SUI Group Holdings Ltd.
For the period ended Dec 31, 2025. Filed Feb 27, 2026.
View on SEC.govAbout this filing
A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2025 · Filed Feb 27, 2026
SUIG$0.96-3.0%Stored close · as of Nov 9, 2026
What changed in Risk Factors?
Read the current filingPrevious report: 10-K
Period ended 2024-12-31; filed 2025-03-10.
0001654954-25-002487
Item 1A. Risk FactorsCurrent report: 10-K
Period ended 2025-12-31; filed 2026-02-27.
0001654954-26-001672
ITEM 1A. RISK FACTORSThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 58 previous paragraphs and 146 current paragraphs.
17 unchanged; 29 reworded; 99 added; 12 removed; 0 previous and 1 current paragraphs rearranged.
Tables are not compared: 5 previous and 11 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (99)
Current report
Our financial results and the market price of our Common Stock may be affected by the price of SUI.
Current report
As part of our capital allocation strategy for assets that are not required to provide working capital for our ongoing operations, we have invested and will continue to invest in SUI. As of February 23, 2026, we held an aggregate of 105,407,044 SUI and loan receivables of 2,961,550 SUI, which we acquired for an aggregate purchase price of approximately $386.5 million, exclusive of fees and expenses, at an average price of $3.56 per SUI. With 80,896,554 million fully adjusted shares issued and outstanding (including unexercised Pre-Funded Warrants) as of February 23, 2026, the Company has grown to approximately 1.34 SUI per share of Common Stock, or $1.17 per share of Common Stock. Our SUI holding (including SUI loan receivables) represents approximately 88.8% of our digital asset holdings, with the remainder being USDC stablecoins at approximately 1.8% and suiUSDe stablecoins approximately 9.4%. The price of SUI has historically been subject to dramatic price fluctuations and is highly volatile. SUI is a highly volatile asset that has traded between $4.33 and $0.85 per SUI on Coinbase in the 12 months preceding February 23, 2026. More recently, during the fourth calendar quarter of 2025, SUI traded between approximately $3.62 and $1.35 per SUI. Moreover, digital assets, such as SUI, are relatively novel. SUI’s initial coin offering took place on April 20, 2023, and Sui’s Mainnet (blockchain protocol) was launched on May 3, 2023. The application of securities laws and other regulations to such assets is unclear in many respects. It is possible that regulators may interpret laws in a manner that adversely affects the liquidity or value of SUI.
Current report
Any decrease in the fair value of SUI below our carrying value for such assets could require us to incur a loss due to the decrease in fair market value, and such charge could be material to our financial results for the applicable reporting period, which may create significant volatility in our reported earnings. Any decrease in reported earnings or increased volatility of such earnings could have a material adverse effect on the market price of our Common Stock. In addition, the application of generally accepted accounting principles in the United States, with respect to SUI, may change in the future and could have a material adverse effect on our financial results and the market price of our Common Stock.
Current report
In addition, if investors view the value of our Common Stock as dependent upon or linked to the value or change in the value of our SUI holdings, the price of SUI may significantly influence the market price of our Common Stock.
Current report
Our SUI treasury strategy has not been tested over an extended period of time or under different market conditions.
Current report
We recently undertook a strategic shift and launched the SUI treasury strategy. We are continually examining the risks and rewards of our strategy to acquire and hold SUI. This strategy has not been tested over an extended period of time or under different market conditions. If SUI prices were to decrease or our SUI treasury strategy otherwise proves unsuccessful, our financial condition, results of operations, and the market price of our Common Stock would be materially adversely impacted. Additionally, given that our SUI treasury business has been developed and pursued only for a few months prior to the Annual Report, investors have a relatively limited means to evaluate our performance, its evolution, and the likelihood of our future success.
Current report
The prices of digital currencies, including SUI, are highly volatile and may be influenced by regulatory, commercial, and technical factors that are highly uncertain, and fluctuations in the price of SUI are likely to influence our financial results and the market price of our Common Stock.
Current report
Fluctuations in the trading prices of digital assets are likely to impact our financial results and the market price of our Common Stock. Our financial results and the market price of our Common Stock and our business and financial condition could be negatively impacted if the price of SUI decreased substantially, including as a result of:
Current report
The growth of the digital assets industry in general, and the use and acceptance of SUI in particular, as well as other digital assets, may also impact the price of our digital asset holdings and is subject to a high degree of uncertainty. The pace of worldwide growth in the adoption and use of digital assets, and SUI in particular, may depend, for instance, on public familiarity with digital assets, ease of buying and accessing the digital assets, institutional and consumer demand for SUI, and the availability and popularity of alternatives to bitcoin. Even if growth in bitcoin adoption occurs in the near or medium-term, there is no assurance that bitcoin usage will continue to grow over the long-term or that such growth will lead to a growth of the adoption of SUI.
