What changed in this filing

/stocks — the workspaceLOADING

Item 1. Business

2025-04-10 compared with 2024-04-01 · 531 added, 534 removed, 430 unchanged (71% of the section changed)

provide services to a variety of cannabis-industry participants in 41 states, including financial institutions desiring to provide business

banking, private banking and commercial banking services to their customers, particularly those customers conducting business in or adjacent

to the cannabis industry.

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

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

Our services include, among other things:

compliance consulting and software for maintaining “Know Your Customer” (“KYC”)

and Bank Secrecy Act (“BSA”) compliance to financial institutions, principally

conducted vis-à-vis our proprietary financial services platform;

origination, onboarding, verification, and servicing of cannabis-related deposit business

for and on behalf of our partner financial institutions;

underwriting, servicing, and administering loans issued to cannabis businesses and related

entities, which are often also our customers, as well as being customers of our partner financial

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

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

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

institutions;

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

as well as being customers of our partner financial institutions.

Services Platform

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institution client and the CRB meet regulatory requirements.

Our platform has been streamlined and finetuned for the past nine years

which enables the Company’s staff to efficiently guide financial institution clients and the CRBs desiring banking services through

the onboarding, validation and monitoring process.

Our automated platform provides for an efficient and effective management tool allowing

our employees to provide continuity of service while enabling compliance staff to monitor BSA activities.

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

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

Our automated platform

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

staff to monitor BSA activities.

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

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

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

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

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

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

Onboarding is an important part of the KYC requirements

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

Investment income is also generated when PCCU or other financial institution

clients invest CRB deposits.

Under our Commercial Alliance Agreement with PCCU, the Company pays 25% of the investment income as a hosting

fee to PCCU based on this income.

Through its relationship with PCCU, depository amounts invested are typically restricted to low-risk

assets with high liquidity and low returns.

The investment income is significantly influenced by the levels of CRB deposits and the prevailing

interest rate environment for cash and similar assets.

We believe that fees based on deposits that we onboard and interest on the daily

balance less cash used to collateralize our loan portfolios maintained with financial institutions will represent a significant portion

of our revenue by 2024.

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

Under our Commercial Alliance Agreement (“PCCU

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

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

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

cash and similar assets.

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

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

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

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

Key changes in

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

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

These are replaced by a fixed asset hosting fee,

calculated based on the average daily balance of account relationships.

The Amended CAA also entitles the Company to all investment income

earned on CRB funds invested on its behalf by PCCU.

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

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

and interest charges if certain thresholds are exceeded.

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

in the Recent Updates below.

Lending Program

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

During 2020, the Company implemented

a commercial lending program, which will be a strong pillar for future revenue and profit growth.

The focus will primarily include senior

secured lending with smaller loans considered for unsecured lending.

Collateral types would include real estate, equipment, and other

business assets.

The Company’s commercial lending

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

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

loans also considered for unsecured lending opportunities.

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

The Company’s commercial lending program is built on:

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

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

cannabis industry participants.

Since 2015, we have facilitated more than $21.5 billion in deposit activity across a footprint of 41

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

to bank cannabis industry participants.

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

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

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

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

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

The Company provides a variety of onboarding, compliance, and monitoring

services to financial institutions and other financial services providers to the large and quickly expanding U.S.

cannabis industry.

cannabis industry is one of the fastest emerging consumer end markets in the U.S.

According to the 2023 MjBizDaily Research the industry

is expected to grow from a $33.6 billion in 2023 to $56.9 billion in 2028 Presently, 38 states plus the District of Columbia and Puerto

Rico have legalized medical cannabis, and 24 states plus the District of Columbia, the Virgin Islands, Guam and the Northern Mariana Islands

have legalized adult-use cannabis.

Company’s management is well positioned to assist growing markets;

having created a reliable reputation and network over the past

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

providers to share experience and knowledge on navigating access to financial services.

We believe this expertise will allow us to enter

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

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

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

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

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

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

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

The Company is well positioned to assist growing markets;

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

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

experience and knowledge on navigating access to financial services.

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

new markets with greater ease.

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

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

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

Each of these matters while separate

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

Management believes that anything that favorably

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

Today, there are several federally legal businesses that are

debanked or otherwise deemed too risky for most financial institutions.

The Cannabis industry will likely be similarly deemed too risky

for most financial institutions.

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

themselves a compliance solution.

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

platform that Safe Harbor operates today.

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

to CRBs and these providers are extremely fragmented.

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access to financial services focused on the cannabis industry.

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

As a result, we have developed

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

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

Our platform supports over 600 customers that trust us with

their financial stewardship.

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

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

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

business into other debanked industries or even internationally;

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

institutions and others willing in loan into the CRB space;

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

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

an industry leading consortium.

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

fees and their expectations.

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

no other competitor can.

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

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

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

resell equipment.

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

by offering a wide range of products and services, delivering unparalleled customer service, maintaining disciplined credit evaluation

and building out service components with other single service providers now serving the cannabis industry with similar reliability.

The Company’s strategy is to be a first-mover in future new legal

markets through its platform offering CRBs in multiple states access to financial services, through financial institutions that already

offer their services to such CRBs.

We are primarily focused on providing onboarding, monitoring and compliance services to financial institutions

through our fintech platform.

Secondarily, we aim to achieve significant growth in domestic onboarded deposits, which we believe will

also lead to increases our loan-related activity.

Finally, we intend to expand our customer base, both domestically and internationally.

We believe that this approach will assist us in gaining greater market share in terms of users of our fintech platform, growing our partner

loan portfolio responsibly, and managing our deposit sources to appropriately fund growth in our earning assets, maintaining favorable

asset quality compared to industry averages, all of which we intend to sustain our reliable profitability.

