🧾 What This Document Is

This is a preliminary earnings report (an 8-K filing with an attached press release) from SHF Holdings, Inc., which does business as Safe Harbor Financial. It’s not the final, audited annual report but a first look at their 2025 results. They filed this to give investors the news quickly while they finish their official paperwork, which is delayed.

👉 Why it matters: It signals a major financial reset for the company. Think of it as a "before and after" picture following a massive cleanup.

🏢 What The Company Does

In simple terms, Safe Harbor Financial is a financial services platform for the legal cannabis and hemp industries. Since most large banks won't work with these businesses due to legal complexity, Safe Harbor acts as a specialized middleman, providing banking, lending, and payment processing through a network of partner financial institutions.

👉 Why it matters: They operate in a high-growth but federally complex industry. Their success depends on navigating regulations and forming strong banking partnerships.

💰 Financial Highlights: The Big Picture

The headline is a steep revenue decline, but a dramatic balance sheet repair.

• Full Year 2025 Revenue: $7.7 million, down 50% from $15.2 million in 2024. This was mainly due to a less favorable revenue-sharing agreement in place for most of the year and fewer active customer accounts.
• The Turnaround in Q4: The fourth quarter showed a promising rebound. Revenue grew 12% sequentially (vs. Q3 2025) to $2.1 million. Loan program income specifically jumped 71% quarter-over-quarter.
• The Real Story is the Balance Sheet:
  • Cash: Skyrocketed to $6.8 million from $2.3 million a year ago.
  • Debt: Completely eliminated. They went from $18.3 million in debt to $0.
  • This "recapitalization" in September 2025 wiped out debt and brought in new cash, restoring the company to positive shareholder equity.

🚀 Key Moves: The Recapitalization & New Deal

The transformative event was a "recapitalization" in September 2025. This wasn't just one action but a combination of major moves:

1. Debt Elimination: They wiped out $18.3 million in debt. This is like paying off a massive, burdensome mortgage.
2. New Cash: They raised $6.8 million in new capital.
3. New Partnership Terms: They renegotiated their critical agreement with their primary banking partner, PCCU. The new deal:
   • Extends the partnership to December 31, 2031 (previously set to expire in 2029).
   • Increases Safe Harbor's share of loan program income to up to 65% (from only 35%).
   • Reduces a key "asset hosting fee," saving about $0.2 million annually.

👉 Why it matters: These moves fundamentally changed the company's financial health and future earning potential. The Q4 improvement is the first evidence of the better economics from the new PCCU deal kicking in.

📦 Financial Position: A Clean Slate

The balance sheet summary shows a company that has been financially restructured.

• From Liability-Laden to Asset-Rich: The company transitioned from being weighed down by debt to having a strong cash position of $6.8 million.
• Operational Cleanup: They also addressed internal control problems ("material weaknesses"), having fixed the majority of them by year-end.
• Streamlined Leadership: The board was reduced from 7 to 5 members, and their banking partner PCCU no longer has the right to appoint directors, giving the company more independence.

🔮 What's Next: Entering 2026 with a New Engine

Management is positioning 2026 as the start of a new chapter. With the debt gone and a more profitable partnership in place, they are:

• Focused on Growth: The sequential revenue increase in Q4 is the first proof point of their new, more profitable model.
• Expanding Services: They've launched new offerings beyond core banking, including insurance, payments, and consulting.
• Finishing the Audit: They are working to file their official annual report (10-K) within a 15-day extension. They caution that the preliminary numbers in this report could change after the audit is complete.

⚖️ Big Picture: Strengths & Risks

👍 Strengths:

• Debt-Free Balance Sheet: A clean financial slate is their biggest strength.
• Improved Economics: The new PCCU deal significantly boosts their share of profits from lending.
• Industry Pioneer: As an early mover in cannabis banking, they have experience and established relationships across 41 states.

⚠️ Risks:

• Regulatory Uncertainty: The cannabis industry operates in a legally gray area at the federal level, which is an ever-present risk.
• Execution Risk: They must prove they can grow revenue and profitability under the new model. The 2025 revenue drop shows vulnerability.
• Audit & Reporting: The delayed 10-K and "preliminary" nature of these results mean final numbers could differ.

🧠 The Analogy

Imagine a house that was drowning in mortgage debt and needed a new roof (the old partnership deal). Safe Harbor didn't just fix the leak; they paid off the entire mortgage, got a cash-out refinance, and installed a brand new, more efficient roof that will last for years. Now, they have no debt payments, cash in the bank, and lower operating costs—finally able to focus on growing the value of the home itself.

📇 Key Contacts & People

• Investor Relations: [email protected]
• Media Relations: [email protected]
• Chief Executive Officer: Terrance Mendez

🧩 Final Takeaway

Safe Harbor Financial completed a dramatic financial overhaul in 2025, wiping out all its debt and securing a much more profitable long-term banking partnership. The steep annual revenue decline shows past struggles, but the strong cash position and improved deal terms set the stage for potential recovery and growth in 2026, pending final audit results.