Filing summary
Entity clarification: This filing is Northern Lights Acquisition Corp.’s Form 10-K, not an operating-company filing by SHF Holdings, Inc. SHF (Safe Harbor Financial) is the proposed acquisition target. The reporting period is the fiscal year ended December 31, 2021; the company began operations in February 2021 as a SPAC.
Business context and proposed transaction
Northern Lights had no operating business or revenue during 2021. Its activities consisted of formation, its June 2021 IPO and the search for a business combination, with a focus on the cannabis industry.
After year-end, on February 11, 2022, the company agreed to acquire all outstanding interests in SHF for $185 million: $115 million in Class A shares and $70 million in cash. The agreement remained subject to customary conditions, including Northern Lights stockholder approval and a minimum of $5,000,001 in tangible net assets at closing.
A related, proposed $60 million PIPE financing would issue 60,000 Series A convertible preferred shares and warrants. Closing is contingent on the business combination.
Financial results and position
| Metric | FY 2021 / December 31, 2021 |
|---|---|
| Revenue | None; no operating revenue was generated. |
| Net income | $1.245 million, including a $2.205 million gain from changes in warrant fair value. This is not an operating-profit measure. |
| Operating costs | $550,343 formation and operating costs; $168,767 franchise tax expense. |
| Operating cash flow | $(548,550) used. |
| Cash outside trust | $254,523; working-capital deficit of $38,537. |
| Trust investments | $117.322 million, held principally in U.S. Treasury investments; intended primarily for a business combination or redemptions, not ordinary operating liquidity. |
| Total assets / liabilities | $117.846 million / $7.327 million. Liabilities included $2.827 million warrant liabilities and a $4.025 million deferred underwriting fee. |
| Debt and margins | No long-term debt reported; margins are not meaningful because there was no revenue. |
The company raised $115 million in its IPO and $5.282 million through sponsor private-placement units. The audited period runs from inception on February 26, 2021 through December 31, 2021; there is no prior-year comparable operating period.
Changes, outlook and risks
- Going concern: Management and the auditor cited substantial doubt about the company’s ability to continue as a going concern if a business combination was not completed by the stated deadline. The auditor’s opinion was unmodified but included a going-concern explanatory paragraph.
- Deadline and funding: The filing states an initial deadline of June 28, 2022, with possible three-month extensions funded by sponsor deposits. It gives conflicting extended deadlines in different places (including December 28, 2023); verify the controlling charter and transaction documents.
- Accounting controls: A material weakness in accounting for complex financial instruments led to restatement of prior financial statements, including reclassification of public shares to temporary equity. Management reported disclosure controls were ineffective as of September 30, 2021 and described ongoing remediation; no auditor attestation on internal controls was provided.
- PIPE dilution and market risk: The proposed preferred stock conversion price can reset downward under specified conditions, and the PIPE warrants and resale registration rights could increase dilution or selling pressure. The filing warns these provisions may adversely affect the Class A share price.
- Transaction and liquidity uncertainty: The deal and PIPE were not completed as of the 10-K. Redemptions, failure to secure funding, or failure to close could prevent the transaction; in liquidation, warrants could expire worthless and trust assets could be exposed to creditor claims.
- Other items: The company reported no pending or contemplated litigation known to management and no off-balance-sheet arrangements. It had no dividend plans before a business combination.
Key facts for investors to verify
- Confirm the business-combination and PIPE status, closing conditions, redemption levels, net cash available, and whether the $70 million cash consideration is fully funded.
- Review the PIPE conversion-price reset, warrant terms, registration rights, and resulting potential dilution under downside share-price scenarios.
- Resolve the filing’s inconsistent extended business-combination deadline and confirm any required sponsor extension deposits.
- Assess remediation of the material weakness and review subsequent filings for any further restatements or control deficiencies.
- Distinguish trust-account assets from cash available for operations; confirm current working capital and financing needs.
- Review SHF’s audited financial statements and operating performance separately; this 10-K does not provide SHF’s revenue, profit, cash flow, or debt metrics.