What changed in this filing

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Item 9A. Controls and Procedures

2026-04-15 compared with 2025-04-10 · 2818 added, 2198 removed, 214 unchanged (96% of the section changed)

Controls and Procedures

Report on Internal Control over Financial Reporting

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

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

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

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

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

conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2024, based on criteria

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

Our management has identified material weaknesses, two of which were recognized in 2022.

A “material weakness”,

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

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

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

management has concluded that our internal control over financial reporting was not effective as of December 31, 2024.

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

Disclosure controls and

procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the

disclosure controls and procedures are met.

Further, the design of disclosure controls and procedures must reflect the fact that there

are resource constraints, and the benefits must be considered relative to their costs.

Because of the inherent limitations in all disclosure

controls and procedures, no evaluation of disclosure controls and procedures can provide absolute assurance that we have detected all

our control deficiencies and instances of fraud, if any.

The design of disclosure controls and procedures also is based partly on certain

assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated

goals under all potential future conditions.

of Disclosure Controls and Procedures

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

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

the SEC’s rules and forms.

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

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

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

As required by Rules 13a-15 and 15d-15 under the Exchange

Act, our Chief Executive Officer and Chief Financial Officer carried out an evaluation of the effectiveness of the design and operation

of our disclosure controls and procedures.

Based upon their evaluation, our Chief Executive Officer and Chief Financial Officer concluded

that our disclosure controls and procedures were not effective as of December 31, 2024 due to the material weaknesses described below.

In light of the material weaknesses, we performed additional analysis as deemed necessary to ensure that our consolidated financial statements

were prepared in accordance with U.S.

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

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

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

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

controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that their objectives

The design of disclosure controls and procedures must reflect the fact that there are resource constraints, and the benefits

must be considered relative to their costs.

Because of the inherent limitations in all disclosure controls and procedures, no evaluation

can provide absolute assurance that all control deficiencies and instances of fraud, if any, have been detected.

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

of the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2025.

Based upon this evaluation,

our Chief Executive Officer and Chief Financial Officer concluded that, solely due to the material weakness described below, the Company’s

disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) were not effective as of December

Annual Report on Internal Control Over Financial Reporting

is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) under

the Exchange Act.

Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability

of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting

Our internal control over financial reporting includes those policies and procedures that:

to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our

reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with

generally accepted accounting principles;

Accordingly, management believes that the financial statements

included in this Annual Report on Form 10-K present fairly in all material respects our financial position, results of operations and

cash flows for the periods presented.

We consider the

following material weaknesses to be outstanding as of December 31, 2024:

Recognition :

The Company has identified a material weakness in our internal control over financial reporting related to the need

to enhance the design and operating effectiveness of internal controls over the review of revenue recognition from calculations that

occur on a monthly basis between the Company and PCCU.

To remediate this material weakness, the Company is developing a tool aimed

at improving oversight and accuracy in the revenue calculation process.

The tool is currently in the testing phase, and management expects

that, once fully implemented, it will enable the Company to establish more robust internal processes for revenue reconciliation with financial

institution partners.

Additionally, the tool will improve the Company’s ability to serve its customer base more effectively.

for Financial Instruments:

Prior to the year ended 2024, the Company identified a material weakness in the effectiveness

of management’s review controls related to the accounting, disclosure, and valuation of complex financial instruments.

In 2023, the Company

did not initially properly account for certain warrants and deferred consideration payable to the Abaca shareholders which was corrected

before the filing of the financial statement.

Remediation plans were put in place in 2024 over these financial instruments, and the Company

subsequently accounted for these warrants and deferred consideration correctly under GAAP for all 2024 quarterly periods, including the

year-end period ending December 31, 2024.

Despite these efforts, on December 31, 2024 the Company did not appropriately apply the guidance

under ASC 470, Debt, in connection with the reclassification of the Amended PCCU Note.

The PCCU Note, which was amended on March 1, 2025,

met the criteria for classification as a non-current liability under ASC 470, but was incorrectly presented as a current liability in

the Company’s financial statements.

This classification error resulted from the material weakness pertaining to these management

review controls remaining ineffective as of year-end 2024.

The Company is in the process of designing its approach to remediation.

As of December 31, 2024, the Company identified a material weakness in its internal control over financial reporting

related to its going concern assessment.

Specifically, management reached an incorrect conclusion regarding the absence of substantial

doubt about the Company’s ability to continue as a going concern, due to deficiencies in the application of ASC 205-40 and SEC

Staff Accounting Bulletin No.

59 (Topic 1.M).

While the Company considered a number of positive indicators—such as adjusted working

capital, a three-year trend of public adjusted EBITDA, material reductions in non-rate expenses, the Amended PCCU Note, and the ability

to renegotiate vendor arrangements—management’s evaluation initially failed to be evaluated based on financial cash flow

projections from the date the financial statements would be issued.

As a result of these factors, the Company’s initial conclusion

regarding its ability to continue as a going concern was not appropriately supported under GAAP.

Ineffective management review constitutes

a material weakness in the Company’s internal control over the going concern analysis.

The Company is in the process of designing

its approach to remediation.

Certain users with unnecessary privileged access were noted within the financially relevant systems resulting in

segregation of duty risk.

The Company’s controls over logical access, specifically user access reviews and privileged access to

financially relevant systems and underlying accounting records were not effectively designed.

Access logs from the Company’s business

systems indicate that the certain users never inappropriately accessed these systems or posted any transactions resulting in inaccurate

financial reporting.

As of the filing, the unnecessary access has been removed and the Company is designing a remediation plan to mitigate

this material weakness.

plan to continue to assess and improve our internal controls and procedures and to take further action as necessary or appropriate to

address any other matters we identify.

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

A failure to maintain

effective internal controls over financial reporting could result in errors in its financial statements that could require the Company

to restate past financial statements, cause the Company to fail to meet its reporting obligations and cause investors to lose confidence

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

reasonable assurance that receipts and expenditures are being made only in accordance with management and director authorization;

reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of assets that could

have a material effect on the consolidated financial statements.

of its inherent limitations, internal control over financial reporting may not prevent or detect all misstatements.

Projections of any

evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions,

or that the degree of compliance with policies or procedures may deteriorate.

assessed the effectiveness of our internal control over financial reporting as of December 31, 2025 using the criteria set forth by the

Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control - Integrated Framework (2013).

on this assessment, management concluded that, due to the material weakness described below, our internal control over financial reporting

was not effective as of December 31, 2025.

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

reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented

or detected on a timely basis.

Previously Reported Material Weaknesses and Remediation

initially reported in our Annual Report on Form 10-K for the year ended December 31, 2024 and our Quarterly Report on Form 10-Q for the

period ended September 30, 2025, management identified several material weaknesses in the Company’s internal control over financial

These weaknesses primarily related to the Company’s ability to appropriately apply GAAP and SEC reporting requirements

to complex transactions, including revenue recognition, accounting for financial instruments, forward purchase arrangements, and stock-based

compensation.

Additional weaknesses existed in management’s going-concern evaluation process and information technology access

2025, the Company implemented a comprehensive remediation plan focused on strengthening technical accounting expertise, enhancing review

controls, and improving documentation and segregation of duties.

Key remediation actions included:

a Chief Executive Officer, who also serves as Chief Financial Officer, and a Senior Vice President of Finance and Controller, who

serves as Principal Accounting Officer, both with extensive SEC-registrant experience to oversee technical accounting, financial

reporting, and internal controls;

a financial advisory firm with expertise in financial reporting to assist management in evaluating and accounting for complex and

non-routine transactions, including the Series B Preferred Stock and related Series B Warrant issuances;

enhanced review procedures over financial statement preparation, including secondary reviews of all complex accounting analyses;

information technology access controls and removing unnecessary privileged user access within key financial systems.

of December 31, 2025, management believes the remediation actions described above adequately address all previously identified material

Management notes that while the material

weakness related to the completeness and accuracy of account activity fee income has been remediated, sufficient time has not elapsed

to conclude that the related controls are operating effectively.

Weakness Identified During the Year Ended December 31, 2025

Documentation and Credit Loss Estimation Process:

connection with the Company’s initial recognition of indemnification liabilities under the Second Amended CAA, the Company was required

for the first time to measure a stand-ready guarantee liability at fair value under ASC 460 and an expected credit loss liability under

Both measurements rely on underlying CRB loan documentation maintained in connection with the Company’s credit administration

responsibilities under the agreement.

During the audit, certain loan documentation used in connection with these measurements was identified

as out of date or inconsistent with the terms of the underlying loans.

While the Company’s valuation conclusions were determined to be

fairly stated as of December 31, 2025, the absence of a formalized loan documentation review and maintenance process represents a control

deficiency that, if not remediated, could result in a material misstatement of the indemnification and expected credit loss liabilities

in future periods.

remediate this material weakness, management is in the process of developing a standardized documentation checklist to ensure that all

relevant inputs are consistently captured and considered in the expected credit loss estimation under ASC 326.

Full implementation of

these procedures is expected to be completed by the second quarter of 2026, after which the controls will be subject to ongoing monitoring

by management to assess operating effectiveness.

failure to maintain effective internal controls over financial reporting could result in errors in our financial statements that could

require us to restate past financial statements, cause us to fail to meet our reporting obligations, and cause investors to lose confidence

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

in Internal Control Over Financial Reporting

Other than the efforts to remediate the material weakness

noted above, there were no changes in our internal control over financial reporting during the fiscal year ended December 31, 2024, covered

by this Report on Form 10-K that have materially affected, or are reasonably likely to materially affect, our internal control over financial

The Company’s management

has expended, and will continue to expend, effort and resources for their mediation of the material weakness and improvement of our internal

control over financial reporting.

While we have processes to properly identify and evaluate the appropriate accounting technical pronouncements

and other literature for all significant or unusual transactions, we have expanded and will continue to improve these processes to ensure

that the nuances of such transactions are effectively evaluated in the context of the increasingly complex accounting standards.

than the remediation actions described above, there were no changes in our internal control over financial reporting that occurred during

the year ended December 31, 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over

financial reporting.

Company’s management has expended, and will continue to expend, a substantial amount of effort and resources for the remediation

of the remaining material weakness and the continued improvement of our internal control over financial reporting.

While we have processes

to properly identify and evaluate the appropriate accounting guidance and other literature for all significant or unusual transactions,

we have expanded and will continue to improve these processes to ensure that the nuances of such transactions are effectively evaluated

in the context of the increasingly complex accounting standards.

Other Information.

1 unchanged sentence

Directors, Executive Officers and Corporate Governance.

required by this item and not set forth below will be set forth in our definitive Proxy Statement to be filed with the Commission within

120 days after the conclusion of our year ended December 31, 2024 (the “Proxy Statement”) pursuant to General Instructions

G(3) of Form 10-K and is incorporated herein by reference.

information relating to the Executive Officers of the Company appears in Part I of this Form 10-K under the heading “Information

about Our Executive Officers” and is incorporated by reference in this section.

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

A copy of our Code of Conduct and Ethics

is filed as Exhibit 14 to this Form 10-K.

Officers and Directors

directors and executive officers are as follows:

Executive Officer and Chief Financial Officer, Director

Accounting Officer, Senior Vice President of Finance

Marketing Officer

Investment and Strategy Officer

Mendez currently serves as the Chief Executive Officer and Chief Financial Officer for the Company, a position he

has held since February 2025 after initially being appointed Co-Chief Executive Officer in January 2025.

Mendez has also served

as the Company’s Interim Chief Financial Officer since the resignation of the Company’s prior Chief Financial Officer,

Dennedy, in June 2025.

Mendez also serves as the Chief Executive Officer of Amos Advisory Solutions

(“AMOS”) since August 2016, a management and outsource consulting firm through which he has held executive leadership

roles in several cannabis and cannabis-related business.

In connection with his employment with AMOS, Mr.

Mendez served from

November 2023 to May 2025 he served as the Chief Financial Officer of 42 Degrees, a cannabis extractor and distributor.

February 2022 to February 2024, he served as the Chief Executive Officer of Devi Holdings, a vertically integrated multi-state

cannabis operator.

From December 2019 to April 2021, he served as the Chief Executive Officer, of Dalwhinnie Enterprises, a single

state vertical integrated cannabis operator.

Mendez was employed from July 2017 to August 2019, as the Vice President of Finance

and Chief Accounting Officer by Hitachi Vantara, a subsidiary of Hitachi, Ltd.

HTHIY), a technology conglomerate.

March 2014 to November 2016, Mr.

Mendez served as Vice President and Chief Audit Executive by Arrow Electronics Inc.

electronics components manufacturer.

From September 2011 to March 2014, Mr.

Mendez was employed as Vice President of FP&A and

was a Segment Financial Controller by Broadridge Financial Solutions Inc.

Mendez spent 14 years in public accounting

with Arthur Andersen & Co.

and Deloitte Touche LLP.

Mendez is a Certified Public Accountant in the States of New York, New

Jersey and Colorado and a Charted Global Management Accountant.

He holds a Bachelor of Science in Economics from the University of

Pennsylvania’s Wharton School of Business.

Mendez’s finance and accounting expertise is a strong asset to the Board

of Directors, and he also has extensive management and industry experience.

Carleton has served as the CEO of the Canadian Securities Exchange (“CSE”) since July 1, 2011.

is a recognized stock exchange in Canada, subject to the oversight of the British Columbia Securities Commission and the Ontario Securities

The CSE was re-organized in November, 2025 to create a holding company (CNSX Global Markets Inc.).

CNSX holds 100% of the

issued and outstanding shares of the CSE and the National Stock Exchange of Australia.

Carleton is the CEO of CNSX Global Markets.

Carleton is a member of the board of the Canadian Securities Exchange (2024), CNSX Global Markets (2025) and the National Stock Exchange

of Australia (2025).

Carleton is also a member of the board of Blue Ocean Technologies LLC, the Operator of Blue Ocean ATS, a US-regulated

trading platform offering trading certain securities between 8 p.m.

Eastern Time.

Blue Ocean is a private company.

is a board member (and chair) of Tetra Digital Inc., the operator of a digital asset custodian, a software services business and company

exploring the issuance of a Canadian dollar denominated stablecoin.

Carleton’s knowledge, none of these companies is an

affiliate or in any way related to the Company.

On September 28, 2022, Mr.

Carleton was appointed as a member of the Board of Directors

in connection with the closing of our initial business combination.

Carleton received his Bachelor of Arts in History from the University

of Ottawa (1981) and his LLB from the University of Toronto (1985).

He has also completed the Executive Development Program at the Wharton

School, University of Pennsylvania.

(Skip) Braun III was appointed to the Board of Directors in May 2025.

He has served as a senior advisor

to Stout since April 2024 and as a member of CrossCountry Consulting’s advisory counsel since February 2024.

Braun was appointed to the Board of Directors of Polarx Therapeutics, Inc.

in January 2026 and serves as the

chair of its audit committee.

Braun was appointed to the Board of Directors of Elite Express Holdings Inc.

in August 2025 and served

through October 2025.

Braun has also served as a director of Crown Bank in New Jersey since October 2024 and is the chairman of the

bank’s audit committee.

From July 2024 to July 2025 Mr.

Braun served as a consultant to Kohlberg Kravis Roberts & Co.

and from December 2016 to July 2023, Mr.

Braun served as a Partner at Grant Thornton LLP.

Braun is considered a financial expert under

the Sarbanes-Oxley rules and has 40 years of diversified experience serving public and private companies during his time in public accounting

with Arthur Andersen LLP, Deloitte & Touche LLP and Grant Thornton LLP.

He holds a Bachelor of Science in Commerce, Accounting from

Rider University.

On September 28, 2022, Mr.

Niehaus was appointed as a member of the Board of Directors in connection with the closing of

the initial business combination.

Niehaus currently serves as the Managing Partner of Interactive Global Solutions, a global consulting

company, a position he has held since January 2011.

Niehaus previously served as a member of the board of managers of SHF, LLC d/b/a

Safe Harbor Financial (“SHF Predecessor”) from February 2022 until September 2022.

From 2003 until 2011, Mr.

Niehaus served

as a Global SVP for First Data Corporation and the Western Union Company.

In this capacity, Mr.

Niehaus was responsible international

government relations and public affairs.

In addition, he spearheaded outreach to US attorneys general in matters relating to compliance

and anti-money laundering activities.

Niehaus was thereafter appointed to be a senior advisor to the Alliance Partnership, an international

rule of law initiative run by the Attorney General Alliance.

Niehaus is an active board member, serving as the chair of the Farnsworth

Group, a multi-state architecture and engineering firm and chair of the Make A Difference Foundation which focusses on green energy initiatives

internationally.

He has also served as advisor to other private companies as well as serving 10 years on the board of the Colorado Great

Outdoors Trust Fund.

Niehaus received his Bachelor of Science in Journalism Communications from the University of Iowa.

background enables him to share his expertise in legal, regulatory, and compliance matters with the Board of Directors.

Seefried served as the Chief Executive Officer of the Company from July 2021 until February 2025 and currently serves

as a member of the Board of Directors, a position she has held since April 2024.

Prior to joining the Company, Ms.

Seefried served as

the Chief Executive Officer of PCCU, the major shareholder of Safe Harbor Financial, from 2001 until June 2021 and as the Chief Executive

Officer of Eagle Legacy Services, a former company owned by PCCU, LLC from January 2020 until March 2021.

Seefried previously served

as a board member of the Colorado Division of Financial Services from 2019 until 2021, and as a board member of the Credit Union Association

from 2007 until 2015.

Seefried received her Bachelor of Science in Business Management from the University of Maryland and her Master

of Business Administration in Finance from Regis University, Colorado.

Mendez’ biographical information is set forth above in “–– Directors .”

On September 24, 2025, Mr.

Beck was appointed Principal Accounting Officer and will continue to serve as the Company’s

Senior Vice President of Finance, Controller, a position that he has held since May 2025.

Prior to his appointment as the Company’s

Senior Vice President of Finance, Controller, Mr.

Beck served as the Chief Financial Officer of AiAdvertising, Inc.

from November 2024

to April 2025 and the Chief Financial Officer of ShiftPixy, Inc.

from January 2023 to March 2024.

Beck also served as a consultant

to Beyond Air Inc.

from September 2021 to December 2022 and as its Chief Financial Officer from November 2018 to August 2021.

a Bachelor of Science in Accounting from Fairleigh Dickinson University and is also a licensed Certified Public Accountant.

On September 24, 2025, Mr.

Kay was appointed Chief Marketing Officer.

Kay joined the Company in April 2025 as Senior Vice

President of Marketing.

Kay has more than 30 years of marketing and brand leadership experience across the cannabis, financial services

and consumer products industries.

Prior to that, Mr.

Kay founded and served as Chief Executive Officer of Brandfan, a marketing agency

providing strategic and creative services to clients across various industries from July 2012 to April 2025.

He has also served as Chief

Marketing Officer for multiple cannabis operators, including 42 Degrees from September 2024 to March 2025 and Devi Holdings from April

2023 to April 2025, where he oversaw brand development, product strategy, and growth initiatives.

Earlier in his career, he held senior

positions with The Marketing Arm (Omnicom), EastWest Marketing Group, and DDB Needham.

Kay has also served on the boards of Devi

Holdings and AFC Warehouse Holdings, both cannabis-related companies, and Fifth Street Floating Rate Corp.

FSFR), a publicly

traded financial services company, where he contributed to strategic planning and governance matters.

Kay earned a Bachelor of Science

degree from the University of Maryland College of Business and Management.

On September 24, 2025, Mr.

Regan was appointed Chief Investment & Strategy Officer.

Regan joined the Company in March

2025 and previously held the position of Head of Investor Relations and Data Science from March 2025 to June 2025 and the position of

Vice President, Strategic Finance and Corporate Development from June 2025 to September 2025.

Prior to joining the Company in March

Regan served as the Director of Research and Founding Partner of Excelsior Equities, LLC from December 2022 to December 2024,

and Founder of MJResearchCo LLC from May 2020 to December 2022.

While at MJResearchCo, Mr.

Regan served as a consultant to HAL Extraction

from November 2020 to December 2022.

Regan has extensive capital markets and investment experience, with over 13 years of experience

at hedge funds Roubaix Capital, Hawkshaw Capital, and Copper Arch Capital, and 5 years of experience at investment banks Excelsior Equities,

Deutsche Bank, Credit Suisse, and DLJ.

He received a Bachelor of Science in Business Administration, major in finance, from Georgetown

University, and a Master of Business Administration from the Massachusetts Institute of Technology’s Sloan School of Management.

He holds FINRA Series 7, Series 24, Series 86, and Series 87 licenses (inactive;

expiration 2026).

Relationships

are no family relationships between our Board of Directors and any of our executive officers.

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

A copy of our Code of Ethics

and Business Conduct is filed as Exhibit 14 to this Form 10-K.

Trading Policy

Company’s Insider Trading Policy governs the purchase, sale and other acquisitions and dispositions of the Company’s securities

by the Company and all of its directors, officers and employees.

This policy is reasonably designed to promote compliance with insider

trading laws, rules and regulations, and the Nasdaq listing standards.

A copy of the Insider Trading Policy is filed as Exhibit 19 to

this Form 10-K.

have been no material changes to the procedures by which our security holders may recommend nominees to the Company’s Board of

Directors since the filing of the definitive proxy statement for the Company’s 2025 annual meeting of shareholders with the SEC

on May 28, 2025.

information required by this Item 10 will be presented in the proxy statement for our 2026 Annual Meeting of Shareholders (the “Proxy

Statement”) in the sections titled “Proposal 1:

Election of Class II Directors,” “Management and Corporate Governance,”

and “Security Ownership of Certain Beneficial Owners and Management” and is incorporated herein by reference to the Proxy

Executive Compensation.

information required under this Item will be contained in the Company’s Proxy Statement under the caption “Compensation Committee

Report,” “Director Compensation,” “Executive Compensation” and “Compensation Committee Interlocks

and Insider Participation,” which information is incorporated by reference herein.

qualify as both a “smaller reporting company” and an “emerging growth company” under the rules promulgated by

the SEC, and we have elected to comply with the disclosure requirements applicable to smaller reporting and emerging growth companies.

Accordingly, this executive compensation summary is not intended to meet the disclosure requirements of larger reporting companies.

a smaller reporting company, we are required to disclose the executive compensation of our named executive officers, which consist of

the following individuals, for the fiscal years ended December 31, 2025 and December 31, 2024, respectively:

(i) any individual serving

as our principal executive officer or acting in a similar capacity, during the fiscal year ended December 31, 2025;

(ii) the two other

most highly compensated executive officers of the Company serving as executive officers at the end of the most recently completed fiscal

and (iii) up to two additional individuals for whom disclosure would have been provided but for the fact that the individual was

not serving as an executive officer at the end of the most recently completed fiscal year.

Compensation Table

following table discloses compensation paid or to be paid to our named executive officers for the fiscal years ended December 31, 2025

and December 31, 2024.

and Principal Position

Mendez (2)(3)(4)

Chief Executive Officer

and Chief Financial Officer

Chief Marketing Officer

Former Chief Financial

Michael Regan

Chief Investment &

Strategy Officer

Principal Accounting Officer,

Senior Vice President of Finance

Sundie Seefried (6)(7)

Former Chief Executive

Donnie Emmi (8)

Former Chief Legal Officer

represent the aggregate grant date fair value of stock awards or option awards, as applicable, granted during the year measured pursuant

to Financial Accounting Standard Board Accounting Standards Codification Topic 718 (Topic 718), the basis for computing stock-based

compensation in our financial statement.

to becoming the co-Chief Executive Officer on January 21, 2025, and for the year 2024 all income earned by Mr.

Mendez was through

his engagement as an independent contractor.

Mendez became our Chief Financial Officer on June 6, 2025 following Mr.

Dennedy’s resignation.

to the terms of Mr.

Mendez’s employment agreement, if the agreement is not renewed or is terminated without cause, the Company

is obligated to pay severance equal to the CEO’s then-current annual base salary.

The severance is considered a nonretirement

postemployment benefit that is accounted for under ASC 712-10, and a liability is accrued when it becomes probable that a payment

will be made, and the amount is estimable.

Since the amount is defined and the amount is probable, an accrual is deemed required.

See “ Narrative Disclosure to Summary Compensation Table––Employment Agreements––Agreement

with Terrance E.

Dennedy resigned as Chief Financial Officer on June 6, 2025.

Seefried resigned as co-Chief Executive Officer on February 28, 2025.

Pursuant to Ms.

Seefried’s employment agreement, in 2025 the Company paid for her participation in the Consolidated

Omnibus Budget Reconciliation Act insurance program following her resignation as co-Chief Executive Officer on February 28, 2025.

Emmi resigned as Chief Legal Office on June 6, 2025.

Disclosure to Summary Compensation Table

Company has developed an executive compensation program which is designed to align compensation with the Company’s business objectives

and the creation of stockholder value, while enabling the Company to attract, motivate and retain individuals who contribute to the long-term

success of the Company.

on the executive compensation program, as described below, are determined and/or ratified by the Board of Directors with recommendations

given by the Compensation Committee.

decisions regarding executive compensation reflect our belief that the executive compensation program must be competitive in order to

attract and retain our executive officers.

The Compensation Committee will seek to implement our compensation policies and philosophies

by linking a significant portion of our executive officers’ cash compensation to performance objectives and by providing a portion

of their compensation as long-term incentive compensation in the form of equity awards.

compensation for our executive officers has three primary components:

base salary, an annual cash incentive bonus, and long-term incentive

compensation in the form of equity awards.

Company’s practice has been to ensure that base salary is fair to the executive officers, competitive within the industry and reasonable

in light of the Company’s cost structure.

The Compensation Committee determines base salaries and manages the base salary review

process, subject to existing employment agreements.

Company uses annual cash incentive bonuses for the executive officers to tie a portion of their compensation to financial and operational

objectives achievable within the applicable fiscal year.

The Company expects that, near the beginning of each year, the Compensation

Committee will select the performance targets, target amounts, target award opportunities and other term and conditions of annual cash

bonuses for the executive officers, subject to the terms of any employment agreement.

Following the end of each year, the Compensation

Committee will determine the extent to which the performance targets were achieved and the amount of the award that is payable to the

executive officers.

Company uses equity awards to reward long-term performance of the executive officers.

The Company believes that providing a meaningful

portion of the total compensation package in the form of equity awards will align the incentives of its executive officers with the interests

of its stockholders and serve to motivate and retain the individual executive officers.

Equity awards are awarded under the Plan, which

has been adopted by the Board of Directors.

connection with the Company’s executive compensation program, the Company has granted equity awards to its executives.

Company maintains various employee benefit plans, including medical, dental, life insurance and 401(k) plans, in which the executive

officers participate.

Agreements and Offer Letters

with Sundie Seefried

February 11, 2022, the Company entered into an executive employment agreement with Sundie Seefried which became effective September 28,

2022, pursuant to which Ms.

Seefried serves as the Chief Executive Officer of the Company.

The executive employment agreement provides

for an annual base salary of $0.4 million, an initial incentive equity grant of options exercisable for 27,500 shares of the Company’s

Common Stock at $133.40 per share that will vest over two years and other customary benefits.

The executive employment agreement, which

is for a two-year term, also provides for severance in the event of a termination by the Company without cause or by Ms.

good reason, of one year’s base salary.

Seefried resigned as co-Chief Executive Officer of the Company effective on February

Seefried continues to be a member of the Board.

with Terrance E.

January 21, 2025, the Company entered into an executive employment agreement with Mr.

Mendez which became effective immediately, pursuant

Mendez now serves as the Chief Executive Officer of the Company.

Under the terms of the agreement, if the contract is not

renewed or is terminated without cause, the Company is obligated to pay severance equal to the Chief Executive Officer’s then-current

annual base salary.

The agreement also provides for an annual cash bonus opportunity of up to

100% of base salary, and for long-term incentive compensation, the terms of which are to be determined by the Board of Directors.

January 21, 2025, the Company’s Board of Directors granted Mr.

Mendez an option to purchase 32,700 shares of our Common Stock at

an exercise price of $8.00 per share.

The option has a ten-year term.

One-third of the option vested immediately upon grant, one-third

will vest on the first anniversary of the grant date, and the remaining one-third will vest on the second anniversary of the grant date.

The terms of this agreement were not altered in connection with Mr.

Mendez assuming the title of the Company’s sole Chief Executive

Officer on February 28, 2025.

Effective January 1, 2026, Mr.

Mendez’s annual base salary was increased to $0.5 million per year.

with James H.

January 10, 2023, the Company entered into an executive employment agreement with James Dennedy, pursuant to which Mr.

Dennedy serves

as the Chief Financial Officer of the Company.

The executive employment agreement provides for an annual base salary of $0.3 million, an

initial incentive equity grant of options exercisable for 17,500 shares of the Company’s Common Stock at $133.40 per share that

will vest over two years and other customary benefits.

The executive employment agreement, which is for a two-year term, also provides

for severance in the event of a termination by the Company without cause or by Mr.

Dennedy for good reason, of one year’s base

April 2, 2024, the Company entered into an amendment to its original agreement with Mr.

Dennedy to facilitate business continuity and

stagger contract expirations to accommodate the Company’s public reporting schedule.

The amendment to Mr.

Dennedy’s executive

employment extends the term of his employment to May 16, 2026.

In addition, the amendment contains a provision that, effective April

1, 2024, deletes and replaces Section 4(b) of Mr.

Dennedy’s original agreement such that all PTO that Mr.

Dennedy accrued through

March 31, 2024, but had not taken, shall be paid to him during the month of April 2024.

As a result, no PTO shall accrue or be paid out

at the time of termination of Mr.

Dennedy’s employment with the Company for any reason.

The amendment also adds a provision that

Dennedy shall be entitled to receive supplemental severance in an amount equivalent to six months of his then-current base salary,

provided that he executes a release of claims against the Company and its affiliated entities, executives, and employees (including claims

related to any non-compete and non-solicit covenants), for the six-month period after the termination of his employment.

Dennedy resigned as Chief Financial Officer on June 6, 2025.

Agreement with Donnie Emmi

On January 10, 2023, the Company

entered into an executive employment agreement with Donnie Emmi, pursuant to which Mr.

Emmi serves as the Chief Legal Officer of the Company.

The executive employment agreement provides for an annual base salary of $285,000, an initial incentive equity grant of options exercisable

for 350,000 shares of the Company’s Common Stock at $6.67 per share that will vest over two years and other customary benefits.

The executive employment agreement, which is for a two-year term, also provides for severance in the event of a termination by the Company

without cause or by Mr.

Emmi for good reason, of one year’s base salary.

On April 2, 2024, the Company entered into an amendment

to its original agreement with Mr.

Emmi to facilitate business continuity and stagger contract expirations to accommodate the Company’s

public reporting schedule.

The amendment to Mr.

Emmi’s executive employment agreement extends the term of his employment to August

In addition, the amendment contains a provision that, effective April 1, 2024, deletes and replaces Section 4(b) of Mr.

original agreement such that all PTO that Mr.

Emmi accrued through March 31, 2024, but had not taken, shall be paid to him during the

month of April 2024.

As a result, no PTO shall accrue or be paid out at the time of termination of Mr.

Emmi’s employment with the

Company for any reason.

The amendment also adds a provision that Mr.

Emmi shall be entitled to receive supplemental severance in an amount

equivalent to six months’ of his then-current base salary, provided that he executes a release of claims against the Company and

its affiliated entities, executives, and employees (including claims related to any non-compete and non-solicit covenants), for the six

month period after the termination of his employment.

Emmi resigned as Chief Legal Officer on

Offer Letter with Jeffrey Kay

Jeffrey Kay joined the Company in April 2025 as

Senior Vice President of Marketing.

His annual salary is $0.3 million per annum and an initial incentive equity grant of options exercisable

for 23,781 shares of the Company’s Common Stock at $2.22 per share that will vest over three years and other customary benefits.

On September 24, 2025, Mr.

Kay was appointed Chief Marketing Officer.

Kay joined the Company in April 2025 as Senior Vice President

of Marketing.

Kay is an at-will employee.

Offer Letter with Michael Regan

Michael Regan joined the Company in March 2025

to June 2025 as Head of Investor Relations and Data Science, and the position of Vice President, Strategic Finance and Corporate Development

from June 2025.

On September 24, 2025, Mr.

Regan was appointed Chief Investment and Strategy Officer.

Regan annual salary was $0.1

million per annum and an initial incentive equity grant of options exercisable for 7,326 shares of the Company’s Common Stock at

$6.40 per share that will vest over three years and other customary benefits.

On January 1, 2026, Mr.

Regan annual salary was increased

to $0.2 million per annum.

Regan is an at-will employee.

Offer Letter with Douglas Beck

Douglas Beck joined the Company in May 2025 as

the Senior VP and Controller of the Company.

On September 24, 2025, Mr.

Beck was appointed Principal Accounting Officer and will continue

to serve as the Company’s Senior Vice President of Finance, Controller, a position that he has held since May 2025.

salary was $0.18 million per year and is he eligible to participate in the Company’s benefits.

