S-1/A: SHF Holdings Registers 46.15M Shares for Equity Line

SHF Holdings, Inc. filed an S-1/A registration statement for the potential sale of up to 46,153,846 shares of Class A Common Stock by CREO Investments LLC, potentially raising up to $500 million for the company.

Summary

• SHF Holdings, Inc. is registering up to 46,153,846 shares of Class A Common Stock for resale by CREO Investments LLC, which could provide the company with up to $150.0 million in gross proceeds, potentially increasing to $500.0 million.
• The company will apply 25% of net cash proceeds from sales to CREO towards the redemption of its Series B Preferred Stock.
• Substantial doubt exists about the company's ability to continue as a going concern, with a working capital deficit of $7,381,312 and cash used in operating activities of $1,815,338 for the six months ended June 30, 2025.
• The company reported a net loss of $(1,757,914) for the six months ended June 30, 2025, a significant decline from a net income of $2,991,203 in the prior year.
• Total revenue decreased by 53.3% to $3,777,686 for the six months ended June 30, 2025, compared to $8,088,334 for the same period in 2024.
• Adjusted EBITDA for the six months ended June 30, 2025, was $(2,176,257), down from $2,061,002 in the prior year.
• Material weaknesses in internal control over financial reporting have been identified across multiple areas, including revenue recognition, accounting for financial instruments, forward purchase receivables, going concern assessment, information technology, and stock compensation expense.
• The company's stockholders' deficit of approximately $17.9 million as of June 30, 2025, is $20.4 million below Nasdaq's $2.5 million minimum equity requirement, leading to a deficiency notice.
• Recent capital raising activities include the issuance of Convertible Promissory Notes totaling $687,500, which were exchanged for Series B Preferred Stock and warrants, and a Securities Purchase Agreement for $28.8 million (including $6.3 million cash) in Series B Preferred Stock and warrants.
• Approximately $10.7 million of debt owed to Partner Colorado Credit Union (PCCU) was converted into Series B Preferred Stock and warrants, and a Forward Purchase Agreement was terminated by issuing Series B Preferred Stock and warrants.

Sentiment

Score: 3

Explanation: The company faces severe financial distress, evidenced by substantial doubt about its ability to continue as a going concern, a significant working capital deficit, and a large accumulated deficit. Recent financial performance shows a sharp decline in revenue and a shift from net income to net loss. While new financing has been secured and debt converted, the dilution risk for existing shareholders is extremely high (up to 94% from the CREO equity line alone). The identified material weaknesses in internal controls and ongoing Nasdaq listing compliance issues (stockholders' equity) further undermine confidence. The cannabis industry's federal illegality adds significant regulatory and operational risks. Given these compounding negative factors and the high uncertainty, the overall sentiment is highly negative.

Positives

• Secured an equity line of credit with CREO for up to $150.0 million, with a potential increase to $500.0 million, providing a significant source of future capital.
• Successfully raised approximately $6.3 million in additional cash through the Series B Preferred Stock offering.
• Converted $10.7 million of debt owed to Partner Colorado Credit Union (PCCU) into Series B Preferred Stock and warrants, reducing debt obligations.
• Regained compliance with Nasdaq's minimum bid price requirement.
• Management has implemented a plan to address liquidity challenges, including renegotiating debt terms, offering stock-based compensation, and restructuring the employee base.
• Elimination of indemnification obligations to PCCU for loan-related losses under the Amended Commercial Alliance Agreement (CAA).
• The Amended CAA entitles the company to 100% of investment income earned on CRB funds invested by PCCU, eliminating prior 25% hosting fees.
• Operating expenses for the six months ended June 30, 2025, decreased by 9.7% ($723,007) compared to the prior year, driven by headcount reductions and lower stock compensation.

