SUI Group Holdings Ltd 10-Q for FY2026 Q2
SUI Group Holdings Ltd. (SUIG)
About this 10-Q
SUI Group Holdings Ltd filed this 10-Q on August 6, 2026, covering the quarter ended June 30, 2026 (FY2026 Q2).
Headline figures
Quarter ended June 30, 2026, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $363K
- down 61.7% from $948K a year earlier
- Net loss
- $18.91M
- compared with net income of $677K a year earlier
- Diluted EPS
- -$0.23
- compared with $0.11 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
__________________________
FORM
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(Mark One) | |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
| For the quarterly period ended |
or | |
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
| For the transition period from _______________________ to ___________________ |
Commission File Number
__________________________
(Exact name of registrant as specified in its charter) |
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(State or other jurisdiction of incorporation or organization) |
| (I.R.S. Employer Identification No.) |
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(Address of principal executive offices) |
| (Zip Code) |
(
(Registrant’s telephone number, including area code)
__________________________
Mill City Ventures III, LTD
(Former name, former address and former fiscal year, if changed since last report)
__________________________
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
| Trading Symbol(s) |
| Name of each exchange on which registered |
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| The (Nasdaq Capital Market) |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). ☒
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☐ | Accelerated filer | ☐ |
☒ | Smaller reporting company | ||
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| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
As of August 3, 2026, Sui Group Holdings Limited had
SUI GROUP HOLDINGS LIMITED
Index to Form 10-Q
for the Quarter Ended June 30, 2026
| 2 |
| Table of Contents |
FORWARD-LOOKING STATEMENTS
This quarterly report on Form 10-Q (the “Report”) contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements are neither historical facts nor assurances of future performance. You should not place undue reliance on any of these forward-looking statements. Forward-looking statements relate to future events or future financial performance of Sui Group Holdings Limited (the “Company,” “SUI Group,” or “we”), and can ordinarily be identified by terminology such as “aims,” “anticipates,” “believes,” “contemplates,” “continue,” “could,” “estimates,” “expects,” “intends,” “may,” “might,” “objective,” “plans,” “potential,” “predicts,” “projects,” “seeks,” “should,” “targets,” “will,” or “would” or the negative of these terms or other similar words. Some of the forward-looking statements contained in this Report relate to, and are based on the Company’s current assumptions regarding, the following:
| · | the ability of the Company to execute its plans; |
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| · | the Company’s digital asset treasury, stablecoin and treasury diversification strategies; |
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| · | the capabilities and limitations of the SUI blockchain; |
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| · | the digital assets to be held by us and the future performance thereof; |
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| · | the success of the Company’s investments; |
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| · | risk of nonperformance by borrowers, service providers and other counterparties; |
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| · | the Company’s relationships with third parties; |
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| · | the dependence of the Company’s success on the general economy and its impact on the industries in which the Company operates; |
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| · | the Company’s regulatory structure and tax treatment; |
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| · | the adequacy of the Company’s cash resources and working capital; and |
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| · | the timing of cash flows. |
Forward-looking statements are subject to numerous risks and uncertainties that could cause actual results to differ materially from the results expressed in, or implied by, these forward-looking statements. Applicable risks and uncertainties include, among others, the Company’s ability to achieve profitable operations; fluctuations in the market price of SUI and other digital asset tokens that will impact the Company’s accounting and financial reporting; government regulation of cryptocurrencies; changes in securities laws or regulations; changes in business, market, financial, political and regulatory conditions; risks relating to the Company’s operations and business, including the highly volatile nature of the price of cryptocurrencies; the risk that the Company’s stock price may be highly correlated to the price of the digital assets that it holds; risks related to increased competition in the industries in which the Company does and will operate; risks relating to significant legal, commercial, regulatory and technical uncertainty regarding digital assets generally; risks relating to the treatment of crypto assets for U.S. and foreign tax purposes; expectations with respect to future performance, growth and anticipated acquisitions; potential litigation involving the Company or the validity or enforceability of the intellectual property of the Company; global economic conditions; geopolitical events and regulatory changes; access to additional financing, and the potential lack of such financing; and the Company’s ability to raise funding in the future and the terms of such funding, including dilution caused thereby; risks relating to minority investments in other sectors including financial technology and artificial intelligence; as well as other risks and uncertainties discussed under “Item 1A. Risk Factors” in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on February 27, 2026 (the “Annual Report”), the Company’s Quarterly Report on Form 10-Q filed with the SEC on May 8, 2026 (the “Quarterly Report”), and in other filings made by the Company from time to time with the SEC. The Company undertakes no obligation to update any forward-looking statement to reflect events or circumstances occurring after the date of this filing. The forward-looking statements made in this Report relate only to events as of the date on which the statements are made.
| 3 |
| Table of Contents |
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SUI GROUP HOLDINGS LIMITED
CONDENSED BALANCE SHEETS
(In thousands, except for share and per share data)
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| June 30, 2026 (unaudited) |
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| December 31, 2025 (audited) |
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Assets |
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Current Assets |
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Cash and cash equivalents |
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Equity investments |
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Debt investments |
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Interest and dividend receivable |
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Digital asset loan receivable |
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Prepaid expenses |
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Income tax receivable |
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Total current assets |
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Digital assets |
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Digital asset loan receivable |
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Digital asset receivable |
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Debt investments |
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Equity investments |
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Other assets |
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Total Assets |
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Liabilities and Shareholders’ Equity |
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Current Liabilities |
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Accounts payable and other liabilities |
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Deferred income |
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Accrued payroll liabilities |
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Total current liabilities |
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Long-term Liabilities |
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Deferred income |
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Total long-term liabilities |
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Total liabilities |
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Commitments and Contingencies |
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Shareholders’ Equity |
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Common stock, par value $ |
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Additional paid-in capital |
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Accumulated deficit |
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Total shareholders’ equity |
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Total liabilities and shareholders’ equity |
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| $ |
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See accompanying Notes to Financial Statements
| 4 |
| Table of Contents |
SUI GROUP HOLDINGS LIMITED
CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)
(In thousands, except for share and per share data)
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| Three Months Ended |
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| Six Months Ended |
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| June 30, 2026 |
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| June 30, 2025 |
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| June 30, 2026 |
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| June 30, 2025 |
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Revenues |
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SUI staking revenue |
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Digital lending interest income |
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Investment income |
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Total Revenues |
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Operating (Income) Expenses |
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Professional fees |
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Stock-based compensation |
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Asset and strategic management fees |
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Compensation expense |
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Insurance |
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Unrealized (gain) loss on digital assets and receivable, net |
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Realized loss on digital assets, net |
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Impairment of digital asset receivable |
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Provision for (recovery of) credit losses |
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Net realized and unrealized gain on investments |
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Other general and administrative |
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Total Operating Expenses |
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Operating Income (Loss) |
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Other Income (Loss) |
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Investment income |
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Net realized and unrealized gain (loss) on investments |
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Other income |
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Total Other Income (Loss) |
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Income (Loss) Before Taxes |
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Provision for Income Taxes |
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Net Income (Loss) |
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Earnings per Share |
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Basic |
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Diluted |
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| $ |
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Weighted-average number of common shares outstanding - basic |
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Weighted-average number of common shares outstanding - diluted |
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See accompanying Notes to Financial Statements
| 5 |
| Table of Contents |
SUI GROUP HOLDINGS LIMITED
CONDENSED STATEMENTS OF SHAREHOLDERS’ EQUITY (UNAUDITED)
(In thousands, except for share and per share data)
Three Months Ended June 30, 2026 |
| Common Shares |
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| Par Value |
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| Additional Paid In Capital |
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| Accumulated Deficit |
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| Total Shareholders’ Equity |
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Balance as of March 31, 2026 |
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Stock-based compensation |
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Net loss |
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Balance as of June 30, 2026 |
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| $ | ( | ) |
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Three Months Ended June 30, 2025 |
| Common Shares |
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| Additional Paid In Capital |
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| Accumulated Deficit |
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| Accumulated Undistributed Net Investment Gain (Loss) |
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| Accumulated Undistributed Net Realized Gain on Investments Transactions |
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| Net Unrealized Appreciation (Depreciation) in value of Investments |
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| Total Shareholders’ Equity |
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Balance as of March 31, 2025 |
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Undistributed net investment gain |
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Undistributed net realized loss on investment transactions |
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Appreciation in value of investments |
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Balance as of June 30, 2025 |
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| $ |
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Six Months Ended June 30, 2026 |
| Common Shares |
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| Par Value |
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| Additional Paid In Capital |
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| Accumulated Deficit |
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| Total Shareholders’ Equity |
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Balance as of December 31, 2025 |
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| $ |
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| $ | ( | ) |
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Stock-based compensation |
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Net loss |
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Balance as of June 30, 2026 |
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| $ |
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| $ |
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| $ | ( | ) |
| $ | 83,828 |
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Six Months Ended June 30, 2025 |
| Common Shares |
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| Par Value |
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| Additional Paid In Capital |
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| Accumulated Deficit |
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| Accumulated Undistributed Net Investment Gain (Loss) |
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| Accumulated Undistributed Net Realized Gain on Investments Transactions |
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| Net Unrealized Appreciation (Depreciation) in value of Investments |
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| Total Shareholders’ Equity |
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Balance as of December 31, 2024 |
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Repurchase of common shares |
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Undistributed net investment gain |
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Undistributed net realized loss on investment transactions |
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Appreciation in value of investments |
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Balance as of June 30, 2025 |
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| $ |
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| $ | ( | ) |
| $ |
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| $ |
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| $ | 213 |
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| $ | 20,256 |
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See accompanying Notes to Financial Statements
| 6 |
| Table of Contents |
SUI GROUP HOLDINGS LIMITED
CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
(In thousands, except for share and per share data)
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| Six Months Ended |
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| June 30, 2026 |
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| June 30, 2025 |
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Cash flows from operating activities: |
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Net income (loss) |
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Adjustments to reconcile net income (loss) to net cash provided (used) in operating activities: |
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Deferred income taxes |
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Unrealized loss on digital assets and receivable, net |
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Realized loss on digital assets, net |
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Impairment of digital asset receivable |
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Net realized and unrealized loss/(gain) on investments |
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Provision for credit losses |
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Staking income |
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Digital lending interest income |
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Stock-based compensation |
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Purchases of investments |
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Proceeds from sales of investments |
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Changes in operating assets and liabilities: |
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Prepaid expenses |
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Interest and dividend receivable |
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Digital assets receivable |
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Other assets |
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Accounts payable and other liabilities |
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Net cash used in operating activities |
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Cash flows from investing activities: |
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Investments in equity securities |
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Proceeds from sales and repayments of investments |
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Purchases of digital asset receivable |
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Net cash used in investing activities |
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Cash flows from financing activities: |
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Payments for repurchase of common stock |
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Net cash used in financing activities |
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Net decrease in cash |
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Cash, beginning of period |
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Cash, end of period |
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Supplemental disclosure of cash flow information: |
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Cash paid for interest |
| $ |
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Non-cash investing activity |
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Transfer of digital assets to digital asset receivable |
| $ | ( | ) |
| $ |
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Digital assets loan receivable |
| $ | ( | ) |
| $ |
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Digital assets loan receivable return |
| $ |
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| $ |
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See accompanying Notes to Financial Statements
| 7 |
| Table of Contents |
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 $
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
The Company’s strategy is to maximize the value of SUIG and support the growth of the Sui ecosystem through scalable, transparent, and long-term value creation strategies. The Company also seeks to enhance balance sheet productivity by investing opportunistically in the SUI ecosystem and allocating capital to high-conviction growth themes across the wider digital asset, financial technology and artificial intelligence sectors. Its Common Stock remains listed on the Nasdaq Capital Market and continues to be available for options trading on Cboe Global Markets.
NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation: The accompanying unaudited condensed financial statements have been prepared by the Company, pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). In the opinion of the Company, the foregoing interim statements contain all adjustments, consisting only of normal recurring adjustments necessary to present fairly the financial position of the Company as of June 30, 2026 and December 31, 2025, as well as its results of operations for the three months ended June 30, 2026 and 2025 and for the six months ended June 30, 2026 and 2025. The condensed balance sheet as of December 31, 2025 has been derived from the audited financial statements as of that date. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts therein. Due to the inherent uncertainty involved in making estimates, actual results in future periods may differ from the estimates.
Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted from this report, as is permitted by rules and regulations of the SEC. Accordingly, the condensed financial statements do not include all information and footnotes required by GAAP for a complete financial statement presentation. These condensed financial statements should be read in conjunction with the financial statements and the notes thereto for the year ended December 31, 2025, which are included in the Company’s Annual Report on Form 10-K filed with the SEC on February 27, 2026 (the “Annual Report”).
Use of estimates: The preparation of financial statements in conformity with GAAP requires management and the independent members of the Company’s board of directors (the “Board”) 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, impairment assessment of equity investments in privately held companies, fair value of embedded derivatives associated with equity investments, digital asset loans, digital asset receivable, impairment assessment of certain digital asset receivable, and the allowance of credit losses on digital assets subject to the current expected credit loss model, which involve the use of observable and unobservable market inputs and management’s judgment. These estimates are 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 June 30, 2026 include $
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Digital assets: The Company accounts for its digital assets, including SUI tokens, in accordance with ASC 350-60, Goodwill and Other – Crypto Assets, 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 based on the volume and level of activity.
Changes in fair value are reflected as unrealized gain or loss on digital assets and realized gains and losses from the derecognition are recognized upon disposition using the specific identification method.
For digital assets not in scope of ASC 350‑60, impairment is recognized when events or changes in circumstances indicate that the carrying amount may not be recoverable. Impairment losses are measured based on the excess of the carrying amount over the fair value of the digital asset, which is determined using the lowest observable market price during the period in which the impairment is identified.
Purchases and sales of digital assets are classified as investing activities in the statement of cash flows. Certain transfers of digital assets may be reflected as non-cash investing activities, as applicable.
Digital asset receivable: The Company recognizes digital asset receivable for digital assets that are held in wallets controlled by third parties. These receivables represent contractual rights to receive specified digital assets. Depending on the nature of the underlying digital asset and the associated settlement mechanics, the receivable may contain an embedded feature that requires evaluation under ASC 815. In circumstances where the underlying digital asset is not readily convertible to cash, the embedded feature may not meet the definition of a derivative.
As a result, the Company applies different subsequent measurement approaches based on the substance of the underlying rights. Digital asset receivable arising from decentralized lending pool arrangements are remeasured at fair value each reporting period, as these receivables represent rights to receive SUI tokens and contain embedded derivatives that require bifurcation. In contrast, digital asset receivable representing rights to receive liquid staking tokens or vault tokens do not contain embedded derivatives and are therefore carried at cost and assessed for impairment, as applicable.
Credit losses: Digital asset loan and certain digital asset receivables are subject to credit exposure and are evaluated for expected credit losses in accordance with ASC 326, Financial Instruments—Credit Losses. The allowance for credit losses is based on management’s evaluation of historical experience, current conditions, and reasonable and supportable forecasts.
Equity investments: The Company accounts for equity investments in which it does not have significant influence in accordance with ASC 321, Investments — Equity Securities.
Equity securities with readily determinable fair values are measured at fair value, with unrealized gains and losses recognized in net income in the period of the change. Fair value is determined in accordance with ASC 820, Fair Value Measurement. Dividends are recognized in earnings when the right to receive payment is established.
For equity investments that do not have a readily determinable fair value, the Company has elected the measurement alternative available under ASC 321. These investments are recorded at cost, less impairment, and adjusted for observable price changes in orderly transactions for identical or similar investments, with adjustments recognized in earnings in the period of the change. The Company evaluates these investments for impairment when indicators exist and records an impairment loss if the carrying amount is not recoverable. Gains or losses on disposals are recognized in earnings when realized.
Debt investments: The Company accounts for its debt investments in accordance with ASC 825, Financial Instruments, and has elected the fair value option for its debt investments, with changes in fair value recognized in earnings each reporting period.
Fair value is determined in accordance with ASC 820, using valuation techniques and inputs that reflect market participant assumptions. Because the fair value option has been elected, these debt investments are not evaluated for impairment or expected credit losses.
Interest income, including amounts attributable to payment-in-kind (PIK) features, is recognized based on the contractual terms of the instruments and recorded on an accrual basis when earned. Interest income recognition is suspended on loans on non-accrual status when collectability of principal or interest is not reasonably assured. Realized gains or losses on the disposition of debt investments are recognized in earnings upon sale.
Fair value measurement of investments: Investments measured at fair value are valued in accordance with ASC Topic 820, Fair Value Measurements, with changes in fair value recognized in earnings each reporting period.
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Fair value is generally based on quoted market prices provided by independent pricing services, broker or dealer quotations, or alternative price sources. When such observable inputs are not available, fair value is determined using valuation techniques that incorporate management judgment and consider all relevant facts and circumstances, consistent with the Company’s valuation policies and procedures.
Investments measured at fair value are classified within the fair value hierarchy based on the observability of the inputs used in the valuation. The determination of fair value, particularly for Level 3 investments, involves significant judgment. Due to the inherent uncertainty associated with valuation, actual results may differ materially from the values recorded.
Income taxes: The Company accounts for income taxes under the asset and liability method in accordance with ASC 740, Income Taxes. Deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial statement carrying amounts and tax basis of assets and liabilities using enacted tax rates in effect for the tax year in which the differences are expected to reverse.
Deferred tax assets are reduced by a valuation allowance when, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred tax assets will be realized. The Company’s assessment of realizability requires significant judgment.
The Company accounts for income taxes in interim periods using the estimated annual effective tax rate method. Under this method, the Company estimates its annual effective tax rate and applies that rate to year‑to‑date pre‑tax income or loss, with discrete income tax items recorded in the period in which they occur.
SUI staking revenue: Beginning in August 2025, the Company commenced SUI staking activities, including native staking, liquid staking and restaking. The Company delegates SUI tokens to third-party validator nodes to participate in proof-of-stake blockchain protocols and earns staking rewards in the form of additional SUI tokens.
The Company evaluated its staking arrangements in accordance with ASC 606, Revenue from Contracts with Customers, and determined that it acts as an agent as it does not control the validation services provided by the third-party validators. Accordingly, staking rewards are recognized on a net basis.
Staking rewards are recognized as non-cash consideration at the fair value of the SUI token earned on the date the rewards are earned, limited to the portion attributable to the Company for delegating its tokens.
Stock-based compensation: The Company’s stock-based compensation consists of stock options and warrants issued to certain employees, non-employees and directors of the Company. The Company recognizes compensation expense based on an estimated grant date fair value using the Black-Scholes option-pricing model or Monte Carlo simulation. If the factors change and different assumptions are used, the Company’s stock-based compensation expense could be materially different in the future. The Company recognizes stock-based compensation expense for these options and warrants on a straight-line basis over the requisite service period. The Company has elected to account for forfeitures as they occur.
Warrants: The Company evaluates warrants to determine whether they should be classified as equity or liabilities in accordance with ASC 480, Distinguishing Liabilities from Equity, and ASC 815, Derivatives and Hedging. Warrants issued as compensation are accounted for in accordance with ASC 718, Compensation - Stock Compensation. Such warrants are measured at fair value on the grant date and recognized as compensation expense over the requisite service period.
Reclassifications: Certain prior‑period amounts have been reclassified to conform to the current financial statement presentation. These reclassifications primarily relate to the aggregation of previously separate operating expense line items into a single financial statement line within the statements of operations. The reclassifications had no impact on previously reported total assets, total liabilities, shareholders’ equity, net income (loss), or cash flows, and no changes were made to the underlying prior‑year balances.
NOTE 3 – DIGITAL ASSETS
During the six months ended June 30, 2026, the Company continued to hold SUI tokens acquired pursuant to the Digital Asset Purchase and Sale Agreement with the Sui Foundation, which remain subject to contractual transfer restrictions through August 30, 2027. The Company is permitted to stake the restricted SUI tokens during the restriction period.
The discount associated with the acquisition of
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The following table presents the activities in digital assets for the six months ended June 30, 2026:
Digital Assets (In thousands, except for token quantities) |
| Number of Tokens |
|
| Cost basis |
|
| Fair value |
| |||
|
|
|
|
|
| |||||||
Balance as of January 1, 2026 |
|
|
|
| $ |
|
| $ |
| |||
Return of digital asset loan |
|
|
|
|
|
|
|
|
| |||
Digital asset loan advanced |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
Transfers of digital asset receivable |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
Realized loss on transfer and digital asset loan advanced |
|
|
|
|
|
|
|
| ( | ) | ||
Staking rewards earned and received |
|
|
|
|
|
|
|
|
| |||
Lending rewards earned and received |
|
|
|
|
|
|
|
|
| |||
Staking/lending rewards accrued in prior period, received |
|
|
|
|
|
|
|
|
| |||
Unrealized gains (losses) |
|
|
|
|
| — |
|
|
| ( | ) | |
Balance as of June 30, 2026 |
|
|
|
| $ |
|
| $ |
| |||
Digital assets are measured at fair value on a recurring basis in accordance with ASC 820, Fair Value Measurement, using quoted prices in active markets (Level 1 inputs).
For the six months ended June 30, 2026, we incurred $
NOTE 4 – DIGITAL ASSET LOAN RECEIVABLE
The Company has entered into digital asset loan arrangements pursuant to which it has lent SUI tokens to third parties in exchange for stated fees payable in digital assets.
Under a digital asset loan arrangement entered into in September 2025 with Galaxy Digital LLC (“Galaxy Digital”), the Company lent SUI tokens under an evergreen facility that may be terminated with seven days’ notice at the Company’s election. The Company earns fees based on a stated annual rate, payable in SUI tokens. Repayment may be made either in kind or in cash equal to the fair value of the digital assets loaned. During the six months ended June 30, 2026, the loan arrangement was fully settled and all outstanding amounts were repaid. The realized loss recognized upon settlement primarily reflected changes in the market value of the underlying SUI tokens during the loan period, rather than any credit-related loss or shortfall in repayment.
In September 2025, the Company entered into a separate digital asset loan agreement with BlueFin Labs Inc. (“BlueFin”), pursuant to which
Neither of the above-mentioned arrangements contain a collateral requirement.