On January 1, 2026, Mr.

salary was increased to $0.2 million per year.

Beck is an at-will employee.

following table sets forth for the year ended December 31, 2025, certain information as to the total remuneration we paid to our non-employee

2025, each director received a quarterly cash payment in the amount of $0.006 million and fees in the amount of $0.005 million per committee.

the chair of the Audit Committee received an annual retainer of $20,000;

the chair of Compensation Committee received an annual retainer

of $0.01 million;

the chair of the Nominating and Corporate Governance Committee received an annual retainer of $0.01 million;

and the chair of the

Board of Directors received an additional $0.015 million.

Mendez did not receive fees for his service as a member of the Board of Directors,

Seefried did not receive fees for her service as a member of the Board of Directors until after her resignation from her position

as co-Chief Executive Officer of the Company.

Earned or Paid in Cash ($)

Other Compensation ($)

Jonathon Niehaus

Sundie Seefried

Richard Carleton

Douglas Fagan (2)

Jennifer Meyers (3)

Jonathan Summers (4)

Karl Racine (5)

represent the aggregate grant date fair value of option awards granted during the year measured

pursuant to Financial Accounting Standard Board Accounting Standards Codification Topic 718

(Topic 718), the basis for computing stock-based compensation in our financial statement.

Fagan resigned from his position as a director of the Company on May 15, 2025.

Meyers resigned from her position as a director of the Company on May 15, 2025.

Summers did not stand for re-election at the 2025 annual meeting of the Company’s stockholders.

Racine resigned from his position as a director of the Company on May 2, 2025.

Equity Awards at December 31, 2025

following table sets forth information regarding outstanding stock options or unvested equity awards as of December 31, 2025.

of Securities Underlying Unexercised Options (#) Exercisable

of Securities Underlying Unexercised Options (#) Unexercisable

Incentive Plan Awards:

Number of Securities Underlying Unexercised Unearned Options (#)

Exercise Price ($)

Expiration Date

of Shares or Units of Stock That Have Not Vested (#)

Value of Shares or Units of Stock That Have Not Vested ($)

Incentive Plan Awards:

Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)

Incentive Plan Awards:

Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)

Michael Regan

Sundie Seefried

There were no outstanding stock options or unvested equity awards as of

December 31, 2025 for either Mr.

information required by this Item 11 will be presented in the Proxy Statement in the sections titled “Compensation Discussion and

Analysis,” “Management and Corporate Governance,” and “Security Ownership of Certain Beneficial Owners and Management”

and is incorporated herein by reference to the Proxy Statement.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

information required under this Item will be contained in the Company’s Proxy Statement under the caption “Security Ownership

of Certain Beneficial Owners” and “Equity Compensation Plan Information,” which information is incorporated by reference

following table sets forth information with respect to the beneficial ownership of our Common Stock as of April 10, 2026, except as

noted, by (i) each stockholder known by us to be the beneficial owner of more than 5% of our Common Stock, (ii) each of our directors

and named executive officers, and (iii) all of our directors and executive officers as a group.

Our only class of voting securities is

our Common Stock.

To our knowledge, none of the shares listed below is held under a voting trust or similar agreement.

To our knowledge,

there are no pending arrangements, including any pledges by any person of securities of the Company, the operation of which may at a

subsequent date result in a change in control of the Company.

There were 4,505,485 shares of Common Stock issued and outstanding on April

otherwise indicated in the following table, the address for each person named in the table is 1526 Cole Blvd., Suite 250, Golden, Colorado

Pursuant to SEC rules, we have included shares of Common Stock that the person has the right to acquire within 60 days after April

Name and Address of Beneficial Owner

Sundie Seefried

Jonathon Niehaus

Richard Carleton

Michael Regan

(All Executive Officers and Directors as a Group (8 persons)):

Five Percent and Other Holders:

Partner Colorado Credit Union

M3 FUNDS, LLC

Indicates ownership of less than 1% of the outstanding shares of our Common Stock.

percentage of beneficial ownership of the Company is calculated based on 4,505,485 shares of Common Stock outstanding as of the

April 10, 2026, plus vested but unexercised options.

(i) 10,900 incentive stock options that are vested, or vest in the next 60 days, to purchase shares of Common Stock and have an exercise

price per share equal to $8.00, and (ii) 91,751 incentive stock options that are vested, or vest in the next 60 days, to purchase

shares of Common Stock and have an exercise price per share equal to $2.40.

(i) 27,500 incentive stock options that are vested, or vest in the next 60 days, to purchase shares of Common Stock and have an exercise

price per share equal to $133.40, and (ii) 11,628 incentive stock options that are vested, or vest in the next 60 days, to purchase

shares of Common Stock and have an exercise price per share equal to $9.68.

11,628 incentive stock options that are vested, or vest in the next 60 days, to purchase shares of Common Stock and have an exercise

price per share equal to $9.68.

entirely of incentive stock options that are vested, or vest in the next 60 days, to purchase shares of Common Stock and have an

exercise price per share equal to $2.40.

solely on information contained in a Schedule 13D filed with the SEC on July 21, 2023.

The business address of Partner Colorado Credit

Union is 6221 Sheridan Blvd, Arvada, CO 80003.

solely on information contained in a Schedule 13G filed with the SEC on December 30, 2025.

The business address of M3 Funds, LLC

is 2070 E 2100 S, Suite 250, Salt Lake City, UT 84109.

Includes 2,442 incentive stock options that are vested, or vest in the

next 60 days, to purchase shares of Common Stock and have an exercise price per share equal to $6.40.

Participation

by Management and a Director in the Series B Preferred Stock Offering

On September 30, 2025, Terrance Mendez, Chief Executive Officer, Interim Chief Financial Officer and Director of

the Company, Michael Regan, Chief Investment & Strategy Officer of the Company, Jeffrey Kay, Chief Marketing Officer of the Company,

Richard Carleton, a Director of the Company, and Margaret Williams, an employee of the Company, all participated in the Company’s

offering of Series B Preferred Stock pursuant to the Series B SPA.

Their participation was subject to stockholder approval in accordance

with Nasdaq Rule 5635(c), which was obtained on November 6, 2026.

In the aggregate, these participants purchased 284 shares of Series

B Preferred Stock and received accompanying Series B Warrants to purchase an aggregate of 18,290 shares of Common Stock.

members of the Company’s management team and its Board of Directors participated in the Series B SPA as buyers.

In the aggregate,

management and board participants purchased 284 shares of Series B Preferred Stock and received accompanying Series B Warrants to purchase

18,290 shares of Common Stock.

individual participants and their respective purchases were as follows:

B Warrant Shares

Chief Executive Officer and Chief

Financial Officer

Michael Regan

Chief Investment and Strategy Officer

Chief Marketing Office

Margret Williams

VP, BSA and Compliance

Richard Carleton

Board of Director

Carleton also agreed to cancel $10,400 of his Board compensation as consideration

for his Series B Preferred Stock and Series B Warrants.

the issuance of shares of Common Stock underlying the Series B Preferred Stock and Series B Warrants to members of management and the

Board constituted compensation under Nasdaq Listing Rule 5635(c), such issuances were conditioned upon and subject to stockholder approval.

On November 6, 2025, at a special meeting of stockholders, the Company’s stockholders approved the issuances to members of management

and the Board of Directors.

terms of the Series B Preferred Stock and Series B Warrants purchased by management and director participants are identical to those

available to all other buyers under the Series B stock purchase agreement or SPA.

No preferential terms, discounts beyond the standard

$800 per $1,000 stated-value purchase price, or other special arrangements were extended to any management or board participant.

additional information regarding the Series B offering, see “Item 13.

Certain Relationships and Related Transactions, and Director

Independence” and Note 19 to the Consolidated Financial Statements included in this Annual Report on Form 10-K.

Additional information required by this Item 12 will be presented in the Proxy Statement in the sections titled “Certain

Relationships and Related Transactions” and “Security Ownership of Certain Beneficial Owners and Management” and is

incorporated herein by reference to the Proxy Statement.

Certain Relationships and Related Transactions and Director Independence.

information required under this Item will be contained in the Company’s Proxy Statement under the caption “Certain Relationships

and Related Party Transactions” and “Corporate Governance,” which information is incorporated by reference herein.

In addition to the below, the information required

by this Item 13 is incorporated herein by reference to the information in the sections entitled “Certain Relationships and Related

Transactions” and “Management and Corporate Governance” in the Proxy Statement.

Director Independence

Applicable rules of Nasdaq require a majority

of a listed company’s board of directors to be comprised of independent directors within one year of listing.

In addition, Nasdaq

rules require that, subject to specified exceptions, each member of a listed company’s audit, compensation and nominating and corporate

governance committees be independent, and that audit committee members also satisfy independence criteria set forth in Rule 10A-3 under

the Exchange Act.

The Nasdaq independence definition includes a series of objective tests, such as that the director is not, and has

not been for at least three years, one of our employees, that neither the director nor any of his or her family members has engaged in

various types of business dealings with us and that the director is not associated with the holders of more than five percent of our

Common Stock.

In addition, under applicable Nasdaq rules, a director will only qualify as an “independent director” if, in

the opinion of the listed company’s board of directors, that person does not have a relationship that would interfere with the

exercise of independent judgment in carrying out the responsibilities of a director.

In February 2026, the Board of Directors, upon recommendation

from the Nominating and Corporate Governance Committee, formally adopted and approved the use of the Nasdaq independence definition as

the Company’s standard for evaluating a director’s independence.

Our Board of Directors has undertaken a review

of the independence of each director.

Based on information provided by each director concerning their background, employment and affiliations,

our Board of Directors has determined that three of our five current directors do not have relationships that would interfere with the

exercise of independent judgment in carrying out the responsibilities of a director and that each of these directors is “independent”

as that term is defined under the listing standards of Nasdaq.

In making such determination, our Board of Directors considered the relationships

that each such non-employee director has with us and all other facts and circumstances that our Board of Directors deemed relevant in

determining their independence, including the beneficial ownership of our capital stock by each non-employee director.

Carleton, Mr.

Niehaus, and Mr.

Braun would be considered “independent” members of our Board of Directors as “independence” is defined in Nasdaq

Marketplace Rule 5605(a)(2).

The Board has determined that Mr.

Mendez is not “independent” because he is an executive officer

of the Company, and that Ms.

Seefried is not “independent” due to her recent previous employment as an executive officer

of the Company.

The Board’s Audit Committee, Compensation Committee, and Nominating

and Corporate Governance Committee each consist entirely of each of the independent directors, in accordance with Nasdaq listing standards

and applicable SEC rules.

Related Party Transaction Policy

The Company’s Board of Directors has adopted

a written Related Party Transaction Policy that requires the Audit Committee of the Board to review and approve or ratify any transaction

between the Company and a “related party,” which is defined as any director, executive officer, nominee for director, or

holder of more than 5% of the Company’s outstanding Common Stock, or any immediate family member of any such person in which the

amount involved exceeds the lesser of $0.12 million since the Company’s last fiscal year or 1% of the average of the Company’s

total assets at year-end for the Company’s last two completed fiscal years.

The Audit Committee of the Board evaluates the material

facts of each such transaction and determines whether approval or ratification is in the best interests of the Company and its stockholders.

Our related party transactions entered into between January 1, 2024 and the date hereof, all of which were previously approved by our

Audit Committee, are described below.

Related Parties

For the fiscal year ended December 31, 2025, the Company identified one related party as defined under ASC 850 and

SEC Regulation S-K Item 404.

PCCU held approximately 25.2% of the Company’s Common Stock as of December

31, 2025, making it both a significant stockholder and the Company’s most significant commercial counterparty.

PCCU also holds the majority

of the Company’s cash deposits.

Commercial Alliance Agreements

Company’s wholly-owned subsidiary, SHF, LLC, operates substantially all of its business with PCCU.

This relationship is

governed by the Second Amended CAA, which replaced the First Amended CAA as of October 1, 2025.

The Company and PCCU had agreed to

the terms for the Second Amended CAA in October 2025 and was executed on February 4, 2026.

First Amended CAA introduced several significant changes to the CAA, including (i) the elimination of the Company’s indemnification

obligations for loan-related losses, (ii) a reduction in the Company’s loan program income share to approximately 35% to

reflect the incremental risk absorbed by PCCU in connection with the elimination of our indemnification obligations, (iii) the replacement

of a multiple per-account fee structure with a single asset hosting fee equal to 1.00% of average daily CRB deposit balances that increased

to 1.30% in the event balances exceeded $130 million, and (iv) us receiving 100% of investment income on CRB deposits.

Second Amended CAA fundamentally restructured the economics of the PCCU relationship.

The primary changes were that (i) the

Company’s share of loan program income increased from approximately 35% up to 65%, reflecting the completion the September

2025 Recapitalization;

(ii) the Company now receives up to 65% of loan program income generated by PCCU’s CRB loan portfolio

in exchange for being obligated to indemnify PCCU for up to 65% of net losses of a default on any loan covered by the Second Amended

CAA, with no contractual cap on total exposure;

and (iii) the asset hosting fee structure transitioned from a flat rate to a tiered

marginal rate schedule based on average daily deposit balances, with rates ranging from 0.50% on the first $25 million to 1.25% on

balances above $125 million, resulting in estimated annual savings of approximately $0.3 million compared to the rates contained in

the First Amended CAA.

See Part I, Item 1., “Business––Recent Developments––September 2025

Recapitalization.”

Company derives substantially all of its revenue from services performed under the CAA.

For the year ended December 31, 2025, revenue

generated under the then-in effect agreement with PCCU approximated 86.7% of total Company revenues.

As of December 31,

2025, amounts due from PCCU approximated 97% of total accounts receivable.

PCCU holds the majority of the Company’s

cash and cash equivalents.

As of December 31, 2025, and December 31, 2024, $6.8 million and $2.2 million of the Company’s cash

was held on deposit at PCCU, respectively.

See Part II, Item 7., 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––Related Party Relationship

September 30, 2025, the Company entered into the Debt Cancellation Agreement whereby PCCU cancelled the PCCU Note.

At the time of cancellation,

the outstanding principal balance was approximately $10.7 million.

In consideration for the cancellation, PCCU received 13,436 shares

of Series B Preferred Stock and a Series B Warrant to purchase 865,200 shares of Common Stock.

As a result, no balance remained outstanding

under the PCCU Note as of December 31, 2025.

The transaction was accounted for as a debt extinguishment under ASC 470-50.

Under the terms

of the Series B Preferred Stock and Series B Warrants, PCCU may not convert its preferred shares or exercise its warrant to the extent

such action would result in PCCU beneficially owning more than 4.99% of the Company’s Common Stock.

Holders of the Series B Preferred

Stock have no voting rights and no right to appoint directors of the Company.

Series B Preferred Stock Offering

See Part III, Item 12., “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder

Matters––Participation by Management and a Director in the Series B Preferred Stock Offering” for a discussion regarding

the participation by a director and several members of management in the Company’s offering of Series B Preferred Stock pursuant

to the Series B SPA.

Principal Accountant Fees and Services.

information required under this Item will be contained in the Company’s Proxy Statement under the caption “Ratification of

the Appointment of Independent Registered Public Accounting Firm,” which information is incorporated by reference herein.

information required by this Item 14 is incorporated herein by reference to the information in the section entitled “Proposal 2:

Ratification of the Appointment of Macias, Gini & O’Connell, LLP as the Company’s Independent Registered Public Accounting

Firm for the Fiscal Year Ending December 31, 2026” in the Proxy Statement.

Exhibits and Financial Statement Schedules.

11 unchanged sentences

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

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

First Amendment to Unit Purchase Agreement dated September 19, 2022 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on September 19, 2022).

Second Amendment to Unit Purchase Agreement dated September 22, 2022 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on September 23, 2022).

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

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

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

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

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

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

First Amendment to Second Amendment to Agreement and Plan of Merger, Warrant Agreement, and Lock-up Agreement dated February 27, 2024 (incorporated by reference to Exhibit 2.1 of the Company’s Current Report on Form 8-K, filed on March 4, 2024).

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

Third Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K, filed March 20, 2025.

Bylaws of the Company (incorporated by reference to Exhibit 3.3 of the Company’s Registration Statement on Form S-1, filed on June 2, 2021).

Description of Registered Securities (incorporated by reference to Exhibit 4.6 of the Company’s Annual Report on Form 10-K, filed on April 1, 2024).

Amended and Restated Commercial Alliance Agreement, dated December 30, 2024, between the Company and Partner Colorado Credit Union (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K, filed on January 7, 2025).

Amended and Restated - 2022 Equity Incentive Plan (incorporated by reference to Exhibit 3 of the Company’s Annual Report on Form 10-K, filed on April 1, 2024).

Form SHF Holdings, Inc.

Stock Option Agreement (incorporated by reference to Exhibit 4 of the Company’s Annual Report on Form 10-K, filed on April 1, 2024).

Form of SHF Holdings, Inc.

Restricted Stock Unit Agreement ( incorporated by reference to Exhibit 5 of the Company’s Annual Report on Form 10-K, filed on April 1, 2024).

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

Letter Agreement dated January 29, 2025 (incorporated by reference to Exhibit 99.1 of the Company’s Current Report on Form 8-K, filed on February 3, 2025).

Purchase Agreement dated February 11, 2022 (incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form

8-K filed on February 14, 2022).

Amendment to Unit Purchase Agreement dated September 19, 2022 (incorporated by reference to Exhibit 10.1 to the Company’s Current

Report on Form 8-K filed on September 19, 2022).

Amendment to Unit Purchase Agreement dated September 22, 2022 (incorporated by reference to Exhibit 10.1 to the Company’s Current

Report on Form 8-K filed on September 23, 2022).

Amendment to Unit Purchase Agreement dated September 28, 2022 (incorporated by reference to Exhibit 10.1 to the Company’s Current

Report on Form 8-K filed on September 29, 2022).

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

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

by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed on October 31, 2022).

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

Digital Solutions, Inc.

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

holders (incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed on November 15, 2022).

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 (incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed on October

Amendment to Second Amendment to Agreement and Plan of Merger, Warrant Agreement, and Lock-up Agreement dated February 27, 2024 (incorporated

by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed on March 4, 2024).

Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to the Company’s Current Report

on Form 8-K filed on September 29, 2022).

of Amendment to the Second Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to the Company’s

Current Report on Form 8-K filed March 20, 2025).

Certificate of Amendment to Second Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K, filed on November 10, 2025).

of the Company (incorporated by reference to Exhibit 3.3 to the Company’s Registration Statement on Form S-1 filed on June

of Designation of Series B Preferred Stock of SHF Holdings, Inc., dated September 30, 2025 (incorporated by reference to Exhibit

3.1 to the Company’s Current Report on Form 8-K filed on October 3, 2025).

to SHF Holdings, Inc.

Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to the Company’s Current Report

on Form 8-K filed on November 10, 2025).

of Warrant (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on October 3, 2025).

of Amended and Restated Warrant (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed

on October 17, 2025).

of Registered Securities (incorporated by reference to Exhibit 4.6 to the Company’s Annual Report on Form 10-K filed on April

and Restated Commercial Alliance Agreement, dated December 30, 2024, between the Company and Partner Colorado Credit Union (incorporated

by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on January 7, 2025).

of Convertible Promissory Note, by and between the Company and the Investors (incorporated by reference to Exhibit 10.1 to the Company’s

Current Report on Form 8-K filed on September 2, 2025).

Stock Purchase Agreement, dated as of September 17, 2025, between SHF Holdings, Inc.

and CREO Investments LLC (incorporated by reference

to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on September 23, 2025).

Rights Agreement dated as of September 17, 2025 between SHF Holdings, Inc.

and CREO Investments LLC (incorporated by reference to

Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on September 23, 2025).

of Securities Purchase Agreement, dated September 30, 2025, by and between SHF Holdings, Inc.

and the investors signatory thereto

(incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on October 3, 2025).

of Registration Rights Agreement (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed

on October 3, 2025).

Cancellation Agreement, dated September 30, 2025, by and between SHF Holdings, Inc.

and Partner Colorado Credit Union (incorporated

by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed on October 3, 2025).

of Exchange and Cancellation Agreement (incorporated by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K

filed on October 3, 2025).

1 to Common Stock Purchase Agreement, dated September 30, 2025, by and between SHF Holdings, Inc.

and CREO Investments LLC (incorporated

by reference to Exhibit 10.6 to the Company’s Current Report on Form 8-K filed on October 3, 2025).

of Amendment to Securities Purchase Agreement, dated October 14, 2025, by and between SHF Holdings, Inc.

and the investor identified

therein (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on October 17, 2025).

Employment Agreement, dated January 21, 2025, between the Company and Terrance Mendez (incorporated by reference to Exhibit 10.1

to the Company’s Current Report on Form 8-K filed on January 27, 2025).

Agreement dated January 29, 2025 (incorporated by reference to Exhibit 99.1 to the Company’s Current Report on Form 8-K filed

on February 3, 2025).

and Restated Senior Secured Promissory Note dated March 3, 2025 (incorporated by reference to Exhibit 10.1 to the Company’s

Current Report on Form 8-K filed on March 4, 2025).

dated as of May 21, 2025, by and between SHF Holdings, Inc.

and Partner Colorado Credit Union (incorporated by reference to Exhibit

10.1 to the Company’s Current Report on Form 8-K filed on May 28, 2025).

and Restated – 2022 Equity Incentive Plan (incorporated by reference to Exhibit 3 to the Company’s Annual Report on Form 10-K

filed on April 1, 2024).

Holdings, Inc.

Amendment to Amended and Restated – 2022 Equity Incentive Plan (incorporated by reference to Exhibit 10.1 to the Company’s

Current Report on Form 8-K filed on July 11, 2025).

SHF Holdings, Inc.

Stock Option Agreement (incorporated by reference to Exhibit 4 to the Company’s Annual Report on Form 10-K

filed on April 1, 2024).

of SHF Holdings, Inc.

Restricted Stock Unit Agreement (incorporated by reference to Exhibit 5 to the Company’s Annual Report

on Form 10-K filed on April 1, 2024).

Agreement, dated March 29, 2023, by and between the Company and Partner Colorado Credit Union (incorporated by reference to Exhibit

3 to the Company’s Quarterly Report on Form 10-Q filed May 15, 2023).

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

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

Amendment to Employment Agreement dated April 2, 2024 between the Company and James Dennedy (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on April 8, 2024).

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

Amendment to Employment Agreement dated April 2, 2024 between the Company and Donald Emmi (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed on April 8, 2024).

Employment Agreement, dated February 11, 2022, between the Company and Sundie Seefried (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed on September 4, 2024).

Amendment to Employment Agreement dated August 1, 2024 between the Company and Sundie Seefried (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on September 4, 2024).

Amendment to Employment Agreement dated August 1, 2024 between the Company and Dan Roda (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed on August 27, 2024).

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

Amendment to Employment Agreement dated August 1, 2024 between the Company and Tyler Beuerlein (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on August 27, 2024).

Executive Employment Agreement, dated January 21, 2025, between the Company and Terrance Mendez (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed on January 27, 2025).

Code of Ethics and Business Conduct (incorporated by reference to Exhibit 1 of the Company’s Annual Report on Form 10-K, filed on April 1, 2024).

[Insider Trading Policies and Procedures]

Subsidiaries of the Registrant

Second Amended and Restated Commercial Alliance Agreement, dated February 4, 2026, by and between the Company and PCCU (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on February 9, 2026).

Code of Ethics and Business Conduct.

18, 2025 letter from Marcum LLP (incorporated by reference to Exhibit 16.1 to the Company’s Current Report on Form 8-K filed

on April 18, 2025).

Safe Harbor Financial Policy on Insider Trading.

of the Registrant.

of Macias, Gini & O’Connell, LLP, independent registered public accounting firm.

Consent of Marcum LLP, independent registered public accounting firm.

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

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

Certification of Principal Executive Officer Pursuant to 18 U.S.C.

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

Certification of Principal Financial Officer Pursuant to 18 U.S.C.

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

Clawback policy (incorporated by reference to Exhibit 97 of the Company’s Annual Report on Form 10-K, filed on April 1, 2024).

Inline XBRL Instance Document

Inline XBRL Taxonomy Extension Calculation Linkbase Document

Inline XBRL Taxonomy Extension Schema Document

Inline XBRL Taxonomy Extension Definition Linkbase Document

Inline XBRL Taxonomy Extension Labels Linkbase Document

Inline XBRL Taxonomy Extension Presentation Linkbase Document

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

Filed herewith.

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

The Company agrees to furnish supplementally a copy of all omitted exhibits and schedules to the SEC upon its request.

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

Certification

of Principal Accounting Officer Pursuant to Securities and Exchange Act Rule 13a-14(a) and 15(d)-14(a), as adopted Pursuant to Section

302 of the Sarbanes Oxley Act of 2002.

of Principal Executive Officer and Principal Chief Financial Officer Pursuant to 18 U.S.C.

Section 1350, as adopted Pursuant to Section

906 of the Sarbanes-Oxley Act of 2002.

of Accounting Principal Officer Pursuant to 18 U.S.C.

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

policy (incorporated by reference to Exhibit 97 to the Company’s Annual Report on Form 10-K filed on April 1, 2024).

XBRL Instance Document

XBRL Taxonomy Extension Calculation Linkbase Document

XBRL Taxonomy Extension Schema Document

XBRL Taxonomy Extension Definition Linkbase Document

XBRL Taxonomy Extension Labels Linkbase Document

XBRL Taxonomy Extension Presentation Linkbase Document

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

to Item 601(a)(5) of Regulation S-K, schedules and similar attachments to this exhibit have been omitted because they do not contain

information material to an investment or voting decision and such information is not otherwise disclosed in such exhibit.

will supplementally provide a copy of any omitted schedule or similar attachment to the U.S.

Securities and Exchange Commission or

its staff upon request.

Form 10-K Summary.

Pursuant to the requirements

of Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto

duly authorized.

SHF HOLDINGS INC .

April 10, 2025

/s/ Terrance E.

Terrance Mendez

Chief Executive Officer

(Principal Executive Officer)

April 10, 2025

Chief Financial Officer

(Principal Financial and Accounting Officer)

Pursuant to the requirements

of Section 13 or 15 (d) of the Securities Exchange Act of 1934, the registrant has duly caused this Annual Report on Form 10-K to be signed

on its behalf by the undersigned, thereunto duly authorized.

/s/ Terrance E.

Chief Executive Officer

April 10, 2025

Chief Financial Officer

April 10, 2025

/s/ Jonathon F.

to the requirements of Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the

undersigned, thereunto duly authorized.

HOLDINGS INC .

April 15, 2026

/s/ Douglas Fagan

Executive Officer and Chief Financial Officer

Executive Officer)

April 15, 2026

Douglas Fagan

/s/ Jennifer Meyers

Accounting Officer, SVP of Accounting and Finance, Controller

Financial and Accounting Officer)

to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, the registrant has duly caused this Annual Report

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

Executive Officer and Chief Financial Officer

April 15, 2026

Jennifer Meyers

/s/ Jonathan Summers

Accounting Officer, SVP of Finance, Controller

April 15, 2026

Jonathan Summers

/s/ Karl Racine

Jonathon Niehaus

April 15, 2026

/s/ Richard Carleton

Jonathon Niehaus

Francis Braun III

April 15, 2026

Francis Braun III

Richard Carleton

/s/ Sundie Seefried

April 15, 2026

Sundie Seefried

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS.

SHF HOLDINGS, INC.

AND SUBSIDIARIES CONSOLIDATED

FINANCIAL STATEMENTS

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

Consolidated Balance Sheets as of December 31, 2024 and 2023

Consolidated Statements of Operations for the years ended December 31, 2024 and 2023

Consolidated Statements of Stockholders’

(Deficit) Equity for the years ended December 31, 2024 and 2023

Consolidated Statements of Cash Flows for the years ended December 31, 2024 and 2023

Notes to the Consolidated Financial Statements for the years ended December 2024 and 2023

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING

To the Stockholders and Board of Directors of

SHF Holdings, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance

sheets of SHF Holdings, Inc.

and subsidiaries (the “Company”) as of December 31, 2024 and 2023, the related consolidated statements

of operations, stockholders’ (deficit) equity, and cash flows for each of the two years in the period ended December 31, 2024, and

the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present

fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations

and its cash flows for each of the two years in the period ended December 31, 2024, in conformity with accounting principles generally

accepted in the United States of America.

Explanatory Paragraph – Going Concern

The accompanying financial statements have been prepared

assuming that the Company will continue as a going concern.

As more fully described in Note 2, the Company has a significant working capital

deficiency, has incurred significant losses and may need to raise additional funds to meet its obligations and sustain its operations.

conditions raise substantial doubt about the Company’s ability to continue as a going concern.

Management’s plans in regard

to these matters are also described in Note 2.

The financial statements do not include any adjustments that might result from the outcome

of this uncertainty.

Basis for Opinion

These financial statements are the responsibility

of the Company’s management.

Our responsibility is to express an opinion on the Company’s financial statements based on our

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”)

and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable

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

We conducted our audits in accordance with the standards

of the PCAOB.

Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements

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

The Company is not required to have, nor were we engaged to perform,

an audit of its internal control over financial reporting.

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

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

control over financial reporting.

April 15, 2026

TO CONSOLIDATED FINANCIAL STATEMENTS

HOLDINGS, INC.

AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS

of Independent Registered Public Accounting Firm (Macias Gini & O’Connell LLP) (PCAOB ID 324 )

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

Balance Sheets as of December 31, 2025 and December 31, 2024

Statements of Operations for the years ended December 31, 2025 and December 31, 2024

Statements of Stockholders’ Equity (Deficit) for the years ended December 31, 2025 and December 31,

Statements of Cash Flows for the years ended December 31, 2025 and December 31, 2024

to the Consolidated Financial Statements for the years ended December 31, 2025 and December 31, 2024

of Independent Registered Public Accounting Firm

the Stockholders and

of Directors of

Holdings, Inc.

on the Consolidated Financial Statements

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

and subsidiaries (the “Company”) as of December

31, 2025, and the related consolidated statements of operations, stockholders’ equity (deficit), and cash flows for the year then

ended, the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated

financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2025, and the

results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in

the United States of America.

Paragraph - Going Concern

accompanying financial statements have been prepared assuming that the Company will continue as a going concern.

As discussed in Note

2 to the financial statements, the Company has incurred recurring losses from operations and experienced negative cash flows from operating

These conditions raise substantial doubt about the Company’s ability to continue as a going concern within one year

after the date that the financial statements are issued.

Management’s plans to address these matters are also described in Note

The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

of Matter - Customer Concentration

2 to the financial statements describes the Company’s significant concentration of revenue from a single customer.

During the year

ended December 31, 2025, approximately 86.7% of the Company’s total revenue was generated from a single customer, which is a related party.

The loss of this

customer could have a material adverse effect on the Company’s operations and financial position.

Our opinion is not modified in

respect of this matter.

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

Our responsibility is to express an opinion

on the Company’s consolidated financial statements based on our audit.

We are a public accounting firm registered with the Public

Company Accounting Oversight Board (the “PCAOB”) and are required to be independent with respect to the Company in accordance

with the U.S.

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

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

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

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

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

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

an opinion on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

Our audits included performing procedures to assess

the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond

to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating

the overall presentation of the financial statements.

We believe that our audits provide a reasonable basis for our opinion.

/s/ Marcum LLP

We have served as the Company’s auditor since

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

to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence

regarding the amounts and disclosures in the consolidated financial statements.

Our audit also included evaluating the accounting principles

used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audit provides a reasonable basis for our opinion.

Macias Gini & O’Connell LLP

M acias Gini & O’Connell LLP

have served as the Company’s auditor since 2025

April 15, 2026

SHF Holdings, Inc.

CONSOLIDATED BALANCE SHEETS

OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

the Stockholders and Board of Directors of

Holdings, Inc.

on the Financial Statements

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

and subsidiaries (the “Company”) as of December

31, 2024 the related consolidated statement of operations, stockholders’ equity (deficit), and cash flows for the year ended December

31, 2024, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements

present fairly, in all material respects, the financial position of the Company as of December 31, 2024, and the results of its operations

and its cash flows for the year ended December 31, 2024, in conformity with accounting principles generally accepted in the United States

Paragraph – Going Concern

accompanying financial statements have been prepared assuming that the Company will continue as a going concern.

As more fully described

in Note 2, the Company has a significant working capital deficiency, has incurred significant losses and may need to raise additional

funds to meet its obligations and sustain its operations.

These conditions raise substantial doubt about the Company’s ability

to continue as a going concern.

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

The financial statements

do not include any adjustments that might result from the outcome of this uncertainty.

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

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

financial statements based on our audit.

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

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

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

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

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

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

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

As part of our audit,

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

on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

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

or fraud, and performing procedures that respond to those risks.

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

the amounts and disclosures in the financial statements.

Our audit also included evaluating the accounting principles used and significant

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

We believe that our audit

provide a reasonable basis for our opinion.

have served as the Company’s auditor from 2022 through 2025.

