SHF Holdings, Inc.: Form 10-K for the period ended Dec 31, 2025

Overview

The Company is based in Golden, Colorado. Founded in 2015 by Partner Colorado Credit Union (“PCCU”), SHF was among the first companies to provide compliant banking and lending services to cannabis related businesses (“CRBs”). Our mission is to provide reliable, compliant financial services to the legal cannabis, hemp, and related industries by enabling financial institution customers to offer compliant banking, lending, and other financial services to CRBs.

We provide compliance and loan origination services to financial institutions that wish to offer business banking, private banking, and commercial banking services to clients operating in or adjacent to the state-legal cannabis industry. Through our proprietary technology platform, which currently operates across 41 states and territories, we enable our financial institution customers to compliantly provide the following services to CRBs:

• Business checking and savings accounts;
• Cash management accounts;
• Savings and investment options;
• Commercial lending;
• Courier services (via third-party relationships);
• Remote deposit services;
• Automatic Clearing House (“ACH”) payments and origination; and
• Wire payments.

Our core service offerings include:

• Regulatory compliance consulting and technology: We provide our financial institution customers with the tools and support needed to maintain “Know Your Customer” (“KYC”), Anti-Money Laundering (“AML”) and Bank Secrecy Act (“BSA”) compliance, principally delivered through our proprietary financial services platform. Specific compliance services include initial customer due diligence, customer application management, program management support, compliance monitoring, and regulatory examination assistance.
• Cannabis-related deposit services: We originate, onboard, verify, and service cannabis-related deposit business for and on behalf of our financial institutions, primarily PCCU, and constitute obligations solely of those institutions; the Company is not a financial institution and does not hold customer deposits on its consolidated balance sheet. Because most CRBs transact with high volumes of cash due to the limited availability of traditional banking services, our platform benefits both CRBs and financial institutions by providing CRBs access to compliant banking and giving financial institutions access to increased, compliantly monitored deposits.
• Lending services: We source, underwrite, service, and administer loans issued to cannabis businesses and related entities, many of which are also clients of our partner financial institutions.

We generate revenue through fee income, investment income, and loan program income earned by providing these compliance and lending services to financial institutions serving the cannabis industry.

Financial Services Platform

We have developed and commercialized a proprietary financial services platform, known as the Safe Harbor Program (the “Program”), which enables financial institutions to provide compliant banking services to CRBs. Our platform is currently deployed across 41 states and territories and is designed to guide financial institution customers and CRBs through the full lifecycle of account onboarding, validation, and ongoing compliance monitoring in a manner consistent with applicable banking regulations and regulatory guidance.

The platform serves as an automated management tool that allows our employees to deliver continuity of service while enabling compliance staff to efficiently monitor BSA and AML activities. It is intended to satisfy the compliance standards required by state and federal banking regulators, and since inception, we have assisted in the processing of approximately $35.4 billion in cannabis-related depository funds and successfully supported our financial institution clients through more than 25 state and federal banking examinations.

It is important to note that the Company is not a financial institution and does not include loans or customer deposits, which are associated with financial institutions, on its consolidated balance sheet. All deposit accounts are held by our financial institution customers, and all funds transmitted to and from those accounts are handled directly by those institutions. Our role is to provide the compliance infrastructure, technology, and CRB client relationships that enable our financial institution partners to serve the cannabis industry.

We also license the Program to financial institutions that wish to independently provide compliant cannabis banking services. Under these licensing arrangements, we provide:

• Initial customer due diligence (e.g., KYC);
• Program management support;
• Regulatory examination assistance;
• Customer application management;
• Compliance monitoring; and
• Regulatory examination assistance.

We believe our platform and processes have been implemented in a manner that is consistent with applicable laws and regulations. Our track record in developing compliance processes that satisfy regulatory standards has established a strong reputation with relevant regulatory authorities, which we believe positions us well to continue growing our existing service offerings and to expand into new ones.

CRB Deposits

We maintain relationships with PCCU and other financial institution partners in which CRB funds are deposited and monetary transactions are processed. Our proprietary platform connects with the core banking systems of these institutions, enabling us to monitor deposit accounts we have onboarded and to extract the data necessary to help ongoing compliance. All fund transmissions including wires, ACH transactions, and other transfers are processed directly through our financial institution partners’ infrastructure. The Company itself is not a financial institution and does not hold customer deposits.

How We Generate Revenue from Deposit Maintained at Financial Institutions?

We generate revenue from deposit maintained at financial institutions in three primary ways. First, we may assess an initial onboarding fee when a CRB or ancillary service provider begins banking through one of our financial institution partners. This fee reflects the time and complexity involved in completing the KYC and BSA due diligence that is required before an account can be opened. Second, we earn monthly deposit and account activity fees that are based on business type, account size, and transaction activity. Third, we earn investment income when our financial institution partners invest CRB deposits in low-risk, liquid assets. The amount of investment income we earn is directly influenced by the level of deposits under their management and the prevailing interest rate environment.

Our Relationship with PCCU

PCCU is our primary financial institution partner and the holder of the majority of CRB deposit accounts we service, and this relationship is governed by the Second Amended CAA. Under the Second Amended CAA, we provide PCCU with the compliance infrastructure, technology, and CRB client relationships needed to serve the cannabis industry, and in return we earn account servicing fees, investment income on CRB deposits, and a share of loan program income on CRB loans originated through PCCU. We also pay PCCU a monthly asset hosting fee for access to its regulated banking platform and infrastructure. The Second Amended CAA will expire on December 31, 2031, afterwards the agreement will automatically renew for periods of two years unless we or PCCU provides a non-renewal notice twelve months prior to the expiration of the then-current period.

Because PCCU accounts for a significant portion of our revenue, the loss of or a material change to this relationship could have a material adverse impact on our results of operations and financial condition. See Part 1, Item 1A., “Risk Factors––Risks Related to the Second Amended CAA,” Part II, Item 7., “Management’s Discussion and Analysis of Financial Condition and Results of Operations for the Years ended December 31, 2025 and 2024––Relationship with PCCU,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations for the Years ended December 31, 2025 and 2024––Related Party Relationship with PCCU” and Note 10 to the Company’s consolidated financial statements in this Form 10-K for additional detail on our relationship with PCCU and the terms of the Second Amended CAA.

Commercial Lending Program

Commercial lending is a key component of our business and an important source of revenue. Our lending program is designed to specifically address the unique financing needs of CRBs, which often have limited access to traditional credit markets. We assist, service, and administer loans on behalf of our financial institution partners, with the majority of lending currently funded through PCCU using CRB deposit balances that we have onboarded and continue to manage.

Our lending program is focused primarily on senior secured loans, with collateral including real estate, equipment, accounts receivable, and other business assets. Unsecured lending opportunities are also considered on a selective basis. Our approach to credit is built on three core principles: thorough investigations of both collateral and borrower creditworthiness; disciplined loan-to-value requirements; and a deep knowledge of the cannabis industry, including the operational and business cycle dynamics unique to CRB borrowers.

Our loan operations team is directly involved in each step of the lending process, including initial due diligence, underwriting, loan closing and documentation, ongoing servicing, payment processing, borrower monitoring, risk rating, and workout and collections when necessary. PCCU’s loan committee retains final approval authority over all credit decisions, and PCCU is the legal lender of record under all loan agreements. We earn a share of the loan program income on loans originated through PCCU under the terms of the Second Amended CAA. See “––CRB Deposits” above and Note 10 to the Company’s consolidated financial statements in this Form 10-K for additional information.

Our available lending capacity is directly tied to the size of our managed deposit base, as the amount we can arrange in loans through PCCU is based on a regulatorily stipulated percentage of average CRB deposits. We are incentivized to deploy available lending capacity, as loan program income on funded loans generally exceeds the investment income that would otherwise be earned on the same deposits. Growing and retaining the CRB deposit base therefore remains central to our ability to expand the lending program.

In 2025, we executed lending program agreements with certain companies that provide us access to private capital sources, including family offices and private equity funds. These agreements provide additional funding channels for CRB loans outside of our PCCU relationship. These agreements are intended to diversify our lending capacity and reduce our dependence on a single funding source. The Company did not have any revenue from these arrangements, we believe these agreements represent an important avenue for future growth as we continue to build and deploy the lending program.

Our Mission

Our mission is to serve as the trusted financial partner to CRBs and the financial institutions that serve them by providing the compliance infrastructure, lending access, and operational support to allow them to operate, grow, and succeed in a highly regulated industry. We are committed to being the most reliable and knowledgeable financial services provider in the cannabis sector, and to expanding the range of services we offer as the industry matures.

We believe our competitive position is based on four strengths that are difficult to replicate: a decade of demonstrated experience navigating the regulatory requirements and passing many audits of cannabis banking; deep cannabis domain expertise amongst our employees and management, long-standing relationships with both CRBs and the financial institutions that serve them; and a proprietary compliance platform that has processed approximately $35.4 billion in cannabis-related deposit activity across 41 states and territories since 2015. These capabilities allow us to serve a broad range of cannabis industry participants, including cultivators, processors, manufacturers, dispensaries, and multi-state operators, as well as the financial institutions that wish to bank them.

Growth Initiatives

We are pursuing growth through four complementary growth initiatives:

• We are focused on growing our core deposit and lending business organically by increasing the number of CRB accounts we onboard and manage for our financial institutions, deepening relationships with existing and potentially new financial institution partners, and by deploying more of our available lending capacity through PCCU and our expanding network of private capital partners.
• In December 2025, we acquired substantially all of the assets of LBMW LLC, a Delaware limited liability company doing business as 420 IT Solutions (“420 IT Solutions”), a company that provided on-site due diligence review services to cannabis-friendly financial institutions. This acquisition added capabilities that are complementary to our existing compliance platform and expanded the suite of services we can offer to financial institution customers seeking to enter or grow their cannabis banking programs.
• We are investing in the development of a managed services business that will offer outsourced consulting and operational support directly to CRBs and financial institutions. These are expected to include outsourced finance, accounting, treasury, information technology, and human resources services, as many CRBs lack the internal infrastructure to operate in these areas efficiently. We generated initial revenue from this business line in 2025, though it was not material. We are actively investing to build this capability and grow it into a meaningful revenue contributor over time.
• We are growing through strategic partnerships with third parties who can expand our reach, capabilities, and capital base. In 2025, we executed lending program agreements that allow us to access private capital sources, including family offices and private equity funds, to provide additional funding capacity for CRB loans outside of our PCCU relationship. These partnerships are intended to reduce our funding concentration risk and increase the volume of loans we are able to originate and service.

We are also pursuing partnerships with other CRB-focused service providers whose offerings are complementary to ours, with the goal of creating a more integrated set of solutions for cannabis businesses and the financial institutions that serve them. While revenue from these partnership channels was not material in 2025, we believe they represent an important foundation for future growth.

We believe that the combination of our established compliance and banking infrastructure, our expanded on-site review capabilities following the acquisition of the assets of 420 IT Solutions, our emerging managed services business, and our growing network of capital and strategic partnerships positions us to serve cannabis businesses and financial institutions more comprehensively than any other provider in our market.

Industry Overview

The U.S. Cannabis Market

The United States cannabis industry has grown into one of the largest and most economically significant emerging sectors in the American economy. In 2025, total U.S. state-licensed cannabis market revenues were estimated at approximately $30.4 billion, with forecasts projecting the market to reach approximately $31.5 billion in 2025 and potentially exceed $76 billion by 2030, reflecting a compound annual growth rate of approximately 19%. The industry supports an estimated 425,000 full-time jobs nationwide and generated more than $4.4 billion in state and local tax revenues in 2025. In addition, the intoxicating hemp market had an estimated value of $21.8 billion in 2025.

The regulatory landscape has continued to evolve at the state level. As of the date hereof, 40 states, three territories, and the District of Columbia permit the medical use of cannabis, and 24 states, two territories, and the District of Columbia have enacted laws permitting adult-use recreational cannabis. Despite this broad state-level acceptance, cannabis remains classified as a Schedule I controlled substance under the Controlled Substances Act (the “CSA”), creating a persistent gap between state and federal law that fundamentally shapes how cannabis businesses operate, including their ability to access banking and financial services, obtain standard business financing, and manage their tax obligations.

Federal Regulatory Developments - Rescheduling to Schedule III

The federal regulatory environment for cannabis has undergone significant and evolving changes recently, and the Company believes these developments are material to an understanding of the industry in which it operates.

In August 2023, the U.S. Department of Health and Human Services (“HHS”) recommended that the Drug Enforcement Administration (“DEA”) reschedule cannabis from Schedule I to Schedule III of the CSA, concluding that cannabis has a currently accepted medical use and a lower potential for abuse than Schedule I or Schedule II substances. In May 2024, the U.S. Department of Justice issued a Notice of Proposed Rulemaking proposing to move cannabis from Schedule I to Schedule III. The proposed rule generated nearly 43,000 public comments. While a formal DEA administrative hearing was initially scheduled for January 2025, that hearing was stayed by the presiding administrative law judge pending resolution of procedural appeals, and the rescheduling process effectively stalled for much of 2025.

On December 18, 2025, President Donald Trump signed an Executive Order titled Increasing Medical Marijuana and Cannabidiol Research, directing the Attorney General of the United States to “take all necessary steps to complete the rulemaking process related to rescheduling marijuana to Schedule III of the CSA in the most expeditious manner in accordance with Federal law.” This Executive Order did not itself reschedule cannabis, as formal rescheduling requires completing the full rulemaking process, which includes DEA issuing a final rule, however we believe it represents the most significant federal cannabis policy directive in more than 50 years and signals a clear intent within the executive branch of the federal government to bring the rescheduling process to conclusion.

Legal challenges to the rescheduling process are anticipated. Organizations opposing rescheduling may argue that the proposed rule is procedurally flawed or scientifically unsupported, and litigation under the Administrative Procedure Act is possible after a final rule is published. The ultimate timing of any final rescheduling rule therefore remains uncertain, and investors should not rely on any specific timeline for completion of the rescheduling process.

We believe the most immediate and financially material consequence of rescheduling would be the elimination of Section 280E of the Internal Revenue Code (“Section 280E”). Under the current law, cannabis businesses classified as drug traffickers under federal law because of the cannabis’ current Schedule I status are prohibited from deducting ordinary and necessary business expenses, including payroll, rent, and marketing costs. This results in effective federal tax rates for cannabis operators that are materially higher than those faced by businesses in other industries. Rescheduling to Schedule III could eliminate the Section 280E penalty, thereby improving cash flows and profitability for state-legal cannabis operators across the country.

Rescheduling could also encourage greater participation by academic institutions and pharmaceutical companies in researching the medicinal properties of cannabis, as we believe such institutions and companies have historically avoided using Schedule I substances in their research.

The Company does not believe that rescheduling, on its own, would eliminate the market for its services. In fact, the Company believes that rescheduling could improve the financial stability of its CRB clients, which would as a result help support higher average account balances. In addition, rescheduling could attract additional financial institutions to join the cannabis banking market, and the Company could partner with some or all of these new entrants.

Banking Access

Despite the growth of state-legal cannabis markets, the vast majority of cannabis-related businesses continue to face constraints in accessing basic banking and financial services. Because cannabis remains a Schedule I controlled substance under federal law, federally regulated financial institutions including banks, credit unions, and payment processors face legal and regulatory risk when providing services to CRBs. Financial institutions that serve CRBs are required to file Suspicious Activity Reports (“SARs”) for cannabis-related transactions under the BSA and related Financial Crimes Enforcement Network (“FinCEN”) guidance, which creates a compliance burden that many financial institutions appear unwilling to assume. As a result, the majority of CRBs continue to operate primarily in cash and in turn this method of operation can create public safety risks, operational inefficiencies, and barriers to tax collection and regulatory oversight.

A bipartisan letter signed by 32 state attorneys general in July 2025 urged Congress to advance the SAFER Banking Act, which is designed to protect federally regulated financial institutions from penalties when they provide services to state-sanctioned cannabis businesses. The SAFER Banking Act has passed the U.S. House of Representatives in prior legislative sessions but has repeatedly failed to advance in the Senate. The bill’s near-term prospects in the current Congress remain uncertain given current legislative dynamics and policy priorities. The Company exists, in part, because of this structural gap in banking access and the need for compliance-driven platforms that enable financial institutions to serve CRBs in a manner that is consistent with applicable federal banking regulations and Fin CEN guidance.

Market Headwinds and Industry Pressures

The cannabis industry experienced meaningful financial and operational headwinds during 2024 and 2025. Wholesale cannabis prices declined in some state markets due to oversupply and increasing competition, constraining operator revenues and reducing average deposit balances across the industry. Cannabis operators collectively carry an estimated $2.5 billion in debt, only approximately 27% of cannabis companies were profitable in 2024, compared to 42% of such companies in 2022. In addition, several large multi-state operators are facing significant debt maturities. These pressures have been reflected in lower average account balances and reduced transaction activity across the Company’s portfolio during 2025.

At the same time, the Company believes there are meaningful catalysts for industry recovery. A potential rescheduling of cannabis could materially improve operator cash flows and profitability. See “Federal Regulatory Developments-Rescheduling to Schedule III.” In addition, broader improvements to the United States’ economy and the growth rate of consumer discretionary spending could support higher cannabis sales volumes. The expansion of state-level markets could increase the number of CRBs as well.

The Company believes that its platform, its established relationships with financial institution customers, and its proprietary compliance infrastructure position it to benefit from an industry recovery as these factors develop.

Regulatory Framework for Cannabis Banking

Under current federal guidance, financial institutions that serve CRBs are required to operate under the framework established in FinCEN’s 2014 guidance memorandum, which outlined our expectations for BSA compliance, ongoing customer due diligence requirements, and SAR filing obligations specific to cannabis banking. The guidance has never been superseded by statute, and financial institutions operating in the cannabis banking space continue to face regulatory examination risk, possible reputational harm in the event of a violation, and the ongoing administrative burden of SAR filings. The Company’s platform and compliance program are designed to address these requirements directly, thereby enabling its financial institution partners to serve CRBs with confidence in their regulatory compliance.

The Company has assisted in the processing of approximately $35.4 billion in cannabis-related depository funds since 2015 and has successfully navigated more than 25 state and federal banking examinations through its financial institution relationships. The Company currently operates its platform across 41 states and territories, serving a diversified base of CRB clients and financial institution customers.

Business Strategy

SHF’s mission is to be the leading compliance-driven financial services platform for the U.S. cannabis industry, enabling partner financial institutions to serve CRBs reliably, safely, and in full conformity with applicable federal and state regulatory requirements. Our strategy is based on five priorities: stabilizing and organically growing our core platform business; deepening lending-related revenue through our relationship with PCCU and other capital sources; building complementary service lines; maintaining and expanding financial institution partnerships; and positioning the Company to benefit from anticipated favorable changes in the federal cannabis banking regulatory environment.

Loans are extended to cannabis related businesses, including both licensed cannabis operators and ancillary service providers to the cannabis industry. The cannabis industry continues to grow and expand at a rapid pace due in part to the on-going opening of additional legalized cannabis markets at the state level. Due to the federally status of cannabis, most cannabis-related businesses have experienced years of inability to access capital at reasonable rates, and these circumstances can force them to purchase properties and equipment and fund their businesses from personal investment or reinvestment of cash from operations, which could potentially limit their own growth. This creates a robust opportunity for us to lend to established entities with real estate assets free of debt. Businesses are taking the opportunity to leverage such assets to expand and grow their operations while we build a senior secured portfolio ostensibly collateralized with a real estate or other hard asset such as equipment.

Furthermore, the industry has typically been subject to “hard money” lending with annual rates available between 18-36%. This is yet another opportunity for us to offer refinancing of real estate and equipment loans at more favorable interest rates. Given that the depository relationship is necessary as part of the compliance process, we benefit from servicing, monitoring, and validating compliance of depository relationships, earning fees on deposits. This results in a lower cost of capital when accounting for the fact that we earn interest income on both the depository and lending relationships.

Stabilize and Organically Grow the Core Deposit and Compliance Platform

Our primary business is providing compliance infrastructure, technology platforms, and ongoing monitoring services that allow partner financial institutions to provide banking services to CRBs. Since 2015, we have assisted in the processing of approximately $35.4 billion in cannabis-related depository funds across a platform footprint of 41 states and territories, and through our financial institution relationships, we have successfully navigated more than 25 state and federal banking examinations. These milestones reflect the depth and durability of our compliance expertise and the strength of our established relationships with both CRBs and financial institutions.

Our near-term organic growth strategy focus is on increasing the number of CRB accounts we onboard and manage, deepening relationships with existing financial institution partners, and selectively expanding to new financial institution partners to the extent market conditions and our operational capacity can support it.

Another key component of our organic growth strategy is early entry into emerging cannabis markets. We define “emerging markets” as American states with cannabis programs that have launched or been materially expanded within the past five years. Our emerging market portfolio spans three distinct opportunity categories:

• New Markets Coming Online: In states that have recently launched or are actively implementing cannabis licensing programs, such as Delaware, Minnesota, Kentucky, Alabama, and Mississippi, we are working to establish banking relationships as operators prepare for launch, with account activity evolving as businesses progress through their respective licensing and operational phases.
• Licensing Expansion in Established Adult-Use States: States expanding their licensing frameworks, such as New York, New Jersey, Maryland, Connecticut, Missouri, and Ohio, increase the demand for compliant banking services as new operators are allowed into these markets.
• Operator Footprint Expansion: States such as Pennsylvania, Illinois, Virginia, and Florida, where existing operators are scaling their operations, require more sophisticated banking and financial services.

By entering these markets early, often before licensing programs are fully developed, the Company aims to position itself as the partner of choice for licensed operators navigating complex and evolving regulatory environments. In emerging markets, deposit levels naturally fluctuate as operators progress through business cycles, from deploying startup capital during launch phases to building working capital reserves as operations mature. See “Recent Developments Emerging Markets” for additional information.

Deepen Lending Revenue Through the Second Amended CAA and Expanding Capital Partnerships

Under the Second Amended CAA, we receive up to 65% of loan program income generated by PCCU’s CRB loan portfolio, an increase from the approximately 35% share in effect from January 1, 2025 until September 30 2025, under the Amended and Restated Commercial Alliance Agreement dated December 30, 2024 by and between the Company and PCCU (the “First Amended CAA”). In exchange, we are obligated to indemnify PCCU for up to 65% of net losses of a default on any loan covered by the Second Amended CAA. As of December 31, 2025, the CRB loan portfolio totaled approximately $52.1 million across 25 loans, with zero historical losses since the program’s inception in 2023. Our strategy is to grow the loan portfolio responsibly by continuing to originate quality CRB loans through PCCU, maintain rigorous credit underwriting standards, and build the cash reserves and capital access necessary to support our indemnification obligations.