Current report
Because SUI has no physical existence beyond the record of transactions on their respective blockchains, a variety of technical factors related to the Sui blockchain could also impact the price of SUI. For example, malicious attacks by stakers, inadequate staking fees to incentivize validating of transactions, hard forks of the blockchain into multiple blockchains, and advances in digital computing, algebraic geometry and quantum computing could undercut the integrity of the blockchain and negatively affect the price of our digital asset holdings. The liquidity of SUI may also be reduced and damage to the public perception of SUI may occur, if financial institutions were to deny banking services to businesses that hold digital assets, provide digital asset-related services or accept digital assets as payment, which could also decrease the price of our digital asset holdings.
Current report
The trading prices of many digital assets, including SUI, have experienced extreme volatility in recent periods and may continue to do so. Extreme volatility in the future, including further decline in the trading prices of SUI, could have a material adverse effect on the Company.
Current report
The trading prices of many digital assets, including SUI, have experienced extreme volatility in recent periods and may continue to do so. For instance, there were steep increases in the value of certain digital assets over the course of 2021, and multiple market observers asserted that digital assets were experiencing a “bubble.” These increases were followed by steep drawdowns throughout 2022 in digital asset trading prices. SUI was launched in May 2023, and over the course of 2023 and 2024, prices of digital assets continued to exhibit extreme volatility. SUI reached a low price of $0.3639 in October 2023 and a high price of $5.34 on January 4, 2025. As of February 23, 2026, the price of SUI was $0.88 Like many digital assets, SUI surged in value in its initial trading period, but shortly thereafter saw a decline in price, including as a result of the broader sell-off in cryptocurrency markets following the events of October 10 (described below); the price continues to fluctuate.
Current report
Extreme volatility may persist. The digital asset markets may still be experiencing a bubble or may experience a bubble again in the future. For example, in the first half of 2022, each of Celsius Network, Voyager Digital Ltd., and Three Arrows Capital declared bankruptcy, resulting in a loss of confidence in participants of the digital asset ecosystem and negative publicity surrounding digital assets more broadly. In November 2022, “FTX” one of the largest digital asset exchanges by volume at the time, halted customer withdrawals amid rumors of the company’s liquidity issues and likely insolvency, which were subsequently corroborated by its CEO. Shortly thereafter, FTX’s CEO resigned, and FTX and many of its affiliates filed for bankruptcy in the United States, while other affiliates have entered insolvency, liquidation, or similar proceedings around the globe, following which the U.S. Department of Justice brought criminal fraud and other charges, and the SEC and CFTC brought civil securities and commodities fraud charges, against certain of FTX’s and its affiliates’ senior executives, including its former CEO, who was found guilty of these criminal charges in November 2023. In addition, several other entities in the digital asset industry filed for bankruptcy following FTX’s bankruptcy filing, such as BlockFi Inc. and Genesis Global Capital, LLC (“Genesis”). In response to these events, the digital asset markets have experienced extreme price volatility and other entities in the digital asset industry have been, and may continue to be, negatively affected, further undermining confidence in the digital asset markets. For example, after October 10, 2025, approximately $19 billion of leveraged positions unwound, exceeding even the FTX collapse in 2022. In 2025, within a few weeks, Bitcoin dropped from the low $120,000s into the low $100,000s and continued to drop further in 2026, while Ether and many smaller tokens suffered double‑digit percentage declines, with some altcoins briefly collapsing to near‑zero on thin order books. Data providers such as CoinGlass recorded more than 1.6 million traders liquidated and total futures open interest shrank by tens of billions of dollars in a day, underscoring how concentrated leverage and fragmented liquidity turned a sharp price move into the largest liquidation event in crypto’s history. These events have also negatively impacted the liquidity of the digital asset markets as certain entities affiliated with FTX engaged in significant trading activity. If the liquidity of the digital asset markets continues to be negatively impacted by these events, digital asset prices, including SUI, may continue to experience significant volatility or price declines, and confidence in the digital asset markets may be further undermined. In addition, regulatory and enforcement scrutiny has been significant, including from, among others, the U.S. Department of Justice, the SEC, the CFTC, the White House and Congress, as…
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Current report
The Sui network utilizes the Move programming language. The use of the Move programming language may make SUI more susceptible to volatility because Move is less widely known than more established programming languages, and developers’ lack of experience with Move could deter the adoption and development of SUI, leading to increased price volatility. Extreme volatility in the future, including further declines in the trading prices of SUI, could have a material adverse effect on the Company.
Current report
The value of SUI may be highly volatile and subject to fluctuations due to a number of factors.
