SHFS

SHF Holdings, Inc. (SHFS) - Q2 2026 10-Q Summary

Business Context and Reporting Period

Company: SHF Holdings, Inc.
Reporting Period: Quarter and six months ended June 30, 2026
Business Model: SHF provides a proprietary fintech platform enabling financial institutions to offer compliant banking and lending services to cannabis-related businesses (CRBs). The Company is not a bank but acts as a compliance and risk management intermediary.
Key Relationship: Partner Colorado Credit Union (PCCU) is the primary financial institution partner and related party, representing the substantial majority of revenue.

Key Financial Metrics

Material Changes vs. Prior Period

• Revenue Growth: Total revenue increased 4.8% QoQ and 3.5% YTD compared to 2025. This was driven primarily by a 50.7% increase in Loan Program Income, resulting from the Second Amended Commercial Alliance Agreement (CAA) which increased SHF's share of loan income from ~35% to up to 65%.
• Expense Fluctuations: General and Administrative (G&A) expenses increased 93.7% in Q2 and 35.0% YTD, driven by strategic marketing investments and franchise tax variances. However, these were partially offset by a $0.4 million credit benefit in Q2 and $0.7 million YTD related to the remeasurement of financial indemnification liabilities.
• Loss Expansion: Net loss widened significantly due to increased operating expenses, a $0.3 million loss on the disposal of ADTX preferred securities, and $0.2 million in issuance costs from the Equity Line of Credit (ELOC).
• Deemed Dividends: A non-cash deemed dividend of $0.98 million (Q2) and $1.07 million (YTD) was recognized due to the induced conversion of Series B Preferred Stock at a reduced price, increasing the net loss attributable to common stockholders.

Guidance, Outlook, Risks, and Contingencies

• Going Concern: Management has concluded that substantial doubt exists regarding the Company's ability to continue as a going concern for at least 12 months due to recurring losses, negative operating cash flows, and an accumulated deficit of $126.2 million.
• Liquidity Strategy: The Company relies on an Equity Line of Credit (ELOC) allowing up to $150 million in share sales. $1.1 million was raised YTD. Access is conditional on the absence of a "Material Adverse Effect."
• Nasdaq Compliance: The Company received notice of non-compliance with the $1.00 minimum bid price requirement. It has until October 19, 2026, to regain compliance. Additionally, a new Nasdaq rule requiring a $5 million Market Value of Listed Securities (MVLS) is currently stayed but poses a future delisting risk if the stay is lifted.
• Material Litigation: In the SHF Holdings, Inc. v. Roda case, the District Court ruled the Second Amendment to the Abaca Merger Agreement void ab initio. Damages are set for trial in August 2026. The potential loss range is $0 to $7.8 million. A $3.0 million payment is currently held in court registry.
• Internal Controls: A material weakness regarding loan documentation and expected credit loss estimation remains outstanding, though remediation is in progress.

Investor Verification Checklist

• Going Concern Status: Verify the sufficiency of the $5.7 million cash balance against the $2.8 million operating cash burn rate for the first half of 2026.
• Litigation Exposure: Monitor the August 2026 trial date for the Abaca merger dispute and the potential $7.8 million liability exposure.
• Nasdaq Listing: Track the stock price to ensure it meets the $1.00 minimum bid price by October 19, 2026, and monitor the status of the stayed $5 million MVLS rule.
• ELOC Viability: Assess the ability to draw on the ELOC given the current stock price and the "Material Adverse Effect" clause.
• Indemnification Liability: Review the $2.3 million total liability for loan indemnification (Stand-Ready Guarantee and Financial Indemnification) and the assumptions used for credit loss estimates.