SHF Holdings, Inc.
For the period ended Mar 31, 2025. Filed May 21, 2025.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Mar 31, 2025 · Filed May 21, 2025
SHFS$0.03-1.1%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-09-30; filed 2024-11-12.
0001493152-24-044750
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2025-03-31; filed 2025-05-21.
0001641172-25-011821
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 110 previous paragraphs and 106 current paragraphs.
23 unchanged; 23 reworded; 56 added; 59 removed; 5 previous and 4 current paragraphs rearranged.
Tables are not compared: 22 previous and 14 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (56)
Current report
Founded in 2015 by Partner Colorado Credit Union (“PCCU”) (please see “Business Reorganization” below for a description of SHF’s organization), SHF’s mission is to provide access to reliable and compliant financial services for the legal cannabis industry. Through that mission and as an early leader with over ten years of experience, SHF is a leading provider of access to reliable and compliance driven banking, lending and other financial services to financial institutions desiring to provide those services to the cannabis industry.
Current report
Through our proprietary platform and on a multi-state level, SHF provides access to the following banking related services through PCCU and other financial institutions:
Current report
Our services allow Cannabis Related Businesses (herein referred to as “CRBs”) to obtain services from financial institutions that allow them to run their business more efficiently and effectively with improved financial insight into their business and access to resources to help them grow. Due to limited availability of payment and other banking solutions for the cannabis industry, most businesses transact with high volumes of cash. Our fintech platform benefits CRBs and financial institutions by providing CRBs with access to financial institutions and financial institutions access to increased deposits with the comfort of knowing that those deposits have been compliantly monitored and validated. By facilitating the daily deposits of cash receipts between CRBs and financial institutions, the risks associated with high cash on hand are mitigated, creating a safer atmosphere for the CRB’s employees and the financial institutions at which the deposit accounts are held. Because the Company is not a financial institution, it does not hold customer deposits. All deposit accounts are held by the Company’s financial institution clients and all transmissions of funds to and from deposit accounts are handled directly by the financial institutions. In an industry with limited capital and financing options, we offer access to loan options at what we believe to be competitive rates, often with less punitive terms than the current industry average. Our financial institution clients offer loan options including senior secured debt and operating lines of debt. Collateral types include real estate, equipment, and other business assets. We also provide access to lending options for ancillary service providers serving the cannabis industry as these businesses also can have difficulty finding reliable financial services.
Current report
To ensure access to consistent and dependable banking access to CRBs, we provide our compliance, validation and monitoring services to financial institutions in a compliance driven environment ensuring strict adherence to the Bank Secrecy Act/FinCEN guidance and related anti money laundering provisions. Since inception, the Company has assisted in the processing of approximately $25.6 billion in cannabis related depository funds. Through its relationship with its financial institution clients, the Company has successfully navigated over 16 state and federal banking exams.
Current report
In strategically selected geographic areas, the Company has licensed its proprietary software and Safe Harbor Program (the “Program”) to other financial institutions to provide compliance-related services to CRBs. As part of the Program, we provide the following to financial institutions interested in licensing the Program to assist in compliant cannabis banking:
Current report
Revenue
Current report
Operating Expenses
Current report
The Company reports provisions for credit losses on internally funded and indemnified loans. Prior to December 31, 2024, the Company indemnified PCCU against losses on sourced loans. With effect from the Amended PCCU CAA, the indemnification obligation ceased on December 31, 2024.
Current report
Revenue
Current report
The reconciliation of account fee income and account hosting fees are as follows:
Current report
Account fee income:
Current report
Account hosting fees:
Current report
Account hosting fees increased in the first quarter of 2025 compared to 2024, primarily due to a change in the method used to calculate charges paid to PCCU for hosting CRB accounts. In 2024, PCCU charged a monthly per-account fee ranging from $25.32 to $27.85 for accounts hosted on their platform. In contrast, under the Amended CAA in 2025, the Company pays PCCU a fixed asset hosting fee calculated as 0.01 multiplied by the average daily balance of account relationships generated by the Company, divided by the number of days in the year, and then multiplied by the number of days in the applicable month.
Current report
Investment income
Current report
Our financial institution pay us interest on daily account balances as per the rates outlined in the agreements. The decrease in investment income was primarily attributable to the reduction average daily deposit balances.
Current report
In 2024, under the terms of the PCCU CAA, the Company paid a hosting fee equal to 25% of the investment income generated from PCCU-related funds. For the three months ended March 31, 2024, PCCU’s contribution to investment income totaled $773,819, resulting in $160,101 in investment hosting fees. These fees were recorded under “General and Administrative Expenses” in the unaudited condensed consolidated statements of operations.
Current report
In contrast, under the Amended PCCU CAA effective on December 31, 2024, the Company is no longer required to pay hosting fees to PCCU. For the three months ended March 31, 2025, PCCU’s contribution to investment income was $292,436.
Current report
Loan interest income
Current report
Loan interest income includes interest earned from both direct loans and those issued under the PCCU CAA, which were indemnified by the Company through December 31, 2024. Upon the execution of the Amended PCCU CAA on December 31, 2024, the indemnification liability was eliminated, and the indemnified status of these loans was removed.
Current report
The majority of the Company’s loan portfolio consists of CRB loans originated by PCCU and primarily serviced by SHF. Under the original PCCU CAA in 2024, the Company received 100% of the loan interest income associated with these loans and was obligated to pay PCCU a servicing fee equal to 0.25% of the outstanding loan balance.
