SHF Holdings, Inc.

Note 1. Organization and Business Operations

Business Description

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

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

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

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

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

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

Significant Accounting Policies

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

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

Basis of Presentation

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

The accompanying unaudited condensed consolidated financial statements contain all normal and recurring adjustments necessary to state fairly the consolidated financial condition, results of operations, statements of stockholders’ equity, and cash flows of the Company for the interim periods presented. Except as otherwise disclosed, all such adjustments consist only of those of a normal recurring nature. Operating results for the three and nine months ended September 30, 2026 are not necessarily indicative of the results that may be expected for the year ending December 31, 2026 or other interim periods.

The condensed unaudited consolidated financial statements include the accounts of SHF Holdings, Inc. and its wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated.

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

Liquidity and Going Concern

Liquidity refers to our ability to meet anticipated cash demands, including funding operations, and covering other routine business expenses. Our primary cash outflows include operating costs, professional services and general business expenditures. The Company’s sources of liquidity are its 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, 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 Nasdaq 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.

In addition, a trial on damages and the remaining claims in the Abaca (as defined below) litigation was held on August 10 and 11, 2026, and the District 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 District Court’s registry is not available to fund operations. See Note 17,Commitments and Contingencies.

These conditions, considered in the aggregate, raise substantial doubt about the Company’s ability to continue as a going concern.

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

On October 23, 2026, the Company entered into a non-binding term sheet with Opifex Media, Inc. (“Opifex”), a Beverly Hills, California-based media holding company focused on the creator economy, regarding the Proposed Transaction (as defined below) described in Note 18,Subsequent Events. 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. The restrictions limit the sources of liquidity and the actions available to management during the pendency of the Proposed Transaction.

Notwithstanding the measures described above, the Company continues to incur operating losses and negative cash flows from operations, the ELOC is not expected to be used while the Proposed Transaction is pending, and the Company’s ability to execute on its expense-management plans involves elements outside of management’s sole control. Accordingly, management has concluded that management’s plans, considered in the aggregate, do not alleviate the substantial doubt about the Company’s ability to continue as a going concern for a period of at least twelve months from the date these unaudited condensed consolidated financial statements are issued.

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

Use of Estimates

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

Reverse Stock Split

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 effected to increase the per share trading price of the Common Stock in order to regain compliance with the $1.00 minimum closing bid price requirement for continued listing on The Nasdaq Capital Market under Nasdaq Listing Rule 5550(a)(2), as described in Note 17,Commitments and Contingencies, Nasdaq Listing Compliance. No fractional shares were issued; stockholders 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, and to the number of shares reserved under the Company’s equity incentive plan. All share and per share amounts for all periods presented have been adjusted to reflect the 2026 Reverse Stock Split.

Cash and Cash Equivalents

Cash and cash equivalents consist of cash on hand, balances due from financial institutions, and other highly liquid investments with original maturities of three months or less from the date of purchase that are readily convertible to known amounts of cash and are subject to an insignificant risk of changes in value.

As of September 30, 2026, cash and cash equivalents were $4.4 million, primarily held in operating accounts, substantially all of which were on deposit with PCCU, a related party (see Note 10,Related Party Transactions). The Company’s investment in a government money market fund represents operating cash of the Company’s wholly owned subsidiary, SHF, LLC.

Revenue Recognition

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

Stock-Based Compensation

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

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

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

Preferred Stock - Classification and Measurement

The Company evaluated its Series B Convertible Preferred Stock under ASC 480, Distinguishing Liabilities from Equity, and ASC 815-40, Contracts in Entity’s Own Equity, and concluded that it is appropriately classified in permanent equity. The Series B Convertible Preferred Stock is not mandatorily redeemable, and it does not contain redemption features that are outside the Company’s control. Any embedded conversion features are indexed to the Company’s own stock and meet the conditions for equity classification, and therefore it is not bifurcated and accounted for as a derivative.

Fair Value Measurements

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

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

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

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

Segment Reporting

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

Financial Assets Measured at Amortized Cost

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

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

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

Contract Asset

The contract asset was recognized in connection with the Second Amended CAA within the scope of ASC 340-40. This asset represents costs incurred to fulfill the contract, specifically the cost of assuming the stand-ready guarantee obligation under ASC 460 and the contingent indemnification exposure under ASC 326. The contract asset is amortized on a systematic and rational basis over the contract term consistent with the release of the underlying guarantee exposure. The contract asset is evaluated for impairment under ASC 340-40-35-3 when facts and circumstances indicate the carrying amount may not be recoverable and any impairment identified is recognized in the period identified and may not be subsequently reversed.

Capitalized Software Development Costs

The Company capitalizes certain costs incurred to develop software for internal use in accordance with ASC 350-40, Intangibles—Goodwill and Other—Internal-Use Software. Costs incurred during the preliminary project stage, including conceptual formulation, evaluation of alternatives and determination of performance requirements, are expensed as incurred. Costs incurred during the application development stage, consisting primarily of external direct costs of materials and services and payroll and payroll-related costs of employees directly associated with the project, are capitalized once management with the relevant authority has authorized and committed to funding the project and it is probable the project will be completed and the software will be used to perform the function intended. Capitalization ceases when the software is substantially complete and ready for its intended use. Costs incurred after the software is placed in service, including training, maintenance and minor enhancements that do not add functionality, and costs that do not qualify for capitalization, are expensed as incurred and are included in general and administrative expenses in the unaudited condensed consolidated statements of operations.

Capitalized software development costs are amortized on a straight-line basis over the estimated useful life of the software, generally five years, beginning when the software is placed in service, and amortization is included in general and administrative expenses. Capitalized software is evaluated for impairment in accordance with ASC 360-10 whenever events or changes in circumstances indicate the carrying amount may not be recoverable. An impairment loss is recognized when the carrying amount exceeds the undiscounted cash flows expected to result from the use and eventual disposition of the asset, measured as the excess of carrying amount over fair value.** **

Stand Ready Guarantees – ASC 460

The Company accounts for its indemnification obligation to PCCU under the Second Amended CAA as a financial guarantee within the scope of ASC 460, Guarantees. Under ASC 460-10-25-3, the issuance of a guarantee imposes a noncontingent obligation to stand ready to perform, and at inception the Company recognizes a stand-ready guarantee liability equal to the fair value of that obligation, irrespective of the likelihood that a payment will actually be required. A new stand-ready liability is recognized at fair value each time a loan is added to the indemnified CRB loan portfolio.

Subsequent to initial recognition, the stand-ready liability is not remeasured to fair value. Consistent with ASC 460-10-35-2, it is reduced through release to income on a systematic and rational basis over the weighted average life of the underlying indemnified loans, reflecting the Company’s progressive release from risk as those loans are repaid or mature.

Financial Indemnification Liabilities

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

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

Concentration of Risk

The Company’s revenue is concentrated in the United States with a single customer, PCCU, which represented the substantial majority of revenue for the three and nine months ended September 30, 2026 and September 30, 2025, see Note 10,Related Party Transactions. Substantially all CRB client deposits are maintained at PCCU, and all fund transmissions to and from those deposit accounts are handled directly by PCCU.

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

As of September 30, 2026 and December 31, 2025, the Company had $3.6 million and $6.5 million of account balances, respectively, in excess of FDIC coverage. Additionally, amounts due from PCCU represented approximately 98.0% and 97.0% of total accounts receivable as of September 30, 2026 and December 31, 2025, respectively, with balances of approximately $0.8 million and $1.0 million, respectively. The Company has not experienced losses on these accounts or receivables, and management does not believe the Company is exposed to significant credit risk on such accounts.

Recently Issued Accounting Standards

Standards Adopted in 2026

ASU 2024-04 – Debt - Debt with Conversion and Other Options (Subtopic 470-20): Induced Conversions: In November 2024, the Financial Accounting Standards Board (“FASB”) issued ASU 2024-04, which clarifies the accounting for induced conversions of convertible debt. The standard is effective for annual periods beginning after December 15, 2025. The Company adopted this standard prospectively. The adoption had no effect on the Company’s unaudited condensed consolidated financial statements. The conversions of Series B Convertible Preferred Stock that were induced via a temporary reduction in the Series B Convertible Preferred Stock’s conversion price, which occurred during the quarter ended June 30, 2026, are equity-classified preferred stock conversions accounted for under ASC 260-10-S99-2 rather than ASU 2024-04 (which amends ASC 470-20), and the resulting deemed dividend is disclosed in Note 12,Earnings Per Share.