Current report
Fluctuations in the price of SUI could adversely affect the Company. The market price of SUI may be highly volatile, and subject to a number of factors, including:
Current report
In addition, there is no assurance that SUI will maintain its value in the intermediate or long term. The value of SUI as represented by the price quoted on sites such as CoinGecko or by the Company’s principal market may also be subject to momentum pricing due to speculation regarding future appreciation in value, leading to greater volatility that could adversely affect the Company. Momentum pricing is typically associated with growth stocks and other assets whose valuation, as determined by the investing public, accounts for future appreciation in value, if any. The Company believes that momentum pricing of SUI has resulted, and may continue to result, in speculation regarding future appreciation in the price of SUI, inflating and making the price of SUI more volatile. As a result, SUI may be more likely to fluctuate in value due to changing investor confidence, which could impact future appreciation or depreciation in the pricing benchmark and could adversely affect the Company.
Current report
The concentration of our SUI holdings could enhance the risks inherent in our SUI treasury strategy.
Current report
As of February 23, 2026, we held an aggregate 105,407,044 SUI and loan receivable of 2,961,550 SUI, which represents approximately 88.8% of our digital asset holdings including SUI loan receivable, with the remainder being USDC stablecoins at approximately 1.8% and suiUSDe stablecoins at approximately 9.4%. Our significant concentration of SUI ownership creates risk that a large holder or consortium of SUI holders could obtain effective control over network governance and consensus mechanisms. If a single entity accumulates a sufficient percentage of total SUI tokens, it could potentially influence transaction validation, protocol upgrades, or fee structures, which might adversely impact other stakeholders or destabilize the network. Furthermore, concentration increases the risk of contentious hard forks, which have fragmented their communities and impacted asset values. For example, in 2017 a group within the Bitcoin community advocated for increasing the block size limit to allow for more transactions, which ultimately lead to the creation of Bitcoin Cash, which features a larger block size. Hard forks can trigger significant price fluctuations in both the original and new cryptocurrencies, because speculation and uncertainty surrounding the hard fork can lead to increased volatility, making it difficult for investors to predict price movements. Due to our concentration of SUI in our treasury strategy, any such occurrence could lead to volatility or a decrease in the market price of our Common Stock.
Current report
If we fail to implement our SUI business strategy or if our SUI treasury strategy is ineffective, our financial performance could be materially adversely affected.
Current report
Our future financial performance and success are dependent in large part upon the effectiveness of our new SUI strategy and our ability to implement our SUI treasury strategy successfully. Implementation of our SUI strategy will require effective management of our operational, financial, and human resources and will place significant demands on those resources. There are risks involved in pursuing our strategy, including those under the caption “Item 1A – Risk Factors - Risks Relating to Our SUI Treasury Strategy”. In addition to the risks set forth elsewhere in this Form 10-K, effectiveness of and the successful implementation of our SUI treasury strategy could also be affected by a number of factors beyond our control, such as increased competition, legal developments, government regulation, general economic conditions, increased operating costs or expenses, and changes in industry trends. We may decide to alter or discontinue certain aspects of our SUI treasury strategy at any time. If we are not able to implement our SUI treasury strategy successfully, our long-term growth and profitability may be adversely affected. Even if we are able to implement some or all of the initiatives of our SUI treasury strategy successfully, our operating results may not improve and could decline substantially.
Current report
Our SUI strategy exposes us to risk of non-performance by counterparties
Current report
Custodial arrangements pose additional risks. Our primary counterparty risk with respect to our SUI is custodian performance obligations under the custody arrangement we have entered into. BitGo is the custodian for all of our SUI and could experience bankruptcy or insolvency. Although BitGo has an insurance policy supporting its cold wallets, the Company has not purchased any additional insurance cover, and BitGo is not FDIC-insured. FTX, a leading cryptocurrency exchange, filed for bankruptcy in November 2022 following an estimated $8 billion liquidity shortfall due to a surge of withdrawals from the exchange, forcing the exchange to halt customer withdrawals. A series of additional recent high-profile bankruptcies, closures, liquidations, regulatory enforcement actions and other events relating to companies operating in the digital asset industry, including the filings for bankruptcy protection by Three Arrows Capital, Celsius Network, Voyager Digital, and Genesis Global Capital, the closure or liquidation of certain financial institutions that provided lending and other services to the digital assets industry, including Signature Bank and Silvergate Bank, SEC enforcement actions against Coinbase, Binance Holdings Ltd. (since withdrawn), and Kraken, the placement of Prime Trust, LLC into receivership following a cease-and-desist order issued by Nevada’s Department of Business and Industry, and the filing and subsequent settlement of a civil fraud lawsuit by the New York Attorney General against Genesis Global Capital, its parent company Digital Currency Group, Inc., and former partner Gemini Trust Company have highlighted the perceived and actual counterparty risk applicable to digital asset ownership and trading. Although these bankruptcies, closures and liquidations have not resulted in any loss or misappropriation of our SUI, nor have such events adversely impacted our access to our SUI, legal precedent created in these bankruptcy and other proceedings may increase the risk of future rulings adverse to our interests in the event one or more of our current and future custodians becomes a debtor in a bankruptcy case or is the subject of other liquidation, insolvency or similar proceedings. If a similar bankruptcy event occurred for BitGo, there is a risk of partial or total loss of our SUI holdings and delays in asset recovery, which could materially impact financial condition and operations.