Current report
Effective December 31, 2024, the Amended PCCU CAA eliminated the Company’s role as guarantor, thereby removing the 100% indemnity liability. Additionally, under the amended agreement, the method for calculating loan interest income was revised, and loan service fees were eliminated. The new loan yield allocation formula factors in the Constant Maturity U.S. Treasury Rate and a proprietary risk rating to determine the interest income split for each loan.
Current report
The reduction in loan interest income for the period is mainly attributed to the implementation of the new formula and the removal of the indemnification structure. According to the Amended CAA, the Company’s interest income on all loans with PCCU is now calculated using a loan yield allocation formula. This formula takes into account the Constant Maturity US Treasury Rate from Standard & Poor’s Capital IQ data service, along with a proprietary risk rating formula to determine the fee split between the Company and PCCU. Prior to the amendment, the Company retained the full interest income from the loans and was responsible for paying loan servicing fees of 0.25% of the loan balance. The amendment eliminates both the loan servicing fees and indemnification liability, while introducing the new interest income split between the Company and PCCU.
Current report
For the three months ended March 31, 2025, the Company recognized $540,222 in loan interest income attributable to PCCU activities. In comparison, for the three months ended March 31, 2024, the Company recognized $1,636,756 in loan interest income from the same activities. Related expenses for the 2024 period included $35,901 in loan servicing fees, in accordance with the PCCU CAA, which were reported under ‘General and Administrative Expenses’ in the Unaudited Condensed Consolidated Statements of Operations.
Current report
Operating expenses
Current report
In three months ended March 31, 2025, we reduced expenses by $315,583 which is a 8.47% reduction in expenses compared to three months ended March 31, 2024.
Current report
Compensation and employee benefits expenses decreased primarily due to previously reported reductions in work force and the related reduction in stock-based compensation of $432,885. Restructuring efforts are ongoing as we continue to optimize our talent portfolio.
Current report
General and administrative expenses include changes across various categories, both increases and decreases, as follows (i) A decrease of $160,101 in investment hosting fees due to the elimination of such fees under the Amended PCCU agreement; (ii) An increase of $199,253 in account hosting fees in accordance with the Amended PCCU; (iii) A decrease of $156,855 in amortization and depreciation expenses; and (iv) Advertising and marketing expenses increased by $100,831, primarily driven by the amortization of $100,000 in stock-based compensation issued to a vendor.
Current report
The increase in professional services expenses was mainly driven by higher legal fees associated with ongoing litigation, including a $300,000 accrual for the settlement of an employment related legal matter.
Current report
The indemnity liability was eliminated from the Balance Sheet as of December 31, 2024, due to the Amended PCCU CAA, which led to the complete reversal of the liability under the ‘credit loss (benefit) expense.’ Please refer to the “Amended and Restated CAA with PCCU” section in the Recent Updates of the Company’s Annual Report on Form 10-K and Form 10-K/A for the fiscal year ended December 31, 2024.
Current report
Interest expense for the three months ended March 31, 2025, primarily relates to the Senior Secured Promissory Note. Compared to the prior period, interest expense decreased by $41,386, largely due to a reduction in the principal balance outstanding during each reporting period.
Current report
Income taxes
Current report
For the three months ended March 31, 2025, the provision for income taxes is $0, principally due to the recognition of a valuation allowance in the year ended December 31, 2024, as it is more likely than not that the deferred tax assets cannot be realized.
Current report
Non-GAAP Financial Measures
Current report
In addition to financial measures presented in accordance with accounting principles generally accepted in the United States of America (GAAP), this document contains non-GAAP financial measures where management believes it to be helpful in understanding our results of operations or financial position. Where non-GAAP financial measures are used, the comparable GAAP financial measure, as well as the reconciliation to the comparable GAAP financial measure, can be found herein.
Current report
For the three months ended March 31, 2025, there was an increase in the average number of accounts; however, the average monthly balance and fees declined due to a reduction in high value accounts compared to the three months ended March 31, 2024. The Company is focused on expanding its client base through various strategic partnerships, which is expected to drive growth in both account balances and fees in the upcoming quarters.
Current report
For the three months ended March 31, 2025, the Company used $1,140,730 in cash for operating activities, compared to $1,475,123 generated during the same period in 2024. The decline in operating cash flow was primarily driven by a decrease in revenue and the payment of trade payables.
Current report
For the three months ended March 31, 2025, the Company used $255,765 in cash for financing activities, compared to $740,544 in the corresponding period of 2024. This decrease was primarily due to higher principal repayments on the senior secured promissory note in 2024. In the first quarter of 2025, the Company and PCCU entered into a Letter Agreement to defer principal payments on the PCCU Note for February and March 2025, while continuing interest payments. Subsequently, the Company executed the Amended PCCU Note, which replaced the original note dated March 29, 2023, and the Letter Agreement. The amended note includes a deferral of principal payments until February 5, 2027.
Current report
Contract assets and liabilities
Current report
Deferred revenue is primarily related to contract liabilities associated with the Company agreements. As of March 31, 2025, SHF reported a contract asset and liability of $0 and $9,105 respectively and on December 31, 2024, SHF reported a contract asset and liability of $0 and $28,335, respectively.
Current report
Liquidity refers to our ability to meet anticipated cash and cash equivalents demands, including servicing debt, funding operations, maintaining assets, and covering other routine business expenses. Our primary cash outflows include debt principal and interest repayments, operating costs, and general business expenditures. The main source of our liquidity continues to be cash inflows generated from operational performance. As of March 31, 2025, the Company does not have significant capital investment commitments.
