”), the Amendment to

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

Solutions, Inc.

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

(the “First Amendment”), and the Second Amendment to Agreement and Plan of Merger, dated October 26, 2023, by and among SHF

Holdings, Inc., Merger Sub I, Merger Sub II, Rockview Digital Solutions, Inc.

d/b/a Abaca and Dan Roda, solely in such individual’s

capacity as the representative of the Abaca security holders (the “Second Amendment,” and collectively with the First Amendment

and the Original Agreement, the “Merger Agreement”).

November 4, 2024, in connection with the Complaint, the Company filed a motion with the Denver County District Court requesting authorization

to deposit the Merger Payment into the Denver County District Court’s registry so that it can be distributed in accordance with

the terms of the Merger Agreement.

Following the granting of that motion, the Company deposited $3,000,000 into the Denver County District

Court’s registry on November 21, 2024.

The Merger Payment has already been accounted for in the working capital deficit disclosed

in the Liquidity and Going Concern section.

reported on its Current Report of Form 8-K filed with the SEC on December 19, 2024, Daniel

Roda, Gregory W.

Ellis, and James R.

Carroll (collectively, the “Defendants”)

caused an answer and counterclaim to be filed in response to the Company Complaint.

The Defendants’ answer and counterclaim, among

other things, asserts several breaches of contract under the Merger Agreement, as amended, relating to the Merger Payment, in addition

to challenging the validity of Dan Roda’s role as the representative of Abaca security holders in the execution of the Second Amendment.

The Defendants’ also assert a third-party claim against the Chairman of the Company’s board of directors, Jonathon F.

The Company and Mr.

Niehaus have filed motions to dismiss the counterclaims, which remain pending.

December 13, 2024, Daniel Roda, Gregory W.

Ellis, and James R.

Carroll (collectively, the “Defendants”) caused an answer

and counterclaim to be filed in response to the Company Complaint.

The Defendants’ answer and counterclaim, among other things,

asserts several breaches of contract under the Merger Agreement, as amended, relating to a delay in payment of the Merger Payment, in

addition to the validity of Stockholder Representatives’ execution of the Amendments.

The Defendants’ counterclaim also asserts

a third-party claim against the Chairman of the Company’s board of directors, Fred Niehaus.

December 16, 2024, the Company accepted the resignation of Daniel Roda as the Company’s Chief Credit Officer.

and Marketing

2024, our marketing strategy focused on several key initiatives aimed at increasing brand visibility and driving awareness across key

with a renowned public relations and investor relations firm to strengthen our communication and outreach efforts

search engine performance to boost online engagement and improve visibility.

our referral programs and success fee models to foster new business relationships and increase revenue streams

participating in industry conferences and delivering impactful keynote speeches, positioning our leadership as thought leaders in

out targeted customer retention promotions designed to strengthen loyalty and enhance customer satisfaction

in strategic email and e-blast campaigns, alongside traditional direct mail efforts, to maintain consistent communication with our

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

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

However, a number of our competitors are

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

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

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

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

They are realizing

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

providing the Company another

opportunity to work side by side with larger banks.

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

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

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

the cannabis industry.

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

applicable to us.

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

factors within the banking and financial services industry.

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

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

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

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

and others to protect our proprietary rights.

Despite these efforts to protect ourselves from infringement or misappropriation of our

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

of our rights.

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

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

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

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

We expect, based

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

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

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

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

This provides an opportunity for lending,

unlike the normal commercial market.

to the federally illegal status of cannabis, most cannabis-related businesses have faced years of inability to access capital at reasonable

these circumstances force them to purchase properties and fund their businesses from personal investment of operational cash,

potentially limiting their own growth.

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

lending is a key component of our business and an important source of revenue.

Our lending program is designed to specifically address

the unique financing needs of CRBs, which often have limited access to traditional credit markets.

We assist, service, and

administer loans on behalf of our financial institution partners, with the majority of lending currently funded through PCCU using CRB

deposit balances that we have onboarded and continue to manage.

lending program is focused primarily on senior secured loans, with collateral including real estate, equipment, accounts receivable,

and other business assets.

Unsecured lending opportunities are also considered on a selective basis.

Our approach to credit is built

on three core principles:

thorough investigations of both collateral and borrower creditworthiness;

disciplined loan-to-value requirements;

and a deep knowledge of the cannabis industry, including the operational and business cycle dynamics unique to CRB borrowers.

loan operations team is directly involved in each step of the lending process, including initial due diligence, underwriting, loan closing

and documentation, ongoing servicing, payment processing, borrower monitoring, risk rating, and workout and collections when necessary.

PCCU’s loan committee retains final approval authority over all credit decisions, and PCCU is the legal lender of record under

all loan agreements.

We earn a share of the loan program income on loans originated through PCCU under the terms of the Second Amended

See “––CRB Deposits” above and Note 10 to the Company’s consolidated financial statements in this

Form 10-K for additional information.

available lending capacity is directly tied to the size of our managed deposit base, as the amount we can arrange in loans through PCCU

is based on a regulatorily stipulated percentage of average CRB deposits.

We are incentivized to deploy available lending capacity, as

loan program income on funded loans generally exceeds the investment income that would otherwise be earned on the same deposits.

and retaining the CRB deposit base therefore remains central to our ability to expand the lending program.

2025, we executed lending program agreements with certain companies that provide us access to private capital sources, including

family offices and private equity funds.

These agreements provide additional funding channels for CRB loans outside of our PCCU

relationship.

These agreements are intended to diversify our lending capacity and reduce our dependence on a single funding source.

The Company did not have any revenue from these arrangements, we believe these agreements represent an

important avenue for future growth as we continue to build and deploy the lending program.

mission is to serve as the trusted financial partner to CRBs and the financial institutions that serve them by providing the compliance

infrastructure, lending access, and operational support to allow them to operate, grow, and succeed in a highly regulated industry.

are committed to being the most reliable and knowledgeable financial services provider in the cannabis sector, and to expanding the range

of services we offer as the industry matures.

believe our competitive position is based on four strengths that are difficult to replicate:

a decade of demonstrated experience

navigating the regulatory requirements and passing many audits of cannabis banking;

deep cannabis domain expertise amongst our

employees and management, long-standing relationships with both CRBs and the financial institutions that serve them;

proprietary compliance platform that has processed approximately $35.4 billion in cannabis-related deposit activity across 41 states

and territories since 2015.

These capabilities allow us to serve a broad range of cannabis industry participants, including

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

are pursuing growth through four complementary growth initiatives:

are focused on growing our core deposit and lending business organically by increasing the

number of CRB accounts we onboard and manage for our financial institutions, deepening relationships with existing and potentially

new financial institution partners, and by deploying more of our available lending capacity

through PCCU and our expanding network of private capital partners.

December 2025, we acquired substantially all of the assets of LBMW LLC, a Delaware limited

liability company doing business as 420 IT Solutions (“420 IT Solutions”), a

company that provided on-site due diligence review services to cannabis-friendly financial

institutions.

This acquisition added capabilities that are complementary to our existing

compliance platform and expanded the suite of services we can offer to financial institution

customers seeking to enter or grow their cannabis banking programs.

are investing in the development of a managed services business that will offer outsourced

consulting and operational support directly to CRBs and financial institutions.

expected to include outsourced finance, accounting, treasury, information technology, and

human resources services, as many CRBs lack the internal infrastructure to operate in these

areas efficiently.

We generated initial revenue from this business line in 2025, though it

was not material.

We are actively investing to build this capability and grow it into a meaningful

revenue contributor over time.

are growing through strategic partnerships with third parties who can expand our reach, capabilities,

and capital base.

In 2025, we executed lending program agreements that allow us to access

private capital sources, including family offices and private equity funds, to provide additional

funding capacity for CRB loans outside of our PCCU relationship.

These partnerships are

intended to reduce our funding concentration risk and increase the volume of loans we are

able to originate and service.

are also pursuing partnerships with other CRB-focused service providers whose offerings are complementary to ours, with the goal of creating

a more integrated set of solutions for cannabis businesses and the financial institutions that serve them.