(In thousands) |
| June 30, 2026 |
|
| December 31, 2025 |
| ||
Digital asset loan receivable — current |
| $ |
|
| $ |
| ||
Digital asset loan receivable — non current |
|
|
|
|
|
| ||
Less: allowance for credit loss |
|
| ( | ) |
|
| ( | ) |
Total Digital asset loan receivable (net) |
| $ |
|
| $ |
| ||
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Digital asset loan receivable activity for the six months ended June 30, 2026, is as follows (In thousands, except for token quantities):
|
| Number of Tokens |
|
| Cost basis |
|
| Fair value |
| |||
December 31, 2025 |
|
|
|
| $ |
|
| $ |
| |||
Loans advanced |
|
|
|
|
|
|
|
|
| |||
Return of digital asset loan |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
Realized loss on return of digital asset loan |
|
| — |
|
|
|
|
|
| ( | ) | |
Digital asset loans interest earned |
|
|
|
|
|
|
|
|
| |||
Digital asset loans interest received |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
Provision for credit losses |
|
| — |
|
|
|
|
|
| ( | ) | |
Unrealized gains losses |
|
|
|
|
|
|
|
|
| |||
June 30, 2026 |
|
|
|
| $ |
|
| $ |
| |||
Digital asset loan receivables are measured at fair value on a recurring basis in accordance with ASC 820, Fair Value Measurement, using quoted prices in active markets (Level 1 inputs).
NOTE 5 – DIGITAL ASSET RECEIVABLE
During the six months ended June 30, 2026, with the assistance of its asset manager, Galaxy Digital, the Company participated in decentralized finance (“DeFi”) protocols built on the SUI blockchain, including liquid staking pools, decentralized lending pools, and vault‑based arrangements governed by on‑chain smart contracts.
The DeFi activity occurred toward the end of the first quarter of 2026 and was unwound by the Company shortly thereafter, at the beginning of the second quarter of 2026 following a change in the Company’s risk assessment of DeFi activities due to DeFi-related security incidents at the time. All amounts deployed in these DeFi arrangements were subsequently collected. The balance remained recorded as a digital asset receivable because the related tokens continued to be held in wallets controlled by Galaxy Digital as of June 30, 2026.
As of June 30, 2026, the digital asset receivable primarily related to rights to receive SuiUSDe from Galaxy Digital and was separate from the DeFi positions described above, which had been unwound and collected at the beginning of the second quarter of 2026. Digital asset receivables are subsequently measured at fair value, with fair value determined using quoted prices in active markets for the underlying digital assets, when available. Changes in fair value are recognized in earnings in the period incurred. The reason for these amounts being recognized as digital asset receivables relates to these SuiUSDe tokens being held in wallets controlled by Galaxy Digital. Because Galaxy Digital controls the wallets holding the underlying assets, the Company does not have direct access to the associated private keys, and the assets are not protected from Galaxy Digital's creditors.
Digital asset receivables are subject to counterparty, liquidity, operational, and protocol-related risks. The Company evaluates these exposures at each reporting date and records allowances for expected credit losses in accordance with the current expected credit loss model.
NOTE 6 – INVESTMENTS
During the six months ended June 30, 2026, the Company executed the following investments in private entities, as part of the Company’s strategy to enhance balance sheet productivity by lending to its ecosystem and strategic partners on a risk adjusted basis and allocating capital to high-conviction growth themes across the digital asset, financial technology and artificial intelligence sectors.
In March 2026, the Company entered into a Simple Agreement for Future Equity ("SAFE") with Nof1 Holdings, Inc. ("Nof1"), an agentic artificial intelligence research and trading technology company, for total cash consideration of $
During the same period, the Company also invested $
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The Company does not have the ability to exercise significant influence over either investee, and neither of the two investments have a readily determinable fair value. Accordingly, each investment is carried at cost. As of June 30, 2026, the Company had not recorded any impairment related to these investments.
Investments as of June 30, 2026 and December 31, 2025, are as follows (In thousands):
|
| As of June 30, 2026 |
|
| As of December 31, 2025 |
| ||
Debt security investments measured at fair value |
|
|
|
|
|
| ||
Short-term Non-banking Loans |
|
|
|
|
|
| ||
Commercial Business Loans |
|
|
|
|
|
| ||
Equity investments in publicly traded companies |
|
|
|
|
|
| ||
Equity investments in privately held companies |
|
|
|
|
|
| ||
Total Investments |
| $ |
|
| $ |
| ||
Fair value measurement
The following table presents the fair value measurements of our investments by major class, as of June 30, 2026, according to the fair value hierarchy (In thousands):
|
| As of June 30, 2026 |
| |||||||||||||
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Total |
| ||||
|
|
|
|
|
|
| ||||||||||
Short-term non-banking loans |
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||
Commercial business loans |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Equity investments in publicly traded companies |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Total |
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||
The following table presents the fair value measurements of our investments by major class, as of December 31, 2025, according to the fair value hierarchy (In thousands):
|
| As of December 31, 2025 |
| |||||||||||||
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Total |
| ||||
|
|
|
|
|
|
| ||||||||||
Short-term non-banking loans |
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||
Commercial business loans |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Equity investments publicly traded companies |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Total |
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||
The following table presents a reconciliation of the beginning and ending fair value balances for our Level 3 investment assets for the three months ended June 30, 2026 (In thousands):
|
| Balance |
| |
| ||||
Balance as of January 1, 2026 |
| $ |
| |
Net change in unrealized depreciation |
|
| ( | ) |
Purchases and other adjustments to cost |
|
|
| |
Sales and redemptions |
|
| ( | ) |
Balance as of June 30, 2026 |
| $ |
| |
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The following table lists our Level 3 investments held as of June 30, 2026 and the unobservable inputs used to determine their valuation:
Security Type |
| 6/30/26 FMV |
|
| Valuation Technique |
| Unobservable Inputs |
| Range | ||
Short-term non-banking loans |
| $ |
|
| discounted cash flow |
| determining private company interest rate based on changes in market rates of instruments with comparable creditworthiness, including assessment related to individual note creditworthiness |
| |||
Commercial business loans |
|
|
|
| discounted cash flow |
| forecasted cash flows available to creditors in a foreclosure sale |
| |||
Total |
| $ |
|
|
|
|
|
|
| ||
The following table presents a reconciliation of the beginning and ending fair value balances for our Level 3 investment assets for the year ended December 31, 2025:
In thousands |
| Balance |
| |
|
|
|
| |
Balance as of January 1, 2025 |
| $ |
| |
Net change in unrealized depreciation |
|
| ( | ) |
Purchases and other adjustments to cost |
|
|
| |
Sales and redemptions |
|
| ( | ) |
Balance as of December 31, 2025 |
| $ |
| |
The following table lists our Level 3 investments held as of December 31, 2025 and the unobservable inputs used to determine their valuation:
Security Type |
| 12/31/25 FMV |
|
| Valuation Technique |
| Unobservable Inputs |
| Range | ||
Short-term non-banking loans |
| $ |
|
| discounted cash flow |
| determining private company interest rate based on changes in market rates of instruments with comparable creditworthiness, including assessment related to individual note creditworthiness |
| |||
Commercial business loans |
|
|
|
| discounted cash flow |
| determining private company interest rate based on changes in market rates of instruments with comparable creditworthiness |
| |||
Total |
| $ |
|
|
|
|
|
|
| ||
There were no transfers between Level 1, Level 2, or Level 3 of the fair value hierarchy during the reporting period.
NOTE 7 – STOCK-BASED COMPENSATION
During the six months ended June 30, 2026, the Company issued compensatory warrants to a newly appointed director. These warrants are equity‑classified and measured at fair value on the grant date. The warrants vest over 24 months in different tranches and have four different exercise prices. Because exercise prices significantly exceeded the fair value of the common stock on the grant date, they contain an implicit market condition. The Company used the graded vesting method to attribute expenses associated with the award.
For the six months ended June 30, 2026, the Company recognized a total stock-based compensation expense of $
The following table summarizes warrant activity for the period ended June 30, 2026:
|
| Number of |
|
|
|
|
|
|
| |||
|
| Shares |
|
|
|
|
| Weighted |
| |||
|
| Issuable |
|
| Weighted |
|
| Average |
| |||
|
| Upon |
|
| Average |
|
| Remaining |
| |||
|
| Exercise of |
|
| Exercise |
|
| Contractual |
| |||
|
| Warrants |
|
| Price |
|
| Life (years) |
| |||
Outstanding on December 31, 2025 |
|
|
|
| $ |
|
|
|
| |||
Issued |
|
|
|
|
|
|
|
|
| |||
Exercised |
|
| - |
|
|
|
|
|
|
|
| |
Expired |
|
| - |
|
|
|
|
|
|
|
| |
Outstanding on June 30, 2026 |
|
|
|
| $ |
|
|
|
| |||
Exercisable on June 30, 2026 |
|
|
|
| $ |
|
|
|
| |||
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NOTE 8 – PER-SHARE INFORMATION
Basic earnings (loss) per share are computed by dividing net income (loss) by the weighted average number of Common Shares outstanding during the period. Diluted earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of dilutive Common Shares outstanding during the period. The Company’s potential dilutive Common Shares include stock options and warrants that are in the money or were pre-funded. The Company uses the treasury stock method to compute the dilutive shares related to in-the-money stock options and warrants, to be included in the dilutive earning per share, when the effect is not anti-dilutive.
A reconciliation of the numerator and denominator used in the calculation of basic and diluted earnings (loss) per share is set forth below (In thousands, except for share):
|
| For the Three Months Ended June 30, |
| |||||
|
| 2026 |
|
| 2025 |
| ||
Basic earnings per share: |
|
|
|
|
|
| ||
Numerator: |
|
|
|
|
|
| ||
Net income (loss) |
| $ | ( | ) |
| $ |
| |
Denominator: |
|
|
|
|
|
|
|
|
Weighted-average number of common shares outstanding - basic |
|
|
|
|
|
| ||
Effect of dilutive share-based rewards |
|
| - |
|
|
|
| |
Weighted-average number of common shares outstanding - diluted |
|
|
|
|
|
| ||
Basic earnings (loss) per common share |
| $ | ( | ) |
| $ |
| |
Diluted earnings (loss) per common share |
| $ | ( | ) |
| $ |
| |
|
| For the Six Months Ended June 30, |
| |||||
|
| 2026 |
|
| 2025 |
| ||
Basic earnings per share: |
|
|
|
|
|
| ||
Numerator: |
|
|
|
|
|
| ||
Net income (loss) |
| $ | ( | ) |
| $ |
| |
Denominator: |
|
|
|
|
|
|
|
|
Weighted-average number of common shares outstanding - basic |
|
|
|
|
|
| ||
Effect of dilutive share-based rewards |
|
| - |
|
|
|
| |
Weighted-average number of common shares outstanding - diluted |
|
|
|
|
|
| ||
Basic earnings (loss) per common share |
| $ | ( | ) |
| $ |
| |
Diluted earnings (loss) per common share |
| $ | ( | ) |
| $ |
| |
For the six months ended June 30, 2026, the following instruments were excluded from the computation of the dilutive earnings per share.
Options* |
|
|
| |
Warrants* |
|
|
|
*Options and Warrants were out-of-money for the period six months ended June 30, 2026
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NOTE 9 – RELATED-PARTY TRANSACTIONS
Karatage is a privately held entity co‑founded by the Company’s Chairman of the Board and the Company’s Chief Investment Officer. Accordingly, Karatage is considered a Related Party under ASC 850, Related Party Disclosures.
Under the arrangement with Karatage, to serve as a strategic advisor to support the Company’s business initiatives and long‑term strategic planning, the Company incurred advisory fees of $
NOTE 10 – INCOME TAXES
The Company’s effective income tax rate for the six months ended June 30, 2026 and 2025 was
The Company continues to assess the realizability of its deferred tax assets at each reporting date. Based on the weight of available evidence, management concluded that it is not more likely than not that the Company’s net deferred tax assets will be realized and, accordingly, the Company continues to maintain a full valuation allowance as of June 30, 2026.
NOTE 11 – SEGMENT
The Company has one reportable operating segment, which is a digital asset platform focused on maximizing SUI per share value and advancing the Sui ecosystem. The legacy financing solutions business is not considered a separate reportable segment, as the Company’s segment reporting has been to reflect the Company’s current strategic and operational decision-making.
During the quarter ended June 30, 2026, the Company’s chief operating decision makers (“CODM”) are the Company’s Chairman and the Chief Investment Officer, who, together, managed the Company’s operations as one operating segment for the purpose of evaluating financial performance and allocating resources. On July 8, 2026, Stephen Mackintosh resigned as the Company’s Chief Investment Officer. The resignation did not result from any disagreement with the Company regarding its operations, policies or practices.
The accounting policies of the Company’s segment are the same as those described in the summary of significant accounting policies. The CODMs use revenue, unrealized gain/loss on SUI and operating income to assess performance and allocate resources. The significant segment expense categories regularly provided to the CODMs are the same as those included on the condensed statements of operations. The measure of segment assets is total assets as reported on the balance sheets.
NOTE 12 – SUBSEQUENT EVENTS
The Company evaluated subsequent events through the date on which these condensed financial statements were issued. No events requiring recognition or disclosure in the condensed financial statements were identified.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
As used in this section and unless otherwise indicated, the terms “we,” “us,” “our,” and “the Company” refer to Sui Group Holdings Limited.
This Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to provide a reader of the Company’s 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 its future results. In addition, unless expressly stated otherwise, the comparisons presented in this MD&A refer to the same period in the prior year. The Company’s MD&A is presented in seven sections:
| · | Overview |
| · | SUI Treasury Management Activity |
| · | Investment Activity |
| · | Results of Operations |
| · | Liquidity and Capital Resources |
| · | Critical Accounting Estimates |
| · | Off-Balance Sheet Arrangements |
OVERVIEW
Sui Group Holdings Limited (“the Company”) 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, generating revenue primarily from interest income, transaction fees, and capital appreciation from related investments.
Beginning in 2025, the Company undertook a strategic shift in its business model to establish a digital asset treasury strategy focused on holding and managing SUI tokens, the native cryptocurrency of the SUI blockchain (“SUI”). Under this strategy, SUI has become the principal asset held in the Company’s treasury. In connection with this shift, the Company entered into a strategic relationship with the Sui Foundation, an independent organization supporting the development and adoption of the SUI network, pursuant to which the Company acquired SUI tokens and participates in staking and other protocol‑level activities.
On August 26, 2025, the Company changed its corporate name to Sui Group Holdings Limited, following an amendment to its Articles of Incorporation filed with the Office 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 core blockchain initiatives.
The Company’s strategy is to maximize the value of SUIG through scalable, transparent, and long-term value creation. The Company seeks to enhance balance sheet productivity by lending to its ecosystem and strategic partners on a risk adjusted basis, and allocating capital to high-conviction growth themes across the digital asset, financial technology and artificial intelligence sectors. To execute this strategy, the Company acquires SUI tokens through a combination of open‑market purchases, negotiated transactions, and other institutional‑grade sourcing arrangements, including an agreement with the Sui Foundation. In addition to holding SUI, the Company seeks to enhance the productivity of its SUI holdings through protocol‑level activities, including staking. During the three months ended March 31, 2026, the Company also engaged in selective decentralized finance (“DeFi”) activities, including liquid staking, protocol-level deployments, and stablecoin-related arrangements conducted through third‑party platforms operating on the SUI blockchain. Subsequent to March 31, 2026, the Company unwound all of its DeFi activities and recovered all amounts involved therein in response to security incidents affecting certain DeFi ecosystems. The Company has since adopted a strategy to deploy a portion of its digital asset holdings through trading-based activities, including high-frequency trading strategies; however, such activities had not commenced as of June 30, 2026.
As of June 30, 2026, the Company held approximately 91.1 million SUI tokens in our treasury (excluding SUI loaned to third parties), representing $62.8 million in digital assets. Including SUI tokens held through digital asset loan arrangements and digital asset receivable, the Company held approximately 108.9 million SUI tokens in our treasury, which equates to approximately 1.35 SUI per share of Common Stock and pre-funded warrants outstanding. The Company actively manages its digital asset holdings to balance liquidity requirements, risk exposure, and return objectives, including the use of third‑party asset managers to deploy portions of its holdings into approved blockchain‑native strategies.
The Company’s principal sources of income currently include staking rewards from our SUI holdings, yield earned from deployed digital assets, realized and unrealized gains or losses on digital assets, and rewards associated with participating in blockchain protocol, and, to a lesser extent, income or valuation changes from other investments. The Company continues to hold the legacy lending assets, some of which generated interest and fee income in the three months ended June 30, 2026; however, they represent a reduced share of the Company’s overall asset base and results of operations compared to prior periods.
Our operating expenses reflect the Company’s transition to a digital asset treasury model and include professional fees, payroll, custody and infrastructure costs related to blockchain asset management, and insurance, and other general administrative expenses. The Company seeks to achieve enhanced operational leverage as it scales its digital asset treasury operation.
This MD&A should be read in conjunction with (i) the accompanying unaudited condensed financial statements and the related notes included in Part I, Item 1 of this Report, (ii) the audited financial statements and related notes for the year ended December 31, 2025 included in our Annual Report and (iii) other publicly available information. All amounts herein are unaudited. In addition, the following discussion of our results of operations and financial condition should be read in the context of this overview.
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| Table of Contents |
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. Since that time, our strategy has focused on building and actively managing a SUI‑based treasury designed to support long‑term value creation while enhancing the productivity of our digital assets through protocol‑level participation and selective yield‑generating activities. We also pursue opportunistic investments in the broader digital asset ecosystem and financial technology and artificial intelligence sectors with the aim of further enhancing balance sheet productivity.
SUI is a next-generation Layer 1 blockchain designed to deliver the scalability, speed, and security required to power decentralized applications and real-world crypto use cases across finance, gaming, artificial intelligence, stablecoins, and more.
During the current quarter, substantially all of our SUI holdings were deployed in staking, staking-related or lending arrangements. Approximately 82% of SUI holdings are staked, generating an estimated annualized yield of 1.7%. For the six months ended June 30, 2026, we earned $0.9 million in staking rewards, representing 796,302 SUI tokens, compared to no staking rewards earned during the six months ended June 30, 2025. We believe this staking strategy enhances the productivity of our treasury while maintaining exposure to potential SUI price appreciation.
We have also participated in ecosystem initiatives related to the deployment and promotion of SUI‑native stablecoins (“SuiUSDe”) in partnership with third‑party platforms and SUI Foundation‑supported programs. These initiatives are intended to support on‑chain liquidity, transactional use cases, and broader adoption of the SUI network. To date, these activities are primarily strategic in nature and are designed to support ecosystem growth rather than serve as a primary source of near‑term revenue. As of June 30, 2026, the Company held approximately $10.0 million of SuiUSDe in connection with these initiatives.
The Company also participates in strategic ecosystem initiatives designed to promote adoption and utility of the SUI network. As part of these efforts, the Company has entered into a digital asset lending arrangement with BlueFin Labs Inc., under which the Company has lent 6.0 million SUI tokens and is entitled to a percentage of revenues generated by certain BlueFin operations.
Our SUI treasury strategy is supported by our official relationship with the Sui Foundation, an independent organization dedicated to the development and adoption of the SUI ecosystem. We believe this relationship, together with our active participation in staking, lending, and other protocol‑level activities, positions us to benefit from continued expansion of the SUI network while providing shareholders with exposure to SUI through a publicly traded corporate structure. On July 28, 2026, we extended our Trademark Agreement with the Sui Foundation pursuant to the terms thereof.
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.
INVESTMENT ACTIVITY
While our primary focus has shifted from our legacy finance operations, we still aim to enhance balance sheet productivity by lending to our ecosystem and strategic partners on a risk adjusted basis and allocating capital to high-conviction growth themes across the digital asset, financial technology and artificial intelligence sectors.
During the six months ended June 30, 2026, we made $6.0 million of strategic investment in artificial intelligence companies, consisting of a $3.0 million investment in Nof1 Holdings, Inc. through a SAFE and a $3.0 million investment in Recursive Superintelligence through an investment structure providing the Company with an indirect beneficial interest in preferred equity interests. Nof1 is an agentic artificial intelligence research and trading technology company focused on developing AI-driven solutions for financial markets, while Recursive Superintelligence is an artificial intelligence research company focused on developing self-improving AI systems. We believe these investments complement our broader strategy of obtaining exposure to emerging technologies, including digital assets, financial technology and artificial intelligence opportunities. These strategic investments are distinct from the Company's traditional specialty finance and loan investment activities.
We also received $0.9 million of redemptions and repayments from legacy investments during the period. As of June 30, 2026, net investments of our traditional specialty finance and loan carried at amortized cost were $13.6 million.
During the six months ended June 30, 2025, we made $4.4 million of investment purchases and had $0.5 million of redemptions and repayments, resulting in net investments at amortized cost of $17.6 million at the end of that period.
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| Table of Contents |
RESULTS OF OPERATIONS
Our operating results for the three and six months ended June 30, 2026 and June 30, 2025 were as follows:
|
| For the Three Months Ended June 30, |
|
| Increase |
|
| Percentage |
| |||||||
(In thousands) |
| 2026 |
|
| 2025 |
|
| (Decrease) |
|
| Change |
| ||||
Revenues |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Investment income |
| $ | — |
|
| $ | 948 |
|
| $ | (948 | ) |
|
| -100 | % |
Digital lending interest income |
|
| 36 |
|
|
| — |
|
|
| 36 |
|
|
| n/a |
|
SUI staking revenue |
|
| 327 |
|
|
| — |
|
|
| 327 |
|
|
| n/a |
|
Total Revenues |
|
| 363 |
|
|
| 948 |
|
|
| (585 | ) |
|
| -62 | % |
Operating Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Professional fees |
|
| 314 |
|
|
| 99 |
|
|
| 215 |
|
|
| 217 | % |
Stock-based compensation |
|
| 1,947 |
|
|
| — |
|
|
| 1,947 |
|
|
| n/a |
|
Asset and strategic management fees |
|
| 286 |
|
|
| — |
|
|
| 286 |
|
|
| n/a |
|
Compensation expense |
|
| 445 |
|
|
| 190 |
|
|
| 255 |
|
|
| 134 | % |
Insurance |
|
| 445 |
|
|
| — |
|
|
| 445 |
|
|
| n/a |
|
Unrealized gain on digital assets and receivable, net |
|
| (2,251 | ) |
|
| — |
|
|
| (2,251 | ) |
|
| n/a |
|
Realized loss on digital assets, net |
|
| 18,910 |
|
|
| — |
|
|
| 18,910 |
|
|
| n/a |
|
Recovery of credit losses |
|
| (81 | ) |
|
| — |
|
|
| (81 | ) |
|
| n/a |
|
Net realized and unrealized gain on investments |
|
| — |
|
|
| (314 | ) |
|
| 314 |
|
|
| 100 | % |
Other general and administrative |
|
| 92 |
|
|
| 27 |
|
|
| 65 |
|
|
| 241 | % |
Total Operating Expenses |
|
| 20,107 |
|
|
| 2 |
|
|
| 20,105 |
|
|
| 1,005,250 | % |
Operating Income (Loss) |
| $ | (19,744 | ) |
| $ | 946 |
|
| $ | (20,690 | ) |
|
| -2,187 | % |
Three Months Ended June 30, 2026 Compared to Three Months Ended June 30, 2025
SUI staking revenue
For the three months ended June 30, 2026, we generated $0.3 million in staking rewards from our SUI token holdings, compared to none for the three months ended June 30, 2025. This income reflects the accrual of 359,792 SUI tokens earned on 89,533,189 tokens staked, representing approximately 82% of our total SUI holdings during the period. The staking yield for the three months ended June 30, 2026, remains consistent with our estimated annualized return of 1.6%, and rewards were accrued daily in accordance with our treasury management strategy. The lack of staking income for the three months ended June 30,2025 is due to the Company not engaging in the holding, staking or investment of cryptocurrency prior to the Private Placement.
