# EDGAR Filing Document

**Accession Number:** 0001854963
**File Stem:** 0001493152-26-023748
**Filing Date:** 2026-5
**Character Count:** 200686
**Document Hash:** 1ac046759db6cd9002e3ea137ef7f6a1
**Contains OCR:** False
**Source Format:** 

## Filing Content

## Filing Summary
**0001493152-26-023748.hdr.sgml**: 20260515

**ACCESSION NUMBER**: 0001493152-26-023748

**CONFORMED SUBMISSION TYPE**: 10-Q

**PUBLIC DOCUMENT COUNT**: 89

**CONFORMED PERIOD OF REPORT**: 20260331

**FILED AS OF DATE**: 20260515

**DATE AS OF CHANGE**: 20260515

**FILER**: 

**COMPANY DATA:**
- **COMPANY CONFORMED NAME:** SHF Holdings, Inc.
- **CENTRAL INDEX KEY:** 0001854963
- **STANDARD INDUSTRIAL CLASSIFICATION:** FINANCE SERVICES [6199]
- **ORGANIZATION NAME:** 02 Finance
- **EIN:** 862409612
- **STATE OF INCORPORATION:** DE
- **FISCAL YEAR END:** 1231

**FILING VALUES:**
- **FORM TYPE:** 10-Q
- **SEC ACT:** 1934 Act
- **SEC FILE NUMBER:** 001-40524
- **FILM NUMBER:** 26987096

**BUSINESS ADDRESS:**
- **STREET 1:** 1526 COLE BLVD.
- **STREET 2:** SUITE 250
- **CITY:** GOLDEN
- **STATE:** CO
- **ZIP:** 80401
- **BUSINESS PHONE:** (303) 431-3435

**MAIL ADDRESS:**
- **STREET 1:** 1526 COLE BLVD.
- **STREET 2:** SUITE 250
- **CITY:** GOLDEN
- **STATE:** CO
- **ZIP:** 80401

**FORMER COMPANY:**
- **FORMER CONFORMED NAME:** Northern Lights Acquisition Corp.
- **DATE OF NAME CHANGE:** 20210402

?xml version='1.0' encoding='ASCII'?

**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

**FORM 10-Q**

☒ **QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**

**For the quarterly period ended March 31, 2026**

**OR**

☐ **TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**

**For the transition period from _________to _________**

**Commission File Number 001-40524**

**SHF Holdings, Inc.**

(Exact name of registrant as specified in Its charter)

---

| | |
|:---|:---|
| **Delaware** | **86-2409612** |
| (State or other jurisdiction<br> of incorporation or organization) | (I.R.S. Employer<br> Identification Number) |
| **1526 Cole Blvd., Suite 250**<br> **Golden, Colorado** | **80401** |
| (Address of principal executive offices) | (Zip Code) |

---

Registrant's telephone number, including area code: **(303) 431-3435**

(Former name or former address, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

---

| | | |
|:---|:---|:---|
| **Title of each class** | **Trading Symbol(s)** | **Name of each exchange on which registered** |
| Class A Common Stock, $0.0001 par value per share | SHFS | The Nasdaq Stock Market LLC |
| Redeemable Warrants, each whole warrant exercisable for one share of Class A Common Stock at an exercise price of $230 per share | SHFSW | The Nasdaq Stock Market LLC |

---

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically, if any, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐ Accelerated filer ☐ <br> Non-accelerated filer ☒ Smaller reporting company ☒ <br> Emerging growth company ☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of May 14, 2026, there were 6,455,796 shares of the Company's Class A Common Stock, par value $0.0001 per share, outstanding.

**SHF HOLDINGS, INC.**

**TABLE OF CONTENTS**

---

| | | |
|:---|:---|:---|
|  |  | **Page** |
| [**PART I – FINANCIAL INFORMATION:**](#ds_001) | [**PART I – FINANCIAL INFORMATION:**](#ds_001) | F-1 |
| Item 1. | [Financial Statements (unaudited):](#ds_001) | F-1 |
|  | [Condensed Consolidated Balance Sheets as of March 31, 2026 and December 31, 2025](#ds_002) | F-1 |
|  | [Condensed Consolidated Statements of Operations for the three months ended March 31, 2026, and March 31, 2025](#ds_003) | F-2 |
|  | [Condensed Consolidated Statements of Stockholders' Equity (Deficit) for the three months ended March 31, 2026, and March 31, 2025](#ds_004) | F-3 |
|  | [Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2026, and March 31, 2025](#ds_005) | F-4 |
|  | [Notes to Condensed Consolidated Financial Statements](#ds_006) | F-5 |
| Item 2. | [Management's Discussion and Analysis of Financial Condition and Results of Operations](#ds_007) | 5 |
| Item 3A. | [Quantitative and Qualitative Disclosures About Market Risk](#SL_001) | 15 |
| Item 4A. | [Controls and Procedures](#SL_002) | 15 |
| [**PART II - OTHER INFORMATION:**](#SL_004) | [**PART II - OTHER INFORMATION:**](#SL_004) | 16 |
| Item 1. | [Legal Proceedings](#SL_003) | 16 |
| Item 1A. | [Risk Factors](#ds_008) | 16 |
| Item 2. | [Unregistered Sales of Equity Securities and Use of Proceeds](#ds_009) | 16 |
| Item 3. | [Defaults Upon Senior Securities](#ds_010) | 16 |
| Item 4. | [Mine Safety Disclosures](#ds_011) | 16 |
| Item 5. | [Other Information](#ds_012) | 16 |
| Item 6. | [Exhibits](#ds_013) | 17 |

---

[**Table of Contents**](#toc_001)

**OTHER INFORMATION**

Unless the context otherwise indicates, when used in this Quarterly Report on Form 10-Q (this "Form 10-Q"), the terms "SHF Holdings," "Safe Harbor," "we," "us," "our," the "Company" and similar terms refer to SHF Holdings, Inc., a Delaware corporation, and its wholly-owned subsidiaries, SHF, LLC, SHFxAbaca, LLC, Safe Harbor Retirement Services, LLC and SHF Managed Services, LLC.

**CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS**

Various of the statements made in this Form 10-Q, including information incorporated herein by reference to other documents, are "forward-looking statements" within the meaning of, and subject to the protections of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act").

Forward-looking statements include statements with respect to our beliefs, plans, objectives, goals, expectations, anticipations, assumptions, estimates, intentions and future performance and condition, and involve known and unknown risks, uncertainties and other factors, which may be beyond our control, and which may cause the actual results, performance, achievements, or financial condition of the Company to be materially different from future results, performance, achievements, or financial condition expressed or implied by such forward-looking statements. Furthermore, this Form 10-Q may contain forward-looking statements regarding the potential for federal rescheduling of cannabis, the potential passage of the SAFER Banking Act of 2025 (the "SAFER Banking Act"), projected growth of the cannabis market, the potential impact of regulatory changes on the Company's business, the Reduction Periods (as defined below) and the anticipated benefits of the Second Amended and Restated Commercial Alliance (the "Second Amended CAA"). You should not expect us to update any forward-looking statements. These forward-looking statements should be read together with the discussion of the Company's risks and uncertainties included under the caption "*Risk Factors*" in the Company's Annual Report on Form 10-K for the year ended December 31, 2025, filed with the Securities and Exchange Commission ("SEC") on April 15, 2026.

All statements other than statements of historical fact are statements that could be forward-looking statements. You can identify these forward-looking statements through our use of words such as "may," "will," "anticipate," "assume," "seek," "should," "indicate," "would," "believe," "contemplate," "consider," "expect," "estimate," "continue," "plan," "point to," "project," "could," "intend," "target" and other similar words and expressions of the future. These forward-looking statements may not be realized due to a variety of factors, including, without limitation:

[**Table of Contents**](#toc_001)

The foregoing factors should not be construed as exhaustive and should be read together with the other cautionary statements included in this Form 10-Q. Because of these risks and other uncertainties, our actual future financial condition, results, performance or achievements, or industry results, may be materially different from the results indicated by the forward-looking statements in this Form 10-Q. In addition, our past results of operations are not necessarily indicative of our future results of operations. You should not rely on any forward-looking statements as predictions of future events.

All written or oral forward-looking statements that are made by us or are attributable to us are expressly qualified in their entirety by this cautionary note. Any forward-looking statement speaks only as of the date on which it is made, and we do not undertake any obligation to update, revise or correct any forward-looking statement, whether as a result of new information, future developments or otherwise, except as required by law.

● Our profitability is subject to interest rate risk;

● Volatility and uncertainty in the financial markets and banking industry may adversely impact our clients and our ability to obtain additional financial institution customers;

● Liquidity risks could affect our operations and jeopardize our financial condition and certain funding sources could increase our interest rate expense;

● The industry in which our clients operate is considered federally illegal, which may pose risk if actions were taken against those clients or our Company;

● Our strategic plan and growth strategy may not be achieved as quickly or as fully as we seek;

● Our success depends on our ability to compete effectively in highly competitive markets;

● Potential gaps in our risk management policies may leave us exposed to unidentified or unanticipated risk, which could negatively affect our business;

● Our ability to resolve our material weaknesses in internal controls over financial reporting;

● We have identified and we may identify additional deficiencies in our internal controls, which may have an impact on our business operations;

● Technological changes affect our business including potentially impacting the revenue stream of traditional products and services, and we may have fewer resources than many competitors to invest in technological improvements;

● Our information systems may experience interruptions and security breaches, and are exposed to cybersecurity threats;

● Many of our major systems depend on and are operated by third-party vendors, and any systems failures or interruptions could adversely affect our operations and the services we provide to our clients;

[**Table of Contents**](#toc_001)

● Any failure to protect the confidentiality of customer information could adversely affect our reputation and subject us to financial sanctions and other costs that could have a material adverse effect on our business, financial condition and results of operations;

● Future acquisitions and expansion activities may disrupt our business, dilute shareholder value and adversely affect our operating results;

● We may not be able to generate sufficient cash to service all of our operation needs;

● Our business may be adversely affected by economic conditions in general and by conditions in the financial markets;

● We are subject to extensive regulations that could limit or restrict our activities and adversely affect our earnings;

● Litigation and regulatory investigations are increasingly common in our businesses and may result in significant financial losses and/or harm to our reputation;

● Liquidity risks arising from the uncertainty surrounding cash flows;

● We are subject to capital adequacy and Nasdaq Stock Market ("Nasdaq") liquidity standards, and if we fail to meet these standards, whether due to losses, growth opportunities or an inability to raise additional capital or otherwise, our financial condition and results of operations would be adversely affected;

● Certain of our existing stockholders could exert significant control over the Company;

● If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, the price of our Class A Common Stock ("Common Stock") and its trading volume could decline;

● We have the ability to issue additional equity securities, which would lead to dilution of our issued and outstanding Common Stock;

● We are an "emerging growth company," and, as a result of the reduced disclosure and governance requirements applicable to emerging growth companies, our Common Stock may be less attractive to investors;

● We may be unable to attract and retain key people to support our business;

● In certain circumstances, we assume the risk of fraud loss and negative balances for accounts maintained at our financial institution partners;

● Severe weather, natural disasters, global pandemics, acts of war or terrorism, theft, civil unrest, government expropriation or other external events could have significant effects on our business;

● There is substantial doubt about our ability to continue as a going concern;

● The Company's ability to comply with Nasdaq's listing requirements and maintain its listing on Nasdaq is uncertain and subject to various risks and factors that may cause actual results to differ materially; and

● Other factors and information in other filings that we make with the SEC under the Exchange Act and Securities Act.

[**Table of Contents**](#toc_001)

**PART I – FINANCIAL INFORMATION**

**SHF Holdings, Inc.**

**CONDENSED CONSOLIDATED BALANCE SHEETS**

**(Unaudited)**

---

| | | |
|:---|:---|:---|
|  | **March 31,**<br> **2026** | **December 31,**<br> **2025** |
| **ASSETS** |  |  |
| **Current Assets:** |  |  |
| &nbsp;&nbsp;&nbsp;Cash and cash equivalents | $5897470 | $6779040 |
| &nbsp;&nbsp;&nbsp;Accounts receivable – trade | 30267 | 31376 |
| &nbsp;&nbsp;&nbsp;Accounts receivable – related party | 724900 | 1009483 |
| &nbsp;&nbsp;&nbsp;Prepaid expenses | 787189 | 862400 |
| &nbsp;&nbsp;&nbsp;Contract asset | 516283 | 516283 |
| &nbsp;&nbsp;&nbsp;Investment in preferred securities | 1424983 |  |
| &nbsp;&nbsp;&nbsp;Other current assets | 3000000 | 3000000 |
| **Total Current Assets** | **12381092** | **12198582** |
| &nbsp;&nbsp;&nbsp;Operating lease right to use asset | 508101 | 547186 |
| &nbsp;&nbsp;&nbsp;Investment in preferred securities | - | 1450000 |
| &nbsp;&nbsp;&nbsp;Prepaid expenses | 330386 | 414329 |
| &nbsp;&nbsp;&nbsp;Contract asset | 2452345 | 2581417 |
| &nbsp;&nbsp;&nbsp;Other assets | 15767 | 15510 |
| **Total Assets** | $**15687691** | $**17207024** |
| **LIABILITIES AND STOCKHOLDERS' EQUITY** |  |  |
| **Current Liabilities:** |  |  |
| &nbsp;&nbsp;&nbsp;Accounts payable | $873652 | $189828 |
| &nbsp;&nbsp;&nbsp;Accounts payable-related party | 161751 | 171365 |
| &nbsp;&nbsp;&nbsp;Accrued expenses | 1072132 | 1310463 |
| &nbsp;&nbsp;&nbsp;Deferred revenue | 15518 | 15415 |
| &nbsp;&nbsp;&nbsp;Operating lease liability | 185899 | 181963 |
| &nbsp;&nbsp;&nbsp;Deferred consideration | 3000000 | 3000000 |
| &nbsp;&nbsp;&nbsp;Stand-ready guarantee liability | 709667 | 711667 |
| &nbsp;&nbsp;&nbsp;Financial indemnification liability | 414868 | 433968 |
| &nbsp;&nbsp;&nbsp;Other current liabilities | 417384 | 485055 |
| **Total Current Liabilities** | **6850871** | **6499724** |
| &nbsp;&nbsp;&nbsp;Warrant liabilities | 23021 | 39620 |
| &nbsp;&nbsp;&nbsp;Stand-ready guarantee liability | 1064499 | 1245416 |
| &nbsp;&nbsp;&nbsp;Financial indemnification liability | 543245 | 657804 |
| &nbsp;&nbsp;&nbsp;Operating lease liability | 480774 | 528552 |
| **Total Liabilities** | **8962410** | **8971116** |
| **Commitment and Contingencies (Note 15)** |  |  |
| **Stockholders' Equity** |  |  |
| Convertible preferred stock, $.0001 par value, 1,250,000 shares authorized, 111 shares issued and outstanding on March 31, 2026, and December 31, 2025, respectively |  |  |
| Series B Convertible Preferred Stock, 35,000 authorized, shares, par value $.0001, 30,808 shares issued and outstanding as of March 31, 2026 and December 31, 2025 | 3 | 3 |
| Class A Common Stock, $.0001 par value, 1,000,000,000 and 130,000,000 shares authorized, 4,505,485 and 4,281,523 issued and outstanding on March 31, 2026, and December 31, 2025, respectively | 451 | 428 |
| Additional paid-in capital | 131420587 | 131152020 |
| Accumulated deficit | (124695760) | (122916543) |
| Total Stockholders' Equity | $6725281 | $8235908 |
| **Total Liabilities and Stockholders' Equity** | $**15687691** | $**17207024** |

---

See accompanying notes to unaudited condensed consolidated financial statements

[**Table of Contents**](#toc_001)

**SHF Holdings, Inc.**

**CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS**

**(Unaudited)**

---

| | | |
|:---|:---|:---|
|  | **For the Three Months Ended**<br> **March 31,** | **For the Three Months Ended**<br> **March 31,** |
|  | **2026** | **2025** |
| Revenue | $1975439 | $1932352 |
| Operating Expenses |  |  |
| &nbsp;&nbsp;&nbsp;Compensation and employee benefits | 1660658 | 1372481 |
| &nbsp;&nbsp;&nbsp;General and administrative expenses | 1068400 | 990826 |
| &nbsp;&nbsp;&nbsp;Professional services | 1145809 | 1499534 |
| &nbsp;&nbsp;&nbsp;Rent expense | 51432 | 61006 |
| &nbsp;&nbsp;&nbsp;Amortization of contract asset | 129072 |  |
| &nbsp;&nbsp;&nbsp;Credit benefit | (316576) | - |
| &nbsp;&nbsp;&nbsp;Total operating expenses | 3738795 | 3923847 |
| Operating loss | (1763356) | (1991495) |
| Other income (expenses) |  |  |
| &nbsp;&nbsp;&nbsp;Change in the fair value of deferred consideration |  | 161000 |
| &nbsp;&nbsp;&nbsp;Loss on ELOC share settlements | (27880) |  |
| &nbsp;&nbsp;&nbsp;Interest expense | (4580) | (112786) |
| &nbsp;&nbsp;&nbsp;Change in fair value of warrant liabilities | 16599 | 1116082 |
| Total other income (expenses) | (15861) | 1164296 |
| Net loss | (1779217) | (827199) |
| Deemed dividend on Series B Preferred Stock redemption | (87612) | - |
| Net loss attributable to common stockholders | $(1866829) | $(827199) |
| Weighted average shares outstanding, basic and diluted | 4353099 | 2786538 |
| Basic and diluted net loss per share | $(0.43) | $(0.30) |

---

See accompanying notes to unaudited condensed consolidated financial statements

[**Table of Contents**](#toc_001)

**SHF Holdings, Inc.**

**Condensed Consolidated Statements of Stockholders' Equity**

**(Unaudited)**

**FOR THE THREE MONTHS ENDED MARCH 31, 2026**

---

| | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  | **Preferred Stock** | **Preferred Stock** | **Series B**<br> **Convertible**<br> **Preferred Stock** | **Series B**<br> **Convertible**<br> **Preferred Stock** | **Class A** <br> **Common Stock** | **Class A** <br> **Common Stock** | | | |
|  | **Shares** | **Amount** | **Shares** | **Amount** | **Shares** | **Amount** | **Additional Paid-in**<br>**Capital** | **Accumulated**<br>**Deficit** | **Total**<br> **Stockholders'**<br>**Equity** |
| **Balance, December 31, 2025** | 111 | $- | 30808 | $3 | 4281523 | $428 | $131152020 | $(122916543) | $8235908 |
| Stock compensation expense |  |  |  |  |  |  | 58908 |  | 58908 |
| Issuance of Class A common stock sold from the equity line of credit or ELOC |  |  |  |  | 223962 | 23 | 172047 |  | 172070 |
| Loss on ELOC share settlements |  |  |  |  |  |  | 27880 |  | 27880 |
| Amortization of share-based consulting services |  |  |  |  |  |  | 52750 |  | 52750 |
| Accrued redemption of Series B Convertible Preferred Stock |  |  |  |  |  |  | (43018) |  | (43018) |
| Net loss | - | - | - | - | - | - | - | (1779217) | (1779217) |
| **Balance March 31, 2026** | **111** | $**-** | **30808** | $**3** | **4505485** | $**451** | $**131420587** | $**(124695760)** | $**6725281** |

---

**SHF Holdings, Inc.**

**Condensed Consolidated Statements of Stockholders' Equity (Deficit)**

**(Unaudited)**

**FOR THE THREE MONTHS ENDED MARCH 31, 2025**

---

| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
|  | **Preferred Stock** | **Preferred Stock** | **Class A**<br> **Common Stock** | **Class A**<br> **Common Stock** | | | |
|  | **Shares** | **Amount** | **Shares** | **Amount** | **Additional**<br> **Paid-in**<br>**Capital** | **Accumulated**<br>**Deficit** | **Total Shareholders'**<br>**Deficit** |
| Balance, December 31, 2024 | 111 | $- | 2783667 | $278 | $108467253 | $(120755545) | $(12288014) |
| Stock compensation expense |  |  |  |  | 741259 |  | 741259 |
| Issuance of Class A common stock for restricted stock awards, net of tax |  |  | 2871 |  | 8768 |  | 8768 |
| Reclassification of forward purchase receivable |  |  |  |  | (4584221) |  | (4584221) |
| Net loss | - | - | - | - | - | (827199) | (827199) |
| Balance, March 31, 2025 | 111 | $- | 2786538 | $278 | $104633059 | $(121582744) | $(16949407) |

