SHF Holdings, Inc.
For the period ended Sep 30, 2026. Filed Nov 9, 2026.
View on SEC.govAbout this filing
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.
Sep 30, 2026 · Filed Nov 9, 2026
SHFS$0.02-5.7%Stored close · as of Nov 9, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious 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 OperationsCurrent report: 10-Q
Period ended 2026-09-30; filed 2026-11-09.
0001493152-26-050640
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 132 previous paragraphs and 141 current paragraphs.
54 unchanged; 47 reworded; 40 added; 31 removed; 0 previous and 0 current paragraphs rearranged.
Tables are not compared: 11 previous and 18 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 (40)
Current report
Reverse Stock Split
Current report
On September 30, 2026, the Company effected a 1-for-12 reverse stock split of its Common Stock (the “2026 Reverse Stock Split”) pursuant to a Certificate of Amendment to its Second Amended and Restated Certificate of Incorporation filed with the Secretary of State of the State of Delaware, which became effective on September 30, 2026. The 2026 Reverse Stock Split was approved by the Company’s stockholders on November 6, 2025, and the 1-for-12 ratio was approved by the board of directors of the Company (the “Board” or the “Board of Directors”) on September 16, 2026. No fractional shares were issued, and stockholders who were otherwise entitled to a fractional share received a number of shares rounded up to the nearest whole share. The 2026 Reverse Stock Split did not change the par value of the Common Stock or the number of authorized shares. Proportional adjustments were made to the number of shares issuable upon exercise or conversion of, and the exercise or conversion prices of, the Company’s outstanding warrants, stock options, restricted stock units and Series B Convertible Preferred Stock, as well as to the number of shares reserved under the Company’s Amended and Restated - 2022 Equity Incentive Plan.
Current report
On April 22, 2026, we received a letter from Nasdaq notifying us that the closing bid price of our Common Stock had been below $1.00 per share for 30 consecutive business days, as required by Nasdaq Listing Rule 5550(a)(2). We were provided an initial compliance period through October 19, 2026. On September 30, 2026, we effected the 2026 Reverse Stock Split. However, the closing bid price of our Common Stock did not remain at or above $1.00 for the required 10 consecutive business days, and we did not regain compliance by October 19, 2026.
Current report
On October 20, 2026, Nasdaq granted us a second compliance period of 180 calendar days through April 19, 2027. To regain compliance, the closing bid price of our Common Stock must be at least $1.00 for a minimum of 10 consecutive business days before that date. Since implementing the 2026 Reverse Stock Split, our Common Stock has consistently traded below $1.00 per share. In connection with the Proposed Transaction (as defined below), the Company may seek stockholder approval of a reverse stock split to the extent needed to meet Nasdaq’s bid price requirement.
Current report
We intend to evaluate all available options to regain compliance, including a further reverse stock split, which would require stockholder approval. Because we effected the 2026 Reverse Stock Split, our options are limited:
Current report
Opifex Term Sheet
Current report
On October 23, 2026, we entered into a non-binding term sheet with Opifex Media, Inc., a Beverly Hills, California-based media holding company focused on the creator economy (“Opifex”), for a proposed transaction in which a wholly owned subsidiary of the Company would merge with and into Opifex, and Opifex’s security holders would receive newly issued shares of Common Stock (the “Proposed Transaction”). See Note 18,Subsequent Events. If the Proposed Transaction results in a change of control under Nasdaq Listing Rule 5110(a), the combined company would be required to satisfy Nasdaq’s initial listing requirements, which are more stringent than the continued listing requirements. The term sheet is non-binding (other than certain specified provisions) and the Proposed Transaction is subject to numerous conditions, including Nasdaq approval. There can be no assurance that definitive agreements will be executed, that the Proposed Transaction will be completed before April 19, 2027, or at all, or that it would result in our regaining or maintaining compliance with Nasdaq listing requirements. See Part II, Item 1A., “Risk Factors- The Proposed Transaction with Opifex may not be completed, and if completed would substantially dilute our existing stockholders and change our business.”
Current report
If we do not regain compliance by April 19, 2027, Nasdaq will notify us that our securities are subject to delisting, and we may request a hearing before a Nasdaq Hearings Panel. See Note 17,Commitments and Contingencies.