Negatives

• Substantial doubt exists about the ability to continue as a going concern due to a significant working capital deficit of $7,381,312 and an accumulated deficit of $122,513,459 as of June 30, 2025.
• Operating activities used $1,815,338 in cash for the six months ended June 30, 2025.
• Reported a net loss of $(1,757,914) for the six months ended June 30, 2025, a significant reversal from a net income of $2,991,203 in the prior year.
• Total revenue decreased by 53.3% for the six months ended June 30, 2025, compared to the prior year.
• Adjusted EBITDA for the six months ended June 30, 2025, was negative $(2,176,257) compared to positive $2,061,002 in the prior year.
• Identified material weaknesses in internal control over financial reporting across multiple critical areas.
• Stockholders' deficit of approximately $17.9 million as of June 30, 2025, is $20.4 million below Nasdaq's $2.5 million minimum equity requirement, resulting in a deficiency notice.
• The company's loan program is substantially dependent on PCCU, which may limit growth and diversification.
• The Amended CAA, while simplifying fees, is anticipated to be more expensive than previous disaggregated fees and has been unprofitable year-to-date in 2025.
• Management projects insufficient liquidity to continue operations beyond October 2025 without additional funding.
• Significant dilution risk for existing shareholders from the CREO equity line (up to 94% of outstanding shares if fully utilized at $3.25) and recent Series B Preferred Stock issuance.
• Professional services expenses increased, primarily due to higher legal fees related to ongoing litigation.

Risks

• There is substantial doubt about the company's ability to continue as a going concern.
• Growth is restricted by substantial dependence on Partner Colorado Credit Union (PCCU) for CRB client deposits and loan funding.
• The company faces competition from traditional financial institutions and other lenders and service providers in the cannabis market.
• Volatility in interest rates may adversely affect revenues, profitability, and competitive position.
• Changes in laws, regulations, or rules, or a failure to comply with them, may adversely affect the business, investments, and results of operations.
• Dependence on third-party vendors, including PCCU, for certain services could adversely affect operations if relationships are not managed effectively or terminated.
• Information systems interruptions or security breaches, including cybersecurity threats, could adversely affect operations and client services.
• The company may suffer uninsured losses or material losses in excess of insurance limits.
• An adverse outcome in litigation to which the company is or becomes a party could materially and adversely affect it.
• Material weaknesses in internal control over financial reporting, if not effectively remediated, could impair the ability to produce timely and accurate financial statements or comply with regulations.
• Providing services to financial institutions that serve the state-licensed cannabis industry exposes the company to additional liabilities and regulatory compliance costs due to federal illegality.
• The company, its financial institution customers, and their CRB clients are subject to various laws regarding financial transactions related to cannabis, which could lead to legal claims or adversely affect the business.
• The company may have difficulty using bankruptcy courts due to its involvement in the regulated cannabis industry.
• The conduct of third parties (financial institution customers and CRB clients) may jeopardize the company's business and regulatory compliance.
• Constraints on marketing services due to cannabis regulations could adversely impact results of operations and growth opportunities.
• Service providers to cannabis businesses may be subject to unfavorable U.S. tax treatment under Section 280E of the Internal Revenue Code.
• Cannabis businesses may be subject to civil asset forfeiture by law enforcement.
• Difficulty obtaining various insurances desired to operate the business due to involvement in the cannabis industry may expose the company to additional risk and financial liability.
• There may be difficulty enforcing certain commercial agreements and contracts related to the state-legal cannabis industry.
• Directors, officers, employees, and investors who are not U.S. citizens may face constraints on cross-border travel into the United States because of their involvement in the cannabis industry.
• The company depends on key management personnel and other experienced employees, and their loss could adversely impact operations.
• Failure by directors, officers, or employees to comply with applicable policies, regulations, and rules could materially and adversely affect the company.
• Changes in accounting rules, assumptions, or judgments could materially and adversely affect the company.
• Inability to comply with Nasdaq's continued listing standards, particularly the stockholders' equity requirement, could lead to delisting.
• The market for the company's securities has been volatile and may continue to be volatile, adversely affecting liquidity and price.
• Issuance of additional shares of common or preferred stock, including under the Equity Incentive Plan or the CREO Purchase Agreement, would dilute the interest of existing stockholders.
• Operating results may fluctuate significantly and could fall below expectations, leading to a decline in stock price.
• If securities or industry analysts cease publishing research or publish unfavorable research, the price and trading volume of Common Stock could decline.
• Inability to obtain additional financing to fund operations and growth.
• Anti-takeover provisions in corporate documents and Delaware law could impair takeover attempts.
• Forum selection provisions in the Certificate of Incorporation could limit stockholders' ability to obtain a favorable judicial forum.
• Reliance on JOBS Act exemptions may make Common Stock less attractive to investors.
• It is not possible to predict the actual number of shares sold under the Purchase Agreement, gross proceeds, or the exact dilution from those sales, and the company may not access the full amount available.
• CREO will pay less than the then-prevailing market price for Common Stock, which could cause the price to decline.
• Investors who buy shares from CREO at different times will likely pay different prices.
• Future resales and/or issuances of Common Stock, or the perception of such sales, may cause the market price to drop significantly.
• Proceeds from sales of Common Stock under the Purchase Agreement may be used in ways with which investors may not agree or that may not yield a significant return.