---

See accompanying notes to unaudited condensed consolidated financial statements

[**Table of Contents**](#toc_001)

**SHF Holdings, Inc.**

**CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS**

**(Unaudited)**

---

| | | |
|:---|:---|:---|
|  | **For The Three Months Ended**<br> **March 31,** | **For The Three Months Ended**<br> **March 31,** |
|  | **2026** | **2025** |
| **CASH FLOWS FROM OPERATING ACTIVITIES:** |  |  |
| Net loss | $(1779217) | $(827199) |
| Adjustments to reconcile net loss to net cash used in operating activities: |  |  |
| &nbsp;&nbsp;&nbsp;Depreciation and amortization expense |  | 1441 |
| &nbsp;&nbsp;&nbsp;Amortization of contract asset | 129072 |  |
| &nbsp;&nbsp;&nbsp;Stock compensation expense | 58908 | 750027 |
| &nbsp;&nbsp;&nbsp;Loss on ELOC share settlements | 27880 |  |
| &nbsp;&nbsp;&nbsp;Amortization of share-based consulting services | 52750 |  |
| &nbsp;&nbsp;&nbsp;Amortization of marketing costs settled with common stock |  | 50000 |
| &nbsp;&nbsp;&nbsp;Lease expense | (4757) | 892 |
| &nbsp;&nbsp;&nbsp;Credit benefit | (316576) |  |
| &nbsp;&nbsp;&nbsp;Change in the fair value of deferred consideration |  | (161000) |
| &nbsp;&nbsp;&nbsp;Change in fair value of warrant liabilities | (16599) | (1116082) |
| Changes in operating assets and liabilities: |  |  |
| &nbsp;&nbsp;&nbsp;Accounts receivable – trade | 1109 | 43813 |
| &nbsp;&nbsp;&nbsp;Accounts receivable – related party | 284583 | 333947 |
| &nbsp;&nbsp;&nbsp;Prepaid expenses | 158897 | 101005 |
| &nbsp;&nbsp;&nbsp;Accrued interest receivable |  | 13418 |
| &nbsp;&nbsp;&nbsp;Other current liabilities | (110689) | 17016 |
| &nbsp;&nbsp;&nbsp;Accounts payable | 683824 | 126924 |
| &nbsp;&nbsp;&nbsp;Accounts payable – related party | (9614) | 82220 |
| &nbsp;&nbsp;&nbsp;Accrued expenses | (238331) | (535902) |
| &nbsp;&nbsp;&nbsp;Contract liabilities | 103 | (19230) |
| &nbsp;&nbsp;&nbsp;Other assets | - | (236) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash used in operating activities | (1078657) | (1140730) |
| **CASH FLOWS FROM INVESTING ACTIVITIES:** |  |  |
| &nbsp;&nbsp;&nbsp;Net proceeds from loan repayment |  | 3245 |
| &nbsp;&nbsp;&nbsp;Proceeds from redemption of investment | 25017 | - |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash provided by investing activities | 25017 | 3245 |
| **CASH FLOWS FROM FINANCING ACTIVITIES:** |  |  |
| &nbsp;&nbsp;&nbsp;Repayment of senior secured promissory note |  | (255765) |
| &nbsp;&nbsp;&nbsp;Proceeds from the sale of Class A Common Stock | 172070 | - |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash provided by (used in) financing activities | 172070 | (255765) |
| Net decrease in cash and cash equivalents | (881570) | (1393250) |
| Cash and cash equivalents – beginning of period | 6779040 | 2324647 |
| Cash and cash equivalents – end of period | $5897470 | $931397 |
| **Supplemental Disclosure of Non-Cash Investing and Financing Activities** |  |  |
| Reclassification of forward purchase receivable | $- | $4584221 |
| Accrued redemption payable to Series B holders | 43018 |  |
| **Supplemental Disclosure of Cash Flows Information** |  |  |
| Interest paid | $4580 | $113561 |

---

See accompanying notes to unaudited condensed consolidated financial statements

[**Table of Contents**](#toc_001)

**SHF Holdings, Inc.**

**Notes to Unaudited Condensed Consolidated Financial Statements**

**Note 1. Organization and Business Operations**

Business Description

SHF Holdings, Inc. (the "Company" or "SHF") is a Delaware corporation headquartered in Golden, Colorado, whose Class A Common Stock ("Common Stock") is listed on the Nasdaq Capital Market ("Nasdaq") under the ticker symbol "SHFS." The Company was founded in 2015 by Partner Colorado Credit Union ("PCCU") and was among the first financial services companies to provide compliant banking and lending services to cannabis related businesses ("CRBs").

SHF's mission is to provide reliable and compliant financial services to the legal cannabis, hemp, and related industries by enabling its financial institution ("FI") customers to offer compliance-driven banking, lending, and other financial services to CRB clients.

The Company operates a proprietary fintech platform across 41 states and territories in the United States. Through this platform, SHF enables its FI customers to compliantly offer the following banking-related services to CRBs:

● Business
 checking and savings accounts; ● Cash
 management accounts ● Savings
 and investment options

● Commercial
 lending ● Courier
 services (via third-party relationships) ● Remote
 deposit services

● Automated
 Clearing House payments and origination ● Wire
 payments.

The Company's platform benefits both CRBs and financial institutions by providing CRBs access to compliant banking and giving financial institutions access to increased, compliantly monitored deposits.

The Company generates revenue through fee income, investment income, loan program income and safe harbor program income earned by providing these compliance and lending services to financial institutions serving the cannabis industry.

**Note 2. Basis of Presentation and Summary of Significant Accounting Policies**

**Significant Accounting Policies**

The accompanying interim unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and results of operations included in the Company's Annual Report on Form 10-K for the year ended December 31, 2025, filed with the SEC.

Refer to Note 2 to the Company's Annual Report on Form 10-K for the year ended December 31, 2025, for a description of the Company's significant accounting policies. The Company has included disclosures below regarding basis of presentation and other accounting policies that (i) are required to be disclosed quarterly, (ii) have material changes or (iii) the Company views as critical as of the date of this report.

**Basis of Presentation**

The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States ("U.S. GAAP" or "GAAP") for interim financial information and the rules and regulations of the SEC.

The accompanying unaudited condensed consolidated financial statements contain all normal and recurring adjustments necessary to state fairly the consolidated financial condition, results of operations, statements of shareholders' deficit, and cash flows of the Company for the interim periods presented. Except as otherwise disclosed, all such adjustments consist only of those of a normal recurring nature. Operating results for the three months ended March 31, 2026 are not necessarily indicative of the results that may be expected for the current year ending December 31, 2026 or other interim periods.

The condensed unaudited consolidated financial statements include the accounts of SHF Holdings, Inc. and its subsidiaries where the Company has controlling financial interests. All significant intercompany balances and transactions have been eliminated.

[**Table of Contents**](#toc_001)

Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to the rules and regulations of the SEC and the instructions to Form 10-Q.

**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. Our primary cash outflows include operating costs, and general business expenditures. The main source of our liquidity continues to be cash inflows generated from operational performance. As of March 31, 2026, the Company does not have significant capital investment commitments.

As of March 31, 2026, the Company had cash and cash equivalents of $5.9 million and net working capital of $5.5 million. The Company has incurred recurring losses from operations and negative cash flows from operations, including an operating loss of $1.8 million and net cash used in operating activities of $1.1 million for the three months ended March 31, 2026, and an accumulated deficit of $124.7 million as of March 31, 2026. These conditions, considered in the aggregate, raise substantial doubt about the Company's ability to continue as a going concern.

Management has developed and is implementing a series of measures intended to preserve liquidity and support the Company's ability to meet its obligations during the look-forward period:

**Strengthened Revenue Profile:** The Second Amended Commercial Alliance Agreement ("Second Amended CAA") with PCCU, effective October 1, 2025, increased the Company's share of loan program income from approximately 35% to up to 65% of the loan program income generated by PCCU's CRB loan portfolio, improving the recurring revenue profile of the Company's core business on a prospective basis. The Company is also exploring strategic relationships with additional financial institutions.

**Access to Additional Capital:** On September 17, 2025, the Company entered into the Equity Line of Credit ("ELOC") with an institutional investor the ("ELOC Investor"), under which the Company may, at its sole discretion and subject to customary conditions, sell up to $150.0 million of newly issued shares of Common Stock to the investor party thereto. The ELOC expires on September 17, 2028. The Company's ability to access the ELOC is subject to a number of conditions, including the absence of any Material Adverse Effect (as defined below), and there can be no assurance that the Company will be able to draw the full amount of the commitment. See Note 14, *Stockholders' Equity*.

**Expense Management:** Management has identified specific actionable cost reductions that are within its direct operational control and that it would implement should operating conditions deteriorate below base-case expectations.

**Cash Flow Monitoring:** Management maintains a 52-week rolling cash flow projection that tracks anticipated expenses, revenues, and ending cash balances against budget. Cash positions are reviewed on a bi-weekly basis to ensure the Company maintains adequate liquidity to fund operations.

Notwithstanding the measures described above, the Company continues to incur operating losses and negative cash flows from operations, and the Company's ability to access the ELOC and to execute on its expense-management plans involves elements outside of management's sole control. Accordingly, management has concluded that management's plans, considered in the aggregate, do not alleviate the 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 unaudited condensed consolidated financial statements are issued.

The accompanying unaudited condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business, and do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets, or the amounts and classification of liabilities that might result from the outcome of this uncertainty.

[**Table of Contents**](#toc_001)

**Use of Estimates**

The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses and the disclosure of contingent assets and liabilities. Material estimates particularly subject to change in the near term include the Company's financial indemnification liability, valuation allowance for deferred tax assets and the fair value of financial instruments including warrant liabilities. Actual results could differ from those estimates.

**Cash and Cash Equivalents**

Cash and cash equivalents consist of cash on hand, balances due from financial institutions, and investments with original maturities of three months or less.

**Revenue Recognition**

The Company recognizes revenue in accordance with Accounting Standards Codification ("ASC") Topic 606, Revenue from Contracts with Customers ("ASC 606"). Revenue is recognized when control of promised services is transferred to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those services, following the five-step model under ASC 606.

● **Account Fee Income** Account fee income consists of fees earned from cannabis-related businesses maintaining accounts with the Company's financial institution partners, including deposit account fees, account activity fees, and onboarding income. These fees are recognized periodically in accordance with the fee schedules established with financial institution partners. Account fee income also includes merchant income earned through referral arrangements with third-party payment processors under which the Company receives a percentage of net revenue generated by referred merchants, recognized as earned.

● **Investment Income** Investment income represents the Company's share of interest earned on net investable cannabis-related business deposit balances held at PCCU and is recognized monthly based on the average net daily deposit balance. Under the First Amended Commercial Alliance Agreement ("Amended CAA"), effective January 1, 2025, investment income was reduced by an investment hosting fee paid to PCCU.

● **Loan Program Income** Loa n program income represents the Company's allocated share of interest earned on cannabis-related business loans originated by PCCU. Under the Amended CAA, the Company's share of loan program income was determined by a loan yield allocation formula that incorporated the Constant Maturity U.S. Treasury Rate published by the Federal Reserve, along with a proprietary risk rating formula to determine the allocation between the Company and PCCU. Under this formula, the Company received approximately 35 % of net interest income on applicable loans, with the remainder retained by PCCU. Effective October 1, 2025, the Second Amended CAA superseded the yield allocation formula and replaced it with a fixed split under which the Company receives up to 65 % of net interest income on applicable loans, with PCCU retaining the remaining 35 %. The fixed split is not subject to variation by risk rating or risk-based pricing methodology. If the Company determines that an adjustment to its indemnification obligation is required to maintain compliance with Nasdaq listing requirements, the Company's share of loan program income will be adjusted by a corresponding amount on a go-forward basis for the applicable loans.

● **Master Program Agreement Revenue** The Company licenses its proprietary Safe Harbor Program to financial institutions under a Master Program Agreement, which grants a non-exclusive, non-transferable right to use the platform. Revenue under these agreements is recognized over the term of the arrangement as services are provided.

**Stock-Based Compensation**

The Company measures all equity-based payment arrangements to employees, directors, and non-employee consultants in accordance with ASC 718, Compensation - Stock Compensation. The grant-date fair value of stock-based awards is determined using either the quoted market price of the Company's Common Stock or the Black-Scholes option valuation model, as appropriate for the instrument type.

Compensation cost for service-based awards is recognized on a straight-line basis over the requisite service period. For performance-based awards, compensation cost is recognized when it becomes probable that the performance condition will be achieved. Forfeitures are recognized as they occur.

[**Table of Contents**](#toc_001)

For non-employee awards settled in equity, including shares of the Company's Series B Convertible Preferred Stock (the "Series B Convertible Preferred Stock") and warrants issued to consultants, the Company measures the fair value at the grant date and recognizes the cost over the service period. Where awards are partially vested at issuance, the vested fair value is recorded as a prepaid asset and amortized to expense over the remaining service period.

The Black-Scholes option model incorporates the following assumptions: expected term (using the simplified method as the average of contractual term and vesting period); expected stock price volatility (based on the Company's historical stock price); risk-free interest rates (based on U.S. Treasury rates for maturities approximating expected lives); and expected dividend yield of zero (as the Company has not paid dividends and does not anticipate doing so in the foreseeable future). Changes in assumptions used to estimate fair value could result in materially different results.

**Warrant Liabilities and Derivative Instruments**

The Company evaluates all financial instruments, including warrants and conversion features, at issuance to determine whether they should be classified as equity or liabilities under ASC 815-40, Derivatives and Hedging - Contracts in an Entity's Own Equity, and ASC 480, Distinguishing Liabilities from Equity.

Warrants that do not meet the criteria for equity classification are recorded as liabilities at fair value on the date of issuance. These warrant liabilities are remeasured at fair value at each subsequent reporting date, with changes in fair value recognized in the consolidated statements of operations. Warrants are valued using the Black-Scholes-Merton model.

**Preferred Stock - Classification and Measurement**

The Company evaluates preferred stock instruments under ASC 480 and ASC 815-40 to determine the appropriate classification between liabilities, mezzanine equity, and permanent equity.

**Fair Value Measurements**

The Company utilizes the fair value hierarchy to apply fair value measurements. The fair value hierarchy is based on inputs to valuation techniques that are used to measure fair values that are either observable or unobservable. Observable inputs reflect assumptions market participants would use in pricing an asset or liability based on market data obtained from independent sources, while unobservable inputs reflect a reporting entity's pricing based upon its own market assumptions. The basis for fair value measurements for each level within the hierarchy is described below:

**Level 1**: Quoted prices for identical assets or liabilities in active markets.

**Level 2**: Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; or model-derived valuations whose inputs are observable or whose significant value drivers are observable.

**Level 3**: Valuations derived from techniques in which one or more significant inputs are unobservable.

[**Table of Contents**](#toc_001)

**Segment Reporting**

The Company operates as one reportable segment, providing financial services and banking solutions to CRBs, under ASC 280, Segment Reporting. The chief operating decision maker, the Company's Chief Executive Officer, reviews financial information on a consolidated basis when allocating resources and assessing performance.

**Financial Assets Measured at Amortized Cost**

For financial assets within the scope of ASC 326, the Company measures the allowance for credit losses based on relevant information about past events, current conditions, and reasonable and supportable forecasts of future economic conditions that can affect the collectability of the reported amounts. The allowance is deducted from the amortized cost basis of the financial asset on the unaudited condensed consolidated balance sheet, and the net amount represents management's best estimate of the cash flows expected to be collected. Changes in the allowance for credit losses are recognized as credit loss expense or reversal in the unaudited condensed consolidated statements of operations.

The Company considers the following factors, among others, in estimating expected credit losses:

● Historical loss experience and default rates for instruments with similar risk characteristics;

● The creditworthiness and financial condition of the counterparty;

● Current and forecasted macroeconomic conditions over the reasonable and supportable forecast period, reverting to historical averages beyond that period; and

● Collateral arrangements, recourse provisions, and other credit enhancements.

Financial assets are written off against the allowance when management determines that the asset is uncollectible and all reasonable collection efforts have been exhausted. Subsequent recoveries, if any, are credited to the allowance for credit losses.

**Contract Asset**

Contract asset was recognized in connection with the Second Amended CAA within the scope of ASC 326. This asset represents costs incurred to fulfill the contract specifically, the cost of assuming the stand-ready guarantee obligation, ASC 460 and the contingent indemnification exposure, ASC 326. The contract asset is amortized on a systematic and rational basis over the contract term consistent with the release of the underlying guarantee exposure. Contract asset is evaluated for impairment under ASC 340-40-35-2 when facts and circumstances indicate the carrying amount may not be recoverable and any impairment is recognized in the period identified and may not be subsequently reversed.

**Stand Ready Guarantees – ASC 460**

The Company accounts for financial guarantees in accordance with ASC 460, Guarantees. At the inception of a guarantee, the Company recognizes a liability equal to the fair value of the assumed stand-ready obligation. This non-contingent liability represents the value of the obligation undertaken by the Company to stand ready to perform under the guarantee, irrespective of the likelihood that a payment will actually be required.

Subsequent to initial recognition, the stand-ready liability is amortized over the contractual term of the guarantee on a systematic basis that reflects the Company's release from risk. If, at any reporting date, a contingent loss accrual required under ASC 450, Contingencies, exceeds the unamortized ASC 460 carrying amount, the Company records the higher contingent loss estimate in accordance with that guidance.

[**Table of Contents**](#toc_001)

**Financial Indemnification Liabilities**

Under ASC 326-20, the Company recognizes a financial indemnification liability for its indemnification obligation to PCCU under the Second Amended CAA. This liability represents the Company's up to 65% share of the lifetime expected credit losses on the covered CRB loan portfolio, measured on a probability-weighted basis and updated each reporting period to reflect current conditions and reasonable and supportable forecasts of future economic conditions. The financial indemnification liability methodology considers historical loss experience, borrower-specific credit quality, collateral values, and forward-looking economic assumptions including conditions specific to the cannabis industry.

The financial indemnification liability is measured independently from, and recognized in addition to, the ASC 460 stand-ready guarantee liability. The two liabilities coexist separately on the consolidated balance sheet and do not offset or true up to each other. The ASC 460 liability is fixed at inception and released over the guarantee term, while the financial indemnification liability is dynamic and remeasured each quarter. Changes in the financial indemnification liability are recognized as credit loss expense or credit income in the unaudited condensed consolidated statements of operations in the period of remeasurement.

**Concentration of Risk**

The Company's revenues are concentrated in the United States with a single customer, PCCU, which represented the substantial majority of revenue for the three months ended March 31, 2026 and March 31, 2025, see Note 8. Substantially all CRB client deposits are maintained at PCCU, and all fund transmissions to and from those deposit accounts are handled directly by PCCU.

Financial instruments that potentially subject the Company to concentrations of credit risk consist of accounts receivable and cash accounts maintained at financial institutions. At times, account balances may exceed the Federal Deposit Insurance Corporation ("FDIC") coverage limit of $0.25 million.

As of March 31, 2026 and December 31, 2025, the Company had approximately $5.6 million and $6.5 million of account balances, respectively, in excess of FDIC coverage. Additionally, amounts due from PCCU represented approximately 96.0% and 97.0% of total accounts receivable as of March 31, 2026 and December 31, 2025, respectively, with balances of approximately $0.8 million and $1.0 million, respectively. The Company has not experienced losses on these accounts or receivables, and management does not believe the Company is exposed to significant credit risk on such accounts.

