What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2025-04-10 compared with 2024-04-01 · 1973 added, 2071 removed, 439 unchanged (90% of the section changed)

Controls and Procedures.

of Disclosure Controls and Procedures

Report on Internal Control over Financial Reporting

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

5 unchanged sentences

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

Our management has identified three (3) material weaknesses, as described below.

Each deficiency was concluded to be a “material

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

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

on a timely basis.

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

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

A “material weakness”,

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

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

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

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

11 unchanged sentences

goals under all potential future conditions.

Report on Internal Control over Financial Reporting

of Disclosure Controls and Procedures

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

4 unchanged sentences

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

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

of the effectiveness of the design and operation of our disclosure controls and procedures.

Based upon their evaluation, our Chief Executive

Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of December 31, 2023

due to the material weaknesses described below.

In light of these material weaknesses, we performed additional analysis as deemed necessary

to ensure that our consolidated financial statements were prepared in accordance with U.S.

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

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

of our disclosure controls and procedures.

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

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

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

were prepared in accordance with U.S.

generally accepted accounting principles.

Accordingly, management believes that the financial statements included in this Annual Report on Form 10-K present fairly in all material

respects our financial position, results of operations and cash flows for the periods presented.

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

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

or detected on a timely basis.

We consider the following material weaknesses to be outstanding as of December 31, 2023:

Accordingly, management believes that the financial statements

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

cash flows for the periods presented.

We consider the

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

Recognition :

During fiscal year 2022 and 2023, the Company’s revenue was earned through certain related party contracts

with PCCU that define contractually the revenue earned by the Company from PCCU for account servicing.

The Company has identified a material

weakness in our internal control over financial reporting related to the need to enhance the design and operating effectiveness of internal

controls over the review of revenue recognition from allocations that occurs on a monthly basis between the Company and PCCU.

remediate this material weakness, the Company has implemented a monthly process with enhanced management review controls to perform and

review revenue recognition.

The analysis and disclosures are assessed by senior management of the Company performing review of the documentation

and disclosures.

Financial Instruments:

During fiscal year 2022 and 2023, the Company had a material weakness with regard to the ineffectiveness

in management review controls of the accounting, disclosure and valuation of complex financial instruments (warrants, Forward Purchase

Agreement, and stock-based compensation).

remediate this material weakness, the Company has implemented a quarterly process with enhanced management review controls to perform

and review complex financial instruments.

The analysis and disclosures are assessed by senior management of the Company performing review

of the documentation and disclosures.

During the three months ending March 31, 2023, the Company identified a material weakness with regard to the initial

implementation of CECL.

This included initially not having supporting documentation of the model aligning to the calculations recorded,

and incorrectly applying the modified retrospective adoption through the Consolidated Statements of Operations only, as opposed to the

Consolidated Statements of Parent-Entity Net Investment and Stockholders’ Equity on January 1, 2023.

remediate this material weakness, the Company enhanced the allowance model documentation during the period from June 30, 2023, through

December 31, 2023, and has implemented a quarterly process with enhanced management review controls to perform and review CECL, however

remediation requires ensuring these controls are effective over time.

The analysis and disclosures are assessed by senior management

of the Company performing review of the documentation and disclosures.

the implementation of our remediation plans for each material weakness, we believe, in subsequent periods, these material weaknesses

can be remediated.

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

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

occur on a monthly basis between the Company and PCCU.

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

at improving oversight and accuracy in the revenue calculation process.

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

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

institution partners.

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

for Financial Instruments:

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

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

In 2023, the Company

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

before the filing of the financial statement.

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

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

year-end period ending December 31, 2024.

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

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

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

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

the Company’s financial statements.

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

review controls remaining ineffective as of year-end 2024.

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

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

related to its going concern assessment.

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

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

Staff Accounting Bulletin No.

59 (Topic 1.M).

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

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

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

projections from the date the financial statements would be issued.

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

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

Ineffective management review constitutes

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

The Company is in the process of designing

its approach to remediation.

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

segregation of duty risk.

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

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

Access logs from the Company’s business

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

financial reporting.

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

this material weakness.

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

6 unchanged sentences

in Internal Control over Financial Reporting

than as noted above in the December 31, 2023 material weaknesses, there was no changes in our internal control over financial reporting

that occurred during the fiscal year ended December 31, 2022 covered by this Report on Form 10-K that has materially affected, or is

reasonably likely to materially affect, our internal control over financial reporting.

Other than the efforts to remediate the material weakness

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

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

The Company’s management

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

control over financial reporting.

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

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

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

Other Information.

1 unchanged sentence

Directors, Executive Officers and Corporate Governance.

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

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

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

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

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

information required under this Item will be contained in the Company’s Proxy Statement for the 2024 Annual Meeting of Stockholders

to be filed with the SEC within 120 days after the year ended December 31, 2023 (the “Proxy Statement”) under the captions

“Directors and Nominees,” “Corporate Governance” and “Delinquent Section 16 (a) Reports,” which information

is incorporated by reference herein.

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

A copy of our Code of Conduct and Ethics is filed as an exhibit to this Annual Report on Form 10-K.

A copy of our Code of Conduct and Ethics

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

Executive Compensation.

12 unchanged sentences

Exhibits and Financial Statement Schedules.

List of documents filed as part of this Annual Report on Form 10-K:

of documents filed as part of this Annual Report on Form 10-K:

Consolidated Financial Statements

The consolidated financial statements required by this item are contained

under the section entitled “Index to Consolidated Financial Statements” (and the consolidated financial statements and related

notes referenced therein) included beginning on page F-1 of this Annual Report on Form 10-K.

consolidated financial statements required by this item are contained under the section entitled “Index to Consolidated Financial

Statements” (and the consolidated financial statements and related notes referenced therein) included beginning on page F-1 of

this Annual Report on Form 10-K.

Consolidated Financial Statements Schedules

All financial statement schedules are omitted because they are either not applicable, not required, or because

the information required is included in the above referenced consolidated financial statements and notes thereto.

financial statement schedules are omitted because they are either not applicable, not required, or because the information required is

included in the above referenced consolidated financial statements and notes thereto.

List of Exhibits

exhibit list in the Exhibit Index is incorporated herein by reference as the list of exhibits required as part of this Annual Report on Form 10-K.

exhibit list in the Exhibit Index is incorporated herein by reference as the list of exhibits required as part of this Annual Report

on Form 10-K.

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

Form of Code of Ethics and Business Conduct

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

8 unchanged sentences

d/b/a Abaca and Dan Roda, solely in such individual’s capacity as the representative of the Abaca security holders (incorporated by reference to Exhibit 2.1 of the Company’s Current Report on Form 8-K, filed on October 27, 2023).

Amended and Restated - 2022 Equity Incentive Plan

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

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

Certificate of Designation (incorporated by reference to Exhibit 3.2 of the Company’s Current Report on Form 8-K, filed on September 29, 2022).

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

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

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

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

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

Form SHF Holdings, Inc.

Stock Option Agreement

Warrant Agreement, dated June 23, 2021, between the Company and Continental Stock Transfer & Trust Company (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on June 25, 2021).

Registration Rights Agreement, dated March 29, 2023, by and between the Company and Partner Colorado Credit Union (incorporated by reference to Exhibit 2 of the Company’s Quarterly Report on Form 10-Q, filed May 15, 2023).

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

Senior Secured Promissory Note, dated March 29, 2023, by and between the Company and Partner Colorado Credit Union (incorporated by reference to Exhibit 4 of the Company’s Quarterly Report on Form 10-Q, filed May 15, 2023)

Securities Issuance Agreement, dated March 29, 2023, by and among the Company and Partner Colorado Credit Union (incorporated by reference to Exhibit 5 of the Company’s Quarterly Report on Form 10-Q, filed May 15, 2023).

Warrant Agreement, dated October 26, 2023, by and among the Company and Continental Stock Transfer & Trust Company (incorporated by reference to Exhibit 2.2 of the Company’s Current Report on Form 8-K, filed on October 27, 2023).

Description of Registered Securities

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

Form of SHF Holdings, Inc.

Restricted Stock Unit Agreement

Letter Agreement, dated June 23, 2021, among the Company, its officers and directors and 5AK, LLC (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on June 25, 2021).

Registration Rights Agreement, dated June 23, 2021, by and among the Company and certain securityholders (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on June 25, 2021).

Form of Indemnity Agreement (incorporated by reference to Exhibit 10.7 to the Company’s Registration Statement on Form S-1 filed on June 2, 2021).

Forward Purchase Agreement dated June 16, 2022 (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K, filed on June 17, 2022).

Registration Rights Agreement dated September 28, 2022 (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K, filed on October 4, 2022).

Lock-Up Agreement dated September 28, 2022 (incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K, filed on October 4, 2022).

Non-Competition Agreement dated September 28, 2022 (incorporated by reference to Exhibit 10.3 of the Company’s Current Report on Form 8-K, filed on October 4, 2022).

Form of Amended and Restated Securities Purchase Agreement (incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K, filed on September 29, 2022).

SHF Holdings, Inc.

2022 Stock Incentive Plan (incorporated by reference to Exhibit 10.4 of the Company’s Current Report on Form 8-K, filed on October 4, 2022).

Forbearance Agreement, dated as of October 27, 2022 by and between SHF Holdings, Inc., Partner Colorado Credit Union and Luminous Capital USA Inc.

(incorporated by reference to Exhibit 99.1 of the Company’s Current Report on Form 8-K, filed on November 1, 2022).

Form of Lock-Up Agreement (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K, filed on November 15, 2022).

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

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

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

Commercial Alliance Agreement, dated March 29, 2023, between the Company and Partner Colorado Credit Unit (incorporated by reference to Exhibit 1 of the Company’s Quarterly Report on Form 10-Q, filed on May 15, 2023).

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

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

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

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

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

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

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

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

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

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

[Insider Trading Policies and Procedures]

Subsidiaries of the Registrant

6 unchanged sentences

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

Clawback policy

XBRL Instance Document

XBRL Taxonomy Extension Calculation Linkbase Document

XBRL Taxonomy Extension Schema Document

XBRL Taxonomy Extension Definition Linkbase Document

XBRL Taxonomy Extension Labels Linkbase Document

XBRL Taxonomy Extension Presentation Linkbase Document

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

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

The Company agrees

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

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

Inline XBRL Instance Document

Inline XBRL Taxonomy Extension Calculation Linkbase Document

Inline XBRL Taxonomy Extension Schema Document

Inline XBRL Taxonomy Extension Definition Linkbase Document

Inline XBRL Taxonomy Extension Labels Linkbase Document

Inline XBRL Taxonomy Extension Presentation Linkbase Document

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

Filed herewith.

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

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

Form 10-K Summary.

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

undersigned, thereunto duly authorized.

HOLDINGS INC .

Pursuant to the requirements

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

duly authorized.

SHF HOLDINGS INC .

April 10, 2025

Sundie Seefried

Executive Officer

Executive Officer)

/s/ Terrance E.

Terrance Mendez

Chief Executive Officer

(Principal Executive Officer)

April 10, 2025

Financial Officer

Financial and Accounting Officer)

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

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

Executive Officer

Chief Financial Officer

(Principal Financial and Accounting Officer)

Pursuant to the requirements

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

on its behalf by the undersigned, thereunto duly authorized.

/s/ Terrance E.

Chief Executive Officer

April 10, 2025

Financial Officer

Chief Financial Officer

April 10, 2025

/s/ Jonathon F.

April 10, 2025

/s/ Douglas Fagan

April 10, 2025

Douglas Fagan

/s/ Jennifer Meyers

April 10, 2025

Jennifer Meyers

/s/ Jonathan Summers

April 10, 2025

Jonathan Summers

/s/ Karl Racine

April 10, 2025

Richard Carleton

/s/ Richard Carleton

April 10, 2025

/s/ John Darwin

Richard Carleton

/s/ Sundie Seefried

April 10, 2025

TO CONSOLIDATED FINANCIAL STATEMENTS.

HOLDINGS, INC.

AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS

Sundie Seefried

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS.

SHF HOLDINGS, INC.

AND SUBSIDIARIES CONSOLIDATED

FINANCIAL STATEMENTS

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

1 unchanged sentence

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

Consolidated Statements of Parent-Entity Net Investment and Stockholders’ Equity for the years ended December 31, 2023 and 2022

Consolidated Statements of Stockholders’

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

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

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

OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

the Stockholders and Board of Directors of

Holdings, Inc.

on the Financial Statements

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

and subsidiaries (the “Company”) as of

December 31, 2023 and 2022, the related consolidated statements of operations, parent-entity net investment and stockholders’

equity, and cash flows for each of the two years in the period ended December 31, 2023, and the related notes (collectively referred

to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects,

the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for

each of the two years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the

United States of America.

Paragraph – Going Concern

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

As more fully described

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

to meet its obligations and sustain its operations.

These conditions raise substantial doubt about the Company’s ability to continue

as a going concern.

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

The financial statements do not

include any adjustments that might result from the outcome of this uncertainty.

in Accounting Principle

discussed in Note 2 to the consolidated financial statements, the Company has changed its method of accounting for the recognition and

measurement of credit losses as of January 1, 2023 due to the adoption of ASC Topic 326, Financial Instruments – Credit Losses .

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

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

financial statements based on our audits.

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

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

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

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

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

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

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

As part of our audits

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

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

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING

To the Stockholders and Board of Directors of

SHF Holdings, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance

sheets of SHF Holdings, Inc.

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

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

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

In our opinion, the financial statements present

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

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

accepted in the United States of America.

Explanatory Paragraph – Going Concern

The accompanying financial statements have been prepared

assuming that the Company will continue as a going concern.

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

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

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

Management’s plans in regard

to these matters are also described in Note 2.

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

of this uncertainty.

Basis for Opinion

These financial statements are the responsibility

of the Company’s management.

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

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

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

federal securities laws and the applicable

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

We conducted our audits in accordance with the standards

of the PCAOB.

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

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

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

an audit of its internal control over financial reporting.

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

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

control over financial reporting.

Accordingly, we express no such opinion.

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

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

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

the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles used and significant

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

We believe that our audits

provide a reasonable basis for our opinion.

have served as the Company’s auditor since 2022.

Holdings, Inc.

BALANCE SHEETS

Our audits included performing procedures to assess

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

to those risks.

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

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

the overall presentation of the financial statements.

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

/s/ Marcum LLP

We have served as the Company’s auditor since

April 10, 2025

SHF Holdings, Inc.

CONSOLIDATED BALANCE SHEETS

Current Assets:

3 unchanged sentences

Accounts receivable

Contract assets

Prepaid expenses – current portion

Accrued interest receivable

Forward purchase receivable

Short-term loans receivable, net

5 unchanged sentences

Intangible assets, net

Deferred tax asset

Deferred tax asset, net

Prepaid expenses – long term position

1 unchanged sentence

Security deposit

LIABILITIES AND PARENT-ENTITY NET INVESTMENT AND STOCKHOLDERS’ EQUITY

LIABILITIES AND STOCKHOLDERS’ (DEFICIT) EQUITY

Current Liabilities:

7 unchanged sentences

Deferred consideration – current portion

Due to seller - current portion

Forward purchase derivative liability

Other current liabilities

Total Current Liabilities

Warrant liability

Warrant liabilities

Deferred consideration – long term portion

Forward purchase derivative liability

Due to seller – long term portion

Senior secured promissory note—long term portion

1 unchanged sentence

Lease liabilities – long term

Deferred underwriter fee

Indemnity liability

1 unchanged sentence

Commitment and Contingencies (Note 13)

Parent-Entity Net Investment and Stockholders’ Equity

Stockholders’ (Deficit) Equity

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

4 unchanged sentences

( 71,569,821 )

Total Parent-Entity Net Investment and Stockholders’ Equity

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

accompanying notes to consolidated financial statements

Holdings, Inc.

STATEMENTS OF OPERATIONS

the year ended December 31,

Total Stockholders’ (Deficit) Equity

$ ( 12,288,014 )

Total Liabilities and Stockholders’ (Deficit) Equity

See accompanying notes to consolidated financial statements

SHF Holdings, Inc.

CONSOLIDATED STATEMENTS OF OPERATIONS

For the year ended December 31,

Operating expenses

Compensation and employee

General and administrative

Compensation and employee benefits

General and administrative expenses

Professional services

Provision for credit losses

Lease expense

Credit loss (benefit) expense

( 1,393,131 )

Impairment of goodwill

of long-lived intangible assets

operating expenses

Impairment of long-lived intangible assets

Total operating expenses

Operating loss

3 unchanged sentences

Interest expense

Change in fair value of

warrant liability

Change in the fair value

of deferred consideration

Change in fair value of warrant liabilities

( 2,803,638 )

Change in fair value of

forward purchase agreement

in fair value of forward purchase option derivative

Total other (income)

Change in the fair value of deferred consideration

( 4,570,157 )

Net loss income before income tax

Total other (income) expenses

$ ( 2,631,697 )

$ ( 1,621,501 )

Provision for income

Net loss before income tax

( 4,459,789 )

( 19,109,548 )

Provision (benefit) for income taxes

$ ( 1,829,701 )

$ ( 48,319,475 )

$ ( 17,279,847 )

Weighted average shares outstanding, basic

2 unchanged sentences

Diluted net loss per share

accompanying notes to consolidated financial statements

Holdings, Inc.

Statements of Parent-Entity Net Investment and Stockholders’ Equity

THE YEARS ENDED DECEMBER 31, 2023 AND 2022

A Common Stock

Parent-Entity

Shareholders’

Balance, December 31, 2021

Issuance of shares in connection with Business

Combination and PIPE offering, net of issuance costs

See accompanying notes to consolidated financial statements

SHF Holdings, Inc.

Consolidated Statements of Stockholders’ (Deficit)

FOR THE YEARS ENDED DECEMBER 31, 2024 AND 2023

Shareholders’ (Deficit)

January 01, 2023

$ ( 39,695,281 )

Acquisition of Abaca

Conversion of PIPE Shares

effect from adoption of CECL

of shares to Abaca shareholders

of PIPE Shares

( 14,013,375 )

Stock option conversion

compensation cost

Restructuring

of deferred underwriting cost

( 17,279,847 )

Balance, December 31, 2022

December 31, 2023

$ 105,924,859

$ ( 71,569,821 )

Cumulative effect from adoption of

Issuance of shares to Abaca shareholders

Conversion of PIPE Shares

( 71,569,821 )

Restricted stock units

Stock compensation cost

PCCU Restructuring

Reversal of deferred underwriting cost

of equity for marketing services

of PIPE shares

compensation cost

( 48,319,475 )

December 31, 2024

$ 108,467,253

$ ( 120,755,545 )

Balance, December 31,

$ ( 12,288,014 )

( 120,755,545 )

accompanying notes to consolidated financial statements

Holdings, Inc.

STATEMENTS OF CASH FLOWS

ended December 31,

CASH FLOWS FROM OPERATING

( 12,288,014 )

See accompanying notes to consolidated financial statements

SHF Holdings, Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS

Year ended December 31,

CASH FLOWS FROM OPERATING ACTIVITIES:

$ ( 48,319,475 )

Adjustments to reconcile net income to net

cash provided by operating activities:

Depreciation and amortization

$ ( 17,279,847 )

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

Depreciation and amortization expense

Stock compensation expense

Net deferred indemnified

loan origination fees

Net deferred indemnified loan origination fees

Interest expense

Lease expense

Provision for credit loss

Credit loss (benefit) expense

( 1,393,131 )

Impairment of goodwill

Impairment of long-lived

intangible assets

Deferred tax credit

Impairment of long-lived intangible assets

Deferred tax expense (benefit), net

( 1,829,701 )

Marketing expense settled via common stock

Change in fair value of warrant liabilities

( 2,803,638 )

Change in fair value of

warrant and forward purchase

option derivative liabilities

Change in the fair value

of deferred consideration

Change in the fair value of deferred consideration

( 4,570,157 )

1 unchanged sentence

Accounts receivable - trade

Accounts receivable –

Related Party

Accounts receivable – related party

Contract assets

Prepaid expenses

Forward purchase receivables

Other current liabilities

Accrued interest receivable

1 unchanged sentence

Other current assets

Accounts payable

( 2,967,145 )

Accounts payable

related party

( 2,515,442 )

Accounts payable – related party

Accrued expenses

Contract liabilities

cash (used in)/provided by operating activities

Security deposit

Net cash provided by (used in) operating activities

$ ( 832,144 )

CASH FLOWS USED IN INVESTING

Purchase of property and

Change in loan receivable,

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchase of property and equipment

Payment to Abaca Shareholder

1 unchanged sentence

Loan receivable repayment

Acquisition of Abaca

Net cash provided by (used in) investing activities

$ ( 2,180,448 )

cash used in investing activities

CASH FLOWS FROM FINANCING ACTIVITIES:

Repayment of senior secured promissory note

( 3,006,993 )

Net cash used in financing activities

$ ( 3,006,993 )

CASH FLOWS USED IN FINANCING

Proceeds from reverse capitalization, net of

transaction costs

Repayment of loans

cash (used in)/provided by financing activities

$ ( 488,834 )

Net (decrease)/increase in cash and cash equivalents

Net decrease in cash and cash equivalents

( 2,564,122 )

Cash and cash equivalents

- beginning of period

Cash and cash equivalents

- end of period

disclosure of cash flow information

( 3,501,426 )

Cash and cash equivalents - beginning of period

Cash and cash equivalents - end of period

Supplemental disclosure of cash flow information

Interest paid

Non-cash transactions:

Marketing expense settled via common stock

Shares issued for the settlement of abaca acquisition

1 unchanged sentence

Operating lease liabilities recognized

Shares issued for the settlement of PCCU debt

Shares issued for the settlement of PCCU debt obligation

Cumulative effect from adoption of CECL

1 unchanged sentence

Interest recognized on PCCU settlement

accompanying notes to consolidated financial statements

Organization and Business Operations

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

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

Holdings, Inc.

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

(“NLIT”), acquired all of

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

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

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

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

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

to “SHF Holdings, Inc.” We use the terms “we,” “us,” “our” 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.)

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

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

SHF Holding, Co., LLC then

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

level (the “reorganization”).

The reorganization effectively occurred July 1, 2021.

In conjunction with the reorganization,

all of the employees engaged in the operations and certain PCCU employees were terminated from PCCU and hired as SHF employees.

Collectively,

Pre-Public Company, 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 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

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

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

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

At the closing, 1,831,683 shares of the Class A Common Stock were deposited with an escrow agent to be held in escrow for a period of

12 months following the closing date to satisfy potential indemnification claims of the parties.

On December 31, 2023, the 12 month period

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

For more information about the Business

Combination, refer to Note 3 to the Consolidated Financial Statements.

As a result of the Business Combination, PCCU is the Company’s

largest stockholder, owning 46.37 % of the Company’s outstanding Class A Common Stock.

