SHF (SHFS) - 2021 Q2 - Quarterly Report

PART I – FINANCIAL INFORMATION Item 1. Financial Statements This section presents Northern Lights Acquisition Corp.'s unaudited condensed financial statements for the period ended June 30, 2021, covering Balance Sheet, Operations, Equity, and Cash Flows, with detailed notes on organization and accounting policies Condensed Balance Sheet as of June 30, 2021 (Unaudited) | Metric | Amount (USD) | | :--- | :--- | | Total Assets | $118,579,327 | | Investments held in Trust Account | $117,290,522 | | Total Liabilities | $11,050,412 | | Warrant liabilities | $6,493,780 | | Deferred underwriter fee payable | $4,025,000 | | Total Stockholders' Equity | $5,000,001 | Condensed Statements of Operations for the three months ended June 30, 2021 and for the period from February 26, 2021 (inception) through June 30, 2021 (Unaudited) | Metric | Three Months Ended June 30, 2021 | Period from Inception through June 30, 2021 | | :--- | :--- | :--- | | Formation and operating costs | $(10,105) | $(10,900) | | Interest earned on marketable securities held in Trust Account | $17 | $17 | | Unrealized loss from marketable securities held in Trust Account | $(9,495) | $(9,495) | | Change in fair value of warrant liability | $(1,462,306) | $(1,462,306) | | Offering costs allocated to warrants | $(261,838) | $(261,838) | | Net Loss | $(1,743,727) | $(1,744,522) | | Basic and diluted net loss per non-redeemable common stock | $(0.59) | $(0.59) | Condensed Statements of Changes in Stockholders' Equity for the three months ended June 30, 2021 and for the period from February 26, 2021 (inception) through June 30, 2021 (Unaudited) | Item | Amount (USD) | | :--- | :--- | | Balance - February 26, 2021 (inception) | $0 | | Issuance of Class B Common stock to Sponsor | $25,000 | | Sale of IPO Units, net of offering costs | $118,304,911 | | Deferred underwriter fee | $(4,025,000) | | Warrant liabilities | $(5,031,474) | | Initial shares subject to possible redemption | $(104,010,715) | | Net loss | $(1,743,727) | | Balance – June 30, 2021 | $5,000,001 | Condensed Statement of Cash Flows for the period from February 26, 2021 (inception) through June 30, 2021 (Unaudited) | Cash Flow Activity | Amount (USD) | | :--- | :--- | | Net cash used in operating activities | $(105) | | Net cash used in investing activities | $(117,300,000) | | Net cash provided by financing activities | $118,238,910 | | Net change in cash | $938,805 | | Cash at the end of the period | $938,805 | Notes to Condensed Financial Statements (Unaudited) Note 1 — Description of Organization and Business Operations - The Company is a blank check company incorporated on February 26, 2021, to effectuate a business combination[16] - The Initial Public Offering (IPO) was consummated on June 28, 2021, generating gross proceeds of $115,000,000 from 11,500,000 units[18] - A private placement of 528,175 units was simultaneously closed, generating gross proceeds of $5,281,750[19] - $117,300,000 from the IPO and private placement proceeds were placed in a Trust Account[20] - The Company has until June 28, 2022 (or up to December 28, 2022, with extensions) to complete a Business Combination, after which it will liquidate[26] - As of June 30, 2021, the Company had $938,805 in cash and a working capital of $757,173 outside the Trust Account[21] Note 2 — Summary of Significant Accounting Policies - The Company is an 'emerging growth company' and has elected not to opt out of the extended transition period for complying with new or revised financial accounting standards[32][35] - Offering costs associated with warrant liabilities are expensed as incurred, while those for Public Shares are charged to stockholders' equity[44] - Class A Common Stock subject to possible redemption is classified as temporary equity due to redemption rights outside the Company's control[45] - Net loss per share is calculated using a two-class method, distinguishing between redeemable Class A common stock and non-redeemable Class A and Class B common stock[48] - The Company adopted ASU 2020-06 on January 1, 2021, simplifying accounting for convertible instruments with no impact on financial position, results of operations, or cash flows[56] Note 3 —Public Offering - The Company sold 11,500,000 Units in its Initial Public Offering at a purchase price of $10.00 per Unit[58] - Each Unit consists of one share of Class A common stock and one-half of one redeemable Public Warrant, exercisable at $11.50 per whole share[58] Note 4 — Private Placement - The Sponsor purchased 528,175 Private Placement Units at $10.00 per unit, totaling $5,281,750[62] - Private Placement Units are identical to Public Units but have transfer restrictions and their warrants allow for cashless exercise and registration rights for the Sponsor[63] Note 5 — Related Party Transactions - 2,875,000 Founder Shares (Class B common stock) were issued to the Sponsor for $25,000, representing 20% of post-IPO shares, subject to lock-up[64][66] - The Sponsor loaned the Company up to $300,000 via a non-interest bearing promissory note for IPO expenses; $92,737 was borrowed and repaid on July 7, 2021[67][103] - The Sponsor or its affiliates may provide Working Capital Loans or Extension Loans for Business Combination purposes, which may be repaid or converted into units[68][69] - The Company reimburses Luminous Capital Inc. (an affiliate of the Sponsor) up to $10,000 per month for administrative support[71] Note 6 — Commitments and Contingencies - Holders of Founder Shares, Private Placement Units, and other securities are entitled to registration rights[72] - The underwriter's over-allotment option for 1,500,000 additional