SHF Holdings, Inc.: Form 10-Q for the period ended Mar 31, 2026

References in this section to “we,” “us,” “our,” “SHF,” or the “Company” refer to SHF Holdings, Inc. References to “management” refer to our officers and Board of Directors. The following discussion and analysis of our financial performance and results of operations should be read in conjunction with our consolidated financial statements and the notes to those financial statements included elsewhere in this Form 10-Q. This discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties. See “Cautionary Note Regarding Forward-Looking Statements.” Our actual results may differ materially from those contained in or implied by any forward-looking statements.

Overview

The Company was founded in 2015 by Partner Colorado Credit Union (“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 cannabis related businesses (“CRBs”) operating legally under applicable state law.

Because cannabis remains a federally controlled substance under the Controlled Substances Act (“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 Bank Secrecy Act (“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, automated clearing house payments, wire transfers, and courier services through third-party relationships. By enabling CRBs to deposit cash receipts through regulated financial institutions, our platform helps to reduce the safety risks associated with high cash volumes and gives CRBs access to financial tools that help them operate more efficiently. In select markets, we also license our Program to other financial institutions, providing them know your customer due diligence tools, compliance monitoring, program management support, and regulatory exam assistance.

We generate revenue primarily through account fee income based on the number of active accounts and the size of deposit balances in such accounts, loan program income on CRB loans we source and service on behalf of our financial institution clients, and investment income earned on CRB-related deposits held at those institutions. Since 2015, the Company has assisted in the processing of more than $36.0 billion in cannabis-related depository funds and has supported its financial institution clients through more than 25 state and federal banking examinations.

Relationship with PCCU

PCCU is the Company’s primary financial institution client and the source of a significant majority of its revenue. The relationship is governed by the Second Amended CAA, which replaced the First Amended Commercial Alliance Agreement (the “First Amended CAA”) effective October 1, 2025.

The First Amended CAA introduced several significant changes to the Commercial Alliance Agreement, 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.

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.

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.

Federal Regulatory Developments — Rescheduling to Schedule III

The federal regulatory environment for cannabis continues to evolve in ways the Company believes are material to its industry. In August 2023, the U.S. Department of Health and Human Services recommended that the Drug Enforcement Administration (“DEA”) reschedule cannabis from Schedule I to Schedule III of the CSA, and in May 2024 the U.S. Department of Justice (“DOJ”) issued a Notice of Proposed Rulemaking to that effect, although the rescheduling process was stayed and effectively stalled for much of 2025. On December 18, 2025, President Trump signed an Executive Order directing the Attorney General to expeditiously complete the rulemaking process to reschedule cannabis to Schedule III. On April 23, 2026, the DOJ issued a final order rescheduling Food and Drug Administration-approved cannabis products and products regulated under state medical marijuana licenses to Schedule III, and the DEA is scheduled to hold an expedited administrative hearing beginning on June 29, 2026 and concluding not later than July 15, 2026 to consider broader rescheduling from Schedule I to Schedule III. Legal challenges are anticipated, and the ultimate timing of any final rule remains uncertain. The Company believes the most financially material consequence of rescheduling would be the elimination of Section 280E of the Internal Revenue Code, which currently prohibits cannabis businesses from deducting ordinary and necessary business expenses and results in effective federal tax rates materially higher than those of other industries, and its elimination could improve cash flows and profitability for state-legal cannabis operators.

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-Q 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 to EBITDA and Adjusted EBITDA is as follows:

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Discussion of Adjusted EBITDA Results

For the three months ended March 31, 2026, EBITDA was $(1.6) million, compared to $(0.7) million for the three months ended March 31, 2025. Adjusted EBITDA was $(1.8) million and $(1.2) million for the three months ended March 31, 2026 and March 31, 2025, respectively, reflecting a decrease of $0.6 million. The decrease was driven by higher operating expenses, primarily reflecting increased compensation from strategic hires, alongside higher marketing spend and reduction in options grants to the board of directors vested immediately.

Management’s focus for the remainder of 2026 is on improving client retention through the Company’s expanded lending capabilities, enhanced client service technology, and continued new account development supported by new marketing initiatives and customer acquisition processes.

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 three-month ended March 31, 2026, represents the average deposit balance over the period; For the period ended March 31, 2025 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 March 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 ending active accounts for each of the three months therein.

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

(6) Represents the average of account activity fee revenue for the three months therein.

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Average active accounts decreased by 2.4% as of March 31, 2026. The accounts lost had lower average balances than the accounts added, resulting in an increase in the average account balance. However, average account fee revenue declined despite growth in total deposit balances, primarily due to the reduction in average fee revenue per account.