Current report
The approval order was stayed on July 29, 2026 following notices of intention to petition for review. On September 11, 2026, the SEC granted the petitions for review, and the order remains stayed. Nasdaq has since proposed that the 30-business-day measurement period begin only after the stay terminates. The rule is not currently in effect, and there is no prescribed timeline for the SEC’s decision. A reverse stock split would not cure an MVLS deficiency because MVLS is based on the aggregate market value of the Company’s listed securities rather than its per-share price. The Company could become subject to immediate suspension and delisting proceedings, without the benefit of a compliance period, as soon as 30 consecutive business days after the rule takes effect. See Part II, Item 1A, “Risk Factors.”
Current report
Effect on Our Business. The loss of our Nasdaq listing would adversely affect:
Current report
In addition, a suspension or threatened suspension of trading could constitute a “Triggering Event” under the Certificate of Designations of Rights and Preferences (the “Series B Certificate of Designations”) of the Series B Convertible Preferred Stock, par value $0.0001 per share (the “Series B Convertible Preferred Stock”). See “Liquidity and Capital Resources” and Note 2,Basis of Presentation and Summary of Significant Accounting Policies, Note 16,Stockholders’ Equity, and Note 18,Subsequent Events. There can be no assurance that we will regain compliance with the minimum bid price requirement or maintain compliance with any other Nasdaq listing requirement.
Current report
On September 16, 2026, the Federal Reserve increased its target federal funds rate by 25 basis points and raised the IORB rate to 3.90%, effective September 17, 2026. This increase is expected to have a favorable impact on the yield earned on the Company’s investable deposits and may contribute to higher investment income in future periods. Based on our average investable deposit base at September 30, 2026, the Company estimates that a 25-basis-point increase in the federal funds by the Federal Reserve would contribute approximately $0.2 million in incremental annualized investment income. Actual results will depend on future balances, partner institution arrangements and any subsequent changes in interest rates, including rate decreases.
Current report
For the nine-month period, the change was primarily driven by the credit benefit recognized during the period, which was offset by higher general and administrative expenses, mainly resulting from increased marketing and technology expenditures, as well as the non-cash amortization of contract asset.
Current report
Professional services consist primarily of legal fees, as well as audit and accounting fees, consulting fees and Board fees. For the nine months ended September 30, 2026, professional services expense was $2.7 million, an increase of $0.01 million, or 0.2%, compared to $2.7 million for the same period in 2025. For the three months ended September 30, 2026, professional services expense increased $0.3 million, or 63.3%, to $0.7 million, compared to $0.4 million for the same period in 2025.
Current report
The comparison is affected by non-cash, equity-based compensation to service providers:
Current report
Excluding these non-cash amounts, professional services expense increased approximately $0.6 million and $0.4 million for the nine and three months ended September 30, 2026, respectively.
Current report
The increase was driven primarily by legal fees, which represent the majority of professional services expense, and related audit and accounting fees. These costs arise from obligations under the Series B Securities and from matters the Company must address as a Nasdaq-listed company, including:
Current report
As described in our Annual Report on Form 10-K for the year ended December 31, 2025, we had expected professional services costs to decline from 2025 levels as non-recurring matters were completed. Instead, recurring legal and accounting costs associated with the Series B Securities, the Abaca litigation and Nasdaq compliance have remained elevated.
Current report
We expect professional services expense to increase in the fourth quarter of 2026 and to remain elevated in future periods. Expected drivers of these expenses include:
Current report
For the three months ended September 30, 2026, total other income (expense), net was income of $0.02 million, compared to income of $1.4 million for the three months ended September 30, 2025, a decrease of $1.4 million. The decrease was primarily due to a non-recurring $3.3 million gain on the extinguishment of the forward purchase derivative, recognized in the three months ended September 30, 2025 upon termination of the Forward Purchase Agreement (the “FPA”) in connection with the September 2025 Recapitalization. The absence of this gain was partially offset by two prior-year items that did not recur in the current period: (i) $1.0 million of costs incurred to secure financing, primarily $0.8 million of non-cash costs related to the ELOC, and (ii) a $0.7 million loss on the change in fair value of warrant liabilities.
