ITEM 1A RISK FACTORS
You should consider the following risk factors, in addition to the other information presented or incorporated by reference into this Annual Report, in evaluating our business and any investment decision relating to our securities.
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Risks Related to Our SUI Treasury Strategy
Our financial results and the market price of our Common Stock may be affected by the price of SUI.
As part of our capital allocation strategy for assets that are not required to provide working capital for our ongoing operations, we have invested and will continue to invest in SUI. As of February 23, 2026, we held an aggregate of 105,407,044 SUI and loan receivables of 2,961,550 SUI, which we acquired for an aggregate purchase price of approximately $386.5 million, exclusive of fees and expenses, at an average price of $3.56 per SUI. With 80,896,554 million fully adjusted shares issued and outstanding (including unexercised Pre-Funded Warrants) as of February 23, 2026, the Company has grown to approximately 1.34 SUI per share of Common Stock, or $1.17 per share of Common Stock. Our SUI holding (including SUI loan receivables) represents approximately 88.8% of our digital asset holdings, with the remainder being USDC stablecoins at approximately 1.8% and suiUSDe stablecoins approximately 9.4%. The price of SUI has historically been subject to dramatic price fluctuations and is highly volatile. SUI is a highly volatile asset that has traded between $4.33 and $0.85 per SUI on Coinbase in the 12 months preceding February 23, 2026. More recently, during the fourth calendar quarter of 2025, SUI traded between approximately $3.62 and $1.35 per SUI. Moreover, digital assets, such as SUI, are relatively novel. SUI’s initial coin offering took place on April 20, 2023, and Sui’s Mainnet (blockchain protocol) was launched on May 3, 2023. The application of securities laws and other regulations to such assets is unclear in many respects. It is possible that regulators may interpret laws in a manner that adversely affects the liquidity or value of SUI.
Any decrease in the fair value of SUI below our carrying value for such assets could require us to incur a loss due to the decrease in fair market value, and such charge could be material to our financial results for the applicable reporting period, which may create significant volatility in our reported earnings. Any decrease in reported earnings or increased volatility of such earnings could have a material adverse effect on the market price of our Common Stock. In addition, the application of generally accepted accounting principles in the United States, with respect to SUI, may change in the future and could have a material adverse effect on our financial results and the market price of our Common Stock.
In addition, if investors view the value of our Common Stock as dependent upon or linked to the value or change in the value of our SUI holdings, the price of SUI may significantly influence the market price of our Common Stock.
Our SUI treasury strategy has not been tested over an extended period of time or under different market conditions.
We recently undertook a strategic shift and launched the SUI treasury strategy. We are continually examining the risks and rewards of our strategy to acquire and hold SUI. This strategy has not been tested over an extended period of time or under different market conditions. If SUI prices were to decrease or our SUI treasury strategy otherwise proves unsuccessful, our financial condition, results of operations, and the market price of our Common Stock would be materially adversely impacted. Additionally, given that our SUI treasury business has been developed and pursued only for a few months prior to the Annual Report, investors have a relatively limited means to evaluate our performance, its evolution, and the likelihood of our future success.
The prices of digital currencies, including SUI, are highly volatile and may be influenced by regulatory, commercial, and technical factors that are highly uncertain, and fluctuations in the price of SUI are likely to influence our financial results and the market price of our Common Stock.
Fluctuations in the trading prices of digital assets are likely to impact our financial results and the market price of our Common Stock. Our financial results and the market price of our Common Stock and our business and financial condition could be negatively impacted if the price of SUI decreased substantially, including as a result of:
· decreased user and investor confidence in digital assets;
· negative publicity or events relating to digital assets;
· negative or unpredictable media or social media coverage of digital assets;
· changes in consumer preferences and the perceived value of digital assets;
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· national and international economic and political conditions.
The growth of the digital assets industry in general, and the use and acceptance of SUI in particular, as well as other digital assets, may also impact the price of our digital asset holdings and is subject to a high degree of uncertainty. The pace of worldwide growth in the adoption and use of digital assets, and SUI in particular, may depend, for instance, on public familiarity with digital assets, ease of buying and accessing the digital assets, institutional and consumer demand for SUI, and the availability and popularity of alternatives to bitcoin. Even if growth in bitcoin adoption occurs in the near or medium-term, there is no assurance that bitcoin usage will continue to grow over the long-term or that such growth will lead to a growth of the adoption of SUI.
Because SUI has no physical existence beyond the record of transactions on their respective blockchains, a variety of technical factors related to the Sui blockchain could also impact the price of SUI. For example, malicious attacks by stakers, inadequate staking fees to incentivize validating of transactions, hard forks of the blockchain into multiple blockchains, and advances in digital computing, algebraic geometry and quantum computing could undercut the integrity of the blockchain and negatively affect the price of our digital asset holdings. The liquidity of SUI may also be reduced and damage to the public perception of SUI may occur, if financial institutions were to deny banking services to businesses that hold digital assets, provide digital asset-related services or accept digital assets as payment, which could also decrease the price of our digital asset holdings.
The trading prices of many digital assets, including SUI, have experienced extreme volatility in recent periods and may continue to do so. Extreme volatility in the future, including further decline in the trading prices of SUI, could have a material adverse effect on the Company.
The trading prices of many digital assets, including SUI, have experienced extreme volatility in recent periods and may continue to do so. For instance, there were steep increases in the value of certain digital assets over the course of 2021, and multiple market observers asserted that digital assets were experiencing a “bubble.” These increases were followed by steep drawdowns throughout 2022 in digital asset trading prices. SUI was launched in May 2023, and over the course of 2023 and 2024, prices of digital assets continued to exhibit extreme volatility. SUI reached a low price of $0.3639 in October 2023 and a high price of $5.34 on January 4, 2025. As of February 23, 2026, the price of SUI was $0.88 Like many digital assets, SUI surged in value in its initial trading period, but shortly thereafter saw a decline in price, including as a result of the broader sell-off in cryptocurrency markets following the events of October 10 (described below); the price continues to fluctuate.
Extreme volatility may persist. The digital asset markets may still be experiencing a bubble or may experience a bubble again in the future. For example, in the first half of 2022, each of Celsius Network, Voyager Digital Ltd., and Three Arrows Capital declared bankruptcy, resulting in a loss of confidence in participants of the digital asset ecosystem and negative publicity surrounding digital assets more broadly. In November 2022, “FTX” one of the largest digital asset exchanges by volume at the time, halted customer withdrawals amid rumors of the company’s liquidity issues and likely insolvency, which were subsequently corroborated by its CEO. Shortly thereafter, FTX’s CEO resigned, and FTX and many of its affiliates filed for bankruptcy in the United States, while other affiliates have entered insolvency, liquidation, or similar proceedings around the globe, following which the U.S. Department of Justice brought criminal fraud and other charges, and the SEC and CFTC brought civil securities and commodities fraud charges, against certain of FTX’s and its affiliates’ senior executives, including its former CEO, who was found guilty of these criminal charges in November 2023. In addition, several other entities in the digital asset industry filed for bankruptcy following FTX’s bankruptcy filing, such as BlockFi Inc. and Genesis Global Capital, LLC (“Genesis”). In response to these events, the digital asset markets have experienced extreme price volatility and other entities in the digital asset industry have been, and may continue to be, negatively affected, further undermining confidence in the digital asset markets. For example, after October 10, 2025, approximately $19 billion of leveraged positions unwound, exceeding even the FTX collapse in 2022. In 2025, within a few weeks, Bitcoin dropped from the low $120,000s into the low $100,000s and continued to drop further in 2026, while Ether and many smaller tokens suffered double‐digit percentage declines, with some altcoins briefly collapsing to near‐zero on thin order books. Data providers such as CoinGlass recorded more than 1.6 million traders liquidated and total futures open interest shrank by tens of billions of dollars in a day, underscoring how concentrated leverage and fragmented liquidity turned a sharp price move into the largest liquidation event in crypto’s history. These events have also negatively impacted the liquidity of the digital asset markets as certain entities affiliated with FTX engaged in significant trading activity. If the liquidity of the digital asset markets continues to be negatively impacted by these events, digital asset prices, including SUI, may continue to experience significant volatility or price declines, and confidence in the digital asset markets may be further undermined. In addition, regulatory and enforcement scrutiny has been significant, including from, among others, the U.S. Department of Justice, the SEC, the CFTC, the White House and Congress, as well as state regulators and authorities. It is not possible to predict all of the risks that regulatory enforcement may pose to the Company, its service providers or to the digital asset industry as a whole.
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The Sui network utilizes the Move programming language. The use of the Move programming language may make SUI more susceptible to volatility because Move is less widely known than more established programming languages, and developers’ lack of experience with Move could deter the adoption and development of SUI, leading to increased price volatility. Extreme volatility in the future, including further declines in the trading prices of SUI, could have a material adverse effect on the Company.
The value of SUI may be highly volatile and subject to fluctuations due to a number of factors.
Fluctuations in the price of SUI could adversely affect the Company. The market price of SUI may be highly volatile, and subject to a number of factors, including:
· An increase in the global SUI supply;
· Forks in the Sui network;
· An active derivatives market for SUI or for digital assets generally;
· The Company’s own acquisitions or dispositions of SUI.
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In addition, there is no assurance that SUI will maintain its value in the intermediate or long term. The value of SUI as represented by the price quoted on sites such as CoinGecko or by the Company’s principal market may also be subject to momentum pricing due to speculation regarding future appreciation in value, leading to greater volatility that could adversely affect the Company. Momentum pricing is typically associated with growth stocks and other assets whose valuation, as determined by the investing public, accounts for future appreciation in value, if any. The Company believes that momentum pricing of SUI has resulted, and may continue to result, in speculation regarding future appreciation in the price of SUI, inflating and making the price of SUI more volatile. As a result, SUI may be more likely to fluctuate in value due to changing investor confidence, which could impact future appreciation or depreciation in the pricing benchmark and could adversely affect the Company.
The concentration of our SUI holdings could enhance the risks inherent in our SUI treasury strategy.
As of February 23, 2026, we held an aggregate 105,407,044 SUI and loan receivable of 2,961,550 SUI, which represents approximately 88.8% of our digital asset holdings including SUI loan receivable, with the remainder being USDC stablecoins at approximately 1.8% and suiUSDe stablecoins at approximately 9.4%. Our significant concentration of SUI ownership creates risk that a large holder or consortium of SUI holders could obtain effective control over network governance and consensus mechanisms. If a single entity accumulates a sufficient percentage of total SUI tokens, it could potentially influence transaction validation, protocol upgrades, or fee structures, which might adversely impact other stakeholders or destabilize the network. Furthermore, concentration increases the risk of contentious hard forks, which have fragmented their communities and impacted asset values. For example, in 2017 a group within the Bitcoin community advocated for increasing the block size limit to allow for more transactions, which ultimately lead to the creation of Bitcoin Cash, which features a larger block size. Hard forks can trigger significant price fluctuations in both the original and new cryptocurrencies, because speculation and uncertainty surrounding the hard fork can lead to increased volatility, making it difficult for investors to predict price movements. Due to our concentration of SUI in our treasury strategy, any such occurrence could lead to volatility or a decrease in the market price of our Common Stock.
If we fail to implement our SUI business strategy or if our SUI treasury strategy is ineffective, our financial performance could be materially adversely affected.
Our future financial performance and success are dependent in large part upon the effectiveness of our new SUI strategy and our ability to implement our SUI treasury strategy successfully. Implementation of our SUI strategy will require effective management of our operational, financial, and human resources and will place significant demands on those resources. There are risks involved in pursuing our strategy, including those under the caption “Item 1A – Risk Factors -Risks Relating to Our SUI Treasury Strategy”. In addition to the risks set forth elsewhere in this Form 10-K, effectiveness of and the successful implementation of our SUI treasury strategy could also be affected by a number of factors beyond our control, such as increased competition, legal developments, government regulation, general economic conditions, increased operating costs or expenses, and changes in industry trends. We may decide to alter or discontinue certain aspects of our SUI treasury strategy at any time. If we are not able to implement our SUI treasury strategy successfully, our long-term growth and profitability may be adversely affected. Even if we are able to implement some or all of the initiatives of our SUI treasury strategy successfully, our operating results may not improve and could decline substantially.
Our SUI strategy exposes us to risk of non-performance by counterparties
Our SUI strategy exposes us to the risk of non-performance by counterparties, whether contractual or otherwise. Risk of non-performance includes inability or refusal of a counterparty to perform because of a deterioration in the counterparty’s financial condition and liquidity or for any other reason. For example, our execution partners, custodians, or other counterparties might fail to perform in accordance with the terms of our agreements with them, which could result in a loss of SUI, a loss of the opportunity to generate funds, or other losses.