Holdings, Inc.

BALANCE SHEETS

Current Assets:

Cash and cash equivalents

Accounts receivable – trade

Accounts receivable – related party

Cash and cash

Accounts receivable –

Prepaid expenses – current portion

Accounts receivable –

related party

Accounts receivable

Prepaid expenses

Accrued interest receivable

Forward purchase receivable

Short-term loans receivable, net

Other current assets

Loans receivable,

Contract asset

current assets

Total Current Assets

Long-term loans receivable, net

Property, plant and equipment, net

Operating lease right to use assets

Intangible assets, net

Deferred tax asset, net

Prepaid expenses – long term position

Forward purchase receivable

Security deposit

LIABILITIES AND STOCKHOLDERS’ (DEFICIT) EQUITY

Long-term loans receivable,

Operating lease right to

Investment in preferred

Prepaid expenses

Contract asset

LIABILITIES AND STOCKHOLDERS’

EQUITY (DEFICIT)

Current Liabilities:

Accounts payable

Accounts payable-related party

Accounts payable-related

Accounts payable

Accrued expenses

Contract liabilities

Lease liabilities – current

Senior secured promissory note – current portion

Deferred consideration – current portion

Forward purchase derivative liability

Other current liabilities

Deferred revenue

Lease liabilities

Senior secured promissory

Deferred consideration

Forward purchase derivative

Stand-ready guarantee liability

Financial indemnification liability

current liabilities

Total Current Liabilities

Warrant liabilities

Deferred consideration – long term portion

Forward purchase derivative liability

Senior secured promissory note—long term portion

Net deferred indemnified loan origination fees

Lease liabilities – long term

Indemnity liability

Total Liabilities

Commitment and Contingencies (Note 13)

Stockholders’ (Deficit) Equity

Convertible preferred stock, $ .0001 par value, 1,250,000 shares authorized, 111 and 1,101 shares issued and outstanding on December 31, 2024, and December 31, 2023, respectively

Class A Common Stock, $ .0001 par value, 130,000,000 shares authorized, 2,783,667 and 2,728,169 issued and outstanding on December 31, 2024, and December 31, 2023, respectively

Senior secured promissory

Stand-ready guarantee liability

Financial indemnification liability

Lease liabilities

Commitment and Contingencies

Stockholders’ Equity

Convertible preferred stock, $ .0001 par value,

1,250,000 shares authorized, 111 and 111 shares issued and outstanding on December 31, 2025, and December 31, 2024, respectively

Series B Convertible Preferred Stock, 35,000

authorized, shares, par value $ .0001 , 30,808 and 0 shares issued and outstanding as of December 31, 2025 and December 31, 2024

Convertible preferred stock, value

Class A Common Stock, $ .0001 par value, 1 billion

and 130 million shares authorized, 4,281,523 and 2,783,666 issued and outstanding on December 31, 2025, and December 31, 2024, respectively

Additional paid-in capital

Retained deficit

Accumulated deficit

( 122,916,543 )

( 120,755,545 )

Total Stockholders’ (Deficit) Equity

Total Stockholders’

Equity (Deficit)

$ ( 12,288,014 )

Total Liabilities and Stockholders’ (Deficit) Equity

See accompanying notes to consolidated financial statements

SHF Holdings, Inc.

CONSOLIDATED STATEMENTS OF OPERATIONS

For the year ended December 31,

Liabilities and Stockholders’ Equity (Deficit)

accompanying notes to consolidated financial statements

Holdings, Inc.

STATEMENTS OF OPERATIONS

The Year Ended December 31,

Operating expenses

Compensation and employee benefits

General and administrative expenses

Compensation and employee

General and administrative

Professional services

Lease expense

Amortization of contract asset

Credit loss (benefit) expense

1 unchanged sentence

Impairment of goodwill

Impairment of long-lived intangible assets

Total operating expenses

Operating loss

of long-lived intangible assets

operating expenses

( 5,399,210 )

2 unchanged sentences

Interest expense

Change in fair value of warrant liabilities

Change in fair value of

warrant liabilities

Gain on extinguishment

of forward purchase derivative

Costs incurred to secure financing

Discount on common stock sold pursuant to the ELOC

in the fair value of deferred consideration

Total other income

Net loss before provision (benefit) for income

( 2,219,468 )

Change in the fair value of deferred consideration

( 4,459,789 )

Total other (income) expenses

Provision (benefit) for

( 2,160,998 )

( 48,319,475 )

Net loss before income tax

Deemed dividend on Series B Preferred Stock redemption

Net loss attributable to common stockholders

$ ( 2,402,433 )

$ ( 48,319,475 )

Provision (benefit) for income taxes

Weighted average shares outstanding, basic

Basic and diluted net

loss per share

accompanying notes to consolidated financial statements

Holdings, Inc.

STATEMENT OF STOCKHOLDERS’ EQUITY (DEFICIT)

FOR THE YEAR ENDED DECEMBER 31, 2025

Preferred Stock

Stockholders’

Balance, December 31, 2024

$ 108,467,253

1 unchanged sentence

$ ( 12,288,014 )

Weighted average shares outstanding, basic

Basic net loss per share

Weighted average shares outstanding, diluted

Diluted net loss per share

See accompanying notes to consolidated financial statements

SHF Holdings, Inc.

Consolidated Statements of Stockholders’ (Deficit)

FOR THE YEARS ENDED DECEMBER 31, 2024 AND 2023

Shareholders’ (Deficit)

January 01, 2023

Reclassification of forward purchase receivable

( 4,584,221 )

effect from adoption of CECL

of shares to Abaca shareholders

of PIPE Shares

( 4,584,221 )

compensation cost

Restructuring

of deferred underwriting cost

Issuance of Class A Common Stock for

restricted stock awards, net of tax

Issuance of Class A Common Stock for

legal settlement

Shares of Class A Common Stock withheld for

net share settlement

Issuance of Series B Convertible Preferred

Stock and Series B Warrants, net of offering costs

Redemption of Series B Convertible Preferred

Issuance of common stock due to reverse stock split

Stock compensation expense

Issuance of Class A Common Stock to Abaca

Issuance of Class A Common Stock for restricted stock award s

Issuance of Class A Common from the Equity Line of

Credit (ELOC)

Discount on common stock sold pursuant to the ELOC

( 2,160,998 )

December 31, 2023

Balance December

$ 131,152,020

$ ( 122,916,543 )

Holdings, Inc.

STATEMENT OF STOCKHOLDERS’ EQUITY (DEFICIT)

THE YEAR ENDED DECEMBER 31, 2024

Shareholders’

Balance, December 31, 2023

$ 105,924,859

of equity for marketing services

of PIPE shares

compensation cost

$ ( 71,569,821 )

$ 105,924,859

December 31, 2024

$ ( 71,569,821 )

Issuance of Class A Common Stock for

marketing services

Conversion of PIPE shares

Issuance of Class A Common Stock for

restricted stock award s

Stock compensation cost

( 48,319,475 )

Balance, December

$ 108,467,253

$ ( 120,755,545 )

See accompanying notes to consolidated financial statements

SHF Holdings, Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS

Year ended December 31,

CASH FLOWS FROM OPERATING ACTIVITIES:

$ ( 12,288,014 )

$ 108,467,253

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

Depreciation and amortization expense

Stock compensation expense

Net deferred indemnified loan origination fees

Interest expense

Lease expense

Credit loss (benefit) expense

$ ( 120,755,545 )

Impairment of goodwill

Impairment of long-lived intangible assets

Deferred tax expense (benefit), net

$ ( 12,288,014 )

Marketing expense settled via common stock

Change in fair value of warrant liabilities

accompanying notes to consolidated financial statements

Holdings, Inc.

STATEMENTS OF CASH FLOWS

The Year Ended December 31,

FROM OPERATING ACTIVITIES:

$ ( 2,160,998 )

Change in the fair value of deferred consideration

$ ( 48,319,475 )

Changes in operating assets and liabilities:

Accounts receivable - trade

Accounts receivable – related party

Contract assets

Prepaid expenses

Other current liabilities

Accrued interest receivable

Deferred underwriting payable

Other current assets

Adjustments to reconcile net

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

and amortization expense

of contract asset

compensation expense

extinguishment of forward purchase derivative

( 3,336,213 )

Accounts payable

of prepaid consulting from the issuance of Series B Convertible Preferred Stock and Series B Warrants

indemnified loan origination fees

on common stock sold pursuant to the ELOC

non-cash issuance costs related to the ELOC

issued in settlement of a legal dispute

interest on issuance of convertible notes

loss (benefit) expense

( 1,393,131 )

Accounts payable – related party

Accrued expenses

Contract liabilities

Security deposit

Net cash provided by (used in) operating activities

Impairment of goodwill

of long-lived intangible assets

tax expense, net

expense settled via Common Stock

in fair value of warrant liabilities

( 1,320,871 )

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchase of property and equipment

Payment to Abaca Shareholder

( 2,803,638 )

Loan receivable repayment

Net cash provided by (used in) investing activities

in the fair value of deferred consideration

Changes in operating assets

and liabilities:

receivable – trade

receivable – related party

current liabilities

interest receivable

current assets

( 2,968,061 )

CASH FLOWS FROM FINANCING ACTIVITIES:

Repayment of senior secured promissory note

payable – related party

cash (used in) provided by operating activities

( 3,417,700 )

Net cash used in financing activities

FROM INVESTING ACTIVITIES:

from sale of preferred securities

from loan repayment and sale

cash provided by investing activities

FLOWS FROM FINANCING ACTIVITIES:

Tax withholding

payments on vesting of restricted stock units

from convertible debt

of Series B Convertible Preferred Stock

proceeds from issuance of Series B Convertible Preferred Stock and Series B Warrants

from the sale of Class A Common Stock

of financed insurance contract

of senior secured promissory note

( 3,006,993 )

cash provided by (used in) financing activities

( 3,006,993 )

Net decrease in cash and cash equivalents

Net increase (decrease) in

cash and cash equivalents

( 2,564,122 )

and cash equivalents – beginning of period

and cash equivalents – end of period

disclosure of cash flow information

transactions:

Reclassification of forward

purchase receivable

$ ( 4,584,221 )

Cash and cash equivalents - beginning of period

Cash and cash equivalents - end of period

Supplemental disclosure of cash flow information

Interest paid

Non-cash transactions:

Marketing expense settled via common stock

Shares issued for the settlement of abaca acquisition

Operating lease right of use assets recognized

Operating lease liabilities recognized

Shares issued for the settlement of PCCU debt obligation

Cumulative effect from adoption of CECL

Reversal of deferred underwriting cost

Interest recognized on PCCU settlement

See accompanying notes to consolidated financial statements

and Business Operations

Business Description

SHF Holdings, Inc.

(the “Company”), based

in Golden, Colorado, specializes in financial technology designed to facilitate banking service solutions tailored to the cannabis industry.

Initially, the Company’s operations were developed as a credit union service organization under Partner Colorado Credit Union (“PCCU”).

A strategic reorganization on July 1, 2021 consolidated select assets and activities from PCCU into SHF LLC (“SHF”) under

SHF Holding Co., LLC.

On September 28, 2022, Northern Lights Acquisition Corp.

(“NLIT”) acquired SHF, changing its name from

Northern Lights Acquisition Corp.

to SHF Holdings, Inc., (the “Business Combination”).

The Business Combination aimed to enhance

the Company’s financial services footprint in the cannabis sector.

On October 31, 2022, the Company acquired Rockview

Digital Solutions, Inc.

d/b/a Abaca (“Abaca”).

This merger, executed in two steps, positioned Abaca as a wholly-owned subsidiary,

bolstering the Company’s fintech offerings and market reach.

The Company facilitates a range of financial services

through its financial institution customers using a proprietary technology platform for deposit and ongoing deposit activity compliance

with banking regulations and regulators.

These include access to business checking and savings accounts, cash management, commercial lending,

courier services, remote deposit services, ACH payments, and wire payments.

These services enable cannabis businesses to manage their

finances effectively.

The Company generates revenue from fee income, investment income, loan interest income and by offering compliance

services to certain financial institutions serving the cannabis industry.

Presentation and Summary of Significant Accounting Policies

Use of Estimates

The preparation of the consolidated financial statements in conformity

with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates

and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes.

Material estimates that

are particularly subject to change in the near term include the determination of the allowance for credit losses, valuation of deferred

tax assets, and the fair value of financial instruments.

Actual results could differ from the estimates.

Basis of Presentation

The accompanying consolidated financial statements and related notes have

been prepared on the accrual basis of accounting in conformity with GAAP and include the accounts of the Company, and its wholly-owned

Marketing expense settled

by the issuance of Common Stock

Investment in preferred securities

Prepaid consulting expense

from the issuance of the Series B Convertible Preferred Stock and Series B Warrants

Extinguishment of debt for

issuance of Series B Convertible Preferred Stock and Series B Warrants

Exchange of forward purchase

derivative liability for the issuance of Series B Convertible Preferred Stock and Series B Warrants

Exchange of convertible notes

for Series B Convertible Preferred Stock and Series B warrants

Financed insurance contract

(classified in accrued expense)

Issuance of stock

to Abaca shareholders

Accrued redemption payable

to Series B holders

of contract asset with corresponding stand-ready guarantee liability

Recognition of contract asset

with corresponding financial indemnification liability

accompanying notes to consolidated financial statements

to Consolidated Financial Statements

1 – Organization and Business Operations

Holdings, Inc.

(the “Company” or “SHF”) is a Delaware corporation headquartered in Golden, Colorado, whose

Class A Common Stock (“Common Stock”) is listed on the Nasdaq Capital Market under the ticker symbol “SHFS.”

The Company was founded in 2015 by Partner Colorado Credit Union (“PCCU”) and was among the first financial services

companies to provide compliant banking services to Cannabis Related Businesses (“CRBs”).

mission is to provide reliable and compliant financial services to the legal cannabis, hemp, and related industries by enabling its financial

institution (“FI”) customers to deliver compliance-driven banking, lending, and other financial services to CRB clients.

Company operates a proprietary fintech platform across 41 states and territories in the United States.

Through this platform, SHF enables

its FI customers to compliantly offer the following banking-related services to CRBs:

Business checking and savings accounts;

Cash management accounts

Savings and investment options

Commercial lending

Courier services (via third-party relationships)

Remote deposit services

Automated Clearing House (“ACH”) payments and origination

Wire payments.

many CRBs have historically operated on a largely cash basis due to limited access to traditional banking services, SHF’s platform

benefits both CRBs and financial institutions.

CRBs gain access to compliant banking services, while financial institutions gain access

to a validated, compliantly monitored deposit base.

Company generates revenue primarily from compliance service fees, account based fee income, investment income on custodied deposits,

and interest income on loans made to or on behalf of financial institutions serving the cannabis industry.

2 – Basis of Presentation and Summary of Significant Accounting Policies

Accounting Policies

of Presentation and Consolidation

accompanying consolidated financial statements have been prepared on the accrual basis of accounting in conformity with accounting principles

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

GAAP”) and include the accounts of SHF Holdings, Inc.

and its wholly-owned

subsidiaries.

The consolidated financial statements reflect all adjustments that, in the opinion of management, are necessary for the

fair presentation of the Company’s results of operations and financial condition as of and for the periods presented.

All intercompany

balances and transactions have been eliminated in consolidation.

The Company has made certain immaterial reclassifications

to the statements of operations for the year ended December 31, 2023, to conform to the presentation for the year ended December 31, 2024.

These reclassifications, totaling $ 18,730 for the year ended December 31, 2023, were moved from ‘Interest Expense’ to ‘General

and administrative expenses’.

The consolidated financial statements include the

accounts of SHF Holdings, Inc.

and its subsidiaries where the Company have controlling financial interests.

All intercompany balances

and transactions have been eliminated except that the par value per share remained $ 0.0001 per share.

Reverse Stock Split

The Company effected a reverse stock split of 1-for-20

on March 14, 2025.

Unless otherwise stated, all share and per share amounts for all periods presented have been adjusted to reflect the

reverse stock split.

Concentrations of Risk

The Company’s financial instruments that are

exposed to concentrations of credit risk consist primarily of cash.

Cash balances are maintained substantially in accounts at PCCU, which

are insured by the National Credit Union Share Insurance Fund (“NCUSIF”) up to regulatory limits.

From time to time, cash

balances may exceed the NCUSIF insurance limit.

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

In addition to providing compliance and related services

for its financial institution partners, the Company offers services to businesses operating primarily in the cannabis industry as well

as businesses offering cannabis adjacent services.

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

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

Currently the Company substantially relies on

PCCU to hold customer deposits and fund its originated loans.

The majority of the Company’s revenue is generated by deposits

and loans hosted by PCCU pursuant to the Commercial Alliance Agreement (“PCCU CAA”) dated March 29, 2023 between PCCU

and the Company, which was amended on December 31, 2024 .

As of December 31, 2024 and 2023, the Company had

only one loan on its balance sheet.

As of December 31, 2023, the Company had a total of

twenty indemnified loans, three of which individually represented more than 10 % of the total balance of indemnified loans.

However, following

the CAA amendment effective December 31, 2024, the Company is no longer responsible for these prior indemnifications.

Therefore, no concentration

related to indemnified loans existed as of December 31, 2024.

We have determined that our Chief Executive Officer

(“CEO”) serves as the Chief Operating Decision Maker (“CODM”), who regularly reviews the financial performance

of the business on a consolidated basis for the purposes of allocating resources and evaluating financial performance.

The Company operates

as one reportable segment and one operating segment, which focuses on providing financial services, particularly tailored to the cannabis

In making this determination, we consider factors

such as the nature of our operating activities, the organizational and reporting structure, and the information reviewed by the CODM to

evaluate and allocate resources effectively.

The CODM utilizes adjusted EBITDA as the primary measure to assess segment performance, considering

revenue trends, operating expenses, and overall financial position when making strategic decisions.

All of our assets are located within

the United States.

Liquidity and Going Concern

Liquidity refers to our ability to meet anticipated

cash demands, including servicing debt, funding operations, maintaining assets, and covering other routine business expenses.

cash outflows include debt principal and interest repayments, operating costs, and general business expenditures.

The main source of our

liquidity continues to be cash inflows generated from operational performance.

As of December 31, 2024, the Company does not have significant

capital investment commitments.

Accounting Standards Codification (“ASC”) 205-40, Presentation of Financial Statements—Going Concern, the Company is

responsible for evaluating whether conditions or events raise substantial doubt about its ability to meet future financial obligations

within one year of the financial statement issuance date.

All intercompany balances and transactions have been eliminated in consolidation.

The consolidated financial statements

reflect all adjustments that, in the opinion of management, are necessary for a fair presentation of the Company’s financial condition

and results of operations for the periods presented.

connection with the preparation of the Company’s Annual Report on Form 10-K for the year ended December 31, 2024, management identified

conditions that raised substantial doubt about the Company’s ability to continue as a going concern.

Those conditions included

recurring operating losses, a net loss of approximately $ 48.3 million (inclusive of significant non-cash charges), limited liquidity

relative to near-term obligations, and uncertainty regarding the Company’s ability to satisfy its then-existing indemnification

obligations under its Commercial Alliance Agreement (“CAA”) with PCCU.

and Going Concern

refers to our ability to meet anticipated cash demands, including servicing debt, funding operations, maintaining assets, and covering

other routine business expenses.

Our primary cash outflows include debt principal and interest repayments, operating costs, and general

business expenditures.

The main source of our liquidity continues to be cash inflows generated from operational performance.

As of December

31, 2025, the Company does not have significant capital investment commitments.

Accounting Standards Codification (“ASC”) 205-40, Presentation of Financial Statements, Going Concern, the Company is responsible

for evaluating whether conditions or events raise substantial doubt about its ability to meet future financial obligations within one

year of the financial statement issuance date.

This evaluation involves two steps:

(1) assessing whether conditions or events

raise substantial doubt about the Company’s ability to continue as a going concern, and (2) if substantial doubt is raised, evaluating

whether the Company has plans to mitigate that doubt.

Disclosures are required if substantial doubt exists or if the Company’s plans

alleviate the doubt.

While the company reported a net working capital

deficit of $ 983,833 at the end of 2024, this figure includes several non-cash liabilities that do not affect liquidity.

After adjusting

for these non-cash items and considering the cost of the Amended PCCU Note the adjusted working capital calculation is as follows:

Schedule of Adjusted Working Capital

Working capital deficit as on December 31, 2024

$ ( 983,833 )

Forward purchase agreement, net

Third anniversary payment consideration

Fees paid in 2025 on the Amended PCCU Note

Adjusted working capital as on December 31, 2024

The Company has the following non-cash items

on its balance sheet that impact the working capital calculation as reported, thus improving working capital:

Obligation under the Forward Purchase Agreement:

of December 31, 2024, the Company had a forward purchase receivable of $ 4,584,221 and a forward purchase derivative liability of $ 7,309,580 ,

resulting in a net liability of $2,725,359.

This liability can be settled in common stock at the Company’s discretion, offering

flexibility to improve working capital, which is management plan and intention.

Obligation under the Third Anniversary Consideration Payment:

As of December 31, 2024, the Company had an outstanding liability of $ 322,000 , payable to the Abaca shareholders.

This liability

can also be settled in common stock at the Company’s discretion, providing further flexibility to enhance working capital, which is management

plan and intention.

At December 31, 2024, the Company reported

cash of $ 2,324,647 and a net

working capital deficit of $ 983,833 , compared to cash of

$ 4,888,769 and a net working

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

Company’s ability to continue as a going concern depends on its capacity to generate sufficient liquidity to meet financial

obligations, including interest repayments under the senior secured note with PCCU.

The Company incurred operating losses of $ 7,091,486

and $ 20,731,049 for the years ended

December 31, 2024 and 2023, respectively.

The reported working capital deficit and operating losses, before adjustment

for non-cash activity raises substantial doubt about the Company’s ability to continue as a going concern for a period of at least

twelve months from the date these consolidated financial statements are issued.

Management’s Plan Related to Going Concern

To address these concerns, the Company has

performed actions, including renegotiating its senior secured loan with PCCU.

On January 29, 2025, the Company and PCCU

entered into a letter agreement to defer the principal payments for February and March 2025 (the “Deferral Period”).

While interest has been repaid during the Deferral Period, the note repayment schedule has been extended by an additional two

Furthermore, on March 1, 2025, the Company

entered into an Amended PCCU Note with PCCU, modifying the outstanding principal of $ 10,748,408

with an interest rate of 4.25 %

The new repayment schedule includes interest-only payments from March 1, 2025, to January 5, 2027, followed by monthly

principal and interest payments from February 5, 2027, to September 5, 2030, with the full loan balance due by October 5, 2030.

two-year deferment of principal has unlocked $ 6,437,050

in cash flow, significantly improving the Company’s liquidity position.

On December 31, 2024, as a result of the Amended

PCCU Note, the Company excluded the short-term obligations of the PCCU Note totaling $ 2,883,167

from current liabilities and reclassified it as non-current liabilities.

the first quarter of 2025, the Company commenced utilizing its stock-based compensation as an alternative to cash payments to attract

and retain talent, the Board of Directors restructured their compensation towards stock-based compensation, and the Company has continued

to reduce costs through lower headcount and other operational spend.

The Company has established a budget and monitors its liquidity

position and will make adjustments as needed.

Due to the uncertainty surrounding cash flows

from operations, the management plans outlined above do not entirely resolve the uncertainty regarding the going concern assumption.

a result, management has determined that there remains substantial doubt about the Company’s ability to continue as a going concern

for a period of at least twelve months from the date these consolidated financial statements are issued.

If the Company is not able to sustain its

present level of operations, it may be forced to make reductions in spending, extend payment terms with suppliers, liquidate assets where

possible, or suspend or curtail planned expansion programs.

Any of these actions could materially harm the Company’s business, results

of operations and future prospects.

The accompanying consolidated financial statements

have been prepared assuming the Company will continue as a going concern, which contemplates the realization of assets and the satisfaction

of liabilities in the normal course of business, and do not include any adjustments to reflect the possible future effects on the recoverability

and classification of assets or amounts and classification of liabilities that may result should the Company not continue as a going concern

as a result of this uncertainty.

Cash and Cash Equivalents

Cash and cash equivalents include cash on hand, amounts

due from financial institutions, and investments with maturities of three months or less.

Accounts Receivable and Allowance for Credit

Accounts receivable are recorded based on account

fee schedules.

While fees are generated from individual CRB-related accounts, amounts are initially collected by the financial institution

and remitted in the subsequent month.

Accounts receivable - related party represents amounts due from PCCU under related party contracts

disclosed in Note 8.

The Company maintains allowances for doubtful accounts for estimated losses resulting from customers’ inability to

make required payments.

In accordance with the adoption of ASU 2016-13, the Company estimates anticipated losses from doubtful accounts

using the current expected credit loss (CECL) model.

This model considers both historical collection experience and forward-looking information,

including changes in economic conditions that may not be reflected in historical trends, such as customers in bankruptcy, liquidation,

or reorganization.

The Company estimates losses based on days past due as measured from the contractual due date.

Receivables are written

off against the allowance for doubtful accounts when they are determined to be uncollectible.

Such determination includes an analysis

of the specific conditions of the account, including time intervals since last collection, customer performance against agreed-upon payment

plans, solvency of the customer, and any bankruptcy proceedings.

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

were no recorded allowances for doubtful accounts on accounts receivable.

Loans Receivable

CRB Loans that significantly support the Company’s

operations are recognized as assets on the balance sheet.

These loans, intended to be held either for the foreseeable future or until

their maturity or full repayment, are recorded at their outstanding principal balance.

This amount is adjusted for any credit loss allowances

and net of any deferred loan origination fees and costs, as applicable, to reflect the net investment in these loans.

The Company recognizes

interest income on CRB Loans over the loan term using the simple-interest method based on outstanding principal amounts.

This approach

ensures a systematic recognition of income, aligning with the time value of money principle.

Interest income recognition is suspended when there

is uncertainty regarding full loan repayment, such as in cases of loan impairment or when payments are overdue by ninety days or more.

Loans under these conditions are placed on nonaccrual status.

Any accrued interest not received by the time a loan is placed on nonaccrual

is reversed from interest income.

Subsequent interest payments on nonaccrual loans are recorded using either the cash basis or the cost

recovery method until the loan meets the criteria for reclassification to accrual status.

Loans are returned to accrual status when they become

current (less than ninety days past due) and when there is reasonable assurance of future payment compliance, evidenced by the full satisfaction

of both principal and interest payments due.

Loans are assessed individually for potential charge-off,

which typically occurs at the point of foreclosure.

Charge-offs are executed to reflect the realizable value of loans that are deemed

uncollectible.

The determination of a loan’s past-due status

is based on its contractual repayment terms.

Loans are either placed on nonaccrual status or charged-off ahead of their contractual delinquency

dates if the collection of principal and interest is deemed doubtful, ceasing the recognition of interest income on such loans.

Allowance for Credit Losses (ACL) and Indemnification

The Company accounts for credit losses in accordance

with ASC 326 – Financial Instruments – Credit Losses (CECL methodology), which replaces the incurred loss model with an expected

credit loss approach.

The allowance for credit losses (ACL) is established to reflect the estimated lifetime credit losses on financial

assets carried at amortized cost, including loans held for investment.

The ACL consists of an asset-specific component for individual

loans with unique risk characteristics and a pooled component based on expected loss models, incorporating probability of default (PD)

and loss given default (LGD).

Given the evolving nature of cannabis-related lending and the absence of extensive historical industry data,

the Company applies significant judgment to estimate credit losses using comparable non-cannabis loan data while adjusting for industry-specific

The ACL estimation process incorporates macroeconomic

conditions, economic forecasts, and reasonable future expectations.

Expected credit losses are measured over the contractual term of the

loans, adjusted for expected prepayments where applicable.

Recoveries on previously charged-off loans are credited to the ACL upon collection.

The Company previously recorded an indemnity liability

under ASC 460 – Guarantees related to its obligation to indemnify PCCU against credit losses on cannabis-related loans.

This liability

was measured using the same methodology as the ACL and included an assessment of potential losses from defaulted loans.

However, following

the execution of the Amended and Restated CAA on December 31, 2024, the Company is no longer obligated to indemnify PCCU for credit losses,

resulting in the complete reversal of the indemnity liability into the statement of operations.

As of December 31, 2024, the Company no

longer has any outstanding indemnified loans.

Property and Equipment, net

Property and equipment are recorded at historical

cost, net of accumulated depreciation.

Depreciation is provided over the assets’ useful lives on a straight-line basis 3 - 5 years

for equipment and furniture and fixtures.

Repairs and maintenance costs are expensed as incurred.

Management periodically assesses the estimated useful

life over which assets are depreciated or amortized.

If the analysis warrants a change in the estimated useful life of property and equipment,

management will reduce the estimated useful life and depreciate or amortize the carrying value prospectively over the shorter remaining

The carrying amounts of assets sold or retired and

the related accumulated depreciation are eliminated in the period of disposal and the resulting gains and losses are included in the results

of operations during the same period.

The Company capitalizes certain costs related to software

developed for internal-use, primarily associated with the ongoing development and enhancement of our technology platform.

Costs incurred

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

These costs are amortized on a straight-line basis over the estimated

useful life of the related asset, generally five years.

Right of Use Assets and Lease Liability

The Company has entered into lease agreements for

a certain facility and certain items of equipment, which provide the right to use the underlying asset and require lease payments over

the term of the lease.

At inception of the lease agreement, the Company assesses whether the agreement conveys the right to control the

use of an identified asset for a period in exchange for consideration, in which case it is classified as a lease.

Each lease is further

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

All identified leases are recorded on

the consolidated balance sheet with a corresponding lease right-of-use asset, net, representing the right to use the underlying asset

for the lease term and the operating lease liabilities representing the obligation to make lease payments arising from the lease.

Company has elected not to recognize lease assets and lease liabilities for short-term leases (leases with a term of 12 months or less)

and leases of low-value assets.

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

based on the present value of lease payments over the lease term and include options to extend or terminate the lease when they are reasonably

certain to be exercised.

The present value of lease payments is determined primarily using the incremental borrowing rate based on the

information available as of the lease commencement date.

Lease expense for operating leases is recorded on

a straight-line basis over the lease term and variable lease costs are recorded as incurred.

The Company’s lease agreements do not

contain any material residual value guarantees or material restrictive covenants.

Finance lease interest expense is recognized based on

an effective interest method and depreciation of assets is recorded on a straight-line basis over the shorter of the lease term and useful

life of the asset.

Both operating and finance lease right of use assets are reviewed for impairment, consistent with other finite lived

assets, whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.

After a right of use asset

is impaired, any remaining balance of the asset is amortized on a straight-line basis over the shorter of the remaining lease term or

the estimated useful life.

Goodwill and Other Intangible Assets

The Company’s methodology for allocating the

purchase price of an acquisition is based on established valuation techniques that reflect the consideration of a number of factors, including

a valuation performed by a third-party appraiser.

Goodwill is measured as the excess of the cost of an acquired business over the fair

value assigned to identifiable assets acquired and liabilities assumed.

Goodwill is tested for impairment at least annually,

unless any events or circumstances indicate it is more likely than not that the fair value of the goodwill is less than its carrying value

at the elected measurement date of December 31.

Goodwill is considered impaired when the estimated

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

If the estimated fair value of such

reporting unit is less than its carrying value, goodwill impairment is recognized based on that difference, not to exceed the carrying

amount of goodwill.

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

a business for which discrete financial information is available and management regularly reviews the operating results of that component.

Finite-lived intangible assets are amortized over

their estimated useful life, which is the period over which the assets are expected to contribute directly or indirectly to the future

cash flows of the Company.

Intangible assets should be tested for impairment at the time of a triggering event, if one were to occur.

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

their carrying amounts.

Stock-based Compensation

The Company measures all equity-based payment arrangements

to employees and directors in accordance with ASC 718, Compensation–Stock Compensation.

The Company’s stock-based compensation

cost is measured based on the fair value at the grant date of the stock-based award.

It is recognized as expense on a straight-line basis

over the requisite service period for the entire award.

Forfeitures are recognized as they occur.

The Company estimates the fair value

of each stock-based award on its measurement date using either the current market price of the stock or Black-Scholes option valuation

model, whichever is most appropriate.

The Black-Scholes valuation model incorporates assumptions such as expected term of the instrument,

volatility of the Company’s future share price, risk free rates, future dividend yields and estimated forfeitures at the initial

grant date, by reference to the underlying terms of the instrument, and the Company’s experience with similar instruments.

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

The stock price of the Company has dropped significantly

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

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

Treasury rates for securities with maturities approximating the awards’ expected

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

vesting period of the awards.

The expected dividend yield is zero as the Company has never paid dividends and does not currently anticipate

paying any in the foreseeable future.

Fair Value Measurements

The Company utilizes the fair value hierarchy to apply

fair value measurements.

The fair value hierarchy is based on inputs to valuation techniques that are used to measure fair values that

are either observable or unobservable.