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

Standards Not Yet Adopted

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

ASU 2025-06 – Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software: In September 2025, the FASB issued ASU 2025-06, which removes the project-stage framework for capitalizing internal-use software costs and instead requires capitalization to begin when management has authorized and committed to funding the software project and it is probable that the project will be completed and the software will be used to perform the function intended. The standard also removes references to website development costs and provides guidance on evaluating significant development uncertainty. The standard is effective for annual periods beginning after December 15, 2027, and interim periods within those annual periods, with early adoption permitted. The Company plans to adopt this standard prospectively on January 1, 2028, and does not anticipate a material impact on its unaudited condensed consolidated financial statements.

ASU 2026-01 – Debt (Subtopic 505-10): Initial Measurement of Paid-in-Kind Dividends on Equity-Classified Preferred Stock: In April 2026, the FASB issued ASU 2026-01, which requires that paid-in-kind (“PIK”) dividends on equity-classified preferred stock be initially measured based on the PIK dividend rate stated in the preferred stock agreement for purposes of both financial statement recognition and earnings per share calculations. The standard does not change when PIK dividends are recorded or when they affect earnings per share. The standard is effective for annual periods beginning after December 15, 2026, and interim periods within those annual periods. Early adoption is permitted and does not anticipate a material impact on its unaudited condensed consolidated financial statements.

Loss of Emerging Growth Company Status: The Company is an emerging growth company (“EGC”) under the Jumpstart Our Business Startups Act of 2012 and has elected to use the extended transition period for complying with new or revised accounting standards. The Company will cease to be an EGC on December 31, 2026, the last day of the fiscal year following the fifth anniversary of its initial public offering. Beginning with its Annual Report on Form 10-K for the year ending December 31, 2026, the Company will be required to adopt new or revised accounting standards on the effective dates applicable to public business entities and will no longer be permitted to defer adoption to the dates applicable to private companies. The Company has adopted, as of the public business entity effective dates, all accounting standards that are effective for public business entities for annual periods beginning on or before January 1, 2026. Accordingly, management does not expect the loss of EGC status to require the adoption of any additional accounting standards in the Annual Report on Form 10-K for the year ending December 31, 2026. The effective dates presented above for standards not yet adopted are those applicable to public business entities, and the Company expects to adopt each such standard on that date.

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

Note 3 -Deferred Consideration

On November 21, 2024, the Company deposited the $3.0 million second annual cash payment into the registry of the Denver County, Colorado District Court (the “District Court”) pending resolution of a dispute among former shareholders of Rockview Digital Solutions, Inc. (d/b/a Abaca) (“Abaca”) regarding the party authorized to receive the payment. See Note 17,Commitments and Contingencies.

The change to deferred consideration recognized as an expense for the three months ended September 30, 2026 and September 30, 2025 was $0.0 and $0.04 million, respectively. The change to deferred consideration is recognized as a credit for the nine months ended September 30, 2026 and September 30, 2025 was $0.0 and $0.1 million, respectively. Deferred consideration as of September 30, 2026 and December 31, 2025 was $3.0 million. This amount has been deposited with the District Court registry, which is carried as an asset pending resolution of the shareholder litigation described in Note 17,Commitments and Contingencies.

Note 4 -Prepaid Expenses

Prepaid expenses as of September 30, 2026 and December 31, 2025 consist of the following:

Insurance

The Company maintains several insurance policies. In addition, in connection with the Company’s de-SPAC transaction that closed on September 28, 2022, the Company obtained a Directors and Officers liability run-off policy that provides coverage through September 2028.

Consulting

In connection with the September 2025 Recapitalization (as defined below), the Company issued 1,063 shares of Series B Convertible Preferred Stock, as well as Common Stock purchase warrants (as amended and restated, the “Series B Warrants” and, together with the Series B Convertible Preferred Stock, the “Series B Securities”) to purchase $0.5 million of Common Stock at the applicable conversion price to three independent service providers in exchange for professional and marketing services to be rendered through September 30, 2027. The equity instruments were measured at their grant-date fair value of approximately $0.8 million based on a valuation performed by a third-party specialist and are classified within stockholders’ equity. The grant-date fair value was recorded as prepaid consulting and is being amortized to professional services expense on a straight-line basis over the two-year service period.

Of these amounts, one of the three service providers received 480 shares of Series B Convertible Preferred Stock and a Series B Warrant to purchase $0.2 million of Common Stock at the applicable conversion price. Effective April 28, 2026, the Company and this service provider amended their agreement and, in connection therewith, the service provider returned to the Company 476 of the then-outstanding, unconverted shares of Series B Convertible Preferred Stock and its unexercised Series B Warrant. The cancellation resulted in the reversal of a prepaid expense of $0.1 million, which is reflected in the unaudited condensed consolidated statement of Stockholders’ Equity for the nine month period ended September 30, 2026.

Note 5 -Investment in Preferred Securities

During the year ended December 31, 2025, in connection with the issuance of 1,875 shares of Series B Convertible Preferred Stock and accompanying Series B Warrants at $800 per share, the Company received, as non-cash consideration, preferred shares of Aditxt Inc. (“ADTX”). No cash was exchanged in this transaction. The ADTX preferred shares had an estimated fair value and carrying value of $1.5 million at the date of receipt.

During the year ended December 31, 2025, ADTX redeemed 43 shares of its preferred stock held by the Company, resulting in cash proceeds of approximately $0.05 million, all of which was collected during the period. No loss was recognized on this redemption.

During the nine months ended September 30, 2026, ADTX redeemed approximately 23 shares of its preferred stock held by the Company in accordance with the terms of the preferred shares. These redemptions resulted in cash proceeds of approximately $0.03 million. During the nine months ended September 30, 2026, the Company converted approximately 829 preferred ADTX shares into common shares and sold them for net proceeds of approximately $0.6 million. In addition, the Company sold approximately 605 preferred ADTX shares to an institutional investor for approximately $0.5 million. The combined proceeds were $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. In connection with these redemptions and sales of shares, the Company recognized a loss of $0.3 million for the nine months ended September 30, 2026 within the unaudited condensed consolidated statements of operations. The liquidation occurred during the three months ended June 30, 2026.

The following table summarizes the activity in the investment during the nine months ended September 30, 2026, and for the year ended December 31, 2025:

Note 6 -Contract Asset

The contract asset was recognized in connection with the Second Amended CAA within the scope of ASC 340. This asset represents costs incurred to fulfill the contract, specifically the cost of assuming the stand-ready guarantee obligation under ASC 460 and the contingent indemnification exposure under ASC 326. The contract asset is amortized on a systematic and rational basis over the contract term, consistent with the release of the underlying guarantee exposure. The contract asset is evaluated for impairment under ASC 340-40-35-3 when facts and circumstances indicate the carrying amount may not be recoverable, and any impairment identified is recognized in the period identified and may not be subsequently reversed.

The following table summarizes the change in the contract asset for the three and nine months ended September 30, 2026:

As of September 30, 2026, $0.3 million and $0.2 million of the stand-ready guarantee and financial indemnification contract assets, respectively, are classified as current, with the remaining $1.5 million and $0.7 million classified as non-current. As of December 31, 2025, $0.3 million and $0.2 million of the stand-ready guarantee and financial indemnification contract assets, respectively, were classified as current, with the remaining $1.7 million and $0.9 million classified as non-current.

Amortization of the contract asset was $0.1 million and $0.4 million for the three and nine months ended September 30, 2026, respectively, compared to $0 for the three and nine months ended September 30, 2025, representing the straight-line amortization of the cost to acquire the contract asset recognized as of October 1, 2025, the effective date of the Second Amended CAA. Amortization expense is recognized within operating expenses and is partially offset each period by the corresponding release of the stand-ready guarantee liability and remeasurement of the financial indemnification liability to income, as described in Note 7,Loan Portfolio Indemnification Obligations.