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Custodial arrangements pose additional risks. Our primary counterparty risk with respect to our SUI is custodian performance obligations under the custody arrangement we have entered into. BitGo is the custodian for all of our SUI and could experience bankruptcy or insolvency. Although BitGo has an insurance policy supporting its cold wallets, the Company has not purchased any additional insurance cover, and BitGo is not FDIC-insured. FTX, a leading cryptocurrency exchange, filed for bankruptcy in November 2022 following an estimated $8 billion liquidity shortfall due to a surge of withdrawals from the exchange, forcing the exchange to halt customer withdrawals. A series of additional recent high-profile bankruptcies, closures, liquidations, regulatory enforcement actions and other events relating to companies operating in the digital asset industry, including the filings for bankruptcy protection by Three Arrows Capital, Celsius Network, Voyager Digital, and Genesis Global Capital, the closure or liquidation of certain financial institutions that provided lending and other services to the digital assets industry, including Signature Bank and Silvergate Bank, SEC enforcement actions against Coinbase, Binance Holdings Ltd. (since withdrawn), and Kraken, the placement of Prime Trust, LLC into receivership following a cease-and-desist order issued by Nevada’s Department of Business and Industry, and the filing and subsequent settlement of a civil fraud lawsuit by the New York Attorney General against Genesis Global Capital, its parent company Digital Currency Group, Inc., and former partner Gemini Trust Company have highlighted the perceived and actual counterparty risk applicable to digital asset ownership and trading. Although these bankruptcies, closures and liquidations have not resulted in any loss or misappropriation of our SUI, nor have such events adversely impacted our access to our SUI, legal precedent created in these bankruptcy and other proceedings may increase the risk of future rulings adverse to our interests in the event one or more of our current and future custodians becomes a debtor in a bankruptcy case or is the subject of other liquidation, insolvency or similar proceedings. If a similar bankruptcy event occurred for BitGo, there is a risk of partial or total loss of our SUI holdings and delays in asset recovery, which could materially impact financial condition and operations.
While our custodian is subject to regulatory regimes intended to protect customers in the event of a custodial bankruptcy, receivership or similar insolvency proceeding, no assurance can be provided that our custodially-held SUI will not become part of the custodian’s insolvency estate if our custodian enters bankruptcy, receivership or similar insolvency proceedings. Additionally, if we pursue any strategies to create income streams or otherwise generate funds using our SUI holdings, we would become subject to additional counterparty risks. Any significant non-performance by counterparties, including in particular the custodian with which we custody substantially all of our SUI, could have a material adverse effect on our business, prospects, financial condition, and operating results.
We intend to mitigate counterparty risks through various measures, including maintaining substantially all of our SUI with BitGo, a well known custodian, and negotiating contractual terms designed to confirm that our custodially‐held SUI remains our property and is not subject to claims of a custodian’s creditors. However, insolvency law related to the custodial holding of digital assets is still developing, and there is no guarantee that these measures would be upheld in an insolvency proceeding. If custodially‐held SUI were nevertheless deemed property of a custodian’s bankruptcy estate, we could be treated as a general unsecured creditor, which could restrict or prevent our ability to exercise ownership rights and could result in a partial or complete loss of the associated value. Even if we ultimately prevailed in asserting our ownership rights, access to our SUI could be delayed or otherwise impaired during the pendency of any insolvency proceeding. Any such outcome could materially adversely affect our financial condition and the market price of our Common Stock.
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Shareholders may not receive the benefits of any forks or airdrops.
In addition to forks, a digital asset may become subject to a similar occurrence known as an “airdrop.” In an airdrop, the promotors of a new digital asset announce to holders of another digital asset that such holders will be entitled to claim a certain amount of the new digital asset for free, based on the fact that they hold such other digital assets. Airdrops may be conducted by sending a token to the holders of set amounts of SUI. Alternatively, airdrops may involve a user being entitled to claim tokens on a decentralized application, second-layer network or entirely separate digital asset network. As such, a user entitled to receive airdrops may be required to take little or significant actions in order to receive such airdropped tokens. Shareholders may not receive the benefits of any forks, the Company may not choose, or be able, to participate in an airdrop, and the timing of receiving any benefits from a fork, airdrop or similar event is uncertain.
A right to receive any such benefit of a hard fork or airdrop is referred to as an “Incidental Right” and any digital asset acquired through an Incidental Right as “IR Assets.” There are likely to be operational, tax, securities law, regulatory, legal and practical issues that significantly limit, or prevent entirely, shareholders’ ability to realize a benefit, through their interests in the Company, from any such Incidental Rights or IR Assets.
The Company may choose to evaluate any such fork, airdrop or similar occurrence on a case-by-case basis in consultation with the Company’s legal advisors, tax consultants and the Asset Manager. In determining whether to attempt to acquire and/or retain any Incidental Right or IR Asset, the Company expects to take into consideration whatever factors it deems relevant in their discretion, including, without limitation:
In determining whether the Incidental Right or IR Asset is, or may be, a security under federal securities laws, the Company takes into account a number of factors, including the definition of a “security” under Section 2(a)(1) of the Securities Act and Section 3(a)(10) of the Exchange Act, SEC v. W.J. Howey Co., 328 U.S. 293 (1946) and the case law interpreting it, as well as reports, orders, press releases, public statements and speeches by the SEC providing guidance on when a digital asset is a “security” for purposes of the federal securities laws.
The Company intends to evaluate each fork, airdrop or similar occurrence on a case-by-case basis in consultation with the Company’s legal advisors, tax consultants, and may decide to abandon any Incidental Rights or IR Asset resulting from a hard fork, airdrop or similar occurrence should the Board conclude, in its discretion, that such abandonment is in the best interests of the Company.
In the event that any forks or airdrops are in fact considered to be an asset of the Company at any point in time, notwithstanding the discussion above, the assets will be valued in a manner consistent with ASC-820, U.S. “GAAP”, and the identification of a principal market for the asset.
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Our SUI holdings and other digital asset holdings are less liquid than our existing cash and cash equivalents and may not be able to serve as a source of liquidity for us to the same extent as cash and cash equivalents.
Historically, the cryptocurrency markets have been characterized by significant volatility in price, limited liquidity and trading volumes compared to sovereign currencies markets, relative anonymity, a developing regulatory landscape, potential susceptibility to market abuse and manipulation, compliance and internal control failures at exchanges, and various other risks inherent in its entirely electronic, virtual form and decentralized network. During times of market instability, we may not be able to sell our SUI and other digital assets at favorable prices or at all. Further, SUI and other digital assets we hold with our custodians and transact with our trade execution partners does not enjoy the same protections as those available to cash or securities deposited with or transacted by institutions subject to regulation by the Federal Deposit Insurance Corporation or the Securities Investor Protection Corporation. Additionally, almost all of our digital asset holdings are comprised of SUI and 99% of our SUI is being staked. The staking process is continuously adjusted in scale, in line with network and market conditions, with adjustments aimed to ensure the Company maintains sufficient liquidity for redemptions on any given business day but any such adjustments are subject to a one-day unbonding period. Finally, we may be unable to enter into term loans or other capital raising transactions collateralized by our unencumbered SUI or otherwise generate funds using our SUI holdings, including in particular during times of market instability or when the price of SUI has declined significantly. If we are unable to sell our SUI or other digital assets, enter into additional capital raising transactions using SUI or other digital assets as collateral, or otherwise generate funds using our SUI or other digital assets holdings, or if we are forced to sell our SUI or other digital assets at a significant loss, in order to meet our working capital requirements, our business and financial condition could be materially adversely impacted.
Exposure to market abuse and manipulation may affect the market price of SUI.
We are also exposed to market manipulation risks such as front-running and wash trading, which risk is enhanced due to the concentration of SUI in our treasury strategy. We have made significant investments in SUI, and plan to continue to do so in the future. Cryptocurrency markets, including those for SUI, may be susceptible to market abuse and manipulation, such as wash trading, coordinated pump-and-dump schemes, spoofing, and other forms of manipulative activity. Sophisticated traders or entities with privileged access to order flow may exploit weaknesses in exchange infrastructure to execute trades ahead of pending orders (front-running), artificially inflate trading volumes (wash trading), or otherwise distort the market price of SUI. Such activities can reduce market integrity and liquidity and create material volatility or losses for holders like us, which could create further risks to us as a result of our concentrated holding of SUI in our treasury strategy. If SUI is affected by these activities, we may experience substantial fluctuations in the fair value of its investment, which could negatively affect our financial condition, results of operations, and reputation. Further, regulatory oversight of cryptocurrency markets is evolving, and there is no assurance that existing or future regulations or market mechanisms will effectively deter or mitigate the impact of market manipulation. As a result, we remain exposed to additional risks and uncertainties relating to the price and liquidity of SUI, which may result in financial loss or impairment of value in its investment.
The failure, insolvency, or mismanagement of our custodians and trade execution partners may result in the partial or total loss of our SUI holdings, delays or failures in executing trades, or other disruptions to liquidity and access.
Our significant investment in SUI depends on third‐party custodians and trade execution partners for the safekeeping, transfer, and management of our digital assets. If any of these service providers were to experience financial distress, operational failure, insolvency, security breaches, or other forms of mismanagement, we could suffer partial or total loss of our SUI holdings, delays or failures in executing trades, or broader disruptions to liquidity and access.
The digital asset industry has experienced several high‐profile custodial and exchange failures. For example, in November 2022, FTX—a major global cryptocurrency exchange—filed for bankruptcy following an estimated $8 billion liquidity shortfall after a surge in customer withdrawals, resulting in the suspension of withdrawals. Public reports indicated that this collapse stemmed from operational mismanagement, including misuse of customer funds, inadequate financial controls, and overreliance on its proprietary FTT token. Events such as these highlight the operational, financial, and governance vulnerabilities that can exist within digital asset service providers.
Many custodians and trade execution partners operate in a rapidly evolving regulatory environment and may lack the robust risk management frameworks, compliance programs, and operational controls typically associated with traditional financial institutions. In addition, cyberattacks, fraud, system failures, and other security incidents affecting these providers could lead to loss of assets or prolonged service interruption.
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Although we rely on third‐party custodians—such as BitGo, the custodian of our SUI holdings—who we believe implement security measures aligned with industry best practices, there can be no assurance that these measures will be effective. As the size of our SUI holdings grows, we may become a more attractive target for malicious actors. If we or any of our custodians are unable to identify, mitigate, or prevent new or evolving security threats, our digital assets could be subject to theft, loss, destruction, or other compromise.
Any inability of our custodians or trade execution partners to safeguard our assets, maintain operational continuity, or perform in accordance with their obligations could materially adversely affect our financial condition, operating results, and reputation.
Internal control failures may occur at BitGo, or other cryptocurrency custodians or exchanges we may utilize in the future.
The security and accessibility of our SUI assets are, in part, dependent on the integrity and reliability of the cryptocurrency custodians and exchanges used to hold, trade, or manage SUI. We currently utilize BitGo as custodian to hold all of our SUI assets. BitGo is a digital asset security firm established in 2013. Many cryptocurrency custodians, including BitGo, are relatively new and unregulated, and may be subject to internal control failures, including inadequate cybersecurity measures, poor risk management practices, or operational errors. Such failures can lead to asset loss, theft, suspension or freezing of accounts, delays in executing trades, or compromised private information. If a custodian or exchange we utilize to hold our SUI experiences an internal control failure, we may suffer partial or total loss of our SUI holdings, incur financial losses, experience disruptions in liquidity, or face reputational harm. Further, the regulatory environment relating to internal controls at cryptocurrency custodians and exchanges remains uncertain and fragmented, increasing the risk of internal control failures. There can be no assurance that our SUI assets will not be affected by such incidents, and the occurrence of internal control failures could materially adversely impact our financial condition and results of operations.
If we or our third-party service providers experience a security breach or cyberattack and unauthorized parties obtain access to our SUI, or if our private keys are lost or destroyed, or other similar circumstances or events occur, we may lose some or all of our SUI and our financial condition and results of operations could be materially adversely affected.
Substantially all of the SUI we own is held in custody accounts at BitGo, a well-known custodian. Security breaches and cyberattacks are of particular concern with respect to our SUI. SUI and other blockchain-based cryptocurrencies and the entities that provide services to participants in the SUI ecosystem have been, and may in the future be, subject to security breaches, cyberattacks, or other malicious activities. For example, in October 2021 it was reported that hackers exploited a flaw in the account recovery process and stole from the accounts of at least 6,000 customers of the Coinbase exchange, although the flaw was subsequently fixed and Coinbase reimbursed affected customers. Similarly, in November 2022, hackers exploited weaknesses in the security architecture of the FTX Trading digital asset exchange and reportedly stole over $400 million in digital assets from customers. A successful security breach or cyberattack could result in:
· harm to our reputation and brand;
Further, any actual or perceived data security breach or cybersecurity attack directed at other companies with digital assets or companies that operate digital asset networks, regardless of whether we are directly impacted, could lead to a general loss of confidence in the broader Sui ecosystem or in the use of the Sui network to conduct financial transactions, which could negatively impact us.
Attacks upon systems across a variety of industries, including industries related to SUI, are increasing in frequency, persistence, and sophistication, and, in many cases, are being conducted by sophisticated, well-funded and organized groups and individuals, including state actors. The techniques used to obtain unauthorized, improper or illegal access to systems and information (including personal data and digital assets), disable or degrade services, or sabotage systems are constantly evolving, may be difficult to detect quickly, and often are not recognized or detected until after they have been launched against a target. These attacks may occur on our systems or those of our third-party service providers or partners. We may experience breaches of our security measures due to human error, malfeasance, insider threats, system errors or vulnerabilities or other irregularities. In particular, we expect that unauthorized parties will attempt to gain access to our systems and facilities, as well as those of our partners and third-party service providers, through various means, such as hacking, social engineering, phishing and fraud. Threats can come from a variety of sources, including criminal hackers, hacktivists, state-sponsored intrusions, industrial espionage, and insiders. In addition, certain types of attacks could harm us even if our systems are left undisturbed. For example, certain threats are designed to remain dormant or undetectable, sometimes for extended periods of time, or until launched against a target and we may not be able to implement adequate preventative measures. Further, there has been an increase in such activities due to the increase in work-from-home arrangements. The risk of cyberattacks could also be increased by cyberwarfare in connection with the ongoing Russia-Ukraine and Israel-Hamas conflicts, or other future conflicts, including potential proliferation of malware into systems unrelated to such conflicts. Any future breach of our operations or those of others in the Sui industry, including third-party services on which we rely, could materially adversely affect our financial condition and results of operations.
