SHF Holdings, Inc.
For the period ended Jun 30, 2025. Filed Aug 14, 2025.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2025 · Filed Aug 14, 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 2025-03-31; filed 2025-05-21.
0001641172-25-011821
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2025-06-30; filed 2025-08-14.
0001641172-25-024215
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 106 previous paragraphs and 87 current paragraphs.
39 unchanged; 18 reworded; 30 added; 49 removed; 0 previous and 0 current paragraphs rearranged.
Tables are not compared: 14 previous and 18 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (30)
Current report
Through our proprietary platform operating in 42 states and territories, SHF ensures our Financial Institution customers can compliantly provide the following banking related services to CRBs:
Current report
Results of Operations
Current report
Three and Six Months June 30, 2025 As Compared To June 30, 2024
Current report
The following is the revenue for the three and six months ended June 30, 2025 and June 30, 2024.
Current report
The following is the account fee income by financial institutions for the three and six months ended June 30, 2025 and June 30, 2024.
Current report
The following is the hosting fee by financial institutions for the three and six months ended June 30, 2025 and June 30, 2024.
Current report
For the three months ended June 30, 2025, as compared to June 30, 2024, the Company reduced operating expenses by $920,996, or 24.6%. For the six months ended June 30, 2025, as compared to June 30, 2024, the Company reduced operating expenses by $723,007 or 9.7%. The Company implemented a business plan that included a reduction of expenses to save cash, refer to management’s plan related to going concern, Note 2 to the accompanying financial statements.
Current report
For the three months ended June 30, 2025, compared to the same period in 2024, the Company reduced compensation and employee benefits by $681,880, or 30.1%. This decrease was primarily driven by reduction in stock compensation expense of $700,000 which is offset by $100,000 for an amount accrued for an amount owed to a former employee. For the six months ended June 30, 2025, compared to the same period in 2024, compensation and employee benefits declined by $1,589,437, or 34.9%, including $833,000 in savings from headcount reductions and a $861,000 reduction in stock compensation expense, offset by $100,000 for an accrual for an amount owed to a former employee. Compensation and employee expenses should continue to decline in the third quarter ending September 30, 2025 with a full effect of the headcount reductions taken during the quarter ended June 30, 2025.
Current report
For the three months ended June 30, 2025, as compared to June 30, 2024, there was a decrease in general and administrative expense of $543,961, or 54.3%. The decrease is primarily related to a decrease of $271,000 from franchise taxes, a decrease of $191,000 for amortization of intangible assets, and a decrease in marketing expenses of $41,000. For the six months ended June 30, 2025, as compared to June 30, 2024, there was a decrease in general and administrative expense of $537,355, or 27%. The decrease was primarily attributed to a franchise taxes of $271,000, and a decrease in marketing expenses of $92,000.
Current report
For the three months ended June 30, 2025, as compared to June 30, 2024, there was an increase in professional services of $208,610, or 41.4%, The increase was attributed to legal fees associated with the Company’s litigation, For the six months ended June 30, 2025, as compared to June 30, 2024, there was an increase in professional services of $1,247,194, or 129.3%. The increase was attributed to legal fees associated with the Abaca legal case, non-cash stock compensation to directors, and a $200,000 legal settlement with a former employee, refer to Note 17 – Commitments and Contingencies for further details.
Current report
For the three months ended June 30, 2025, there was no credit loss (benefit) expense as compared to a credit loss (benefit) of $(97,248). For the six months ended June 30, 2025, there was no credit loss (benefit) expense as compared to a credit loss (benefit) of $(166,035). Effective with the Amended PCCU CAA, the Company is not indemnifying loans issued by PCCU.
Current report
Interest expense for the three and six months ended June 30, 2025, and June 30, 2024, primarily relates to the Senior Secured Promissory Note. For the three months ended June 30, 2025, interest expense decreased by $53,489, or 31.7%, compared to the same period in 2024, primarily due to principal repayments on the note. For the six months ended June 30, 2025, interest expense decreased by $94,875, or 29.4%, compared to the prior-year period, also driven by principal repayments on the Senior Secured Promissory Note.