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Removed paragraphs (59)
Previous report
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS (MD&A) OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Previous report
The following discussion and analysis of our financial condition and results of operations should be read together with our unaudited Condensed Consolidated Financial Statements and the related notes thereto appearing in Part I, Item 1 of this Quarterly Report on Form 10-Q.
Previous report
Forward Looking Statements
Previous report
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements generally relate to future events or our future financial or operating performance and may include statements concerning, among other things, our business strategy (including anticipated trends and developments in, and management plans for, our business and the markets in which we operate), financial results, results of operations, revenues, operating expenses, and capital expenditures, sales and marketing initiatives and competition. In some cases, you can identify forward-looking statements because they contain words such as “may,” “might,” “will,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “suggests,” “potential” or “continue” or the negative of these words or other similar terms or expressions that concern our expectations, strategy, plans or intentions. These statements are not guarantees of future performance; they reflect our current views with respect to future events and are based on assumptions and are subject to known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from expectations or results projected or implied by forward-looking statements.
Previous report
We discuss many of these risks in other filings we make from time to time with the SEC. Also, these forward-looking statements represent our estimates and assumptions only as of the date of this Quarterly Report on Form 10-Q, which are inherently subject to change and involve risks and uncertainties. Unless required by federal securities laws, we assume no obligation to update any of these forward-looking statements, or to update the reasons actual results could differ materially from those anticipated, to reflect circumstances or events that occur after the statements are made. Given these uncertainties, investors should not place undue reliance on these forward-looking statements.
Previous report
Investors should read this Quarterly Report on Form 10-Q and the documents that we reference in this report and have filed with the SEC, including our Annual Report on Form 10-K, filed with the SEC on April 1, 2024, with the understanding that our actual future results may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements.
Previous report
We provide services to a variety of cannabis-industry participants in 41 states, including financial institutions that support business banking, private banking and commercial banking services to their customers, particularly those customers conducting business in or adjacent to the cannabis industry. Our services include, among other things:
Previous report
Financial Services Platform
Previous report
The Company has developed and commercialized a software-based services platform for financial institutions providing banking services to cannabis-related businesses (“CRBs”). Our software enabled services access and maintain reliable financial information to enable both our financial institution clients and our CRB clients to meet regulatory requirements. Our platform has been streamlined and fine-tuned since 2014. Our software platform enables the Company’s staff to efficiently guide financial institution clients and CRBs desiring banking services through the onboarding, validation and monitoring process. Our automated platform provides for an efficient and effective management tool allowing our employees to provide continuity of service while enabling compliance staff to monitor BSA activities.
Previous report
Through the Company’s financial services platform, our financial institution clients have the ability to provide CRBs with access to traditional financial services including wires, debit, ACH, remote deposit capture, business checking and savings accounts, courier and vaulting services, cash management accounts and commercial lending. We believe our services have been implemented consistent with applicable law and regulations, ensuring our financial institution clients will be able to provide CRBs with reliable access to these services. We feel our history of developing processes that satisfy regulatory standards has resulted in a solid reputation with related authorities and solidifies our ability to continue to grow existing services while simultaneously reducing barriers to expanding into new service offerings.
Previous report
CRB Deposits
Previous report
The Company maintains relationships with PCCU and other financial institutions in which CRBs’ funds are deposited and monetary transactions are performed. The Company’s agreements with the financial institution allow the Company’s platform to interface with the financial institution’s core banking systems to monitor account activity for those accounts the Company facilitated the onboarding.
Previous report
The Company earns income on deposit activity and from onboarding fees, which have historically been the majority of our revenue. When we help establish a new relationship between a CRB or ancillary service provider with our financial institution clients for which the Company provides its onboarding services, an initial onboarding fee is assessed based on the type and complexity of the business. Onboarding is an important part of the KYC requirements set forth in federal guidance. Additionally, the Company assesses fees monthly based on the frequency and amount of deposit activity fees of the applicable CRB client. These fees are also based on business type and size.
Previous report
The Company earns investment income based on the balances maintained on deposit by our CRB clients with our financial institution clients. Our financial institution clients invest the deposits of our CRB clients principally in US Treasury Federal Overnight Securities. We recognize revenue pursuant to the interest earned on these deposit balances and incur a cost of revenue we owe to the financial institution for facilitating the investment activity. Under our PCCU CAA, the Company pays 25% of the investment income as a hosting cost of revenue fee to PCCU based on the earned investment income from the CRB deposit balances maintained at PCCU. Through its relationship with PCCU, depository amounts invested are typically restricted to low-risk assets with high liquidity and modest returns. The investment income is significantly influenced by the levels of CRB deposits and the prevailing interest rate environment for cash and similar assets.
Previous report
Commercial Lending Program
Previous report
We earn interest income from lending activity we facilitate between our CRB clients and our financial institution clients and to a lesser extent, direct lending by the Company. The robust CRB deposits onboarded by the Company and held at PCCU provide a strong foundation for lending capacity. In 2020, the Company launched a commercial lending program that has developed to be our largest revenue component by value and percentage. The program focuses on senior secured lending, with smaller unsecured loans also being considered. Collateral types include real estate, equipment, and other business assets.
Previous report
Currently, lending is primarily funded through PCCU. The Company is seeking relationships with additional financial institutions and other sources of working capital to directly fund the loans. The Company, in collaboration with third parties manages loan underwriting and loan servicing. As the program develops, the Company intends to establish a full-service internal lending function to perform a larger percentage of the underwriting and servicing activities, improve efficiency and increase profitability of this revenue element.
