Wed, May 21, 10:03 AM (28 days ago)
**SHF Holdings, Inc. (SHFS) Q1 2025 Financial Summary** **Financial Health and Performance:** - **Revenue:** $1,932,352, down 52.30% YoY from $4,050,799. - **Operating Loss:** $1,477,923, compared to a profit of $324,941 in Q1 2024. - **Net Loss:** $313,627, reversing a net income of $2,049,676 in Q1 2024. - **Cash Flow:** Used $1,140,730 in operating activities, down from $1,475,123 generated in Q1 2024. - **Cash and Cash Equivalents:** $931,397, down from $2,324,647 in Q1 2024. - **Working Capital Deficit:** $6,723,895, widened from $983,833 in Q1 2024. **Profit Margins:** - **Operating Margin:** -76.50%, compared to 8.02% in Q1 2024. - **Net Margin:** -16.23%, compared to 50.60% in Q1 2024. **Earnings Changes:** - **EPS (Basic):** -$0.11, compared to $0.74 in Q1 2024. - **EPS (Diluted):** -$0.11, compared to $0.73 in Q1 2024. **Quarterly Performance Discussion:** - **Revenue Decline:** Driven by reductions in account fee income, investment income, and loan interest income. - **Expense Reduction:** Total operating expenses decreased by 8.47%, primarily due to a significant reduction in compensation and employee benefits. - **Cash Flow:** Negative operating cash flow due to decreased revenue and increased expenses. - **Liquidity:** Significant doubt about the ability to continue as a going concern due to liquidity challenges. **Trends and Uncertainties:** - **Revenue Trends:** Declining revenue trends due to reduced depository activity and loan interest income. - **Expense Trends:** Ongoing efforts to optimize talent portfolio and reduce expenses. - **Liquidity Trends:** Need to raise additional debt or equity financing to address liquidity challenges. - **Future Operations Impact:** Potential curtailment of operations or strategic alternatives if sufficient capital is not secured. **Future Outlook:** - **Liquidity Concerns:** Management is focused on executing the business plan while addressing liquidity challenges. - **Strategic Initiatives:** Implementing strategic partnerships, renegotiating senior secured loan, and exploring financing options. - **Going Concern:** The company's ability to continue as a going concern is uncertain due to liquidity challenges and the need for additional financing. **Key Metrics:** - **Average Monthly Ending Deposit Balance:** $97,023,799, down 28.38% YoY. - **Account Fees:** $882,840, down 32.25% YoY. - **Average Active Accounts:** 782, up 5.11% YoY. - **Average Account Balance:** $124,071, down 31.83% YoY. - **Average Fees per Account:** $1,129, down 35.52% YoY. **Management's Plan:** - **Strategic Partnerships:** To broaden revenue base by providing additional financial services to cannabis operators. - **Senior Secured Loan Renegotiation:** To address liquidity challenges. - **Stock-Based Compensation:** To attract and retain talent. - **Board of Directors' Compensation:** To align with stock-based incentives. - **Financing Options:** Exploring with potential investors, lenders, and strategic partners. **Liquidity and Going Concern:** - **Liquidity:** Ability to meet anticipated cash demands, including servicing debt, funding operations, and covering business expenses. - **Going Concern:** Substantial doubt about the ability to continue as a going concern due to liquidity challenges and the need for additional financing. **Legal and Regulatory:** - **Nasdaq Listing:** Non-compliance with continued listing requirements due to stockholders' equity deficit. - **Litigation:** Ongoing legal proceedings, including the Abaca legal case in Denver. **Financial Instruments:** - **Warrants and Derivatives:** Valuation and accounting for public, private placement, PIPE, and Abaca warrants, as well as forward purchase option derivatives. - **Fair Value Measurements:** Use of Level 3 inputs for valuation, including the Black-Scholes model and Monte Carlo Simulation. **Internal Control:** - **Material Weaknesses:** Identified in revenue recognition, accounting for financial instruments, going concern assessment, information technology, forfeiture of stock compensation expense, and accounting for forward purchase receivables. - **Remediation Plans:** Implementing enhanced management review controls and processes to address material weaknesses. **Stockholders' Equity:** - **Reverse Stock Split:** 1-for-20 reverse stock split effective March 14, 2025. - **Preferred Stock:** 111 shares issued and outstanding. - **Common Stock:** 2,786,538 shares issued and outstanding. - **Stock-Based Compensation:** $249,239 recognized in Q1 2025, compared to $612,124 in Q1 2024. **Subsequent Events:** - **Executive Changes:** Resignations and appointments of directors and officers. - **Legal Settlements:** Offer to settle an employment-related legal matter for $300,000 in shares and cash. **Non-GAAP Measures:** - **EBITDA:** -$199,400, compared to $1,960,672 in Q1 2024. - **Adjusted EBITDA:** -$1,227,243, compared to $1,087,360 in Q1 2024. **Conclusion:** SHF Holdings, Inc. faces significant liquidity challenges and uncertainty about its ability to continue as a going concern. The company is implementing strategic initiatives to address these challenges, including raising additional financing, optimizing expenses, and exploring strategic partnerships. However, the outcome remains uncertain, and the company's future operations may be impacted by its ability to secure sufficient capital.