Current report
For the nine months ended September 30, 2026, total other income (expense), net was expense of $0.5 million, compared to income of $2.5 million for the nine months ended September 30, 2025, a decrease of $3.0 million. The decrease was primarily due to the non-recurring $3.3 million gain on the extinguishment of the forward purchase derivative recognized in the prior-year period upon termination of the FPA in connection with the September 2025 Recapitalization, a $0.6 million decrease in the gain on the change in fair value of warrant liabilities reflecting changes in the Company’s stock price, a $0.3 million loss on the sale of the Company’s investment in preferred securities, and $0.2 million of issuance costs related to the ELOC in the current period. These decreases were partially offset by two prior-year items that did not recur: $1.0 million of costs incurred to secure financing, primarily $0.8 million of non-cash costs related to the ELOC, and $0.5 million of interest expense. The Company had no interest-bearing secured debt during 2026 following the cancellation of the PCCU senior secured promissory note in September 2025.
Current report
Net loss on disposal of investment in preferred securities
Current report
Cost incurred to Secure Financing
Current report
The Company did not incur any costs to secure financing during the three or nine months ended September 30, 2026. During the three and nine months ended September 30, 2025, the Company incurred costs to secure financing of $1.0 million. These consisted primarily of $0.8 million of non-cash costs related to the Company’s ELOC, representing the fair value of 1,000 shares of Series B Convertible Preferred Stock and a Series B Warrant to purchase 5,364 shares of Common Stock issued to the ELOC investor as consideration for its purchase commitment, which were expensed in full upon issuance. These costs were non-recurring and related to the financing transactions completed in connection with the September 2025 Recapitalization.
Current report
Issuance cost from the sale of the Common Stock
Current report
For the nine months ended September 30, 2026, net cash used in operating activities was $4.0 million, compared to $2.4 million in 2025, an increase of $1.7 million. The increase reflects a $2.7 million higher net loss, which included a $1.1 million non-cash credit benefit that is deducted in reconciling to operating cash flow and therefore does not reduce cash used. Non-cash charges added back in 2026 included $0.4 million of contract asset amortization, a $0.3 million loss on the sale of ADTX preferred securities and $0.2 million of ELOC issuance discount, while the 2025 period had included a $3.3 million non-cash gain on extinguishment of the forward purchase derivative. Changes in operating assets and liabilities provided $0.1 million in 2026 versus $0.7 million in 2025; the 2025 period benefited from a $0.6 million increase in accounts payable and a $0.5 million reduction in prepaid expenses that did not recur.
Current report
Investing activities provided $0.5 million of cash during the nine months ended September 30, 2026, primarily from $0.8 million of proceeds received from the sale of preferred securities, partially offset by $0.3 million of expenditures related to internally generated intangible assets.
Current report
In addition, a trial on damages and the remaining claims in the Abaca litigation was held on August 10 and 11, 2026, and the Denver County District Court (the “Court”) has not issued its ruling. The Company assesses a loss as reasonably possible but not probable and estimates the range of reasonably possible loss at $0 to $7.8 million. An adverse ruling at or near the upper end of that range would exceed the Company’s available liquidity. The $3.0 million second anniversary payment deposited in the Court’s registry is not available to fund operations. See Note 17,Commitments and Contingencies.
Current report
Subsequent to September 30, 2026, the conversion price of the Series B Convertible Preferred Stock was reduced to $0.1210 per share, and holders have converted 19,529 preferred shares into approximately 131.2 million shares of Common Stock. As a result, the Company is required to register approximately 157.0 million shares of Common Stock for resale under the Registration Rights Agreement unless this requirement is waived by the applicable holders of the Series B Convertible Preferred Stock. No such waiver has been executed. The Company did not file the required registration statement by the November 6, 2026 filing deadline, and a filing failure under the Registration Rights Agreement has occurred. Failure to meet the applicable filing or effectiveness deadlines would require cash registration delay payments of approximately $0.3 million for each 30-day period until cured, except for any period during which all of a holder’s registrable securities may be sold under Rule 144 under the Securities Act. Because the applicable Rule 144 holding period for the Series B securities has been satisfied, the Company has concluded that no registration delay payments are owed as a result of the filing failure. If the registration statement is not filed by November 11, 2026, a Triggering Event will occur under the Series B Certificate of Designations. In addition, certain events, including a failure to timely file a required registration statement or a suspension or threatened suspension of trading of the Common Stock on Nasdaq, could constitute a Triggering Event under the Series B Certificate of Designations. On October 20, 2026, Nasdaq granted the Company a second compliance period through April 19, 2027 to regain compliance with the minimum bid price requirement. See Note 16,Stockholders’ Equity, Note 17,Commitments and Contingencies, and Note 18,Subsequent Events.