We may require significant additional capital to expand our SUI treasury strategy; if we cannot raise such capital on acceptable terms, our business and share price may be adversely affected.
We may require or choose to seek additional financing to expand our SUI treasury strategy. We cannot be certain that such financing will be available on favorable or acceptable terms, if at all, and our ability to secure such capital may be significantly impacted by the valuation and inherent volatility of SUI. If we raise additional funds through the issuance of Common Stock, preferred stock, or other equity-linked securities, our existing stockholders will experience immediate and potentially significant dilution of their ownership and voting power. Furthermore, any issuance of debt or senior equity instruments could subject us to restrictive operational covenants and result in the subordination of the rights of our common stockholders to superior liquidation and dividend preferences. Our inability to raise additional capital on acceptable terms in the future may prevent us from executing our SUI treasury strategy or maintaining our competitive position, which could result in a material decrease in our stock price and the loss of all or part of your investment.
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We may be unable to enter into term loans or other capital raising transactions collateralized by our unencumbered SUI or otherwise generate funds using our SUI holdings, including in particular during times of market instability or when the price of SUI has declined significantly.
Although we do not currently intend to do so, the ability to access liquidity or raise additional capital through transactions such as term loans collateralized by our SUI holdings is subject to evolving market practices and regulatory frameworks. The digital asset lending and collateralization markets are relatively new, with limited standardized processes, fluctuating asset valuations, and a small pool of counterparties willing to accept SUI as collateral. There can be no assurance that we will be able to enter into term loans or other capital raising transactions using its SUI holdings on favorable terms, or at all. If we are not able to convert its SUI holdings into liquidity or use them as collateral for borrowing, its financial flexibility and ability to pursue growth opportunities, meet obligations, or respond to changing market conditions could be materially adversely affected.
We may be subject to regulatory developments related to cryptocurrency assets and cryptocurrency asset markets, which could adversely affect our business, financial condition, and results of operations.
As SUI and other digital assets are relatively novel and the application of state and federal securities laws and other laws and regulations to digital assets is unclear in certain respects, it is possible that regulators in the United States or foreign countries may interpret or apply existing laws and regulations in a manner that adversely affects the price of SUI. The U.S. federal government, states, regulatory agencies, and foreign countries may also enact new laws and regulations, or pursue regulatory, legislative, enforcement or judicial actions, that could materially impact the price of SUI or the ability of individuals or institutions such as us to own or transfer SUI.
The U.S. federal government, states, regulatory agencies, and foreign countries may also enact new laws and regulations, or pursue regulatory, legislative, enforcement or judicial actions, that could materially impact the price of SUI or other forms of digital assets or the ability of individuals or institutions such as us to own or transfer SUI. For example, the U.S. executive branch, the SEC, the European Union’s Markets in Crypto Assets Regulation, among others have been active in recent years, and in the U.K., the Financial Services and Markets Act 2023, or FSMA 2023 became law. It is not possible to predict whether, or when, any of these developments will lead to Congress granting additional authorities to the SEC, “CFTC”, or other regulators, or whether, or when, any other federal, state or foreign legislative bodies will take any similar actions. It is also not possible to predict the nature of any such additional authorities, how additional legislation or regulatory oversight might impact the ability of digital asset markets to function or the willingness of financial and other institutions to continue to provide services to the digital assets industry, nor how any new regulations or changes to existing regulations might impact the value of digital assets generally. The consequences of increased regulation of digital assets and digital asset activities could adversely affect the market price of SUI we intend to own, and in turn adversely affect the market price of our Common Stock. See “Item 1Business – Regulation of SUI and Government Oversight” for additional information.
Moreover, the risks of us engaging in a SUI treasury strategy have created and could continue to create complications due to the lack of experience that third parties have with companies engaging in such a strategy, such as increased costs of director and officer liability insurance or the potential inability to obtain such coverage on acceptable terms in the future.
The growth of the digital assets industry in general, and the use and acceptance of SUI in particular, may also impact the price of SUI and is subject to a high degree of uncertainty. The pace of worldwide growth in the adoption and use of SUI may depend on public familiarity with digital assets, ease of buying, accessing or gaining exposure to SUI, institutional demand for SUI as an investment asset, the participation of traditional financial institutions in the digital assets industry, and the availability and popularity of alternatives to SUI. Even if growth in SUI usage occurs in the near or medium-term, there is no assurance that SUI usage will continue to grow over the long-term.
The liquidity of SUI may also be impacted to the extent that changes in applicable laws and regulatory requirements negatively impact the ability of exchanges and trading venues to provide services for SUI and other digital assets.
Changes in the accounting treatment of our SUI holdings could have significant accounting impacts, including increasing the volatility of our results.
We have adopted Accounting Standards Update (“ASU”) 2023-08, which requires in-scope crypto assets to be measured at fair value each reporting period with change recognized in net income, and to be presented separately from other intangible assets. SUI tokens meet the scope criteria of ASU 2023-08; accordingly, our SUI holdings are measured at fair value through net income.
Given the price volatility of SUI, we expect the adoption of ASU 2023-08 to increase the volatility of our financial results and to affect the carrying value of our SUI on our balance sheet in future periods. Recognizing fair value changes in GAAP net income may have adverse tax consequences, depending on applicable tax rules.
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If we violate anti-money laundering or sanctions rules, we could be subject to regulatory enforcement action resulting in significant fines, which could materially adversely affect our financial performance.
While we maintain anti-money laundering (AML), know-your-customer (KYC), and other due diligence procedures to screen counterparties, these processes may not be foolproof. If a sanctioned entity or individual evades detection and we complete a transaction with such a party, we could be subject to regulatory and legal penalties, reputational damage, and the forced unwinding of affected transactions. In 2022, several major cryptocurrency companies faced significant reputational damage and incurred substantial costs for remediation efforts after their transactions were linked to sanctioned addresses by regulators like the Office of Foreign Assets Control (OFAC). On October 11, 2022, OFAC announced a more than $24.28 million settlement with Bittrex Inc., a cryptocurrency exchange. The settlement resolved 116,421 transactions with persons with an internet protocol (IP) address or physical address in the Crimea region of Ukraine, Cuba, Iran, Sudan and Syria that resulted in violations of multiple U.S. sanctions programs. If we enter into transactions involving our SUI holdings, there is risk over similar oversights, which could lead to significant fines from OFAC and impact our financial results.
Absent federal regulations, there is a possibility that SUI may be deemed to be a “security.” Any classification of SUI as a “security” would subject us to additional regulation and could materially impact the operation of our business and financial conditions.
We believe that SUI is not a security, but neither the SEC nor any other U.S. federal or state regulator has publicly stated whether they agree with our assessment. Despite the Trump Administration’s Executive Order titled “Strengthening American Leadership in Digital Financial Technology” which includes as an objective, “protecting and promoting the ability of individual citizens and private sector entities alike to access and ... to maintain self-custody of digital assets,” SUI has not yet been classified with respect to U.S. federal securities laws. Therefore, while (for the reasons discussed below) we have concluded that the SEC is not likely to classify SUI as a “security” within the meaning of the U.S. federal securities laws, and so registration of the Company under the 1940 Act is therefore not required under the applicable securities laws, we acknowledge that a regulatory body or federal court may determine otherwise. Our conclusion, even if reasonable under the circumstances, would not preclude legal or regulatory action based on a determination by the SEC that SUI is a “security” requiring us to register as an investment company under the 1940 Act.
We have adapted our process for analyzing the U.S. federal securities law status of SUI and other cryptocurrencies over time, as guidance and case law have evolved. As part of our U.S. federal securities law analysis, we take into account a number of factors, including the various definitions of “security” under U.S. federal securities laws and federal court decisions interpreting the elements of these definitions, such as the U.S. Supreme Court’s decisions in the Howey and Reves cases, as well as court rulings, reports, orders, press releases, public statements, and speeches by the SEC Commissioners and SEC Staff providing guidance on when a digital asset or a transaction to which a digital asset may relate may be deemed a security by the SEC for purposes of U.S. federal securities laws. Our position that we believe the SEC would not view SUI as a “security” is premised, among other reasons, on our conclusion SUI does not meet the elements of the Howey test. Among the reasons for our conclusion that SUI is not a security is that holders of SUI do not have a reasonable expectation of profits from our efforts or the efforts of the Sui Foundation or any other enterprise in respect of their holding of SUI. Also, SUI ownership does not convey the right to receive any interest, rewards, or other returns.
We acknowledge, however, that the SEC, a federal court or another relevant regulatory entity with jurisdiction or other enforceable authority over us could take a different view. Application of securities laws to the specific facts and circumstances of digital assets is complex and subject to change. Our conclusion, even if reasonable under the circumstances, would not preclude legal or regulatory action based on a finding that SUI, or any other digital asset we might hold, is a “security.” As such, we are at risk of enforcement proceedings against us, which could result in potential injunctions, cease-and-desist orders, fines, and penalties if SUI was determined to be a security by a regulatory body or a court. Such developments could subject us to fines, penalties, and other damages, and adversely affect our business, results of operations, financial condition, and prospects.
If we were deemed to be an investment company under the 1940 Act, applicable restrictions likely would make it impractical for us to continue segments of our business as currently contemplated.
Under Sections 3(a)(1)(A) and (C) of the 1940 Act, a company generally will be deemed to be an “investment company” if (i) it is, or holds itself out as being, engaged primarily, or proposes to engage primarily, in the business of investing, reinvesting, or trading in securities or (ii) it engages, or proposes to engage, in the business of investing, reinvesting, owning, holding, or trading in securities and it owns or proposes to acquire investment securities having a value exceeding 40% of the value of its total assets (exclusive of U.S. government securities, shares of registered money market funds under Rule 2a-7 under the 1940 Act, and cash items) on an unconsolidated basis. Rule 3a-1 under the 1940 Act generally provides that, notwithstanding the Section 3(a)(1)(C) test described in clause (ii) above, an entity will not be deemed to be an “investment company” for purposes of the 1940 Act if no more than 45% of the value of its assets (exclusive of U.S. government securities, shares of registered money market funds under Rule 2a-7 under the 1940 Act, and cash items) consists of, and no more than 45% of its net income after taxes (for the past four fiscal quarters combined) is derived from, securities other than U.S. government securities, shares of registered money market funds under Rule 2a-7 under the 1940 Act, securities issued by employees’ securities companies, securities issued by qualifying majority owned subsidiaries of such entity, and securities issued by qualifying companies that are controlled primarily by such entity. We do not believe that we are an “investment company” as such term is defined in either Section 3(a)(1)(A) or Section 3(a)(1)(C) of the 1940 Act.
A component of our business—our legacy finance business—focuses on providing short-term specialty finance solutions primarily to private businesses, micro- and small-cap public companies and high-net-worth individuals. To avoid becoming subject to regulation under the 1940 Act, we periodically monitor our investment holdings as a whole with a view towards ensuring that investments and other holdings which may be considered “investment securities” do not comprise more than 40% of our total assets. We undertake this analysis (1) on a quarterly basis and in connection with the review and preparation of our financial statements filed as part of our quarterly and annual reports with the SEC, and (2) at other times when we are considering how to structure a new transaction that is of a significant size — with “significance” largely based on the outcome of our most recent quarterly review. We do not currently believe that our legacy finance business will subject us to the 1940 Act, but this may change. This review is generally undertaken by our Chief Financial Officer and may involve outside legal counsel, in particular in a case where we are considering the structure of a potential new transaction.
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With respect to Section 3(a)(1)(A), following the launch of our SUI treasury strategy, an amount in excess of 40% of our total assets were used to acquire SUI. Since we believe SUI is not an investment security, we do not hold ourselves out as being engaged primarily, nor do we propose to engage primarily, in the business of investing, reinvesting, or trading in securities within the meaning of Section 3(a)(1)(A) of the 1940 Act.
With respect to Section 3(a)(1)(C), we believe we satisfy the elements of Rule 3a-1 and therefore are currently not deemed to be an investment company under, and we intend to conduct our operations such that we will not be deemed an investment company under, Section 3(a)(1)(C). We believe that we are not an investment company pursuant to Rule 3a-1 under the 1940 Act because no more than 45% of the value of the Company’s total assets (exclusive of U.S. government securities, shares of registered money market funds under Rule 2a-7 of the 1940 Act, and cash items) consists of, and no more than 45% of the Company’s net income after taxes (for the last four fiscal quarters combined) is derived from, securities other than U.S. government securities, shares of registered money market funds under Rule 2a-7 of the 1940 Act, securities issued by employees’ securities companies, securities issued by qualifying majority owned subsidiaries of the Company, and securities issued by qualifying companies that are controlled primarily by the Company.
SUI and other digital assets, as well as new business models and transactions enabled by blockchain technologies, present novel interpretive questions under the 1940 Act. There is a risk that assets or arrangements that we have concluded are not securities could be deemed to be securities by the SEC or another authority for purposes of the 1940 Act, which would increase the percentage of securities held by us for 1940 Act purposes.
If we were deemed to be an investment company, Rule 3a-2 under the 1940 Act is a safe harbor that provides a one-year grace period for transient investment companies that have a bona fide intent to be engaged primarily, as soon as is reasonably possible (in any event by the termination of such one-year period), in a business other than that of investing, reinvesting, owning, holding, or trading in securities, with such intent evidenced by the company’s business activities and an appropriate resolution of its board of directors. The grace period is available not more than once every three years and runs from the earlier of (i) the date on which the issuer owns securities and/or cash having a value exceeding 50% of the issuer’s total assets or (ii) the date on which the issuer owns or proposes to acquire investment securities having a value exceeding 40% of the value of such issuer’s total assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis. Rule 3a-2 is a safe harbor and we may rely on any exemption or exclusion from investment company status available to us under the 1940 Act at any given time. Furthermore, reliance on Rule 3a-2, Section 3(a)(1)(C), or Rule 3a-1 could require us to take actions to dispose of securities, limit our ability to make certain investments or enter into joint ventures, or otherwise limit or change our service offerings and operations.