Digital lending interest income
During the three months ended June 30, 2026, our digital lending interest income was $35.6 thousand, compared to none for the three months ended June 30, 2025. This pertains to the interest income on digital assets lent to the borrowers, as well as yield earned on deployed digital assets as digital asset receivable. Additional information regarding these arrangements is included in Note 4 — Digital Asset Loan Receivable to the accompanying unaudited condensed financial statements. The lack of digital lending interest income for the three months ended June 30, 2025 is due to the Company not engaging in the holding, staking or investment of cryptocurrency prior to the Private Placement.
Investment income
For the three months ended June 30, 2026, our total investment income was $0 compared to $0.9 million for the three months ended June 30, 2025. The variance is attributable to the Company’s change in accounting presentation following its cessation of investment company accounting under ASC 946 with effect from August 2025. Accordingly, investment income for the three months ended June 30, 2026, is classified within other income and totaled $0.2 million.
Professional fees
During the three months ended June 30, 2026, and 2025, we had professional fees expense amounting to $0.3 million and $99.0 thousand, respectively. The increase was driven primarily by higher professional costs associated with the Company’s strategic transition and expanded public-company activities, including professional fees related to recruiting, accounting and audit‑related services, marketing and public relations in connection with the Company’s rebranding and investor communications, and legal fees related to SEC reporting and regulatory compliance.
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| Table of Contents |
Stock-based compensation
During the three months ended June 30, 2026, and 2025, we had stock-based compensation amounting to $1.9 million and $0, respectively. 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, advisors and non-employee director in the third quarter of 2025 and the issuance of warrants to a non-employee director in the first quarter of 2026.
Asset and strategic management fees
During the three months ended June 30, 2026, we incurred $0.3 million in asset and strategic management fees under our strategic and asset management arrangements, compared to $0 during the three months ended June 30, 2025. 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. Due to the change in operations to our SUI strategy, there were no asset and strategic management fees for the three months ended June 30, 2025.
Compensation expense
During the three months ended June 30, 2026, and 2025, we had compensation expense amounting to $0.4 million and $0.2 million, respectively. The increase was primarily to additional salary paid to certain personnel beginning in the third quarter of 2025 and the appointment of three new independent directors in connection with the Company’s strategic transition.
Insurance expense
During the three months ended June 30, 2026, and 2025, we had insurance expense amounting to $0.4 million and $0, respectively. The increase was due to additional directors and officers’ insurance policies that the Company deemed necessary due to our change in strategy.
Unrealized gain on digital assets and receivable, net
During the three months ended June 30, 2026, we recognized a net unrealized gain of $2.3 million compared to $0 during the three months ended June 30, 2025. The net amount reflects a gross unrealized loss of $0.6 million on our digital asset and receivable holdings, offset by $2.9 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 $13.8 million will amortize on a straight-line basis over the period to August 30, 2027. This is due to decrease in the price of the SUI token during the current reporting period. The lack of unrealized gain on digital assets and receivables for the three months ended June 30, 2025 is due to the Company not investing in digital assets prior to the Private Placement.
Realized loss on digital assets, net
During the three months ended June 30, 2026, we recognized a net realized loss of $ 18.9 million compared to $0 during the three months ended June 30, 2025. The current-period loss primarily reflects a $2.4 million realized loss recognized upon the return of the principal balance of 961,550 SUI tokens receivable from Galaxy Digital, $14.0 million realized loss recognized on additional 4,000,000 SUI loaned to BlueFin. The loss also includes certain adjustments related to previously recognized digital asset activity, partially offset by a $1.1 million realized gain recognized upon the unwind of certain DeFi arrangements. Both the realized loss and realized gain were primarily attributable to fluctuations in the market price of SUI during the period and did not reflect any loss of principal or shortfall in the recovery of the underlying SUI tokens. The realized gain resulted from the recovery and subsequent disposition of digital assets for which impairment losses had been recognized in a prior period, resulting in a lower carrying value upon return of the underlying SUI tokens. The lack of unrealized loss on digital assets for the three months ended June 30, 2025 is due to the Company not investing in digital assets prior to the Private Placement.
Net realized and unrealized gain/loss on investment
During the three months ended June 30, 2026, our net realized and unrealized gain on investment was $0, compared to $0.3 million for the three months ended June 30, 2025. The decrease 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, realized and unrealized gains and losses are no longer presented within this line item and are instead reflected within other income (expense).
During the three months ended June 30, 2026, net realized and unrealized loss on investment of $0.5 million was recognized within other income, primarily reflecting downward fair value adjustments on certain legacy investment and loan-related positions due to increased credit risk and uncertainly arising from borrower delinquencies, and refinancing delays which outwaited mitigating factors such as guarantor support and prior repayment history as of June 30, 2026.
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| Table of Contents |
Recovery of credit losses
During the three months ended June 30, 2026, the Company recognized the recovery of credit losses of $81.0 thousand compared to $0 for the three months ended June 30, 2025. The recovery was primarily attributable to a decrease in the expected credit loss allowance recorded on the Company's digital asset receivables, reflecting changes in the underlying receivable balances subject to the allowance. No comparable provision was recognized during the three months ended June 30, 2025, as these arrangements were not in place during the prior-year period.
Other general and administrative
During the three months ended June 30, 2026, and 2025, we had other general and administrative expenses amounting to $92.0 thousand and $27.0 thousand, respectively. The increase was due to additional custody fees incurred due to digital asset activity increases.
Six Months Ended June 30, 2026 Compared to Six Months Ended June 30, 2025
|
| For the Six Months Ended June 30, |
|
| Increase |
|
| Percentage |
| |||||||
(In thousands) |
| 2026 |
|
| 2025 |
|
| (Decrease) |
|
| Change |
| ||||
Revenues |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Investment income |
| $ | — |
|
| $ | 1,726 |
|
| $ | (1,726 | ) |
|
| -100 | % |
Digital lending interest income |
|
| 106 |
|
|
| — |
|
|
| 106 |
|
|
| n/a |
|
SUI staking revenue |
|
| 850 |
|
|
| — |
|
|
| 850 |
|
|
| n/a |
|
Total Revenues |
|
| 956 |
|
|
| 1,726 |
|
|
| (770 | ) |
|
| -45 | % |
Operating Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Professional fees |
|
| 2,094 |
|
|
| 241 |
|
|
| 1,853 |
|
|
| 769 | % |
Stock-based compensation |
|
| 3,941 |
|
|
| — |
|
|
| 3,941 |
|
|
| n/a |
|
Asset and strategic management fees |
|
| 626 |
|
|
| — |
|
|
| 626 |
|
|
| n/a |
|
Compensation expense |
|
| 896 |
|
|
| 383 |
|
|
| 513 |
|
|
| 134 | % |
Insurance |
|
| 896 |
|
|
| 24 |
|
|
| 872 |
|
|
| 3,633 | % |
Unrealized loss on digital assets and receivable, net |
|
| 16,354 |
|
|
| — |
|
|
| 16,354 |
|
|
| n/a |
|
Realized loss on digital assets, net |
|
| 53,765 |
|
|
| — |
|
|
| 53,765 |
|
|
| n/a |
|
Impairment of digital asset receivable |
|
| 1,367 |
|
|
| — |
|
|
| 1,367 |
|
|
| n/a |
|
Provision for credit losses |
|
| 1,070 |
|
|
| — |
|
|
| 1,070 |
|
|
| n/a |
|
Net realized and unrealized gain on investments |
|
| — |
|
|
| (477 | ) |
|
| (477 | ) |
|
| 100 | % |
Other general and administrative |
|
| 197 |
|
|
| 47 |
|
|
| 150 |
|
|
| 319 | % |
Total Operating Expenses |
|
| 81,206 |
|
|
| 218 |
|
|
| 80,988 |
|
|
| 37,150 | % |
Operating Income (Loss) |
| $ | (80,250 | ) |
| $ | 1,508 |
|
| $ | (81,758 | ) |
|
| -5,422 | % |
SUI staking revenue
For the six months ended June 30, 2026, we generated $0.8 million in staking rewards from our SUI token holdings, compared to $0 for the six months ended June 30, 2025. This income reflects the accrual of 796,302 SUI tokens earned on average 95,538,678 SUI tokens staked, representing approximately 88% 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. The lack of staking revenue for the six months ended June 30, 2025 is due to the Company not engaging in the holding, staking or investment of cryptocurrency prior to the Private Placement.
Digital lending interest income
During the six months ended June 30, 2026, our digital lending interest income was $0.1 million, compared to $0 for the six months ended June 30, 2025. This pertains to the interest income on digital assets lent to the borrowers, as well as yield earned on deployed digital assets as digital asset receivable. Additional information regarding these arrangements is included in Note 4 — Digital Asset Loan Receivable to the accompanying unaudited condensed financial statements. The lack of digital lending interest income for the six months ended June 30, 2025 is due to the Company not engaging in the holding, staking or investment of cryptocurrency prior to the Private Placement.
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Investment income
For the six months ended June 30, 2026, our total investment income was $0, compared to $1.73 million for the six months ended June 30, 2025. The variance is attributable to the Company’s change in accounting presentation following its cessation of investment company accounting under ASC 946 with effect from August 2025. Accordingly, investment income for the six months ended June 30, 2026, is classified within other income and totaled $0.8 million.
Professional fees
During the six months ended June 30, 2026, and 2025, we had professional fees expense amounting to $2.1 million and $0.2 million, respectively. The increase was driven primarily by higher professional costs associated with the Company’s strategic transition and expanded public-company activities, including professional fees related to recruiting, accounting and audit‑related services, marketing and public relations in connection with the Company’s rebranding and investor communications, and legal fees related to SEC reporting and regulatory compliance.
Stock-based compensation
During the six months ended June 30, 2026, and 2025, we had stock-based compensation amounting to $3.9 million and $0, respectively. 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, advisors and non-employee director in the third quarter of 2025 and the issuance of warrants to a non-employee director in the first quarter of 2026.
Asset and strategic management fees
During the six months ended June 30, 2026, we incurred $0.6 million in asset and strategic management fees under our strategic and asset management arrangements, compared to $0 during the six months ended June 30, 2025. 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. Due to the change in operations to our SUI strategy, there were no asset and strategic management fees for the six months ended June 30, 2025.
Compensation expense
During the six months ended June 30, 2026, and 2025, we had compensation expense amounting to $0.9 million and $0.4 million, respectively. The increase was primarily to additional salary paid to certain personnel beginning in the third quarter of 2025 and the appointment of three new independent directors in connection with the Company’s strategic transition.
Insurance expense
During the six months ended June 30, 2026, and 2025, we had insurance expense amounting to $0.9 million and $24 thousand, 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 and receivable, net
During the six months ended June 30, 2026, we recognized a net unrealized loss of $16.4 million compared to $0 during the six months ended June 30, 2025. The net amount reflects a gross unrealized loss of $22.3 million on our digital asset and receivable holdings, partially offset by $5.9 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 $13.8 million will amortize on a straight-line basis over the period to August 30, 2027. This is due to decrease in the price of the SUI token during the current reporting period. Due to the change in operations to our SUI strategy, there were no unrealized gains or losses on digital assets and receivable for the six months ended June 30, 2025.
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| Table of Contents |
Realized loss on digital assets, net
During the six months ended June 30, 2026, we recognized a net realized loss of $53.8 million compared to $0 during the six months ended June 30, 2025. The current-period loss primarily reflects a $38.5 million realized loss associated with the transfer of 11,900,024 SUI tokens to Galaxy Digital for deployment in blockchain protocol participation, stablecoin-related strategies, and selective DeFi activities. The net realized loss also includes a $2.4 million realized loss recognized upon the return of the principal balance of 961,550 SUI tokens receivable from Galaxy Digital and $14.0 million realized loss recognized on additional 4,000,000 SUI loaned to BlueFin, partially offset by a $1.1 million realized gain recognized upon the unwind of certain DeFi arrangements. Both the realized loss and realized gain were primarily attributable to fluctuations in the market price of SUI during the period and did not reflect any loss of principal or shortfall in the recovery of the underlying SUI tokens. The realized gain primarily resulted from the recovery of digital assets for which impairment losses had been recognized in a prior period. Due to the change in operations to our SUI strategy, there were no realized gains or losses for the six months ended June 30, 2025.
Net realized and unrealized gain/loss on investment
During the six months ended June 30, 2026, our net realized and unrealized gain on investment was $0, compared to $0.5 million for the six months ended June 30, 2025. The decrease 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, realized and unrealized gains and losses are no longer presented within this line item and are instead reflected within other income (expense).
During the six months ended June 30, 2026, net realized and unrealized loss on investment of $10.7 million was recognized within other income, primarily reflecting downward fair value adjustments on certain legacy investment and loan-related positions due to increased credit risk and uncertainly arising from borrower delinquencies, and refinancing delays which outwaited mitigating factors such as guarantor support and prior repayment history as of June 30, 2026.
Impairment of digital asset receivable
During the six months ended June 30, 2026, the Company recognized impairment charges of $1.4 million on its digital asset receivable. The impairment primarily reflected declines in the market price of SUI below the cost basis of certain receivable positions associated with previously deployed DeFi arrangements. The impairment did not result from a shortfall in the recovery of the underlying digital assets or a loss of principal, but rather from decreases in the fair value of the underlying SUI tokens. No such impairment was recognized during the six months ended June 30, 2025, as the Company did not hold digital asset receivables during the comparable prior-year period.
Provision for credit losses
During the six months ended June 30, 2026, the Company recognized a provision for credit losses of $1.1 million compared to $0 for the six months ended June 30, 2025. The increase was primarily attributable to the establishment of credit loss estimates associated with the Company's receivable positions. No comparable provision was recognized during the six months ended June 30, 2025, as these arrangements were not in place during the prior-year period.
Other general and administrative
During the six months ended June 30, 2026, and 2025, we had other general and administrative expenses amounting to $0.2 million and $47 thousand, respectively. The increase was due to additional custody fees incurred due to digital asset activity increases.
Cash Flows for the Six Months Ended June 30, 2026 and 2025
Cash flows used in or provided by operating activities are affected primarily by net income or loss, adjusted for non-cash items including net realized and unrealized loss on digital assets and investment, stock-based compensation, and changes in working capital.
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For the six months ended June 30, 2026, net cash used in operating activities was $3.7 million, compared to $3.9 million for the six months ended June 30, 2025. The decrease in net cash used in operating activities period over period was driven primarily by differences in accounting classification and non-cash adjustments between the periods.
Although the Company generated a net loss of $89.9 million during the six months ended June 30, 2026, a significant portion of the loss related to non‑cash items, including $70.1 million of realized and unrealized losses on digital assets and digital asset receivable, $3.9 million of stock-based compensation expense, $1.4 million of impairment of digital asset receivable, and a $10.7 million net realized loss on investments, which reduced net income but did not result in corresponding cash outflows during the period. By comparison, during the six months ended June 30, 2025, the Company generated net income of $1.1 million, but cash used in operating activities was higher due primarily to cash outflows associated with purchases of investments, which were classified as operating activities under the Company’s former accounting treatment as an investment company under ASC 946.
Cash flows used in investing activities are affected primarily by purchases and dispositions of digital assets and investments. For the six months ended June 30, 2026, net cash used in investing activities was $15.1 million, compared to $0 during the six months ended June 30, 2025. Cash used in investing activities during the current period was primarily attributable to purchases of SuiUSDe under the Company’s SUI treasury strategy, a $3.0 million SAFE investment in Nof1 Holdings, Inc., an artificial intelligence research and trading technology company, and a $3.0 million investment in Recursive Superintelligence, an artificial intelligence research company focused on developing self-improving AI systems, through an investment vehicle providing the Company with an indirect beneficial interest in the underlying equity interests. These investments were made as part of the Company's broader strategy to enhance balance sheet productivity by lending to its ecosystem and strategic partners on a risk adjusted basis, and allocating capital to high-conviction growth themes across the digital asset, financial technology and artificial intelligence sectors.
For the six months ended June 30, 2026, net cash provided by financing activities was $0, compared to $0.6 million of cash used in financing activities during the six months ended June 30, 2025. Cash used in financing activities during the six months ended June 30, 2025 related primarily to the repurchase of shares of the Company’s common stock pursuant to the Company’s stock repurchase program.
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 2026, we had cash and cash equivalents of $3.1 million, a decrease of $18.8 million from $21.9 million as of December 31, 2025. The decrease was driven primarily by cash outflows related to purchases of SuiUSDe and other investing activities during the period.
The primary uses of the Company’s existing liquidity and any funds raised in the future are expected to support the Company’s value-creation strategies and for other general corporate purposes, including funding operating expenses or to service debt to the extent we borrow or issue senior securities. In addition to cash and cash equivalents, the Company’s investments may include highly liquid stable coins, including SuiUSDe, as well as temporary investments consisting of cash equivalents (including USDC), U.S. government securities, and high‑quality debt securities with maturities of one year or less from the time of investment.
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 generated 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 June 30, 2026, approximately 88% 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 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 or utilize other liquid digital asset holdings, including stablecoins, 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, investment activities, and working capital needs through our existing cash and cash equivalents, stablecoin holdings, and other liquid investments 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.
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Summary cash flow data is as follows (In thousands):
|
| For the Six Months Ended June 30, |
| |||||
Cash flows used by: |
| 2026 |
|
| 2025 |
| ||
Operating activities |
| $ | (3,688 | ) |
| $ | (3,898 | ) |
Investing activities |
|
| (15,107 | ) |
|
| — |
|
Financing activities |
|
| — |
|
|
| (630 | ) |
Net decrease in cash |
|
| (18,795 | ) |
|
| (4,528 | ) |
Cash, beginning of period |
|
| 21,936 |
|
|
| 6,026 |
|
Cash, end of period |
| $ | 3,141 |
|
| $ | 1,498 |
|
CRITICAL ACCOUNTING 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 asset receivable, digital asset loan receivable, as well as the application of the current expected credit loss (“CECL”) model to digital asset receivable and digital asset loan receivable. The most significant estimates affecting the Company’s results of operations and financial position currently relate to the following:
| · | Investment valuation: We continue to hold certain short-term, secured loans and equity-linked investments from our specialty finance operations. These assets are measured at fair value and are evaluated quarterly for impairment. Valuation inputs include expected cash flows, collateral assessments, and market comparables, with oversight from management and the Audit Committee. |
|
|
|
| · | CECL: The Company estimates expected credit losses on digital asset loan receivable and digital asset receivable using a forward‑looking CECL model. Significant judgments include counterparty creditworthiness, collateral coverage and volatility of the underlying digital assets, structure and duration of the arrangements, and current and forecasted market conditions. Changes in these assumptions could materially affect the allowance for expected credit losses and related results of operations. |
|
|
|
| · | Impairment assessment of equity investments in privately held companies: The Company evaluates equity investments in privately held companies without readily determinable fair values for impairment based on qualitative factors, including the financial condition and operating results of the investee, changes in business strategy, market conditions, recent financing activities, and other company‑specific events. |
|
|
|
| · | Fair value of embedded derivatives associated with equity investments: Certain equity investments contain embedded derivative features that are required to be separately accounted for at fair value. The determination of fair value requires management to apply judgment in selecting valuation methodologies and key assumptions, including volatility, probability‑weighted outcomes, and other inputs that may not be directly observable. |
|
|
|
| · | Impairment assessment of certain digital asset receivables: The Company evaluates certain digital asset receivables carried at cost, net of impairment, for recoverability based on observable market data and qualitative factors, including volatility in the market prices of the underlying digital assets, protocol performance, liquidity conditions, counterparty considerations, and other relevant events or changes in circumstances. |
We will continue to evaluate and disclose additional critical accounting policies as our operations expand and as new standards or interpretations emerge. For further detail, refer to our Annual Report.
OFF-BALANCE-SHEET ARRANGEMENTS
During the six months ended June 30, 2026, we did not engage in any off-balance sheet arrangements as described in Item 303(a)(4) of Regulation S-K.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As a “smaller reporting company”, the Company is not required to provide the information required by this item.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures designed to provide reasonable assurance that information required to be disclosed in our reports filed pursuant to the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer as appropriate, to allow timely decisions regarding required disclosure. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.
As of June 30, 2026, our Chief Executive Officer and Chief Financial Officer carried out an evaluation of the effectiveness of our disclosure controls and procedures as such term is defined in Rule 13a-15(e) under the Exchange Act. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded our disclosure controls and procedures were not effective as of June 30, 2026 due to the material weakness in our internal control over financial reporting identified and disclosed in Item 9A of our Annual Report on Form 10-K for the year ended December 31, 2025.
During the quarter ended June 30, 2026, the Company continued its remediation plan to address the previously identified material weakness. As part of these efforts, the Company has engaged outside consultants with expertise in accounting, financial reporting, and internal controls to assist management in evaluating and enhancing our accounting processes and controls. In addition, these consultants are supporting management in implementing our new strategic initiatives designed to strengthen financial oversight and operational accountability.
The Company expects that the actions taken and those planned, including the continued involvement of external resources, will remediate the identified material weakness; however, the material weakness will not be considered fully remediated until the applicable controls have been designed, implemented, and operated effectively for a sufficient period of time, and management has completed testing to confirm their effectiveness.
Changes in Internal Control over Financial Reporting
Other than the steps taken to remediate material weaknesses as described above, there were no significant changes in our internal controls over financial reporting that occurred during the fiscal quarter covered by this report that materially affected, or were reasonably likely to materially affect such controls.
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
From time to time we may become involved in various legal proceedings that arise in the ordinary course of business, including actions related to our intellectual property. Although the outcomes of these legal proceedings cannot be predicted with certainty, we are currently not aware of any such legal proceedings or claims that we believe, either individually or in the aggregate, will have a material adverse effect on our business, financial condition, or results of operations.
ITEM 1A. RISK FACTORS
In addition to the risk factors set forth below, you should carefully consider the factors discussed in “Item 1A. Risk Factors” in our Annual Report and in our Quarterly Report. The risks described below and in those documents are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materially adversely affect our business, financial condition and/or operating results.
Risks Related to Our Investments
We have made, and may continue to make, loans to and minority investments in the digital asset, financial technology and artificial intelligence sectors, which subject us to distinct operational, regulatory, valuation, and liquidity risks that are separate from, and in addition to, the risks associated with our digital asset treasury strategy.