While revenue from these partnership

channels was not material in 2025, we believe they represent an important foundation for future growth.

believe that the combination of our established compliance and banking infrastructure, our expanded on-site review capabilities following

the acquisition of the assets of 420 IT Solutions, our emerging managed services business, and our growing network of capital and strategic

partnerships positions us to serve cannabis businesses and financial institutions more comprehensively than any other provider in our

Cannabis Market

United States cannabis industry has grown into one of the largest and most economically significant emerging sectors in the American

In 2025, total U.S.

state-licensed cannabis market revenues were estimated at approximately $30.4 billion, with forecasts projecting

the market to reach approximately $31.5 billion in 2025 and potentially exceed $76 billion by 2030, reflecting a compound annual growth

rate of approximately 19%.

The industry supports an estimated 425,000 full-time jobs nationwide and generated more than $4.4 billion

in state and local tax revenues in 2025.

In addition, the intoxicating hemp market had an estimated value of $21.8 billion in 2025.

regulatory landscape has continued to evolve at the state level.

As of the date hereof, 40 states, three territories, and the District

of Columbia permit the medical use of cannabis, and 24 states, two territories, and the District of Columbia have enacted laws permitting

adult-use recreational cannabis.

Despite this broad state-level acceptance, cannabis remains classified as a Schedule I controlled substance

under the Controlled Substances Act (the “CSA”), creating a persistent gap between state and federal law that fundamentally

shapes how cannabis businesses operate, including their ability to access banking and financial services, obtain standard business financing,

and manage their tax obligations.

Regulatory Developments - Rescheduling to Schedule III

federal regulatory environment for cannabis has undergone significant and evolving changes recently, and the Company believes these developments

are material to an understanding of the industry in which it operates.

August 2023, the U.S.

Department of Health and Human Services (“HHS”) recommended that the Drug Enforcement Administration

(“DEA”) reschedule cannabis from Schedule I to Schedule III of the CSA, concluding that cannabis has a currently accepted

medical use and a lower potential for abuse than Schedule I or Schedule II substances.

In May 2024, the U.S.

Department of Justice issued

a Notice of Proposed Rulemaking proposing to move cannabis from Schedule I to Schedule III.

The proposed rule generated nearly 43,000

public comments.

While a formal DEA administrative hearing was initially scheduled for January 2025, that hearing was stayed by the presiding

administrative law judge pending resolution of procedural appeals, and the rescheduling process effectively stalled for much of 2025.

December 18, 2025, President Donald Trump signed an Executive Order titled Increasing Medical Marijuana and Cannabidiol Research ,

directing the Attorney General of the United States to “take all necessary steps to complete the rulemaking process related to

rescheduling marijuana to Schedule III of the CSA in the most expeditious manner in accordance with Federal law.” This Executive

Order did not itself reschedule cannabis, as formal rescheduling requires completing the full rulemaking process, which includes DEA

issuing a final rule, however we believe it represents the most significant federal cannabis policy directive in more than 50 years and

signals a clear intent within the executive branch of the federal government to bring the rescheduling process to conclusion.

challenges to the rescheduling process are anticipated.

Organizations opposing rescheduling may argue that the proposed rule is procedurally

flawed or scientifically unsupported, and litigation under the Administrative Procedure Act is possible after a final rule is published.

The ultimate timing of any final rescheduling rule therefore remains uncertain, and investors should not rely on any specific timeline

for completion of the rescheduling process.

believe the most immediate and financially material consequence of rescheduling would be the elimination of Section 280E of the Internal

Revenue Code (“Section 280E”).

Under the current law, cannabis businesses classified as drug traffickers under federal law

because of the cannabis’ current Schedule I status are prohibited from deducting ordinary and necessary business expenses, including

payroll, rent, and marketing costs.

This results in effective federal tax rates for cannabis operators that are materially higher than

those faced by businesses in other industries.

Rescheduling to Schedule III could eliminate the Section 280E penalty, thereby improving

cash flows and profitability for state-legal cannabis operators across the country.

could also encourage greater participation by academic institutions and pharmaceutical companies in researching the medicinal properties

of cannabis, as we believe such institutions and companies have historically avoided using Schedule I substances in their research.

Company does not believe that rescheduling, on its own, would eliminate the market for its services.

In fact, the Company believes that

rescheduling could improve the financial stability of its CRB clients, which would as a result help support higher average account balances.

In addition, rescheduling could attract additional financial institutions to join the cannabis banking market, and the Company could

partner with some or all of these new entrants.

the growth of state-legal cannabis markets, the vast majority of cannabis-related businesses continue to face constraints in accessing

basic banking and financial services.

Because cannabis remains a Schedule I controlled substance under federal law, federally regulated

financial institutions including banks, credit unions, and payment processors face legal and regulatory risk when providing

services to CRBs.

Financial institutions that serve CRBs are required to file Suspicious Activity Reports (“SARs”) for cannabis-related

transactions under the BSA and related Financial Crimes Enforcement Network (“FinCEN”) guidance, which creates a compliance

burden that many financial institutions appear unwilling to assume.

As a result, the majority of CRBs continue to operate primarily in

cash and in turn this method of operation can create public safety risks, operational inefficiencies, and barriers to tax

collection and regulatory oversight.

bipartisan letter signed by 32 state attorneys general in July 2025 urged Congress to advance the SAFER Banking Act, which is designed

to protect federally regulated financial institutions from penalties when they provide services to state-sanctioned cannabis businesses.

The SAFER Banking Act has passed the U.S.

House of Representatives in prior legislative sessions but has repeatedly failed to advance

in the Senate.

The bill’s near-term prospects in the current Congress remain uncertain given current legislative dynamics and policy

The Company exists, in part, because of this structural gap in banking access and the need for compliance-driven platforms

that enable financial institutions to serve CRBs in a manner that is consistent with applicable federal banking regulations and Fin CEN

Headwinds and Industry Pressures

cannabis industry experienced meaningful financial and operational headwinds during 2024 and 2025.

Wholesale cannabis prices declined

in some state markets due to oversupply and increasing competition, constraining operator revenues and reducing average deposit balances

across the industry.

Cannabis operators collectively carry an estimated $2.5 billion in debt, only approximately 27% of cannabis companies

were profitable in 2024, compared to 42% of such companies in 2022.

In addition, several large multi-state operators are facing significant

debt maturities.

These pressures have been reflected in lower average account balances and reduced transaction activity across the Company’s

portfolio during 2025.

the same time, the Company believes there are meaningful catalysts for industry recovery.

A potential rescheduling of cannabis could

materially improve operator cash flows and profitability.

See “Federal Regulatory Developments-Rescheduling

to Schedule III.” In addition, broader improvements to the United States’ economy and the growth rate of consumer discretionary

spending could support higher cannabis sales volumes.

The expansion of state-level markets could increase the number of CRBs as well.

Company believes that its platform, its established relationships with financial institution customers, and its proprietary compliance

infrastructure position it to benefit from an industry recovery as these factors develop.

Framework for Cannabis Banking

current federal guidance, financial institutions that serve CRBs are required to operate under the framework established in FinCEN’s

2014 guidance memorandum, which outlined our expectations for BSA compliance, ongoing customer due diligence requirements, and SAR filing

obligations specific to cannabis banking.

The guidance has never been superseded by statute, and financial institutions operating in

the cannabis banking space continue to face regulatory examination risk, possible reputational harm in the event of a violation, and

the ongoing administrative burden of SAR filings.

The Company’s platform and compliance program are designed to address these requirements

directly, thereby enabling its financial institution partners to serve CRBs with confidence in their regulatory compliance.

Company has assisted in the processing of approximately $35.4 billion in cannabis-related depository funds since 2015 and has successfully

navigated more than 25 state and federal banking examinations through its financial institution relationships.

The Company currently

operates its platform across 41 states and territories, serving a diversified base of CRB clients and financial institution customers.

mission is to be the leading compliance-driven financial services platform for the U.S.

cannabis industry, enabling partner financial

institutions to serve CRBs reliably, safely, and in full conformity with applicable federal and state regulatory requirements.

is based on five priorities:

stabilizing and organically growing our core platform business;

deepening lending-related revenue through

our relationship with PCCU and other capital sources;

building complementary service lines;

maintaining and expanding financial institution

partnerships;

and positioning the Company to benefit from anticipated favorable changes in the federal cannabis banking regulatory environment.

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

cannabis industry.

The cannabis industry continues to grow and expand at a rapid pace due in part to the on-going opening of

additional legalized cannabis markets at the state level.

Due to the federally status of cannabis, most cannabis-related businesses

have experienced years of inability to access capital at reasonable rates, and these circumstances can force them to purchase

properties and equipment and fund their businesses from personal investment or reinvestment of cash from operations, which could

potentially limit their own growth.