Current report
While our custodian is subject to regulatory regimes intended to protect customers in the event of a custodial bankruptcy, receivership or similar insolvency proceeding, no assurance can be provided that our custodially-held SUI will not become part of the custodian’s insolvency estate if our custodian enters bankruptcy, receivership or similar insolvency proceedings. Additionally, if we pursue any strategies to create income streams or otherwise generate funds using our SUI holdings, we would become subject to additional counterparty risks. Any significant non-performance by counterparties, including in particular the custodian with which we custody substantially all of our SUI, could have a material adverse effect on our business, prospects, financial condition, and operating results.
Current report
We intend to mitigate counterparty risks through various measures, including maintaining substantially all of our SUI with BitGo, a well known custodian, and negotiating contractual terms designed to confirm that our custodially‑held SUI remains our property and is not subject to claims of a custodian’s creditors. However, insolvency law related to the custodial holding of digital assets is still developing, and there is no guarantee that these measures would be upheld in an insolvency proceeding. If custodially‑held SUI were nevertheless deemed property of a custodian’s bankruptcy estate, we could be treated as a general unsecured creditor, which could restrict or prevent our ability to exercise ownership rights and could result in a partial or complete loss of the associated value. Even if we ultimately prevailed in asserting our ownership rights, access to our SUI could be delayed or otherwise impaired during the pendency of any insolvency proceeding. Any such outcome could materially adversely affect our financial condition and the market price of our Common Stock.
Current report
Shareholders may not receive the benefits of any forks or airdrops.
Current report
In addition to forks, a digital asset may become subject to a similar occurrence known as an “airdrop.” In an airdrop, the promotors of a new digital asset announce to holders of another digital asset that such holders will be entitled to claim a certain amount of the new digital asset for free, based on the fact that they hold such other digital assets. Airdrops may be conducted by sending a token to the holders of set amounts of SUI. Alternatively, airdrops may involve a user being entitled to claim tokens on a decentralized application, second-layer network or entirely separate digital asset network. As such, a user entitled to receive airdrops may be required to take little or significant actions in order to receive such airdropped tokens. Shareholders may not receive the benefits of any forks, the Company may not choose, or be able, to participate in an airdrop, and the timing of receiving any benefits from a fork, airdrop or similar event is uncertain.
Current report
A right to receive any such benefit of a hard fork or airdrop is referred to as an “Incidental Right” and any digital asset acquired through an Incidental Right as “IR Assets.” There are likely to be operational, tax, securities law, regulatory, legal and practical issues that significantly limit, or prevent entirely, shareholders’ ability to realize a benefit, through their interests in the Company, from any such Incidental Rights or IR Assets.
Current report
The Company may choose to evaluate any such fork, airdrop or similar occurrence on a case-by-case basis in consultation with the Company’s legal advisors, tax consultants and the Asset Manager. In determining whether to attempt to acquire and/or retain any Incidental Right or IR Asset, the Company expects to take into consideration whatever factors it deems relevant in their discretion, including, without limitation:
Current report
In determining whether the Incidental Right or IR Asset is, or may be, a security under federal securities laws, the Company takes into account a number of factors, including the definition of a “security” under Section 2(a)(1) of the Securities Act and Section 3(a)(10) of the Exchange Act, SEC v. W.J. Howey Co., 328 U.S. 293 (1946) and the case law interpreting it, as well as reports, orders, press releases, public statements and speeches by the SEC providing guidance on when a digital asset is a “security” for purposes of the federal securities laws.
Current report
The Company intends to evaluate each fork, airdrop or similar occurrence on a case-by-case basis in consultation with the Company’s legal advisors, tax consultants, and may decide to abandon any Incidental Rights or IR Asset resulting from a hard fork, airdrop or similar occurrence should the Board conclude, in its discretion, that such abandonment is in the best interests of the Company.
Current report
In the event that any forks or airdrops are in fact considered to be an asset of the Company at any point in time, notwithstanding the discussion above, the assets will be valued in a manner consistent with ASC-820, U.S. “GAAP”, and the identification of a principal market for the asset.
Current report
Our SUI holdings and other digital asset holdings are less liquid than our existing cash and cash equivalents and may not be able to serve as a source of liquidity for us to the same extent as cash and cash equivalents.