In 2025, we executed lending program agreements with certain companies that provide us access to private capital sources, including family offices and private equity funds. These agreements provide additional funding channels for CRB loans outside of our PCCU relationship. These agreements are intended to diversify our lending capacity and reduce our dependence on a single funding source. The Company did not have any revenue from these arrangements, we believe these agreements represent an important avenue for future growth as we continue to build and deploy the lending program.

The September 2025 Recapitalization (as defined below) eliminated approximately $18 million in debt and raised gross proceeds of $6.7 million in new capital, and also resulted in the establishment of the $150 million Equity Line of Credit (“ELOC”) with CREO Investments LLC (“CREO”) that can potentially be expanded to $500 million, thereby meaningfully improving our ability to support our lending commitments and portfolio growth. During the fourth quarter of 2025, the Company issued 1,326,603 shares of Class A Common Stock (“Common Stock”) and received proceeds of approximately $1.8 million.

Build Complementary Service Lines

In December 2025, we acquired substantially all of the assets of 420 IT Solutions, a company that provided on-site due diligence review services to cannabis-friendly financial institutions. This acquisition added capabilities that are complementary to our existing compliance platform and expanded the suite of services we can offer to financial institution customers seeking to enter or grow their cannabis banking programs. On-site reviews are a key component of BSA/AML compliance for cannabis-banking financial institutions, and bringing this capability in-house strengthens both our service offerings and our compliance infrastructure.

In addition, we are investing in the development of a managed services business that will offer outsourced consulting and operational support directly to CRBs and financial institutions. These are expected to include outsourced finance, accounting, treasury, information technology, and human resources services, as many CRBs lack the internal infrastructure to operate in these areas efficiently. We generated initial revenue from this business line in 2025, though it was not material. We are actively investing to build this capability and grow it into a meaningful revenue contributor over time.

Maintain and Expand Financial Institution Partnerships

Our business model depends on maintaining strong, trust-based relationships with our financial institution partners. PCCU remains our most significant financial institution customer. We continue to partner with other financial institutions that wish to compliantly provide banking services to CRBs, including with respect to KYC onboarding, ongoing compliance monitoring, program management support, and regulatory examination assistance.

We are also pursuing partnerships with other CRB-focused service providers whose offerings are complementary to ours, with the goal of creating a more integrated set of solutions for cannabis businesses and the financial institutions that serve them. While revenue from these broader partnership channels was not material in 2025, we believe they represent an important foundation for future growth.

Position for Regulatory Tailwinds

We believe the Company is well-positioned to capitalize on any cannabis-related rescheduling developments. As discussed above, we believe that a rescheduling of cannabis from Schedule I to Schedule III would decrease tax burdens for cannabis operators and improve the financial stability of CRBs.

The potential impact of such reforms on our current and prospective financial institution partners could be significant. According to FinCen approximately 998 depository institutions, 816 banks and 182 credit unions, were actively filing marijuana-related SARs, which is the primary indicator that an institution is serving CRBs, as of December 2024. This represents less than 11% of the approximately 9,140 Federal Deposit Insurance Corporation- and National Credit Union Administration-insured depository institutions operating in the United States as of December 31, 2024. In addition, industry analysts estimate that less than 200 financial institutions nationwide have a dedicated, actively marketed cannabis banking program.

We believe the primary reason the vast majority of U.S. financial institutions have not entered the cannabis banking market is regulatory risk and the compliance burden. Under current federal law and the 2014 FinCEN guidance, every institution serving a CRB must file initial and continuing SARs on a quarterly basis, establish and maintain enhanced BSA/AML compliance programs, and accept the reputational and examination risk that accompanies providing banking services in connection with a federally controlled substance. This compliance burden represents the market barrier that the Company’s platform is specifically designed to address. We believe that passage of the SAFER Banking Act or related federal cannabis banking legislation, or regulatory relief related to the rescheduling of cannabis to Schedule III, would meaningfully lower that barrier and expand the scope of financial institutions willing to enter the cannabis banking market. An increase in the number of financial institutions seeking to serve CRBs would represent a larger market for our compliance services. Regulatory relief would, in our view, be more likely to accelerate the adoption of cannabis banking programs by financial institutions than to make our compliance infrastructure obsolete, given that state-level regulatory requirements, ongoing due diligence obligations, and BSA program management would remain necessary regardless of federal scheduling changes.

Operational Efficiency and Financial Discipline

Following the September 2025 Recapitalization and the restructuring of the Commercial Alliance Agreement (“CAA”) with PCCU in February 2026, we are focused on operating with greater financial discipline. With no material debt outstanding as of December 31, 2025, and improved liquidity from the recapitalization and the ELOC, our near-term priorities include reducing operating costs, improving cash generation, and maintaining the cash reserves required to support our lending indemnification obligations under the Second Amended CAA.

We believe that the combination of our established compliance and banking infrastructure, our expanded on-site review capabilities through the 420 IT Solutions asset acquisition, our emerging managed services offerings, and our growing network of capital and strategic partnerships positions us to serve cannabis businesses and financial institutions more comprehensively than any other provider in our market

Sales and Marketing

Our sales and marketing efforts are focused on three audiences: financial institutions seeking to enter or expand their cannabis banking programs, CRBs seeking access to compliant banking and financial services, and the broader regulatory and legislative community whose decisions shape our operating environment.

We generate new financial institution relationships primarily through direct outreach, referrals from existing partners, and participation in industry conferences and events. Our leadership team actively engages in speaking opportunities and thought leadership forums that position the Company as a recognized authority in cannabis banking compliance. We also maintain relationships with state regulators, legislators, and attorneys general to support awareness of compliant cannabis banking frameworks and to contribute to policy discussions as they evolve.

CRB customer acquisition is largely driven by referrals from our financial institution partners and from existing CRB customers, reflecting the trust-based nature of our platform. We also support customer acquisition and retention through targeted outreach, referral programs, and success fee arrangements that align our growth incentives with those of our partners.

In 2025, we completed a comprehensive rebrand of the Company and its digital presence, repositioning the Company around a unified value proposition that we are the Company where cannabis businesses can come to bank, borrow, operate, and grow. The rebrand included a full redesign of our website and client-facing materials to reflect the expanded scope of our platform beyond compliance and deposit services.

Also in 2025, we formalized and professionalized our Safe Harbor Partner Program by hiring a Senior Vice President of Strategic Partnerships and enrolling more than a dozen third-party partners. These partners refer CRB clients to our platform in exchange for referral fees, while referred CRB clients receive preferential pricing on our services. Although the program was not a material revenue contributor in 2025, it represents an important investment in our distribution infrastructure and is expected to support client acquisition growth in 2026 and beyond.

The December 2025 acquisition of substantially all of the assets of 420 IT Solutions also meaningfully expanded our field presence. Our team now can conduct on-site reviews at financial institutions and CRB locations across the country, and our established presence in key cannabis markets provides the Company with additional capacity to attend industry events, build relationships with prospective clients, and support business development activity in growth markets where in-person engagement is an important part of building trust.

To support broader brand awareness and investor communications, we work with outside public relations and investor relations advisors and maintain an ongoing program of digital marketing, search engine optimization, and direct outreach to current and prospective clients.

Competition

The market for cannabis-related banking and financial compliance services is competitive and evolving. We face competition from two primary sources: (1) software-as-a-service (“SaaS”) compliance technology providers that enable financial institutions to build and operate their own cannabis banking programs and (2) integrated financial technology (“fintech”) company platforms that combine regulatory compliance solutions with broader financial services offerings. We believe we compete on the basis of our regulatory reputation, compliance track record, depth of cannabis industry expertise, breadth of financial services, quality of client relationships, and the overall value of our platform.

SaaS Compliance Technology Providers

A number of companies offer software platforms designed to provide financial institutions with the compliance infrastructure and monitoring tools necessary to provide banking services to CRBs without engaging a specialized third-party compliance provider. These platforms provide KYC tools, BSA monitoring, SAR preparation, and related compliance workflows that financial institutions can operate internally. By lowering the cost and amount of expertise required for a financial institution to build its own cannabis banking program, these SaaS providers reduce barriers to entry for banks and credit unions that have not historically participated in the cannabis banking market. We believe our competitive advantages over these providers include our more than 10-year operational track record in cannabis banking, our established relationships with state and federal banking regulators, our zero-lending-failure history, and the depth of our full-service platform, which extends well beyond software tooling to include client onboarding, ongoing relationship management, lending support, and regulatory examination assistance.

Integrated Fintech Platforms Offering Regulatory Compliance Solutions

A second source of competition comes from fintech companies that bundle regulatory compliance capabilities with complementary financial services, such as payment, supply chain management, or lending, into a vertically integrated suite of services. These platforms seek to serve CRBs through this suite of services, thereby increasing customer switching costs and reducing the need for a standalone compliance and banking infrastructure provider. Competitors in this category include financial institutions that have developed proprietary compliance and banking capabilities specifically tailored to the cannabis industry, as well as specialty lenders that combine capital deployment with advisory services.

Competitive Dynamics and Risks

We expect competition to increase as the cannabis industry matures, as additional states legalize cannabis for medical and/or adult use, and as federal regulatory developments, including the potential rescheduling of cannabis under the CSA, reduce barriers that have historically limited larger financial institutions’ participation in the market. If cannabis is rescheduled to Schedule III, we believe that a broader set of well-capitalized banks, credit unions, and fintech companies would likely seek to enter into or expand their presence in the cannabis banking market, potentially reducing our competitive differentiation and increasing pricing pressure on the fees we charge.

Despite these risks, we believe our primary competitive strengths include the following:

• Our leadership team’s rare combination of areas of expertise. We believe we are uniquely positioned as the only fintech cannabis financial solution whose executive leadership team, including our Chief Executive Officer, brings together direct, hands-on experience in cannabis operations, financial services, and banking. This integrated expertise allows us to serve cannabis-related businesses with a depth of understanding that we believe no competitor can replicate.
• Our established regulatory reputation and proven track record. Since our founding in 2015, we have successfully navigated more than 25 state and federal banking examinations, a record we believe is unmatched in our industry and reflects the rigor and integrity of our compliance infrastructure.
• Our proprietary compliance management platform. Our technology platform, operating across 41 states and territories, has facilitated the processing of approximately $35.4 billion in cannabis-related depository funds since 2015. The platform enables financial institution partners to provide BSA and FinCEN-compliant banking services to CRBs, including KYC onboarding, ongoing transaction monitoring, and regulatory exam support.
• Our comprehensive suite of financial services for CRBs. Through our financial institution customers and strategic partners, we offer CRBs access to business checking and savings accounts, cash management, commercial lending, ACH and wire payment services, remote deposit, and ancillary compliance consulting, addressing the full spectrum of financial needs that CRBs face in an underserved market.

We cannot assure you, however, that we will be able to compete successfully against current or future competitors, and increased competition could materially and adversely affect our business, financial condition, and results of operations. For additional information, see Part I, Item 1A., “Risk Factors.”

Intellectual Property

The acquisition of substantially all of the assets of 420 IT Solutions included the transfer of, among other things, the registered trademark “420 IT Solutions”, domain name registrations, and other intellectual property, including 420 IT Solution’s whitepaper of banking compliance services and site inspection templates.

Except as described above, we do not have any registered intellectual property, and therefore we currently rely on confidentiality, and non-disclosure agreements with our employees and others to protect our proprietary rights. Despite these efforts to protect ourselves from infringement or misappropriation of our intellectual property rights, unauthorized parties may attempt to copy or otherwise obtain and use our intellectual property in violation of our rights. In the event of a successful claim of infringement against us, or our failure or inability to develop non-infringing intellectual property or license the infringed or similar intellectual property on a timely basis, our business could be harmed.

Seasonality

Most loan production is generally subject to seasonality, with the lowest volume typically being in the first quarter of each year. This does not necessarily apply to us as we serve the cannabis industry with demands for access to capital at reasonable rates throughout the year. We expect, based upon our pipeline of demand, a methodical and consistent growth in the lending portfolio.

Investments

The Company’s investment activities are limited in scope and are guided by four core principles: investment quality, liquidity, interest-rate risk management, and return on investment. Given the nature of our business and our obligations under the Second Amended CAA, maintaining adequate liquidity is our primary investment objective.

Most of the Company’s liquid assets are held in cash and cash equivalents, including interest-bearing money market accounts. The Company does not maintain a significant portfolio of marketable securities.

During 2025, the Company acquired 1.5 million preferred securities of Aditxt, Inc. (“ADTX”) for $1.5 million, which is accounted for at cost less impairment under Accounting Standards Codification (“ASC”) 321, as the preferred shares are not actively traded and do not have a readily determinable fair value. During the year ended December 31, 2025, the Company received redemption proceeds of approximately $0.05 million for 43 shares of ADTX. As of December 31, 2025, the Company holds 1,457 preferred securities of ADTX having carrying value of $1.45 million. This investment is classified as long-term and will be periodically assessed for impairment or observable price changes.

The Company does not engage in speculative investment activity and does not hold derivative financial instruments for investment purposes.

Regulations and Legislation

Cannabis remains a Schedule I controlled substance under the CSA, making it illegal under federal law despite being legal for medical and/or adult recreational use in a majority of U.S. states. This conflict between federal and state law is the central regulatory reality shaping our business.

The Federal-State Conflict and Its Impact on Banking

Because cannabis remains federally illegal, most financial institutions are unwilling to provide banking services to CRBs. The risks deterring participation include potential federal prosecution, civil asset forfeiture exposure, reputational risk, and significant BSA compliance obligations. FinCEN issued guidance in February 2014 establishing a framework for how financial institutions may serve the cannabis industry while meeting their BSA and AML obligations. While this guidance created a path forward, it also imposed substantial compliance burdens, including detailed customer due diligence, transaction monitoring, and SAR filing obligations, that most financial institutions are unwilling or unable to resource adequately.

We believe the absence of a federal “safe harbor” for financial institutions and their officers and directors who service CRBs remains the single most significant structural barrier to entry in this market, and this was the primary reason the Company was founded and continues to operate.

Pending and Recent Federal Legislation

Congress has made several attempts to address the banking access problem. The SAFE Banking Act of 2021 (the “SAFE Banking Act”) passed the U.S. House of Representatives in April 2021, and an updated version, the SAFER Banking Act, passed the Senate Banking Committee in September 2023. As of the date of this filing, neither bill has been enacted into law. We continue to monitor legislative developments closely.

Separately, HHS recommended in 2023 that cannabis be rescheduled from Schedule I to Schedule III under the CSA. This recommendation was forwarded to the DEA and remains pending. If rescheduling occurs, it could meaningfully impact cannabis businesses, including by modifying the application of Section 280E, which currently prohibits ordinary business deductions for companies trafficking in Schedule I substances. Greater after-tax cash flow for CRBs could increase deposit activity and borrowing capacity both of which would benefit the Company.

We do not believe passage of the SAFE Banking Act or the SAFER Banking Act alone would significantly reduce the barriers to entry that define our competitive advantage. The high cash-intensity of the cannabis business, its illicit history, and the ongoing presence of an illicit market mean that BSA compliance obligations will remain demanding regardless of whether a safe harbor is enacted. We expect many potential competitors will continue to avoid the sector.

Our Compliance Framework

The Company operates in a compliance-first manner aligned with the 2014 FinCEN Guidance and BSA requirements. Although we are not a chartered financial institution, our agreements with financial institution partners require that we provide services consistent with applicable regulatory standards. Our compliance program includes comprehensive written policies and procedures, ongoing and annual employee training, quarterly and annual third-party compliance audits, and continuous assessments by management. These policies are formally reviewed at least annually. The Company has successfully navigated more than 25 state and federal regulatory examinations with no adverse findings attributable to our program.

Competitive Barriers to Entry

The regulatory environment has created both a barrier and an opportunity. While some fintech companies have attempted to enter this space because these companies benefit from less restrictive regulatory requirements than chartered institutions, sustainable cannabis fintech models require deep regulatory expertise, robust BSA programs, and reliable financial institution partnerships. We believe competition remains limited for these reasons and that our established platform, proprietary technology, and compliance track record provide a durable competitive advantage.

We expect most large financial institutions to remain on the sidelines until federal legalization occurs, and even then, the cannabis sector will require specialized compliance expertise that takes years to build. We also anticipate that regulatory requirements applicable to fintechs will increase over time, further reinforcing the value of our established, compliance-tested program.

Concentrations

The Company’s business is currently concentrated in two significant ways:

• Financial Institution Partner Concentration.

Substantially all of the Company’s revenue is derived from services provided to PCCU under Second Amended CAA. For the years ended December 31, 2025, and December 31, 2024, revenue generated under then-in-effect version of the CAA approximated 86.7% and 83.5% of the Company’s total revenue, respectively. PCCU is also a significant related party. In addition, the Company receives revenue from merchant services, which is a shared fee for the use of automated teller machines. Merchant service revenue for the years ended December 31, 2025 and December 31, 2024, was approximately 9.7% and 8.6%, respectively. As of the date of this filing, PCCU holds approximately 25% of the Company’s Common Stock. PCCU also holds approximately 43% of Series B Convertible Preferred Stock (“Series B Preferred Stock”) and Common Stock purchase warrants (as amended and restated, each, a “Series B Warrant”) combined, and is the largest holder of those securities. In the aggregate, PCCU’s holdings represent substantial actual and potential ownership of the Company on a fully diluted basis. PCCU also holds substantially all of the cash deposits of CRBs onboarded through the Company’s platform. The loss of, or a material adverse change to, the Company’s relationship with PCCU would have a material adverse impact on the Company’s results of operations and financial condition. The Company is actively working to expand its financial institution partner base to reduce this revenue concentration over time. The Company has other sources of revenue, such as merchant services. During the year ended December 31, 2025, one financial institution terminated its relationship with the Company.

• CRB Deposit Concentration.

The Company does not directly hold CRB deposit accounts. All deposit accounts are maintained at PCCU or other financial institutions, and all fund transmissions are handled directly by those institutions. The Company’s fee income from onboarded deposits is well-diversified at the individual CRB level. No one CRB account for the year ended December 31, 2025 represented more than 10% of total fee income from onboarded deposits. The Company monitors account retention as a key indicator of its ability to efficiently and compliantly onboard, validate, and monitor CRB accounts.

Loans Receivables

The Company does not originate or hold loans on its own balance sheet in the ordinary course of business. Loans to CRBs are originated and funded by PCCU pursuant to the Second Amended CAA. The Company’s role is to identify, underwrite loans on PCCU’s behalf, earning a share of loan program income. See “Overview–Our Relationship with PCCU” above.

During the year ended December 31, 2025, the Company’s sole loan receivable, which had a carrying value of approximately $0.4 million as of December 31, 2024, was sold, generating proceeds of approximately $0.4 million. As a result, the Company had no loans on its consolidated balance sheet as of December 31, 2025.

For further discussion of the loan program income sharing arrangement and the Company’s obligations under the Second Amended CAA, see Note 9 to the Company’s consolidated financial statements in this Form 10-K.

Employees

As of December 31, 2025, we had 39 full-time employees and one part-time employee. None of our employees are represented by a labor union or covered by a collective bargaining agreement. Approximately 70% of our workforce is based in Colorado, with approximately 8% in Arkansas, and the remainder distributed across six additional states. The Company utilizes a remote-capable workforce model that supports client relationship management across the 41 states and territories in which we operate.

Human Capital Management

Our human capital strategy reflects the specialized nature of our business. Serving the cannabis industry at the intersection of financial services and regulatory compliance requires employees with expertise that is difficult to recruit and takes significant time to develop. Cannabis industry knowledge cannot be easily trained, as, although compliance and financial services skills can be taught, deep operational understanding of the cannabis sector must be cultivated over time. Retaining experienced employees is therefore a direct operational priority.

Our human capital management focuses on the following areas:

• Talent Acquisition and Retention. We recruit for specialized roles spanning cannabis compliance, banking operations, relationship management, and information technology. Our talent acquisition efforts are concentrated in sales, business development, and client-facing roles that directly drive revenue. We offer competitive base compensation, performance-based incentive programs, and equity participation through the Plan, which is intended to align employee interests with long-term shareholder value creation.
• Performance Management. The Company is transitioning to a performance-based compensation framework that ties cash bonuses and equity grants to defined, measurable outcomes including revenue growth, client acquisition, and operational efficiency. Performance evaluations are conducted quarterly and annually and serve as the basis for compensation decisions and career development planning.
• Learning and Development. All employees receive ongoing compliance training aligned with BSA/AML requirements and the 2014 FinCEN guidance. New employees complete industry-specific onboarding covering cannabis banking compliance and the Company’s Code of Business Conduct and Ethics, which is available on our website at www.shfinancial.org (http://www.shfinancial.org). We supplement internal training with cannabis industry conferences and continuing education programs.
• Technology and Productivity. We are actively investing in artificial intelligence-enabled compliance management and customer relationship management tools designed to automate routine tasks and increase individual employee output. This allows our team to focus on higher-value client-facing activities as we grow, without a proportional increase in headcount.
• Compensation and Benefits. We offer a competitive total rewards package including comprehensive medical, dental, and vision coverage, with the Company contributing to employee premiums on a tenure-based scale and funding a portion of employee Health Savings Accounts monthly. Effective in 2025, the Company transitioned to an unlimited paid time off policy, which provides employees with flexibility to manage their personal and professional needs without a fixed accrual cap. The Company offers a 401(k) retirement plan to all eligible employees. The employer matching contribution was suspended in 2024 and discontinued in 2025. The Company intends to reassess the matching contribution as its financial position improves.

Recent Developments

Emerging Markets

In March 2026, we announced that emerging U.S. market average deposit balances increased 29% over the twelve months ended February 4, 2026, driving total average deposit balances up 4.5%, and that emerging U.S. markets represented 31% of the Company’s average deposit balances at the time of the announcement.

420 IT Solutions Acquisition

On December 19, 2025, Safe Harbor Managed Services LLC, a wholly-owned subsidiary of the Company, completed the acquisition of substantially all of the assets of 420 IT Solutions. 420 IT Solutions is engaged in the business of providing third-party professional advisory and technology services to the cannabis industry. The aggregate purchase price for the acquired assets consisted of 125,000 Earnout Shares (as defined below), plus the assumption of certain identified liabilities under contracts assigned to the Company. The acquisition included the transfer of customer contracts, the registered trademark “420 IT Solutions”, domain name registrations, and other intellectual property. No cash consideration was paid at closing. In connection with the acquisition, 420 IT Solutions’ founders, joined the Company to lead the third-party professional advisory and technology services division. See Part II, Item 7., “Management’s Discussion and Analysis of Financial Condition and Results of Operations for the Years ended December 31, 2025 and 2024––Acquisition of 420 IT Solutions.”

