SHF (SHFS) - 2023 Q4 - Annual Report

Financial Performance - For the fiscal year ending December 31, 2023, the Company reported a total revenue of $17,562,903, an increase of 85.29$9,478,819 in 2022[199]. - The Company recognized an Adjusted EBITDA of $3,626,411 for 2023, a significant increase from$1,302,093 in 2022[182]. - Operating expenses surged to $38,275,222 in 2023, a 227.79$11,676,659 in 2022, primarily due to higher compensation and employee benefits[204]. - The Company reported total revenue of $13,836,703 for the year ended December 31, 2023, compared to$8,823,608 for the year ended December 31, 2022, reflecting a significant increase[242]. - Loan interest income grew to $2,972,434 in 2023, a 163.01$1,130,178 in 2022[199]. - The Company incurred an operating loss of $20,712,319 for the year ended December 31, 2023, with cash used in operations amounting to$832,144, compared to cash provided by operations of $1,697,380 in 2022[213][210]. Banking Services and Operations - The Company provides a range of banking services to Cannabis Related Businesses (CRBs), including business checking and savings accounts, cash management accounts, and commercial lending[160]. - The Company’s proprietary platform enhances financial insight for CRBs, allowing them to operate more efficiently in a cash-intensive industry[160]. - The Company serviced 22 loans in 2023, up from 11 loans in 2022, indicating a focus on expanding its lending operations[202]. - The Company anticipates continued growth in account activity and lending as it focuses on enhancing its lending platform[192]. - The Company’s capacity for CRB related loans at 60$77,610,599 as of December 31, 2023, down from $96,683,385 in 2022[242]. Strategic Agreements - The Company entered into a Commercial Alliance Agreement with PCCU on March 29, 2023, to govern lending-related and account-related services[170]. - Under the Commercial Alliance Agreement, the Company is obligated to remit 25$549,000 recognized in Q4 2023[240]. - The Commercial Alliance Agreement includes a fee structure where SHF-serviced loans incur a yearly fee of 0.25% and loans financed and serviced by PCCU incur a fee of 0.35%[238]. - The Commercial Alliance Agreement has an initial term of two years with a one-year automatic renewal unless terminated with 120 days' notice[239]. Financial Position and Capital - As of December 31, 2023, the company reported cash and cash equivalents totaling $4,888,769, a decrease from$8,390,195 as of December 31, 2022[209]. - The company reported a net working capital deficit of $135,355 as of December 31, 2023, raising concerns about its ability to continue as a going concern for at least twelve months[213][214]. - CRB related deposits decreased from$161,138,975 on December 31, 2022, to $129,350,998 on December 31, 2023, indicating a decline in available capital[242]. - The Company’s net worth decreased from$133,231,565 on December 31, 2022, to $81,087,746 on December 31, 2023, reflecting a significant reduction in financial strength[242]. Compliance and Internal Controls - The Company has successfully navigated 16 state and federal banking exams, ensuring compliance in a highly regulated environment[161]. - The Company has identified three material weaknesses in internal controls related to Revenue Recognition, Complex Financial Instruments, and Credit Losses as of December 31, 2023[232]. Impairments and Adjustments - The impairment of goodwill and long-lived intangible assets amounted to$18,907,739 in 2023, reflecting a 100% increase from zero in 2022[204]. - The company recognized a goodwill impairment of $13.2 million and impairments of$1,865,668 for market-related intangible assets and $1,814,795 for customer relationships during the interim assessment[226]. - The forward purchase agreement's receivable value decreased from$37.9 million to $4.6 million due to a reset price adjustment influenced by stock trading values[224]. - The company has adopted the modified retrospective method for credit loss provisioning, resulting in a decrease in provisions[208]. Revenue Recognition Changes - A strategic change in Q4 2023 led to an additional$549,000 in revenue due to a new method for calculating interest on customer deposit balances[218]. - The Company has adopted Federal Reserve's interest rates for customer deposits, leading to a strategic shift in revenue recognition starting from Q4 2023[240].