Previous report
Non-GAAP Measures
Previous report
We use certain non-GAAP measures, referenced in this MD&A. These measures are not recognized measures under GAAP and do not have a standardized meaning prescribed by GAAP and therefore may not be comparable to similar measures presented by other companies. Accordingly, these measures should not be considered in isolation from nor as a substitute for our financial information reported under GAAP. We use non-GAAP measures including EBITDA, Adjusted EBITDA and Adjusted EBITDA margin which may be calculated differently by other companies. These non-GAAP measures and metrics are used to provide investors with supplemental measures of our operating performance and liquidity and thus highlight trends in our business that may not otherwise be apparent when relying solely on GAAP measures. These supplemental non-GAAP financial measures should not be considered superior to, as a substitute for, or as an alternative to, and should be considered in conjunction with, the GAAP financial measures presented. We also recognize that securities analysts, investors and other interested parties frequently use non-GAAP measures in the evaluation of companies within our industry.
Previous report
For the nine months ended September 30, 2024, there was a decline in the average number of accounts and fees compared to the previous period, primarily due to a decrease in clientele following the termination of an agreement with the Central Bank of Arkansas. We expect this trend to shift as we lead with our lending program typically requiring borrowers to place deposits with financial institutions with which we have relationships.
Previous report
We are focused on enhancing and growing our lending platform. Incremental lending key metrics will be monitored as this portion of our business grows in volume. Metrics will include average loan balance, average life to repayment, average effective interest rate and loan status, amongst others.
Previous report
The Company reports a provision for credit losses both as it relates to loans funded internally and those carried by PCCU or other financial institutions. The Company indemnifies PCCU and other financial institutions for losses on loans to borrowers sourced by the Company and funded by PCCU and other financial institutions. The Company anticipates comparable arrangements with other financial institutions that fund loans to borrowers sourced by the Company.
Previous report
The decrease in deposit, activity and onboarding income was primarily attributable to the decrease in the number of accounts related to the Abaca acquisition. In the nine months ended September 30, 2024, PCCU accounted for $3,778,633 of the revenue generated from deposits, activities, and client onboarding. Related to this revenue, the Company recognized $356,369 in account hosting expenses, in accordance with the PCCU CAA. In the nine months ended September 30, 2023, PCCU contributed $4,051,353 to the revenue from similar sources, with account hosting expenses amounting to $170,987 as per the Loan Servicing Agreement provisions. These expenses were categorized under “General and Administrative Expenses” in the Consolidated Statements of Operations.
Previous report
Under our Commercial Alliance Agreement with PCCU (“PCCU CAA”), we pay 25% of the investment income as a hosting fee based on this income. In the nine months ended September 30, 2024, the income derived from investment income associated with PCCU totaled $1,601,611. In relation to this income, the Company incurred $374,591 in investment hosting fees, consistent with the stipulations of the PCCU CAA. In the nine months ended September 30, 2023, PCCU’s contribution to investment income amounted to $4,051,353, against which the Company recorded investment hosting fees of $978,671, as governed by the terms of the Loan Servicing Agreement. These expenses were categorized under “General and administrative expenses” in the Consolidated Statements of Operations.
Previous report
We previously had a Loan Servicing Agreement with PCCU (related party) which has since been superseded by the PCCU CAA. The loan interest income reflects our share of loan interest on issued loans. We are obligated to pay 0.35% on the total outstanding principal of each loan that is funded and serviced by PCCU. Loan interest earned on the Company’s direct loans and the indemnified loans grew as the Company increased its focus on lending. For the nine months ended September 30, 2024, SHF serviced twenty-four loans, as compared to twelve loans in the nine months ended September 30, 2023. In nine months ended September 2024, the Company recognized $4,814,349 in loan interest income attributable to PCCU activities. The related expenses for this income included $106,946 in loan servicing fees, in compliance with both the Loan Servicing Agreement and the PCCU CAA. In nine months ended September 2023, loan interest income from PCCU operations amounted to $1,977,337, with associated loan servicing fees totaling $53,790, pursuant to the same agreements. These expenses were categorized under “General and administrative expenses” in the Consolidated Statements of Operations.
Previous report
Compensation and employee benefits decreased in the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023 on account of stock-based compensation and also related to a reduction in force.
Previous report
Rent expenses decreased in the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023 due to reduction in the number of lease properties.
Previous report
(Benefit)/ Provision for credit losses increased in the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023 due to increase in loan portfolio amount .
Previous report
For the nine months ended September 30, 2024, general and administrative expenses decreased across various categories including: i) approximately $ 604,080 in investment hosting fees due to a reduction in investment income, and ii) approximately $535,179 in amortization and depreciation due to the reduction in the gross value of intangible assets from impairment recorded in 2023.
Previous report
The interest expenses decreased by $551,135, primarily due to the elimination of the interest component on the deferred cash consideration payable to the PCCU related to the business combination, which was settled and restructured at the end of the first quarter of 2023.
Previous report
Provision for income taxes
Previous report
Our provision for income taxes in the nine months ended September 30, 2024 increased $1,255,062, compared to the same period in 2023, due to an increase in income before provision for income taxes.
Previous report
The decrease in deposit, activity and onboarding income was primarily attributable to the decrease in the number of accounts related to the Abaca acquisition. In the three months ended September 30, 2024, PCCU accounted for $1,354,036 of the revenue generated from deposits, activities, and client onboarding. Related to this revenue, the Company recognized $131,002 in account hosting expenses, in accordance with the PCCU CAA. In the three months ended September 30, 2023, PCCU contributed $1,287,669 to the revenue from similar sources, with account hosting expenses amounting to $54,729 as per the Loan Servicing Agreement provisions. These expenses were categorized under “General and administrative expenses” in the Consolidated Statements of Operations.