Components of our Results of Operations

Revenue

The Company generates revenue through four 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.
• General and administrative expenses include the asset hosting fee paid to PCCU under the First Amended CAA or the Second Amended CAA, as applicable, 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 one of the largest components 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.

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Discussion of our Results of Operations Three Months Ended March 31, 2026 Compared to the Three Months Ended March 31, 2025

Revenue

Account fee income

Account fee income decreased by $0.2 million, or 19.0%, for the three months ended March 31, 2026, compared to the same period in 2025. The decline was primarily due to a merchant service partner renegotiating its revenue-sharing arrangement on less favorable terms, which reduced account fee income by approximately $0.15 million year over year. In addition, client attrition and lower average fees collected from PCCU-hosted clients contributed approximately $0.05 million to the overall decrease.

Investment income

Investment income represents interest earned on net investable CRB deposit balances held at 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 the Company’s agreements, investment income is calculated daily on net investable CRB deposit balances and paid monthly in arrears.

Investment income was $0.2 million for the three months ended March 31, 2026, compared to $0.3 million for the three months ended March 31, 2025, a decrease of $0.05 million, or 17.8%. The net average daily investable deposit base grew to $45.0 million from $34.5 million between those periods, but the benefit of that growth was more than offset by a decline in the IORB rate from 4.40% to 3.65%. .

Loan program income

Loan program income was generated primarily from CRB loans originated by PCCU and underwritten and serviced by the Company under the First Amended CAA for the period ended March 31, 2025 and the Second Amended CAA for the period ended March 31, 2026.

For the three months ended March 31, 2026, the Company serviced twenty-two loans, compared to twenty-three loans for the same period in 2025. Loan program income attributable to PCCU activities totaled $0.8 million for the three months ended March 31, 2026, compared to $0.5 million for the three months ended March 31, 2025. The increase was primarily driven by the Second Amended CAA, which increased the Company’s share of loan program income to 65% from approximately 35% under the First Amended CAA. In addition, the loan portfolio was $51.5 million as of March 31, 2026, compared to $56.8 million as of March 31, 2025, a decrease of $5.3 million. The weighted average interest rate for the three months ended March 31, 2026 was approximately 10.3% and was 10.2% for the three months ended March 31, 2025.

Operating expenses

Total operating expenses

Total operating expenses decreased by $0.2 million, or 4.7%, to $3.7 million for the three months ended March 31, 2026, compared to $3.9 million for the same period in 2025. The decrease was primarily driven by lower professional services expenses due to reduced stock awards to directors and a release of credit loss provisions resulting from the systematic release of liability and remeasurement reflecting changes in risk ratings. These reductions were partially offset by higher amortization of contract assets in line with scheduled amortization and increased compensation and employee benefits expenses, driven by higher average staff costs and employee bonus accruals.

Compensation and employee benefits

Compensation and employee benefits expenses increased by $0.3 million, or 21.0%, to $1.7 million for the three months ended March 31, 2026, compared to $1.3 million for the same period in 2025. The increase was primarily driven by higher bonus accruals and increased employee salaries, including costs associated with the acquisition of LBMW LLC (d/b/a 420 IT Solutions), which contributes approximately $0.5 million annually plus fringe benefits to compensation expense. The rise in expenses also reflects the full-period impact of hiring of additional personnel to support the Company’s strategic initiatives, including expanding lending capabilities, developing managed business solutions, and enhancing beyond-banking services. These increases were partially offset by a decrease in stock-based compensation expense related to a prior stock grant issued to an executive.

General and administrative expenses

General and administrative expenses increased by $0.07 million, or 7.8%, to $1.1 million for the three months ended March 31, 2026, compared to $1.0 million for the three months ended March 31, 2025. The increase was primarily due to marketing activities and was offset by lower asset hosting fees under the Second Amended CAA.

Professional services

Professional services expenses decreased by $0.4 million, or 23.6%, to $1.1 million for the three months ended March 31, 2026, compared to $1.5 million for the same period in 2025. The decrease was primarily driven by a reduction in fully vested stock-based awards issued to the board of directors, as no stock options were issued during the three months ended March 31, 2026. This reduction was partially offset by an increase in one-time cash bonuses awarded to directors and higher legal fees associated with the Abaca litigation.

Rent expense

Rent expense decreased by $0.01 million, or 15.7%, to $0.05 million for the three months ended March 31, 2026, from $0.06 million for the three months ended March 31, 2025, primarily due to 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 6 to the Company’s unaudited condensed consolidated financial statements in this Form 10-Q. Amortization of contract costs was $0.1 million for the three months ended March 31, 2026, compared to $0 for the three months ended March 31, 2025. It represents the straight-line amortization of the cost to acquire a contract asset recognized as of October 1, 2025, the effective date of the Second Amended CAA.