**Recently Issued Accounting Standards**

**Standards Adopted in 2026**

**ASU 2024-04 – Debt - Debt with Conversion and Other Options (Subtopic 470-20): Induced Conversions:** In November 2024, the Financial Accounting Standards Board ("FASB") issued ASU 2024-04, which clarifies the accounting for induced conversions of convertible debt. The standard is effective for annual periods beginning after December 15, 2025. The Company adopted this standard prospectively and the adoption did not have an impact on its unaudited condensed consolidated financial statements.

**ASU 2025-05 - Financial Instruments - Credit Losses (Topic 326): Accounts Receivable and Contract Assets:** In July 2025, the FASB issued ASU 2025-05, which provides a practical expedient by allowing entities to assume current credit conditions will remain unchanged for the remaining life of current accounts receivable and current contract assets under ASC 606. The standard is effective for years beginning after December 15, 2025. The Company adopted this standard prospectively and the adoption did not have an impact on its unaudited condensed consolidated financial statements.

**Standards Not Yet Adopted**

**ASU 2024-03 / ASU 2025-01 - Disaggregation of Income Statement Expenses (Subtopic 220-40):** In November 2024, the FASB issued ASU 2024-03, subsequently clarified by ASU 2025-01 (January 2025), requiring entities to disaggregate certain income statement expense line items in the footnotes, including purchases of inventory, employee compensation, depreciation, and amortization. The standard is effective for annual periods beginning after December 15, 2026, and interim periods within annual periods beginning after December 15, 2027. Early adoption is permitted. The Company plans to adopt this standard prospectively and does not anticipate a material impact on its financial reporting.

[**Table of Contents**](#toc_001)

The Company will continue to monitor the development of accounting standards and intends to adopt them in accordance with their respective effective dates. Additional disclosures will be provided in future filings as the Company completes its assessment of these standards' impact.

**Note 3 - Deferred Consideration**

On November 21, 2024, the Company deposited the $3.0 million second annual cash payment into the registry of the Denver County, Colorado District Court (the "District Court") pending resolution of a dispute among former shareholders of Rockview Digital Solutions, Inc. (d/b/a Abaca) regarding the party authorized to receive the payment. See Note 15, Commitments and Contingencies.

The change to deferred consideration for the three months ended March 31, 2026 and March 31, 2025 was $0 and $0.2 million, respectively. Deferred consideration as of March 31, 2026 and December 31, 2025 was $3.0 million. This amount has been deposited with the District Court registry, which is carried as a restricted asset pending resolution of the shareholder litigation described in Note 15, Commitments and Contingencies.

**Note 4 - Prepaid Expenses**

Prepaid expenses as of March 31, 2026 and December 31, 2025 consists of the following:

---

| | | |
|:---|:---|:---|
|  | **As of March 31, 2026** | **As of December 31, 2025** |
| Insurance | $626706 | $791423 |
| Consulting | 278657 | 325100 |
| Others | 212212 | 160206 |
| Prepaid expenses | 1117575 | 1276729 |
| Less: Current portion | 787189 | 862400 |
| Total non-current portion | $330386 | $414329 |

---

**Insurance**

The Company maintains several insurance policies. In addition, in connection with the Company's de-SPAC transaction, the Company obtained a Directors and Officers liability run-off policy that provides coverage through September 2028.

**Consulting**

In connection with the September 30, 2025 Recapitalization (as defined below), the Company issued 1,063 shares of Series B Convertible Preferred Stock and Common Stock purchase warrants (as amended and restated, the "Series B Warrants") to purchase 68,453 shares of Common Stock to three independent service providers in exchange for professional and marketing services to be rendered through September 30, 2027. The equity instruments were measured at their grant-date fair value of approximately $0.8 million based on a valuation performed by a third-party specialist and are classified within stockholders' equity. The grant-date fair value was recorded as prepaid consulting and is being amortized to professional services expense on a straight-line basis over the two-year service period.

**Note 5 - Investment in Preferred Securities**

During the year ended December 31, 2025, as partial consideration received in connection with the issuance of 1,875 shares of Series B Convertible Preferred Stock and Series B Warrants to purchase Common Stock, the Company received preferred shares of Aditxt, Inc. ("ADTX"), a publicly traded company. The Series B Convertible Preferred Stock was issued at $800 per share. No cash was exchanged in this transaction. The ADTX preferred securities had an estimated fair value and carrying value of $1.5 million at the date of receipt.

The investment represents less than 20% of the voting interests in ADTX, and the Company does not have the ability to exercise significant influence or control over ADTX. Accordingly, the investment is accounted for under ASC 321, *Investments – Equity Securities*. Because ADTX's preferred shares are not actively traded and lack a readily determinable fair value, the Company has elected to measure the investment at cost, less any impairment, adjusted for observable price changes in orderly transactions for identical or similar instruments, as permitted under ASC 321-10-35-2.

[**Table of Contents**](#toc_001)

During the periods ended March 31, 2026 and December 31, 2025, ADTX redeemed approximately 23 and 43 shares, respectively, of its preferred stock held by the Company in accordance with the terms of the preferred shares. These redemptions resulted in cash proceeds of approximately $0.03 million and $0.05 million for the respective periods. No gain or loss was recognized upon redemption. Additionally, no impairments or other observable price changes were identified as of March 31, 2026 or December 31, 2025.

The following table summarizes the activity in the investment during the period ended March 31, 2026 and December 31, 2025:

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **March 31, 2026** | **March 31, 2026** | **December 31, 2025** | **December 31, 2025** |
|  | **Shares** | **Amount** | **Shares** | **Amount** |
| Beginning balance | 1457 | $1450000 |  |  |
| Initial recognition at fair value (September 30, 2025) |  |  | 1500 | $1500000 |
| Proceeds from redemption | (23) | (25017) | (43) | (50000) |
| Impairment charges |  |  |  |  |
| Observable price adjustments | - | - | - | - |
| Ending balance | 1434 | $1424983 | 1457 | $1450000 |

---

During the three months ended March 31, 2026, the Company reclassified the investment from a long-term asset to a short-term asset on the unaudited condensed consolidated balance sheets to reflect management's intent to dispose of the investment within the next twelve months. As of December 31, 2025, the investment was classified as a long-term asset. The investment continues to be measured in accordance with ASC 321, and any future gains or losses resulting from dispositions or impairments will be recognized in Other Income (Expenses) in the condensed consolidated statements of operations.

**Note 6 - Loan Portfolio Indemnification Obligations**

Under the Second Amended CAA, the Company indemnifies PCCU for up to 65% of default-related losses on PCCU's CRB loan portfolio.

The obligation is recognized as two independent, coexisting liabilities that do not offset each other: (i) a noncontingent stand-ready guarantee liability under ASC 460, measured at fair value at inception, and (ii) a contingent expected credit loss (benefit) liability under ASC 326-20, representing the Company's up to 65% share of estimated lifetime expected credit losses (benefit) on the PCCU CRB portfolio. Each liability is recognized with a corresponding contract asset under ASC 340-40-25-2, as the indemnification costs are directly related to the Second Amended CAA and are expected to be recovered through the Company's up to 65% share of loan program income.

**ASC 460 - Guarantee Liability**

The issuance of a guarantee imposes a noncontingent obligation to stand ready to perform and initial recognition is required at inception regardless of whether payment is probable. The stand-ready liability is recognized separately from the ASC 326 liability.

The stand-ready liability is measured at fair value at inception under ASC 820-10 using a market-based insurance pricing approach that is classified as Level 3 due to the absence of observable market inputs for cannabis lending guarantees. The fair value of a guarantee at inception reflects the premium that a market participant (analogized to a specialty insurance carrier) would charge in an arm's-length transaction to underwrite the same risk. Because no direct market comparable exist for cannabis CRB loan portfolio guarantees, management estimated the standalone selling price by constructing the premium components a specialty financial guarantor would require. The fair value incorporates three components: (a) the expected loss element, representing the probability-weighted losses the guarantor expects to absorb; (b) a stand-ready risk premium, representing the additional compensation a market participant would require for uncertainty, volatility, and the uncapped nature of the commitment beyond expected losses; and (c) a time value adjustment. Key Level 3 inputs as of March 31, 2026 and December 31, 2025 are as follows:

Schedule of Significant Unobservable Input

---

| | | |
|:---|:---|:---|
| **Significant Unobservable Input** | **March 31, 2026** | **December 31, 2025** |
| Pooled Probability of Default or PD (Ratings 2–5) | 7.25% | 7.25% |
| Pooled Loss Given Default or LGD (inclusive of 17.5% and 16.6% cannabis qualitative premium as of March 31, 2026 and December 31, 2025, respectively) | 35% | 35% |
| Tranche C PD (Rating 9, individually evaluated) | 35% | 35% |
| Tranche C LGD on uncollateralized gap | 50% | 50% |
| Stand-ready risk premium loading | 120% of expected loss | 120% of expected loss |
| Discount rate | 4.35% | 4.0% |
| Weighted average pay out year – Tranche A | 3.8 years | 4 years |
| Weighted average pay out year – Tranche B | 2.8 years | 3 years |
| Weighted average pay out year – Tranche C | 1.8 years | 2 years |
| Weighted average pay out year – Stand Ready Premium | 2.8 years | 3 years |

---

The maximum potential amount of future payments under the guarantee is approximately $33.5 million and $33.8 million, as of March 31, 2026 and December 31, 2025, respectively, representing 65% of the total outstanding CRB loan portfolio balance. The indemnification percentage is subject to reduction, at the discretion of management, under the Second Amended CAA's listing-related adjustment clause.

The stand-ready guarantee liability is reduced through amortization on a straight-line basis over three years, representing the weighted average life of the underlying loan portfolio at inception. The release period and pattern are reassessed at least annually and will be adjusted prospectively if material changes in portfolio composition, paydowns, or maturities indicate that the weighted average life assumption is no longer appropriate. The corresponding contract asset is amortized on the same basis as operating expense partially offset by the liability release to income each period.

[**Table of Contents**](#toc_001)

**ASC 326-20 - Financial Indemnification Liability**

The financial indemnification liability is estimated using a probability of default ("PD") × loss given default ("LGD") framework, with the indemnified portfolio segmented by management's internal risk rating scale into three tranches. Key assumptions are independently developed by management, incorporating cannabis industry-specific risk factors through a 17.5% qualitative LGD premium applied across all pooled tranches and individual evaluation of Tranche C loans.

The indemnified portfolio is segmented into three tranches. Loans rated 9 or 10 are individually evaluated rather than included in the pooled analysis.

The expected credit loss liability as of March 31, 2026 is as follows:

Schedule of Expected Credit Loss Liability

---

| | | | | |
|:---|:---|:---|:---|:---|
| **Tranche** | **Ratings** | **Loan Balance** | **Loss Method** | **Reserve** |
| Tranche A - Pass Rated | 2–5 | $35376181 | Pooled; rates 0.5%–1.8% | $404218 |
| Tranche B - Elevated Risk | 6–8 | 6803605 | Pooled; rates 3.2%–4.4% | 164493 |
| Tranche C - Specific Risk | 9 | 9346394 | Individual evaluation | 389402 |
| **Total** |  | $**51526180** |  | $**958113** |

---

The expected credit loss liability as of December 31 2025 is as follows:

---

| | | | | |
|:---|:---|:---|:---|:---|
| **Tranche** | **Ratings** | **Loan Balance** | **Loss Method** | **Reserve** |
| Tranche A - Pass Rated | 2–5 | $35544024 | Pooled; rates 0.5%–1.8% | $406066 |
| Tranche B - Elevated Risk | 6–8 | 7168435 | Pooled; rates 3.2%–9.2% | 296304 |
| Tranche C - Specific Risk | 9 | 9346394 | Individual evaluation | 389402 |
| **Total** |  | $**52058853** |  | $**1091772** |

---

There is a single loan in Tranche C that is individually evaluated due to its past-maturity status, as the original maturity date was in July 2024, and its commercial and industrial (C&I) structure, which is secured solely by a UCC filing on business assets and with certain personal guarantees. Management has assigned this exposure a risk rating of 9, indicating that full collection or liquidation is highly questionable and improbable. A probability of default (PD) of 35% and a loss given default (LGD) of 50% have been applied to the uncollateralized portion of approximately $3.4 million. Collection efforts have been escalated, including the initiation of foreclosure proceedings, with anticipated losses estimated to range from 20% to 50% of the outstanding balance. Interest income continues to be recognized on this loan, and there have been no defaults in scheduled repayments to date.

Loans in the portfolio are secured primarily by real estate used for cannabis-specific purposes, including cultivation facilities, processing facilities, and retail dispensaries, and in certain cases by business assets under UCC filings. Because cannabis-use properties have limited alternative-use marketability under current federal law, management applies a two-step discount to collateral values: (i) elimination of the cannabis license premium (the "green tax"), reflecting that a non-cannabis buyer would not ascribe value to the cannabis operating license embedded in the appraised value; and (ii) a reduction to the remaining value to reflect proceeds realizable from a liquidation sale to a non-cannabis buyer. As of March 31, 2026 and December 31, 2025, this methodology results in adjusted portfolio collateral of approximately $44.1 million and $44.1 million against a gross balance of $51.5 million and $52.1 million, respectively.

The portfolio has experienced minimal credit losses since program inception. Management supplements this limited loss history with cannabis industry benchmarks and peer data. Cannabis industry-specific risk including 100% single-industry concentration, Schedule I federal status, and collateral marketability constraints is reflected through an embedded 17.5% and 16.6% qualitative LGD premium across all pooled tranches as of March 31, 2026 and December 31, 2025, respectively.

Expected credit losses are estimated using historical loss rates derived from a five-year lookback period, reflecting 2 restructured loans out of 28 over that period. Management determined that reasonable and supportable forecasts of future economic conditions beyond the historical loss experience could not be made for this portfolio given its limited loss history and the significant uncertainty surrounding the cannabis regulatory and legal environment. Accordingly, the historical loss rates are applied without forward-looking adjustment, with immediate reversion to historical rates.

The financial indemnification liability is remeasured quarterly; changes are recognized as credit loss expense or income per ASC 326-20-35-8. The inception-date contract asset is reduced as underlying loans pay down or mature and is not subject to straight-line amortization. The 65% indemnification percentage is subject to reduction under the Second Amended CAA's listing-related adjustment clause if the Company fails to maintain Nasdaq listing standards. A reduction would result in a partial release of the ASC 460 liability to income, a downward remeasurement of the financial indemnification liability, and an impairment assessment of the related contract assets.

For the three months ended March 31, 2026, the Company recognized $0.2 million from the systematic amortization of its ASC 460 stand-ready guarantee liability, based on a weighted-average remaining term of three years for the covered CRB loan portfolio. Additionally, the Company recorded $0.1 million from the remeasurement of its ASC 326 financial indemnification liability, driven by changes in the underlying risk ratings of the CRB loan portfolio due to the upgrade of one loan.

[**Table of Contents**](#toc_001)

The following table summarizes the change of the contract asset for the three months ended March 31, 2026:

Schedule of Contract Asset

---

| | | | |
|:---|:---|:---|:---|
|  | **Stand-ready<br> guarantee liability** | **Financial<br> indemnification liability** | **Total** |
| Beginning, December 31, 2025 | $2049599 | $1048101 | $3097700 |
| Amortization | (85401) | (43671) | (129072) |
| Balance, March 31, 2026 | 1964198 | 1004430 | 2968628 |
| Less: current portion | (341600) | (174683) | (516283) |
| Total non-current portion | $1622598 | $829747 | $2452345 |

---

The following table summarizes the changes of the contract asset for the year ended December 31, 2025:

---

| | | | |
|:---|:---|:---|:---|
|  | **Stand-ready<br> guarantee liability** | **Financial<br> indemnification liability** | **Total** |
| Balance, December 31, 2024 | $- | $- | $- |
| Initial recognition as per Second Amended CAA | 2135000 | 1091772 | 3226772 |
| Amortization | (85401) | (43671) | (129072) |
| Balance, December 31, 2025 | 2049599 | 1048101 | 3097700 |
| Less: current portion | (341600) | (174683) | (516283) |
| Total non-current portion | $1707999 | $873418 | $2581417 |

---

The following table summarizes the changes of the liabilities for the three months ended March 31, 2026.

Summary of Movement of Liabilities

---

| | | | |
|:---|:---|:---|:---|
|  | **Stand-ready<br> guarantee liability** | **Financial<br> indemnification liability** | **Total** |
| Balance, December 31, 2025 | $1957083 | $1091772 | $3048855 |
| Benefit | (182917) | (133659) | (316576) |
| Balance, March 31, 2026 | 1774166 | 958113 | 2732279 |
| Less: current portion | (709667) | (414868) | (1124535) |
| Total non-current portion | $1064499 | $543245 | $1607744 |

---

The following table summarizes the changes of the liabilities for the year ended December 31, 2025:

---

| | | | |
|:---|:---|:---|:---|
|  | **Stand-ready<br> guarantee liability** | **Financial<br> indemnification liability** | **Total** |
| Balance, December 31, 2024 | $- | $- | $- |
| Initial recognition as per Second Amended CAA | 2135000 | 1091772 | 3226772 |
| Benefit | (177917) | - | (177917) |
| Balance, December 31, 2025 | 1957083 | 1091772 | 3048855 |
| Less: current portion | (711667) | (433968) | (1145635) |
| Total non-current portion | $1245416 | $657804 | $1903220 |

---

**Note 7 - Revenue**

The following table presents the Company's revenue disaggregated by type for the three months ended March 31, 2026 and March 31, 2025:

Schedule of Disaggregated Revenue

---

| | | |
|:---|:---|:---|
|  | **Three Months Ended March 31,** | **Three Months Ended March 31,** |
|  | **2026** | **2025** |
| Account fee income | $868629 | $1072465 |
| Loan program income | 840672 | 540222 |
| Investment income | 246908 | 300435 |
| Safe Harbor Program income | 19230 | 19230 |
| Total | $1975439 | $1932352 |

---

[**Table of Contents**](#toc_001)

**Note 8 - Related Party Transactions**

**Partner Colorado Credit Union ("PCCU") - Related Party Status**

The Company identifies related parties in accordance with ASC 850 and Rule 1-02(u) of Regulation S-X.

PCCU is a related party because it held approximately 24.0% and 25.2% of the Company's Common Stock as of March 31, 2026 and December 31, 2025, respectively. PCCU is also the largest holder of the Company's Series B Convertible Preferred Stock and holds approximately 43.3% of outstanding shares and associated Series B Warrants as of March 31, 2026 and December 31, 2025 and holds all of the Company's cash deposits. These factors give PCCU the ability to significantly influence the Company's management and operating policies.

**Debt Cancellation Agreement**

On September 30, 2025, the Company and PCCU entered into a Debt Cancellation Agreement under which the approximately $10.7 million outstanding principal balance on the Senior Secured Promissory Note (originally dated March 29, 2023) was fully satisfied. In exchange, PCCU received:

● 13,436 shares of Series B Convertible Preferred Stock; and

● A Series B Warrant to purchase 865,200 shares of Common Stock at an exercise price of $7.7644 per share.

PCCU's conversion and warrant exercise rights are subject to a 4.99% beneficial ownership cap.

**Commercial Alliance Agreement ("CAA") - Major Customer Concentration**

The Company derives substantially all of its revenue from services provided to PCCU. Revenue under the Second Amended CAA and the Amended CAA, as applicable, was $1.8 million and $1.6 million represented 90.0% and 83.0% of total revenue for the three months ended March 31, 2026 and March 31, 2025, respectively. Amounts due from PCCU represented 96.0% and 97.0% of total accounts receivable for the period ended March 31, 2026 and December 31, 2025. The loss of, or a material change to, this relationship could have a material adverse effect on the Company's results of operations and financial condition.