This creates a robust opportunity for us to lend to established entities with real estate assets

free of debt.

Businesses are taking the opportunity to leverage such assets to expand and grow their operations while we build a senior

secured portfolio ostensibly collateralized with a real estate base.

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

This is yet another opportunity

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

since the depository relationship is necessary as

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

earning fees on deposits.

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

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

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

These characteristics are pillars

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

Businesses are taking the opportunity to leverage such assets to expand and grow their operations while we build a

senior secured portfolio ostensibly collateralized with a real estate or other hard asset such as equipment.

the industry has typically been subject to “hard money” lending with annual rates available between 18-36%.

This is yet another

opportunity for us to offer refinancing of real estate and equipment loans at more favorable interest rates.

Given that the depository

relationship is necessary as part of the compliance process, we benefit from servicing, monitoring, and validating compliance of depository

relationships, earning fees on deposits.

This results in a lower cost of capital when accounting for the fact that we earn interest income on both

the depository and lending relationships.

and Organically Grow the Core Deposit and Compliance Platform

primary business is providing compliance infrastructure, technology platforms, and ongoing monitoring services that allow partner

financial institutions to provide banking services to CRBs.

Since 2015, we have assisted in the processing of approximately $35.4

billion in cannabis-related depository funds across a platform footprint of 41 states and territories, and through our financial

institution relationships, we have successfully navigated more than 25 state and federal banking examinations.

These milestones

reflect the depth and durability of our compliance expertise and the strength of our established relationships with both CRBs and

financial institutions.

near-term organic growth strategy focus is on increasing the number of CRB accounts we onboard and manage, deepening relationships with

existing financial institution partners, and selectively expanding to new financial institution partners to the extent market conditions

and our operational capacity can support it.

key component of our organic growth strategy is early entry into emerging cannabis markets.

We define “emerging markets”

as American states with cannabis programs that have launched or been materially expanded within the past five years.

Our emerging market

portfolio spans three distinct opportunity categories:

Markets Coming Online:

In states that have recently launched or are actively implementing

cannabis licensing programs, such as Delaware, Minnesota, Kentucky, Alabama, and Mississippi,

we are working to establish banking relationships as operators prepare for launch, with account

activity evolving as businesses progress through their respective licensing and operational

Expansion in Established Adult-Use States:

States expanding their licensing frameworks,

such as New York, New Jersey, Maryland, Connecticut, Missouri, and Ohio, increase the demand

for compliant banking services as new operators are allowed into these markets.

Footprint Expansion:

States such as Pennsylvania, Illinois, Virginia, and Florida, where

existing operators are scaling their operations, require more sophisticated banking and financial

entering these markets early, often before licensing programs are fully developed, the Company aims to position itself as the

partner of choice for licensed operators navigating complex and evolving regulatory environments.

In emerging markets, deposit

levels naturally fluctuate as operators progress through business cycles, from deploying startup capital during launch phases to

building working capital reserves as operations mature.

See “Recent Developments Emerging Markets” for additional information.

Lending Revenue Through the Second Amended CAA and Expanding Capital Partnerships

the Second Amended CAA, we receive up to 65% of loan program income generated by PCCU’s CRB loan portfolio, an increase from

the approximately 35% share in effect from January 1, 2025 until September 30 2025, under the Amended and Restated Commercial Alliance Agreement dated

December 30, 2024 by and between the Company and PCCU (the “First Amended CAA”).

In exchange, we are obligated to

indemnify PCCU for up to 65% of net losses of a default on any loan covered by the Second Amended CAA.

As of December 31, 2025, the

CRB loan portfolio totaled approximately $52.1 million across 25 loans, with zero historical losses since the program’s

inception in 2023.

Our strategy is to grow the loan portfolio responsibly by continuing to originate quality CRB loans through PCCU,

maintain rigorous credit underwriting standards, and build the cash reserves and capital access necessary to support our

indemnification obligations.

2025, we executed lending program agreements with certain companies that provide us access to private capital sources, including family

offices and private equity funds.

These agreements provide additional funding channels for CRB loans outside of our PCCU relationship.

These agreements are intended to diversify our lending capacity and reduce our dependence on a single funding source.

The Company did not have any revenue from these arrangements, we believe these agreements represent an important

avenue for future growth as we continue to build and deploy the lending program.

September 2025 Recapitalization (as defined below) eliminated approximately $18 million in debt and raised gross proceeds of $6.7

million in new capital, and also resulted in the establishment of the $150 million Equity Line of Credit (“ELOC”) with

CREO Investments LLC (“CREO”) that can potentially be expanded to $500 million, thereby meaningfully improving our

ability to support our lending commitments and portfolio growth.

During the fourth quarter of 2025, the Company issued 1,326,603

shares of Class A Common Stock (“Common Stock”) and received proceeds of approximately $1.8 million.

Complementary Service Lines

December 2025, we acquired substantially all of the assets of 420 IT Solutions, a company that provided on-site due diligence review

services to cannabis-friendly financial institutions.

This acquisition added capabilities that are complementary to our existing compliance

platform and expanded the suite of services we can offer to financial institution customers seeking to enter or grow their cannabis banking

On-site reviews are a key component of BSA/AML compliance for cannabis-banking financial institutions, and bringing this capability

in-house strengthens both our service offerings and our compliance infrastructure.

addition, we are investing in the development of a managed services business that will offer outsourced consulting and operational support

directly to CRBs and financial institutions.

These are expected to include outsourced finance, accounting, treasury, information technology,

and human resources services, as many CRBs lack the internal infrastructure to operate in these areas efficiently.

We generated initial

revenue from this business line in 2025, though it was not material.

We are actively investing to build this capability and grow it into

a meaningful revenue contributor over time.

and Expand Financial Institution Partnerships

business model depends on maintaining strong, trust-based relationships with our financial institution partners.

PCCU remains our most

significant financial institution customer.

We continue to partner with other financial institutions that wish to compliantly provide

banking services to CRBs, including with respect to KYC onboarding, ongoing compliance monitoring, program management support, and regulatory

examination assistance.

are also pursuing partnerships with other CRB-focused service providers whose offerings are complementary to ours, with the goal of creating

a more integrated set of solutions for cannabis businesses and the financial institutions that serve them.

While revenue from these broader

partnership channels was not material in 2025, we believe they represent an important foundation for future growth.

for Regulatory Tailwinds

believe the Company is well-positioned to capitalize on any cannabis-related rescheduling developments.

As discussed above, we believe

that a rescheduling of cannabis from Schedule I to Schedule III would decrease tax burdens for cannabis operators and improve the financial

stability of CRBs.

potential impact of such reforms on our current and prospective financial institution partners could be significant.

According to FinCen

approximately 998 depository institutions, 816 banks and 182 credit unions, were actively filing marijuana-related SARs, which is the

primary indicator that an institution is serving CRBs, as of December 2024.

This represents less than 11% of the approximately 9,140

Federal Deposit Insurance Corporation- and National Credit Union Administration-insured depository institutions operating in the United

States as of December 31, 2024.

In addition, industry analysts estimate that less than 200 financial institutions nationwide have a dedicated,

actively marketed cannabis banking program.

believe the primary reason the vast majority of U.S.

financial institutions have not entered the cannabis banking market is regulatory

risk and the compliance burden.

Under current federal law and the 2014 FinCEN guidance, every institution serving a CRB must file initial

and continuing SARs on a quarterly basis, establish and maintain enhanced BSA/AML compliance programs, and accept the reputational and

examination risk that accompanies providing banking services in connection with a federally controlled substance.

This compliance burden

represents the market barrier that the Company’s platform is specifically designed to address.

We believe that passage of the SAFER

Banking Act or related federal cannabis banking legislation, or regulatory relief related to the rescheduling of cannabis to Schedule

III, would meaningfully lower that barrier and expand the scope of financial institutions willing to enter the cannabis banking market.

An increase in the number of financial institutions seeking to serve CRBs would represent a larger market for our compliance services.

Regulatory relief would, in our view, be more likely to accelerate the adoption of cannabis banking programs by financial institutions

than to make our compliance infrastructure obsolete, given that state-level regulatory requirements, ongoing due diligence obligations,

and BSA program management would remain necessary regardless of federal scheduling changes.