Current report
Material Cash Requirements. The Company’s material cash requirements over the next twelve months include:
Current report
Proposed Transaction. On October 23, 2026, the Company entered into a non-binding term sheet with Opifex, a Beverly Hills, California-based media holding company focused on the creator economy, regarding the Proposed Transaction. The Company does not intend to draw on the ELOC until the earlier of the closing of the Proposed Transaction or the termination of the term sheet. The Company has also agreed not to make certain payments without Opifex’s consent while the term sheet is in effect, including voluntary payments to holders of the Series B Securities, litigation settlements, and bonuses, retention or change-of-control payments not previously in effect and disclosed. These restrictions limit the sources of liquidity and the actions available to management during the pendency of the Proposed Transaction.
Current report
We are a party to litigation in the Court arising from our October 2022 acquisition of Rockview Digital Solutions, Inc. (d/b/a Abaca) (“Abaca”). On April 23, 2026, the Court ruled on the parties’ cross-motions for summary judgment. It held that the October 2023 amendment to the Abaca merger agreement is void and that we breached the original merger agreement with respect to the first anniversary parent shares. It reserved damages and the remaining claims, including the counterclaim concerning the $3.0 million second anniversary cash payment, for trial. Trial was held on August 10 and 11, 2026. The Court has not issued its ruling, and we cannot predict when it will rule or the outcome.
Current report
We assess a loss as reasonably possible but not probable, and estimate the range of reasonably possible loss at $0 to $7.8 million. Other than the $3.0 million second anniversary payment deposited into the Court’s registry in November 2024, which is reflected as deferred consideration and is not available to fund operations, no amount has been accrued.
Current report
An adverse ruling at or near the upper end of the range would exceed our cash and cash equivalents of $4.4 million as of September 30, 2026, and could have a material adverse effect on our financial position, results of operations and liquidity. If a judgment is entered against us, we may seek to appeal. However, staying enforcement of a money judgment pending appeal generally requires posting a bond or other security, which we may not be able to obtain or fund.
Current report
Legal fees related to this matter were a significant component of professional services expense in 2026, and we expect to continue to incur legal costs through any post-trial proceedings or appeal.
Current report
Under the term sheet, Opifex would acquire the Company subject to this litigation, and its resolution would not be a condition to closing.
Current report
See Note 17,Commitments and Contingencies, to the unaudited condensed consolidated financial statements and Part II, Item 1, “Legal Proceedings.”
Current report
On October 21, 2026, PCCU sold all 13,340 shares of Series B Convertible Preferred Stock it held to another holder of Series B Convertible Preferred Stock in a privately negotiated transaction to which the Company was not a party. Following the sale, PCCU:
Current report
Accordingly, effective October 21, 2026, the Company no longer considers PCCU a related party.
Current report
PCCU remains the Company’s most significant customer and financial institution partner. It accounted for $5.4 million, or 93%, of total revenue for the nine months ended September 30, 2026, under the Second Amended CAA. The Company’s results of operations and liquidity remain highly dependent on that relationship. Further, PCCU continues to hold Series B Warrants to purchase 360,532 shares of Common Stock at an exercise price of $18.6336 per share. See Note 2,Basis of Presentation and Summary of Significant Accounting Policies, Note 10,Related Party Transactions, and Note 18,Subsequent Events to the unaudited condensed consolidated financial statements.
Removed paragraphs (31)
Previous report
Board of Directors and Executive Officers
Previous 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.
Previous 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.
Previous 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”).
Previous 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.
Previous 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.
Previous report
On July 15, 2026, Michael Regan was appointed as the Company’s Chief Operating Officer and Secretary.
Previous 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.
Previous 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.
Previous report
Voluntary Market Adjustment to Series B Preferred Stock and related Warrants
Previous 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.