**Related Party Balances**

The following amounts with PCCU are included in the unaudited condensed consolidated balance sheets:

Schedule of Related Party Balances from Balance Sheet

---

| | | |
|:---|:---|:---|
|  | **March 31, 2026** | **December 31, 2025** |
| Cash and cash equivalents | $5897470 | $6779040 |
| Accounts receivable | 724900 | 1009483 |
| Accounts payable | 161751 | 171365 |

---

**Note 9 - Lease**

The Company has a non-cancellable operating lease for its corporate office space in Golden, Colorado which qualifies for capitalization under ASC 842 Leases. As of March 31, 2026, the Golden, Colorado lease has a remaining term of approximately 3.2 years and includes an option to extend for up to ten additional years; however, the extension option is not recognized as part of the right-of-use asset as it is not reasonably certain to be exercised. As of March 31, 2026, and December 31, 2025, the net right-of-use asset "ROU" recorded under the operating lease was $0.5 million and $0.5 million, respectively, and the corresponding lease liability was $0.6 million and $0.7 million, respectively.

[**Table of Contents**](#toc_001)

The Company evaluates contracts above certain thresholds to identify leases and lease components. Lease and non-lease components are not separated for facility space leases. The Company uses its contractual borrowing rate to determine lease discount rates when an implicit rate is not available. Lease cost for the three months ended March 31, 2026 and March 31, 2025, included in unaudited condensed consolidated statements of operations, is as follows:

Schedule of Lease Cost

---

| | | |
|:---|:---|:---|
|  | **Three Months Ended,** | **Three Months Ended,** |
|  | **March 31, 2026** | **March 31, 2025** |
| Operating lease cost | $51432 | $61006 |

---

The following represents the activity for the right of use asset:

Schedule of Right of Use Assets

---

| | | |
|:---|:---|:---|
|  | **March 31, 2026** | **December 31, 2025** |
| Beginning balance | $547186 | $703524 |
| Amortization charge for the period | (39085) | (156338) |
| Ending balance | $508101 | $547186 |
| Other information relating to the operating lease is as follows: |  |  |
| Weighted average remaining lease term in years | 3.2 | 3.5 |
| Weighted average discount rate | 6.9% | 6.9% |

---

Future minimum lease payments as of March 31, 2026 are as follows:

Schedule of Future Minimum Lease Payments

---

| | |
|:---|:---|
| **Year** | **Amount** |
| 2026 (remainder of the year) | $166800 |
| 2027 | 226705 |
| 2028 | 231216 |
| Thereafter | 117709 |
| Total future minimum lease payments | 742430 |
| Less: imputed interest | (75757) |
| Operating lease liabilities | 666673 |
| Less: current portion | 185899 |
| Non-current portion of lease liabilities | $480774 |

---

**Note 10 - Earnings Per Share**

Basic net loss per common share is calculated by dividing the net loss attributable to common stockholders by the weighted-average number of common shares outstanding during the period, without consideration for potentially dilutive securities. Net loss attributable to common stockholders represents net loss adjusted for deemed dividends on preferred stock. When the Company redeems shares of Series B Convertible Preferred Stock, the excess of the cash redemption price paid over the carrying value of the shares redeemed is treated as a deemed dividend to such stockholders. This deemed dividend is not recognized in the consolidated statements of operations but is deducted from net loss in computing net loss attributable to common stockholders for purposes of the basic and diluted loss per share calculation.

[**Table of Contents**](#toc_001)

Diluted net loss per share is computed by dividing the net loss attributable to common stockholders by the weighted-average number of common shares and potentially dilutive securities outstanding for the period. For the Company's diluted loss per share calculation, the Company uses the "if-converted method" for the Series B Convertible Preferred Stock and the "treasury stock method" for warrants and stock options. The Company applies the more dilutive of the two-class method or the if-converted / treasury stock method for each class of potentially dilutive instruments. Because the Company incurred a net loss in both periods presented, all potentially dilutive securities have been excluded from the computation of diluted net loss per share as their inclusion would be anti-dilutive. Accordingly, basic and diluted weighted-average shares outstanding are identical for both periods presented.

During the three months ended March 31, 2026, the Company issued common stock under the ELOC and raised $0.2 million. As per the term of the ELOC, the Company is required to redeem shares of its Series B Convertible Preferred Stock for total cash consideration raised under the ELOC, pursuant to the mandatory use of proceeds provision of its ELOC. The Series B Convertible Preferred Stock was originally issued at a fair value of $589 per share, reflecting the relative fair value allocation of the $800 per unit transaction price between the Series B Convertible Preferred Stock and the accompanying Series B Warrants, based on standalone fair values determined using a Monte Carlo simulation model. For the three months ended March 31, 2026, the redemption price of $0.2 million exceeded the aggregate carrying value of the redeemed shares of $0.1 million by $0.1 million. This excess represents a deemed dividend to such stockholders and has been deducted from net loss in computing net loss attributable to common stockholders for purposes of loss per share. The deemed dividend is a non-cash item and does not affect the Company's unaudited net loss, unaudited stockholders' equity, or unaudited cash flows from operations, for the three months ended March 31, 2026.

The schedule of loss per share, basic and diluted is as follows:

Schedule of Earning Per Shares, Basic and Diluted

---

| | | |
|:---|:---|:---|
| **For The Three Months Ended March 31,** | **2026** | **2025** |
| Net loss | $(1779217) | $(827199) |
| Deemed dividend on Series B Preferred Stock redemption | (87612) | - |
| Net loss attributable to common stockholders | (1866829) | (827199) |
| Weighted average shares outstanding – basic and diluted | 4353099 | 2786538 |
| Basic and diluted net loss per share | $(0.43) | $(0.30) |

---

The following is a schedule of the weighted average shares outstanding, basic and diluted, for the three months ended March 31, 2026 and March 31, 2025, respectively.

Schedule of Weighted Average Shares Outstanding - Basic and Diluted

---

| | | |
|:---|:---|:---|
| | **Three Months Ended March 31,** | **Three Months Ended March 31,** |
| <br>**Weighted Average Shares Calculation – Basic and Diluted** | **2026** | **2025** |
| Weighted average shares | 4353099 | 2786538 |

---

Certain share-based equity awards and warrants were excluded from the computation of dilutive loss per share because inclusion of these awards would have had an anti-dilutive effect. The following table reflects the awards that were excluded from diluted net loss per share:

Schedule of Share-based Equity Awards and Warrants Excluded from Computation of Earnings

---

| | | |
|:---|:---|:---|
|  | **Three Months Ended March 31,** | **Three Months Ended March 31,** |
|  | **2026** | **2025** |
| Shares to be issued to Abaca shareholders |  | 37500 |
| Stock options | 538618 | 214824 |
| Conversion of Series B Convertible Preferred Stock | 19840289 |  |
| Conversion of preferred stock | 4440 | 4440 |
| Warrants | 10521974 | 601829 |
| Total | 30905321 | 858593 |

---

[**Table of Contents**](#toc_001)

**Note 11 -Warrants**

**Public and Private Placement Warrants**

As of March 31, 2026, and December 31, 2025, the Company had 287,500 public warrants and 13,205 private placement warrants to purchase Common Stock outstanding, respectively, each with an adjusted exercise price of $230 per share.

The public and private placement warrants may only be exercised for a whole number of shares of Common Stock.

The public and private placement warrants are exercisable and 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 will become effective when the price per share of the Common Stock equals or exceeds $360.00 per share. Once the warrants become redeemable, 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; and

● if, and only if, the reported
 last sale price of the Common Stock equals or exceeds $360.00 per share (as adjusted for stock splits, stock dividends,
 reorganizations, recapitalizations and the like and certain issuances of Common Stock and equity-linked securities) for
 any 20 trading days within a 30-trading day period commencing no earlier than the date the warrants become exercisable and ending
 on the third business day before the date on which the Company sends the notice of redemption to the warrant holders.

If and when the warrant becomes redeemable by the Company, the Company may exercise its redemption rights; this is also the case if the Company is unable to register or qualify the underlying securities for sale under all applicable state securities laws.

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 applicable warrant agreement. The exercise price and number of shares of Common Stock issuable upon exercise of the warrants may be adjusted in certain circumstances including in the event of a stock dividend, or recapitalization, reorganization, merger or consolidation. However, the warrants will not be adjusted for the issuance of Common Stock at a price below its exercise price. Additionally, in no event will the Company be required to net cash settle the warrants.

The private placement warrants are identical to the public warrants, except that the private placement warrants and the Common Stock issuable upon the exercise of the private placement warrants were not transferable, assignable or saleable, subject to certain limited exceptions. Additionally, the private placement warrants are exercisable on a cashless basis and non-redeemable so long as they are held by the initial purchasers or their permitted transferees. If the private placement warrants are held by someone other than the initial purchasers or their permitted transferees, the private placement warrants will be redeemable by the Company and exercisable by such holders on the same basis as the public warrants.

[**Table of Contents**](#toc_001)

**PIPE Warrants**

As of March 31, 2026 and December 31, 2025, there were 51,125 outstanding PIPE warrants to purchase Common Stock.

The PIPE warrants have an adjusted exercise price of $100.00 per share of Common Stock to be paid in cash except if the shares underlying the warrants were not covered by an effective registration statement after the nine-month anniversary of the closing date, in which case cashless exercise is permitted. The PIPE warrants are also subject to adjustment for other customary adjustments for stock dividends, stock splits and similar corporate actions. The PIPE warrants are exercisable for a period of five years following the closing, or September 28, 2027. After the exercise of a PIPE Warrant, the Company may be required to pay certain penalties if it fails to deliver the Common Stock within a specified period of time.

**Abaca Warrants**

As of March 31, 2026 and December 31, 2025, the Company had 250,000 Abaca warrants outstanding, each exercisable to purchase one share of the Company's Common Stock at an exercise price of $40.00 per share, payable in cash. The Abaca warrants become exercisable one year after the effective date of the registration statement covering the underlying shares and expire five (5) years after that date.

The Company may, at its sole discretion, settle exercises of the Abaca warrants in either (i) shares of Common Stock or (ii) cash equal to the intrinsic value of the Warrants (the difference between the fair market value of the Common Stock on the date of exercise and the $40.00 exercise price, multiplied by the number of Warrants exercised).

On November 10, 2025, the registration statement on Form S-1 covering the shares issuable upon exercise of the Abaca warrants became effective, thereby satisfying the Company's commitment to register such shares for resale.

**Series B Warrants**

On September 30, 2025, in connection with the issuance of the Company's Series B Convertible Preferred Stock, the Company also issued Series B Warrants to purchase an aggregate of 1,999,544 shares of Common Stock at an initial exercise price of $7.7644 per share, subject to adjustment. As of March 31, 2026 and December 31, 2025, there are 9,920,144 and 1,999,544 Series B Warrants to purchase Common Stock at an exercise price of $1.5528 and $7.7644 per share, respectively.

The Series B Convertible Preferred Stock and the Series B Warrants both include down-round adjustment provisions and automatic price reset mechanics. The first and final automatic reset has already occurred, resetting the conversion price and exercise price to $1.5528 per share. While no further automatic resets are triggered, the reset required the registration of additional shares underlying the Series B Warrants . On May 6, 2026, the Company filed a registration statement on Form S-1 to register, among other things, these additional shares (the "Reset Registration Statement"), see Note 16 Subsequent Events. Additional issuances of Common Stock at prices below the conversion or exercise price, except for through the ELOC, may trigger further anti-dilution adjustments, thereby increasing the number of shares issuable to holders of the Series B Convertible Preferred Stock and the Series B Warrants and further diluting existing common stockholders.

The Series B Warrants became exercisable on May 11, 2026 (the "Initial Exercisability Date") and expire on May 11, 2029, the third anniversary of the Initial Exercisability Date. Each holder is subject to a 4.99% beneficial-ownership limitation, which may be increased to up to 9.99% upon 61 days' prior written notice to the Company. If a registration statement covering the resale of the underlying shares is not effective at the time of exercise, the holder may elect to exercise the warrants on a cashless basis.

[**Table of Contents**](#toc_001)

The Series B Warrants include down-round and anti-dilution provisions under which the exercise price is subject to reduction if the Company issues shares of Common Stock, or common stock equivalents, at a price below the then-current exercise price. The exercise price and/or number of warrant shares were also subject to automatic resets on the 60th, 90th, and 180th calendar days following the effective date, and are subject to automatic resets upon standard corporate events such as stock splits, combinations, and stock dividends. All automatic resets occurred prior to the Initial Exercisability Date; accordingly, the exercise price and warrant share count in effect on that date will already reflect any adjustments triggered during the pre-exercisability period.

The Company evaluated the Series B Warrants under ASC 815 and ASC 480. Management concluded that the Series B Warrants are indexed to the Company's own stock and satisfy all conditions for equity classification in stockholders' equity. In reaching this conclusion, management noted that: (i) the beneficial-ownership limitation is a timing deferral and does not introduce a non-equity observable index; (ii) the down-round feature is disregarded in the indexation analysis under ASC 815-10-15-7E; and (iii) the automatic reset provisions are fully operative before the Series B Warrants become exercisable, such that the settlement amount upon exercise is determined solely by reference to a fixed number of shares and a fixed exercise price, subject only to standard anti-dilution adjustments. Because the Series B Warrants are classified in equity, they will not be subsequently remeasured at fair value. This treatment differs from the Company's other outstanding warrants which are classified as derivative liabilities and remeasured each reporting period.

The aggregate fair value of each unit of Series B Convertible Preferred Stock and accompanying Series B Warrant was established at $800, representing the price paid by unaffiliated third-party investors in an arm's-length transaction on September 30, 2025. Because both instruments are recorded separately on the balance sheet, the Company allocated the $800 unit price between them on a fair value basis in accordance with ASC 470-20-30-5. The fair value of each Series B Warrant was estimated using a Monte Carlo simulation model provided by a third-party. The model produced an estimated fair value of $211 per Series B Warrant and $589 per share of Series B Convertible Preferred Stock. Both instruments are classified in permanent equity and will not be subsequently remeasured.

**Note 12 - Financial Instruments**

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.

[**Table of Contents**](#toc_001)

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 as of March 31, 2026 and December 31, 2025:

Schedule of Financial Assets and Liabilities Recorded at Fair Value

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  | **As of March 31, 2026** | **As of March 31, 2026** | **As of March 31, 2026** | **As of December 31, 2025** | **As of December 31, 2025** | **As of December 31, 2025** |
|  | **Total Fair Value** | **Quoted Prices in Active Markets**<br> **(Level 1)** | **Significant Other Unobservable Inputs**<br> **(Level 3)**  | **Total Fair Value** | **Quoted Prices in Active Markets**<br> **(Level 1)**  | **Significant Other <br>Unobservable <br> Inputs**<br> **(Level 3)**  |
| Description |  |  |  |  |  |  |
| Liabilities: |  |  |  |  |  |  |
| PIPE warrants | $49 | $- | $49 | $280 | $- | $280 |
| Public warrants | 9459 | 9459 |  | 10896 | 10896 |  |
| Private placement warrants | 2 |  | 2 | 14 |  | 14 |
| Abaca warrant | 13511 |  | 13511 | 28430 |  | 28430 |

---

 

*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. 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.

As of March 31, 2026, the Company had no assets or liabilities measured at fair value on a non-recurring basis. During the year ended December 31, 2025, the Company recognized the ASC 460 stand-ready guarantee liability under the Second Amended CAA at fair value on a non-recurring basis upon initial recognition on October 1, 2025. This liability was measured at inception only and is not remeasured at fair value in subsequent reporting periods. The carrying amount as of December 31, 2025 was $2.1 million, reflecting the systematic release of the liability as the Company is progressively released from risk on the underlying loan portfolio. The fair value measurement for stand-ready guarantee liability was prepared internally by management using an insurance-pricing methodology, reflecting the premium that a knowledgeable, willing third-party surety or specialty insurer would charge to assume the indemnification obligation in an arm's-length transaction, consistent with the market participant framework of ASC 820-10-35-9.

The following table summarizes this non-recurring fair value measurement as of the initial recognition date:

Schedule of Non-Recurring Fair Value Measurement

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | **December 31, 2025** | **December 31, 2025** | **December 31, 2025** | **December 31, 2025** | **December 31, 2025** |
|  | **Carrying amount <br> $** | **Fair value<br> $** | **Fair value measurement using** | **Fair value measurement using** | **Fair value measurement using** |
|  | | | **Level 1 <br> $** | **Level 2 <br> $** | **Level 3 <br> $** |
| **Liabilities** | | | | | |
| Stand-ready guarantee liability | $2135000 | $2135000 | $- | $- | $2135000 |

---

**Level 3 Measurement - Significant Unobservable Inputs**

The ASC 460 Guarantee liability was classified as Level 3 because its fair value was determined using significant unobservable inputs for which there is no active market. The following table summarizes the valuation methodology and significant unobservable inputs used in the Level 3 measurement:

Schedule of Valuation Methodology and Significant Unobservable Inputs

---

| | | |
|:---|:---|:---|
| **Input** | **Value Used** | **Sensitivity** |
| Probability of Default - Tranches A & B (Ratings 2–5, pooled) | 7.25%, derived from loan level analysis of the portfolio. | An increase raises fair value |
| Probability of Default - Tranche C (Rating 9, individually evaluated) | 35%, based on Rating 9 definition, past-maturity status, and personal guarantees | An increase raises fair value |
| Loss Given Default - Tranches A & B | 25.00% for Tranche A and 35% for Tranche B, inclusive of 13% cannabis-specific qualitative premium reflecting court access limitations, collateral possession restrictions, and refinancing risk | An increase raises fair value |
| Loss Given Default - Tranche C (uncollateralized gap) | 50%, representing the midpoint of the Rating 9 anticipated loss range applied to the uncollateralized exposure | An increase raises fair value |
| Stand-Ready Risk Premium | 120% loading applied to total expected loss, reflecting compensation for uncapped exposure, cannabis concentration risk, portfolio illiquidity, and six-year guarantee term commitment | An increase raises fair value |
| Discount Rate | 4.0% risk-free rate (6-year Treasury) | An increase reduces fair value |
| Weighted Average Payout Timing | Tranche A: 4 years; Tranche B: 3 years; Tranche C: 2 years; Stand-ready premium: 3 years — based on the portfolio's contractual maturity profile | A longer weighted average payout timing reduces fair value |

---

[**Table of Contents**](#toc_001)

*Fair Value of Financial Instruments*

The following tables present the carrying amounts and fair values of financial instruments on a non-recurring basis, by the level of valuation inputs in the fair value hierarchy, as of March 31, 2026 and December 31, 2025:

Schedule of Carrying Amount and Fair Value of Financial Instruments

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | **As of March 31, 2026** | **As of March 31, 2026** | **As of March 31, 2026** | **As of March 31, 2026** | **As of March 31, 2026** |
|  | **Carrying amount <br> $** | **Fair value <br> $** | **Fair value <br> measurement using** | **Fair value <br> measurement using** | **Fair value <br> measurement using** |
|  | | | **Level 1 <br> $** | **Level 2 <br> $** | **Level 3 <br> $** |
| **Assets** |  |  |  |  |  |
| Cash and cash equivalents | $5897470 | $5897470 | $5897470 | $- | $- |
| Investment in preferred securities | 1424983 | 1424983 |  |  | 1424983 |
| **Liabilities** |  |  |  |  |  |
| Deferred consideration | 3000000 | 3000000 | 3000000 |  |  |
| Public warrants | 9459 | 9459 | 9459 |  |  |
| Private placement warrants | 2 | 2 |  |  | 2 |
| PIPE warrants | 49 | 49 |  |  | 49 |
| Abaca warrants | 13511 | 13511 |  |  | 13511 |

---

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | **As of December 31, 2025** | **As of December 31, 2025** | **As of December 31, 2025** | **As of December 31, 2025** | **As of December 31, 2025** |
|  | **Carrying amount <br> $** | **Fair value <br> $** | **Fair value <br> measurement using** | **Fair value <br> measurement using** | **Fair value <br> measurement using** |
|  | | | **Level 1 <br> $** | **Level 2 <br> $** | **Level 3 <br> $** |
| **Assets** |  |  |  |  |  |
| Cash and cash equivalents | $6779040 | $6779040 | $6779040 | $- | $- |
| Investment in preferred securities | 1450000 | 1450000 |  |  | 1450000 |
| **Liabilities** |  |  |  |  |  |
| Deferred consideration | 3000000 | 3000000 | 3000000 |  |  |
| Public warrants | 10896 | 10896 | 10896 |  |  |
| Private placement warrants | 14 | 14 |  |  | 14 |
| PIPE warrants | 280 | 280 |  |  | 280 |
| Abaca warrants | 28430 | 28430 |  |  | 28430 |

---

The change in the liability measured at fair value on a recurring basis for which the Company has utilized Level 3 inputs to determine fair value are presented in the following table

Schedule of Fair Value Assets Measured on Recurring Basis

---

| | | | |
|:---|:---|:---|:---|
|  | **For The Three Months Ended March 31, 2026** | **For The Three Months Ended March 31, 2026** | **For The Three Months Ended March 31, 2026** |
|  | **PIPE Warrants** | **Abaca Warrant** | **Private Placement Warrants** |
| Balance, January 1, 2026 | $280 | $28430 | $14 |
| Fair value adjustment | (231) | (14919) | (12) |
| Balance, March 31, 2026 | $49 | $13511 | $2 |

---

[**Table of Contents**](#toc_001)

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | **For The Three Months Ended March 31, 2025** | **For The Three Months Ended March 31, 2025** | **For The Three Months Ended March 31, 2025** | **For The Three Months Ended March 31, 2025** | **For The Three Months Ended March 31, 2025** |
|  | **PIPE Warrants** | **Abaca Warrant** | **Private Placement Warrants** | **Third anniversary payment consideration** | **Forward Purchase Derivative** |
| Balance, January 1, 2025 | $79512 | $1024900 | $9632 | $322000 | $7309580 |
| Fair value adjustment | (71918) | (795652) | (9110) | (161000) | - |
| Balance, March 31, 2025 | $7594 | $229248 | $522 | $161000 | $7309580 |

---

As of March 31, 2026 and December 31, 2025, the fair market value of the private placement warrants, Abaca warrants and PIPE warrants, were based on Black-Scholes Merton option pricing model.