Observable inputs reflect assumptions market participants would use in pricing an asset or liability

based on market data obtained from independent sources, while unobservable inputs reflect a reporting entity’s pricing based upon

its own market assumptions.

The basis for fair value measurements for each level within the hierarchy is described below:

Level 1 — Quoted prices for identical assets

or liabilities in active markets.

Level 2 — Quoted prices for similar assets or

liabilities in active markets;

quoted prices for identical or similar assets or liabilities in markets that are not active;

or model-derived

valuations whose inputs are observable or whose significant value drivers are observable.

Level 3 —Valuations derived from valuation techniques

in which one or more significant inputs to the valuation model are unobservable.

Revenue Recognition

SHF recognizes revenue in accordance with ASC Topic

606, Revenue from Contracts with Customers (“ASC 606”).

The core principle of ASC 606 requires that an entity recognize revenue

to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which SHF expects to

be entitled in exchange for those goods or services.

ASC 606 defines a five-step process to achieve this core principle including identifying

performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating

the transaction price to each separate performance obligation.

Revenue is recorded at a point in time when the performance

obligation is satisfied, and no contingencies exist.

Revenue consists primarily of fees earned on deposit accounts such as bank account

charges, onboarding income, account activity fee income and other miscellaneous fees.

Revenue from account fee income is recognized when

the Company fulfills its service obligations, which include fees charged for financial services such as account maintenance, transaction

processing, and other related services.

Revenue from interest on loans is recognized over

the loan period as earned.

The Company utilizes a fixed percentage fee structure, under which financial institutions receive a share of

interest income from CRB-related loans.

Revenue from investment income is recognized based

on interest earned on daily deposit balances maintained with financial institutions.

In addition, the Company recognizes revenue from the

Master Program Agreement.

The Master Program Agreement is a non-exclusive and non-transferable right to implement and utilize the Safe

Harbor Program.

The Safe Harbor Program has two performance obligations;

an implementation fee recognized when the contract is effective

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

Amounts received in advance of the service being provided

is recorded as a liability under deferred revenue on the consolidated balance sheets.

Customers consist of financial institutions providing

services to CRBs.

Revenues are concentrated in the United States of America.

Contract Assets / Contract Liabilities

A contract asset is the Company’s right to consideration

in exchange for goods or services that the Company has transferred to a customer.

Conversely, the Company recognizes a contract liability

if the customer’s payment of consideration precedes the reporting entity’s performance.

As of December 31, 2024, the Company reported contract

assets and contract liabilities of $ 0 and $ 28,335 , respectively, from contracts with customers.

As of December 31, 2023, the Company reported

a contract asset and liability of $ 0 and $ 21,922 , respectively.

Warrants Liabilities

The Company has four separate warrants including public,

private, PIPE and Abaca and has evaluated each of the warrant arrangements separately in accordance with ASC 480 and 815, to determine

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

Warrants are recognized

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

These warrants are recorded

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

Conversely, warrants that

do not meet the criteria for equity classification under ASC 815-40 are classified as liabilities.

Such warrants are initially recorded

at fair value on the issuance date and are subject to remeasurement at each balance sheet date thereafter.

Any changes in fair value are

recognized in the statement of operations.

None of our warrant contracts met criteria to be considered indexed to their own stock, and

as a result, have each been accounted for as a liability financial instrument.

The fair value of warrants classified as liabilities

is determined using appropriate valuation models, such as the Black-Scholes model, which incorporates various inputs, including the current

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

(1) assessing whether conditions or events raise substantial

doubt about the Company’s ability to continue as a going concern, and (2) if substantial doubt is raised, evaluating whether the

Company has plans to mitigate that doubt.

Disclosures are required if substantial doubt exists or if the Company’s plans alleviate

of December 31, 2025, the Company has cash and cash equivalents of $ 6.8

million and net working capital of $ 5.7

The Company has incurred recurring losses from operations and experienced negative cash flows from operations, including an

operating loss of $ 5.4

million and cash used in operating activities of $ 3.4

million for the year ended December 31, 2025.

These conditions raise substantial doubt about the Company’s ability to continue as a

going concern for a period of at least twelve months from the date these consolidated financial statements are issued.

As of December 31, 2025, management believes our cash and cash equivalents is sufficient enough to meet our financial

obligations for the next twelve months.

has developed and implemented a series of measures intended to preserve liquidity and support the Company’s ability to meet its obligations

during the look-forward period.

Revenue Profile.

The Second Amended CAA increased the Company’s share of loan program income from approximately 35 % to 65 % of the

PCCU’s loan portfolio.

This agreement improves the recurring revenue profile of the Company’s core business on a prospective basis.

Additionally,

the Company is exploring strategic partnerships with other financial institutions.

to Additional Capital.

The Company has entered into a $ 150 million Equity Line of Credit, providing contingent access to additional

capital subject to customary conditions.

Management has identified and quantified specific, actionable cost reductions that are within its direct operational

control and that it would implement should operating conditions deteriorate below base-case expectations.

Flow Monitoring.

Management maintains a 52-week rolling cash flow projection that tracks anticipated expenses, revenues, and ending

cash balances against budget.

Cash positions are reviewed on a bi-weekly basis to ensure the Company maintains adequate liquidity to

fund operations.

Notwithstanding

the measures described above, the Company continues to incur operating losses and negative cash flows from operations, and uncertainty

remains as to whether these conditions will be fully resolved within the look-forward period.

As a result, management has concluded that

substantial doubt exists about the Company’s ability to continue as a going concern for a period of at least twelve months from the date

these consolidated financial statements are issued.

accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets

and the satisfaction of liabilities in the normal course of business.

These financial statements do not include any adjustments that

might result from the outcome of this uncertainty.

preparation of the consolidated financial statements in conformity with U.S.

GAAP requires management to make estimates and assumptions

that affect the reported amounts of assets, liabilities, revenues, and expenses and the disclosure of contingent assets and liabilities.

Material estimates particularly subject to change in the near term include the financial indemnification liability, valuation allowance for deferred

tax assets and the fair value of financial instruments including warrant liabilities.

Actual results could differ from those estimates.

Company effected a reverse stock split of 1-for-20 on March 14, 2025.

Unless otherwise stated, all share and per share amounts for all

periods presented have been adjusted to reflect the reverse stock split.

and Cash Equivalents

and cash equivalents consist of cash on hand, balances due from financial institutions, and investments with original maturities of three

months or less.

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

is recognized when control of promised services is transferred to customers in an amount that reflects the consideration to which the

Company expects to be entitled in exchange for those services, following the five-step model under ASC 606.

● Account Fee Income

The Company earns fees for compliance services provided to financial institution customers, including account onboarding fees, account maintenance fees, transaction processing fees, and other account activity fees.

These fees are recognized at the point in time when the performance obligation is satisfied and no contingencies exist.

● Investment Income

The Company earns investment income based on interest earned on daily average deposit balances maintained by CRBs at financial institution customers.

This income is recognized as earned over the applicable period.

● Loan Program Income

Revenue from loan program income is recognized over the loan period as earned.

Under the Commercial Alliance Agreement with PCCU, as amended (the “Amended CAA”), the Company’s share of loan interest income is determined by a loan yield allocation formula and recognized as earned.

● Master Program Agreement Revenue

The Company licenses its proprietary Safe Harbor Program to financial institutions under a Master Program Agreement, which grants a non-exclusive, non-transferable right to use the platform.

Revenue under these agreements is recognized over the term of the arrangement as services are provided.

Company measures all equity-based payment arrangements to employees, directors, and non-employee consultants in accordance with ASC

718, Compensation - Stock Compensation .

The grant-date fair value of stock-based awards is determined using either the quoted

market price of the Company’s Common Stock or the Black-Scholes option valuation model, as appropriate for the instrument

cost for service-based awards is recognized on a straight-line basis over the requisite service period.

For performance-based awards,

compensation cost is recognized when it becomes probable that the performance condition will be achieved.

Forfeitures are recognized

as they occur.

non-employee awards settled in equity including Series B Convertible Preferred Stock and warrants issued to consultants, the Company measures

the fair value at the grant date and recognizes the cost over the service period.

Where awards are partially vested at issuance, the

vested fair value is recorded as a prepaid asset and amortized to expense over the remaining service period.

Black-Scholes option model incorporates the following assumptions:

expected term (using the simplified method as the average of contractual

term and vesting period);

expected stock price volatility (based on the Company’s historical stock price);

risk-free interest rate

(based on U.S.

Treasury rates for maturities approximating expected lives);

and expected dividend yield of zero (as the Company has not

paid dividends and does not anticipate doing so in the foreseeable future).

Changes in assumptions used to estimate fair value could

result in materially different results.

Debt and Original Issue Discount

Company accounts for convertible debt instruments under ASC 470-20, Debt with Conversion and Other Options .

Debt issuance costs

and original issue discounts are recorded as a direct reduction to the carrying amount of the related debt instrument and amortized to

interest expense over the contractual term using the effective interest method in accordance with ASC 835-30.

Liabilities and Derivative Instruments

Company evaluates all financial instruments, including warrants and conversion features, at issuance to determine whether they

should be classified as equity or liabilities under ASC 815-40, Derivatives and Hedging - Contracts in an Entity’s

Own Equity , and ASC 480, Distinguishing Liabilities from Equity .

that do not meet the criteria for equity classification are recorded as liabilities at fair value on the date of issuance.

These warrant

liabilities are remeasured at fair value at each subsequent reporting date, with changes in fair value recognized in the consolidated

statements of operations.

Warrants are valued using the Black-Scholes-Merton model.

Stock - Classification and Measurement

Company evaluates preferred stock instruments under ASC 480 and ASC 815-40 to determine the appropriate classification between liabilities,

mezzanine equity, and permanent equity.

Extinguishment

of Liabilities

a financial liability is extinguished through the issuance of equity instruments, the Company accounts for the transaction under ASC

405-20, Liabilities - Extinguishments of Liabilities , and ASC 470-50, Debt - Modifications and Extinguishments .

The equity instruments issued are measured at fair value, and any difference between the carrying amount of the extinguished liability

and the fair value of the equity issued is recognized as a gain or loss on extinguishment in the consolidated statements of operations.

Value Measurements

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

The fair value hierarchy is based on inputs to valuation

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

Observable inputs reflect assumptions market

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

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

The basis for fair value measurements for each level

within the hierarchy is described below:

Quoted prices for identical assets or liabilities in active markets.

Quoted prices for similar assets or liabilities in active markets;

quoted prices for identical or similar assets or liabilities

in markets that are not active;

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

Valuations derived from techniques in which one or more significant inputs are unobservable.

Company operates as one

reportable segment providing financial services and banking solutions to CRBs under ASC 280, Segment Reporting .

operating decision maker, the Company’s Chief Executive Officer, reviews financial information on a consolidated basis when

allocating resources and assessing performance.

Assets Measured at Amortized Cost

financial assets within the scope of ASC 326, the Company measures the allowance for credit losses based on relevant information about

past events, current conditions, and reasonable and supportable forecasts of future economic conditions that affect the collectability

of the reported amounts.

The allowance is deducted from the amortized cost basis of the financial asset on the consolidated balance sheet,

and the net amount represents management’s best estimate of the cash flows expected to be collected.

Changes in the allowance for credit

losses are recognized as credit loss expense or reversal in the consolidated statements of operations.

Company considers the following factors, among others, in estimating expected credit losses:

loss experience and default rates for instruments with similar risk characteristics;

creditworthiness and financial condition of the counterparty;

and forecasted macroeconomic conditions over the reasonable and supportable forecast period, reverting to historical averages beyond

arrangements, recourse provisions, and other credit enhancements.

assets are written off against the allowance when management determines that the asset is uncollectible and all reasonable collection

efforts have been exhausted.

Subsequent recoveries, if any, are credited to the allowance for credit losses.

Contract Asset

The contract asset

recognized in connection with the Second Amended CAA with PCCU are not financial asset within the scope of ASC 326.

represent costs incurred to fulfill the contract specifically, the cost of assuming the stand-ready guarantee obligation (ASC 460)

and the contingent indemnification exposure (ASC 326).

The contract asset is amortized on a systematic and rational basis over the

contract term consistent with the release of the underlying guarantee exposure.

Contract asset are evaluated for impairment under

ASC 340-40-35-2 when facts and circumstances indicate the carrying amount may not be recoverable;

any impairment is recognized in

the period identified and may not be subsequently reversed.

Ready Guarantees – ASC 460

Company accounts for financial guarantees in accordance with ASC 460, Guarantees .

At the inception of a guarantee, the Company

recognizes a liability equal to the fair value of the stand-ready obligation assumed.

This non-contingent liability represents the value

of the obligation undertaken by the Company to stand ready to perform under the guarantee, irrespective of the likelihood that a payment

will actually be required.

to initial recognition, the stand-ready liability is amortized over the contractual term of the guarantee on a systematic basis that

reflects the Company’s release from risk.

If, at any reporting date, a contingent loss accrual required under ASC 450, Contingencies ,

exceeds the unamortized ASC 460 carrying amount, the Company records the higher contingent loss estimate in accordance with that guidance.

Financial Indemnification Liabilities

ASC 326-20, the Company recognizes a financial indemnification liability for its indemnification obligation to

PCCU under the Second Amended CAA.

This liability represents the Company’s up to 65% share of the lifetime expected credit

losses on the covered CRB loan portfolio, measured on a probability-weighted basis and updated each reporting period to reflect

current conditions and reasonable and supportable forecasts of future economic conditions.

The financial indemnification liability

methodology considers historical loss experience, borrower-specific credit quality, collateral values, and forward-looking economic

assumptions including conditions specific to the cannabis industry.

financial indemnification liability is measured independently from, and recognized in addition to, the ASC 460 stand-ready guarantee liability.

The two liabilities

coexist separately on the consolidated balance sheet and do not offset or true up to each other.

The ASC 460 liability is fixed at inception

and released over the guarantee term, while the financial indemnification liability is dynamic and remeasured each quarter.

Changes in the financial indemnification liability

are recognized as credit loss expense or credit loss income in the consolidated statements of operations in the period of remeasurement.

Concentration

Company’s revenues are concentrated in the United States with a single customer, PCCU, which represented the substantial majority

of revenues for the years ended December 31, 2025 and 2024 (see Note 10).

Substantially all CRB client deposits are maintained at PCCU,

and all fund transmissions to and from those deposit accounts are handled directly by PCCU.

instruments that potentially subject the Company to concentrations of credit risk consist accounts receivable and cash accounts maintained at

financial institutions.

At times, account balances may exceed the Federal Deposit Insurance Corporation (“FDIC”)

coverage limit of $ 0.3

of December 31, 2025 and December 31, 2024, the Company had approximately $ 6.5 million and $ 2.0 million, respectively, in excess of FDIC

Additionally, amounts due from PCCU represented approximately 97.0 % and 87.8 % of total accounts receivable as of

December 31, 2025 and December 31, 2024, respectively, with balances of approximately $ 1.0 million at each date.

The Company has not experienced

losses on these accounts or receivables, and management does not believe the Company is exposed to significant credit risk on such accounts.

Issued Accounting Standards

Adopted in 2025

2023-09 - Income Taxes (Topic 740):

In December 2023, the FASB issued ASU 2023-09, which requires additional disaggregated

disclosures in the income tax rate reconciliation and disclosures of income taxes paid by jurisdiction.

The standard is effective for

annual periods beginning after December 15, 2024.

The Company adopted this standard prospectively as of January 1, 2025.

not have a material impact on the Company’s financial statements.

This is reported on a prospective basis.

2024-02 - Codification Improvements:

In March 2024, the FASB issued ASU 2024-02, which removes references to the FASB Concepts

Statements from the Codification.

The standard is effective for public entities for years beginning after December 15, 2024.

adopted this standard prospectively as of January 1, 2025.

Adoption did not have a material impact on the Company’s financial statements.

2024-01 – Compensation - Stock Compensation (Topic 718):

Profits Interest and Similar Awards:

In March 2024, the

FASB issued ASU 2024-01, which clarifies whether profits interest and similar awards are subject to ASC 718.

The standard is

effective for years beginning after December 15, 2024.

The Company adopted this standard prospectively as of January 1, 2025.

Adoption did not have a material impact on the Company’s financial statements.

Not Yet Adopted

2024-03 / ASU 2025-01 - Disaggregation of Income Statement Expenses (Subtopic 220-40):

In November 2024, the FASB issued ASU

2024-03, subsequently clarified by ASU 2025-01 (January 2025), requiring entities to disaggregate certain income statement expense line

items in the footnotes, including purchases of inventory, employee compensation, depreciation, and amortization.

The standard is effective

for annual periods beginning after December 15, 2026, and interim periods within annual periods beginning after December 15, 2027.

adoption is permitted.

The Company plans to adopt prospectively and does not anticipate a material impact on its financial reporting.

2024-04 – Debt - Debt with Conversion and Other Options (Subtopic 470-20):

Induced Conversions:

In November 2024,

the FASB issued ASU 2024-04, which clarifies the accounting for induced conversions of convertible debt.

The standard is effective

for annual periods beginning after December 15, 2025.

The Company plans to adopt prospectively and does not anticipate a material

impact on its financial reporting.

2025-05 - Financial Instruments - Credit Losses (Topic 326):

Accounts Receivable and Contract Assets:

In July 2025, the

FASB issued ASU 2025-05, which provides a practical expedient allowing entities to assume current credit conditions remain unchanged

for the remaining life of current accounts receivable and current contract assets under ASC 606.

The standard is effective for years

beginning after December 15, 2025.

The Company is currently evaluating the potential impact on its consolidated financial statements.

2025-08 - Financial Instruments - Credit Losses (Topic 326):

Purchased Loans:

In December 2025, the FASB issued ASU

2025-08, which expands the population of acquired financial assets subject to the gross-up approach for recognizing credit losses at

The standard introduces the concept of “purchased seasoned loans” and requires acquired loans (other than

credit cards) that have not experienced significant credit deterioration since origination to follow the gross-up approach.

amendments are effective for annual periods beginning after December 15, 2026.

Due to the Company’s Second Amended CAA with

PCCU, management believes this standard may have a material impact on the Company’s financial statements upon adoption.

Company is currently evaluating the scope and magnitude of that impact.

Company will continue to monitor the development of accounting standards and intends to adopt them in accordance with their respective

effective dates.

Additional disclosures will be provided in future filings as the Company completes its assessment.

3 - Deferred Consideration

In line with ASC Topic 815, “Derivatives and

Hedging” (“ASC 815”), the Company treats the deferred consideration from the Abaca acquisition as a derivative liability,

since it does not fulfill the equity classification criteria.

As a result, this obligation is recognized as a liability on the balance

sheet at fair value and is adjusted to reflect its fair value at the end of each reporting period.

The liability will be reassessed at

fair value on every balance sheet date until the obligation’s term concludes.

Fluctuations in its fair value are recorded in the

consolidated statements of operations.

Forward purchase derivative

The Company accounted for the forward purchase derivative

in the business combination in accordance with the guidance contained in ASC Topic 815, the Company classifies the forward purchase derivative

as an asset or liability carried at fair value and adjusts the forward purchase derivative to fair value at each reporting period.

the terms of the contract, the forward purchase derivative may be settled in either cash or stock upon maturity, at the discretion of

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

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

On December 31, 2022, a Monte-Carlo Simulation within a risk-neutral framework was used to estimate the forward purchase derivative’s

fair value, assuming Geometric Brownian Motion for future stock prices.

Values from each simulation path were determined per contractual

terms and discounted by a matching risk-free rate.

In 2023 and 2024, no FPA holder sales occurred, and no significant risk factor changes

affecting FPA derivative values were noted.

Consequently, management retained the December 31, 2022 valuation for year-end 2023 and 2024.

Earnings Per Share

Basic and diluted earnings per share are computed

and disclosed in accordance with ASC Topic 260, Earnings Per Share.

The Company utilizes the two-class method to compute earnings available

to common stockholders.

Under the two-class method, earnings are adjusted by accretion amounts to redeemable noncontrolling interests

recorded at redemption value.

The adjustments represent dividend distributions, in substance, to the noncontrolling interest holder as

the holders have contractual rights to receive an amount upon redemption other than the fair value of the applicable shares.

earnings are adjusted to reflect this in substance distribution that is different from other common stockholders.

In addition, the Company

allocates net earnings to each class of common stock and participating security as if all of the net earnings for the period had been

The Company’s participating securities consist of share-based payment awards that contain a non-forfeitable right to

receive dividends and therefore are considered to participate in undistributed earnings with common stockholders (Refer to Note 14).

earnings per common share excludes dilution and is calculated by dividing net earnings allocated to common shares by the weighted-average

number of common shares outstanding for the period.

Diluted earnings per common share is calculated by dividing net earnings allocable

to common shares by the weighted-average number of common shares outstanding for the period, as adjusted for the potential dilutive effect

of non-participating share-based awards.

Deferred tax assets and liabilities are recognized

for the estimated future tax consequences attributable to differences between the tax bases of assets and liabilities and their carrying

amounts for financial reporting purposes.

Deferred tax assets and liabilities are adjusted through the provision for income taxes as changes

in tax laws or rates are enacted.

A valuation allowance is established when it is determined

that it is more likely than not that some portion or all of the deferred tax assets may not be realized .

ASC Topic 740 also prescribes a recognition threshold

and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in

a tax return.

For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing

The Company recognizes accrued interest and penalties related to unrecognized tax benefits, if any, as income tax expense.

There were no unrecognized tax benefits and no amounts accrued for interest and penalties as of December 31, 2024 and December 31, 2023.

The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation

from its position.

Recently Issued Accounting Standards

From time to time, new accounting pronouncements are

issued by the Financial Accounting Standards Board, or FASB, or other standard setting bodies and adopted by the Company as of the specified

effective date.

Unless otherwise discussed, the impact of recently issued standards that are not yet effective are not expected to have

a material impact on the Company’s financial position or results of operations upon adoption.

Adopted Standards

Segment Reporting

In November 2023, the FASB issued ASU 2023-07, Segment

Reporting (Topic 280), requiring public entities to disclose significant segment expenses and other segment items.

It also mandates that

public entities provide, in interim periods, all disclosures related to a reportable segment’s profit or loss and assets that were

previously required only annually.

Public entities with a single reportable segment must

comply with all ASC 280 disclosure requirements, including significant segment expense disclosures.

The guidance upon adoption has been

applied retrospectively to all periods presented unless impractical.

This ASU applies to all public entities and is effective

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

The Company has adopted

ASU 2023-07, Segment Reporting (Topic 280) and applied disclosure requirements throughout the financial statements.

Fair Value Measurement of Equity Securities Subject

to Contractual Sale Restrictions

This Accounting Standard Update (ASU 2022-03) clarifies

that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security

and, therefore, is not considered when measuring fair value.

Recognizing a contractual restriction on the sale of an equity security as

a separate unit of account is not permitted.

This ASU is effective for fiscal years beginning after December 15, 2023, including interim

periods within those fiscal years.

The Company has prospectively adopted this standard during the year ended December 31, 2024, and the

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

Reference Rate Reform (Topic 848):

the Sunset Date of Topic 848

This Accounting Standard Update (ASU 2022-06) defers

the Sunset Date of ASC Topic 848, Reference Rate Reform (Topic 848), which provides temporary optional relief in accounting for the impact

of Reference Rate Reform.

This ASU is effective upon issuance (December 21, 2022) and generally can be applied through December 31, 2024.

The Company has prospectively adopted this standard during the year ended December 31, 2024, and the ASU has not had a material impact

on the Company’s audited consolidated financial statements.

Investments-Equity Method and Joint Ventures

In March 2023, the FASB issued ASU 2023-02, Investments-Equity

Method and Joint Ventures (Topic 323):

Accounting for Investments in Tax Credit Structures using the Proportional Amortization Method.

The FASB issued final guidance allowing entities to apply the proportional amortization method to equity investments in all tax credit

programs that meet the conditions in ASC 323-740, rather than just investments in qualified affordable projects that generate low-income

housing tax credits, as was required under the legacy guidance.

The guidance is effective for public business entities for fiscal years

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

The Company has prospectively adopted this standard during

the year ended December 31, 2024, and the ASU has not had a material impact on the Company’s audited consolidated financial statements.

Standards Pending to be Adopted

In December 2023, the FASB issued ASU 2023-09, Income

Taxes (Topic 740).

This ASU requires public business entities to disclose in their rate reconciliation table additional categories of

information about income taxes paid, including certain disclosures that would be disaggregated by jurisdiction and other categories.

ASU is effective for fiscal years after December 15, 2024.

Early adoption would be permitted.

The Company does not expect this ASU to

have a material impact on its audited consolidated financial statements.

In January 2024, the FASB issued ASU 2024-01, Compensation-Stock

Compensation (Topic 718):

Scope Application of Profits Interests and Similar Awards, which clarifies the scope and application of profits

interest awards under ASC 718 by providing illustrative guidance.

The amendments apply to all entities that account for profits interest

awards as compensation for services provided by employees or non-employees.

The amendments are effective for fiscal years beginning after

December 15, 2024, including interim periods within those years, for public entities, and for fiscal years beginning after December 15,

2025, for all other entities, with early adoption permitted.

The Company will adopt this standard prospectively and is currently assessing

the impact of adopting this guidance on its financial statements and related disclosures.

In March 2024, the FASB issued ASU 2024-02, Codification

Improvements:

Amendments to Remove References to the Concepts Statements.

Since the Concept Statements are not considered authoritative

and do not establish Generally Accepted Accounting Principles (GAAP), the ASU eliminates references to these statements from the codification.

The amendments are effective for public entities for fiscal years beginning after December 15, 2024, and for all other entities for fiscal

years beginning after December 15, 2025, with early adoption permitted.

The Company will adopt this ASU prospectively and does not anticipate

a material impact on its financial reporting as a result of adopting this ASU.

ASU 2024-03, Disaggregation of Income Statement Expenses,

was issued in November 2024 and requires public business entities to disaggregate certain income statement expense captions in the footnotes

of the financial statements.

Specifically, entities must provide disclosures that separately present expenses related to purchases of

inventory, employee compensation, depreciation, intangible asset amortization, and depletion (including depreciation, depletion, and amortization

for oil and gas producing activities).

While this ASU does not change the presentation of expense captions on the face of the income statement,

it requires detailed disclosures in the notes to the financial statements.

The amendments are effective for fiscal years beginning after

December 15, 2026, and for interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted.

will adopt this ASU prospectively and does not anticipate a material impact on its financial reporting as a result of adopting this ASU.

In November 2024, the FASB issued ASU 2024-04, Debt—Debt

with Conversion and Other Options (Subtopic 470-20):

Induced Conversions of Convertible Debt Instruments, which provides clarification

on the accounting treatment of convertible debt settlements that occur under terms differing from those of the original instrument.

amendments specify that if the settlement is considered an induced conversion, an entity must recognize an inducement expense at the offer

acceptance date.

Conversely, if the settlement is treated as a debt extinguishment, an entity must recognize a gain or loss at the extinguishment

This ASU is effective for all entities for fiscal years beginning after December 15, 2025, including interim periods within those

years, with early adoption permitted.

The Company will adopt this ASU prospectively and does not anticipate a material impact on its financial

reporting as a result of adopting this ASU.

In January 2025, the FASB issued ASU 2025-01, Income

Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40).

The Board is issuing this Update

to clarify the effective date of Accounting Standards Update No.

2024-03, Income Statement—Reporting Comprehensive Income—Expense

Disaggregation Disclosures (Subtopic 220-40):

Disaggregation of Income Statement Expenses.

The amendment in this Update applies to all

public business entities but only potentially affects non-calendar year-end entities.

The amendment in this Update amends the effective

date of Update 2024-03 to clarify that all public business entities are required to adopt the guidance in annual reporting periods beginning

after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027.

Early adoption of Update

2024-03 is permitted.

The Company will adopt this ASU prospectively and does not anticipate a material impact on its financial reporting

as a result of adopting this ASU.

The Company will continue to monitor the development

of these standards and intends to adopt them in accordance with their respective effective dates.

Additional disclosures will be provided

in future filings as the Company finalizes its assessment of these standards’ impacts.

consideration

On November 11, 2022, as provided in Exhibit 2.1 of

the Company’s Current Report on Form 8-K filed with the SEC on November 16, 2022, on November 11, 2022, the Company entered into

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

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

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

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

and Dan Roda, solely in such individual’s capacity as the representative of the Company Security Holders (the “Merger Agreement.”)

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

The payment structure included $ 9 million in

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

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

Additionally, the Class A Common Stock consideration was settled through

105,000 Class A Common Stock which represented a monetary equivalent calculated against the closing trading price, alongside deferred

stock consideration calculated with a 10-day VWAP formula.

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

the deferred stock and cash considerations.

The foregoing description of the Merger Agreement does not purport to be complete and is qualified

in its entirety by the Merger Agreement attached as Exhibit 2.1 to the Company’s Current Report on Form 8-K filed with the SEC on

November 16, 2022.

A Second Amendment to the Merger Agreement, dated

October 26, 2023, by and among the Company, Merger Sub I, Merger Sub II, Rockview Digital Solutions, Inc., a Delaware corporation, d/b/a

Abaca and Dan Roda, solely in such individual’s capacity as the representative of the Abaca security holders as referenced in Exhibit

2.1 of the Company’s Current Report on Form 8-K, filed with the SEC on October 27, 2023 (the “Second Amendment”) amends

the Merger Agreement to provide for deferred stock consideration of 291,792

shares of Class A Common Stock to be issued at the first anniversary of the Second Amendment based on a recalculated value of

No changes affected the scheduled cash payments under the Amended Second Amendment.

Furthermore, a third-anniversary

consideration of $ 1.5

million was introduced, payable in cash or Class A Common Stock at the Company’s discretion, alongside an issue of 250,000

stock warrants at an exercise price of $4 0.00

per share of Class A Common Stock.

The adjustments and additional considerations have been valued and recorded according to ASC

815, reflecting changes in the fair value of deferred consideration in the consolidated statements of operations.

The change in the amount of deferred consideration

from January 1, 2023, to December 31, 2024, is as follows:

of Change in Deferred Consideration

Consideration

November 11, 2022, the Company entered into the first Amendment to the Merger Agreement with Rockview Digital Solutions, Inc.

and other parties.

The Merger Agreement included a $ 30 million payment through a mix of cash and stock, including $ 9 million in cash

over three annual installments and 105,000 Common Stock (“Common Stock”), alongside deferred stock considerations

based on a 10-day volume weighted average price (“VWAP”) formula.

Second Amendment to the Merger Agreement, dated October 26, 2023, introduced deferred stock consideration of 291,791 shares of Common

Stock at a recalculated value of $ 40.00 per share.

No changes were made to the cash payments.

Additionally, 250,000 stock warrants at

$ 40.00 per share were issued, and a third-anniversary consideration payment of $ 1.5 million due October 5, 2025 was introduced, payable

in cash or Common Stock with a floor value of $ 40.00 per share, at the Company’s discretion.

The Company issued 37,517 unregistered

shares of Common Stock in lieu of cash, computed using the floor value on October 3, 2025.

On October 21, 2025, the Company filed Form

S-1 to register the 37,517 shares of Common Stock issued on October 3, 2025 and the 250,000 common shares underlying the Abaca warrants

to purchase Common Stock with an exercise price of $ 40.00 per share.

November 21, 2024, the Company deposited the $ 3.0 million second annual cash payment into the registry of the Denver County, Colorado District

Court pending resolution of a dispute among former Abaca shareholders regarding the party authorized to receive the payment.

20 Commitments and Contingencies.

adjustments and changes to deferred consideration have been valued and recorded according to ASC 815 in the Company’s consolidated financial statements.

change in the amount of deferred consideration from January 1, 2024, to December 31, 2025:

Schedule of Change in Deferred Consideration

Considerations

Consideration

Third Anniversary

Consideration Payment

January 1, 2023

Working capital adjustment

Issuance of shares and payment to shareholders

Issuance of Abaca warrants

Issuance of third anniversary payment consideration

Gain recognized in the consolidated statements of operations

Balance, January 1, 2024

Fair value adjustment

December 31, 2023

Balance, December 31, 2024

Fair value adjustment

December 31, 2024

On October 17, 2024, the

Company caused a Complaint to be filed in the District Court for the City and County of Denver, Colorado, captioned SHF Holdings, Inc.

Daniel Roda, Gregory W.

Ellis, and James R.

Carroll , Case No.

2024CV33187 (Denver County District Court).

November 21, 2024, in connection with the Company’s request, the Company caused the Merger Payment to be deposited into the Denver

County District Court’s registry so that it can be distributed in accordance with the terms of the Merger Agreement.

Payment has already been accounted for in the working capital deficit disclosed in the Liquidity and Going Concern section.

December 19, 2024, Daniel Roda, Gregory W.

Ellis, and James R.

Carroll caused

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

For additional details, p lease refer to the

section titled “Abaca legal case in Denver” in the Recent Updates above as well as the Company’s Current Reports on

Form 8-K filed with the SEC on October 18, 2024 and December 19, 2024.

