S-1: SHF Holdings Registers 52.28M Shares for Resale

SHF Holdings, Inc. files an S-1 registration statement for the resale of up to 52.28 million Class A Common Stock by selling stockholders, including shares from recent preferred stock and warrant issuances.

Summary

• SHF Holdings, Inc. (SHFS) has filed an S-1 registration statement for the resale of up to 52,280,646 shares of Class A Common Stock by various selling stockholders.
• The registered shares include 49,993,585 shares from the conversion of Series B Convertible Preferred Stock (at a potential floor conversion price of $1.5528), 1,999,544 shares underlying Series B Warrants (at a floor exercise price of $1.5528), 250,000 shares underlying Abaca Warrants (at an exercise price of $40.00), and 37,517 shares issued to Abaca Holders.
• The company will not receive any proceeds from the sale of Common Stock by the Selling Stockholders; however, it could receive approximately $24.6 million if all outstanding Warrants are exercised in cash at the floor exercise price.
• As of June 30, 2025, the company reported cash and cash equivalents of $247,318, a working capital deficit of $7,381,312, and an accumulated deficit of $122,513,459.
• Management has identified 'substantial doubt' about the company's ability to continue as a going concern, projecting insufficient liquidity to continue operations beyond October 2025.
• For the six months ended June 30, 2025, the company reported a net loss of $(1,757,914), a significant decline from a net income of $2,991,203 for the same period in 2024.
• Total revenue decreased by 53.3% to $3,777,686 for the six months ended June 30, 2025, compared to $8,088,334 in the prior year.
• Adjusted EBITDA for the six months ended June 30, 2025, was $(2,176,257), a substantial decrease from $2,061,002 in the same period of 2024.
• The company has regained compliance with Nasdaq's minimum stockholders' equity requirement (Rule 5550(b)(1)) due to recent preferred equity financing, with stockholders' equity now exceeding $2.5 million.
• A Debt Cancellation Agreement with Partner Colorado Credit Union (PCCU) on September 30, 2025, settled approximately $10.7 million in outstanding debt in exchange for 13,436 shares of Series B Preferred Stock and warrants.
• The Forward Purchase Agreement (FPA) with Midtown East, Verdun, and Vellar was terminated on September 30, 2025, in exchange for Series B Preferred Stock and warrants.
• Material weaknesses in internal control over financial reporting were identified across several areas, including revenue recognition, accounting for financial instruments, forward purchase receivables, going concern assessment, information technology, and stock compensation expense.

Sentiment

Score: 3

Explanation: The company faces severe financial distress, evidenced by 'substantial doubt about its ability to continue as a going concern' and projected insufficient liquidity beyond October 2025. Despite recent capital raises and debt restructuring offering some temporary relief and regaining Nasdaq compliance, the overall financial performance shows significant deterioration with declining revenues and negative adjusted EBITDA. The massive dilution from the registration of over 52 million shares for resale, coupled with identified material weaknesses in internal controls and ongoing regulatory risks in the cannabis industry, indicates a highly precarious financial position and high investment risk.

Positives

• Regained Nasdaq compliance for minimum stockholders' equity (Rule 5550(b)(1)) due to recent preferred equity financing, with stockholders' equity now exceeding $2.5 million.
• Elimination of indemnification obligations to PCCU for loan-related losses under the Amended Commercial Alliance Agreement (CAA).
• Debt restructuring with PCCU, converting approximately $10.7 million debt into Series B Preferred Stock and warrants, and deferring principal payments on the Amended PCCU Note until January 5, 2027, improving short-term liquidity.
• Termination of the Forward Purchase Agreement, simplifying financial instruments and reducing potential future liabilities.
• Facilitated over $25.6 billion in deposit activity across 41 states and territories since 2015, demonstrating significant operational scale and market presence.
• Successfully navigated over 16 state and federal banking exams through its financial institution relationships, reinforcing its compliance expertise.
• Strategic plan includes expanding relationships, enhancing lending, developing new products, investing in technology, and attracting/retaining talent to capitalize on industry growth.