If we were to be deemed an investment company in the future, restrictions imposed by the 1940 Act — including limitations on our ability to issue different classes of stock and equity compensation to directors, officers, and employees and restrictions on management, operations, and transactions with affiliated persons — likely would make it impractical for us to continue our business as contemplated, and could have a material adverse effect on our business, results of operations, financial condition, and prospects.
The recently enacted GENIUS Act creates a new federal regulatory framework for stablecoins in the United States, and its implementation could materially impact our investment in, issuance of and holding of stablecoins and compliance obligations.
We hold the stablecoin USDC, and on October 1, 2025, we launched a proprietary Sui-native synthetic dollar token, suiUSDe. We plan to make additional investments in stablecoins, including suiUSDe in the future. In July 2025, the United States enacted the GENIUS Act, which provides for the creation of the first comprehensive federal regime for the issuance, custody, and use of payment stablecoins. This law applies to key aspects of stablecoin programs, including state and federal licensing of issuers, reserve composition and management, redemption rights, disclosures, and ongoing regulatory supervision. While the GENIUS Act has been signed into law, it will not become effective until the earlier of January 18, 2027, or 120 days after the primary federal payment stablecoin regulators issue any final regulations implementing the GENIUS Act. The impact of these legal and regulatory changes will depend in part on how the GENIUS Act is implemented through rulemaking by U.S. regulators. Therefore, while a consistent federal framework could increase institutional and consumer confidence in stablecoins over time, the scope, timing, and substance of implementing the associated regulations and supervisory practices remain uncertain. There is no guarantee that USDC or suiUSDe will meet the criteria of the GENIUS Act, and compliance may require us to make changes to our holding of stablecoins or elements of the suiUSDe coin. These changes could increase our legal, compliance, operational, and technology costs or limit the types of stablecoins we may issue, hold or invest in and could have a material adverse effect on our business, results of operations, financial condition, and prospects.
The classification of any of our cryptocurrencies as a commodity could subject us to additional regulation by the CFTC, resulting in significant compliance costs or the cessation of certain activities.
Some digital cryptocurrency assets are classified as commodities under the Commodity Exchange Act and are subject to regulation by the CFTC. If our activities require CFTC registration, we may be required to comply with extensive regulatory obligations, which could result in significant costs and operational disruptions. Additionally, current and future legislative or regulatory developments, including new CFTC interpretations, could further impact how digital cryptocurrency assets and digital cryptocurrency asset derivatives are classified and traded. If SUI is regulated as a commodity, we may be required to register the Company as a commodity pool operator with the CFTC through the National Futures Association. Compliance with these additional regulatory requirements could result in substantial, non-recurring expenses, adversely affecting an investment in our Common Stock. If we choose not to comply with such regulations, we may be forced to cease our SUI treasury operations, or to cease holding USDC or issuing suiUSDe which could materially adversely impact our business, results of operations, financial condition, and shareholders.
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We face other risks related to our SUI treasury business model.
Our SUI treasury business model exposes us to various risks, including the following:
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Risks Related to Our Portfolio Investment
We may need to raise additional capital to fund our portfolio investment operations, and such capital may not be available to us in sufficient amounts or on acceptable terms.
For the time being, management believes that our current cash is sufficient to continue portfolio investment operations for the foreseeable future. Nevertheless, various future developments may cause us to seek or require additional financing. In addition, we may determine to seek additional financing in order to avail ourselves of additional opportunities to provide specialty finance solutions to borrowers. Alternatively, we may seek additional financing in the event that a material portion of our investments default, leaving us with diminished means to pay for our operations and continue making investments.
In any event, additional financing could be sought from a number of sources, including but not limited to sales of additional equity or debt securities, or loans from financial institutions or our affiliates. We cannot, however, be certain that any such financing will be available on terms favorable or acceptable to us if at all. If additional funds are raised by the issuance of our equity securities, such as through the issuance of stock, convertible securities, or the issuance and exercise of warrants, then the ownership interest of our existing shareholders will be diluted. If additional funds are raised by the issuance of debt or other equity instruments, we may become subject to certain operational limitations, and such securities may have rights senior to the rights of our common shareholders. If adequate funds are not available on acceptable terms, we may be unable to consummate acquisitions or investments desired by our management and Board.
If we are unable to maintain diverse and robust sources of capital, our growth prospects, business, financial condition and results of operations could be adversely affected.
Our business, including our portfolio investment business, depends in part on maintaining diverse and robust sources of capital to originate our short-term loans. If we were to borrow money in the future, events of default or breaches of financial, performance or other covenants, or worse than expected performance of one or more of our short-term loans, could reduce or terminate our future access to funding. The availability and capacity of sources of capital also depends on many factors that are outside of our control, such as credit market volatility and regulatory reforms. In the event that we do not maintain adequate sources of capital for our portfolio investment business, we may not be able to maintain the necessary levels of funding to retain current loan volume, which could adversely affect our business, financial condition and results of operations.
Although we have identified general guidelines that we believe are important in evaluating prospective portfolio investment opportunities, we may enter into transactions with borrowers that do not meet such guidelines, increasing the risk that the price of our Common Stock could be volatile.
Although we have identified general guidelines for evaluating prospective portfolio investment opportunities, it is possible that a borrower with which we enter into a transaction will not have all, or any, of the attributes outlined in those guidelines. If we complete transactions with borrowers that do not meet some or any of these guidelines, it is possible that such an investment may not be as successful as an alternative opportunity that were to satisfy some or all of those guidelines. Portfolio investments that do not perform as well as imagined, or as well as they otherwise might have, in combination with the public knowledge that we may stray, or have strayed, from strict implementation of our investment guidelines, could affect the volatility of the trading price of our Common Stock.
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We may provide specialty finance solutions to early-stage companies, financially unstable businesses, or borrowers lacking an established record of revenue or earnings, which could adversely affect the price of our Common Stock.
While we believe that being entrepreneurial in our approach to specialty finance is a strength, we may complete investments with an early-stage company, a financially unstable business or an entity lacking an established record of revenues, cash flows or earnings. These kinds of transactions present numerous risks associated with investing in a business without a proven business model and with limited historical financial data, volatile revenues, cash flows or earnings and difficulties in obtaining and retaining key personnel. Although our management endeavors to evaluate the risks inherent in each particular investment we consider and make, we may not be able to properly ascertain or assess all of the significant risk factors and we may not have adequate time to complete a full evaluation of those risks. Furthermore, some of these risks may be outside of our control and leave us with no ability to control or reduce the chances that those risks will adversely impact a borrower or our likelihood of repayment. Failure by borrowers to repay the amounts owed to us pursuant to these specialty finance solutions could materially adversely affect our financial conditions and results of operations and ultimately the price of our Common Stock.
Many of our specialty finance investment transactions involve borrowers about which little, if any, information is publicly available, which may impair our ability to identify borrowers able to repay our loans and adversely affect the price of our Common Stock.
In pursuing our short-term specialty finance business, we often interact with privately held companies about which very little public information exists. As a result, we are often required to make our portfolio investment decision on the basis of limited information, nearly all of which is obtained from the business itself, which may result in our consummating an investment with a borrower that is not as solvent or profitable as we suspected, if at all. These risks could affect our results of operations and, ultimately, the trading price of our Common Stock.
If we are deemed to be an investment company under the 1940 Act, we may be required to institute burdensome compliance requirements and our activities may be restricted. In such an event, our business would likely be materially adversely affected.
If we are deemed to be an investment company under the 1940 Act, then our activities may be restricted or complicated, including through:
· restrictions on the nature of our investments;
· restrictions on our issuance of securities;
· a requirement to register as an investment company;
In order not to be regulated as an investment company under the 1940 Act, unless we can qualify for an exclusion, we must ensure that we are engaged primarily in a business other than investing, reinvesting or trading of “securities” and that our activities do not include investing, reinvesting, owning, holding or trading “investment securities” constituting more than 40% of our assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis.
We do not believe that our portfolio investment activities alone will subject us to the 1940 Act. We periodically monitor our portfolio investment holdings as a whole with a view towards ensuring that investments and other holdings which may be considered “investment securities” do not comprise more than 40% of our total assets. We undertake this analysis (1) on a quarterly basis and in connection with the review and preparation of our financial statements filed as part of our quarterly and annual reports with the SEC, and (2) at other times when we are considering how to structure a new transaction that is of a significant size—with “significance” largely based on the outcome of our most recent quarterly review. This review is generally undertaken by our Chief Financial Officer and may involve outside legal counsel, in particular in a case where we are considering the structure of a potential new transaction.
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If, however, we do not invest as discussed above or are otherwise unsuccessful in ensuring that no more than 40% of our total assets consist of “investment securities,” then we may be deemed to be subject to the 1940 Act. It is also possible that regulatory authorities, such as the SEC, may disagree with our analysis of whether certain investment holdings constitute “investment securities,” under federal securities law and the 1940 Act in particular. If that were to be the case, we would likely incur significant costs and be required to spend significant time restructuring parts of our operations and/or complying with the additional regulatory burdens imposed under the 1940 Act. Any restructuring or additional regulatory requirements would hinder our ability to operate as profitably as we have since the withdrawal of our BDC election and would adversely affect the trading price of our Common Stock.
Our $10 million in principal amount loan to Mustang Funding, LLC is subordinated to Senior Lenders in right of payment, in respect of our exercise of rights and remedies, and in right of collateral, with the result that our investment portfolio will for the foreseeable future be highly concentrated in and dependent upon the operational and financing success of Mustang.
On December 12, 2022, contemporaneously with our entry into a non-binding letter of intent with Mustang Funding, LLC (“Mustang”) contemplating a combination or merger transaction, we entered into a lending agreement with Mustang pursuant to which we loaned Mustang the principal amount of $5 million maturing in September 2023 (as amended, the “Mustang Litigation Funding”). Among other things, our related loan agreement with Mustang requires us to consent to any additional indebtedness Mustang may incur, subject to certain limitations and exceptions.
Although our loan to Mustang was not secured at the time that it was made, we negotiated for and obtained the right in the governing documents to seek and obtain collateral in the event that there were a default by Mustang or our negotiations for a combination transaction were to break down. At that time, we believed it was important to obtain this right because (i) Mustang was contemporaneously seeking a senior secured lending facility with whom we had no previous working experience, and (ii) a breakdown in combination negotiations, combined with our anticipated subordination (discussed below) could mean that we would need to extend the terms of this loan beyond nine months. In sum, as a creditor, we believed that we needed to secure our loan on more traditional commercial lending terms in order to better protect our investment.
On December 28, 2022, we entered into a subordination agreement with Orion Pip LLC, in its capacity as administrative and collateral agent for itself and other Senior Lenders under a senior secured lending agreement with Mustang, pursuant to which we subordinated our right to payment (subject to certain exceptions) and our right to exercise rights and remedies, to Mustang’s prior repayment in full of all amounts owing to the Senior Lenders. The subordination agreement prohibited the Senior Lenders or Mustang from extending the stated maturity of amounts owing under the senior secured lending agreement beyond December 2026. The Senior Lenders are owed $15.675 million in principal amount under the senior secured lending agreement as of December 31, 2025.
In June, August and September 2023, we advanced additional principal to Mustang as we continued working with them on a potential definitive merger agreement and related deliverables. These additional principal advances resulted in the loan principal growing to an aggregate of $10 million. In connection with these advances, the maturity date of our loan was ultimately extended to June 2024. In April 2024, we agreed to a final extension of the maturity date to the earlier of December 31, 2024, or 90 days after the termination of negotiations for our combination transaction with Mustang.
On August 20, 2024, we terminated the non-binding letter of intent with Mustang. As a result, amounts owing under our $10 million loan to Mustang were to mature on November 18, 2024. Nevertheless, the subordination agreement with the Senior Lenders effectively worked to prohibit Mustang’s payment, and our collection, of our loan. Accordingly, at that time we invoked our right to obtain collateral security from Mustang for our loan for the purpose of protecting our investment and essentially converting our loan position from a short-term unsecured loan to a longer-term loan involving standard commercial lending terms, including terms relating to collateral security. Ultimately, in late January 2025 we were able to enter into an amendment to our loan agreement with Mustang that extended the maturity date of our loan to March 2027 and increased the interest rate on our loan principal to 20% per annum (with 15% per annum remaining payable in cash on a monthly basis, and the additional 5% per annum being payable upon maturity), and also enter into an amended and restated subordination agreement with Orion Pip LLC that subordinated our right to collateral on customary and negotiated terms and conditions. Presently and for the foreseeable future, we expect that we will receive interest payments as required by our loan agreement with Mustang.
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Changes in laws or regulations, or a failure to comply with laws and regulations, whether by us or by our borrowers, may adversely affect our portfolio investment business, including our results of operations and ultimately the price of our Common Stock.
Both we and our borrowers are typically subject to various local, state and federal laws and regulations. Compliance with, and monitoring of, applicable laws and regulations may be difficult, time consuming and costly. Those laws and regulations and their interpretation and manner of application or enforcement may also change from time to time and those changes could have a material adverse effect on our portfolio investment business, investments and results of operations. In addition, a failure to comply with applicable laws or regulations, as interpreted and applied, could have a material adverse effect on our business and results of operations. Any of these outcomes would likely adversely affect the trading price of our Common Stock.