Efficiency and Financial Discipline

the September 2025 Recapitalization and the restructuring of the Commercial Alliance Agreement (“CAA”) with PCCU in

February 2026, we are focused on operating with greater financial discipline.

With no material debt outstanding as of December 31,

2025, and improved liquidity from the recapitalization and the ELOC, our near-term priorities include reducing operating costs,

improving cash generation, and maintaining the cash reserves required to support our lending indemnification obligations under the

Second Amended CAA.

believe that the combination of our established compliance and banking infrastructure, our expanded on-site review capabilities through

the 420 IT Solutions asset acquisition, our emerging managed services offerings, and our growing network of capital and strategic partnerships

positions us to serve cannabis businesses and financial institutions more comprehensively than any other provider in our market

and Marketing

sales and marketing efforts are focused on three audiences:

financial institutions seeking to enter or expand their cannabis banking

programs, CRBs seeking access to compliant banking and financial services, and the broader regulatory and legislative community whose

decisions shape our operating environment.

generate new financial institution relationships primarily through direct outreach, referrals from existing partners, and participation

in industry conferences and events.

Our leadership team actively engages in speaking opportunities and thought leadership forums that

position the Company as a recognized authority in cannabis banking compliance.

We also maintain relationships with state regulators,

legislators, and attorneys general to support awareness of compliant cannabis banking frameworks and to contribute to policy discussions

as they evolve.

customer acquisition is largely driven by referrals from our financial institution partners and from existing CRB customers, reflecting

the trust-based nature of our platform.

We also support customer acquisition and retention through targeted outreach, referral programs,

and success fee arrangements that align our growth incentives with those of our partners.

2025, we completed a comprehensive rebrand of the Company and its digital presence, repositioning the Company around a unified value

proposition that we are the Company where cannabis businesses can come to bank, borrow, operate, and grow.

The rebrand included a full

redesign of our website and client-facing materials to reflect the expanded scope of our platform beyond compliance and deposit services.

in 2025, we formalized and professionalized our Safe Harbor Partner Program by hiring a Senior Vice President of Strategic Partnerships

and enrolling more than a dozen third-party partners.

These partners refer CRB clients to our platform in exchange for referral fees,

while referred CRB clients receive preferential pricing on our services.

Although the program was not a material revenue contributor

in 2025, it represents an important investment in our distribution infrastructure and is expected to support client acquisition growth

in 2026 and beyond.

December 2025 acquisition of substantially all of the assets of 420 IT Solutions also meaningfully expanded our field presence.

now can conduct on-site reviews at financial institutions and CRB locations across the country, and our established presence in key cannabis

markets provides the Company with additional capacity to attend industry events, build relationships with prospective clients, and support

business development activity in growth markets where in-person engagement is an important part of building trust.

support broader brand awareness and investor communications, we work with outside public relations and investor relations advisors and

maintain an ongoing program of digital marketing, search engine optimization, and direct outreach to current and prospective clients.

market for cannabis-related banking and financial compliance services is competitive and evolving.

We face competition from two primary

(1) software-as-a-service (“SaaS”) compliance technology providers that enable financial institutions to build and

operate their own cannabis banking programs and (2) integrated financial technology (“fintech”) company platforms that combine

regulatory compliance solutions with broader financial services offerings.

We believe we compete on the basis of our regulatory reputation,

compliance track record, depth of cannabis industry expertise, breadth of financial services, quality of client relationships, and the

overall value of our platform.

Compliance Technology Providers

number of companies offer software platforms designed to provide financial institutions with the compliance infrastructure and monitoring

tools necessary to provide banking services to CRBs without engaging a specialized third-party compliance provider.

These platforms provide

KYC tools, BSA monitoring, SAR preparation, and related compliance workflows that financial institutions can operate internally.

the cost and amount of expertise required for a financial institution to build its own cannabis banking program, these SaaS providers

reduce barriers to entry for banks and credit unions that have not historically participated in the cannabis banking market.

our competitive advantages over these providers include our more than 10-year operational track record in cannabis banking, our established

relationships with state and federal banking regulators, our zero-lending-failure history, and the depth of our full-service platform,

which extends well beyond software tooling to include client onboarding, ongoing relationship management, lending support, and regulatory

examination assistance.

Fintech Platforms Offering Regulatory Compliance Solutions

second source of competition comes from fintech companies that bundle regulatory compliance capabilities with complementary financial

services, such as payment, supply chain management, or lending, into a vertically integrated suite of services.

These platforms seek

to serve CRBs through this suite of services, thereby increasing customer switching costs and reducing the need for a standalone compliance

and banking infrastructure provider.

Competitors in this category include financial institutions that have developed proprietary compliance

and banking capabilities specifically tailored to the cannabis industry, as well as specialty lenders that combine capital deployment

with advisory services.

Dynamics and Risks

expect competition to increase as the cannabis industry matures, as additional states legalize cannabis for medical and/or adult use,

and as federal regulatory developments, including the potential rescheduling of cannabis under the CSA, reduce barriers that have historically

limited larger financial institutions’ participation in the market.

If cannabis is rescheduled to Schedule III, we believe that

a broader set of well-capitalized banks, credit unions, and fintech companies would likely seek to enter into or expand their presence

in the cannabis banking market, potentially reducing our competitive differentiation and increasing pricing pressure on the fees we charge.

these risks, we believe our primary competitive strengths include the following:

leadership team’s rare combination of areas of expertise.

We believe we are uniquely

positioned as the only fintech cannabis financial solution whose executive leadership team,

including our Chief Executive Officer, brings together direct, hands-on experience in cannabis

operations, financial services, and banking.

This integrated expertise allows us to serve

cannabis-related businesses with a depth of understanding that we believe no competitor can

established regulatory reputation and proven track record.

Since our founding in 2015,

we have successfully navigated more than 25 state and federal banking examinations, a record

we believe is unmatched in our industry and reflects the rigor and integrity of our compliance

infrastructure.

proprietary compliance management platform.

Our technology platform, operating across

41 states and territories, has facilitated the processing of approximately $35.4 billion in

cannabis-related depository funds since 2015.

The platform enables financial institution

partners to provide BSA and FinCEN-compliant banking services to CRBs, including KYC onboarding,

ongoing transaction monitoring, and regulatory exam support.

comprehensive suite of financial services for CRBs.

Through our financial institution

customers and strategic partners, we offer CRBs access to business checking and savings accounts,

cash management, commercial lending, ACH and wire payment services, remote deposit, and ancillary

compliance consulting, addressing the full spectrum of financial needs that CRBs face in

an underserved market.

cannot assure you, however, that we will be able to compete successfully against current or future competitors, and increased competition

could materially and adversely affect our business, financial condition, and results of operations.

For additional information, see Part

I, Item 1A., “Risk Factors.”

The acquisition of substantially all of the assets

of 420 IT Solutions included the transfer of, among other things, the registered trademark “420 IT Solutions”, domain name

registrations, and other intellectual property, including 420 IT Solution’s whitepaper of banking compliance services and site inspection

Except as described above, we do not have any registered intellectual property, and therefore we currently rely

on confidentiality, and non-disclosure agreements with our employees and others to protect our proprietary rights.

Despite these

efforts to protect ourselves from infringement or misappropriation of our intellectual property rights, unauthorized parties may

attempt to copy or otherwise obtain and use our intellectual property in violation of our rights.

In the event of a successful claim

of infringement against us, or our failure or inability to develop non-infringing intellectual property or license the infringed or

similar intellectual property on a timely basis, our business could be harmed.

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

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

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

Company’s investment activities are limited in scope and are guided by four core principles:

investment quality, liquidity, interest-rate

risk management, and return on investment.

Given the nature of our business and our obligations under the Second Amended CAA, maintaining

adequate liquidity is our primary investment objective.

of the Company’s liquid assets are held in cash and cash equivalents, including interest-bearing money market accounts.

does not maintain a significant portfolio of marketable securities.

2025, the Company acquired 1.5 million preferred securities of Aditxt, Inc.

(“ADTX”) for $1.5 million, which is accounted

for at cost less impairment under Accounting Standards Codification (“ASC”) 321, as the preferred shares are not actively

traded and do not have a readily determinable fair value.

During the year ended December 31, 2025 ,

the Company received redemption proceeds

of approximately $0.05 million for 43 shares

As of December 31, 2025, the Company holds 1,457 preferred securities of ADTX having carrying value

of $1.45 million.