Negatives

• Substantial doubt exists about the company's ability to continue as a going concern, with management projecting insufficient liquidity to continue operations beyond October 2025.
• Reported a significant net loss of $(1,757,914) for the six months ended June 30, 2025, a sharp reversal from a net income of $2,991,203 in the comparable prior-year period.
• Total revenue decreased by 53.3% to $3,777,686 for the six months ended June 30, 2025, primarily due to reductions in account fee income, loan interest income, and investment income.
• Adjusted EBITDA declined significantly to $(2,176,257) for the six months ended June 30, 2025, from $2,061,002 in the prior-year period.
• The company had a working capital deficit of $7,381,312 and cash and cash equivalents of only $247,318 as of June 30, 2025.
• Identified material weaknesses in internal control over financial reporting across multiple critical areas, including revenue recognition, financial instruments, forward purchase receivables, going concern assessment, information technology, and stock compensation expense.
• The Amended Commercial Alliance Agreement with PCCU has been unprofitable year-to-date in 2025 despite significant cost cuts, indicating challenges in its core revenue model.
• The company remains heavily dependent on PCCU for substantially all CRB client deposits and loan funding, which restricts growth and poses concentration risk.
• Increased professional services expenses, primarily due to higher legal fees related to ongoing litigation, impacting profitability.
• The current Nasdaq closing price of $3.78 per share (October 17, 2025) is significantly lower than the exercise/conversion prices of many outstanding warrants and preferred stock, indicating substantial dilution risk for existing shareholders and potential lack of cash exercise for the company.

Risks

• There is substantial doubt as to our ability to continue as a going concern.
• Substantially all of the Company's CRB clients' deposits are currently held at Partner Colorado Credit Union (PCCU), which means that our growth will be restricted until we can enter into agreements with additional financial institutions or directly with CRB clients.
• The Company's loan program is currently substantially dependent on the regulatory restrictions placed on PCCU, currently the largest funding source of loans facilitated by the Company, which may limit the types, terms and amounts of loans that we may offer.
• The Company may face competition from traditional financial institutions and other lenders and service providers for its lending and other services, which may adversely affect the Company's ability to achieve its business goals and its results of operations.
• The soundness of our financial institution customers could adversely affect us.
• Volatility in interest rates may adversely affect our revenues, profitability, and competitive position.
• Changes in laws, regulations or rules, or a failure to comply with any laws, regulations or rules, may adversely affect our business, investments and results of operations.
• The Company is dependent on third parties for certain services, and if we cannot manage our relationships with such third parties, our business, results of operations, financial condition, and cash flows could be adversely affected.
• An information systems interruption or breach in security of the Company's systems could adversely affect us.
• The Company may suffer uninsured losses or suffer 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 us.
• We have identified material weaknesses in our internal control over financial reporting. If the remediation of such material weaknesses are not effective, or if we identify additional material weaknesses in the future or otherwise fail to develop and maintain effective internal control over financial reporting, our ability to produce timely and accurate financial statements or comply with applicable laws and regulations could be impaired.
• The Company provides services to financial institutions that provide banking services to businesses in or ancillary to the state-licensed cannabis industry and the hemp industry, which could expose us to additional liabilities and regulatory compliance cost and adversely impact our business, operations, financial condition, brand and reputation.
• The Company, its financial institution customers and their cannabis related business (CRB) clients are subject to a variety of laws regarding financial transactions related to cannabis, which could subject their CRB clients to legal claims or otherwise adversely affect our business.
• We may have difficulty using bankruptcy courts due to our involvement in the regulated cannabis industry.
• The conduct of third parties may jeopardize our business and regulatory compliance.
• We may be subject to constraints on marketing our services, which could adversely impact our results of operations and our 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.
• Because we provide services to companies that provide services to CRBs, we may have a difficult time obtaining the various insurances that are desired to operate our business, which may expose us to additional risk and financial liability.
• There may be difficulty enforcing certain of our commercial agreements and contracts.
• 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.
• Failure by the Company's directors, officers or employees to comply with applicable policies, regulations and rules could materially and adversely affect us.
• Changes in accounting rules, assumptions or judgments could materially and adversely affect the Company.
• If the Company fails to implement and maintain an effective system of internal controls, it may not be able to accurately determine its financial results or prevent fraud.
• There can be no assurance that we will be able to comply with the continued listing standards of Nasdaq.
• The market for our securities has been volatile and may continue to be volatile, which would adversely affect the liquidity and price of our securities.
• The Company may issue additional shares of common or preferred stock under the Equity Incentive Plan or otherwise, any one of which would dilute the interest of the Company's stockholders and likely present other risks.
• Our operating results may fluctuate significantly and could fall below the expectations of securities analysts and investors due to seasonality and other factors, some of which are beyond our control, resulting in a decline in our stock price.
• If securities or industry analysts do not publish or cease publishing research or reports about the Company, its business, or its market, or if they change their recommendations regarding our Common Stock adversely, then the price and trading volume of the Common Stock could decline.
• We may be unable to obtain additional financing to fund our operations and growth.
• Anti-takeover provisions contained in our Second Amended and Restated Certificate of Incorporation and Bylaws, as well as provisions of Delaware law, could impair a takeover attempt, which could limit the price investors might be willing to pay in the future for our Common Stock.
• Our Second Amended and Restated Certificate of Incorporation provides that the Court of Chancery of the State of Delaware will be the sole and exclusive forum for certain stockholder litigation matters, which could limit our stockholders' ability to obtain a favorable judicial forum for disputes with us or our directors, officers, employees or stockholders.
• The JOBS Act permits emerging growth companies like us to take advantage of certain exemptions from various reporting requirements applicable to other public companies that are not emerging growth companies.
• It is not possible to predict the actual number of shares of our Common Stock, if any, we will sell under the Purchase Agreement, or the actual gross proceeds resulting from those sales or the dilution to you from those sales. Further, we may not have access to the full amount available under the Purchase Agreement.
• The Selling Stockholders will pay less than the then-prevailing market price for our Common Stock, which could cause the price of our Common Stock to decline.
• Investors who buy shares of Common Stock from the Selling Stockholders at different times will likely pay different prices.
• Future resales and/or issuances of shares of Common Stock, including pursuant to this prospectus, or the perception that such sales may occur, may cause the market price of our shares to drop significantly.
• We may use proceeds from sales of our Common Stock made pursuant to the Purchase Agreement in ways with which you may not agree or in ways which 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 new products, investing in technology, and attracting and retaining talent. Management believes that any developments favorably impacting the cannabis industry will, in turn, favorably impact the company. They anticipate continued growth in the total available market for their services, though this growth may be partially offset by increased competition from financial institutions that choose to develop in-house compliance programs rather than outsourcing.

