SHF Holdings, Inc.
For the period ended Jun 30, 2026. Filed Aug 7, 2026.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2026 · Filed Aug 7, 2026
SHFS$0.03-1.1%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2026-03-31; filed 2026-05-15.
0001493152-26-023748
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2026-06-30; filed 2026-08-07.
0001493152-26-036606
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 112 previous paragraphs and 132 current paragraphs.
56 unchanged; 25 reworded; 46 added; 31 removed; 0 previous and 5 current paragraphs rearranged.
Tables are not compared: 7 previous and 11 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (46)
Current report
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Current report
On June 17, 2026, Nasdaq published Nasdaq listing library rule number 1877 that allows state-licensed medical marijuana companies that register with the DEA and operate in compliance with federal law are eligible to list on Nasdaq if they can provide an opinion of counsel from a law firm, acceptable to Nasdaq, with expertise in controlled substance regulatory compliance confirming that the company operates in compliance with the DOJ order and applicable requirements of the CSA. This potentially allows the Company to hold medical cannabis licenses without jeopardizing its Nasdaq listing.
Current report
For the three and six months ended June 30, 2026, the Company continued to grow its deposit base and expand the scale of its client relationships. Average deposit balances increased $7.0 million, or 6.8%, to $108.4 million for the three-month period, and $3.6 million, or 3.4%, to $107.3 million for the six-month period, each compared to the same periods last year. Active accounts grew 0.5% for the three-month period, while the six-month period reflected a modest 0.9% reduction in active accounts; in each case, average account balance increased, rising 6.3% to $0.1 million for the three-month period and 4.4% to $0.1 million for the six-month period. Average Account fee revenue was $0.2 million for both the three- and six-month periods, decreasing 17.1% and 17.6%, respectively, compared to the prior year periods, as average fees collected per account decreased 17.6% to $299 for the three-month period and 16.8% to $308 for the six-month period. This decline reflects a continued shift in the account portfolio toward larger, higher-balance relationships, which generate proportionately lower fee revenue relative to their deposit contribution but can support the Company’s growing deposit base and associated investment income.
Current report
Recent Events
Current report
Board of Directors and Executive Officers
Current report
On April 20, 2026, Sundie Seefried tendered her resignation as a member of the Board. Ms. Seefried’s departure was not the result of any disagreement with the Company on any matter relating to its operations, policies or practices.
Current report
On April 22, 2026, the Board appointed each of Sean Tonner and Tyler Klimas as directors, effective immediately, and the Board also approved an increase in the number of directorships on the Board from five to six.
Current report
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 (the “2026 Annual Meeting”).
Current report
On June 17, 2026, the Company’s stockholders elected Jonathon F. Niehaus and Sean Tonner to serve as Class II directors of the Company at the 2026 Annual Meeting.
Current report
On July 7, 2026, Douglas Beck informed the Company of his decision to resign from his roles at the Company effective July 31, 2026.
Current report
On July 15, 2026, Michael Regan was appointed as the Company’s Chief Operating Officer and Secretary.
Current report
Nasdaq Listing Compliance
Current report
As a condition of continued Nasdaq listing, the Company is required to maintain stockholders’ equity of at least $2.5 million under Nasdaq Listing Rule 5550(b)(1) and a minimum closing bid price of $1.00 per share for 30 consecutive business days under Nasdaq Listing Rule 5550(a)(2). 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 Marketplace Rule 5550(a)(2). The notice had no immediate effect on the listing of the Company’s Common Stock or warrants. Pursuant to Nasdaq Marketplace 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. At a special meeting held on November 6, 2025, stockholders approved authorization for the Board to effect, at its discretion, a reverse stock split at a ratio between 2-for-1 and 12-for-1; as of June 30, 2026, no reverse stock split had been effected. If the Company is ultimately unable to regain compliance, Nasdaq staff would notify the Company that its securities are subject to delisting, which determination the Company may appeal to a Hearings Panel. There can be no assurance the Company will regain or maintain compliance with this or other Nasdaq listing standards.