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

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

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

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

October 26, 2022, 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

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

payable in connection with the business combination.

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

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

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

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

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

(the “Abaca Stockholders’ Representative”).

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

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

as consideration thereunder.

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

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

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

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

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

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

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

(a) cash consideration in an amount equal

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

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

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

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

the “Share Consideration”).

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

and covenants in the Agreement.

As on October 26, 2023, the Company and the Abaca stockholders entered into the second amendment to the

Abaca merger agreement to redefine the deferred cash consideration payable and the deferred stock consideration payable on the one-year

anniversary of the merger closing.

(Refer to Note 4 to the Consolidated Financial Statements.)

Company generates both interest income and fee income through providing a variety of services to financial institutions desiring to service

the cannabis industry including, among other things, the origination, onboarding, and servicing of cannabis-related deposit business

for and on behalf of those partner institutions;

Bank Secrecy Act and other regulatory compliance and reporting related to these accounts;

onboarding these accounts and responding to account and customer service inquiries;

and sourcing, underwriting, and servicing, and administering

loans issued to cannabis businesses and related entities.

In addition to PCCU, the Company provides these similar services and outsourced

support to other financial institutions providing banking to the cannabis industry.

These services are provided to other financial institutions

under the Safe Harbor Master Program Agreement.

Basis of Presentation and Summary of Significant Accounting Policies

See accompanying notes to consolidated financial statements

and Business Operations

Business Description

SHF Holdings, Inc.

(the “Company”), based

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

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

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

SHF Holding Co., LLC.

On September 28, 2022, Northern Lights Acquisition Corp.

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

Northern Lights Acquisition Corp.

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

The Business Combination aimed to enhance

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

On October 31, 2022, the Company acquired Rockview

Digital Solutions, Inc.

d/b/a Abaca (“Abaca”).

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

bolstering the Company’s fintech offerings and market reach.

The Company facilitates a range of financial services

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

with banking regulations and regulators.

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

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

These services enable cannabis businesses to manage their

finances effectively.

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

services to certain financial institutions serving the cannabis industry.

Presentation and Summary of Significant Accounting Policies

Use of Estimates

preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States

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

financial statements and accompanying notes.

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

determination of the allowance for credit losses, indemnification liabilities, valuation and useful lives of intangibles and the fair

value of financial instruments.

The preparation of the consolidated financial statements in conformity

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

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

Material estimates that

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

tax assets, and the fair value of financial instruments.

Actual results could differ from the estimates.

Basis of Presentation

accompanying consolidated financial statements and related notes have been prepared on the accrual basis of accounting in conformity

with accounting principles generally accepted in the United States of America (“GAAP”) and include the accounts

of the Company, and its wholly-owned subsidiaries.

The consolidated financial statements reflect all adjustments that, in the opinion

of management, are necessary for the fair presentation of the Company’s results of operations and financial condition as of and

for the periods presented.

All intercompany balances and transactions have been eliminated in consolidation.

this reporting period, we have adopted the Current Expected Credit Loss (CECL) accounting standard for the first time, marking a significant

change in our accounting policy for the recognition of credit losses.

This adoption necessitates the estimation and immediate recognition

of expected credit losses over the lifetimes of our financial assets upon their origination or acquisition, which is a departure from

the previous incurred loss approach.

The accounting method was adopted with on a modified retrospectively

basis, and the effects of this adoption were recorded as of January 1, 2023.

Company has made certain immaterial reclassifications to the 2022 balance sheet and statements of operations to conform to the

presentation of the 2023 balance sheet and statements of operations.

These included reclassifications totaling $ 1,198,781

from accounts receivable-trade and $ 32,946

from accrued interest receivable into accounts receivable - related party, $ 196,968

from accounts payable and $ 4,881,074

from accrued expenses into accounts payable - related party, $ 109,081

of net deferred loan origination fees to liabilities, and reclassification of $ 97,593 from Interest expense into change in the fair value of deferred consideration.

Corresponding adjustments have been made to the statement of cash flows and

applicable notes to the consolidated financial statements.

Liquidity and Going Concern

of December 31, 2023, the Company had $ 4,888,769 cash and net working capital deficit of $ 135,355 .

The Company has also incurred an operating

loss of $ 20,712,319 for the year ended December 31, 2023, and cash flows used in operating activities of $ 832,144 .

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

to continue as a going concern for a period of at least twelve months from the date these consolidated financial statements have been

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

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

Any of these actions could materially

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

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

the realization of assets and the satisfaction of liabilities in the normal course of business, and do not include any adjustments to

reflect the possible future effects on the recoverability and classification of assets or amounts and classification of liabilities that

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

Cash and Cash Equivalents

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

The accompanying consolidated financial statements and related notes have

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

subsidiaries.

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

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

All intercompany

balances and transactions have been eliminated in consolidation.

The Company has made certain immaterial reclassifications

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

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

and administrative expenses’.

The consolidated financial statements include the

accounts of SHF Holdings, Inc.

and its subsidiaries where the Company have controlling financial interests.

All intercompany balances

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

Reverse Stock Split

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

on March 14, 2025.

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

reverse stock split.

Concentrations of Risk

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

Cash balances are

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

up to regulatory limits.

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

The Company has not experienced any

credit losses associated with its cash balances in the past.

the Company only services the cannabis industry.

The Company’s financial instruments that are

exposed to concentrations of credit risk consist primarily of cash.

Cash balances are maintained substantially in accounts at PCCU, which

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

From time to time, cash

balances may exceed the NCUSIF insurance limit.

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

In addition to providing compliance and related services

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

as businesses offering cannabis adjacent services.

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

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

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

As of this time, majority of the Company’s

revenue is generated by deposits and loans hosted by PCCU pursuant to a master service agreement.

Company had only one loan on its balance sheet as of December 31, 2023, which comprises 100 % of the total loan balance.

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.

Accounts Receivable and Allowance for Doubtful Accounts

receivable are recorded based on account fee schedules.

While fees are generated from individual CRB related accounts, amounts are initially

collected by the financial institutional partners and remitted in the subsequent month.

Accounts receivable - related party represents

amounts due from PCCU under related party contracts disclosed in Note 10.

The Company maintains allowances for doubtful accounts for

estimated losses as a result of a customers’ inability to make required payments.

The Company estimates anticipated losses from

doubtful accounts based on days past due as measured from the contractual due date and historical collection history.

The Company also

takes into consideration changes in economic conditions that may not be reflected in historical trends, for example customers in bankruptcy,

liquidation or reorganization.

Receivables are written-off against the allowance for doubtful accounts when they are determined uncollectible.

Such determination includes analysis and consideration of the particular conditions of the account, including time intervals since last

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

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

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

Currently the Company substantially relies on

PCCU to hold customer deposits and fund its originated loans.

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

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

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

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

only one loan on its balance sheet.

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

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

However, following

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

Therefore, no concentration

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

We have determined that our Chief Executive Officer

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

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

The Company operates

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

In making this determination, we consider factors

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

evaluate and allocate resources effectively.

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

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

All of our assets are located within

the United States.

Liquidity and Going Concern

Liquidity refers to our ability to meet anticipated

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

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

The main source of our

liquidity continues to be cash inflows generated from operational performance.

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

capital investment commitments.

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

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

within one year of the financial statement issuance date.

This evaluation involves two steps:

(1) assessing whether conditions or events

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

whether the Company has plans to mitigate that doubt.

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

alleviate the doubt.

While the company reported a net working capital

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

After adjusting

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

Schedule of Adjusted Working Capital

Working capital deficit as on December 31, 2024

$ ( 983,833 )

Forward purchase agreement, net

Third anniversary payment consideration

Fees paid in 2025 on the Amended PCCU Note

Adjusted working capital as on December 31, 2024

The Company has the following non-cash items

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

Obligation under the Forward Purchase Agreement:

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

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

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

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

Obligation under the Third Anniversary Consideration Payment:

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

This liability

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

plan and intention.

At December 31, 2024, the Company reported

cash of $ 2,324,647 and a net

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

$ 4,888,769 and a net working

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

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

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

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

and $ 20,731,049 for the years ended

December 31, 2024 and 2023, respectively.

The reported working capital deficit and operating losses, before adjustment

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

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

Management’s Plan Related to Going Concern

To address these concerns, the Company has

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

On January 29, 2025, the Company and PCCU

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

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

Furthermore, on March 1, 2025, the Company

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

with an interest rate of 4.25 %

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

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

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

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

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

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

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

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

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

to reduce costs through lower headcount and other operational spend.

The Company has established a budget and monitors its liquidity

position and will make adjustments as needed.

Due to the uncertainty surrounding cash flows

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

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

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

If the Company is not able to sustain its

present level of operations, it may be forced to make reductions in spending, extend payment terms with suppliers, liquidate assets where

possible, or suspend or curtail planned expansion programs.

Any of these actions could materially harm the Company’s business, results

of operations and future prospects.

The accompanying consolidated financial statements

have been prepared assuming the Company will continue as a going concern, which contemplates the realization of assets and the satisfaction

of liabilities in the normal course of business, and do not include any adjustments to reflect the possible future effects on the recoverability

and classification of assets or amounts and classification of liabilities that may result should the Company not continue as a going concern

as a result of this uncertainty.

Cash and Cash Equivalents

Cash and cash equivalents include cash on hand, amounts

due from financial institutions, and investments with maturities of three months or less.

Accounts Receivable and Allowance for Credit

Accounts receivable are recorded based on account

fee schedules.

While fees are generated from individual CRB-related accounts, amounts are initially collected by the financial institution

and remitted in the subsequent month.

Accounts receivable - related party represents amounts due from PCCU under related party contracts

disclosed in Note 8.

The Company maintains allowances for doubtful accounts for estimated losses resulting from customers’ inability to

make required payments.

In accordance with the adoption of ASU 2016-13, the Company estimates anticipated losses from doubtful accounts

using the current expected credit loss (CECL) model.

This model considers both historical collection experience and forward-looking information,

including changes in economic conditions that may not be reflected in historical trends, such as customers in bankruptcy, liquidation,

or reorganization.

The Company estimates losses based on days past due as measured from the contractual due date.

Receivables are written

off against the allowance for doubtful accounts when they are determined to be uncollectible.

Such determination includes an analysis

of the specific conditions of the account, including time intervals since last collection, customer performance against agreed-upon payment

plans, solvency of the customer, and any bankruptcy proceedings.

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

were no recorded allowances for doubtful accounts on accounts receivable.

Loans Receivable

Loans that significantly support the Company’s operations are recognized as assets on the balance sheet.

These loans, intended

to be held either for the foreseeable future or until their maturity or full repayment, are recorded at their outstanding principal balance.

This amount is adjusted for any credit loss allowances and net of any deferred loan origination fees and costs, as applicable, to reflect

the net investment in these loans.

The Company recognizes interest income on CRB Loans over the loan term using the simple-interest method

based on outstanding principal amounts.

This approach ensures a systematic recognition of income, aligning with the time value of money

income recognition is suspended when there is uncertainty regarding full loan repayment, such as in cases of loan impairment or when

payments are overdue by ninety days or more.

CRB Loans that significantly support the Company’s

operations are recognized as assets on the balance sheet.

These loans, intended to be held either for the foreseeable future or until

their maturity or full repayment, are recorded at their outstanding principal balance.

This amount is adjusted for any credit loss allowances

and net of any deferred loan origination fees and costs, as applicable, to reflect the net investment in these loans.

The Company recognizes

interest income on CRB Loans over the loan term using the simple-interest method based on outstanding principal amounts.

This approach

ensures a systematic recognition of income, aligning with the time value of money principle.

Interest income recognition is suspended when there

is uncertainty regarding full loan repayment, such as in cases of loan impairment or when payments are overdue by ninety days or more.

Loans under these conditions are placed on nonaccrual status.

Any accrued interest not received

by the time a loan is placed on nonaccrual is reversed from interest income.

Subsequent interest payments on nonaccrual loans are recorded

using either the cash basis or the cost recovery method until the loan meets the criteria for reclassification to accrual status.

are returned to accrual status when they become current (less than ninety days past due) and when there is reasonable assurance of future

payment compliance, evidenced by the full satisfaction of both principal and interest payments due.

are assessed individually for potential charge-off, which typically occurs at the point of foreclosure.

Charge-offs are executed to reflect

the realizable value of loans that are deemed uncollectible.

determination of a loan’s past-due status is based on its contractual repayment terms.

Loans are either placed on nonaccrual status

or charged-off ahead of their contractual delinquency dates if the collection of principal and interest is deemed doubtful, ceasing the

recognition of interest income on such loans.

Allowance for Credit Losses (ACL)

January 1, 2023, the Company adopted Accounting Standards Codification Topic 326 – Financial Instruments – Credit Losses

(ASC Topic 326), which replaced the incurred loss methodology for estimated probable credit losses with an expected credit loss methodology

that is referred to as the current expected credit loss (“CECL”) methodology.

ACL is a valuation account that is deducted from the amortized cost basis of financial assets carried at their amortized cost, including

loans held for investment, to present the net amount that is expected to be collected throughout the life of the financial asset.

estimated ACL is recorded through a provision for credit losses charged against operations.

Management periodically evaluates the adequacy

of the ACL to maintain it at a level it believes to be reasonable.

The Company uses the same methods used to determine the ACL to assess

any reserves needed for off-balance sheet credit risks such as unfunded loan commitments including Indemnified loans to PCCU.

These reserves

for off-balance sheet credit risks are presented in the liabilities section in the consolidated balance sheets as an “Indemnity

ACL consists of two components:

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

risk characteristics with other loans;

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

characteristics.

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

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

which are derived from internally developed model estimation approaches for smaller homogenous loans.

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

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

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

the likelihood of default across the loan pool.

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

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

This involves a detailed

analysis of two primary components:

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

and the unpaid principal balance of the loan;

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

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

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

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

is the fact that these borrowers are involved in the cannabis business.

Despite being legal at the state level in certain jurisdictions,

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

As cannabis related lending is a new practice

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

Therefore, significant judgement

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

the cannabis industry.

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

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

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

expectations around the current and future macroeconomic outlook.

Expected credit losses are estimated over the contractual term of the

loans, adjusted for expected prepayments when appropriate.

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

modification under certain conditions.

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

Recoveries are credited to the ACL

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

Any amounts collected in excess

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

Allowance for Loan Losses (ALL)

to the adoption of CECL on January 1, 2023, the Company recognized an allowance for loan losses is a valuation allowance for probable

incurred credit losses, increased by the provision for loan losses and decreased by charge-offs less recoveries.

Management estimates

the required allowance for loan losses balance using past loan loss experience, known and inherent risks in the nature and volume of

the portfolio, information about specific borrower situations and estimated collateral values, economic conditions, and other factors.

Allocations of the allowance for loan losses may be made for specific loans, but the entire allowance is available for any loan that,

in management’s judgment, should be charged-off.

allowance for loan losses consists of specific and general components.

The specific component relates to loans that are individually

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

The general component covers non-classified loans and

is based on historical loss experience adjusted for current factors.

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

may change in the near term.

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

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

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

an individual loan basis if deemed necessary.

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

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

is expected solely from the collateral.

loans SHF originates are secured by various types of assets of the borrowers, including real property and certain personal property,

including value associated with other assets to the extent permitted by applicable laws and the regulations governing the borrowers.

The documents governing the loans also include a variety of provisions intended to provide remedies against the value associated with

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

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

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

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

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

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

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

The sale of a license or other

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

A defaulted loan may also

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

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

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

administrative agent.

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

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

Net Deferred Loan Origination Fees and Cost

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

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

Where applicable, the loan origination

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

These loan origination costs are typically incremental

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

Net loan origination fees are initially deferred and presented net of loans receivable

asset for portfolio loans, or as a separate liability for indemnified loans, and recognized as interest income utilizing the interest

Indemnity Liability

the Loan Servicing Agreement and Commercial Alliance Agreement with PCCU, the Company had agreed to indemnify PCCU from all claims related

to Company’s cannabis-related business, including but not limited to default-related credit losses as defined in the Loan Servicing

The indemnification component of the Loan Servicing Agreement and the Commercial Alliance Agreement (refer to Note 10 to the

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

In determining the applicability of ASC 460, the Company considered that the agreement outlines a broad indemnification of all claims

related to the cannabis-related business.

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

In the lending industry, it is inherently anticipated future credit losses will result from currently issued debt.

The Company’s

indemnity obligation is subordinate to PCCU’s and other financial institution clients’ other means of collecting on the loans

including foreclosure of the collateral, recourse against personal and/or corporate guarantors and other default remedies available in

the loan agreements.

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

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

Therefore, as defined

in ASC 460, the indemnification clause represents a general loss contingency in that it is an existing condition, situation or set of

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

occur or fail to occur.

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

the agreement at the balance sheet date.

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

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

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

A loss contingency is reported when it is both probable

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

Any accrued interest not received by the time a loan is placed on nonaccrual

is reversed from interest income.

Subsequent interest payments on nonaccrual loans are recorded using either the cash basis or the cost

recovery method until the loan meets the criteria for reclassification to accrual status.

Loans are returned to accrual status when they become

current (less than ninety days past due) and when there is reasonable assurance of future payment compliance, evidenced by the full satisfaction

of both principal and interest payments due.

Loans are assessed individually for potential charge-off,

which typically occurs at the point of foreclosure.

Charge-offs are executed to reflect the realizable value of loans that are deemed

uncollectible.

The determination of a loan’s past-due status

is based on its contractual repayment terms.

Loans are either placed on nonaccrual status or charged-off ahead of their contractual delinquency

dates if the collection of principal and interest is deemed doubtful, ceasing the recognition of interest income on such loans.

Allowance for Credit Losses (ACL) and Indemnification

The Company accounts for credit losses in accordance

with ASC 326 – Financial Instruments – Credit Losses (CECL methodology), which replaces the incurred loss model with an expected

credit loss approach.

The allowance for credit losses (ACL) is established to reflect the estimated lifetime credit losses on financial

assets carried at amortized cost, including loans held for investment.

The ACL consists of an asset-specific component for individual

loans with unique risk characteristics and a pooled component based on expected loss models, incorporating probability of default (PD)

and loss given default (LGD).

Given the evolving nature of cannabis-related lending and the absence of extensive historical industry data,

the Company applies significant judgment to estimate credit losses using comparable non-cannabis loan data while adjusting for industry-specific

The ACL estimation process incorporates macroeconomic

conditions, economic forecasts, and reasonable future expectations.

Expected credit losses are measured over the contractual term of the

loans, adjusted for expected prepayments where applicable.

Recoveries on previously charged-off loans are credited to the ACL upon collection.

The Company previously recorded an indemnity liability

under ASC 460 – Guarantees related to its obligation to indemnify PCCU against credit losses on cannabis-related loans.

This liability

was measured using the same methodology as the ACL and included an assessment of potential losses from defaulted loans.

However, following

the execution of the Amended and Restated CAA on December 31, 2024, the Company is no longer obligated to indemnify PCCU for credit losses,

resulting in the complete reversal of the indemnity liability into the statement of operations.

As of December 31, 2024, the Company no

longer has any outstanding indemnified loans.

Property and Equipment, net

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

Depreciation is provided over the assets’ useful

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

Property and equipment are recorded at historical

cost, net of accumulated depreciation.

Depreciation is provided over the assets’ useful lives on a straight-line basis 3 - 5 years

for equipment and furniture and fixtures.

Repairs and maintenance costs are expensed as incurred.

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

If the analysis warrants a change in

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

carrying value prospectively over the shorter remaining useful life.

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

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

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

enhancement of our technology platform.

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

costs are amortized on a straight-line basis over the estimated useful life of the related asset, generally five years.

Management periodically assesses the estimated useful

life over which assets are depreciated or amortized.

If the analysis warrants a change in the estimated useful life of property and equipment,

management will reduce the estimated useful life and depreciate or amortize the carrying value prospectively over the shorter remaining

The carrying amounts of assets sold or retired and

the related accumulated depreciation are eliminated in the period of disposal and the resulting gains and losses are included in the results

of operations during the same period.

The Company capitalizes certain costs related to software

developed for internal-use, primarily associated with the ongoing development and enhancement of our technology platform.

Costs incurred

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

These costs are amortized on a straight-line basis over the estimated

useful life of the related asset, generally five years.

Right of Use Assets and Lease Liability

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

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

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

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

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

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

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

arising from the lease.

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

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

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

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

the lease when they are reasonably certain to be exercised.

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

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

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

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

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

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

Both operating and finance lease right of use assets are reviewed

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

may not be recoverable.

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

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

The Company has entered into lease agreements for

a certain facility and certain items of equipment, which provide the right to use the underlying asset and require lease payments over

the term of the lease.

At inception of the lease agreement, the Company assesses whether the agreement conveys the right to control the

use of an identified asset for a period in exchange for consideration, in which case it is classified as a lease.

Each lease is further

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

All identified leases are recorded on

the consolidated balance sheet with a corresponding lease right-of-use asset, net, representing the right to use the underlying asset

for the lease term and the operating lease liabilities representing the obligation to make lease payments arising from the lease.

Company has elected not to recognize lease assets and lease liabilities for short-term leases (leases with a term of 12 months or less)

and leases of low-value assets.

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

based on the present value of lease payments over the lease term and include options to extend or terminate the lease when they are reasonably

certain to be exercised.

The present value of lease payments is determined primarily using the incremental borrowing rate based on the

information available as of the lease commencement date.

Lease expense for operating leases is recorded on

a straight-line basis over the lease term and variable lease costs are recorded as incurred.

The Company’s lease agreements do not

contain any material residual value guarantees or material restrictive covenants.

Finance lease interest expense is recognized based on

an effective interest method and depreciation of assets is recorded on a straight-line basis over the shorter of the lease term and useful

life of the asset.

Both operating and finance lease right of use assets are reviewed for impairment, consistent with other finite lived

assets, whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.

After a right of use asset

is impaired, any remaining balance of the asset is amortized on a straight-line basis over the shorter of the remaining lease term or

the estimated useful life.

Goodwill and Other Intangible Assets

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

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

Goodwill is measured as the excess

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

is tested for impairment at least annually, unless any events or circumstances indicate it is more likely than not that the fair value

of the goodwill is less than its carrying value.

The Company previously had elected to test goodwill for impairment as of November 15 th

annually, which was one year from the date of the Abaca acquisition.

During the year ended December 31, 2023 the Company elected

to change this accounting policy to measure goodwill impairment on December 31 st (see Note 2 (xxv) for additional information

on this accounting policy change).

is considered impaired when the estimated fair value of the reporting unit that was allocated the goodwill is less than its carrying

If the estimated fair value of such reporting unit is less than its carrying value, goodwill impairment is recognized based on

that difference, not to exceed the carrying amount of goodwill.