Changes in consumer finance and other applicable laws and regulations, as well as changes in government enforcement policies and priorities, may negatively impact the management of our business, results of operations, ability to offer certain kinds of specialty finance solutions or the terms and conditions upon which they are offered, and our ability to compete.
Consumer finance regulation is constantly changing, and new laws or regulations, or new interpretations of existing laws or regulations, could have a materially adverse impact on our ability to operate as currently intended or as we may intend to expand in the future, and cause us to incur significant expense in order to ensure compliance. These regulatory changes and uncertainties make our business planning more difficult and could result in changes to our business model and potentially adversely impact our results of operations. Because we operate as a non-bank lender, we are sometimes subject to state usury laws and other laws and regulations. Furthermore, to the extent applicable, these laws can impose specific statutory liabilities upon creditors who fail to comply with their provisions and may affect the enforceability of a loan. If the application of consumer protection laws were to cause our loans, or any of the terms of our loans, to be unenforceable against the relevant borrowers, our specialty finance business may be materially adversely affected. Even if we seek to comply with licensing and other requirements that we believe may be applicable to us, if we are found to not have complied with applicable laws, we could lose one or more of our licenses or authorizations or face other sanctions or penalties or be required to obtain a license in one or more such jurisdictions, which may have an adverse effect on our business.
New laws, regulations, policy or changes in enforcement of existing laws or regulations applicable to our business, or reexamination of current practices, could adversely impact our profitability, limit our ability to continue existing or pursue new business activities, require us to change certain of our business practices, affect retention of key personnel, or expose us to additional costs, including compliance costs. These changes also may require us to invest significant resources, and devote significant management attention, to make any necessary changes and could adversely affect our business.
We may engage in transactions with businesses that may be affiliated with our officers, directors or significant shareholders, and which may involve actual or potential conflicts of interest.
We may decide to make investments in one or more businesses affiliated with our officers, directors or significant shareholders. Such investment opportunities may compete with other opportunities for our investment dollars. Although we are not specifically focusing on, or targeting, any particular transaction with any affiliates or affiliated entities, we would pursue such a transaction if we determined that such an affiliated investment were attractive from a risk-adjusted return perspective, and such transaction were approved by a majority of our independent and disinterested directors. Any such activity would involve actual or potential conflicts of interest. Although we are confident that we can navigate these conflicts consistent with best practices and applicable law, the existence or appearance of such conflicts of interest could make our Common Stock less attractive and thereby reduce its trading price.
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Our ability to identify and consummate investment opportunities, and any need we may have for additional capital, will almost certainly be affected by general economic conditions.
General economic conditions will almost certainly impact our ability to (i) identify, pursue and consummate investment opportunities, and (ii) if necessary, seek and obtain additional financing on terms acceptable or favorable to us, if at all. Therefore, a deterioration in general economic conditions may adversely affect our business or slow the growth of our business.
Our reputation and brand are important to our portfolio investment business, and if we are unable to continue developing our reputation and brand, our ability to retain existing capital sources, and to attract borrowers could be adversely affected.
We believe that maintaining a strong brand and trustworthy reputation is critical to our portfolio investment business and our ability to attract borrowers, attract new capital sources and maintain existing capital sources. Factors that we believe affect our brand and reputation include:
· the non-bank lending industry generally; and
Negative publicity or negative public perception of these factors, even if inaccurate, could adversely affect our brand and reputation. Any negative publicity or negative public perception of the loans we make, or similar loans made by similar lenders or our competitors, may also result in negative publicity that is adverse to our reputation. If we are unable to protect our reputation, our business, financial condition and results of operations could be adversely affected.
Risks Related to Our Operations and Ownership of Our Common Stock
The price of our Common Stock has been and may continue to be volatile and fluctuate substantially, which could result in substantial losses for purchasers of our Common Stock.
Our stock price has been and is likely to continue to be volatile. The stock market in general has experienced extreme volatility that has often been unrelated to the operating performance of particular companies.
The price of our stock also depends partly on the value of SUI, which has been and continues to be volatile. As a result of this volatility, you may not be able to sell your Common Stock at an advantageous price, or at all.
You should consider an investment in our Common Stock to be risky, and you should invest in our Common Stock only if you can withstand a significant loss and wide fluctuation in the market value of your investment. The market price of our Common Stock could be subject to significant fluctuations in response to the factors described in this section and other factors, many of which are beyond our control. Among the many factors that could affect our stock price are:
· our SUI treasury strategy and the price of SUI;
· the historically limited trading volume of our Common Stock;
· future sale of shares of our Common stock;
· actions by our competitors;
· regulatory or legal developments in the United States and other countries;
· the recruitment or departure of key personnel;
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· general economic, industry and market conditions; and
We are highly dependent on the services provided by certain executives and key personnel.
Our success depends in significant part upon the continued service of our senior management personnel and directors. In particular, we are materially dependent upon the services of Marius Barnett, our Chairman, Douglas M. Polinsky, our Chief Executive Officer and Joseph A. Geraci, II, our Chief Financial Officer. Practically, we cannot prevent the departure of these directors and executives, whether due to death, disability, retirement or otherwise. Any loss of the services provided by these key personnel would likely have a material and adverse effect on our operations and ability to execute our business plans.
Future sales and issuances of our capital stock or rights to purchase capital stock could result in additional dilution of the percentage ownership of our stockholders and could cause the price of our Common Stock to decline.
We expect to raise capital to fund our business by issuing additional shares of Common Stock and/or other securities. Future sales and issuances of our capital stock or rights to purchase our capital stock could result in substantial dilution to our existing shareholders. We may sell Common Stock, warrants and other equity securities in one or more transactions at prices and in a manner as we may determine from time to time. If we sell any such securities in subsequent transactions, investors may be materially diluted. New investors in such subsequent transactions could gain rights, preferences and privileges senior to those of holders of our Common Stock.
Our articles of incorporation grant our Board the power to designate and issue additional shares and classes of common and preferred stock without shareholder approval, which could cause significant dilution and adversely affect the rights of existing stockholders.
Our authorized capital consists of 2,000,000,000 shares of capital stock. As of the date of the Annual Report, we only have 76,802,872 shares of Common Stock issued and outstanding and a further 15,098,076 stock for issuance upon the exercise of various warrants. Pursuant to authority granted by our articles of incorporation, our Board, without any action by our shareholders, may designate and issue shares in such classes or series (including other classes or series of preferred stock) as it deems appropriate, and may establish the rights, preferences and privileges of such shares, including dividends, liquidation and voting rights. The issuance of additional Common Stock or preferred stock:
· may significantly dilute the equity interest of our then-current stockholders;
· may adversely affect the prevailing market price for our Common Stock.
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Cyber incidents or attacks directed at us could result in information theft, data corruption, operational disruption and/or financial loss.
We depend on digital technologies, including information systems, infrastructure and cloud applications and services, including those belonging to third parties with whom we deal. Sophisticated and deliberate attacks on, or security breaches in, our systems or infrastructure, or the systems or infrastructure of third parties or the cloud, could lead to corruption or misappropriation of our assets, proprietary information and sensitive or confidential data. We have not made a significant investment in data security protection (preferring instead to rely upon the data-security know-how and investments made by the third parties with whom we deal and upon whom we rely), and we may not be sufficiently protected against such occurrences. We may not have sufficient resources to adequately protect against, or to investigate and remediate any vulnerability to, cyber incidents. It is possible that any of these occurrences, or a combination of them, could have adverse consequences on our business and lead to financial loss.
The use of, or inability to use, artificial intelligence by us, our employees, consultants, directors, vendors , investors or contract counterparties presents risks and challenges that may adversely impact our business and operating results or the business and operating results of our vendors, investors or contract counterparties.
We may use generative artificial intelligence and/or machine learning (collectively, “AI”) tools in our operations. If our peers use AI tools to optimize operations and we fail to utilize AI tools in a comparable manner, we may be competitively disadvantaged. However, while AI tools may facilitate optimization and operational efficiencies, they also have the potential for inaccuracy, bias, infringement or misappropriation of intellectual property, and risks related to data privacy and cybersecurity. The use of AI tools may introduce errors or inadequacies that are not easily detectable, including deficiencies, inaccuracies or biases in the data used for AI training, or in the content, analyses or recommendations generated by AI applications. The results of such errors or inadequacies may adversely affect our business, financial condition and results of operations. The legal requirements relating to AI continue to evolve and remain uncertain, including how legal developments could impact our business and ability to enforce our proprietary rights or protect against infringement of those rights. Cybersecurity threat actors may utilize AI tools to automate and enhance cybersecurity attacks against us. The integration of AI tools in the digital asset industry may present significant opportunities and risks for our vendors, investors or contract counterparties, similar to those risks described above.
Business disruptions, including interruptions, delays, or failures of our systems or other third-party services as a result of geopolitical tensions, acts of terrorism, natural disasters, pandemics, and similar events, could materially adversely affect our operating results or result in a material weakness in our internal controls that could adversely affect the market price of our Common Stock.
Any disruptions or failures of our systems or other services that we use, including as a result of a natural disaster, fire, cyberattack (including the potential increase in risk for such attacks due to cyberwarfare in connection with the ongoing Russia-Ukraine and Israel-Hamas conflicts), act of terrorism, geopolitical conflict (including due to the ongoing Russia-Ukraine, Israel-Hamas and U.S.-Venezuela conflicts and any potential conflict involving China and Taiwan), pandemic, the effects of climate change, or other catastrophic event, as well as power outages, telecommunications infrastructure outages, a decision by one of our third-party service providers to materially change the pricing or terms of their services, or other unanticipated problems with our third-party services that we use, such as a failure to meet service standards, could severely impact our ability to conduct our business operations, or result in a material weakness in our internal control over financial reporting, any of which could materially adversely affect our future operating results.
We do not intend to pay dividends on our Common Stock.
We intend to retain all of our earnings, if any, for the foreseeable future to finance the operation and expansion of our business and do not anticipate paying cash dividends. Any future determination to pay dividends will be at the discretion of our Board, subject to compliance with applicable law and any contractual provisions, and will depend on, among other factors, our results of operations, financial condition, capital requirements and other factors that our Board deems relevant. As a result, investors in our Common Shares should expect to receive a return on investment only if the market price of the Common Shares increases, which may never occur.
One of the manners in which we may seek to grow the Company is through acquisition or combination transactions, as well as through the launch of new investment strategies. It is possible that, even after we announce a potential acquisition, combination transaction, or new business initiative, such transactions or initiatives may not ultimately close, materialize, or achieve their intended objectives. Our announcement of these potential transactions or strategies—and the occasional failure of them to proceed as planned—may cause the price of our Common Stock to be volatile.
As disclosed in prior reports, we have stated our intention to grow the Company both organically, including by expanding our specialty finance operations into new markets or niches, and through acquisition or combination transactions such as mergers or similarly structured transactions. More recently, we launched a new SUI treasury strategy, under which the principal holding in our treasury reserve on the balance sheet is allocated to the native cryptocurrency of the Sui blockchain. This new strategy represents a meaningful expansion of the Company’s portfolio investment activities and introduces additional uncertainties, particularly given the emerging nature of digital asset markets. Public announcements regarding the launch, progress, or performance of this strategy may affect the trading volume and price of our Common Stock. Moreover, should this strategy fail to develop as anticipated, fail to scale, or otherwise underperform, such outcomes could similarly contribute to volatility in the trading volume and price of our Common Stock.
In the past, we have also announced our execution of non-binding letters of intent for acquisition or combination transactions. These announcements may create volatility in the trading volume and price of our Common Stock, particularly where there is limited publicly available information about the counterparty to such a transaction or uncertainty regarding our ability to successfully enter into definitive agreements. Moreover, the failure of the transactions contemplated in these announcements to close could similarly create volatility in the trading volume and price of our Common Stock. Such volatility could ultimately reduce market liquidity for our Common Stock, creating a risk that you may not be able to sell your shares at a time or price you consider favorable.
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An historical example of this dynamic is our December 2022 announcement of a non-binding letter of intent with Mustang Funding, LLC, a private litigation‐funding business, contemplating a merger transaction. Although we negotiated a proposed definitive agreement, we were unable to finalize and enter into that agreement, and we ultimately terminated the non-binding letter of intent in August 2024. The volatility in the trading volume and price of our Common Stock contemporaneous with our public announcements regarding the entry into—and subsequent termination of—the non-binding letter of intent, as well as related announcements regarding amendments to our prior loans to Mustang Funding, was not insignificant from a comparative standpoint.
If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, our stock price and trading volume could decline.
The trading market for our Common Stock, including the general volume of transactions in our Common Stock, will depend in part on the research and reports that securities or industry analysts publish about us or our business. Securities and industry analysts do not currently, and may never, publish research on the Company. If no securities or industry analysts commence coverage of the Company, the trading price for our stock may be negatively impacted. In the event securities or industry analysts initiate coverage, if one or more of the analysts who covers us downgrades our stock or publishes inaccurate or unfavorable research about our business, our stock price may decline. If one or more of these analysts ceases coverage of the Company or fails to publish reports on us regularly, demand for our stock could decrease, which might cause our stock price and trading volume to decline.
Requirements associated with being a public company in the United States require significant company resources and management attention.
As a public company, we are subject to certain reporting requirements of the Exchange Act and other rules and regulations of the SEC and Nasdaq (as defined below). We are also subject to various other regulatory requirements, including SOX, and the Dodd-Frank Wall Street Reform and Consumer Protection Act.