Current report
The Company has warrant liabilities related to Public, Private Placement, PIPE, and Abaca Warrants, which may be settled in cash or stock at the option of the Company. The liabilities are subject to adjustments based on its fair value which is calculated by the Black Scholes Merton option pricing method and Monte Carlo Simulation method. Changes in the Company’s stock price primarily resulted in the decrease in fair market value.
Current report
Income tax (benefit) expense for the three months ended June 30, 2025 was $(58,470) as compared to income tax of $487,627 for the three months ended June 30, 2024. Income tax (benefit)expense for the six months ended June 30, 2025 was $(58,470) as compared to an income tax expense of $48,742 for the six months ended June 30, 2024. The change in income tax (benefit) resulted in a reversal of estimated accrual.
Current report
Liquidity, Capital Resources and Capital Resources.
Current report
Liquidity refers to our ability to meet expected cash obligations, including operating costs, interest payments, and general business expenditures. As of June 30, 2025, we had cash and cash equivalents of $247,318 and a net working capital deficit of $7,381,312. We also had an accumulated deficit of $122,513,459 and used cash of $1,815,338 in operating activities during the six months ended June 30, 2025.
Current report
Pursuant to ASC 205-40,Presentation of Financial Statements – Going Concern, we evaluated whether there are conditions or events that raise substantial doubt about our ability to continue as a going concern for at least one year from the date of issuance of these unaudited condensed consolidated financial statements. Based on current financial projections, we believe substantial doubt exists regarding our ability to continue as a going concern.
Current report
Management projects that the Company will not have sufficient liquidity to continue operations, including making required interest payments under the Amended PCCU Note, see Note 9), beyond October 2025. The total outstanding balance under the Amended PCCU Note is $10,748,408. xPCCU holds a senior security interest in all of the Company’s assets other than the NASDAQ listing. In the event of a payment default, and if such default is not cured within the applicable grace period, PCCU may exercise its rights under the security agreement, which could include accelerating the debt and pursuing remedies that could materially and adversely affect the Company’s operations and financial position.
Current report
The Company continues to experience reductions in depository activity, loan interest income, and fee revenue, as well as legal expenses related to ongoing shareholder and former employee litigation. These factors have further constrained liquidity and heightened the uncertainty surrounding our ability to sustain operations.
Current report
The Company entered into a purchase loan agreement with PCCU on July 31, 2025, for the sale of a loan receivable of $385,642 as of June 30, 2025 to PCCU. On July 31, 2025, the Company received $384,527 from PCCU for the sale of the loan, see Note 18, Subsequent Events.
Current report
Additionally, as of June 30, 2025, our stockholders’ deficit of approximately $17.9 million is $20.4 million below the $2.5 million minimum equity requirement for continued listing on The Nasdaq Capital Market under Rule 5550(b)(1). We received a deficiency notice from Nasdaq and submitted a compliance plan on May 22, 2025. Nasdaq confirmed receipt of the plan but has provided no additional commentary as of the date of issuance of the financial statements. There is no assurance that the Company will regain compliance within the allowed period.
Current report
Notwithstanding these financial conditions, the Company does not anticipate any material impact to services provided to its cannabis-related business (CRB) clients, whose deposits are maintained with the Company’s contracted financial institutions. However, these developments could ultimately result in changes to the Company’s ownership structure.
Current report
In response to the liquidity challenges and the existence of substantial doubt about the Company’s ability to continue as a going concern, management has implemented and is pursuing a series of initiatives intended to improve the Company’s financial condition and operating flexibility.
Current report
The Company has undertaken several operational and financial restructuring measures, including:
Current report
In addition, the Company is actively engaged in discussions with potential investors, lenders, acquirers, investment banks, and strategic partners to secure additional capital through debt and equity financing or other strategic alternatives. Management is also exploring the potential use of its Nasdaq listing as part of a broader strategy that may include digital assets or treasury-related partnerships. These discussions remain preliminary, and no assurance can be given that any such transaction will materialize.