In addition to our digital asset treasury strategy, we selectively allocate capital to loans to and minority equity investments in private digital asset, financial technology and artificial intelligence entities that we believe are complementary to our broader investment thesis. These investments diversify our capital allocation but differ in nature and risk profile from our digital asset treasury and staking strategy, and there can be no assurance that these investments will perform in a manner consistent with, or will enhance the value of, our SUI treasury strategy.
Digital assets, financial technology and artificial intelligence are dynamic sectors, each subject to its own rapidly evolving and unsettled regulatory landscape. Financial technology entities in which we invest may be subject to evolving money transmission, banking, consumer protection, and other financial services regulation that varies by jurisdiction. Artificial intelligence entities in which we invest are subject to a separate and equally unsettled body of law, including emerging AI-specific legislation such as the European Union's Artificial Intelligence Act and a growing number of U.S. state AI laws, the application and enforcement of which remain difficult to predict. Changes in, or new interpretations of, the laws and regulations applicable to either sector could materially and adversely affect the business, financial condition, or prospects of the entities in which we invest, and in turn, the value of our investments.
Because these are minority investments, we generally do not, and may not in the future, control the management, strategic direction, development, or commercialization of the underlying technologies or businesses. While we may seek to negotiate board observer rights, information rights, or other protective provisions in connection with such investments, there is no assurance that we will obtain such rights, or that any rights we do obtain will be sufficient to protect our investment or allow us to meaningfully influence the entity's strategic or operational decisions. Other investors in these entities may have business goals and interests that differ from, or conflict with, our own.
These entities are frequently early-stage, unproven, and face significant competition, and their technologies may never be successfully developed, commercialized, or adopted by the market. Our investments in these entities are illiquid and non-marketable at the time of investment, are typically subject to transfer restrictions, and generally have no public trading market. Any return of, or return on, our capital depends on the performance of the technology and the operating company and may depend on a future liquidity event — such as an initial public offering, acquisition, or follow-on financing at a higher valuation — that may never occur, or that may occur on terms less favorable than we anticipate. If any entity in which we hold a minority investment is unable to obtain additional financing, fails to achieve commercial success, or ceases operations, we could lose all or a substantial portion of our invested capital.
As our capital allocated to non-digital-asset investments increases, we may also become subject to additional risks under the Investment Company Act of 1940, as described in the Risk Factor included in our Annual Report and titled “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.”
Risks Related to Agentic Artificial Intelligence
The rapid development and deployment of AI models capable of autonomous decision-making, task execution, and interaction with external systems with limited or no human oversight—known as agentic artificial intelligence (“agentic AI”)— pose significant and evolving risks to our financial condition and results of operations.
We, our contract counterparties, entities we invest in, or our service providers may integrate agentic AI tools into our operations, including in connection with trading, compliance monitoring, cybersecurity and blockchain analytics. While these tools may enhance efficiency, because these systems operate with reduced human supervision relative to traditional software and earlier AI applications, they also introduce novel and potentially significant risks, including risks related to model accuracy and reliability, unintended actions, data security and privacy, third-party system dependencies, intellectual property, regulatory compliance, and potential liability for outcomes produced or actions taken by such systems. Agentic AI may take actions that are unintended, erroneous, or inconsistent with our policies, risk tolerances, or applicable legal and regulatory requirements. Errors or unintended behaviors may propagate rapidly and at scale before they are detected and corrected, potentially resulting in material financial losses, regulatory violations or reputational harm.
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Agentic AI may also significantly enhance the offensive capabilities of malicious actors targeting our systems or infrastructure. Unlike traditional cyberattacks that require sustained human direction, agentic AI can autonomously identify vulnerabilities, adapt attack strategies in real time, and coordinate complex, multi-stage intrusions across various attack surfaces, such as smart contracts, cross-chain protocols and third-party integrations, with minimal human involvement. These AI-driven offensive capabilities may lower the cost and technical expertise required to launch attacks, broaden the pool of potential threat actors, and enable attacks of a speed, scale, and complexity that exceed the capacity of our existing security infrastructure. As a result, traditional perimeter controls and static security rules are no longer the most effective security mechanisms. As agentic AI tools become more widely accessible, we anticipate that the frequency, sophistication, and severity of AI-powered attacks will increase, and there can be no assurance that our defensive measures will keep pace.
Our competitors and other participants in the cryptocurrency industry may also deploy agentic AI in ways that could adversely affect us, including through AI-driven trading strategies that increase market volatility, which could materially and adversely impact the value of our digital assets and our revenues. We may also face increased liability and litigation risk arising from the actions or outputs of agentic AI, and the legal and regulatory frameworks governing autonomous AI-driven actions are unsettled and evolving rapidly. Furthermore, the market for AI talent is highly competitive, and our inability to attract and retain personnel with the specialized expertise necessary to oversee agentic AI or counteract these threats could further impair our ability to manage these risks.
No assurance can be given that we will be able to effectively anticipate, manage, or mitigate the risks associated with agentic AI. The failure to do so could have a material adverse effect on our business, financial condition and results of operations.
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 we could lose a significant portion or all of our investment.
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. 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) any 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 (the “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.
On April 2, 2026, we received from a Senior Lender a notice of foreclosure and public sale of all or a material portion of Mustang’s assets. This notice of foreclosure has been extended multiple times since then. Presently, we understand that the foreclosure has been postponed pending further negotiations between Mustang and its creditors. The timing and outcome of any such foreclosure, restructuring, insolvency or similar proceeding are uncertain and may be protracted, contested and costly. If a foreclosure or other enforcement action continues, or if there is no improvement in Mustang’s financial or business condition, we may lose a substantial portion or all of our investment in Mustang or be required to accept cash or securities with a value that is significantly less than the carrying value of the loan, any of which could result in significant losses and have a material adverse effect on our business, financial condition and results of operations.
We have not received interest payments when due under our loan agreement with Mustang since February 2026, and, based on Mustang’s current financial condition and the foreclosure action described above, we do not expect to receive the overdue or any future interest payments in the foreseeable future. Continued non-payment could adversely affect our revenues, results of operations and financial condition.
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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES, USE OF PROCEEDS AND ISSUER PURCHASES OF EQUITY SECURITIES
Kristina Campbell
On July 6, 2026, the Board appointed Ms. Kristina Campbell (“Ms. Campbell”) to serve as a member of the Board and chair of the audit committee. As compensation for her services on the Board, Ms. Campbell will receive an annual director fee of $250,000, to be paid on a quarterly basis. In addition, the Company granted to Ms. Campbell warrants (the “Campbell Warrants”) to purchase 207,565 shares of the Company’s common stock (the “Common Stock”) at various prices per share of Common Stock as follows: (i) 83,026 shares of Common Stock at an exercise price of $5.420 per share of Common Stock; (ii) 41,513 shares of Common Stock at an exercise price of $5.962 per share of Common Stock; (iii) 41,513 shares of Common Stock at an exercise price of $6.504 per share of Common Stock; and (iv) 41,513 shares of Common Stock at an exercise price of $7.046 per share of Common Stock. The Campbell Warrants are exercisable for a period of five years. The Campbell Warrants will vest over a period of 24 months starting six months from the Issue Date (July 6, 2026) in four equal installments (being 25% every six months), subject to Ms. Campbell (i) being a director of the Company at each respective vesting date and (ii) not having been legally and validly terminated or removed as a director pursuant to the Company’s bylaws and applicable law. The Campbell Warrants are subject to vesting conditions and will not become exercisable unless and until stockholders approve the grant of the Campbell Warrants. The Campbell Warrants were issued in reliance on the exemption(s) from registration set forth in Section 4(a)(2) and/or Regulation D of the Securities Act.
Howard Liszt
On July 6, 2026, as compensation for his ongoing services on the Board, the Board approved the award to Howard Liszt of warrants (the “Liszt Warrants”) to purchase 83,026 shares of Common Stock at various prices per share of Common Stock as follows: (i) 33,211 shares of Common Stock at an exercise price of $5.420 per share of Common Stock; (ii) 16,605 shares of Common Stock at an exercise price of $5.962 per share of Common Stock; (iii) 16,605 shares of Common Stock at an exercise price of $6.504 per share of Common Stock; and (iv) 16,605 shares of Common Stock at an exercise price of $7.046 per share of Common Stock. The Liszt Warrants are exercisable for a period of five years. The Liszt Warrants will vest over a period of 24 months starting six months from the Issue Date (July 6, 2026) in four equal installments (being 25% every six months), subject to Mr. Liszt (i) being a director of the Company at each respective vesting date and (ii) not having been legally and validly terminated or removed as a director pursuant to the Company’s bylaws and applicable law. The Liszt Warrants are subject to vesting conditions and will not become exercisable unless and until stockholders approve the grant of the Liszt Warrants. The Liszt Warrants were issued in reliance on the exemption(s) from registration set forth in Section 4(a)(2) and/or Regulation D of the Securities Act.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
(a) None.
(b) None.
(c) None.
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ITEM 6. EXHIBITS
Exhibit Number | Description | |
| ||
| ||
| ||
| ||
| ||
| ||
| ||
| Warrant Agreement, dated July 6, 2026, between Sui Group Holdings Limited and Kristina Campbell. | |
| Warrant Agreement, dated July 6, 2026, between Sui Group Holdings Limited and Howard Liszt. | |
| ||
| ||
| ||
101.INS* |
| Inline XBRL Instance Document |
101.SCH* |
| Inline XBRL Taxonomy Extension Schema Document |
101.CAL* |
| Inline XBRL Taxonomy Extension Calculation Linkbase Document |
101.DEF* |
| Inline XBRL Taxonomy Extension Definition Linkbase Document |
101.LAB* |
| Inline XBRL Taxonomy Extension Label Linkbase Document |
101.PRE* |
| Inline XBRL Taxonomy Extension Presentation Linkbase Document |
104* |
| Cover Page Interactive Data File (embedded within the Inline XBRL document) |
* Filed herewith
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SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
SUI GROUP HOLDINGS LIMITED | |||
| Date: August 6, 2026 | By: | /s/ Douglas Polinsky | |
|
| DOUGLAS M. POLINSKY | |
Chief Executive Officer | |||
|
| (Principal Executive Officer) |
|
SUI GROUP HOLDINGS LIMITED | |||
| Date: August 6, 2026 | By: | /s/ Joseph Geraci | |
|
| JOSEPH A. GERACI, II | |
Chief Financial Officer | |||
|
| (Principal Financial and Accounting Officer) |
|
| 31 |
EXHIBIT 10.3
Execution Version
NEITHER THIS SECURITY NOR THE SECURITIES FOR WHICH THIS SECURITY IS EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS. THIS SECURITY AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT WITH A REGISTERED BROKER DEALER OR OTHER LOAN WITH A FINANCIAL INSTITUTION THAT IS AN “ACCREDITED INVESTOR” AS DEFINED IN RULE 501(a) UNDER THE SECURITIES ACT OR OTHER LOAN SECURED BY SUCH SECURITIES.
COMMON STOCK PURCHASE WARRANT
SUI GROUP HOLDINGS LIMITED
Warrant Shares: 207,565.00
Issue Date: July 6, 2026
THIS COMMON STOCK PURCHASE WARRANT (this “Warrant”) certifies that, for value received, Kristina Campbell or her assigns (the “Holder”) is entitled, upon the terms and subject to the limitations on exercise and the conditions hereinafter set forth, at any time on and after the applicable Vesting Date (as defined in Section 2(a)) until the earlier of the date that this Warrant has been exercised in full or the fifth anniversary of the Issue Date (such date, the “Termination Date”), to subscribe for and purchase from Sui Group Holdings Limited, a Minnesota corporation (the “Company”), up to the number of shares of common stock, par value $0.001 per share (the “Common Stock”), of the Company (as subject to adjustment hereunder, the “Warrant Shares”) and at the Exercise Price set forth in Section 2(b).
Section 1. Definitions.
“Affiliate” means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a Person, as such terms are used in and construed under Rule 405 under the Securities Act.
“Beneficial Owner” has the meaning assigned to such term in Rule 13d-3 and Rule 13d-5 under the Exchange Act.
“Commission” means the United States Securities and Exchange Commission.
“Common Stock Equivalents” means any securities of the Company which would entitle the holder thereof to acquire at any time Common Stock, including, without limitation, any debt, preferred stock, right, option, warrant or other instrument that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock.
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“Effective Date” means the earliest of the date that (a) the initial registration statement registering for resale all of the Warrant and Warrant Shares has been declared effective by the Commission, (b) all of the Warrant and Warrant Shares have been sold pursuant to Rule 144 or may be sold pursuant to Rule 144 without the requirement for the Company to be in compliance with the current public information requirement of Rule 144 and without volume or manner-ofsale restrictions, (c) following the one year anniversary of the Issue Date provided that a holder of the Warrant Shares is not an Affiliate of the Company, or (d) all of the Warrant Shares may be sold pursuant to an exemption from registration under Section 4(a)(1) of the Securities Act without volume or manner-of-sale restrictions.
“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
“Person” means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind.
“Trading Market” means any of the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question: the NYSE American, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market or the New York Stock Exchange (or any successors to any of the foregoing).
“Transfer Agent” means Pacific Stock Transfer Company, the current transfer agent of the Company, with a mailing address of 6725 Via Austi Parkway, Suite 300, Las Vegas, NV 89119, and any successor transfer agent of the Company.
Section 2. Exercise.
(a) Exercise of Warrant. Exercise of the purchase rights represented by this Warrant may be made, in whole or in part, on and after the applicable Vesting Date and on or before the Termination Date by delivery to the Company of a duly executed facsimile copy or PDF or DocuSign copy submitted by e-mail (or e-mail attachment) of the Notice of Exercise in the form annexed hereto as Exhibit A (the “Notice of Exercise”). Within the earlier of (i) one (1) Trading Day (as defined below) and (ii) the number of Trading Days comprising the Standard Settlement Period (as defined in Section 2(d)(i) herein) following the date of exercise as aforesaid, the Holder shall deliver the aggregate Exercise Price for the Warrant Shares specified in the applicable Notice of Exercise by wire transfer or cashier’s check drawn on a United States bank unless the cashless exercise procedure specified in Section 2(c) below is specified in the applicable Notice of Exercise. No ink-original Notice of Exercise shall be required, nor shall any medallion guarantee (or other type of guarantee or notarization) of any Notice of Exercise be required. Notwithstanding anything herein to the contrary, the Holder shall not be required to physically surrender this Warrant to the Company until the Holder has purchased all of the Warrant Shares available hereunder and the Warrant has been exercised in full, in which case, the Holder shall surrender this Warrant to the Company for cancellation within three (3) Trading Days of the date on which the final Notice of Exercise is delivered to the Company. Partial exercises of this Warrant resulting in purchases of a portion of the total number of Warrant Shares available hereunder shall have the effect of lowering the outstanding number of Warrant Shares purchasable hereunder in an amount equal to the applicable number of Warrant Shares purchased. The Holder and the Company shall maintain records showing the number of Warrant Shares purchased and the date of such purchases. The Company shall deliver any objection to any Notice of Exercise within one (1) Trading Day of receipt of such notice. Each Tranche (as defined in Section 2(b)) of this Warrant shall vest as follows: on the 6 month anniversary of the Issue Date, 25% of each Tranche of this Warrant will vest and an additional 25% of each Tranche of this Warrant will vest on each of the twelve (12) month, eighteen (18) month and twenty-four (24) month anniversaries of the Issue Date such that, on the twenty-four (24) month anniversary of the Issue Date, each Tranche of this Warrant will be fully vested; provided, however, that, at the time of each vesting, the Holder is serving on the board of directors of the Company. The date on which any part of a Tranche of this Warrant vests (such vested part of a Tranche of this Warrant, the “Vested Tranche”) pursuant to the preceding sentence is referred to herein as the “Vesting Date” with respect to such Vested Tranche of this Warrant. Each Vested Tranche of this Warrant may be exercised, in whole or in part, on and after the applicable Vesting Date and on or prior to the Termination Date pursuant to the procedures set forth in this Section 2(a).
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The Holder and any assignee, by acceptance of this Warrant, acknowledge and agree that, by reason of the provisions of this paragraph, following the purchase of a portion of the Warrant Shares hereunder, the number of Warrant Shares available for purchase hereunder at any given time may be less than the amount stated on the face hereof.
For the avoidance of doubt, there is no circumstance that would require the Company to net cash settle the Warrants.
(b) Exercise Price. This Warrant shall entitle the Holder, subject to the provisions of this Warrant, to purchase from the Company the number of Warrant Shares at the prices set forth below, subject to the adjustments provided in Section 3 hereof:
(i) 83,026.00 Warrant Shares at an exercise price of $5.420 per Warrant Share;
(ii) 41,513.00 Warrant Shares at an exercise price of $5.962 per Warrant Share;
(iii) 41,513.00 Warrant Shares at an exercise price of $6.504 per Warrant Share; and
(iv) 41,513.00 Warrant Shares at an exercise price of $7.046 per Warrant Share.
Each of subsections (i), (ii), (iii) and (iv) is referred to herein as a “Tranche”. The term “Exercise Price” as used herein shall mean the price per Warrant Share (including in cash or by payment of Warrants pursuant to a “cashless exercise,” to the extent permitted hereunder) described in the prior sentence at which the Warrant Shares from the relevant Tranche may be purchased at the time a Warrant is exercised.
(c) Cashless Exercise. If, on any date on which Holder exercises this Warrant, the issuance of the Warrant Shares would not be pursuant to an effective registration statement under the Securities Act, the holder may, in lieu of payment of the exercise price in cash, exercise this Warrant, in whole or in part, at such time by means of a “cashless exercise” in which the Holder shall be entitled to receive a number of Warrant Shares equal to the quotient obtained by dividing [(A-B) (X)] by (A), where:
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| A = | as applicable: (i) the VWAP (as defined below) on the Trading Day immediately preceding the date of the applicable Notice of Exercise if such Notice of Exercise is (1) both executed and delivered pursuant to Section 2(a) hereof on a day that is not a Trading Day or (2) both executed and delivered pursuant to Section 2(a) hereof on a Trading Day prior to the opening of “regular trading hours” (as defined in Rule 600(b) of Regulation NMS promulgated under the federal securities laws) on such Trading Day, (ii) at the option of the Holder, either (y) the VWAP on the Trading Day immediately preceding the date of the applicable Notice of Exercise or (z) the Bid Price (as defined below) of the Common Stock on the principal Trading Market as reported by Bloomberg L.P. (“Bloomberg”) as of the time of the Holder’s execution and delivery of the applicable Notice of Exercise if such Notice of Exercise is executed and delivered during “regular trading hours” on a Trading Day and is delivered within two (2) hours thereafter (including until two (2) hours after the close of “regular trading hours” on a Trading Day) pursuant to Section 2(a) hereof or (iii) the VWAP on the date of the applicable Notice of Exercise if the date of such Notice of Exercise is a Trading Day and such Notice of Exercise is both executed and delivered pursuant to Section 2(a) hereof after the close of “regular trading hours” on such Trading Day; |
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| B = | the Exercise Price of this Warrant, as adjusted hereunder, in effect on the date of exercise; and |
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| X = | the number of Warrant Shares that would be issuable upon exercise of this Warrant in accordance with the terms of this Warrant if such exercise were by means of a cash exercise rather than a cashless exercise. |
If Warrant Shares are issued in such a cashless exercise, the parties acknowledge and agree that in accordance with Section 3(a)(9) of the Securities Act, the Warrant Shares shall take on the characteristics of the Warrants being exercised and any holding period of the Warrant Shares being issued may be tacked on to the holding period of this Warrant. For the avoidance of doubt, in the absence of an effective registration statement registering the issuance of the Warrant Shares, the Company shall issue, and the Holder agrees to receive, unregistered Warrant Shares upon a cashless exercise of this Warrant pursuant to this Section 2(c). The Company agrees not to take any position contrary to this Section 2(c).
“Bid Price” means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on a Trading Market, the bid price of the Common Stock for the time in question (or the nearest preceding date) on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)), (b) if OTCQB or OTCQX is a Trading Market, the volume weighted average price of the Common Stock for such date (or the nearest preceding date) on OTCQB or OTCQX as applicable, (c) if the Common Stock is not then listed or quoted for trading on OTCQB or OTCQX and if prices for the Common Stock are then reported on The Pink Open Market (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported, or (d) in all other cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith by the holders of a majority in interest of the Warrants then outstanding and reasonably acceptable to the Company, the fees and expenses of which shall be paid by the Company.
“Trading Day” means any day on which the Trading Market is open for trading, including any day on which the Trading Market is open for trading for a period of time less than the customary time.
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“VWAP” means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on a Trading Market, the daily volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)), (b) if OTCQB or OTCQX is a Trading Market, the volume weighted average price of the Common Stock for such date (or the nearest preceding date) on OTCQB or OTCQX as applicable, (c) if the Common Stock is not then listed or quoted for trading on OTCQB or OTCQX and if prices for the Common Stock are then reported on The Pink Open Market (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported, or (d) in all other cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith by the holders of a majority in interest of the Warrants then outstanding and reasonably acceptable to the Company, the fees and expenses of which shall be paid by the Company.
(d) Mechanics of Exercise.
(i) Delivery of Warrant Shares Upon Exercise. The Company shall cause the Warrant Shares purchased hereunder to be transmitted by the Transfer Agent to the Holder by crediting the account of the Holder’s or its designee’s balance account with The Depository Trust Company through its Deposit or Withdrawal at Custodian system (“DWAC”) if the Company is then a participant in such system and either (A) there is an effective registration statement permitting the issuance of the Warrant Shares to or resale of the Warrant Shares by the Holder or (B) the Warrant Shares are eligible for resale by the Holder without volume or manner-of-sale limitations pursuant to Rule 144 (assuming cashless exercise of the Warrants), and otherwise by physical delivery of a certificate, registered in the Company’s share register in the name of the Holder or its designee, for the number of Warrant Shares to which the Holder is entitled pursuant to such exercise to the address specified by the Holder in the Notice of Exercise by the date that is the earliest of (i) one (1) Trading Day after the delivery to the Company of the Notice of Exercise, provided that payment of the aggregate Exercise Price (other than in the instance of a cashless exercise) is received by the Company by such date, (ii) one (1) Trading Day after delivery of the aggregate Exercise Price to the Company and (iii) the number of Trading Days comprising the Standard Settlement Period after the delivery to the Company of the Notice of Exercise, provided that payment of the aggregate Exercise Price (other than in the instance of a cashless exercise) is received by the Company by such date (such date, the “Warrant Share Delivery Date”). Upon delivery of the Notice of Exercise, the Holder shall be deemed for all corporate purposes to have become the holder of record of the Warrant Shares with respect to which this Warrant has been exercised, irrespective of the date of delivery of the Warrant Shares, provided that payment of the aggregate Exercise Price (other than in the case of a cashless exercise) is received within the earlier of (i) two (2) Trading Days and (ii) the number of Trading Days comprising the Standard Settlement Period following delivery of the Notice of Exercise. If the Company fails for any reason to deliver to the Holder the Warrant Shares subject to a Notice of Exercise by the Warrant Share Delivery Date, provided that payment of the aggregate Exercise Price (other than in the instance of a cashless exercise) is received by the Company by such date, the Company shall pay to the Holder, in cash, as liquidated damages and not as a penalty, for each $1,000 of Warrant Shares subject to such exercise (based on the VWAP of the Common Stock on the date of the applicable Notice of Exercise), $10 per Trading Day (increasing to $20 per Trading Day on the fifth Trading Day after such liquidated damages begin to accrue) for each Trading Day after such Warrant Share Delivery Date until such Warrant Shares are delivered or the Holder rescinds such exercise. The Company agrees to maintain a transfer agent that is a participant in the FAST program so long as this Warrant remains outstanding and exercisable. As used herein, “Standard Settlement Period” means the standard settlement period, expressed in a number of Trading Days, on the Company’s primary Trading Market with respect to the Common Stock as in effect on the date of delivery of the Notice of Exercise.