Previous report
We have agreements with PCCU (related party) and Five Star Bank (FSB) where our financial institution clients pay us interest on the daily account balance as per the rates in the agreements. Under our Commercial Alliance Agreement with PCCU (“PCCU CAA”), we pay 25% of the investment income as a hosting fee based on this income. In the three months ended September 30, 2024, the income derived from investment income associated with PCCU totaled $434,949. In relation to this income, the Company incurred $96,870 in investment hosting fees, consistent with the stipulations of the PCCU CAA. In three months ended September 30, 2023, PCCU’s contribution to investment income amounted to $1,186,246, against which the Company recorded investment hosting fees of $273,939, as governed by the terms of the Loan Servicing Agreement. These expenses were categorized under “General and administrative expenses” in the Consolidated Statements of Operations.
Previous report
We had a Loan Servicing Agreement with PCCU (related party) where our financial institution carries the loan balances on their financial statement; the Loan Servicing Agreement has since been superseded by the PCCU CAA. The loan interest income reflects our share of loan interest on issued loans. We are obligated to pay 0.35% on the total outstanding principal of each loan that is funded and serviced by PCCU. Loan interest earned on the Company’s direct loans and the indemnified loans grew as the Company increased its focus on lending. For the quarter ended September 30, 2024, SHF serviced twenty-four loans, as compared to twelve loans in the quarter ended September 30, 2023. In the quarter ended September 30, 2024, the Company recognized $1,341,501 in loan interest income attributable to PCCU activities. Related expenses for this income included $34,889 in loan servicing fees, in compliance with both the Loan Servicing Agreement and the PCCU CAA. In the quarter ended September 30, 2023, loan interest income from PCCU operations amounted to $906,213, with associated loan servicing fees totaling $25,120, pursuant to the same agreements. These expenses were categorized under “General and Administrative Expenses” in the Consolidated Statements of Operations.
Previous report
Compensation and employee benefits decreased in the three months ended September 30, 2024 compared to the three months ended September 30, 2023 on account of stock-based compensation and the decrease in the headcount.
Previous report
Rent expenses decreased in the three months ended September 30, 2024 compared to the three months ended September 30, 2023 due to reduction in the number of lease properties.
Previous report
(Benefit)/ Provision for credit losses increased in the three months ended September 30, 2024 compared to the three months ended September 30, 2023 due to increase in loan portfolio amount.
Previous report
For the three months ended September 30, 2024, general and administrative expenses decreased across various categories including: i) approximately $177,069 in investment hosting fees due to a reduction in investment income, and (ii) approximately $128,014 in amortization and depreciation due to the reduction in the gross value of intangible assets from impairment recorded in 2023.
Previous report
Other income /(expenses)
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Reworded paragraphs (23)
Previous wording
Unless the context otherwise requires, references in this section to “we,” “us,” or “our” refer to SHF Holdings, Inc and its subsidiaries (herein referred to as the “Company”). References to “management” refer to our officers and Board of Directors. The following discussion and analysis of our financial performance and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements.
Current wording
References in this section to “we,” “us,” “our,” “SHF” or the “Company” refer to SHF Holdings, Inc. References to “management” refer to our officers and board of managers. The following discussion and analysis of our financial performance and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and the notes to those financial statements included elsewhere in this Form 10-Q This discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties. See “Cautionary Note Regarding Forward-Looking Statements.” Our actual results may differ materially from those contained in or implied by any forward-looking statements.
Previous wording
The Company generates interest and fee income by providing a variety of services to PCCU and other financial institutions to facilitate its banking services to CRBs including, among other things, Bank Secrecy Act and other regulatory compliance and reporting, onboarding, responding to account inquiries, responding to customer service inquiries relating to CRB deposit accounts held at financial institution clients, and sourcing and originating loans. In addition, the Company provides these similar services and outsourced support to other financial institutions providing banking to the cannabis industry.
Current wording
The Company generates interest and fee income through providing a variety of services to our financial institutions to facilitate its banking services to CRBs including, among other things, Bank Secrecy Act and other regulatory compliance and reporting, onboarding, responding to account inquiries, responding to customer service inquiries relating to CRB deposit accounts held at financial institution clients, and sourcing and originating loans. In addition, the Company provides these similar services and outsourced support to other financial institutions providing banking to the cannabis industry.
Previous wording
Operating expenses consist of compensation and benefits, professional services, rent expense, provisions for credit losses and other general and administrative expenses.
Current wording
Operating expenses consist of compensation and benefits, professional services, rent expense, credit loss (benefit) expense and other general and administrative expenses.
Previous wording
Discussion of our Results of Operations —2024 Compared to 2023 (Three Months Ended September 30)
Current wording
Discussion of our Results of Operations —March 31, 2025 Compared to March 31, 2024 (Three months ended)
Previous wording
Account fee income consists of deposit account fees, activity fees and onboarding income. We receive a flat fee and lower rates for ancillary accounts, which are accounts provided to businesses servicing the cannabis industry in general but do not manufacture, possess, distribute or transport cannabis.