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

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

As such, we enter into a Commercial

Alliance Agreement (“CAA”) with each partner financial institution that sets forth the terms and conditions of the lending-related

and account-related services governing the relationship between the Company and each partner financial institution with regard to the

CRB deposit accounts.

For example, we entered into a Commercial Alliance Agreement with PCCU, which sets forth the application,

underwriting and approval process for loans from PCCU to their CRB customers, as well as the loan servicing and monitoring responsibilities

provided by both PCCU and us.

For the loans subject to our CAA with PCCU, we perform a significant portion of the underwriting activities

for each loan, including all compliance analysis, credit analysis of the potential borrower, due diligence, and all administration, including

hiring and incurring the costs of all related personnel or third-party vendors necessary to perform these services.

We receive all interest

income on such loans, minus a monthly fee at an annual rate of 0.25% of the then-outstanding principal balance of each loan (0.35% for

loans funded and serviced by PCCU).

Under the CAA, we agree to indemnify PCCU from all claims related to default-related credit losses

as defined in the CAA.

The CAA is presently set to expire on March 29, 2025, which may automatically be renewed for additional one-year

terms unless a party provides 120 days’ notice of non-renewal or there is a termination for cause, provided that a notice of non-renewal

is not provided until 30 months following the signing date.

key strategic initiatives include:

First Philosophy:

Due to the fact that we are providing services to financial institutions

that desire to provide banking services to CRBs, thereby allowing funds derived from cannabis-related

businesses to flow through the financial system, we must ensure the system is protected from

illicit activities by monitoring and validating funds along with “knowing our customer.”

Our close partnerships with financial institutions demand that we understand the regulatory

pressure they face with high risk, cash intensive businesses.

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

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

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

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

the growth of our assets.

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

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

As such, we enter into an agreement, with each

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

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

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

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

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

issued by PCCU to cannabis-related businesses.

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

Company and PCCU.

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

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

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

For SHF-serviced loans—CRB loans

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

Loans both financed

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

These fees were calculated based on the average daily

balance of each loan for the preceding month.

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

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

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

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

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

Furthermore, for CRB deposits

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

Company receiving 75%.

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

or policy changes dictated otherwise.

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

notice prior to the end of the term.

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

every two years unless terminated with 12 months’ notice.

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

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

and loan servicing fees.

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

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

Additionally,

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

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

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

key priorities include:

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

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

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

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

intensive businesses.

Products and Services .

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

attractively priced with a focus on convenience and accessibility to the financial institutions’ customers.

We offer to our financial

institutions clients a means to offer their CRB customers a full suite of online banking services, including access to account balances,

statements and other documents, online transfers, online bill payment and electronic delivery of customer statements, as well as automated

teller machines (“ATMs”), and banking by mobile devices, telephone and mail.

We continuously look for ways of improving our

products, services and delivery channels;

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

more sophisticated products and services.

We have built the present business over the past nine years listening to the needs of the cannabis

industry and rising to the occasion to expand our business model with their needs in mind.

We will continue to evolve with the industry

and lead on this level.

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

with a focus on convenience and accessibility.

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

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

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

and banking by mobile devices, telephone and mail.

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

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

and services.

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

expand our business model with their needs in mind.

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

a Primary Focus upon which to grow relationships.

Our focus on growing deposits is twofold

on a strategic level.

First, we must KYC in order to assist with facilitating the movement

of their funds into the financial system with safe and sound practices.

We have the benefit

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

this secures a great

understanding of the business, operations, cashflow, and continuity.

The second most strategic

factor of growing deposits is that it is critical to our near and long-term success on our

lending strategy.

Utilizing our deposit balances on which to lend will allow us to reduce

our use of alternative funding sources and the use of core deposits to fund our growth;

in turn, will improve our mix of deposits and enable us to achieve a lower cost of funds.

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

First, we must

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

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

this secures a great understanding of the

business, operations, cashflow, and continuity.

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

near and long-term success on our lending strategy.

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

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

this, in turn, will

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

to solidify a long-term relationship:

The loans issued by our partner financial institutions

provides us not only increased profit margins over the long term, but a solid long-term relationship

with the client;

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

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

this ensures reduced client attrition.

This is the relationship we will

strive for from the KYC competitive advantage we presently hold, with over 720 accounts from

which to select the most credit worthy opportunities and understand the business to whom

our partner financial institutions lend.

Lending Function:

To optimize control of the lending process, facilitate servicing, and

grow a participation network of financial institutions interested in securing portions of

larger loans.

This has enabled us to speed up our processes and scale the lending portfolio

in line with our depository growth.

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

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

Institution Relationships to scale:

It will be important to have the right financial

institutions partnering with the Company as we scale our business nationally.

So often, financial

institutions wish to enter the market only to exit due to the complexities of serving the

cannabis industry.

We seek out financial institutions that can provide reliable access to

additional functionality and balance sheet access for growth.

We narrow our partnerships

to those providing optimal financial positioning for both our clients and the Company;

to build as we build.

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

as we scale our business nationally.

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

of serving the cannabis industry.

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

and balance sheet access for growth.

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

and the Company;

willing to build as we build.

Superior Customer Experience to Make Banking with Us Easy.

We have already taken steps

to better target and attract core deposits and accelerate our digital transformation by making

investments in technology and developing fintech partnerships.

We have been focused on evaluating

digital solutions in a number of areas.

This includes investments made to automate our process

for opening accounts, small business lending, and the ability to offer our wealth management

customers a leading digital platform.

Furthermore, our business model allows us to cultivate

close relationships between service representatives and clients;

this ensures that we know

their needs while increasing our knowledge of their operations.

● Rationalize

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

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

We have been focused

on evaluating digital solutions in a number of areas.

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

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

Furthermore, our business

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

this ensures that we know their needs

while increasing our knowledge of their operations.