(ii) Delivery of New Warrants Upon Exercise. If this Warrant shall have been exercised in part, the Company shall, at the request of a Holder and upon surrender of this Warrant certificate, at the time of delivery of the Warrant Shares, deliver to the Holder a new Warrant evidencing the rights of the Holder to purchase the unpurchased Warrant Shares called for by this Warrant, which new Warrant shall in all other respects be identical with this Warrant.
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(iii) Rescission Rights. If the Company fails to cause the Transfer Agent to transmit to the Holder the Warrant Shares pursuant to Section 2(d)(i) by the Warrant Share Delivery Date, then the Holder will have the right to Rescind such exercise.
(iv) Compensation for Buy-In on Failure to Timely Deliver Warrant Shares Upon Exercise. In addition to any other rights available to the Holder, if the Company fails to cause the Transfer Agent to transmit to the Holder the Warrant Shares in accordance with the provisions of Section 2(d)(i) above pursuant to an exercise on or before the Warrant Share Delivery Date (other than any such failure that is solely due to any action or inaction by the Holder with respect to such exercise), and if after such date the Holder is required by its broker to purchase (in an open market transaction or otherwise) or the Holder’s brokerage firm otherwise purchases, shares of Common Stock to deliver in satisfaction of a sale by the Holder of the Warrant Shares which the Holder anticipated receiving upon such exercise (a “Buy-In”), then the Company shall (A) pay in cash to the Holder the amount, if any, by which (x) the Holder’s total purchase price (including brokerage commissions, if any) for the Warrant Shares so purchased exceeds (y) the amount obtained by multiplying (1) the number of Warrant Shares that the Company was required to deliver to the Holder in connection with the exercise at issue times (2) the price at which the sell order giving rise to such purchase obligation was executed, and (B) at the option of the Holder, either reinstate the portion of the Warrant and equivalent number of Warrant Shares for which such exercise was not honored (in which case such exercise shall be deemed rescinded) or deliver to the Holder the number of shares of Common Stock that would have been issued had the Company timely complied with its exercise and delivery obligations hereunder. For example, if the Holder purchases shares of Common Stock having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted exercise of Warrants with an aggregate sale price giving rise to such purchase obligation of $10,000, under clause (A) of the immediately preceding sentence the Company shall be required to pay the Holder $1,000. The Holder shall provide the Company written notice indicating the amounts payable to the Holder in respect of the Buy-In and, upon request of the Company, evidence of the amount of such loss. Nothing herein shall limit a Holder’s right to pursue any other remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Company’s failure to timely deliver Warrant Shares as required pursuant to the terms hereof.
(v) No Fractional Shares or Scrip. No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant. As to any fraction of a share which the Holder would otherwise be entitled to purchase upon such exercise, the Company shall, at its election, either pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the Exercise Price or round up to the next whole share of Common Stock.
(vi) Charges, Taxes and Expenses. The issuance and delivery of Warrant Shares shall be made without charge to the Holder for any issue or transfer tax or other incidental expense in respect of the issuance of such Warrant Shares, all of which taxes and expenses shall be paid by the Company, and such Warrant Shares shall be issued in the name of the Holder or in such name or names as may be directed by the Holder; provided, however, that, in the event that Warrant Shares are to be issued in a name other than the name of the Holder, this Warrant when surrendered for exercise shall be accompanied by the Assignment Form, attached hereto as Exhibit B, duly executed by the Holder and the Company may require, as a condition thereto, the payment of a sum sufficient to reimburse it for any transfer tax incidental thereto. The Company shall pay all Transfer Agent fees required for same-day processing of any Notice of Exercise and all fees to the Depository Trust Company (or another established clearing corporation performing similar functions) required for same-day electronic delivery of the Warrant Shares.
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(vii) Closing of Books. The Company will not close its stockholder books or records in any manner which prevents the timely exercise of this Warrant, pursuant to the terms hereof.
(e) Holder’s Exercise Limitations. The Company shall not effect any exercise of this Warrant, and a Holder shall not have the right to exercise any portion of this Warrant, pursuant to Section 2 or otherwise, to the extent that after giving effect to such issuance after exercise as set forth on the applicable Notice of Exercise, the Holder (together with (i) the Holder’s Affiliates, (ii) any other Persons acting as a group together with the Holder or any of the Holder’s Affiliates, and (iii) any other Persons whose beneficial ownership of the shares of Common Stock would or could be aggregated with the Holder’s for purposes of Section 13(d) of the Exchange Act (such Persons, “Attribution Parties”)), would beneficially own in excess of the Beneficial Ownership Limitation (as defined below). For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by the Holder and its Affiliates and Attribution Parties shall include the number of Warrant Shares issuable upon exercise of this Warrant with respect to which such determination is being made, but shall exclude the number of Warrant Shares which would be issuable upon (i) exercise of the remaining, nonexercised portion of this Warrant beneficially owned by the Holder or any of its Affiliates or Attribution Parties and (ii) exercise or conversion of the unexercised or nonconverted portion of any other securities of the Company (including, without limitation, any other Common Stock Equivalents) subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially owned by the Holder or any of its Affiliates or Attribution Parties. Except as set forth in the preceding sentence, for purposes of this Section 2(e), beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder, it being acknowledged by the Holder that the Company is not representing to the Holder that such calculation is in compliance with Section 13(d) of the Exchange Act and the Holder is solely responsible for any schedules required to be filed in accordance therewith. To the extent that the limitation contained in this Section 2(e) applies, the submission of a Notice of Exercise shall be deemed to be the Holder’s determination of whether this Warrant is exercisable (in relation to other securities owned by the Holder together with any Affiliates and Attribution Parties) and of which portion of this Warrant is exercisable, in each case subject to the Beneficial Ownership Limitation. In addition, a determination as to any group status as contemplated above shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. For purposes of this Section 2(e), in determining the number of outstanding shares of Common Stock, a Holder may rely on the number of outstanding shares of Common Stock as reflected in (A) the Company’s most recent periodic or annual report filed with the Commission, as the case may be, (B) a more recent public announcement by the Company or (C) a more recent written notice by the Company or the Transfer Agent setting forth the number of shares of Common Stock outstanding. Upon the written or oral request of a Holder, the Company shall within one (1) Trading Day confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including this Warrant, by the Holder or its Affiliates or Attribution Parties since the date as of which such number of outstanding shares of Common Stock was reported. The “Beneficial Ownership Limitation” shall be 4.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of Warrant Shares issuable upon exercise of this Warrant. The Holder, upon notice to the Company, may increase or decrease the Beneficial Ownership Limitation provisions of this Section 2(e), provided that the Beneficial Ownership Limitation in no event exceeds 19.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of Warrant Shares upon exercise of this Warrant held by the Holder and the provisions of this Section 2(e) shall continue to apply. Any increase in the Beneficial Ownership Limitation will not be effective until the 61st day after such notice is delivered to the Company. In the event that the issuance of Common Stock to the Holder upon exercise of this Warrant results in the Holder, together with the Attribution Parties, collectively being deemed to beneficially own, in the aggregate, more than the Beneficial Ownership Limitation, the number of shares so issued by which the aggregate Beneficial Ownership of the Holder and its Attribution Parties exceeds such limitation (the “Excess Shares”) shall be deemed null and void and shall be cancelled ab initio, and the Holder and/or the Attribution Parties shall not have the power to vote or to transfer the Excess Shares. As soon as reasonably practicable after the issuance of the Excess Shares has been deemed null and void, the Company shall return to the Holder the exercise price paid by the Holder for the Excess Shares and the Holder shall return the Excess Shares to the Company. The provisions of this paragraph shall not be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 2(e) to correct this paragraph (or any portion hereof) which may be defective or inconsistent with the intended Beneficial Ownership Limitation herein contained or to make changes or supplements necessary or desirable to properly give effect to such limitation. The limitations contained in this paragraph shall apply to a successor holder of this Warrant. If the Warrant is unexercisable as a result of the Holder’s Beneficial Ownership Limitation, no alternative consideration is owing to the Holder, provided that the Holder shall continue to have the right, subject to the conditions set out herein, to exercise any unexercised portion of the Warrant which was otherwise exercisable and all other rights, powers and remedies hereunder shall remain in full force and effect.
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(f) Notwithstanding anything in this Warrant to the contrary, and in addition to the beneficial ownership limitations described above, the Company and the Holder agree that no shares of Common Stock may be issued to Holder under this Warrant unless (i) if required, stockholder approval is obtained in accordance with Nasdaq Listing Rules 5635(c), or (ii) the Common Stock is not listed for quotation on Nasdaq or another exchange with similar approval requirements.
Section 3. Certain Adjustments.
(a) Stock Dividends and Splits. If the Company, at any time while this Warrant is outstanding: (i) pays a stock dividend or otherwise makes a distribution or distributions on shares of its Common Stock or any other equity or equity equivalent securities payable in shares of Common Stock (which, for avoidance of doubt, shall not include any Warrant Shares issued by the Company upon exercise of this Warrant), (ii) subdivides outstanding shares of Common Stock into a larger number of shares or (iii) combines (including by way of reverse stock split) outstanding shares of Common Stock into a smaller number of shares, then in each case the Exercise Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding immediately before such event and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event, and the number of shares issuable upon exercise of this Warrant shall be proportionately adjusted such that the aggregate Exercise Price of this Warrant shall remain unchanged. Any adjustment made pursuant to this Section 3(a) shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, or combination or re-classification.
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(b) Subsequent Rights Offerings. In addition to any adjustments pursuant to Section 3(a) above, if at any time the Company grants, issues or sells any Common Stock Equivalents or rights to purchase stock, warrants, securities or other property pro rata to the record holders of any class of shares of Common Stock (the “Purchase Rights”), then the Holder will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder could have acquired if the Holder had held the number of shares of Common Stock acquirable upon complete exercise of this Warrant (without regard to any limitations on exercise hereof, including without limitation, the Beneficial Ownership Limitation) immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights (provided, however, that, to the extent that the Holder’s right to participate in any such Purchase Right would result in the Holder exceeding the Beneficial Ownership Limitation, then the Holder shall not be entitled to participate in such Purchase Right to such extent (or beneficial ownership of such shares of Common Stock as a result of such Purchase Right to such extent) and such Purchase Right to such extent shall be held in abeyance for the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding the Beneficial Ownership Limitation).
(c) Pro Rata Distributions. During such time as this Warrant is outstanding, if the Company shall declare or make any dividend or other distribution of its assets (or rights to acquire its assets) to holders of shares of Common Stock, by way of return of capital or otherwise (including, without limitation, any distribution of cash, stock or other securities, property or options by way of a dividend, spin off or other similar transaction) (a “Distribution”), at any time after the issuance of this Warrant, then, in each such case, the Holder shall be entitled to participate in such Distribution to the same extent that the Holder would have participated therein if the Holder had held the number of shares of Common Stock acquirable upon complete exercise of this Warrant (without regard to any limitations on exercise hereof, including without limitation, the Beneficial Ownership Limitation) immediately before the date of which a record is taken for such Distribution, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined for the participation in such Distribution (provided, however, that, to the extent that the Holder’s right to participate in any such Distribution would result in the Holder exceeding the Beneficial Ownership Limitation, then the Holder shall not be entitled to participate in such Distribution to such extent (or in the beneficial ownership of any shares of Common Stock as a result of such Distribution to such extent) and the portion of such Distribution shall be held in abeyance for the benefit of the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding the Beneficial Ownership Limitation).
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(d) Fundamental Transaction. If, at any time while this Warrant is outstanding, (i) the Company, directly or indirectly, in one or more related transactions effects any merger or consolidation of the Company with or into another Person in which the Company is not the surviving entity (other than a reincorporation in a different state), (ii) the Company or any subsidiary, directly or indirectly, effects any sale, lease, license, assignment, transfer, conveyance or other disposition of all or substantially all of the assets of the Company and its subsidiaries, taken as a whole, in one or a series of related transactions, (iii) any, direct or indirect, purchase offer, tender offer or exchange offer (whether by the Company or another Person) is completed pursuant to which holders of Common Stock are permitted to sell, tender or exchange their shares for other securities, cash or property and has been accepted by the holders of 50% or more of the outstanding shares of the aggregate voting power of all classes of equity of the Company, (iv) the Company, directly or indirectly, in one or more related transactions effects any reclassification, reorganization or recapitalization of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property, or (v) the Company, directly or indirectly, in one or more related transactions consummates a stock or share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off, merger or scheme of arrangement) with another Person or group of Persons whereby such other Person or group acquires more than 50% of the outstanding shares of the aggregate voting power of all classes of equity of the Company (each a “Fundamental Transaction”), then, upon any subsequent exercise of this Warrant, the Holder shall have the right to receive, for each Warrant Share that would have been issuable upon such exercise immediately prior to the occurrence of such Fundamental Transaction, at the option of the Holder (without regard to any limitation in Section 2(e) on the exercise of this Warrant (the “Fundamental Transaction Rights”)), the number of shares of Common Stock of the successor or acquiring corporation or of the Company, if it is the surviving corporation, and any additional consideration (the “Alternate Consideration”) receivable as a result of such Fundamental Transaction by a holder of the number of shares of Common Stock for which this Warrant is exercisable immediately prior to such Fundamental Transaction (without regard to any limitation in Section 2(e) on the exercise of this Warrant). For purposes of any such exercise, the determination of the Exercise Price shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one share of Common Stock in such Fundamental Transaction, and the Company shall apportion the Exercise Price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration. If holders of Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate Consideration it receives upon any exercise of this Warrant following such Fundamental Transaction. The Company shall cause any successor entity in a Fundamental Transaction in which the Company is not the survivor (the “Successor Entity”) to assume in writing all of the obligations of the Company under this Warrant in accordance with the provisions of this Section 3(d) pursuant to written agreements in form and substance reasonably satisfactory to the Holder prior to such Fundamental Transaction and shall, at the option of the Holder, deliver to the Holder in exchange for this Warrant a security of the Successor Entity evidenced by a written instrument substantially similar in form and substance to this Warrant which is exercisable for a corresponding number of shares of capital stock of such Successor Entity (or its parent entity) equivalent to the shares of Common Stock acquirable and receivable upon exercise of this Warrant (without regard to any limitations on the exercise of this Warrant) prior to such Fundamental Transaction, and with an exercise price which applies the exercise price hereunder to such shares of capital stock (but taking into account the relative value of the shares of Common Stock pursuant to such Fundamental Transaction and the value of such shares of capital stock, such number of shares of capital stock and such exercise price being for the purpose of protecting the economic value of this Warrant immediately prior to the consummation of such Fundamental Transaction), and which is reasonably satisfactory in form and substance to the Holder. Upon the occurrence of any such Fundamental Transaction, the Successor Entity shall succeed to, and be substituted for (so that from and after the date of such Fundamental Transaction, the provisions of this Warrant referring to the “Company” shall refer instead to the Successor Entity), and may exercise every right and power of the Company and shall assume all of the obligations of the Company under this Warrant with the same effect as if such Successor Entity had been named as the Company herein, provided, however, that to the extent that the Holder’s right to participate in any such Fundamental Transaction Rights would result in the Holder and its Attribution Parties, collectively, beneficially owning in excess of the Beneficial Ownership Limitation of the Common Stock that would be issued and outstanding following receipt of such Fundamental Transaction Rights (such excess amount of Common Stock, the “Excess Fundamental Transaction Rights”), then the Holder shall not be entitled to participate in such Fundamental Transaction Rights to the extent of the Excess Fundamental Transaction Rights (and shall not have the right to acquire such Excess Fundamental Transaction Rights). The Excess Fundamental Transaction Rights shall be held in abeyance for the benefit of the Holder until such time or times as (1) its right to receive some or all of the Excess Fundamental Transaction Rights would not result in the Holder and its Attribution Parties beneficially owning Common Stock in excess of the Beneficial Ownership Limitation and (2) the Holder so certifies in writing to the Company and specifies the number of shares of Common Stock it is able to receive without exceeding the Beneficial Ownership Limitation, at which time or times the Holder shall be granted that portion of the Excess Fundamental Transaction Rights (and any Excess Fundamental Transaction Rights granted, issued or sold on such initial Fundamental Transaction Rights or on any subsequent Fundamental Transaction Rights to be held similarly in abeyance) to the same extent as if there had been no such limitation. For the avoidance of doubt, the Holder shall be entitled to the benefits of the provisions of this Section 3(d) regardless of whether the Company has sufficient authorized shares of Common Stock for the issuance of Warrant Shares.
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(e) [Reserved].
(f) Calculations. All calculations under this Section 3 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be. For purposes of this Section 3, the number of shares of Common Stock deemed to be issued and outstanding as of a given date shall be the sum of the number of shares of Common Stock (excluding treasury shares, if any) issued and outstanding.
(g) Notice to Holder.
(i) Adjustment to Exercise Price. Whenever the Exercise Price is adjusted pursuant to any provision of this Section 3, the Company shall promptly deliver to the Holder by facsimile or email a notice setting forth the Exercise Price after such adjustment and any resulting adjustment to the number of Warrant Shares and setting forth a brief statement of the facts requiring such adjustment.
(ii) Notice to Allow Exercise by Holder. If, while the Warrant is outstanding, (A) the Company declares a dividend (or any other distribution in whatever form) on the Common Stock, (B) the Company declares a special nonrecurring cash dividend on, or a redemption of, the shares of Common Stock, (C) the Company authorizes the granting to all holders of the shares of Common Stock rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights, (D) the approval of any shareholders of the Company is required in connection with a Fundamental Transaction, or (E) the Company authorizes the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company, then, in each case, the Company shall cause to be delivered by facsimile or email to the Holder at its last facsimile number or email address as it shall appear upon the Warrant Register (as defined below) of the Company, at least 20 calendar days prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of the Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date as of which it is expected that holders of the Common Stock of record shall be entitled to exchange their shares of Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or share exchange; provided that the failure to deliver such notice or any defect therein or in the delivery thereof shall not affect the validity of the corporate action required to be specified in such notice. To the extent that any notice provided in this Warrant constitutes, or contains, material, non-public information regarding the Company or any of the subsidiaries, the Company shall simultaneously file such notice with the Commission pursuant to a Current Report on Form 8-K. The Holder shall remain entitled to exercise this Warrant during the period commencing on the date of such notice to the effective date of the event triggering such notice except as may otherwise be expressly set forth herein.
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(iii) Voluntary Adjustment by the Company. Subject to the rules and regulations of the Trading Market, the Company may at any time during the term of this Warrant reduce the then current Exercise Price to any amount and for any period of time deemed appropriate by the board of directors of the Company.
Section 4. Transfer of Warrant.
(a) Transferability. Subject to compliance with any applicable securities laws, and the conditions set forth in Section 4(d) hereof, each Warrant and all rights hereunder (including, without limitation, any registration rights) are transferable, in whole or in part, only with respect to the vested portion of a Warrant and upon surrender of this Warrant at the principal office of the Company or its designated agent, together with a written assignment of the relevant portion of the Warrant substantially in the form attached hereto duly executed by the Holder or its agent or attorney and funds sufficient to pay any transfer taxes payable upon the making of such transfer. Upon such surrender and, if required, such payment, the Company shall execute and deliver a new Warrant or Warrants in the name of the assignee or assignees, as applicable, and in the denomination or denominations specified in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant not so assigned, and this Warrant shall promptly be cancelled. Notwithstanding anything herein to the contrary, the Holder shall not be required to physically surrender this Warrant to the Company unless the Holder has assigned this Warrant in full, in which case the Holder shall surrender this Warrant to the Company within three (3) Trading Days of the date on which the Holder delivers an assignment form to the Company assigning this Warrant in full. The Warrant, if properly assigned in accordance herewith, may be exercised by a new holder for the purchase of Warrant Shares without having a new Warrant issued.
(b) New Warrants. Subject to compliance with applicable securities laws, this Warrant may be divided or combined with other Warrants upon presentation hereof at the aforesaid office of the Company, together with a written notice specifying the names and denominations in which new Warrants are to be issued, signed by the Holder or its agent or attorney. Subject to compliance with Section 4(a), as to any transfer which may be involved in such division or combination, the Company shall execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided or combined in accordance with such notice. All Warrants issued on transfers or exchanges shall be dated the original Issue Date of this Warrant and shall be identical with this Warrant except as to the number of Warrant Shares issuable pursuant thereto.
(c) Warrant Register. The Company shall register this Warrant, upon records to be maintained by the Company for that purpose (the “Warrant Register”), in the name of the record Holder hereof from time to time. The Company may deem and treat the registered Holder of this Warrant as the absolute owner hereof for the purpose of any exercise hereof or any distribution to the Holder, and for all other purposes, absent actual notice to the contrary.
(d) Transfer Restrictions.
(i) If, at the time of the surrender of this Warrant in connection with any transfer of this Warrant, the transfer of this Warrant shall not be either (i) registered pursuant to an effective registration statement under the Securities Act and under applicable state securities or blue sky laws or (ii) eligible for resale without volume or manner-of-sale restrictions or current public information requirements pursuant to Rule 144, the Company may, as a condition of allowing such transfer, require that the Holder or transferee of this Warrant, as the case may be, execute a written agreement pursuant to which such transferee agrees to be bound, solely with respect to the transferred Warrant, by those provisions of this Warrant, as if such transferee were an original holder hereunder (other than with respect to any warrant transferred pursuant to an effective registration statement).