Current wording
Account fee income consists of deposit account fees, activity fees and onboarding income. We receive a flat fee and lower rates for ancillary accounts, which are accounts provided to businesses servicing the cannabis industry in general but do not manufacture, possess, distribute or transport cannabis. The decrease in account fee income was primarily attributable to the previously disclosed reduction in the average monthly ending deposit balance.
Previous wording
The Company provides similar account services and outsourced support to other financial institutions providing banking to the cannabis industry. These services are provided under the Safe Harbor Master Program Agreement.
Current wording
The Company provides similar account services and outsourced support to other financial institutions that offer banking services to the cannabis industry. These services are provided under the Safe Harbor Master Program Agreement.
Previous wording
For the three months ended September 30, 2024, the fair value of deferred consideration decreased by $128,496. This reduction was due to a decline in the fair value adjustment on the stock and cash consideration payable to the Abaca shareholders, as a result of payments made before the end of 2023, which affected the fair value of the third anniversary payment.
Current wording
The deferred consideration from the Abaca acquisition is classified as a derivative liability under ASC 815 and recorded at fair value, with periodic adjustments. Its value fluctuates based on factors such as the Company’s stock price, market volatility, risk-free interest rates, and amendments to the agreement. For the three months ending March 31, 2025, the fair value of deferred consideration decreased by $161,000 from its balance as of December 31, 2024. This reduction was due to a decline in the fair value adjustment on the stock and cash consideration payable to the Abaca shareholders, which affected the fair value of the third anniversary payment.
Previous wording
The change in the fair value of warrant liabilities by $3,173,843 was attributable to the decrease in the share price.
Current wording
The Company has warrant liabilities related to Public, Private Placement, PIPE, and Abaca Warrants, which may be settled in cash or stock depending on conditions such as stock price or registration status. These warrants are accounted for as derivative liabilities due to their contingent nature. The liabilities are subject to adjustments based on terms and stock performance. The change in the fair value of warrant liabilities by $1,116,082 from December 31, 2024 was attributable to the decrease in the share price.
Previous wording
To provide investors with additional information regarding our financial results, we have disclosed EBITDA and Adjusted EBITDA, both of which are non-GAAP financial measures that we calculate as net income before taxes and depreciation and amortization expense in the case of EBITDA and further adjusted to exclude non-cash, unusual and/or infrequent costs in the case of Adjusted EBITDA. Below we have provided a reconciliation of net (loss)/income (the most directly comparable U.S. GAAP financial measure) to EBITDA and from EBITDA to Adjusted EBITDA.
Current wording
To provide investors with additional information regarding our financial results, we have disclosed EBITDA and Adjusted EBITDA, both of which are non-GAAP financial measures that we calculate as net profit before taxes and depreciation and amortization expense in the case of EBITDA and further adjusted to exclude non-cash, unusual and/or infrequent costs in the case of Adjusted EBITDA. Below we have provided a reconciliation of net profit (the most directly comparable GAAP financial measure) to EBITDA and from EBITDA to Adjusted EBITDA.
Previous wording
EBITDA and Adjusted EBITDA have limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our results as reported under U.S. GAAP. Some of these limitations are as follows:
Current wording
EBITDA and Adjusted EBITDA have limitations as an analytical tool, and it should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are as follows:
Previous wording
Because of these limitations, you should consider EBITDA and Adjusted EBITDA alongside other financial performance measures, including net loss and our other U.S. GAAP results.
Current wording
Because of these limitations, you should consider EBITDA and Adjusted EBITDA alongside other financial performance measures, including net profit and our other GAAP results.
Previous wording
A reconciliation of net income to non-GAAP EBITDA and Adjusted EBITDA is as follows:
Current wording
A reconciliation of net profit to non-GAAP EBITDA and Adjusted EBITDA is as follows:
Previous wording
For the three and nine months ended September 30, 2024, our EBITDA income improved primarily as a result of decrease in General and Administrative expenses. This reduction was driven by lower investment hosting fees, decreased amortization and depreciation expenses, and reduced business insurance costs. Additionally, there were decreases in compensation, employee benefits, marketing expenses, and other insurance costs. These factors contributing to our financial performance are further discussed in the “Discussion of our Results of Operations” section below. Other adjustments include estimated future credit losses not yet realized, including amounts indemnified to PCCU for loans funded by them. The Company has entered into a Commercial Alliance Agreement with PCCU (referred to as “PCCU CAA”), pursuant to which the Company agreed to indemnify PCCU for claims associated with CRB activities including any loan default related losses for loans funded by PCCU. Deferred loan origination fees and costs represent the change in net deferred loan origination fees and costs. When included with a new loan origination, we receive an upfront loan origination fee in conjunction with new loans funded by our financial institution partners and incur costs associated with originating a specific loan. For accounting purposes, the cash received for loan origination fees and costs is initially deferred and recognized as interest income utilizing the interest method.
Current wording
For the three months ended March 31, 2025, our adjusted EBITDA declined primarily due to a decrease in account loan interest income resulting from the revised calculation methodology under the Amended PCCU CAA, lower investment income driven by a reduction in the average daily deposit balance, and higher asset hosting fees and professional expenses. These factors contributing to our financial performance are further discussed in the “Discussion of our Results of Operations” section above. In 2024, the other adjustments include estimated future credit losses not yet realized, including amounts indemnified to PCCU for loans funded by them. The Company entered into the PCCU CAA with PCCU, under which it agreed to indemnify PCCU for claims related to CRB activities, including loan default-related losses for loans funded by PCCU. This agreement was subsequently amended and restated, effective December 31, 2024, to eliminate the Company’s indemnification liability. Deferred loan origination fees and costs represent the change in net deferred loan origination fees and costs. When included with a new loan origination, we receive an upfront loan origination fee in conjunction with new loans funded by our financial institution partners and incur costs associated with originating a specific loan. For accounting purposes, the cash received for loan origination fees and costs is initially deferred and recognized as interest income utilizing the interest method.
