Item 3. Legal Proceedings
Item
3. Legal Proceedings.
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. v. 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.
Beyond
the foregoing, we may, from time to time, in the ordinary course, be subject to various legal proceedings and disputes. In addition,
as part of the ordinary course of business, we may be parties to litigation involving claims relating to the ownership of funds in particular
accounts, the collection of delinquent accounts, credit relationships, challenges to security interests in collateral and foreclosure
interests, which are incidental to our regular business activities. While the ultimate liability with respect to these other litigation
matters and claims cannot be determined at this time, we are currently not aware of any such pending or threatened legal proceedings
or claims that we believe will have or is likely to have, individually or in the aggregate, a material adverse effect on our business,
financial position, results of operations or cash flows. Where appropriate, reserves for these various matters of litigation are established,
under FASB ASC Topic 450, Contingencies, based in part upon management’s judgment and the advice of legal counsel.
At
least quarterly, we assess our liabilities and contingencies in connection with outstanding legal proceedings utilizing the latest information
available. For those matters where it is probable that we will incur a loss and the amount of the loss can be reasonably estimated, we
record a liability in our consolidated financial statements. These legal reserves may be increased or decreased to reflect any relevant
developments based on our quarterly reviews. For other matters, where a loss is not probable or the amount of the loss cannot be estimated,
we have not accrued legal reserves, consistent with applicable accounting guidance. Based on information currently available to us, advice
of counsel, and available insurance coverage, we believe that our established reserves are adequate and the liabilities arising from
the legal proceedings will not have a material adverse effect on our consolidated financial condition. We note, however, that in light
of the inherent uncertainty in legal proceedings there can be no assurance that the ultimate resolution will not exceed established reserves.
As a result, the outcome of a particular matter or a combination of matters, if unfavorable, may be material to our financial position,
results of operations or cash flows for a particular period, depending upon the size of the loss or our income for that particular period.
Item
4. Mine Safety Disclosures.
Not
applicable.
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Table of Contents
PART
II