Existing and Evaluate New Lines of Businesses.

Our strategy and expectations for

growth also includes rationalizing existing and evaluating new lines of businesses, to further

grow our revenue streams and fee income opportunities.

Our plan includes the expansion of

our treasury management and wealth management functions, as well as to build our private

banking and specialty finance capabilities.

This initiative will incorporate a merger and

acquisition strategy that allows us to expand more rapidly than new entrants into the market

trying to compete.

Our strategy and expectations for growth also includes rationalizing existing

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

Our plan includes the expansion

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

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

market trying to compete.

Significantly

Improve Operational Efficiency.

Our goal is to improve our efficiency.

believe there are opportunities to reduce our costs, we also need to identify and automate

manual processes that are currently being performed.

The additional technology expertise

resulting from our acquisition of Rockview Digital Solutions, Inc., a Delaware corporation,

d/b/a Abaca will enable us to assess and automate faster.

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

manual processes.

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

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

Brand Awareness.

Building brand awareness in the communities

we serve will be key for both growing our presence in these markets as well as laying a strong foundation for future expansion.

we have placed a significant focus on marketing and business development as we work toward building a greater national brand awareness.

Many initiatives are underway including improved signage and promotions, evaluating affinity relationships, and greater community involvement.

We will continue to work with state officials, regulators, and legislators to familiarize them with the manner financial services can

be available in a safe and sound way for their state;

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

as well as laying a strong foundation for future expansion.

Recently we have placed a significant focus on marketing and business

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

Many initiatives are underway including improved signage

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

We will continue to work with state officials,

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

this will ensure their community safety.

This multi-prong approach utilizing internal

expertise and networks forged over the past nine years will allow us to dominate the financial arena moving forward .

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

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

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

We believe that one of o ur primary

differentiator is our culture and the quality of our people delivering our products and services

in such a manner that customers receive the best knowledge, expertise, advice, and service

when and where they need it.

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

best team members to execute our strategy.

In doing so, we will implement development programs

that enable employees to pursue career aspirations, expand their depth of knowledge and improve

their skill set.

and Release of EF Hutton Note

November 2, 2022, EF Hutton, division of Benchmark Investments, LLC (“EF Hutton”), notified the Company that it was in default

on a promissory note in the total amount of $2,166,250 executed on September 28, 2022.

On March 10, 2023, the Company and EF Hutton agreed

to fully resolve the balance due, as well as all obligations set forth in the promissory note, for the total sum of $550,000, which was

paid on March 10, 2023.

On March 13, 2023, the Company was provided with a fully executed Satisfaction and Release of Promissory Note.

Bid Price Compliance

On March 16, 2023, the Company received

a letter from the listing qualifications department staff of The Nasdaq Stock Market (“Nasdaq”) notifying the Company that

for a period 30 consecutive business days, the Company did not maintain a minimum closing bid price of $1 per share for its common stock,

as required by Nasdaq listing rule 5550(a)(2).

The compliance deadline was extended by Nasdaq on September 13, 2023 for an additional

180-day period, expiring on March 11, 2024.

On January 5, 2024, prior to the expiration, Nasdaq notified the Company that it has regained

compliance with Listing Rule 5550(a)(2) and closed the matter.

As of March 28 th , 2024,

the Company’s closing bid price was $0.96.

If the Company does not maintain a minimum closing bid price above $1 per share for its

Common Stock for a period of 30 consecutive business days, Nasdaq may re-open this matter.

Note and Commercial Alliance Agreement

On March 29, 2023, the Company and PCCU entered into a definitive transaction

to settle and restructure the deferred obligations stemming from the September 28, 2022 business combination, including $56,949,800 into

a five-year Senior Secured Promissory Note in the principal amount of $14,500,000 bearing interest at the rate of 4.25% (the “Note”);

a Security Agreement pursuant to which the Company will grant, as collateral for the Note, a first priority security interest in substantially

all of the assets of the Company;

and a Securities Issuance Agreement, pursuant to which the Company will issue 11,200,000 shares of the

Company’s Class A Common Stock to PCCU.

The Company and PCCU also entered into the CAA that sets forth the terms and conditions

of the lending-related and account-related services governing the relationship between the Company and PCCU.

Bank Agreement Termination

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

Under the agreement, Company

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

related businesses primarily located in Arkansas.

The agreement was originally executed by Rockview Digital Solutions, LLC, which was

acquired by the Company in October 2022.

The termination was effective as of October 1, 2023, allowing for an orderly transition and

reduced impact on customer operations.

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

any material early termination penalties.

Amendment to Agreement and Plan of Merger

October 26, 2023, we entered into:

(1) a Second Amendment to Agreement and Plan of Merger (the “Second Amendment”) with 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 ( “Abaca”),

and Dan Roda, solely in such individual’s capacity as the representative of the Company Securityholders (the “Abaca Stockholders’

Representative”), and (2) a Warrant Agreement with Continental Stock Transfer & Trust Company (solely as warrant agent to the

Warrant Agreement).

First Amendment modified, among other things, the First Anniversary Parent Shares to be issued as consideration so that the First Anniversary

Parent Shares equal $12,600,000 minus the note balance of $500,000, plus accrued interest, divided by the 10-day VWAP of the Parent Common

Stock for the 10 days immediately preceding the first anniversary of the Closing Date.

The Second Amendment modified, among other things,

the First Anniversary Parent Shares to be issued as consideration so that the First Anniversary Parent Shares equal $12,600,000 less

the Closing Note Balance and Working Capital Adjustment, collectively in the amount of $928,356.16, divided by $2.00 per share.

result, 5,835,822 shares of Parent Common Stock will be issued as the First Anniversary Parent Shares.