Note 7 -Loan Portfolio Indemnification Obligations

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

The obligation is recognized as two independent, coexisting liabilities that do not offset each other: (i) a noncontingent stand-ready guarantee liability under ASC 460, measured at fair value at inception, and (ii) a contingent expected credit loss (benefit) liability under ASC 326-20, representing the Company’s up to 65% share of estimated lifetime expected credit losses (benefit) on the PCCU CRB portfolio. Each liability is recognized with a corresponding contract asset under ASC 340-40-25-3, as the indemnification costs are directly related to the Second Amended CAA and are expected to be recovered through the Company’s up to 65% share of loan program income.

ASC 460 - Guarantee Liability

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

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

Key Level 3 inputs as of December 31, 2025 are as follows:

For loans entered into subsequent to October 1, 2025, the effective date of the Second Amended CAA, management evaluates the stand-ready guarantee on a specific identification basis, separate from the pooled tranche inputs presented above. Loans originated under this methodology are evaluated using the tranche-specific assumptions determined at each loan’s origination date, as follows:

The maximum potential amount of future payments under the guarantee across all loans evaluated on a specific identification basis is approximately $33.3 million and $33.8 million as of September 30, 2026 and December 31, 2025, respectively, representing 65% of the total outstanding CRB loan portfolio balance.

Each stand-ready guarantee liability tranche is reduced through amortization on a straight-line basis over its respective weighted average payout period, determined at origination and disclosed in the table above. The release period and release pattern for each tranche are reassessed at least annually. If material changes in the portfolio composition at inception, loan paydowns, or maturities indicate that the weighted average life assumption is no longer appropriate, the Company adjusts the release period and pattern prospectively.

ASC 326-20 - Financial Indemnification Liability

The financial indemnification liability is estimated using a probability of default (“PD”) × loss given default (“LGD”) framework, with the indemnified portfolio segmented by management’s internal risk rating scale into three tranches. Key assumptions are independently developed by management, incorporating cannabis industry-specific risk factors through a qualitative LGD premium ranging from 12.5% to 17.9% applied across all pooled tranches and individual evaluation of Tranche C loans.

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

The expected credit loss liability as of September 30, 2026 is as follows:

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

At December 31, 2025, there was a single loan within Tranche C that was individually evaluated due to its commercial and industrial (C&I) structure and collateral-dependent status. Following an independent risk review completed by the loan’s third-party servicer in May 2026, which considered debt-service coverage trends, revenue growth, and a sustained history of current payments, and applied a conservative override to the loan’s quantitatively-indicated rating the loan’s risk rating was upgraded from 9 (Doubtful) to 8 (Substandard) as of September 30, 2026. In connection with this upgrade, management revised the PD applied to the loan to reflect the improved risk profile; the LGD assumption of 50% was not changed, as the collateral composition and expected recovery in a default scenario are unaffected by the payment-performance improvement. The loan remains current on all scheduled payments, and interest income continues to be recognized.

Loans in the portfolio are secured primarily by real estate used for cannabis-specific purposes, including cultivation facilities, processing facilities, and retail dispensaries, and in certain cases by business assets under UCC filings. Because cannabis-use properties have limited alternative-use marketability under current federal law, management applies a two-step discount to collateral values: (i) elimination of the cannabis license premium (the “green tax”), reflecting that a non-cannabis buyer would not ascribe value to the cannabis operating license embedded in the appraised value; and (ii) a reduction to the remaining value to reflect proceeds realizable from a liquidation sale to a non-cannabis buyer. As of September 30, 2026 and December 31, 2025, this methodology results in adjusted portfolio collateral of approximately $44.1 million and $44.1 million against a gross balance of $51.3 million and $52.1 million, respectively.

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

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

The financial indemnification liability is remeasured quarterly; changes are recognized as credit loss expense or income per ASC 326-20-35-8. The 65% indemnification percentage is subject to reduction under the Second Amended CAA’s listing-related adjustment clause if the Company fails to maintain Nasdaq listing standards. A reduction would result in a partial release of the ASC 460 liability to income, a downward remeasurement of the financial indemnification liability, and an impairment assessment of the related contract assets.

Roll forward of Stand-Ready Guarantee Liability and Financial Indemnification Liability

As of September 30, 2026, $0.7 million and $0.1 million of the stand-ready guarantee liability and financial indemnification liability, respectively, are classified as current, with the remaining $0.7 million and $0.5 million classified as non-current. As of December 31, 2025, $0.7 million and $0.4 million of the stand-ready guarantee liability and financial indemnification liability, respectively, were classified as current, with the remaining $1.2 million and $0.7 million classified as non-current.

Note 8-Capitalized Software Development Cost

During the nine months ended September 30, 2026, the Company began development of internal use software. External development costs incurred during the application development stage were capitalized in accordance with ASC 350-40, Intangibles – Goodwill and Other – Internal-Use Software. The software was substantially complete and placed in service on September 1, 2026, and is being amortized on a straight-line basis over its estimated useful life offive years.

Capitalized software development costs consisted of the following:

Amortization expense related to capitalized software development costs was $0.004 million for each of the three and nine months ended September 30, 2026 and is included in general and administrative expenses. There wasno amortization expense for the three and nine months ended September 30, 2025. The expected future amortization of capitalized software development costs are as follows:

No impairment was identified for the three and nine months ended September 30, 2026.

Note 9 -Revenue

The following table presents the Company’s revenue disaggregated by type for the three and nine months ended September 30, 2026 and September 30, 2025:

Note 10 -Related Party Transactions

Partner Colorado Credit Union - Related Party Status

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

PCCU is a related party because it held approximately 8.8% and 25.2% of the Company’s Common Stock as of September 30, 2026 and December 31, 2025, respectively. PCCU is also the largest holder of the Company’s Series B Convertible Preferred Stock and holds approximately 49% of outstanding Series B Convertible Preferred Stock and 44% of the associated Series B Warrants as of September 30, 2026; these figures were both approximately 43% on December 31, 2025. These factors give PCCU the ability to significantly influence the Company’s management and operating policies.

Debt Cancellation Agreement

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

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

Commercial Alliance Agreement - Major Customer Concentration

The Company derives substantially all of its revenue from services provided to PCCU. Revenue generated under the Second Amended CAA and the First Amended CAA, as applicable, totaled $5.4 million and $4.8 million, representing 93% and 85% of total revenue for the nine months ended September 30, 2026 and September 30, 2025, respectively. For the three months ended September 30, 2026 and September 30, 2025, revenue under these agreements totaled $1.8 million and $1.6 million, respectively, accounting for 94% and 88% of total revenue. Amounts due from PCCU represented 98% and 97% of total accounts receivable for the periods ended September 30, 2026 and December 31, 2025. The loss of, or a material change to, this relationship could have a material adverse effect on the Company’s results of operations and financial condition.

Related Party Balances

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

In October 2026, PCCU sold 13,340 shares of Series B Convertible Preferred Stock to another holder of Series B Convertible Preferred Stock. See Note 18,Subsequent Events.

Note 11 -Lease

The Company has a non-cancellable operating lease for its corporate office space in Golden, Colorado, which qualifies for capitalization under ASC 842 Leases. As of September 30, 2026, the Golden, Colorado lease has a remaining term of approximately 2.8 years and includes an option to extend for up to ten additional years; however, the extension option is not recognized as part of the right-of-use asset as it is not reasonably certain to be exercised. As of September 30, 2026 and December 31, 2025, the net right-of-use asset “ROU” recorded under the operating lease was $0.4 million and $0.5 million, respectively, and the corresponding lease liability was $0.6 million and $0.7 million, respectively.

The Company evaluates contracts above certain thresholds to identify leases and lease components. Lease and non-lease components are not separated for facility space leases. The Company uses its contractual borrowing rate to determine lease discount rates when an implicit rate is not available. Lease cost for the three months and nine months ended September 30, 2026 and September 30, 2025, included in unaudited condensed consolidated statements of operations, is as follows:

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

Future minimum lease payments as of September 30, 2026 are as follows:

Note 12 -Earnings Per Share

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

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

Time Limited Market Adjustment to Series B Convertible Preferred Stock

During the period from May 6, 2026 through July 31, 2026 (the “Offer Period”), pursuant to Section 8(i) of the Series B Certificate of Designations (as defined below), and with the prior written consent of the Required Holders (as defined in the Series B SPA (as defined below)), the Company temporarily reduced the conversion price of the Series B Convertible Preferred Stock from $18.6336 to $7.80 per share. The reduced conversion price reverted to $18.6336 on August 1, 2026 for any shares of Series B Convertible Preferred Stock that were not converted during the Offer Period.