Current report
Historically, the cryptocurrency markets have been characterized by significant volatility in price, limited liquidity and trading volumes compared to sovereign currencies markets, relative anonymity, a developing regulatory landscape, potential susceptibility to market abuse and manipulation, compliance and internal control failures at exchanges, and various other risks inherent in its entirely electronic, virtual form and decentralized network. During times of market instability, we may not be able to sell our SUI and other digital assets at favorable prices or at all. Further, SUI and other digital assets we hold with our custodians and transact with our trade execution partners does not enjoy the same protections as those available to cash or securities deposited with or transacted by institutions subject to regulation by the Federal Deposit Insurance Corporation or the Securities Investor Protection Corporation. Additionally, almost all of our digital asset holdings are comprised of SUI and 99% of our SUI is being staked. The staking process is continuously adjusted in scale, in line with network and market conditions, with adjustments aimed to ensure the Company maintains sufficient liquidity for redemptions on any given business day but any such adjustments are subject to a one-day unbonding period. Finally, we may be unable to enter into term loans or other capital raising transactions collateralized by our unencumbered SUI or otherwise generate funds using our SUI holdings, including in particular during times of market instability or when the price of SUI has declined significantly. If we are unable to sell our SUI or other digital assets, enter into additional capital raising transactions using SUI or other digital assets as collateral, or otherwise generate funds using our SUI or other digital assets holdings, or if we are forced to sell our SUI or other digital assets at a significant loss, in order to meet our working capital requirements, our business and financial condition could be materially adversely impacted.
Current report
Exposure to market abuse and manipulation may affect the market price of SUI.
Current report
We are also exposed to market manipulation risks such as front-running and wash trading, which risk is enhanced due to the concentration of SUI in our treasury strategy. We have made significant investments in SUI, and plan to continue to do so in the future. Cryptocurrency markets, including those for SUI, may be susceptible to market abuse and manipulation, such as wash trading, coordinated pump-and-dump schemes, spoofing, and other forms of manipulative activity. Sophisticated traders or entities with privileged access to order flow may exploit weaknesses in exchange infrastructure to execute trades ahead of pending orders (front-running), artificially inflate trading volumes (wash trading), or otherwise distort the market price of SUI. Such activities can reduce market integrity and liquidity and create material volatility or losses for holders like us, which could create further risks to us as a result of our concentrated holding of SUI in our treasury strategy. If SUI is affected by these activities, we may experience substantial fluctuations in the fair value of its investment, which could negatively affect our financial condition, results of operations, and reputation. Further, regulatory oversight of cryptocurrency markets is evolving, and there is no assurance that existing or future regulations or market mechanisms will effectively deter or mitigate the impact of market manipulation. As a result, we remain exposed to additional risks and uncertainties relating to the price and liquidity of SUI, which may result in financial loss or impairment of value in its investment.
Current report
The failure, insolvency, or mismanagement of our custodians and trade execution partners may result in the partial or total loss of our SUI holdings, delays or failures in executing trades, or other disruptions to liquidity and access.
Current report
Our significant investment in SUI depends on third‑party custodians and trade execution partners for the safekeeping, transfer, and management of our digital assets. If any of these service providers were to experience financial distress, operational failure, insolvency, security breaches, or other forms of mismanagement, we could suffer partial or total loss of our SUI holdings, delays or failures in executing trades, or broader disruptions to liquidity and access.
Current report
The digital asset industry has experienced several high‑profile custodial and exchange failures. For example, in November 2022, FTX—a major global cryptocurrency exchange—filed for bankruptcy following an estimated $8 billion liquidity shortfall after a surge in customer withdrawals, resulting in the suspension of withdrawals. Public reports indicated that this collapse stemmed from operational mismanagement, including misuse of customer funds, inadequate financial controls, and overreliance on its proprietary FTT token. Events such as these highlight the operational, financial, and governance vulnerabilities that can exist within digital asset service providers.
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Removed paragraphs (12)
Previous report
We have a relatively short operating history upon which to evaluate our current business.
Previous report
We withdrew our election to be treated as a BDC under the 1940 Act at the end of 2019, and during the years since that time have refocused our business on providing short-term specialty finance solutions to private businesses, small-cap public companies and high-net-worth individuals. Given that our current business has been developed and pursued over the five years prior to this filing, investors have a relatively limited means to evaluate our performance, its evolution, and the likelihood of our future success.