A reporting unit is an operating segment or a component of an operating

segment provided that the component constitutes a business for which discrete financial information is available and management regularly

reviews the operating results of that component.

intangible assets are amortized over their estimated useful life, which is the period over which the assets are expected to contribute

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

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

event, if one were to occur.

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

from the assets are less than their carrying amounts.

The Company’s methodology for allocating the

purchase price of an acquisition is based on established valuation techniques that reflect the consideration of a number of factors, including

a valuation performed by a third-party appraiser.

Goodwill is measured as the excess of the cost of an acquired business over the fair

value assigned to identifiable assets acquired and liabilities assumed.

Goodwill is tested for impairment at least annually,

unless any events or circumstances indicate it is more likely than not that the fair value of the goodwill is less than its carrying value

at the elected measurement date of December 31.

Goodwill is considered impaired when the estimated

fair value of the reporting unit that was allocated the goodwill is less than its carrying value.

If the estimated fair value of such

reporting unit is less than its carrying value, goodwill impairment is recognized based on that difference, not to exceed the carrying

amount of goodwill.

A reporting unit is an operating segment or a component of an operating segment provided that the component constitutes

a business for which discrete financial information is available and management regularly reviews the operating results of that component.

Finite-lived intangible assets are amortized over

their estimated useful life, which is the period over which the assets are expected to contribute directly or indirectly to the future

cash flows of the Company.

Intangible assets should be tested for impairment at the time of a triggering event, if one were to occur.

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

their carrying amounts.

Stock-based Compensation

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

Compensation.

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

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

Forfeitures are recognized

as they occur.

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

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

The Black-Scholes valuation model incorporates

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

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

experience with similar instruments.

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

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

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

stock compensation.

The Company measures all equity-based payment arrangements

to employees and directors in accordance with ASC 718, Compensation–Stock Compensation.

The Company’s stock-based compensation

cost is measured based on the fair value at the grant date of the stock-based award.

It is recognized as expense on a straight-line basis

over the requisite service period for the entire award.

Forfeitures are recognized as they occur.

The Company estimates the fair value

of each stock-based award on its measurement date using either the current market price of the stock or Black-Scholes option valuation

model, whichever is most appropriate.

The Black-Scholes valuation model incorporates assumptions such as expected term of the instrument,

volatility of the Company’s future share price, risk free rates, future dividend yields and estimated forfeitures at the initial

grant date, by reference to the underlying terms of the instrument, and the Company’s experience with similar instruments.

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

The stock price of the Company has dropped significantly

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

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

Treasury rates for securities with maturities approximating

the awards’ expected lives.

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

of contractual term and vesting period the awards.

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

not currently anticipate paying any in the foreseeable future.

Treasury rates for securities with maturities approximating the awards’ expected

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

vesting period of the awards.

The expected dividend yield is zero as the Company has never paid dividends and does not currently anticipate

paying any in the foreseeable future.

Fair Value Measurements

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

The fair value hierarchy is based on inputs to valuation

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

Observable inputs reflect assumptions market

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

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

The basis for fair value measurements for each level

within the hierarchy is described below:

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

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

quoted prices for identical or similar assets or liabilities

in markets that are not active;

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

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

The Company utilizes the fair value hierarchy to apply

fair value measurements.

The fair value hierarchy is based on inputs to valuation techniques that are used to measure fair values that

are either observable or unobservable.

Observable inputs reflect assumptions market participants would use in pricing an asset or liability

based on market data obtained from independent sources, while unobservable inputs reflect a reporting entity’s pricing based upon

its own market assumptions.

The basis for fair value measurements for each level within the hierarchy is described below:

Level 1 — Quoted prices for identical assets

or liabilities in active markets.

Level 2 — Quoted prices for similar assets or

liabilities in active markets;

quoted prices for identical or similar assets or liabilities in markets that are not active;

or model-derived

valuations whose inputs are observable or whose significant value drivers are observable.

Level 3 —Valuations derived from valuation techniques

in which one or more significant inputs to the valuation model are unobservable.

Revenue Recognition

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

The core principle

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

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

ASC 606 defines a five-step process

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

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

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

Revenue consists primarily of

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

income and other miscellaneous fees.

Under the terms of the Loan Servicing Agreement and the Commercial Alliance Agreement, the Company

is responsible for covering account hosting costs associated with the fees generated from deposits held at PCCU.

These costs are classified

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

addition, SHF recognizes revenue from the Master Program Agreement.

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

right to implement and utilize the Safe Harbor Program.

SHF recognizes revenue in accordance with ASC Topic

606, Revenue from Contracts with Customers (“ASC 606”).

The core principle of ASC 606 requires that an entity recognize revenue

to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which SHF expects to

be entitled in exchange for those goods or services.

ASC 606 defines a five-step process to achieve this core principle including identifying

performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating

the transaction price to each separate performance obligation.

Revenue is recorded at a point in time when the performance

obligation is satisfied, and no contingencies exist.

Revenue consists primarily of fees earned on deposit accounts such as bank account

charges, onboarding income, account activity fee income and other miscellaneous fees.

Revenue from account fee income is recognized when

the Company fulfills its service obligations, which include fees charged for financial services such as account maintenance, transaction

processing, and other related services.

Revenue from interest on loans is recognized over

the loan period as earned.

The Company utilizes a fixed percentage fee structure, under which financial institutions receive a share of

interest income from CRB-related loans.

Revenue from investment income is recognized based

on interest earned on daily deposit balances maintained with financial institutions.

In addition, the Company recognizes revenue from the

Master Program Agreement.

The Master Program Agreement is a non-exclusive and non-transferable right to implement and utilize the Safe

Harbor Program.

The Safe Harbor Program has two performance obligations;

an implementation fee

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

recognizes revenue from interest on loans and investment income distributed by PCCU, which is determined by particular customer account

As per the Loan Servicing Agreement and the Commercial Alliance Agreement, SHF bears the expenses for hosting investments and

servicing loans related to this interest and investment income.

These expenses are allocated to “General and Administrative Expenses”

in the Consolidated Statements of Operations.

received in advance of the service being provided is recorded as a liability under deferred revenue on the consolidated balance sheets.

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

consist of financial institutions providing services to CRBs.

an implementation fee recognized when the contract is effective

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

Amounts received in advance of the service being provided

is recorded as a liability under deferred revenue on the consolidated balance sheets.

Customers consist of financial institutions providing

services to CRBs.

Revenues are concentrated in the United States of America.

Contract Assets / Contract Liabilities

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

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

entity’s performance.

of December 31, 2023, the Company reported contract assets and contract liabilities of $ 0 and $ 21,922 , respectively, from contracts with

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

Warrants Liability

Company has evaluated each of the warrant arrangements separately in accordance with ASC 480 and 815, to determine classification as

either equity instruments or liabilities based on the specific terms and features of each warrant.

Warrants are recognized as equity

if they are indexed to our own stock and meet the equity classification criteria in ASC 815-40.

These warrants are recorded within stockholders’

equity at their issuance date and are not subsequently remeasured at fair value.

Conversely, warrants that do not meet the criteria for

equity classification under ASC 815-40 are classified as liabilities.

Such warrants are initially recorded at fair value on the issuance

date and are subject to remeasurement at each balance sheet date thereafter.

Any changes in fair value are recognized in the statement

of operations.

None of our warrant contracts met criteria to be considered indexed to their own stock, as a result, have each been accounted

for as a liability financial instrument.

The fair value of warrants classified as liabilities is determined using appropriate

valuation models, such as the Black-Scholes model, which incorporates various inputs, including the current stock price, expected volatility,

risk-free interest rate, and the expected term of the warrants.

A contract asset is the Company’s right to consideration

in exchange for goods or services that the Company has transferred to a customer.

Conversely, the Company recognizes a contract liability

if the customer’s payment of consideration precedes the reporting entity’s performance.

As of December 31, 2024, the Company reported contract

assets and contract liabilities of $ 0 and $ 28,335 , respectively, from contracts with customers.

As of December 31, 2023, the Company reported

a contract asset and liability of $ 0 and $ 21,922 , respectively.

Warrants Liabilities

The Company has four separate warrants including public,

private, PIPE and Abaca and has evaluated each of the warrant arrangements separately in accordance with ASC 480 and 815, to determine

classification as either equity instruments or liabilities based on the specific terms and features of each warrant.

Warrants are recognized

as equity if they are indexed to our own stock and meet the equity classification criteria in ASC 815-40.

These warrants are recorded

within stockholders’ equity at their issuance date and are not subsequently remeasured at fair value.

Conversely, warrants that

do not meet the criteria for equity classification under ASC 815-40 are classified as liabilities.

Such warrants are initially recorded

at fair value on the issuance date and are subject to remeasurement at each balance sheet date thereafter.

Any changes in fair value are

recognized in the statement of operations.

None of our warrant contracts met criteria to be considered indexed to their own stock, and

as a result, have each been accounted for as a liability financial instrument.

The fair value of warrants classified as liabilities

is determined using appropriate valuation models, such as the Black-Scholes model, which incorporates various inputs, including the current

stock price, expected volatility, risk-free interest rate, and the expected term of the warrants.

Deferred consideration

line with ASC Topic 815, “Derivatives and Hedging” (“ASC 815”), the Company treats the deferred consideration

from the Abaca acquisition as a derivative liability, since it does not fulfill the equity classification criteria.

As a result, this

obligation is recognized as a liability on the balance sheet at fair value and is adjusted to reflect its fair value at the end of each

reporting period.

The liability will be reassessed at fair value on every balance sheet date until the obligation’s term concludes.

Fluctuations in its fair value are recorded in the consolidated statements of operations.

In line with ASC Topic 815, “Derivatives and

Hedging” (“ASC 815”), the Company treats the deferred consideration from the Abaca acquisition as a derivative liability,

since it does not fulfill the equity classification criteria.

As a result, this obligation is recognized as a liability on the balance

sheet at fair value and is adjusted to reflect its fair value at the end of each reporting period.

The liability will be reassessed at

fair value on every balance sheet date until the obligation’s term concludes.

Fluctuations in its fair value are recorded in the

consolidated statements of operations.

Forward purchase derivative

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

ASC Topic 815 The Company classifies the forward purchase derivative as an asset or liability carried at fair value and adjusts

the forward purchase derivative to fair value at each reporting period.

This derivative asset or liability is subject to re-measurement

at each balance sheet date until the conditions under the forward purchase agreement are exercised or expire, and any change in fair

value is recognized in the consolidated statement of operations.

On December 31, 2022, a Monte-Carlo Simulation within a risk-neutral

framework was used to estimate the forward purchase derivative’s fair value, assuming Geometric Brownian Motion for future stock

Values from each simulation path were determined per contractual terms and discounted by a matching risk-free rate.

no FPA holder sales occurred, and no significant risk factor changes affecting FPA derivative values were noted.

Consequently, management

retained the December 31, 2022 valuation for year-end 2023.

The Company accounted for the forward purchase derivative

in the business combination in accordance with the guidance contained in ASC Topic 815, the Company classifies the forward purchase derivative

as an asset or liability carried at fair value and adjusts the forward purchase derivative to fair value at each reporting period.

the terms of the contract, the forward purchase derivative may be settled in either cash or stock upon maturity, at the discretion of

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

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

On December 31, 2022, a Monte-Carlo Simulation within a risk-neutral framework was used to estimate the forward purchase derivative’s

fair value, assuming Geometric Brownian Motion for future stock prices.

Values from each simulation path were determined per contractual

terms and discounted by a matching risk-free rate.

In 2023 and 2024, no FPA holder sales occurred, and no significant risk factor changes

affecting FPA derivative values were noted.

Consequently, management retained the December 31, 2022 valuation for year-end 2023 and 2024.

Earnings Per Share

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

The Company utilizes

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

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

amounts to redeemable noncontrolling interests recorded at redemption value.

The adjustments represent dividend distributions, in substance,

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

value of the applicable shares.

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

common shareholders.

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

of the net earnings for the period had been distributed.

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

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

with common shareholders (Refer to Note 16).

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

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

Diluted earnings per common share

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

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

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

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

Deferred tax assets and liabilities are adjusted

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

to the merger, the Company was a pass-through entity for tax purposes, in which PCCU was exempt from most federal, state, and local taxes

under the provisions of the Internal Revenue Code and state tax laws, except for being subject to unrelated business income tax.

September 28, 2022, the Company became subject to income taxes as a Corporation and complies with the accounting and reporting requirements

of ASC Topic 740, which requires an asset and liability approach to financial accounting and reporting for income taxes.

Deferred income

tax assets and liabilities are computed for differences between the financial statement and tax bases of assets and liabilities that

will result in future taxable or deductible amounts, based on enacted tax laws and rates applicable to the periods in which the differences

are expected to affect taxable income.

Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount

expected to be realized.

740-270-25-2 requires that an annual effective tax rate be determined and such annual effective rate applied to year to date income in

interim periods.

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

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

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

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

Management is unable to estimate

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

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

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

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

to be sustained upon examination by taxing authorities.

The Company recognizes accrued interest and penalties related to unrecognized

tax benefits, if any, as income tax expense.

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

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

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

payments, accruals or material deviation from its position.

Offering Costs

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

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

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

statements of operations.

Offering costs associated with the Public Shares were charged to Parent-Entity Net Investment and Stockholders’

Equity upon the completion of the Initial Public Offering.

Basic and diluted earnings per share are computed

and disclosed in accordance with ASC Topic 260, Earnings Per Share.

The Company utilizes the two-class method to compute earnings available

to common stockholders.

Under the two-class method, earnings are adjusted by accretion amounts to redeemable noncontrolling interests

recorded at redemption value.

The adjustments represent dividend distributions, in substance, to the noncontrolling interest holder as

the holders have contractual rights to receive an amount upon redemption other than the fair value of the applicable shares.

earnings are adjusted to reflect this in substance distribution that is different from other common stockholders.

In addition, the Company

allocates net earnings to each class of common stock and participating security as if all of the net earnings for the period had been

The Company’s participating securities consist of share-based payment awards that contain a non-forfeitable right to

receive dividends and therefore are considered to participate in undistributed earnings with common stockholders (Refer to Note 14).

earnings per common share excludes dilution and is calculated by dividing net earnings allocated to common shares by the weighted-average

number of common shares outstanding for the period.

Diluted earnings per common share is calculated by dividing net earnings allocable

to common shares by the weighted-average number of common shares outstanding for the period, as adjusted for the potential dilutive effect

of non-participating share-based awards.

Deferred tax assets and liabilities are recognized

for the estimated future tax consequences attributable to differences between the tax bases of assets and liabilities and their carrying

amounts for financial reporting purposes.

Deferred tax assets and liabilities are adjusted through the provision for income taxes as changes

in tax laws or rates are enacted.

A valuation allowance is established when it is determined

that it is more likely than not that some portion or all of the deferred tax assets may not be realized .

ASC Topic 740 also prescribes a recognition threshold

and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in

a tax return.

For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing

The Company recognizes accrued interest and penalties related to unrecognized tax benefits, if any, as income tax expense.

There were no unrecognized tax benefits and no amounts accrued for interest and penalties as of December 31, 2024 and December 31, 2023.

The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation

from its position.

Recently Issued Accounting Standards

time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board, or FASB, or other standard setting

bodies and adopted by the Company as of the specified effective date.

Unless otherwise discussed, the impact of recently issued standards

that are not yet effective are not expected to have a material impact on the Company’s financial position or results of operations

upon adoption.

the impairment test for Intangibles-Goodwill and Other

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

(“ASU 2017-04”).

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

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

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

As a result, an entity

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

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

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

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

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

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

after January 1, 2017.

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

however, the standard was applied

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

Expected Credit Losses

June 2016, the FASB issued ASU No.

2016-13, Financial Instruments — Credit Losses (Topic 326):

Measurement of Credit Losses on

Financial Instruments, which introduces a model based on expected losses to estimate credit losses for most financial assets and certain

other instruments.

In November 2019, the FASB issued ASU No.

2019-10 Financial Instruments — Credit Losses (Topic 326), Derivatives

and Hedging (Topic 815), and Leases (Topic 842).

The update allows the extension of the initial effective date for entities which have

not yet adopted ASU No.

The standard is effective for annual reporting periods beginning after December 15, 2022 for private

companies and SEC filers classified as smaller reporting entities, with early adoption permitted.

Entities apply the standard’s

provisions by recording a cumulative effect adjustment to retained deficit.

The Company has adopted ASU 2016-13 as of January 1, 2023,

utilizing the modified retrospective method.

Transition Impact:

The table below provides details on the transition impacts of adopting CECL.

Other balance sheet lines not presented

were not affected by CECL.

Schedule of Current Expected Credit Losses Transition Impact

Loans receivable, gross

Allowance for

Indemnity liability

Retained deficit

( 39,695,281 )

( 40,276,599 )

$ ( 39,195,816 )

$ ( 39,210,796 )

ASU 2016-02, Leases, (“ASC 842”) and related amendments, require lessees to recognize a right-of-use asset and a lease liability

for substantially all leases and to disclose key information about leasing arrangements and aligns certain underlying principles of the

lessor model with the revenue standard.

The Company adopted this guidance during fiscal year 2022 using the optional transition method,

which allows entities to apply the guidance at the adoption date and recognize a cumulative effect adjustment to the opening balance

of retained earnings, if any, in the period of adoption with no restatement of comparative periods.

At January 1, 2022 adoption date,

there were no leases outstanding that met criteria for recognition.

The Company has since recognized any leases in accordance with ASC

842 by recording right-of-use assets and operating lease liabilities on the consolidated balance sheets.

Debt Restructurings and Vintage Disclosures

Accounting Standard Update (ASU 2022-02) eliminates the recognition and measurement guidance on troubled debt restructurings for creditors

that have adopted ASC 326 and requires them to make enhanced disclosures about loan modifications for borrowers experiencing financial

The new guidance also requires public business entities to present current period gross write-offs (on a current year-to-date

basis for interim-period disclosures) by year of origination in their vintage disclosures.

For entities that have adopted ASU 2016-13,

this ASU is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years.

did not adopt ASU 2022-02 as of December 31, 2022;

however, it has adopted this standard as of January 1, 2023 and the ASU has not had

a material impact on the Company’s consolidated financial statements.

Pending to be Adopted

Value Measurement of Equity Securities Subject to Contractual Sale Restrictions

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

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

Recognizing a contractual

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

This ASU is effective for fiscal years

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

The Company does not expect this ASU to have

a material impact on its consolidated financial statements.

Rate Reform (Topic 848):

Deferral of the Sunset Date of Topic 848

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

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

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

can be applied through December 31, 2024.

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

Investments-Equity Method and Joint Ventures

March 2023, the FASB issued ASU 2023-02, Investments-Equity Method and Joint Ventures (Topic 323):

Accounting for Investments in Tax

Credit Structures using the Proportional Amortization Method.

The FASB issued final guidance allowing entities to apply the proportional

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

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

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

The Company is evaluating the impact of this update on its consolidated financial statements.

Combinations-Joint Venture Formations

August 2023, the FASB issued 2023-05, Business Combinations-Joint Venture Formations (Subtopic 805-60);

Recognition and Initial Measurement.

This ASU contains guidance requiring certain joint ventures to apply a new basis of accounting upon formation by recognizing and initially

measuring most of their assets and liabilities at fair value.

This guidance is effective for all joint venture formations with a formation

date on or after January 1, 2025.

Early adoption is permitted.

Joint Ventures formed before the effective date have the option to apply

it retrospectively, while those formed after the effective date are required to apply it prospectively.

The Company is evaluating the

impact of this update on its consolidated financial statements.

Improvements, “Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative.”

October 2023, the FASB issued ASU 2023-06, Disclosure Improvements, “Codification Amendments in Response to the SEC’s Disclosure

Update and Simplification Initiative.” This ASU amends the disclosure or presentation requirements related to various subtopics

in the FASB codification.

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

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

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

The amendments in this Update should be applied prospectively.

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

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

Codification and will not become effective for any entity.

The Company is evaluating the impact of this update on its consolidated financial

November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280).

This ASU requires public entities to provide disclosures of

significant segment expenses and other segment items.

It also requires public entities to provide in interim periods all disclosures

about a reportable segment’s profit or loss and assets that are currently required annually.

Public entities with a single reportable

segment will have to provide all the disclosures required by ASC 280, including the significant segment expense disclosures.

This guidance

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

From time to time, new accounting pronouncements are

issued by the Financial Accounting Standards Board, or FASB, or other standard setting bodies and adopted by the Company as of the specified

effective date.

Unless otherwise discussed, the impact of recently issued standards that are not yet effective are not expected to have

a material impact on the Company’s financial position or results of operations upon adoption.

Adopted Standards

Segment Reporting

In November 2023, the FASB issued ASU 2023-07, Segment

Reporting (Topic 280), requiring public entities to disclose significant segment expenses and other segment items.

It also mandates that

public entities provide, in interim periods, all disclosures related to a reportable segment’s profit or loss and assets that were

previously required only annually.

Public entities with a single reportable segment must

comply with all ASC 280 disclosure requirements, including significant segment expense disclosures.

The guidance upon adoption has been

applied retrospectively to all periods presented unless impractical.

This ASU applies to all public entities and is effective

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

Early adoption is permitted.

The Company is evaluating the impact of this update on its consolidated financial statements.

December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740).

This ASU requires public business entities to disclose in their

rate reconciliation table additional categories of information about income taxes paid, including certain disclosures that would be disaggregated

by jurisdiction and other categories.

This ASU is effective for public entities for fiscal years beginning after December 15, 2024, and

interim periods within fiscal years beginning after December 15, 2025.

For all other entities, this ASU is effective for fiscal years

after December 15, 2024 and for interim periods beginning after December 15, 2026.

The Company has adopted

ASU 2023-07, Segment Reporting (Topic 280) and applied disclosure requirements throughout the financial statements.

Fair Value Measurement of Equity Securities Subject

to Contractual Sale Restrictions

This Accounting Standard Update (ASU 2022-03) clarifies

that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security

and, therefore, is not considered when measuring fair value.

Recognizing a contractual restriction on the sale of an equity security as

a separate unit of account is not permitted.

This ASU is effective for fiscal years beginning after December 15, 2023, including interim

periods within those fiscal years.

The Company has prospectively adopted this standard during the year ended December 31, 2024, and the

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

Reference Rate Reform (Topic 848):

the Sunset Date of Topic 848

This Accounting Standard Update (ASU 2022-06) defers

the Sunset Date of ASC Topic 848, Reference Rate Reform (Topic 848), which provides temporary optional relief in accounting for the impact

of Reference Rate Reform.

This ASU is effective upon issuance (December 21, 2022) and generally can be applied through December 31, 2024.

The Company has prospectively adopted this standard during the year ended December 31, 2024, and the ASU has not had a material impact

on the Company’s audited consolidated financial statements.

Investments-Equity Method and Joint Ventures

In March 2023, the FASB issued ASU 2023-02, Investments-Equity

Method and Joint Ventures (Topic 323):

Accounting for Investments in Tax Credit Structures using the Proportional Amortization Method.