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(ii) Notwithstanding the above, in connection with any transfer of this Warrant or Warrant Shares other than pursuant to an effective registration statement or Rule 144, to the Company or to an Affiliate of a Holder or in connection with a pledge as contemplated in Section 4(d)(iii), the Company may require the transferor thereof to provide to the Company an opinion of counsel selected by the transferor and reasonably acceptable to the Company, the form and substance of which opinion shall be reasonably satisfactory to the Company, to the effect that such transfer does not require registration under the Securities Act. As a condition of transfer (other than pursuant to an effective registration statement or Rule 144), any such transferee shall agree in writing to be bound by the terms of this Warrant and shall have the rights and obligations of a Holder under this Warrant.
(iii) The Company acknowledges and agrees that a Holder may from time to time pledge pursuant to a bona fide margin agreement with a registered broker-dealer or grant a security interest in this Warrant or Warrant Shares to a financial institution that is an “accredited investor” as defined in Rule 501(a) of Regulation D under the Securities Act and, if required under the terms of such arrangement, such Holder may transfer pledged or secured Warrants or Warrant Shares to the pledgees or secured parties. Such a pledge or transfer would not be subject to approval of the Company and no legal opinion of legal counsel of the pledgee, secured party or pledgor shall be required in connection therewith. Further, no notice shall be required of such pledge. At the appropriate Holder’s expense, the Company will execute and deliver such reasonable documentation as a pledgee or secured party of the Warrants or Warrant Shares may reasonably request in connection with a pledge or transfer of the Warrants or Warrant Shares, including, if the Warrants or Warrant Shares are subject to registration pursuant to any registration rights agreement, the preparation and filing of any required prospectus supplement under Rule 424(b)(3) under the Securities Act or other applicable provision of the Securities Act to appropriately amend the list of selling stockholders thereunder.
(iv) Certificates evidencing the Warrant Shares shall not contain any legend (including the legend set forth on the front page of this Warrant), (i) while a registration statement covering the resale of such security is effective under the Securities Act, (ii) following any sale of such Warrant Shares pursuant to Rule 144 and the Company is then in compliance with the current public information required under Rule 144, (iii) if such Warrant Shares may be sold under Rule 144, without the requirement for the Company to be in compliance with the current public information required under Rule 144 as to such Warrant Shares and without volume or manner-of-sale restrictions, or (iv) if such legend is not required under applicable requirements of the Securities Act (including judicial interpretations and pronouncements issued by the staff of the Commission). The Company shall cause its counsel to issue a legal opinion to the Transfer Agent or the Holder promptly after the Effective Date if required by the Transfer Agent to effect the removal of the legend hereunder, or if requested by a Holder, respectively. If all or any portion of a Warrant is exercised at a time when there is an effective registration statement to cover the resale of the Warrant Shares, or if the Warrant Shares may be sold under Rule 144 and the Company is then in compliance with the current public information required under Rule 144, or if the Warrant Shares may be sold under Rule 144 without the requirement for the Company to be in compliance with the current public information required under Rule 144 as to such Warrant Shares or if such legend is not otherwise required under applicable requirements of the Securities Act (including judicial interpretations and pronouncements issued by the staff of the Commission), then such Warrant Shares shall be issued free of all legends. The Company shall cause its counsel to issue a legal opinion to the Transfer Agent promptly after the Effective Date if required by the Transfer Agent to effect the removal of the legend hereunder or if reasonably required by a Holder. The Company agrees that following the Effective Date or at such time as such legend is no longer required under this Section 4(d)(iv), it will, no later than the earlier of (i) two (2) Trading Days and (ii) the number of Trading Days comprising the Standard Settlement Period (as defined below) following the delivery by a Holder to the Company or the Transfer Agent of a certificate representing the Warrant Shares, as the case may be, issued with a restrictive legend (such date, the “Legend Removal Date”), deliver or cause to be delivered to such Holder a certificate representing such shares that is free from all restrictive and other legends. The Company may not make any notation on its records or give instructions to the Transfer Agent that enlarge the restrictions on transfer set forth in this Section 4(d)(iv). Certificates for Warrant Shares subject to legend removal hereunder shall be transmitted by the Transfer Agent to the Holder by crediting the account of the Holder’s prime broker with The Depository Trust Company as directed by such Holder. As used herein, “Standard Settlement Period” means the standard settlement period, expressed in a number of Trading Days, on the Company’s primary Trading Market with respect to the Common Stock as in effect on the date of delivery of a certificate representing Warrant Shares, as the case may be, issued with a restrictive legend. The Holder shall provide the Company written notice of a removal request (the “Request Notice”) at least two (2) Trading Days prior to delivery of the legended Share certificate.
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(v) In addition to such Holder’s other available remedies, the Company shall pay to a Holder, in cash, (i) as partial liquidated damages and not as a penalty, for each $1,000 of Warrant Shares (based on the VWAP of the Common Stock on the date such Warrant Shares are submitted to the Transfer Agent) delivered for removal of the restrictive legend and subject to Section 4(d)(iv), $10 per Trading Day (increasing to $20 per Trading Day five (5) Trading Days after such damages have begun to accrue) for each Trading Day after the Legend Removal Date (or, if later, four (4) days after the Request Notice date) until such certificate is delivered without a legend and (ii) if the Company fails to (a) issue and deliver (or cause to be delivered) to a Holder by the Legend Removal Date a certificate representing the Warrant Shares so delivered to the Company by such Holder that is free from all restrictive and other legends and (b) if after the Legend Removal Date such Holder purchases (in an open market transaction or otherwise) shares of Common Stock to deliver in satisfaction of a sale by such Holder of all or any portion of the number of shares of Common Stock, or a sale of a number of shares of Common Stock equal to all or any portion of the number of shares of Common Stock that such Holder anticipated receiving from the Company without any restrictive legend, then, an amount equal to the excess of such Holder’s total purchase price (including brokerage commissions and other out-of-pocket expenses, if any) for the shares of Common Stock so purchased (including brokerage commissions and other out-of-pocket expenses, if any) over the product of (A) such number of Warrant Shares that the Company was required to deliver to such Holder by the Legend Removal Date multiplied by (B) the lowest closing sale price of the Common Stock on any Trading Day during the period commencing on the date of the delivery by such Holder to the Company of the applicable Warrant Shares and ending on the date of such delivery and payment under this clause (ii).
(vi) The Holder agrees with the Company that such Holder will sell any Warrants or Warrant Shares pursuant to either the registration requirements of the Securities Act, including any applicable prospectus delivery requirements, or an exemption therefrom, and that if any Warrants or Warrant Shares are sold pursuant to a registration statement, they will be sold in compliance with the plan of distribution set forth therein, and acknowledges that the removal of the restrictive legend from certificates representing such Warrant Shares as set forth in this Section 4 is predicated upon the Company’s reliance upon this understanding.
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Section 5. Miscellaneous.
(a) No Rights as Stockholder Until Exercise; No Settlement in Cash. This Warrant does not entitle the Holder to any voting rights, dividends or other rights as a stockholder of the Company prior to the exercise hereof as set forth in Section 2(d)(i), except as expressly set forth in Section 3. Without limiting any rights of a Holder to receive Warrant Shares on a “cashless exercise” pursuant to Section 2(c) or to receive cash payments pursuant to Section 2(d)(i) and Section 2(d)(iv) herein, in no event shall the Company be required to net cash settle an exercise of this Warrant.
(b) Loss, Theft, Destruction or Mutilation of Warrant. The Company covenants that upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant or any stock certificate relating to the Warrant Shares, and in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to it (which, in the case of the Warrant, shall not include the posting of any bond), and upon surrender and cancellation of such Warrant or stock certificate, if mutilated, the Company will make and deliver a new Warrant or stock certificate of like tenor and dated as of such cancellation, in lieu of such Warrant or stock certificate.
(c) Saturdays, Sundays, Holidays, etc. If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall not be a Trading Day, then such action may be taken or such right may be exercised on the next succeeding Trading Day.
(d) Authorized Shares. The Company covenants that, during the period the Warrant is outstanding, it will reserve from its authorized and unissued shares of Common Stock and keep available a sufficient number of authorized but unissued shares to provide for the issuance of the Warrant Shares upon the exercise of any purchase rights under this Warrant. The Company further covenants that its issuance of this Warrant shall constitute full authority to its officers who are charged with the duty of issuing the necessary Warrant Shares upon the exercise of the purchase rights under this Warrant. The Company will take all such reasonable action as may be necessary to assure that such Warrant Shares may be issued and delivered as provided herein without violation of any applicable law or regulation, or of any requirements of the Trading Market upon which the Common Stock may be listed. The Company covenants that all Warrant Shares which may be issued and delivered upon the exercise of the purchase rights represented by this Warrant will, upon exercise of the purchase rights represented by this Warrant and payment for such Warrant Shares in accordance herewith, be duly authorized, validly issued, fully paid and nonassessable and free from all taxes, liens and charges created by the Company in respect of the issue thereof (other than taxes in respect of any transfer occurring contemporaneously with such issue). Except and to the extent as waived or consented to by the Holder, the Company shall not by any action, including, without limitation, amending its certificate of incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate to protect the rights of Holder as set forth in this Warrant against impairment. Without limiting the generality of the foregoing, the Company will (i) take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable shares of Common Stock upon the exercise of this Warrant and (ii) use commercially reasonable efforts to obtain all such authorizations, exemptions or consents from any public regulatory body having jurisdiction thereof, as may be, necessary to enable the Company to perform its obligations under this Warrant. Before taking any action which would result in an adjustment in the number of Warrant Shares for which this Warrant is exercisable or in the Exercise Price, the Company shall obtain all such authorizations or exemptions thereof, or consents thereto, as may be necessary from any public regulatory body or bodies having jurisdiction thereof.
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(e) Governing Law. All questions concerning the construction, validity, enforcement and interpretation of this Warrant shall be governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the principles of conflicts of law thereof that would require the application of the laws of any other jurisdiction. Each party agrees that all legal proceedings concerning the interpretations, enforcement and defense of the transactions contemplated by this Warrant (whether brought against a party hereto or their respective affiliates, directors, officers, shareholders, partners, members, employees or agents) shall be commenced exclusively in the state and federal courts sitting in the City of New York. Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in the City of New York, Borough of Manhattan for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is improper or is an inconvenient venue for such proceeding. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Warrant and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law. If either party shall commence an action, suit or proceeding to enforce any provisions of this Warrant, the prevailing party in such action, suit or proceeding shall be reimbursed by the other party for their reasonable attorneys’ fees and other costs and expenses incurred with the investigation, preparation and prosecution of such action or proceeding.
(f) Restrictions. The Holder acknowledges that the Warrant Shares acquired upon the exercise of this Warrant, if not registered, and the Holder does not utilize cashless exercise, will have restrictions upon resale imposed by state and federal securities laws, and in such case, by the acceptance hereof, represents and warrants that the Holder will acquire such Warrant Shares issuable upon such exercise for its own account and not with a view to or for distributing or reselling Warrant Shares or any part thereof in violation of the Securities Act or any applicable state securities law.
(g) Nonwaiver and Expenses. No course of dealing or any delay or failure to exercise any right hereunder on the part of Holder shall operate as a waiver of such right or otherwise prejudice the Holder’s rights, powers or remedies. Without limiting any other provision of this Warrant, if the Company willfully and knowingly fails to comply with any provision of this Warrant, which results in any material damages to the Holder, the Company shall pay to the Holder such amounts as shall be sufficient to cover any costs and expenses including, but not limited to, reasonable attorneys’ fees, including those of appellate proceedings, incurred by the Holder in collecting any amounts due pursuant hereto or in otherwise enforcing any of its rights, powers or remedies hereunder.
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(h) Notices. Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be in writing and shall be deemed given and effective on the earliest of: (a) the time of transmission, if such notice or communication is delivered email attachment at the email address as set forth on the signature pages attached hereto at or prior to 5:30 p.m. (New York City time) on a Trading Day, (b) the next Trading Day after the time of transmission, if such notice or communication is delivered via email attachment at the email address as set forth on the signature pages attached hereto on a day that is not a Trading Day or later than 5:30 p.m. (New York City time) on any Trading Day, (c) the second (2nd) Trading Day following the date of mailing, if sent by U.S. nationally recognized overnight courier service or (d) upon actual receipt by the party to whom such notice is required to be given. The address for such notices and communications shall be as set forth on the signature pages attached hereto. To the extent that any notice provided constitutes, or contains material, non-public information regarding the Company, the Company shall simultaneously file such notice with the Commission pursuant to a Current Report on Form 8-K.
(i) Limitation of Liability. No provision hereof, in the absence of any affirmative action by the Holder to exercise this Warrant to purchase Warrant Shares, and no enumeration herein of the rights or privileges of the Holder, shall give rise to any liability of the Holder for the purchase price of any Common Stock or as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company.
(j) Remedies. The Holder, in addition to being entitled to exercise all rights granted by law, including recovery of damages, will be entitled to specific performance of its rights under this Warrant. The Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Warrant and hereby agrees to waive and not to assert the defense in any action for specific performance that a remedy at law would be adequate.
(k) Successors and Assigns. Subject to applicable securities laws, this Warrant and the rights and obligations evidenced hereby shall inure to the benefit of and be binding upon the successors and permitted assigns of the Company and the successors and permitted assigns of Holder. The provisions of this Warrant are intended to be for the benefit of any Holder from time to time of this Warrant and shall be enforceable by the Holder or holder of Warrant Shares.
(l) Amendment. This Warrant may be modified or amended or the provisions hereof waived with the written consent of the Company and the Holder.
(m) Severability. Wherever possible, each provision of this Warrant shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Warrant shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provisions or the remaining provisions of this Warrant.
(n) Headings. The headings used in this Warrant are for the convenience of reference only and shall not, for any purpose, be deemed a part of this Warrant.
(o) Execution and Counterparts. This Warrant may be executed in two or more counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party, it being understood that both parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission or by e-mail delivery of a “.pdf” format data file or Docusign, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or “.pdf” or Docusign signature page were an original thereof.
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(Signature Page Follows)
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IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its officer thereunto duly authorized as of the date first above indicated.
| SUI GROUP HOLDINGS LIMITED |
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| By: |
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| Name: | Douglas M. Polinsky |
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| Title: | Chief Executive Officer |
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| Signature Page to Campbell Warrant |
EXHIBIT A
NOTICE OF EXERCISE
TO: SUI GROUP HOLDINGS LIMITED
(1) The undersigned hereby elects to purchase ___________ Warrant Shares of the Company pursuant to the terms of the attached Warrant (only if exercised in full) from Tranche(s) __________, and tenders herewith payment of the exercise price in full, together with all applicable transfer taxes, if any.
(2) Payment shall take the form of (check applicable box):
☐ in lawful money of the United States; or
☐ if permitted the cancellation of such number of Warrant Shares as is necessary, in accordance with the formula set forth in subsection 2(c), to exercise this Warrant with respect to the maximum number of Warrant Shares purchasable pursuant to the cashless exercise procedure set forth in subsection 2(c).
(3) Please issue said Warrant Shares in the name of the undersigned or in such other name as is specified below:
The Warrant Shares shall be delivered to the following DWAC Account Number:
(4) Accredited Investor. The undersigned is an “accredited investor” as defined in Rule 501(a) of Regulation D promulgated under the Securities Act of 1933, as amended.
[SIGNATURE OF HOLDER]
Name of Investing Entity:
Signature of Authorized Signatory of Investing Entity:
Name of Authorized Signatory:
Title of Authorized Signatory:
Date:
| Signature Page to Campbell Warrant |
EXHIBIT B
ASSIGNMENT FORM
(To assign the foregoing Warrant, execute this form and supply required information. Do not use this form to exercise the Warrant to purchase shares.)
FOR VALUE RECEIVED, [the right to purchase ________ Warrant Shares of the Company pursuant to the terms of the attached Warrant from Tranche(s) __________ is] / [the attached Warrant and all rights evidenced thereby are] hereby assigned to
Name:
(Please Print)
Address:
(Please Print)
Phone Number:
Email Address:
Dated: _______________ __, ______
Holder’s Signature: __________________________________________
Holder’s Address: ___________________________________________
_____________________________________________________________________________________
| Signature Page to Campbell Warrant |
EXHIBIT 10.4
EXECUTION VERSION
NEITHER THIS SECURITY NOR THE SECURITIES FOR WHICH THIS SECURITY IS EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS. THIS SECURITY AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT WITH A REGISTERED BROKER DEALER OR OTHER LOAN WITH A FINANCIAL INSTITUTION THAT IS AN “ACCREDITED INVESTOR” AS DEFINED IN RULE 501(a) UNDER THE SECURITIES ACT OR OTHER LOAN SECURED BY SUCH SECURITIES.
COMMON STOCK PURCHASE WARRANT
SUI GROUP HOLDINGS LIMITED
Warrant Shares: 83,026.00
Issue Date: July 6, 2026
THIS COMMON STOCK PURCHASE WARRANT (this “Warrant”) certifies that, for value received, Howard Liszt or his assigns (the “Holder”) is entitled, upon the terms and subject to the limitations on exercise and the conditions hereinafter set forth, at any time on and after the applicable Vesting Date (as defined in Section 2(a)) until the earlier of the date that this Warrant has been exercised in full or the fifth anniversary of the Issue Date (such date, the “Termination Date”), to subscribe for and purchase from Sui Group Holdings Limited, a Minnesota corporation (the “Company”), up to the number of shares of common stock, par value $0.001 per share (the “Common Stock”), of the Company (as subject to adjustment hereunder, the “Warrant Shares”) and at the Exercise Price set forth in Section 2(b).
Section 1. Definitions.
“Affiliate” means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a Person, as such terms are used in and construed under Rule 405 under the Securities Act.
“Beneficial Owner” has the meaning assigned to such term in Rule 13d-3 and Rule 13d-5 under the Exchange Act.
“Commission” means the United States Securities and Exchange Commission.
“Common Stock Equivalents” means any securities of the Company which would entitle the holder thereof to acquire at any time Common Stock, including, without limitation, any debt, preferred stock, right, option, warrant or other instrument that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock.
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“Effective Date” means the earliest of the date that (a) the initial registration statement registering for resale all of the Warrant and Warrant Shares has been declared effective by the Commission, (b) all of the Warrant and Warrant Shares have been sold pursuant to Rule 144 or may be sold pursuant to Rule 144 without the requirement for the Company to be in compliance with the current public information requirement of Rule 144 and without volume or manner-of-sale restrictions, (c) following the one year anniversary of the Issue Date provided that a holder of the Warrant Shares is not an Affiliate of the Company, or (d) all of the Warrant Shares may be sold pursuant to an exemption from registration under Section 4(a)(1) of the Securities Act without volume or manner-of-sale restrictions.
“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
“Person” means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind.
“Trading Market” means any of the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question: the NYSE American, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market or the New York Stock Exchange (or any successors to any of the foregoing).
“Transfer Agent” means Pacific Stock Transfer Company, the current transfer agent of the Company, with a mailing address of 6725 Via Austi Parkway, Suite 300, Las Vegas, NV 89119, and any successor transfer agent of the Company.
Section 2. Exercise.
(a) Exercise of Warrant. Exercise of the purchase rights represented by this Warrant may be made, in whole or in part, on and after the applicable Vesting Date and on or before the Termination Date by delivery to the Company of a duly executed facsimile copy or PDF or DocuSign copy submitted by e-mail (or e-mail attachment) of the Notice of Exercise in the form annexed hereto as Exhibit A (the “Notice of Exercise”). Within the earlier of (i) one (1) Trading Day (as defined below) and (ii) the number of Trading Days comprising the Standard Settlement Period (as defined in Section 2(d)(i) herein) following the date of exercise as aforesaid, the Holder shall deliver the aggregate Exercise Price for the Warrant Shares specified in the applicable Notice of Exercise by wire transfer or cashier’s check drawn on a United States bank unless the cashless exercise procedure specified in Section 2(c) below is specified in the applicable Notice of Exercise. No ink-original Notice of Exercise shall be required, nor shall any medallion guarantee (or other type of guarantee or notarization) of any Notice of Exercise be required. Notwithstanding anything herein to the contrary, the Holder shall not be required to physically surrender this Warrant to the Company until the Holder has purchased all of the Warrant Shares available hereunder and the Warrant has been exercised in full, in which case, the Holder shall surrender this Warrant to the Company for cancellation within three (3) Trading Days of the date on which the final Notice of Exercise is delivered to the Company. Partial exercises of this Warrant resulting in purchases of a portion of the total number of Warrant Shares available hereunder shall have the effect of lowering the outstanding number of Warrant Shares purchasable hereunder in an amount equal to the applicable number of Warrant Shares purchased. The Holder and the Company shall maintain records showing the number of Warrant Shares purchased and the date of such purchases. The Company shall deliver any objection to any Notice of Exercise within one (1) Trading Day of receipt of such notice. Each Tranche (as defined in Section 2(b)) of this Warrant shall vest as follows: on the 6 month anniversary of the Issue Date, 25% of each Tranche of this Warrant will vest and an additional 25% of each Tranche of this Warrant will vest on each of the twelve (12) month, eighteen (18) month and twenty-four (24) month anniversaries of the Issue Date such that, on the twenty-four (24) month anniversary of the Issue Date, each Tranche of this Warrant will be fully vested; provided, however, that, at the time of each vesting, the Holder is serving on the board of directors of the Company. The date on which any part of a Tranche of this Warrant vests (such vested part of a Tranche of this Warrant, the “Vested Tranche”) pursuant to the preceding sentence is referred to herein as the “Vesting Date” with respect to such Vested Tranche of this Warrant. Each Vested Tranche of this Warrant may be exercised, in whole or in part, on and after the applicable Vesting Date and on or prior to the Termination Date pursuant to the procedures set forth in this Section 2(a).
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The Holder and any assignee, by acceptance of this Warrant, acknowledge and agree that, by reason of the provisions of this paragraph, following the purchase of a portion of the Warrant Shares hereunder, the number of Warrant Shares available for purchase hereunder at any given time may be less than the amount stated on the face hereof.
For the avoidance of doubt, there is no circumstance that would require the Company to net cash settle the Warrants.
(b) Exercise Price. This Warrant shall entitle the Holder, subject to the provisions of this Warrant, to purchase from the Company the number of Warrant Shares at the prices set forth below, subject to the adjustments provided in Section 3 hereof:
(i) 33,211.00 Warrant Shares at an exercise price of $5.420 per Warrant Share;
(ii) 16,605.00 Warrant Shares at an exercise price of $5.962 per Warrant Share;
(iii) 16,605.00 Warrant Shares at an exercise price of $6.504 per Warrant Share; and
(iv) 16,605.00 Warrant Shares at an exercise price of $7.046 per Warrant Share.