Preferred Stock Conversions

The Company accounted for conversions of Series B Convertible Preferred Stock during the Offer Period as induced conversions under ASC 260-10-S99-2, applying the framework of ASC 470-20-40-13 through 40-16 by analogy, as the reduced conversion price was available only for a limited period of time. Because the Preferred Stock is equity-classified, the induced conversions, including the resulting deemed dividend, were recorded entirely within permanent stockholders’ equity, with no charge to the statement of operations. The deemed dividend for each conversion was measured, on the applicable conversion date, as the excess of the fair value of the Common Stock issued at the reduced conversion price of $7.80 over the fair value of the shares that would have been issued at the original $18.6336 conversion price, using the closing market price of the Common Stock on the conversion date.

During the nine months ended September 30, 2026, holders converted 3,198 shares of Series B Convertible Preferred Stock into 410,001 shares of Common Stock at the reduced conversion price, resulting in a deemed dividend of $1.1 million. The deemed dividend was added to the net loss in computing net loss attributable to common stockholders for purposes of basic and diluted loss per share. The deemed dividend did not affect the Company’s net loss, total stockholders’ equity, or cash flows from operations.

Issuance of Class A Common Stock

During the nine months ended September 30, 2026, the Company issued Common Stock and raised $1.1 million. Under the terms of the ELOC, the Company is required to redeem shares of its Series B Convertible Preferred Stock for 25% of the total cash consideration raised under the ELOC, pursuant to the mandatory use of proceeds provision. The Series B Convertible Preferred Stock was originally issued at a fair value of $589 per share, reflecting the relative fair value allocation of the $800 per unit transaction price between the Series B Convertible Preferred Stock and the accompanying Series B Warrants, based on standalone fair values determined using a Monte Carlo simulation model. For the nine months ended September 30, 2026, the redemption price exceeded the aggregate carrying value of the redeemed shares by $0.2 million. This excess represents a deemed dividend to such stockholders and has been added to the net loss in computing net loss attributable to common stockholders for purposes of loss per share. The deemed dividend is a non-cash item and does not affect the Company’s unaudited net loss, unaudited stockholders’ equity, or unaudited cash flows from operations for the three and nine months ended September 30, 2026.

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

For the three-month period ended September 30, 2025, earnings per share was calculated using the two-class method to allocate net income between the Common Stock and the Series B Convertible Preferred Stock based on their respective participation rights. The Company’s net income of $0.2 million was allocated between a 242,268 weighted average for the Common Stock and a 341 weighted average Series B Convertible Preferred Stock, resulting in basic earnings per share of Common Stock of $0.74 and basic earning per share of Series B Convertible Preferred Stock of $0.74. No preferred dividends were declared or paid in that period. For all other periods presented the Company incurred a net loss and potentially dilutive securities were excluded as anti-dilutive.

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

Excluded from the computation of loss per share is the Series A Convertible Preferred Stock, par value $0.0001 per share (the “Series A Convertible Preferred Stock”). The shareholders are entitled to receive dividends on shares of Series A Convertible Preferred Stock equal (on an as-if-converted-to-Common-Stock basis) to and in the same form as dividends actually paid on shares of the Common Stock when, as and if such dividends are paid on shares of the Common Stock. No other dividends shall be paid on shares of Series A Convertible Preferred Stock.

On October 22, 2026, the conversion price related to the Series B Preferred Stock was reduced to $0.1210 per share pursuant to the stock combination adjustment provision of the Certificate of Designation, which resets the conversion price on the sixteenth trading day following a reverse stock split to the average of the five lowest daily VWAPs of the Common Stock during the preceding fifteen trading days, if lower than the price then in effect. Had the adjustment occurred on September 30, 2026, the number of potentially dilutive shares would have increased to approximately 224.8 million. See Note 18,Subsequent Events.

Note 13 -Warrants

Public and Private Placement Warrants

As of September 30, 2026 and December 31, 2025, the Company had 23,959 public warrants and 1,101 private placement warrants to purchase Common Stock outstanding, each with an adjusted exercise price of $2,760 per share.

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

The public and private placement warrants are exercisable and expire on September 28, 2027, or earlier upon redemption or liquidation.

No warrant will be exercisable for cash or on a cashless basis, and the Company will not be obligated to issue any shares to holders seeking to exercise their warrants, unless the issuance of the shares upon such exercise is registered or qualified under the securities laws of the state of the exercising holder, or an exemption from registration is available.

Redemption of warrants will become effective when the price per share of the Common Stock equals or exceeds $4,320.00 per share. Once the warrants become redeemable, the Company may redeem the warrants:

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

If the Company calls the warrants for redemption, management will have the option to require all holders that wish to exercise the warrants to do so on a “cashless basis,” as described in the applicable warrant agreement. The exercise price and number of shares of Common Stock issuable upon exercise of the warrants may be adjusted in certain circumstances including in the event of a stock dividend, or recapitalization, reorganization, merger or consolidation. However, the warrants will not be adjusted for the issuance of Common Stock at a price below its exercise price. Additionally, in no event will the Company be required to net cash settle the warrants.

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

PIPE Warrants

As of September 30, 2026 and December 31, 2025, there were 4,261 outstanding PIPE warrants to purchase Common Stock.

The PIPE warrants have an adjusted exercise price of $1,200.00 per share of Common Stock to be paid in cash except if the shares underlying the warrants were not covered by an effective registration statement after the nine-month anniversary of the closing date, in which case cashless exercise is permitted. The PIPE warrants are also subject to adjustment for other customary adjustments for stock dividends, stock splits and similar corporate actions. The PIPE warrants are exercisable for a period of five years following the closing, or September 28, 2027. After the exercise of a PIPE Warrant, the Company may be required to pay certain penalties if it fails to deliver the Common Stock within a specified period of time.

Abaca Warrants

As of September 30, 2026 and December 31, 2025, the Company had 20,834 Abaca warrants outstanding, each exercisable to purchase one share of the Company’s Common Stock at an exercise price of $480.00 per share, payable in cash. The Abaca warrants become exercisable one year after the effective date of the registration statement covering the underlying shares and expire five (5) years after that date.

The Company may, at its sole discretion, settle exercises of the Abaca warrants in either (i) shares of Common Stock or (ii) cash equal to the intrinsic value of the Abaca warrants (the difference between the fair market value of the Common Stock on the date of exercise and the $480.00 exercise price, multiplied by the number of Abaca warrants exercised).

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

Series B Warrants

On September 30, 2025, in connection with the issuance of the Company’s Series B Convertible Preferred Stock, the Company also issued Series B Warrants to purchase an aggregate of $15.5 million at the then applicable exercise price of $93.1728 per share, or 166,647 shares of Common Stock, subject to adjustment. The Series B Warrants include down-round adjustment provisions and automatic price reset mechanics. The first and final automatic reset had already occurred, resetting the conversion price and exercise price to $18.6336 per share. The Series B Warrants are classified within stockholders’ equity, and the reset of the exercise price had no impact on the Company’s unaudited condensed consolidated statements of operations.

During the Offer Period, pursuant to Section 8(i) of the Series B Certificate of Designations and with the prior written consent of the Required Holders, the Company temporarily reduced the conversion price of the Preferred Stock from $18.6336 to $7.80 per share and, pursuant to Section 2(h) of the Series B Warrants and with the prior written consent of the Required Holders, temporarily reduced the exercise price of the Series B Warrants from $18.6336 to $7.80 per share, conditioned on cash exercise and an effective registration statement for the shares underlying the Series B Warrants. The exercise price reverted at the conclusion of the Offer Period. This reduction was effected under authority separate from, and does not constitute a further adjustment of, the automatic anti-dilution reset mechanism and floor price described above; the Company’s Series B Certificate of Designations authority for this election was previously approved by stockholders in connection with the original issuance of the Series B Convertible Preferred Stock, satisfying Nasdaq Listing Rule 5635(d) without requiring a new stockholder vote.

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

As of September 30, 2026 and December 31, 2025, there were Series B Warrants to purchase $15.3 million and $15.5 million of Common Stock at the applicable exercise price of $18.6336 and $93.1728 per share, respectively.