Future Outlook

The company aims to become the cannabis industry's leading financial services provider by expanding relationships with CRBs and partner financial institutions, enhancing lending capabilities, developing additional products, investing in technology, and attracting experienced personnel. It anticipates that favorable policy changes in the cannabis industry, such as the SAFER Banking Act or rescheduling, will positively impact the company. Management believes its established platform and compliance expertise position it to capitalize on industry growth and the demand for compliant banking solutions. However, management projects insufficient liquidity to continue operations beyond October 2025 without additional funding, indicating a challenging short-term outlook.

Management Comments

• "We believe that our unique banking relationships, reputation of reliability in the cannabis industry, as well as our deep expertise and experience in the industry will position us to serve a broad range of cannabis industry participants."
• "We feel our history of developing processes that satisfy regulatory standards has resulted in a solid reputation with related authorities and solidifies our ability to continue to grow existing services and reduces barriers to expanding into new service offerings."
• "Management believes that anything that favorably impacts the cannabis industry will in turn favorably impact the Company."
• "Management remains committed to executing its business plan while addressing the Company’s liquidity needs in a timely and prudent manner."

Industry Context

The cannabis industry is identified as one of the fastest-growing emerging consumer packaged goods markets in the United States, with predictions of expanding from $44 billion in 2025 to $76 billion by 2030. Despite this growth, the industry faces significant challenges including regulatory complexity (federal illegality, Section 280E tax treatment), capital constraints, competition from illicit markets, and limited access to traditional banking services. Potential federal policy changes, such as the SAFER Banking Act or rescheduling cannabis, could significantly improve access to financial services. The company positions itself as a key enabler in this market, offering compliant financial services solutions to financial institutions serving CRBs, leveraging its established platform and compliance expertise to address the industry's unique needs.

Comparison to Industry Standards

• The company operates in an increasingly competitive market for its lending, compliance, client intake, management, and banking services, facing competition from both traditional financial institutions and fintech companies.
• Many competitors are substantially larger and possess considerably greater financial, technical, and marketing resources than the company.
• Traditional financial institutions may have lower costs of funds, greater lending capacity, or higher risk tolerances, potentially increasing competition in providing loans to CRBs.
• The company's value proposition is based on offering a tested and scalable compliance platform that enables financial institutions to serve CRBs without assuming the full burden of creating and operating their own compliance infrastructure.
• Ancillary technology providers also market compliance and monitoring solutions to financial institutions, serving as an alternative to outsourcing arrangements with the company.

Management Changes

Corporate Governance

Legal Proceedings

• On October 17, 2024, the company filed a declaratory judgment action in Denver County District Court against former Abaca shareholders (Daniel Roda, Gregory W. Ellis, and James R. Carroll) concerning a $3.0 million contingent merger consideration payment. The payment was deposited into the court registry on November 21, 2024. Defendants filed a counterclaim on December 19, 2024. On January 16, 2025, the company filed a motion to dismiss counterclaims, and on April 18, 2025, the District Court dismissed Gregory W. Ellis as a counter-plaintiff. The case is proceeding to discovery, with no accrual for loss required as of June 30, 2025.
• A settlement offer of $300,000 was made to a former employee related to employment matters, accrued as of March 31, 2025. The settlement was accepted and finalized in Q3 2025, involving $100,000 in cash payments over 12 months and the issuance of 89,308 shares of Common Stock (valued at $200,000) on July 7, 2025.