This investment is classified as long-term and will be periodically assessed for impairment or observable price

Company does not engage in speculative investment activity and does not hold derivative financial instruments for investment purposes.

and Legislation

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

services to the underserved cannabis industry.

Among the factors preventing most financial institutions from providing similar services

conflicting state and federal laws regarding legalization;

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

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

creating additional compliance pressures;

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

industry, creating potential for differing interpretations and inconsistent standards;

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

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

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

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

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

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

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

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

businesses including those in the cannabis industry (i.e., those legal operating in states that have approved cannabis for medicinal

and/or adult use).

More recently, the Secure and Fair Enforcement (SAFE) Banking Act successfully passed the Senate Banking Committee

as of September 2023.

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

Even with the passage of the

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

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

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

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

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

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

This recommendation has been provided to the Drug Enforcement Administration

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

The rescheduling of cannabis could impact 280E

IRS Tax code presently applied to cannabis licensees;

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

and ability to service debt.

Regulatory Challenges

remains a controlled substance under the CSA.

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

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

and financial services providers for entering the business.

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

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

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

Although, in our opinion,

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

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

We also believe that the

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

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

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

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

fined simply for servicing the cannabis industry.

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

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

Given inherent risks associated with

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

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

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

ways to maximize tax efficiencies.

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

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

This understanding, diligence

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

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

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

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

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

We, however, view this as an opportunity.

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

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

This primarily relates to

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

In addition, given our history working with credit unions,

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

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

that is an SEC registrant.

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

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

These policies and procedures are continuously assessed

by management and formally reviewed at least annually.

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

are delivered in an appropriate manner.

A third party is engaged to audit our compliance with certain policies on a quarterly and annual

Regulations and Ramifications

penalties for non-compliance are significant.

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

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

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

We believe that most institutions cannot withstand such

a penalty and will not take that risk.

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

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

protect the financial institution.

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

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

with a competitive advantage.

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

Focused Fintech Competition

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

This has created the utilization of fintech

models to provided financial services to the cannabis industry.

Unregulated financial technology companies (“fintechs”),

i.e., those not formally regulated by federal agencies, are not subject to the same restrictions as chartered financial institutions

(i.e., concentration limits on the percentage of balance sheet composed of higher risk cannabis deposits).

Fintechs may enjoy this less

restricted environment for a period of time, but we anticipate these companies will become subject to increasing regulatory requirements.

We believe competition at the fintech level remains limited, as the emerging cannabis market requires the creation of sustainable fintech

models that understand the regulatory environment, combining technology and regulation.

While not fully regulated, fintech models are

responsible for moving funds through the financial system via banking partners and must therefore be aware of regulations surrounding

the movement of funds and implement BSA programs themselves.

the Company Addresses Regulatory Challenges

The Company’s onboarding process for CRBs desiring

banking services is a multi-step process that is designed to fulfill the financial institution’s “know your customer”

requirements and the diligence expectations set forth in the 2014 FinCEN Guidance related to providing services to CRBs, particularly

developing an understanding of the normal and expected activity for the business.

● The account opening process begins

with an application and supporting documentation provided by the CRB, which are uploaded and logged so that, following a quality control

review, open items and questions are flagged for follow up.

All account-related documentation is stored in a secure database that allows

the Company’s oversight, audit and exam functions to have access to all of the CRB’s documents.

● As part of the Company’s diligence

process, background checks are performed on all business owners, with the need for additional background checks of indirect owners or

investors determined in the application review stage.

● Other diligence includes, among

other things, as applicable, confirmation of licensure, on-site visits and regular audits to review business processes and inspect business

locations, verification of sources of funds, review of business and inventory records, and review of other information necessary for a

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

● The account opening process is

completed with the assistance of a financial institution staff member.

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

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

We believe our solutions

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

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

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

FinCEN Guidance relating to CRBs.

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

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

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

We have increased

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

This experience has allowed for the formulation

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

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

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

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

onboarding of CRB accounts for PCCU.

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

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

services relationship monitoring.

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

and functions associated with the emerging cannabis market.

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

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

for their own CRB customers without our assistance.

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

and to enhance existing processes for increased efficiencies.

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

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

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

We believe most financial institutions will not enter

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

Even then, the industry

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

The 2014 FinCEN Guidance issued

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

cannabis industry.

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

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

cannabis industry.

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

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

We have seen several financial

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

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

risk, and AML/BSA regulatory requirements.

CRBs have been unbanked or even banked secretly.

Many financial institutions start serving

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

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

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

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

expensive financial institution risk without direct control.

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

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

This allows the Company to continue

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

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

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

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

Legislative Developments

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

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

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

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

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

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

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

It could also affect our competitors differently

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

A change in statutes, regulations or regulatory policies applicable

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

remains a Schedule I controlled substance under the CSA, making it illegal under federal law despite being legal for medical and/or adult

recreational use in a majority of U.S.

This conflict between federal and state law is the central regulatory reality shaping

our business.

Federal-State Conflict and Its Impact on Banking

cannabis remains federally illegal, most financial institutions are unwilling to provide banking services to CRBs.

The risks deterring

participation include potential federal prosecution, civil asset forfeiture exposure, reputational risk, and significant BSA compliance

FinCEN issued guidance in February 2014 establishing a framework for how financial institutions may serve the cannabis industry

while meeting their BSA and AML obligations.

While this guidance created a path forward, it also imposed substantial compliance burdens,

including detailed customer due diligence, transaction monitoring, and SAR filing obligations, that most financial institutions are unwilling

or unable to resource adequately.

believe the absence of a federal “safe harbor” for financial institutions and their officers and directors who service CRBs

remains the single most significant structural barrier to entry in this market, and this was the primary reason the Company was founded

and continues to operate.

and Recent Federal Legislation

has made several attempts to address the banking access problem.

The SAFE Banking Act of 2021 (the “SAFE Banking Act”) passed

House of Representatives in April 2021, and an updated version, the SAFER Banking Act, passed the Senate Banking Committee in

September 2023.

As of the date of this filing, neither bill has been enacted into law.

We continue to monitor legislative developments

HHS recommended in 2023 that cannabis be rescheduled from Schedule I to Schedule III under the CSA.

This recommendation was forwarded

to the DEA and remains pending.

If rescheduling occurs, it could meaningfully impact cannabis businesses, including by modifying the

application of Section 280E, which currently prohibits ordinary business deductions for companies trafficking in Schedule I substances.

Greater after-tax cash flow for CRBs could increase deposit activity and borrowing capacity both of which would benefit the Company.

do not believe passage of the SAFE Banking Act or the SAFER Banking Act alone would significantly reduce the barriers to entry that define

our competitive advantage.

The high cash-intensity of the cannabis business, its illicit history, and the ongoing presence of an illicit

market mean that BSA compliance obligations will remain demanding regardless of whether a safe harbor is enacted.

We expect many potential

competitors will continue to avoid the sector.

Compliance Framework

Company operates in a compliance-first manner aligned with the 2014 FinCEN Guidance and BSA requirements.

Although we are not a chartered

financial institution, our agreements with financial institution partners require that we provide services consistent with applicable

regulatory standards.

Our compliance program includes comprehensive written policies and procedures, ongoing and annual employee training,

quarterly and annual third-party compliance audits, and continuous assessments by management.

These policies are formally reviewed at

least annually.

The Company has successfully navigated more than 25 state and federal regulatory examinations with no adverse findings

attributable to our program.

Barriers to Entry

regulatory environment has created both a barrier and an opportunity.

While some fintech companies have attempted to enter this space

because these companies benefit from less restrictive regulatory requirements than chartered institutions, sustainable cannabis fintech

models require deep regulatory expertise, robust BSA programs, and reliable financial institution partnerships.

We believe competition

remains limited for these reasons and that our established platform, proprietary technology, and compliance track record provide a durable

competitive advantage.

expect most large financial institutions to remain on the sidelines until federal legalization occurs, and even then, the cannabis sector

will require specialized compliance expertise that takes years to build.

We also anticipate that regulatory requirements applicable to

fintechs will increase over time, further reinforcing the value of our established, compliance-tested program.

Concentrations

Currently, substantially all deposits are maintained

at PCCU, and all transmissions of funds to or from these deposit accounts are handled directly by PCCU.

We intend to expand our relationships

with other financial institutions that similarly hold the CRB deposit accounts and handle transmissions of funds to and from the accounts.