As of March 31, 2026 and December 31, 2025, 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, PIPE warrants, and Abaca warrants as of their measurement dates:

Schedule of Level 3 Fair Value Measurements Inputs

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  | **As of March 31, 2026** | **As of March 31, 2026** | **As of March 31, 2026** | **As of December 31, 2025** | **As of December 31, 2025** | **As of December 31, 2025** |
|  | **PIPE Warrants** | **Private Warrants** | **Abaca Warrants** | **PIPE Warrants** | **Private Warrants** | **Abaca Warrants** |
| Exercise price | $100 | $230 | $40 | $100 | $230.00 | $40.00 |
| Share price | $0.83 | $0.83 | $0.83 | $1.06 | $1.06 | $1.06 |
| Expected term (years) | 1.49 | 1.49 | 2.57 | 1.7 | 1.7 | 2.8 |
| Volatility | 115% | 115% | 115% | 115% | 115% | 115% |
| Risk-free rate | 3.7% | 3.7% | 3.7% | 3.5% | 3.5% | 3.5% |

---

[**Table of Contents**](#toc_001)

**Note 13 - Income Taxes** 

For the three months ended March 31, 2026 and March 31, 2025, there was no provision for income taxes. As of March 31, 2026 and December 31, 2025, the Company had a net deferred tax assets of $46.3 and $45.7 million, respectively. The Company has recorded a full valuation allowance for both periods. The Company had a net operating loss ("NOL") of approximately $71.7 million and $67.7 million as of March 31, 2026 and December 31, 2025, respectively.

Pursuant to Section 382 of the Internal Revenue Code of 1986, as amended ("Section 382"), a corporation that undergoes an "ownership change," generally defined as a cumulative increase of more than 50 percentage points in the stock ownership of 5% shareholders within a rolling three-year period may have its ability to utilize pre-change net NOL carryforwards and certain other tax attributes significantly limited on an annual basis.

Since inception, the Company has undergone a number of significant equity transactions, including its initial public offering, the reverse acquisition of Northern Lights Acquisition Corp., the acquisition of Abaca, various share issuances to settle obligations, and its September 2025 Recapitalization, as defined below. The Company has not completed a Section 382 analysis to determine whether one or more ownership changes have occurred or to quantify any resulting annual limitation. If it is determined that an ownership change has occurred, the annual limitation could materially reduce the Company's ability to utilize its existing NOL carryforwards and other deferred tax assets to offset future taxable income.

**Note 14 - Stockholders' Equity** 

**Preferred Stock**

Holders of preferred stock are entitled to receive dividends only if and when dividends are paid on the Company's Common Stock. In that event, preferred stockholders receive dividends on an as-converted-to-Common-Stock basis, in the same form as dividends paid to the Common Stockholders. No additional or separate dividends are payable on the preferred stock.

The preferred stock is convertible into shares of Common Stock. The initial conversion price was $200 per share. The conversion price is subject to downward adjustment at five specified intervals 10, 55, 100, 145, and 190 days after the effectiveness of a registration statement covering the shares issuable upon conversion. At each adjustment date, the conversion price resets to the lower of (i) the then-current conversion price and (ii) the greater of 80% of the five-day volume weighted average price of the Common Stock and $50 (the "Floor Price"). Regardless of any price resets, each preferred stockholder retains the right to receive the total number of shares of Common Stock that would have been issuable at the adjusted conversion price based on their original investment amount.

On January 25, 2023, stockholders approved a reduction in the Floor Price to $25.00 per share at a special meeting.

**Series B Convertible Preferred Stock**

On September 30, 2025, the Company entered into a Securities Stock Purchase Agreement (the "Series B SPA") with certain institutional and accredited investors, pursuant to which it issued 31,052 shares of Series B Convertible Preferred Stock and accompanying Series B Warrants to purchase 1,999,544 shares of Common Stock. The aggregate gross consideration received was $24.3 million, consisting of $6.1 million from the sale of the Company's Series B Convertible Preferred Stock and the Series B Warrants (approximately $5.9 million from third-party accredited investors and $0.2 million from management and board participation, whose participation was approved by stockholders on November 6, 2025), approximately $0.6 million in cash proceeds from unsecured Notes issued in August and September 2025 that were subsequently exchanged for Series B Convertible Preferred Stock and warrants at closing, along with $10.7 million from the cancellation of debt and $7.3 million from the termination of the Forward Purchase Agreement. Offering costs of $0.4 million were charged to additional paid-in capital. During the three months ended December 31, 2025, the Company redeemed 244 shares of its Series B Convertible Preferred Stock for total cash consideration of $0.5 million pursuant to the mandatory use-of-proceeds provision of the ELOC. This redemption reduced the number of shares for Series B Convertible Preferred Stock to 30,808. The Company refers to the foregoing transactions collectively as the "September 2025 Recapitalization."

[**Table of Contents**](#toc_001)

The Series B Convertible Preferred Stock has a stated value of $1,000 per share, ranks senior to all classes of Common Stock with respect to dividends and liquidation, and is convertible at the holder's option into Common Stock. Both the Series B Convertible Preferred Stock and Series B Warrants are classified within permanent stockholders' equity and are not subject to remeasurement in subsequent periods.

The initial conversion price of $7.7644 per share was subject to automatic price resets. In January 2026, the conversion price and the Series B Warrant exercise price each reset to the contractual floor of $1.5528 per share, as the Company's Common Stock was trading below the floor at the time of the reset. No further automatic resets remain. This reset significantly increases the number of shares of Common Stock potentially issuable upon conversion and exercise of these instruments. The Company filed the Reset Registration Statement on May 6, 2026.

At a special meeting held on November 6, 2025, stockholders approved the issuance of Common Stock upon conversion of the Series B Convertible Preferred Stock and exercise of the Series B Warrants, an increase in authorized Common Stock from 130,000,000 to 1,000,000,000 shares, and authorization for the Board to effect a reverse stock split at a ratio between 2-for-1 and 12-for-1 at its discretion. As of March 31, 2026, no reverse stock split had been effected.

**Common Stock**

Holders of Common Stock are entitled to one vote for each share held. As of March 31, 2026 and December 31, 2025, there were 4,505,485 and 4,281,523 shares of Common Stock issued and outstanding, respectively.

**Equity Line of Credit and Related Series B Redemption Obligation**

On September 17, 2025, the Company entered into an Equity Line of Credit, or ELOC with the ELOC Investor, pursuant to which the Company may issue and sell up to $150.0 million of newly issued shares of Common Stock at its sole discretion. The facility expires on September 17, 2028. Shares sold under the ELOC are priced at a 10% discount to the lowest intraday stock price on the draw date. The facility may be expanded up to $500.0 million with the mutual consent of both parties.

As consideration for the ELOC Investor's purchase commitment, the Company issued 1,000 shares of Series B Convertible Preferred Stock and a Series B Warrant to purchase 64,369 shares of Common Stock, valued at $0.8 million in aggregate, which was expensed in full, upon issuance.

Pursuant to Amendment No. 1 to the ELOC, 25% of net cash proceeds from each draw must be applied toward the redemption of outstanding Series B Convertible Preferred Stock at a redemption price of $1,200 per share.

This mandatory use-of-proceeds provision represents a contractual earmark of future equity proceeds but does not create a separate liability at issuance, because no redemption obligation arises until the Company actually receives proceeds by electing to draw under the facility. Consistent with ASC 480-10-25-4 through 25-14, the Series B Convertible Preferred Stock continues to be classified in permanent equity, as any redemption remains conditional on the Company's discretionary decision to utilize the ELOC and does not constitute an unconditional obligation to transfer assets.

Under the ELOC, a "Material Adverse Effect" includes any material adverse change in the enforceability of the agreement, our results of operations, assets, business, or financial condition taken as a whole, or our ability to perform our material obligations in a timely manner. Company specific deterioration, including a significant decline in revenues or cash flows, loss of key customers or contracts, material litigation or regulatory action, failure to maintain required licenses or permits, a material weakness in internal controls, or loss of key management personnel, is not excluded from this definition and could independently trigger the ELOC Investor's termination rights.

[**Table of Contents**](#toc_001)

The Company's representations and warranties regarding the absence of a Material Adverse Effect must remain true and correct not only at the initial closing of the facility, but also at the time of each subsequent VWAP Purchase Notice throughout the term of the agreement. As a result, even after the facility has commenced and initial drawings have been made, any supervening adverse development could prevent the Company from accessing the remaining unfunded commitment.

If a Material Adverse Effect occurs and is continuing, the ELOC Investor has the right to terminate the ELOC upon ten (10) trading days' written notice. In that event, we would lose access to any remaining unfunded portion of the $150 million commitment. While the ELOC excludes certain broad macroeconomic, industry-wide, and geopolitical events from the definition of Material Adverse Effect, no such exclusion applies to adverse developments that are specific to our business or operations.

There can be no assurance that a Material Adverse Effect will not occur during the term of the ELOC. Should one occur, and should we be unable to secure alternative financing on acceptable terms, or at all, our liquidity position, business operations, financial condition, and results of operations could be materially and affected. See Note 2, Basis of Presentation – Liquidity and Going Concern.

During the three months ended March 31, 2026, the Company issued 223,962 shares of Common Stock under the ELOC, generating net proceeds of $0.2 million at an average price of $0.77 per share. These shares were sold at a contractual 10% discount to the lowest intraday stock price on each respective draw date. The Company is obligated to apply 25% of the proceeds to redeem the Series B Convertible Preferred Stock. As of March 31, 2026 and December 31, 2025, the Company accrued $0.22 million and $0.18 million for such redemption, respectively.

For the three months ended March 31, 2026, the Company recorded financing costs of $0.03 million, which are presented in the condensed unaudited consolidated statements of operations under "Other income (expenses)." This amount represents the difference between the fair market value of the shares on the settlement date and the proceeds received under the ELOC.

**2022 Equity Incentive Plan**

The Amended and Restated - 2022 Equity Incentive Plan (the "Plan") was approved by the Company's stockholders on June 28, 2022. On April 30, 2025, the Plan was amended to provide that the total number of shares of Common Stock that may be issued, under the Plan will automatically increase upon the occurrence of a Dilution Event (as defined in the Plan) and on the first trading day of each calendar year, beginning with calendar year 2026, by such number of shares of Common Stock necessary to make the total shares of Common Stock authorized under the Plan equal to fifteen percent (15%) of the total outstanding shares of Common Stock on the last day of the prior calendar year (subject to a maximum annual increase of 50,000 shares of Common Stock). The Plan permits the grant of incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock units, stock bonus awards, and performance compensation awards. The Company has not issued stock appreciation rights, restricted stock, stock bonus awards, or performance compensation awards in the period ended March 31, 2026 and December 31, 2025. As of March 31, 2026, a total of 642,229 shares of Common Stock were authorized for issuance under the Plan, of which 94,279 shares remained available for future issuances.

**Stock Options**

Stock options are awarded to encourage ownership of the Company's Common Stock by employees and to provide incentives for employees to render services and to exert maximum effort for the success of the Company. The Company's incentive stock options generally permit net-share settlement upon exercise. The option exercise price, vesting schedule and exercise period are determined for each grant by the administrator (person appointed by board to administer the stock plans) of the applicable plan. The Company's stock options generally have a 10-year contractual term.

There were no options granted during the three months ended March 31, 2026. The assumptions used to determine the fair value of options granted in the three months ended March 31, 2025 using the Black-Scholes-Merton model are as follows:

Schedule of Fair Value of Options Granted Black-Scholes-Merton Model

---

| | |
|:---|:---|
| Dividend yield | -% |
| Risk-free interest rate | 3.62 to 4.23% |
| Expected volatility (weighted-average and range, if applicable) | 100% |
| Expected term | 6 to 6.5 years |

---

[**Table of Contents**](#toc_001)

A summary of the Company's stock option activities and related information for the three-month ended March 31, 2026 is as follows:

Schedule of Stock Option Activities and Related Information

---

| | | | |
|:---|:---|:---|:---|
| **Stock Option** | **No. of Stock <br> Option** | **Weighted-Average Exercise Price** | **Weighted-Average<br> Remaining<br> Contractual Life<br> (in Years)** |
| January 1, 2026 | 538618 | $11.25 | 9.3 |
| Granted |  |  |  |
| Exercised |  |  |  |
| Expired |  |  |  |
| Cancelled / Forfeited | - | - | - |
| March 31, 2026 | 538618 | $11.25 | 9.0 |
| Vested and expected to vest, March 31, 2026 | 538618 | $11.25 | 9.0 |

---

A summary of the Company's stock option activities and related information for the three months ended March 31, 2025 is as follows:

---

| | | | |
|:---|:---|:---|:---|
| **Stock Option** | **No. of Stock <br> Option** | **Weighted-Average Exercise Price** | **Weighted-Average<br> Remaining<br> Contractual Life<br> (in Years)** |
| January 1, 2025 | 105090 | $98.55 | 0.7 |
| Granted | 127153 | 3.40 | 1.3 |
| Exercised |  |  |  |
| Expired |  |  |  |
| Cancelled / Forfeited | (20731) | (69.07) | - |
| March 31, 2025 | 211512 | $44.24 | 1 |

---

The following options were outstanding at their respective exercise price on March 31, 2026 and December 31, 2025, respectively:

Schedule of Options Outstanding

---

| | | |
|:---|:---|:---|
| **Exercise Price Options Outstanding** | **March 31, 2026** | **December 31, 2025** |
| $1.27 | 25000 | 25000 |
| $2.22 | 23781 | 23781 |
| $2.40 | 364893 | 364893 |
| $6.40 | 7326 | 7326 |
| $7.80 | 5731 | 5731 |
| $8.00 | 32700 | 32700 |
| $9.68 | 34884 | 34884 |
| $31.20 | 9978 | 9978 |
| $62.54 | 6825 | 6825 |
| $133.40 | 27500 | 27500 |
| **Total** | 538618 | 538618 |

---

[**Table of Contents**](#toc_001)

Stock compensation expense recognized for stock options for the three months ended March 31, 2026 and March 31, 2025 was $0.06 million and $0.7 million.

Stock compensation expenses are comprised of the following:

Schedule of Stock Compensation Expenses

---

| | | |
|:---|:---|:---|
|  | **For The Three Months Ended** | **For The Three Months Ended** |
|  | **2026** | **2025** |
| Compensation and employee benefits | $58908 | $152266 |
| Professional services | - | 588993 |
| Total | $58908 | $741259 |

---

As of March 31, 2026, there was $0.2 million unrecognized stock compensation expense related to stock options. The unrecognized compensation expense is expected to be recognized over a weighted-average period of approximately 1.5 years based on vesting under the award service conditions.

**Restricted Stock** 

The Company did not have any outstanding restricted stock units ("RSUs") as of March 31, 2026. A summary of the Company's RSU activity and related information for the three months ended March 31, 2025 is presented below:

Schedule of Restricted Stock Units

---

| | | | |
|:---|:---|:---|:---|
| **Restricted Stock Units** | **No. of RSU** | **Weighted-Average**<br> **Grant Date**<br> **Fair Value<br> Per RSU** | **Weighted-Average<br> Remaining<br> Contractual Life<br> (in Years)** |
| January 1, 2025 | 8583 | $26.20 | 1.00 |
| Granted |  |  |  |
| Vested | (4292) | 26.20 |  |
| Expired |  |  |  |
| Cancelled / Forfeited | (980) | - | - |
| March 31, 2025 | 3311 | $26.20 | 0.8 |

---

Stock compensation expense for restricted stock for the three months ended March 31, 2026 and March 31, 2025 was $0 and $0.02 million, respectively.

**Note 15 - Commitments and Contingencies**

**Contractual Commitments**

The Company has an employment agreement with its Chief Executive Officer. Under the terms of the agreement, if the contract is not renewed or is terminated without cause, the Company is obligated to pay severance equal to the CEO's then-current annual base salary. The agreement also provides for an annual cash bonus opportunity of up to 100% of base salary, based on performance criteria established by the Board of Directors, and for long-term incentive compensation, the terms of which are to be determined by the Board of Directors.

The Company is party to contractual obligations, including lease liabilities related to operating leases, and stipulated cash bonus arrangements with employees. These obligations are time-based and are reflected in the accompanying consolidated financial statements. The Company expects to meet these commitments in the ordinary course of business.

In addition, the Company has entered into deferred bonus agreements with certain non-executive employees. These agreements provide for cash bonus payments upon the employee's continued employment through specified payment dates as set forth in each individual arrangement. As of March 31, 2026, the aggregate amount of deferred bonuses outstanding under these agreements was approximately $0.1 million. The Company expects to fund these obligations from operating cash flows in the ordinary course of business.

[**Table of Contents**](#toc_001)

**Acquisition of 420 IT Solutions**

On December 19, 2025, Safe Harbor Managed Services LLC, a wholly-owned subsidiary of the Company, entered into an Asset Purchase Agreement with LBMW LLC (d/b/a 420 IT Solutions) and its founders. The Company accounted for this transaction as an asset purchase pursuant to ASC 805, Business Combinations.

The aggregate purchase price consisted of 125,000 shares of Common Stock ("Earnout Shares"), plus the assumption of certain identified liabilities under contracts assigned to the Company. The Earnout Shares are subject to performance-based vesting over a two-year earnout period ended December 31, 2027. Intangible assets and contingent consideration are recognized as the performance conditions become probable of achievement. The Company evaluated the achievement of the performance obligation and deemed this unlikely to be reached. Therefore, the intangible assets and contingent liability were not recorded as of March 31, 2026 and December 31, 2025. If circumstances change when the revenue target is probable, then the intangible assets and a contingent liability will be recorded. The Company will continue to evaluate the achievability of the earnout performance conditions through the earnout period ending December 31, 2027.