The expenses incurred by public companies for reporting and corporate governance compliance have been increasing and can decrease our net income or increase our net loss and may require us to reduce costs in other areas of our business or increase the prices of our products. Additionally, if these requirements divert our management’s attention from other business concerns, they could have a material adverse effect on our business, financial condition and operating results. These requirements increase our legal and financial compliance costs and make some activities more time-consuming and costly. For example, we expect that the rules and regulations applicable to us as a public company may make it increasingly more difficult and more expensive for us to obtain certain types of insurance, including director and officer liability insurance, and we may be forced to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage as a private company. These laws and regulations can make it more difficult for us to attract and retain qualified persons to serve on the Board and committees of the Board, or as executive officers.
These rules and regulations are often subject to varying interpretations, in many cases due to their lack of specificity, and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices. Furthermore, if we are unable to satisfy our obligations as a public company, we could be subject to delisting of our Common Stock, fines, sanctions and other regulatory action and potentially civil litigation.
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We have identified and may in the future identify additional material weaknesses in internal controls over financial reporting. If we cannot remediate internal controls weaknesses or if we cannot maintain effective internal controls over financial reporting in the future, it could harm us.
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with GAAP. Under standards established by the Public Company Accounting Oversight Board (“PCAOB”), a deficiency in internal control over financial reporting exists when the design or operation of a control does not allow management or personnel, in the normal course of performing their assigned functions, to prevent or detect misstatements on a timely basis. The PCAOB defines a material weakness as a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of annual or interim financial statements will not be prevented, or detected and corrected, on a timely basis.
As more fully disclosed in “Item 9A — Controls and Procedures” of this Annual Report, we identified a material weakness related to the proper accounting for transactions in accordance with GAAP. To remediate the material weakness, we engaged outside consultants with expertise in accounting, financial reporting and internal controls to assist management in evaluating and enhancing our accounting processes and controls. We cannot ensure that we have remediated the material weakness or that we will not in the future have additional material weaknesses. Should this material weakness persist, or new material weaknesses arise or be discovered in the future, material misstatements could occur and go undetected in our interim or annual consolidated financial statements. If we fail to remediate any future material weaknesses or maintain proper and effective internal control over financial reporting in the future, we may be required to restate our financial statements, experience delays in satisfying our reporting obligations or fail to comply with SEC rules and regulations, which could result in investigations and sanctions by regulatory authorities. Any of these results could adversely affect our business and the value of our Common Stock.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 1C. CYBERSECURITY
Our risk management strategy for cybersecurity generally includes:
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We presently do not engage third parties to assist us with the assessment, identification or management of cybersecurity risks, or in evaluating the effectiveness of our existing approaches, nor do we have formal processes assessing, identifying, and managing material risks from cybersecurity threats, including risks associated with our use of third-party service providers.
We are unaware of any material cybersecurity breaches during the year ended December 31, 2025. Our criteria for determining the materiality of cybersecurity incidents include assessing potential or actual financial impacts, reputational damage, and operational disruptions.
The Audit Committee is the governance body involved in, and ultimately responsible for, cybersecurity oversight. Members of the Audit Committee generally coordinate with our Chief Financial Officer in this regard, with management alerting the committee members to any specific concerns of which management may be aware. In the event of a cybersecurity concern or event, our Chief Financial Officer would report the event or his or her concerns to our Audit Committee and full Board, as well as outside legal counsel. None of our directors on the Audit Committee nor our Chief Financial Officer have particular experience in cybersecurity matters, nor are there formal processes in place by which such persons would monitor the prevention, detection, mitigation and remediation of cybersecurity incidents.
ITEM 2. PROPERTIES
Our executive offices are located at 1907 Wayzata Boulevard, Suite 205, Wayzata, Minnesota 55391, and our telephone number is: (952) 479-1923. We are party to an operating lease for office space expiring November 30, 2026. The lease does not have significant lease escalations, rent abatements or concessions, leasehold improvements, or other build-out clauses; and they do not contain contingent-rent provisions. The lease does not include options to renew. We consider our current office space adequate for our current operations.
ITEM 3. LEGAL PROCEEDINGS
There is no material litigation, arbitration or governmental proceeding currently pending against us or any members of our management team in their capacity as such.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
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PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market Information
Our Common Stock is listed for trading on The Nasdaq Stock Market LLC (“Nasdaq”) under the symbol “SUIG”. The transfer agent and registrar for our Common Stock is Pacific Stock Transfer Company, 6725 Via Austi Parkway, Suite 300, Las Vegas, NV 89119.
Holders
As of the date of this filing, we had approximately 185 holders of record of our Common Stock and shares held in street name by approximately 178 non-objecting beneficial owners.
Dividends
We do not expect that the Board will declare any cash dividends in the foreseeable future.
See “Item 12 — Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters - Securities Authorized for Issuance Under Equity Compensation Plans” below for further details regarding equity compensation plans.
Recent Purchases of Equity Securities by the Issuer
The following table provides information about Company purchases of equity securities that are registered by the Company pursuant to Section 12 of the Exchange Act during the quarter ended December 31, 2025:
(1) Represents share repurchases under the Company’s previously announced $50 million stock repurchase program (the “New Program”).
(2) Represents approximate dollar value of shares that were available to be purchased under the New Program as of December 31, 2025. The Program does not have a specific expiration date. During the year ended December 31, 2025, 8,077,337 shares had been repurchased under the New Program (including 276,296 shares repurchased during the quarter ended September 30, 2025), and 641,225 shares had been repurchased under the Company’s prior $2.0 million stock repurchase program, exhausting all remaining capacity under that program.
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ITEM 6. [RESERVED]
ITEM 7 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Our Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) set forth below should be read in conjunction with our audited financial statements, and notes thereto, filed together with this Annual Report. The following discussion contains “forward-looking statements” that reflect our future plans, estimates, beliefs and expected performance. We caution that assumptions, expectations, projections, intentions or beliefs about future events may, and often do, vary from actual results and the differences can be material. Please see “Cautionary Statement Regarding Forward-Looking Statements” and “Item 1A — Risk Factors.”
This MD&A is intended to provide a reader of our financial statements with a narrative from the perspective of management on our financial condition, results of operations, liquidity and certain other factors that may affect our future results. In addition, unless expressly stated otherwise, the comparisons presented in this MD&A refer to the same period in the prior year. Our MD&A is presented in below sections:
· Overview
· SUI Treasury Management Activity
· Portfolio Investment Activity
· Results of Operations
· Critical Accounting Policies and Estimates
OVERVIEW
Sui Group Holdings Limited was originally incorporated as Mill City Ventures III, Ltd. in the State of Minnesota on January 10, 2006. Since 2020, we operated as a publicly traded specialty finance company focused on short-term, non-bank lending solutions. Revenue was primarily generated through interest income, transaction fees, and capital appreciation from related portfolio investments.
In July 2025, we undertook a strategic shift by launching the industry’s first SUI treasury strategy, under which the principal holding in our treasury reserve on the balance sheet is allocated to the native cryptocurrency of the Sui blockchain (commonly referred to as “SUI”). In support of this strategic shift, on July 31, 2025, the Company completed the private placement of 75,881,625 shares of Common Stock at an offering price of $5.42 per-share, and Pre-Funded Warrants to purchase up to 7,144,205 shares of Common Stock at an offering price of $5.4199 per Pre-Funded Warrants, exercisable at a per-share price of $0.0001. On July 31, 2025, the Company consummated the offer and sale of its securities pursuant to the Securities Purchase Agreement, dated as of July 27, 2025, by and among the Company and the investors identified on the signature pages thereto. The transaction was settled through a combination of cash, cash equivalent, USDC, and digital assets, resulting in cash and cash equivalents proceeds of $259.0 million and the receipt of approximately $191.0 million in SUI tokens and USDT coins contributed in-kind by certain investors as part of their investment consideration. The Company issued warrants to the Sui Foundation, certain investors involved in the private placement and certain management and directors in conjunction with the private placement. Since the launch of our digital asset treasury strategy, we have established the largest publicly traded SUI treasury, backed by an exclusive relationship with the Sui Foundation, an independent organization dedicated to the advancement and adoption of the Sui network.
SUI is a next-generation Layer 1 blockchain designed to deliver the scalability, speed, and security required to power decentralized applications and real-world cryptocurrency use cases across finance, gaming, artificial intelligence, stablecoins, and more. Its horizontally scalable architecture, low-latency finality, and secure, developer-friendly design, position it as a leading infrastructure platform capable of handling real-world scale. As institutional and consumer adoption accelerates, SUI offers the potential to enable a wide range of transformative digital experiences and create long-term value opportunities for Sui Group and its shareholders.
On August 26, 2025, we formally changed our name to Sui Group Holdings Limited, following an amendment to our Articles of Incorporation filed with the Officer of the Minnesota Secretary of State. In conjunction with the name change and the rebranding, we changed our ticker symbol from “MCVT” to “SUIG”, aligning our public identity with our new treasury strategy.
The Company’s strategy is to maximize the value of SUI per-share and support the growth of the Sui ecosystem through scalable, transparent, and long-term value creation strategies. We therefore aim to capitalize on this opportunity by acquiring SUI tokens through open-market purchases, institutional-grade deal flow typically reserved for cryptocurrency funds, and a negotiated purchase agreement with the Sui Foundation. This structure enables broader investor access to SUI through a regulated, publicly traded vehicle. As the only SUI treasury with Sui Foundation support, we believe that we are uniquely positioned to capitalize on technology trends and ecosystem growth relating to SUI, while providing regulated, liquid, and institutional-grade access to the Sui blockchain designed for scalability and global adoption.
On September 19, 2025, our shareholders approved all proposals presented at the annual meeting, including the amendment to increase the authorized capital stock and election of directors, as well as the approval of issuance of Common Stock issuable upon exercise of the management warrants and pursuant to the Purchase Agreement with A.G.P./Alliance Global Partners (“A.G.P.”). These changes are expected to enhance our corporate governance and better align executive compensation with shareholder interests.
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During 2025, we also continued to return capital to shareholders through our stock repurchase programs. For the year ended December 31, 2025, we repurchased 8,718,562 shares of Common Stock for $18.9 million, completing our original $2.0 million authorization and utilizing $16.9 million of the new $50.0 million program approved by the Board in September 2025. In comparison, during the year ended December 31, 2024, we did not repurchase any shares of Common Stock.
As of December 31, 2025, we held 105 million SUI tokens in our treasury, representing $147.4 million in digital assets. This equates to approximately 1.34 SUI per share of Common Stock and Pre-Funded Warrants (as defined below) outstanding. Approximately 99% of our SUI holdings continued to be staked, generating an annualized yield of approximately 1.7%, or approximately $10,000 in daily staking rewards, with the balance of the SUI tokens applied to higher margin direct lending opportunities. We believe this staking strategy enhances the productivity of our treasury while maintaining exposure to potential SUI price appreciation and serves as a flexible source of liquidity for future acquisitions and operational portfolio investments.
For the year ended December 31, 2025, we earned $2.1 million in staking rewards, representing 799,951 SUI tokens generated from substantially all tokens staked, as compared to $0 earned in staking rewards during the year ended December 31, 2024.
Our principal sources of income now include staking rewards from our SUI holdings, realized and unrealized gains or losses on digital assets, and rewards earned through protocol participation. We actively monitor market conditions and developments across blockchain protocols to optimize yield and asset performance. Legacy income streams from interest and fees on short-term loans remain part of our portfolio, although they represent a smaller portion of our overall financial profile.
Our operating expenses now reflect a blend of our legacy finance and digital asset treasury operation, including professional fees, payroll, custody and infrastructure costs related to blockchain asset management, and insurance. We seek to achieve enhanced operational leverage as we plan to scale our digital asset treasury strategy and expand our operational footprint.
SUI TREASURY MANAGEMENT ACTIVITY
In late July 2025, we formally launched our SUI treasury strategy, establishing SUI, the native token of the Sui blockchain, as a core component of our digital asset treasury platform. In connection with the launch of our SUI treasury strategy, on July 27, 2025, the Company entered into an agreement (the “Digital Asset Purchase Agreement”) with the Sui Foundation, whereby the Company acquired approximately 44 million SUI tokens at a discounted purchase price equal to 85% of the twenty-four-hour time-weighted average price (“TWAP”) of SUI tokens on July 31, 2025. The Digital Asset Purchase Agreement also obliges the Company to use one half of all cash raised after the PIPE transaction to offer to purchase additional SUI from the Sui Foundation, and an option for the Sui Foundation to purchase from the Company up to one hundred percent (100%) of the total dollar amount of SUI acquired by the Company in certain market purchases and subject to certain conditions including a 15% discount to prevailing market prices. This initiative reflects our conviction in the long-term potential of the Sui blockchain and its role in powering the next generation of decentralized applications across finance, gaming, artificial intelligence, and other sectors.
During the fourth quarter of 2025, we also entered into certain digital asset lending arrangements, which resulted in the recognition of a digital loan receivable, measured at fair value, reflecting an extension of our broader digital asset activities. On September 29, 2025, the Company entered into a digital currency loan agreement with Galaxy Digital LLC (“Galaxy”) pursuant to which the Company lent 961,550 SUI tokens. The loan carries a fee of 4.5% per annum, paid in digital assets, and is structured as an evergreen facility with the ability to terminate upon a seven‐day notice period at the election of the Company. On October 7, 2025, the Company entered into a separate digital currency loan agreement with BlueFin Labs Inc. (“BlueFin”) under which the Company lent 2,000,000 SUI tokens to BlueFin for a fee equal to 5.0% of all revenues generated by BlueFin’s decentralized exchange, paid in SUI tokens. These arrangements were not material to our overall liquidity but are consistent with our strategy to responsibly deploy digital assets in ways that enhance yield and operational flexibility.