The FASB issued final guidance allowing entities to apply the proportional amortization method to equity investments in all tax credit

programs that meet the conditions in ASC 323-740, rather than just investments in qualified affordable projects that generate low-income

housing tax credits, as was required under the legacy guidance.

The guidance is effective for public business entities for fiscal years

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

The Company has prospectively adopted this standard during

the year ended December 31, 2024, and the ASU has not had a material impact on the Company’s audited consolidated financial statements.

Standards Pending to be Adopted

In December 2023, the FASB issued ASU 2023-09, Income

Taxes (Topic 740).

This ASU requires public business entities to disclose in their rate reconciliation table additional categories of

information about income taxes paid, including certain disclosures that would be disaggregated by jurisdiction and other categories.

ASU is effective for fiscal years after December 15, 2024.

Early adoption would be permitted.

The Company is

evaluating the impact of this update on its consolidated financial statements.

Change in annual goodwill impairment testing date

the current financial year, the Company has elected to change the annual impairment testing date for its goodwill from November 15th

to December 31st.

The change was considered by the Company to be preferable considering guidance in the December 8, 2014 “Remarks

before the 2014 AICPA Conference on Current SEC and PCAOB Developments” by Carlton E.

Tartar, Associate Chief Accountant, Office

of the Chief Accountant as follows:

This change aligns the impairment

testing process more closely with the Company’s financial year-end and facilitates a more efficient integration of the impairment

analysis with the annual financial reporting cycle.

This adjustment in timing is deemed to provide

a more relevant and timely assessment of the recoverable amounts of our assets, reflecting the operational and financial performance

for the entire financial year.

We do not believe a different result in impairment

assessment would have occurred had the measurement been conducted at November 15, 2023 vs.

December 31, 2023.

November 15 th was previously elected

because it was one year from the date, we had acquired the goodwill.

The Company had noted no goodwill impairment trigger events between

the November 15 th and December 31 st dates in 2022.

While November 15 th was the elected policy date

at that time, we could have also considered December 31 st a relevant measurement date in determining that policy in the

We conducted an impairment test at June 30,

2023 as outlined in Note 5, which allowed for less than twelve months between conducting impairment tests with this policy change.

change is applied prospectively from the current year and does not materially affect the comparability of our financial statements.

Business Combination

September 28, 2022, the Business Combination detailed in Note 1 above was accounted for as a reverse recapitalization, with no goodwill

or other intangible assets recorded, in accordance with GAAP.

Under this method of accounting, NLIT was treated as the acquired company

for financial reporting purposes.

Accordingly, for accounting purposes, the Business Combination was treated as the equivalent of SHF

issuing shares for the net assets of NLIT, accompanied by a recapitalization.

The net assets of NLIT were recognized at fair value (which

was consistent with carrying value), with no goodwill or other intangible assets recorded.

related events in connection with the Business Combination are summarized below:

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

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

the terms of the Purchase Agreement.

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

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

In addition, pursuant to the terms of the purchase

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

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

was approximately $ 10.85 million.

Approximately

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

Approximately $ 21.9 million

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

The residual $ 35 million is due in six quarterly instalments of $ 6.4 million

Interest accrues at an effective annual rate of approximately 4.71 %.

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

until the amount is paid in full.

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

transferred to additional paid in capital.

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

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

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

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

Twenty (20) percent of the aggregate value was

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

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

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

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

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

the date of the business combination.

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

are to be recorded in accordance with GAAP.

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

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

As of December 31, 2023,

there were 1,101 preferred shares issued and outstanding and 14,616 preferred shares issued and outstanding on December 31, 2022.

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

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

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

No other dividends shall be paid on the preferred

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

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

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

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

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

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

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

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

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

A Common Stock:

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

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

As of December 31, 2022, and

December 31, 2023 there were 23,732,889 and 54,563,372 shares, respectively, of Class A Common Stock issued or outstanding.

December 31, 2023, and December 31, 2022, 3,667,377 Class A Common Stock are held by the purchasers under forward purchase agreement

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

The fair value of net assets

on September 28,2022 in the books of NLIT are as follows:

of Fair Value Net Assets

Cash & Cash Equivalents

Prepaid Expense

Cash held in Trust

Deferred offering cost

Accounts Payable

( 1,374,021 )

Accrued Expense

( 1,202,164 )

Advance from sponsor

( 1,150,000 )

Deferred underwriter payable

( 4,025,000 )

Forward purchase derivative

Warrant Liability

( 1,394,453 )

Class A Common Stock

subject to possible redemption

( 79,259,819 )

value of net assets acquired

The following table summarizes the total fair value of

The Company does not expect this ASU to

have a material impact on its audited consolidated financial statements.

In January 2024, the FASB issued ASU 2024-01, Compensation-Stock

Compensation (Topic 718):

Scope Application of Profits Interests and Similar Awards, which clarifies the scope and application of profits

interest awards under ASC 718 by providing illustrative guidance.

The amendments apply to all entities that account for profits interest

awards as compensation for services provided by employees or non-employees.

The amendments are effective for fiscal years beginning after

December 15, 2024, including interim periods within those years, for public entities, and for fiscal years beginning after December 15,

2025, for all other entities, with early adoption permitted.

The Company will adopt this standard prospectively and is currently assessing

the impact of adopting this guidance on its financial statements and related disclosures.

In March 2024, the FASB issued ASU 2024-02, Codification

Improvements:

Amendments to Remove References to the Concepts Statements.

Since the Concept Statements are not considered authoritative

and do not establish Generally Accepted Accounting Principles (GAAP), the ASU eliminates references to these statements from the codification.

The amendments are effective for public entities for fiscal years beginning after December 15, 2024, and for all other entities for fiscal

years beginning after December 15, 2025, with early adoption permitted.

The Company will adopt this ASU prospectively and does not anticipate

a material impact on its financial reporting as a result of adopting this ASU.

ASU 2024-03, Disaggregation of Income Statement Expenses,

was issued in November 2024 and requires public business entities to disaggregate certain income statement expense captions in the footnotes

of the financial statements.

Specifically, entities must provide disclosures that separately present expenses related to purchases of

inventory, employee compensation, depreciation, intangible asset amortization, and depletion (including depreciation, depletion, and amortization

for oil and gas producing activities).

While this ASU does not change the presentation of expense captions on the face of the income statement,

it requires detailed disclosures in the notes to the financial statements.

The amendments are effective for fiscal years beginning after

December 15, 2026, and for interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted.

will adopt this ASU prospectively and does not anticipate a material impact on its financial reporting as a result of adopting this ASU.

In November 2024, the FASB issued ASU 2024-04, Debt—Debt

with Conversion and Other Options (Subtopic 470-20):

Induced Conversions of Convertible Debt Instruments, which provides clarification

on the accounting treatment of convertible debt settlements that occur under terms differing from those of the original instrument.

amendments specify that if the settlement is considered an induced conversion, an entity must recognize an inducement expense at the offer

acceptance date.

Conversely, if the settlement is treated as a debt extinguishment, an entity must recognize a gain or loss at the extinguishment

This ASU is effective for all entities for fiscal years beginning after December 15, 2025, including interim periods within those

years, with early adoption permitted.

The Company will adopt this ASU prospectively and does not anticipate a material impact on its financial

reporting as a result of adopting this ASU.

In January 2025, the FASB issued ASU 2025-01, Income

Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40).

The Board is issuing this Update

to clarify the effective date of Accounting Standards Update No.

2024-03, Income Statement—Reporting Comprehensive Income—Expense

Disaggregation Disclosures (Subtopic 220-40):

Disaggregation of Income Statement Expenses.

The amendment in this Update applies to all

public business entities but only potentially affects non-calendar year-end entities.

The amendment in this Update amends the effective

date of Update 2024-03 to clarify that all public business entities are required to adopt the guidance in annual reporting periods beginning

after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027.

Early adoption of Update

2024-03 is permitted.

The Company will adopt this ASU prospectively and does not anticipate a material impact on its financial reporting

as a result of adopting this ASU.

The Company will continue to monitor the development

of these standards and intends to adopt them in accordance with their respective effective dates.

Additional disclosures will be provided

in future filings as the Company finalizes its assessment of these standards’ impacts.

consideration

of Fair Value Consideration

Company’s Class A common

stock comprises of 11,386,139 shares

$ 115,000,000

Cash consideration

Deferred cash consideration

Total fair value of consideration

$ 185,000,000

Parent-Entity

Net Investment:

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

in the Carved-Out Operations.

For purposes of these consolidated financial statements, investing requirements have been summarized as

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

No separate equity accounts

are maintained for SHS, SHF or the Branches.

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

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

at the rate of 4.25 %;

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

interest in substantially all of the assets of the Company;

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

11,200,000 shares of the Company’s Class A Common Stock to PCCU (Refer to Note 10 to the financial statements below.)

November 15, 2022, the Company and its subsidiary entered into a series of merger and acquisition transactions resulting in the acquisition

of 100 % control of Rockview Digital Solutions Inc.

d/b/a/ ABACA (collectively “Abaca”).

This acquisition was completed in

exchange for a combination of cash and the Company’s shares.

As part of the acquisition, the Company’s Notes of $ 500,000

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

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

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

increases the Company’s financial

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

the United States;

increases the Company’s lending capacity;

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

talent pool of the cannabis industry’s foremost financial services and financial technology experts.

to the Abaca merger agreement, as amended, the Company acquired Abaca in exchange for $ 30,000,000 ,

paid in a combination of cash and shares of the Company as follows:

consideration in an amount equal to (i) $ 9,000,000 ($ 3,000,000 was payable at the closing of the Mergers (the “Merger Closing”),

with an additional $ 3,000,000 payable at each of the one-year and two-year anniversaries of the Merger Closing), (collectively, the

“Deferred Cash Consideration”);

Stock equal to the lesser of (1) 2,100,000 shares or (2) a number of shares equal to (i) $ 8,400,000 , divided by (ii) the Closing

Parent Trading Price and $ 12,600,000 (minus an outstanding note balance of $ 500,000 , plus accrued interest) in shares of Class A

Common Stock at the one-year anniversary of the Merger Closing based on a 10-day VWAP (collectively, the “Deferred stock consideration”).

Company measures the deferred cash consideration and deferred stock consideration at fair value on the acquisition date based on a report

received from an independent valuation firm.

following table summarizes the purchase price allocation:

of Purchase Price Allocation

Property, plant & equipment

Cash & cash equivalents

Prepaid expense

Security deposit

Accounts receivables

Accounts Payable

Accrued Expense

Fair value of net assets

Other intangibles

Deferred tax liabilities

( 1,758,769 )

purchase consideration

following table summarizes the total fair value of consideration:

of Fair Value Consideration

Deferred cash payment

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

Settlement of pre-existing notes along with

accrued interest

Deferred consideration

settled in common stock

Fair value of consideration

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

and liabilities assumed on the acquisition date.

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

interest with Abaca.

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

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

For the fair value of the identifiable intangible assets acquired,

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

to those future cash flows.

assets were recorded at estimated fair value, as determined by management based on available information which includes a valuation prepared

by an independent third party.

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

approach and multi-period excess earnings methods.

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

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

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

The useful lives of intangible assets were determined

based upon the remaining useful economic lives of the intangible assets that are expected to contribute directly or indirectly to future

The estimated fair value of intangible assets and related useful lives as included in the purchase price allocation include:

Schedule of Intangible Assets and Related Useful Lives as Included

in Purchase Price Allocation

life in Years

Market related intangible assets

Customer relationships

Developed technology

Fair value of consideration

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

Deferred consideration

per the note 4, Under the Abaca merger agreement, as amended, the Company acquired Abaca in exchange for $ 30,000,000 ,

paid in a combination of cash and shares of the Company as follows:

consideration in an amount equal to (i) $ 9,000,000 ($ 3,000,000 was payable at the closing of the Mergers (the “Merger Closing”),

with an additional $ 3,000,000 payable at each of the one-year and two-year anniversaries of the Merger Closing), (collectively, the

“Deferred Cash Consideration”);

Stock equal to the lesser of (1) 2,100,000 shares or (2) a number of shares equal to (i) $ 8,400,000 , divided by (ii) the Closing

Parent Trading Price and $ 12,600,000 (minus an outstanding note balance of $ 500,000 , plus accrued interest) in shares of Class A

Common Stock at the one-year anniversary of the Merger Closing based on a 10-day VWAP (collectively, the “Deferred stock consideration”)

a result, there was $ 11.3 million and $ 5.6 million of liabilities for deferred stock consideration and deferred cash consideration were

recognized at the date of acquisition on November 15, 2022.

Such liabilities were marked to fair value throughout the years ended December

31, 2023, and 2022, for the change in the fair value of deferred consideration in the consolidated statements of operations.

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

the deferred consideration payable and the deferred stock consideration payable on the one-year anniversary of the merger closing.

main points of the amendment are outlined below:

The deferred stock consideration

payable on the first anniversary of the merger amounts to $ 12,600,000 minus the Closing Note Balance and the Working Capital divided

by $ 2.00 per share.

As a result, 5,835,822 shares of common stock issued as the stock consideration on the first anniversary of the

No changes were made to the

cash payments of $ 3,000,000 payable at each of the one-year (November 15, 2023) and two-year (October 5, 2024) anniversaries of the

original closing.

Added a Third Anniversary

Consideration Payment of $ 1,500,000 (due October 5, 2024) 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

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.

The Company issued stock

warrants equal to 5,000,000 shares of the Company’s common stock for an initial exercise price of $ 2.00 per share.

The Company has also granted

the Abaca Stockholders’ Representative the right to nominate 3 qualified candidates for the Company’s Board of Directors

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

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

a result of the above, under the original agreement, the Company would have been obligated to issue 16.67 million common shares to the

shareholders of Abaca, based on the fair value of the Company’s common shares on October 26, 2023, of $ 0.70 .

The second amendment

to the merger agreement revised these terms such that the Company issued 5.8 million common shares at a value of $ 2.00 .

The difference

between the fair value of the first anniversary payment liability recognized vs.

remeasured under the amended terms was $ 7.7 million

recorded as a fair value adjustment in the statement of operations.

the second amendment introduced a third-anniversary consideration, which includes a payment of $ 1.5 million, settleable in cash, stock,

or a combination of both, at the discretion of the Company and warrants of 5 million shares of the Company’s common stock at an

initial exercise price of $ 2.00 per share.

The fair value of this third-anniversary payment and warrants was determined pursuant to ASC

815, and recognized as $ 430,000 and $ 1,643,699 , respectively on October 26, 2023, also recorded as part of the fair value adjustment.

The change in the amount of deferred consideration from January 1, 2022, to December 31, 2023, is as follows:

On November 11, 2022, as provided in Exhibit 2.1 of

the Company’s Current Report on Form 8-K filed with the SEC on November 16, 2022, on November 11, 2022, the Company entered into

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

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

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

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

and Dan Roda, solely in such individual’s capacity as the representative of the Company Security Holders (the “Merger Agreement.”)

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

The payment structure included $ 9 million in

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

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

Additionally, the Class A Common Stock consideration was settled through

105,000 Class A Common Stock which represented a monetary equivalent calculated against the closing trading price, alongside deferred

stock consideration calculated with a 10-day VWAP formula.

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

the deferred stock and cash considerations.

The foregoing description of the Merger Agreement does not purport to be complete and is qualified

in its entirety by the Merger Agreement attached as Exhibit 2.1 to the Company’s Current Report on Form 8-K filed with the SEC on

November 16, 2022.

A Second Amendment to the Merger Agreement, dated

October 26, 2023, by and among the Company, Merger Sub I, Merger Sub II, Rockview Digital Solutions, Inc., a Delaware corporation, d/b/a

Abaca and Dan Roda, solely in such individual’s capacity as the representative of the Abaca security holders as referenced in Exhibit

2.1 of the Company’s Current Report on Form 8-K, filed with the SEC on October 27, 2023 (the “Second Amendment”) amends

the Merger Agreement to provide for deferred stock consideration of 291,792

shares of Class A Common Stock to be issued at the first anniversary of the Second Amendment based on a recalculated value of

No changes affected the scheduled cash payments under the Amended Second Amendment.

Furthermore, a third-anniversary

consideration of $ 1.5

million was introduced, payable in cash or Class A Common Stock at the Company’s discretion, alongside an issue of 250,000

stock warrants at an exercise price of $4 0.00

per share of Class A Common Stock.

The adjustments and additional considerations have been valued and recorded according to ASC

815, reflecting changes in the fair value of deferred consideration in the consolidated statements of operations.

The change in the amount of deferred consideration

from January 1, 2023, to December 31, 2024, is as follows:

of Change in Deferred Consideration

1 unchanged sentence

Consideration

Anniversary Consideration Payment

Third Anniversary

Consideration Payment

January 1, 2023

Abaca acquisition

Fair value adjustment

December 31, 2022

Working capital adjustment

Issuance of shares and payment to shareholders

( 4,085,075 )

( 3,000,000 )

Issuance of Abaca warrants

( 1,643,699 )

Issuance of third anniversary payment

consideration

Gain recognized in the consolidated statements

of operations

( 5,645,107 )

Issuance of third anniversary payment consideration

Gain recognized in the consolidated statements of operations

Fair value adjustment

December 31, 2023

second amendment has also led to a net gain of $ 5.6 million, which has been recorded in the Consolidated Statements of Operations.

table below outlines the effects of the transaction:

of Change in Fair Value of Deferred Consideration

Change in the fair value of stock

consideration

Fair value of third-anniversary consideration

Fair value of

Abaca warrants

( 1,643,699 )

Change in the fair value of deferred consideration

on October 26, 2023, due to Second Amendment

Adjustment to

the fair value of deferred consideration for the year 2023

( 1,074,950 )

Net impact recognized

in the Consolidated Statements of Operations

Goodwill and Finite-lived Intangible Assets

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

net identifiable assets acquired.

Goodwill is tested for impairment at least annually, or more frequently if a triggering event occurs.

July 20, 2023, the Company agreed to terminate the Master Services and Revenue Sharing Agreement between Abaca and Central Bank, effective

October 1, 2023.

Under the agreement, the Company provided expertise and intellectual property that allowed the Company and Central Bank

to jointly serve the deposit banking needs of cannabis related businesses primarily located in Arkansas.

Company engaged a third-party valuation specialist to assist in the performance of an impairment analysis of the goodwill at June 30,

2023 in conjunction with the aforementioned triggering event, and also at December 31, 2023 for the annual impairment test.

In conducting

the quantitative goodwill impairment tests as of June 30, 2023, and December 31, 2023, the Company adopted a hybrid method, allocating

one-third of the emphasis on the income approach and the remainder two-third on the market approach to assess the goodwill’s fair

The discounted cash flow models reflect company’s assumptions regarding revenue growth rates, risk-adjusted discount rate,

terminal period growth rate, economic and market trends and other expectations about the anticipated operating results of the goodwill.

Under the market approach, the Company estimates the fair value based on market multiples of revenues derived from comparable publicly

traded companies with operating characteristics similar to the Company.

the interim impairment assessment at June 30, 2023, it was found that the carrying value of goodwill exceeded its fair value, leading

to the recognition of a $ 13.21 million non-cash goodwill impairment charge in the Company’s consolidated statements of operations.

The December 31, 2023, annual impairment test resulted in no additional impairment expense recognized, as the fair value did not surpass

the carrying value.

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

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

will prove to be an accurate prediction of future results.

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

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

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

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

of December 31, 2022, there were no negative indicators in the goodwill impairment that would impact the fair value of the goodwill.

change in the carrying amount of goodwill from January 1, 2022, to December 31, 2023, is as follows:

Schedule of Carrying Amount of Goodwill

January 1, 2022

Acquisition of Abaca

Fair value adjustment

December 31, 2024

Impairment of Goodwill

On October 17, 2024, the

Company caused a Complaint to be filed in the District Court for the City and County of Denver, Colorado, captioned SHF Holdings, Inc.

Daniel Roda, Gregory W.

Ellis, and James R.

Carroll , Case No.

2024CV33187 (Denver County District Court).

November 21, 2024, in connection with the Company’s request, the Company caused the Merger Payment to be deposited into the Denver

County District Court’s registry so that it can be distributed in accordance with the terms of the Merger Agreement.

Payment has already been accounted for in the working capital deficit disclosed in the Liquidity and Going Concern section.

December 19, 2024, Daniel Roda, Gregory W.

Ellis, and James R.

Carroll caused

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

For additional details, p lease refer to the

section titled “Abaca legal case in Denver” in the Recent Updates above as well as the Company’s Current Reports on

Form 8-K filed with the SEC on October 18, 2024 and December 19, 2024.

On November 20, 2024, the Company deposited $ 3,000,000

with the District Court of Denver, Colorado, for the court to determine the appropriate disbursement method to Abaca shareholders.

amount is recorded under “Other Current Assets” on the balance sheet.

Goodwill and Finite-lived Intangible Assets

The Company’s goodwill was derived from the

Abaca Merger, where the purchase price exceeded the fair value of the net identifiable assets acquired.

Goodwill is tested for impairment

at least annually, or more frequently if a triggering event occurs.

On December 31, 2024, the Company conducted its annual

goodwill impairment test in accordance with ASC 350, utilizing a combination of the Discounted Cash Flow (DCF) Method and the Guideline

Public Company (GPC) Method.

The DCF method estimated the present value of projected future cash flows using an appropriate discount rate,

while the GPC method compared key financial metrics against publicly traded comparable companies.

To validate the results, the enterprise

value approach was used as a cross-check.

The impairment assessment incorporated an equally weighted enterprise value derived from both

the DCF and GPC methods.

As the fair value of the asset group was determined to be lower than its carrying amount, the Company recorded

a full goodwill impairment charge of $ 6.06 million.

In 2023, the Company conducted an interim goodwill

and intangible asset impairment assessment on June 30, 2023, which indicated that the carrying value of goodwill exceeded its fair value.

As a result, the Company recognized a non-cash goodwill impairment charge of $ 13.21 million in its consolidated statements of operations.

However, the annual impairment test conducted on December 31, 2023, did not result in any additional impairment charges, as the fair value

remained at or above the carrying value.

The following presents a summary of the Company’s

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

Schedule of Goodwill

Year ended December 31,

Beginning balance

( 6,058,000 )

December 31, 2023

of December 31, 2023, our accumulated goodwill impairment was $ 13,208,276 .

intangible assets

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

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

of June 30, 2023, due to the triggering event mentioned in the analysis of Goodwill analysis above, the Company conducted an interim

Furthermore, in alignment with our policy, an annual assessment was carried out on December 31, 2023.

The finite-lived intangible

assets consist of market-related intangibles, customer relationships, and developed technologies.

interim test, conducted as of June 30, 2023, utilized the Royalty Method for market-related intangibles, the Discounted Cash Flow Method

for customer relationships, and the Cost to Re-create Method for developed technologies.