The Second Amendment also added

a Third Anniversary Consideration Payment of $1,500,000 which will be payable in cash, stock, or a combination of both at the Company’s

If the Company decides to pay with shares, their value will be determined by the 10-day NASDAQ average before

the anniversary, with prices ranging between $2.00 and $4.36.

Shares given purely for payment won’t be restricted by the Lock-Up

However, if the Lock-Up Agreement is in effect, the payment will be split into $750,000 cash and an equivalent $750,000 in

The lock-up duration for any shares will adhere to the legal minimum.

In the event of a company stock consolidation or similar

activity, the number of shares to be issued for the payment will be adjusted to reflect the decreased total of outstanding shares.

changes were made to the cash payments of $3,000,000 payable at each of the one-year and two-year anniversaries of the original closing.

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

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

Committee shall select and recommend one candidate for service on the Company’s Board of Directors in the Company’s 2024

annual proxy statement.

addition, pursuant to the Warrant Agreement the Company agreed to deliver the Company Securityholders warrants to purchase up to an aggregate

of 5,000,000 shares of Parent Common Stock at an initial exercise price of $2.00 per share.

February 27, 2024, The Company and the Abaca Stockholders’ Representative entered into the First Amendment to Second Amendment

to Agreement and Plan of Merger Warrant Agreement and Lock-up Agreement, revising the Second Amendment to their Merger Agreement.

This revision modifies the Common Stock’s registration requirements and timelines, updates the warrant agreement by changing

warrant durations and eliminating the redemption clause, and adjusts the Lock-Up Agreement to shorten the lock-up period to match

the amendment’s effective date.

These modifications were mutually agreed upon to ensure both compliance and clarity in the

ongoing agreements.

Board has unanimously determined that the Second Amendment, First Amendment to Second Amendment and Warrant Agreement are advisable and

in the best interests of the Company’s Stockholders.

The Board has approved the Second Amendment and Warrant Agreement on the terms

and subject to the conditions set forth therein.

The foregoing description of the Second Amendment, First Amendment to Second Amendment

and the Warrant Agreement, along with the supporting documents, and the transactions contemplated thereby does not purport to be complete

and is subject to, and qualified in its entirety by, the full text of the Second Amendment, First Amendment to Second Amendment and the

Warrant Agreement, copies of which are attached hereto as ( Exhibits 2.1 and 2.2) and are incorporated herein by reference.

We believe that one of our primary differentiator is

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

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

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

members to execute our strategy.

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

the use of stock-based compensation options.

Additionally, we will implement structured development programs to support employees

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

NASDAQ Listing Compliance

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

from the listing qualifications department staff of Nasdaq (the “Staff”) notifying the Company that for the last 30 consecutive

business days, the Company did not maintain a minimum closing bid price of $1.00 per share for its common stock, and thus, the Company

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

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

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

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

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

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

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

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

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

If the Company does not regain compliance

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

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

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

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

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

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

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

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

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

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

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

Bid Price Requirement is now closed.

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

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

Specifically, the Company’s

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

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

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

Market continued listing standards.

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

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

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

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

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

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

The Company intends to timely

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

There can be no assurance that

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

compliance with any other Nasdaq requirement in the future.

and restated CAA with PCCU

December 31, 2024, the Amended CAA,

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

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

then-current term.

modifications under the Amended CAA include:

of Indemnification Obligations:

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

the original or future agreements.

of Prior Fees and Implementation of Asset Hosting Fee Structure:

Under the previous agreement, the Company was required to pay

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

The Amended CAA eliminates

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

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

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

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

This revised model aligns

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

Income Entitlement:

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

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

Yield Allocation Formula:

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

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

Loan-to-Share

Ratio Compliance:

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

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

daily balance (ADB) until compliance is restored.

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

based on the shortfall.

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

Rate + 120 bps, calculated daily and paid monthly.

to Senior Secured Promissory Note and Deferral Agreement with PCCU

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

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

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

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

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

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

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

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

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

legal case in Denver

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

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

Daniel Roda, Gregory W.

Ellis, and James R.

Carroll , Case No.

2024CV33187 (Denver County District Court).

The Complaint was

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

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

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

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

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

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

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

Solutions, Inc.

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

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

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

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

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

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

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

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

the terms of the Merger Agreement.

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

Court’s registry on November 21, 2024.

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

in the Liquidity and Going Concern section.

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

Roda, Gregory W.

Ellis, and James R.

Carroll (collectively, the “Defendants”)

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

The Defendants’ answer and counterclaim, among

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

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

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

The Company and Mr.

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

December 13, 2024, Daniel Roda, Gregory W.

Ellis, and James R.

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

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

The Defendants’ answer and counterclaim, among other things,

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

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

The Defendants’ counterclaim also asserts

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

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

and Marketing

2023, we formally produced our first marketing plan and will be focusing on the following activities to ensure greater exposure and brand

of a well-known public relations and investor relations firm,

website to optimize search engine optimization,

relationships and success fees,

conference participation and speaking engagements,

retention promotions, and

and e-blast campaigns along with more traditional direct mail marketing activities.

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

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

search engine performance to boost online engagement and improve visibility.

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

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

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

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

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

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

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

employees and others to protect our proprietary rights.

Despite these efforts to protect ourselves from infringement or misappropriation

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

violation of our rights.

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

and others to protect our proprietary rights.

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

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

of our rights.

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

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unlike the normal commercial market.

to the federally illegal status of cannabis, most cannabis-related businesses, licensed or unlicensed, have faced years of inability

to access capital at reasonable rates;

these circumstances force them to purchase properties and fund their businesses from personal

investment of operational cash, potentially limiting their own growth.

This provides for a robust opportunity to lend to established

entities with real estate assets free of debt.

Businesses are taking the opportunity to leverage such assets to expand and grow their

operations while we build a senior secured portfolio ostensibly collateralized with a real estate base.