Related Party Transactions

• Partner Colorado Credit Union (PCCU) is a related party due to its significant ownership, role as the most significant financial institution customer, sole lending institution, counterparty to the PCCU Note, and holder of the majority of the company's deposits.
• The Amended and Restated Commercial Alliance Agreement (Amended CAA) with PCCU, effective December 31, 2024, extended the term to December 31, 2028, eliminated the company's indemnification obligations for loan-related losses, replaced prior fees with a fixed asset hosting fee, and entitles the company to 100% of investment income earned on CRB funds invested by PCCU. It also introduced a new loan yield allocation formula and penalties for not maintaining Loan-to-Share Ratio thresholds.
• The Senior Secured Promissory Note with PCCU, originally $14.5 million from March 29, 2023, was amended on March 1, 2025, to a principal balance of $10,748,408, with interest-only payments until January 5, 2027, and full repayment by October 5, 2030.
• On September 30, 2025, approximately $10.7 million of outstanding principal under the Loan Agreements (including the Amended PCCU Note) was deemed repaid and cancelled in exchange for 13,436 shares of Series B Preferred Stock and a Series B Warrant to purchase 865,200 shares of Common Stock.
• Terrance Mendez (CEO, Interim CFO, Director), Michael Regan (Chief Investment & Strategy Officer), Jeffrey Kay (Chief Marketing Officer), Richard Carleton (Director), and Margaret Williams (employee) participated in the September 30, 2025, Series B Preferred Stock offering, subject to stockholder approval.
• On September 30, 2025, Exchange and Cancellation Agreements were entered into with Verdun Investments LLC, Vellar Opportunity Fund SPV LLC – Series 1, and Midtown East Management NL, LLC (Sellers), terminating the Forward Purchase Agreement (FPA) in exchange for Series B Preferred Stock and warrants.
• On September 30, 2025, Convertible Promissory Notes totaling $687,500 were exchanged for 825 shares of Series B Preferred Stock and Series B Warrants to purchase 53,127 shares of Common Stock.

Stakeholder Impact

• Shareholders face significant dilution from the CREO equity line (up to 94% of outstanding shares if fully utilized at $3.25 per share) and recent Series B Preferred Stock and warrant issuances. The stock price is expected to remain volatile.
• Employees have been impacted by restructuring efforts and headcount reductions, with stock-based compensation being used in lieu of cash payments to conserve liquidity.
• Financial institution customers, particularly PCCU, continue to rely on the company's compliance platform for serving CRBs. PCCU's debt has been converted to equity, altering its exposure.
• Creditors, specifically PCCU, have seen a significant portion of their debt converted into equity, reducing the company's direct debt obligations to them.
• Regulatory bodies maintain ongoing scrutiny due to the company's involvement in the cannabis industry and the identified material weaknesses in internal controls, as well as Nasdaq listing compliance issues.

Next Steps

• Seek stockholder approval for issuing additional shares of Common Stock to CREO in excess of the 19.99% Exchange Cap.
• File a registration statement on Form S-1 with the SEC by October 29, 2025, to register Common Stock underlying the Series B Preferred Stock and Series B Warrants for resale by buyers.
• Continue to implement management's plan to improve financial condition and operating flexibility, including strategic partnerships, renegotiating debt, stock-based compensation, and employee restructuring.
• Actively engage in discussions with potential investors, lenders, acquirers, investment banks, and strategic partners to secure additional capital.
• Monitor cash flows, reduce discretionary expenditures, and prioritize liquidity preservation.
• Address Nasdaq's deficiency notice regarding stockholders' equity and work to regain compliance.
• Proceed with the discovery phase of the Abaca legal case.
• Evaluate the impact of the One Big Beautiful Bill Act (OBBBA) on financial condition and results of operations, with impacts to be included in Q3 2025 financial statements.

Key Dates

Recommendation

The company is in a precarious financial position, explicitly stating 'substantial doubt about our ability to continue as a going concern' and projecting insufficient liquidity beyond October 2025. While recent capital raises and debt conversions provide some temporary relief, they come with extreme dilution for existing shareholders (up to 94% from the CREO equity line alone). The significant decline in revenue and shift to net losses, coupled with multiple identified material weaknesses in internal controls and ongoing Nasdaq listing non-compliance, paint a dire picture. The inherent risks of operating in the federally illegal cannabis industry further compound these issues. Given the severe financial distress, high dilution, and operational challenges, a strong sell recommendation is warranted to avoid further capital erosion.

Keywords

Cannabis banking, Financial services, Fintech, SEC filing, S-1/A, Equity line, CREO, Nasdaq, Compliance, Risk management, Corporate governance, Capital raise, Dilution, Going concern, Cannabis industry, Partner Colorado Credit Union, Series B Preferred Stock, Warrants