Current report
On July 22, 2026, the SEC approved a proposed Nasdaq rule (originally filed with the SEC on January 13, 2026) that would require Nasdaq-listed companies to maintain a minimum market value of listed securities (“MVLS”) of at least $5 million. As approved, the rule provides that if a company’s MVLS remains below $5 million for 30 consecutive business days, it would become immediately subject to suspension and delisting, without any cure or compliance period. Subsequent to the SEC’s approval, on July 29, 2026, the SEC notified Nasdaq that it had received notices of intention to petition for review of the July 22, 2026 approval order and that, as a result, the order is stayed until the SEC orders otherwise. Accordingly, the new MVLS requirement is not currently in effect, and there can be no assurance as to whether or when the stay will be lifted or the rule will become effective. See Part II, Item 1A. “Risk Factors–A new Nasdaq rule will delist companies whose market capitalization falls below $5 million for 30 or more consecutive trading days.”
Current report
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.
Current report
Voluntary Market Adjustment to Series B Preferred Stock and related Warrants
Current report
On May 6, 2026, the Company offered the holders of its Series B Convertible Preferred Stock and Series B Warrants a voluntary, time-limited inducement running from May 6, 2026, through July 31, 2026 (the “Offer Period”) to reduce the conversion price of the Preferred Stock and the cash exercise price of the Warrants from $1.5528 to $0.65 per share, a 20% discount to the closing price of the Company’s Common Stock on the day before the offer. The conversion price and exercise price will revert to $1.5528 on August 1, 2026. Warrants exercised during the Offer Period, subject to an effective registration statement, must be settled on a cash basis; the net share settlement alternative previously available is not permitted during this period. Participation is voluntary; holders who do not accept retain their Preferred Stock and Warrants on the original terms. On May 6, 2026, the Company filed a registration statement on Form S-1 to register, among other things, these additional shares. As of June 30, 2026, the aforementioned registration statement had not become effective.
Current report
Between May 6, 2026 and June 30, 2026, holders converted 3,198 shares of Series B Convertible Preferred Stock into 4,920,008 shares of Common Stock. No Series B Warrants have been exercised as of that date.
Current report
The Company accounts for the Preferred Stock conversions as an induced conversion under ASC 260-10-S99-2, applying the induced-conversion framework in ASC 470-20-40-13 through 40-16 by analogy, given that the reduced conversion price is available only for a limited period.
Current report
The voluntary market adjustment related to the Series B Preferred Stock gives rise to a deemed dividend, measured as the excess of the fair value of the consideration transferred to holders under the reduced terms over the fair value that would have been transferred under the original terms. The Company recognized a deemed dividend of $0.9 million in connection with the Preferred Stock conversions, measured on each respective conversion as of the May 6, 2026, modification date. The deemed dividends are entirely within permanent stockholders’ equity, and is reflected as an increase to net loss available to common stockholders in the calculation of basic and diluted loss per share for the three and six months ended June 30, 2026. The deemed dividend is considered a non-cash item and had no effect on the Company’s net loss, total stockholders’ equity, or cash flows from operations.
Current report
For the three months ended June 30, 2026, loan program income was $0.8 million, compared to $0.6 million for the three months ended June 30, 2025, an increase of $0.3 million, or 50.7%. For the six months ended June 30, 2026, loan program income was $1.7 million, compared to $1.1 million for the six months ended June 30, 2025, an increase of $0.6 million, or 53.1%.
Current report
The increase for both periods 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, together with less than $0.02 million of additional loan origination fees collected on refinanced loans in the three-month period. This increase was partially offset by a decline in the average loan portfolio to $51.5 million for the six months ended June 30, 2026, from $53.1 million for the same period in 2025, reflecting fewer loans outstanding year over year, the impact of which was mitigated by improved retention of the Company’s share of loan program income under the Second Amended CAA.
Current report
For the three months ended June 30, 2026, total operating expenses increased by $0.2 million, or 5.1%, to $3.0 million, compared to $2.8 million for the same period in 2025. For the six months ended June 30, 2026, total operating expenses decreased $0.04 million, or 0.6%, to $6.7 million, compared to $6.7 million for the same period in 2025.
Current report
For the three-month period, the change was primarily driven by a credit benefit recognized during the period and lower compensation and employee benefits expense, partially offset by higher general and administrative expenses.
Current report
For the three months ended June 30, 2026, compensation and employee benefits expenses decreased by $0.1 million, or 6.7%, to $1.5 million, compared to $1.6 million for the same period in 2025. The decrease was primarily driven by savings from the departure of certain executive officers, partially offset by the impact of staff increases and salary adjustments to support strategic growth initiatives.