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

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

potentially limiting their own growth.

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

free of debt.

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

secured portfolio ostensibly collateralized with a real estate base.

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

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

businesses including those in the cannabis industry (i.e.

those legal operating in states that have approved cannabis for medicinal and/or

More recently, the SAFER Banking Act updates the Secure and Fair Enforcement (SAFE) Banking Act and has successfully passed

the Senate Banking Committee as of September 2023.

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

and/or adult use).

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

as of September 2023.

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

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

We feel due to the

high cash nature of the business, which we believe will persist in the near and mid-term, and the illicit history of cannabis, many potential

competitors will remain hesitant to serve the industry, resulting in an outsized opportunity for the Company.

Even with the passage of the

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

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

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

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

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

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and ability to service debt.

inception (including as a wholly owned subsidiary asset of PCCU), the Company has onboarded over $21.5 billion in cannabis related funds

into the financial system with what we believe to be the highest level of monitoring and validation.

In conjunction with its financial

institution clients, the Company has successfully completed 16 state and federal exams without interruption resulting in reliable financial

The Company’s onboarded deposits currently consist of over 720 accounts that were onboarded and validated in a methodical

manner to ensure continuity of service while under significant regulatory scrutiny.

The Company’s services started with only 10

test CRBs resulting in current onboarded accounts representing approximately 70 times growth since the Company began operations.

Company has successfully grown its onboarded deposits at a rapid pace, with a compound annual growth rate (“CAGR”) of 53%

from 2015 to 2023.

Onboarded deposits processed in 2022 were approximately $3.6 billion and grew to approximately $4.2 billion in 2023.

Company’s onboarding process for CRBs desiring banking services through PCCU or another financial institution is a multi-step process

that is designed to fulfill the financial institution’s “know your customer” requirements and the diligence expectations

set forth in the 2014 FinCEN Guidance related to providing services to CRBs, particularly developing an understanding of the normal and

expected activity for the business.

The account opening process begins with an application and supporting documentation provided by the CRB, which are uploaded and logged

so that, following a quality control review, open items and questions are flagged for follow up.

All account-related documentation is

stored in a secure database that allows the Company’s oversight, audit and exam functions to have access to all of the CRB’s

As part of the Company’s diligence process, background checks are performed on all business owners, with the need for additional

background checks of indirect owners or investors determined in the application review stage.

Other diligence includes, among other things, as applicable, confirmation of licensure, on-site visits and regular audits to review business

processes and inspect business locations, verification of sources of funds, review of business and inventory records, and review of other

information necessary for a full understanding of the prospective customer’s business and historical operations.

The account opening process is completed with the assistance of a financial institution staff member.

substantially all deposits are maintained at PCCU, and all transmissions of funds to or from these deposit accounts are handled directly

We have expanded, and intend to continue to expand, our relationships with other financial institutions that similarly hold

the CRB deposit accounts and handle transmissions of funds to and from the accounts.

Although we do not directly hold the deposit accounts,

we believe that account retention is a measure of our ability to efficiently and compliantly onboard, validate and monitor CRB accounts.

The largest 10 CRB accounts held at PCCU for the period ended December 31, 2023 represented less than 5% of fee income from onboarded

deposits, which is currently our largest source of revenue.

Building upon the existing foundation, we believe the Company has the ability

to continue to grow the financial institution clients for which it onboards deposits and related fee income at a strong pace.

we plan to add access to additional financial services to the Company’s platform, such as merchant processing, custodial relationships,

insurance products, broker/dealer services, payment processing services and investment services, although in each case these services

would be provided by a third party holding necessary licenses.

Company had one loan on its balance sheet as of December 31, 2023.

The Company also indemnified twenty loans as of December 31, 2023;

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

Regulatory Challenges

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are delivered in an appropriate manner.

An external audit firm is engaged to audit our compliance with certain policies on a quarterly

and annual basis.

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

Regulations and Ramifications

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models to provided financial services to the cannabis industry.

Unregulated fintechs, i.e., those not formally regulated by federal agencies,

are not subject to the same restrictions as chartered financial institutions (i.e., concentration limits on the percentage of balance

sheet composed of higher risk cannabis deposits).

Fintechs may enjoy this less restricted environment for a period of time, but we anticipate

these companies will become subject to increasing regulatory requirements.

We believe competition at the fintech level remains limited,

as the emerging cannabis market requires the creation of sustainable fintech models that understand the regulatory environment, combining

technology and regulation.

While not fully regulated, fintech models are responsible for moving funds through the financial system via

banking partners and must therefore be aware of regulations surrounding the movement of funds and implement BSA programs themselves.

Unregulated financial technology companies (“fintechs”),

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

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

Fintechs may enjoy this less

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

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

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

While not fully regulated, fintech models are

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

the movement of funds and implement BSA programs themselves.

the Company Addresses Regulatory Challenges

The Company’s onboarding process for CRBs desiring

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

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

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

● The account opening process begins

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

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

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

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

● As part of the Company’s diligence

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

investors determined in the application review stage.

● Other diligence includes, among

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

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

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

● The account opening process is

completed with the assistance of a financial institution staff member.

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

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

of December 31, 2023, we had forty three full time employees, and two part time employees.

None of our employees are represented by a

union or parties to a Collective Bargaining Agreement.

Concentrations

Currently, substantially all deposits are maintained

at PCCU, and all transmissions of funds to or from these deposit accounts are handled directly by PCCU.

We intend to expand our relationships

with other financial institutions that similarly hold the CRB deposit accounts and handle transmissions of funds to and from the accounts.

Although we do not directly hold the deposit accounts, we believe that account retention is a measure of our ability to efficiently and

compliantly onboard, validate and monitor CRB accounts.