Current report
While these plans are factored and heighted to alleviate the conditions giving rise to the going concern uncertainty, there can be no assurance that they will be successfully executed, or that any financing will be secured on acceptable terms, or at all. If the Company is unable to implement these plans or obtain sufficient funding, it may be required to curtail operations or pursue other strategic alternatives. The Company is closely monitoring its cash flows, reducing discretionary expenditures, and prioritizing liquidity preservation while continuing to assess all available strategic options.
Current report
Management remains committed to executing its business plan while addressing the Company’s liquidity needs in a timely and prudent manner.
Current report
For the six months ended June 30, 2025, the Company used $1,815,338 of cash in operating activities to fund its net loss of $1,757,914. Operating cash flow benefited from $783,762 in non-cash stock-based compensation and $532,761 generated through effective working capital management. For the six months ended June 30, 2024, the Company cash provided by operations was $2,704,637 primarily from a net income of $2,991,203, increases in changes in operating assets and liabilities $1,390,207, offset by non-cash expenses of $1,340,207.
Current report
For the six months ended June 30, 2025, and June 30, 2024, the Company generated cash from investing activities was $6,545 and $6,083 from the proceeds of loan, respectively.
Current report
For the six months ended June 30, 2025, and June 2024, the Company used from financing activities was $268,536 and $1,487,507 was primarily from the repayment of the senior secured promissory notes, respectively.
Removed paragraphs (49)
Previous 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:
Previous report
Components of our Results of Operations
Previous report
Other general and administrative expenses consist of various miscellaneous items including account hosting fees, insurance expense, advertising and marketing, travel meals and entertainment and other office and operating expense.
Previous report
Discussion of our Results of Operations —March 31, 2025 Compared to March 31, 2024 (Three months ended)
Previous report
The reconciliation of account fee income and account hosting fees are as follows:
Previous report
Account fee income:
Previous report
Account hosting fees:
Previous 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.
Previous 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.
Previous 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.
Previous 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.
Previous 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.
Previous 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.
Previous report
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 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.
Previous report
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 report
Financial Condition
Previous report
Cash and cash equivalents
Previous report
Cash and cash equivalents totaled $931,397 and $2,324,647 as of March 31, 2025 and December 31, 2024, respectively.
Previous 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.
Previous report
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 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.
Previous report
Contract assets and liabilities
Previous 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.
Previous report
Liquidity and going concern
Previous 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.
Previous report
Under Accounting Standards Codification (“ASC”) 205-40, Presentation of Financial Statements—Going Concern, the Company is responsible for evaluating whether conditions or events raise substantial doubt about its ability to meet future financial obligations within one year of the financial statement issuance date. This evaluation involves two steps: (1) assessing whether conditions or events raise substantial doubt about the Company’s ability to continue as a going concern, and (2) if substantial doubt is raised, evaluating whether the Company has plans to mitigate that doubt. Disclosures are required if substantial doubt exists or if the Company’s plans alleviate the substantial doubt. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Previous report
At March 31, 2025, the Company reported cash and cash equivalents of $931,397 and net working capital deficit of $6,723,895, compared to cash and cash equivalents of $2,324,647 and net working capital deficit of $983,833 as of December 31, 2024. The Company’s ability to continue as a going concern depends on its capacity to generate sufficient liquidity to meet financial obligations, including interest repayments under the senior secured note with PCCU (as defined below). The Company has an operating loss of $1,477,923 for the period ended March 31, 2025.
Previous report
In the first quarter of 2025, the Company experienced a $315,583 decline in total operating expenses compared to the first quarter of 2024, driven by a significant reduction in compensation and employee benefits. However, this positive trend was more than offset by reductions in depository activity, loan interest income, and fee income, in addition to ongoing legal expenses related to shareholder and employee matters. These factors have negatively impacted the Company’s ability to effectively address the going concern uncertainties.
Previous report
As a result, the Company may need to raise additional debt or equity financing to resolve these challenges. In the event of a default on the Amended PCCU debt, and if the Company is unable to cure the default within the 30-day grace period, the provisions of the debt agreement would allow PCCU to subjectively accelerate the debt and elect to exercise its security interest in all of the Company’s assets. While it is highly likely that the Company’s services would continue in such circumstances, a default would significantly impact the Company’s valuation.