Each of subsections (i), (ii), (iii) and (iv) is referred to herein as a “Tranche”. The term “Exercise Price” as used herein shall mean the price per Warrant Share (including in cash or by payment of Warrants pursuant to a “cashless exercise,” to the extent permitted hereunder) described in the prior sentence at which the Warrant Shares from the relevant Tranche may be purchased at the time a Warrant is exercised.
(c) Cashless Exercise. If, on any date on which Holder exercises this Warrant, the issuance of the Warrant Shares would not be pursuant to an effective registration statement under the Securities Act, the holder may, in lieu of payment of the exercise price in cash, exercise this Warrant, in whole or in part, at such time by means of a “cashless exercise” in which the Holder shall be entitled to receive a number of Warrant Shares equal to the quotient obtained by dividing [(A-B) (X)] by (A), where:
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| A = | as applicable: (i) the VWAP (as defined below) on the Trading Day immediately preceding the date of the applicable Notice of Exercise if such Notice of Exercise is (1) both executed and delivered pursuant to Section 2(a) hereof on a day that is not a Trading Day or (2) both executed and delivered pursuant to Section 2(a) hereof on a Trading Day prior to the opening of “regular trading hours” (as defined in Rule 600(b) of Regulation NMS promulgated under the federal securities laws) on such Trading Day, (ii) at the option of the Holder, either (y) the VWAP on the Trading Day immediately preceding the date of the applicable Notice of Exercise or (z) the Bid Price (as defined below) of the Common Stock on the principal Trading Market as reported by Bloomberg L.P. (“Bloomberg”) as of the time of the Holder’s execution and delivery of the applicable Notice of Exercise if such Notice of Exercise is executed and delivered during “regular trading hours” on a Trading Day and is delivered within two (2) hours thereafter (including until two (2) hours after the close of “regular trading hours” on a Trading Day) pursuant to Section 2(a) hereof or (iii) the VWAP on the date of the applicable Notice of Exercise if the date of such Notice of Exercise is a Trading Day and such Notice of Exercise is both executed and delivered pursuant to Section 2(a) hereof after the close of “regular trading hours” on such Trading Day; |
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| B = | the Exercise Price of this Warrant, as adjusted hereunder, in effect on the date of exercise; and |
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| X = | the number of Warrant Shares that would be issuable upon exercise of this Warrant in accordance with the terms of this Warrant if such exercise were by means of a cash exercise rather than a cashless exercise. |
If Warrant Shares are issued in such a cashless exercise, the parties acknowledge and agree that in accordance with Section 3(a)(9) of the Securities Act, the Warrant Shares shall take on the characteristics of the Warrants being exercised and any holding period of the Warrant Shares being issued may be tacked on to the holding period of this Warrant. For the avoidance of doubt, in the absence of an effective registration statement registering the issuance of the Warrant Shares, the Company shall issue, and the Holder agrees to receive, unregistered Warrant Shares upon a cashless exercise of this Warrant pursuant to this Section 2(c). The Company agrees not to take any position contrary to this Section 2(c).
“Bid Price” means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on a Trading Market, the bid price of the Common Stock for the time in question (or the nearest preceding date) on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)), (b) if OTCQB or OTCQX is a Trading Market, the volume weighted average price of the Common Stock for such date (or the nearest preceding date) on OTCQB or OTCQX as applicable, (c) if the Common Stock is not then listed or quoted for trading on OTCQB or OTCQX and if prices for the Common Stock are then reported on The Pink Open Market (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported, or (d) in all other cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith by the holders of a majority in interest of the Warrants then outstanding and reasonably acceptable to the Company, the fees and expenses of which shall be paid by the Company.
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“Trading Day” means any day on which the Trading Market is open for trading, including any day on which the Trading Market is open for trading for a period of time less than the customary time.
“VWAP” means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on a Trading Market, the daily volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)), (b) if OTCQB or OTCQX is a Trading Market, the volume weighted average price of the Common Stock for such date (or the nearest preceding date) on OTCQB or OTCQX as applicable, (c) if the Common Stock is not then listed or quoted for trading on OTCQB or OTCQX and if prices for the Common Stock are then reported on The Pink Open Market (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported, or (d) in all other cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith by the holders of a majority in interest of the Warrants then outstanding and reasonably acceptable to the Company, the fees and expenses of which shall be paid by the Company.
(d) Mechanics of Exercise.
(i) Delivery of Warrant Shares Upon Exercise. The Company shall cause the Warrant Shares purchased hereunder to be transmitted by the Transfer Agent to the Holder by crediting the account of the Holder’s or its designee’s balance account with The Depository Trust Company through its Deposit or Withdrawal at Custodian system (“DWAC”) if the Company is then a participant in such system and either (A) there is an effective registration statement permitting the issuance of the Warrant Shares to or resale of the Warrant Shares by the Holder or (B) the Warrant Shares are eligible for resale by the Holder without volume or manner-of-sale limitations pursuant to Rule 144 (assuming cashless exercise of the Warrants), and otherwise by physical delivery of a certificate, registered in the Company’s share register in the name of the Holder or its designee, for the number of Warrant Shares to which the Holder is entitled pursuant to such exercise to the address specified by the Holder in the Notice of Exercise by the date that is the earliest of (i) one (1) Trading Day after the delivery to the Company of the Notice of Exercise, provided that payment of the aggregate Exercise Price (other than in the instance of a cashless exercise) is received by the Company by such date, (ii) one (1) Trading Day after delivery of the aggregate Exercise Price to the Company and (iii) the number of Trading Days comprising the Standard Settlement Period after the delivery to the Company of the Notice of Exercise, provided that payment of the aggregate Exercise Price (other than in the instance of a cashless exercise) is received by the Company by such date (such date, the “Warrant Share Delivery Date”). Upon delivery of the Notice of Exercise, the Holder shall be deemed for all corporate purposes to have become the holder of record of the Warrant Shares with respect to which this Warrant has been exercised, irrespective of the date of delivery of the Warrant Shares, provided that payment of the aggregate Exercise Price (other than in the case of a cashless exercise) is received within the earlier of (i) two (2) Trading Days and (ii) the number of Trading Days comprising the Standard Settlement Period following delivery of the Notice of Exercise. If the Company fails for any reason to deliver to the Holder the Warrant Shares subject to a Notice of Exercise by the Warrant Share Delivery Date, provided that payment of the aggregate Exercise Price (other than in the instance of a cashless exercise) is received by the Company by such date, the Company shall pay to the Holder, in cash, as liquidated damages and not as a penalty, for each $1,000 of Warrant Shares subject to such exercise (based on the VWAP of the Common Stock on the date of the applicable Notice of Exercise), $10 per Trading Day (increasing to $20 per Trading Day on the fifth Trading Day after such liquidated damages begin to accrue) for each Trading Day after such Warrant Share Delivery Date until such Warrant Shares are delivered or the Holder rescinds such exercise. The Company agrees to maintain a transfer agent that is a participant in the FAST program so long as this Warrant remains outstanding and exercisable. As used herein, “Standard Settlement Period” means the standard settlement period, expressed in a number of Trading Days, on the Company’s primary Trading Market with respect to the Common Stock as in effect on the date of delivery of the Notice of Exercise.
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(ii) Delivery of New Warrants Upon Exercise. If this Warrant shall have been exercised in part, the Company shall, at the request of a Holder and upon surrender of this Warrant certificate, at the time of delivery of the Warrant Shares, deliver to the Holder a new Warrant evidencing the rights of the Holder to purchase the unpurchased Warrant Shares called for by this Warrant, which new Warrant shall in all other respects be identical with this Warrant.
(iii) Rescission Rights. If the Company fails to cause the Transfer Agent to transmit to the Holder the Warrant Shares pursuant to Section 2(d)(i) by the Warrant Share Delivery Date, then the Holder will have the right to Rescind such exercise.
(iv) Compensation for Buy-In on Failure to Timely Deliver Warrant Shares Upon Exercise. In addition to any other rights available to the Holder, if the Company fails to cause the Transfer Agent to transmit to the Holder the Warrant Shares in accordance with the provisions of Section 2(d)(i) above pursuant to an exercise on or before the Warrant Share Delivery Date (other than any such failure that is solely due to any action or inaction by the Holder with respect to such exercise), and if after such date the Holder is required by its broker to purchase (in an open market transaction or otherwise) or the Holder’s brokerage firm otherwise purchases, shares of Common Stock to deliver in satisfaction of a sale by the Holder of the Warrant Shares which the Holder anticipated receiving upon such exercise (a “Buy-In”), then the Company shall (A) pay in cash to the Holder the amount, if any, by which (x) the Holder’s total purchase price (including brokerage commissions, if any) for the Warrant Shares so purchased exceeds (y) the amount obtained by multiplying (1) the number of Warrant Shares that the Company was required to deliver to the Holder in connection with the exercise at issue times (2) the price at which the sell order giving rise to such purchase obligation was executed, and (B) at the option of the Holder, either reinstate the portion of the Warrant and equivalent number of Warrant Shares for which such exercise was not honored (in which case such exercise shall be deemed rescinded) or deliver to the Holder the number of shares of Common Stock that would have been issued had the Company timely complied with its exercise and delivery obligations hereunder. For example, if the Holder purchases shares of Common Stock having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted exercise of Warrants with an aggregate sale price giving rise to such purchase obligation of $10,000, under clause (A) of the immediately preceding sentence the Company shall be required to pay the Holder $1,000. The Holder shall provide the Company written notice indicating the amounts payable to the Holder in respect of the Buy-In and, upon request of the Company, evidence of the amount of such loss. Nothing herein shall limit a Holder’s right to pursue any other remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Company’s failure to timely deliver Warrant Shares as required pursuant to the terms hereof.
(v) No Fractional Shares or Scrip. No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant. As to any fraction of a share which the Holder would otherwise be entitled to purchase upon such exercise, the Company shall, at its election, either pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the Exercise Price or round up to the next whole share of Common Stock.
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(vi) Charges, Taxes and Expenses. The issuance and delivery of Warrant Shares shall be made without charge to the Holder for any issue or transfer tax or other incidental expense in respect of the issuance of such Warrant Shares, all of which taxes and expenses shall be paid by the Company, and such Warrant Shares shall be issued in the name of the Holder or in such name or names as may be directed by the Holder; provided, however, that, in the event that Warrant Shares are to be issued in a name other than the name of the Holder, this Warrant when surrendered for exercise shall be accompanied by the Assignment Form, attached hereto as Exhibit B, duly executed by the Holder and the Company may require, as a condition thereto, the payment of a sum sufficient to reimburse it for any transfer tax incidental thereto. The Company shall pay all Transfer Agent fees required for same-day processing of any Notice of Exercise and all fees to the Depository Trust Company (or another established clearing corporation performing similar functions) required for same-day electronic delivery of the Warrant Shares.
(vii) Closing of Books. The Company will not close its stockholder books or records in any manner which prevents the timely exercise of this Warrant, pursuant to the terms hereof.
(e) Holder’s Exercise Limitations. The Company shall not effect any exercise of this Warrant, and a Holder shall not have the right to exercise any portion of this Warrant, pursuant to Section 2 or otherwise, to the extent that after giving effect to such issuance after exercise as set forth on the applicable Notice of Exercise, the Holder (together with (i) the Holder’s Affiliates, (ii) any other Persons acting as a group together with the Holder or any of the Holder’s Affiliates, and (iii) any other Persons whose beneficial ownership of the shares of Common Stock would or could be aggregated with the Holder’s for purposes of Section 13(d) of the Exchange Act (such Persons, “Attribution Parties”)), would beneficially own in excess of the Beneficial Ownership Limitation (as defined below). For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by the Holder and its Affiliates and Attribution Parties shall include the number of Warrant Shares issuable upon exercise of this Warrant with respect to which such determination is being made, but shall exclude the number of Warrant Shares which would be issuable upon (i) exercise of the remaining, nonexercised portion of this Warrant beneficially owned by the Holder or any of its Affiliates or Attribution Parties and (ii) exercise or conversion of the unexercised or nonconverted portion of any other securities of the Company (including, without limitation, any other Common Stock Equivalents) subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially owned by the Holder or any of its Affiliates or Attribution Parties. Except as set forth in the preceding sentence, for purposes of this Section 2(e), beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder, it being acknowledged by the Holder that the Company is not representing to the Holder that such calculation is in compliance with Section 13(d) of the Exchange Act and the Holder is solely responsible for any schedules required to be filed in accordance therewith. To the extent that the limitation contained in this Section 2(e) applies, the submission of a Notice of Exercise shall be deemed to be the Holder’s determination of whether this Warrant is exercisable (in relation to other securities owned by the Holder together with any Affiliates and Attribution Parties) and of which portion of this Warrant is exercisable, in each case subject to the Beneficial Ownership Limitation. In addition, a determination as to any group status as contemplated above shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. For purposes of this Section 2(e), in determining the number of outstanding shares of Common Stock, a Holder may rely on the number of outstanding shares of Common Stock as reflected in (A) the Company’s most recent periodic or annual report filed with the Commission, as the case may be, (B) a more recent public announcement by the Company or (C) a more recent written notice by the Company or the Transfer Agent setting forth the number of shares of Common Stock outstanding. Upon the written or oral request of a Holder, the Company shall within one (1) Trading Day confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including this Warrant, by the Holder or its Affiliates or Attribution Parties since the date as of which such number of outstanding shares of Common Stock was reported. The “Beneficial Ownership Limitation” shall be 4.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of Warrant Shares issuable upon exercise of this Warrant. The Holder, upon notice to the Company, may increase or decrease the Beneficial Ownership Limitation provisions of this Section 2(e), provided that the Beneficial Ownership Limitation in no event exceeds 19.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of Warrant Shares upon exercise of this Warrant held by the Holder and the provisions of this Section 2(e) shall continue to apply. Any increase in the Beneficial Ownership Limitation will not be effective until the 61st day after such notice is delivered to the Company. In the event that the issuance of Common Stock to the Holder upon exercise of this Warrant results in the Holder, together with the Attribution Parties, collectively being deemed to beneficially own, in the aggregate, more than the Beneficial Ownership Limitation, the number of shares so issued by which the aggregate Beneficial Ownership of the Holder and its Attribution Parties exceeds such limitation (the “Excess Shares”) shall be deemed null and void and shall be cancelled ab initio, and the Holder and/or the Attribution Parties shall not have the power to vote or to transfer the Excess Shares. As soon as reasonably practicable after the issuance of the Excess Shares has been deemed null and void, the Company shall return to the Holder the exercise price paid by the Holder for the Excess Shares and the Holder shall return the Excess Shares to the Company. The provisions of this paragraph shall not be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 2(e) to correct this paragraph (or any portion hereof) which may be defective or inconsistent with the intended Beneficial Ownership Limitation herein contained or to make changes or supplements necessary or desirable to properly give effect to such limitation. The limitations contained in this paragraph shall apply to a successor holder of this Warrant. If the Warrant is unexercisable as a result of the Holder’s Beneficial Ownership Limitation, no alternative consideration is owing to the Holder, provided that the Holder shall continue to have the right, subject to the conditions set out herein, to exercise any unexercised portion of the Warrant which was otherwise exercisable and all other rights, powers and remedies hereunder shall remain in full force and effect.
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(f) Notwithstanding anything in this Warrant to the contrary, and in addition to the beneficial ownership limitations described above, the Company and the Holder agree that no shares of Common Stock may be issued to Holder under this Warrant unless (i) if required, stockholder approval is obtained in accordance with Nasdaq Listing Rules 5635(c), or (ii) the Common Stock is not listed for quotation on Nasdaq or another exchange with similar approval requirements.
Section 3. Certain Adjustments.
(a) Stock Dividends and Splits. If the Company, at any time while this Warrant is outstanding: (i) pays a stock dividend or otherwise makes a distribution or distributions on shares of its Common Stock or any other equity or equity equivalent securities payable in shares of Common Stock (which, for avoidance of doubt, shall not include any Warrant Shares issued by the Company upon exercise of this Warrant), (ii) subdivides outstanding shares of Common Stock into a larger number of shares or (iii) combines (including by way of reverse stock split) outstanding shares of Common Stock into a smaller number of shares, then in each case the Exercise Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding immediately before such event and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event, and the number of shares issuable upon exercise of this Warrant shall be proportionately adjusted such that the aggregate Exercise Price of this Warrant shall remain unchanged. Any adjustment made pursuant to this Section 3(a) shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, or combination or re-classification.
(b) Subsequent Rights Offerings. In addition to any adjustments pursuant to Section 3(a) above, if at any time the Company grants, issues or sells any Common Stock Equivalents or rights to purchase stock, warrants, securities or other property pro rata to the record holders of any class of shares of Common Stock (the “Purchase Rights”), then the Holder will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder could have acquired if the Holder had held the number of shares of Common Stock acquirable upon complete exercise of this Warrant (without regard to any limitations on exercise hereof, including without limitation, the Beneficial Ownership Limitation) immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights (provided, however, that, to the extent that the Holder’s right to participate in any such Purchase Right would result in the Holder exceeding the Beneficial Ownership Limitation, then the Holder shall not be entitled to participate in such Purchase Right to such extent (or beneficial ownership of such shares of Common Stock as a result of such Purchase Right to such extent) and such Purchase Right to such extent shall be held in abeyance for the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding the Beneficial Ownership Limitation).
(c) Pro Rata Distributions. During such time as this Warrant is outstanding, if the Company shall declare or make any dividend or other distribution of its assets (or rights to acquire its assets) to holders of shares of Common Stock, by way of return of capital or otherwise (including, without limitation, any distribution of cash, stock or other securities, property or options by way of a dividend, spin off or other similar transaction) (a “Distribution”), at any time after the issuance of this Warrant, then, in each such case, the Holder shall be entitled to participate in such Distribution to the same extent that the Holder would have participated therein if the Holder had held the number of shares of Common Stock acquirable upon complete exercise of this Warrant (without regard to any limitations on exercise hereof, including without limitation, the Beneficial Ownership Limitation) immediately before the date of which a record is taken for such Distribution, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined for the participation in such Distribution (provided, however, that, to the extent that the Holder’s right to participate in any such Distribution would result in the Holder exceeding the Beneficial Ownership Limitation, then the Holder shall not be entitled to participate in such Distribution to such extent (or in the beneficial ownership of any shares of Common Stock as a result of such Distribution to such extent) and the portion of such Distribution shall be held in abeyance for the benefit of the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding the Beneficial Ownership Limitation).
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(d) Fundamental Transaction. If, at any time while this Warrant is outstanding, (i) the Company, directly or indirectly, in one or more related transactions effects any merger or consolidation of the Company with or into another Person in which the Company is not the surviving entity (other than a reincorporation in a different state), (ii) the Company or any subsidiary, directly or indirectly, effects any sale, lease, license, assignment, transfer, conveyance or other disposition of all or substantially all of the assets of the Company and its subsidiaries, taken as a whole, in one or a series of related transactions, (iii) any, direct or indirect, purchase offer, tender offer or exchange offer (whether by the Company or another Person) is completed pursuant to which holders of Common Stock are permitted to sell, tender or exchange their shares for other securities, cash or property and has been accepted by the holders of 50% or more of the outstanding shares of the aggregate voting power of all classes of equity of the Company, (iv) the Company, directly or indirectly, in one or more related transactions effects any reclassification, reorganization or recapitalization of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property, or (v) the Company, directly or indirectly, in one or more related transactions consummates a stock or share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off, merger or scheme of arrangement) with another Person or group of Persons whereby such other Person or group acquires more than 50% of the outstanding shares of the aggregate voting power of all classes of equity of the Company (each a “Fundamental Transaction”), then, upon any subsequent exercise of this Warrant, the Holder shall have the right to receive, for each Warrant Share that would have been issuable upon such exercise immediately prior to the occurrence of such Fundamental Transaction, at the option of the Holder (without regard to any limitation in Section 2(e) on the exercise of this Warrant (the “Fundamental Transaction Rights”)), the number of shares of Common Stock of the successor or acquiring corporation or of the Company, if it is the surviving corporation, and any additional consideration (the “Alternate Consideration”) receivable as a result of such Fundamental Transaction by a holder of the number of shares of Common Stock for which this Warrant is exercisable immediately prior to such Fundamental Transaction (without regard to any limitation in Section 2(e) on the exercise of this Warrant). For purposes of any such exercise, the determination of the Exercise Price shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one share of Common Stock in such Fundamental Transaction, and the Company shall apportion the Exercise Price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration. If holders of Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate Consideration it receives upon any exercise of this Warrant following such Fundamental Transaction. The Company shall cause any successor entity in a Fundamental Transaction in which the Company is not the survivor (the “Successor Entity”) to assume in writing all of the obligations of the Company under this Warrant in accordance with the provisions of this Section 3(d) pursuant to written agreements in form and substance reasonably satisfactory to the Holder prior to such Fundamental Transaction and shall, at the option of the Holder, deliver to the Holder in exchange for this Warrant a security of the Successor Entity evidenced by a written instrument substantially similar in form and substance to this Warrant which is exercisable for a corresponding number of shares of capital stock of such Successor Entity (or its parent entity) equivalent to the shares of Common Stock acquirable and receivable upon exercise of this Warrant (without regard to any limitations on the exercise of this Warrant) prior to such Fundamental Transaction, and with an exercise price which applies the exercise price hereunder to such shares of capital stock (but taking into account the relative value of the shares of Common Stock pursuant to such Fundamental Transaction and the value of such shares of capital stock, such number of shares of capital stock and such exercise price being for the purpose of protecting the economic value of this Warrant immediately prior to the consummation of such Fundamental Transaction), and which is reasonably satisfactory in form and substance to the Holder. Upon the occurrence of any such Fundamental Transaction, the Successor Entity shall succeed to, and be substituted for (so that from and after the date of such Fundamental Transaction, the provisions of this Warrant referring to the “Company” shall refer instead to the Successor Entity), and may exercise every right and power of the Company and shall assume all of the obligations of the Company under this Warrant with the same effect as if such Successor Entity had been named as the Company herein, provided, however, that to the extent that the Holder’s right to participate in any such Fundamental Transaction Rights would result in the Holder and its Attribution Parties, collectively, beneficially owning in excess of the Beneficial Ownership Limitation of the Common Stock that would be issued and outstanding following receipt of such Fundamental Transaction Rights (such excess amount of Common Stock, the “Excess Fundamental Transaction Rights”), then the Holder shall not be entitled to participate in such Fundamental Transaction Rights to the extent of the Excess Fundamental Transaction Rights (and shall not have the right to acquire such Excess Fundamental Transaction Rights). The Excess Fundamental Transaction Rights shall be held in abeyance for the benefit of the Holder until such time or times as (1) its right to receive some or all of the Excess Fundamental Transaction Rights would not result in the Holder and its Attribution Parties beneficially owning Common Stock in excess of the Beneficial Ownership Limitation and (2) the Holder so certifies in writing to the Company and specifies the number of shares of Common Stock it is able to receive without exceeding the Beneficial Ownership Limitation, at which time or times the Holder shall be granted that portion of the Excess Fundamental Transaction Rights (and any Excess Fundamental Transaction Rights granted, issued or sold on such initial Fundamental Transaction Rights or on any subsequent Fundamental Transaction Rights to be held similarly in abeyance) to the same extent as if there had been no such limitation. For the avoidance of doubt, the Holder shall be entitled to the benefits of the provisions of this Section 3(d) regardless of whether the Company has sufficient authorized shares of Common Stock for the issuance of Warrant Shares.
