SHF (US:SHFS)2025-05-20 21:51PART I – FINANCIAL INFORMATION Financial Statements (unaudited) Unaudited Q1 2025 financial statements reveal significant deterioration, including a net loss and negative operating cash flow, raising substantial doubt about going concern Condensed Consolidated Balance Sheets As of March 31, 2025, total assets significantly decreased to $6.66 million, and the stockholders' deficit worsened to -$16.95 million Condensed Consolidated Balance Sheet Highlights (as of March 31, 2025 vs. December 31, 2024) | Metric | March 31, 2025 ($) | December 31, 2024 ($) | | :--- | :--- | :--- | | Cash and cash equivalents | 931,397 | 2,324,647 | | Total Assets | 6,655,102 | 13,218,287 | | Total Liabilities | 23,604,509 | 25,506,301 | | Total Stockholders' Deficit | (16,949,407) | (12,288,014) | Condensed Consolidated Statements of Operations For Q1 2025, the company reported a net loss of $0.31 million, a significant reversal from prior-year net income, driven by a 52% revenue decline Statement of Operations Summary (For the three months ended March 31) | Metric | 2025 ($) | 2024 ($) | | :--- | :--- | :--- | | Revenue | 1,932,352 | 4,050,799 | | Total operating expenses | 3,410,275 | 3,725,858 | | Operating (loss)/income | (1,477,923) | 324,941 | | Net (loss)/income | (313,627) | 2,049,676 | | Diluted (loss)/income per share | (0.11) | 0.73 | Condensed Consolidated Statements of Cash Flows For Q1 2025, net cash used in operating activities was $1.14 million, a significant reversal from prior-year cash provided, reducing cash and equivalents to $931,397 Cash Flow Summary (For the three months ended March 31) | Metric | 2025 ($) | 2024 ($) | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | (1,140,730) | 1,475,123 | | Net cash provided by investing activities | 3,245 | 3,014 | | Net cash used in financing activities | (255,765) | (740,544) | | Net (decrease)/increase in cash and cash equivalents | (1,393,250) | 737,593 | | Cash and cash equivalents – end of period | 931,397 | 5,626,362 | Notes to Condensed Consolidated Financial Statements The notes detail critical accounting policies, a significant 'going concern' warning, impairment charges, PCCU note amendments, revenue declines, and material weaknesses in internal controls - The company specializes in providing financial solutions, including banking and lending access, for the cannabis industry through partnerships with financial institutions2627 - There is substantial doubt about the Company's ability to continue as a going concern, with cash of $931,397 projected to support operations only through September 30, 2025, alongside a working capital deficit of $6.7 million and an operating loss of $1.5 million for the quarter3741 - Management's plans to address the going concern issue include seeking strategic partnerships, renegotiating debt, using stock-based compensation, and exploring new financing, but the success of these plans is uncertain43 - On April 7, 2025, Nasdaq notified the company of non-compliance with listing requirements due to a stockholders' equity deficit of $12.3 million, below the $2.5 million minimum42102 - The company recorded a full goodwill impairment charge of $6.06 million and full impairment of finite-lived intangible assets for the fiscal year ended December 31, 2024, with no impairment in Q1 2025636567 - Effective December 31, 2024, the company's indemnification liability to PCCU for loan losses was eliminated under an amended agreement, revising the fee and interest income structure7586 - Subsequent to the quarter, the CFO and three board members resigned for personal reasons, and a new director and audit committee chair was appointed158159160 Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes Q1 2025's poor results to significant revenue declines, especially in loan interest and investment income, coupled with increased professional services costs, raising substantial doubt about going concern Revenue Breakdown Q1 2025 vs Q1 2024 | Revenue Type | Q1 2025 ($) | Q1 2024 ($) | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Account fee income | 1,072,465 | 1,620,994 | (548,529) | (33.84)% | | Investment income | 300,435 | 773,819 | (473,384) | (61.18)% | | Loan interest income | 540,222 | 1,636,756 | (1,096,534) | (66.99)% | | Total Revenue | 1,932,352 | 4,050,799 | (2,118,447) | (52.30)% | Operating Expenses Q1 2025 vs Q1 2024 | Expense Type | Q1 2025 ($) | Q1 2024 ($) | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Compensation and employee benefits | 1,342,261 | 2,280,038 | (937,777) | (41.13)% | | General and administrative expenses | 990,826 | 984,220 | 6,606 | 0.67% | | Professional services | 1,016,182 | 460,950 | 555,232 | 120.45% | | Total Operating Expenses | 3,410,275 | 3,725,858 | (315,583) | (8.47)% | - The decrease in loan interest income is attributed to a revised loan yield allocation formula under the Amended PCCU CAA181182 - Professional services expenses increased significantly due to higher legal fees, including a $300,000 accrual for a potential employment-related legal settlement187 Adjusted EBITDA Reconciliation (Non-GAAP) | Metric | Three months Ended March 31, 2025 ($) | Three months Ended March 31, 2024 ($) | | :--- | :--- | :--- | | Net (loss)/income | (313,627) | 2,049,676 | | EBITDA | (199,400) | 1,960,672 | | Adjusted EBITDA | (1,227,243) | 1,087,360 | - The company's cash of $931,397 as of March 31, 2025, is insufficient to fund operations for the next 12 months, raising substantial doubt about its ability to continue as a going concern217 Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, SHF Holdings, Inc. is not required to provide information regarding market risk - The Company is a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and is not required to provide information regarding market risk238 Controls and Procedures Management concluded that disclosure controls and procedures were ineffective as of March 31, 2025, due to multiple material weaknesses in internal control over financial reporting - Management concluded that disclosure controls and procedures were not effective as of March 31, 2025240243 - Multiple material weaknesses were identified, including deficiencies in Revenue Recognition (PCCU calculations), Financial Instruments (Amended PCCU Note classification), Going Concern assessment, Information Technology access controls, Stock Compensation forfeiture recording, and Forward Purchase Receivables reclassification and valuation245247248250252254 - The company is implementing remediation plans for these weaknesses, including developing new tools, enhancing monthly review processes, and strengthening IT access controls246249251253255 PART II - OTHER INFORMATION Legal Proceedings The company is involved in various legal proceedings, including the Abaca case, but management does not anticipate a material adverse effect from their final disposition - The company is subject to various legal proceedings; details on the Abaca legal case are in Note 12 of the financial statements260 Risk Factors As a smaller reporting company, SHF Holdings, Inc. is not required to provide information for this item - The Company is a smaller reporting company and is not required to provide the information otherwise required by this Item 1A261 Unregistered Sales of Equity Securities and Use of Proceeds There were no unregistered sales of equity securities or use of proceeds to report for the period - None262 Defaults Upon Senior Securities There were no defaults upon senior securities to report for the period - None263 Mine Safety Disclosures This item is not applicable to the company - Not applicable264 Other Information During Q1 2025, no director or officer adopted or terminated any Rule 10b5-1 or non-Rule 10b5-1 trading arrangements - No director or officer adopted or terminated any "Rule 10b5-1 trading arrangement" or "non-Rule 10b5-1 trading arrangement" during the three months ended March 31, 2025265 Exhibits This section lists exhibits filed with the Quarterly Report on Form 10-Q, including merger agreements, corporate governance documents, and Sarbanes-Oxley certifications - A list of exhibits filed with the report is provided, including merger agreements, corporate governance documents, and executive certifications267268