Previous report
As of March 31, 2025, our cash and cash equivalents amounted to $931,397, which management does not believe is sufficient to fund our operations and meet our obligations as they come due over the next 12 months, as the current funds are projected to support operations only through September 30, 2025. Additionally, the reported working capital deficit, excluding adjustments for non-cash activities, along with the uncertainty surrounding cash flows from operations, raises substantial significant doubt about the Company’s ability to continue as a going concern for at least twelve months from the issuance date of these unaudited condensed consolidated financial statements. The Company is currently developing plans to address its liquidity needs, the probability of success of such plans is uncertain. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Previous report
In addition, on April 7, 2025, the Company was notified by The Nasdaq Stock Market LLC (“Nasdaq”) that it no longer meets the continued listing requirements for the Nasdaq Capital Market due to a stockholders’ equity deficit of $12,288,014 as of December 31, 2024, which was below the required $2.5 million minimum stockholders’ equity. The Company has been granted 45 calendar days, until May 22, 2025, to submit a plan to regain compliance with Nasdaq’s listing requirements. If the plan is accepted, Nasdaq may grant an extension of up to 180 calendar days from the date of this letter for the Company to meet the continued listing standards. The Company intends to timely submit a Compliance Plan to Nasdaq to regain compliance with the Shareholders’ Equity requirement. There can be no assurance that Nasdaq will accept the Company’s plan or that the Company will be able to regain compliance with Listing Rule 5550(b)(1) or maintain compliance with any other Nasdaq requirement in the future.
Previous report
The Company has implemented several initiatives, to address these concerns, including implementing strategic partnerships to broaden its revenue base by providing additional financial services to cannabis operators, renegotiating its senior secured loan with PCCU, offering stock-based compensation in lieu of cash payments to attract and retain talent, and restructuring the Board of Directors’ compensation to better align with stock-based incentives. Additionally, the Company is actively engaged in discussions with various parties, including potential investors, lenders, and strategic partners, to explore financing options or other strategic transactions. While we are working diligently to secure additional financing, there can be no assurance that these efforts will be successful or that any financing will be obtained on terms favorable to us or at all. If we are unable to secure sufficient capital, we may need to curtail certain operations or pursue other strategic alternatives. We continue to closely monitor our cash flow on weekly basis and liquidity position and are taking steps to preserve cash. Management remains focused on executing our business plan while addressing these liquidity challenges in a timely manner.
Previous report
PCCU is the holder of the Senior Secured Promissory Note, as disclosed in Note 9 of these unaudited condensed consolidated financial statements. As the holder of this note, PCCU has a security interest in all of the Company’s assets. In the event of default, which may reasonably occur due to the liquidity challenges described herein, PCCU may exercise its rights under this security interest.
Previous report
CRB deposits are maintained with the Company’s contracted financial institutions; accordingly, the Company’s liquidity issues do not affect the security of these deposits. Furthermore, we do not anticipate any significant impact on the services provided to our CRB clients. The only foreseeable change would be a potential shift in the ownership of the Company’s underlying business operations.
Previous report
The accompanying unaudited condensed consolidated financial statements have been prepared assuming the Company will continue as a going concern, 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 amounts and classification of liabilities that may result should the Company not continue as a going concern as a result of this uncertainty.
Previous report
Litigation
Previous report
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 report
Commercial Alliance Agreement (the “PCC CAA”)
Previous report
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.
Showing the first 40 of 49 passages. Open the source sections for the rest.
Reworded paragraphs (18)
Previous wording
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 wording
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, hemp, and related industries by enabling our Financial Institution customers to provide compliance driven banking, lending and other financial services to our Cannabis Related Business “CRB” clients.
Previous wording
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 wording
Due to limited availability of payment and other banking solutions for the cannabis industry, most CRBs 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 customers 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 customers 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.