Although we do not directly hold the deposit accounts, we believe that account retention is a measure of our ability to efficiently and

compliantly onboard, validate and monitor CRB accounts.

The largest 10 CRB accounts held at PCCU for the period ended December 31, 2024

represented less than 5% of fee income from onboarded deposits, which is currently our largest source of revenue.

Building upon the existing

foundation, we believe the Company has the ability to continue to grow the financial institution clients for which it onboards deposits

and related fee income at a strong pace.

In addition, we plan to add access to additional financial services to the Company’s platform,

such as merchant processing, custodial relationships, insurance products, broker/dealer services, payment processing services and investment

services, although in each case these services would be provided by a third party holding necessary licenses.

Loans Receivables

The Company had one loan on its balance sheet as of

December 31, 2024.

The Company entered into the Amended CAA, effective December 31, 2024, and as of that date, no indemnified

loans remain outstanding.

In contrast, as of December 31, 2023, the Company had indemnified a total of twenty loans, with three loans

individually accounting for more than 10% of the total indemnified loan balance.

Under the previous CAA, loan interest income was determined

based on a fixed percentage fee structure, where PCCU received a share of interest income from CRB-related loans.

Additionally, the Company

earned servicing fees of 0.25% annually on loans funded by PCCU and 0.35% on loans both financed and serviced by PCCU.

Under the amended

CAA, the Company’s loan interest income will now be determined using a loan yield allocation formula incorporating the Constant

Maturity US Treasury Rate, along with a proprietary risk rating formula to determine the fee split.

This transition restructures the revenue-sharing

model, eliminating fixed servicing fees while providing SHF with greater control over loan interest income.

The breakdown of the loan portfolio on December 31,

2023, by region, including loan amounts, regional concentration, collateral segmentation between real estate and business assets, and

loan-to-value ratios for each region are as follows:

Concentration

Business Assets

Total Collateral

As a result of the Amended CAA, the Company no longer has any indemnified loans, and therefore the loan

portfolio breakdown as of December 31, 2024, is no longer relevant.

of December 31, 2024, we had forty-one full time employees, and one part time employee.

None of our employees are represented by a labor

union or covered by a collective bargaining agreement.

Company’s business is currently concentrated in two significant ways:

Institution Partner Concentration.

Substantially

all of the Company’s revenue is derived from services provided to PCCU under Second Amended CAA.

For the years ended December

31, 2025, and December 31, 2024, revenue generated under then-in-effect version of the CAA approximated 86.7% and 83.5% of the

Company’s total revenue, respectively.

PCCU is also a significant related party.

In addition, the Company receives revenue

from merchant services, which is a shared fee for the use of automated teller machines.

Merchant service revenue for the years ended

December 31, 2025 and December 31, 2024, was approximately 9.7% and 8.6%, respectively.

As of the date of this filing, PCCU holds

approximately 25% of the Company’s Common Stock.

PCCU also holds approximately 43% of Series B Convertible Preferred Stock

(“Series B Preferred Stock”) and Common Stock purchase warrants (as amended and restated, each, a “Series B

Warrant”) combined, and is the largest holder of those securities.

In the aggregate, PCCU’s holdings represent

substantial actual and potential ownership of the Company on a fully diluted basis.

PCCU also holds substantially all of the cash

deposits of CRBs onboarded through the Company’s platform.

The loss of, or a material adverse change to, the Company’s

relationship with PCCU would have a material adverse impact on the Company’s results of operations and financial condition.

The Company is actively working to expand its financial institution partner base to reduce this revenue concentration over time.

Company has other sources of revenue, such as merchant services.

During the year ended December 31, 2025, one financial institution

terminated its relationship with the Company.

Deposit Concentration.

Company does not directly hold CRB deposit accounts.

All deposit accounts are maintained at PCCU or other financial institutions,

and all fund transmissions are handled directly by those institutions.

The Company’s fee income from onboarded deposits is well-diversified

at the individual CRB level.

No one CRB account for the year ended December 31, 2025 represented more than 10% of total fee income from onboarded

The Company monitors account retention as a key indicator of its ability to efficiently

and compliantly onboard, validate, and monitor CRB accounts.

Company does not originate or hold loans on its own balance sheet in the ordinary course of business.

Loans to CRBs are originated and

funded by PCCU pursuant to the Second Amended CAA.

The Company’s role is to identify, underwrite loans on PCCU’s

behalf, earning a share of loan program income.

See “Overview–Our Relationship with PCCU” above.

the year ended December 31, 2025, the Company’s sole loan receivable, which had a carrying value of approximately $0.4 million

as of December 31, 2024, was sold, generating proceeds of approximately $0.4 million.

As a result, the Company had no loans on its consolidated

balance sheet as of December 31, 2025.

further discussion of the loan program income sharing arrangement and the Company’s obligations under the Second Amended CAA,

see Note 9 to the Company’s consolidated financial statements in this Form 10-K.

of December 31, 2025, we had 39 full-time employees and one part-time employee.

None of our employees are represented by a labor union

or covered by a collective bargaining agreement.

Approximately 70% of our workforce is based in Colorado, with approximately 8% in Arkansas,

and the remainder distributed across six additional states.

The Company utilizes a remote-capable workforce model that supports client

relationship management across the 41 states and territories in which we operate.

Capital Management

Company’s key human capital management objectives are to attract, retain and develop the highest quality talent.

To support these

objectives, the Company’s human resources programs are designed to continuously develop talent;

reward and support our team members

through competitive pay and benefits;

enhance the Company’s culture through efforts aimed at making the workplace more engaging

and inclusive;

and engage team members as brand ambassadors of our products and experiences.

corporate culture and core values (focus on the customer, innovative and forward thinking, sound financial management, doing what is

right, collaborative thinking, developing our people and strengthening our communities) reflect our commitments to our customers, investors,

team members, and the communities in which we do business.

These values serve as guiding principles to provide a safe and positive work

environment for our team members and delivering on our goals to our customers, investors, stakeholders and communities we serve.

we have a strong workforce, with a good mix of professional credentials, experience, tenure and diversity, that coupled with their commitment

to uncompromising values, provide the foundation for our Company’s success.

Company’s Human Capital Management includes the following areas of focus:

Due to the high risk and complex nature of serving cannabis businesses, we strive to build a workforce with experience with the cannabis

We can more easily train compliance and financial services, but cannabis expertise is difficult to train.

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

workforce composition aligns with our business needs.

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

The company had 41 full-time equivalent employees (FTEs) at the end of 2024.

Approximately 76% of our workforce is based in Colorado,

with another 12% in Arkansas, supported by an efficient remote workforce that cultivates new and existing cannabis relationships across

multiple states.

The remaining employees are spread across six other states.

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

Our talent acquisition team uses internal and

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

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

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

New employees are provided industry-relevant compliance

training and are introduced to our Code of Business Conduct and Ethics, which is posted on our website at www.shfinancial.org .

The inclusion of our website addressed in this Form 10-K does not include or incorporate by reference the information on our website

into this Form 10-K.

and Consistent Practices.

Employees want to know that if they are working hard and dedicated to the company, the person next to them

should be as well.

All of our communications, evaluations, assessments, and monitoring ensure that our employees are treated with respect

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

Performance evaluations done on a quarterly and annual

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

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

what role they fill.

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

utilizing objective criteria on which

to base rewards.

human capital strategy reflects the specialized nature of our business.

Serving the cannabis industry at the intersection of financial

services and regulatory compliance requires employees with expertise that is difficult to recruit and takes significant time to develop.

Cannabis industry knowledge cannot be easily trained, as, although compliance and financial services skills can be taught, deep operational

understanding of the cannabis sector must be cultivated over time.

Retaining experienced employees is therefore a direct operational

human capital management focuses on the following areas:

Acquisition and Retention .

We recruit for specialized roles spanning cannabis

compliance, banking operations, relationship management, and information technology.

talent acquisition efforts are concentrated in sales, business development, and client-facing

roles that directly drive revenue.

We offer competitive base compensation, performance-based

incentive programs, and equity participation through the Plan, which is intended to align

employee interests with long-term shareholder value creation.

● Performance

The Company is transitioning to a performance-based compensation framework

that ties cash bonuses and equity grants to defined, measurable outcomes including revenue

growth, client acquisition, and operational efficiency.

Performance evaluations are conducted

quarterly and annually and serve as the basis for compensation decisions and career development

and Development.