Units was exercised in full on June 28, 2021[73] - Underwriting fees include a $1,725,000 cash discount and $4,025,000 deferred fee, payable upon the closing of a Business Combination[74] - The underwriters have a right of first refusal for future equity, convertible, and debt offerings for 12 months from the closing of a business combination[75] Note 7 – Warrant Liability - As of June 30, 2021, there were 5,750,000 Public Warrants and 264,088 Private Placement Warrants outstanding[78] - Public Warrants become exercisable on the later of Business Combination completion or 12 months from IPO closing, and expire five years after Business Combination[79] - The Company may redeem Public Warrants at $0.01 per warrant if the Class A common stock price equals or exceeds $18.00 for 20 trading days within a 30-trading day period[82] - Warrants are classified as derivative liabilities and recorded at fair value due to variable exercise price adjustments and potential for net cash settlement[87][88] Note 8 – Stockholders' Equity - The Company is authorized to issue 1,250,000 preferred shares (none issued), 125,000,000 Class A common shares (1,514,656 outstanding excluding redeemable shares), and 12,500,000 Class B common shares (2,875,000 outstanding)[90][91][92] - Class B common shares automatically convert into Class A common shares upon Business Combination, with an adjustment mechanism to maintain 20% ownership for Founder Shares[94] Note 9 – Fair Value Measurements - Marketable securities held in the Trust Account ($117,290,522) are classified as Level 1 fair value measurements[96] - Public Warrants ($6,493,780) and Private Placement Warrants ($384,067) are classified as Level 3 fair value measurements[96] - Warrants are valued using a binomial Monte-Carlo simulation with Level 3 inputs, including expected stock-price volatility, expected life, and risk-free interest rate[100] - The fair value of derivative warrant liabilities increased by $1,462,306 from issuance on June 28, 2021, to June 30, 2021, due to changes in valuation inputs[101] Note 10 – Subsequent Events - The $92,737 borrowed from the promissory note was fully repaid on July 7, 2021[103] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations The blank check company reported a net loss from inception to June 30, 2021, primarily due to warrant liability changes and offering costs - The Company is a blank check company with no operating revenues to date, focused on identifying a target company for a business combination[106][109] - Net loss from inception (February 26, 2021) through June 30, 2021, was $1,744,522, primarily due to changes in the fair value of warrant liability and offering costs allocated to warrants[110] - As of June 30, 2021, the Company had $938,805 in cash and a working capital of $757,173 available outside the Trust Account[114] - The Sponsor or its affiliates may provide Working Capital Loans or Extension Loans to finance transaction costs or extend the Business Combination period[115][116] Item 3. Quantitative and Qualitative Disclosures About Market Risk Trust Account investments in short-term U.S. government treasury bills are not expected to have material interest rate risk - Investments in the Trust Account are in short-term U.S. government treasury bills or money market funds[134] - The Company does not believe there will be a material exposure to interest rate risk due to the short-term nature of these investments[134] Item 4. Controls and Procedures Management deemed disclosure controls and procedures effective as of June 30, 2021, with no material changes in internal control over financial reporting - Disclosure controls and procedures were evaluated and deemed effective at a reasonable assurance level as of June 30, 2021[137] - No material changes in internal control over financial reporting occurred during the fiscal quarter ended June 30, 2021[138] PART II - OTHER INFORMATION Item 1. Legal Proceedings The Company reported no legal proceedings as of the date of this Quarterly Report on Form 10-Q - No legal proceedings to report[141] Item 1A. Risk Factors No material changes to the risk factors previously disclosed in the final prospectus dated June 23, 2021, were reported - No material changes to the risk factors disclosed in the final prospectus dated June 23, 2021[142] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The Company completed an unregistered private sale of 528,175 Private Placement Units to the Sponsor, placing $117,300,000 from IPO and private placement proceeds into a Trust Account - Private sale of 528,175 Private Placement Units to the Sponsor for $5,281,750 on June 28, 2021, exempt under Section 4(a)(2) of the Securities Act[143] - $117,300,000 from the Initial Public Offering and Private Placement Units was placed in a Trust Account[147] - A total of $1,725,000 in underwriting discounts and commissions and $513,677 for other offering costs were paid, with $4,025,000 in deferred underwriting commissions[147] Item 3. Defaults Upon Senior Securities The Company reported no defaults upon senior securities - No defaults upon senior securities[148] Item 4. Mine Safety Disclosures This item is not applicable to the Company - Not Applicable[149] Item 5. Other Information The Company reported no other information for this period - No other information[149] Item 6. Exhibits This section lists exhibits filed or incorporated by reference into the Quarterly Report on Form 10-Q, including certifications and XBRL documents - Lists various certifications (31.1, 31.2, 31.3, 32.1, 32.2, 32.3) and XBRL documents (101.INS, 101.CAL, 101.SCH, 101.DEF, 101.LAB, 101.PRE) filed or incorporated by reference[151]