Current report
For the six months ended June 30, 2026, compensation and employee benefits expenses increased by $0.2 million, or 6.2%, to $3.1 million, compared to $3.0 million for the same period in 2025. The increase was primarily driven by investments in staff to support strategic growth initiatives, offset in part by savings from the departure of certain executive officers and a decrease in stock-based compensation expense, reflecting lower fair values of awards granted during 2026 and the completed vesting of certain prior-period grants.
Current report
For the three and six months ended June 30, 2026, general and administrative expenses increased $0.4 million and $0.5 million, or 93.7% and 35.0%, to $0.9 million and $2.0 million, compared to $0.5 million and $1.4 million for the same periods in 2025, respectively. The increase was primarily due to strategic investments in (i) investor related marketing intended to increase market awareness of the Company’s business developments, (ii) brand marketing intended to build awareness of the Company’s expanded capabilities, including its broader lending program, its expanded consulting support for CRBs under its Managed Services offering, and its efforts to onboard additional financial institution clients to its platform, (iii) marketing of the Company’s compliant and transparent pooled employer retirement plan, which has facilitated more in-depth conversations with multi-state operators that would not otherwise bank through the Company, and (iv) the development of infrastructure supporting the Company’s efforts to embed artificial intelligence capabilities into its operating environment resulting in higher subscription costs and, for the three-month period, higher franchise tax expense as described below. The Company partially recovered its investor relations marketing investment through issuances under its ELOC facility during the period. These increases were partially offset by lower PCCU account hosting fees under the Second Amended CAA.
Current report
General and administrative expenses for the three months ended June 30, 2026, also reflected a year-over-year franchise tax variance of $0.3 million. This variance was driven by a refund of a prior-year franchise tax overpayment recognized in the three months ended June 30, 2025, rather than any increase in the Company’s underlying franchise tax expense for the current period. Franchise tax expense is also affected by the number of the Company’s authorized shares, an increase in which is amortized over an annual period and was not material to the three-month period.
Current report
For the six months ended June 30, 2026, professional services expenses decreased $0.3 million, or 12.4%, to $1.9 million, compared to $2.2 million for the same period in 2025, driven primarily by lower litigation-related legal fees, the absence of a one-time litigation settlement expense recognized in 2025, and the absence of a stock-based compensation award granted in 2025, which reduced expense by approximately $0.6 million. These decreases were partially offset by higher director fees, reflecting a one-time bonus and an increase in the number of directors eligible for board fees.
Current report
For the three months ended June 30, 2026, professional services expenses increased less than $0.1 million, or 11.3%, to $0.8 million, compared to $0.7 million for the same period in 2025, as a reduction in litigation-related legal fees was offset by higher director fees and increased business consulting expenses. The comparatively modest three-month movement, against a more meaningful six-month decline, reflects the stabilization of the Company’s legal fee base following the resolution of litigation matters in prior periods.
Current report
Credit benefit losses related to our stand ready guarantee and financial indemnification liabilities
Current report
Other Income Expense
Current report
Total other (expense) income
Current report
For the six months ended June 30, 2026, total other income (expense) was $(0.5) million, compared to total other income of $1.1 million for the six months ended June 30, 2025, a decline of $1.6 million. The decline was primarily attributable to a $1.2 million decrease in the gain recognized on the change in fair value of the warrant liability, together with issuance costs of $0.3 million and $0.2 million recognized on the share settlements, respectively, and the absence of a $0.1 million gain on the change in fair value of deferred consideration recognized in the prior-year period. These items were partially offset by a $0.2 million decrease in interest expense.
Current report
For the three months ended June 30, 2026, the Company recognized no change in the fair value of deferred consideration, compared to a loss of $0.04 million for the three months ended June 30, 2025. For the six months ended June 30, 2026, the Company recognized no change in the fair value of deferred consideration, compared to a gain of $0.1 million for the six months ended June 30, 2025. The liability was fully extinguished in October 2025 upon settlement of the third-anniversary payment obligation, and accordingly no further changes in fair value were recognized during 2026. The gain recognized for the six months ended June 30, 2025 primarily resulted from a decline in the Company’s stock price during that period, which reduced the fair value of the obligation prior to its settlement.
Current report
The Company had no secured debt outstanding as of and during the six-month period ended June 30, 2026.