The largest 10 CRB accounts held at PCCU for the period ended December 31, 2024

represented less than 5% of fee income from onboarded deposits, which is currently our largest source of revenue.

Building upon the existing

foundation, we believe the Company has the ability to continue to grow the financial institution clients for which it onboards deposits

and related fee income at a strong pace.

In addition, we plan to add access to additional financial services to the Company’s platform,

such as merchant processing, custodial relationships, insurance products, broker/dealer services, payment processing services and investment

services, although in each case these services would be provided by a third party holding necessary licenses.

Loans Receivables

The Company had one loan on its balance sheet as of

December 31, 2024.

The Company entered into the Amended CAA, effective December 31, 2024, and as of that date, no indemnified

loans remain outstanding.

In contrast, as of December 31, 2023, the Company had indemnified a total of twenty loans, with three loans

individually accounting for more than 10% of the total indemnified loan balance.

Under the previous CAA, loan interest income was determined

based on a fixed percentage fee structure, where PCCU received a share of interest income from CRB-related loans.

Additionally, the Company

earned servicing fees of 0.25% annually on loans funded by PCCU and 0.35% on loans both financed and serviced by PCCU.

Under the amended

CAA, the Company’s loan interest income will now be determined using a loan yield allocation formula incorporating the Constant

Maturity US Treasury Rate, along with a proprietary risk rating formula to determine the fee split.

This transition restructures the revenue-sharing

model, eliminating fixed servicing fees while providing SHF with greater control over loan interest income.

The breakdown of the loan portfolio on December 31,

2023, by region, including loan amounts, regional concentration, collateral segmentation between real estate and business assets, and

loan-to-value ratios for each region are as follows:

Concentration

Business Assets

Total Collateral

As a result of the Amended CAA, the Company no longer has any indemnified loans, and therefore the loan

portfolio breakdown as of December 31, 2024, is no longer relevant.

of December 31, 2024, we had forty-one full time employees, and one part time employee.

None of our employees are represented by a labor

union or covered by a collective bargaining agreement.

Capital Management

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Attracting, developing, and retaining the best talent with the right skills is central to our long-term strategy to drive our success.

Our workforce composition is aligned with our business needs.

trusts it has adequate human capital to operate its business successfully.

The Company had 43 full-time equivalent employees, or FTEs,

at the end of 2023.

Approximately 70% of our workforce is in Colorado and another 16% in Arkansas, with an expanding remote workforce

to cultivate new and existing cannabis relationships in multiple states.

The others are spread around to six other states.

workforce composition aligns with our business needs.

Management trusts that it has adequate human capital to operate the business successfully.

The company had 41 full-time equivalent employees (FTEs) at the end of 2024.

Approximately 76% of our workforce is based in Colorado,

with another 12% in Arkansas, supported by an efficient remote workforce that cultivates new and existing cannabis relationships across

multiple states.

The remaining employees are spread across six other states.

acquisition efforts focused on sales, business development and income generator roles.

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with all federal and state laws relating to discrimination in the workplace.

New employees are provided industry-relevant compliance

training and are introduced to our Code of Business Conduct and Ethics, which is posted on our website at www.shfinancial.org .

The inclusion of our website addressed in this Form 10-K does not include or incorporate by reference the information on our website

into this Form 10-K.

and Consistent Practices.

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We do this with mentoring programs, delegating to train employees to the next level, and specific leadership training programs to encourage

staff to reach hire levels.

staff to reach higher levels.

Promoting from within is a solid strategy for long term success and loyalty.

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The COVID-19 pandemic

has underscored for us the importance of keeping our employees safe and healthy.

In response to the pandemic, the Company has continued

taking actions aligned with the World Health Organization and the Centers for Disease Control and Prevention to protect its workforce

so they can more safely and effectively perform their work.

We implemented remote work options that have granted employees a combination

of working at the office or from home.

We ensure further safety by encouraging any employee that might not feel well or have family members

that might be ill to work from home in order to protect the office environment.

underscored the importance of keeping our employees safe and healthy.

In response to the pandemic, the Company has continued taking actions

aligned with the World Health Organization and the Centers for Disease Control and Prevention to protect its workforce so they can more

safely and effectively perform their work.

We implemented remote work options that have granted employees a combination of working at

the office or from home.

We ensure further safety by encouraging any employee that might not feel well or have family members that might

be ill to work from home in order to protect the office environment.

and Inclusion.

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paid to the employee at that time.

Company was founded in 2015 as a solution to a major problem that plagued the nascent legalized cannabis industry in Colorado - access

to reliable and compliant financial services.

Cannabis related funds were already finding their way into the financial system, including

via hidden, misrepresented accounts and unlawful banking practices.

Based upon our research, we determined that the appropriate step

was to protect the financial system from criminal activity and provide legitimacy to the legal state CRBs.

From decades of regulatory

and banking experience, we created a detailed compliance program to assist financial institutions desiring to provide safe and sound

financial services that would accomplish industry accountability and protect the financial system.

The compliance program provides onboarding,

validation and monitoring services to financial institutions desiring to provide traditional banking services to all types of marijuana,

hemp, and CBD businesses, and to ancillary businesses that provide services to the cannabis industry.

These ancillary businesses include

payroll companies, payment processors, and professionals providing services to and receiving payment from CRBs.

As the lawful cannabis

industry grew beyond Colorado, the Company evolved its business practices to build a national footprint and currently provides services

to financial institutions that provide banking services in 41 states where cannabis is either legal medicinally or for full adult use.

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

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

Holdings, Inc.

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

(“NLIT”), acquired all of

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

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

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

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

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

to “SHF Holdings, Inc.” In this Annual Report on Form 10-K (the “Form 10-K”), we use the terms “we,”

“us,” “our,” “Safe Harbor” and the “Company” to refer to the business and operations

of SHF Holdings, Inc.

following the closing of the Business Combination.