Our team members are inspired to achieve their full potential through learning and development opportunities, recognition,

and motivation.

We invest in creating opportunities to help them grow and build their careers, through a multitude of learning and development

These include online instructor-led, cannabis industry focused conferences, and on-the-job learning assignments.

Understanding

that all employees learn differently, we offer a variety of learning options including traditional classroom learning, virtual learning,

any time learning, mobile learning, and social collaboration.

Development and Succession Planning.

We focus on growing leadership internally and ensuring the continuity of business at all levels.

We do this with mentoring programs, delegating to train employees to the next level, and specific leadership training programs to encourage

staff to reach higher levels.

Promoting from within is a solid strategy for long term success and loyalty.

To assess and improve employee retention and engagement, the Company regularly conducts anonymous surveys to seek feedback

from our employees on a variety of topics, including but not limited to, confidence in company leadership, competitiveness of our compensation

and benefits package, career growth opportunities, and improvements on how we could make our company an employer of choice.

closely monitors the implementation of these surveys and results are shared with our employees and reviewed by senior leadership, who

analyze areas of progress or deterioration and prioritize actions and activities to drive meaningful improvements in employee engagement.

Management believes that the Company’s employee relations are favorable.

also hold regular strategic update meetings to review corporate strategies and financial successes to ensure they understand the underlying

reason for assigned tasks and goals.

We establish regular functional area meetings at which employees are encouraged to provide client

and operational feedback, ensuring they contribute and demonstrate future potential talent.

Cross functional meetings are also scheduled

regularly to ensure cross functional teamwork.

Consistent with our operating principles, the health and safety of our employees is of top priority.

Hazards in the workplace

are actively identified and management tracks incidents so remedial actions can be taken to improve workplace safety.

The COVID-19 pandemic

underscored the importance of keeping our employees safe and healthy.

In response to the pandemic, the Company has continued taking actions

aligned with the World Health Organization and the Centers for Disease Control and Prevention to protect its workforce so they can more

safely and effectively perform their work.

We implemented remote work options that have granted employees a combination of working at

the office or from home.

We ensure further safety by encouraging any employee that might not feel well or have family members that might

be ill to work from home in order to protect the office environment.

and Inclusion.

Our diversity and inclusion goals are to build teams that reflect the communities we serve while hiring and supporting

a diverse array of talent.

Over 48% of our workforce is female with over 24% of management also comprised of female employees.

we have over 22% of the workforce represented as Latino, Hispanic or African American.

diversity and inclusion pillars are also reflected in our employee learning programs, particularly with respect to our policies against

harassment and the elimination of bias in the workplace.

Annual harassment training is done by all employees to ensure a workplace free

of any type of harassment.

Any and all complaints are dealt with in the most professional and expedited manner, creating a level of trust

between management and staff.

Rewards (Compensation and Benefits).

As part of our compensation philosophy, we believe in a competitive, total rewards program aligned

with our business objectives and the interests of our stakeholders.

We remain committed to delivering a compensation program with the

fundamental principles of fairness, transparency, efficiency, and compliance with laws and regulations.

Based on specific job position

and market conditions, our total rewards program combines fixed and variable compensation:

base salary, short-term incentive, equity-based

long-term incentive, and a broad range of benefits.

This compensation approach plays a significant role in our ability to attract, retain

and motivate the quality of talent necessary to achieve our strategic business goals and drive sustained performance.

Our compensation

model engages employees to contribute towards the achievement of shared corporate objectives, while differentiating pay on performance

based on individual contributions.

The Company takes pride in providing excellent health and wellness benefits to our employees and their families.

The benefits package

offered includes comprehensive medical, dental, vision, as well as supplemental short and long-term life and out of pocket costs insurance.

Along with these benefits, we also offer and fund a portion of employee Health Savings Accounts (“HSA”) monthly.

Our nationwide healthcare plans allow full-time and part time employees to select from multiple health plan options.

provides competitive medical premiums.

The Company contributes a percentage of the employee premium depending upon tenure, with those

employed longest receiving full payment of premium for employee coverage.

The Company also contributes monthly towards the HSA accounts.

Vision and Legal Plans.

Employees are eligible to participate in our dental, vision, and legal plan offerings.

The Company contributes

up to 100% depending on the plan and chosen tier and provides access to numerous providers across the country.

Employees can also choose

to purchase out-of-pocket insurance policies providing income protection and cash for services with different plans from accident, short-term

disability, long term disability, additional life insurance, and more.

Retirement Plan.

In addition to health insurance benefits, the Company also 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, and a non-tax qualified

retirement contribution plan to certain eligible highly-compensated employees.

Our total benefits package supports our employees’

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

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

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

vacations, family situations, and even holiday shopping.

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

paid to the employee at that time.

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

access to reliable and compliant financial services.

Cannabis related funds were already finding their way into the financial

system, including via hidden, misrepresented accounts and unlawful banking practices.

Based upon our research, we determined that

the appropriate step was to protect the financial system from criminal activity and provide legitimacy to the legal state CRBs.

decades of regulatory and banking experience, we created a detailed compliance program to assist financial institutions desiring to

provide safe and sound financial services that would accomplish industry accountability and protect the financial system.

compliance program provides onboarding, validation and monitoring services to financial institutions desiring to provide traditional

banking services to all types of marijuana, hemp, and CBD businesses, and to ancillary businesses that provide services to the

cannabis industry.

These ancillary businesses include payroll companies, payment processors, and professionals providing services to

and receiving payment from CRBs.

As the lawful cannabis industry grew beyond Colorado, the Company evolved its business practices to

build a national footprint and currently provides services to financial institutions that provide banking services in 41states and

territories of the United States of America where cannabis is either legal medicinally or for full adult use.

Harbor Financial (SHF) was established by PCCU following the approval of a contribution of certain assets and operational activities

from select PCCU branches and Safe Harbor Services, a wholly owned subsidiary of PCCU.

These assets and operations were first transferred

to SHF Holding Co., LLC, which then contributed them to SHF.

PCCU’s investment in SHF was maintained at the SHF Holding Co., LLC

level (collectively referred to as the “Pre-Public Company”).

This reorganization took effect on July 1, 2021.

part of the reorganization, all employees involved in the Carved-Out Operations—including those from PCCU—were transitioned

Following this transfer, SHF assumed full ownership of the Carved-Out Operations, and the Pre-Public Company was dissolved.

Additionally,

on July 1, 2021, SHF entered into an Account Servicing Agreement and a Support Services Agreement with PCCU, formalizing their operational

relationship.

These agreements were later amended and restated, as detailed in Note 8 of the Consolidated Financial Statements included

in this Form 10K.

September 28, 2022, the Company acquired all outstanding membership interests of SHF through a Business Combination.

This transaction

was completed under a Unit Purchase Agreement dated February 11, 2022 (the “Business Combination Agreement”), involving SHF,

SHF Holding Co., LLC (a wholly owned subsidiary of PCCU and direct parent of SHF), PCCU, NLIT (a special purpose acquisition company),

and its sponsor, 5AK, LLC.

Following the completion of the Business Combination, NLIT was renamed “SHF Holdings, Inc.” In

this Annual Report on Form 10-K, the terms “we,” “us,” “our,” “Safe Harbor,” and the

“Company” refer to SHF Holdings, Inc.

and its operations after the closing of the Business Combination.

mailing address is 1526 Cole Blvd., Suite 250, Golden, Colorado 80401.

Our telephone number is (303) 431-3435.

All employees receive ongoing compliance training aligned with BSA/AML

requirements and the 2014 FinCEN guidance.

New employees complete industry-specific onboarding

covering cannabis banking compliance and the Company’s Code of Business Conduct and

Ethics, which is available on our website at www.shfinancial.org.

We supplement internal

training with cannabis industry conferences and continuing education programs.

and Productivity.

We are actively investing in artificial intelligence-enabled compliance

management and customer relationship management tools designed to automate routine tasks

and increase individual employee output.

This allows our team to focus on higher-value client-facing

activities as we grow, without a proportional increase in headcount.

● Compensation

and Benefits.

We offer a competitive total rewards package including comprehensive

medical, dental, and vision coverage, with the Company contributing to employee premiums

on a tenure-based scale and funding a portion of employee Health Savings Accounts monthly.