Current report
For the three months ended June 30, 2026, interest expense was less than $0.1 million, compared to $0.1 million for the three months ended June 30, 2025, a decrease of $0.1 million, or 98.0%. For the six months ended June 30, 2026, interest expense was less than $0.1 million, compared to $0.2 million for the six months ended June 30, 2025, a decrease of $0.2 million, or 97.0%.
Current report
Interest Income
Current report
For the three and six months ended June 30, 2026, the Company recognized interest income of less than $0.1 million, compared to no interest income for the same periods in 2025. Interest income relates to earnings on available cash held in an interest-bearing, cash-equivalent money market account.
Current report
Loss on Sale of Investment
Showing the first 40 of 46 passages. Open the source sections for the rest.
Removed paragraphs (31)
Previous report
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.
Previous report
Non-GAAP Financial Measures
Previous report
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.
Previous report
Earnings Before Interest Taxes Depreciation and Amortization (EBITDA) and Adjusted EBITDA
Previous report
“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.
Previous report
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.
Previous report
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.
Previous report
A reconciliation of net loss to EBITDA and Adjusted EBITDA is as follows:
Previous report
Discussion of Adjusted EBITDA Results
Previous report
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.
Previous report
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.
Previous report
Other Metrics
Previous report
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.
Previous report
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.
Previous report
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.
Previous report
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.
Previous report
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.
Previous report
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.
Previous report
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.
Previous report
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.
Previous report
Credit loss (benefit) expense
Previous report
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.
Previous report
Other Income (Expenses)
Previous report
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.
Previous report
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.
Previous report
Loss on ELOC share settlements
Previous report
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.
Previous report
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.
Previous report
For the three months ended March 31, 2026 and March 31, 2025, the cash flow from investing activities was nil.
Previous report
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.
Previous report
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.
Reworded paragraphs (25)
Previous wording
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.
Current wording
The Company was founded in 2015 by 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.
Previous wording
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.
Current wording
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 of 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.
Previous wording
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.
Current wording
The federal regulatory environment for cannabis continues to evolve in ways the Company believes are material to its industry.
Previous wording
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.
Current wording
While medical cannabis produced and sold by state-licensed operators who have applied for DEA licenses is now Schedule III, all other 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.
Previous wording
Discussion of our Results of Operations Three Months Ended March 31, 2026 Compared to the Three Months Ended March 31, 2025
Current wording
Discussion of our Results of Operations for the Three and Six Months Ended June 30, 2026 Compared to the Three Months Ended June 30, 2025
Previous wording
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.
Current wording
Account fee income decreased by $0.4 million, or 18.7%, for the six months ended June 30, 2026, compared to the same period in 2025. The decline was primarily due to lower revenue from a merchant service partner, which reduced account fee income by approximately $0.2 million year over year. In addition, lower average fees collected from PCCU-hosted accounts contributed approximately $0.1 million to the overall decrease.
Previous wording
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%. .
Current wording
For the six months ended June 30, 2026, investment income was $0.5 million, compared to $0.6 million for the six months ended June 30, 2025, a decrease of $0.1 million, or 10.0%. The average investable deposit base grew to $46.8 million from $35.1 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%.
Previous wording
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.
Current wording
For the three and six months ended June 30, 2026, rent expense decreased by less than $0.01 million, or 3.5% and 9.5%, respectively, to $0.1 million for each period, compared to $0.1 million for the same periods in 2025, primarily due to the closure of the Company’s Arkansas office during 2025.
Previous wording
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.
Current wording
For the three and six months ended June 30, 2026, amortization of the contract asset was $0.1 million and $0.3 million, respectively, compared to $0 for the same periods in 2025. This represents the straight-line amortization of costs capitalized to secure the Second Amended CAA, discussed in Note 6 to the accompanying unaudited condensed consolidated financial statements, following the October 1, 2025, effective date of that agreement.
Previous wording
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.
Current wording
For the three and six months ended June 30, 2026, the Company recognized a credit benefit of $0.4 million and $0.7 million, respectively, compared to no benefit for the same periods in 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 and six months ended June 30, 2026, the Company reduced this liability, which was recognized as a benefit within operating expenses. In addition, the Company remeasured its expected liability under ASC 326 and benefited from a risk reduction on certain loans as of June 30, 2026, resulting in a reduction of the financial indemnification liability, which was also recognized as a credit benefit.
Previous wording
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.