Previous report
Our business depends in part on maintaining diverse and robust sources of capital to originate our short-term loans. In January 2022, we entered into a Loan and Security Agreement (the “Loan Agreement”) with Eastman Investment, Inc., a Nevada corporation, and Lyle A. Berman, as trustee of the Lyle A. Berman Revocable Trust (collectively, the “Lenders”). Mr. Berman is a director of our company. Under the Loan Agreement, the Lenders made available to us a $5 million revolving line of credit for us to use in the ordinary course of our short-term specialty finance business. Amounts drawn under the Loan Agreement accrued interest at the per annum rate of 8%, and all our obligations under the Loan Agreement were secured by a grant of a collateral security interest in substantially all of our assets. As a Lender, Mr. Berman was obligated to furnish only one-half of the aggregate $5 million available under the Loan Agreement. The Loan Agreement had a five-year term ending on January 3, 2027, at which time all amounts owing under the Loan Agreement were to become due and payable; subject, however, to each Lender’s right, including Mr. Berman, to terminate the Loan Agreement, solely with respect to such Lender’s obligation to provide further credit, at any time after January 3, 2023. See “Certain Relationships and Related Transactions.” In January 2024, we terminated the Loan Agreement having earlier satisfied all of our obligations thereunder.
Previous report
In light of all of the foregoing, a significant and material amount of our assets are now invested in Mustang through March 2027. Given the size of the investment relative to our balance sheet, Mustang’s payment of interest and repayment of principal owed under that loan will likely materially contribute to our results of operation and may affect the trading price of common stock. Furthermore, while we believe that the addition of collateral security and the termination of our combination negotiations permits us to classify our investment in Mustang as a “commercial lending transaction” that will not be considered an “investment security” for purposes of the 1940 Act, we cannot be certain that regulatory authorities will concur with our analysis and conclusion. For more information and context for these risks, please see “Business — Our Investment Process” and “Risk Factors —If we are deemed to be an investment company under the 1940 Act ….”
Previous report
A limited number of shareholders control a significant majority of our voting stock and, as a result, control the election of our Board of Directors. As a result, these shareholders may exert an influence on actions requiring a shareholder vote, potentially in a manner that you do not support.
Previous report
Nine shareholders (five of whom are presently officers and directors) beneficially own shares representing a majority of our issued and outstanding common stock. As a result, investors in our common stock cannot reasonably expect to have any significant influence over the election of our directors or other matters submitted to a vote of our shareholders. Instead, our existing significant shareholders will exert a substantial influence on the election of our directors and any actions requiring or otherwise put to a shareholder vote, potentially in a manner that you do not support. Examples of such voting matters, apart from the election of our directors, includes amendments to our articles of incorporation, bylaws, and approval of major corporate transactions. The concentrated amount of control over our affairs held by a relatively few number of significant investors could serve to reduce the attractiveness or liquidity of our common stock, and thereby depress its trading price.
Previous report
We may issue additional common stock or preferred shares without the approval of our shareholders. Any such issuances would dilute the interest of our shareholders and likely present other risks.
Previous report
Our articles of incorporation authorize the issuance of up to 111,111,111 shares of capital stock. Because we presently have only 6,385,255 shares of common stock issued and outstanding, our Board of Directors has the power and authority to issue a substantial number of additional shares of common stock or preferred shares. The issuance of additional common stock or preferred shares:
Previous report
Our stock price may be volatile, or may decline regardless of our operating performance, and you could lose all or part of your investment as a result.
Previous report
In addition, the securities markets have experienced significant price and volume fluctuations that have affected and continue to affect market price of equity securities of many companies. These fluctuations have often been unrelated or disproportionate to the operating performance of particular companies. These broad market fluctuations, as well as general economic, systemic, political and market conditions, such as recessions, loss of investor confidence, interest rate changes, or international currency fluctuations, may negatively affect the market price of our shares.
Previous report
If any of the foregoing occurs, it could cause our stock price to fall and may expose us to securities class action litigation that, even if unsuccessful, could be costly to defend and a distraction to management.
Reworded paragraphs (29)
Previous wording
You should consider the following risk factors, in addition to the other information presented or incorporated by reference into this Annual Report on Form 10-K, in evaluating our business and any investment decision relating to our securities.
Current wording
You should consider the following risk factors, in addition to the other information presented or incorporated by reference into this Annual Report, in evaluating our business and any investment decision relating to our securities.
Previous wording
We may need to raise additional capital to fund our operations, and such capital may not be available to us in sufficient amounts or on acceptable terms.
Current wording
We may need to raise additional capital to fund our portfolio investment operations, and such capital may not be available to us in sufficient amounts or on acceptable terms.
Previous wording
For the time being, management believes that our current cash is sufficient to continue operations for the foreseeable future. Nevertheless, various future developments may cause us to seek or require additional financing. In addition, we may determine to seek additional financing in order to avail ourselves of additional opportunities to provide specialty finance solutions to borrowers. Alternatively, we may seek additional financing in the event that a material portion of our investments default, leaving us with diminished means to pay for our operations and continue making investments.