(Refer to Note 3 to the Consolidated Financial Statements included

elsewhere in this Form 10-K for more information regarding the Business Combination.)

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

both certain branches and Safe Harbor Services, a wholly-owned subsidiary of PCCU, to SHF Holding, Co., LLC.

SHF Holding, Co., LLC then

contributed the same assets and related operations to SHF, with PCCU’s investment in SHF maintained at the SHF Holding, Co., LLC

level (collectively the “Pre-Public Company”).

The reorganization effectively occurred July 1, 2021.

In conjunction with

the reorganization, all of the employees engaged in the operations and certain PCCU employees were terminated from PCCU and hired as

SHF employees.

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

the entirety of the Carved-Out Operations were owned by SHF and the Pre-Public Company was dissolved.

In addition, effective July 1,

2021, SHF entered into an Account Servicing Agreement and Support Services Agreement with PCCU, which memorialized the operational relationship

between SHF and PCCU and which were subsequently amended and restated and are discussed in Note 10 to the Consolidated Financial Statements

included elsewhere in this Form 10-K.

September 28, 2022, the parties consummated the Business Combination, resulting in NLIT acquiring all of the issued and outstanding membership

interests of SHF upon exchange for an aggregate of $185,000,000, consisting of (i) 11,386,139 shares of the Company’s Class A Common

Stock with an aggregate value equal to $115,000,000 and (ii) $70,000,000 in cash, $56,949,801 of which will be paid on a deferred basis.

At the closing, 1,831,683 shares of the Class A Common Stock (the “Escrow Shares”) were deposited with an escrow agent to

be held in escrow for a period of 12 months following the closing date to satisfy potential indemnification claims of the parties.

December 31, 2023, the 12-month period has expired, and the Company is in discussion with the escrow agent for the release of the Escrow

For more information about the Business Combination, refer to Note 3 to the Consolidated Financial Statements included elsewhere

Company was founded in 2015 as a solution to a major problem that plagued the nascent legalized cannabis industry in Colorado -

access to reliable and compliant financial services.

Cannabis related funds were already finding their way into the financial

system, including via hidden, misrepresented accounts and unlawful banking practices.

Based upon our research, we determined that

the appropriate step was to protect the financial system from criminal activity and provide legitimacy to the legal state CRBs.

decades of regulatory and banking experience, we created a detailed compliance program to assist financial institutions desiring to

provide safe and sound financial services that would accomplish industry accountability and protect the financial system.

compliance program provides onboarding, validation and monitoring services to financial institutions desiring to provide traditional

banking services to all types of marijuana, hemp, and CBD businesses, and to ancillary businesses that provide services to the

cannabis industry.

These ancillary businesses include payroll companies, payment processors, and professionals providing services to

and receiving payment from CRBs.

As the lawful cannabis industry grew beyond Colorado, the Company evolved its business practices to

build a national footprint and currently provides services to financial institutions that provide banking services in 41states and

territories of the United States of America where cannabis is either legal medicinally or for full adult use.

Harbor Financial (SHF) was established by PCCU following the approval of a contribution of certain assets and operational activities

from select PCCU branches and Safe Harbor Services, a wholly owned subsidiary of PCCU.

These assets and operations were first transferred

to SHF Holding Co., LLC, which then contributed them to SHF.

PCCU’s investment in SHF was maintained at the SHF Holding Co., LLC

level (collectively referred to as the “Pre-Public Company”).

This reorganization took effect on July 1, 2021.

part of the reorganization, all employees involved in the Carved-Out Operations—including those from PCCU—were transitioned

Following this transfer, SHF assumed full ownership of the Carved-Out Operations, and the Pre-Public Company was dissolved.

Additionally,

on July 1, 2021, SHF entered into an Account Servicing Agreement and a Support Services Agreement with PCCU, formalizing their operational

relationship.

These agreements were later amended and restated, as detailed in Note 8 of the Consolidated Financial Statements included

in this Form 10K.

As a result of the Business Combination, PCCU is the Company’s largest stockholder, owning 39.62% of the Company’s

outstanding Class A Common Stock as of December 31, 2023.

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

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

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

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

October 26, 2022, the Company, entered into a Forbearance Agreement (the “Forbearance Agreement”) with PCCU and Luminous

Capital USA Inc.

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

Under the Forbearance Agreement, PCCU agreed to defer

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

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

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

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

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

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

(the “Abaca Stockholders’ Representative”).

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

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

as consideration thereunder.

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

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

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

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

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

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

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

(a) cash consideration in an amount equal

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

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

and (b) 2,100,000 shares of Class A Common Stock at the Merger Closing and $12,600,000 (minus an outstanding note balance of $500,000,

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

the “Share Consideration”).

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

and covenants in the Abaca Merger Agreement.

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

$56,949,800 into a five-year Senior Secured Promissory Note (the “Note”) in the principal amount of $14,500,000 bearing interest

at the rate of 4.25%;

a Security Agreement pursuant to which the Company will grant, as collateral for the Note, a first priority security

interest in substantially all of the assets of the Company;

and a Securities Issuance Agreement, pursuant to which the Company will issue

11,200,000 shares of the Company’s Class A Common Stock to PCCU.

The Company and PCCU also entered into the Commercial Alliance

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

the Company and PCCU and supersedes the Loan Servicing Agreement, as well as the Amended and Restated Support Services Agreement and

the Amended and Restated Account Servicing Agreement.

October 26, 2023, we entered into:

(1) a Second Amendment to Agreement and Plan of Merger (the “Second Amendment”) with 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 ( “Abaca”),

and Dan Roda, solely in such individual’s capacity as the representative of the Company Securityholders (the “Abaca Stockholders’

Representative”), and (2) a Warrant Agreement with Continental Stock Transfer & Trust Company (solely as warrant agent to the

Warrant Agreement).