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."
• "We believe there is currently a relatively small subset of the financial services industry willing to provide a full suite of financial services to CRBs and these providers are extremely fragmented."
• "Management remains committed to executing its business plan while addressing the Company’s liquidity needs in a timely and prudent manner."

Industry Context

The U.S. cannabis market is projected to grow significantly from $44 billion in 2025 to $76 billion by 2030, indicating a robust underlying market for the company's services. However, the industry faces substantial headwinds, including complex and conflicting federal and state regulations (e.g., federal illegality, Section 280E tax treatment), high interest rates limiting capital access, competition from illicit markets, and limited access to traditional banking services. Proposed federal legislation like the SAFER Banking Act and STATES 2.0 Act, along with potential cannabis rescheduling, could significantly improve banking access and profitability for CRBs, which would directly benefit the company. The fragmented and underpenetrated market for compliant financial services for CRBs creates a significant opportunity for outsourced solutions, positioning the company to leverage its established track record and compliance expertise.

Comparison to Industry Standards

• The filing notes that many of the company's competitors are substantially larger and have considerably greater financial, technical, and marketing resources. This suggests the company operates at a disadvantage in terms of scale and capital.
• Traditional financial institutions, which may have lower costs of funds, greater lending capacity, or higher risk tolerances, could pose increased competition in providing loans to CRBs, potentially impacting the company's ability to compete effectively.
• The company's value proposition is based on offering a 'tested and scalable compliance platform' to financial institutions, implying a competitive advantage in specialized compliance solutions compared to institutions building in-house capabilities.

Management Changes

Corporate Governance

Legal Proceedings

• The company filed a declaratory judgment action on October 17, 2024, in Denver County District Court against former Abaca shareholders (Daniel Roda, Gregory W. Ellis, and James R. Carroll) regarding a $3.0 million contingent merger consideration payment.
• On November 21, 2024, the company deposited the $3.0 million payment into the court registry, where it remains pending resolution of the dispute.
• The defendants filed a counterclaim on December 19, 2024, alleging breach of contract and related causes of action, with a third-party claim against a board member.
• On January 16, 2025, the company filed a motion to dismiss all counterclaims.
• On April 18, 2025, the District Court dismissed Gregory W. Ellis as a counter-plaintiff and denied a third-party intervention request; the case will proceed to the discovery phase.
• The company made a settlement offer of $300,000 to a former employee related to employment matters, accrued as of March 31, 2025, and finalized in Q3 2025, with $100,000 paid in cash and 89,308 shares of Common Stock (valued at $200,000) issued.