Second Amended CAA

During the fourth quarter of 2025, SHF LLC, a wholly-owned subsidiary of the Company, and PCCU reached agreement on the material economic terms of the Second Amended CAA on or about October 1, 2025, following completion of the September 2025 Recapitalization. The written agreement was formally executed on February 4, 2026; the intervening period involved only procedural and documentation matters that did not affect the substance of the agreed terms. Accordingly, the Company has given effect to the Second Amended CAA from October 1, 2025, consistent with ASC 606 contract modification guidance. Under the Second Amended CAA, we receive up to 65% of loan program income generated by PCCU’s CRB loan portfolio, an increase from the approximately 35% share in effect under the First Amended CAA. In exchange, we are obligated to indemnify PCCU for up to 65% of net losses on any loan default covered by the Second Amended CAA. See Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations for the years ended December 31, 2025 and December 31, 2024––Relationship with PCCU” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations for the years ended December 31, 2025 and December 31, 2024––Related Party Relationship with PCCU.”

September 2025 Recapitalization

On August 27, 2025, the Company issued Convertible Promissory Notes (the “Notes”) to certain accredited investors with an aggregate principal amount of $0.6 million, a 20% original issue discount (“OID”) and maturity date of September 9, 2026. The conversion price of the Notes is the lesser of (i) a twenty percent (20%) discount to the average volume-weighted average price (“VWAP”) of the Common Stock for the twenty (20) consecutive trading days ending on the trading day immediately prior to the execution date of the Note and (ii) a twenty percent (20%) discount to the average VWAP of the Common Stock for the twenty (20) consecutive trading days ending on the trading day immediately preceding the date of a conversion notice, subject to adjustment as provided in the Note. On September 9, 2025, the Company issued an additional Note to an accredited investor in the principal amount of $0.1 million on identical terms, bringing the aggregate principal amount to $0.7 million.

On September 17, 2025, we established the ELOC with CREO, which provided we may sell to CREO up to $150 million of Common Stock and granted us and CREO the mutual right to agree to increase this amount to $500 million.

On September 30, 2025, all outstanding Notes were exchanged for an aggregate of 825 shares of the Series B Preferred Stock and Series B Warrants to purchase 53,127 shares of Common Stock. Also on September 30, 2025, the Company entered into Exchange and Cancellation Agreements (each, an “Exchange and Cancellation Agreement”) with each of Midtown East Management NL, LLC (“Midtown”), which was subsequently assigned in part to Verdun Investments LLC (“Verdun”) and Vellar Opportunity Fund SPV LLC – Series 1 (“Vellar”) relating to a Forward Purchase Agreement (the “FPA”) that the Company initially entered into on June 16, 2022. In exchange for each counterparty irrevocably cancelling, waiving, and terminating all of their rights under the FPA, the Company issued an aggregate of 5,002 shares of Series B Preferred Stock and Series B Warrants to purchase 322,111 shares of Common Stock.

We refer to these Notes transactions, the entrance into the ELOC and the termination of the FPA collectively as the “September 2025 Recapitalization.” The September 2025 Recapitalization eliminated approximately $18 million in debt and raised over $6.7 million in new capital and also resulted in the establishment of the $150 million ELOC that can potentially be expanded to $500 million, thereby meaningfully improving our ability to support our lending commitments and portfolio growth. See Part II, Item 7., “Management’s Discussion and Analysis of Financial Condition and Results of Operations for the Years ended December 31, 2025 and 2024––Relationship with PCCU” and Part II, Item 7., “Management’s Discussion and Analysis of Financial Condition and Results of Operations for the Years ended December 31, 2025 and 2024––Gain on Extinguishment of Debt.”

Corporate History

The Company was founded in 2015 to address the lack of reliable and compliant financial services available to CRBs in Colorado. At that time, many financial institutions were unwilling to serve the industry due to regulatory uncertainty and compliance burdens. Drawing on regulatory and banking experience, we developed a compliance program designed to assist financial institutions in providing services to CRBs while addressing BSA and AML obligations.

Our program provides onboarding, monitoring, and validation services to financial institutions seeking to offer traditional banking products to licensed cannabis, hemp, and CBD operators, as well as ancillary businesses that provide goods and services to the cannabis industry. As cannabis legalization has expanded beyond Colorado, our operations have grown to support financial institutions that provide services in 41 states and territories where cannabis is permitted for medical or adult use.

Our principal executive offices are located at 1526 Cole Boulevard, Suite 250, Golden, Colorado 80401, and our telephone number is (303) 431-3435. Our website is www.shfinancial.org (http://www.shfinancial.org); information on our website is not incorporated by reference into this Form 10-K.

Available Information

We maintain a website at the address shfinancial.org. On our website, you can access, free of charge, our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, our annual proxy statement on Schedule 14A, and amendments to those materials filed or furnished pursuant to Sections 13(a) and 15(d) of the Exchange Act. Materials are available online as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. In addition, the SEC maintains a website at the address www.sec.gov (http://www.sec.gov) that contains the information we file or furnish electronically with the SEC. The information contained on our website or on the SEC’s website is not incorporated by reference in, or considered part of, this Form 10-K. Our principal executive offices are located at 1526 Cole Boulevard, Suite 250, Golden, Colorado 80401, and our telephone number is (303) 431-3435

Emerging Growth Company

We are an emerging growth company (“EGC”) as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). As such, we are eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies,” including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002 (“SOX”), reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a non-binding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved.

In addition, Section 107 of the JOBS Act also provides that an EGC can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act, for complying with new or revised accounting standards. In other words, an EGC can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We intend to take advantage of the benefits of this extended transition period, for as long as it is available. We will remain an EGC until the earlier of (1) the last day of the fiscal year (a) following the fifth anniversary of the date of the first sale of our common equity securities pursuant to an effective registration statement under the Securities Act, which is December 31, 2026, and (b) in which we have total annual gross revenue of at least $1.07 billion, (2) the date on which we are deemed to be a large accelerated filer, which means the market value of our Common Stock that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter, and (3) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period. References herein to “emerging growth company” have the meaning provided in the JOBS Act. The Company will cease to be an EGC on December 31, 2026.

Smaller Reporting Company

We are a “smaller reporting company” as defined in Item 10(f)(1) of Regulation S-K, which allows us to take advantage of certain exemptions from disclosure requirements including exemption from compliance with the auditor attestation requirements of Section 404. We will remain a smaller reporting company until the last day of the fiscal year in which (i) the market value of the shares of our Common Stock held by non-affiliates exceeds $250.0 million as of the prior June 30, and (ii) our annual revenue exceeded $100.0 million during such completed fiscal year or the market value of the shares of our Common Stock held by non-affiliates exceeds $700.0 million as of the prior June 30. To the extent we take advantage of such reduced disclosure obligations, it may also make comparison of our financial statements with other public companies difficult or impossible.

We are subject to risks and uncertainties that could potentially negatively impact our business, financial conditions, results of operations and cash flows. This section contains a description of certain risks and uncertainties identified by management that could, individually or in combination, harm our business, results of operations, liquidity and financial condition, as well as our financial instruments and our securities. These disclosures reflect the Company’s beliefs and opinions as to factors that could materially and adversely affect the Company and its securities in the future. References to past events are provided by way of example only and are not intended to be a complete listing or a representation as to whether or not such factors have occurred in the past or their likelihood of occurring in the future. In evaluating us and our business and making or continuing an investment in our securities, you should carefully consider the risks described below as well as other information contained in this Form 10-K and any risk factors and uncertainties discussed in our other public filings with the SEC under the caption “Risk Factors.” We may face other risks that are not contained in this Form 10-K, including additional risk that are not presently known, or that we presently deem immaterial. This Form 10-K and the risks discussed below also include forward-looking statements, and our actual results may differ substantially from those discussed in such forward-looking statements. Please refer to the sections in this Form 10-K titled “Cautionary Note Regarding Forward-Looking Statements” for additional information regarding forward-looking statements and “Summary of Risk Factors” for additional information regarding the risks and uncertainties that could potentially negatively impact our business, financial conditions, results of operations and cash flows.

Risks Related to the Company’s Business

Our revenue has declined significantly in recent periods, and we cannot guarantee that the economics of the Second Amended CAA will fully restore our financial performance.

Our loan interest income declined sharply following the First Amended CAA, which reduced our income share to approximately 35%. While the Second Amended CAA, increases our income share to up to 65%, this comes at the cost of an up to 65% loan loss indemnification obligation. As such, we cannot guarantee that the economics of the Second Amended CAA will fully restore our financial performance if we are required to fulfill our indemnification obligations.

Our revenue has declined due to account attrition, lower pricing, introduction of money market accounts that share interest earned with the depositor and reduced transaction activity within the cannabis industry.

The fees we earn from deposit accounts and transaction activity are directly tied to the number of active CRB accounts, the average balances those accounts maintain, and the volume of transactions processed through our platform. Over recent periods, we have experienced account attrition and lower balances, reflecting broader economic pressures in the U.S. cannabis industry, including reduced wholesale pricing and constrained operator liquidity. These trends reduce both our account fee income and the deposit base on which we earn investment income. We also introduced a money market account that shares the interest earned with depositors, which reduces the average revenue generated from CRBs. We cannot predict when, or whether, conditions in the cannabis industry will improve, or whether accounts lost to attrition will be replaced by new customers.

Volatility in interest rates may adversely affect our revenues, profitability, and competitive position.

Our investment income is earned on CRB deposits held at PCCU based on the Interest on Reserve Balances (IORB) paid by the Federal Reserve, which is sensitive to changes in prevailing interest rates and including policy decisions by the Federal Reserve. When interest rates decline, the yield earned on CRB deposits decreases, and when interest rates rise, the yield earned on CRB deposits increases. A sustained low-rate environment could materially reduce our revenues and make it more difficult for us to achieve or maintain profitability. In addition, lower interest rates could reduce the interest rates charged on new loans made to CRB borrowers.

Our recurring operating losses and negative cash flows from operations raise substantial doubt about our ability to continue as a going concern.

The Company has incurred recurring losses from operations and negative cash flows from operations, including an operating loss of approximately $5.4 million and cash used in operating activities of approximately $3.4 million for the year ended December 31, 2025, which raise substantial doubt about the Company’s ability to continue as a going concern. Management has taken steps to preserve liquidity, including restructuring revenue sharing under the Second Amended CAA to increase the Company’s share of loan program income from approximately 35% to 65%, seeking strategic partnerships, reducing operating expenses, maintaining access to a $150 million ELOC and monitoring its liquidity position. Notwithstanding these measures, there is no assurance that management’s plans will be sufficient to sustain operations, and if the Company is unable to achieve profitability or access adequate capital on acceptable terms, it may be forced to reduce spending, liquidate assets, or curtail operations, any of which could materially harm the Company’s business and financial condition.

Furthermore, the independent auditors’ report on our consolidated financial statements for the year ended December 31, 2025 includes an explanatory paragraph that expresses substantial doubt about our ability to continue as a going concern. In addition, our future financial statements may include similar qualifications about our ability to continue as a going concern. Our financial statements were prepared assuming that we will continue as a going concern and do not include any adjustments that may result from the outcome of this uncertainty. See Part II, Item 7., “Management’s Discussion and Analysis of Financial Condition and Results of Operations for the Years ended December 31, 2025 and 2024––Liquidity” and Note 2 to the Company’s consolidated financial statements in this Form 10-K for further details.

Risks Related to the Second Amended CAA

PCCU’s loan program is substantially dependent on the regulatory restrictions placed on PCCU, which may limit the types, terms, and amounts of loans offered.

PCCU is a federally chartered credit union subject to regulation by the National Credit Union Administration. PCCU is subject to regulatory capital requirements, portfolio concentration limits, currently capped at 60% of total assets in CRB-related deposits, and periodic examinations by applicable oversight authorities. If PCCU’s regulators impose more restrictive requirements, reduce its concentration limit, or restrict its ability to make CRB loans, the size and composition of the loan portfolio from which we earn income could be materially reduced. We have no ability to compel PCCU to originate loans or to maintain its current regulatory posture, and changes in PCCU’s regulatory environment could restrict the loan program we depend on for a significant portion of our revenue.

The Second Amended CAA reinstates an indemnification obligation of up to 65% of loan loss.

Under the Second Amended CAA, we receive up to 65% of loan program income generated by PCCU’s CRB loan portfolio. In exchange, we are obligated to indemnify PCCU for up to 65% of net losses of a default on any loan covered by the Second Amended CAA. This obligation has no maximum dollar limit and covers principal, accrued interest, fees, legal costs, collection costs, and collateral disposition costs, net of any recoveries. As of the date the Second Amended CAA was entered into, the total loan portfolio was approximately $52.1 million, giving us a theoretical maximum indemnification exposure of approximately $33.8 million. If one or more significant loan defaults occur, our indemnification obligations could be substantial and could materially impair our financial condition and ability to operate. See Part II, Item 7., “Management’s Discussion and Analysis of Financial Condition and Results of Operations for the Years ended December 31, 2025 and 2024––Relationship with PCCU.”

We are required to maintain sufficient balance sheet resources to support our indemnification obligations under the Second Amended CAA.

The Second Amended CAA requires us to certify monthly to PCCU that we maintain adequate liquidity to support our 65% indemnification obligation. While we currently meet this requirement, there is no assurance that we will continue to do so. Our cash position may decline as a result of operating losses, capital expenditures, debt service, or indemnification payments. If we are unable to certify adequate liquidity or if material indemnification claims are made against us, our ability to continue operating could be significantly impaired

Our indemnification obligation is unlimited in amount, and our actual losses could exceed our current estimates and our available cash.

The indemnification obligation under the Second Amended CAA has no dollar cap. Our ability to satisfy indemnification claims depends entirely on our maintaining sufficient cash and liquidity at the time a claim arises. As of December 31, 2025, we held cash of $6.8 million; however, our cash position may decline due to operating losses, working capital needs, or prior indemnification payments. If we are unable to fund an indemnification claim, PCCU would bear the full loss on the affected loan. Such a failure could severely damage our relationship with PCCU, result in a default under the Second Amended CAA, and jeopardize our ability to continue operating.

We are required to maintain sufficient cash and cash equivalents to support our indemnification obligations under the Second Amended CAA.

The Second Amended CAA requires us to certify monthly to PCCU that we maintain adequate liquidity to support our 65% indemnification obligation. While we currently meet this requirement, there is no assurance that we will continue to do so. Our cash position may decline as a result of operating losses, capital expenditures, debt service, or indemnification payments. If we are unable to certify adequate liquidity or if material indemnification claims are made against us, our ability to continue operating could be significantly impaired.

PCCU retains final loan approval authority and may decline loans that meet our underwriting standards, which could limit our revenue growth.

We control the loan origination process and assist with underwriting, risk rating, and credit analysis, for these loans and determine which loan applications are submitted to PCCU for funding. However, PCCU’s loan committee retains final approval authority and may reject loans that we have underwritten and recommended for funding. A pattern of rejections on loans we consider creditworthy could reduce the size of the loan portfolio, limit our loan program income, and constrain our ability to grow revenue under the Second Amended CAA. We cannot compel PCCU to approve any loan we originate, and disagreements over credit standards could adversely affect our relationship with PCCU and our financial results.

One borrower represents approximately 18% of the total loan portfolio and carries the second highest risk classification.

As of December 31, 2025, one borrower had an outstanding loan balance of approximately $9.3 million, representing approximately 18% of our total CRB loan portfolio. This loan carries the second highest risk rating under the risk rating classification system used in the loan program, and which indicates that collection or liquidation in full is highly questionable, doubtful and improbable, with anticipated losses ranging from 20% to 50% of the outstanding balance. Our 65% indemnification exposure on this single loan could result in a loss to us of between approximately $2.2 million, net of estimated collateral value and $6.1 million, uncollateralized. As of December 31, 2025, the Company has recorded provisions of $0.4 million and $0.3 million in the consolidated balance sheet for financial indemnification liability under ASC 326 and standby guarantee obligations under ASC 460, respectively. The realization of any portion of this loss could materially impair our liquidity and financial condition.

The CRB loan portfolio is concentrated entirely in the cannabis industry, and cannabis-specific collateral is subject to significant valuation discounts, legal uncertainties, and a limited buyer pool in a foreclosure or forced sale.

All loans in the portfolio we indemnify are made to CRBs. In the event of a default, the primary collateral securing these loans is typically real estate used in cannabis operations. PCCU eliminates the cannabis license premium (sometimes referred to as the “green tax”) from its collateral valuations and applies a further 60% reduction to estimate realizable value in a non-cannabis sale. As a result, the effective collateral value available to offset loan losses in a foreclosure or forced sale is significantly lower than for comparable conventional commercial real estate. This means our actual loss for a given default, and therefore our indemnification payments under the Second Amended CAA, may be materially higher than we currently estimate.

Certain provisions in the Second Amended CAA create a direct link between our listing compliance and our revenue.

The Second Amended CAA contains a provision that automatically reduces our loan program income share percentage if we determine that our indemnification percentage must be reduced in order to maintain our listing on The Nasdaq Stock Market (“Nasdaq”). In the event of such a determination, our income split percentage will be reduced to match our indemnification percentage, with a retroactive true-up to the immediately preceding quarter that will be settled within ten days of our next filing with the SEC. A reduction in the indemnity percentage would directly reduce our revenue and could signal financial distress to the market. This provision means that a Nasdaq compliance issue could simultaneously impair both our capital markets access and our operating income.

The initial fair value measurement of our stand-ready guarantee liability at inception under the Second Amended CAA involves significant estimates and judgment and is subject to material uncertainty.

We are required under ASC 460, Guarantees, to recognize the fair value of our stand-ready guarantee obligation at inception. We are finalizing this initial fair value measurement with the assistance of a third-party valuation specialist. This is a Level 3 measurement under the fair value hierarchy, meaning it relies on significant unobservable inputs, including assumed default probabilities, loss given default rates, cannabis-specific collateral discount assumptions, discount rates, and the timing of potential guarantee payments. The fair value of this liability is fixed at inception and released over the remaining term of the Second Amended CAA as we are released from risk. Because this measurement depends entirely on management assumptions and unobservable market inputs, actual results could differ materially from our estimates. Errors in this measurement, or changes in the assumptions used, could result in material charges to our income statement or require restatements of our financial statements.

Our ongoing expected financial indemnification liability under the Current Expected Credit Loss (“CECL”) standard (ASC 326) requires quarterly ongoing remeasurement and is subject to material uncertainty.

Pursuant to ASC 326, Financial Instruments – Credit Losses, using the CECL methodology, coinciding with the first period in which the Company held financial assets within the scope of the standard. Our financial indemnification liability represents our estimate of 65% of the expected credit losses on the covered loan portfolio under the Second Amended CAA. Unlike our ASC 460 stand-ready guarantee liability, which is fixed at inception, our financial indemnification liability is dynamic and remeasured every quarter to reflect current conditions, forward-looking economic forecasts, updated default probability assumptions, revised loss given default estimates, and changes in collateral values. Because the cannabis commercial real estate lending market has limited historical loss data for reliable statistical calibration, our estimates for financial indemnification liability involve a higher-than-normal degree of management judgment. Changes in these estimates in future periods, including as a result of borrower deterioration, collateral value declines, or changes in economic conditions, could result in material charges to credit loss expense in our income statement. Errors in these measurements could also require restatements of our financial statements.

We are dependent on third parties, including PCCU and other service providers, for certain critical services, and disruptions at PCCU would directly and immediately impair our operations.

PCCU provides the regulated banking infrastructure on which our entire service model depends. We do not hold a bank or credit union charter and cannot directly offer deposit, lending, or payment services to CRB clients. Operational disruptions at PCCU whether caused by a regulatory action, a cybersecurity incident, a financial stress event, or an operational failure would directly and immediately impair our ability to serve our clients and generate revenue. We have limited ability to transition our operations to an alternative financial institution partner on short notice, and the loss of PCCU’s operational infrastructure for any extended period could be fatal to our business.

We are almost entirely dependent on PCCU as our banking partner. Substantially all deposits from our CRB clients are held at PCCU, and substantially all of our revenue is generated through the services we provide under the Second Amended CAA. We currently have no other financial institution partner of comparable scope. The loss of our relationship with PCCU, or a material adverse change to the terms of the CAA, would have a material adverse effect on our business, revenues, and operations. Until we enter into agreements with one or more additional financial institution partners, our ability to grow our client base and diversify our revenue is significantly constrained

Loan program income (formerly loan interest income) could decline under the Second Amended CAA if the indemnity reserve would cause our shareholders’ equity to drop below the Nasdaq Listing Requirements to maintain compliance.

The Second Amended CAA contains a provision that automatically reduces our loan program income (formerly loan interest income) share percentage if we determine that our indemnification percentage must be reduced in order to maintain our Nasdaq listing. In the event of such a determination, our income split percentage will be reduced to match our indemnification percentage. Any such adjustment in our indemnification obligation would result in a corresponding decrease in the amount of loan program income generated by PCCU’s CRB loan portfolio that we receive pursuant to the Second Amended CAA. The current listing requirement is a minimum of $2.5 million of shareholders’ equity, and if Nasdaq were to increase this requirement such that it exceeded the Company’s balance sheet equity, or the Company’s balance sheet equity decreases below $2.5 million, our loan program income could decline. See “––Risks Related to the Second Amended CAA––Certain provisions in the Second Amended CAA create a direct link between our listing compliance and our revenue.”

Risks Related to the Cannabis Industry and Regulatory Environment

We have agreements with financial institutions that provide banking services to CRBs, which exposes us to additional liabilities, regulatory compliance costs, and reputational risk.

Our business is built on serving an industry that remains illegal under federal law. This creates unique risks that do not apply to service providers operating in conventional industries, including potential federal enforcement actions, heightened regulatory scrutiny of our financial institution partners, difficulty obtaining banking services and insurance, and reputational harm that could affect our ability to attract investors, employees, and customers. Any increase in federal enforcement activity targeting cannabis-related financial services could have an immediate and material adverse effect on our business.

Cannabis remains a Schedule I controlled substance under federal law, and changes in federal enforcement policy or the scheduling status of cannabis could affect our business in unpredictable ways.

Cannabis is classified as a Schedule I controlled substance under the CSA and is illegal under federal law. While some federal administrations have adopted policies of non-enforcement with respect to state-licensed cannabis operations, those policies can change at any time. Potential federal rescheduling of cannabis from Schedule I to Schedule III, while potentially reducing enforcement risk for CRBs, could also attract new competitors into the cannabis banking market, alter the regulatory framework governing financial institutions that serve CRBs, change the federal tax treatment of CRB operators, or otherwise disrupt the economics of the market we serve. We cannot predict the direction or timing of federal cannabis policy changes or their ultimate effect on our business.

The Company, our financial institution customers, and our CRB clients are subject to complex federal and state laws governing financial transactions related to cannabis, which could subject them to legal claims or restrict their activities.