On November 20, 2024, the Company deposited $ 3,000,000

with the District Court of Denver, Colorado, for the court to determine the appropriate disbursement method to Abaca shareholders.

amount is recorded under “Other Current Assets” on the balance sheet.

Shares issued to Abaca

Balance, December 31, 2025

fair value of the third anniversary payment consideration, at the time of settlement, was determined using the Monte Carlo Simulation.

following table provides quantitative information regarding Level 3 fair value measurements inputs for the third anniversary payment

consideration as of their measurement dates:

Schedule of Fair Value Measurements Inputs for the Third Anniversary Payment Consideration

Third anniversary consideration

Risk free interest rate

Market discount rate

Remaining term in years

Expected volatility

October 3, 2025, the Company issued 37,517

shares of Common Stock in full settlement of the third anniversary consideration payment, resulting in a zero balance for all

remaining deferred consideration obligations as of December 31, 2025.

The only remaining balance in the table above represents the

$ 3.0 million deposited with the

District Court registry, which is carried as a restricted asset pending resolution of the shareholder litigation described in Note

20 Commitments and Contingencies.

4 - Goodwill and Finite-lived Intangible Assets

The Company’s goodwill was derived from the

Abaca Merger, where the purchase price exceeded the fair value of the net identifiable assets acquired.

Goodwill is tested for impairment

at least annually, or more frequently if a triggering event occurs.

On December 31, 2024, the Company conducted its annual

goodwill impairment test in accordance with ASC 350, utilizing a combination of the Discounted Cash Flow (DCF) Method and the Guideline

Public Company (GPC) Method.

The DCF method estimated the present value of projected future cash flows using an appropriate discount rate,

while the GPC method compared key financial metrics against publicly traded comparable companies.

To validate the results, the enterprise

value approach was used as a cross-check.

The impairment assessment incorporated an equally weighted enterprise value derived from both

the DCF and GPC methods.

As the fair value of the asset group was determined to be lower than its carrying amount, the Company recorded

a full goodwill impairment charge of $ 6.06 million.

In 2023, the Company conducted an interim goodwill

and intangible asset impairment assessment on June 30, 2023, which indicated that the carrying value of goodwill exceeded its fair value.

As a result, the Company recognized a non-cash goodwill impairment charge of $ 13.21 million in its consolidated statements of operations.

However, the annual impairment test conducted on December 31, 2023, did not result in any additional impairment charges, as the fair value

remained at or above the carrying value.

The following presents a summary of the Company’s

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

Schedule of Goodwill

Year ended December 31,

Beginning balance

( 6,058,000 )

( 13,208,276 )

Ending balance

Finite-lived intangible assets

The Company reviews its finite-lived intangible assets

for impairment at least annually on December 31 unless any events or circumstances indicate it is more likely than not that the fair value

of the finite-lived intangible assets is less than its carrying value.

In accordance with the Company’s established policy,

an annual impairment review of finite-lived intangible assets was conducted on December 31, 2024.

The recoverability test compared the

sum of estimated undiscounted future cash flows of the asset group to its carrying amount.

As the undiscounted cash flows were determined

to be lower than the carrying amount, the Company performed a fair value assessment using a Discounted Cash Flow (DCF) analysis.

indicated that the fair value of the asset group was below its carrying amount, leading to impairment charges of $ 0.05 million for market-related

intangible assets, $ 0.05 million for customer relationships, and $ 2.99 million for developed technologies.

In 2023, following a triggering event in the second

quarter, the Company performed an interim impairment assessment for goodwill and intangible assets.

In addition, the Company conducted

its annual impairment review on December 31, 2023, in line with its policy.

The finite-lived intangible assets evaluated included market-related

intangibles, customer relationships, and developed technologies.

The interim assessment resulted in an impairment charge of $ 3.68 million,

primarily related to market-related intangibles and customer relationships, as their carrying values exceeded their fair values.

review further identified an additional impairment charge of $ 2.02 million related to developed technologies.

The following presents a summary of the Company’s

finite-lived intangible assets as of December 31, 2024, and December 31, 2023:

As of December 2024:

Schedule of Finite Lived Intangible Assets

Gross Carrying Amount

Carrying amount

Market related intangible assets

Customer relationships

Developed technology

Total intangible assets

As of December 31, 2023:

Gross Carrying Amount

Net Carrying amount

Market related intangible assets

Customer relationships

Developed technology

Total intangible assets

During the year ended December 31, 2024, amortization

expense and impairment of finite-lived intangible assets were $ 630,863 and $ 3,090,881 , respectively, compared to $ 1,199,878 and $ 5,699,464 ,

respectively, for the year ended December 31, 2023.

of December 31, 2024, the Company recorded full impairment charges against all remaining goodwill and finite-lived intangible assets,

which were derived primarily from the October 2022 acquisition of Abaca.

The impairment charges

totaled $ 3.1 million, comprised of $ 0.05 million for market-related intangible assets, $ 0.05 million for customer relationships, and

$ 3.0 million for developed technology.

Impairment expense for the year ended December 31, 2024 was $ 6.1 million.

Following these

charges, the carrying values of all such assets were zero as of December 31, 2024.

IT Asset Acquisition

December 2025, the Company’s wholly-owned subsidiary, Safe Harbor Managed Services LLC, completed an asset acquisition from

LBMW LLC, doing business as 420 IT Solutions (“420 IT Solutions”), a managed services business.

The purchased assets

consist primarily of intellectual property, including a registered trademark, and certain assigned customer contracts and goodwill.

No cash consideration was paid.

The aggregate purchase price consisted of 125,000

shares of the Company’s Common Stock (the “Earnout Shares”), which vest based on the achievement of net

revenue performance targets during the periods ending December 31, 2026 and December 31, 2027, and the assumption of certain

specified liabilities.

transaction was accounted for as an asset acquisition under ASC 805-50.

The total consideration transferred was measured at the fair

value of the Earnout Shares at the acquisition date.

Because vesting is contingent solely on future performance conditions, the

Earnout Shares are accounted for as contingent consideration and recognized as the performance conditions become probable of

Therefore, the Company did not record any intangible assets and contingent liability as of December 31, 2025.

circumstances change when the revenue target is probable, then the intangible assets and a contingent liability will be

recorded within one year from the acquisition date.

5 - Loans Receivable

Commercial real estate loans receivable, net consist

of the following:

of Commercial Real Estate Loans Receivable

December 31, 2024

December 31, 2023

Commercial real estate loans receivable, gross

Allowance for credit losses

Commercial real estate loans receivable, net

Current portion

Noncurrent portion

Allowance for Credit Losses

The allowance for credit losses is maintained at a

level believed to be sufficient to provide for estimated credit losses based on evaluating known and inherent risks in the loan portfolio.

The Company’s estimated the allowance for credit losses on the reporting date in accordance with the credit loss policy described

The allowance for credit losses consists of the following

activity for the year ended December 31, 2024 and 2023:

Schedule of Allowance For Loan Losses

of December 31, 2024, the Company held one commercial real estate loan receivable with a gross carrying value of $ 0.4

million, net of no allowance for credit losses.

On July 31, 2025, the Company sold this loan to PCCU, a related party to improve

Prior to the sale, the Company received a principal payment of $ 0.008

million, reducing the outstanding balance to $ 0.4

The loan was sold at carrying value, and no gain or loss was recognized on the sale.

See Note 10 Related Party Transactions

for further information regarding the Company’s relationship with PCCU.

following table summarizes the activity in commercial real estate loans receivable for the years ended December 31, 2025 and December

Schedule of Commercial Real Estate Loans Receivable

Commercial real estate loans receivable,

Sale of loans

Transferred to held for

Commercial real estate

loans receivable, net

Non-current portion

6 - Investment in Preferred Securities

September 30, 2025, as partial consideration received in connection with the issuance of 1,875 shares of Series B Convertible Preferred

Stock and Series B Warrants to purchase Common Stock (see Note 19), the Company received preferred shares of Aditxt, Inc.

a publicly traded company.

The Series B Convertible Preferred Stock was issued at $ 800 per share.

No cash was exchanged in this transaction.

The ADTX preferred securities had an estimated fair value and carrying value of $ 1.5 million at the date of receipt.

investment represents less than 20% of the voting interests in ADTX, and the Company does not have the ability to exercise significant

influence or control over ADTX.

Accordingly, the investment is accounted for under ASC 321, Investments – Equity Securities .

Because ADTX’s preferred shares are not actively traded and lack a readily determinable fair value, the Company has elected to

measure the investment at cost, less any impairment, adjusted for observable price changes in orderly transactions for identical or similar

instruments, as permitted under ASC 321-10-35-2.

the year ended December 31, 2025, ADTX redeemed approximately 43

shares of its preferred stock held by the Company pursuant to the preferred share terms, resulting in cash proceeds of $ 0.05

No gain or loss was recognized on this redemption.

No impairments or other observable price adjustments were recognized during the

year ended December 31, 2025.

Allowance for credit losses

Beginning balance

Cumulative effect from adoption of CECL

Ending balance

Loans receivable:

Individually evaluated for impairment

Collectively evaluated for impairment

Allowance for credit losses:

Individually evaluated for impairment

Collectively evaluated for impairment

As of December 31, 2024 and December 31, 2023, no

loans were past due, or classified as non-accrual or considered impaired.

Additionally, no loans were modified during the years ended

December 31, 2024, or 2023.

Credit quality of loans:

As part of the on-going monitoring of the credit quality

of the Company’s loan portfolio, management tracks credit quality indicators based on the loan payment status on monthly basis.

The Company evaluated the credit quality of each indemnified loan by assessing the risk factors and assigning a risk rating based on a

variety of factors.

The detailed breakdown of risk factors described in Note 6.

The carrying value, excluding the CECL Reserve, of

the Company’s loans held at carrying value within each risk rating is as follows:

of Risk Rating

December 31, 2024

following table summarizes the activity in the investment during the year ended December 31, 2025:

Schedule of Activity in Investment

Initial recognition at fair value

(September 30, 2025)

Proceeds from redemption

Impairment charges

Observable price adjustments

Balance, December 31, 2025

of December 31, 2025, the investment is classified as a long-term asset on the consolidated balance sheet and continues to be measured

in accordance with ASC 321.

Any future gains or losses resulting from dispositions or impairments will be recognized in Other Income

(Expense) in the consolidated statements of operations.

7 – Prepaid Expenses

expenses as of December 31, 2025 and December 31, 2024 consists of the following:

Schedule of Prepaid Expenses

Ended December 31,

Prepaid expenses

Current portion

Total non-current portion

Company maintains several insurance policies.

In addition, in connection with the Company’s de-SPAC transaction, the Company obtained

a Directors and Officers liability run-off policy providing coverage through September 2028.

connection with the September 30, 2025 recapitalization, the Company issued 1,063

shares of Series B Convertible Preferred Stock and accompanying Series B Warrants to purchase 68,453

shares of Common Stock to three independent service providers in exchange for professional and marketing services to be rendered

through September 30, 2027.

The instruments were measured at grant-date fair value of approximately $ 0.8

million using a third-party valuation specialist and are classified within stockholders’ equity.

The fair value was recorded

as a prepaid consulting asset and is being amortized to professional services expense on a straight-line basis over the two-year

service term.

As of December 31, 2025, the unamortized balance was approximately $ 0.3

There are claw back features for certain consultants as of December 31, 2025, and the prepaid balance is approximately $ 0.2

September 2024, the Company entered into a six-month marketing services agreement with an independent third-party marketing services

provider for social media, investor engagement, and influencer-related marketing services covering the period September 4, 2024 through

March 3, 2025.

Compensation consisted of $ 0.2

million in Common Stock, valued at the Nasdaq closing price

on September 3, 2024, and a $ 0.1 million

cash marketing budget.

The stock-based portion was recorded as a prepaid asset and amortized to marketing expense on a straight-line

basis over the service term.

As of December 31, 2024, the unamortized balance was approximately $ 0.1

The arrangement was fully amortized by March 3, 2025.

8 - Loan Portfolio Indemnification Obligations

Under the Second Amended CAA, the

Company indemnifies PCCU for up to 65% of Default-Related Losses on PCCU’s CRB loan portfolio.

The Agreement has a stated

effective date of October 1, 2025.

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.

the Company has given effect to the Second Amended CAA from October 1, 2025, consistent with ASC 606 contract modification guidance.

The obligation is recognized as two independent,

coexisting liabilities that do not offset each other:

(i) a noncontingent stand-ready guarantee liability under ASC 460, measured at

fair value at inception, and (ii) a contingent expected credit loss liability under ASC 326-20, representing the Company’s up to

65% share of estimated lifetime expected credit losses on the PCCU CRB portfolio.

Each liability is recognized with a corresponding contract

asset under ASC 340-40-25-2, as the indemnification costs are directly related to the Agreement and are expected to be recovered through

the Company’s up to 65% share of loan program income.

The net Day 1 equity impact is zero.

The following table summarizes the October 1, 2025, inception date, consolidated

balance sheet impact of ASC 460 and ASC 326.

Schedule of Balance Sheet Impact

Contract asset

Financial indemnification liability

Stand-ready guarantee liability

ASC 460 - Guarantee

The issuance of a guarantee imposes a noncontingent

obligation to stand ready to perform;

initial recognition is required at inception regardless of whether payment is probable.

The stand-ready

liability is recognized separately from the ASC 326 liability.

The stand-ready liability is measured at fair value

at inception under ASC 820-10 using a market-based insurance pricing approach, classified as Level 3 due to the absence of observable

market inputs for cannabis lending guarantees.

The fair value of a guarantee at inception reflects the premium that a market participant

(analogized to a specialty insurance carrier) would charge in an arm’s-length transaction to underwrite the same risk.

direct market comparable exist for cannabis CRB loan portfolio guarantees, management estimated the standalone selling price by constructing

the premium components a specialty financial guarantor would require.

The fair value incorporates three components:

(a) the expected loss

element, representing the probability-weighted losses the guarantor expects to absorb;

(b) a stand-ready risk premium, representing the

additional compensation a market participant would require for uncertainty, volatility, and the uncapped nature of the commitment beyond

expected losses;

and (c) a time value adjustment.

Key Level 3 inputs are as follows:

of Significant Unobservable Input

Significant Unobservable Input

Pooled Probability of Default or PD (Ratings 2–5)

Pooled Loss Given Default or LGD (inclusive of 13% cannabis qualitative premium)

Tranche C PD (Rating 9, individually evaluated)

Tranche C LGD on uncollateralized gap

Stand-ready risk premium loading

120% of expected loss

Discount rate

Weighted average pay out year – Tranche A

Weighted average pay out year – Tranche B

Weighted average pay out year – Tranche C

Weighted average pay out year – Stand Ready Premium

The maximum potential number of future payments under

the guarantee is approximately $ 33.8 million, representing 65 % of the total outstanding CRB loan portfolio balance.

The indemnification

percentage is subject to reduction under the Agreement’s Listing-Related Adjustment Clause.

The stand-ready guarantee liability is reduced through amortization on a straight-line basis over three years, representing

the weighted average life of the underlying loan portfolio at inception.

The release period and pattern are reassessed at least annually

and will be adjusted prospectively if material changes in portfolio composition, paydowns, or maturities indicate that the weighted average

life assumption is no longer appropriate.

The corresponding contract asset is amortized on the same basis as operating expense partially offset

by the liability release to income each period.

ASC 326-20 - Financial Indemnification Liability

Financial indemnification liability

are estimated using a PD × LGD framework segmented by PCCU’s internal risk rating scale.

Management uses PCCU’s

reserve methodology as a baseline and independently evaluates key assumptions, with adjustments where management’s estimates

differ from PCCU’s.

The cannabis industry specific risk is reflected through a 16.6% qualitative LGD premium and

management’s independent assessment of Tranche C.

indemnified portfolio is segmented into three tranches.

Loans rated 9 or 10 are individually evaluated rather than included in the

pooled analysis:

Schedule of Expected Credit Loss Liability

Tranche A - Pass Rated

rates 0.453 % – 1.81 %

Tranche B - Elevated Risk

rates 3.17 % – 9.21 %

Tranche C - Specific Risk

Individual evaluation

There is a single loan in Tranche C that is individually

evaluated due to its past-maturity status (original maturity July 2024) and commercial and industrial or C&I structure secured solely by a UCC filing on business

assets with certain personal guarantees.

Management applied a 35% PD and 50% LGD on the uncollateralized gap of approximately $ 3.4 million.

Loans in the portfolio are secured primarily by real

estate used for cannabis-specific purposes, including cultivation facilities, processing facilities, and retail dispensaries, and in certain

cases by business assets under UCC filings.

Because cannabis-use properties have limited alternative-use marketability under current federal

law, management applies a two-step discount to collateral values:

(i) elimination of the cannabis license premium (the “green tax”),

reflecting that a non-cannabis buyer would not ascribe value to the cannabis operating license embedded in the appraised value;

a reduction to the remaining value to reflect proceeds realizable from a liquidation sale to a non-cannabis buyer.

This methodology results

in adjusted portfolio collateral of approximately $ 44.1 million against a gross balance of $ 52.1 million.

The portfolio has experienced zero credit losses since

program inception.

Management supplements this limited loss history with cannabis industry benchmarks and peer data.

Cannabis industry-specific

risk including 100% single-industry concentration, Schedule I federal status, and collateral marketability constraints is reflected through

an embedded 16.6% qualitative LGD premium across all pooled tranches.

Expected credit losses are estimated using historical

loss rates derived from a five-year lookback period, reflecting 2 restructured loans out of 28 over that period.

Management determined that

reasonable and supportable forecasts of future economic conditions beyond the historical loss experience could not be made for this portfolio,

given its limited loss history and the significant uncertainty surrounding the cannabis regulatory and legal environment.

the historical loss rates are applied without forward-looking adjustment, with immediate reversion to historical rates.

The financial indemnification liability is remeasured quarterly;

are recognized as credit loss expense or income per ASC 326-20-35-8.

The inception-date contract asset is reduced as underlying loans

pay down or mature and is not subject to straight-line amortization.

The 65% indemnification percentage is subject to reduction under

the Agreement’s Listing-Related Adjustment Clause if the Company fails to maintain NASDAQ listing standards.

A reduction would result

in a partial release of the ASC 460 liability to income, a downward remeasurement of the financial indemnification liability, and an impairment assessment

of the related contract assets.

For the year ended December 31,

2025, the Company recognized a reversal of provision of $ 0.2

million, representing the systematic release of the ASC 460 stand-ready guarantee liability computed over the

weighted-average remaining life of three years of the covered CRB loan portfolio.

As of December 31, 2025, the Company did not

change its financial indemnification liability, as such there was no impact on the consolidated statements of operations.

As of December 31, 2024, there was no financial indemnification liability

as the Company ceased indemnifying the loan portfolio subject to the first amendment to the PCCU CAA.

As of December 31, 2024, the Company

favorably reversed a $ 1.4 M indemnification liability.

For the period between January 1, 2025 and September 30, 2025, the Company did not

indemnify loan portfolio.

following table summarizes the changes of the contract asset for the year ended December 31, 2025 and December 31, 2024:

of Contract Asset

For the Year Ended

December 31, 2025

Indemnification

As of December 31, 2024, the Company had no indemnified loans outstanding.

However, as of December 31, 2023, the Company had indemnified a total of twenty loans, three of which individually represented more than

10% of the total balance of indemnified loans.

The schedule below details outstanding indemnified

amounts funded by PCCU and categorized as either collateralized loans or unsecured loans and lines of credit as of December 31, 2024 and

For the Year Ended

December 31, 2024

of Outstanding Amounts

Secured term loans

Unsecured loans and lines of credit

Total loans funded by PCCU

As of December 31, 2023, secured loans carried interest

rates ranging from 8.00 % to 13.00 %, while unsecured loans and lines of credit had interest rates between 10.00% and 12.50%.

Additionally,

unsecured lines of credit had an incremental availability of $ 996,958 as of December 31, 2023.

For the loans outstanding as of December 31, 2023,

SHF had agreed to indemnify PCCU for losses on certain PCCU loans.

The indemnity liability reflects SHF management’s estimate of

probable credit losses inherent under the agreement as of the balance sheet date.

The Company’s estimated indemnity liability on

the reporting date was calculated in accordance with the allowance for credit loss and indemnity liability policies described in Note

As per the Amended CAA, effective December

31, 2024, the Company no longer serves as a guarantor of credit losses to PCCU, accordingly reduced the indemnity liability on loans funded

by PCCU to $ 0 at December 31, 2024.

The indemnity liability activity are as follows:

of Indemnity Liability

Beginning balance

Cumulative effect from adoption of CECL

(Benefit) expense

( 1,382,408 )

Initial recognition as per Second Amended CAA

Ending balance

As of December 31, 2023, one loan had been classified

as nonaccrual.

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

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

During the second quarter of 2024, the company received

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

Credit quality of indemnified loans:

As part of the on-going monitoring of the credit quality

of the Company’s indemnified loan portfolio, management tracks credit quality indicators based on the loan payment status on monthly

The Company continuously evaluates the credit quality of each indemnified loan by assessing the risk factors and assigning a risk

rating based on a variety of factors.

Risk factors include property type, geographic and local market dynamics, physical condition, projected

cash flow, loan structure and exit plan, loan-to-value ratio, fixed charge coverage ratio, project sponsorship, and other factors deemed

Based on a 10-point scale, the Company’s loans are rated “0” through “10,” from less risk to

greater risk, which ratings are defined as follows:

Free of repayment risk.

The loan is fully guaranteed by the full faith and backing of the US Government or entirely secured by cash controlled by SHF.

Highest Quality

High caliber loan with the lowest risk of default.

Significant excess cash flow after debt service and moderate to low leverage.

High quality loan that carry’s a low risk of default.

Strong cash flow and relatively few negative individual risk factors.

Loans with lower-than-average level of risk.

Excess cash flow and other factors contributing to the overall low level of risk in the loan.

Risk factors may be mixed with some negative and some positive aspects, but the overall rating will indicate an average level of risk.

Loans in this category have the maximum level of risk that can be accepted while still recommending a new loan for origination.

The loan risk factors may contain multiple negative factors, but they are generally outweighed by the positive aspects of the loan.

There is a temporary and curable condition resulting in a lower risk rating.

Special Mention

There is a potential weakness that may result in the deterioration of the prospect of repayment that are not temporary and may require additional collection or workout efforts.

Loans in this category are inadequately protected by the current net worth and paying capacity of the obligors or of the collateral pledged and have well-defined weaknesses that jeopardize the liquidation of the debt with distinct possibility of loss.

SHF may be required to advance additional funds to manage the loan.

Escalated collection activities such as foreclosure have been scheduled with anticipated losses up to 20% of the outstanding balance.

Collection or liquidation in full highly questionable and improbable.

Escalated collection activities such as foreclosure have commenced with anticipated losses from 20% to 50% of the outstanding balance.

Uncollectable loans.

A complete write-off is imminent although a partial recovery may be affected in the future.

The carrying value, excluding the CECL Reserve, of

the Company’s indemnified loans held at carrying value within each risk rating is as follows:

of Indemnified Loans Risk Rating

The provision for credit losses (benefit) on the statements

of operations consists of the following activity for the years ended December 31, 2024 and December 31, 2023:

of Provision for Loan Losses

Commercial real estate loans

Indemnity liability

Commercial real estate loans

Indemnity liability

December 31, 2024

December 31, 2023

Commercial real estate loans

Indemnity liability

Commercial real estate loans

Indemnity liability

Credit loss (benefit)

Property and equipment, net

Property and equipment consist of the following:

of Property and Equipment

Office furniture

Property and equipment, gross

accumulated depreciation

Property and equipment, net

Depreciation expense was $ 81,066 and $ 173,828 for

the years ended December 31, 2024, and 2023, respectively.

party transactions

PCCU is considered a related party as it holds a significant

ownership interest in the Company, is our most significant financial institution customer, serves as the Company’s sole lending financial institution, is the counterparty to the PCCU Note, and is where we maintain the majority of our deposits.

The agreements between PCCU and

the Company are as follows:

Account Servicing Agreement

The Company had an Account Servicing Agreement with

SHF provides services as per the agreement to CRB accounts at PCCU.

In addition to providing the services, SHF assumed the costs

associated with the CRB accounts.

These costs include employees to manage account onboarding, monitoring and compliance, rent and office

expense, insurance and other operating expenses necessary to service these accounts.

Under the agreement, PCCU agreed to pay SHF all revenue

generated from CRB accounts.

Amounts due to SHF were due monthly in arrears and upon receipt of invoice.

This agreement was replaced and

superseded in its entirety by the PCCU CAA, which was entered into on March 29, 2023, and later amended and restated on December 31, 2024.

Support Services Agreement

On July 1, 2021, SHF entered into a Support Services

Agreement with PCCU.

In connection with PCCU hosting the depository accounts and the related loans and providing certain infrastructure

support, PCCU received (and SHF paid) a monthly fee per depository account.

In addition, 25 % of any investment income associated with

CRB deposits is paid to PCCU.

This agreement was replaced and superseded in its entirety by the PCCU CAA, which was entered into on March

29, 2023, and later amended and restated on December 31, 2024.

Loan Servicing Agreement

Effective February 11, 2022, SHF entered into a Loan

Servicing Agreement with PCCU.

The agreement sets forth the application, underwriting and approval process for loans from PCCU to CRB

customers and the loan servicing and monitoring responsibilities provided by both PCCU and SHF.

PCCU received a monthly servicing fee

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

For the loans that are

subject to this agreement, SHF originated the loans and performed all compliance analysis, credit analysis of the potential borrower,

due diligence and underwriting and all administration, including hiring and incurring the costs of all related personnel or third-party

vendors necessary to performed these services.

Under the Loan Servicing Agreement, SHF agreed to indemnify PCCU from all claims related

to default-related credit losses as defined in the Loan Servicing Agreement.

This agreement was replaced and superseded in its entirety

by the PCCU CAA, which was entered into on March 29, 2023, and later amended and restated on December 31, 2024.

Commercial Alliance Agreement (the “PCCU CAA”)

On March 29, 2023, the Company and PCCU entered into the PCCU CAA.

Agreement sets forth the terms and conditions of the lending and account-related services, governing the relationship between the Company

The PCCU CAA replaces and supersedes, in their entirety, the following agreements entered into between the aforementioned parties:

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

the Second Amended

and Restated Account Servicing Agreement (“the “Account Servicing Agreement,” dated May 23, 2022, effective February

11, 2022) and the Second Amended and Restated Support Services Agreement (the “Support Agreement,” dated May 23, 2022, effective

February 11, 2022).

The PCCU CAA sets forth the application, underwriting, loan approval, and

foreclosure process for loans from PCCU to borrowers that are cannabis-related businesses and the loan servicing and monitoring responsibilities

provided by the Company and PCCU.

In particular, the PCCU CAA provides for procedures to be followed upon the default of a loan to ensure

that neither the Company nor PCCU will take title to or possession of any cannabis-related assets, including real property, that may be

collateral for a loan funded pursuant to the PCCU CAA.

Under the PCCU CAA, the PCCU has the right to receive monthly fees for managing

For SHF-serviced loans, which are CRB loans provided by the PCCU but primarily handled by SHF, a yearly fee of 0.25 % of the remaining loan balance is applied.

On the other hand, loans both financed and serviced by the PCCU are charged a yearly fee of 0.35 % on their outstanding balance.

These fees are calculated using the average

daily balance of each loan for the preceding month.

In addition, under the PCCU CAA the Company’s is obligated to indemnify PCCU

from certain default-related loan losses.

Furthermore, the PCCU CAA provides

for certain fees to be paid to the Company for certain identified account related services to include:

all cannabis-related income, including

all lending-related income (such as loan origination fees, interest income on CRB-related loans, participation fees and servicing fees),

investment income, interest income, account activity fees, processing fees, flat fees, and other revenue generated from cannabis and multi-state

hemp accounts that are hosted on PCCU’s core system for a monthly fee equal to $30.96 per account in 2022, $25.32-$27.85 per account

in 2023, and $26.08-$28.69 in 2024.

In addition, regarding CRB deposits held at PCCU, SHF pays PCCU a fee of 25% of the related income

earned from investment and interest on these deposits, excluding interest income on loans funded by PCCU.

Finally, under the PCCU CAA, PCCU will continue to allow its ratio of CRB-related deposits to total assets to equal at least 60% unless otherwise

dictated by regulatory, regulator or policy requirements.

The initial term of the PCCU CAA is for a period of two

years, with a one-year automatic renewal unless a party provides one hundred twenty days’ written notice prior to the end of the

Up to the third quarter of 2023, our investment earnings

were solely from interest on deposits at the Federal Reserve Bank, capped at the earnings accrued by PCCU from its reserves.

a strategic shift in the fourth quarter of 2023 led us to adopt Federal Reserve’s interest rates applied to the daily average balance

of SHF customer deposits, with certain exclusions.

This method, applied retroactively from the beginning of 2023, resulted in incremental

revenue of $ 549,000 recognized in the fourth quarter.

Under our PCCU CAA, we are obligated to remit 25 % of the investment

hosting fees to PCCU based on this income.

The schedule below demonstrates the ratio of CRB related

loans funded by PCCU to the relative lending limits:

of Demonstrated Deposit Capacity

current portion

Total non-current portion

following table summarizes the changes of the liabilities for the year ended December 31, 2025 and December 31, 2024:

Summary of Movement of

the Year Ended

December 31, 2025

the Year Ended

December 31, 2024

CRB related deposits

Beginning balance

Initial recognition as per

Second Amended CAA

( 1,393,131 )

Capacity at 60%

PCCU net worth

Capacity at 1.3125

Limiting capacity

PCCU loans funded

Amounts available under lines of credit

Incremental capacity *

* If the loans funded by PCCU exceed the limiting capacity, the PCCU CAA specifies that PCCU will be

unable to fund additional loans until the incremental capacity is positive.

On December 31, 2024, the Company and PCCU entered

into an Amended CAA, extending the term through December 31, 2028,

with automatic two-year renewal periods unless a party provides written notice of non-renewal at least 12 months before the current term

Key modifications under the Amended CAA include:

· Elimination of Indemnification Obligations:

is no longer required to indemnify PCCU for any loan-related losses under either the original or future agreements.

· Elimination 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.

· Investment 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.

· Loan 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) Ratio.

I f 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.

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.

The revenue from the PCCU CAA recognized in the statements

of operations consists of the following for the years ended December 31, 2024, and December 31, 2023:

of Revenue from Operations

December 31, 2024

December 31, 2023

Account servicing agreement

Commercial Alliance Agreement

The operating expenses from the PCCU CAA recognized

in the statements of operations consists of the following for the years ended December 31, 2024, and December 31, 2023:

of Operating Expense from Operations

December 31, 2024

December 31, 2023

Support services agreement

Loan servicing agreement

Commercial Alliance Agreement

The outstanding balances associated with the PCCU

disclosed in the balance sheet are as follows:

of Outstanding Balances from Balance Sheet

December 31, 2024

December 31, 2023

current portion

non-current portion

following table presents the Company’s revenue disaggregated by type for the years ended December 31, 2025 and 2024:

Schedule of Disaggregated Revenue

Ended December 31,

Account fee income

Loan program income

Investment income

Safe Harbor Program income

fee income consists of fees earned from cannabis-related businesses maintaining accounts with the Company’s financial institution

partners, including deposit account fees, account activity fees, and onboarding income.

These fees are recognized periodically in accordance

with the fee schedules established with financial institution partners.

Account fee income also includes merchant income earned through

referral arrangements with third-party payment processors, under which the Company receives a percentage of net revenue generated by

referred merchants, recognized as earned.

program income represents the Company’s allocated share of interest earned on cannabis-related business loans originated by PCCU.

Under the First Amended Commercial Alliance Agreement, effective January 1, 2025, the Company’s share of loan program income is

determined by a loan yield allocation formula that incorporates the Constant Maturity U.S.

Treasury Rate published by the Federal Reserve,

along with a proprietary risk rating formula to determine the allocation between the Company and PCCU.

Loan program income is recognized

over the loan term as earned.

income represents the Company’s share of interest earned on net investable cannabis-related business deposit balances held at PCCU,

recognized monthly based on the average net daily deposit balance.

Under the CAA, investment income was reduced by an investment

hosting fee paid to PCCU.

Under the First Amended CAA, effective January 1, 2025, the hosting investment fee was eliminated and the Company

receives all investment income earned on CRB funds invested on its behalf by PCCU.

Harbor Program income represents fees earned under the Company’s Master Program Agreement, which grants licensees a non-exclusive,

non-transferable right to implement and utilize the Safe Harbor Program.

Revenue is recognized over the term of the agreement as the

performance obligation is satisfied.

10 - Related Party Transactions

Company identifies related parties in accordance with ASC 850 and Rule 1-02(u) of Regulation S-X.

Colorado Credit Union (“PCCU”) - Related Party Status

is a related party because it held approximately 25.2 % and 38.8 % of the Company’s Common Stock as of December 31, 2025 and 2024,

respectively.