Current wording
For the time being, management believes that our current cash is sufficient to continue portfolio investment operations for the foreseeable future. Nevertheless, various future developments may cause us to seek or require additional financing. In addition, we may determine to seek additional financing in order to avail ourselves of additional opportunities to provide specialty finance solutions to borrowers. Alternatively, we may seek additional financing in the event that a material portion of our investments default, leaving us with diminished means to pay for our operations and continue making investments.
Previous wording
If we were to borrow money in the future, events of default or breaches of financial, performance or other covenants, or worse than expected performance of one or more of our short-term loans, could reduce or terminate our future access to funding. The availability and capacity of sources of capital also depends on many factors that are outside of our control, such as credit market volatility and regulatory reforms. In the event that we do not maintain adequate sources of capital, we may not be able to maintain the necessary levels of funding to retain current loan volume, which could adversely affect our business, financial condition and results of operations.
Current wording
Our business, including our portfolio investment business, depends in part on maintaining diverse and robust sources of capital to originate our short-term loans. If we were to borrow money in the future, events of default or breaches of financial, performance or other covenants, or worse than expected performance of one or more of our short-term loans, could reduce or terminate our future access to funding. The availability and capacity of sources of capital also depends on many factors that are outside of our control, such as credit market volatility and regulatory reforms. In the event that we do not maintain adequate sources of capital for our portfolio investment business, we may not be able to maintain the necessary levels of funding to retain current loan volume, which could adversely affect our business, financial condition and results of operations.
Previous wording
Although we have identified general guidelines that we believe are important in evaluating prospective investment opportunities, we may enter into transactions with borrowers that do not meet such guidelines, increasing the risk that the price of our common stock could be volatile.
Current wording
Although we have identified general guidelines that we believe are important in evaluating prospective portfolio investment opportunities, we may enter into transactions with borrowers that do not meet such guidelines, increasing the risk that the price of our Common Stock could be volatile.
Previous wording
Although we have identified general guidelines for evaluating prospective investment opportunities, it is possible that a borrower with which we enter into a transaction will not have all, or any, of the attributes outlined in those guidelines. If we complete transactions with borrowers that do not meet some or any of these guidelines, it is possible that such an investment may not be as successful as an alternative opportunity that were to satisfy some or all of those guidelines. Investments that do not perform as well as imagined, or as well as they otherwise might have, in combination with the public knowledge that we may stray, or have strayed, from strict implementation of our investment guidelines, could affect the volatility of the trading price of our common stock.
Current wording
Although we have identified general guidelines for evaluating prospective portfolio investment opportunities, it is possible that a borrower with which we enter into a transaction will not have all, or any, of the attributes outlined in those guidelines. If we complete transactions with borrowers that do not meet some or any of these guidelines, it is possible that such an investment may not be as successful as an alternative opportunity that were to satisfy some or all of those guidelines. Portfolio investments that do not perform as well as imagined, or as well as they otherwise might have, in combination with the public knowledge that we may stray, or have strayed, from strict implementation of our investment guidelines, could affect the volatility of the trading price of our Common Stock.
Previous wording
We may provide specialty finance solutions to early-stage companies, financially unstable businesses, or a borrower lacking an established record of revenue or earnings, which could adversely affect the price of our common stock.
Current wording
We may provide specialty finance solutions to early-stage companies, financially unstable businesses, or borrowers lacking an established record of revenue or earnings, which could adversely affect the price of our Common Stock.
Previous wording
While we believe that being entrepreneurial in our approach to specialty finance is a strength, we may complete investments with an early-stage company, a financially unstable business or an entity lacking an established record of revenues, cash flows or earnings. These kinds of transactions present numerous risks associated with investing in a business without a proven business model and with limited historical financial data, volatile revenues, cash flows or earnings and difficulties in obtaining and retaining key personnel. Although our management endeavors to evaluate the risks inherent in each particular investment we consider and make, we may not be able to properly ascertain or assess all of the significant risk factors and we may not have adequate time to complete a full evaluation of those risks. Furthermore, some of these risks may be outside of our control and leave us with no ability to control or reduce the chances that those risks will adversely impact a borrower or our likelihood of repayment. The manifestation of any of these risks could adversely affect the trading price of our common stock.
Current wording
While we believe that being entrepreneurial in our approach to specialty finance is a strength, we may complete investments with an early-stage company, a financially unstable business or an entity lacking an established record of revenues, cash flows or earnings. These kinds of transactions present numerous risks associated with investing in a business without a proven business model and with limited historical financial data, volatile revenues, cash flows or earnings and difficulties in obtaining and retaining key personnel. Although our management endeavors to evaluate the risks inherent in each particular investment we consider and make, we may not be able to properly ascertain or assess all of the significant risk factors and we may not have adequate time to complete a full evaluation of those risks. Furthermore, some of these risks may be outside of our control and leave us with no ability to control or reduce the chances that those risks will adversely impact a borrower or our likelihood of repayment. Failure by borrowers to repay the amounts owed to us pursuant to these specialty finance solutions could materially adversely affect our financial conditions and results of operations and ultimately the price of our Common Stock.