Financial institutions that bank cannabis businesses must navigate a complex web of federal and state laws, including the BSA, anti-money laundering requirements, FinCEN guidance on marijuana banking, and various state cannabis regulatory frameworks. Changes in FinCEN guidance, BSA or AML examination standards, or the legal interpretation of applicable statutes could require us, or our financial institution partners, to modify or discontinue certain services to CRB clients. Any such change could materially reduce our revenues and disrupt our operations.

State-level regulatory changes, including market saturation, license non-renewals, and changes to cannabis program structures could impair borrower viability and increase the credit risk in the portfolio we indemnify.

The viability of CRB borrowers in our loan portfolio depends substantially on conditions in their respective state cannabis markets. Market saturation, the non-renewal of cannabis licenses, adverse changes to state cannabis program structures, or increased state regulation could impair CRB operators’ ability to generate sufficient revenue to service their debt obligations. An increase in default rates among portfolio borrowers would increase the probability that we would be required to fund indemnification payments to PCCU, which could materially impair our financial condition.

Because cannabis remains federally illegal, CRB borrowers generally cannot access bankruptcy protections but instead work through the receivership process, which complicates loan workouts and could increase our loss given default.

Under the applicable bankruptcy laws, debtors engaged in the cultivation, distribution, or sale of a federally illegal substance are generally ineligible for bankruptcy protection. This means that when a CRB borrower defaults, the workout and collateral recovery process must proceed entirely outside of bankruptcy court, typically through foreclosure, deed-in-lieu arrangements, or negotiated settlements. These processes typically take one to three years and yield lower net recovery proceeds than a bankruptcy-supervised liquidation. The result is that our actual loss for a given default on indemnified loans may be materially higher, and our indemnification payments may arise over a longer timeline with greater uncertainty than would be the case for conventional commercial real estate loans.

Service providers to cannabis businesses may be subject to unfavorable U.S. federal income tax treatment, including potential disallowance of ordinary business deductions under Section 280E.

Section 280E prohibits deductions for ordinary and necessary business expenses incurred by taxpayers who traffic in Schedule I or Schedule II controlled substances. This provision significantly increases the effective federal income tax rate for CRB operators, reducing their after-tax cash flow and their ability to service debt. Although Section 280E applies directly to CRBs rather than to service providers such as us, the financial burden it places on our borrowers affects their creditworthiness and the credit quality of the loan portfolio we indemnify. Any adverse change in federal tax policy applicable to cannabis-related businesses could further impair the financial condition of our CRB clients.

Cannabis businesses may be subject to civil asset forfeiture under federal law, which could result in the loss of collateral securing loans in our portfolio.

Federal law permits the seizure and forfeiture of assets used in connection with, or derived from, violations of the CSA. If federal authorities were to seize cannabis-related assets pledged as collateral for loans in the PCCU portfolio, the collateral available to secure repayment would be lost or materially impaired, increasing the risk that we would be required to fund indemnification payments. The risk of civil forfeiture is difficult to predict and is not fully reflected in our current collateral valuations.

We may have difficulty enforcing certain of our commercial agreements and contracts related to cannabis-adjacent services.

Because cannabis remains federally illegal, certain agreements relating to cannabis industry services may be challenged as unenforceable in federal courts or in states that do not recognize contracts related to federally illegal activities. If any of our material agreements were found to be unenforceable, we could lose the benefit of the relevant contract rights and suffer material financial harm.

Because we serve cannabis-related businesses, we may have difficulty obtaining certain insurance coverages, which could expose us to additional financial liability.

The cannabis industry’s federal legal status limits access to standard commercial insurance products. Many conventional insurers decline to provide coverage to cannabis-adjacent businesses, and the specialized insurance products that are available often carry higher premiums and more limited coverage terms. Gaps in our insurance program could leave us exposed to uninsured losses including those arising from indemnification claims, litigation, cybersecurity incidents, or errors and omissions that could materially impair our financial condition.

The conduct of third parties, including our CRB clients and their financial institution providers, may jeopardize our regulatory compliance and business relationships.

Our ability to maintain compliance with applicable laws depends in part on the conduct of the CRBs we serve and the financial institution partners through which we operate. If a CRB client engages in unlicensed activity, money laundering, or other regulatory violations, we could be exposed to regulatory sanctions, reputational harm, or legal liability even if we were unaware of the misconduct. We have what we believe to be effective compliance monitoring procedures in place, but we cannot guarantee that they will detect or prevent all violations by third parties.

Directors, officers, employees, and investors who are not U.S. citizens may face cross-border travel restrictions into the United States due to their involvement in the cannabis industry.

Individuals who are not U.S. citizens and who are associated with the cannabis industry, including through employment, investment, or service on our board of directors, may be subject to restrictions on entry into the United States. This could limit our ability to attract and retain international talent at the board and management levels and could affect relationships with international investors. These restrictions create practical operational challenges that do not affect companies operating in federally legal industries.

We may be subject to marketing and advertising constraints on promoting our services to cannabis-related businesses, which could limit our growth.

Restrictions on advertising and marketing to regulated industries, including cannabis, may limit our ability to promote our platform and services to prospective CRB clients or to financial institutions considering offering cannabis banking services. These constraints could slow our ability to grow our client base and expand into new geographic markets, adversely affecting our revenue growth.

Risks Related to Nasdaq Listing Compliance

Our Common Stock has previously traded below $1.00 per share, and if it were to trade below $1.00 in the future it could create an imminent risk of a Nasdaq minimum bid price deficiency notice.

Nasdaq Listing Rule 5550(a)(2) requires that listed companies maintain a minimum closing bid price of at least $1.00 per share. If our Common Stock closes below $1.00 per share for 30 consecutive trading days, Nasdaq will issue a deficiency notice and we will have 180 calendar days to regain compliance. Our stockholders approved a reverse stock split of the outstanding shares of our Common Stock within the range of 2-for-1 to 12-for-1, which our Board could execute proactively before any deficiency notice is issued. However, if a deficiency notice is received before such action is taken, we may be unable to regain compliance through other means within the required timeframe. Failure to regain compliance could ultimately result in the delisting of our Common Stock from Nasdaq.

A proposed new Nasdaq rule would delist companies whose market capitalization falls below $5 million for 30 or more consecutive trading days.

We are aware of a proposed new Nasdaq rule which was filed with the SEC on January 13, 2026, that would result in mandatory delisting without a cure period if a listed company’s market capitalization is below $5 million for 30 consecutive trading days. The SEC is expected to make a decision on this proposed rule by April 29, 2026. If such a rule is adopted and we fail to satisfy its requirements, our shares could be delisted from Nasdaq, which would have severe adverse consequences for our stockholders and our ability to raise capital. Given that our current stock price and number of shares outstanding as of the date hereof put us below the $5 million requirement, it is possible that we would not be compliant with such a rule at the time of its adoption and could be delisted as soon as 30 trading days after the proposed rule takes effect.

A delisting of our Common Stock could materially impair our ability to make future draws under the ELOC.

The ELOC requires that, as a condition precedent to each draw, there has been no suspension of trading in, or notice of delisting of, our Common Stock. The ELOC also requires us to use commercially reasonable efforts to maintain the listing and trading of our Common Stock on Nasdaq or another Eligible Market (as defined below). If we receive a final and non-appealable notice that our Common Stock will be delisted from Nasdaq, we are required to promptly seek listing on a market designated as eligible under the ELOC, which includes the Over The Counter Market (OTC), The New York Stock Exchange American, or any nationally recognized successor to any of the foregoing (each, an “Eligible Market”).

During any period between a delisting from Nasdaq and the successful listing of our Common Stock on an Eligible Market, we would be unable to satisfy the conditions precedent to make draws under the ELOC. There can be no assurance that we will maintain our Nasdaq listing, or that if delisted, we will be able to obtain listing on an Eligible Market in a timely manner or at all. Any inability to make draws under the ELOC, whether temporary or prolonged, could have a material adverse effect on our business, financial condition and results of operations.

Risks Related to Our Capital Structure and Securities

The conversion of our Series B Preferred Stock, exercise of Series B Warrants, and future draws under the ELOC could result in substantial dilution to existing holders of our Common Stock.

In connection with our September 2025 Recapitalization, we issued 31,052 shares of Series B Preferred Stock and Series B Warrants to purchase approximately 1,999,544 shares of Common Stock. As these instruments are converted or exercised, and as we draw on the ELOC, substantial additional shares of Common Stock will be issued and outstanding. This dilution could depress the market price of our Common Stock, making it harder for existing stockholders to sell their shares at or above their purchase price and potentially triggering further Nasdaq compliance issues.

The ELOC is an active financing facility, its pricing and redemption mechanics significantly reduce our net proceeds on each draw and increase dilution to existing stockholders.

We have an active ELOC under which we may raise capital by issuing shares of our Common Stock. However, each draw under the ELOC is subject to the satisfaction of certain conditions precedent, including: (i) no material adverse change in our business, operations, properties, or financial condition; (ii) no suspension of trading in, or notice of delisting of, our Common Stock; (iii) our representations and warranties remaining true and correct in all material respects; and (iv) no occurrence of any event that would reasonably be expected to have a material adverse effect on our ability to perform our obligations under the ELOC. Each draw is also priced at 90% of the lowest intraday trade price on the draw date, meaning we do not receive full market value for the shares we issue. Additionally, each draw is subject to a 25% redemption right, under which the Series B investor returns 25% of the gross draw amount to us as a redemption of Series B Preferred Stock, reducing our net cash proceeds. The combined effect of these features means we retain approximately $0.675 of net cash proceeds for every dollar of shares issued at market. To raise $1.00 of net capital, we must issue shares representing approximately $1.48 of gross market value. This structure, together with the conditions precedent described above, increases dilution to existing common stockholders and reduces the effective capacity and reliability of the ELOC as a liquidity source.

Our Series B Preferred Stock and Series B Warrants contain anti-dilution and reset provisions that could further dilute common stockholders.

The Series B instruments include down-round adjustment provisions and automatic price reset mechanics. The first and final automatic reset has already occurred, resetting the conversion price and exercise price to $1.5528 per share. While no further automatic resets are triggered, the increased share counts resulting from the reset require additional share registration. Additional issuances of Common Stock at prices below the conversion or exercise price, whether under the ELOC or otherwise, may trigger further anti-dilution adjustments, increasing the number of shares issuable to Series B holders and further diluting existing common stockholders.

Our Common Stock price may be highly volatile, and stockholders may not be able to sell their shares at or above their purchase price.

Our Common Stock has experienced significant price volatility, including extended periods of trading below $1.00 per share. Factors that have contributed, and may continue to contribute, to this volatility include our financial condition and operating results, changes to the terms of our Second Amended CAA, regulatory developments affecting the cannabis industry, Nasdaq compliance notices, limited analyst coverage, low trading volumes, and broader stock market conditions. This volatility makes it difficult for stockholders to predict when, or whether, they will be able to sell their shares at a price they consider acceptable.

The soundness of our financial institution customers and partners could adversely affect us.

We depend on the financial health and stability of PCCU and any other financial institution partners we may engage with. PCCU is subject to its own regulatory requirements, capital adequacy standards, and examinations by applicable oversight authorities. A regulatory enforcement action against PCCU, a deterioration in PCCU’s financial condition, or a significant adverse event at PCCU could directly and materially impair our ability to provide services to CRB clients, collect fees and interest income, and fund our operations. We have limited ability to anticipate or mitigate risks arising from the financial condition of our banking partners.

Our investment in preferred securities of ADTX is illiquid, subject to impairment, and may result in a partial or total loss.

We hold an investment in preferred securities of Aditxt, Inc. (“ADTX”), a publicly traded company, with a carrying value of $1.45 million as of December 31, 2025. The investment was received as non-cash consideration in connection with the issuance of our Series B Preferred Stock in September 2025. Because ADTX’s preferred shares are not actively traded and do not have a readily determinable fair value, the investment is measured at cost, less any impairment, adjusted for observable price changes in orderly transactions for identical or similar instruments under ASC 321. We do not have the ability to exercise significant influence or control over ADTX, and we hold less than 20% of its voting interests.

Starting April 1, 2026, the Company can convert the ADTX preferred shares into shares of ADTX common stock at a 50% premium to the $1,000 value using a conversion price based on a 20% discount to the trailing five-day volume-weighted average price (VWAP) of ADXT’s common stock, which can be sold Nasdaq in tranches over multiple quarters depending on the average trading volume. Based on the conversion mechanics, the aggregate face value of ADTX’s common stock issuable upon full conversion would exceed the current carrying value of the preferred shares. However, the timing and actual proceeds we realize upon conversion and sale will depend on the trading price and volume of ADTX’s common stock at the time of each transaction. If ADTX’s common stock price declines, trading volume is insufficient to absorb our sales without significant price impact, or ADTX experiences a deterioration in its financial condition or business prospects, we may realize proceeds below our carrying value or be required to recognize an impairment charge, either of which could have a material adverse effect on our consolidated results of operations.

Risks Related to Internal Controls and Financial Reporting

The Second Amended CAA introduces significant new accounting complexity that involves material judgment and estimation uncertainty.

The Second Amended CAA requires us to measure and record a stand-ready guarantee liability at fair value at inception under ASC 460, estimate and recognize an initial financial indemnification liability under ASC 326-20, and account for retroactive revenue recognition as a subsequent event for the period from October 1, 2025 through December 31, 2025. Each of these accounting determinations involve significant estimates and management judgment. Errors in our estimates or judgments could result in material misstatements in our financial statements, which could require restatements, damage investor confidence, and adversely affect our ability to timely file required SEC reports.

One material weakness in revenue recognition related to our activity fee income from deposits held at PCCU has been remediated, however sufficient time hasn’t passed for us to conclude that its operating effectively.

As of December 31, 2025, the Company had material weaknesses we have identified, one specifically relates to revenue recognition for activity fee income earned on CRB deposits held at PCCU. This weakness has been remediated however sufficient time hasn’t passed for us to conclude that it is operating effectively. There remains a risk that our reported activity fee revenues may be misstated. A misstatement in this revenue category could adversely affect investor confidence in our financial reporting, attract SEC comment or inquiry, and impair our ability to file required periodic reports on a timely basis. See Part II, Item 9A., “Controls and Procedures.”

We have identified a material weakness in internal control over financial reporting related to our loan documentation and expected credit loss estimation process, which could result in a material misstatement of our financial statements.

During the fourth quarter of 2025, in connection with the Company’s initial recognition of an indemnification liability under the Second Amended CAA, management identified a material weakness in internal control over financial reporting. Specifically, for the first time, the Company was required to measure a stand-ready guarantee liability at fair value under ASC 460 and an expected credit loss liability under ASC 326-20. Both measurements depend on underlying loan documentation maintained as part of the Company’s credit administration responsibilities under the Second Amended CAA. During the audit, certain loan documentation used in connection with these measurements was found to be out of date or inconsistent with the terms of the underlying loans.

While management concluded that the indemnification and expected credit loss liabilities which together totaled approximately $3.1 million as of December 31, 2025 are fairly stated as of that date, the absence of a formalized loan documentation review and maintenance process represents a control deficiency. If not remediated, this deficiency could result in a material misstatement of the Company’s indemnification liability under ASC 460 or its expected credit loss liability under ASC 326-20 in future periods.

If our financial statements are not accurate, investors may not have a complete understanding of our operations. If we do not file financial statements on a timely basis as required by the SEC, we could face severe consequences. If we are unable to conclude that its internal control over financial reporting is effective, investors may lose confidence in the accuracy and completeness of our financial reports, the market price of our Common Stock could decline, and we could be subject to sanctions or investigations by the Nasdaq, the SEC or other regulatory authorities. Moreover, responding to such investigations are likely to consume a significant amount of our management resources and cause us to incur significant legal and accounting expenses. Failure to remedy any material weakness in internal control over financial reporting, or to maintain effective control systems, could also restrict our future access to the capital markets. This could result in an adverse reaction in the financial markets due to a loss of confidence in the reliability of our financial statements.

Our control over financial reporting will not prevent or detect all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud will be detected. We cannot assure you that the measures we have taken to date, or any measures we may take in the future, will be sufficient to avoid potential future material weaknesses. See Part II, Item 9A., “Controls and Procedures.”

Risks Related to Legal Proceedings and Regulatory Compliance

An adverse outcome in litigation to which we are or may become a party could materially and adversely affect us.

We are currently a party to a declaratory judgment action pending in a Denver County, Colorado District Court in connection with our acquisition of Rockview Digital Solutions, Inc. d/b/a Abaca (“Abaca”). We cannot predict the timing, outcome, or cost of this litigation. An adverse ruling could result in financial judgments against us, require us to alter our business practices, or damage our reputation. In addition to existing litigation, we may in the future become subject to other legal proceedings in the ordinary course of our business. The cost of defending any litigation, even if we are ultimately successful, could be significant and could divert management attention and resources from our core operations.

Changes in laws, regulations, or rules applicable to cannabis banking, financial services, or public company reporting could adversely affect our business and results of operations.

We operate at the intersection of cannabis regulation, financial services regulation, and public company reporting requirements, all of which are subject to change. Modifications to FinCEN guidance on cannabis banking, changes in SEC reporting requirements, updates to Nasdaq listing standards, or shifts in state cannabis regulations could require us to make significant operational or compliance changes, incur additional costs, or modify or discontinue certain services. The regulatory environment in which we operate is complex and evolving, and we may not be able to adapt quickly enough to avoid adverse consequences.

An interruption in, or breach of security of, our information systems could adversely affect us.

We operate a proprietary compliance technology platform that processes sensitive financial and regulatory compliance data for CRB clients and financial institutions. A cyberattack, data breach, ransomware incident, or systems failure affecting our platform, or the platforms or systems of CRB clients or other third parties we are engaged with, could expose us to significant legal liability, regulatory sanctions, reputational harm, and operational disruption. Recovery from a serious cybersecurity incident could be costly and time-consuming, and our insurance coverage for cyber-related losses may be insufficient to fully cover the resulting damages. Our ability to maintain the trust of our clients and financial institution partners depends on the security and reliability of our technology infrastructure. For information on our cybersecurity risk management, strategy and governance, see Part I, Item 1C., “Cybersecurity.”

We may suffer uninsured losses or losses in excess of our insurance limits.

We carry insurance intended to cover various business risks, but the specialized nature of our cannabis-adjacent business limits our access to certain commercial insurance products. Our insurance policies are subject to coverage exclusions, deductibles, and limits that may be insufficient to fully compensate us for significant losses. In particular, losses arising from indemnification obligations under the Second Amended CAA, professional liability, cyber incidents, or regulatory actions may not be fully covered by our existing policies. Significant uninsured losses could materially impair our financial condition and our ability to continue operating.

Risks Related to Our Securities

There can be no assurance that we will be able to comply with the continued listing standards of Nasdaq.

Nasdaq requires that the trading price of its listed stocks remain above $1.00 in order for stock to remain listed. If a listed stock trades below $1.00 for more than 30 consecutive trading days, then it is subject to delisting from the Nasdaq. In addition, to maintain a listing on Nasdaq, we must satisfy minimum financial and other continued listing requirements and standards, including those regarding director independence and independent committee requirements, minimum stockholders’ equity, and certain corporate governance requirements. If we are unable to satisfy these requirements or standards, we could be subject to delisting, which would have a negative effect on the price of our Common Stock and would impair your ability to sell or purchase our Common Stock when you wish to do so. In the event of a delisting, we would expect to take actions to restore our compliance with the listing requirements, but we can provide no assurance that any such action taken by us would allow our Common Stock to become listed again, stabilize the market price or improve the liquidity of our Common Stock, prevent our Common Stock from dropping below the minimum bid price requirement, or prevent future non-compliance with the listing requirements.

The market for our securities has been volatile and may continue to be volatile, which would adversely affect the liquidity and price of our securities.

The price of our securities may fluctuate significantly due to the market’s reaction to sales of shares of Common Stock, including those issued to the holders of our convertible preferred stock upon the conversion thereof, and to general market and economic conditions. An active trading market for our securities may never develop or, if developed, it may not be sustained. In addition, the price of our securities can vary due to general economic conditions and forecasts, our general business condition and the release of our financial reports. Additionally, if our securities become delisted from Nasdaq for any reason, and are quoted on the Over-the-Counter Markets, an inter-dealer automated quotation system for equity securities that is not a national securities exchange, the liquidity and price of our securities may be more limited than if we were quoted or listed on Nasdaq or another national securities exchange. You may be unable to sell your securities unless a market can be established or sustained.

The Company may issue additional shares of common or preferred stock under the Amended and Restated - 2022 Equity Incentive Plan (the “Equity Incentive Plan” or the “Plan”) or otherwise, any one of which would dilute the interest of the Company’s stockholders and likely present other risks.

The Company’s Second Amended and Restated Certificate of Incorporation authorizes the issuance of up to 1,000,000,000 shares of Common Stock and 1,250,000 shares of preferred stock, par value $0.0001 per share. There are currently 995,494,515 unissued shares of Common Stock available for issuance, which amount does not take into account shares reserved for issuance upon exercise of outstanding warrants and stock options. As of April 10, 2026, there were 30,808 shares of Common Stock, 111 shares of Series A Convertible Preferred Stock (“Series A Preferred Stock”) and 31,052 shares of Series B Preferred Stock issued and outstanding and an aggregate of 2,601,374 warrants outstanding. The Purchase Agreement permits the issuance of certain securities, including Common Stock, options and other equity awards, under the Equity Incentive Plan. The Company may issue additional shares of common or preferred stock to under the Equity Incentive Plan or as needed for working capital or other purposes.

The issuance of additional shares of common or preferred stock:

• may significantly dilute the equity interest of existing investors;
• may subordinate the rights of holders of Common Stock if preferred stock is issued with rights senior to those afforded the Common Stock;
• could cause a change in control if a substantial number of shares of Common Stock is issued, which may affect, among other things, the Company’s ability to use its net operating loss carry forwards, if any, and could result in the resignation or removal of the Company’s present officers and directors; and
• may adversely affect prevailing market prices for the Common Stock.

Our operating results may fluctuate significantly and could fall below the expectations of securities analysts and investors due to seasonality and other factors, some of which are beyond our control, resulting in a decline in our stock price.

• Our operating results may fluctuate significantly because of several factors, including:
• labor availability and costs for hourly and management personnel;
• profitability of our services, especially in new markets and due to seasonal fluctuations;
• changes in interest rates;
• macroeconomic conditions, both nationally and locally;
• negative publicity relating to products we serve;
• changes in consumer preferences and competitive conditions;
• expansion to new markets; and
• fluctuations in commodity prices.

If securities or industry analysts do not publish or cease publishing research or reports about the Company, its business, or its market, or if they change their recommendations regarding our Common Stock adversely, then the price and trading volume of the Common Stock could decline.