Previous 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.
Previous 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.
Previous 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.
Previous 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.
Previous 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.
Previous 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.
Previous report
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 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.
Previous report
Loss on Sale of Investment
Previous report
Issuance costs
Previous report
For the six months ended June 30, 2026, the Company used $2.8 million of cash in operating activities, compared to $1.8 million used during the same period in 2025. The increase in cash used was primarily driven by a higher net loss, partially offset by favorable changes in operating assets and liabilities and non-cash adjustments, including a $0.7 million credit benefit and a $0.3 million loss on the sale of investment securities.
Previous report
Investing activities provided $0.7 million of cash for the six months ended June 30, 2026, primarily from proceeds on the sale of the Company’s investment in preferred securities.
Previous report
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 report
On October 17, 2024, the Company filed a complaint in the Denver County, Colorado District Court (the “District Court”), captionedSHF 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”).
Previous report
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.
Previous report
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.
Previous report
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.
Previous report
On April 23, 2026, the District Court issued an omnibus order on cross-motions for summary judgment in the matter.
Previous report
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 report
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.
Reworded paragraphs (47)
Previous wording
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.
Current wording
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. Unless otherwise stated, all share and per share amounts for all periods presented have been adjusted to reflect the 2026 Reverse Stock Split (as defined below).
Previous wording
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.
Current wording
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 Safe Harbor Program to other financial institutions, providing them know your customer due diligence tools, compliance monitoring, program management support, and regulatory exam assistance.
Previous wording
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.
Current wording
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 $38.7 billion in cannabis-related depository funds and has supported its financial institution clients through more than 25 state and federal banking examinations.
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 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.
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 (as defined below); (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 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.
Current wording
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. See “Related Party Relationships.”
Previous wording
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 wording
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. In April 2026, the Attorney General issued a final order, effective April 28, 2026, 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 from June 29, 2026 through July 15, 2026 on the proposed transfer of marijuana generally from Schedule I to Schedule III, and post-hearing briefs were filed on August 17, 2026. On September 29, 2026, before issuing a recommended decision, the DEA’s Chief Administrative Law Judge stayed the proceeding to consider a motion to add a September 2026 Government Accountability Office report on federal drug-scheduling procedures to the hearing record. On October 22, 2026, the Chief Administrative Law Judge admitted the report into the record and permitted limited supplemental briefing on it, with initial briefs due October 29, 2026 and replies due November 5, 2026, but denied a request to reopen the hearing for additional testimony and evidence. The Chief Administrative Law Judge is expected to issue a recommended decision to the DEA Administrator, who will make the final determination. The stay does not affect the April 2026 order. The April 2026 order is the subject of consolidated petitions for review in the U.S. Court of Appeals for the District of Columbia Circuit; on September 9, 2026, the court denied a motion to stay the order pending review, and the order remains in effect. There can be no assurance as to the timing or outcome of the DEA proceeding or the pending litigation, or as to whether broader rescheduling will occur.
Previous 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.
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 could also affect our market. The SAFER Banking Act, which would provide a safe harbor for depository institutions that serve CRBs, has not been reintroduced in the current Congress. On March 18, 2026, the Capital Lending and Investment for Marijuana Businesses (“CLIMB”) Act (H.R. 7987) was introduced in the U.S. House of Representatives and referred to the House Committee on Financial Services. Among other things, the CLIMB Act would protect financial institutions, insurers and other service providers from federal penalties solely for serving state-legal cannabis businesses and would permit such businesses to list on national securities exchanges. The Preparing Regulators Effectively for a Post-Prohibition Adult-Use Regulated Environment Act (H.R. 2935 and S. 3576) would establish a federal commission to recommend a regulatory framework for cannabis following the end of federal prohibition. Neither bill has advanced beyond referral to committee, and there can be no assurance that either will be enacted. If enacted, the CLIMB Act or similar legislation could expand the availability of banking, lending and capital markets services to CRBs, which could increase demand for compliant financial services but could also increase competition in our market, including from larger financial institutions. 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
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 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. Because Section 280E applies only to trafficking in Schedule I and Schedule II controlled substances, it no longer applies to activities involving marijuana covered by the April 2026 order, but it continues to apply to adult-use cannabis businesses unless and until broader rescheduling occurs.
