Note 8 - Related Party Transactions

PCCU is considered a related party as it holds a significant ownership interest in the Company, is our most significant financial institution customer, serves as the Company’s sole lending financial institution, is the counterparty to the PCCU Note, and is where we maintain the majority of our deposits. The agreements between PCCU and the Company are as follows:

Commercial Alliance Agreement (the “PCCU CAA”)

On March 29, 2023, the Company and PCCU entered into the PCCU CAA, which was subsequently amended and restated on December 31, 2024. This agreement sets forth the terms and conditions of lending and account-related services, governing the relationship between the Company and PCCU. The PCCU CAA outlined the application, underwriting, loan approval, and foreclosure processes for loans issued by PCCU to CRBs (as defined below), as well as the loan servicing and monitoring responsibilities of both parties.

The PCCU CAA includes procedures to be followed in the event of a loan default to ensure that neither the Company nor PCCU takes title to, or possession of, any cannabis-related assets, including real property that may have served as collateral for loans funded by PCCU under the agreement. A default by either the Company or PCCU occurs in the event of bankruptcy, insolvency, or an inability to pay debts in the ordinary course of business. If a default occurs, no services will be provided under the agreement.

Under the PCCU CAA, PCCU had the right to receive monthly fees for managing loans. For SHF-serviced loans (CRB loans provided by PCCU but primarily handled by SHF), a yearly fee of 0.25% of the remaining loan balance was applied. For loans both financed and serviced by PCCU, a yearly fee of 0.35% on the outstanding balance was charged. These fees were calculated based on the average daily balance of each loan for the preceding month.

Additionally, until December 31, 2024, the Company was obligated under the PCCU CAA to indemnify PCCU from certain default-related loan losses, as fully defined in the agreement.

Furthermore, the PCCU CAA outlined certain fees to be paid to the Company for specified account-related services, including cannabis-related income such as loan origination fees, interest income on CRB-related loans, participation fees, servicing fees, investment income, account activity fees, processing fees, and other revenue. These fees were set at $26.08-$28.69 in 2024.

Regarding CRB deposits held at PCCU, investment and interest income earned on these deposits (excluding interest income on loans funded by PCCU) was shared at a ratio of 25% to PCCU and 75% to the Company. Additionally, PCCU maintained its CRB-related deposits to total assets ratio at 60%, unless otherwise dictated by regulatory, regulator, or policy requirements. The initial term of the PCCU CAA was two years, with a one-year automatic renewal, unless either party provided a one hundred twenty-day written notice prior to the end of the term.

The Amended PCCU CAA extends the term through December 31, 2028, with automatic renewals every two years unless terminated with 12 months’ notice.

The key changes under the Amended PCCU CAA compared to the CAA include:

As of June 30, 2025, the Company’s incremental loan capacity was approximately $6.2 million. The lending capacity limit is based upon an average 30 day CRB daily average related deposits.

The following represents related party balances due from and owed with PCCU as of June 30, 2025 and December 31, 2024 that are on the balance sheet are as follows:

 Schedule of Related Party Balances from Balance Sheet

Of the $247,318 and $2,324,647 of cash and cash equivalents on June 30, 2025 and December 31, 2024, respectively, $235,993 and $2,202,895 of the cash and cash equivalents, respectively, were held in deposit accounts at PCCU.