Credit loss (benefit) expense

The Company recognized a benefit of $0.3 million for the three months ended March 31, 2026, compared to no credit loss benefit for the three months ended March 31, 2025.

In accordance with ASC 460, the stand-ready guarantee liability is recognized on a straight-line basis over a weighted-average remaining loan maturity of three years. During the three months ended March 31, 2026, the Company reduced the stand-ready guarantee liability by $0.2 million, which was recognized as a benefit within operating expenses in the consolidated statement of operations. In addition, the Company remeasured its expected credit loss liability under ASC 326 and identified a downward change in the internal risk ratings of a loan as of March 31, 2026, resulting in a $0.1 million reduction in the liability, which was also recognized as a credit benefit in operating expenses.

Other Income (Expenses)

Total other income (expenses) was ($0.02) million for the three months ended March 31, 2026, compared to total other income (expenses) of $1.1 million for the three months ended March 31, 2025, representing a decline of $1.2 million year over year. This change was primarily attributable to a $1.1 million decrease in the change in fair value of the warrant liability.

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 three months ended March 31, 2025, the Company recognized a gain of $0.2 million, primarily resulting from a decline in the Company’s stock price during 2025, which reduced the fair value of the third-anniversary payment obligation prior to its settlement. 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 price of $40.00 per share. As a result of this settlement, the deferred consideration liability was fully extinguished.

Interest Expense

Interest expense for the period ended March 31, 2026 primarily relates to financing an insurance policy. For the three months ended March 31, 2025 interest expense was due to the Senior Secured Promissory Note to PCCU (the “PCCU Note”).

Loss on ELOC share settlements

For the period ended March 31, 2026, loss on ELOC share settlements were $0.03 million. This represents the difference between the stock price on the trading date and the settlement date, multiplied by the number of shares.

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 period ended March 31, 2026, the Company recognized a gain of $0.02 million from changes in the fair value of warrant liabilities, compared to a gain of $1.1 million for the period ended March 31, 2025. The $1.0 million decrease year over year was due to a reduction in the aggregate fair value of outstanding warrant liabilities, driven by changes in the Company’s stock price during the period. As of March 31, 2026, all outstanding warrants were out of the money.

Financial Condition

Cash and cash equivalents

Cash and cash equivalents totaled $5.9 million as of March 31, 2026, and $6.8 million as of December 31, 2025.

Cash flows

For the three months ended March 31, 2026, the Company used $1.1 million of cash in operating activities. Operating cash flows for the three months ended March 31, 2026 improved as compared to the three months ended March 31, 2025 primarily due to changes to operating assets and liabilities that totaled $0.8 million, which were offset by net loss of $1.8 million and $0.07 million reduction from non-cash adjustments to reconcile net loss to net cash used in operating activities. For the period ended March 31, 2025, the Company used approximately $1.1 million of cash from operating activities, including net loss of $0.8 million and non-cash adjustments to reconcile net income to net cash used in operating activities of $0.5 million that were offset by $0.2 million of changes to operating cash assets and liabilities.

For the three months ended March 31, 2026 and March 31, 2025, the cash flow from investing activities was nil.

For the period ended March 31, 2026, the Company had $0.2 million of cash from financing activities. This was mainly from the proceeds from sales under the ELOC (as defined below). For the period ended March 31, 2025, the Company used $0.3 million for the repayment of the PCCU Note.

Liquidity

Liquidity refers to our ability to meet anticipated cash demands, including funding operations, servicing contractual obligations, and covering other routine business expenditures. Our primary cash outflows include operating costs and general business expenditures. The main source of our liquidity continues to be cash inflows generated from operational performance. As of March 31, 2026, we do not have significant capital investment commitments.

Under ASC 205-40, Presentation of Financial Statements: Going Concern, we are required to evaluate at each annual and interim reporting period whether there are conditions or events, considered in the aggregate, that raise substantial doubt about our ability to continue as a going concern within one year after the date the financial statements are issued, and, if substantial doubt is raised, whether our plans to mitigate those conditions, when considered in the aggregate, alleviate that doubt.

As of March 31, 2026, we had cash and cash equivalents of $5.9 million and net working capital of $5.5 million. We have incurred recurring losses from operations and negative cash flows from operations, including an operating loss of $1.8 million and net cash used in operating activities of $1.1 million for the three months ended March 31, 2026, and an accumulated deficit of $124.7 million as of March 31, 2026. These conditions, considered in the aggregate, raise substantial doubt about our ability to continue as a going concern for a period of at least twelve months from the date these unaudited condensed consolidated financial statements are issued.