This assessment led to the recognition of an

impairment charge of $ 3,680,463 due to the market-related intangibles and customer relationships carrying values exceeding their fair

The annual evaluation on December 31, 2023, applied the Relief from Royalty Method for both market-related intangibles and developed

technologies, and the Multi-Period Excess Earnings Method for customer relationships, revealing a diminished fair value of developed

technologies below their carrying value, resulting in an additional impairment charge of $ 2,019,000 .

The total impairment charges for

the year, amounting to $ 5,699,464 , were reflected in our consolidated statements of operations for the fiscal year ended December 31,

( 13,208,276 )

Ending balance

Finite-lived intangible assets

The Company reviews its finite-lived intangible assets

for impairment at least annually on December 31 unless any events or circumstances indicate it is more likely than not that the fair value

of the finite-lived intangible assets is less than its carrying value.

In accordance with the Company’s established policy,

an annual impairment review of finite-lived intangible assets was conducted on December 31, 2024.

The recoverability test compared the

sum of estimated undiscounted future cash flows of the asset group to its carrying amount.

As the undiscounted cash flows were determined

to be lower than the carrying amount, the Company performed a fair value assessment using a Discounted Cash Flow (DCF) analysis.

indicated that the fair value of the asset group was below its carrying amount, leading to impairment charges of $ 0.05 million for market-related

intangible assets, $ 0.05 million for customer relationships, and $ 2.99 million for developed technologies.

In 2023, following a triggering event in the second

quarter, the Company performed an interim impairment assessment for goodwill and intangible assets.

In addition, the Company conducted

its annual impairment review on December 31, 2023, in line with its policy.

The finite-lived intangible assets evaluated included market-related

intangibles, customer relationships, and developed technologies.

The interim assessment resulted in an impairment charge of $ 3.68 million,

primarily related to market-related intangibles and customer relationships, as their carrying values exceeded their fair values.

review further identified an additional impairment charge of $ 2.02 million related to developed technologies.

The following presents a summary of the Company’s

finite-lived intangible assets as of December 31, 2024, and December 31, 2023:

As of December 2024:

Schedule of Finite Lived Intangible Assets

Useful life in Years

in Acquisition

Gross Carrying Amount

Carrying amount

Market related intangible assets

1 unchanged sentence

Developed technology

intangible assets

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

Useful life in Years

in Acquisition

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

Total intangible assets

As of December 31, 2023:

Gross Carrying Amount

Net Carrying amount

Market related intangible assets

1 unchanged sentence

Developed technology

intangible assets

Total intangible assets

During the year ended December 31, 2024, amortization

expense and impairment of finite-lived intangible assets were $ 630,863 and $ 3,090,881 , respectively, compared to $ 1,199,878 and $ 5,699,464 ,

respectively, for the year ended December 31, 2023.

Loans Receivable

real estate loans receivable, net consist of the following:

Commercial real estate loans receivable, net consist

of the following:

of Commercial Real Estate Loans Receivable

Commercial real estate loans receivable,

for credit losses

real estate loans receivable, net

December 31, 2024

December 31, 2023

Commercial real estate loans receivable, gross

Allowance for credit losses

Commercial real estate loans receivable, net

Current portion

Noncurrent portion

for Credit Losses

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

known and inherent risks in the loan portfolio.

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

accordance with the credit loss policy described in Note 2.

allowance for credit losses consists of the following activity for the year ended December 31, 2023 and 2022:

Allowance for Credit Losses

The allowance for credit losses is maintained at a

level believed to be sufficient to provide for estimated credit losses based on evaluating known and inherent risks in the loan portfolio.

The Company’s estimated the allowance for credit losses on the reporting date in accordance with the credit loss policy described

The allowance for credit losses consists of the following

activity for the year ended December 31, 2024 and 2023:

Schedule of Allowance For Loan Losses

Year ended December 31,

Allowance for credit losses

Beginning balance

Cumulative effect from

adoption of CECL

Cumulative effect from adoption of CECL

Ending balance

1 unchanged sentence

Individually evaluated for impairment

evaluated for impairment

Collectively evaluated for impairment

Allowance for credit losses:

Individually evaluated for impairment

Collectively evaluated

for impairment

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

Additionally, no loans

were modified during the years ended December 31, 2023, or 2022.

quality of loans:

part of the on-going monitoring of the credit quality of the Company’s loan portfolio, management tracks credit quality indicators

based on the loan payment status on monthly basis.

The Company continuously evaluates the credit quality of each indemnified loan by

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

The detailed breakdown of risk factors described

carrying value, excluding the CECL Reserve, of the Company’s loans held at carrying value within each risk rating is as follows:

Collectively evaluated for impairment

As of December 31, 2024 and December 31, 2023, no

loans were past due, or classified as non-accrual or considered impaired.

Additionally, no loans were modified during the years ended

December 31, 2024, or 2023.

Credit quality of loans:

As part of the on-going monitoring of the credit quality

of the Company’s loan portfolio, management tracks credit quality indicators based on the loan payment status on monthly basis.

The Company evaluated the credit quality of each indemnified loan by assessing the risk factors and assigning a risk rating based on a

variety of factors.

The detailed breakdown of risk factors described in Note 6.

The carrying value, excluding the CECL Reserve, of

the Company’s loans held at carrying value within each risk rating is as follows:

of Risk Rating

Indemnification Liability

discussed at Note 10 to the consolidated financial statements, and pursuant to PCCU Agreements, PCCU funds loans through a third-party

SHF earns the associated interest and pays PCCU a loan hosting payment at an annual rate of 0.35% of the outstanding loan principal

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

The below schedule details outstanding amounts

funded by PCCU and categorized as either collateralized loans or unsecured loans and lines of credit.

December 31, 2024

December 31, 2023

Indemnification

As of December 31, 2024, the Company had no indemnified loans outstanding.

However, as of December 31, 2023, the Company had indemnified a total of twenty loans, three of which individually represented more than

10% of the total balance of indemnified loans.

The schedule below details outstanding indemnified

amounts funded by PCCU and categorized as either collateralized loans or unsecured loans and lines of credit as of December 31, 2024 and

December 31, 2023.

of Outstanding Amounts

Secured term loans

Unsecured loans and

lines of credit

loans funded by Parent

loans contained an interest rate ranging from 7 % to 12 %.

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

+1.50 % to Prime +6.00 %.

Unsecured lines of credit had incremental availability of $ 525,000 and $ 996,958 at December 31, 2023 and December

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

The indemnity liability reflects SHF management’s estimate of probable

credit losses inherent under the agreement at the balance sheet date.

The Company’s estimated indemnity liability on the reporting

date was calculated in accordance with the allowance for credit loss policy described in Note 2.

indemnity liability activity are as follows:

Schedule of Indemnity Liability

Unsecured loans and lines of credit

Total loans funded by PCCU

As of December 31, 2023, secured loans carried interest

rates ranging from 8.00 % to 13.00 %, while unsecured loans and lines of credit had interest rates between 10.00% and 12.50%.

Additionally,

unsecured lines of credit had an incremental availability of $ 996,958 as of December 31, 2023.

For the loans outstanding as of December 31, 2023,

SHF had agreed to indemnify PCCU for losses on certain PCCU loans.

The indemnity liability reflects SHF management’s estimate of

probable credit losses inherent under the agreement as of the balance sheet date.

The Company’s estimated indemnity liability on

the reporting date was calculated in accordance with the allowance for credit loss and indemnity liability policies described in Note

As per the Amended CAA, effective December

31, 2024, the Company no longer serves as a guarantor of credit losses to PCCU, accordingly reduced the indemnity liability on loans funded

by PCCU to $ 0 at December 31, 2024.

The indemnity liability activity are as follows:

of Indemnity Liability

Beginning balance

Cumulative effect from

adoption of CECL

Cumulative effect from adoption of CECL

(Benefit) expense

( 1,382,408 )

Ending balance

loans were current and considered performing at December 31, 2023 except one loan which was identified pursuant to potential default

on January 5, 2023.

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

was past due pursuant to its December 2022 payment.

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

due to business losses.

The Company is discussing workout options with the borrower.

The above-mentioned loan is now greater than 120

days delinquent and is included in the Company’s CECL methodology to calculate management’s best estimate of credit losses

in relation to this loan and the overall loan portfolio on a collective basis.

quality of indemnified loans:

part of the on-going monitoring of the credit quality of the Company’s indemnified loan portfolio, management tracks credit quality

indicators based on the loan payment status on monthly basis.

The Company continuously evaluates the credit quality of each indemnified

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

Risk factors include property type, geographic

and local market dynamics, physical condition, projected cash flow, loan structure and exit plan, loan-to-value ratio, fixed charge coverage

ratio, project sponsorship, and other factors deemed necessary.

Based on a 10-point scale, the Company’s loans are rated “0”

through “10,” from less risk to greater risk, which ratings are defined as follows:

of repayment risk.

The loan is fully guaranteed by the full faith and backing of the US Government or entirely secured by cash controlled

caliber loan with the lowest risk of default.

As of December 31, 2023, one loan had been classified

as nonaccrual.

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

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

During the second quarter of 2024, the company received

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

Credit quality of indemnified loans:

As part of the on-going monitoring of the credit quality

of the Company’s indemnified loan portfolio, management tracks credit quality indicators based on the loan payment status on monthly

The Company continuously evaluates the credit quality of each indemnified loan by assessing the risk factors and assigning a risk

rating based on a variety of factors.

Risk factors include property type, geographic and local market dynamics, physical condition, projected

cash flow, loan structure and exit plan, loan-to-value ratio, fixed charge coverage ratio, project sponsorship, and other factors deemed

Based on a 10-point scale, the Company’s loans are rated “0” through “10,” from less risk to

greater risk, which ratings are defined as follows:

Free of repayment risk.

The loan is fully guaranteed by the full faith and backing of the US Government or entirely secured by cash controlled by SHF.

Highest Quality

High caliber loan with the lowest risk of default.

Significant excess cash flow after debt service and moderate to low leverage.

quality loan that carry’s a low risk of default.

High quality loan that carry’s a low risk of default.

Strong cash flow and relatively few negative individual risk factors.

with lower-than-average level of risk.

Loans with lower-than-average level of risk.

Excess cash flow and other factors contributing to the overall low level of risk in the loan.

factors may be mixed with some negative and some positive aspects, but the overall rating will indicate an average level of risk.

in this category have the maximum level of risk that can be accepted while still recommending a new loan for origination.

risk factors may contain multiple negative factors, but they are generally outweighed by the positive aspects of the loan.

is a temporary and curable condition resulting in a lower risk rating.

is a potential weakness that may result in the deterioration of the prospect of repayment that are not temporary and may require

additional collection or workout efforts.

in this category are inadequately protected by the current net worth and paying capacity of the obligors or of the collateral pledged

and have well-defined weaknesses that jeopardize the liquidation of the debt with distinct possibility of loss.

SHF may be required

to advance additional funds to manage the loan.

Escalated collection activities such as foreclosure have been scheduled with anticipated

losses up to 20% of the outstanding balance.

or liquidation in full highly questionable and improbable.

Escalated collection activities such as foreclosure have commenced with

anticipated losses from 20% to 50% of the outstanding balance.

Uncollectable

Risk factors may be mixed with some negative and some positive aspects, but the overall rating will indicate an average level of risk.

Loans in this category have the maximum level of risk that can be accepted while still recommending a new loan for origination.

The loan risk factors may contain multiple negative factors, but they are generally outweighed by the positive aspects of the loan.

There is a temporary and curable condition resulting in a lower risk rating.

Special Mention

There is a potential weakness that may result in the deterioration of the prospect of repayment that are not temporary and may require additional collection or workout efforts.

Loans in this category are inadequately protected by the current net worth and paying capacity of the obligors or of the collateral pledged and have well-defined weaknesses that jeopardize the liquidation of the debt with distinct possibility of loss.

SHF may be required to advance additional funds to manage the loan.

Escalated collection activities such as foreclosure have been scheduled with anticipated losses up to 20% of the outstanding balance.

Collection or liquidation in full highly questionable and improbable.

Escalated collection activities such as foreclosure have commenced with anticipated losses from 20% to 50% of the outstanding balance.

Uncollectable loans.

A complete write-off is imminent although a partial recovery may be affected in the future.

has agreed to indemnify PCCU from all claims related to SHF’s cannabis-related business.

Other than potential credit losses, no

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

carrying value, excluding the CECL Reserve, of the Company’s indemnified loans held at carrying value within each risk rating is

The carrying value, excluding the CECL Reserve, of

the Company’s indemnified loans held at carrying value within each risk rating is as follows:

of Indemnified Loans Risk Rating

provision for credit losses on the statement of operations consists of the following activity for the year ended December 31, 2023 and

December 31, 2022:

The provision for credit losses (benefit) on the statements

of operations consists of the following activity for the years ended December 31, 2024 and December 31, 2023:

of Provision for Loan Losses

real estate loans

Commercial real estate loans

Indemnity liability

Commercial real estate loans

Indemnity liability

December 31, 2024

December 31, 2023

Commercial real estate loans

Indemnity liability

Commercial real estate loans

Indemnity liability

Credit loss (benefit)

Property and equipment, net

and equipment consist of the following:

of Property and Equipment, Net

Property and equipment consist of the following:

of Property and Equipment

Office furniture

1 unchanged sentence

accumulated depreciation

Property and equipment,

expense was $ 173,828 and $ 10,361 for the years ended December 31, 2023, and 2022, respectively.

Related party transactions

Servicing Agreement

Company had an Account Servicing Agreement with PCCU.

Property and equipment, net

Depreciation expense was $ 81,066 and $ 173,828 for

the years ended December 31, 2024, and 2023, respectively.

party transactions

PCCU is considered a related party as it holds a significant

ownership interest in the Company, is our most significant financial institution customer, serves as the Company’s sole lending financial institution, is the counterparty to the PCCU Note, and is where we maintain the majority of our deposits.

The agreements between PCCU and

the Company are as follows:

Account Servicing Agreement

The Company had an Account Servicing Agreement with

SHF provides services as per the agreement to CRB accounts at PCCU.

to providing the services, SHF assumed the costs associated with the CRB accounts.

These costs include employees to manage account onboarding,

monitoring and compliance, rent and office expense, insurance and other operating expenses necessary to service these accounts.

the agreement, PCCU agreed to pay SHF all revenue generated from CRB accounts.

Amounts due to SHF were due monthly in arrears and upon

receipt of invoice.

This agreement was replaced and superseded in its entirety by Commercial Alliance Agreement entered on March 29,

2023, between PCCU and the Company.

Services Agreement

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

In connection with PCCU hosting the depository accounts and the

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

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

In addition to providing the services, SHF assumed the costs

associated with the CRB accounts.

These costs include employees to manage account onboarding, monitoring and compliance, rent and office

expense, insurance and other operating expenses necessary to service these accounts.

Under the agreement, PCCU agreed to pay SHF all revenue

generated from CRB accounts.

Amounts due to SHF were due monthly in arrears and upon receipt of invoice.

This agreement was replaced and

superseded in its entirety by the PCCU CAA, which was entered into on March 29, 2023, and later amended and restated on December 31, 2024.

Support Services Agreement

On July 1, 2021, SHF entered into a Support Services

Agreement with PCCU.

In connection with PCCU hosting the depository accounts and the related loans and providing certain infrastructure

support, PCCU received (and SHF paid) a monthly fee per depository account.

In addition, 25 % of any investment income associated with

CRB deposits is paid to PCCU.

This agreement was replaced and superseded in its entirety by the PCCU CAA, which was entered into on March

29, 2023, and later amended and restated on December 31, 2024.

Loan Servicing Agreement

Effective February 11, 2022, SHF entered into a Loan

Servicing Agreement with PCCU.

The agreement sets forth the application, underwriting and approval process for loans from PCCU to CRB

customers and the loan servicing and monitoring responsibilities provided by both PCCU and SHF.

PCCU received a monthly servicing fee

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

For the loans that are

subject to this agreement, SHF originated the loans and performed all compliance analysis, credit analysis of the potential borrower,

due diligence and underwriting and all administration, including hiring and incurring the costs of all related personnel or third-party

vendors necessary to performed these services.

Under the Loan Servicing Agreement, SHF agreed to indemnify PCCU from all claims related

to default-related credit losses as defined in the Loan Servicing Agreement.

This agreement was replaced and superseded in its entirety

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

Servicing Agreement

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

The agreement sets forth the application, underwriting and

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

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

and serviced by PCCU.

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

credit analysis of the potential borrower, due diligence and underwriting and all administration, including hiring and incurring the

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

Under the Loan Servicing Agreement, SHF has

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

This agreement

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

Alliance Agreement

March 29, 2023, the Company and PCCU entered into the Commercial Alliance Agreement.

This Agreement sets forth the terms and conditions

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

The Commercial Alliance Agreement

replaces and supersedes, in their entirety, the following agreements entered into between the aforementioned parties:

the Amended and

Restated Loan Servicing Agreement (the “Loan Servicing Agreement”, dated September 21, 2022);

the Second Amended and Restated

Account Servicing Agreement (“the “Account Servicing Agreement,” dated May 23, 2022, effective February 11, 2022) and

the Second Amended and Restated Support Services Agreement (the “Support Agreement,” dated May 23, 2022, effective February

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

borrowers that are cannabis-related businesses and the loan servicing and monitoring responsibilities provided by the Company and PCCU.

In particular, the Commercial Alliance Agreement provides for procedures to be followed upon the default of a loan to ensure that neither

the Company nor PCCU will take title to or possession of any cannabis-related assets, including real property, that may be collateral

for a loan funded by PCCU pursuant to the Commercial Alliance Agreement.

Under the Commercial Alliance agreement, the PCCU has the right to receive monthly fees

for managing loans.

by the PCCU CAA, which was entered into on March 29, 2023, and later amended and restated on December 31, 2024.

Commercial Alliance Agreement (the “PCCU CAA”)

On March 29, 2023, the Company and PCCU entered into the PCCU CAA.

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

The PCCU CAA replaces and supersedes, in their entirety, the following agreements entered into between the aforementioned parties:

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

the Second Amended

and Restated Account Servicing Agreement (“the “Account Servicing Agreement,” dated May 23, 2022, effective February

11, 2022) and the Second Amended and Restated Support Services Agreement (the “Support Agreement,” dated May 23, 2022, effective

February 11, 2022).

The PCCU CAA sets forth the application, underwriting, loan approval, and

foreclosure process for loans from PCCU to borrowers that are cannabis-related businesses and the loan servicing and monitoring responsibilities

provided by the Company and PCCU.

In particular, the PCCU CAA provides for procedures to be followed upon the default of a loan to ensure

that neither the Company nor PCCU will take title to or possession of any cannabis-related assets, including real property, that may be

collateral for a loan funded pursuant to the PCCU CAA.

Under the PCCU CAA, the PCCU has the right to receive monthly fees for managing

For SHF-serviced loans, which are CRB loans provided by the PCCU but primarily handled by SHF, a yearly fee of 0.25 % of the remaining loan balance is applied.

On the other hand, loans

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

These fees are calculated using

the average daily balance of each loan for the preceding month.

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

Agreement to indemnify PCCU from certain default-related loan losses (as fully defined in the Commercial Alliance Agreement).

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

services to include:

all cannabis-related income, including all lending-related income (such as loan origination fees, interest income

on CRB-related loans, participation fees and servicing fees), investment income, interest income, account activity fees, processing fees,

flat fees, and other revenue generated from cannabis and multi-state hemp accounts that are hosted on PCCU’s core system for a

monthly fee equal to $30.96 per account in 2022, $25.32-$27.85 per account in 2023, and $26.08-$28.69 in 2024.

In addition, as it pertains

to CRB deposits held at PCCU, investment and interest income earned on these deposits (excluding interest income on loans funded by PCCU)

will be shared 25% to PCCU and 75% to the Company.

Finally, under the Commercial Alliance Agreement, PCCU will continue to allow its

ratio of CRB-related deposits to total assets to equal at least 60% unless otherwise dictated by regulatory, regulator or policy requirements.

The initial term of the Commercial Alliance Agreement is for a period of two years, with a one-year automatic renewal unless a party

provides one hundred twenty days’ written notice prior to the end of the term.

fiscal 2022 and up to the third quarter of 2023, our investment earnings were solely from interest on deposits at the Federal Reserve

Bank, capped at the earnings accrued by PCCU from its reserves.

However, a strategic shift in the fourth quarter of 2023 led us to adopt

Federal Reserve’s interest rates applied to the daily average balance of SHF customer deposits, with certain exclusions.

applied retroactively from the beginning of 2023, resulted in incremental revenue of $ 549,000 recognized in the fourth quarter.

our Commercial Alliance Agreement, we are obligated to remit 25 % of the investment hosting fees to PCCU based on this income.

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

On the other hand, loans both financed and serviced by the PCCU are charged a yearly fee of 0.35 % on their outstanding balance.

These fees are calculated using the average

daily balance of each loan for the preceding month.

In addition, under the PCCU CAA the Company’s is obligated to indemnify PCCU

from certain default-related loan losses.

Furthermore, the PCCU CAA provides

for certain fees to be paid to the Company for certain identified account related services to include:

all cannabis-related income, including

all lending-related income (such as loan origination fees, interest income on CRB-related loans, participation fees and servicing fees),

investment income, interest income, account activity fees, processing fees, flat fees, and other revenue generated from cannabis and multi-state

hemp accounts that are hosted on PCCU’s core system for a monthly fee equal to $30.96 per account in 2022, $25.32-$27.85 per account

in 2023, and $26.08-$28.69 in 2024.

In addition, regarding CRB deposits held at PCCU, SHF pays PCCU a fee of 25% of the related income

earned from investment and interest on these deposits, excluding interest income on loans funded by PCCU.

Finally, under the PCCU CAA, PCCU will continue to allow its ratio of CRB-related deposits to total assets to equal at least 60% unless otherwise

dictated by regulatory, regulator or policy requirements.

The initial term of the PCCU CAA is for a period of two

years, with a one-year automatic renewal unless a party provides one hundred twenty days’ written notice prior to the end of the

Up to the third quarter of 2023, our investment earnings

were solely from interest on deposits at the Federal Reserve Bank, capped at the earnings accrued by PCCU from its reserves.

a strategic shift in the fourth quarter of 2023 led us to adopt Federal Reserve’s interest rates applied to the daily average balance

of SHF customer deposits, with certain exclusions.

This method, applied retroactively from the beginning of 2023, resulted in incremental

revenue of $ 549,000 recognized in the fourth quarter.

Under our PCCU CAA, we are obligated to remit 25 % of the investment

hosting fees to PCCU based on this income.