PCCU is also the largest holder of the Company’s Series B Convertible Preferred Stock (approximately 43% of outstanding

shares and associated warrants) and holds the majority of the Company’s cash deposits.

These factors give PCCU the ability to significantly

influence the Company’s management and operating policies.

Cancellation Agreement

September 30, 2025, the Company and PCCU entered into a Debt Cancellation Agreement under which the approximately $ 10.7 million outstanding

principal balance on the Senior Secured Promissory Note (originally dated March 29, 2023) was fully satisfied.

In exchange, PCCU received:

shares of Series B Convertible Preferred Stock;

Series B Warrant to purchase 865,200 shares of Common Stock at an exercise price of $ 7.7644

conversion and warrant exercise rights are subject to a 4.99 % beneficial ownership cap.

See Note 11 for the accounting treatment of this

Alliance Agreement (“CAA”) - Major Customer Concentration

Company derives substantially all of its revenue from services provided to PCCU.

Revenue under the CAA was $ 6.7 million and $ 12.7 million represented 86.7 %

and 83.5 % of total revenue for the years ended December 31, 2025 and 2024, respectively.

Amounts due from PCCU represented 97.0 % and

87.8 % of total accounts receivable at those dates.

The loss of, or a material change to, this relationship could have a material adverse

effect on the Company’s results of operations and financial condition.

history and key terms:

Schedule of Agreement History and Key Terms

servicing fees ($26.08–$28.69/month in 2024);

Company indemnified PCCU against loan losses;

investment income split 75% Company

extended to December 31, 2028;

indemnification eliminated;

per-account fees replaced by a fixed asset hosting fee (0.01 × average

daily deposit balance);

Company receives 100% of investment income on CRB funds;

loan program income split introduced using a Constant

Maturity Treasury-based yield allocation formula which was approximately 35%.

October 1, 2025

economic terms agreed on or about October 1, 2025, following completion of the September 2025 Recapitalization;

written agreement

formally executed on February 4, 2026 following resolution of procedural and documentation matters only.

Term extended to December

Company’s loan program income share increased from approximately 35% to up to 65%;

indemnification reinstated at

the Company’s 65% income share, supported by a minimum cash reserve tied to PCCU’s financial indemnification liability

asset hosting fee changed to a graduated (tiered) structure;

NASDAQ compliance provision added (see below).

compliance provision.

If maintaining the Company’s NASDAQ listing requires a reduction in its indemnification percentage, the

loan program income share will adjust downward by a corresponding amount.

The Company is actively monitoring its NASDAQ compliance obligations

in connection with this provision.

See Note 20 - Commitments and Contingencies.

Although the Second Amended CAA was formally executed on February 4, 2026, after the balance sheet date, the Company

and PCCU reached agreement on the material economic terms on or about October 1, 2025, following completion of the September 2025 Recapitalization.

The intervening period between October 1, 2025 and the February 4, 2026 execution date 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, in accordance with ASC 606-10-25-10 through 25-13, and the agreement’s financial statement impacts are treated as a Type 1 recognized

subsequent event under ASC 855-10-25-1, as the economic terms relate to conditions existing as of December 31, 2025.

Accordingly, the financial effects were recognized in the financial statements for the year ended December 31, 2025, including:

retroactive reduction in asset hosting fees of approximately $ 0.06 million (difference between

the First Amended CAA flat rate of 1.00% and the tiered rates under the Second Amended CAA

for Q4 2025);

● Recognition

of approximately $ 0.4 million in incremental loan program income for Q4 2025, reflecting

the increase in the Company’s share from approximately 35% up to 65%.

Party Balances

The following amounts with PCCU are included in the

consolidated balance sheets:

Schedule of Related Party Balances from Balance Sheet

Cash and cash equivalents

Accounts receivable

Accounts payable

Senior Secured Promissory Note (Refer to Note 9 to the financial statements below)

Of the $ 2.3 million and $ 4.9 million of cash and cash

equivalents on December 31, 2024 and December 31, 2023, respectively, $ 2.2 million and $ 4.6 million of the cash and cash equivalents,

respectively, were held in deposit accounts at PCCU.

Issuance of shares to PCCU

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

the following definitive transaction documents to settle and restructure the deferred obligation:

A five-year 5

Senior Secured Promissory Note (the “PCCU Note”) in the principal amount of $ 14,500,000

bearing interest at the rate of 4.25 %

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

in substantially all of the assets of the Company.

The Company has repaid $ 3.5

million as of December 31, 2024.

A Securities Issuance Agreement, pursuant to which the Company issued 560,000 shares of the Company’s Class A Common Stock to PCCU.

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

PCCU holds 1,080,807 shares of the company as of December 31, 2024, representing a 39 % holding.

The Registration Rights Agreement requires the Company to register the Shares for resale pursuant to the Securities Act of 1933, as amended (the “Securities Act”);

and the Lock-Up Agreement restricts PCCU from transferring the Shares until the earlier of (i) six (6) months after the date of the Securities Issuance Documents or (ii) the consummation of a transaction with an unaffiliated third party in which all of the Company’s stockholders have the right to exchange their shares of Class A Common Stock for cash, securities, or other property;

The PCCU CAA that sets forth the terms and conditions of the lending-related and account-related services governing the relationship between the Company and PCCU which supersedes the Loan Servicing Agreement, as well as the Amended and Restated Support Services Agreement and the Amended and Restated Account Servicing Agreement.

Senior Secured

Promissory Note

of Senior Secured Promissory Note

December 31, 2024

December 31, 2023

Senior Secured Promissory Note (current)

Senior Secured Promissory Note (long term)

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

definitive transaction documents to settle and restructure the deferred obligation following the Business Combination under which the

Company has issued the five-year Senior Secured Promissory Note (the “PCCU Note”) in the principal amount of $ 14,500,000 bearing

interest at the rate of 4.25 % and a Security Agreement, as referenced in Exhibit 3 of the Company’s Quarterly Report on Form 10-Q,

filed with the SEC on May 15, 2023, pursuant to which the Company will grant, as collateral for the PCCU Note, a first priority security

interest in substantially all of the assets of the Company.

The PCCU Note amount was to be paid in 54 installments

of $ 295,487 each, covering both principal and interest, starting from November 5, 2023.

For the period between March 29, 2023, and

October 5, 2023, the Company had paid only the interest portion.

On January 29, 2025, the Company and PCCU agreed

to a Letter Agreement to defer principal payments on the PCCU Note for February and March 2025, with interest payments continuing.

On March 1, 2025, the Company entered into the Amended PCCU Note, replacing the original note dated March 29, 2023 and the letter

The Amended PCCU Note has a principal balance of $ 10,748,408 ,

accruing interest at 4.25 %

annually, with interest-only payments until January 5, 2027, and full repayment by October 5, 2030.

The agreement maintains

PCCU’s first-priority security interest and enforces a DSCR of 1.4 to 1.0.

Upon the effective date of the Amended PCCU Note

and as of December 31, 2024, the Company reflected on its Consolidated Balance Sheet the unpaid balance due to PCCU as a non-current

repayment schedule for the outstanding principal balance as on December 31, 2024, is as follows:

of Outstanding Amount on Debt

During the first quarter of 2025, the Company

identified that its 2024 Debt Service Coverage Ratio (DSCR), based upon payment terms under the PCCU Note, measured on the balance

sheet date, fell below the required threshold, leading to a potential breach of the covenant under the terms of the PCCU Note.

DSCR covenant mandates that the Company maintain a minimum ratio of 1.4

assessed annually.

PCCU waived the potential covenant breach prior to the Amended PCCU Note

thus there was no event of default.

Management is actively monitoring the Company’s financial performance and liquidity position

to ensure compliance with all debt covenants in future periods.

The Company continues to evaluate operational and financial strategies

to strengthen its ability to meet its debt obligations.

underwriter fee

As part of the reverse acquisition of the Company

and NLIT, the Company executed a note on September 28, 2022 with EF Hutton related to PIPE financing under which the Company was obligated

to pay the principal sum of $ 2,166,250 on the following schedule:

(i) $ 715,750 on October 14, 2022, and (ii) $ 362,625 on each of October

31, 2022, November 30, 2022, December 31, 2022, and January 31, 2023.

The Company made the payment of its first installment

of $ 715,750 and defaulted on the remaining outstanding amounts.

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

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

has been accounted for in the “Consolidated Statements of Stockholders’ (Deficit) Equity”, as a component of additional

paid in capital.

The Company has non-cancellable operating leases

for facility space with varying terms.

All of the active leases for facility space qualified for capitalization under FASB ASC 842, Leases.

These leases have remaining lease terms between one 1

years and may include options to extend the leases for up to ten

The extension terms are not recognized as part of the right-of-use assets.

The Company has elected not to capitalize leases

with terms equal to, or less than, one year.

As of December 31, 2024, and December 31, 2023, net assets recorded under operating leases

were $ 703,524 and $ 859,861

respectively, and net lease liabilities were $ 874,834

and $ 1,007,993 , respectively.

The Company analyzes contracts above certain thresholds

to identify leases and lease components.

Lease and non-lease components are not separated for facility space leases.

The Company uses

its contractual borrowing rate to determine lease discount rates when an implicit rate is not available.

Total lease cost for the year

ended December 31, 2024 and December 31, 2023, included in Consolidated Statements of Operations, is detailed in the table below:

of Lease Cost and Right of Use Assets Related to Lease and Future Minimum Lease Payments

December 31, 2024

December 31, 2023

Operating lease cost

Short-term lease cost

Total Lease Cost

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

Senior Secured Promissory Note

Company evaluates its related party relationships at each reporting date in accordance with ASC 850 and SEC Regulation S-X Rule 4-08(k).

11- Senior Secured Promissory Note and Debt Cancellation Agreement with PCCU

outstanding amounts under the Senior Secured Promissory Note are as follows:

Schedule of Outstanding Amounts under Senior Secured Promissory Note

Senior Secured Promissory Note

Senior Secured Promissory

Note -long-term

Company and PCCU entered into a Senior Secured Promissory Note and Security Agreement (together, the “PCCU Note”) on March

29, 2023, under which PCCU agreed to lend $ 14.5 million to the Company.

March 1, 2025, SHF executed an Amended and Restated Senior Secured Promissory Note with PCCU, replacing the original note dated March

The principal balance on the amended note remained $ 10.7 million, accruing interest at 4.25 % annually.

This amended and restated

agreement allows for interest-only payments until January 5, 2027, postponing principal payments, with full repayment due by October

September 30, 2025, the Company entered into a Debt Cancellation Agreement with PCCU.

Under the terms of the Debt Cancellation Agreement,

the outstanding balance of $ 10.7 million due under the Loan Agreements was deemed fully repaid and satisfied.

In exchange, PCCU received:

shares of the Company’s Series B Convertible Preferred Stock, and

warrant (the “Series B warrant”) to purchase 865,200 shares of the Company’s Common Stock, subject to adjustment

as provided in the warrant agreement.

transaction was accounted for under ASC 470-50, Debt – Modifications and Extinguishments.

The fair value of the Series B Convertible

Preferred Stock and Series B Warrants to purchase Common Stock issued was estimated at $ 800 per unit, which represented the cash

price paid by unaffiliated third-party investors on the same day for identical instruments in accordance with ASC 505, Equity Issuances

for Non-Cash Consideration.

Because the total fair value of the equity instruments issued equaled the carrying amount of the debt extinguished,

the Company did not recognize a gain (loss) on extinguishment of debt.

As a result of the Debt Cancellation Agreement, there was no outstanding

balance on the Senior Secured Promissory Note as of December 31, 2025.

12- Convertible Promissory Notes

August 27, 2025 and September 9, 2025, the Company issued unsecured Convertible Promissory Notes (the “Notes”) to

accredited investors in two closings under identical terms.

The Notes had an aggregate principal amount of $ 0.7

million, an original issue discount (“OID”) of 20 %,

and a maturity date of September

The Company received aggregate cash proceeds of $ 0.6

million, with the $ 0.1

million difference representing the OID.

The Notes did not bear stated interest;

the OID represented the investors’ entire

yield and was recognized as interest expense over the term of the Notes under ASC 835-30.

September 30, 2025, prior to their maturity date, the Notes were exchanged for Series B Convertible Preferred Stock and Series B

Warrants to purchase Common Stock (together, the “Series B instruments”) in connection with the Company’s broader

recapitalization.

The Series B instruments were issued to the noteholders at $ 800

per unit, the same price paid by unaffiliated third-party investors for identical instruments on the same date.

transaction was accounted for as an extinguishment under ASC 470-50.

The carrying amount of the Notes at the exchange date was $ 0.7

fair value of the Series B instruments issued $ 0.8 million exceeded the carrying amount of the Notes extinguished $ 0.7 million.

Accordingly, the total financing cost associated with the Notes consisted of (i) the $ 0.1

million OID recognized as interest expense over the period from issuance to exchange, and (ii) the $ 0.1

million net loss on extinguishment recognized upon the exchange of the Notes for Series B instruments, reflecting the excess of the

fair value of equity issued over the carrying amount of the debt extinguished.

Company has a non-cancellable operating lease for its corporate office space in Golden, Colorado which qualifies for capitalization

under ASC 842 Leases.

As of December 31, 2025, the Golden, Colorado lease has a remaining term of approximately

three-and-two-quarter years and includes an option to extend for up to ten additional years;

however, the extension option is not

recognized as part of the right-of-use asset as it is not reasonably certain to be exercised.

As of December 31, 2025, and December

31, 2024, the net right-of-use asset “ROU” recorded under the operating lease was $ 0.5

million and $ 0.7

million, respectively, and the corresponding lease liability was $ 0.7

million and $ 0.9

million, respectively.

the third quarter of 2025, the property owner of the Golden, Colorado facility became subject to a court-appointed receivership.

the receivership period, the Company continued to occupy the premises and made all rental payments in accordance with the existing lease

During the fourth quarter of 2025, the receivership process concluded with the sale of the property to a new owner.

The Company’s

lease was assumed by the new property owner and continues in full force and effect under its existing terms and conditions.

in property ownership did not result in a lease modification, reassignment, or early termination, and had no material impact on the Company’s

operations or financial position.

Management evaluated the assumption of the lease by the new owner under ASC 842-10-35 and concluded

that the event did not constitute a lease modification requiring remeasurement.

No impairment of the right-of-use asset was identified

in connection with this matter.

of December 31, 2025, management has not identified any impairment indicators related to the ROU asset, and no changes to the lease

term or measurement have been recorded.

The lease was not modified as a result of the new land lord.

The Company will continue to

monitor the status of the receivership and evaluate whether the event results in a lease modification, remeasurement, or impairment

in future periods in accordance with ASC 842-10-35.

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

Lease and non-lease components are not separated

for facility space leases.

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

not available.

Lease cost for the year ended December 31, 2025, and December 31, 2024, included in consolidated statements of operations,

is as follows:

Schedule of Lease Cost

following represents the activity for the right of use assets:

Schedule of Right of Use Assets

Beginning balance

Additions to right-of-use assets

Amortization charge for the year

Lease modifications

Amortization charge for

Ending balance

Further information related to leases is as follows:

Weighted-average remaining lease term

Other information relating to the operating

lease is as follows:

Weighted average remaining lease term in years

Weighted average discount rate

Future minimum lease payments as of December 31, 2024 and December 31,

2023 are as follows:

minimum lease payments as of December 31, 2025 are as follows:

Schedule of Future Minimum Lease Payments

3 unchanged sentences

current portion

Non-current portion of lease liabilities

Disaggregated revenue

Revenue by type are as follows:

of Disaggregated Revenue

Year ended December 31

Account fee income

Investment income

Loan interest income

Safe Harbor Program income

Total Revenue

Account fee income is generated from businesses maintaining

accounts with the Company’s financial institution partners and includes deposit account fees, account activity fees, and onboarding

These fees are recognized periodically in accordance with the fee schedule established with financial institution partners.

Company also earns income from outsourced support services provided to financial institutions offering banking solutions to the cannabis

industry, with revenue recognized based on usage as specified in the agreements.

Loan interest income consists of interest earned on

both direct and indemnified loans under the PCCU CAA.

The Company utilizes a fixed percentage fee structure, under which financial institutions

receive a share of interest income from CRB-related loans.

Investment income is derived from interest earned

on the daily deposit balances of cannabis businesses held with the Company’s financial institution partners and is recognized monthly

based on the average net daily deposit balance.

The Safe Harbor Program provides financial institutions

with a non-exclusive, non-transferable right to implement and utilize the documented process for managing compliance requirements.

Revenue from account fee income, loan interest income,

and investment income is recognized at a point in time, while revenue from Safe Harbor Program income is recognized over time.

for all revenue streams, except for Safe Harbor Program income, are collected on a monthly basis.

Under the Safe Harbor Program, any difference

between amounts collected and revenue recognized as of the reporting date is recorded as contract assets and contract liabilities.

are applicable only to account fees collected from customers and are granted as part of the ongoing business relationship with the customer.

Under the Company’s PCCU CAA, the Company is

obligated to remit as a fee, 25 % investment hosting fees to PCCU based on income which is classified as “General and Administrative

Expenses” in the Consolidated Statements of Operations.

During the year ended December 31, 2024, PCCU’s contributions to the

Company’s revenues included $ 4,565,545 from deposits, activities, and client onboarding, $ 1,903,422 from investment income, and

$ 6,254,175 from loan interest income.

The associated expenses for these revenues were $ 452,371 for account hosting, $ 457,105 for investment

hosting fees, and $ 143,217 for loan servicing fees, all in accordance with the PCCU CAA, classified as “General and Administrative

Expenses” in the Consolidated Statements of Operations.

During the year ended December 31, 2023, PCCU’s contributions to the

Company’s revenues included $ 5,150,397 from deposits, activities, and client onboarding, $ 5,803,114 from investment income, and

$ 2,883,192 from loan interest income.

The related expenses for these revenue streams were $ 529,209 for account hosting, $ 1,445,517 for

investment hosting fees, and $ 81,577 for loan servicing fees, all in compliance with the Loan Servicing Agreement, classified as “General

and Administrative Expenses” in the Consolidated Statements of Operations.

and Contingencies

Contractual Commitments

In connection with the issuance of Class A Common

Stock to Abaca shareholders, the Company commits to registering the stock upon the exercise of Abaca Warrants if required by law or regulation

to ensure the shares can be sold without restrictive legends, known as the “Warrant Registration Requirement”.

requirement arise, the Company is obliged to file a registration statement with the SEC within 45 calendar days of notification of the

Warrant Registration Requirement.

The failure to file within this timeframe constitutes an event of default.

Moreover, the Company is

dedicated to making the registration statement effective as promptly as possible and maintaining its effectiveness, along with a current

prospectus, until the Warrants expire according to this Agreement’s terms.

In the event a registration statement triggered by a

Warrant Registration Requirement is not declared effective by the SEC within one year from its filing date, Warrant holders are entitled

to exercise their Warrants on a cashless basis from the 366th day post-filing until the statement becomes effective.

NASDAQ Listing Compliance

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.

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.

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.

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.

Legal and Related Matters

The Company is involved in, or has been involved in,

arbitrations or various other legal proceedings that arise from the normal course of its business.

The ultimate outcome of any litigation

is uncertain, and either unfavorable or favorable outcomes could have a material impact on the Company’s results of operations,

balance sheets and cash flows due to defense costs, and divert management resources.

The Company cannot predict the timing or outcome

of these claims and other proceedings.

With respect to the cases, described below, we evaluate the associated developments on a regular

basis and accrue a liability when we believe a loss is probable and the amount can be reasonably estimated.

Abaca legal case in Denver

October 17, 2024, the Company caused a Complaint to be filed in the District Court for the City and County of Denver, Colorado, captioned

SHF Holdings, Inc.

Daniel Roda, Gregory W.

Ellis, and James R.

Carroll , Case No.

2024CV33187 (Denver County District Court).

On November 21, 2024, in connection with the Company’s request, the Company caused the

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

the terms of the Merger Agreement.

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

Liquidity and Going Concern section.

On December 19, 2024, Daniel

Roda, Gregory W.

Ellis, and James R.

Carroll caused an answer and counterclaim to be filed

in response to the Company Complaint.

For additional details, p lease

refer to the section titled “Abaca legal case in Denver” in the Recent Updates above as well as the Company’s Current

Reports on Form 8-K filed with the SEC on October 18, 2024 and December 19, 2024.

Given the uncertainty of legal proceedings, the Company

will continue to monitor the litigation and assess any potential financial impact in accordance with ASC 450, Contingencies.

At this time,

no loss contingency has been recorded, as the potential impact cannot be reasonably estimated.

Basic net income (loss) per common share is calculated

by dividing the net income (loss) attributable to common stockholders by the weighted-average number of common shares outstanding during

the period, without consideration for potentially dilutive securities.

Diluted net income (loss) per share is computed by dividing the

net income (loss) attributable to common stockholders by the weighted average number of common shares and potentially dilutive securities

outstanding for the period.

For the Company’s diluted earnings per share calculation, the Company uses the “if-converted”

method for preferred stock and convertible debt and the “treasury stock” method for Warrants and Options.

Non-current portion

of lease liabilities

14 - Earnings Per Share

Basic net loss per common share

is calculated by dividing the net loss attributable to common stockholders by the weighted-average number of common shares outstanding

during the period, without consideration for potentially dilutive securities.

Net loss attributable to common stockholders represents

net loss adjusted for deemed dividends on preferred stock.

When the Company redeems shares of Series B Convertible Preferred Stock, the

excess of the cash redemption price paid over the carrying value of the shares redeemed is treated as a deemed dividend to the preferred

stockholders.

This deemed dividend is not recognized in the consolidated statements of operations but is deducted from net loss in computing

net loss attributable to common stockholders for purposes of the basic and diluted loss per share calculation.

Diluted net loss per share is computed by dividing

the net loss attributable to common stockholders by the weighted-average number of common shares and potentially dilutive securities outstanding

for the period.

For the Company’s diluted loss per share calculation, the Company uses the “if-converted method” for the Series

B Convertible Preferred Stock and the “treasury stock method” for warrants and stock options.

The Company applies the more dilutive

of the two-class method or the if-converted / treasury stock method for each class of potentially dilutive instruments.

Because the Company

incurred a net loss in both periods presented, all potentially dilutive securities have been excluded from the computation of diluted

net loss per share as their inclusion would be anti-dilutive.

Accordingly, basic and diluted weighted-average shares outstanding are identical

for both periods presented.

During the year ended December 31, 2025, the Company

redeemed 244 shares of its Series B Convertible Preferred Stock for total cash consideration of $ 0.5 million, pursuant to the mandatory

use-of-proceeds provision of its ELOC agreement.

The Series B Convertible Preferred Stock was originally issued at a fair value of $ 589

per share, reflecting the relative fair value allocation of the $800 per unit transaction price between the Series B preferred shares

and the accompanying Series B Warrants, based on standalone fair values determined using a Monte Carlo simulation model.

The redemption

price of $ 0.5 million exceeded the aggregate carrying value of the redeemed shares of $ 0.3 million by $ 0.2 million.

This excess represents

a deemed dividend to the preferred stockholders and has been deducted from net loss in computing net loss attributable to common stockholders

for purposes of loss per share.

The deemed dividend is a non-cash item and does not affect the Company’s net loss, stockholders’

equity (deficit), or cash flows from operations.

schedule of loss per shares, basic and diluted is as follows:

Schedule of Earning Per Shares, Basic and Diluted

For year Ended December 31

Ended December 31,

$ ( 2,160,998 )

$ ( 48,319,475 )

Weighted average shares outstanding – basic

Basic net loss per share

Weighted average shares outstanding – diluted

Diluted net loss per share

Deemed dividend on Series B Preferred Stock redemption

Net loss attributable to common stockholders

( 2,402,433 )

Weighted average shares outstanding – basic and diluted

Basic and diluted net loss per share

following is a schedule of the weighted average shares outstanding - basic and diluted, for the year ended December 31, 2025 and December

Schedule of Weighted Average Shares Outstanding - Basic and Diluted

Weighted average shares calculation – basic

December 31, 2024

December 31, 2023

Company public shares

Company initial stockholders

PCCU stockholders

Issuance of Equity for Marketing Services

Shares issued for Abaca acquisition

Restricted stock units issued

Conversion of Preferred stock

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

these awards would have had an anti-dilutive effect.

The following table reflects the awards excluded.

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

For year Ended December 31

Share based payments

Average Shares Calculation – Basic and Diluted

Weighted average shares

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

would have had an anti-dilutive effect.

The following table reflects the awards that were excluded from diluted net loss per share:

Schedule of Share-based Equity Awards and Warrants Excluded from Computation of Earnings

Shares to be issued to Abaca shareholders

Stock options

Conversion of Series B Convertible Preferred

Conversion of preferred stock

The holders of Series A Convertible Preferred Stock

shall be entitled to receive, and the Company shall pay, dividends on shares of Series A Convertible Preferred Stock equal (on an as-if-converted-to-Class-A-Common-Stock

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

on shares of the Class A Common Stock.

No other dividends shall be paid on shares of Series A Convertible Preferred Stock.

Purchase Agreement

On June 16, 2022, the Company entered into a Forward

Purchase Agreement (“FPA”) with Midtown East Management NL, LLC (“Midtown East”), which subsequently assigned

obligations to purchase 83,334 shares of Class A Common Stock each to Verdun Investments LLC (“Verdun”) and Vellar Opportunity

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

The collective acquisition involved 0.19

million shares of Class A Common Stock, with Midtown East, Verdun, and Vellar waiving their redemption rights.

The Company incurred costs

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

At the maturity of the FPA holders,

the parties will receive the value of their shares multiplied by the Forward Price.

The Forward Price is the Redemption Price, as defined

in Section 9.2(a) of the Counterparty’s Amended and Restated Certificate of Incorporation, filed by the Counterparty with the Secretary

of State of the State of Delaware on June 21, 2021.

The FPA holders will also receive an additional amount in cash or shares, at the Company’s

An early termination clause allows for the shares

to be sold on the open market, with any proceeds exceeding the Reset Price retained by the sellers.

The Reset Price is initially the Redemption

The Reset Price shall be adjusted on the first Scheduled Trading Day of each month, commencing on the first calendar month following

the closing of the Business Combination, to be the lowest of (a) the then-current Reset Price, (b) $ 200.00 , and (c) the VWAP Price of

the last ten (10) Scheduled Trading Days of the prior calendar month, but not lower than $ 100.00 .

However, if the Counterparty offers

and sells Shares in a follow-on offering or series of related offerings at a price lower than, or upon any conversion or exchange price

of currently outstanding or future issuances of any securities convertible or exchangeable for Shares being equal to a price lower than,

the then-current Reset Price (the “Offering Price”), the Reset Price shall be further reduced to equal the Offering Price.

Following a price reset in 2022 to $ 25 per share,

the FPA receivable was reduced from $ 37.9 million to $ 4.6 million.

As of December 31, 2024, there have been no transactions by the FPA

holders, and the value of the FPA receivable has remained unchanged.

The reconciliation statement of the Class A Common Stock held by

the parties is as follows:

15 - Forward Purchase Agreement

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

East”), which subsequently assigned obligations to purchase Common Stock each to Verdun Investments LLC (“Verdun”)

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

the “FPA Holders”).

Under the FPA, the FPA Holders agreed not to exercise their stock redemption rights in exchange for $ 7.3

million payable in stock or cash at the option of the Company

on or before September 28, 2025 (the “FPA Liability”).

Forward Purchase Receivable

FPA provided the Company with the right to receive the Reset Price, which is $ 25.00

per share as of June 30, 2025, if the FPA Holders elect to sell their shares prior to the agreement’s maturity on September

Upon sale, the FPA Holders are required to remit the Reset Price per share sold to the Company, and they retain any

proceeds in excess of the Reset Price.

If the shares are not sold before maturity, the Company will receive the shares back.

Company does not have control over the timing of any share sales and does not share in any price appreciation.

Reset Price was subject to monthly downward adjustment to the lowest of (a) the prior Reset Price, (b) $ 200.00 , and (c) the volume-weighted

average price (“VWAP”) of the Company’s shares over the ten most recent trading days of the prior month, but not below

Additionally, if the Company issues shares or convertible securities at a price lower than the then-current Reset Price, the

Reset Price was adjusted to match that lower offering price.

the FPA Holders sell shares prior to maturity, the Company was entitled to receive $ 25.00 per share sold.

As of March 31, 2025, the Company’s

stock closed at $ 4.2945 per share, and management considered that it was highly improbable that the FPA Holders will sell any shares

before the September 28, 2025 settlement date, as doing so would not be economically beneficial.

During the first quarter of 2025, the

Company reclassified the forward purchase receivable to additional paid-in capital, as the arrangement met the criteria for equity classification

under ASC 815-40 and ASC 480.

reconciliation statement of the Common Stock held by the FPA holders is as follows:

of Reconciliation Statement of Common Stock Held By FPA

Balance, December 31, 2023 and December 31, 2024

reclassification to additional paid-in capital

( 1,214,005 )

( 1,897,405 )

( 1,472,811 )

( 4,584,221 )

issuance of Series B Convertible Preferred Stock and Series B Warrants as

per the Exchange and Cancellation Agreements

Balance, December 31, 2025

Forward Purchase Derivative Liability

September 28, 2025, the Company was required to either (a) make a cash payment or (b) issue Common Stock sufficient to satisfy

the FPA derivative liability of $ 7.3 million.

However, in September 2025, each of the FPA holders agreed to Exchange and Cancellation

Agreements under which they irrevocably cancelled and terminated all of their rights under the FPA, extinguishing the Company’s

FPA derivative liability.

In return, the holders received Series B Convertible Preferred Stock and Series B Warrants to purchase Common Stock.

On September 30, 2025, the Company issued the following securities in full satisfaction of its FPA derivative liability:

Schedule of Forward Purchase Agreement

December 31, 2023

Shares sold during

the year ended

December 31, 2024

Name of the party

Public and Private Placement Warrants

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

Company has 287,500 Public warrants and 13,205 Private Placement Warrants.

The Public and Private Placement Warrants may only

be exercised for a whole number of Class A Common Stock.

The Public and Private Placement Warrants became exercisable

on September 28, 2022, the date of the Business Combination and will expire on September 28, 2027, or earlier upon redemption or liquidation .

No warrant will be exercisable for cash or on a cashless

basis, and the Company will not be obligated to issue any shares to holders seeking to exercise their warrants, unless the issuance of

the shares upon such exercise is registered or qualified under the securities laws of the state of the exercising holder, or an exemption

from registration is available.

Redemption of warrants become exercisable when the

price per share of Class A Common Stock equals or exceeds $ 360.00 .

Once the warrants become exercisable, the Company may redeem the warrants:

in whole and not in part;

at a price of $ 0.01 per warrant;

upon not less than 30 days’ prior written notice of redemption to each warrant holder;

if, and only if, the reported last sale price of the Class A Common Stock equals or exceeds $ 360.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like and certain issuances of Class A Common Stock and equity-linked securities) for any 20 trading days within a 30-trading day period commencing no earlier than the date the warrants become exercisable and ending on the third business day before the date on which the Company sends the notice of redemption to the warrant holders.

If and when the warrants become redeemable by the

Company, the Company may exercise its redemption rights;

this is also the case if the Company is unable to register or qualify the underlying

securities for sale under all applicable state securities laws.

If the Company calls the warrants for redemption,

management will have the option to require all holders that wish to exercise the Warrants to do so on a “cashless basis,”

as described in the warrant agreement.

The exercise price and number of shares of Class A Common Stock issuable upon exercise of the warrants

may be adjusted in certain circumstances including in the event of a stock dividend, or recapitalization, reorganization, merger or consolidation.

However, the warrants will not be adjusted for issuance of Class A Common Stock at a price below its exercise price.

Additionally, in

no event will the Company be required to net cash settle the warrants.

The private placement warrants are identical to the

public warrants, except that the private placement warrants and the Class A Common Stock issuable upon the exercise of the private placement

warrants were not transferable, assignable or saleable, subject to certain limited exceptions.

Additionally, the private placement warrants

are exercisable on a cashless basis and non-redeemable so long as they are held by the initial purchasers or their permitted transferees.

If the private placement warrants are held by someone other than the initial purchasers or their permitted transferees, the private placement

warrants will be redeemable by the Company and exercisable by such holders on the same basis as the public warrants.

PIPE Warrants

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

Company had 51,125 PIPE Warrants, as referenced in Exhibit 4.1 of the Company’s Current Report on Form 8-K, filed with the SEC on

October 4, 2022.

The PIPE Warrants have an adjusted exercise price

of $ 100.00 per share of Class A Common Stock to be paid in cash except if the shares underlying the warrants are not covered by an effective

registration statement after the six-month anniversary of the closing date, in which case cashless exercise is permitted.

The PIPE Warrants

are also subject to adjustment for other customary adjustments for stock dividends, stock splits and similar corporate actions.

