SHF Holdings, Inc. quarterly report, Q1 FY2022

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Business context and reporting period

The supplied filing is Northern Lights Acquisition Corp.’s unaudited Form 10-Q for the quarter ended March 31, 2022—not a filing by SHF Holdings, Inc. Northern Lights was a SPAC with no operating business or revenue, seeking a business combination. On February 11, 2022, it agreed to acquire Safe Harbor Financial (SHF) for $185 million: $115 million in shares and $70 million in cash. A related $60 million PIPE financing was committed, subject to closing conditions.

Financial results and liquidity

  • Revenue: None; the company had not commenced operations.
  • Net income: $784,548 for Q1 2022, versus a $795 loss from inception through March 31, 2021. Q1 income included a $1.50 million noncash gain from revaluing warrant liabilities and $1,117 of unrealized trust-account gains, offset by $719,788 of operating and franchise-tax costs. The prior-period comparison covers only the company’s initial weeks, not a full quarter.
  • Cash flow: $181,638 used in operating activities and $25,000 used in financing activities; cash declined $206,638 to $47,885.
  • Assets and liquidity: Total assets were $117.74 million, including $117.32 million in the Trust Account. Cash outside the Trust Account was $47,885; working capital deficit was $821,478.
  • Liabilities and debt: Total liabilities were $6.44 million, including $1.09 million of current liabilities, $1.32 million of warrant liabilities, and $4.03 million of deferred underwriting fees. The filing reports no long-term debt.
  • Margins: Not meaningful because the company had no revenue or operating business.

Material changes and transaction terms

Compared with December 31, 2021, cash fell from $254,523 to $47,885; current liabilities rose from $475,559 to $1.09 million; and warrant liabilities declined from $2.83 million to $1.32 million. The warrant revaluation was the principal reason reported Q1 net income was positive. Trust assets were nearly unchanged. The proposed SHF purchase and PIPE financing remained conditional; the filing does not report their completion.

Outlook, risks, and unusual items

  • Management aimed to complete the business combination by June 28, 2022, the SPAC’s 12-month deadline. It described possible extensions, funded by sponsor deposits, but acknowledged no assurance of financing or closing.
  • Management stated that failure to complete a combination by the deadline would create substantial doubt about the company’s ability to continue as a going concern. It had only $47,885 of cash outside the Trust Account and might need additional funding.
  • The filing describes a possible extension to 18 months, but gives inconsistent dates: December 28, 2022 in the notes and December 28, 2023 in MD&A. Verify the applicable deadline.
  • Public shareholders could redeem shares in connection with a business combination. Redemptions, transaction financing, dilution from share or preferred-stock issuance, and the ability to meet closing conditions could affect the transaction.
  • Management cited potential adverse effects from COVID-19, the Russia-Ukraine conflict and related sanctions, market volatility, financing availability, and proposed SEC SPAC rules.
  • Disclosure controls were deemed ineffective due to a material weakness in accounting for complex financial instruments; the filing says the weakness had resulted in restatement of prior financial statements. Management reported additional review procedures and ongoing remediation.
  • No legal proceedings were reported. The company said it had no off-balance-sheet arrangements.

Important facts for investors to verify

  1. Confirm issuer identity: this source is Northern Lights Acquisition Corp.’s filing, despite the request metadata naming SHF Holdings, Inc.
  2. Check subsequent filings for whether the SHF transaction and $60 million PIPE closed, and for actual redemption levels and transaction funding.
  3. Resolve the extension-date inconsistency and confirm the applicable business-combination deadline and any extension deposits.
  4. Review the restatement details, remediation progress, and any later updates to the material weakness in financial reporting controls.
  5. Assess the transaction’s final terms, including potential dilution, preferred-stock conversion adjustments, warrants, and cash available after redemptions and fees.