Previous wording
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 wording
On June 17, 2026, Nasdaq published guidance on the Nasdaq Listing Center (identification number 1877) stating that 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.
Previous wording
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.
Current wording
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. 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.
Previous wording
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 wording
For the three and nine months ended September 30, 2026, the Company continued to grow its deposit base and expand the scale of its client relationships. Average deposit balances increased $4.0 million, or 3.8%, to $112.0 million for the three-month period, and $3.6 million, or 3.4%, to $108.8 million for the nine-month period, each compared to the same periods last year. Active accounts reduced by 1.7% for the three-month period, while the nine-month period reduced by 1.3%; in each case, average account balance increased, rising 5.6% to $0.1 million for the three-month period and 4.7% to $0.1 million for the nine-month period. Average account fee revenue was $0.2 million for both the three- and nine-month periods, decreasing 14.4% and 16.6%, respectively, compared to the prior year periods, as average fees collected per account decreased 12.9% to $304.00 for the three-month period and 15.7% to $306.00 for the nine-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.
Previous wording
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 wording
Proposed Market Value of Listed Securities Requirement. On July 22, 2026, the SEC approved a Nasdaq rule that would require listed companies to maintain a minimum market value of listed securities (“MVLS”) of $5.0 million. A company whose MVLS remains below $5.0 million for 30 consecutive business days would become immediately subject to suspension and delisting, without a compliance period, and a hearing request would not stay the suspension.
Previous 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
Current wording
Discussion of our Results of Operations for the Three and Nine Months Ended September 30, 2026 Compared to the Three and Nine Months Ended September 30, 2025
Previous wording
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 wording
Account fee income decreased by $0.2 million, or 17.1%, for the three months ended September 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 $0.1 million year over year. Account fee income was also negatively impacted by competitive pressures on fees.
Previous 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.
Current wording
Account fee income decreased by $0.6 million, or 18.2%, for the nine months ended September 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 $0.3 million year over year. In addition, lower average fees collected from PCCU-hosted accounts contributed approximately $0.2 million to the overall decrease.
Previous wording
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 wording
For the three months ended September 30, 2026, loan program income was $0.9 million, compared to $0.5 million for the three months ended September 30, 2025, an increase of $0.4 million, or 70.2%. For the nine months ended September 30, 2026, loan program income was $2.5 million, compared to $1.6 million for the nine months ended September 30, 2025, an increase of $0.9 million, or 58.6%.
Previous wording
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 wording
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. This increase was partially offset by a decline in the average loan portfolio balance to $51.34 million for the nine months ended September 30, 2026, from $53.11 million for the same period in 2025, reflecting fewer loans outstanding year over year.
Previous wording
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%.
Current wording
For the three months ended September 30, 2026, investment income was $0.3 million, compared to $0.3 million for the three months ended September 30, 2025. The average investable deposit base grew to $53.4 million from $42.9 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%.
Previous 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%.
Current wording
For the nine months ended September 30, 2026, investment income was $0.8 million, compared to $0.9 million for the nine months ended September 30, 2025, a decrease of $0.1 million, or 12.5%. The average investable deposit base grew to $49.2 million from $37.5 million between those periods, but the benefit of that growth was more than offset by a decline in the IORB rate from approximately 4.40% to 3.65% during the nine months ended September 30, 2025 and 2026, respectively.
Previous wording
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 wording
For the three months ended September 30, 2026, total operating expenses decreased by $0.1 million, or 3.2%, to $3.0 million, compared to $3.1 million for the same period in 2025. For the nine months ended September 30, 2026, total operating expenses decreased $0.1 million, or 1.4%, to $9.7 million, compared to $9.8 million for the same period in 2025.
Previous wording
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 wording
For the three-month period, the change was primarily attributable to a credit benefit recognized during the period and lower compensation and employee benefits expenses, partially offset by an investment in marketing and business development captured in general and administrative expenses.
Previous wording
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 wording
For the three months ended September 30, 2026, compensation and employee benefits expenses decreased by $0.2 million, or 10.6%, to $1.5 million, compared to $1.7 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, primarily the build-out of the Company’s managed services business that offers outsourced consulting and operational support directly to CRBs and financial institutions (“Managed Services”). Compensation and employee benefits attributable to Managed Services personnel were approximately $0.1 million for the three months ended September 30, 2026.