Warrants are exercisable for a period of five years following the Closing, or September 28, 2027.

After exercise of a PIPE Warrant, the

Company may be required to pay certain penalties if it fails to deliver the Class A Common Stock within a specified period of time .

Abaca Warrants

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

Company issued 250,000 Abaca warrants, as referenced in Exhibit 2.2 of the Company’s Current Report on Form 8-K, filed with the

SEC on October 27, 2023.

The 250,000 Abaca warrants have an exercise price

of $ 40.00 per share of Class A Common Stock to be paid in cash.

An Abaca Warrant may be exercised only during the period commencing 1

year of the Effective Date and terminating five ( 5 ) years from the effective date of the registration statement.

The Company may, in its

sole discretion, settle the Abaca Warrant when exercised, in whole or in part, in cash in lieu of issuing shares of common stock underlying

The Company may elect to pay the Registered Holder in cash in the amount equal to the difference between the fair market

value of the Company’s Class A Common Stock on the date of exercise and the warrant price $ 40.00 multiplied by the number of shares

of Class A Common Stock.

The Company commits to promptly registering shares of Class A Common Stock issued upon Abaca Warrant exercises

if required by law, ensuring these shares can be sold without restrictions.

This registration must be filed within 45 days of receiving

a notification of such a requirement, with failure to do so constituting a default.

The Company will endeavor to keep the registration

effective until the Warrants expire.

If the registration is not effective within one year, Abaca Warrant holders may exercise their Warrants

on a cashless basis, receiving shares based on a defined fair market value calculation.

This process aims to facilitate the straightforward

and lawful exercise of the Abaca Warrants, ensuring the shares issued are readily tradable without the need for restrictive legends.

Fair value is defined as the price that would be received

to sell an asset or paid to transfer a liability in an orderly transaction between market participants.

The fair value hierarchy ranks

the inputs used in measuring fair value as follows:

Level 1 – Observable, unadjusted quoted prices in active markets

Level 2 – Inputs other than quoted prices included in Level 1 that are directly or indirectly observable for the asset or liability

Level 3 – Unobservable inputs with little or no market activity that require the Company to use reasonable inputs and assumptions

The Company uses fair value measurements to record

adjustments to certain financial assets and liabilities on a recurring basis.

The Company may be required to record certain assets at

fair value on a nonrecurring basis in specific circumstances, such as evidence of impairment.

Methodologies used to determine fair value

might be highly subjective and judgmental in nature;

Preferred Stock

At December 31, 2025, the

Series B Warrants to purchase Common Stock had an exercise price of $ 7.7644

per share and include customary anti-dilution and adjustment provisions.

The Company accounted for the issuance of the Series B

Convertible Preferred Stock and Series B Warrants as equity instruments under U.S.

exchange of the FPA obligation for Series B Convertible Preferred Stock and Series B Warrants was accounted for as an extinguishment

of a liability.

The equity instruments issued were measured at their fair value of $ 800 per

unit, consistent with the cash price paid by unaffiliated third-party investors for identical securities on the same

FPA Liability had been carried on the Company’s balance sheet at $ 7.3 million since December 31, 2022 and, if settled in the ordinary

course, would have required the Company to satisfy the amount due either in cash or through the issuance of Class A Common Stock.

September 30, 2025, all three FPA holders agreed to cancel and terminate all of their rights under the FPA in exchange for 5,002 shares

of Series B Convertible Preferred Stock and warrants to purchase 322,111 shares of Common Stock, valued at $ 800 per unit, consistent

with the price paid by unaffiliated third-party investors for identical instruments on the same date.

The aggregate fair value of the

equity instruments issued was $ 4.0 million, which was less than the $ 7.3 million carrying amount of the FPA derivative liability.

the Company recognized a gain on extinguishment of $ 3.3 million, which is included in Other Income (Expense) in the consolidated statements

of operations for the year ended December 31, 2025.

This transaction simultaneously preserved the Company’s cash and protected existing

stockholders from dilution.

the terms of the Series B Convertible Preferred Stock Purchase Agreement, each holder’s conversion rights are subject to a 4.99 %

beneficial ownership limitation, such that no holder may convert its Series B shares or exercise related warrants to the extent that

doing so would cause its ownership of the Company’s Common Stock to exceed 4.99 %.

This limitation may be increased to 9.99 %

upon 61 days’ written notice but may not be waived entirely.

As a result, the conversion and exercise rights of each of Verdun,

Midtown, and Vellar are limited at any given time to the extent that doing so would exceed the 4.99 % beneficial ownership threshold.

16 - Warrants

and Private Placement Warrants

of December 31, 2025, and December 31, 2024, the Company had 287,500 public warrants and 13,205 private placement warrants to purchase

Common Stock are outstanding, respectively, each with an adjusted exercise price of $ 230 per share.

public and private placement warrants may only be exercised for a whole number of Common Stock.

public and private placement warrants are exercisable and expire on September 28, 2027, or earlier upon redemption or liquidation.

warrant will be exercisable for cash or on a cashless basis, and the Company will not be obligated to issue any shares to holders seeking

to exercise their warrants, unless the issuance of the shares upon such exercise is registered or qualified under the securities laws

of the state of the exercising holder, or an exemption from registration is available.

of warrants will become effective when the price per share of the Common Stock equals or exceeds $ 360.00

Once the warrants become redeemable, the Company may redeem the warrants:

whole and not in part;

a price of $ 0.01 per warrant;

not less than 30 days’ prior written notice of redemption to each warrant holder;

and only if, the reported last sale price of the Common Stock equals or exceeds $ 360.00 per share (as adjusted for stock splits,

stock dividends, reorganizations, recapitalizations and the like and certain issuances of Common Stock and equity-linked securities)

for any 20 trading days within a 30-trading day period commencing no earlier than the date the warrants become exercisable and ending

on the third business day before the date on which the Company sends the notice of redemption to the warrant holders.

and when the warrant becomes redeemable by the Company, the Company may exercise its redemption rights;

this is also the case if the

Company is unable to register or qualify the underlying securities for sale under all applicable state securities laws.

the Company calls the warrants for redemption, management will have the option to require all holders that wish to exercise the warrants

to do so on a “cashless basis,” as described in the warrant agreement.

The exercise price and number of shares of Common

Stock issuable upon exercise of the warrants may be adjusted in certain circumstances including in the event of a stock dividend, or

recapitalization, reorganization, merger or consolidation.

However, the warrants will not be adjusted for the issuance of Common Stock

at a price below its exercise price.

Additionally, in no event will the Company be required to net cash settle the warrants.

private placement warrants are identical to the public warrants, except that the private placement warrants and the Common Stock issuable

upon the exercise of the private placement warrants were not transferable, assignable or saleable, subject to certain limited exceptions.

Additionally, the private placement warrants are exercisable on a cashless basis and non-redeemable so long as they are held by the initial

purchasers or their permitted transferees.

If the private placement warrants are held by someone other than the initial purchasers or

their permitted transferees, the private placement warrants will be redeemable by the Company and exercisable by such holders on the

same basis as the public warrants.

of December 31, 2025 and December 31, 2024, there were 51,125 outstanding PIPE warrants to purchase Common Stock.

PIPE warrants have an adjusted exercise price of $ 100.00 per share of Common Stock to be paid in cash except if the shares underlying

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

cashless exercise is permitted.

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

stock splits and similar corporate actions.

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

After the exercise of a PIPE Warrant, the Company may be required to pay certain penalties if it fails to deliver the Common Stock within a specified period of time.

of December 31, 2025, and December 31, 2024, the Company had 250,000 Abaca warrants outstanding, each exercisable to purchase one share

of the Company’s Common Stock at an exercise price of $ 40.00 per share, payable in cash.

The Abaca Warrants become exercisable

one year after the effective date of the registration statement covering the underlying shares and expire five ( 5 ) years after that date.

Company may, at its sole discretion, settle exercises of the Abaca warrants in either (i) shares of Common Stock or (ii) cash equal to

the intrinsic value of the Warrants (the difference between the fair market value of the Common Stock on the date of exercise and the

$ 40.00 exercise price, multiplied by the number of Warrants exercised).

November 10, 2025, the registration statement on Form S-1 covering the shares issuable upon exercise of the Abaca Warrants became effective,

thereby satisfying the Company’s commitment to register such shares for resale.

September 30, 2025, in connection with the issuance of the Company’s Series B Convertible Preferred Stock, the Company also

issued Series B Warrants to purchase an aggregate of 1,999,544

shares of Common Stock at an initial exercise price of $ 7.7644

per share, subject to adjustment.

Series B Warrants become exercisable on the date that is six months and one day after the effective date of the Company’s Form

S-1 registration statement filed on October 21, 2025 (the “Initial Exercisability Date”), and expire on the third anniversary

of the Initial Exercisability Date.

Each holder is subject to a 4.99 % beneficial-ownership limitation, which may be increased to up to

9.99 % upon 61 days’ prior written notice to the Company.

If a registration statement covering the resale of the underlying shares

is not effective at the time of exercise, the holder may elect to exercise the warrants on a cashless basis.

Series B Warrants include down-round and anti-dilution provisions under which the exercise price is subject to reduction if the Company

issues shares of Common Stock, or common stock equivalents, at a price below the then-current exercise price.

The exercise price

and/or number of warrant shares are also subject to automatic resets on the 60th, 90th, and 180th calendar days following the issuance

date, and upon standard corporate events such as stock splits, combinations, and stock dividends.

All automatic resets occur prior to

the Initial Exercisability Date;

accordingly, the exercise price and warrant share count in effect on that date will already reflect

any adjustments triggered during the pre-exercisability period.

Company evaluated the Series B Warrants under ASC 815-40 and ASC 480.

Management concluded that the warrants are indexed to the Company’s

own stock and satisfy all conditions for equity classification in stockholders’ equity.

In reaching this conclusion, management

(i) the beneficial-ownership limitation is a timing deferral and does not introduce a non-equity observable index;

down-round feature is disregarded in the indexation analysis under ASC 815-10-15-75A;

and (iii) the automatic reset provisions are fully

operative before the warrants become exercisable, such that the settlement amount upon exercise is determined solely by reference to

a fixed number of shares and a fixed exercise price, subject only to standard anti-dilution adjustments.

Because the Series B Warrants

are classified in equity, they will not be subsequently remeasured at fair value.

This treatment differs from the Company’s other

outstanding warrants which are classified as derivative liabilities and remeasured each reporting period (see Note 19).

aggregate fair value of each unit of Series B Convertible Preferred Stock and accompanying Series B Warrant was established at

representing the price paid by unaffiliated third-party investors in an arm’s-length transaction on September 30, 2025.

Because both instruments are recorded separately on the balance sheet, the Company allocated the $ 800

unit price between them on a fair value basis in accordance with ASC 470-20-30-5.

The fair value of each Series B Warrant was

estimated using a Monte Carlo simulation model provided by a third-party.

The model produced an estimated fair value of $ 211

per Series B Warrant and $ 589

per share of Series B Convertible Preferred Stock.

Both instruments are classified in permanent equity and will not be subsequently

17 - Financial Instruments

value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between

market participants.

The fair value hierarchy ranks the inputs used in measuring fair value as follows:

1 – Observable, unadjusted quoted prices in active markets

2 – Inputs other than quoted prices included in Level 1 that are directly or indirectly observable for the asset or liability

3 – Unobservable inputs with little or no market activity that require the Company to use reasonable inputs and assumptions

Company uses fair value measurements to record adjustments to certain financial assets and liabilities on a recurring basis.

may be required to record certain assets at fair value on a nonrecurring basis in specific circumstances, such as evidence of impairment.

Methodologies used to determine fair value might be highly subjective and judgmental in nature;

therefore, valuations may not be precise.

If the Company determines that a valuation

technique change is necessary, the change is assumed to have occurred at the end of the respective reporting period.

Assets and Liabilities Reported at Fair Value on

a Recurring Basis

Public Warrants:

Public warrants are recorded at fair value on a recurring

The Company obtains exchange traded price, of Level 1 inputs, based on observable data to value these warrants.

Private Placement Warrants:

Private Placement Warrants are recorded at fair value

on a recurring basis based upon an internal Company assessed value of these derivatives with Level 3 inputs, which are derived from the

Black-Scholes model.

PIPE Warrants:

PIPE Warrants are recorded at fair value on a recurring

basis based upon an internal Company assessed value of these derivatives with Level 3 inputs, which are derived from the Black-Scholes

Abaca Warrants:

Abaca Warrants are recorded at fair value on a recurring

If the Company determines that a valuation technique change is necessary, the change is assumed to have occurred at the end of the respective

reporting period.

and Liabilities Reported at Fair Value on a Recurring Basis

warrants are recorded at fair value on a recurring basis.

The Company obtains exchange traded price, of Level 1 inputs, based on observable

data to value these warrants.

Placement Warrants:

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

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

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

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

Warrants are recorded at fair value on a recurring basis.

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

Level 3 inputs, based on unobservable data derived from

the Black-Scholes model.

Third anniversary payment consideration:

Third anniversary payment consideration are recorded at fair value on a

recurring basis.

The Company values these derivatives based on third party reports for Level 3 inputs.

Level 3 inputs are based on unobservable

data The Company values these derivatives based on third party reports for Level 3 inputs.

Level 3 inputs are based on unobservable data

derived from the Monte Carlo Simulation model for 2024 and for 2023 the Black Scholes-Merton model.

Forward purchase option derivatives:

Forward purchase option derivatives are recorded at fair value on a recurring

In 2022, the Company values these derivatives based on third party reports for Level 3 inputs.

In 2023 and 2024, no significant

risk factors, such as volatility, expected term, reset price, or changes, were observed to affect the values of forward purchase option

The following tables summarize financial assets and

liabilities recorded at fair value on a recurring basis, by the level of valuation inputs in the fair value hierarchy on December 31,

2024 and December 31, 2023:

Schedule of Fair Value Assets and Liabilities Measured on Recurring Basis

Total Fair Value

Quoted Prices in Active Markets

Significant Other Unobservable Inputs

Total Fair Value

Quoted Prices in Active Markets

Significant Other

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

anniversary payment consideration:

third anniversary payment consideration was classified as a derivative liability under ASC 815, Derivatives and Hedging, and was recorded

at fair value on a recurring basis using Level 3 inputs.

On October 3, 2025, the third anniversary payment of $ 1.5 million, which was

due in October 2025, was settled in full through the issuance of 37,517 shares of Common Stock at a floor value of $ 40.00 per share at

the Company’s election.

As a result of this settlement, the liability was fully extinguished during the year ended December 31,

purchase option derivatives:

purchase option derivatives are recorded at fair value on a recurring basis.

On September 30, 2025, all three FPA holders entered into

Exchange and Cancellation Agreements with the Company, pursuant to which they irrevocably cancelled, waived, and terminated all of their

rights under the FPA in exchange for shares of Series B Convertible Preferred Stock and Series B Warrants to purchase Class A Common

This transaction extinguished the FPA derivative liability in its entirety and was accounted for as a debt extinguishment under

ASC 405-20, resulting in a gain on extinguishment of $ 3.3 million recognized in Other Income (Expense) for the year ended December 31,

following tables summarize financial assets and liabilities recorded at fair value on a recurring basis, by the level of valuation inputs

in the fair value hierarchy on December 31, 2025 and December 31, 2024:

Schedule of Financial Assets and Liabilities Recorded at Fair Value

December 31, 2025

12 unchanged sentences

Third anniversary payment consideration

Assets Measured at Fair Value on a Nonrecurring Basis

Assets that are measured at fair value on a nonrecurring

basis primarily comprises of property, plant and equipment, right-to-use assets, finite lived intangible assets and goodwill.

does not record these at fair value on a recurring basis, however, the carrying value of the assets may be reduced to fair value when

the Company determines that impairment has occurred.

As of December 31, 2024, each of the

Company’s finite-lived intangible assets were measured at fair value on a nonrecurring basis as part of the annual

impairment testing.

To assess the fair value, the Company utilized the Discounted Cash Flow (DCF) Method and the Guideline Public

Company (GPC) Method, incorporating an equally weighted enterprise value derived from both methods.

In contrast, as of December 31,

2023, the Company’s developed technology assets were measured at fair value on a nonrecurring basis using the Relief from

Royalty Method for the annual impairment test, providing an accurate reflection of market conditions and asset performance.

to note 4 - Goodwill and Finite-lived intangible assets).

The following table presents the carrying amounts

and fair values of financial instruments measured on a nonrecurring basis, by the level of valuation inputs in the fair value hierarchy,

as of December 31, 2024, and December 31, 2023:

of Carrying Amounts and Fair Values of Financial Instruments

As on December 31, 2024

Fair value measurement using

Market related intangible assets

Customer relationships

Developed technology

As on December 31, 2023

Measured at Fair Value on a Nonrecurring Basis

that are measured at fair value on a nonrecurring basis primarily comprises of property, plant and equipment, right-to-use assets, finite

lived intangible assets and goodwill.

The Company does not record these at fair value on a recurring basis, however, the carrying value

of the assets may be reduced to fair value when the Company determines that impairment has occurred.

of December 31, 2024, the Company had no assets or liabilities measured at fair value on a non-recurring basis.

During the year

ended December 31, 2025, the Company recognized the ASC 460 stand-ready guarantee liability under the Second Amended CAA at fair

value on a non-recurring basis upon initial recognition on October 1, 2025.

This liability was measured at inception only and is not

remeasured at fair value in subsequent reporting periods.

The carrying amount as of December 31, 2025 was $ 2.1 million, reflecting

the systematic release of the liability as the Company is progressively released from risk on the underlying loan portfolio.

fair value measurement for stand-ready guarantee liability was prepared internally by management using an insurance-pricing

methodology, reflecting the premium that a knowledgeable, willing third-party surety or specialty insurer would charge to assume the

indemnification obligation in an arm’s-length transaction, consistent with the market participant framework of ASC

The following table summarizes this non-recurring fair value measurement as of the initial recognition date:

Schedule of Non-Recurring Fair Value Measurement

December 31, 2025

Carrying amount

Fair value measurement using

Developed Technology

The following table provides quantitative information

regarding Level 3 fair value measurements inputs as it relates to the finite lived intangible assets as of their measurement

of Finite Lived Intangible Assets Measurement

As on December 31, 2024

Discount rate

Risk-free Rate

Fair value measurements inputs

As on December 31, 2023

Developed technology

Stand-ready guarantee liability

3 Measurement - Significant Unobservable Inputs

ASC 460 Guarantee liability was classified as Level 3 because its fair value was determined using significant unobservable inputs for

which there is no active market.

The following table summarizes the valuation methodology and significant unobservable inputs used in

the Level 3 measurement:

Schedule of Valuation Methodology and Significant Unobservable Inputs

Probability of Default -Tranches A & B (Ratings

7.25%, derived from loan level analysis of the portfolio.

An increase raises fair value

Probability of Default - Tranche C (Rating 9, individually

35%, based on Rating 9 definition, past-maturity status,

and personal guarantees

An increase raises fair value

Loss Given Default - Tranches A & B

25.00% for Tranche A and 35% for Tranche B, inclusive

of 13% cannabis-specific qualitative premium reflecting court access limitations, collateral possession restrictions, and

refinancing risk

An increase raises fair value

Loss Given Default - Tranche C (uncollateralized gap)

50%, representing the midpoint of the Rating 9 anticipated

loss range applied to the uncollateralized exposure

An increase raises fair value

Stand-Ready Risk Premium

loading applied to total expected loss, reflecting compensation for uncapped exposure, cannabis concentration risk, portfolio

illiquidity, and six-year guarantee term commitment

An increase raises fair value

Discount Rate

Estimated useful life

Fair value measurements inputs

Fair Value of Financial Instruments

The Company uses various methodologies and assumptions

to estimate the fair value of certain financial instruments.

With the exceptions of loans receivable, warrants and forward purchase option

derivatives, the Company considers the carrying amounts of its financial instruments (cash, accounts receivable and accounts payable)

in the balance sheet to approximate fair value because of the short-term or highly liquid nature of these financial instruments.

The following tables present the carrying amounts

and fair values of financial instruments, by the level of valuation inputs in the fair value hierarchy, as of the dates indicated:

Schedule of Carrying Amounts and Fair Values of Financial Instruments

As on December 31, 2024

Fair value measurement using

Cash and cash equivalents

Forward purchase receivables

risk-free rate (6-year Treasury)

An increase reduces fair value

Weighted Average Payout Timing

Stand-ready premium:

3 years — based on the portfolio’s contractual maturity profile

A longer weighted average payout timing reduces fair

Value of Financial Instruments

following tables present the carrying amounts and fair values of financial instruments on a non-recurring basis, by the level of valuation

inputs in the fair value hierarchy, as of December 31, 2025 and December 31, 2024:

of Carrying Amounts and Fair Values of Financial Instruments

value measurement using

Cash and cash

Forward purchase agreement

Investment in preferred

Deferred consideration

Senior Secured Promissory note

Public warrants

2 unchanged sentences

Abaca warrants

Third anniversary payment consideration

Forward purchase derivative

As on December 31, 2023

Fair value measurement using

value measurement using

Cash and cash equivalents

Forward purchase receivables

Forward purchase agreement

Deferred consideration

4 unchanged sentences

Abaca warrants

Forward purchase derivative

Third anniversary payment consideration

The change in the assets measured at fair value on

a recurring basis for which the Company has utilized Level 3 inputs to determine fair value are presented in the following table:

Forward purchase derivative

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

value are presented in the following table:

Schedule of Fair Value Assets Measured on Recurring Basis

For the Year ended December 31, 2024

PIPE Warrants

Third anniversary

payment consideration

Balance at the beginning of the period

Issued to Abaca shareholders

Placement Warrants

anniversary payment consideration

Purchase Derivative

the Year Ended December 31, 2025

Placement Warrants

anniversary payment consideration

Purchase Derivative

Balance, January 1, 2025

Fair value adjustment

Exchanged for Common Stock

Exchanged for Series B

Convertible Preferred Stock and Series B Warrants

( 7,309,580 )

Balance at the end of the period

For the Year ended December 31, 2023

PIPE Warrants

Third anniversary

payment consideration

Balance at the beginning of the period

Issued to Abaca shareholders

Balance, December 31, 2025

Placement Warrants

anniversary payment consideration

Purchase Derivative

the Year ended December 31, 2024

Placement Warrants

anniversary payment consideration

Purchase Derivative

Balance, January 1, 2024

Beginning balance

Fair value adjustment

Balance at the end of the period

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

the valuation of Private Placement Warrants, PIPE warrants, and Abaca warrants was carried out using the Black-Scholes model, while the

fair value of the Abaca third anniversary payment consideration was determined using the Black Scholes Merton Option pricing model.

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

As of December 31, 2024, the Company assessed

the fair value of its Forward Purchase Agreement (FPA) derivative utilizing a Monte Carlo Simulation within a risk-neutral setting,

which is a particular instance of the Income Approach, based on calculations from December 31, 2022 and December 31, 2023.

Throughout the periods ended December 31, of 2023 and 2024, there were no notable alterations in risk factors such as volatility,

expected term and reset price that would impact the valuation of the FPA derivative.

Consequently, management retained the December

31, 2022, valuation for December 31, 2023 and December 31, 2024.

The Company will continue to monitor the fair value of the forward

option derivative each reporting period with subsequent revisions to be recorded in the Statements of Operations.

During the fiscal years 2023 and 2024, there were

no changes in the classification of financial instruments within Level 2 and Level 3 of the fair value hierarchy.

The following table provides quantitative information

regarding Level 3 fair value measurements inputs as it relates to the private placement warrants and public warrants as of their measurement

( 2,359,185 )

Balance, December 31, 2024

Ending balance

of December 31, 2025 and on December 31, 2024, the fair market of the private placement warrants, Abaca warrants and PIPE warrants,

were based on Black-Scholes Merton option pricing model.

The valuation was performed by the Company

as of December 31, 2025, and by a third-party prior for prior periods.

the year ended December 31, 2025 and December 31, 2024, there were no changes in the classification of financial instruments within Level

2 and Level 3 of the fair value hierarchy.

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

warrants, public warrants, third anniversary payment consideration and Abaca warrants as of their measurement dates:

Schedule of Level 3 Fair Value Measurements Inputs

December 31, 2024

December 31, 2023

Consideration

Anniversary Payment Consideration

on December 31, 2025

on December 31, 2024

Anniversary Payment Consideration

Exercise price

1 unchanged sentence

Risk-free rate

Warrants and rights outstanding, measurement input

The following table provides quantitative information

regarding Level 3 fair value measurements inputs as it relates to the forward purchase derivatives as of their measurement dates on December

31, 2024 and December 31, 2023:

Schedule of Level 3 Fair Value Measurements Inputs

December 31, 2024

December 31, 2023

Expected term (years)

Additional Maturity Consideration per share

Risk-free rate

Risk-adjusted discount rate

Derivative liability, measurement input

The major components of income tax expense (benefit)

for the years ended December 31, 2024 and December 31, 2023:

of Major Components of Income Tax

For year ended December 31,

Measurement input

October 3, 2025, the Company issued 37,517 shares of Common Stock to the Abaca shareholders as part of the third anniversary consideration

payment under the acquisition agreement (see Note 3), valued at $ 0.3 million.

18 - Income Taxes

major components of income tax expense (benefit) for the year ended December 31, 2025 and December 31, 2024 as follows:

Schedule of Major Components of Income Tax

For The Year Ended

Current income tax:

Current tax on profits

Current (benefit) tax on profits

Deferred tax:

Deferred taxation - current year

Income tax expense (benefit)

A reconciliation follows between tax expense (benefit)

and the product of accounting loss multiplied by the United States domestic tax rate for the years ended December 31, 2024 and December

of Effective Income Tax Rate Reconciliation

For year ended December 31,

Accounting loss before tax from continuing operations

Deferred taxation - current

tax (benefit) expense

tables below reconcile the United States effective tax rate of 21% to the Company’s income tax (benefit) for the years ended

December 31, 2025 (pursuant to ASU 203-09) and December 31, 2024.

Schedule of Effective Income Tax Rate Reconciliation

December 31, 2025

Net loss before income taxes

$ ( 2,219,468 )

Accounting loss before income tax

United States federal statutory tax rate

Arkansas tax benefit, net of federal tax benefit

Deferred state income taxes, no federal benefit

Permanent differences, net

Changes in valuation allowance

Non-taxable or non-deductible items

Change in fair market value of warrant liability

Gain on extinguishment of forward purchase derivative and exchange of debt

Costs incurred to secure financing

Prior year true up of deferred taxes

Income tax benefit

December 31, 2024

Net loss before income taxes

$ ( 4,459,789 )

At federal statutory income tax rate of 21 %

United States federal statutory income tax rate of 21%

State income tax benefit, net of federal benefit

1 unchanged sentence

Valuation allowance charges affecting the provision for income taxes

Deferred Tax Assets and Liabilities

As of December 31, 2024 and December 31, 2023, the significant component of the Company’s deferred tax assets and liabilities:

of December 31, 2025 and December 31, 2024, the significant component of the Company’s deferred tax assets and liabilities

of deferred tax assets and liabilities

December 31, 2024

Deferred tax assets:

Loan loss reserve

$ ( 340,982 )

Capital loss carryover

1 unchanged sentence

Deferred revenue

Property plant and equipment’s

Transaction costs

Change in Forward Purchase Contract

( 2,227,772 )

NOL carryforward

Lease liabilities

Total deferred tax assets (A)

Deferred tax liabilities:

Forward purchase contract

carry forward

Accrued expenses

Contract assets

Right of use assets

Intangible assets

Total deferred tax liabilities (B)

( 1,121,394 )

Deferred tax assets (C=A-B)

Valuation allowance (D)

( 44,350,833 )

( 44,277,919 )

Deferred tax assets, net (C-D)

( 43,829,019 )

Reconciliation of deferred tax asset, net:

of Deferred Tax Liabilities Net

Year on year change

December 31, 2023

Opening balance

Tax (expense)/ income during the period recognized in the statement of operations

( 43,829,019 )

( 9,593,985 )

Closing balance

The Company offsets tax assets and liabilities

only if it has a legally enforceable right to set off current tax assets and current tax liabilities and the deferred tax assets and

deferred tax liabilities relate to income taxes levied by the same tax authority.

The Company does not consider their deferred tax

assets to be realizable and has established full valuation allowance during the year ending December 31, 2024.

The Company has US federal tax loss carryovers totaling

Total deferred tax assets

Deferred tax liabilities:

Lease liabilities

Financial indemnification liability

Stand ready liability

Total deferred tax liabilities

Net deferred tax assets

Valuation allowance

Deferred tax asset

Company offsets tax assets and liabilities only if it has a legally enforceable right to set off current tax assets and current tax

liabilities and the deferred tax assets and deferred tax liabilities relate to income taxes levied by the same tax authority.

Company does not consider their deferred tax assets to be realizable and has established full valuation allowance during the year

ended December 31, 2025 and December 31, 2024.

As of December 31, 2025, the Company has US federal tax loss carryovers $ 67.7

The Company has US federal tax loss carryovers $ 20.4

million arising from 2020 through 2022 which have an unlimited carryover period.

4 unchanged sentences

The Company has open years for

examination from Federal and State of Arkansas for the years ending December 31, 2020 and forward and from State of Colorado from

December 31, 2021 and forward.

examination from Federal, State of Arkansas and Colorado for the years ending December 31, 2020 and forward and from State of

Colorado from December 31, 2021 and forward.

The Company does not have any uncertain tax positions as of December 31,

The Company offers to all employees a tax-qualified

retirement contribution plan, with the Company’s 100 % matching contribution up to 4 % of a participant’s eligible compensation.

The Company’s consolidated matching contributions for the year ended December 31, 2024, amounting to $ 119,942 , and December 31,

2023, amounting to $ 62,785 , respectively.

Stockholders’ (Deficit) Equity

On January 28, 2025, the board of directors of the

Company approved a reverse stock split of the Company’s Common Stock at a ratio of 1-for-20 shares, which reverse stock split became

effective on March 14, 2025.

Preferred Stock

The Company is authorized to issue 1,250,000

shares of preferred stock, with a par value of $ 0.0001

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

As of December 31, 2024, there were 111

shares of Class A Preferred Stock issued and outstanding, and there were 1,101

shares of Class A Preferred Stock issued and outstanding on December 31, 2023.

The holders of preferred stock shall be entitled

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

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

of the Class A Common Stock.

No other dividends shall be paid on the preferred stock.

The terms of the preferred stock provide for an

initial conversion price of $ 10.00

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

55 days, 100 days, 145 days and 190 days after the effectiveness of a registration statement registering the shares of Class A Common

Stock issuable upon conversion of the preferred stock to the lower of the Conversion Price and the greater of (i)

80% of the volume weighted average price of the Class A Common Stock for the prior five trading days and (ii) $50.00 (the “Floor

Price”), provided that, so long as a preferred stock holders continues to hold any preferred shares, such preferred stock holder

will be entitled to receive the aggregate shares of Class A Common Stock that would be issuable based upon its initial purchase of preferred

stock at the adjusted Conversion Price .

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

the stockholders approved a reduction in the floor conversion price of the outstanding preferred stock from $4 0.00

per share to $ 25 .00 per share.

The Company is authorized to issue up to 130,000,000

shares of Class A Common Stock, with a par value of $ .0001 per share.

Holders of the Company’s Class A Common Stock are entitled

to one vote for each share.

As of December 31, 2024 and December 31, 2023, there were 2,783,667 and 2,728,169 shares of Class A Common

Stock issued and outstanding, respectively.

As of December 31, 2024 and December 31, 2023, 183,369 Class A Common Stock are held by the

purchasers under Forward Purchase Agreement dated June 16, 2022, by and among the Company and such purchasers.

The Company has open years for

examination from Federal and State of Arkansas for the years ended December 31, 2020 and forward and from State of Colorado from

December 31, 2021 and forward.

382 Limitations on Net Operating Loss Carryforwards

to Section 382 of the Internal Revenue Code of 1986, as amended, a corporation that undergoes an “ownership change,”

generally defined as a cumulative increase of more than 50 percentage points in the stock ownership of 5% shareholders within a

rolling three-year period may have its ability to utilize pre-change net operating loss (“NOL”) carryforwards and

certain other tax attributes significantly limited on an annual basis.

inception, the Company has undergone a number of significant equity transactions, including its initial public offering, the reverse

acquisition of Northern Lights Acquisition Corp., the acquisition of Abaca, various share issuances to settle obligations, and its September 2025 recapitalization.

The Company has not completed a Section 382 analysis to determine whether one or more ownership changes have occurred or to quantify

any resulting annual limitation.

If it is determined that an ownership change has occurred, the annual limitation could materially reduce

the Company’s ability to utilize its existing NOL carryforwards and other deferred tax assets to offset future taxable income.

19 - Stockholders’ Equity (Deficit)

Company is authorized to issue up to 1,250,000 shares of preferred stock, par value $ 0.0001 per share.