Related Party Transactions

• Partner Colorado Credit Union (PCCU) is a significant related party, holding a substantial ownership interest, serving as the primary financial institution customer, sole lending institution, counterparty to the PCCU Note, and custodian of most deposits.
• The historical Account Servicing Agreement, Support Services Agreement, and Loan Servicing Agreement with PCCU were replaced by the Commercial Alliance Agreement (PCCU CAA) on March 29, 2023, which was further amended on December 31, 2024 (Amended CAA).
• Under the Amended CAA, the company pays PCCU a fixed asset hosting fee based on average daily account balances and receives 100% of the investment income earned on CRB funds invested by PCCU, eliminating prior indemnification obligations for loan losses.
• On September 30, 2025, the company entered into a Debt Cancellation Agreement with PCCU, settling approximately $10.7 million of outstanding debt in exchange for 13,436 shares of Series B Preferred Stock and warrants to purchase 865,200 shares of common stock.
• Terrance Mendez (CEO/Interim CFO), Michael Regan (Chief Investment & Strategy Officer), Jeffrey Kay (Chief Marketing Officer), Richard Carleton (Director), and Margaret Williams (employee) participated in the Series B Preferred Stock offering on September 30, 2025, which is subject to stockholder approval under Nasdaq Rule 5635(c).

Stakeholder Impact

• Shareholders face significant potential dilution from the registration of 52,280,646 shares for resale, representing a substantial increase over the 2,953,473 shares outstanding as of October 16, 2025. This could lead to downward pressure on the stock price.
• Employees have experienced restructuring efforts and headcount reductions, and the company is utilizing stock-based compensation in lieu of cash payments, impacting their immediate cash compensation.
• Customers (financial institutions) benefit from the company's compliance platform for serving CRBs, but the profitability challenges of the Amended CAA may lead to future adjustments in service terms or fees.
• CRB clients continue to have access to compliant banking and lending services through the company's platform and partner financial institutions, which is critical given the industry's limited access to traditional financial services.
• Creditors, particularly PCCU, have seen a significant portion of their debt converted into equity and warrants, and principal payments on the remaining debt deferred, shifting their risk exposure from debt to equity and extending repayment timelines.

Next Steps

• Selling stockholders may offer and sell 52,280,646 shares of Class A Common Stock from time to time.
• The company intends to use any net proceeds from warrant exercises for working capital and general corporate purposes.
• The company anticipates that its Quarterly Report on Form 10-Q for the period ended September 30, 2025, will reflect stockholders' equity exceeding $2.5 million.
• The company believes its stockholders' equity will continue to exceed $2.5 million as of December 31, 2025.
• The company will continue to monitor the Abaca legal case and assess any potential financial exposure as it proceeds to the discovery phase of litigation.
• The company expects to reduce the accrued liability by $200,000 in the third quarter of 2025 related to the former employee settlement.
• The company will continue to monitor the development of new accounting standards and intends to adopt them in accordance with their respective effective dates.
• Management is pursuing strategic partnerships aimed at expanding service offerings to cannabis-related businesses.
• Management is renegotiating terms under its Amended PCCU Note to improve financial flexibility.
• Management is offering stock-based compensation in lieu of cash to conserve liquidity and attract/retain key personnel and vendors.
• Management is restructuring its employee base to align staffing with current operating needs.
• Management is adjusting Board of Directors compensation to further align interests with shareholders through equity incentives.
• Management is actively engaged in discussions with potential investors, lenders, acquirers, investment banks, and strategic partners to secure additional capital through debt and equity financing or other strategic alternatives.
• Management is exploring the potential use of its Nasdaq listing as part of a broader strategy that may include digital assets or treasury-related partnerships.
• The company will include the impact of the One Big Beautiful Bill Act (OBBBA) tax law changes in its financial statements beginning in the quarter ending September 30, 2025.

Key Dates

Recommendation

The company is in a highly precarious financial position, explicitly stating 'substantial doubt about its ability to continue as a going concern' and projecting insufficient liquidity beyond October 2025. This fundamental going concern risk, coupled with a significant net loss, sharply declining revenues, negative adjusted EBITDA, and a substantial working capital deficit, indicates severe operational and financial distress. While recent capital raises and debt restructuring provide some temporary relief and Nasdaq compliance was regained, these measures come at the cost of massive shareholder dilution (over 52 million shares registered for resale vs. ~2.95 million outstanding). The identified material weaknesses in internal controls and the inherent regulatory risks of operating in the federally illegal cannabis industry further compound the uncertainty. Given the high probability of further value erosion and potential for operational failure, a seasoned investor would likely recommend a strong sell.

Keywords

Financial services, Cannabis industry, Fintech, SEC filing, S-1, Nasdaq, SHFS, Compliance, Banking, Lending, CRB, Partner Colorado Credit Union, PCCU, Series B Preferred Stock, Warrants, Capital raise, Going concern, Risk management, Corporate governance, Equity financing, Dilution