The trading market for our Common Stock may be influenced by the research and reports that industry or securities analysts may publish about us, our business, our market, or our competitors. If any of the analysts who may cover the Company change their recommendation regarding our stock adversely, or provide more favorable relative recommendations about our competitors, the price of our Common Stock would likely decline. If any analyst who may cover the Company were to cease coverage of us or fail to regularly publish reports on it, we could lose visibility in the financial markets, which could cause the stock price or trading volume of our Common Stock to decline.

We may be unable to obtain additional financing to fund our operations and growth.

We may require financing to fund our operations or growth in future periods. The failure to secure additional financing could have a material adverse effect on the continued development or growth of the Company. Except as otherwise provided for in the ELOC, none of our officers, directors or stockholders is required to provide any financing to us.

Anti-takeover provisions contained in our Second Amended and Restated Certificate of Incorporation and Bylaws, as well as provisions of Delaware law, could impair a takeover attempt, which could limit the price investors might be willing to pay in the future for our Common Stock.

Our Second Amended and Restated Certificate of Incorporation contains provisions that may discourage unsolicited takeover proposals that stockholders may consider to be in their best interests. We are also subject to anti-takeover provisions under Delaware law, which could delay or prevent a change of control. Together, these provisions may make more difficult the removal of management and may discourage transactions that otherwise could involve payment of a premium over prevailing market prices for our securities. These provisions include:

• a prohibition on stockholder action by written consent, which forces stockholder action to be taken at an annual or special meeting of our stockholders;
• a denial of the right of stockholders to call a special meeting;
• a vote of 66 2/3% required to approve certain amendments to the Second Amended and Restated Certificate of Incorporation and the Bylaws; and
• the designation of Delaware as the exclusive forum for certain disputes.

Our Second Amended and Restated Certificate of Incorporation provides that the Court of Chancery of the State of Delaware will be the sole and exclusive forum for certain stockholder litigation matters, which could limit our stockholder’s ability to obtain a favorable judicial forum for disputes with us or our directors, officers, employees or stockholders.

Our Second Amended and Restated Certificate of Incorporation provides, to the fullest extent permitted by law, that internal corporate claims may be brought only in the Court of Chancery in the State of Delaware (or, if the Court of Chancery does not have, or declines to accept, jurisdiction, another state court or a federal court located within the State of Delaware). In addition, our Second Amended and Restated Certificate of Incorporation provides that the federal district courts of the United States will be the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act. This forum selection provision does not apply to claims brought to enforce a duty or liability created by the Exchange Act. Any person or entity purchasing or otherwise acquiring or holding any interest in our stock shall be deemed to have notice of and consented to the forum provision in our Second Amended and Restated Certificate of Incorporation.

This choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or any of our directors, officers, other employees or stockholders, which may discourage lawsuits with respect to such claims. Alternatively, if a court were to find the choice of forum provision contained in our Second Amended and Restated Certificate of Incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could harm our business, operating results and financial condition. For example, under the Securities Act, federal courts have concurrent jurisdiction over all suits brought to enforce any duty or liability created by the Securities Act, and investors cannot waive compliance with the federal securities laws and the rules and regulations thereunder. Accordingly, there is uncertainty as to whether a court would enforce such a forum selection provision as written in connection with claims arising under the Securities Act.

The JOBS Act permits “emerging growth companies” like us to take advantage of certain exemptions from various reporting requirements applicable to other public companies that are not emerging growth companies.

We qualify as an “emerging growth company” as defined in Section 2(a)(19) of the Securities Act, as modified by the JOBS Act. As such, we take advantage of certain exemptions from various reporting requirements applicable to other public companies that are not emerging growth companies for as long as we continue to be an emerging growth company, including (i) the exemption from the auditor attestation requirements with respect to internal control over financial reporting under Section 404 of SOX, (ii) the exemptions from say-on-pay, say-on-frequency and say-on-golden parachute voting requirements and (iii) reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements. As a result, our stockholders may not have access to certain information they deem important. We will remain an emerging growth company until the earliest of (a) the last day of the fiscal year (1) following July 28, 2026, the fifth anniversary of our initial public offering (“IPO”), (2) in which we have total annual gross revenue of at least $1.07 billion or (3) in which we are deemed to be a large accelerated filer, which means the market value of our Common Stock, public warrants and public units that is held by non-affiliates exceeds $700 million as of the last business day of our prior second fiscal quarter, and (b) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period. We cannot predict if investors will find our Common Stock less attractive if we choose to rely on these exemptions. If some investors find our Common Stock less attractive as a result of any choices to reduce future disclosure, there may be a less active trading market for our Common Stock and the price of our Common Stock may be more volatile. The Company’s total revenue for the year ended December 31, 2024 was approximately $15.2 million. If the Company expands its business through acquisitions and/or grows revenue organically, we may cease to be an emerging growth company prior to December 31, 2026.

In addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the exemption from complying with new or revised accounting standards provided in Section 7(a)(2)(B) of the Securities Act as long as we are an emerging growth company. An emerging growth company can therefore delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies, but any such election to opt out is irrevocable. We have elected to avail ourselves of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, we, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of our consolidated financial statements with another public company that is neither an emerging growth company nor an emerging growth company that has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.

If some investors find our Common Stock less attractive as a result of the foregoing, there may be a less active trading market for our Common Stock and more stock price volatility.

The Certificate of Designation governing our Series B Preferred Stock contains covenants that may limit our business flexibility.

The Certificate of Designation governing our Series B Preferred Stock requires the consent or cooperation of the holders of Series B Preferred Stock for certain corporate actions. If we are unable to obtain such consent or cooperation, these provisions of the Certificate of Designation governing our Series B Preferred Stock could limit our business flexibility or our ability to take, or refrain from taking, certain actions that management may believe would be in the interest of the Company and its stockholders, which could adversely affect our business and results of operations.

Risk Management and Strategy

The Company has implemented a written information security program designed to address the confidentiality, integrity, and availability of information systems and the non-public personal information the Company holds on behalf of its clients and business partners. The program is designed to comply with applicable requirements under Regulation S-P and the Federal Trade Commission Safeguards Rule.

Program Components.

The Company’s cybersecurity risk management program includes the following key elements:

• Threat Detection and Response: The Company uses a combination of automated tools and manual procedures to detect, contain, and respond to cybersecurity threats, including malicious code detection, network monitoring, and security incident response protocols
• Vulnerability Management: The Company engages a third-party cybersecurity service provider it believes is qualified to conduct periodic vulnerability assessments, penetration testing, and risk evaluations of the Company’s information systems.
• Third-Party Vendor Risk Management: Before engaging service providers that will access, transmit, or store Company or client data, management performs due diligence to evaluate their cybersecurity practices. The Company seeks to engage vendors that maintain cybersecurity programs reasonably consistent with the Company’s own standards.
• Employee Training and Awareness: All officers and employees are subject to the Company’s information security policies and procedures and are required to participate in periodic cybersecurity education and awareness training.
• Integration with Enterprise Risk Management: The Company’s cybersecurity risk management program is integrated into its broader enterprise risk management framework and utilizes the same common reporting channels and governance processes and the broader framework.
• Third-Party Assessments. The Company engages an external cybersecurity services provider to assist in assessing and managing cybersecurity risks. This provider supports threat monitoring, incident response planning, and periodic assessments of the effectiveness of the Company’s security controls.
• Material Cybersecurity Incidents. To date, the Company has not experienced any cybersecurity incident that has materially affected, or is reasonably likely to materially affect, the Company’s business strategy, results of operations, or financial condition. However, we cannot guarantee that future incidents will not occur or will not be material. See Part I, Item 1A., “Risk Factors––Risks Related to Legal Proceedings and Regulatory Compliance––An interruption in, or breach of security of, our information systems could adversely affect us.”

Governance

Board Oversight

The Board of Directors recognizes that cybersecurity is an important component of the Company’s overall risk management framework. The Board has delegated primary oversight responsibility for cybersecurity risk to management, which periodically briefs the Board on the status of the cybersecurity program, material developments, and the threat environment. Management reviews and discusses with the Board the guidelines and policies with respect to risk assessment and risk management of cybersecurity and other relevant risks related to the Company’s information systems. The Board receives updates from management on cybersecurity matters as needed or when a significant incident or emerging risk warrants attention.

Management Responsibility

Day-to-day responsibility for the cybersecurity program is managed by Jeremy Robinson, the Company’s Vice President of Information Technology, who oversees the design, implementation, and maintenance of the Company’s information security program, including:

• Monitoring the prevention, detection, mitigation, and remediation of cybersecurity threats and incidents;
• Managing relationships with third-party cybersecurity service providers; and
• Reporting material cybersecurity threats or incidents to the Chief Executive Officer and, where appropriate, to the Board.

The Company believes that Mr. Robinson has developed relevant knowledge, skills, and experience in information technology and cybersecurity risk management through his career in the information technology sector, including his experience overseeing third-party vendors, evaluating security controls, and responding to information security risks. The Chief Executive Officer is responsible for ensuring that material cybersecurity matters are escalated to the Board in a timely manner, although Mr. Robinson may also report material cybersecurity threats or incidents to the Board.

Incident Response

The Company maintains cybersecurity incident response procedures that provide a framework for identifying, assessing, containing, and remediating cybersecurity incidents, including procedures for timely reporting to the Board and, where required, to regulators and affected individuals

The Company leases approximately 8,043 square feet of office space for its executive offices located in Golden, Colorado. Monthly rent is approximately $0.02 million, increasing annually to a maximum of $0.02 million per month for the final six months of the lease term. The lease expires June 30, 2029.

During the year ended December 31, 2025, the property owner of the Golden, Colorado facility became subject to a court-appointed receivership. Throughout the receivership period, the Company continued to occupy the premises and made all rental payments in accordance with the existing lease terms. During the fourth quarter of 2025, the receivership process concluded with the sale of the property to a new owner. The Company’s lease was assumed by the new property owner, and the lease continues in full force and effect under its existing terms and conditions. The sale and change in ownership did not result in a lease modification, reassignment, or early termination of the lease, and had no material impact on the Company’s operations or financial position. No impairment of the related right-of-use asset was identified, and no remeasurement of the lease liability was required under ASC 842.

The Company has no other material properties and does not own any real property.

SHF Holdings, Inc. v. Roda, Ellis, and Carroll (Denver District Court)

On October 17, 2024, the Company filed a complaint 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. The lawsuit arises from a dispute over the terms of the Company’s October 2022 acquisition of Abaca pursuant to a merger agreement that was subsequently amended in November 2022 and in October 2023 (the “Second Amendment”).

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

On November 21, 2024, at the Company’s request, the disputed merger payment of $3.0 million was deposited into the Denver County, Colorado District Court’s registry pending resolution of the dispute.

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

The case is currently in active discovery. A ruling on the summary judgement briefing is pending, and a court date is scheduled for May 2026.

Financial Exposure

The Company has assessed its potential exposure under ASC 450, see Note 20 Commitments and Contingencies. If the District Court upholds the Second Amendment, which the Company believes was validly executed and is binding, its cash obligation is limited to the $3.0 million already deposited in the District Court’s registry, with additional exposure limited primarily to legal fees. The Company currently considers an adverse outcome reasonably possible but not probable. Accordingly, no accrual has been recorded for this contingency beyond the $3.0 million already reflected in the financial statements. The estimated range of loss is $0 to $7.8 million. For additional details regarding this matter, please refer to Note 20 to the consolidated financial statements included in this Annual Report on Form 10-K, and to the Company’s Current Reports on Form 8-K filed with the SEC on October 18, 2024 and December 19, 2024.

Other Legal Matters

In addition to the foregoing, from time to time we may be party to various legal proceedings and claims arising in the ordinary course of business. These may include disputes relating to the ownership of funds in particular accounts, the collection of delinquent accounts, credit relationships, challenges to security interests in collateral, and foreclosure matters incidental to our regular business activities.

We assess our legal liabilities and contingencies at least quarterly using the most recently available information, advice of legal counsel, and applicable accounting guidance under ASC Topic 450. Where a loss is probable and can be reasonably estimated, we record a reserve in our consolidated financial statements. These reserves are adjusted each quarter to reflect relevant developments. Where a loss is not probable or cannot be reasonably estimated, we do not accrue a reserve.

Based on information currently available to us and the advice of counsel, we are not aware of any pending or threatened legal proceedings or claims, other than the matter described above, that we believe are likely to have, individually or in the aggregate, a material adverse effect on our business, financial position, results of operations, or cash flows. We note, however, that legal proceedings are inherently uncertain, and the ultimate resolution of any matter could differ from our current assessments. An unfavorable outcome in one or more matters, depending on its magnitude, could be material to our financial results for a particular period.

References in this section to “we,” “us,” “our,” “SHF,” or the “Company” refer to SHF Holdings, Inc. References to “management” refer to our officers and Board of Directors. The following discussion and analysis of our financial performance and results of operations should be read in conjunction with our consolidated financial statements and the notes to those financial statements included elsewhere in this Form 10-K. 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.

Overview

The Company was founded in 2015 by PCCU and is headquartered in Golden, Colorado. We operate a proprietary compliance technology platform that enables financial institutions to provide banking and lending services to CRBs operating legally under applicable state law.

Because cannabis remains a federally controlled substance under the CSA, most financial institutions have historically been unwilling to serve CRBs, creating significant demand for the compliance infrastructure and risk management services we provide. We are not a bank or credit union and do not hold customer deposits. Instead, we provide compliance monitoring, onboarding, and reporting services that allow our financial institution clients to accept and maintain CRB deposit accounts in a manner consistent with BSA requirements, FinCEN guidance, and applicable anti-money laundering regulations.

Through our financial institution clients, we facilitate access to business checking and savings accounts, cash management, commercial lending, remote deposit, ACH payments, wire transfers, and courier services through third-party relationships. By enabling CRBs to deposit cash receipts through regulated financial institutions, our platform helps to reduce the safety risks associated with high cash volumes and gives CRBs access to financial tools that help them operate more efficiently. In select markets, we also license our Program to other financial institutions, providing them KYC due diligence tools, compliance monitoring, program management support, and regulatory exam assistance.

We generate revenue primarily through three streams: account fee income based on the number of active accounts and the size of deposit balances in such accounts, loan program income (formerly loan interest income) on CRBs loans we source and service on behalf of our financial institution clients, and investment income earned on CRB-related deposits held at those institutions. Since 2015, the Company has assisted in the processing of more than $35.4 billion in cannabis-related depository funds and has supported its financial institution clients through more than 25 state and federal banking examinations.

Relationship with PCCU

PCCU is our primary financial institution client and the source of a significant majority of our revenue. This relationship is governed by the Second Amended CAA, which replaced the First Amended CAA as of October 1, 2025.

The First Amended CAA introduced several significant changes to the CAA, including (i) the elimination of the Company’s indemnification obligations for loan-related losses, (ii) a reduction in the Company’s loan program income share to approximately 35% to reflect the incremental risk absorbed by PCCU in connection with the elimination of our indemnification obligations, (iii) the replacement of a multiple per-account fee structure with a single asset hosting fee equal to 1.00% of average daily CRB deposit balances that increased to 1.30% in the event balances exceeded $130 million, and (iv) us receiving 100% of investment income on CRB deposits.

The Second Amended CAA fundamentally restructured the economics of the PCCU relationship. The primary changes were that (i) the Company’s share of loan program income increased from approximately 35% to up to 65%, reflecting the completion the September 2025 Recapitalization; (ii) the Company now receives up to 65% of loan program income generated by PCCU’s CRB loan portfolio in exchange for being obligated to indemnify PCCU for up to 65% of net losses of a default on any loan covered by the Second Amended CAA, with no contractual cap on total exposure; and (iii) the asset hosting fee structure transitioned from a flat rate to a tiered marginal rate schedule based on average daily deposit balances, with rates ranging from 0.50% on the first $25 million to 1.25% on balances above $125 million, resulting in estimated annual savings of approximately $0.3 million compared to the rates contained in the First Amended CAA. See Part I, Item 1., “Business––Recent Developments––September 2025 Recapitalization.”

The concentration of our business with PCCU and the re-assumption of the indemnification obligation each represent material risks to the Company. Any loss of or material adverse change to the PCCU relationship, or any significant loan defaults in the CRB portfolio for which we are required to fund indemnification payments, could have a material adverse impact on our liquidity, financial condition, and results of operations. See “––Related Party Relationship with PCCU” as well as Part I, Item 1A., “Risk Factors––Risks Related to the Second Amended CAA” and Part III, Item 13., Certain Relationships and Related Party Transactions.”

Year Ended December 31, 2025 Performance Summary

Total revenue for the year ended December 31, 2025 was $7.7 million, a decrease of approximately 49.7% compared to $15.2 million for the year ended December 31, 2024.

The decline was primarily driven by a 63% reduction in loan program income resulting from revised interest allocation provisions under the First Amended CAA. This decrease was partially offset by approximately $0.4 million in incremental loan program income recognized following the execution of the Second Amended CAA, which had a retroactive effective date of October 1, 2025. Investment income also decreased by 45%, reflecting declining balances, lower prevailing interest rates that ranged from 3.65% to 4.40% in 2025 versus 4.40% to 5.40% in 2024 and the implementation of an interest-bearing deposit program for customers. Additionally, account fee income declined by 39%, which was attributable to a reduction in the number of active accounts following the conclusion of our relationship with Five Star Bank, as well as lower fees associated with merchant services.

Total operating expenses decreased by $9.3 million, or 42%, to $13.1 million for the year ended 2025, compared to $22.3 million in fiscal year 2024, due to the absence of $9.1 million in goodwill and intangible asset impairment charges recorded in 2024 and from ongoing cost reduction actions including workforce restructuring and reduced overhead. The Company reported a net loss of $2.2 million for the year ended December 31, 2025, compared to net loss of $48.3 million in year 2024. The net loss in 2024 was significantly influenced by a large, non-recurring deferred tax asset valuation adjustment of $43.9 million. Excluding that item, the underlying operating performance declined year-over-year consistent with the revenue trends described above.

Material Weaknesses in Internal Controls

Management identified material weaknesses in the Company’s internal control over financial reporting as of December 31, 2024. These weaknesses primarily related to the Company’s application of U.S. generally accepted accounting principles (“GAAP”) to complex transactions, including revenue recognition, accounting for financial instruments, forward purchase arrangements, and stock-based compensation, as well as deficiencies in the going concern evaluation process and information technology access controls. The Company has implemented a remediation plan, including hiring new senior financial leadership with public company experience, engaging external technical accounting advisors, implementing enhanced financial statement review procedures, and upgrading IT access controls.

As of December 31, 2025, management believes these remediation actions have addressed all previously identified material weaknesses; however, a material weakness was identified during the fourth quarter of 2025 related to the Company’s loan documentation and credit loss estimation process.

Additionally, while the material weakness related to the completeness and accuracy of account activity fee income has been remediated, sufficient time has not elapsed to conclude that the related controls are operating effectively. See “Internal Control Over Financial Reporting” below for further discussion.

Industry and Regulatory Environment

Cannabis remains a Schedule I controlled substance under federal law, which creates ongoing legal and compliance risks for us and for the financial institutions we serve. Proposed federal legislation, including the SAFER Banking Act, could expand the availability of banking services to CRBs and increase competition in our market. Conversely, changes in federal or state enforcement priorities could adversely affect our clients and, in turn, our business. We monitor legislative and regulatory developments closely, as they are a primary driver of both the demand for, and the risks associated with our services. See Part I, Item 1., “Business––Industry Overview” for further discussion of the current and evolving industry and regulatory landscape.

Key Metrics

In addition to the measures presented in our consolidated financial statements, management regularly monitors certain operational and non-GAAP financial measures to evaluate business performance. These metrics are described below.

Non-GAAP Financial Measures

In addition to financial measures prepared in accordance with GAAP, this Form 10-K contains non-GAAP financial measures that management believes are useful in understanding our results of operations and financial position. For each non-GAAP measure presented, we have provided a reconciliation to the most directly comparable GAAP financial measure.

Earnings Before Interest Taxes Depreciation and Amortization (EBITDA) and Adjusted EBITDA

“EBITDA” is defined as net income (loss) before interest expense, income tax expense (benefit), and depreciation and amortization. “Adjusted EBITDA” is further adjusted to exclude non-cash, unusual, and infrequent items that management does not consider reflective of the Company’s core operating performance.

We present EBITDA and Adjusted EBITDA because management uses these measures to evaluate operating performance, develop forward-looking operating plans, and make strategic decisions regarding resource allocation. We believe these measures provide useful supplemental information to investors evaluating our results in the same manner as management.

These measures have material limitations as analytical tools and should not be considered in isolation or as a substitute for analysis of our GAAP results. Specifically, although depreciation and amortization are non-cash charges, the underlying assets may require future replacement and neither EBITDA nor Adjusted EBITDA reflects the associated capital expenditure requirements. In addition, neither measure reflects changes in working capital needs or tax payments that may reduce cash available to the Company. Accordingly, these measures should be considered alongside net income (loss) and other GAAP results.

A reconciliation of net (loss) income to EBITDA and Adjusted EBITDA is as follows:

Discussion of Adjusted EBITDA Results

For the year ended December 31, 2025, EBITDA was $(1.5) million, compared to $(3.2) million for the year ended December 31, 2024. Adjusted EBITDA was $(3.9) million and $2.9 million for the years ended December 31, 2025 and December 31, 2024, respectively, a decline of $6.7 million. The decline was driven by three primary factors, each of which is directly connected to structural changes in the Company’s revenue arrangements and market conditions, rather than deterioration in the underlying business operations of the Company.

The most significant factor was the First Amended CAA. This agreement made two economically material changes to the Company’s revenue model.

• First, it reduced the Company’s share of loan program income from substantially all of the interest earned on the CRB loan portfolio to approximately 35%, with PCCU retaining the remainder to compensate for their absorption of the credit risk that the Company had previously indemnified them against. This structural reduction in loan program income accounted for the majority of the year-over-year revenue decline.
• Second, the First Amended CAA replaced the prior per-account fee structure with an asset hosting fee equal to 1.00% of average daily CRB deposit balances, which resulted in higher hosting costs relative to the prior structure.

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Together, these two changes under the First Amended CAA represented the primary explanation for the decline in Adjusted EBITDA and should be understood as a deliberate restructuring of the economic relationship with PCCU rather than an operational shortfall. The revenue impact of these reductions was partially offset in the fourth quarter of 2025 by the Second Amended CAA, which increased the Company’s share of loan program income from approximately 35% up to 65% and has been recognized as a Type 1 subsequent event under ASC 855.

The second factor was a decline in investment income. The Federal Reserve reduced its IORB rate multiple times during 2024 and 2025, from 5.40% at the start of 2024 to 3.65% by the end of 2025. Because the Company’s investment income is directly tied to the IORB rate applied to CRB deposit balances held at PCCU, these rate reductions directly generated lower investment income. This decline was compounded by the full-year impact in 2025 of the Company’s money market account program, introduced in 2024, under which the Company effectively shares a portion of the IORB rate with CRB clients. Although this arrangement improved client retention and deposit growth, it did further reduce the Company’s net investment margin.