Previous wording
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 wording
To ensure access to consistent and dependable banking access to our CRB clients, 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.
Previous 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.
Current wording
The Company generates interest and fee income through providing a variety of services to our financial institution customers to facilitate their banking services to CRBs including, among other things, Bank Secrecy Act and other regulatory compliance and reporting, marketing new CRBs clients and 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, credit loss (benefit) expense and other general and administrative expenses.
Current wording
Operating expenses consist of compensation and benefits, professional services, rent expense, account hosting fees, advertising and marketing, and other general and administrative expenses.
Previous wording
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 wording
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. The indemnification obligation ceased on December 31, 2024, when the Amended PCCU CAA took effect.
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. The decrease in account fee income was primarily attributable to the previously disclosed reduction in the average monthly ending deposit balance.
Current wording
Account fee income consists of deposit account fees, activity fees and onboarding income. The Company receives 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 the account fee income was primarily attributable to the previously disclosed reduction in the average monthly ending deposit balance.
Previous wording
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 wording
Account hosting fees increased in the three ended and six months ended June 30, 2025 compared to 2024, primarily due to the amendment. 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. This new asset hosting fee replaced the prior Investment Hosting Fee and Loan Hosting Fee, as described below. We anticipate that the new asset hosting fee will be more expensive than the disaggregated fees in the PCCU CAA.
Previous wording
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 wording
Some of the Company’s financial institutions pay us interest on daily account balances as per the rates outlined in the agreements. The decrease in investment income was primarily attributable to a reduction in average daily deposit balances.
Previous wording
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 wording
During 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 and six months ended June 30, 2024, PCCU’s contribution to investment income totaled $435,238 and $1,166,663, resulting in $117,620 and $277,721 investment hosting fees. These fees were recorded under general and administrative expenses in the unaudited condensed consolidated statements of operations.
Previous wording
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 wording
In contrast, under the Amended PCCU CAA effective December 31, 2024, the Company is no longer required to pay investment hosting fees to PCCU. For the three months ended and six months ended June 30, 2025, PCCU’s contribution to investment income was $260,387 and $552,823.
Previous wording
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 wording
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 the Federal Reserve’s website, 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. The interest income split, given the current portfolio of loans, and using the loan yield allocation formula is approximately 39% in favor of the Company, the remainder is retained by PCCU. The interest income split will vary depending on changes to the loan portfolio.
Previous wording
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 wording
For the three months and six months ended June 30, 2025, the Company recognized $506,233 and $1,046,455 in loan interest income attributable to PCCU activities. In comparison, for the three months and six months ended June 30, 2024, the Company recognized $1,836,092 and $3,472,848 in loan interest income from the same activities. Related expenses for the 2024 period included $36,156 and $72,057 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.
Previous 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.
Current wording
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 and six months ending June 30, 2025, the fair value of deferred consideration decreased by $252,495, of 119.4% and $276,030, or 69.7%. This decrease was predominantly due to a decline in the stock price which affected the fair value of the warrants and third anniversary payment.
Previous wording
For our business operations, we monitor the following key metrics.
Current wording
The Company monitors the following key metrics for its business operations.
Previous wording
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 wording
For the three months and six months ended June 30, 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 and six months ended June 30, 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.
Previous 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.
Current wording
In connection with our management assessment of internal control over financial reporting as of and for the six months ended June 30, 2025, the Company has identified material weaknesses within our internal controls over financial reporting. Refer to Item 4A of this document for additional details.
Previous wording
PCCU is considered a related party as it holds a significant ownership interest in the Company, is our most significant financial institution customer, serves as the Company’s sole lending financial institution, is the counterparty to the PCCU Note, and is where we maintain the majority of our deposits. The agreements between PCCU and the Company are as follows:
Current wording
PCCU is considered a related party as it holds a significant ownership interest in the Company, is our most significant financial institution customer, serves as the Company’s sole lending financial institution, is the counterparty to the PCCU Note, and is where we maintain the majority of the Company’s deposits. Refer to Note 8 Related Party Transactions, to the accompanying unaudited consolidated financial statements that describe the related party transactions.