Previous wording
Our lending capacity is dependent on the size of our managed deposit base and number of active accounts. In addition, fees are generated based on open accounts and account activity. We monitor account activity including deposits, withdrawals and ending account balance daily. Total account balances represent the balance of onboarded and monitored deposits on hand at financial institution clients at period end. Average account balance represents the total account balance divided by the number of accounts at the period end.
Current wording
Our ability to originate loans for PCCU is dependent on the size of our managed deposit base and number of active accounts. In addition, fees are generated based on open accounts and account activity. We monitor account activity including deposits, withdrawals and ending account balance daily. Total account balances represent the balance of onboarded and monitored deposits on hand at financial institution clients at period end. Average account balance represents the total account balance divided by the number of accounts at the period end.
Previous wording
Currently a significant amount of our fees are generated from account openings, active accounts and account activity. As a result, we monitor account openings and closings on a daily, weekly and monthly basis. We strive to meet the appropriate balance between depository balances and fees and therefore review account fees per average number of active accounts managed.
Current wording
Currently a significant amount of our fees is generated from active accounts and account activity. As a result, we monitor account openings and closings on a daily, weekly and monthly basis. We strive to meet the appropriate balance between depository balances and fees and therefore review account fees per average number of active accounts managed.
Previous wording
Cash and cash equivalents totaled $5,861,475 and $4,888,769 as of September 30, 2024 and December 31, 2023, respectively.
Current wording
Cash and cash equivalents totaled $931,397 and $2,324,647 as of March 31, 2025 and December 31, 2024, respectively.
Previous wording
For the nine months ended September 30, 2024, the Company generated $8,173 in cash from investing activities, compared to $783,481 for the nine months ended September 30, 2023. The decrease was primarily due to the repayment of loans by customers in the previous period.
Current wording
For the three months ended March 31, 2025, the Company generated $3,245 in cash from investing activities, compared to $3,014 during the same period in 2024. This change is attributed to the loan receivable repayment schedule serviced by the Company.
Previous wording
As reported on its Current Report on Form 8-K, on October 17, 2024 the Company caused a declaratory judgment complaint to be filed in the District Court for the City and County of Denver, Colorado, captioned SHF Holdings, Inc. v. Daniel Roda, Gregory W. Ellis, and James R. Carroll, Case No. 2024CV33187, Denver County District Court (“Declaratory Judgement Complaint”). The Declaratory Judgement Complaint was filed related to the Amended Abaca Merger Agreement, dated October 26, 2023. On November 4, 2024, in connection with the Declaratory Judgment Complaint, the Company filed a motion with the court requesting that the court authorize the Company to deposit the $3,000,000 payment owed pursuant to the Amended Abaca Merger Agreement into the court’s registry so that it can be distributed in accordance with the terms of the Amended Abaca Merger Agreement. The payment obligation of $3,000,000 has already been accounted for in the working capital deficit disclosed in the Liquidity and Going Concern section*.*
Current wording
On October 17, 2024, the Company caused a Complaint to be filed in the District Court for the City and County of Denver, Colorado, captionedSHF Holdings, Inc. v. Daniel Roda, Gregory W. Ellis, and James R. Carroll, Case No. 2024CV33187 (Denver County District Court). On November 21, 2024, in connection with the Company’s request, the Company caused the Merger Payment to be deposited into the Denver County District Court’s registry so that it can be distributed in accordance with the terms of the Merger Agreement. The Merger Payment has already been accounted for in the working capital deficit disclosed in the Liquidity and Going Concern section. On December 19, 2024, Daniel Roda, Gregory W. Ellis, and James R. Carroll caused an answer and counterclaim to be filed in response to the Company Complaint. For additional details, please refer to the section titled “Abaca legal case in Denver” in the Recent Updates of the Company’s Annual Report on Form 10-K and Form 10-K/A for the fiscal year ended December 31, 2024 as well as the Company’s Current Reports on Form 8-K filed with the SEC on October 18, 2024 and December 19, 2024.
Previous wording
As of September 30, 2024, there were no significant changes in the application or the nature of accounting estimates that are considered critical in nature from those presented in our Annual Report on Form 10-K.
Current wording
As of March 31, 2025, there were no significant changes in the application or the nature of accounting estimates that are considered critical in nature from those presented in our Annual Report on Form 10-K and Form 10-K/A.
Previous wording
In connection with our management assessment of internal control over financial reporting as of and for the nine months ended September 30, 2024, the Company has identified two (2) material weaknesses within our internal controls associated with Revenue Recognition and Complex Financial Instruments. Refer to Item 4 of this Quarterly Report on Form 10-Q for additional details.
Current wording
In connection with our management assessment of internal control over financial reporting as of and for the three months ended March 31, 2025, the Company has identified material weaknesses within our internal controls over financial reporting. Refer to Item 9A of this document for additional details.