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As of December 31, 2025, we held 105 million SUI tokens, valued at $147.4 million based on a market price of $1.4 per token as compared to $0 in cryptocurrency during the year ended December 31, 2024.
99% of our SUI holdings are staked, generating an estimated 1.7% annual yield, or approximately $10,000 in daily staking rewards. We believe this staking strategy enhances the productivity of our treasury while maintaining exposure to potential SUI price appreciation. For the year ended December 31, 2025, we earned $2.1 million in staking rewards, representing 799,951 SUI tokens generated from substantially all tokens staked, as compared to $0 earned in staking rewards during the year ended December 31, 2024.
Our treasury strategy is designed for scale, transparency, and long-term value creation, and is supported by our official relationship with the Sui Foundation. We believe this alignment positions us uniquely as the only publicly traded company with institutional-grade exposure to the Sui blockchain.
We continue to monitor developments in the Sui ecosystem, including advancements in staking infrastructure, validator expansion, and adoption of SUI-native applications. These developments are expected to further support the intrinsic value of our SUI holdings and reinforce our strategic positioning.
PORTFOLIO INVESTMENT ACTIVITY
While our primary focus has shifted from our legacy finance operations, the business objective of our legacy business is to generate revenues from the interest and fees we charge, and capital appreciation from any related portfolio investments we make.
During the year ended December 31, 2025, we made $8.2 million of portfolio investment purchases and had $4.5 million of redemptions and repayments, resulting in net portfolio investments at amortized cost of $17.5 million at the end of the period. During the year ended December 31, 2024, we made $5.7 million of portfolio investment purchases and had $9.8 million of redemptions and repayments, resulting in net portfolio investments at amortized cost of $13.7 million at the end of that period.
In August 2025, the Company entered into a $3.0 million short-term secured loan arrangement, with a maturity date of May 12, 2026. In determination of the fair value of this short-term loan arrangement in accordance with the Company’s investment valuation policy at December 31, 2025, the Company determined the borrower is experiencing financial difficulty and the collection of the full amount of principal and related interest was in doubt. As a result, the fair value of the short-term loan arrangement includes an adjustment for the borrower’s creditworthiness and financial position, resulting in a fair value of zero as of December 31, 2025. In addition, the Company recorded a full reserve of the accrued interest of this short-term loan arrangement at December 31, 2025 totaling approximately $0.2 million.
Our portfolio composition by major class, based on fair value at December 31, 2025, was as follows:
(1) Prior to the fiscal year ending December 31, 2025, the loan was classified as a short-term non-banking loan. In January 2025, the maturity date was extended to March 2027, resulting in the loan being reclassified as a commercial business loan.
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FACTORS AFFECTING THE COMPARABILITY OF OUR RESULTS OF OPERATIONS AND MATERIAL TRENDS
We believe that the most significant factors affecting the comparability of our results of operations include:
Known Trends and Uncertainties
Known trends and uncertainties that are reasonably likely to have a material impact on our future financial condition and results of operations include the following: (i) regulatory developments, including potential SEC guidance on the accounting treatment of digital assets, possible classification of SUI as a security, and implementation of pending digital asset market structure legislation, which could materially affect our financial reporting and business operations; (ii) custody and counterparty risks, including concentration of our digital asset custody with BitGo and risks associated with lending SUI tokens to third-party service providers; (iii) variability in staking rewards, as factors such as changes in network participation, validator performance, and Sui network economics could cause our staking yields to decline below the current annualized rate of approximately 1.7%; (iv) macroeconomic conditions, including changes in interest rates and general economic conditions that could affect the market price of SUI, demand for our portfolio investment products, and our ability to raise capital; and (v) competitive dynamics in the digital asset treasury management space, including the emergence of competing digital asset treasury vehicles and strategies that could affect our competitive positioning and growth prospects.
RESULTS OF OPERATIONS
This section of the Annual Report generally discusses fiscal years 2025 and 2024 results and year-to-year comparisons between fiscal year 2025 and fiscal year 2024. Discussions of fiscal year 2023 results and year-to-year comparisons between fiscal 2024 and 2023 that are not included in this Annual Report can be found Management’s Discussion and Analysis of Financial Condition and Results of Operations in Part II, Item 7 of our annual report on Form 10-K for the year ended December 31, 2024.
The recent trends and developments that have had, or are reasonably likely to have, a material favorable or unfavorable impact on our revenues or income from continuing operations include changes in digital asset market conditions and pricing, the ramp‐up of our treasury management activities beginning in the third quarter of 2025, and fluctuations in interest income earned on digital asset–related arrangements. More information on these trends and developments can be found in the Management’s Discussion and Analysis of Financial Condition and Results of Operations section, where we also discuss other operational and market factors that could impact our financial results in future periods.
For the Year Ended December 31, Increase (Decrease) Change
Revenues
Digital lending interest income 83,517 — 83,517 n/a
Operating Expenses:
Provision for digital asset loan credit losses 548,144 — (548,144 ) n/a
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SUI Staking Revenue
During the year ended December 31, 2025, we generated approximately $2.1 million in staking rewards from our SUI token holdings as compared to $0 during the year ended December 31, 2024. This income reflects the accrual of 799,951 SUI tokens earned on 104,266,127 SUI tokens staked, representing approximately 99% of our total SUI holdings during the period. The staking yield remains consistent with our estimated annualized return of 1.7%, and rewards were accrued daily in accordance with our treasury management strategy.
Staking rewards are recognized as income when earned and are valued based on the market price of SUI at the time earned. These rewards enhance the productivity of our digital asset treasury while maintaining exposure to the underlying token. We continue to monitor validator performance, protocol-level developments, and infrastructure improvements to optimize staking efficiency and security.
Portfolio Investment Income
During the year ended December 31, 2025, our total portfolio investment income was $1.7 million as compared to $3.3 million for the year ended December 31, 2024. The decrease primarily reflects the Company’s change in accounting presentation following its cessation of investment company accounting under Accounting Standard Codification 946 (“ASC 946”) during the quarter ended September 30, 2025. As a result of this change, portfolio investment income recognized during the first half of 2025 continues to be presented within revenue, while portfolio investment income recognized during the second half of 2025 is presented within other income and totaled $2.9 million.
Professional Fees
During the year ended December 31, 2025, and 2024, we had professional fees expense amounting to $2.8 million and $0.6 million, respectively. The increase was due to the increased professional costs related to the launch of our new SUI treasury strategy and includes asset and strategic management fees under our asset and strategic management arrangements.
Stock-based Compensation
During the year ended December 31, 2025, and 2024, we had stock-based compensation amounting to $4.4 million and $0, (respectively the “Stock-based Compensation”). The increase was attributable to non-cash compensatory expenses incurred in connection with the issuance of warrants in the Private Placement to certain members of management and a director, as discussed in “Note 8 — Share-Based Compensation” of our condensed financial statements.
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Asset and Strategic Management Fees
During the year ended December 31, 2025, we incurred $1.6 million in asset and strategic management fees under our strategic and asset management arrangements. During the year ended December 31, 2024, we incurred no fees in asset and strategic management fees. These fees were calculated based on a tiered schedule applied to our average daily AUM, which includes SUI, cash, and cash equivalents, but excludes assets from our short-term lending business. Fees are calculated monthly in arrears and pro-rated for partial periods due to asset contributions or withdrawals.
These arrangements support our digital asset treasury strategy, including discretionary investment management, staking operations, protocol-specific guidance, and infrastructure alignment. We expect advisory fees to scale with AUM and remain aligned with our long-term strategy to deliver institutional-grade exposure to the Sui blockchain.
Insurance Expense
During the year ended December 31, 2025, and 2024, we had insurance expense amounting to $0.8 million and $0.1 million, respectively. The increase was due to additional directors and officers’ insurance policies that the Company deemed necessary due to our change in strategy.
Unrealized Loss on Digital Assets, Net
During the year ended December 31, 2025, we recognized an unrealized loss, net of $253.6 million compared to no unrealized loss during the year ended December 31, 2024. The net amount reflects a gross unrealized loss of $258.5 million on our digital asset holdings, partially offset by $4.9 million of amortized deferred income related to the discount received on the purchase of SUI tokens as discussed in “Note 3 — Digital Assets” of our financial statements. The remaining deferred income balance of $19.8 million will amortize on a straight line basis over the period to August 30, 2027.
Net Realized and Unrealized Loss / (Gain) on Portfolio Investment
During the year ended December 31, 2025, our net realized and unrealized gain on portfolio investment was $0.5 million, compared to $0.3 million for the year ended December 31, 2024. The decrease of $0.2 million primarily reflects the Company’s change in accounting presentation following its cessation of investment company accounting under ASC 946 during the quarter ended September 30, 2025. As a result of this change, net realized and unrealized gain on portfolio investment recognized during the first half of 2025 continues to be presented within operating expenses, while net realized and unrealized loss on portfolio investment recognized in the second half of 2025 is presented within other income and totaled $3.1 million.
Cash Flows for the Year Ended December 31, 2025 and 2024
Net cash used in operating activities was $8.2 million for the year ended December 31, 2025, compared to $5.7 million provided in the prior year. Cash flows provided by operating activities for the year ended December 31, 2024, were primarily related to net proceeds from sales of investments. The decrease in operating cash flow was driven primarily by lower net income, with the Company’s operating loss for the year substantially influenced by significant non-cash charges, including the realized loss on digital assets of $3.3 million, unrealized loss on digital assets of $253.6 million, and net realized and unrealized loss on portfolio investments for $2.6 million for the year ended December 31, 2025. The decrease is also due to the Company’s change in accounting presentation following its cessation of investment company accounting under ASC 946 during the quarter ended September 30, 2025. Cash flows provided by operating activities for the year ended December 31, 2024, were primarily related to redemptions and repayments of short-term loans and portfolio investments totaling $9.8 million, offset mostly by the funding of our short-term loans and purchases of portfolio investments aggregating $5.7 million. Operating cash flows were also impacted by changes in working capital, including increases in prepaid expenses and interest and dividend receivable, which reduced cash generated from operations by $0.7 million. These outflows were partially offset by increases in accounts payable and accrued income taxes. For the year ended December 31, 2024, operating cash flows were primarily generated from interest earned on short‐term loans.
The level of cash flow used in or provided by investing activities is affected primarily by our purchase of SUI tokens. For the year ended December 31, 2025, net cash used in investing activities was $195.5 million, as compared to $0 for the year ended December 31, 2024. The use of cash was primarily attributable to purchases of SUI tokens related to the SUI strategy. During the year ended December 31, 2025, non-cash investing activities consisted of the lending of 961,550 SUI tokens to Galaxy Digital LLC and 2,000,000 SUI tokens to BlueFin Labs Inc., representing an aggregate fair value of $8.1 million at the time of the transactions.
The level of cash flows used in or provided by financing activities is affected primarily by the issuance and repurchase of Common Stock and the issuance of warrants in connection with the Private Placement. For the year ended December 31, 2025, net cash provided in financing activities was $219.5 million, as compared to $0 in the year ended December 31, 2024. Cash flows provided in financing activities for the year ended December 31, 2025 were related to the proceeds received from the Private Placement, which was supplemented by the proceeds received from the exercise of stock options and warrants, offset by issuance costs of our private offering and the repurchase of our Common Stock. During the year ended December 31, 2025, non-cash financing activities consisted of the receipt of approximately $191.0 million in SUI tokens and USDT. These digital assets were received from certain investors as a portion of the total consideration provided in connection with the Private Placement.
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Liquidity and Capital Resources
As of December 31, 2025, we had cash and cash equivalents of $21.9 million, an increase of $15.9 million from $6.0 million as of December 31, 2024. Cash equivalents as of December 31, 2025 include $2.2 million of USD Coins (USDC), a stablecoin pegged to the U.S. dollar. The primary use of our existing funds and any funds raised in the future is expected to be for our SUI strategy and other general corporate purposes, including operating expenses or to service debt to the extent we borrow or issue senior securities. Our portfolio investments may consist of cash, cash equivalents (including USDC), U.S. government securities or high-quality debt securities maturing in one year or less from the time of investment, which we refer to collectively as “temporary portfolio investments.”
To support our ongoing liquidity and capital needs, we also have access to additional financing under the equity line of credit established pursuant to our purchase agreement with A.G.P./Alliance Global Partners (“A.G.P.”). Subject to the terms and conditions of the agreement, we may, from time to time at our discretion, direct A.G.P. to purchase shares of our Common Stock, providing us with a flexible source of capital to fund operations or strategic initiatives. Any sales of Common Stock under the agreement will be made at our discretion and are subject to customary limitations, including share volume restrictions and conditions relating to market pricing and effectiveness of our registration statement. The A.G.P. purchase agreement provides additional optional capacity up to $500 million that we may utilize if needed to supplement liquidity.
Management believes our existing liquidity sources, together with the cash general from operations, will be sufficient to meet our liquidity needs in the short and long term. However, we recognize that a significant portion of our assets consist of SUI tokens, which are less liquid than cash and cash equivalents. As of December 31, 2025, approximately 99% of our SUI holdings are staked and subject to a one-day unbonding period, which may limit our ability to rapidly access liquidity from these assets. While we view our SUI holdings as long-term strategic assets and do not currently expect to need to sell SUI to meet our operating liquidity requirements over the next twelve months, we may periodically sell SUI for general corporate purposes, including to generate cash for treasury management, acquisitions, or strategies that generate tax benefits in accordance with applicable law.
In the short term, we expect to meet our operating expenses, portfolio investment activities, and working capital needs through our existing cash and cash equivalents and cash generated from operations.