The Board of Directors has the

authority to establish the specific rights, preferences, and designations of any series of preferred stock.

of December 31, 2025 and December 31, 2024, there were 111 shares of convertible preferred stock issued and outstanding.

Holders of preferred

stock are entitled to receive dividends only if and when dividends are paid on the Company’s Common Stock.

In that event, preferred

stockholders receive dividends on an as-converted-to-Common-Stock basis, in the same form as dividends

paid to the Common Stockholders.

No additional or separate dividends are payable on the preferred stock.

preferred stock is convertible into shares of Common Stock.

The initial conversion price was $ 200 per share.

The conversion

price is subject to downward adjustment at five specified intervals 10, 55, 100, 145, and 190 days after the effectiveness of

a registration statement covering the shares issuable upon conversion.

At each adjustment date, the conversion price resets to the lower

of (i) the then-current conversion price and (ii) the greater of 80% of the five-day volume weighted average price of the Common Stock

and $50 (the “Floor Price”).

Regardless of any price resets, each preferred stockholder retains the right to receive the

total number of shares of Common Stock that would have been issuable at the adjusted conversion price based on their original investment

January 25, 2023, stockholders approved a further reduction in the Floor Price from $ 40.00 per share to $ 25.00 per share at a special

B Convertible Preferred Stock

September 30, 2025, the Company entered into a Series B SPA with certain institutional and accredited investors (the

Under the Series B SPA, the Company issued 31,052 shares

of Series B Convertible Preferred Stock (out of 35,000 authorized

shares) and accompanying Series B Warrants to purchase 1,999,544 shares

of Common Stock.

The purchase price was $ 800 per

$ 1,000 stated

value per unit, representing the arm’s-length transaction price established by independent ELOC investors.

The aggregate

consideration received was $ 24.3

million, consisting of $ 6.1

million from the Company’s Series B Convertible Preferred Stock and warrant financing (approximately $ 5.9

million from third-party accredited investors and $ 0.2

million from management and board participation, with stockholder approval obtained on November 6, 2025), approximately $ 0.6

million in cash proceeds from unsecured Notes issued in August and September 2025 that were subsequently exchanged for Series B

Convertible Preferred Stock and warrants at closing, along with $ 10.7

million from the cancellation of debt and $ 7.3

million from the termination of the FPA.

Offering costs of $ 0.4 million

were charged to additional paid-in capital.

The Series B Convertible Preferred Stock, including its reset and anti-dilution

provisions, was evaluated and determined to meet the criteria for classification within permanent stockholders’ equity, as the

reset features are indexed to the Company’s own stock and the instrument does not embody an unconditional obligation to

transfer assets.

Both the Series B Convertible Preferred Stock and the accompanying Series B Warrants were measured at fair value at

issuance at $ 800

per unit, consistent with the price paid by unaffiliated third-party investors for identical instruments on the same date in

accordance with ASC 820.

No subsequent remeasurement is performed.

Series B Convertible Preferred Stock has a stated value of $ 1,000 per share and ranks senior to all classes of Common Stock with respect

to dividends and distributions upon liquidation.

Dividends accrue only when declared by the Board of Directors, calculated on an as-converted

Each share is convertible at the holder’s option into Common Stock at an initial conversion price of $ 7.7644 per

share, subject to proportional adjustment for stock splits, stock dividends, combinations, and similar events.

Series B Convertible Preferred Stock includes automatic price reset and anti-dilution provisions that are substantially similar to

those in the Series B Warrants.

The conversion price resets automatically at 60, 90, and 180 days after the applicable date to the

lower of the then-current market price or the prior conversion price, subject to a floor of $ 1.5528

per share as defined in the Certificate of Designation.

Additional downward adjustments apply if the Company subsequently issues

equity at a price below the then-current conversion price.

Holders are subject to a 4.99 %

beneficial ownership cap, which may be increased to 9.99 %

upon 61 days’ written notice.

With the consent of the Required Holders (as defined in the Series B instruments), the Board may also voluntarily reduce the conversion

price for any period permitted under Nasdaq rules.

the Series B Convertible Preferred Stock and Series B Warrants were issued together as a unit, the $ 800 per unit of proceeds was allocated

between the two instruments on a relative fair value basis in accordance with ASC 470-20-30-5.

To perform this allocation, the Company

used a Monte Carlo simulation model to estimate the standalone fair value of each instrument, arriving at approximately $ 589 per share

of Series B Convertible Preferred Stock and $ 211 per Series B Warrant.

These standalone fair values were used solely to calculate each

instrument’s proportionate share of the $ 800 unit proceeds;

they do not represent the transaction price of either instrument individually.

Both instruments were determined to qualify for equity classification under ASC 815-40 and ASC 480 and will not be remeasured in subsequent

a special meeting of stockholders held on November 6, 2025, the Company’s

stockholders approved four actions relevant to the Company’s capital structure.

First, stockholders approved the issuance of Common

Stock upon conversion of the Series B Convertible Preferred Stock and exercise of the Series B Warrants, including participation by members

of management and the Board of Directors.

Because those issuances constituted compensation under Nasdaq Listing Rule 5635(c), they were

conditioned upon and subject to this stockholder approval.

No preferential pricing or special terms were extended to management or director

participants beyond those available to all other Buyers.

Second, stockholders approved the issuance of shares of Common Stock to the counterparty

under the Company’s ELOC agreement (see Common Stock section below).

Third, stockholders approved an increase in the number of authorized

shares of Common Stock from 130,000,000 to 1,000,000,000 shares.

This increase was necessary to ensure the

Company maintains a sufficient reserve of authorized but unissued shares to satisfy its obligations upon conversion of the Series B Convertible

Preferred Stock, exercise of the Series B Warrants, and future draws under the ELOC, and to maintain the flexibility to issue Common Stock or securities

convertible into common stock for general corporate purposes if an attractive opportunity to do so arises.

Fourth, stockholders authorized

the Board of Directors, in its sole discretion, to affect a reverse stock split of the Company’s outstanding Common Stock at any

ratio between 2-for-1 and 12-for-1 , if and when the Board determines such action to be in the

best interests of the Company and its stockholders.

As of December 31, 2025, no reverse stock split had been effected pursuant to this

authorization.

Company filed registration statements on Form S-1 on October 17 and October 21, 2025 to register the resale of shares issuable upon

conversion of the Series B Convertible Preferred Stock and exercise of the Series B Warrants, as well as shares issuable under its

The registration statement covering the ELOC became effective on November 7, 2025, and the registration

statement covering the Series B Convertible Preferred Stock and Series B Warrants became effective on November 12, 2025.

January 2026, the first automatic price reset under the Series B Convertible Preferred Stock and Series B Warrants occurred, 60 days

after the applicable date as provided in the Certificate of Designation and warrant agreements.

Because the Company’s Common

Stock was trading below the floor price at the time of the reset, the conversion price of the Series B Convertible Preferred Stock and

the exercise price of the Series B Warrants each reset to the floor price of $ 1.5528 per share.

No further automatic resets remain under

the 60, 90, and 180-day reset schedule.

The reset to the floor price significantly increases the number of shares of Common Stock

potentially issuable upon conversion and exercise of these instruments.

The Company is required to register the additional shares resulting

from the reset and has initiated the necessary steps to do so.

Failure to timely complete that registration would constitute a breach

of the Company’s obligations to the Series B holders.

of December 31, 2025, the Company is authorized to issue up to 1,000,000,000 shares of Common Stock, par value $ 0.0001 per share.

Holders of Common Stock are entitled

to one vote for each share held.

As of December 31, 2025 and December 31, 2024, there were 4,281,523 and 2,783,666 shares of Common Stock issued and outstanding, respectively.

Line of Credit and Related Series B Redemption Obligation

September 17, 2025, the Company entered into the ELOC with an institutional

investor (the “ELOC Investor”), pursuant to which the Company, at its sole discretion, may issue and sell up to $ 150.0 million

of newly issued shares of Common Stock from time to time.

The facility is subject to customary conditions and limitations, including

a 4.99 % beneficial ownership cap and a 19.99% exchange cap applicable to the ELOC Investor.

facility expires on September 17, 2028.

The Company filed a registration statement on Form S-1 to register the resale of

shares issuable under the facility.

That registration statement became effective on November 7, 2025, at which point the Company became

eligible to draw on the facility.

On November 6, 2025, stockholders approved the issuance of shares of Common Stock under the

ELOC in excess of 19.99 % of the Company’s shares outstanding as of the date of the agreement, as required under Nasdaq Listing

sale of Common Stock under the ELOC will be priced at a 10% discount to the lowest intraday stock price on the draw date.

discount represents a cost to the Company and will be recognized as an expense in the period in which the shares are sold.

ELOC provides that, with the mutual consent of the Company and the ELOC Investor, the total facility commitment may be expanded

up to $ 500.0 million.

Any such increase would require the Company to issue additional commitment shares equal to 0.75% (75 basis points)

per $100 million of incremental commitment, payable in shares of Common Stock valued at the average closing price for the five

trading days preceding the date of issuance.

consideration for the ELOC Investor’s purchase commitment, the Company issued to the ELOC Investor 1,000 shares of Series B Convertible

Preferred Stock and a Series B Warrant to purchase 64,369 shares of Common Stock on September 30, 2025, valued at $ 800 per unit,

or $ 0.8 million in aggregate.

This commitment fee was recorded within Other Expense and expensed in full upon issuance.

the Company incurred $ 0.2 million in other ELOC-related issuance costs, which were also expensed as incurred.

Accordingly, the Company’s

initial commitment-fee obligation under the ELOC has been satisfied in full.

September 30, 2025, the Company and the ELOC Investor executed Amendment No.

1 to the ELOC Agreement, which requires the Company to

apply 25% of the net cash proceeds received from each draw under the facility toward the redemption of outstanding shares of Series

B Convertible Preferred Stock.

Pursuant to the Certificate of Designation governing the Series B Convertible Preferred Stock, such

redemptions are permitted only at 120% of the $ 1,000

stated value per share, plus any accrued but unpaid dividends, resulting in a cash redemption price of $ 1,200

As a result, for each dollar of shares sold under the ELOC at market, the Company retains approximately $ 0.675

in net cash after the 10 %

pricing discount and the 25% Series B redemption obligation.

Redemptions of Series B Convertible Preferred Stock does not create treasury stock, rather these redeemed shares

are considered retired and cancelled per our Certificate of Designation.

mandatory use-of-proceeds provision represents a contractual earmark of future equity proceeds but does not create a separate liability

at issuance, because no redemption obligation arises until the Company actually receives proceeds by electing to draw under the facility.

Consistent with ASC 480-10-25-4 through 25-14, the Series B Convertible Preferred Stock continues to be classified in permanent equity,

as any redemption remains conditional on the Company’s discretionary decision to utilize the ELOC and does not constitute an unconditional

obligation to transfer assets.

the ELOC, Material Adverse Effect includes any material adverse change in the enforceability of the agreement, our results of

operations, assets, business, or financial condition taken as a whole, or our ability to perform our material obligations in a

timely manner.

Company specific deterioration including a significant decline in revenues or cash flows, loss of key customers or

contracts, material litigation or regulatory action, failure to maintain required licenses or permits, a material weakness in

internal controls, or loss of key management personnel is not excluded from this definition and could independently trigger the

Investor’s termination rights.

Company’s representations and warranties regarding the absence of a Material Adverse Effect must remain true and correct not only

at the initial closing of the facility, but also at the time of each subsequent VWAP Purchase Notice throughout the term of the agreement.

As a result, even after the facility has commenced and initial drawings have been made, any supervening adverse development could prevent

us from accessing the remaining unfunded commitment.

a Material Adverse Effect occurs and is continuing, the Investor has the right to terminate the Purchase Agreement upon ten (10) Trading

Days’ written notice.

In that event, we would lose access to any remaining unfunded portion of the $ 150 million commitment.

ELOC excludes certain broad macroeconomic, industry-wide, and geopolitical events from the definition of Material Adverse Effect, no

such exclusion applies to adverse developments that are specific to our business or operations.

can be no assurance that a Material Adverse Effect will not occur during the term of the Purchase Agreement.

Should one occur, and should

we be unable to secure alternative financing on acceptable terms, or at all, our liquidity position, business operations, financial condition,

and results of operations could be materially and adversely affected.

During the year ended December 31,

2025, the Company issued 1,326,603

shares of Common Stock under the ELOC, generating net proceeds of $ 1.8

million, equivalent to an average price of $ 1.341 per share.

In connection with these draws, the Company sold shares of Common Stock at a contractual 10% discount

to the lowest intraday stock price on each draw date.

This pricing discount represents a direct cost of accessing the ELOC facility and

resulted in a non-cash charge of approximately $ 0.08 million, which was recognized in the statement of operations for the year ended December

The recorded expense reflects the difference between the fair market value of the shares issued on the settlement date and the

proceeds received pursuant to the ELOC Agreement.

Equity Incentive Plan

Share-based compensation expense recognized in the

year ended December 31, 2024 and December 31, 2023 totaled $ 1,575,952 and $ 3,739,156 , respectively.

The 2022 Equity Incentive Plan was approved by the

Company’s stockholders on June 28, 2022.

The 2022 Plan permits the grant of incentive stock options, non-qualified stock options,

stock appreciation rights, restricted stock, restricted stock units, stock bonus awards, and performance compensation awards.

has not issued stock appreciation rights, restricted stock, stock bonus awards, or performance compensation awards in the year ended December

31, 2024 and December 31, 2023.

Stock Options

Stock options are awarded to encourage ownership of

the Company’s Class A Common Stock by employees and to provide increased incentive for employees to render services and to exert

maximum effort for the success of the Company.

The Company’s incentive stock options generally permit net-share settlement upon

The option exercise price, vesting schedule and exercise period are determined for each grant by the administrator (person appointed

by board to administer the stock plans) of the applicable plan.

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

The assumptions used to determine the fair value of

options granted in the year ended December 31, 2023, using the Black-Scholes-Merton model are as follows:

Amended and Restated - 2022 Equity Incentive Plan (the “Plan”) was approved by the Company’s stockholders on June 28,

On April 30, 2025, the Plan was amended to provide that the total number of shares of Common Stock that may be issued, under the

Plan will automatically increase upon the occurrence of a Dilution Event (as defined in the Plan) and on the first trading day of each

calendar year, beginning with calendar year 2026, by such number of shares of Common Stock necessary to make the total shares of Common

Stock authorized under the Plan equal to fifteen percent (15%) of the total outstanding shares of Common Stock on the last day of the

prior calendar year (subject to a maximum annual increase of 50,000 shares of Common Stock).

The Plan permits the grant of incentive

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

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

in the year ended December 31, 2025 and December 31, 2024.

As of December 31, 2025, a total of 626,749 shares of Common Stock were authorized

for issuance under the Plan, of which 78,799 shares remained available for future issuances.

options are awarded to encourage ownership of the Company’s Common Stock by employees and to provide incentives for employees to

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

The Company’s incentive stock options generally permit

net-share settlement upon exercise.

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

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

The Company’s stock options

generally have a 10 -year contractual term.

assumptions used to determine the fair value of options granted in the year ended December 31, 2025 using the Black-Scholes-Merton option

model are as follows:

of Fair Value of Options Granted Black-Scholes-Merton Model

1 unchanged sentence

Risk-free interest rate

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

Expected term

6 to 6.5 years

The expected term of the options granted is calculated

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

The shares and the redeemable warrants

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

the date of listing.

Based on these factors Management has considered the expected volatility at 100 % for the current period.

The risk-free

interest rate used is the current yield on U.S.

Treasury notes with a term equal to the expected term of the options at the grant date.

The expected dividend yield is based on annualized dividends on the underlying share during the expected term of the option.

A summary of the Company’s stock option activities

and related information for the year ended December 31, 2024 is as follows:

of Stock Option and Related Information

Average Grant

Date Fair Value

Contractual Life

January 01, 2024

Expected volatility

Expected term in years

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

model are as follows:

Dividend yield

Risk-free interest rate

Expected volatility

Expected term in years

summary of the Company’s stock option activities and related information for the year ended December 31, 2025 is as follows:

Weighted-Average

Balance, January 1, 2025

Cancelled / Forfeited

December 31, 2024

A summary of the Company’s stock option activities

and related information for the year ended December 31, 2023 is as follows:

Average Grant

Date Fair Value

Per Stock Option

Contractual Life

Balance, December

Vested and expected

to vest December 31, 2025

Weighted-Average

Exercise Price

January 1, 2024

1 unchanged sentence

December 31, 2024

The following options were outstanding at their respective

options forfeited during the period were associated with awards previously granted to former officers and employees whose service with

the Company terminated prior to vesting or exercise.

August 7, 2025, the Company granted 183,501 performance-based stock option awards to certain executive officers, including the Chief

Executive Officer, Chief Investment and Strategic Officer, and Principal Accounting Officer.

These options were issued under the 2022

Stock Option and Incentive Plan and are performance-based awards that vest only upon the Company’s successful completion of an

equity transaction resulting in proceeds in excess of $ 4 million.

The performance condition is non-market based as defined in ASC 718-10-20.

performance condition was satisfied on September 30, 2025 upon the closing of the Company’s Series B Convertible Preferred

Stock financing, gross cash proceeds of $ 6.7

million, exceeding the $ 4.0

million threshold required for vesting.

Accordingly, the Company recognized $ 0.3

million of stock-based compensation expense during the year ended December 31, 2025 in connection with these awards.

following options were outstanding as of December 31, 2025, at their respective exercise price:

Schedule of Options Outstanding

Exercise Price

of Options Outstanding

Exercise price options outstanding

December 31, 2024

December 31, 2023

Restricted Stock Units (“RSUs”)

A summary of the Company’s RSU activities and

related information for the year ended December 31, 2024 is as follows:

of Restricted Stock Units

Restricted Stock Units

Average Grant

Date Fair Value

Options Outstanding

compensation expense recognized for stock options for the year ended December 31, 2025 and December 31, 2024 was $ 1.5 million and $ 1.6

compensation expenses is comprised of the following:

Schedule of Stock Compensation Expenses

Ended December 31

and employee benefits

of December 31, 2025, there was $ 0.3

unrecognized stock compensation expense related to stock options.

The unrecognized compensation expense is expected to be recognized

over a weighted-average period of approximately 1.6

years based on vesting under the award service conditions.

The weighted-average fair value of the stock options granted for the year

ended December 31, 2025 was $ 3.00

There were no stock options granted for the year ended December 31, 2024.

Stock Units (“RSUs”)

summary of the Company’s RSU activities and related information for the year ended December 31, 2025 and December 31, 2024 is as

Schedule of Restricted Stock Units

Average Grant Date Fair Value Per RSU

Average Remaining Contractual Life (in Years)

January 1, 2025

1 unchanged sentence

December 31, 2025

A summary of the Company’s RSU activities and

related information for the year ended December 31, 2023 is as follows:

Restricted Stock Units

Average Grant

Date Fair Value

Average Grant Date Fair Value Per RSU

Average Remaining Contractual Life (in Years)

January 1, 2024

1 unchanged sentence

December 31, 2024

The following RSU were outstanding at their respective

of Exercise Price of Restricted Stock Units

Vest price RSU outstanding

December 31, 2024

December 31, 2023

Stock-Based Compensation to Vendor

On September 3, 2024, the Company issued 12,116 shares

of common stock to Outside The Box Capital Inc.

as compensation for marketing and distribution services under a Marketing Services Agreement.

The fair value of the common stock issued was determined based on the market price of the Company’s stock on the grant date, which

was $ 12.38 per share, resulting in a total fair value of $ 150,000 .

The fair value of the award is recorded as an expense under “General

and administrative expenses” in the statement of operations, with the expense being recognized over the service period from September

4, 2024, to March 3, 2025, aligning with the period during which the services are rendered.

In accordance with ASC 718, “Compensation—Stock

Compensation,” as updated by ASU 2018-07, the stock award has been classified as equity as it is settled through the issuance of

common stock and does not contain any terms requiring cash settlement or other liabilities.

The Company has evaluated events and transactions subsequent to December 31, 2024 through the date the consolidated financial statements

Except as disclosed in the consolidated financial statements previously and items below, there are no other events to report:

· Effective January 21, 2025, the Company appointed Terrance E.

Mendez as Co-Chief Executive Officer

(Co-CEO), alongside Sundie Seefried, whose title changed to Co-CEO.

Mendez, age 49, has extensive leadership experience in

cannabis-related businesses and financial management roles.

The Company entered into a three-year employment agreement with Mr.

Mendez, providing an annual salary of $ 360,000 ,

eligibility for performance-based incentives, and stock options vesting over three years.

The agreement includes a 10-month

post-termination non-compete and non-solicitation clause.

· On January 28, 2025, Sundie Seefried informed the Board of Directors of the Company of her decision

to resign as Co-Chief Executive Officer, effective February 28, 2025.

Seefried will continue to serve as a member of the Board.

Her resignation was not due to any disagreement with the Company or concerns regarding its operations, policies, or practices.

her departure, Terrance E.

Mendez transitioned from Co-Chief Executive Officer to the sole Chief Executive Officer of the

· On January 29, 2025, the Company and PCCU entered into a letter

agreement to defer the principal payments on the Note for the months of February and March 2025 (the “Deferral Period”).

The Company will remain responsible for payment of interest during the Deferral Period and will extend the Note repayment period for

an additional two months.

· On March 1, 2025, the Company and PCCU modified the PCCU Note.

According to the terms of the Amended

PCCU Note, the principal balance is $ 10,748,408 ,

accruing interest at an annual rate of 4.25 %.

The Company will make interest-only payments until January 5, 2027, after which it will begin making both principal and interest

payments until the maturity date on October 5, 2030.

The Amended PCCU Note also includes provisions for early repayment, along with

prepayment fees, such as a yield maintenance fee in the case of prepayment or acceleration.

Furthermore, the agreement preserves

PCCU’s first-priority security interest in the Company’s assets as outlined in the security agreement dated March 29,

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

April 1, 2025, the Company received a letter from the Staff, indicating that the Company had not regained compliance with the Minimum

Bid Price Requirement by March 31, 2025, and unless the Company requests a hearing and appeals the determination by April 8, 2025,

the Company’s class A common stock and warrants would be delisted from The Nasdaq Capital Market and that trading of the Company’s

securities will be suspended, effective at opening of business on April 10, 2025.

Further, the Company was notified that on April

10, 2025, a Form 25-NSE will be filed with the SEC, which will remove the Company’s securities from listing and registration

on The Nasdaq Stock Market.

On April 7, 2025, the Company was notified by the staff of The Nasdaq Stock Market LLC’s Listing

Qualifications Department that the Staff has determined that for 10 consecutive business days, from March 24, 2025 to April 4, 2025,

the minimum closing bid price for the Company’s Class A common stock was at least $ 1.00 per share or greater.

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.

April 7, 2025, the Company received a letter from Nasdaq indicating that the Company was not in compliance with Nasdaq’s Listing

Rule 5550(b)(1) because the Company’s shareholders’ equity for the year ended December 31, 2024, as reported in the Company’s

Current Report on Form 8-K on April 1, 2025, was below the minimum shareholders’ equity requirement of $ 2,500,000 (the “Shareholders’

Equity Requirement”).

Notice had no immediate effect on the Company’s continued listing on Nasdaq, subject to the Company’s compliance with

the other continued listing requirements.

In accordance with Nasdaq rules, the Company has been provided 45 calendar days, to submit

a plan to regain compliance with the Shareholders’ Equity Requirement (the “Compliance Plan”).

If the Compliance

Plan is accepted, Nasdaq may grant up to 180 calendar days from the date of the Notice for the Company to regain compliance with

the Shareholders’ Equity Requirement.

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.

compensation expense for RSU for the year ended December 31, 2025 and December 31, 2024 $ 0.04 million and $ 0.06 million, respectively.

RSU awards recognized during the year ended December 31, 2025, and 2024 relate to employee stock awards.

the year ended December 31, 2025 and December 31, 2024, the Company completed a net share settlement for 4,292 and 5,392 , restricted

shares on behalf of certain employees that participate in the Plan upon the vesting of the restricted shares pursuant to the terms of

the Plan, respectively.

The net share settlement was in connection with payroll taxes incurred on restricted shares that vested and were

transferred to the employees during the year ended December 31, 2025 and December 31, 2024 which created taxable income for the employees.

At the employees’ request, the Company has paid these taxes on behalf of the employees in exchange for the employees returning

an equivalent value of restricted shares to the Company.

These transactions resulted in a decrease of $ 0.00 million and $ 0.1 million

for the year ended December 31, 2025 and December 31, 2024, to stockholders’ deficit on the consolidated balance

sheets as the cash payment of the taxes effectively were a repurchase of the restricted shares granted in previous years.

of December 31, 2025, there was $ 0.0

million of unrecognized stock compensation expense related

to RSU awards.

20 - Commitments and Contingencies

Company has an employment agreement with its Chief Executive Officer.

Under the terms of the agreement, if the contract is not renewed

or is terminated without cause, the Company is obligated to pay severance equal to the CEO’s then-current annual base salary.

agreement also provides for an annual cash bonus opportunity of up to 100% of base salary, based on performance criteria established

by the Board of Directors, and for long-term incentive compensation, the terms of which are to be determined by the Board of Directors.

Company is party to contractual obligations, including lease liabilities related to operating leases, and stipulated cash bonus arrangements

with employees.

These obligations are time-based and are reflected in the accompanying consolidated financial statements.

expects to meet these commitments in the ordinary course of business.

addition, the Company has entered into deferred bonus agreements with certain non-executive employees.

These agreements provide for cash

bonus payments upon the employee’s continued employment through specified payment dates as set forth in each individual arrangement.

As of December 31, 2025, the aggregate amount of deferred bonuses outstanding under these agreements was approximately $ 0.1 million.

The Company expects to fund these obligations from operating cash flows in the ordinary course of business.

of 420 IT Solutions

December 19, 2025, Safe Harbor Managed Services LLC, a wholly-owned subsidiary of the Company, entered into an Asset Purchase Agreement

with 420 IT Solutions and its founders.

accounted for this transaction as an asset purchase pursuant to ASC 805, Business Combinations .

aggregate purchase price consisted of 125,000

Earnout Shares, plus the assumption of certain identified liabilities under contracts assigned to the Company.

The Earnout Shares

are subject to performance-based vesting over a two-year earnout period ended December 31, 2027.

Intangible assets and contingent

consideration are recognized as the performance conditions become probable of achievement.

The Company evaluated the

achievement of the performance obligation and deemed this unlikely to be reached.

Therefore, the intangible assets and contingent

liability were not recorded as of December 31, 2025.

If circumstances change when the revenue target is probable, then the

intangible assets and a contingent liability will be recorded.

The Company has one year to evaluate this transaction.

and Related Matters

Company is involved in, or has been involved in, arbitrations or various other legal proceedings that arise from the normal course of

its business.

The ultimate outcome of any litigation is uncertain, and either an unfavorable or favorable outcome could have a material

impact on the Company’s results of operations, balance sheets, and cash flows due to defense costs, and could divert management

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

With respect to the cases described

below, the Company evaluates associated developments on a regular basis and accrues a liability when it believes a loss is probable and

the amount can be reasonably estimated.

- Denver County District Court

October 17, 2024, the Company filed a complaint 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.

The lawsuit arises from a dispute over the terms

of the Company’s October 2022 acquisition of Abaca, which was subsequently

amended by a First Amendment in November 2022 and a Second Amendment in October 2023.

The Second Amendment restructured certain merger

consideration, including introducing warrants and modifying payment timing.

The defendants contend the Second Amendment is invalid under

Delaware law and seek to have it set aside, which would reinstate the original payment terms and potentially increase the Company’s

The Company maintains that the Second Amendment was validly executed and is binding.

November 21, 2024, at the Company’s request, the disputed merger payment of $ 3.0 million was deposited into the Denver County District

Court’s registry pending resolution of the dispute.

This amount is reflected in the Company’s financial statements.

December 19, 2024, the defendants filed an answer and counterclaims against the Company alleging breach of contract and related causes

of action, and a third-party claim was asserted against Fred Niehaus, the Company’s Chairman.

January 16, 2025, the Company filed a motion to dismiss all counterclaims.

April 18, 2025, the Court issued an order denying the Company’s motion to dismiss most counterclaims, while dismissing the claims

Niehaus with prejudice.

The Court also dismissed Gregory W.

Ellis as a counter-plaintiff and third-party plaintiff because

Ellis lacked standing to bring any claim, and denied a third-party’s request to intervene in the litigation.

The Court further

clarified that the Delaware statutes cited by the defendants (DGCL §§ 251(d) and 264(b)) govern pre-closing amendments and

do not authorize post-merger amendments altering consideration a finding consistent with the Company’s legal position.

case is currently in active discovery.

The Company filed a motion for summary judgment on December 16, 2025, covering Counterclaims I

The defendants filed cross-motions for summary judgment on January 23, 2026, covering Counterclaims I through V and a declaratory

judgment claim.

All briefing on summary judgment is complete as of the date of this filing, and rulings are pending.

A court date is

scheduled for May 2026.

Company is vigorously defending against the counterclaims and continues to monitor the proceedings and potential financial exposure.

If the District Court upholds the Second Amendment, its cash obligation is limited to the $ 3.0

million already deposited in the District Court’s registry, with additional exposure limited primarily to legal fees.

Company currently considers an adverse outcome reasonably possible but not probable.

The estimated range of loss is $0 to $7.8 million.

Accordingly, no accrual has been recorded for this contingency beyond the $3.0 million already reflected in the financial

Listing Compliance

a condition of continued listing, the Company is required to maintain (i) a minimum of $2.5 million in stockholders’ equity under Nasdaq

Listing Rule 5550(b)(1), and (ii) a minimum closing bid price of $1.00 per share for 30 consecutive business days under Nasdaq Listing

Rule 5550(a)(2).

Company continuously monitors its compliance with these requirements.

As of December 31, 2025, the Company’s stockholders’ equity was

approximately $8.2 million, which exceeds the $2.5 million minimum.

However, the Company’s Class A common stock is currently trading

below $1.00 per share.

If the closing bid price remains below $1.00 for 30 consecutive business days, Nasdaq may issue a deficiency notice,

and the Company would have 180 days to regain compliance.

addition, the Company is aware of a proposed new Nasdaq rule filed with the SEC on January 13, 2026, that would require listed companies

to maintain a minimum market value of listed securities of at least $5 million.

Under the proposed rule, if a company’s market value

of listed securities falls below $5 million for 30 consecutive business days, Nasdaq would immediately suspend trading and delist the

company’s securities without a cure period and without a stay of suspension during any appeal.

The SEC has extended its review period

and is expected to make a decision on this proposed rule by April 29, 2026.

If adopted, the rule would become effective 60 days after

SEC approval.

Based on the Company’s current stock price and number of shares outstanding as of the date of this filing, the Company

may not be in compliance with this proposed requirement at the time of its adoption and could be subject to immediate delisting as soon

as 30 business days after the rule takes effect.

can be no assurance that the Company will maintain compliance with these or any other Nasdaq listing requirements in the future.

to do so could ultimately result in the delisting of the Company’s common stock, which would adversely affect stockholders’ ability to

trade their shares and the Company’s ability to raise capital.

Furthermore, as described elsewhere in this Annual Report, a delisting

event or a compliance failure that triggers the Listing-Related Adjustment Clause in the Second Amended CAA would simultaneously reduce

the Company’s loan program income share, compounding the adverse financial impact of any such event.

21 - Subsequent Events

Company has evaluated events and transactions occurring after December 31, 2025, through the date these financial statements were issued,

and has identified the following matters requiring disclosure.

Unless otherwise noted, these are non-recognized subsequent events under

ASC 855-10 that do not adjust amounts in the December 31, 2025 financial statements but are material enough to warrant disclosure.

Amended and Restated Commercial Alliance Agreement

February 4, 2026, SHF LLC, a wholly owned subsidiary of the Company, executed the Second Amended CAA with PCCU, a related party.

agreement carries a retroactive effective date of October 1, 2025.

The Company had agreed to the terms for the Second Amended CAA in October 2025 and was executed on February 4, 2026,

see Note 10 - Related Party Transactions.

Reset of Series B Convertible Preferred Stock and Warrants

to December 31, 2025, the first and only automatic price reset under the Company’s Series B Convertible Preferred Stock and accompanying

Series B Warrants occurred, see Note 19 Stockholders’ Equity (Deficit).

to December 31, 2025, the Company has continued to draw on its ELOC, under which the Company may

raise up to $ 150.0 million through the issuance of shares of its common stock.

The Company issued 223,962 shares of Common Stock under the ELOC after December 31, 2025, receiving gross proceeds of approximately $ 0.2 million at average share price of $ 0.77 .

These transactions will be reflected in the Company’s first

quarter 2026 financial statements.

Other Material Subsequent Events

Company has evaluated all other events and transactions occurring after December 31, 2025, through the date these financial statements

were issued, and has determined that no other events or transactions have occurred that would require recognition or disclosure in these

financial statements.

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

What changed 10-K

Item 9A. Controls and Procedures