If the Company elects to issue additional Common Stock at prices below the conversion or exercise price, except through the ELOC, it will trigger further anti-dilution adjustments, thereby increasing the number of shares issuable to holders of the Series B Convertible Preferred Stock and the Series B Warrants and further diluting existing common stockholders.

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

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

Note 14 -Financial Instruments

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. The fair value hierarchy ranks the inputs used in measuring fair value as follows:

The Company uses fair value measurements to record adjustments to certain financial assets and liabilities on a recurring basis. The Company may be required to record certain assets at fair value on a nonrecurring basis in specific circumstances, such as evidence of impairment. Methodologies used to determine fair value might be highly subjective and judgmental in nature; therefore, valuations may not be precise. If the Company determines that a valuation technique change is necessary, the change is assumed to have occurred at the end of the respective reporting period.

Recurring Fair Value Measurements

The Company’s financial liabilities measured at fair value on a recurring basis consist of warrant liabilities, valued using Level 1 (quoted market prices) or Level 3 (internally developed option-pricing models) inputs. The Company holds no Level 2 instruments. The following table presents these liabilities by level of the fair value hierarchy as of September 30, 2026 and December 31, 2025:

Nearly all warrant values declined from December 31, 2025 to September 30, 2026, reflecting a decline in the Company’s share price over the period, as further discussed below.

Nonrecurring Fair Value Measurements

During the nine months ended September 30, 2026, the Company added three new loans to the indemnified CRB portfolio, one of which was added during the three months ended September 30, 2026. As a result, the Company initially recognized new stand-ready guarantee liabilities at an aggregate fair value of $0.01 million for the nine months ended September 30, 2026, of which $0.002 million related to the loan that was added during the three months ended September 30, 2026. These fair values were determined using the Level 3 insurance-pricing methodology described below. No other assets or liabilities were measured at fair value on a nonrecurring basis during the three or nine months ended September 30, 2026.

The Company recognized a stand-ready guarantee liability under ASC 460 in connection with the Second Amended CAA with PCCU, initially at inception on October 1, 2025. The liability is measured at fair value once, at inception, and is not subsequently remeasured; it is reduced through systematic amortization as the Company is progressively released from risk on the underlying loan portfolio. As of December 31, 2025, the carrying amount of this liability was $2 million. The Company determined fair value using an insurance-pricing approach, representing the premium a third-party surety or insurer would charge to assume the same obligation.

Fair Value of Financial Instruments

The following tables present the carrying amounts and fair values of the Company’s financial instruments, by level of the fair value hierarchy, as of September 30, 2026 and December 31, 2025. In each case, carrying value approximates fair value.

Changes in Level 3 Liabilities

The following tables present the changes in the Company’s Level 3 liabilities measured at fair value on a recurring basis for the nine months ended September 30, 2026 and September 30, 2025. All changes during each period were attributable to fair value adjustments, with no purchases, issuances, or settlements:

Quantitative Information About Level 3 Fair Value Measurements

The PIPE warrants, private placement warrants, and Abaca warrants are valued using the Black-Scholes-Merton option pricing model. The following tables present the significant unobservable inputs used in these valuations as of September 30, 2026 and December 31, 2025:

There were no transfers between Level 2 and Level 3 of the fair value hierarchy during either period presented.

Assets and liabilities measured at fair value on a nonrecurring basis

The Company’s only asset subject to fair value measurement on a nonrecurring basis is its right-of-use asset associated with its office lease, which is tested for impairment when indicators are present. No impairment indicators were identified during the nine months ended September 30, 2026.

The Company also recognizes a stand-ready guarantee liability under ASC 460 in connection with the Second Amended CAA with PCCU. A new stand-ready guarantee liability is initially recognized at fair value each time a new loan is added to the indemnified CRB loan portfolio, using the Level 3 insurance-pricing methodology described above, consistent with the market participant framework of ASC 820-10-35-9. Once recognized, each liability is not subsequently remeasured to fair value; it is instead reduced through systematic amortization as the Company is progressively released from risk on the underlying loan. During the three and nine months ended September 30, 2026, one and two new loans, respectively, were added to the indemnified portfolio, resulting in the recognition of new stand-ready guarantee liabilities with fair values of approximately $0.001 million and $0.01 million, respectively.

Level 3 Measurement - Significant Unobservable Inputs

The ASC 460 Guarantee liability was classified as Level 3 because its fair value was determined using significant unobservable inputs for which there is no active market. The following table summarizes the valuation methodology and significant unobservable inputs used in the Level 3 measurement for those loans indemnified at October 1, 2025:

For loans entered into subsequent to October 1, 2025 (the inception date), management evaluates the stand-ready guarantee on a specific identification basis, separate from the pooled tranche inputs presented above. Loans originated under this methodology are evaluated using the tranche-specific assumptions determined at each loan’s origination date, as follows:

Note 15 -Income Taxes

For the three and nine months ended September 30, 2026, no provision for income taxes was recorded. Similarly, no provision for income taxes was recognized for the three months ended September 30, 2025. For the nine months ended September 30, 2025, the Company recorded an income tax benefit of approximately $0.06 million. As of September 30, 2026 and December 31, 2025, the Company had net deferred tax assets of $8.5 million and $45.8 million, respectively. The Company has recorded a full valuation allowance for both periods. The Company had a net operating loss (“NOL”) of approximately $34.2 million and $67.7 million as of September 30, 2026 and December 31, 2025, respectively.

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

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

Note 16 -Stockholders’ Equity

At a special meeting held on November 6, 2025, the Company’s stockholders approved the issuance of Common Stock upon conversion of the Series B Convertible Preferred Stock and exercise of the Series B Warrants, an increase in authorized Common Stock from 130,000,000 to 1,000,000,000 shares, and authorization for the Board to effect a reverse stock split at a ratio between 1-for-2 and 1-for-12 at its discretion. On September 30, 2026, the Company implemented the 2026 Reverse Stock Split. See Note 2,Basis of Presentation and Summary of Significant Accounting Policies.

Preferred Stock

The Company is authorized to issue 1,250,000 shares of preferred stock, $0.0001 par value per share.

Holders of preferred stock are entitled to receive dividends only if and when dividends are paid on the Company’s Common Stock. In that event, preferred stockholders receive dividends on an as-converted-to-Common-Stock basis, in the same form as dividends paid to the Common Stockholders. No additional or separate dividends are payable on the preferred stock except that holders of Series B Convertible Preferred Stock are entitled to receive dividends when and as declared by the Board in its sole discretion and to participate in distributions to holders of Common Stock on an as-converted basis.

Series A Convertible Preferred Stock

As of September 30, 2026 and December 31, 2025, there were 111 shares of Series A Convertible Preferred Stock issued and outstanding. As of September 30, 2026, each share of Series A Convertible Preferred Stock is convertible into Common Stock at a conversion price of $300 per share, convertible in the aggregate into approximately 370 shares of Common Stock.

The Series A Convertible Preferred Stock was issued with an initial conversion price of $2,400 per share. That price was subject to downward adjustment on five specified dates following the effectiveness of the registration statement covering the shares of Common Stock issuable upon conversion, subject to a floor price (the “Floor Price”). On January 25, 2023, stockholders approved a reduction in the Floor Price to $300.00 per share. All scheduled adjustments have occurred, and the conversion price has been reduced to the Floor Price. No further scheduled adjustments remain, other than customary adjustments for stock splits, stock dividends, and similar events.

Series B Convertible Preferred Stock

The Company is authorized to issue 35,000 shares of Series B Convertible Preferred Stock, par value $0.0001 per share (the “Series B Convertible Preferred Stock”). As of September 30, 2026 and December 31, 2025,27,134 and 30,808 shares of Series B Convertible Preferred Stock, respectively, were issued and outstanding.

On September 30, 2025, the Company entered into a Securities Purchase Agreement (the “Series B SPA”) with certain institutional and accredited investors, pursuant to which it issued 31,052 shares of Series B Convertible Preferred Stock and accompanying Series B Warrants to purchase $15.5 million worth of Common Stock. The aggregate gross consideration received was $24.3 million, consisting of $6.1 million from the sale of the Company’s Series B Convertible Preferred Stock and the Series B Warrants (approximately $5.9 million from third-party accredited investors and $0.2 million from management and board participation, whose participation was approved by stockholders on November 6, 2025), approximately $0.6 million in cash proceeds from unsecured notes issued in August and September 2025 that were subsequently exchanged for Series B Convertible Preferred Stock and warrants at closing, along with $10.7 million from the cancellation of debt and $7.3 million from the termination of the Forward Purchase Agreement. Offering costs of $0.4 million were charged to additional paid-in capital. During the three months ended December 31, 2025, the Company redeemed 244 shares of its Series B Convertible Preferred Stock for total cash consideration of $0.3 million pursuant to the mandatory use-of-proceeds provision of the ELOC. This redemption reduced the number of shares for Series B Convertible Preferred Stock to 30,808. The Company refers to the foregoing transactions collectively as the “September 2025 Recapitalization.”