We do not have material contractual obligations that we believe would impair our ability to meet our liquidity needs or otherwise impact our short- or long-term financial condition. Our existing contractual arrangements including our strategic advisory agreement with Karatage, advisory agreement with the Sui Foundation and agreements with key executives are not expected to materially affect our liquidity.
In the long term, our liquidity will depend on our ability to generate cash from operations, the performance and realizable value of our SUI holdings, and our ability to access capital markets or secure additional financing arrangements.
Summary cash flow data is as follows:
For the Year Ended December 31,
Cash flows provided by (used in):: 2025 2024
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CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Our financial statements are prepared in conformity with the Generally Accepted Accounting Principles in the United States of America (“GAAP”), which requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Critical accounting policies are those that require the application of management’s most difficult, subjective or complex judgments, often because of the need to make estimates about the effect of matters that are inherently uncertain and that may change in subsequent periods.
In preparing the financial statements, management utilizes available information—including historical performance, industry benchmarks, and current economic conditions—to inform its estimates and judgments, with appropriate consideration of materiality. Actual results may differ materially from these estimates. In addition, other companies may utilize different estimates, which may impact the comparability of our results of operations to those of companies in similar businesses.
As our operations have evolved to include blockchain-native treasury management, our critical accounting policies now encompass both legacy finance and digital asset activities. The critical accounting policies include fair value measurement of digital assets and digital assets loan receivables and current expected credit loss (CECL) measurement of digital assets loan receivables. Further, the most significant estimates currently relate to:
ITEM 7A QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information otherwise required under this item.
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ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Item Page
Reports of Independent Registered Public Accounting Firm (PCAOB ID: 542) F-2
Investment Schedules — December 31, 2024 F-8
Notes to Financial Statements F-9
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and
Shareholders of Sui Group Holdings Limited
Opinion on the Financial Statements
We have audited the accompanying balance sheets of Sui Group Holdings Limited, formerly Mill City ventures III, LTD (the Company) as of December 31, 2025 and 2024, including the related statements of operations, shareholders’ equity, and cash flows for each of the years in the two-year period ended December 31, 2025, and the related notes and the investment schedule as of December 31, 2024 (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2025, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Emphasis of Matter – Investment Valuation
As explained in Note 6 to the financial statements, the accompanying financial statements include investments valued at $13,658,097 and $13,006,231 as of December 31, 2025 and 2024, respectively, whose fair values have been estimated by management in absence of readily determinable fair values. Such estimates are based on financial and other information provided by management of its portfolio companies and pertinent market and industry data. The investments are valued based on unobservable inputs as of December 31, 2025 and 2024. Because such valuations, and particularly valuations of private investments and private companies, are inherently uncertain, they may fluctuate significantly over short periods of time. These determinations of fair value could differ materially from the values that would have been utilized had a ready market for these investments existed.
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Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the Audit Committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
/s/ Boulay PLLP
We have served as the Company’s auditor since 2019.
Boulay PLLP
Minneapolis, MN
February 27, 2026
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SUI GROUP HOLDINGS LIMITED
BALANCE SHEETS
Assets
Current Assets
Digital assets receivable, at fair value (cost: $53,565 and $0) 28,774 —
Income tax receivable 131,360 —
Liabilities and Shareholders' Equity
Current Liabilities
Long Term Liabilities
Total long term liabilities 7,905,886 —
Shareholders' Equity
Accumulated undistributed investment gain (loss) — (152,389 )
Net unrealized depreciation in value of investments — (263,527 )
See accompanying Notes to Financial Statements
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SUI GROUP HOLDINGS LIMITED
STATEMENTS OF OPERATIONS
Year Ended
Revenues
Digital lending interest income 83,517 —
Operating Expenses
Stock-based Compensation 4,431,781 —
Asset and strategic management fees 1,614,717 —
Unrealized loss on digital assets, net 253,582,413 —
Realized loss on digital assets 3,292,227 —
Provision for digital asset loan credit losses 548,144 —
Net realized and unrealized gain on portfolio investments (476,986 ) (267,932 )
Other Income/(Loss)
Portfolio investment income 2,887,486 —
Net realized and unrealized loss on portfolio investments (3,059,626 ) —
Earnings per Share
See accompanying Notes to Financial Statements
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SUI GROUP HOLDINGS LIMITED
STATEMENTS OF SHAREHOLDERS EQUITY
Undistributed net portfolio investment gain — — — — 651,795 — — 651,795
Depreciation in value of portfolio investments — — — — — 476,781 476,781
Undistributed net portfolio investment gain — — — 899,794 — — 899,794
Appreciation in value of portfolio investments — — — — — 1,029,277 1,029,277
See accompanying Notes to Financial Statements
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SUI GROUP HOLDINGS LIMITED
STATEMENTS OF CASH FLOWS
Year Ended
Cash flows from operating activities:
Adjustments to reconcile net income (loss) to net cash provided (used)
in operating activities:
Unrealized loss on digital assets, net 253,582,413 —
Realized loss on digital assets 3,292,227 —
Provision for digital asset loan credit losses 548,144
Digital lending revenue (77,928 )
Stock-based Compensation 4,431,781 —
Changes in operating assets and liabilities:
Digital assets receivable (59,154 ) —
Net cash provided (used) in operating activities (8,235,211 ) 5,650,086
Cash flows from investing activities:
Purchases of portfolio investments (3,818,608 ) —
Proceeds from sales and repayments of portfolio investments 4,000,100 —
Net cash provided (used) in investing activities (195,358,509 ) —
Cash flows from financing activities:
Issuance costs of private offering (21,192,358 ) —
Proceeds from option and warrant exercise 628,909 —
Payments for repurchase of common stock (18,931,518 ) —
Net cash provided in financing activities 219,503,884 —
Supplemental disclosure of cash flow information:
Cash paid for income taxes $ — $ 159,750
Cash paid for interest $ — $ 320
Non-cash investing and financing activities:
In-kind digital assets acquired $ (191,001,099 ) $ —
Digital assets loan receivable $ 8,076,572 $ —
See accompanying Notes to Financial Statements
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SUI GROUP HOLDINGS LIMITED
Investment Schedule
Investment / Industry Cost Fair Value Percentage ofNet Assets
Short-Term Non-banking Loans
Business Services - 15% secured loans
Real Estate - 15% secured loans
Real Estate - 24% secured loans
Common Stock
Other Equity
See accompanying Notes to Financial Statements
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NOTE 1 — ORGANIZATION
Sui Group Holdings Limited (the “Company”, “Sui Group”, or “we”), formerly known as Mill City Ventures III, Ltd., is a Minnesota corporation headquartered in Wayzata, Minnesota. The Company changed its name to Sui Group Holdings Limited on August 26, 2025, following an amendment to our Articles of Incorporation filed with the Office of the Minnesota Secretary of State. This name change and concurrent rebranding coincide with a change in strategy toward digital asset treasury management.
Prior to the rebrand, the Company operated under the name Mill City Ventures III, Ltd. as a publicly traded specialty finance company listed on Nasdaq under the ticker symbol “MCVT”. Its legacy business centered on issuing short-term, collateralized loans to small businesses and individuals, with a focus on generating high-yield returns.
To support the digital asset treasury strategy, the Company completed a $450 million private placement in July 2025 (the “Private Placement”). Following the Private Placement, the Company began implementing its SUI treasury strategy, acquiring over 74 million SUI tokens and generating 1.0 million SUI tokens from staking and other lending activities in addition to the 33 million tokens received as in-kind consideration from the Private Placement.
To further institutionalize its position within the Sui ecosystem, the Company formalized its relationship with the Sui Foundation through the Digital Asset Purchase and Sale Agreement (the “Digital Asset Purchase Agreement”), under which the Sui Foundation agreed to sell 44 million SUI tokens at a discounted purchase price equal to 85% of the twenty-four-hour time-weighted average price (“TWAP”) of SUI tokens on July 31, 2025. The Digital Asset Purchase Agreement provides formal recognition of the Company as a digital asset treasury company with backing from the Sui Foundation. In connection with this strategy, the Company changed its ticker symbol to “SUIG” and transitioned its operations to focus on institutional-grade exposure to the SUI digital asset.
The Company’s strategy is to maximize the value of SUI per-share and support the growth of the Sui ecosystem through scalable, transparent, and long-term value creation strategies. Its Common Stock remains listed on the Nasdaq Capital Market and continues to be available for options trading on Cboe Global Markets.
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation: The accompanying Financial Statements have been prepared in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standard Codification (“ASC”) which is the source of authoritative accounting principles recognized by the FASB to be applied by non-governmental entities in the preparation of financial statements in conformity with Generally Accepted Accounting Principles (“GAAP”) in the United States.
Change in application of ASC 946: As discussed in “Note 1 — Organization”, the Company changed its strategy during the quarter ended September 30, 2025 and as a result no longer meets the definition of an investment company under ASC 946 – Financial Services – Investment Companies. Accordingly, the Company discontinued the application of ASC 946 and is accounting for this change on a prospective basis.
Use of estimates: The preparation of financial statements in conformity with GAAP requires management and our independent Board members to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosures of contingent assets and liabilities, at the date of the financial statements, as well as the reported amounts of expenses during the reporting period. Significant estimates and assumptions include, but are not limited to, the determination of the fair value of investment assets, which involves the use of observable and unobservable market inputs which is based on management’s evaluation of available positive and negative evidence, including historical operating results and expectations of future taxable income. Actual results could differ from those estimates.
Cash and cash equivalents: The Company maintains the cash balances in financial institutions and with regulated financial investment brokers. The Company considers all highly liquid investments purchased with an original maturity date of three months or less to be cash equivalents. Cash equivalents as of December 31, 2025 include $2,249,758 of USD Coins (USDC), a stablecoin pegged to the U.S. dollar.
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Digital assets: The Company has adopted Accounting Standards Update (“ASU”) 2023-08, Digital Assets, which provides guidance on the recognition, measurement, presentation, and disclosure of digital assets. The standard was adopted prospectively, and no cumulative-effect adjustment was recorded upon adoption. The Company accounts for its digital assets, including SUI tokens, in accordance with ASC 350 – Intangibles – Goodwill and Other. The Company has determined its digital assets meet the scoping criteria of ASC 350-60, which requires eligible cryptocurrency assets to be measured at fair value, with changes in fair value recognized in net income. Fair value is determined in accordance with ASC 820 – Fair Value Measurement, using quoted prices in active markets. The Company has designated Coinbase as its principal market because it has the greatest volume and level of activity of SUI for determining the fair value of SUI tokens.
The activity from remeasurement of digital assets at fair value is reflected in the statements of operations within unrealized gain (loss) on digital assets. Realized gains and losses from the derecognition of digital assets are presented within realized gain (loss) on digital assets in the statements of operations. The Company uses the specific identification method to calculate the realized gains (losses) on digital assets.
Sales and purchases of digital assets are reflected as cash flows from investing activities in the statement of cash flows. Contributions of digital assets received as part of the consideration received are presented as noncash investing and financing activities in the statements of cash flows. Non‐cash disposals of digital assets that occur in connection with loan arrangements are accounted for consistent with the policies described in the digital asset loan receivables section below, which provides additional detail on the treatment of digital assets transferred pursuant to such agreements.
Digital asset loan receivables: The Company enters into digital asset lending arrangements in the ordinary course of business, whereby digital assets are loaned to the borrowers in exchange for a fee in accordance with the terms of the lending arrangement.
Upon origination, the digital assets loaned are derecognized at their carrying amount and a corresponding digital asset loan receivable is recognized at fair value. Subsequently, a digital asset loan receivable is remeasured at fair value on each reporting date using quoted prices from the Company’s principal market for the underlying digital asset, in accordance with ASC 820. Gains and losses associated with the derecognition of the SUI tokens is included in “Realized loss on digital assets” on the statements of operations. Subsequent change in the fair value of the digital asset loan receivable is recognized as “Unrealized loss on digital assets” on the statements of operations.
Fees earned on digital asset loan receivables are recognized as revenue under “Digital lending interest income” on the statements of operations.
The exchange of digital assets loaned for digital asset loan receivable is disclosed as a noncash investing activity. Fair value gains and losses are presented as reconciling items in the reconciliation of net income to net cash flows from operating activities.
The Company regularly evaluates its credit exposure to borrowers to determine whether an allowance for credit losses is required under ASC 326, Financial Instruments – Credit Losses (CECL). The allowance reflects management’s assessment of borrower creditworthiness, collateral volatility, and liquidity conditions in digital asset markets.
Valuation of portfolio investments: In connection with the change in accounting methods from ASC 946 - Financial Services - Investment Companies during the third quarter of 2025, the Company ceased applying investment company accounting and transitioned to accounting standards applicable to operating entities, in light of the change in its business model. Concurrently, the Company elected to apply the fair value option under ASC 825 - Financial Instruments, as it relates to the Company’s portfolio investments.
The change in accounting policy has been applied prospectively from the date of the election of ASC 825 – Financial Instruments. Portfolio investments are valued in accordance with ASC Topic 820 - Fair Value Measurements, which defines fair value, establishes a framework for measuring fair value, and requires disclosures about fair value measurements. Fair value is generally based on quoted market prices provided by independent pricing services, broker or dealer quotations, or alternative price sources. In the absence of quoted market prices, broker or dealer quotations, or alternative price sources, investments are measured at fair value as determined by the Company’s Board based on, among other things, the input of our executive management, the Audit Committee of the Board, and any independent third-party valuation experts that may be engaged by management to assist in the valuation of our portfolio investments, but in all cases consistent with our written valuation policies and procedures.
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