The third factor was a reduction in account fee income primarily driven by a decline in the weighted average fee per account during the year. This decline was driven by a shift in the client portfolio to newer accounts that generate fees at a lower rate given either lower initial balances, or large balances across multiple accounts.

Management has identified three primary causes that it believes elevated attrition in 2025.

1) A portion of the attrition reflected industry-level dynamics, including consolidation among cannabis operators and business closures driven by ongoing market pressures in certain state markets, all of which are outside of the Company’s control.

2) Competitive pricing pressure from other cannabis banking providers.

3) More stringent loan underwriting and approval standards, including enhanced collateral requirements and longer processing timelines through PCCU’s loan committee, were implemented by PCCU. These changes reduced the Company’s ability to offer CRB clients competitive lending terms and timely access to credit, both of which are key factors in client retention and acquisition. The resulting decline in loan origination activity contributed to elevated client attrition during this period. The Second Amended CAA increased the Company’s loan program income share to up to 65%, which management believes will support improved loan production and client retention going forward

EBITDA was also impacted by approximately $0.5 million in lost income from a strategic merchant services partner that renegotiated its revenue-sharing arrangement such that it resulted in less favorable terms for the Company in 2025. This is a discrete, identifiable reduction that management does not expect to recur at the same magnitude going forward.

Management’s focus for 2026 is on improving client retention through the Company’s expanding lending capability, enhanced client service technology, and continued new account development driven by new marketing and customer acquisition processes.

The significant non-cash and non-recurring items excluded from Adjusted EBITDA in 2025 include a $3.3 million gain on extinguishment of the FPA, a $1.0 million charge for costs incurred in connection with the September 2025 Recapitalization, a $1.5 million non-cash stock-based compensation charge, and a $1.3 million non-cash gain from the change in fair value of warrant and forward purchase derivative liabilities.

For the year ended December 31, 2024, GAAP net loss figure of $48.3 million in the reconciliation above reflects the impact of significant non-recurring items, including a large deferred tax valuation recognition and subsequent write-off. Management believes that for the year ended December 31, 2024 Adjusted EBITDA of $2.9 million is the more relevant basis for comparison, as it reflects the operating performance of the business under the CAA structure before the entrance into the First Amended CAA.

Other Metrics

Management monitors the following operational metrics to assess the health and trajectory of the core banking services business.

Total account balances, number of accounts and average account balances

Our ability to generate account fee income and investment income is directly tied to the number of active CRB accounts we manage and the total deposit balances maintained at our financial institution clients. We monitor account activity including daily deposits, withdrawals, and ending balances on an ongoing basis. Average account balances represent the average aggregate ending balance of onboarded and monitored CRB deposits held at financial institution clients over the revenue generating period. at period end. Average account balance is total account balances divided by total active accounts at period end. Trailing 14-day average balances represent the aggregate ending balance of onboarded and monitored CRB deposits held at financial institution clients over the 14 calendar days at the period end and represent a period end balance that smooths our clients’ two-week payroll cycles.

Account Fees per Average Active Account

Our fee income is generated from active accounts and account-level transaction activity. We track account openings and closings on a daily, weekly, and monthly basis and monitor account fees per average active account as an indicator of pricing efficiency and revenue quality.

(1) For the year ended December 31, 2025, represents the average deposit balance over the year; For the year ended December 31, 2024 represents the average of monthly ending account balances. This represents the average balance for the relevant revenue generating period.

(2) Represents the average balance for the 14 calendar days ending on December 31, which represents a period end balance that smooths our clients’ two-week payroll cycles.

(3) Reported account activity fee revenue

(4) Represents the average of monthly ending active accounts

(5) Refer to the below section – Discussion of Results of our Operations for additional discussion of trends.

Average active accounts increased by 16 or 2.1% in 2025, and the accounts lost carried higher average balances than the accounts won, resulting in a decline in average account balance and a net decline in account fee revenue despite positive account growth. Management’s primary retention and growth initiatives for 2026 are described in the section above.

Components of our Results of Operations

Revenue

The Company generates revenue through three primary streams. Account fee income consists of fees charged to financial institution clients based on the number of active CRB accounts managed, account-level transaction activity, and deposit balances. These fees compensate the Company for providing BSA compliance monitoring, onboarding, account management, and related regulatory reporting services. Loan program income represents the Company’s contractual share of interest earned on CRB loans originated and serviced by the Company on behalf of its financial institution clients, primarily PCCU. The Company’s share of loan program income is currently determined in accordance with the Second Amended CAA. Investment income represents interest earned on CRB deposit balances held at financial institution clients and is based on the prevailing market rates applied to those balances. In addition, the Company earns fees from licensing its proprietary Program to other financial institutions and from ancillary services provided to businesses serving the cannabis industry.

Operating Expenses

Operating expenses consist of compensation and employee benefits, professional services, general and administrative expenses, rent expense, and provision (benefit) for credit losses.

• Compensation and employee benefits consist of employee wages, payroll taxes, employee benefits, and non-cash stock-based compensation. Stock-based compensation has increasingly been used as a component of total compensation to preserve cash and align employee and consultant incentives with the performance of the Common Stock.
• Professional services consist of legal fees, audit and accounting fees, general consulting fees, and board-related fees. Legal fees include both ongoing corporate legal services and costs associated with the Company’s active litigation matters. Professional services expenses increased materially in 2025 primarily due to legal fees associated with the Abaca litigation described in “Litigation” below, as well as costs incurred in connection with the September 2025 Recapitalization.
• General and administrative expenses include the asset hosting fee paid to PCCU under the First Amended CAA or the Second Amended CAA, as applicable, investment hosting fees, bank sharing fees paid to financial institution clients, insurance, advertising and marketing, travel and entertainment, and other office and operating expenses. The asset hosting fee represents consideration paid to PCCU for access to its banking platform, regulated deposit infrastructure, and bank charter and is the largest component of general and administrative expenses. See “Related Party Relationships.”
• Rent expense reflects the cost of the Company’s corporate office. The Company closed its Arkansas office during 2025, thereby reducing its ongoing rent obligations.
• Provision (benefit) for credit losses reflects the Company’s estimated losses on loans it is obligated to indemnify. Under the Second Amended CAA, we receive up to 65% of loan program income generated by PCCU’s CRB loan portfolio. In exchange, we are obligated to indemnify PCCU for up to 65% of net losses of a default on any loan covered by the Second Amended CAA. This obligation has no maximum dollar limit and covers principal, accrued interest, fees, legal costs, collection costs, and collateral disposition costs, net of any recoveries. Because the Company and PCCU reached agreement on the material economic terms of the Second Amended CAA on or about October 1, 2025, and the written agreement was formally executed on February 4, 2026, with the intervening period involving only procedural and documentation matters, the Company has given effect to the Second Amended CAA from October 1, 2025 in accordance with ASC 606-10-25-10 through 25-13. Accordingly, its financial statement impact is reflected in the Company’s consolidated financial statements for the year ended December 31, 2025. See “Related Party Relationships” and Note 10 to the Company’s consolidated financial statements in this Form 10-K for further detail.

Discussion of our Results of Operations -2025 Compared to 2024 (Year Ended December 31)

Revenue

Account fee income

Account fee income decreased by $2.5 million, or 38.5%, for the year ended December 31, 2025 compared to the year ended December 31, 2024. The decline was driven by following factors.

• During 2025 the Company had limited lending capacity available through PCCU under the First Amended CAA. Access to loans is a meaningful factor in client retention, and this constraint directly contributed to client attrition during the affected period. This attrition was further compounded by broader cannabis industry pressures, including operator consolidation and business closures in certain state markets, which resulted in additional account losses that were partially offset by 227 new account openings during the year. In aggregate, client attrition and the reduction in average fees collected from PCCU-hosted clients accounted for approximately $1.4 million of the year-over-year decline.
• The termination of the Company’s banking relationship with Five Star Bank in the fourth quarter of 2024. This reduced fee income by approximately $0.5 million during 2025.
• A strategic merchant services partner renegotiated its revenue-sharing arrangement on less favorable terms during 2025, reducing account fee income by approximately $0.5 million compared to the prior year.

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Investment income

Investment income represents interest earned on net investable CRB deposit balances held at our partner financial institutions. The rate of return on these balances is directly benchmarked to the Interest on Reserve Balances (“IORB”) rate published by the Federal Reserve Bank of Kansas City. Under our agreements, investment income is calculated daily on net investable CRB deposit balances and paid to the Company monthly in arrears.

For the year ended December 31, 2025, total investment income was $1.2 million, compared to $2.1 million for the year ended December 31, 2024, a decrease of $0.9 million, or 44.8%. The year-over-year decline was primarily driven by four factors:

1) Decline in IORB rates. The IORB rate at the beginning of 2025 was 4.40%, which already reflected three rate reductions totaling 100 basis points that were enacted by the Federal Reserve in the second half of 2024. During 2025, the Federal Reserve further reduced the IORB rate by 25 basis points effective September 2025, and by an additional 25 basis points effective December 2025, which brought the IORB rate to 3.65% at year-end. In total, the IORB rate declined by 75 basis points during the 2025 fiscal year, compressing the yield earned on net investable CRB deposit balances throughout the year and directly reducing investment income relative to 2024, when the IORB rate averaged approximately 5.10% across the full year.

2) Launch of interest-bearing money market accounts. In the first quarter of 2025, the Company launched interest-bearing money market accounts for CRB clients. While this product enhances the Company’s competitive deposit offerings, balances held in money market accounts generate interest income that is credited directly to clients rather than recognized as investment income by the Company, which reduced the net investable deposit base upon which the Company earns IORB-benchmarked investment income.

3) Decline in average daily deposit balances. Average daily CRB deposit balances declined during 2025 compared to 2024, which reduced the principal base upon which investment income is earned. As discussed in “Discussion of Adjusted EBITDA Results” above, Management has identified three primary causes of the elevated client attrition and deposit outflows experienced during 2025

4) The Company’s banking relationship with Five Star Bank was terminated in 2024. Five Star Bank contributed $0.2 million to investment income in 2024, which is not material in 2025 results, representing an incremental headwind in the year-over-year comparison.

Loan program income

In 2025, loan program income was generated primarily from CRBs loans originated by PCCU and underwritten and serviced by the Company under the First Amended CAA.

For the year ended December 31, 2025, the Company serviced twenty-two loans, compared to twenty-four loans for the year ended December 31, 2024. For the year ended December 31, 2025, the Company recognized $2.5 million loan program income attributable to PCCU activities, compared to $6.3 million for the year ended December 31, 2024. The decrease in loan program income was driven by three primary factors.

1) The First Amended CAA became effective January 1, 2025, pursuant to which the Company received approximately 35% of loan program income generated by the applicable loans, with the remainder retained by PCCU. This replaced the prior structure in effect in 2024, under which the Company received 100% of loan program income and paid PCCU a servicing fee of 0.25% to 0.35% per annum. This structural change reduced the Company’s effective yield on the portfolio in 2025 relative to the prior year. Due to the Second Amended CAA, the Company’s share of loan program income increased to up to 65%. The Second Amended CAA constitutes a Type 1 subsequent event, and as such the Company recognized approximately $0.4 million in incremental loan program income attributable to the fourth quarter of 2025, partially offsetting the decline in loan program income resulting from the reduced allocation under the First Amended CAA.

2) The composition of the loan portfolio has not changed materially during 2025. As of December 31, 2025, the portfolio consisted of twenty-two loans with an aggregate outstanding balance of $52.1 million, compared to twenty-four loans with an aggregate outstanding balance of $56.8 million as of December 31, 2024.

3) The weighted average interest rate on the loan portfolio was approximately 10.6% as of December 31, 2025, compared to approximately 10.2% as of December 31, 2024. All loans in the portfolio carry fixed interest rates. The increase in the weighted average rate reflects changes in portfolio composition resulting from principal repayments on higher-risk rated loans.

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Operating expenses

Total operating expenses

Total operating expenses decreased by $9.3 million or 41.5%, to $13.1 million for the year ended December 31, 2025, from $22.3 for the year ended December 31, 2024. The decrease was driven primarily by the absence of non-cash impairment charges that were recognized in 2024, lower headcount-related costs, and reduced general and administrative expenses, partially offset by higher professional services costs associated with litigation and the September 2025 Recapitalization.

Compensation and employee benefits

Compensation and employee benefits decreased by $1.5 million, or 19.5%, to $6.3 million for the year ended December 31, 2025, from $7.8 million for the year ended December 31, 2024. The decrease reflects several deliberate cost-reduction actions taken during 2025, including a reduction in headcount as the Company continued to optimize its workforce, a reduction in the scope of employee bonus programs, and the termination of the Company’s matching contributions to its 401(k) plan. In addition, non-cash stock-based compensation expense decreased year over year. These decreases were partially offset by executive bonus compensation of approximately $0.5 million awarded during 2025, as well as a one-time settlement payment of approximately $0.3 million to a former employee, which was satisfied through a combination of cash and shares of the Company’s Common Stock. The Company has increasingly used equity-based compensation to preserve cash and align employee and consultant incentives with the performance of its Common Stock.

General and administrative expenses

General and administrative expenses decreased by $0.7 million, or 18.0%, to $3.3 million for the year ended December 31, 2025, from $4.0 million for the year ended December 31, 2024. The decrease was driven by several factors: (i) a decrease of approximately $0.7 million in depreciation and amortization expense as certain intangible assets became fully amortized in 2024; (ii) a reduction of approximately $0.07 million in bank-sharing fees paid to other financial-institution clients due to a lower number of active accounts; and (iii) a reduction in investment relations expense of approximately $0.12 million. These decreases were partially offset by an increase in hosting fees paid to PCCU, as the First Amended CAA resulted in an incremental cost of approximately $0.2 million after netting the savings from the elimination of investment-hosting and loan-services fees.

Subsequent to December 31, 2025, the Second Amended CAA replaced the flat 1.00% asset hosting fee rate with a tiered rate structure. Under the new structure, the rate ranges from 0.50% on the first $25 million of average daily balances to 1.25% on balances above $125 million. The new rates apply retroactively from October 1, 2025, which resulted in a reduction of approximately $0.06 million in asset hosting fee expense for the fourth quarter of 2025. This adjustment has been recognized in the fourth quarter of 2025 financial statements as a Type 1 subsequent event.

Impairment of goodwill and long-lived intangible assets

No impairment of goodwill and long-lived intangible assets charges were recorded during the year ended December 31, 2025. During the year ended December 31, 2024, the Company recognized impairment charges of $6.1 million related to goodwill and $3.1 million related to finite-lived intangible assets, each identified through the Company’s annual impairment assessment as of December 31, 2024. The absence of impairment charges in 2025 accounts for $9.1 million of the total year-over-year decrease in operating expenses.

Professional services

Professional services expenses increased by $0.8 million or 32.2%, to $3.3 million for the year ended December 31, 2025, from $2.5 million for the year ended December 31, 2024. The increase reflects a structural shift in how the Company sources and manages certain services, as well as a concentration of non-recurring costs associated with significant corporate events during 2025, partially offset by savings realized from the transition to an outsourced service model and lower ongoing audit fees following the completion of the Company’s auditor transition.

The most significant structural change in 2025 was the elimination of the Company’s internal legal team and the engagement of external general counsel and compliance service providers in its place. This transition reclassified costs previously reported within compensation and employee benefits into professional services and generated one-time transition costs during 2025. Notwithstanding those transition costs, the Company estimates that this change in structure produced annualized savings in excess of $0.3 million relative to the cost of maintaining an internal legal function, the benefit of which is expected to be fully reflected in future periods.

The increase in professional services expense was also attributable to the following during 2025:

• Legal fees associated with the shareholder litigation described in “Litigation” below;
• Costs incurred in connection with the resolution of employment matters with former employees;
• Advisory, legal, and other fees related to the September 2025 Recapitalization, including the cost of filing required registration statements, the cost of issuance of convertible notes and the solicitation of required shareholder votes;
• Fees incurred in connection with the transition to a new independent registered public accounting firm, including parallel engagement costs during the transition period; and
• Accounting and audit fees related to the restatement of the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2025, which was a non-recurring event.

In connection with the September 2025 Recapitalization, the Company issued 1,063 shares of Series B Preferred Stock and accompanying Series B Warrants to three independent service providers in exchange for a two-year service arrangement that run through September 30, 2027. This structure reduced the immediate cash cost of those services; however, under GAAP the equity instruments issued were recorded at fair value as a prepaid asset and are being amortized to professional services expense ratably over the two-year service term. The portion of amortization recognized during the year ended December 31, 2025, is included within professional services expense above. The unamortized balance as of December 31, 2025, is reflected as a $0.3 million prepaid asset on the consolidated balance sheet. See Note 7 to the consolidated financial statements for further detail. Partially offsetting these increases, the Company eliminated prior-year external counsel retainer arrangements that were no longer necessary following the outsourcing of its legal function and began to benefit from lower recurring audit and accounting fees following the completion of its auditor transition. The Company expects that, with the majority of these non-recurring items now behind it, ongoing professional services costs will decline in future periods relative to the elevated 2025 levels.

Rent expense

Rent expense decreased by $0.03 million, or 9.9%, to $0.2 million for the year ended December 31, 2025, from $0.3 million for the year ended December 31, 2024, primarily reflecting the closure of the Company’s Arkansas office during 2025.

Amortization of contract asset

The Company capitalized costs as a contract asset to secure the Second Amended CAA related to the (i) stand-ready guarantee liability and (ii) financial indemnification liability discussed in Note 8 to the Company’s consolidated financial statements in this Form 10-K. Amortization of contract costs was $0.1 million for the year ended December 31, 2025, compared to $0 for the year ended December 31, 2024. It represents the straight-line amortization of the cost to acquire a contract asset recognized as of October 1, 2025, the effective date.

Credit loss (benefit) expense

The Company recognized a credit benefit of $0.2 million for the year ended December 31, 2025, compared to a credit benefit of $1.4 million for the year ended December 31, 2024.

For the year ended December 31, 2024, the credit benefit resulted from the full release of the indemnification liability under the CAA. The First Amended CAA eliminated the Company’s obligation to indemnify PCCU for CRB loan losses, and accordingly, the previous indemnification liability was fully reversed.

For the year ended December 31, 2025, the Second Amended CAA, effective October 1, 2025, reinstated indemnification obligations, requiring the Company to cover up to 65% of PCCU CRB loan portfolio. The Company recorded a stand ready guarantee liability of $2.1 million under ASC 460 and a financial indemnification liability of $1.1 million under ASC 326, each with a corresponding contract asset.

In accordance with ASC 460, the liability is recognized on a straight line basis, based on a weighted-average remaining loan maturity of three years. The Company reduced the stand ready guarantee liability by $0.2 million and the consolidated statement of operation reflects $0.2 million as benefit in operating expense. The expected amortization per year is approximately $0.7 million in future periods, which will be reassessed annually.

Other Income (Expenses)

Total other income (expenses) for the year ended December 31, 2025, was $3.2 million, compared to total other expense of $2.6 million for the year ended December 31, 2024, an improvement of $0.5 million. The increase was primarily due to a $3.3 million gain on the extinguishment of the FPA Liability, which had been carried on the Company’s balance sheet at $7.3 million since December 31, 2022 and was settled through the issuance of Series B Preferred Stock and Series B Warrants rather than cash or Common Stock. The increase in other income is partially offset by costs incurred to secure financing and shift in the fair value of warrant liabilities. Each component is described below.

Change in Fair Value of Deferred Consideration

The contingent consideration payable to the former shareholders of Abaca was classified as a derivative liability under ASC 815 and remeasured at fair value at each reporting date, with changes recognized in earnings. The liability’s fair value was sensitive to the Company’s stock price, implied volatility, risk-free interest rates, and any amendments to the underlying arrangement.

For the year ended December 31, 2025, the Company recognized a gain of $0.08 million related to the decrease in the fair value of the deferred consideration, compared to a gain of $0.4 million for the year ended December 31, 2024. The gain in 2025 was primarily attributable to the decline in the Company’s stock price during 2025, which reduced the fair value of the third anniversary payment obligation prior to its extinguishment

The third anniversary payment of $1.5 million was settled in full on October 3, 2025, through the non-cash issuance of 37,517 shares of the Company’s Common Stock at the contractual floor value of $40.00 per share. As a result of this settlement, the deferred consideration liability was fully extinguished prior to December 31, 2025, and no balance remains on the consolidated balance sheet as of that date. The last fair value measurement of the liability occurred at the time of settlement in October 2025, at which point the Company’s stock price had declined from $9.00 per share as of December 31, 2024 to $6.90 per share on October 3, 2025. This non-cash settlement is reflected in the supplemental schedule of non-cash investing and financing activities in the consolidated statements of cash flows.

Interest Expense

Interest expense for the year ended December 31, 2025 consisted of (i) interest on the senior secured promissory note with PCCU (the “PCCU Note”) and (ii) non-cash interest expense related to the OID on the Notes. By comparison, interest expense for the year ended December 31, 2024 primarily reflected interest incurred on only the PCCU Note.

During 2024, the Company made $2.2 million in scheduled principal repayments on the PCCU Note, reducing the outstanding balance to approximately $11.0 million as of December 31, 2024. The Company made one additional scheduled principal payment in January 2025. In March 2025, the Company and PCCU amended the PCCU Note to convert it to an interest only structure for a two-year period and to extend the maturity date to October 2030. Following this amendment, the Company remained current on all required interest payments through the date of the September 2025 Recapitalization.

On September 30, 2025, in connection with the Company’s September 2025 Recapitalization, PCCU cancelled the PCCU Note in full pursuant to a Debt Cancellation Agreement (the “Debt Cancellation Agreement”). At the time of debt cancellation, the outstanding principal balance was approximately $10.7 million. In consideration for the cancellation, PCCU received 13,436 shares of Series B Preferred Stock and a Series B Warrant to purchase 865,200 shares of Common Stock. As a result, no balance remained outstanding under the PCCU Note as of December 31, 2025. See Note 11 to the Company’s consolidated financial statements in this Form 10-K for further details.

The year-over-year decrease in interest expense of $0.04 million was primarily attributable to a lower average principal balance on the PCCU Note during 2025 relative to 2024. This decrease was partially offset by approximately $0.1 million of non-cash interest expense recognized in connection with the OID on the Notes. These Notes were subsequently exchanged for Series B Preferred Stock and Series B Warrants in connection with the Exchange and Cancellation Agreements. See Note 11 to the Company’s consolidated financial statements in this Form 10-K for additional information.