Effective in 2025, the Company transitioned to an unlimited paid time off policy, which provides

employees with flexibility to manage their personal and professional needs without a fixed

The Company offers a 401(k) retirement plan to all eligible employees.

matching contribution was suspended in 2024 and discontinued in 2025.

The Company intends

to reassess the matching contribution as its financial position improves.

Emerging Markets

In March 2026, we announced that emerging U.S.

market average deposit balances increased 29% over the twelve months

ended February 4, 2026, driving total average deposit balances up 4.5%, and that emerging U.S.

markets represented 31% of the Company’s

average deposit balances at the time of the announcement.

IT Solutions Acquisition

December 19, 2025, Safe Harbor Managed Services LLC, a wholly-owned subsidiary of the Company, completed the acquisition of substantially

all of the assets of 420 IT Solutions.

420 IT Solutions is engaged in the business of providing third-party professional advisory and

technology services to the cannabis industry.

The aggregate purchase price for the acquired assets consisted of 125,000 Earnout Shares

(as defined below), plus the assumption of certain identified liabilities under contracts assigned to the Company.

The acquisition included

the transfer of customer contracts, the registered trademark “420 IT Solutions”, domain name registrations, and other intellectual property.

No cash consideration was paid at closing.

In connection

with the acquisition, 420 IT Solutions’ founders, joined the Company to lead the third-party

professional advisory and technology services division.

See Part II, Item 7., “Management’s Discussion and Analysis of Financial

Condition and Results of Operations for the Years ended December 31, 2025 and 2024––Acquisition of 420 IT Solutions.”

During the fourth quarter of 2025, SHF LLC, a wholly-owned subsidiary of the Company, and PCCU reached agreement

on the material economic terms of the Second Amended CAA on or about October 1, 2025, following completion of the September 2025 Recapitalization.

The written agreement was formally executed on February 4, 2026;

the intervening period involved only procedural and documentation matters

that did not affect the substance of the agreed terms.

Accordingly, the Company has given effect to the Second Amended CAA from October

1, 2025, consistent with ASC 606 contract modification guidance.

Under the Second Amended CAA, we receive up to 65% of loan program income

generated by PCCU’s CRB loan portfolio, an increase from the approximately 35% share in effect under the First Amended CAA.

we are obligated to indemnify PCCU for up to 65% of net losses on any loan default covered by the Second Amended CAA.

See Part II, Item

“Management’s Discussion and Analysis of Financial Condition and Results of Operations for the years ended December 31, 2025 and

December 31, 2024––Relationship with PCCU” and “Management’s Discussion and Analysis of Financial Condition and

Results of Operations for the years ended December 31, 2025 and December 31, 2024––Related Party Relationship with PCCU.”

2025 Recapitalization

August 27, 2025, the Company issued Convertible Promissory Notes (the “Notes”) to certain accredited investors with an

aggregate principal amount of $0.6 million, a 20% original issue discount (“OID”) and maturity date of September 9, 2026.

The conversion price of the Notes is the lesser of (i) a twenty percent (20%) discount to the average volume-weighted average price

(“VWAP”) of the Common Stock for the twenty (20) consecutive trading days ending on the trading day immediately prior to

the execution date of the Note and (ii) a twenty percent (20%) discount to the average VWAP of the Common Stock for the twenty (20)

consecutive trading days ending on the trading day immediately preceding the date of a conversion notice, subject to adjustment as

provided in the Note.

On September 9, 2025, the Company issued an additional Note to an accredited investor in the principal amount

of $0.1 million on identical terms, bringing the aggregate principal amount to $0.7 million.

On September 17, 2025, we established the ELOC

with CREO, which provided we may sell to CREO up to $150 million of Common Stock and granted us and CREO the mutual right to

agree to increase this amount to $500 million.

On September 30, 2025, all outstanding Notes were exchanged for an aggregate of 825

shares of the Series B Preferred Stock and Series B Warrants to purchase 53,127 shares of Common Stock.

Also on September 30, 2025,

the Company entered into Exchange and Cancellation Agreements (each, an “Exchange and Cancellation Agreement”) with each

of Midtown East Management NL, LLC (“Midtown”), which was subsequently assigned in part to Verdun Investments LLC

(“Verdun”) and Vellar Opportunity Fund SPV LLC – Series 1 (“Vellar”) relating to a Forward Purchase

Agreement (the “FPA”) that the Company initially entered into on June 16, 2022.

In exchange for each counterparty

irrevocably cancelling, waiving, and terminating all of their rights under the FPA, the Company issued an aggregate of 5,002 shares

of Series B Preferred Stock and Series B Warrants to purchase 322,111 shares of Common Stock.

refer to these Notes transactions, the entrance into the ELOC and the termination of the FPA collectively as the “September 2025

Recapitalization.” The September 2025 Recapitalization eliminated approximately $18 million in debt and raised over $6.7 million

in new capital and also resulted in the establishment of the $150 million ELOC that can potentially be expanded to $500 million, thereby

meaningfully improving our ability to support our lending commitments and portfolio growth.

See Part II, Item 7., “Management’s

Discussion and Analysis of Financial Condition and Results of Operations for the Years ended December 31, 2025 and 2024––Relationship

with PCCU” and Part II, Item 7., “Management’s Discussion and Analysis of Financial Condition and Results of Operations

for the Years ended December 31, 2025 and 2024––Gain on Extinguishment of Debt.”

Company was founded in 2015 to address the lack of reliable and compliant financial services available to CRBs in Colorado.

At that time,

many financial institutions were unwilling to serve the industry due to regulatory uncertainty and compliance burdens.

Drawing on regulatory

and banking experience, we developed a compliance program designed to assist financial institutions in providing services to CRBs while

addressing BSA and AML obligations.

program provides onboarding, monitoring, and validation services to financial institutions seeking to offer traditional banking products

to licensed cannabis, hemp, and CBD operators, as well as ancillary businesses that provide goods and services to the cannabis industry.

As cannabis legalization has expanded beyond Colorado, our operations have grown to support financial institutions that provide services

in 41 states and territories where cannabis is permitted for medical or adult use.

principal executive offices are located at 1526 Cole Boulevard, Suite 250, Golden, Colorado 80401, and our telephone number is (303)

Our website is www.shfinancial.org;

information on our website is not incorporated by reference into this Form 10-K.

maintain a website at the address shfinancial.org.

7 unchanged sentences

The information contained on our website or on the SEC’s

website is not incorporated by reference in, or considered part of, this Annual Report on Form 10-K.

Growth Company Status

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

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

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

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

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

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

website is not incorporated by reference in, or considered part of, this Form 10-K.

Our principal executive offices are located at 1526

Cole Boulevard, Suite 250, Golden, Colorado 80401, and our telephone number is (303) 431-3435

Growth Company

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

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

companies that are not “emerging growth companies,” including, but not limited to, not being required to comply with the

auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002 (“SOX”), reduced disclosure obligations

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

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

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

6 unchanged sentences

day of the fiscal year (a) following the fifth anniversary of the date of the first sale of our common equity securities pursuant to

an effective registration statement under the Securities Act and (b) in which we have total annual gross revenue of at least $1.07 billion,

(2) the date on which we are deemed to be a large accelerated filer, which means the market value of our common stock that is held by

non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter, and (3) the date

on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period.

References herein to “emerging

growth company” have the meaning provided in the JOBS Act.

an effective registration statement under the Securities Act, which is December 31, 2026, and (b) in which we have total annual gross

revenue of at least $1.07 billion, (2) the date on which we are deemed to be a large accelerated filer, which means the market value

of our Common Stock that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second

fiscal quarter, and (3) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period.

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

The Company will cease to be an EGC on December 31, 2026.

Reporting Company

are a “smaller reporting company” as defined in Item 10(f)(1) of Regulation S-K, which allows us to take advantage of certain

exemptions from disclosure requirements including exemption from compliance with the auditor attestation requirements of Section 404.

We will remain a smaller reporting company until the last day of the fiscal year in which (i) the market value of the shares of our Common

Stock held by non-affiliates exceeds $250.0 million as of the prior June 30, and (ii) our annual revenue exceeded $100.0 million during

such completed fiscal year or the market value of the shares of our Common Stock held by non-affiliates exceeds $700.0 million as of

the prior June 30.

To the extent we take advantage of such reduced disclosure obligations, it may also make comparison of our financial

statements with other public companies difficult or impossible.

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

What changed 10-K

Item 1. Business