**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 an unfavorable or favorable outcome could have a material impact on the Company's results of operations, balance sheets, and cash flows due to defense costs, and could divert management resources. The Company cannot predict the timing or outcome of these claims and other proceedings. With respect to the cases described below, the Company evaluates associated developments on a regular basis and accrues a liability when it believes a loss is probable and the amount can be reasonably estimated.

**Abaca - Denver County District Court**

On October 17, 2024, the Company filed a complaint in the District Court, captioned *SHF Holdings, Inc. v. Daniel Roda, Gregory W. Ellis, and James R. Carroll*, Case No. 2024CV33187. The lawsuit arises from a dispute over the terms of the Company's October 2022 acquisition of Abaca pursuant to a merger agreement (the "Merger Agreement") that was subsequently amended in November 2022 and in October 2023 (the "Second Amendment").

The Second Amendment restructured certain merger consideration, including introducing warrants and modifying payment timing. The defendants contend the Second Amendment is invalid under Delaware law and seek to have it set aside, which would reinstate the original payment terms and potentially increase the Company's obligations. The Company maintains that the Second Amendment was validly executed and is binding.

On November 21, 2024, at the Company's request, the disputed merger payment of $3.0 million was deposited into the Denver County, Colorado District Court's registry pending resolution of the dispute. This amount has been reflected in the Company's consolidated balance sheet.

On December 19, 2024, the defendants filed an answer and counterclaims against the Company. On April 18, 2025, the District Court issued an order denying the Company's motion to dismiss most of the counterclaims, but the District Court did dismiss claims against the Company's Chairman, Fred Niehaus, with prejudice. The District Court also clarified that the Delaware statutes cited by the defendants govern pre-closing amendments and do not authorize post-merger amendments altering consideration, a finding that is consistent with the Company's legal position.

On April 23, 2026, the District Court issued an omnibus order on cross-motions for summary judgment in the matter.

The Court denied the Company's motion for summary judgment in its entirety. The Court granted the counterclaim plaintiffs' cross-motion in part, primarily ruling that the Second Amendment to the Merger Agreement is void ab initio under Section 251(d) of the Delaware General Corporation Law, and because of that ruling, that the Company breached the original Merger Agreement with respect to the first anniversary parent shares. Damages on this counterclaim is set for trial on August 10-11, 2026. The Court also denied both parties' motions on the counterclaim concerning the second anniversary cash consideration payment of $3.0 million and denied the counterclaim plaintiffs' motion on the Company's declaratory judgment claim; those claims are also set for trial on August 10–11, 2026. The Court's order is not a final, appealable order under C.R.C.P. 54(b).

The $3.0 million previously deposited into the Court's registry in November 2024 remains reflected in the Company's condensed unaudited consolidated financial statements. The Company intends to continue defending its positions vigorously. Given the preliminary stage of the damages proceedings and the matters remaining for trial, the range of loss is $0 to $7.8 million. An adverse resolution could have a material adverse effect on the Company's financial position, results of operations, or cash flows.

[**Table of Contents**](#toc_001)

The Company currently assesses a loss as reasonably possible but not probable. No damages have been determined by the Court; the Omnibus Order expressly reserves the damages methodology, standard, and quantum for a future hearing. The defendants' sole designated damages expert has not been qualified, and the Company's motion to exclude that expert remains pending. Because the amount of any potential loss cannot be reasonably estimated at this time, no accrual has been recorded for this contingency beyond the $3.0 million already reflected in the financial statements.

**Nasdaq Listing Compliance**

As a condition of continued listing, the Company is required to maintain (i) a minimum of $2.5 million in stockholders' equity under Nasdaq Listing Rule 5550(b)(1), and (ii) a minimum closing bid price of $1.00 per share for 30 consecutive business days under Nasdaq Listing Rule 5550(a)(2).

The Company continuously monitors its compliance with these requirements. As of March 31, 2026, the Company's stockholders' equity was approximately $6.7 million, which exceeds the $2.5 million minimum.

On April 22, 2026, the Company received a letter from the listing qualifications department staff of Nasdaq 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, as required by Nasdaq Listing Rule 5550(a)(2).

The notice has no immediate effect on the listing of the Company's Common Stock or warrants, and the Company's Common Stock and warrants continue to trade on Nasdaq under the symbols "SHFS" and "SHFSW," respectively. Pursuant to Nasdaq Listing Rule 5810(c)(3)(A), the Company was provided with a compliance period of 180 calendar days, or until October 19, 2026, to regain compliance with the minimum bid price requirement. The notice states that to regain compliance the closing bid price of the Company's Common Stock must meet or exceed $1.00 for a minimum of 10 consecutive business days.

If the Company does not regain compliance by October 19, 2026, the Company may be eligible for a second compliance period for up to an additional 180 days. In connection with any extension period, if it appears that the Company will not be able to regain compliance with Nasdaq Listing Rule 5550(a)(2), or if the Company is not otherwise eligible, the Nasdaq staff will provide notice to the Company that its securities will be subject to delisting. At that time, the Company may appeal any such delisting determination to a Hearings Panel.

The Company intends to actively monitor the bid price and may evaluate other available options to resolve the deficiency and regain compliance with the Nasdaq Listing Rules. While the Company is exercising diligent efforts to maintain the listing of its Common Stock and warrants on Nasdaq, there can be no assurance that the Company will be able to regain or maintain compliance with the foregoing or other Nasdaq listing standards.

In addition, the Company is aware of a proposed new Nasdaq rule filed with the SEC on January 13, 2026, that would require listed companies to maintain a minimum market value of listed securities of at least $5 million. Under the proposed rule, if a company's market value of listed securities falls below $5 million for 30 consecutive business days, Nasdaq would immediately suspend trading and delist the company's securities without a cure period and without a stay of suspension during any appeal. On March 11, 2026, the SEC designated a longer period under Section 19(b)(2) of the Exchange Act in which to act on the proposal, and extended the deadline to April 29, 2026. On April 28, 2026, the SEC issued an order instituting proceedings under Section 19(b)(2)(B) of the Exchange Act to determine whether to approve or disapprove the proposed rule change, which was published in the Federal Register on May 1, 2026. The institution of proceedings does not indicate that the SEC has reached any conclusion on the proposed rule but does signal additional review. Under the Commission's procedural framework, a final decision on the proposed rule is not expected before June 2026. Based on the Company's current stock price and number of shares outstanding as of the date of this filing, the Company may not be in compliance with this proposed requirement at the time of its adoption and could be subject to immediate delisting as soon as 30 consecutive business days after the rule takes effect.

There can be no assurance that the Company will maintain compliance with these or any other Nasdaq listing requirements in the future. Failure to do so could ultimately result in the delisting of the Company's common stock, which would adversely affect stockholders' ability to trade their shares and the Company's ability to raise capital.

**Note 16 - Subsequent Events**

The Company has evaluated events and transactions occurring after March 31, 2026, through (the date these financial statements were issued), and has identified the following matters requiring disclosure. Unless otherwise noted, these are non-recognized subsequent events under ASC 855-10 that do not adjust amounts in March 31, 2026 financial statements but are material enough to warrant disclosure.

On May 6, 2026, the Company notified the holders of its Series B Convertible Preferred Stock and the Series B Warrants of voluntary reductions to the conversion price of the Series B Convertible Preferred Stock and the cash exercise price of the Series B Warrants. From May 6, 2026 through July 31, 2026, the conversion price of the Series B Preferred Stock will be voluntarily reduced from $1.5528 to $0.65 per share, and the cash exercise price of the Series B Warrants will be voluntarily reduced from $1.5528 to $0.65 per share from the date on which the Reset Registration Statement is declared effective by the SEC until July 31, 2026. If all the Series B Warrants are exercised, the aggregate gross proceeds will be approximately $15.5 million; however, there is no assurance that any holders will elect to exercise their Series B Warrants or convert their Series B Convertible Preferred Stock during the applicable reduction periods.

The Series B Convertible Preferred Stock and Series B Warrants continue to qualify for equity classification under ASC 815-40 and ASC 480 and will not be remeasured as a result of these voluntary reductions. Consistent with the down-round provisions of the Series B Convertible Preferred Stock and the Series B Warrants and ASC 260-10, as amended by ASU 2017-11, the incremental value transferred to holders is measured as the difference between the fair value of the instruments immediately before and immediately after the reductions. This transaction will be recognized as a deemed dividend, reducing income available to common stockholders in the computation of basic and diluted loss per share. The deemed dividend is a non-cash item and will have no effect on the Company's net loss, total stockholders' equity, or cash flows from operations.

Subsequent to March 31, 2026, the Company has continued to draw on its ELOC, under which the Company may raise up to $150.0 million through the issuance of shares of its common stock. The Company issued 648,771 shares of Common Stock under the ELOC after March 31, 2026, receiving gross proceeds of approximately $0.5 million at average share price of $0.73. These transactions will be reflected in the Company's unaudited condensed financial statements for the three and six months ended June 30, 2026.

Subsequent to March 31, 2026, the Company issued 1,301,538 common shares after receiving conversion notices for 846 shares of Series B Convertible Preferred Stock from shareholders.

[**Table of Contents**](#toc_001)

**Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.**

*References in this section to "we," "us," "our," "SHF," or the "Company" refer to SHF Holdings, Inc. References to "management" refer to our officers and Board of Directors. The following discussion and analysis of our financial performance and results of operations should be read in conjunction with our consolidated financial statements and the notes to those financial statements included elsewhere in this Form 10-Q. This discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties. See "Cautionary Note Regarding Forward-Looking Statements." Our actual results may differ materially from those contained in or implied by any forward-looking statements.*

***Overview***

The Company was founded in 2015 by Partner Colorado Credit Union ("PCCU") and is headquartered in Golden, Colorado. We operate a proprietary compliance technology platform that enables financial institutions to provide banking and lending services to cannabis related businesses ("CRBs") operating legally under applicable state law.

Because cannabis remains a federally controlled substance under the Controlled Substances Act ("CSA"), most financial institutions have historically been unwilling to serve CRBs, creating significant demand for the compliance infrastructure and risk management services we provide. We are not a bank or credit union and do not hold customer deposits. Instead, we provide compliance monitoring, onboarding, and reporting services that allow our financial institution clients to accept and maintain CRB deposit accounts in a manner consistent with Bank Secrecy Act ("BSA") requirements, FinCEN guidance, and applicable anti-money laundering regulations.

Through our financial institution clients, we facilitate access to business checking and savings accounts, cash management, commercial lending, remote deposit, automated clearing house payments, wire transfers, and courier services through third-party relationships. By enabling CRBs to deposit cash receipts through regulated financial institutions, our platform helps to reduce the safety risks associated with high cash volumes and gives CRBs access to financial tools that help them operate more efficiently. In select markets, we also license our Program to other financial institutions, providing them know your customer due diligence tools, compliance monitoring, program management support, and regulatory exam assistance.

We generate revenue primarily through account fee income based on the number of active accounts and the size of deposit balances in such accounts, loan program income on CRB loans we source and service on behalf of our financial institution clients, and investment income earned on CRB-related deposits held at those institutions. Since 2015, the Company has assisted in the processing of more than $36.0 billion in cannabis-related depository funds and has supported its financial institution clients through more than 25 state and federal banking examinations.

**Relationship with PCCU**

PCCU is the Company's primary financial institution client and the source of a significant majority of its revenue. The relationship is governed by the Second Amended CAA, which replaced the First Amended Commercial Alliance Agreement (the "First Amended CAA") effective October 1, 2025.

The First Amended CAA introduced several significant changes to the Commercial Alliance Agreement, including (i) the elimination of the Company's indemnification obligations for loan-related losses, (ii) a reduction in the Company's loan program income share to approximately 35% to reflect the incremental risk absorbed by PCCU in connection with the elimination of our indemnification obligations, (iii) the replacement of a multiple per-account fee structure with a single asset hosting fee equal to 1.00% of average daily CRB deposit balances that increased to 1.30% in the event balances exceeded $130 million, and (iv) us receiving 100% of investment income on CRB deposits.

The Second Amended CAA fundamentally restructured the economics of the PCCU relationship. The primary changes were that (i) the Company's share of loan program income increased from approximately 35% to up to 65%, reflecting the completion the September 2025 Recapitalization; (ii) the Company now receives up to 65% of loan program income generated by PCCU's CRB loan portfolio in exchange for being obligated to indemnify PCCU for up to 65% of net losses of a default on any loan covered by the Second Amended CAA, with no contractual cap on total exposure; and (iii) the asset hosting fee structure transitioned from a flat rate to a tiered marginal rate schedule based on average daily deposit balances, with rates ranging from 0.50% on the first $25 million to 1.25% on balances above $125 million, resulting in estimated annual savings of approximately $0.3 million compared to the rates contained in the First Amended CAA.

The concentration of our business with PCCU and the re-assumption of the indemnification obligation each represent material risks to the Company. Any loss of or material adverse change to the PCCU relationship, or any significant loan defaults in the CRB portfolio for which we are required to fund indemnification payments, could have a material adverse impact on our liquidity, financial condition, and results of operations.

[**Table of Contents**](#toc_001)

**Industry and Regulatory Environment**

Cannabis remains a Schedule I controlled substance under federal law, which creates ongoing legal and compliance risks for us and for the financial institutions we serve. Proposed federal legislation, including the SAFER Banking Act, could expand the availability of banking services to CRBs and increase competition in our market. Conversely, changes in federal or state enforcement priorities could adversely affect our clients and, in turn, our business. We monitor legislative and regulatory developments closely, as they are a primary driver of both the demand for, and the risks associated with our services.

Federal Regulatory Developments — Rescheduling to Schedule III

The federal regulatory environment for cannabis continues to evolve in ways the Company believes are material to its industry. In August 2023, the U.S. Department of Health and Human Services recommended that the Drug Enforcement Administration ("DEA") reschedule cannabis from Schedule I to Schedule III of the CSA, and in May 2024 the U.S. Department of Justice ("DOJ") issued a Notice of Proposed Rulemaking to that effect, although the rescheduling process was stayed and effectively stalled for much of 2025. On December 18, 2025, President Trump signed an Executive Order directing the Attorney General to expeditiously complete the rulemaking process to reschedule cannabis to Schedule III. On April 23, 2026, the DOJ issued a final order rescheduling Food and Drug Administration-approved cannabis products and products regulated under state medical marijuana licenses to Schedule III, and the DEA is scheduled to hold an expedited administrative hearing beginning on June 29, 2026 and concluding not later than July 15, 2026 to consider broader rescheduling from Schedule I to Schedule III. Legal challenges are anticipated, and the ultimate timing of any final rule remains uncertain. The Company believes the most financially material consequence of rescheduling would be the elimination of Section 280E of the Internal Revenue Code, which currently prohibits cannabis businesses from deducting ordinary and necessary business expenses and results in effective federal tax rates materially higher than those of other industries, and its elimination could improve cash flows and profitability for state-legal cannabis operators.

***Key Metrics***

In addition to the measures presented in our consolidated financial statements, management regularly monitors certain operational and non-GAAP financial measures to evaluate business performance. These metrics are described below.

***Non-GAAP Financial Measures***

In addition to financial measures prepared in accordance with GAAP, this Form 10-Q contains non-GAAP financial measures that management believes are useful in understanding our results of operations and financial position. For each non-GAAP measure presented, we have provided a reconciliation to the most directly comparable GAAP financial measure.

***Earnings Before Interest Taxes Depreciation and Amortization (EBITDA) and Adjusted EBITDA***

"EBITDA" is defined as net income (loss) before interest expense, income tax expense (benefit), and depreciation and amortization. "Adjusted EBITDA" is further adjusted to exclude non-cash, unusual, and infrequent items that management does not consider reflective of the Company's core operating performance.

We present EBITDA and Adjusted EBITDA because management uses these measures to evaluate operating performance, develop forward-looking operating plans, and make strategic decisions regarding resource allocation. We believe these measures provide useful supplemental information to investors evaluating our results in the same manner as management.

These measures have material limitations as analytical tools and should not be considered in isolation or as a substitute for analysis of our GAAP results. Specifically, although depreciation and amortization are non-cash charges, the underlying assets may require future replacement and neither EBITDA nor Adjusted EBITDA reflects the associated capital expenditure requirements. In addition, neither measure reflects changes in working capital needs or tax payments that may reduce cash available to the Company. Accordingly, these measures should be considered alongside net income (loss) and other GAAP results.

A reconciliation of net loss to EBITDA and Adjusted EBITDA is as follows:

---

| | | |
|:---|:---|:---|
| **For The Three Months Ended March 31,** | **2026** | **2025** |
| Net loss | $(1779217) | $(827199) |
| Interest expense | 4580 | 112786 |
| Amortization of share-based consulting services | 52750 |  |
| Amortization of contract asset | 129072 |  |
| Depreciation and amortization | - | 1441 |
| **EBITDA** | (1592815) | (712972) |
| **Other adjustments:** |  |  |
| Credit benefit | (316576) |  |
| Change in the fair value of warrants | (16599) | (1116082) |
| Change in the fair value of deferred consideration |  | (161000) |
| Loss on ELOC share settlements | 27880 |  |
| Stock based compensation | 58908 | 762811 |
| **Adjusted EBITDA** | $(1839202) | $(1227243) |

---

[**Table of Contents**](#toc_001)

**Discussion of Adjusted EBITDA Results**

For the three months ended March 31, 2026, EBITDA was $(1.6) million, compared to $(0.7) million for the three months ended March 31, 2025. Adjusted EBITDA was $(1.8) million and $(1.2) million for the three months ended March 31, 2026 and March 31, 2025, respectively, reflecting a decrease of $0.6 million. The decrease was driven by higher operating expenses, primarily reflecting increased compensation from strategic hires, alongside higher marketing spend and reduction in options grants to the board of directors vested immediately.

Management's focus for the remainder of 2026 is on improving client retention through the Company's expanded lending capabilities, enhanced client service technology, and continued new account development supported by new marketing initiatives and customer acquisition processes.

***Other Metrics***

 ****

Management monitors the following operational metrics to assess the health and trajectory of the core banking services business.

***Total account balances, number of accounts and average account balances***

Our ability to generate account fee income and investment income is directly tied to the number of active CRB accounts we manage and the total deposit balances maintained at our financial institution clients. We monitor account activity including daily deposits, withdrawals, and ending balances on an ongoing basis. Average account balances represent the average aggregate ending balance of onboarded and monitored CRB deposits held at financial institution clients over the revenue generating period. at period end. Average account balance is total account balances divided by total active accounts at period end. Trailing 14-day average balances represent the aggregate ending balance of onboarded and monitored CRB deposits held at financial institution clients over the 14 calendar days at the period end and represent a period end balance that smooths our clients' two-week payroll cycles.

***Account Fees per Average Active Account***

Our fee income is generated from active accounts and account-level transaction activity. We track account openings and closings on a daily, weekly, and monthly basis and monitor account fees per average active account as an indicator of pricing efficiency and revenue quality.

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| **For The Three Months Ended March 31,** |  | **2026** | **2025**<br>| **Change** | **Change (%)** |
| Average deposit balance | (1) | $105360624 | $97023799 | $8336825 | 8.6% |
| Trailing 14-day average account balance | (2) | $104605687 | $107781165 | $(3175478) | (2.9)% |
| Account fees | (3) | $723224 | $882840 | $(159616) | (18.1)% |
| Average active accounts | (4) | 763 | 782 | $(19) | (2.4)% |
| Average account balance | (5) | $138027 | $124071 | $13956 | 11.2% |
| Average fees per account | (6) | $947 | $1129 | $(182) | (16.1)% |

---

&nbsp;&nbsp;&nbsp;&nbsp;(1) For
 the three-month ended March 31, 2026, represents the average deposit balance over the period; For the period ended March 31, 2025
 represents the average of monthly ending account balances. This represents the average balance for the relevant revenue generating
 period.

(2) Represents
 the average balance for the 14 calendar days ending on March 31, which represents a period end balance that smooths our clients'
 two-week payroll cycles.

(3) Reported
 account activity fee revenue.