Gain on Extinguishment of Debt

On June 16, 2022, the Company entered the FPA with Midtown, which subsequently assigned the FPA in part to Verdun and Vellar. The FPA was carried as a derivative liability on the Company’s balance sheet at a carrying value of $7.3 million as of the settlement date.

On September 30, 2025, the Company entered into Exchange and Cancellation Agreements with each of Midtown, Verdun, and Vellar under which each counterparty irrevocably cancelled, waived, and terminated all of its rights under the FPA. In full settlement of the FPA Liability, the Company issued an aggregate of 5,002 shares of Series B Preferred Stock and Series B Warrants to purchase 322,111 shares of Common Stock at an exercise price of $7.7644 per share. In February 2026, the Series B Preferred Stock and Series B Warrants’ exercise price was reduced to $1.5528.

The transaction was accounted for as an extinguishment of a liability under ASC 405-20. The equity instruments issued were measured at their fair value of $800 per unit, consistent with the price paid by unaffiliated third-party investors for identical securities on the same date. Because the aggregate fair value of the equity instruments issued was less than the carrying amount of the FPA Liability, the Company recognized a gain on extinguishment of $3.3 million, which is included in Other Income (Expense) for the year ended December 31, 2025.

In August and September 2025, the Company issued the Notes in the aggregate principal amount of $0.7 million, with a 20% OID, resulting in net proceeds of $0.6 million. The Notes did not bear stated interest and the OID represented the investors’ yield and was recognized as non-cash interest expense under ASC 835-30.

On September 30, 2025, the Notes were exchanged for Series B Preferred Stock and Series B Warrants at $800 per unit. The exchange was accounted for as an extinguishment of debt under ASC 470-50. To the extent the fair value of the equity instruments issued exceeded the carrying amount of the Notes at the time of settlement, the Company recognized a loss on extinguishment. For the year ended December 31, 2025, the Company recorded a net loss on extinguishment of debt of $0.003 million related to these convertible note exchanges.

Costs Incurred to Secure Financing

For the year ended December 31, 2025, the Company incurred $1.1 million in costs related to establishing its ELOC, of which $0.8 million was in the non-cash form of Series B Preferred shares issued as commitment consideration. These costs were expensed as incurred in accordance with ASC 505-10-45-2, as the ELOC does not qualify for deferral treatment under GAAP. There were no comparable costs during the year ended December 31, 2024.

Discount on Common Stock sold pursuant to the ELOC

For the year ended December 31, 2025, the Company drew on its ELOC, selling shares of Common Stock at a contractual 10% discount to the lowest intraday stock price on each draw date. This pricing discount, which represents a direct cost of accessing the facility, resulted in a non-cash charge of approximately $0.08 million recognized in the statement of operations for the year ended December 31, 2025. This expense reflects the difference between the fair market value of the shares issued on settlement date and the proceeds received by the Company under the ELOC.

Change in Fair Value of Warrant Liabilities

The Company has outstanding public warrants, private placement warrants, PIPE warrants, and Abaca warrants, each of which is accounted for as a derivative liability because the settlement of these instruments may be in cash or stock depending on conditions such as the Company’s stock price or registration status. Public warrants are remeasured at fair value using observable market prices (Level 1). Private placement warrants, PIPE warrants and Abaca warrants are remeasured using the Black-Scholes-Merton option pricing model (Level 3). Changes in fair value are recognized in earnings for each reporting period.

For the year ended December 31, 2025, the Company recognized a gain of $1.3 million on the change in fair value of warrant liabilities, compared to a loss of $2.8 million for the year ended December 31, 2024. The favorable change of $4.1 million was primarily driven by a reduction in the aggregate fair value of outstanding warrant liabilities, reflecting changes in the Company’s stock price and associated implied volatility during the year. As of December 31, 2025, all outstanding warrants were out of the money.

For the year ended December 31, 2024, the $2.8 million loss was attributable to increases in warrant liability fair values, driven by movements in the Company’s stock price relative to warrant exercise prices during that period.

Income tax (benefit) expense

Income tax (benefit)/expense for the year ended December 31, 2025 was $0.06 million, compared to $43.9 million for the year ended December 31, 2024. For the year ended December 31, 2024, income tax expense was primarily due to the recognition of a full valuation allowance against the Company’s net deferred tax assets. As of December 31, 2025 and December 31, 2024, the Company had net deferred tax assets of approximately $45.8 million and $44.4 million, respectively and a full valuation allowance has been recorded in each period.

The Company’s net operating loss (“NOL”) carryforwards are subject to limitation under Section 382 of the Internal Revenue Code of 1986, as amended. As of December 31, 2025, the Company had approximately $67.7 million of federal NOL carryforwards. For further detail, see Note 18 to the Company’s consolidated financial statements in this Form 10-K.

Financial Condition

Cash and cash equivalents

Cash and cash equivalents totaled $6.8 million and $2.3 million as of December 31, 2025 and 2024, respectively.

Cash flows

For the year ended December 31, 2025, the Company used $3.4 million of cash in operating activities. Operating cash flows for December 31, 2025 decreased from the prior year primarily due to the net loss of $2.2 million and changes to operating assets and liabilities that totaled $0.8 million, which were offset by $2.0 million of non-cash adjustments to reconcile net income to net cash provided by operating activities. For the year ended December 31, 2024, the Company generated approximately $0.4 million of cash from operating activities, including non-cash adjustments to reconcile net income to net cash provided by operating activities of $50.8 million that were offset by a net loss of $48.3 million and $2.0 million of changes to operating cash assets and liabilities.

For the year ended December 31, 2025, the Company generated cash from investing activities of approximately $0.4 million, primarily from the proceeds of a loan and from the sale of investment securities. For the year ended December 31, 2024, cash from investing activities of $0.01 million from the proceeds from a loan.

For the year ended December 31, 2025, the Company had generated $7.4 million of cash from financing activities. This primarily reflects proceeds of $0.6 million from the issuance of the Notes, $6.1 million of gross proceeds from the issuance of Series B Preferred Stock and Series B Warrants to purchase Common Stock, excluding $0.4 million offering cost, and $1.8 million from the sale of Common Stock under the ELOC. This was offset by the repayment of the PCCU Note totaling $0.3 million, $0.1 million repayment of a loan payable for insurance financing and $0.3 million from the redemption of Series B Preferred Stock. For the year ended December 31, 2024, the Company used $3.0 million to repay the PCCU Note.

Liquidity

Liquidity refers to our ability to meet anticipated cash demands, including servicing debt, funding operations, maintaining assets, and covering other routine business expenses. Our primary cash outflows include operating costs, general business expenditures, and, to a lesser extent, debt interest payments following the deferral of principal under the PCCU Note. The primary source of our liquidity is cash generated from operations. As of December 31, 2025, the Company does not have significant capital investment commitments.

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 doubt.

As of December 31, 2025, the Company has cash and cash equivalents of $6.8 million and net working capital of $5.7 million. The Company has incurred recurring losses from operations and experienced negative cash flows from operations, including an operating loss of $5.4 million and cash used in operating activities of $3.4 million for the year ended December 31, 2025. These conditions raise doubt about the Company’s ability to continue as a going concern for a period of at least twelve months from the date these consolidated financial statements are issued. As of December 31, 2025, management believes our cash and cash equivalents is sufficient enough to meet our financial obligations for the next twelve months.

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

Strengthened Revenue Profile. The Second Amended CAA increased the Company’s share of loan program income from approximately 35% to 65% of the PCCU’s loan portfolio. This agreement improves the recurring revenue profile of the Company’s core business on a prospective basis. Additionally, the Company is exploring strategic partnerships with other financial institutions.

Access to Additional Capital. The Company has entered into a $150 million Equity Line of Credit, providing contingent access to additional capital subject to customary conditions.

Expense Management. Management has identified and quantified specific, actionable cost reductions that are within its direct operational control and that it would implement should operating conditions deteriorate below base-case expectations.

Cash Flow Monitoring. Management maintains a 52-week rolling cash flow projection that tracks anticipated expenses, revenues, and ending cash balances against budget. Cash positions are reviewed on a bi-weekly basis to ensure the Company maintains adequate liquidity to fund operations.

Notwithstanding the measures described above, the Company continues to incur operating losses and negative cash flows from operations, and uncertainty remains as to whether these conditions will be fully resolved within the look-forward period. As a result, management has concluded that substantial doubt exists about the Company’s ability to continue as a going concern for a period of at least twelve months from the date these consolidated financial statements are issued.

The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. These financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Litigation

On October 17, 2024, the Company filed a complaint 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. The lawsuit arises from a dispute over the terms of the Company’s October 2022 acquisition of Abaca pursuant to a merger agreement that was subsequently amended in November 2022 and in October 2023 (the “Second Amendment”).

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

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

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

The case is currently in active discovery. A ruling on the summary judgement briefing is pending, and a court date is scheduled for May 2026.

See Part I, Item 3., “Legal Proceedings” and Note 20 to the Company’s consolidated financial statements in this Form 10-K for additional information.

Critical Accounting Estimates

Our consolidated financial statements and accompanying notes are prepared in accordance with GAAP. Preparing consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses, as well as disclosure of contingent assets and liabilities. An appreciation of our critical accounting policies is necessary to understand our financial results. In some cases, we could reasonably use different accounting policies and estimates, and changes in our estimates are reasonably likely to occur from period to period. Accordingly, actual results could differ materially from our estimates, and our financial condition or results of operations could be affected. We base our estimates on our experience and other assumptions that we believe are reasonable, and we evaluate these estimates on an ongoing basis. We refer to the following accounting estimates as critical accounting estimates, based on their importance to the financial reporting and potential for changes in future periods:

Revenue recognition

The Company recognizes revenue in accordance with ASC 606, Revenue from Contracts with Customers, by identifying contracts with customers, identifying distinct performance obligations, determining and allocating transaction prices, and recognizing revenue as each performance obligation is satisfied. A critical element of this process is the determination of whether the Company acts as a principal or agent (gross versus net revenue presentation) in each of its revenue streams.

The Company’s primary revenue streams are account fee income, loan program income, and investment income. Each stream involves contractual arrangements with PCCU. Accordingly, the terms of the Second Amended CAA are material to the Company’s revenue recognition policies and estimates. See “Relationship with PCCU.”

The Company’s revenue recognition process requires management to exercise judgment in three primary areas: determining the transaction price for account fee income, estimating the Company’s allocated share of loan program income under a variable yield formula, and determining average net daily deposit balances for investment income. Each involves assumptions that, if different, could materially affect reported revenue. Except for account fee income, where the Company acts as principal, the Company serves as an agent for loan program income and investment income. Because its primary role is to facilitate the contract with PCCU, the Company recognizes these revenues on a net basis.

Account Fee Income

Account fee income consists of fees charged to CRBs for account maintenance, transaction processing, compliance monitoring, and other ancillary services. Fees are recognized as services are performed. The Company presents this revenue on a gross basis because it bears primary responsibility for compliance monitoring, account management, and reporting, and retains sole discretion over fee pricing.

The key estimation challenge is the transaction price, which varies by account type, deposit balance tier, and customer activity. Management determines the appropriate fee tier each period and evaluates any adjustments for credits, waivers, or usage-based fluctuations. Following the revised fee schedule effective January 1, 2025, changes in customer mix and average deposit levels directly affect recognized revenue.

Loan Program Income

The Company earns income from CRB loans originated and funded by PCCU and primarily serviced by the Company. Revenue is recognized over the loan’s term as interest is earned, reflecting only the Company’s allocated share of net interest income. Management has concluded this arrangement is best characterized as a collaborative arrangement under ASC 808, given the bidirectional flow of consideration, shared credit risk, and the absence of a traditional customer-vendor relationship between the Company and PCCU. The timing and amount of income recognized are identical regardless of whether ASC 808 or ASC 606 governs how the Company accrues its allocated share monthly as earned.

Effective December 31, 2024, the Company’s allocated share of net interest income is determined under a loan yield allocation formula that combines the externally observable Constant Maturity U.S. Treasury Rate with a proprietary internal risk rating assigned to each loan. The risk rating is a management estimate that directly drives the income split between the Company and PCCU, and changes in risk ratings across the portfolio will increase or decrease the Company’s recognized share of interest income accordingly.

Investment Income

Investment income represents interest earned on CRB deposit balances held at PCCU at the IORB rate, classified as a return on a financial instrument under ASC 310 and outside the scope of ASC 606. Income is accrued monthly based on average net daily deposit balances and the prevailing IORB rate, both of which are externally determinable. To the extent ASC 606 were determined to apply, the recognition outcome would be identical, and accordingly no change in previously reported amounts would arise from this classification. Pursuant to the each of the First Amended CAA and the Second Amended CAA, the Company is entitled to 100% of this investment income, replacing the prior structure under which 25% was remitted to PCCU as an investment hosting fee. This change is a material factor in the comparability of investment income between 2024 and 2025.

Stock-Based Compensation

The Company grants stock options and restricted stock units (“RSUs”) to employees, directors, and consultants under the Plan, which was originally approved by stockholders on June 28, 2022. During 2025, the Plan was amended to provide that the total number of shares of Common Stock authorized for issuance under the Plan will automatically increase upon the occurrence of a Dilution Event (as defined in the Plan) and on the first trading day of each calendar year, beginning January 1, 2026, by the number of shares necessary to bring the total authorized shares under the Plan equal to fifteen percent (15%) of total outstanding shares of Common Stock as of the last day of the immediately preceding calendar year, subject to a maximum annual increase of 50,000 shares. The Company also filed a Registration Statement on Form S-8 during 2025 to register the shares of Common Stock issuable under the Plan, ensuring that shares delivered to grantees upon exercise or settlement of awards are freely tradeable. The Company has not issued stock appreciation rights, restricted stock, stock bonus awards, or performance compensation awards in the year ended December 31, 2025 and December 31, 2024. As of December 31, 2025, a total of 626,749 shares of Common Stock were authorized for issuance under the Plan, of which 78,799 shares remained available for future issuances.

The Company accounts for all equity-based awards under ASC 718, Compensation - Stock Compensation. Stock-based compensation is considered a critical accounting estimate because the fair value of option awards is determined at the grant date using valuation models and assumptions that are inherently uncertain. Changes in those assumptions particularly expected stock price volatility can materially affect the amount of compensation expense recognized over the requisite service period.

Stock Options

Stock options are granted to incentivize employee and director ownership of the Company’s Common Stock and to help align compensation with the long-term performance of the Company. Options generally have a 10-year contractual term and permit net-share settlement upon exercise. The exercise price, vesting schedule, and exercise period for each grant are determined by the Plan administrator at the time of grant.

The fair value of each option award is measured on the grant date using the Black-Scholes-Merton option valuation model. The key assumptions applied during the year ended December 31, 2025 were as follows:

Compensation cost for service-based options is recognized on a straight-line basis over the requisite service period. During 2025, the Company also granted performance-based stock options that vest upon the Company’s successful completion of an equity transaction generating proceeds in excess of $4.0 million. This performance condition is non-market-based as defined under ASC 718-10-20. Compensation cost for such performance-based awards is recognized only when it becomes probable that the performance condition will be achieved, with cumulative expense adjusted prospectively as management’s estimates evolve. Forfeitures are recognized as they occur. Changes in any of the valuation assumptions described above, or in management’s assessment of the probability of achieving a performance condition, could produce materially different compensation expense amounts in current and future reporting periods.

Restricted Stock Units

RSUs are valued at the closing market price of the Company’s Common Stock on the grant date. Compensation cost is recognized on a straight-line basis over the requisite service period. Because RSU fair value is based on an observable market price rather than a valuation model, estimation uncertainty is lower than for stock options. As of December 31, 2025, RSU activity under the Plan had substantially wound down, with no units remaining outstanding.

Plan Share Pool - Dilution Event and Annual Reset Provisions

The automatic share pool expansion mechanic introduced by the 2025 amendment to the Plan requires management to assess on a continuous basis whether a Dilution Event has occurred, which in turn determines the number of shares available for future grants and the scope of future equity compensation arrangements. An incorrect assessment of whether a Dilution Event has been triggered could affect the calculation of available shares and, indirectly, the trajectory of future compensation expense. The Company monitors its equity issuance activity on an ongoing basis to ensure compliance with the Plan’s terms.

Warrants Liability

The Company’s accounting for its outstanding warrant liabilities, comprised of public warrants, private placement warrants, PIPE warrants, and Abaca warrants, constitutes a critical accounting estimate because of the significant judgment and assumptions required in their valuation and the potential impact on our financial statements. These warrants are carried at fair value on a recurring basis, with changes in fair value recognized in the consolidated statements of operations each reporting period.

• For public warrants, the Company uses Level 1 inputs, relying on exchange-traded prices to determine fair value. This approach minimizes estimation uncertainty for this class of warrants.
• For private placement warrants and PIPE warrants, fair value is determined using the Black-Scholes-Merton option pricing model, which incorporates Level 3 unobservable inputs. Key assumptions include the expected volatility of the Company’s Common Stock, the exercise price of each warrant, the fair market value of the underlying Common Stock, the risk-free interest rate, the expected remaining life of the warrants, and an assumed zero dividend yield.
• For Abaca warrants, the Company has 250,000 warrants outstanding, each exercisable to purchase one share of Common Stock at an exercise price of $40.00 per share. The Abaca warrants are classified as a liability and carried at fair value using Level 3 inputs. Fair value is assessed at each reporting period end.

In connection with the issuance of Series B Preferred Stock on September 30, 2025, the Company also issued Series B Warrants to purchase 1,999,544 shares of Common Stock. After evaluation under ASC 815-40 and ASC 480, the Series B Warrants were determined to qualify for equity classification and will not be subsequently remeasured at fair value.

The key assumptions driving the Level 3 warrant valuations are stock price volatility, the risk-free rate, and the expected remaining life of each warrant each are inherently uncertain and subject to change. Fluctuations in the Company’s stock price, shifts in market volatility, changes in prevailing interest rates, or changes in the holders’ expected exercise behavior could lead to significant period-to-period movements in the recorded fair values of these warrant liabilities and, correspondingly, material swings in the Company’s reported results of operations. The Company closely monitors these assumptions and market conditions at each reporting date to ensure the warrant valuations reflect current fair market value.

Deferred Consideration

The Company’s accounting for deferred consideration arising from the acquisition of Abaca represents a critical accounting estimate. In accordance with ASC 815, Derivatives and Hedging, this obligation is classified as a derivative liability and is carried on the balance sheet at fair value, with changes in fair value reflected in the consolidated statements of operations at each reporting period end.

The deferred consideration arrangement includes cash payments scheduled at various anniversaries of the merger closing and the potential issuance of Common Stock based on specified conditions. The third anniversary payment of $1.5 million, which was due in October 2025, was settled on October 3, 2025, through the issuance of 37,517 shares of Common Stock, using a floor value of $40.00 per share at the Company’s election.

The fair value of the deferred consideration was determined using a Monte Carlo Simulation model and influenced by several factors, including the Company’s stock price, stock price volatility, the risk-free interest rate, the timing and structure of remaining payment obligations, and the specific terms of the Abaca merger agreement and its amendments. Changes in the Company’s stock price, fluctuations in market volatility, or shifts in the risk-free interest rate could produce material adjustments to the recorded fair value of this derivative liability in future periods, with a corresponding impact on the Company’s financial position and results of operations. These estimates and assumptions are subject to inherent uncertainty and the exercise of management’s judgment, and the Company monitors related developments and market conditions closely to ensure the liability is accurately valued at each reporting date.

Forward Purchase Agreement and Forward Purchase Derivative

As previously disclosed, the Company entered the FPA with Midtown, which subsequently assigned the FPA in part to Verdun and Vellar. The FPA gave rise to both a FPA receivable, which had been carried on the balance sheet, and an FPA derivative liability.

During the first quarter of 2025, the Company reclassified the FPA receivable balance of $4.6 million to additional paid-in capital after determining that the arrangement met the conditions for equity classification under ASC 815-40 and ASC 480.

On September 30, 2025, all three FPA holders entered into Exchange and Cancellation Agreements with the Company, pursuant to which they irrevocably cancelled, waived, and terminated all of their rights under the FPA in exchange for shares of Series B Preferred Stock and Series B Warrants to purchase Common Stock. This transaction extinguished the FPA derivative liability, which had been carried at $7.3 million since December 31, 2022 without change, and was accounted for as a debt extinguishment under ASC 405-20. The fair value of the equity instruments issued was measured at $800 per unit, consistent with the cash price paid by unaffiliated third-party investors for identical instruments on the same date. The carrying amount of the FPA Liability exceeded the aggregate fair value of the instruments issued, resulting in a gain on extinguishment of $3.3 million, which is included in Other Income (Expense) in the consolidated statements of operations for the year ended December 31, 2025.

As a result of these transactions, the FPA receivable and FPA derivative liability are fully settled as of December 31, 2025, and no amounts remain on the balance sheet related to the FPA. Accordingly, FPA and forward purchase derivative are not expected to constitute critical accounting estimates in future periods.

Investment in Preferred Securities - Valuation and Impairment Assessment

The Company holds an investment in preferred securities of ADTX with a carrying value of $1.45 million as of December 31, 2025, and this is accounted for under the measurement alternative permitted by ASC 321-10-35-2. Because ADTX’s preferred shares are not actively traded and lack a readily determinable fair value, the investment is carried at cost, less any impairment, adjusted for observable price changes in orderly transactions for identical or similar instruments.

This accounting policy requires management to exercise judgment in two key areas: (i) assessing at each reporting date whether qualitative indicators of impairment exist, and (ii) identifying and evaluating any observable price changes in orderly transactions involving identical or similar instruments. Both assessments involve significant judgment given the limited liquidity and publicly available financial information regarding ADTX.

As of December 31, 2025, management identified no indicators of impairment and no qualifying observable price changes. However, future changes in ADTX’s financial condition or business prospects could require the Company to recognize impairment charges that may be material to its results of operations.

Stand Ready Guarantee Obligation

In connection with the Second Amended CAA with PCCU, the Company assumed an obligation to indemnify PCCU for up to 65% of credit losses on PCCU’s CRB loan portfolio, which had a total outstanding balance of approximately $52.1 million as of December 31, 2025. Under ASC 460, the issuance of a guarantee creates a noncontingent obligation to stand ready to perform, requiring the Company to recognize a liability at fair value at inception regardless of whether losses are probable. Because no observable market exists for cannabis lending guarantee obligations, the Company measured the stand-ready liability using a Level 3 insurance-pricing methodology under ASC 820, estimating the premium a knowledgeable, willing third-party surety or specialty financial guarantor would charge to assume the same obligation in an arm’s-length transaction. The fair value incorporates three components: (i) probability-weighted expected credit losses at the Company’s 65% indemnification share, applying a pooled probability of default of 7.25% and loss given default of 25.0% for performing loans, and a 35% probability of default and 50% loss given default for the individually evaluated criticized credit; (ii) a stand-ready risk premium of 120% of expected losses, reflecting the uncertainty, volatility, and duration of the commitment and the illiquidity of cannabis real estate collateral; and (iii) a time value discount at a risk-adjusted rate of 4.0%. The resulting fair value at inception was $2.1 million, which is recognized as a stand-ready guarantee liability with an offsetting contract asset, resulting in a net zero equity impact on Day 1. The liability is released to income on a systematic basis as the Company is progressively released from risk through loan paydowns and maturities.