Previous wording
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 wording
For the nine months ended September 30, 2026, compensation and employee benefits expenses increased by $0.003 million, or 0.1%, to $4.7 million, compared to $4.7 million for the same period in 2025. The increase was primarily driven by investments in staff to support strategic growth initiatives, principally the development of the Company’s Managed Services offering, which accounted for approximately $0.4 million of the increase, offset in part by savings from the departure of certain executive officers and a decrease in stock-based compensation expense, as no stock awards were granted in 2026. The Company expects compensation and employee benefits associated with its Managed Services personnel to continue at an annualized rate of approximately $0.5 million as it develops this business.
Previous wording
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 wording
For the three and nine months ended September 30, 2026, general and administrative expenses increased $0.03 million and $0.5 million, or 3.9% and 23.4%, to $0.9 million and $2.8 million, compared to $0.9 million and $2.3 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. 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.
Previous 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.
Current wording
For the three and nine months ended September 30, 2026, rent expense was $0.05 million and $0.2 million, respectively, compared to $0.06 million and $0.2 million for the same periods in 2025, a decrease of $0.01 million, or 11.5%, and $0.02 million, or 10.1%, respectively, primarily due to the closure of the Company’s Arkansas office during 2025.
Previous 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.
Current wording
For the three and nine months ended September 30, 2026, amortization of the contract asset was $0.1 million and $0.4 million, respectively, compared to $0 for the same periods in 2025. The contract asset is amortized on a systematic and rational basis over the contract term, consistent with the release of the underlying guaranteed exposure, discussed in Note 6,Contract Asset, to the accompanying unaudited condensed consolidated financial statements, following the October 1, 2025, effective date of that agreement.
Previous 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.
Current wording
For the three and nine months ended September 30, 2026, the Company recognized a credit benefit of $0.4 million and $1.1 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 nine months ended September 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 September 30, 2026, resulting in a reduction of the financial indemnification liability, which was also recognized as a credit benefit.
Previous wording
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 wording
The third-anniversary payment obligation was fully extinguished in October 2025 upon settlement and accordingly no further changes in fair value were recognized during 2026. For the three months ended September 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 September 30, 2025. For the nine months ended September 30, 2026, the Company recognized no change in the fair value of deferred consideration, compared to a gain of $0.1 million for the nine months ended September 30, 2025. The gain recognized for the nine months ended September 30, 2025 primarily resulted from a decline in the Company’s stock price, reducing the third-anniversary payment obligation during that period prior to settlement.
Previous wording
The Company had no secured debt outstanding as of and during the six-month period ended June 30, 2026.
Current wording
The Company had no secured debt outstanding as of and during the nine-month period ended September 30, 2026.
Previous 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.
Current wording
Interest expense for the three and nine months ended September 30, 2026, related entirely to the financing of an insurance policy, a routine, unsecured financing arrangement. By contrast, interest expense for the three and nine months ended September 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 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 wording
For the three months ended September 30, 2026, interest expense was $0, compared to $0.3 million for the three months ended September 30, 2025, a decrease of $0.3 million, or 100.0%. For the nine months ended September 30, 2026, interest expense was less than $0.1 million, compared to $0.5 million for the nine months ended September 30, 2025, a decrease of $0.5 million, or 98.6%.
Previous wording
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 wording
For the three and nine months ended September 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.
Previous wording
The Company received the ADTX preferred shares in 2025 in connection with the restructuring of certain of its Series B Preferred Stock and associated warrants, and not as part of any investment strategy in the biotechnology sector. At the time of receipt, the Company anticipated recovering at least $1.5 million from the eventual sale of these shares. However, ADTX was subsequently delisted on June 23, 2026, prior to the Company’s ability to liquidate the shares, which adversely affected the value realized on disposition.
Current wording
The Company received the Aditxt Inc. (“ADTX”) preferred shares in 2025 in connection with the restructuring of certain of its Series B Convertible Preferred Stock and associated warrants, and not as part of any investment strategy in the biotechnology sector. At the time of receipt, the Company anticipated recovering at least $1.5 million from the eventual sale of these shares. However, ADTX was subsequently delisted on June 23, 2026, prior to the Company’s ability to liquidate the shares, which adversely affected the value realized on disposition.