First Amendment modified, among other things, the First Anniversary Parent Shares to be issued as consideration so that the First Anniversary

Parent Shares equal $12,600,000 minus the note balance of $500,000, plus accrued interest, divided by the 10-day VWAP of the Parent Common

Stock for the 10 days immediately preceding the first anniversary of the Closing Date.

The Second Amendment modified, among other things,

the First Anniversary Parent Shares to be issued as consideration so that the First Anniversary Parent Shares equal $12,600,000 less

the Closing Note Balance and Working Capital Adjustment, collectively in the amount of $928,356.16, divided by $2.00 per share.

result, 5,835,822 shares of Parent Common Stock will be issued as the First Anniversary Parent Shares.

The Second Amendment also added

a Third Anniversary Consideration Payment of $1,500,000 which will be payable in cash, stock, or a combination of both at Company’s

If the Company decides to pay with shares, their value will be determined by the 10-day NASDAQ average before the anniversary,

with prices ranging between $2.00 and $4.36.

Shares given purely for payment won’t be restricted by the Lock-Up Agreement.

if the Lock-Up Agreement is in effect, the payment will be split into $750,000 cash and an equivalent $750,000 in shares.

duration for any shares will adhere to the legal minimum.

In the event of a company stock consolidation or similar activity, the number

of shares to be issued for the payment will be adjusted to reflect the decreased total of outstanding shares.

No changes were made to

the cash payments of $3,000,000 payable at each of the one-year and two-year anniversaries of the original closing.

The Company has agreed

to prepare and file a Registration Statement within 45 calendar days of the execution of the Second Amendment registering the resale

of all Registrable Securities.

The Company has also granted the Abaca Stockholders’ Representative the right to nominate three

qualified candidates for the Company’s Board of Directors to the Company’s Nominating and Corporate Governance Committee

(“NCG Committee”) of which the NCG Committee shall select and recommend one candidate for service on the Company’s

Board of Directors in the Company’s 2024 annual proxy statement.

addition, pursuant to the Warrant Agreement the Company agreed to deliver the Company Securityholders warrants to purchase up to an aggregate

of 5,000,000 shares of Parent Common Stock at an initial exercise price of $2.00 per share.

February 27, 2024, The Company and the Abaca Stockholders’ Representative entered into First Amendment to Second Amendment to Agreement

and Plan of Merger Warrant Agreement and Lock-up Agreement, revising the Second Amendment to their Merger Agreement.

This revision modifies

the Common Stock’s registration requirements and timelines, updates the warrant agreement by changing warrant durations and eliminating

the redemption clause, and adjusts the Lock-Up Agreement to shorten the lock-up period to match the amendment’s effective date.

These modifications were mutually agreed upon to ensure both compliance and clarity in the ongoing agreements.

Board has unanimously determined that the Second Amendment, First Amendment to Second Amendment and Warrant Agreement are advisable and

in the best interests of the Company’s stockholders, has approved the Second Amendment and Warrant Agreement on the terms and subject

to the conditions set forth therein.

The foregoing description of the Second Amendment, First Amendment to Second Amendment and the Warrant

Agreement, along with the supporting documents, and the transactions contemplated thereby does not purport to be complete and is subject

to, and qualified in its entirety by, the full text of the Second Amendment, First Amendment to Second Amendment and the Warrant Agreement,

copies of which are attached hereto as Exhibits 2.1 and 2.2 and are incorporated herein by reference

September 28, 2022, the Company acquired all outstanding membership interests of SHF through a Business Combination.

This transaction

was completed under a Unit Purchase Agreement dated February 11, 2022 (the “Business Combination Agreement”), involving SHF,

SHF Holding Co., LLC (a wholly owned subsidiary of PCCU and direct parent of SHF), PCCU, NLIT (a special purpose acquisition company),

and its sponsor, 5AK, LLC.

Following the completion of the Business Combination, NLIT was renamed “SHF Holdings, Inc.” In

this Annual Report on Form 10-K, the terms “we,” “us,” “our,” “Safe Harbor,” and the

“Company” refer to SHF Holdings, Inc.

and its operations after the closing of the Business Combination.

mailing address is 1526 Cole Blvd., Suite 250, Golden, Colorado 80401.

Our telephone number is (303) 431-3435.

maintain a website at the address https://shfinancial.org/.

On our website, you can access, free of charge, our Annual Report on Form

10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, our annual proxy statement on Schedule 14A, and amendments to those

materials filed or furnished pursuant to Sections 13(a) and 15(d) of the Exchange Act.

Materials are available online as soon as reasonably

practicable after we electronically file such material with, or furnish it to, the SEC.

In addition, the SEC maintains a website at the

address www.sec.gov that contains the information we file or furnish electronically with the SEC.

The information contained on our website

or on the SEC’s website is not incorporated by reference in, or considered part of, this Annual Report on Form 10-K.

maintain a website at the address shfinancial.org.

On our website, you can access, free of charge, our Annual Report on Form 10-K, Quarterly

Reports on Form 10-Q, Current Reports on Form 8-K, our annual proxy statement on Schedule 14A, and amendments to those materials filed

or furnished pursuant to Sections 13(a) and 15(d) of the Exchange Act.

Materials are available online as soon as reasonably practicable

after we electronically file such material with, or furnish it to, the SEC.

In addition, the SEC maintains a website at the address www.sec.gov

that contains the information we file or furnish electronically with the SEC.

The information contained on our website or on the SEC’s

website is not incorporated by reference in, or considered part of, this Annual Report on Form 10-K.

Growth Company Status

20 unchanged sentences

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What changed 10-K

Item 1. Business