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

The initial conversion price of $93.17 per share was subject to automatic price resets. In January 2026, the conversion price and the Series B Warrant exercise price each reset to the contractual floor of $18.63 per share, as the Company’s Common Stock was trading below the floor at the time of the reset. On May 6, 2026, the Company filed a registration statement on Form S-1 (Registration No. 333-295616) to register, among other things, additional shares in connection with this reset. This registration statement was declared effective by the SEC on August 11, 2026.

Certain Terms of the Series B Convertible Preferred Stock

The Certificate of Designations of Rights and Preferences (the “Series B Certificate of Designations”) provides for a reduction of the conversion price following any stock split, stock combination or similar event if the market price of the Common Stock following that event is below the conversion price then in effect. The 2026 Reverse Stock Split resulted in such an adjustment after September 30, 2026, see Note 18,Subsequent Events. This reset significantly increases the number of shares of Common Stock potentially issuable upon conversion.

The Series B Certificate of Designations also defines certain “Triggering Events.” These include registration statement failures, a suspension or delisting of the Common Stock from an eligible market (including a move from the Nasdaq Capital Market to the OTC Markets), failures to deliver conversion shares, payment defaults, cross-defaults or judgments exceeding $500,000, bankruptcy events, covenant breaches, a Material Adverse Effect, and any Series B Convertible Preferred Stock remaining outstanding on or after September 30, 2027. While a Triggering Event continues, the Company may not redeem the Series B Convertible Preferred Stock or make payments on indebtedness or investments (including loans and advances), and holders may pursue legal and equitable remedies, including reimbursement of enforcement costs. In addition, under the Registration Rights Agreement the Company entered into with the purchasers of the Series B Convertible Preferred Stock and Series B Warrants (the “Registration Rights Agreement”), a delisting from the Nasdaq Capital Market would require cash payments to holders of 1% of their monthly purchase price until cured. Following the October 22, 2026 reduction of the conversion price of the Series B Convertible Preferred Stock, the Registration Rights Agreement required the Company to file a registration statement by November 6, 2026 (the “Filing Deadline”). The Company did not file the registration statement by the Filing Deadline, and a filing failure under the Registration Rights Agreement has occurred. A Triggering Event will occur if the registration statement is not filed within five days after the Filing Deadline, or by November 11, 2026. As of the date of this report, the holders have not executed a waiver of, or agreed to extend, this requirement. The Company intends to file the registration statement promptly after filing this report. Registration delay payments under the Registration Rights Agreement are not payable to a holder for any period during which all of that holder’s registrable securities may be sold under Rule 144 under the Securities Act. Because the Series B securities were purchased in September 2025 and the applicable Rule 144 holding period has been satisfied, the Company has concluded that no registration delay payments are owed as a result of the filing failure. As of the date of this report, no Triggering Event has occurred.

Separately, a Change of Control (as defined in the Series B Certificate of Designation) consummated without the prior written consent of the Required Holders, which consent may not be unreasonably withheld, conditioned or delayed, constitutes a Triggering Event. The Company also may not enter into a Fundamental Transaction (as defined in the Series B Certificate of Designation) unless the successor entity assumes in writing the Company’s obligations under the Series B Convertible Preferred Stock, in a form reasonably satisfactory to the Required Holders. Upon a Change of Control, holders may require the Company to exchange their shares for the greatest of 125% of the Conversion Amount (as defined in the Series B Certificate of Designation) or specified as-converted values. This amount is payable in cash or in rights convertible into successor equity, at the Company’s election. Holders of the Series B Warrants may require the Company to purchase the unexercised warrants at their Black Scholes Value (as defined in the Series B Warrants). Based on 27,134 shares of Series B Convertible Preferred Stock outstanding as of September 30, 2026, the minimum Change of Control exchange amount would be approximately $33.9 million.

The foregoing summaries of the Series B Certificate of Designations and the Registration Rights Agreement do not purport to be complete and are qualified in their entirety by reference to the full text of the Series B Certificate of Designations and the Registration Rights Agreement, as applicable, copies of which were filed as Exhibit 3.1 and Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the SEC on October 3, 2025, which are incorporated herein by reference. Further, the foregoing summary of the Series B Warrant does not purport to be complete and is qualified in its entirety by reference to the full text of the Series B Warrant, a copy of which was filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the SEC on October 17, 2025, which is incorporated herein by reference.

Time Limited Inducement Offer

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 during the Offer Period to reduce the conversion price of the Series B Convertible Preferred Stock and the cash exercise price of the Series B Warrants from $18.6336 to $7.80 per share, a 20% discount to the closing price of the Company’s Common Stock on the day before the beginning of the Offer Period. The Offer Period expired on July 31, 2026 and the conversion price and exercise price reverted to $18.6336 effective August 1, 2026. Series B Warrants exercised during the Offer Period, subject to an effective registration statement for the shares underlying the Series B Warrants, were required to be settled on a cash basis; the net–share settlement alternative previously available was not permitted during the Offer Period. Participation was voluntary; holders who did not accept retained their Series B Convertible Preferred Stock and Series B Warrants on the original terms.

During the Offer Period, holders converted 3,198 shares of Series B Convertible Preferred Stock into 410,001 shares of Common Stock. No Series B Warrants were exercised during the Offer Period.

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.

The voluntary market adjustment related to the Series B Convertible 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 Series B Convertible Preferred Stock conversions, measured on each respective conversion. The deemed dividend was recorded 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 nine months ended September 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.

Common Stock

The Company is authorized to issue 1,000,000,000 shares of Common Stock.

Holders of Common Stock are entitled to one vote for each share held. As of September 30, 2026, and December 31, 2025, there were 1,028,702 and 356,794 shares of Common Stock issued and outstanding, respectively.

Equity Line of Credit and Related Series B Redemption Obligation

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

As consideration for the ELOC Investor’s purchase commitment, the Company issued 1,000 shares of Series B Convertible Preferred Stock and a Series B Warrant to purchase 5,364 shares of Common Stock, valued at $0.8 million in aggregate, which was expensed in full upon issuance.

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

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

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

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

If a Material Adverse Effect occurs and is continuing, the ELOC Investor has the right to terminate the ELOC upon ten (10) trading days’ written notice. In that event, we would lose access to any remaining unfunded portion of the $150 million commitment. While the ELOC excludes certain broad macroeconomic, industry-wide, and geopolitical events from the definition of Material Adverse Effect, no such exclusion applies to adverse developments that are specific to our business or operations. In addition, under the terms of the ELOC, we may not deliver a VWAP Purchase Notice when the closing price of our Common Stock is below $1.00 per share without the prior consent of the ELOC Investor. Prior to the 2026 Reverse Stock Split, the closing price of our Common Stock was below $1.00 per share across substantially all trading days during the three months ended September 30, 2026, and, accordingly, our ability to draw on the ELOC during those periods was subject to the ELOC Investor’s approval.

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

During the three and nine months ended September 30, 2026, the Company issued 866 and 261,818 shares of Common Stock, respectively, under the ELOC. For the nine months ended September 30, 2026, net proceeds were $1.1 million, or an average of $4.32 per share. Proceeds of $1,362 from the shares issued during the three months ended September 30, 2026 were receivable as of September 30, 2026 and were collected in October 2026, and this amount is included in other current assets and is excluded from financing activities in the unaudited condensed consolidated statement of cash flows. Shares were sold at a contractual 10% discount to the lowest intraday price of the Common Stock on each draw date.

The Company is required to apply 25% of the proceeds of each draw towards the redemption of Series B Convertible Preferred Stock at $1,200.00 per share. As of September 30, 2026 and December 31, 2025, the Company had accrued $0.5 million and $0.2 million, respectively, for such redemptions within other current liabilities.