Management has developed and is implementing a series of measures intended to preserve liquidity, including (i) the increased share of loan program income under the Second Amended CAA, effective October 1, 2025, (ii) access to the $150.0 million ELOC entered into on September 17, 2025 (subject to customary conditions, including the absence of a Material Adverse Effect), (iii) identified cost-reduction measures available to management if operating conditions deteriorate, and (iv) bi-weekly cash flow monitoring against a 52-week rolling forecast.

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

The accompanying unaudited condensed consolidated financial statements have been prepared on a going concern basis and 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 Denver County, Colorado District Court (the “District Court”), 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 Rockview Digital Solutions, Inc. d/b/a Abaca (“Abaca”) pursuant to a merger agreement (the “Merger Agreement”) that was subsequently amended in November 2022 and in October 2023 (the “Second Amendment”).

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 unaudited condensed consolidated balance sheet.

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

On April 23, 2026, the District Court issued an omnibus order on cross-motions for summary judgment in the matter.

The Court denied the Company’s motion for summary judgment in its entirety. The Court granted the counterclaim plaintiffs’ cross-motion in part, primarily ruling that the Second Amendment to the Merger Agreement is void ab initio under Section 251(d) of the Delaware General Corporation Law, and because of that ruling, that the Company breached the original Merger Agreement with respect to the first anniversary parent shares. Damages on this counterclaim is set for trial on August 10-11, 2026. The Court also denied both parties’ motions on the counterclaim concerning the second anniversary cash consideration payment of $3.0 million and denied the counterclaim plaintiffs’ motion on the Company’s declaratory judgment claim; those claims are also set for trial on August 10–11, 2026. The Court’s order is not a final, appealable order under C.R.C.P. 54(b).

The $3.0 million previously deposited into the Court’s registry in November 2024 remains reflected in the Company’s condensed consolidated financial statements. The Company intends to continue defending its positions vigorously. Given the preliminary stage of the damages proceedings and the matters remaining for trial, the range of loss is $0 to $7.8 million. An adverse resolution could have a material adverse effect on the Company’s financial position, results of operations, or cash flows.

In addition, the Company may evaluate the possibility of a negotiated resolution of the dispute. In the event of a negotiated resolution, the Company’s ability to fund any payments owed in cash may be materially constrained by the terms of the previously disclosed Equity Line of Credit, as amended (“ELOC”), and the Company’s Series B Convertible Preferred Stock. Litigation is inherently uncertain, and there can be no assurance that any negotiated resolution will be reached or that the terms of any such resolution are favorable to the Company. See Part II, Item 1A. “Risk Factors-Recent developments in shareholder litigation against us on certain counterclaims could result in a material adverse effect on our financial position, results of operations, and cash flows.

Critical Accounting Estimates

As of March 31, 2026, there were no significant changes in the application or the nature of accounting estimates that are considered critical in nature from those presented in our Annual Report on Form 10-K.

Emerging Growth Company Status

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 statement with other public companies difficult or impossible.

Internal Control Over Financial Reporting

In connection with our management assessment of internal control over financial reporting as of and for the three months ended March 31, 2026, the Company has identified material weaknesses within our internal controls over financial reporting. Refer to Item 4A of this document for additional details.

For the three months ended March 31, 2026, the material weakness related to the completeness and accuracy of account activity fee income has been remediated, however sufficient time has not elapsed to conclude that the related controls are operating effectively.

Related Party Relationships

PCCU is a related party because it held approximately 24% of the Company’s Common Stock as of March 31, 2026, 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.

Recent developments in shareholder litigation against us on certain counterclaims could result in a material adverse effect on our financial position, results of operations, and cash flows.

As previously disclosed in a Current Report on Form 8-K filed with the SEC, on April 23, 2026 the District Court granted summary judgment against us on counterclaims relating to the validity of the Second Amendment and our payment of the first anniversary parent shares, with damages to be determined at a future hearing. Additional claims, including a counterclaim concerning the $3.0 million second anniversary cash consideration payment and our declaratory judgment claim, are set for trial on August 10th and 11th of this year. We intend to defend our positions vigorously and to pursue all available legal options, but we may not prevail at trial or on any appeal that may become available.

The ultimate resolution of the litigation could result in damages, settlement payments, or other obligations that are material to us. Our ability to fund any such payment in cash may be materially constrained by the terms of the ELOC or our Series B Convertible Preferred Stock. The $3.0 million previously deposited into the District Court’s registry remains reflected in our condensed consolidated financial statements pending resolution of the related claims and is not currently available for our general operating or strategic use. An adverse outcome could have a material adverse effect on our business, financial position, results of operations, cash flows, liquidity, the trading price of our securities, and our ability to regain or maintain compliance with applicable Nasdaq listing standards. See Part I, Item 2 “Management’s Discussion and Analysis of Financial Condition and Results of Operations–Litigation” for additional details.