Previous wording
For the three and six months ended June 30, 2026, the Company recognized a loss of $0.3 million on the sale of its investment in preferred securities of ADTX, compared to no such loss for the same periods in 2025. During the six months ended June 30, 2026, ADTX redeemed 23 shares, and the Company liquidated its remaining 1,434 shares of ADTX preferred stock through a combination of open-market and privately negotiated transactions, generating proceeds of approximately $1.1 million, of which approximately $0.5 million remained receivable as of June 30, 2026, and is included in other current assets in the condensed unaudited consolidated balance sheet as of June 30, 2026. The liquidation of the 1,434 shares occurred during the three months ended June 30, 2026 and gave rise to the loss recognized in both periods.
Current wording
For the nine months ended September 30, 2026, the Company recognized a loss of $0.3 million on the sale of its investment in preferred securities of ADTX, compared to no such loss for the same periods in 2025. During the nine months ended September 30, 2026, ADTX redeemed 23 shares, and the Company liquidated its remaining 1,434 shares of ADTX preferred stock through a combination of open-market and privately negotiated transactions, generating proceeds of approximately $1.1 million, of which approximately $0.3 million remained receivable as of September 30, 2026, and is included in other current assets in the condensed unaudited consolidated balance sheet as of September 30, 2026. The liquidation of the 1,434 shares occurred during the three months ended June 30, 2026.
Previous 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.
Current wording
For the nine months ended September 30, 2026, issuance costs from the sale of Common Stock under the ELOC were $0.2 million. No issuance costs were incurred for the three months ended September 30, 2026 or for the three and nine months ended September 30, 2025. Issuance costs represent the difference between the market price of the Common Stock on the draw date and the price on the settlement date, multiplied by the number of shares issued.
Previous 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.
Current wording
For the three months ended September 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 loss of $0.7 million for the three months ended September 30, 2025, an increase of $0.7 million, or 101.20%. For the nine months ended September 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 $0.6 million for the nine months ended September 30, 2025, a decrease of $0.6 million, or 93.4%. The year-over-year decrease was due to the changes in the Company’s stock price during each period. As of September 30, 2026, all outstanding warrants were out of the money.
Previous wording
Cash and cash equivalents were $5.7 million as of June 30, 2026, and $6.8 million as of December 31, 2025.
Current wording
Cash and cash equivalents were $4.4 million as of September 30, 2026, and $6.8 million as of December 31, 2025.
Previous wording
Financing activities provided $1.1 million of cash for the six months ended June 30, 2026, from proceeds under the Company’s ELOC, compared to $0.3 million of cash used during the same period in 2025, primarily to repay the PCCU Note.
Current wording
Financing activities provided $1.1 million of cash during the nine months ended September 30, 2026, primarily from proceeds received under the Company’s ELOC, compared to $0.5 million of cash provided by financing activities during the same period in 2025, which consisted of proceeds from the issuance of convertible debt ($0.6 million) and Series B Convertible Preferred Stock ($0.2 million), partially offset by the repayment of the PCCU Note ($0.3 million).
Previous wording
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 June 30, 2026, we do not have significant capital investment commitments.
Current wording
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, professional services and general business expenditures. Our sources of liquidity are our existing cash and cash equivalents, cash flows from operations to the extent achieved and, subject to the restrictions described below, the sale of Common Stock pursuant to the Equity Line of Credit (the “ELOC”). As of September 30, 2026, we do not have significant capital investment commitments.
Previous 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.
Current wording
As of September 30, 2026, the Company had cash and cash equivalents of $4.4 million, working capital of $3.7 million, and total stockholders’ equity of $5.2 million, which is $2.7 million above the minimum stockholders’ equity requirement of $2.5 million under Nasdaq Listing Rule 5550(b)(1). The Company has incurred recurring losses from operations and negative cash flows from operations, including an operating loss of $3.8 million and net cash used in operating activities of $4.0 million for the nine months ended September 30, 2026, and an accumulated deficit of $127.2 million as of September 30, 2026.
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