The schedule below demonstrates the ratio of CRB related

loans funded by PCCU to the relative lending limits:

of Demonstrated Deposit Capacity

December 31, 2024

December 31, 2023

CRB related deposits

6 unchanged sentences

PCCU loans funded

Amounts available under

lines of credit

$ 154,971,429

revenue from the PCCU Agreements recognized in the statements of operations consists of the following for the year ended December 31,

2023, and December 31, 2022:

Amounts available under lines of credit

Incremental capacity *

* If the loans funded by PCCU exceed the limiting capacity, the PCCU CAA specifies that PCCU will be

unable to fund additional loans until the incremental capacity is positive.

On December 31, 2024, the Company and PCCU entered

into an Amended CAA, extending the term through December 31, 2028,

with automatic two-year renewal periods unless a party provides written notice of non-renewal at least 12 months before the current term

Key modifications under the Amended CAA include:

· Elimination of Indemnification Obligations:

is no longer required to indemnify PCCU for any loan-related losses under either the original or future agreements.

· Elimination of Prior Fees and Implementation of Asset Hosting

Fee Structure:

Under the previous agreement, the Company was required to pay various fees to PCCU, including per-account servicing

fees, investment hosting fees, and loan servicing fees.

The Amended CAA eliminates all these charges and replaces them with a fixed account

servicing fee.

Under the new structure, the Company will pay a single asset hosting fees which is calculated as 0.01 multiplied by the

average daily balance of account relationships generated by the Company, divided by the number of days in the year, and multiplied by

the number of days in the applicable month.

This revised model aligns servicing costs with account balances rather than a flat per-account

charge, offering a more scalable and efficient fee structure.

· Investment Income Entitlement:

Under the Amended CAA,

the Company received all investment income earned on CRB funds invested on its behalf by PCCU, effectively eliminating the investment

hosting fees that were previously payable to PCCU.

· Loan Yield Allocation Formula:

The Company’s interest

income will be determined using a loan yield allocation formula incorporating the Constant Maturity US Treasury Rate and a proprietary

risk rating formula for determining the fee split.

· Loan-to-Share Ratio Compliance:

The Amended CAA introduces

penalties for the Company if it fails to maintain the agreed Loan-to-Share (LTS) Ratio.

I f the LTS Maximum (60%) is exceeded for over

90 days, the Asset Hosting Fee increases from 1.00% to 1.10% of the average daily balance (ADB) until compliance is restored.

LTS Minimum (27.5%) is breached, SHF must pay a quarterly adjustment fee based on the shortfall.

Additionally, if the LTS Ratio exceeds

100% for 90 days, SHF incurs an interest charge at the Federal Funds Rate + 120 bps, calculated daily and paid monthly.

The revenue from the PCCU CAA recognized in the statements

of operations consists of the following for the years ended December 31, 2024, and December 31, 2023:

of Revenue from Operations

December 31, 2024

December 31, 2023

Account servicing agreement

Commercial alliance

operating expense from the PCCU Agreements recognized in the statements of operations consists of the following for the year ended December

31, 2023, and December 31, 2022:

Commercial Alliance Agreement

The operating expenses from the PCCU CAA recognized

in the statements of operations consists of the following for the years ended December 31, 2024, and December 31, 2023:

of Operating Expense from Operations

December 31, 2024

December 31, 2023

Support services agreement

Loan servicing agreement

Commercial alliance

Operating expense

of shares to PCCU

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

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

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

interest in substantially all of the assets of the Company.

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

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

In connection with the Securities

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

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

(the “Securities Act”);

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

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

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

cash, securities, or other property;

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

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

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

July 1, 2021, SHF entered into a one-year gross lease with PCCU to lease space in its existing office at a monthly rent of $ 5,400 .

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

pursuant to ASC 842.

The lease was terminated on February 1, 2023.

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

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

The amount outstanding on December 31, 2023, and December 31, 2022, is $ 0 and

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

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

Commercial Alliance Agreement

The outstanding balances associated with the PCCU

disclosed in the balance sheet are as follows:

of Outstanding Balances from Balance Sheet

3 unchanged sentences

Accounts payable

Due to Seller (Refer to Note 11 to the financial

statements below)

Senior Secured Promissory Note (Refer to Note

12 to the financial statements below)

Of the $ 8.9 million and $ 8.4 million

of cash and cash equivalents at December 31, 2023 and 2022, $ 4.6 million and $ 8.3 million of the cash and cash equivalents were held

in deposit accounts at PCCU as a related party.

with Abaca shareholder

disclosed in Notes 4 and 5 to the consolidated financial statements, the merger with Abaca that occurred in October 2022 involves certain

payments either paid or payable to the former shareholders of Abaca, warrants and issuances of stock.

The former shareholders of Abaca

represent a related party to the Company based on current employment with the Company and their significant equity ownership interest

in the Company.

Due to Seller

due to seller were as follows:

of Amounts Due to Seller

Due to Seller-Current (Unsecured)

Due to Seller-long term

loans funded by PCCU

contemplated by the Unit Purchase Agreement, related to reverse acquisition of NLIT, the consideration paid to PCCU in connection with

the Business Combination consisted of an aggregate of $ 185,000,000 , consisting of (i) 11,386,139 shares of the Company’s Class

A Common Stock with an aggregate value equal to$ 115,000,000 and (ii) $ 70,000,000 in cash, $ 56,949,800 of which was to be paid on a deferred

basis (the “Deferred Cash Consideration”).

Deferred Cash Consideration was to be paid in one payment of $ 21,949,800 on or before December 15, 2022, and the $ 35,000,000 balance

in six equal instalments of $ 6,416,667 , payable beginning on the first business day following April 1,2023 and on the first business

day of each of the following five fiscal quarters, for a total of $ 38,500,002 .

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

(“Luminous”).

As per the terms of the agreement, PCCU has agreed to defer all payments owed by the Company pursuant

to the Purchase Agreement for a period of six (6) months from the date hereof while the Parties engage in good faith efforts to renegotiate

the payment terms applicable to the Deferred Obligation (the “Forbearance Period”).

loan included 5 % interest annualized using the simple interest method and an approximate 4.71 % effective interest rate.

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

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

at the rate of 4.25 %;

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

interest in substantially all of the assets of the Company;

and a Securities Issuance Agreement, pursuant to which the Company issued

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

The breakdown of the liabilities settled under this transaction

are as follows:

Breakdown of Liabilities Settled

Due to Seller

Cash payment obligation under business combination

Business combination expense payable to seller

Interest accrued but

Total deferred obligation

Senior secured promissory note

Change in deferred

Amount charged to Stockholders’

Equity towards issuance of common stock

Senior Secured Promissory Note

Senior Secured Promissory Note (Refer to Note 9 to the financial statements below)

Of the $ 2.3 million and $ 4.9 million of cash and cash

equivalents on December 31, 2024 and December 31, 2023, respectively, $ 2.2 million and $ 4.6 million of the cash and cash equivalents,

respectively, were held in deposit accounts at PCCU.

Issuance of shares to PCCU

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

the following definitive transaction documents to settle and restructure the deferred obligation:

A five-year 5

Senior Secured Promissory Note (the “PCCU Note”) in the principal amount of $ 14,500,000

bearing interest at the rate of 4.25 %

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

in substantially all of the assets of the Company.

The Company has repaid $ 3.5

million as of December 31, 2024.

A Securities Issuance Agreement, pursuant to which the Company issued 560,000 shares of the Company’s Class A Common Stock to PCCU.

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

PCCU holds 1,080,807 shares of the company as of December 31, 2024, representing a 39 % holding.

The Registration Rights Agreement requires the Company to register the Shares for resale pursuant to the Securities Act of 1933, as amended (the “Securities Act”);

and the Lock-Up Agreement restricts PCCU from transferring the Shares until the earlier of (i) six (6) months after the date of the Securities Issuance Documents or (ii) the consummation of a transaction with an unaffiliated third party in which all of the Company’s stockholders have the right to exchange their shares of Class A Common Stock for cash, securities, or other property;

The PCCU CAA that sets forth the terms and conditions of the lending-related and account-related services governing the relationship between the Company and PCCU which supersedes the Loan Servicing Agreement, as well as the Amended and Restated Support Services Agreement and the Amended and Restated Account Servicing Agreement.

Senior Secured

Promissory Note

of Senior Secured Promissory Note

Senior Secured Promissory Note

Senior Secured Promissory

Note (long term)

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

related to business Combination (Refer to Note 3) under which the Company has issued the five-year Senior Secured Promissory Note (the

“Note”) in the principal amount of $ 14,500,000 bearing interest at the rate of 4.25 % and a Security Agreement pursuant to

which the Company will grant, as collateral for the Note, a first priority security interest in substantially all of the assets of the

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

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

repayment schedule of the outstanding principal amount on December 31, 2023, is as follows:

December 31, 2024

December 31, 2023

Senior Secured Promissory Note (current)

Senior Secured Promissory Note (long term)

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

definitive transaction documents to settle and restructure the deferred obligation following the Business Combination under which the

Company has issued the five-year Senior Secured Promissory Note (the “PCCU Note”) in the principal amount of $ 14,500,000 bearing

interest at the rate of 4.25 % and a Security Agreement, as referenced in Exhibit 3 of the Company’s Quarterly Report on Form 10-Q,

filed with the SEC on May 15, 2023, pursuant to which the Company will grant, as collateral for the PCCU Note, a first priority security

interest in substantially all of the assets of the Company.

The PCCU Note amount was to be paid in 54 installments

of $ 295,487 each, covering both principal and interest, starting from November 5, 2023.

For the period between March 29, 2023, and

October 5, 2023, the Company had paid only the interest portion.

On January 29, 2025, the Company and PCCU agreed

to a Letter Agreement to defer principal payments on the PCCU Note for February and March 2025, with interest payments continuing.

On March 1, 2025, the Company entered into the Amended PCCU Note, replacing the original note dated March 29, 2023 and the letter

The Amended PCCU Note has a principal balance of $ 10,748,408 ,

accruing interest at 4.25 %

annually, with interest-only payments until January 5, 2027, and full repayment by October 5, 2030.

The agreement maintains

PCCU’s first-priority security interest and enforces a DSCR of 1.4 to 1.0.

Upon the effective date of the Amended PCCU Note

and as of December 31, 2024, the Company reflected on its Consolidated Balance Sheet the unpaid balance due to PCCU as a non-current

repayment schedule for the outstanding principal balance as on December 31, 2024, is as follows:

of Outstanding Amount on Debt

Year of payment

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

All of the active leases for facility space qualified

for capitalization under FASB ASC 842, Leases.

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

to extend the leases for up to ten years .

During the first quarter of 2025, the Company

identified that its 2024 Debt Service Coverage Ratio (DSCR), based upon payment terms under the PCCU Note, measured on the balance

sheet date, fell below the required threshold, leading to a potential breach of the covenant under the terms of the PCCU Note.

DSCR covenant mandates that the Company maintain a minimum ratio of 1.4

assessed annually.

PCCU waived the potential covenant breach prior to the Amended PCCU Note

thus there was no event of default.

Management is actively monitoring the Company’s financial performance and liquidity position

to ensure compliance with all debt covenants in future periods.

The Company continues to evaluate operational and financial strategies

to strengthen its ability to meet its debt obligations.

underwriter fee

As part of the reverse acquisition of the Company

and NLIT, the Company executed a note on September 28, 2022 with EF Hutton related to PIPE financing under which the Company was obligated

to pay the principal sum of $ 2,166,250 on the following schedule:

(i) $ 715,750 on October 14, 2022, and (ii) $ 362,625 on each of October

31, 2022, November 30, 2022, December 31, 2022, and January 31, 2023.

The Company made the payment of its first installment

of $ 715,750 and defaulted on the remaining outstanding amounts.

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

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

has been accounted for in the “Consolidated Statements of Stockholders’ (Deficit) Equity”, as a component of additional

paid in capital.

The Company has non-cancellable operating leases

for facility space with varying terms.

All of the active leases for facility space qualified for capitalization under FASB ASC 842, Leases.

These leases have remaining lease terms between one 1

years and may include options to extend the leases for up to ten

The extension terms are not recognized as part of the right-of-use assets.

The Company has

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

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

recorded under operating leases were $ 859,861 and $ 1,016,198 , respectively, and net lease liabilities were $ 1,007,993 and $ 1,028,233 ,

respectively.

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

Lease and non-lease components are not separated

for facility space leases.

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

not available.

Total lease cost for the years ended December 31, 2023 and 2022, included in Consolidated Statements of Operations, is

detailed in the table below:

The Company has elected not to capitalize leases

with terms equal to, or less than, one year.

As of December 31, 2024, and December 31, 2023, net assets recorded under operating leases

were $ 703,524 and $ 859,861

respectively, and net lease liabilities were $ 874,834

and $ 1,007,993 , respectively.

The Company analyzes contracts above certain thresholds

to identify leases and lease components.

Lease and non-lease components are not separated for facility space leases.

The Company uses

its contractual borrowing rate to determine lease discount rates when an implicit rate is not available.

Total lease cost for the year

ended December 31, 2024 and December 31, 2023, included in Consolidated Statements of Operations, is detailed in the table below:

of Lease Cost and Right of Use Assets Related to Lease and Future Minimum Lease Payments

December 31, 2024

December 31, 2023

Operating lease cost

Short-term lease cost

Total Lease Cost

ROU assets that are related to lease properties

are presented as follows:

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

Beginning balance

3 unchanged sentences

Ending balance

Further information related to leases is as

Further information related to leases is as follows:

Weighted-average remaining lease term

Weighted-average discount rate

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

Future minimum lease payments as of December 31, 2024 and December 31,

2023 are as follows:

Schedule of Future Minimum Lease Payments

3 unchanged sentences

Current portion

Non-current portion

of lease liabilities

Disaggregated

by type are as follows:

Non-current portion of lease liabilities

Disaggregated revenue

Revenue by type are as follows:

of Disaggregated Revenue

ended December 31

Deposit, activity, onboarding income

Year ended December 31

Account fee income

Investment income

Loan interest income

Safe Harbor Program

Safe Harbor Program income

Total Revenue

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

schedule with financial partner institutions.

Safe Harbor Program income consists of outsourced support to other financial institutions

providing banking to the cannabis industry whose income is recognized on the basis of usage as per the agreements.

Loan interest income

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

Investment income

consist of interest earned on the daily deposits balance with financial institution.

fiscal 2022 and up to the third quarter of 2023, our investment earnings were solely from interest on deposits at the Federal Reserve

Bank, capped at the earnings accrued by PCCU from its reserves.

However, a strategic shift in the fourth quarter of 2023 led us to adopt

Federal Reserve’s interest rates applied to the daily average balance of SHF customer deposits, with certain exclusions.

applied retroactively from the beginning of 2023, resulted in incremental revenue of $ 549,000 recognized in the fourth quarter.

our Commercial Alliance Agreement, we are obligated to remit 25 % of the investment hosting fees to PCCU based on this income which is

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

In 2023, PCCU’s contributions

to the Company’s revenues included $ 5,150,397 from deposits, activities, and client onboarding, $ 5,803,114 from investment income,

and $ 2,883,192 from loan interest income.

The associated expenses for these revenues were $ 529,209 for account hosting, $ 1,445,517 for

investment hosting fees, and $ 81,577 for loan servicing fees, all in accordance with the Loan Servicing Agreement and the Commercial

Alliance Agreement, classified as “General and Administrative Expenses” in the Consolidated Statements of Operations.

2022, PCCU contributed to the Company’s revenues with $ 5,554,922 from deposits, activities, and client onboarding, $ 2,110,572 from

investment income, and $ 989,642 from loan interest income.

The related expenses for these revenue streams were $ 255,853 for account hosting,

$ 519,406 for investment hosting fees, and $ 26,088 for loan servicing fees, all in compliance with the Loan Servicing Agreement, classified

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

Deferred underwriter fee

connection with the business combination (refer to Note 3), the Company executed a note on September 28, 2022 with EF Hutton related

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

(i) $ 715,750

on October 14, 2022, and (ii) $ 362,625 on each of October 31, 2022, November 30, 2022, December 31, 2022, and January 31, 2023.

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

The outstanding balance

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

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

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

for in the “Consolidated Statements of Parent-Entity Net Investment and Stockholders’ Equity.”

Commitments and Contingencies

Company is involved in, or has been involved in, arbitrations or various other legal proceedings

that arise from the normal course of its business.

The ultimate outcome of any litigation

is uncertain, and either unfavorable or favorable outcomes could have a material impact on

the Company’s results of operations, balance sheets and cash flows due to defense costs,

and divert management resources.

The Company cannot predict the timing or outcome of these

claims and other proceedings.

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

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

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

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

of the Company and the IPO.

connection with the issuance of common stock to Abaca shareholders, the Company commits to registering the stock upon the exercise

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

Should this requirement arise, the Company is obliged to file a registration statement with the SEC within 45 calendar

days of notification of the Warrant Registration Requirement.

Account fee income is generated from businesses maintaining

accounts with the Company’s financial institution partners and includes deposit account fees, account activity fees, and onboarding

These fees are recognized periodically in accordance with the fee schedule established with financial institution partners.

Company also earns income from outsourced support services provided to financial institutions offering banking solutions to the cannabis

industry, with revenue recognized based on usage as specified in the agreements.

Loan interest income consists of interest earned on

both direct and indemnified loans under the PCCU CAA.

The Company utilizes a fixed percentage fee structure, under which financial institutions

receive a share of interest income from CRB-related loans.

Investment income is derived from interest earned

on the daily deposit balances of cannabis businesses held with the Company’s financial institution partners and is recognized monthly

based on the average net daily deposit balance.

The Safe Harbor Program provides financial institutions

with a non-exclusive, non-transferable right to implement and utilize the documented process for managing compliance requirements.

Revenue from account fee income, loan interest income,

and investment income is recognized at a point in time, while revenue from Safe Harbor Program income is recognized over time.

for all revenue streams, except for Safe Harbor Program income, are collected on a monthly basis.

Under the Safe Harbor Program, any difference

between amounts collected and revenue recognized as of the reporting date is recorded as contract assets and contract liabilities.

are applicable only to account fees collected from customers and are granted as part of the ongoing business relationship with the customer.

Under the Company’s PCCU CAA, the Company is

obligated to remit as a fee, 25 % investment hosting fees to PCCU based on income which is classified as “General and Administrative

Expenses” in the Consolidated Statements of Operations.

During the year ended December 31, 2024, PCCU’s contributions to the

Company’s revenues included $ 4,565,545 from deposits, activities, and client onboarding, $ 1,903,422 from investment income, and

$ 6,254,175 from loan interest income.

The associated expenses for these revenues were $ 452,371 for account hosting, $ 457,105 for investment

hosting fees, and $ 143,217 for loan servicing fees, all in accordance with the PCCU CAA, classified as “General and Administrative

Expenses” in the Consolidated Statements of Operations.

During the year ended December 31, 2023, PCCU’s contributions to the

Company’s revenues included $ 5,150,397 from deposits, activities, and client onboarding, $ 5,803,114 from investment income, and

$ 2,883,192 from loan interest income.

The related expenses for these revenue streams were $ 529,209 for account hosting, $ 1,445,517 for

investment hosting fees, and $ 81,577 for loan servicing fees, all in compliance with the Loan Servicing Agreement, classified as “General

and Administrative Expenses” in the Consolidated Statements of Operations.

and Contingencies

Contractual Commitments

In connection with the issuance of Class A Common

Stock to Abaca shareholders, the Company commits to registering the stock upon the exercise of Abaca Warrants if required by law or regulation

to ensure the shares can be sold without restrictive legends, known as the “Warrant Registration Requirement”.

requirement arise, the Company is obliged to file a registration statement with the SEC within 45 calendar days of notification of the

Warrant Registration Requirement.

The failure to file within this timeframe constitutes an event of default.

Moreover, the Company is dedicated to making the registration statement effective as promptly as possible and maintaining its effectiveness,

along with a current prospectus, until the Warrants expire according to this Agreement’s terms.

In the event a registration

statement triggered by a Warrant Registration Requirement is not declared effective by the SEC within one year from its filing date,

Warrant holders are entitled to exercise their Warrants on a cashless basis from the 366th day post-filing until the statement becomes

Earnings Per Share

net income (loss) per common share is calculated by dividing the net income (loss) attributable to common stockholders by the weighted-average

number of common shares outstanding during the period, without consideration for potentially dilutive securities.

Diluted net income

(loss) per share is computed by dividing the net income (loss) attributable to common stockholders by the weighted average number of

common shares and potentially dilutive securities outstanding for the period.

For the Company’s diluted earnings per share calculation,

the Company uses the “if-converted” method for preferred stock and convertible debt and the “treasury stock”

method for Warrants and Options.

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

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

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

of Earning Per Shares, Basic and Diluted

Ended December 31

Moreover, the Company is

dedicated to making the registration statement effective as promptly as possible and maintaining its effectiveness, along with a current

prospectus, until the Warrants expire according to this Agreement’s terms.

In the event a registration statement triggered by a

Warrant Registration Requirement is not declared effective by the SEC within one year from its filing date, Warrant holders are entitled

to exercise their Warrants on a cashless basis from the 366th day post-filing until the statement becomes effective.

NASDAQ Listing Compliance

April 8, 2024, the Company received a notification letter from the listing qualifications department staff of Nasdaq (the “Staff”)

notifying the Company that for the last 30 consecutive business days, the Company did not maintain a minimum closing bid price of

$1.00 per share for its common stock, and thus, the Company no longer met Nasdaq’s minimum bid price requirement for continued

listing on The Nasdaq Capital Market under Nasdaq Marketplace Rule 5550(a)(2), requiring a minimum bid price of $1.00 per share (the

“Minimum Bid Price Requirement”).

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

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

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

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

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

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

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

If the Company does not regain compliance

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

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

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

an effort to comply with the $ 1.00 Minimum Bid Requirement, on March 4, 2025, we filed an amendment to our Second Amended and Restated

Certificate of Incorporation with the Secretary of State of the State of Delaware to effect a reverse split of our issued and outstanding

Class A Common Stock at a ratio of one for twenty.

April 7, 2025, the Company was informed by the staff that they had determined the minimum closing bid price for the Company’s Class

A common stock was at least $ 1.00 per share for 10 consecutive business days, from March 24, 2025, to April 4, 2025.

the Staff has determined that the Company has regained compliance with Minimum Bid Price Requirement, and, as such, the Staff has indicated

that the matter of the Company’s compliance with Minimum Bid Price Requirement is now closed.

On April 7, 2025, the Company received a notice from Nasdaq indicating that it no longer meets the continued listing requirements for

the Nasdaq Capital Market.

Specifically, the Company’s stockholders’ equity as of December 31, 2024, was a deficit of $ 12,288,014 ,

which is below the minimum required stockholders' equity of $ 2.5

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

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

continued listing standards.

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

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

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

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

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

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

The Company intends to timely

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

There can be no assurance that

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

compliance with any other Nasdaq requirement in the future.