Financial Indemnification Liabilities

In connection with the Second Amended CAA with PCCU, the Company assumed an obligation to indemnify PCCU for up to 65% of credit losses on PCCU’s CRB loan portfolio, which had a total outstanding balance of approximately $52.1 million as of December 31, 2025. The Company recognizes a financial indemnification liability under ASC 326-20 representing the contingent component of its obligation, management’s estimate of the Company’s share of lifetime expected credit losses on PCCU’s CRB loan portfolio. A corresponding contract asset of equal amount was recognized under ASC 340-40 at inception, resulting in a net zero equity impact on Day 1. Expected credit losses are estimated using a probability of default times loss given default framework applied to the portfolio segmented into three tranches: pass-rated loans evaluated on a pooled basis, elevated-risk loans evaluated on a pooled basis at higher loss rates, and a single past-maturity commercial loan that is individually evaluated due to its credit profile and limited collateral coverage. Because the portfolio consists entirely of cannabis-use real estate, management applies a two-step collateral discount, eliminating the cannabis license premium embedded in appraised values and reducing the residual to proceeds realizable by a non-cannabis buyer in a liquidation sale resulting in adjusted collateral coverage that is less than the gross portfolio balance. A qualitative loss given default premium is applied across all pooled tranches to reflect the portfolio’s complete concentration in a single industry operating under federal illegality, constrained collateral marketability, and the absence of conventional refinancing markets. The financial indemnification liability is dynamic and remeasured quarterly based on changes in portfolio credit quality, economic conditions, and forward-looking assumptions, with all changes recognized in credit loss expense or income in the period of remeasurement. This estimate is inherently uncertain due to the portfolio’s complete concentration in cannabis-related borrowers, limited industry loss history, and the potential for adverse changes in borrower credit quality, collateral values, or the regulatory environment governing cannabis; such changes could materially affect the carrying amount of this liability in future periods.

Emerging Growth Company Status

We are an EGC as defined in the JOBS Act. As such, we are eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies,” including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of SOX, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a non-binding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved.

In addition, Section 107 of the JOBS Act also provides that an EGC can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act, for complying with new or revised accounting standards. In other words, an EGC can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We intend to take advantage of the benefits of this extended transition period, for as long as it is available. We will remain an EGC until the earlier of (1) the last day of the fiscal year (a) following the fifth anniversary of the date of the first sale of our common equity securities pursuant to an effective registration statement under the Securities Act, which is December 31, 2026, and (b) in which we have total annual gross revenue of at least $1.07 billion, (2) the date on which we are deemed to be a large accelerated filer, which means the market value of our Common Stock that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter, and (3) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period. References herein to “emerging growth company” have the meaning provided in the JOBS Act. The Company will cease to be an EGC on December 31, 2026.

Smaller Reporting Company

We are a “smaller reporting company” as defined in Item 10(f)(1) of Regulation S-K, which allows us to take advantage of certain exemptions from disclosure requirements including exemption from compliance with the auditor attestation requirements of Section 404. We will remain a smaller reporting company until the last day of the fiscal year in which (i) the market value of the shares of our Common Stock held by non-affiliates exceeds $250.0 million as of the prior June 30, and (ii) our annual revenue exceeded $100.0 million during such completed fiscal year or the market value of the shares of our Common Stock held by non-affiliates exceeds $700.0 million as of the prior June 30. To the extent we take advantage of such reduced disclosure obligations, it may also make comparison of our financial statements with other public companies difficult or impossible.

Internal Control Over Financial Reporting

In connection with management’s assessment of internal control over financial reporting as of December 31, 2025, the Company identified material weaknesses in prior periods related to the application of U.S. GAAP to complex transactions, the going concern evaluation process, and information technology access controls.

During 2025, the Company executed a comprehensive remediation plan to address these weaknesses, and management believes all previously identified material weaknesses have been remediated as of December 31, 2025. Additionally, while the material weakness related to the completeness and accuracy of account activity fee income has been remediated, sufficient time has not elapsed to conclude that the related controls are operating effectively.

However, a material weakness was identified during the fourth quarter of 2025 related to the Company’s loan documentation and credit loss estimation process. See Item 9A, “Controls and Procedures” for a full description of the identified material weakness and management’s remediation plan.

Related Party Relationship with PCCU

PCCU is a related party because it held approximately 25.2% of the Company’s Common Stock as of December 31, 2025, holds approximately 43.3% of the Series B Preferred Stock and Series B Warrants as of the date hereof, and serves as the federally regulated credit union through which the Company’s CRB clients hold their deposit accounts and obtain loans. Because PCCU holds the majority of the Company’s client deposits and has the ability to significantly influence the Company’s management and operating policies, all transactions and arrangements between the Company and PCCU are disclosed as related party transactions in accordance with ASC 850 and SEC Regulation S-X. However, as of May 21, 2025, PCCU no longer has contractual rights to appoint members to the Board of Directors.

Revenue Concentration

In 2025, the Company derived substantially all of its revenue from services provided to PCCU under the First Amended CAA. For the years ended December 31, 2025 and December 31, 2024, revenue generated under the then-applicable agreements totaled $6.7 million and $12.7 million, represented 86.7% and 83.5% of total revenue, respectively. As of December 31, 2025 and December 31, 2024, amounts due from PCCU totaled $1.0 million and $1.0 million, representing 97.0% and 87.8% of total accounts receivable, respectively.

The loss of or a material adverse change to this relationship could have a material adverse impact on the Company’s results of operations and financial condition. Management monitors this concentration risk on an ongoing basis.

Commercial Alliance Agreement

The Company’s commercial relationship with PCCU is currently governed by the Second Amended CAA, which sets forth the complete terms and conditions governing the relationship between the Company and PCCU, including account-related services, lending activities, fee arrangements, and loan capacity parameters. Under the CAA, the First Amended CAA, and the Second Amended CAA, as applicable, the Company originates, underwrites, and services CRB loans on PCCU’s behalf. PCCU, as the federally regulated credit union, is the legal holder of CRB deposits and the maker of CRB loans. The Company provides all compliance analysis, credit analysis, due diligence, underwriting, and administration required to onboard and service CRB accounts and loans. The CAA also includes default procedures designed to ensure that neither party takes title to or possession of cannabis-related assets, including real property that may serve as collateral.

The CAA was originally executed on March 29, 2023, and was subsequently amended and restated by the First Amended CAA on December 31, 2024. The CAA and the First Amended CAA were further amended and restated by the Second Amended CAA, which was executed on February 4, 2026 with a retroactive effective date of October 1, 2025. The Company and PCCU reached agreement on the material economic terms of the Second Amended CAA on or about October 1, 2025, following completion of the September 2025 Recapitalization. The written agreement was formally executed on February 4, 2026; the intervening period involved only procedural and documentation matters that did not affect the substance of the agreed terms. The Second Amended CAA extended the customer agreement with PCCU through December 31, 2031, with an automatic renewal for subsequent periods of two years each, unless notice of non-renewal is provided no later than twelve (12) calendar months prior to the expiration of the then-current term. This is an extension from the First Amended CAA’s termination date of December 31, 2028.

The Differences Between the Agreements

The Second Amended CAA increases the Company’s share of CRBs loan program income to up to 65% of total interest, compared to approximately 35% received under the Amended CAA. The Second Amended CAA also shifts the calculation the asset hosting fee to a graduated scale based on deposits, which is expected to result in a reduction of fees between approximately $0.2 million to $0.3 million annually compared to the First Amended CAA.

Under the CAA, which was effective for the year ended December 31, 2024, the Company was entitled to receive all of loan program income while bearing 100% of the indemnification risk on loans originated through PCCU. The Company was also obligated to pay PCCU asset hosting fees based on a fixed fee per account from $26.08 to $28.69, investment hosting fees calculated based upon 25% of investment income earned on the monthly closing CRB deposit balance, and loan servicing fees based upon 0.25% of the total loans serviced by PCCU but managed by the Company.

The First Amended CAA introduced significant changes to this arrangement. The Company’s share of loan program income was reduced from 100% to 35%, with the introduction of a yield and loss allocation framework, while the Company’s indemnification liability was fully eliminated. Investment hosting fees and loan servicing fees were also eliminated, and the method of calculating asset hosting fees was revised from a fixed per-account fee to a percentage applied to average daily balances of deposits held at PCCU.

The Second Amended CAA now determines the revenue the Company receives from its relationship with PCCU from October 1, 2025 until at least the end of 2031. Under the Second Amended CAA, the Company receives up to 65% of net interest income on applicable loans and correspondingly indemnifies up to 65% of default-related losses, with PCCU indemnifying the remaining 35%. The asset hosting fee structure was also revised from a flat rate of 1.0% to a sliding scale ranging from 0.50% for average daily deposit balances below $25.0 million to 1.25% for average daily deposit balances exceeding $125.0 million.

The Company is required to deposit into escrow a current copy of the source code and technical documentation for the Company’s proprietary software that the Company uses to provide its services under the Second Amended CAA (the “Escrowed Software”). In the event of certain defaults by the Company under the Second Amended CAA or if the Company enters into, among other things, bankruptcy, then the Escrowed Software will be released from escrow and transferred to PCCU. In the event of such a release, PCCU will receive a nonexclusive, royalty-free, fully-paid, non-transferrable, non-sub licensable license to (a) use the Escrowed Software for the purpose of maintaining, supporting, performing, and operating an equivalent of the services as had otherwise been provided to PCCU by the Company and (b) modify, enhance, and create derivative works of the Escrowed Software

Key Economic Terms Under the Agreements

Asset Hosting Fees

Under the First Amended CAA in 2025, the Company paid PCCU a single asset hosting fee in exchange for access to PCCU’s Jack Henry core banking platform, regulated deposit infrastructure, and related operational support. This fee replaced all prior per-account servicing fees, investment hosting fees, and loan servicing fees that existed under earlier agreements.

The asset hosting fee was calculated as 1.00% per annum applied to the average daily balances of CRB account relationships generated by the Company and hosted at PCCU, divided by the number of days in the year and multiplied by the number of days in the applicable month. The fee increases to 1.30% per annum on the entire average daily balances once deposits exceed $130 million. For the year ended December 31, 2025, the Company incurred $1.2 million in asset hosting fees payable to PCCU.

On February 4, 2026, the Company and PCCU executed the Second Amended CAA with a retroactive effective date of October 1, 2025. The Second Amended CAA replaced the flat 1.00% rate in the First Amended CAA with a tiered marginal rate structure (ranging from 0.50% on the first $25 million of average daily balance to 1.25% on balances above $125 million) and increased the Company’s share of loan program income from approximately 35% up to 65%, with a corresponding indemnification obligation of up to 65% for loan defaults. The execution of the Second Amended CAA is a Type 1 recognized subsequent event under ASC 855-10-25-1. As a result, the retroactive reduction in asset hosting fees of $0.06 million for the period October 1 through December 31, 2025 has been recognized as a reduction of operating expense in the year ended December 31, 2025. On a prospective basis, the tiered rate structure is expected to generate annualized savings of approximately $0.3 million compared to First Amended CAA rates beginning in the first quarter of 2026.

Investment Income

Under both the First Amended CAA and the Second Amended CAA, the Company receives 100% of the investment income earned on CRB funds invested on its behalf by PCCU. The 25% investment hosting fee that was paid to PCCU under the CAA ceased on January 1, 2025.

Loan Program Income

The Second Amended CAA provides that each loan covered by the Second Amended CAA is subject to an allocation of yield and default-related losses among the Company and PCCU. Pursuant to this yield and loss allocation, the Company will receive up to 65% of all net interest income on the applicable loans and will also indemnify up to 65% of default-related losses of such loans, with PCCU indemnifying the other 35%. However, if the Company determines that adjustments to its indemnity obligations are required in order to maintain compliance with the listing requirements of Nasdaq, then the amount of loan program income the Company receives will also be adjusted (but not above 65%) to match the Company’s new indemnification obligation on a go-forward basis for the applicable loans. This applies retroactively starting October 1, 2025, and this change is expected to materially increase the Company’s loan program income.

Under the First Amended CAA, the Company’s 2025 share of interest income on CRB loans originated and serviced was determined using a loan yield allocation formula that incorporated the Constant Maturity U.S. Treasury Rate and a proprietary risk-rating formula. Under this formula, the Company’s interest income split was approximately 35% of total loan program generated during the year ended December 31, 2025, with the remainder retained by PCCU. For the year ended December 31, 2025, the Company recognized $2.4 million in loan program income attributable to PCCU activities, compared to $6.3 million for the year ended December 31, 2024

Financial Indemnification Liability

The Company’s obligation to indemnify PCCU against default-related loan losses, which existed under the original CAA, was eliminated in its entirety when the First Amended CAA took effect on January 1, 2025. As a result, the Company recorded no provisions for financial indemnification liability on indemnified loans during the period January 1, 2025 through September 30, 2025.

The Second Amended CAA, executed on February 4, 2026 with a retroactive effective date of October 1, 2025, reinstated an indemnification obligation on restructured terms. Under the Second Amended CAA, the Company is obligated to indemnify PCCU for up to 65% of net losses on any CRB loan default, the same proportional percentage as the Company’s increased share of loan program income under that agreement. This structure aligns risk and reward, as the higher income share is paired with a proportional assumption of credit loss exposure.

The associated obligations under the Agreement are recognized in the Company’s December 31, 2025 financial statements at its October 1, 2025 inception date, consistent with the Type 1 recognized subsequent event framework under ASC 855-10-25-1. The obligation comprises two independent, coexisting liabilities that do not offset or true-up to each other:

• ASC 460 Stand-Ready Guarantee Liability: At inception, the Company recognized a stand-ready guarantee liability of approximately $2.1 million measured at fair value under ASC 820-10, representing the noncontingent obligation to stand ready to perform in the event of borrower default on PCCU’s cannabis-related business loan portfolio. Under ASC 460-10-25-3, the issuance of a guarantee imposes a noncontingent obligation to stand ready to perform, and initial recognition is required regardless of the probability that payments will be required. A corresponding contract asset of equal amount was recognized under ASC 340-40.
• ASC 326-20 Financial Indemnification Liability: Separately, the Company recognized a contingent expected liability of approximately $1.1 million under ASC 326-20, representing management’s estimate of SHF’s up to 65% share of lifetime expected credit losses on the PCCU loan portfolio based on current portfolio conditions and reasonable and supportable forecasts. A corresponding contract asset of equal amount was recognized under ASC 340-40.

The net Day 1 equity impact is zero, as each liability is fully offset by its corresponding contract asset at inception, consistent with ASC 340-40-25-2 and the treatment of these costs as incremental costs incurred to fulfill the Commercial Alliance Agreement.

The ASC 460 stand-ready liability is fixed at inception and released to income on a systematic and rational basis consistent with the reduction in guarantee exposure over the contract term per ASC 460-10-35-2. The ASC 326-20 financial indemnification liability is dynamic and remeasured quarterly based on changes in portfolio credit quality, economic conditions, and forward-looking assumptions, with changes recognized in credit loss expense or income. The two liabilities are governed by different measurement objectives under US GAAP and do not substitute for one another.

As of December 31, 2025, the Company’s incremental loan capacity, representing the difference between the regulatorily stipulated lending limit and the gross amount of loans currently outstanding, was approximately $12.0 million. The Company is economically incentivized to minimize incremental loan capacity, as the interest income earned on deployed loans exceeds the income that could otherwise be generated on uninvested deposits.

Related Party Balances

The table below summarizes the cash and cash equivalents held at PCCU, along with the amounts due from and payable to PCCU as reported on the Company’s consolidated balance sheets.

Summary of Operating Expenses Paid to PCCU

The following table summarizes operating expenses incurred by the Company under its agreements with PCCU:

See Part III, Item 13., “Certain Relationships and Related Party Transactions” for further discussion of the related party transactions we have entered into with PCCU.

Acquisition of 420 IT Solutions

On December 19, 2025, Safe Harbor Managed Services LLC, a wholly-owned subsidiary of the Company, completed the acquisition of substantially all of the assets of 420 IT Solutions. 420 IT Solutions is engaged in the business of providing third-party professional advisory and technology services to the cannabis industry. The aggregate purchase price for the acquired assets consisted of 125,000 Earnout Shares, plus the assumption of certain identified liabilities under contracts assigned to the Company. The Earnout Shares are subject to performance-based vesting over a two-year earnout period ending December 31, 2027, as follows:

• 2026 Tranche: 50% of the Earnout Shares (62,500 shares) vest if the acquired business generates net revenue of at least $5.0 million for the calendar year ending December 31, 2026.
• 2027 Tranche: 50% of the Earnout Shares (62,500 shares) vest if the acquired business generates net revenue of at least $6.0 million for the calendar year ending December 31, 2027. If the 2026 target is not met but the 2027 target is achieved, all 125,000 Earnout Shares vest in 2027.

Earnout Shares that have not yet vested are held by the Company (or its transfer agent) during the earnout period and may not be sold, transferred, pledged, or assigned by 420 It Solutions. The Earnout Shares will be issued as restricted securities under Rule 144. The acquisition included the transfer of customer contracts, the registered trademark “420 IT Solutions”, domain name registrations, and other intellectual property. No cash consideration was paid at closing.

This acquisition added capabilities that are complementary to our existing compliance platform and expanded the suite of services we can offer to financial institution customers seeking to enter or grow their cannabis banking programs. On-site reviews are a key component of BSA/AML compliance for cannabis-banking financial institutions, and bringing this capability in-house strengthens both our service offerings and our compliance infrastructure. In addition, 420 IT Solutions’ founders, joined the Company to lead the third-party professional advisory and technology services division following the acquisition.

The Company is a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and is not required to provide the information otherwise required with respect to market risk.

Evaluation of Disclosure Controls and Procedures

Disclosure controls and procedures are designed to ensure that information required to be disclosed by us in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that their objectives are met. The design of disclosure controls and procedures must reflect the fact that there are resource constraints, and the benefits must be considered relative to their costs. Because of the inherent limitations in all disclosure controls and procedures, no evaluation can provide absolute assurance that all control deficiencies and instances of fraud, if any, have been detected.

As required by Rules 13a-15 and 15d-15 under the Exchange Act, our Chief Executive Officer and Chief Financial Officer carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2025. Based upon this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, solely due to the material weakness described below, the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) were not effective as of December 31, 2025.

Management’s Annual Report on Internal Control Over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) under the Exchange Act. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Our internal control over financial reporting includes those policies and procedures that:

• pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets;
• provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles;
• provide reasonable assurance that receipts and expenditures are being made only in accordance with management and director authorization; and
• provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of assets that could have a material effect on the consolidated financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect all misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with policies or procedures may deteriorate.

Management assessed the effectiveness of our internal control over financial reporting as of December 31, 2025 using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control - Integrated Framework (2013). Based on this assessment, management concluded that, due to the material weakness described below, our internal control over financial reporting was not effective as of December 31, 2025.

Material Weakness

A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.

Previously Reported Material Weaknesses and Remediation

As initially reported in our Annual Report on Form 10-K for the year ended December 31, 2024 and our Quarterly Report on Form 10-Q for the period ended September 30, 2025, management identified several material weaknesses in the Company’s internal control over financial reporting. These weaknesses primarily related to the Company’s ability to appropriately apply GAAP and SEC reporting requirements to complex transactions, including revenue recognition, accounting for financial instruments, forward purchase arrangements, and stock-based compensation. Additional weaknesses existed in management’s going-concern evaluation process and information technology access controls.

During 2025, the Company implemented a comprehensive remediation plan focused on strengthening technical accounting expertise, enhancing review controls, and improving documentation and segregation of duties. Key remediation actions included:

• Hiring a Chief Executive Officer, who also serves as Chief Financial Officer, and a Senior Vice President of Finance and Controller, who serves as Principal Accounting Officer, both with extensive SEC-registrant experience to oversee technical accounting, financial reporting, and internal controls;
• Engaging a financial advisory firm with expertise in financial reporting to assist management in evaluating and accounting for complex and non-routine transactions, including the Series B Preferred Stock and related Series B Warrant issuances;
• Implementing enhanced review procedures over financial statement preparation, including secondary reviews of all complex accounting analyses; and
• Upgrading information technology access controls and removing unnecessary privileged user access within key financial systems.

As of December 31, 2025, management believes the remediation actions described above adequately address all previously identified material weaknesses. Management notes that while the material weakness related to the completeness and accuracy of account activity fee income has been remediated, sufficient time has not elapsed to conclude that the related controls are operating effectively.

Material Weakness Identified During the Year Ended December 31, 2025

Loan Documentation and Credit Loss Estimation Process: In connection with the Company’s initial recognition of indemnification liabilities under the Second Amended CAA, the Company was required for the first time to measure a stand-ready guarantee liability at fair value under ASC 460 and an expected credit loss liability under ASC 326-20. Both measurements rely on underlying CRB loan documentation maintained in connection with the Company’s credit administration responsibilities under the agreement. During the audit, certain loan documentation used in connection with these measurements was identified as out of date or inconsistent with the terms of the underlying loans. While the Company’s valuation conclusions were determined to be fairly stated as of December 31, 2025, the absence of a formalized loan documentation review and maintenance process represents a control deficiency that, if not remediated, could result in a material misstatement of the indemnification and expected credit loss liabilities in future periods.

To remediate this material weakness, management is in the process of developing a standardized documentation checklist to ensure that all relevant inputs are consistently captured and considered in the expected credit loss estimation under ASC 326. Full implementation of these procedures is expected to be completed by the second quarter of 2026, after which the controls will be subject to ongoing monitoring by management to assess operating effectiveness.

A failure to maintain effective internal controls over financial reporting could result in errors in our financial statements that could require us to restate past financial statements, cause us to fail to meet our reporting obligations, and cause investors to lose confidence in our reported financial information, all of which could materially and adversely affect the Company.

Changes in Internal Control Over Financial Reporting

Other than the remediation actions described above, there were no changes in our internal control over financial reporting that occurred during the year ended December 31, 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

The Company’s management has expended, and will continue to expend, a substantial amount of effort and resources for the remediation of the remaining material weakness and the continued improvement of our internal control over financial reporting. While we have processes to properly identify and evaluate the appropriate accounting guidance and other literature for all significant or unusual transactions, we have expanded and will continue to improve these processes to ensure that the nuances of such transactions are effectively evaluated in the context of the increasingly complex accounting standards.