Current wording
For the three months ended June 30, 2026, total other income (expense) was $(0.5) million, compared to $(0.02) million for the three months ended June 30, 2025, a decline of $0.5 million. The decline was primarily attributable to issuance costs of $0.3 million and $0.2 million recognized on the share settlements, together with a $0.1 million decrease in the gain recognized on the change in fair value of the warrant liability.
Previous wording
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”).
Current wording
Interest expense for the three and six months ended June 30, 2026, related entirely to the financing of an insurance policy, a routine, unsecured financing arrangement. By contrast, interest expense for the three and six months ended June 30, 2025, was attributable to the Senior Secured Promissory Note to PCCU (the “PCCU Note”), which the Company repaid in full prior to the current period.
Previous wording
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.
Current wording
For the three months ended June 30, 2026, issuance costs from the sale of ELOC were $0.2 million. There were no issuance costs related to the same period in 2025. For the six months ended June 30, 2026, issuance costs were $0.2 million. Again, there were no issuance costs related to the same period in 2025. Issuance costs represent the difference between the stock price on the trading date and the settlement date, multiplied by the number of shares issued.
Previous wording
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.
Current wording
For the three months ended June 30, 2026, the Company recognized a gain of less than $0.1 million from changes in the fair value of warrant liabilities, compared to a gain of $0.1 million for the three months ended June 30, 2025, a decrease of $0.1 million, or 89.4%. For the six months ended June 30, 2026, the Company recognized a gain of less than $0.1 million from changes in the fair value of warrant liabilities, compared to a gain of $1.3 million for the six months ended June 30, 2025, a decrease of $1.2 million, or 97.5%. The year-over-year decrease was due to the changes in the Company’s stock price during each period. As of June 30, 2026, all outstanding warrants were out of the money.
Previous wording
Cash and cash equivalents totaled $5.9 million as of March 31, 2026, and $6.8 million as of December 31, 2025.
Current wording
Cash and cash equivalents were $5.7 million as of June 30, 2026, and $6.8 million as of December 31, 2025.
Previous wording
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.
Current wording
As of June 30, 2026, the Company had no secured debt, cash and cash equivalents of $5.7 million, working capital of $4.7 million, and total stockholders’ equity of $6.1 million, which exceeds the minimum Nasdaq requirements. The Company has incurred recurring losses from operations and negative cash flows from operations, including an operating loss of $2.8 million and net cash used in operating activities of $2.8 million for the six months ended June 30, 2026, and an accumulated deficit of $126.2 million as of June 30, 2026. In addition, it is reasonably possible but not probable that a material adverse effect may result from the litigation matter as discussed in Note 16, Commitments and Contingencies. These conditions, considered in the aggregate, raise substantial doubt about the Company’s ability to continue as a going concern.
Previous wording
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.
Current wording
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:
Previous wording
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.
Current wording
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.
Previous wording
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.
Current wording
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.
Previous wording
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).
Current wording
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 are 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 final, it is an appealable order under C.R.C.P. 54(b).
Previous wording
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.
Current wording
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. 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.
Previous wording
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.
Current wording
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 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.”
Previous wording
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.
Current wording
In connection with our management’s assessment of internal control over financial reporting as of and for the six months ended June 30, 2026, the Company has identified material weaknesses within our internal controls over financial reporting. Refer to Part I, Item 4 of this document for additional details.
Previous wording
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.
Current wording
For the six months ended June 30, 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.
Previous wording
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.
Current wording
PCCU is a related party because it held approximately 8.8% of the Company’s Common Stock as of June 30, 2026, holds 49.2% of the Series B Preferred Stock and 43.9% of the 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.
Rearranged current paragraphs (5)
Current report — wording carried from elsewhere
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.
Current report — wording carried from elsewhere
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. The DEA held an expedited administrative hearing between June 29, 2026 and 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.
Current report — wording carried from elsewhere
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.
Current report — wording carried from elsewhere
Account fee income decreased by $0.2 million, or 18.4%, for the three months ended June 30, 2026, compared to the same period in 2025. The decline was primarily due to lower revenue from a merchant service partner, which reduced account fee income by approximately $0.2 million year over year.
Current report — wording carried from elsewhere
For the three months ended June 30, 2026, investment income was $0.3 million, compared to $0.3 million for the three months ended June 30, 2025. The average investable deposit base grew to $45.8 million from $35.3 million between those periods, but the benefit of that growth was offset by a decline in the Interest on Reserve Balances (IORB) rate from 4.40% to 3.65%.