Legal and Related Matters

The Company is involved in, or has been involved in,

arbitrations or various other legal proceedings that arise from the normal course of its business.

The ultimate outcome of any litigation

is uncertain, and either unfavorable or favorable outcomes could have a material impact on the Company’s results of operations,

balance sheets and cash flows due to defense costs, and divert management resources.

The Company cannot predict the timing or outcome

of these claims and other proceedings.

With respect to the cases, described below, we evaluate the associated developments on a regular

basis and accrue a liability when we believe a loss is probable and the amount can be reasonably estimated.

Abaca legal case in Denver

October 17, 2024, the Company caused a Complaint to be filed in the District Court for the City and County of Denver, Colorado, captioned

SHF Holdings, Inc.

Daniel Roda, Gregory W.

Ellis, and James R.

Carroll , Case No.

2024CV33187 (Denver County District Court).

On November 21, 2024, in connection with the Company’s request, the Company caused the

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

the terms of the Merger Agreement.

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

Liquidity and Going Concern section.

On December 19, 2024, Daniel

Roda, Gregory W.

Ellis, and James R.

Carroll caused an answer and counterclaim to be filed

in response to the Company Complaint.

For additional details, p lease

refer to the section titled “Abaca legal case in Denver” in the Recent Updates above as well as the Company’s Current

Reports on Form 8-K filed with the SEC on October 18, 2024 and December 19, 2024.

Given the uncertainty of legal proceedings, the Company

will continue to monitor the litigation and assess any potential financial impact in accordance with ASC 450, Contingencies.

At this time,

no loss contingency has been recorded, as the potential impact cannot be reasonably estimated.

Basic net income (loss) per common share is calculated

by dividing the net income (loss) attributable to common stockholders by the weighted-average number of common shares outstanding during

the period, without consideration for potentially dilutive securities.

Diluted net income (loss) per share is computed by dividing the

net income (loss) attributable to common stockholders by the weighted average number of common shares and potentially dilutive securities

outstanding for the period.

For the Company’s diluted earnings per share calculation, the Company uses the “if-converted”

method for preferred stock and convertible debt and the “treasury stock” method for Warrants and Options.

Schedule of Earning Per Shares, Basic and Diluted

For year Ended December 31

$ ( 48,319,475 )

4 unchanged sentences

Diluted net loss per share

Weighted average shares calculation

Schedule of Weighted Average Shares Outstanding - Basic And Diluted

Weighted average shares calculation – basic

December 31, 2024

December 31, 2023

Company public shares

1 unchanged sentence

PCCU stockholders

Issuance of Equity for Marketing Services

Shares issued for Abaca acquisition

Restricted stock units issued

Conversion of Preferred

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

had an anti-dilutive effect.

Conversion of Preferred stock

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

these awards would have had an anti-dilutive effect.

The following table reflects the awards excluded.

of Share-based Equity Awards Excluded From Computation of Dilutive Loss

Ended December 31

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

For year Ended December 31

Share based payments

Shares to be issued to Abaca shareholders

Conversion of preferred

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

A Convertible Preferred Stock equal (on an as-if-converted-to-Class-A-Common-Stock basis) to and in the same form as dividends actually

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

No other dividends

shall be paid on shares of Series A Convertible Preferred Stock.

Forward Purchase Agreement

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

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

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

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

Purchase Agreement to each of Verdun and Vellar.

As contemplated by the Forward Purchase Agreement:

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

from investors at market price in the public market.

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

to the acquired shares.

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

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

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

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

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

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

prior to the Maturity Date .

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

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

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

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

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

If Midtown East, Verdun and

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

and paid to SHF.

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

trading value of the common stock combined with preferred shareholders electing to convert

their preferred shares to common stock triggered a lower reset price embedded in the forward

purchase agreement, or FPA.

In 2022, the Company had already called a special meeting to

lower the make-whole price under the preferred share purchase agreement to $ 1.25 /share.

2022, an agreement was reached among the Company, its common shareholders, and preferred investors, leading to a reduction in the

make-whole price to $ 1.25 per share.

This reset resulted in a significant decrease in the FPA receivable, from $ 37.9 million as of

September 30, 2022, to $ 4.6 million.

In 2023, there were no share transactions by FPA holders, and management identified no additional

impacts on the FPA receivable’s value on December 31, 2023.

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

of Forward Purchase Agreement

Conversion of preferred stock

The holders of Series A Convertible Preferred Stock

shall be entitled to receive, and the Company shall pay, dividends on shares of Series A Convertible Preferred Stock equal (on an as-if-converted-to-Class-A-Common-Stock

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

on shares of the Class A Common Stock.

No other dividends shall be paid on shares of Series A Convertible Preferred Stock.

Purchase Agreement

On June 16, 2022, the Company entered into a Forward

Purchase Agreement (“FPA”) with Midtown East Management NL, LLC (“Midtown East”), which subsequently assigned

obligations to purchase 83,334 shares of Class A Common Stock each to Verdun Investments LLC (“Verdun”) and Vellar Opportunity

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

The collective acquisition involved 0.19

million shares of Class A Common Stock, with Midtown East, Verdun, and Vellar waiving their redemption rights.

The Company incurred costs

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

At the maturity of the FPA holders,

the parties will receive the value of their shares multiplied by the Forward Price.

The Forward Price is the Redemption Price, as defined

in Section 9.2(a) of the Counterparty’s Amended and Restated Certificate of Incorporation, filed by the Counterparty with the Secretary

of State of the State of Delaware on June 21, 2021.

The FPA holders will also receive an additional amount in cash or shares, at the Company’s

An early termination clause allows for the shares

to be sold on the open market, with any proceeds exceeding the Reset Price retained by the sellers.

The Reset Price is initially the Redemption

The Reset Price shall be adjusted on the first Scheduled Trading Day of each month, commencing on the first calendar month following

the closing of the Business Combination, to be the lowest of (a) the then-current Reset Price, (b) $ 200.00 , and (c) the VWAP Price of

the last ten (10) Scheduled Trading Days of the prior calendar month, but not lower than $ 100.00 .

However, if the Counterparty offers

and sells Shares in a follow-on offering or series of related offerings at a price lower than, or upon any conversion or exchange price

of currently outstanding or future issuances of any securities convertible or exchangeable for Shares being equal to a price lower than,

the then-current Reset Price (the “Offering Price”), the Reset Price shall be further reduced to equal the Offering Price.

Following a price reset in 2022 to $ 25 per share,

the FPA receivable was reduced from $ 37.9 million to $ 4.6 million.

As of December 31, 2024, there have been no transactions by the FPA

holders, and the value of the FPA receivable has remained unchanged.

The reconciliation statement of the Class A Common Stock held by

the parties is as follows:

Schedule of Forward Purchase Agreement

December 31, 2023

ended December 31, 2023

Shares sold during

the year ended

December 31, 2024

(September 28, 2022)

September 29, 2022

to December 31, 2022

December 31, 2024

Warrant Liabilities

and Private Placement Warrants

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

Public and Private Placement Warrants may only be exercised for a whole number of shares.

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

on September 28, 2027, or earlier upon redemption or liquidation .

warrant will be exercisable for cash or on a cashless basis, and the Company will not be obligated to issue any shares to holders seeking

to exercise their warrants, unless the issuance of the shares upon such exercise is registered or qualified under the securities laws

of the state of the exercising holder, or an exemption from registration is available.

of warrants become exercisable when the price per Class A Common Stock equals or exceeds $ 18.00 .

Once the warrants become exercisable,

the Company may redeem the warrants:

whole and not in part;

a price of $ 0.01 per warrant;

not less than 30 days’ prior written notice of redemption to each warrant holder;

and only if, the reported last sale price of the Class A Common Stock equals or exceeds $ 18.00 per share (as adjusted for stock splits,

stock dividends, reorganizations, recapitalizations and the like and certain issuances of Class A Common Stock and equity-linked

securities) for any 20 trading days within a 30-trading day period commencing no earlier than the date the warrants become exercisable

and ending on the third business day before the date on which the Company sends the notice of redemption to the warrant holders.

and when the warrants become redeemable by the Company, the Company may exercise its redemption rights;

this is also the case if the

Company is unable to register or qualify the underlying securities for sale under all applicable state securities laws.

the Company calls the warrants for redemption, management will have the option to require all holders that wish to exercise the Warrants

to do so on a “cashless basis,” as described in the warrant agreement.

The exercise price and number of shares of Class A

Common Stock issuable upon exercise of the warrants may be adjusted in certain circumstances including in the event of a stock dividend,

or recapitalization, reorganization, merger or consolidation.

However, the warrants will not be adjusted for issuance of Class A Common

Stock at a price below its exercise price.

Additionally, in no event will the Company be required to net cash settle the warrants.

private placement warrants are identical to the public warrants, except that the private placement warrants and the Class A Common Stock

issuable upon the exercise of the private placement warrants were not transferable, assignable or saleable, subject to certain limited

Additionally, the private placement warrants are exercisable on a cashless basis and non-redeemable so long as they are held

by the initial purchasers or their permitted transferees.

If the private placement warrants are held by someone other than the initial

purchasers or their permitted transferees, the private placement warrants will be redeemable by the Company and exercisable by such holders

on the same basis as the public warrants.

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

PIPE Warrants have an exercise price of $ 11.50 per share of Class A Common Stock to be paid in cash (except if the shares underlying

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

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

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

as adjusted and (ii) $5.00 .

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

splits and similar corporate actions.

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

After exercise of a PIPE Warrant, the Company may be required to pay certain penalties if it fails to deliver the Class A Common

Stock within a specified period of time.

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

As of December 31, 2022, the Company has no Abaca warrants

Abaca 5,000,000 stock warrants have an exercise price of $ 2.00 per share of Class A Common stock to be paid in Cash.

A Warrant may be

exercised only during the period commencing 1 year of the Effective Date and terminating five ( 5 ) years from the effective date of the

registration statement.

The Company may, in its sole discretion, settle the Warrant when exercised, in whole or in part, in cash in lieu

of issuing shares of Common Stock underlying the Warrant.

The Company may elect to pay the Registered Holder in cash in the amount equal

to the difference between the fair market value of the Company’s Common Stock on the date of exercise and the warrant price ($ 2.00 )

multiplied by the number of shares of Common Stock.

The Company commits to promptly registering shares issued upon Warrant exercises

Name of the party

Public and Private Placement Warrants

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

Company has 287,500 Public warrants and 13,205 Private Placement Warrants.

The Public and Private Placement Warrants may only

be exercised for a whole number of Class A Common Stock.

The Public and Private Placement Warrants became exercisable

on September 28, 2022, the date of the Business Combination and will expire on September 28, 2027, or earlier upon redemption or liquidation .

No warrant will be exercisable for cash or on a cashless

basis, and the Company will not be obligated to issue any shares to holders seeking to exercise their warrants, unless the issuance of

the shares upon such exercise is registered or qualified under the securities laws of the state of the exercising holder, or an exemption

from registration is available.

Redemption of warrants become exercisable when the

price per share of Class A Common Stock equals or exceeds $ 360.00 .

Once the warrants become exercisable, the Company may redeem the warrants:

in whole and not in part;

at a price of $ 0.01 per warrant;

upon not less than 30 days’ prior written notice of redemption to each warrant holder;

if, and only if, the reported last sale price of the Class A Common Stock equals or exceeds $ 360.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like and certain issuances of Class A Common Stock and equity-linked securities) for any 20 trading days within a 30-trading day period commencing no earlier than the date the warrants become exercisable and ending on the third business day before the date on which the Company sends the notice of redemption to the warrant holders.

If and when the warrants become redeemable by the

Company, the Company may exercise its redemption rights;

this is also the case if the Company is unable to register or qualify the underlying

securities for sale under all applicable state securities laws.

If the Company calls the warrants for redemption,

management will have the option to require all holders that wish to exercise the Warrants to do so on a “cashless basis,”

as described in the warrant agreement.

The exercise price and number of shares of Class A Common Stock issuable upon exercise of the warrants

may be adjusted in certain circumstances including in the event of a stock dividend, or recapitalization, reorganization, merger or consolidation.

However, the warrants will not be adjusted for issuance of Class A Common Stock at a price below its exercise price.

Additionally, in

no event will the Company be required to net cash settle the warrants.

The private placement warrants are identical to the

public warrants, except that the private placement warrants and the Class A Common Stock issuable upon the exercise of the private placement

warrants were not transferable, assignable or saleable, subject to certain limited exceptions.

Additionally, the private placement warrants

are exercisable on a cashless basis and non-redeemable so long as they are held by the initial purchasers or their permitted transferees.

If the private placement warrants are held by someone other than the initial purchasers or their permitted transferees, the private placement

warrants will be redeemable by the Company and exercisable by such holders on the same basis as the public warrants.

PIPE Warrants

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

Company had 51,125 PIPE Warrants, as referenced in Exhibit 4.1 of the Company’s Current Report on Form 8-K, filed with the SEC on

October 4, 2022.

The PIPE Warrants have an adjusted exercise price

of $ 100.00 per share of Class A Common Stock to be paid in cash except if the shares underlying the warrants are not covered by an effective

registration statement after the six-month anniversary of the closing date, in which case cashless exercise is permitted.

The PIPE Warrants

are also subject to adjustment for other customary adjustments for stock dividends, stock splits and similar corporate actions.

Warrants are exercisable for a period of five years following the Closing, or September 28, 2027.

After exercise of a PIPE Warrant, the

Company may be required to pay certain penalties if it fails to deliver the Class A Common Stock within a specified period of time .

Abaca Warrants

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

Company issued 250,000 Abaca warrants, as referenced in Exhibit 2.2 of the Company’s Current Report on Form 8-K, filed with the

SEC on October 27, 2023.

The 250,000 Abaca warrants have an exercise price

of $ 40.00 per share of Class A Common Stock to be paid in cash.

An Abaca Warrant may be exercised only during the period commencing 1

year of the Effective Date and terminating five ( 5 ) years from the effective date of the registration statement.

The Company may, in its

sole discretion, settle the Abaca Warrant when exercised, in whole or in part, in cash in lieu of issuing shares of common stock underlying

The Company may elect to pay the Registered Holder in cash in the amount equal to the difference between the fair market

value of the Company’s Class A Common Stock on the date of exercise and the warrant price $ 40.00 multiplied by the number of shares

of Class A Common Stock.

The Company commits to promptly registering shares of Class A Common Stock issued upon Abaca Warrant exercises

if required by law, ensuring these shares can be sold without restrictions.

3 unchanged sentences

effective until the Warrants expire.

If the registration isn’t effective within one year, Warrant holders may exercise their Warrants

If the registration is not effective within one year, Abaca Warrant holders may exercise their Warrants

on a cashless basis, receiving shares based on a defined fair market value calculation.

This process aims to facilitate the straightforward

and lawful exercise of Warrants, ensuring the shares issued are readily tradable without the need for restrictive legends.

Financial Instruments

value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between

market participants.

The fair value hierarchy ranks the inputs used in measuring fair value as follows:

1 – Observable, unadjusted quoted prices in active markets

2 – Inputs other than quoted prices included in Level 1 that are directly or indirectly observable for the asset or liability

3 – Unobservable inputs with little or no market activity that require the Company to use reasonable inputs and assumptions

Company uses fair value measurements to record adjustments to certain financial assets and liabilities on a recurring basis.

may be required to record certain assets at fair value on a nonrecurring basis in specific circumstances, such as evidence of impairment.

Methodologies used to determine fair value might be highly subjective and judgmental in nature;

and lawful exercise of the Abaca Warrants, ensuring the shares issued are readily tradable without the need for restrictive legends.

Fair value is defined as the price that would be received

to sell an asset or paid to transfer a liability in an orderly transaction between market participants.

The fair value hierarchy ranks

the inputs used in measuring fair value as follows:

Level 1 – Observable, unadjusted quoted prices in active markets

Level 2 – Inputs other than quoted prices included in Level 1 that are directly or indirectly observable for the asset or liability

Level 3 – Unobservable inputs with little or no market activity that require the Company to use reasonable inputs and assumptions

The Company uses fair value measurements to record

adjustments to certain financial assets and liabilities on a recurring basis.

The Company may be required to record certain assets at

fair value on a nonrecurring basis in specific circumstances, such as evidence of impairment.

Methodologies used to determine fair value

might be highly subjective and judgmental in nature;

therefore, valuations may not be precise.

If the Company determines that a valuation technique change is necessary, the change is assumed to have occurred at the end of the respective

reporting period.

and Liabilities Reported at Fair Value on a Recurring Basis

warrants are recorded at fair value on a recurring basis.

The Company obtains exchange traded price, of Level 1 inputs, based on observable

data to value these warrants.

Placement Warrants:

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

In 2023, the Company internally assessed the value of these derivatives

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

This is a change from 2022, when the valuation was

based on third-party reports, also utilizing Level 3 inputs for these derivatives.

Management believes that this change was necessary

to enhance the precision and control over the valuation process, allowing for a more tailored and responsive approach to the unique characteristics

of the derivatives and the evolving market conditions.

Warrants are recorded at fair value on a recurring basis.

In 2023, the Company internally assessed the value of these derivatives with

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

This is a change from 2022, when the valuation was based on third-party reports,

also utilizing Level 3 inputs for these derivatives.

Management believes that this change was necessary to enhance the precision and

control over the valuation process, allowing for a more tailored and responsive approach to the unique characteristics of the derivatives

and the evolving market conditions.

Warrants are recorded at fair value on a recurring basis.

The Company internally assessed the value of these derivatives with Level 3

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

anniversary payment consideration:

anniversary payment consideration are recorded at fair value on a recurring basis.

The Company value these derivatives based on third

party reports for Level 3 inputs.

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

purchase option derivatives:

purchase option derivatives are recorded at fair value on a recurring basis.

In 2022, the Company values these derivatives based on third

party reports for Level 3 inputs.

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

Consequently,

management retained the December 31, 2022, valuation for December 31, 2023.

following tables summarize financial assets and liabilities recorded at fair value on a recurring basis, by the level of valuation inputs

in the fair value hierarchy on December 31, 2023, and December 31,2022:

of Fair Value Assets and Liabilities Measured on Recurring Basis

Prices in Active Markets (Level 1)

Other Unobservable Inputs (Level 3)

Prices in Active Markets (Level 1)

Unobserva ble

If the Company determines that a valuation

technique change is necessary, the change is assumed to have occurred at the end of the respective reporting period.

Assets and Liabilities Reported at Fair Value on

a Recurring Basis

Public Warrants:

Public warrants are recorded at fair value on a recurring

The Company obtains exchange traded price, of Level 1 inputs, based on observable data to value these warrants.

Private Placement Warrants:

Private Placement Warrants are recorded at fair value

on a recurring basis based upon an internal Company assessed value of these derivatives with Level 3 inputs, which are derived from the

Black-Scholes model.

PIPE Warrants:

PIPE Warrants are recorded at fair value on a recurring

basis based upon an internal Company assessed value of these derivatives with Level 3 inputs, which are derived from the Black-Scholes

Abaca Warrants:

Abaca Warrants are recorded at fair value on a recurring

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

Level 3 inputs, based on unobservable data derived from

the Black-Scholes model.

Third anniversary payment consideration:

Third anniversary payment consideration are recorded at fair value on a

recurring basis.

The Company values these derivatives based on third party reports for Level 3 inputs.

Level 3 inputs are based on unobservable

data The Company values these derivatives based on third party reports for Level 3 inputs.

Level 3 inputs are based on unobservable data

derived from the Monte Carlo Simulation model for 2024 and for 2023 the Black Scholes-Merton model.

Forward purchase option derivatives:

Forward purchase option derivatives are recorded at fair value on a recurring

In 2022, the Company values these derivatives based on third party reports for Level 3 inputs.

In 2023 and 2024, no significant

risk factors, such as volatility, expected term, reset price, or changes, were observed to affect the values of forward purchase option

The following tables summarize financial assets and

liabilities recorded at fair value on a recurring basis, by the level of valuation inputs in the fair value hierarchy on December 31,

2024 and December 31, 2023:

Schedule of Fair Value Assets and Liabilities Measured on Recurring Basis

Total Fair Value

Quoted Prices in Active Markets

Significant Other Unobservable Inputs

Total Fair Value

Quoted Prices in Active Markets

Significant Other

December 31, 2024

December 31, 2023

Total Fair Value

Quoted Prices in Active Markets

Significant Other Unobservable Inputs

Total Fair Value

Quoted Prices in Active Markets

Significant Other

PIPE warrants

4 unchanged sentences

Third anniversary payment consideration

Measured at Fair Value on a Nonrecurring Basis

that are measured at fair value on a nonrecurring basis primarily comprises of property, plant and equipment, right-to-use assets, finite

lived intangible assets and goodwill.

The Company does not record these at fair value on a recurring basis, however, the carrying value

of the assets may be reduced to fair value when the Company determines that impairment has occurred.

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

Assets Measured at Fair Value on a Nonrecurring Basis

Assets that are measured at fair value on a nonrecurring

basis primarily comprises of property, plant and equipment, right-to-use assets, finite lived intangible assets and goodwill.

does not record these at fair value on a recurring basis, however, the carrying value of the assets may be reduced to fair value when

the Company determines that impairment has occurred.

As of December 31, 2024, each of the

Company’s finite-lived intangible assets were measured at fair value on a nonrecurring basis as part of the annual

impairment testing.

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

from Royalty Method for accurately reflecting market conditions and asset performance (Refer to note 5 - Goodwill and Finite-lived intangible

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

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

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

on December 31, 2023

value measurement using

To assess the fair value, the Company utilized the Discounted Cash Flow (DCF) Method and the Guideline Public

Company (GPC) Method, incorporating an equally weighted enterprise value derived from both methods.

In contrast, as of December 31,

2023, the Company’s developed technology assets were measured at fair value on a nonrecurring basis using the Relief from

Royalty Method for the annual impairment test, providing an accurate reflection of market conditions and asset performance.

to note 4 - Goodwill and Finite-lived intangible assets).

The following table presents the carrying amounts

and fair values of financial instruments measured on a nonrecurring basis, by the level of valuation inputs in the fair value hierarchy,

as of December 31, 2024, and December 31, 2023:

of Carrying Amounts and Fair Values of Financial Instruments

As on December 31, 2024

Fair value measurement using

Market related intangible assets

Customer relationships

Developed technology

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

intangible assets as of their measurement dates:

As on December 31, 2023

Fair value measurement using

Developed Technology

The following table provides quantitative information

regarding Level 3 fair value measurements inputs as it relates to the finite lived intangible assets as of their measurement

of Finite Lived Intangible Assets Measurement

1 unchanged sentence

Discount rate

Risk-free Rate

Fair value measurements inputs

As on December 31, 2023

Developed technology

Discount rate

Estimated useful life

Fair value measurements inputs

were no assets or liabilities recorded at fair value on a nonrecurring basis for the period ended December 31, 2022.