(4) Represents
 the average of ending active accounts for each of the three months therein.

(5) Refer
 to the below section – *Discussion of Results of our Operations* for additional discussion of trends.

(6) Represents the average of account activity fee revenue for the three months therein.

[**Table of Contents**](#toc_001)

Average active accounts decreased by 2.4% as of March 31, 2026. The accounts lost had lower average balances than the accounts added, resulting in an increase in the average account balance. However, average account fee revenue declined despite growth in total deposit balances, primarily due to the reduction in average fee revenue per account.

***Components of our Results of Operations***

***Revenue***

The Company generates revenue through four primary streams. Account fee income consists of fees charged to financial institution clients based on the number of active CRB accounts managed, account-level transaction activity, and deposit balances. These fees compensate the Company for providing BSA compliance monitoring, onboarding, account management, and related regulatory reporting services. Loan program income represents the Company's contractual share of interest earned on CRB loans originated and serviced by the Company on behalf of its financial institution clients, primarily PCCU. The Company's share of loan program income is currently determined in accordance with the Second Amended CAA. Investment income represents interest earned on CRB deposit balances held at financial institution clients and is based on the prevailing market rates applied to those balances. In addition, the Company earns fees from licensing its proprietary Program to other financial institutions and from ancillary services provided to businesses serving the cannabis industry.

***Operating Expenses***

Operating expenses consist of compensation and employee benefits, professional services, general and administrative expenses, rent expense, and provision (benefit) for credit losses.

● **Compensation and employee benefits** consist of employee wages, payroll taxes, employee benefits, and non-cash stock-based compensation. Stock-based compensation has increasingly been used as a component of total compensation to preserve cash and align employee and consultant incentives with the performance of the Common Stock.

● **Professional services** consist of legal fees, audit and accounting fees, general consulting fees, and board-related fees. Legal fees include both ongoing corporate legal services and costs associated with the Company's active litigation matters.

● **General and administrative expenses** include the asset hosting fee paid to PCCU under the First Amended CAA or the Second Amended CAA, as applicable, insurance, advertising and marketing, travel and entertainment, and other office and operating expenses. The asset hosting fee represents consideration paid to PCCU for access to its banking platform, regulated deposit infrastructure, and bank charter and is one of the largest components of general and administrative expenses. See "Related Party Relationships."

● **Rent expense** reflects the cost of the Company's corporate office. The Company closed its Arkansas office during 2025, thereby reducing its ongoing rent obligations.

● **Provision (benefit) for credit losses** reflects the Company's estimated losses on loans it is obligated to indemnify. Under the Second Amended CAA, we receive up to 65% of loan program income generated by PCCU's CRB loan portfolio. In exchange, we are obligated to indemnify PCCU for up to 65% of net losses of a default on any loan covered by the Second Amended CAA. This obligation has no maximum dollar limit and covers principal, accrued interest, fees, legal costs, collection costs, and collateral disposition costs, net of any recoveries.

[**Table of Contents**](#toc_001)

***Discussion of our Results of Operations Three Months Ended March 31, 2026 Compared to the Three Months Ended March 31, 2025***

***Revenue***

---

| | | | | |
|:---|:---|:---|:---|:---|
| **For The Three Months Ended March 31,** | **2026** | **2025<br>**  | **Change ($)** | **Change (%)** |
| Account fee income | $868629 | $1072465 | $(203836) | (19.0)% |
| Safe Harbor Program income | 19230 | 19230 |  | 0.00% |
| Investment income | 246908 | 300435 | (53527) | (17.8)% |
| Loan program income | 840672 | 540222 | 300450 | 55.6% |
| Total revenue | $1975439 | $1932352 | $43087 | 2.2% |

---

***Account fee income***

Account fee income decreased by $0.2 million, or 19.0%, for the three months ended March 31, 2026, compared to the same period in 2025. The decline was primarily due to a merchant service partner renegotiating its revenue-sharing arrangement on less favorable terms, which reduced account fee income by approximately $0.15 million year over year. In addition, client attrition and lower average fees collected from PCCU-hosted clients contributed approximately $0.05 million to the overall decrease.

***Investment income***

Investment income represents interest earned on net investable CRB deposit balances held at partner financial institutions. The rate of return on these balances is directly benchmarked to the Interest on Reserve Balances ("IORB") rate published by the Federal Reserve Bank of Kansas City. Under the Company's agreements, investment income is calculated daily on net investable CRB deposit balances and paid monthly in arrears.

Investment income was $0.2 million for the three months ended March 31, 2026, compared to $0.3 million for the three months ended March 31, 2025, a decrease of $0.05 million, or 17.8%. The net average daily investable deposit base grew to $45.0 million from $34.5 million between those periods, but the benefit of that growth was more than offset by a decline in the IORB rate from 4.40% to 3.65%. .

***Loan program income***

Loan program income was generated primarily from CRB loans originated by PCCU and underwritten and serviced by the Company under the First Amended CAA for the period ended March 31, 2025 and the Second Amended CAA for the period ended March 31, 2026.

For the three months ended March 31, 2026, the Company serviced twenty-two loans, compared to twenty-three loans for the same period in 2025. Loan program income attributable to PCCU activities totaled $0.8 million for the three months ended March 31, 2026, compared to $0.5 million for the three months ended March 31, 2025. The increase was primarily driven by the Second Amended CAA, which increased the Company's share of loan program income to 65% from approximately 35% under the First Amended CAA. In addition, the loan portfolio was $51.5 million as of March 31, 2026, compared to $56.8 million as of March 31, 2025, a decrease of $5.3 million. The weighted average interest rate for the three months ended March 31, 2026 was approximately 10.3% and was 10.2% for the three months ended March 31, 2025.

[**Table of Contents**](#toc_001)

***Operating expenses***

---

| | | | | |
|:---|:---|:---|:---|:---|
| **For The Three Months Ended March 31,** | **2026** | **2025** | **Change ($)** | **Change (%)** |
| Compensation and employee benefits | $1660658 | $1372481 | $288177 | 21.0% |
| General and administrative expenses | 1068400 | 990826 | 77574 | 7.8% |
| Professional services | 1145809 | 1499534 | (353725) | (23.6)% |
| Rent expense | 51432 | 61006 | (9574) | (15.7)% |
| Amortization of contract asset | 129072 |  | 129072 | 100% |
| Credit loss (benefit) expense | (316576) | - | (316576) | 100% |
| Total operating expenses | $3738795 | $3923847 | $(185052) | (4.7)% |

---

*Total operating expenses* 

Total operating expenses decreased by $0.2 million, or 4.7%, to $3.7 million for the three months ended March 31, 2026, compared to $3.9 million for the same period in 2025. The decrease was primarily driven by lower professional services expenses due to reduced stock awards to directors and a release of credit loss provisions resulting from the systematic release of liability and remeasurement reflecting changes in risk ratings. These reductions were partially offset by higher amortization of contract assets in line with scheduled amortization and increased compensation and employee benefits expenses, driven by higher average staff costs and employee bonus accruals.

*Compensation and employee benefits*

Compensation and employee benefits expenses increased by $0.3 million, or 21.0%, to $1.7 million for the three months ended March 31, 2026, compared to $1.3 million for the same period in 2025. The increase was primarily driven by higher bonus accruals and increased employee salaries, including costs associated with the acquisition of LBMW LLC (d/b/a 420 IT Solutions), which contributes approximately $0.5 million annually plus fringe benefits to compensation expense. The rise in expenses also reflects the full-period impact of hiring of additional personnel to support the Company's strategic initiatives, including expanding lending capabilities, developing managed business solutions, and enhancing beyond-banking services. These increases were partially offset by a decrease in stock-based compensation expense related to a prior stock grant issued to an executive.

*General and administrative expenses*

General and administrative expenses increased by $0.07 million, or 7.8%, to $1.1 million for the three months ended March 31, 2026, compared to $1.0 million for the three months ended March 31, 2025. The increase was primarily due to marketing activities and was offset by lower asset hosting fees under the Second Amended CAA.

*Professional services*

Professional services expenses decreased by $0.4 million, or 23.6%, to $1.1 million for the three months ended March 31, 2026, compared to $1.5 million for the same period in 2025. The decrease was primarily driven by a reduction in fully vested stock-based awards issued to the board of directors, as no stock options were issued during the three months ended March 31, 2026. This reduction was partially offset by an increase in one-time cash bonuses awarded to directors and higher legal fees associated with the Abaca litigation.

[**Table of Contents**](#toc_001)

*Rent expense*

Rent expense decreased by $0.01 million, or 15.7%, to $0.05 million for the three months ended March 31, 2026, from $0.06 million for the three months ended March 31, 2025, primarily due to the closure of the Company's Arkansas office during 2025.

*Amortization of contract asset*

The Company capitalized costs as a contract asset to secure the Second Amended CAA related to the (i) stand-ready guarantee liability and (ii) financial indemnification liability discussed in Note 6 to the Company's unaudited condensed consolidated financial statements in this Form 10-Q. Amortization of contract costs was $0.1 million for the three months ended March 31, 2026, compared to $0 for the three months ended March 31, 2025. It represents the straight-line amortization of the cost to acquire a contract asset recognized as of October 1, 2025, the effective date of the Second Amended CAA.

*Credit loss (benefit) expense* 

The Company recognized a benefit of $0.3 million for the three months ended March 31, 2026, compared to no credit loss benefit for the three months ended March 31, 2025.

In accordance with ASC 460, the stand-ready guarantee liability is recognized on a straight-line basis over a weighted-average remaining loan maturity of three years. During the three months ended March 31, 2026, the Company reduced the stand-ready guarantee liability by $0.2 million, which was recognized as a benefit within operating expenses in the consolidated statement of operations. In addition, the Company remeasured its expected credit loss liability under ASC 326 and identified a downward change in the internal risk ratings of a loan as of March 31, 2026, resulting in a $0.1 million reduction in the liability, which was also recognized as a credit benefit in operating expenses.

***Other Income (Expenses)***

---

| | | | | |
|:---|:---|:---|:---|:---|
| **For The Three Months Ended March 31,** | **2026** | **2025<br>**  | **Change** | **Change %** |
| Change in the fair value of deferred consideration | $- | $161000 | $(161000) | 100.0% |
| Interest expense | (4580) | (112786) | 108206 | 95.9% |
| Loss on ELOC share settlements | (27880) |  | (27880) | 100.0% |
| Change in fair value of warrant liabilities | 16599 | 1116082 | (1099483) | (98.5)% |
| **Total Other Income (Expenses)** | $(15861) | $1164296 | $(1180157) | (101.4)% |

---

Total other income (expenses) was ($0.02) million for the three months ended March 31, 2026, compared to total other income (expenses) of $1.1 million for the three months ended March 31, 2025, representing a decline of $1.2 million year over year. This change was primarily attributable to a $1.1 million decrease in the change in fair value of the warrant liability.

*Change in Fair Value of Deferred Consideration*

The contingent consideration payable to the former shareholders of Abaca was classified as a derivative liability under ASC 815 and remeasured at fair value at each reporting date, with changes recognized in earnings. The liability's fair value was sensitive to the Company's stock price, implied volatility, risk-free interest rates, and any amendments to the underlying arrangement.

For the three months ended March 31, 2025, the Company recognized a gain of $0.2 million, primarily resulting from a decline in the Company's stock price during 2025, which reduced the fair value of the third-anniversary payment obligation prior to its settlement. The third-anniversary payment of $1.5 million was settled in full on October 3, 2025 through the non-cash issuance of 37,517 shares of the Company's Common Stock at the contractual floor price of $40.00 per share. As a result of this settlement, the deferred consideration liability was fully extinguished.

*Interest Expense*

Interest expense for the period ended March 31, 2026 primarily relates to financing an insurance policy. For the three months ended March 31, 2025 interest expense was due to the Senior Secured Promissory Note to PCCU (the "PCCU Note").

*Loss on ELOC share settlements*

For the period ended March 31, 2026, loss on ELOC share settlements were $0.03 million. This represents the difference between the stock price on the trading date and the settlement date, multiplied by the number of shares.

[**Table of Contents**](#toc_001)

*Change in Fair Value of Warrant Liabilities*

The Company has outstanding public warrants, private placement warrants, PIPE warrants, and Abaca warrants, each of which is accounted for as a derivative liability because the settlement of these instruments may be in cash or stock depending on conditions such as the Company's stock price or registration status. Public warrants are remeasured at fair value using observable market prices (Level 1). Private placement warrants, PIPE warrants and Abaca warrants are remeasured using the Black-Scholes-Merton option pricing model (Level 3). Changes in fair value are recognized in earnings for each reporting period.

For the period ended March 31, 2026, the Company recognized a gain of $0.02 million from changes in the fair value of warrant liabilities, compared to a gain of $1.1 million for the period ended March 31, 2025. The $1.0 million decrease year over year was due to a reduction in the aggregate fair value of outstanding warrant liabilities, driven by changes in the Company's stock price during the period. As of March 31, 2026, all outstanding warrants were out of the money.

***Financial Condition***

***Cash and cash equivalents***

Cash and cash equivalents totaled $5.9 million as of March 31, 2026, and $6.8 million as of December 31, 2025.

***Cash flows***

For the three months ended March 31, 2026, the Company used $1.1 million of cash in operating activities. Operating cash flows for the three months ended March 31, 2026 improved as compared to the three months ended March 31, 2025 primarily due to changes to operating assets and liabilities that totaled $0.8 million, which were offset by net loss of $1.8 million and $0.07 million reduction from non-cash adjustments to reconcile net loss to net cash used in operating activities. For the period ended March 31, 2025, the Company used approximately $1.1 million of cash from operating activities, including net loss of $0.8 million and non-cash adjustments to reconcile net income to net cash used in operating activities of $0.5 million that were offset by $0.2 million of changes to operating cash assets and liabilities.

For the three months ended March 31, 2026 and March 31, 2025, the cash flow from investing activities was nil.

For the period ended March 31, 2026, the Company had $0.2 million of cash from financing activities. This was mainly from the proceeds from sales under the ELOC (as defined below). For the period ended March 31, 2025, the Company used $0.3 million for the repayment of the PCCU Note.

[**Table of Contents**](#toc_001)

***Liquidity***

Liquidity refers to our ability to meet anticipated cash demands, including funding operations, servicing contractual obligations, and covering other routine business expenditures. Our primary cash outflows include operating costs and general business expenditures. The main source of our liquidity continues to be cash inflows generated from operational performance. As of March 31, 2026, we do not have significant capital investment commitments.

Under ASC 205-40, *Presentation of Financial Statements: Going Concern*, we are required to evaluate at each annual and interim reporting period whether there are conditions or events, considered in the aggregate, that raise substantial doubt about our ability to continue as a going concern within one year after the date the financial statements are issued, and, if substantial doubt is raised, whether our plans to mitigate those conditions, when considered in the aggregate, alleviate that doubt.

As of March 31, 2026, we had cash and cash equivalents of $5.9 million and net working capital of $5.5 million. We have incurred recurring losses from operations and negative cash flows from operations, including an operating loss of $1.8 million and net cash used in operating activities of $1.1 million for the three months ended March 31, 2026, and an accumulated deficit of $124.7 million as of March 31, 2026. These conditions, considered in the aggregate, raise substantial doubt about our ability to continue as a going concern for a period of at least twelve months from the date these unaudited condensed consolidated financial statements are issued.

Management has developed and is implementing a series of measures intended to preserve liquidity, including (i) the increased share of loan program income under the Second Amended CAA, effective October 1, 2025, (ii) access to the $150.0 million ELOC entered into on September 17, 2025 (subject to customary conditions, including the absence of a Material Adverse Effect), (iii) identified cost-reduction measures available to management if operating conditions deteriorate, and (iv) bi-weekly cash flow monitoring against a 52-week rolling forecast.

Notwithstanding these measures, we continue to incur operating losses and negative cash flows from operations, and our ability to access the ELOC and execute on our expense-management plans involves elements outside of management's sole control. Accordingly, management has concluded that its plans, considered in the aggregate, do not alleviate the substantial doubt about our ability to continue as a going concern for a period of at least twelve months from the date these unaudited condensed consolidated financial statements are issued.

The accompanying unaudited condensed consolidated financial statements have been prepared on a going concern basis and do not include any adjustments that might result from the outcome of this uncertainty.

[**Table of Contents**](#toc_001)

***Litigation***

On October 17, 2024, the Company filed a complaint in the Denver County, Colorado District Court (the "District Court"), captioned *SHF Holdings, Inc. v. Daniel Roda, Gregory W. Ellis, and James R. Carroll*, Case No. 2024CV33187. The lawsuit arises from a dispute over the terms of the Company's October 2022 acquisition of Rockview Digital Solutions, Inc. d/b/a Abaca ("Abaca") pursuant to a merger agreement (the "Merger Agreement") that was subsequently amended in November 2022 and in October 2023 (the "Second Amendment").

The Second Amendment restructured certain merger consideration, including introducing warrants and modifying payment timing. The defendants contend the Second Amendment is invalid under Delaware law and seek to have it set aside, which would reinstate the original payment terms and potentially increase the Company's obligations. The Company maintains that the Second Amendment was validly executed and is binding.

On November 21, 2024, at the Company's request, the disputed merger payment of $3.0 million was deposited into the Denver County, Colorado District Court's registry pending resolution of the dispute. This amount has been reflected in the Company's unaudited condensed consolidated balance sheet.

On December 19, 2024, the defendants filed an answer and counterclaims against the Company. On April 18, 2025, the District Court issued an order denying the Company's motion to dismiss most of the counterclaims, but the District Court did dismiss claims against the Company's Chairman, Fred Niehaus, with prejudice. The District Court also clarified that the Delaware statutes cited by the defendants govern pre-closing amendments and do not authorize post-merger amendments altering consideration, a finding that is consistent with the Company's legal position.

On April 23, 2026, the District Court issued an omnibus order on cross-motions for summary judgment in the matter.

The Court denied the Company's motion for summary judgment in its entirety. The Court granted the counterclaim plaintiffs' cross-motion in part, primarily ruling that the Second Amendment to the Merger Agreement is void ab initio under Section 251(d) of the Delaware General Corporation Law, and because of that ruling, that the Company breached the original Merger Agreement with respect to the first anniversary parent shares. Damages on this counterclaim is set for trial on August 10-11, 2026. The Court also denied both parties' motions on the counterclaim concerning the second anniversary cash consideration payment of $3.0 million and denied the counterclaim plaintiffs' motion on the Company's declaratory judgment claim; those claims are also set for trial on August 10–11, 2026. The Court's order is not a final, appealable order under C.R.C.P. 54(b).

The $3.0 million previously deposited into the Court's registry in November 2024 remains reflected in the Company's condensed consolidated financial statements. The Company intends to continue defending its positions vigorously. Given the preliminary stage of the damages proceedings and the matters remaining for trial, the range of loss is $0 to $7.8 million. An adverse resolution could have a material adverse effect on the Company's financial position, results of operations, or cash flows.

In addition, the Company may evaluate the possibility of a negotiated resolution of the dispute. In the event of a negotiated resolution, the Company's ability to fund any payments owed in cash may be materially constrained by the terms of the previously disclosed Equity Line of Credit, as amended ("ELOC"), and the Company's Series B Convertible Preferred Stock. Litigation is inherently uncertain, and there can be no assurance that any negotiated resolution will be reached or that the terms of any such resolution are favorable to the Company. See Part II, Item 1A. "*Risk Factors-Recent developments in shareholder litigation against us on certain counterclaims could result in a material adverse effect on our financial position, results of operations, and cash flows.*

***Critical Accounting Estimates***

As of March 31, 2026, there were no significant changes in the application or the nature of accounting estimates that are considered critical in nature from those presented in our Annual Report on Form 10-K.

***Emerging Growth Company Status***

We are an emerging growth company ("EGC") as defined in the Jumpstart Our Business Startups Act of 2012 (the "JOBS Act"). As such, we are eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not "emerging growth companies," including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002 ("SOX"), reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a non-binding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved.