For the three and nine months ended September 30, 2026, the Company recorded issuance costs from the sale of Common Stock under the ELOC of $0 and $0.2 million, respectively, presented within other income (expense) in the unaudited condensed consolidated statements of operations. These costs represent the excess of the fair value of the shares on each settlement date over the proceeds received.

2022 Equity Incentive Plan

The Amended and Restated - 2022 Equity Incentive Plan (the “Plan”) was approved by the Company’s stockholders on June 28, 2022. On April 30, 2025, the Plan was amended to provide that the total number of shares of Common Stock that may be issued under the Plan will automatically increase upon the occurrence of a Dilution Event (as defined in the Plan) and on the first trading day of each calendar year, beginning with calendar year 2026, by such number of shares of Common Stock necessary to make the total shares of Common Stock authorized under the Plan equal to fifteen percent (15%) of the total outstanding shares of Common Stock on the last day of the prior calendar year (subject to a maximum annual increase of 4,167 shares of Common Stock). The Plan permits the grant of incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock units, stock bonus awards, and performance compensation awards.

Under the Series B Certificate of Designations and related Series B Warrants, shares issued to employees, officers, and directors under Company stock plans are exempt from anti-dilution protection so long as the aggregate number of such issuances does not exceed 15% of the number of shares of Common Stock that were outstanding as of September 30, 2025. If the Company issues shares under its stock plans above that 15% cap, and the effective price per share is below the then-current Series B Convertible Preferred Stock conversion price or Series B Warrant exercise price, that issuance would trigger an automatic downward reset of both the Series B Convertible Preferred Stock conversion price and the Series B Warrant exercise price, along with a corresponding increase in the number of shares issuable on conversion or exercise.

The Company has not issued stock appreciation rights, restricted stock, stock bonus awards, or performance compensation awards during the nine months ended September 30, 2026. As of September 30, 2026, a total of 53,519 shares of Common Stock were authorized for issuance under the Plan, of which 13,821 shares remained available for future issuances without triggering an automatic downward reset of both the Series B Convertible Preferred Stock conversion price and the Series B Warrant exercise price.

Stock Options

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

There were no options granted during the three and nine months ended September 30, 2026. The assumptions used to determine the fair value of options granted for the three and nine months ended September 30, 2025, using the Black-Scholes-Merton model are as follows:

A summary of the Company’s stock option activities and related information for the nine months ended September 30, 2026, is as follows

A summary of the Company’s stock option activities and related information for the nine months ended September 30, 2025, is as follows:

The following options were outstanding at their respective exercise price as of September 30, 2026 and December 31, 2025.

Stock compensation expense for the three months ended September 30, 2026, and September 30, 2025, is as follows:

Stock compensation expense for the nine months ended September 30, 2026, and September 30, 2025, is as follows:

As of September 30, 2026, there was $0.1 million of unrecognized stock compensation expense related to outstanding stock options. The unrecognized compensation expense is expected to be recognized over a weighted-average period of approximately 1.1 years based on vesting under the award service conditions.

Restricted Stock

The Company does not have any outstanding restricted stock units (“RSUs”) as of September 30, 2026. A summary of the Company’s RSU activity and related information for the nine months ended September 30, 2025, is presented below:

Stock compensation expense for RSU for the three and nine months ended September 30, 2025 was $0.009 million and $0.03 million, respectively.

Note 17 -Commitments and Contingencies

Contractual Commitments

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

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

In addition, the Company has entered into deferred bonus agreements with certain non-executive employees. These agreements provide for cash bonus payments upon the employee’s continued employment through specified payment dates as set forth in each individual arrangement. As of September 30, 2026, the aggregate amount of deferred bonuses outstanding under these agreements was approximately $0.1 million. The Company expects to fund these obligations from operating cash flows in the ordinary course of business.

Acquisition of 420 IT Solutions

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

The aggregate purchase price consisted of 10,417 shares of Common Stock (“Earnout Shares”), plus the assumption of certain identified liabilities under contracts assigned to the Company. The Earnout Shares are subject to performance-based vesting over a two-year earnout period ending December 31, 2027. Intangible assets and contingent consideration are recognized as the performance conditions become probable of achievement. The Company evaluated the achievement of the performance condition and deemed this unlikely to be reached. Therefore, the intangible assets and contingent liability were not recorded as of September 30, 2026, and December 31, 2025. If circumstances change when the revenue target is probable, then the intangible assets and a contingent liability will be recorded. The Company will continue to evaluate the achievability of the earnout performance conditions through the earnout period ending December 31, 2027.

Legal and Related Matters

The Company is involved in, or has been involved in, arbitrations or various other legal proceedings that arise from the normal course of its business. The ultimate outcome of any litigation is uncertain, and either an unfavorable or favorable outcome could have a material impact on the Company’s results of operations, balance sheets, and cash flows due to defense costs, and could divert management resources. The Company cannot predict the timing or outcome of these claims and other proceedings. With respect to the cases described below, the Company evaluates associated developments on a regular basis and accrues a liability when it believes a loss is probable and the amount can be reasonably estimated.

Abaca - Denver County District Court

On October 17, 2024, the Company filed a complaint in the District Court, 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 Abaca pursuant to a merger agreement (the “Merger Agreement”) that was subsequently amended in November 2022 and in October 2023 (the “Second Amendment”).

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

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

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

On April 23, 2026, the District Court issued an omnibus order on the parties’ cross-motions for summary judgment (the “Omnibus Order”). The District Court denied the Company’s motion for summary judgment in its entirety. The District 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. As a result of that ruling, the District Court found that the Company breached the original Merger Agreement with respect to the first anniversary parent shares and reserved the determination of damages on that counterclaim for trial. The District Court denied both parties’ motions on the counterclaim concerning the $3.0 million second anniversary cash consideration payment and denied the counterclaim plaintiffs’ motion on the Company’s declaratory judgment claim.

A trial on damages and the remaining claims was held on August 10 and 11, 2026. As of the date of this report, the District Court has not issued its final ruling, and the Company cannot predict when the District Court will rule or the outcome of its ruling. The Omnibus Order is interlocutory and is not a final, appealable judgment. The Company expects that the Omnibus Order, together with the District Court’s ruling following trial, will be subject to appeal upon entry of a final judgment. The Company intends to continue to defend its positions vigorously, including through any available appeal.

The $3.0 million previously deposited into the District Court’s registry in November 2024 remains reflected in the Company’s condensed unaudited consolidated financial statements. The range of loss is $0 to $7.8 million, plus interest. An adverse resolution could have a material adverse effect on the Company’s financial position, results of operations, and cash flows.

The Company currently assesses a loss as reasonably possible but not probable. No damages have been determined by the District Court; the Omnibus Order expressly reserves the damages methodology, standard, and quantum for a future hearing.

Nasdaq Listing Compliance

As a condition of continued listing on the Nasdaq Capital Market, the Company is required to maintain, among other things, (i) stockholders’ equity of at least $2.5 million under Nasdaq Listing Rule 5550(b)(1), (ii) a minimum bid price of $1.00 per share under Nasdaq Listing Rule 5550(a)(2), and (iii) a market value of publicly held shares of at least $1.0 million under Nasdaq Listing Rule 5550(a)(5). The Company continuously monitors its compliance with these requirements. As of September 30, 2026, the Company’s stockholders’ equity was approximately $5.2 million, which exceeds the $2.5 million minimum.

Minimum Bid Price.

On April 22, 2026, the Company received a letter from the Listing Qualifications Department of Nasdaq. The letter stated that for the preceding 30 consecutive business days, the Company had not maintained a minimum closing bid price of $1.00 per share for its Common Stock, as required by Nasdaq Listing Rule 5550(a)(2). Under Nasdaq Listing Rule 5810(c)(3)(A), the Company was provided with an initial compliance period of 180 calendar days through October 19, 2026 to regain compliance.

On September 30, 2026, the Company effected the 2026 Reverse Stock Split, as authorized by its stockholders on November 6, 2025. See Note 2,Basis of Presentation and Summary of Significant Accounting Policies. The Company did not regain compliance with the minimum bid price requirement by October 19, 2026.