Value of Financial Instruments

Company uses various methodologies and assumptions to estimate the fair value of certain financial instruments.

With the exceptions of

loans receivable, warrants and forward purchase option derivatives, the Company considers the carrying amounts of its financial instruments

(cash, accounts receivable and accounts payable) in the balance sheet to approximate fair value because of the short-term or highly liquid

nature of these financial instruments.

following tables present the carrying amounts and fair values of financial instruments, by the level of valuation inputs in the fair

value hierarchy, as of the dates indicated:

of Carrying Amounts and Fair Values of Financial Instruments

on December 31, 2023

value measurement using

Fair Value of Financial Instruments

The Company uses various methodologies and assumptions

to estimate the fair value of certain financial instruments.

With the exceptions of loans receivable, warrants and forward purchase option

derivatives, the Company considers the carrying amounts of its financial instruments (cash, accounts receivable and accounts payable)

in the balance sheet to approximate fair value because of the short-term or highly liquid nature of these financial instruments.

The following tables present the carrying amounts

and fair values of financial instruments, by the level of valuation inputs in the fair value hierarchy, as of the dates indicated:

Schedule of Carrying Amounts and Fair Values of Financial Instruments

As on December 31, 2024

Fair value measurement using

Cash and cash equivalents

6 unchanged sentences

Abaca Warrants

Forward purchase derivative

Third anniversary payment consideration

on December 31, 2022

value measurement using

Forward purchase derivative

As on December 31, 2023

Fair value measurement using

Cash and cash equivalents

1 unchanged sentence

Deferred consideration

Due to seller - current portion

Due to seller - long term position

Deferred underwriter fee payable

Senior secured promissory note

Public warrants

1 unchanged sentence

PIPE warrants

Abaca warrants

Forward purchase derivative

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

value are presented in the following table:

of Fair Value Assets Measured on Recurring Basis

the Year ended December 31, 2023

consideration

Balance at the beginning of the

Third anniversary payment consideration

The change in the assets measured at fair value on

a recurring basis for which the Company has utilized Level 3 inputs to determine fair value are presented in the following table:

Schedule of Fair Value Assets Measured on Recurring Basis

For the Year ended December 31, 2024

PIPE Warrants

Third anniversary

payment consideration

Balance at the beginning of the period

Issued to Abaca shareholders

Acquired under business combination

Fair value adjustment

Balance at the end of

the Year ended December 31, 2022

Balance at the beginning of the period

Acquired under business combination

( 2,359,185 )

Fair value adjustment

Balance at the end of

2023, the valuation of private placement warrants, PIPE warrants, and Abaca warrants was carried out using the Black-Scholes model, while

the fair value of the Abaca third anniversary payment consideration was determined using the Black Scholes Merton Option pricing model.

Contrastingly, in 2022, the fair value assessments for both the private placement warrants and PIPE warrants were conducted using the

Black-Scholes model and the Black Scholes-Merton model, respectively.

Management believes that the change in method for PIPE warrants

was necessary to enhance the precision and control over the valuation process, allowing for a more tailored and responsive approach to

the unique characteristics of the derivatives and the evolving market conditions.

As of December 31, 2023, and December 31, 2022, these

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

2022, the fair value of the forward purchase derivative was estimated using a Monte-Carlo Simulation in a risk-neutral framework (a special

case of the Income Approach).

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

Consequently, management

retained the December 31, 2022, valuation for December 31, 2023.The Company will continue to monitor the fair value of the forward option

derivative each reporting period with subsequent revisions to be recorded in the Statements of Operations.

the fiscal years 2022 and 2023, there were no changes in the classification of financial instruments within Level 2 and Level 3 of the

fair value hierarchy.

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

warrants and public warrants as of their measurement dates:

of Level 3 Fair Value Measurement Inputs

PIPE Warrants

Private Warrants

consideration

Abaca Warrants

PIPE Warrants

Private Warrants

consideration

Abaca Warrants

Balance at the end of the period

For the Year ended December 31, 2023

PIPE Warrants

Private Warrants

Third anniversary

payment consideration

Balance at the beginning of the period

Issued to Abaca shareholders

Fair value adjustment

Balance at the end of the period

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

the valuation of Private Placement Warrants, PIPE warrants, and Abaca warrants was carried out using the Black-Scholes model, while the

fair value of the Abaca third anniversary payment consideration was determined using the Black Scholes Merton Option pricing model.

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

As of December 31, 2024, the Company assessed

the fair value of its Forward Purchase Agreement (FPA) derivative utilizing a Monte Carlo Simulation within a risk-neutral setting,

which is a particular instance of the Income Approach, based on calculations from December 31, 2022 and December 31, 2023.

Throughout the periods ended December 31, of 2023 and 2024, there were no notable alterations in risk factors such as volatility,

expected term and reset price that would impact the valuation of the FPA derivative.

Consequently, management retained the December

31, 2022, valuation for December 31, 2023 and December 31, 2024.

The Company will continue to monitor the fair value of the forward

option derivative each reporting period with subsequent revisions to be recorded in the Statements of Operations.

During the fiscal years 2023 and 2024, there were

no changes in the classification of financial instruments within Level 2 and Level 3 of the fair value hierarchy.

The following table provides quantitative information

regarding Level 3 fair value measurements inputs as it relates to the private placement warrants and public warrants as of their measurement

Schedule of Level 3 Fair Value Measurements Inputs

December 31, 2024

December 31, 2023

Consideration

Abaca Warrants

PIPE Warrants

Private Warrants

Consideration

Abaca Warrants

Exercise price

1 unchanged sentence

Risk-free rate

Warrants and rights outstanding,

measurement input

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

derivatives as of their measurement dates on December 31, 2023 and December 31, 2022:

Level 3 Fair Value Measurements Inputs

Warrants and rights outstanding, measurement input

The following table provides quantitative information

regarding Level 3 fair value measurements inputs as it relates to the forward purchase derivatives as of their measurement dates on December

31, 2024 and December 31, 2023:

Schedule of Level 3 Fair Value Measurements Inputs

December 31, 2024

December 31, 2023

Expected term (years)

3 unchanged sentences

Derivative liability, measurement input

major components of income tax expense for the years ended 31 December 2023 and 31 December 2022:

The major components of income tax expense (benefit)

for the years ended December 31, 2024 and December 31, 2023:

of Major Components of Income Tax

3 unchanged sentences

Deferred tax:

taxation - current year

$ ( 1,829,701 )

$ ( 9,249,499 )

Income tax benefit reported

in the income statement

$ ( 1,829,701 )

$ ( 9,252,893 )

reconciliation follows between tax benefit and the product of accounting profit multiplied by the United States domestic tax rate for

the years ended December 31, 2023 and December 31, 2022:

Deferred taxation - current year

Income tax expense (benefit)

A reconciliation follows between tax expense (benefit)

and the product of accounting loss multiplied by the United States domestic tax rate for the years ended December 31, 2024 and December

of Effective Income Tax Rate Reconciliation

For year ended December 31,

Accounting loss before tax from

continuing operations

( 19,109,548 )

$ ( 44,380,976 )

Accounting loss before

Accounting loss before tax from continuing operations

( 4,459,789 )

Accounting loss before income tax

( 4,459,789 )

At federal statutory income tax rate of 21 %

( 4,013,005 )

( 9,320,005 )

State income tax benefit, net of federal

( 1,304,510 )

State income tax benefit, net of federal benefit

Permanent differences, net

( 1,829,701 )

$ ( 9,252,893 )

taxes are comprised of the following:

Valuation allowance charges affecting the provision for income taxes

Deferred Tax Assets and Liabilities

As of December 31, 2024 and December 31, 2023, the significant component of the Company’s deferred tax assets and liabilities:

of Deferred Tax Assets and Liabilities

December 31, 2024

Deferred tax assets:

Loan loss reserve

$ ( 340,982 )

Capital loss carryover

1 unchanged sentence

Deferred revenue

Property plant and equipment’s

Transaction costs

Change in Forward Purchase

NOL Carryforward

Change in Forward Purchase Contract

( 2,227,772 )

ROU Liabilities

NOL carryforward

Lease liabilities

Total deferred tax assets (A)

Deferred tax liabilities:

Right of use assets

Intangible assets

Total deferred tax liabilities (B)

( 1,121,394 )

Deferred tax assets (C=A-B)

Valuation allowance (D)

( 44,350,833 )

Net deferred tax

assets / (liabilities)

Reflected in the statement of financial

position as follows:

Deferred tax assets

Deferred tax liabilities

( 44,277,919 )

Deferred tax assets net

Reconciliation

of deferred tax liabilities net:

Deferred tax assets, net (C-D)

( 43,829,019 )

Reconciliation of deferred tax asset, net:

of Deferred Tax Liabilities Net

on year change

Opening balance as on December

Tax Income/(expense) during the period recognized

in profit or loss

Year on year change

December 31, 2023

Opening balance

Tax (expense)/ income during the period recognized in the statement of operations

( 43,829,019 )

Closing balance as

on December 31, 2023

Company offsets tax assets and liabilities only if it has a legally enforceable right to set off current tax assets and current tax liabilities

and the deferred tax assets and deferred tax liabilities relate to income taxes levied by the same tax authority.

The Company considers

their deferred tax assets to be realizable and has not established a valuation allowance.

The Company has US federal tax loss carryovers

totaling $ 13.1 million arising from 2020 through 2023 which have an unlimited carryover period.

The Company has State of Colorado loss

carryovers arising in 2020 through 2023 of $ 12.8 million which expire in 2042 and State of Arkansas loss carryovers arising in 2020 through 2022 of

$ 0.2 million which expire in 2028 through 2032.

( 9,593,985 )

Closing balance

The Company offsets tax assets and liabilities

only if it has a legally enforceable right to set off current tax assets and current tax liabilities and the deferred tax assets and

deferred tax liabilities relate to income taxes levied by the same tax authority.

The Company does not consider their deferred tax

assets to be realizable and has established full valuation allowance during the year ending December 31, 2024.

The Company has US federal tax loss carryovers totaling

million arising from 2020 through 2022 which have an unlimited carryover period.

The Company has State of Colorado loss carryovers

arising in 2022 of $ 21.4

million which begin to expire in 2042.

The Company currently has no tax examinations in progress.

The Company has open years

for examination from Federal and State of Arkansas for the years ending December 31, 2020, forward and from State of Colorado from December

The Company has open years for

examination from Federal and State of Arkansas for the years ending December 31, 2020 and forward and from State of Colorado from

December 31, 2021 and forward.

The Company does not have any uncertain tax positions as of December 31, 2023.

In both 2022 and 2023, the Company did not make any payments towards federal or state taxes.

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

to 4 % of a participant’s eligible compensation.

The Company’s consolidated matching contributions for the year ended December

31, 2023, amounting to $ 62,785 , and December 31, 2022, amounting to $ 47,806 , respectively.

Share based compensation

The Company offers to all employees a tax-qualified

retirement contribution plan, with the Company’s 100 % matching contribution up to 4 % of a participant’s eligible compensation.

The Company’s consolidated matching contributions for the year ended December 31, 2024, amounting to $ 119,942 , and December 31,

2023, amounting to $ 62,785 , respectively.

Stockholders’ (Deficit) Equity

On January 28, 2025, the board of directors of the

Company approved a reverse stock split of the Company’s Common Stock at a ratio of 1-for-20 shares, which reverse stock split became

effective on March 14, 2025.

Preferred Stock

The Company is authorized to issue 1,250,000

shares of preferred stock, with a par value of $ 0.0001

per share, with such designation rights and preferences as may be determined from time to time by the Company’s Board of

As of December 31, 2024, there were 111

shares of Class A Preferred Stock issued and outstanding, and there were 1,101

shares of Class A Preferred Stock issued and outstanding on December 31, 2023.

The holders of preferred stock shall be entitled

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

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

of the Class A Common Stock.

No other dividends shall be paid on the preferred stock.

The terms of the preferred stock provide for an

initial conversion price of $ 10.00

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

55 days, 100 days, 145 days and 190 days after the effectiveness of a registration statement registering the shares of Class A Common

Stock issuable upon conversion of the preferred stock to the lower of the Conversion Price and the greater of (i)

80% of the volume weighted average price of the Class A Common Stock for the prior five trading days and (ii) $50.00 (the “Floor

Price”), provided that, so long as a preferred stock holders continues to hold any preferred shares, such preferred stock holder

will be entitled to receive the aggregate shares of Class A Common Stock that would be issuable based upon its initial purchase of preferred

stock at the adjusted Conversion Price .

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

the stockholders approved a reduction in the floor conversion price of the outstanding preferred stock from $4 0.00

per share to $ 25 .00 per share.

The Company is authorized to issue up to 130,000,000

shares of Class A Common Stock, with a par value of $ .0001 per share.

Holders of the Company’s Class A Common Stock are entitled

to one vote for each share.

As of December 31, 2024 and December 31, 2023, there were 2,783,667 and 2,728,169 shares of Class A Common

Stock issued and outstanding, respectively.

As of December 31, 2024 and December 31, 2023, 183,369 Class A Common Stock are held by the

purchasers under Forward Purchase Agreement dated June 16, 2022, by and among the Company and such purchasers.

2022 Equity Incentive Plan

compensation expense recognized for the years ended December 31, 2023, and 2022 totaled $ 3.71 million and $ 2.81 million respectively.

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

The 2022 Plan permits the grant of incentive stock options,

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

compensation awards.

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

the year ended December 31, 2023, and December 31, 2022.

In conjunction with the 2023 Plan, as of December 31, 2023, the Company had

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

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

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

The Company’s incentive stock options generally

permit net-share settlement upon exercise.

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

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

The Company’s stock options

generally have a 10 -year contractual term.

assumptions used to determine the fair value of options granted in the year ended December 31, 2023, using the Black-Scholes-Merton model

are as follows:

Share-based compensation expense recognized in the

year ended December 31, 2024 and December 31, 2023 totaled $ 1,575,952 and $ 3,739,156 , respectively.

The 2022 Equity Incentive Plan was approved by the

Company’s stockholders on June 28, 2022.

The 2022 Plan permits the grant of incentive stock options, non-qualified stock options,

stock appreciation rights, restricted stock, restricted stock units, stock bonus awards, and performance compensation awards.

has not issued stock appreciation rights, restricted stock, stock bonus awards, or performance compensation awards in the year ended December

31, 2024 and December 31, 2023.

Stock Options

Stock options are awarded to encourage ownership of

the Company’s Class A Common Stock by employees and to provide increased incentive for employees to render services and to exert

maximum effort for the success of the Company.

The Company’s incentive stock options generally permit net-share settlement upon

The option exercise price, vesting schedule and exercise period are determined for each grant by the administrator (person appointed

by board to administer the stock plans) of the applicable plan.

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

The assumptions used to determine the fair value of

options granted in the year ended December 31, 2023, using the Black-Scholes-Merton model are as follows:

of Fair Value of Options Granted Black-Scholes-Merton Model

1 unchanged sentence

Risk-free interest rate

Expected volatility (weighted-average

and range, if applicable)

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

Expected term

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

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

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

for the current period.

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

term of the options at the grant date.

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

expected term of the option.

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

Schedule of Stock Option and Related Information

of Stock Option

Average Exercise Price

Weighted-Average

6 to 6.5 years

The expected term of the options granted is calculated

based on the simplified method by taking average of contractual term and vesting period the awards.

The shares and the redeemable warrants

of the Company were listed on the stock exchange for a limited period of the time and the share price has also dropped significantly from

the date of listing.

Based on these factors Management has considered the expected volatility at 100 % for the current period.

The risk-free

interest rate used is the current yield on U.S.

Treasury notes with a term equal to the expected term of the options at the grant date.

The expected dividend yield is based on annualized dividends on the underlying share during the expected term of the option.

A summary of the Company’s stock option activities

and related information for the year ended December 31, 2024 is as follows:

of Stock Option and Related Information

Average Grant

Date Fair Value

Contractual Life

January 01, 2024

Cancelled / Forfeited

December 31, 2024

A summary of the Company’s stock option activities

and related information for the year ended December 31, 2023 is as follows:

Average Grant

Date Fair Value

Per Stock Option

Contractual Life

January 01, 2023

Cancelled / Forfeited

December 31, 2023

December 31, 2023, there were no unrecognized compensation costs related to non-vested stock options to be recognized.

Share based compensation

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

of Stock Option

Average Exercise Price

Weighted-Average

following options were outstanding at their respective exercise price:

The following options were outstanding at their respective

exercise price:

of Options Outstanding

price options outstanding

Stock Units (“RSUs”)

summary of the Company’s RSU activities and related information for the year ended December 31, 2023, is as follows:

Exercise price options outstanding

December 31, 2024

December 31, 2023

Restricted Stock Units (“RSUs”)

A summary of the Company’s RSU activities and

related information for the year ended December 31, 2024 is as follows:

of Restricted Stock Units

Weighted-Average

Restricted Stock Units

Average Grant

Date Fair Value

January 01, 2024

Cancelled / Forfeited

December 31, 2024

( 1,266,228 )

A summary of the Company’s RSU activities and

related information for the year ended December 31, 2023 is as follows:

Restricted Stock Units

Average Grant

Date Fair Value

January 01, 2023

Cancelled / Forfeited

December 31, 2023

following RSU were outstanding at their respective exercise price:

The following RSU were outstanding at their respective

of Exercise Price of Restricted Stock Units

Exercise price RSU outstanding

fair value as of the respective vesting dates of RSUs that vested during the year ended December 31, 2023, and December 31, 2022 was

$ 1,140,648 and $ 0 .

As of December 31, 2023, there is no unrecognized share-based compensation expense related to RSU awards.

Subsequent event

For the period subsequent to the reporting date up to the date of filing this report, there have been no significant

events that would materially affect the financial position or results of operations as presented in this 10-K.

Vest price RSU outstanding

December 31, 2024

December 31, 2023

Stock-Based Compensation to Vendor

On September 3, 2024, the Company issued 12,116 shares

of common stock to Outside The Box Capital Inc.

as compensation for marketing and distribution services under a Marketing Services Agreement.

The fair value of the common stock issued was determined based on the market price of the Company’s stock on the grant date, which

was $ 12.38 per share, resulting in a total fair value of $ 150,000 .

The fair value of the award is recorded as an expense under “General

and administrative expenses” in the statement of operations, with the expense being recognized over the service period from September

4, 2024, to March 3, 2025, aligning with the period during which the services are rendered.

In accordance with ASC 718, “Compensation—Stock

Compensation,” as updated by ASU 2018-07, the stock award has been classified as equity as it is settled through the issuance of

common stock and does not contain any terms requiring cash settlement or other liabilities.

The Company has evaluated events and transactions subsequent to December 31, 2024 through the date the consolidated financial statements

Except as disclosed in the consolidated financial statements previously and items below, there are no other events to report:

· Effective January 21, 2025, the Company appointed Terrance E.

Mendez as Co-Chief Executive Officer

(Co-CEO), alongside Sundie Seefried, whose title changed to Co-CEO.

Mendez, age 49, has extensive leadership experience in

cannabis-related businesses and financial management roles.

The Company entered into a three-year employment agreement with Mr.

Mendez, providing an annual salary of $ 360,000 ,

eligibility for performance-based incentives, and stock options vesting over three years.

The agreement includes a 10-month

post-termination non-compete and non-solicitation clause.

· On January 28, 2025, Sundie Seefried informed the Board of Directors of the Company of her decision

to resign as Co-Chief Executive Officer, effective February 28, 2025.

Seefried will continue to serve as a member of the Board.

Her resignation was not due to any disagreement with the Company or concerns regarding its operations, policies, or practices.

her departure, Terrance E.

Mendez transitioned from Co-Chief Executive Officer to the sole Chief Executive Officer of the

· On January 29, 2025, the Company and PCCU entered into a letter

agreement to defer the principal payments on the Note for the months of February and March 2025 (the “Deferral Period”).

The Company will remain responsible for payment of interest during the Deferral Period and will extend the Note repayment period for

an additional two months.

· On March 1, 2025, the Company and PCCU modified the PCCU Note.

According to the terms of the Amended

PCCU Note, the principal balance is $ 10,748,408 ,

accruing interest at an annual rate of 4.25 %.

The Company will make interest-only payments until January 5, 2027, after which it will begin making both principal and interest

payments until the maturity date on October 5, 2030.

The Amended PCCU Note also includes provisions for early repayment, along with

prepayment fees, such as a yield maintenance fee in the case of prepayment or acceleration.

Furthermore, the agreement preserves

PCCU’s first-priority security interest in the Company’s assets as outlined in the security agreement dated March 29,

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

April 1, 2025, the Company received a letter from the Staff, indicating that the Company had not regained compliance with the Minimum

Bid Price Requirement by March 31, 2025, and unless the Company requests a hearing and appeals the determination by April 8, 2025,

the Company’s class A common stock and warrants would be delisted from The Nasdaq Capital Market and that trading of the Company’s

securities will be suspended, effective at opening of business on April 10, 2025.

Further, the Company was notified that on April

10, 2025, a Form 25-NSE will be filed with the SEC, which will remove the Company’s securities from listing and registration

on The Nasdaq Stock Market.

On April 7, 2025, the Company was notified by the staff of The Nasdaq Stock Market LLC’s Listing

Qualifications Department that the Staff has determined that for 10 consecutive business days, from March 24, 2025 to April 4, 2025,

the minimum closing bid price for the Company’s Class A common stock was at least $ 1.00 per share or greater.

the Staff has determined that the Company has regained compliance with Minimum Bid Price Requirement, and, as such, the Staff has

indicated that the matter of the Company’s compliance with Minimum Bid Price Requirement is now closed.

April 7, 2025, the Company received a letter from Nasdaq indicating that the Company was not in compliance with Nasdaq’s Listing

Rule 5550(b)(1) because the Company’s shareholders’ equity for the year ended December 31, 2024, as reported in the Company’s

Current Report on Form 8-K on April 1, 2025, was below the minimum shareholders’ equity requirement of $ 2,500,000 (the “Shareholders’

Equity Requirement”).

Notice had no immediate effect on the Company’s continued listing on Nasdaq, subject to the Company’s compliance with

the other continued listing requirements.

In accordance with Nasdaq rules, the Company has been provided 45 calendar days, to submit

a plan to regain compliance with the Shareholders’ Equity Requirement (the “Compliance Plan”).

If the Compliance

Plan is accepted, Nasdaq may grant up to 180 calendar days from the date of the Notice for the Company to regain compliance with

the Shareholders’ Equity Requirement.

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

There can be no assurance that Nasdaq will accept the Company’s plan or that the Company will be able to regain compliance

with Listing Rule 5550(b)(1) or maintain compliance with any other Nasdaq requirement in the future.

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

What changed 10-K

Item 9A. Controls and Procedures