In addition, Section 107 of the JOBS Act also provides that an EGC can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act, for complying with new or revised accounting standards. In other words, an EGC can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We intend to take advantage of the benefits of this extended transition period, for as long as it is available. We will remain an EGC until the earlier of (1) the last day of the fiscal year (a) following the fifth anniversary of the date of the first sale of our common equity securities pursuant to an effective registration statement under the Securities Act, which is December 31, 2026, and (b) in which we have total annual gross revenue of at least $1.07 billion, (2) the date on which we are deemed to be a large accelerated filer, which means the market value of our Common Stock that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter, and (3) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period. References herein to "emerging growth company" have the meaning provided in the JOBS Act. The Company will cease to be an EGC on December 31, 2026.

***Smaller Reporting Company***

We are a "smaller reporting company" as defined in Item 10(f)(1) of Regulation S-K, which allows us to take advantage of certain exemptions from disclosure requirements including exemption from compliance with the auditor attestation requirements of Section 404. We will remain a smaller reporting company until the last day of the fiscal year in which (i) the market value of the shares of our Common Stock held by non-affiliates exceeds $250.0 million as of the prior June 30, and (ii) our annual revenue exceeded $100.0 million during such completed fiscal year or the market value of the shares of our Common Stock held by non-affiliates exceeds $700.0 million as of the prior June 30. To the extent we take advantage of such reduced disclosure obligations, it may also make comparison of our financial statement with other public companies difficult or impossible.

***Internal Control Over Financial Reporting***

In connection with our management assessment of internal control over financial reporting as of and for the three months ended March 31, 2026, the Company has identified material weaknesses within our internal controls over financial reporting. Refer to Item 4A of this document for additional details.

For the three months ended March 31, 2026, the material weakness related to the completeness and accuracy of account activity fee income has been remediated, however sufficient time has not elapsed to conclude that the related controls are operating effectively.

***Related Party Relationships***

PCCU is a related party because it held approximately 24% of the Company's Common Stock as of March 31, 2026, holds approximately 43.3% of the Series B Preferred Stock and Series B Warrants as of the date hereof, and serves as the federally regulated credit union through which the Company's CRB clients hold their deposit accounts and obtain loans. Because PCCU holds the majority of the Company's client deposits and has the ability to significantly influence the Company's management and operating policies, all transactions and arrangements between the Company and PCCU are disclosed as related party transactions in accordance with ASC 850 and SEC Regulation S-X. However, as of May 21, 2025, PCCU no longer has contractual rights to appoint members to the Board of Directors.

[**Table of Contents**](#toc_001)

**Item 3A. Quantitative and Qualitative Disclosures About Market Risk.**

The Company is a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and is not required to provide the information otherwise required with respect to market risk.

**Item 4A. Controls and Procedures.**

***Evaluation of Disclosure Controls and Procedures***

Disclosure controls and procedures are designed to ensure that information required to be disclosed by us in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

We do not expect that our disclosure controls and procedures will prevent all errors and all instances of fraud. Disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Further, the design of disclosure controls and procedures must reflect the fact that there are resource constraints, and the benefits must be considered relative to their costs. Because of the inherent limitations in all disclosure controls and procedures, no evaluation of disclosure controls and procedures can provide absolute assurance that we have detected all our control deficiencies and instances of fraud, if any. The design of disclosure controls and procedures also is based partly on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

As required by Rules 13a-15 and 15d-15 under the Exchange Act, our Chief Executive Officer / Chief Financial Officer and our Principal Accounting 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 / Chief Financial Officer and Principal Accounting Officer concluded that, solely due to the below-mentioned material weaknesses, the Company's disclosure controls and procedures (as defined in Rules 13a-15 (e) and 15d-15 (e) under the Exchange Act) were not effective as of March 31, 2026.

***Material Weaknesses***

A 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.

As disclosed in Item 9A of the Company's Annual Report on Form 10-K for the year ended December 31, 2025, management identified, during the fourth quarter of 2025, a material weakness in internal control over financial reporting related to the Company's loan documentation and expected credit loss estimation process (the "Loan Documentation Material Weakness"). This material weakness arose in connection with the Company's initial recognition, under the Second Amended CAA effective October 1, 2025, of a stand-ready guarantee liability at fair value under ASC 460 and an expected credit loss liability under ASC 326-20. Both measurements rely on underlying CRB loan documentation maintained as part of the Company's credit administration responsibilities under the Second Amended CAA. In connection with the year-end audit, certain loan documentation used in connection with these measurements was identified as out of date or inconsistent with the terms of the underlying loans. The Loan Documentation Material Weakness remained outstanding as of March 31, 2026.

While the Company's valuation conclusions with respect to the stand-ready guarantee liability and the expected credit loss liability were determined to be fairly stated as of March 31, 2026, the absence of a formalized loan documentation review and maintenance process represents a control deficiency that, if not remediated, could result in a material misstatement of the Company's indemnification liability under ASC 460 or its expected credit loss liability under ASC 326-20 in future periods.

[**Table of Contents**](#toc_001)

**Status of Previously Remediated Material Weakness**

As also disclosed in Item 9A of the Company's Annual Report on Form 10-K for the year ended December 31, 2025, the previously identified material weakness related to the completeness and accuracy of account activity fee income earned on CRB deposits held at PCCU has been remediated. As of March 31, 2026, sufficient time has not yet elapsed to enable management to conclude that the related controls are operating effectively. Management will continue to monitor the operating effectiveness of these controls during 2026.

 ****

**Remediation of Loan Documentation Material Weakness**

Management is actively engaged in remediating the Loan Documentation Material Weakness. As described in the Company's Annual Report on Form 10-K, the remediation plan includes the design and implementation of a standardized loan documentation checklist intended to ensure that all relevant inputs are consistently captured and considered in the Company's measurement of the stand-ready guarantee liability under ASC 460 and the expected credit loss liability under ASC 326-20. During the three months ended March 31, 2026, the Company hired a consultant to review the loan program. Management expects to complete the full implementation of the remediation plan by the third quarter of 2026. The material weakness will not be considered remediated until the applicable controls have been designed and have operated effectively for a sufficient period of time, and management has concluded, through testing, that the controls are operating effectively.

A failure to maintain effective internal controls over financial reporting could result in errors in our financial statements that could require us to restate past financial statements, cause us to fail to meet our reporting obligations, and cause investors to lose confidence in our reported financial information, all of which could materially and adversely affect the Company.

 ****

**Changes in Internal Control Over Financial Reporting**

Other than the remediation activities described above with respect to the Loan Documentation Material Weakness, there were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the three months ended March 31, 2026 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

**PART II - OTHER INFORMATION**

**Item 1. Legal Proceedings**

From time to time, we may be subject to various other legal proceedings and claims that are routine and incidental to our business. Although some of the legal proceedings set forth herein may result in adverse decisions or settlements, Management believes that the final disposition of such matters will not have a material adverse effect on our business, financial position, results of operations or cash flows. For additional information regarding certain legal proceedings, see "*Abaca – Denver County District Court*" in NOTE 15 – COMMITMENTS AND CONTINGENCIES to the Company's consolidated financial statements in this Form 10-Q.

**Item 1A. Risk Factors**

**Recent developments in shareholder litigation against us on certain counterclaims could result in a material adverse effect on our financial position, results of operations, and cash flows.**

As previously disclosed in a Current Report on Form 8-K filed with the SEC, on April 23, 2026 the District Court granted summary judgment against us on counterclaims relating to the validity of the Second Amendment and our payment of the first anniversary parent shares, with damages to be determined at a future hearing. Additional claims, including a counterclaim concerning the $3.0 million second anniversary cash consideration payment and our declaratory judgment claim, are set for trial on August 10th and 11th of this year. We intend to defend our positions vigorously and to pursue all available legal options, but we may not prevail at trial or on any appeal that may become available.

The ultimate resolution of the litigation could result in damages, settlement payments, or other obligations that are material to us. Our ability to fund any such payment in cash may be materially constrained by the terms of the ELOC or our Series B Convertible Preferred Stock. The $3.0 million previously deposited into the District Court's registry remains reflected in our condensed consolidated financial statements pending resolution of the related claims and is not currently available for our general operating or strategic use. An adverse outcome could have a material adverse effect on our business, financial position, results of operations, cash flows, liquidity, the trading price of our securities, and our ability to regain or maintain compliance with applicable Nasdaq listing standards. See Part I, Item 2 "*Management's Discussion and Analysis of Financial Condition and Results of Operations–Litigation*" for additional details.

**Item 2. Unregistered Sale of Equity Securities and Use of Proceeds**

During the three months ended March 31, 2026, the Company issued 223,962 shares of Common Stock under the ELOC and received net proceeds of $172,070 with an average price per share of $0.77. These issuances were made in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act and/or Rule 506(b) of Regulation D promulgated thereunder.

**Item 3. Defaults Upon Senior Securities**

None.

**Item 4. Mine Safety Disclosures**

Not applicable.

**Item 5. Other Information**

On April 20, 2026, Sundie Seefried resigned from the Board of Directors, effective immediately.

On April 22, 2026, the Board approved an increase in its size from five to six directors and appointed Tyler Klimas as a Class III director and Sean Tonner as a Class II director, with both appointments effective immediately. On May 8, 2026, Mr. Klimas was appointed to the Audit Committee, Compensation Committee, and Nominating and Corporate Governance Committee, and was also named Chair of the Nominating and Corporate Governance Committee. On the same day, Mr. Tonner was appointed to the Compensation Committee and the Nominating and Corporate Governance Committee and was named Chair of the Compensation Committee. Both directors will receive compensation in accordance with the Company's outside director compensation program, prorated for any partial year of service.

On May 6, 2026, the Company notified the holders of its Series B Convertible Preferred Stock and the Series B Warrants of voluntary reductions to the conversion price of the Series B Convertible Preferred Stock and the cash exercise price of the Series B Warrants. From May 6, 2026 through July 31, 2026, the conversion price of the Series B Preferred Stock will be voluntarily reduced from $1.5528 to $0.65 per share, and the cash exercise price of the Series B Warrants will be voluntarily reduced from $1.5528 to $0.65 per share from the date on which the registration statement filed on May 6, 2026 is declared effective by the SEC until July 31, 2026. If all the Series B Warrants are exercised, the aggregate gross proceeds will be approximately $15.5 million; however, there is no assurance that any holders will elect to exercise their Series B Warrants or convert their Series B Convertible Preferred Stock during the applicable reduction periods.

On May 8, 2026, Richard Carleton informed the Board of Directors of his decision not to be considered for reelection to the Board at the Company's 2026 annual meeting of stockholders.

During the three months ended March 31, 2026, no director or "officer" (as defined in Rule 16a-1(f) under the Exchange Act) of the Company adopted or terminated any "Rule 10b5-1 trading arrangement" or "non-Rule 10b5-1 trading arrangement," as each term is defined in Item 408(a) of Regulation S-K.

[**Table of Contents**](#toc_001)

**Item 6. Exhibits**

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

---

| | |
|:---|:---|
| **No.** | **Description of Exhibit** |
| 3.1 | [Second Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to the Company's Current Report on Form 8-K filed on September 29, 2022).](https://www.sec.gov/Archives/edgar/data/1854963/000149315222027126/ex3-1.htm) |
| 3.2 | [Certificate of Amendment to the Second Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to the Company's Current Report on Form 8-K filed March 20, 2025).](https://www.sec.gov/Archives/edgar/data/1854963/000149315225010999/ex3-1.htm) |
| 3.3 | [Certificate of Amendment to Second Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 of the Company's Current Report on Form 8-K, filed on November 10, 2025).](https://www.sec.gov/Archives/edgar/data/1854963/000149315225021369/ex3-1.htm) |
| 3.4 | [Bylaws of the Company (incorporated by reference to Exhibit 3.3 to the Company's Registration Statement on Form S-1 filed on June 2, 2021).](https://www.sec.gov/Archives/edgar/data/1854963/000110465921075303/tm2112515d2_ex3-3.htm) |
| 3.5 | [Certificate of Designation of Series B Preferred Stock of SHF Holdings, Inc., dated September 30, 2025 (incorporated by reference to Exhibit 3.1 to the Company's Current Report on Form 8-K filed on October 3, 2025).](https://www.sec.gov/Archives/edgar/data/1854963/000149315225016886/ex3-1.htm) |
| 3.6 | [Amendment to SHF Holdings, Inc. Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to the Company's Current Report on Form 8-K filed on November 10, 2025).](https://www.sec.gov/Archives/edgar/data/1854963/000149315225021369/ex3-1.htm) |
| 10.1 | [Second Amended and Restated Commercial Alliance Agreement, dated February 4, 2026, by and between the Company and PCCU (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on February 9, 2026).](https://www.sec.gov/Archives/edgar/data/1854963/000149315226005705/ex10-1.htm) |
| 31.1\* | [Certification of Principal Executive Officer and Principal Chief Financial Officer Pursuant to Securities and Exchange Act Rule 13a-14(a) and 15(d)-14(a), as adopted Pursuant to Section 302 of the Sarbanes Oxley Act of 2002.](ex31-1.htm) |
| 31.2\* | [Certification of Principal Accounting Officer Pursuant to Securities and Exchange Act Rule 13a-14(a) and 15(d)-14(a), as adopted Pursuant to Section 302 of the Sarbanes Oxley Act of 2002.](ex31-2.htm) |
| 32.1\*\* | [Certificate of Principal Executive Officer and Principal Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.](ex32-1.htm) |
| 32.2\*\* | [Certificate of Accounting Principal Officer Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.](ex32-2.htm) |
| 101.INS\* | Inline XBRL Instance Document |
| 101.CAL\* | Inline XBRL Taxonomy Extension Calculation Linkbase Document |
| 101.SCH\* | Inline XBRL Taxonomy Extension Schema Document |
| 101.DEF\* | Inline XBRL Taxonomy Extension Definition Linkbase Document |
| 101.LAB\* | Inline XBRL Taxonomy Extension Labels Linkbase Document |
| 101.PRE\* | Inline XBRL Taxonomy Extension Presentation Linkbase Document |
| 104\* | Cover Page Interactive Data File (embedded within the Inline XBRL document) |

---

---

| | |
|:---|:---|
| \* | Filed herewith. |
| \*\* | Furnished. |
| † | Pursuant to Item 601(a)(5) of Regulation S-K, schedules and similar attachments to this exhibit have been omitted because they do not contain information material to an investment or voting decision and such information is not otherwise disclosed in such exhibit. The Company will supplementally provide a copy of any omitted schedule or similar attachment to the U.S. Securities and Exchange Commission or its staff upon request. |

---

[**Table of Contents**](#toc_001)

**SIGNATURES**

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.

---

| | | |
|:---|:---|:---|
| **Signature** | **Title** | **Date** |
| */s/ Terrance E. Mendez* | Chief Executive Officer and Chief Financial Officer | May 15, 2026 |
| Terrance E. Mendez | (Principal Executive Officer) |  |
| */s/ Douglas Beck* | Principal Accounting Officer, Senior Vice President of Finance | May 15, 2026 |
| Douglas Beck | (Principal Financial and Accounting Officer) |  |

---

## Exhibit 31.1

**Exhibit 31.1**

**CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002**

I, Terrance E. Mendez, certify that:

&nbsp;&nbsp;&nbsp;&nbsp;1. I have reviewed this Quarterly
 Report on Form 10-Q for the period ended March 31, 2026, of SHF Holdings, Inc.;

&nbsp;&nbsp;&nbsp;&nbsp;2. Based on my knowledge,
 this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements
 made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this
 report;

&nbsp;&nbsp;&nbsp;&nbsp;3. Based on my knowledge,
 the financial statements, and other financial information included in this report, fairly present in all material respects the financial
 condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

&nbsp;&nbsp;&nbsp;&nbsp;4. The registrant's
 other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in
 Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f)
 and 15d-15(f)) for the registrant and have:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a. Designed such disclosure
 controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material
 information relating to the registrant, including its subsidiaries, is made known to us by others within those entities, particularly
 during the period in which this report is being prepared;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b. Designed such internal
 control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision,
 to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for
 external purposes in accordance with generally accepted accounting principles;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c. Evaluated the effectiveness
 of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness
 of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d. Disclosed in this report
 any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent
 fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is
 reasonably likely to materially affect, the registrant's internal control over financial reporting; and

&nbsp;&nbsp;&nbsp;&nbsp;5. The registrant's
 other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting,
 to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the
 equivalent functions):

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a. All significant deficiencies
 and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely
 affect the registrant's ability to record, process, summarize and report financial information; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b. Any fraud, whether or not
 material, that involves management or other employees who have a significant role in the registrant's internal control over
 financial reporting.

---

| | |
|:---|:---|
| Date: May 15, 2026 | */s/ Terrance E. Mendez* |
|  | Terrance E. Mendez |
|  | Chief Executive Officer and Chief Financial Officer<br>|
|  | (Principal Executive Officer) |

---

## Exhibit 31.2

**Exhibit 31.2**

**CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002**

I, Douglas Beck, certify that:

&nbsp;&nbsp;&nbsp;&nbsp;1. I
 have reviewed this Quarterly Report on Form 10-Q for the period ended March 31, 2026, of SHF Holdings, Inc.;

&nbsp;&nbsp;&nbsp;&nbsp;2. Based on my
 knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make
 the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period
 covered by this report;

&nbsp;&nbsp;&nbsp;&nbsp;3. Based on my
 knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects
 the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

&nbsp;&nbsp;&nbsp;&nbsp;4. The registrant's
 other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in
 Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f)
 and 15d-15(f)) for the registrant and have:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a. Designed such
 disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure
 that material information relating to the registrant, including its subsidiaries, is made known to us by others within those entities,
 particularly during the period in which this report is being prepared;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b. Designed such
 internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision,
 to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for
 external purposes in accordance with generally accepted accounting principles;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c. Evaluated the
 effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the
 effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;
 and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d. Disclosed in
 this report any change in the registrant's internal control over financial reporting that occurred during the registrant's
 most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected,
 or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

&nbsp;&nbsp;&nbsp;&nbsp;5. The registrant's
 other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting,
 to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the
 equivalent functions):

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a. All significant
 deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably
 likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b. Any fraud,
 whether or not material, that involves management or other employees who have a significant role in the registrant's internal
 control over financial reporting.

---

| | |
|:---|:---|
| Date: May 15, 2026 | */s/ Douglas Beck* |
|  | Douglas Beck |
|  | Principal Accounting Officer, SVP of Finance, Controller (Principal Financial and Accounting Officer) |

---

## Exhibit 32.1

**Exhibit 32.1**

**CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002**

In connection with the Quarterly Report of SHF Holdings, Inc. on Form 10-Q for the period ended March 31, 2026, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Terrance E. Mendez, Chief Executive Officer of SHF Holdings, Inc., certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

&nbsp;&nbsp;&nbsp;&nbsp;1. The Report fully complies with the requirements of
 Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

&nbsp;&nbsp;&nbsp;&nbsp;2. The information contained
 in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

---

| | |
|:---|:---|
| Date: May 15, 2026 | */s/ Terrance E. Mendez* |
|  | Terrance E. Mendez |
|  | Chief Executive Officer and Chief Financial Officer |
|  | (Principal Executive Officer) |

---

## Exhibit 32.2

**Exhibit 32.2**

**CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002**

In connection with the Quarterly Report of SHF Holdings, Inc. on Form 10-Q for the period ended March 31, 2026, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Douglas Beck, Principal Accounting Officer of SHF Holdings, Inc., certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

&nbsp;&nbsp;&nbsp;&nbsp;1. The
 Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

&nbsp;&nbsp;&nbsp;&nbsp;2. The
 information contained in the Report fairly presents, in all material respects, the financial condition and results of operations
 of the Company.

---

| | |
|:---|:---|
| Date: May 15, 2026 | */s/ Douglas Beck* |
|  | Douglas Beck |
|  | Principal Accounting Officer, SVP of Finance, Controller |
|  | (Principal Financial and Accounting Officer) |

---