On October 20, 2026, Nasdaq notified the Company that it had been granted a second compliance period of 180 calendar days through April 19, 2027, under Nasdaq Listing Rule 5810(c)(3)(A)(ii). The Company also provided written notice of its intention to cure the deficiency during the second compliance period, including by effecting a reverse stock split, if necessary. To regain compliance, the closing bid price of the Common Stock must be at least $1.00 for a minimum of 10 consecutive business days before April 19, 2027. The Nasdaq notification has no immediate effect on the listing of the Common Stock or warrants, which continue to trade on the Nasdaq Capital Market under the symbols “SHFS” and “SHFSW,” respectively. In addition, if our Common Stock has a closing bid price of $0.10 or less for ten consecutive business days, Nasdaq will issue a Staff Delisting Determination notwithstanding the second compliance period, and trading would be suspended pending any Hearings Panel review.

If the Company does not regain compliance by April 19, 2027, Nasdaq will notify the Company that its securities are subject to delisting. The Company may then request a hearing before a Nasdaq Hearings Panel, and a timely request would generally stay any suspension pending the Panel’s decision.

Because the Company effected the 2026 Reverse Stock Split, Nasdaq Listing Rule 5810(c)(3)(A)(iv) limits its options during and after the second compliance period:

The Company intends to actively monitor the bid price of its Common Stock and will evaluate available options to regain compliance, including a further reverse stock split, subject to stockholder approval. While the Company is exercising diligent efforts to maintain the listing of its Common Stock and warrants on Nasdaq, there can be no assurance that it will regain compliance during the second compliance period or maintain compliance with the foregoing or other Nasdaq listing standards. A suspension or delisting of the Common Stock could constitute a Triggering Event under the Series B Certificate of Designations. See Note 16,Stockholders’ Equity.

Proposed Market Value of Listed Securities Requirement

On July 22, 2026, the SEC approved a proposed Nasdaq rule change (SR-NASDAQ-2026-004), originally filed with the SEC on January 13, 2026. The rule would establish a new continued listing requirement of a minimum Market Value of Listed Securities (“MVLS”) of $5.0 million for companies listed on the Nasdaq Global Select Market, Nasdaq Global Market and Nasdaq Capital Market. As approved, the rule would not provide a compliance or cure period. A company whose MVLS remains below $5.0 million for 30 consecutive business days would receive a Staff Delisting Determination and would become immediately subject to suspension and delisting. That company could request review by a Nasdaq Hearings Panel, but a timely hearing request would not stay the suspension of trading.

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 the order is stayed until the SEC orders otherwise. On September 11, 2026, the SEC issued an order granting the petitions for review, and the approval order remains stayed pending completion of the SEC’s review. The period for interested persons to submit written statements in support of or in opposition to the approval order closed on October 6, 2026. On September 25, 2026, Nasdaq filed a proposed rule change (SR-NASDAQ-2026-081) providing that the 30-consecutive-business-day period would begin on the business day following termination of the stay.

Accordingly, the MVLS requirement is not currently in effect. Upon completion of its review, the SEC may affirm, modify or set aside the approval order, or remand the matter to Nasdaq. There is no prescribed timeline for the SEC’s decision, and there can be no assurance as to the outcome or timing of the review, or whether the rule will become effective in its current or a modified form.

If the stay is lifted and the rule becomes effective, the Company would not be in compliance with the requirement, based on its current stock price and number of shares outstanding as of the date of this report. 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.

Retention Plan

In July 2026, the Board approved a retention plan for key employees and directors of the Company and its subsidiaries, and in August 2026 the Company entered into retention agreements with the participants. In August 2026, the Board adopted an amended and restated retention plan (the “Retention Plan”) and form of retention agreement under which directors are not eligible to participate and the retention agreements previously entered into with directors were canceled ab initio. Under the Retention Plan, a determination of Insolvency (as defined in the Retention Plan) by the Chief Executive Officer requires Board approval, a stockholder-approved liquidation does not constitute a Change in Control (as defined in the Retention Plan), and payment of any retention incentive is conditioned on the participant’s continued service through the applicable date and execution of a general release of claims.

The Retention Plan provides for cash retention payments upon a Change in Control and for enhanced compensation during a period of Insolvency. The aggregate potential payments to certain officers of the Company are approximately $1.0 million upon a Change in Control, plus the continuation of health benefits, and approximately $0.4 million annually in additional compensation during an Insolvency period.

As of September 30, 2026, no Change in Control had occurred and no determination of Insolvency had been made. Because payment is contingent on future events that were not probable as of the balance sheet date and, where applicable, on future service, no liability has been recognized for these arrangements as of September 30, 2026. The Company will recognize a liability and related compensation expense when a triggering event becomes probable and, for the Insolvency component, as service is rendered during any Insolvency period.

Note 18 -Subsequent Events

The Company has evaluated events and transactions occurring after September 30, 2026, through the date these financial statements were issued, and has identified the following matters requiring disclosure. Unless otherwise noted, these are non-recognized subsequent events under ASC 855-10 that do not adjust amounts in the September 30, 2026, financial statements but are material enough to warrant disclosure.

Series B Convertible Preferred Stock Conversion Price Adjustment.

As a result of the 2026 Reverse Stock Split effected on September 30, 2026, on October 22, 2026 the conversion price of the Series B Convertible Preferred Stock was reduced from $18.6336 to $0.1210 per share. Based on the 7,605 shares of Series B Convertible Preferred Stock outstanding as of November 6, 2026, the number of shares of Common Stock issuable upon conversion increased from approximately 408,139 shares to approximately 62,851,246 shares, without regard to the beneficial ownership limitations applicable to holders that are provided for in the Series B Certificate of Designations. The adjustment did not affect the exercise price of the Series B Warrants, which was proportionally adjusted for the 2026 Reverse Stock Split to $18.6336.

The conversion price in effect at September 30, 2026, was $18.6336, and the subsequent adjustment was calculated based on the trading prices of the Common Stock after that date. Accordingly, the adjustment is a non-recognized subsequent event and is not reflected in the unaudited condensed consolidated financial statements, including the potentially dilutive securities disclosed in Note 12,Earnings Per Share. Because the Series B Convertible Preferred Stock is classified in permanent equity and the adjustment occurred pursuant to its original terms.

Conversions of the Series B Convertible Preferred Stock at the adjusted conversion price would result in substantial dilution to holders of Common Stock. Since September 30, 2026 through November 6, 2026, holders have converted 19,529 shares of Series B Convertible Preferred Stock into 131,219,818 shares of Common Stock.

Proposed Transaction with Opifex Media, Inc*.*

As previously disclosed, 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, 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”). The Proposed Transaction is expected to be accounted for as a reverse acquisition, with Opifex as the accounting acquirer.

Sale of Series B Convertible Preferred by Partner Colorado Credit Union

On October 21, 2026, the Company was informed that PCCU sold all 13,340 shares of Series B Convertible Preferred Stock, representing approximately 60.9% of the Series B Convertible Preferred Stock then outstanding, that it held to another holder of Series B Convertible Preferred Stock. PCCU retained its Series B Warrants. The sale was a privately negotiated transaction to which the Company was not a party. Following the sale, PCCU holds no Series B Convertible Preferred Stock and beneficially owns less than 5% of the Company’s outstanding Common Stock. PCCU has no representation on the Company’s Board of Directors and no other ability to significantly influence the Company’s management or operating policies. Accordingly, effective October 21, 2026, the Company no longer considers PCCU a related party. PCCU remains the Company’s largest customer and the depository for substantially all of the Company’s cash, see Note 10,Related Party Transactions.

Conversion of Series B Convertible Preferred Stock to Common

Following the reduction of the conversion price to $0.1210 per share on October 22, 2026, and through November 6, 2026, holders converted 19,529 shares of Series B Convertible Preferred Stock into 131,219,818 shares of Common Stock. The conversions were made pursuant to the terms of the Series B Certificate of Designations, and the shares were issued in reliance on the exemption from registration provided by Section 3(a)(9) of the Securities Act. As a result, the number of shares of Common Stock outstanding increased from 1,028,702 at September 30, 2026 to 132,248,520 as of November 6, 2026.

As of November 6, 2026,7,605 shares of Series B Convertible Preferred Stock remained outstanding and were convertible into approximately 62,851,246 shares of Common Stock at the current conversion price, without regard to the beneficial ownership limitations applicable to holders under the terms of the Series B Certificate of Designations.