SHF (US:SHFS)2025-04-10 20:05Revenue and Income - For the year ended December 31, 2024, total revenue decreased by 13.21% to $15,242,560 compared to $17,562,903 in 2023[190] - Account fee income declined by 25.16% to $6,447,201 from $8,614,945, primarily due to a reduction in the number of accounts and average monthly ending deposit balance[190] - Loan interest income increased significantly by 122.90% to $6,625,576 compared to $2,972,434 in 2023[190] - Investment income from PCCU decreased from $5,803,114 in 2023 to $1,903,422 in 2024, resulting in a reduction of investment hosting fees from $1,445,517 to $457,105[196] - The revenue from the Commercial Alliance Agreement for the year ended December 31, 2024, was $12,601,271, compared to $10,761,245 for the year ended December 31, 2023, reflecting an increase of approximately 17.1%[267] Account and Deposit Metrics - Average monthly ending deposit balance decreased by 42.49% to $117,847,512 from $204,923,090[182] - The average active accounts dropped by 18.78% to 757 from 932[182] - The average account balance decreased by 29.16% to $155,728 from $219,835[182] - CRB related deposits as of December 31, 2024, were $116,064,487, a decrease from $129,350,998 as of December 31, 2023[267] Expenses and Financial Performance - Adjusted EBITDA for 2024 was $2,888,868, down from $3,607,681 in 2023, attributed to decreased account fee income and higher professional expenses[177] - Total operating expenses were reduced by $15,959,906, or 41.68%, from $38,293,952 in 2023 to $22,334,046 in 2024[200] - The total operating expenses for the Commercial Alliance Agreement in 2024 were $1,052,693, down from $2,056,303 in 2023, indicating a decrease of approximately 48.9%[268] Cash Flow and Working Capital - Cash and cash equivalents decreased from $4,888,769 in 2023 to $2,324,647 in 2024[210] - The Company generated $430,477 in cash from operations in 2024, an improvement from cash used of $832,144 in 2023[212] - The Company reported a net working capital deficit of $983,833 at the end of 2024, compared to a deficit of $135,355 at the end of 2023[219] Debt and Obligations - Interest expense decreased by $561,346, from $1,094,736 in 2023 to $533,390 in 2024, primarily due to restructuring of obligations[206] - The Company has renegotiated its senior secured loan with PCCU, deferring principal payments for February and March 2025[222] - The Company modified the outstanding principal of $10,748,408 with an interest rate of 4.25% per annum, unlocking $6,437,050 in cash flow, significantly improving liquidity[223] - As of December 31, 2024, the Company reclassified short-term obligations of the PCCU Note totaling $2,883,167 as non-current liabilities[224] Impairments and Financial Reporting - The Company recorded a full goodwill impairment charge of $6.06 million due to the fair value of the asset group being lower than its carrying amount[243] - Impairment charges of $0.05 million for market-related intangible assets, $0.05 million for customer relationships, and $2.99 million for developed technologies were also recorded[244] - The Company identified material weaknesses in internal controls over financial reporting as of December 31, 2024[251] Strategic Initiatives and Future Outlook - The company anticipates a reversal of the trend in account numbers as it focuses on its lending program[182] - The Company has implemented stock-based compensation to attract talent, alongside cost reductions through lower headcount and operational spending[225] - Management has substantial doubt about the Company's ability to continue as a going concern for at least twelve months from the issuance of the financial statements[226] - The Amended Commercial Alliance Agreement extends the term through December 31, 2028, with automatic two-year renewal periods[263] - Under the Amended CAA, the Company will pay a single asset hosting fee calculated as 0.01 multiplied by the average daily balance of account relationships[266] - The Company is classified as an emerging growth company, allowing it to delay adopting new accounting standards until they apply to private companies[250] Compliance and Regulatory Matters - The company successfully navigated over 16 state and federal banking exams, ensuring compliance in a regulated environment[167] - The Company’s obligations under the PCCU CAA include paying 25% of investment earnings as a hosting fee to PCCU[262] - The deferred consideration from the Abaca acquisition is accounted for as a derivative liability, with fair value assessments influenced by stock price and market conditions[249] - The Company utilizes a Monte-Carlo Simulation for the valuation of forward purchase derivatives, maintaining the established valuation for 2023 and 2024[241]