Filing summary
Registrant and period: Despite the request metadata naming SHF Holdings, Inc., this filing is Northern Lights Acquisition Corp.’s unaudited Form 10-Q for the quarter and six months ended June 30, 2022, filed August 22, 2022. Northern Lights was a pre-combination SPAC; it had no operating revenue or business operations. SHF was its proposed acquisition target, not the registrant in this filing.
Financial performance and position
- Revenue and margins: No operating revenue; margins are not applicable. The company reported trust-account interest as non-operating income.
- Net loss: Q2 2022 net loss was $1.83 million, compared with $1.74 million in Q2 2021. Six-month 2022 net loss was $1.04 million; the filing’s comparison is the period from inception through June 30, 2021, so it is not a like-for-like six-month comparison.
- Q2 results drivers: $1.87 million of operating costs included $781,070 of initial expense for the forward-purchase option derivative. Interest income was $145,992. Changes in warrant and forward-purchase derivative fair values also affected reported results.
- Cash flow: Cash used in operating activities was $250,699 for the six months. Cash declined $82,082 to $172,441. The company also received a $1.15 million sponsor-affiliate advance, which it deposited into the trust account to fund an extension.
- Balance sheet and liquidity: Total assets were $119.03 million, including $118.45 million in the trust account. Current liabilities were $2.19 million; total liabilities were $9.55 million, including a $1.15 million sponsor advance, $4.03 million deferred underwriting fee, and $1.39 million warrant liabilities. Working capital deficit was $1.81 million. The filing reports no long-term debt.
Material changes and transaction status
- Northern Lights agreed to acquire SHF for stated consideration of $185 million: $115 million in shares and $70 million in cash. Stockholders approved the transaction on June 28, 2022, but regulatory approvals and other closing conditions remained outstanding.
- The transaction deadline was extended from June 28 to September 28, 2022, following a $1.15 million trust-account deposit. The purchase agreement’s outside date was also amended, with further extension possible through September 28.
- A planned $60 million PIPE financing was intended to help fund the transaction. The investors had a right to terminate because the transaction had not closed by June 30; the company said it was confirming their continued interest.
- Public holders submitted redemption requests for 7,554,784 shares. A forward-purchase arrangement resulted in 3,804,872 shares being purchased and waiving redemption rights; the arrangement also created a $795,942 derivative liability and $781,070 of initial expense.
Outlook, risks and unusual matters
- Management intended to complete the SHF transaction before September 28, 2022, but gave no assurance it would close. If it did not close, further extension funding was uncertain; failure to complete a transaction by the applicable deadline could lead to liquidation.
- Management disclosed substantial doubt about the company’s ability to continue as a going concern beyond September 28 without a business combination or additional funding. Sponsor and affiliate funding was not committed beyond the advance already made.
- The filing identifies risks from redemptions, PIPE-investor withdrawal, regulatory approvals, financing availability, and possible dilution. It also notes potential effects from COVID-19 and the Russia-Ukraine conflict, whose specific impact was undetermined.
- Disclosure controls were deemed ineffective due to a material weakness in accounting for complex financial instruments, which had required a restatement of prior financial statements. Management reported additional review procedures and ongoing remediation efforts.
- Quarterly loss includes substantial derivative fair-value and transaction-related items; it should not be read as operating performance of SHF.
Important facts for investors to verify
- Whether the SHF acquisition closed, whether required regulatory approvals were obtained, and the final transaction terms.
- Whether PIPE investors maintained their $60 million commitments and what financing was ultimately available at closing.
- Final public-share redemptions, trust funds available, and the status and settlement terms of the forward-purchase arrangement.
- How the company addressed its going-concern uncertainty and whether it obtained additional extension funding.
- Remediation of the material weakness and whether subsequent filings report effective disclosure controls.