Previous wording
On March 29, 2023, the Company and PCCU entered into the Commercial Alliance Agreement (referred to as PCCU CAA). This Agreement sets forth the terms and conditions of the lending and account-related services, governing the relationship between the Company and PCCU. The PCCU CAA sets forth the application, underwriting, loan approval, and foreclosure process for loans from PCCU to borrowers that are cannabis-related businesses and the loan servicing and monitoring responsibilities provided by the Company and PCCU. In particular, the PCCU CAA provides for procedures to be followed upon the default of a loan to ensure that neither the Company nor PCCU will take title to or possession of any cannabis-related assets, including real property, that may be collateral for a loan funded by PCCU pursuant to the PCCU CAA. Under the PCCU CAA, the PCCU has the right to receive monthly fees for managing loans. For SHF-serviced loans, which are CRB loans provided by the PCCU but primarily handled by SHF, a yearly fee of 0.25% of the remaining loan balance is applied. On the other hand, loans both financed and serviced by the PCCU are charged a yearly fee of 0.35% on their outstanding balance. These fees are calculated using the average daily balance of each loan for the preceding month. In addition, the Company’s is obligated by the PCCU CAA to indemnify PCCU from certain default-related loan losses (as fully defined in the PCCU CAA).
Current wording
On March 29, 2023, the Company and PCCU entered into a PCCU CAA, which was subsequently amended and restated on December 31, 2024. This agreement sets forth the terms and conditions of lending and account-related services, governing the relationship between the Company and PCCU. The PCCU CAA outlined the application, underwriting, loan approval, and foreclosure processes for loans issued by PCCU to CRBs (as defined below), as well as the loan servicing and monitoring responsibilities of both parties.
Previous wording
In addition, the PCCU CAA provides for certain fees to be paid to the Company for certain identified account related services to include: all cannabis-related income, including all lending-related income (such as loan origination fees, interest income on CRB-related loans, participation fees and servicing fees), investment income, interest income, account activity fees, processing fees, flat fees, and other revenue generated from cannabis and multi-state hemp accounts that are hosted on PCCU’s core system for a monthly fee equal to $30.96 per account in 2022, $25.32-$27.85 per account in 2023, and $26.08-$28.69 in 2024. In addition, as it pertains to CRB deposits held at PCCU, investment and interest income earned on these deposits (excluding interest income on loans funded by PCCU) will be shared 25% to PCCU and 75% to the Company. Finally, under the PCCU CAA, PCCU will continue to allow its ratio of CRB-related deposits to total assets to equal at least 60% unless otherwise dictated by regulatory, regulator or policy requirements. The initial term of the PCCU CAA is for a period of two years, with a one-year automatic renewal unless a party provides one hundred twenty days’ written notice prior to the end of the term.
Current wording
Furthermore, the PCCU CAA outlined certain fees to be paid to the Company for specified account-related services, including cannabis-related income such as loan origination fees, interest income on CRB-related loans, participation fees, servicing fees, investment income, account activity fees, processing fees, and other revenue. These fees were set at $30.96 per account in 2022, $25.32-$27.85 per account in 2023, and $26.08-$28.69 in 2024.
Previous wording
The schedule below demonstrates the ratio of CRB related loans funded by PCCU to the relative lending limits:
Current wording
The schedule below illustrates the ratio of CRB-related loans funded by PCCU to the corresponding lending limits under the Amended PCCU CAA.:
Rearranged current paragraphs (4)
Current report — wording carried from elsewhere
In particular, the PCCU CAA provided procedures to be followed upon the default of a loan to ensure that neither the Company nor PCCU would take title to or possession of cannabis-related assets, including real property that may have served as collateral for loans funded by PCCU pursuant to the agreement.
Current report — wording carried from elsewhere
Under the PCCU CAA, PCCU had the right to receive monthly fees for managing loans. For SHF-serviced loans (CRB loans provided by PCCU but primarily handled by SHF), a yearly fee of 0.25% of the remaining loan balance was applied. For loans both financed and serviced by PCCU, a yearly fee of 0.35% on the outstanding balance was charged. These fees were calculated based on the average daily balance of each loan for the preceding month.
Current report — wording carried from elsewhere
Additionally, until December 31, 2024 the Company was obligated under the PCCU CAA to indemnify PCCU from certain default-related loan losses, as fully defined in the agreement.
Current report — wording carried from elsewhere
Regarding CRB deposits held at PCCU, investment and interest income earned on these deposits (excluding interest income on loans funded by PCCU) was shared at a ratio of 25% to PCCU and 75% to the Company. Additionally, PCCU maintained its CRB-related deposits to total assets ratio at 60%, unless otherwise dictated by regulatory, regulator, or policy requirements. The initial term of the PCCU CAA was two years, with a one-year automatic renewal, unless either party provided a one hundred twenty-day written notice prior to the end of the term.
Rearranged previous paragraphs (5)
Previous report — wording carried elsewhere
Discussion of our Results of Operations —2024 Compared to 2023 (Nine Months Ended September 30)
Previous report — wording carried elsewhere
The Company provides similar account services and outsourced support to other financial institutions providing banking services to the cannabis industry.
Previous report — wording carried elsewhere
For the nine months ended September 30, 2024, the fair value of deferred consideration decreased by $908,574. This reduction was due to a decline in the fair value adjustment on the stock and cash consideration payable to the Abaca shareholders, as a result of payments made before the end of 2023, and a decrease in the share price as of September 30,2024, which affected the fair value of the third anniversary payment.
Previous report — wording carried elsewhere
Account fee income consists of deposit account fees, activity fees and onboarding income. We receive a flat fee and lower rates for ancillary accounts, which are accounts provided to businesses servicing the cannabis industry in general but do not manufacture, possess, distribute or transport cannabis.
Previous report — wording carried elsewhere
The change in the fair value of warrant liabilities by $1,275,007 was attributable to the decrease in the share price.