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(e) [Reserved].
(f) Calculations. All calculations under this Section 3 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be. For purposes of this Section 3, the number of shares of Common Stock deemed to be issued and outstanding as of a given date shall be the sum of the number of shares of Common Stock (excluding treasury shares, if any) issued and outstanding.
(g) Notice to Holder.
(i) Adjustment to Exercise Price. Whenever the Exercise Price is adjusted pursuant to any provision of this Section 3, the Company shall promptly deliver to the Holder by facsimile or email a notice setting forth the Exercise Price after such adjustment and any resulting adjustment to the number of Warrant Shares and setting forth a brief statement of the facts requiring such adjustment.
(ii) Notice to Allow Exercise by Holder. If, while the Warrant is outstanding, (A) the Company declares a dividend (or any other distribution in whatever form) on the Common Stock, (B) the Company declares a special nonrecurring cash dividend on, or a redemption of, the shares of Common Stock, (C) the Company authorizes the granting to all holders of the shares of Common Stock rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights, (D) the approval of any shareholders of the Company is required in connection with a Fundamental Transaction, or (E) the Company authorizes the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company, then, in each case, the Company shall cause to be delivered by facsimile or email to the Holder at its last facsimile number or email address as it shall appear upon the Warrant Register (as defined below) of the Company, at least 20 calendar days prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of the Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date as of which it is expected that holders of the Common Stock of record shall be entitled to exchange their shares of Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or share exchange; provided that the failure to deliver such notice or any defect therein or in the delivery thereof shall not affect the validity of the corporate action required to be specified in such notice. To the extent that any notice provided in this Warrant constitutes, or contains, material, non-public information regarding the Company or any of the subsidiaries, the Company shall simultaneously file such notice with the Commission pursuant to a Current Report on Form 8-K. The Holder shall remain entitled to exercise this Warrant during the period commencing on the date of such notice to the effective date of the event triggering such notice except as may otherwise be expressly set forth herein.
(iii) Voluntary Adjustment by the Company. Subject to the rules and regulations of the Trading Market, the Company may at any time during the term of this Warrant reduce the then current Exercise Price to any amount and for any period of time deemed appropriate by the board of directors of the Company.
Section 4. Transfer of Warrant.
(a) Transferability. Subject to compliance with any applicable securities laws, and the conditions set forth in Section 4(d) hereof, each Warrant and all rights hereunder (including, without limitation, any registration rights) are transferable, in whole or in part, only with respect to the vested portion of a Warrant and upon surrender of this Warrant at the principal office of the Company or its designated agent, together with a written assignment of the relevant portion of the Warrant substantially in the form attached hereto duly executed by the Holder or its agent or attorney and funds sufficient to pay any transfer taxes payable upon the making of such transfer. Upon such surrender and, if required, such payment, the Company shall execute and deliver a new Warrant or Warrants in the name of the assignee or assignees, as applicable, and in the denomination or denominations specified in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant not so assigned, and this Warrant shall promptly be cancelled. Notwithstanding anything herein to the contrary, the Holder shall not be required to physically surrender this Warrant to the Company unless the Holder has assigned this Warrant in full, in which case the Holder shall surrender this Warrant to the Company within three (3) Trading Days of the date on which the Holder delivers an assignment form to the Company assigning this Warrant in full. The Warrant, if properly assigned in accordance herewith, may be exercised by a new holder for the purchase of Warrant Shares without having a new Warrant issued.
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(b) New Warrants. Subject to compliance with applicable securities laws, this Warrant may be divided or combined with other Warrants upon presentation hereof at the aforesaid office of the Company, together with a written notice specifying the names and denominations in which new Warrants are to be issued, signed by the Holder or its agent or attorney. Subject to compliance with Section 4(a), as to any transfer which may be involved in such division or combination, the Company shall execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided or combined in accordance with such notice. All Warrants issued on transfers or exchanges shall be dated the original Issue Date of this Warrant and shall be identical with this Warrant except as to the number of Warrant Shares issuable pursuant thereto.
(c) Warrant Register. The Company shall register this Warrant, upon records to be maintained by the Company for that purpose (the “Warrant Register”), in the name of the record Holder hereof from time to time. The Company may deem and treat the registered Holder of this Warrant as the absolute owner hereof for the purpose of any exercise hereof or any distribution to the Holder, and for all other purposes, absent actual notice to the contrary.
(d) Transfer Restrictions.
(i) If, at the time of the surrender of this Warrant in connection with any transfer of this Warrant, the transfer of this Warrant shall not be either (i) registered pursuant to an effective registration statement under the Securities Act and under applicable state securities or blue sky laws or (ii) eligible for resale without volume or manner-of-sale restrictions or current public information requirements pursuant to Rule 144, the Company may, as a condition of allowing such transfer, require that the Holder or transferee of this Warrant, as the case may be, execute a written agreement pursuant to which such transferee agrees to be bound, solely with respect to the transferred Warrant, by those provisions of this Warrant, as if such transferee were an original holder hereunder (other than with respect to any warrant transferred pursuant to an effective registration statement).
(ii) Notwithstanding the above, in connection with any transfer of this Warrant or Warrant Shares other than pursuant to an effective registration statement or Rule 144, to the Company or to an Affiliate of a Holder or in connection with a pledge as contemplated in Section 4(d)(iii), the Company may require the transferor thereof to provide to the Company an opinion of counsel selected by the transferor and reasonably acceptable to the Company, the form and substance of which opinion shall be reasonably satisfactory to the Company, to the effect that such transfer does not require registration under the Securities Act. As a condition of transfer (other than pursuant to an effective registration statement or Rule 144), any such transferee shall agree in writing to be bound by the terms of this Warrant and shall have the rights and obligations of a Holder under this Warrant.
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(iii) The Company acknowledges and agrees that a Holder may from time to time pledge pursuant to a bona fide margin agreement with a registered broker-dealer or grant a security interest in this Warrant or Warrant Shares to a financial institution that is an “accredited investor” as defined in Rule 501(a) of Regulation D under the Securities Act and, if required under the terms of such arrangement, such Holder may transfer pledged or secured Warrants or Warrant Shares to the pledgees or secured parties. Such a pledge or transfer would not be subject to approval of the Company and no legal opinion of legal counsel of the pledgee, secured party or pledgor shall be required in connection therewith. Further, no notice shall be required of such pledge. At the appropriate Holder’s expense, the Company will execute and deliver such reasonable documentation as a pledgee or secured party of the Warrants or Warrant Shares may reasonably request in connection with a pledge or transfer of the Warrants or Warrant Shares, including, if the Warrants or Warrant Shares are subject to registration pursuant to any registration rights agreement, the preparation and filing of any required prospectus supplement under Rule 424(b)(3) under the Securities Act or other applicable provision of the Securities Act to appropriately amend the list of selling stockholders thereunder.
(iv) Certificates evidencing the Warrant Shares shall not contain any legend (including the legend set forth on the front page of this Warrant), (i) while a registration statement covering the resale of such security is effective under the Securities Act, (ii) following any sale of such Warrant Shares pursuant to Rule 144 and the Company is then in compliance with the current public information required under Rule 144, (iii) if such Warrant Shares are may be sold under Rule 144, without the requirement for the Company to be in compliance with the current public information required under Rule 144 as to such Warrant Shares and without volume or manner-of-sale restrictions, or (iv) if such legend is not required under applicable requirements of the Securities Act (including judicial interpretations and pronouncements issued by the staff of the Commission). The Company shall cause its counsel to issue a legal opinion to the Transfer Agent or the Holder promptly after the Effective Date if required by the Transfer Agent to effect the removal of the legend hereunder, or if requested by a Holder, respectively. If all or any portion of a Warrant is exercised at a time when there is an effective registration statement to cover the resale of the Warrant Shares, or if the Warrant Shares may be sold under Rule 144 and the Company is then in compliance with the current public information required under Rule 144, or if the Warrant Shares may be sold under Rule 144 without the requirement for the Company to be in compliance with the current public information required under Rule 144 as to such Warrant Shares or if such legend is not otherwise required under applicable requirements of the Securities Act (including judicial interpretations and pronouncements issued by the staff of the Commission), then such Warrant Shares shall be issued free of all legends. The Company shall cause its counsel to issue a legal opinion to the Transfer Agent promptly after the Effective Date if required by the Transfer Agent to effect the removal of the legend hereunder or if reasonably required by a Holder. The Company agrees that following the Effective Date or at such time as such legend is no longer required under this Section 4(d)(iv), it will, no later than the earlier of (i) two (2) Trading Days and (ii) the number of Trading Days comprising the Standard Settlement Period (as defined below) following the delivery by a Holder to the Company or the Transfer Agent of a certificate representing the Warrant Shares, as the case may be, issued with a restrictive legend (such date, the “Legend Removal Date”), deliver or cause to be delivered to such Holder a certificate representing such shares that is free from all restrictive and other legends. The Company may not make any notation on its records or give instructions to the Transfer Agent that enlarge the restrictions on transfer set forth in this Section 4(d)(iv). Certificates for Warrant Shares subject to legend removal hereunder shall be transmitted by the Transfer Agent to the Holder by crediting the account of the Holder’s prime broker with The Depository Trust Company as directed by such Holder. As used herein, “Standard Settlement Period” means the standard settlement period, expressed in a number of Trading Days, on the Company’s primary Trading Market with respect to the Common Stock as in effect on the date of delivery of a certificate representing Warrant Shares, as the case may be, issued with a restrictive legend. The Holder shall provide the Company written notice of a removal request (the “Request Notice”) at least two (2) Trading Days prior to delivery of the legended Share certificate.
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(v) In addition to such Holder’s other available remedies, the Company shall pay to a Holder, in cash, (i) as partial liquidated damages and not as a penalty, for each $1,000 of Warrant Shares (based on the VWAP of the Common Stock on the date such Warrant Shares are submitted to the Transfer Agent) delivered for removal of the restrictive legend and subject to Section 4(d)(iv), $10 per Trading Day (increasing to $20 per Trading Day five (5) Trading Days after such damages have begun to accrue) for each Trading Day after the Legend Removal Date (or, if later, four (4) days after the Request Notice date) until such certificate is delivered without a legend and (ii) if the Company fails to (a) issue and deliver (or cause to be delivered) to a Holder by the Legend Removal Date a certificate representing the Warrant Shares so delivered to the Company by such Holder that is free from all restrictive and other legends and (b) if after the Legend Removal Date such Holder purchases (in an open market transaction or otherwise) shares of Common Stock to deliver in satisfaction of a sale by such Holder of all or any portion of the number of shares of Common Stock, or a sale of a number of shares of Common Stock equal to all or any portion of the number of shares of Common Stock that such Holder anticipated receiving from the Company without any restrictive legend, then, an amount equal to the excess of such Holder’s total purchase price (including brokerage commissions and other out-of-pocket expenses, if any) for the shares of Common Stock so purchased (including brokerage commissions and other out-of-pocket expenses, if any) over the product of (A) such number of Warrant Shares that the Company was required to deliver to such Holder by the Legend Removal Date multiplied by (B) the lowest closing sale price of the Common Stock on any Trading Day during the period commencing on the date of the delivery by such Holder to the Company of the applicable Warrant Shares and ending on the date of such delivery and payment under this clause (ii).
(vi) The Holder agrees with the Company that such Holder will sell any Warrants or Warrant Shares pursuant to either the registration requirements of the Securities Act, including any applicable prospectus delivery requirements, or an exemption therefrom, and that if any Warrants or Warrant Shares are sold pursuant to a registration statement, they will be sold in compliance with the plan of distribution set forth therein, and acknowledges that the removal of the restrictive legend from certificates representing such Warrant Shares as set forth in this Section 4 is predicated upon the Company’s reliance upon this understanding.
Section 5. Miscellaneous.
(a) No Rights as Stockholder Until Exercise; No Settlement in Cash. This Warrant does not entitle the Holder to any voting rights, dividends or other rights as a stockholder of the Company prior to the exercise hereof as set forth in Section 2(d)(i), except as expressly set forth in Section 3. Without limiting any rights of a Holder to receive Warrant Shares on a “cashless exercise” pursuant to Section 2(c) or to receive cash payments pursuant to Section 2(d)(i) and Section 2(d)(iv) herein, in no event shall the Company be required to net cash settle an exercise of this Warrant.
(b) Loss, Theft, Destruction or Mutilation of Warrant. The Company covenants that upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant or any stock certificate relating to the Warrant Shares, and in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to it (which, in the case of the Warrant, shall not include the posting of any bond), and upon surrender and cancellation of such Warrant or stock certificate, if mutilated, the Company will make and deliver a new Warrant or stock certificate of like tenor and dated as of such cancellation, in lieu of such Warrant or stock certificate.
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(c) Saturdays, Sundays, Holidays, etc. If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall not be a Trading Day, then such action may be taken or such right may be exercised on the next succeeding Trading Day.
(d) Authorized Shares. The Company covenants that, during the period the Warrant is outstanding, it will reserve from its authorized and unissued shares of Common Stock and keep available a sufficient number of authorized but unissued shares to provide for the issuance of the Warrant Shares upon the exercise of any purchase rights under this Warrant. The Company further covenants that its issuance of this Warrant shall constitute full authority to its officers who are charged with the duty of issuing the necessary Warrant Shares upon the exercise of the purchase rights under this Warrant. The Company will take all such reasonable action as may be necessary to assure that such Warrant Shares may be issued and delivered as provided herein without violation of any applicable law or regulation, or of any requirements of the Trading Market upon which the Common Stock may be listed. The Company covenants that all Warrant Shares which may be issued and delivered upon the exercise of the purchase rights represented by this Warrant will, upon exercise of the purchase rights represented by this Warrant and payment for such Warrant Shares in accordance herewith, be duly authorized, validly issued, fully paid and nonassessable and free from all taxes, liens and charges created by the Company in respect of the issue thereof (other than taxes in respect of any transfer occurring contemporaneously with such issue). Except and to the extent as waived or consented to by the Holder, the Company shall not by any action, including, without limitation, amending its certificate of incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate to protect the rights of Holder as set forth in this Warrant against impairment. Without limiting the generality of the foregoing, the Company will (i) take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable shares of Common Stock upon the exercise of this Warrant and (ii) use commercially reasonable efforts to obtain all such authorizations, exemptions or consents from any public regulatory body having jurisdiction thereof, as may be, necessary to enable the Company to perform its obligations under this Warrant. Before taking any action which would result in an adjustment in the number of Warrant Shares for which this Warrant is exercisable or in the Exercise Price, the Company shall obtain all such authorizations or exemptions thereof, or consents thereto, as may be necessary from any public regulatory body or bodies having jurisdiction thereof.
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(e) Governing Law. All questions concerning the construction, validity, enforcement and interpretation of this Warrant shall be governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the principles of conflicts of law thereof that would require the application of the laws of any other jurisdiction. Each party agrees that all legal proceedings concerning the interpretations, enforcement and defense of the transactions contemplated by this Warrant (whether brought against a party hereto or their respective affiliates, directors, officers, shareholders, partners, members, employees or agents) shall be commenced exclusively in the state and federal courts sitting in the City of New York. Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in the City of New York, Borough of Manhattan for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is improper or is an inconvenient venue for such proceeding. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Warrant and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law. If either party shall commence an action, suit or proceeding to enforce any provisions of this Warrant, the prevailing party in such action, suit or proceeding shall be reimbursed by the other party for their reasonable attorneys’ fees and other costs and expenses incurred with the investigation, preparation and prosecution of such action or proceeding.
(f) Restrictions. The Holder acknowledges that the Warrant Shares acquired upon the exercise of this Warrant, if not registered, and the Holder does not utilize cashless exercise, will have restrictions upon resale imposed by state and federal securities laws, and in such case, by the acceptance hereof, represents and warrants that the Holder will acquire such Warrant Shares issuable upon such exercise for its own account and not with a view to or for distributing or reselling Warrant Shares or any part thereof in violation of the Securities Act or any applicable state securities law.
(g) Nonwaiver and Expenses. No course of dealing or any delay or failure to exercise any right hereunder on the part of Holder shall operate as a waiver of such right or otherwise prejudice the Holder’s rights, powers or remedies. Without limiting any other provision of this Warrant, if the Company willfully and knowingly fails to comply with any provision of this Warrant, which results in any material damages to the Holder, the Company shall pay to the Holder such amounts as shall be sufficient to cover any costs and expenses including, but not limited to, reasonable attorneys’ fees, including those of appellate proceedings, incurred by the Holder in collecting any amounts due pursuant hereto or in otherwise enforcing any of its rights, powers or remedies hereunder.
(h) Notices. Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be in writing and shall be deemed given and effective on the earliest of: (a) the time of transmission, if such notice or communication is delivered email attachment at the email address as set forth on the signature pages attached hereto at or prior to 5:30 p.m. (New York City time) on a Trading Day, (b) the next Trading Day after the time of transmission, if such notice or communication is delivered via email attachment at the email address as set forth on the signature pages attached hereto on a day that is not a Trading Day or later than 5:30 p.m. (New York City time) on any Trading Day, (c) the second (2nd) Trading Day following the date of mailing, if sent by U.S. nationally recognized overnight courier service or (d) upon actual receipt by the party to whom such notice is required to be given. The address for such notices and communications shall be as set forth on the signature pages attached hereto. To the extent that any notice provided constitutes, or contains material, non-public information regarding the Company, the Company shall simultaneously file such notice with the Commission pursuant to a Current Report on Form 8-K.
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(i) Limitation of Liability. No provision hereof, in the absence of any affirmative action by the Holder to exercise this Warrant to purchase Warrant Shares, and no enumeration herein of the rights or privileges of the Holder, shall give rise to any liability of the Holder for the purchase price of any Common Stock or as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company.
(j) Remedies. The Holder, in addition to being entitled to exercise all rights granted by law, including recovery of damages, will be entitled to specific performance of its rights under this Warrant. The Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Warrant and hereby agrees to waive and not to assert the defense in any action for specific performance that a remedy at law would be adequate.
(k) Successors and Assigns. Subject to applicable securities laws, this Warrant and the rights and obligations evidenced hereby shall inure to the benefit of and be binding upon the successors and permitted assigns of the Company and the successors and permitted assigns of Holder. The provisions of this Warrant are intended to be for the benefit of any Holder from time to time of this Warrant and shall be enforceable by the Holder or holder of Warrant Shares.
(l) Amendment. This Warrant may be modified or amended or the provisions hereof waived with the written consent of the Company and the Holder.
(m) Severability. Wherever possible, each provision of this Warrant shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Warrant shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provisions or the remaining provisions of this Warrant.
(n) Headings. The headings used in this Warrant are for the convenience of reference only and shall not, for any purpose, be deemed a part of this Warrant.
(o) Execution and Counterparts. This Warrant may be executed in two or more counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party, it being understood that both parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission or by e-mail delivery of a “.pdf” format data file or Docusign, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or “.pdf” or Docusign signature page were an original thereof.
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(Signature Page Follows)
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IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its officer thereunto duly authorized as of the date first above indicated.
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EXHIBIT A
NOTICE OF EXERCISE
TO: SUI GROUP HOLDINGS LIMITED
(1) The undersigned hereby elects to purchase _________________ Warrant Shares of the Company pursuant to the terms of the attached Warrant (only if exercised in full) from Tranche(s)_________________, and tenders herewith payment of the exercise price in full, together with all applicable transfer taxes, if any.
(2) Payment shall take the form of (check applicable box):
☐ in lawful money of the United States; or
☐ if permitted the cancellation of such number of Warrant Shares as is necessary, in accordance with the formula set forth in subsection 2(c), to exercise this Warrant with respect to the maximum number of Warrant Shares purchasable pursuant to the cashless exercise procedure set forth in subsection 2(c).
(3) Please issue said Warrant Shares in the name of the undersigned or in such other name as is specified below:
The Warrant Shares shall be delivered to the following DWAC Account Number:
(4) Accredited Investor. The undersigned is an “accredited investor” as defined in Rule 501(a) of Regulation D promulgated under the Securities Act of 1933, as amended.
[SIGNATURE OF HOLDER]
Name of Investing Entity:
Signature of Authorized Signatory of Investing Entity:
Name of Authorized Signatory:
Title of Authorized Signatory:
Date:
Signature Page to Liszt Warrant
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EXHIBIT B
ASSIGNMENT FORM
(To assign the foregoing Warrant, execute this form and supply required information. Do not use this form to exercise the Warrant to purchase shares.)
FOR VALUE RECEIVED, [the right to purchase _________________ Warrant Shares of the Company pursuant to the terms of the attached Warrant from Tranche(s) = _________________ is] / [the attached Warrant and all rights evidenced thereby are] hereby assigned to
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EXHIBIT 31.1
SECTION 302 CERTIFICATION
I, Douglas M. Polinsky, certify that:
| 1. | I have reviewed this Quarterly Report on Form 10-Q of Sui Group Holdings Limited; | |
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| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | |
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| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; | |
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| 4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: | |
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| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
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| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
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| (c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
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| (d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
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| 5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): | |
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| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
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| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Date: August 6, 2026 | /s/ Douglas Polinsky |
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| Chief Executive Officer |
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EXHIBIT 31.2
SECTION 302 CERTIFICATION
I, Joseph A. Geraci, II, certify that:
| 1. | I have reviewed this Quarterly Report on Form 10-Q of Sui Group Holdings Limited; | |
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| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | |
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| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; | |
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| 4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: | |
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| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
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| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
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| (c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
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| (d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
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| 5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): | |
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| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
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| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Date: August 6, 2026 | /s/ Joseph Geraci |
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| Chief Financial Officer |
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EXHIBIT 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. §1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Sui Group Holdings Limited (the “Company”) on Form 10-Q for the period ended June 30, 2026, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Douglas M. Polinsky, Chief Executive Officer of the Company, and I, Joseph A. Geraci, II, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
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| 1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
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| 2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
| /s/ Douglas Polinsky |
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| Douglas M. Polinsky Chief Executive Officer |
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| August 6, 2026 |
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| /s/ Joseph Geraci |
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| Joseph A. Geraci, II Chief Financial Officer
August 6, 2026 |
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