Previous wording
In pursuing our business, we often interact with a privately held companies about which very little public information exists. As a result, we are often required to make our investment decision on the basis of limited information, nearly all of which is obtained from the business itself, which may result in our consummating an investment with a borrower that is not as solvent or profitable as we suspected, if at all. These risks could affect our results of operations and, ultimately, the trading price of our common stock.
Current wording
In pursuing our short-term specialty finance business, we often interact with privately held companies about which very little public information exists. As a result, we are often required to make our portfolio investment decision on the basis of limited information, nearly all of which is obtained from the business itself, which may result in our consummating an investment with a borrower that is not as solvent or profitable as we suspected, if at all. These risks could affect our results of operations and, ultimately, the trading price of our Common Stock.
Previous wording
If we are deemed to be an investment company under the 1940 Act, we may be required to institute burdensome compliance requirements and our activities may be restricted. In such an event, our business would likely be materially and adversely affected.
Current wording
If we are deemed to be an investment company under the 1940 Act, we may be required to institute burdensome compliance requirements and our activities may be restricted. In such an event, our business would likely be materially adversely affected.
Previous wording
We do not believe that our principal activities will subject us to the 1940 Act. To this end, we hold reserve un-invested assets in cash and United States “government securities” within the meaning of Section 2(a)(16) of the Act having a maturity of 185 days or less or in money market funds meeting certain conditions under Rule 2a-7 promulgated under the 1940 Act, which invest only in direct U.S. government treasury obligations. Furthermore, we periodically monitor our investment holdings as a whole with a view towards ensuring that investments and other holdings which may be considered “investment securities” do not comprise more than 40% of our total assets. We undertake this analysis (1) on a quarterly basis and in connection with the review and preparation of our financial statements filed as part of our quarterly and annual reports with the SEC, and (2) at other times when we are considering how to structure a new transaction that is of a significant size—with “significance” largely based on the outcome of our most recent quarterly review. This review is generally undertaken by our Chief Financial Officer and may involve outside legal counsel, in particular in a case where we are considering the structure of a potential new transaction.
Current wording
We do not believe that our portfolio investment activities alone will subject us to the 1940 Act. We periodically monitor our portfolio investment holdings as a whole with a view towards ensuring that investments and other holdings which may be considered “investment securities” do not comprise more than 40% of our total assets. We undertake this analysis (1) on a quarterly basis and in connection with the review and preparation of our financial statements filed as part of our quarterly and annual reports with the SEC, and (2) at other times when we are considering how to structure a new transaction that is of a significant size—with “significance” largely based on the outcome of our most recent quarterly review. This review is generally undertaken by our Chief Financial Officer and may involve outside legal counsel, in particular in a case where we are considering the structure of a potential new transaction.
Previous wording
If, however, we do not invest as discussed above or are otherwise unsuccessful in ensuring that no more than 40% of our total assets consist of “investment securities,” then we may be deemed to be subject to the 1940 Act. It is also possible that regulatory authorities, such as the SEC, may disagree with our analysis of whether certain investment holdings constitute “investment securities,” and may more broadly disagree with our position that the short-term promissory notes we receive in exchange for our short-term loans, are not properly considered “investment securities” under federal securities law and the 1940 Act in particular. If that were to be the case, we would likely incur significant costs and be required to spent significant time restructuring parts of our operations and/or complying with the additional regulatory burdens imposed under the 1940 Act. Any restructuring or additional regulatory requirements would surely hinder our ability to operate as profitably as we have since the withdrawal of our BDC election, and would of course adversely affect the trading price of our common stock.
Current wording
If, however, we do not invest as discussed above or are otherwise unsuccessful in ensuring that no more than 40% of our total assets consist of “investment securities,” then we may be deemed to be subject to the 1940 Act. It is also possible that regulatory authorities, such as the SEC, may disagree with our analysis of whether certain investment holdings constitute “investment securities,” under federal securities law and the 1940 Act in particular. If that were to be the case, we would likely incur significant costs and be required to spend significant time restructuring parts of our operations and/or complying with the additional regulatory burdens imposed under the 1940 Act. Any restructuring or additional regulatory requirements would hinder our ability to operate as profitably as we have since the withdrawal of our BDC election and would adversely affect the trading price of our Common Stock.
Previous wording
Our $10 million in principal amount loan to Mustang Funding, LLC is subordinated to senior lenders in right of payment, in respect of our exercise of rights and remedies, and in right of collateral, with the result that our investment portfolio and results of operations will for the foreseeable future be highly concentrated in and dependent upon the operational and financing success of Mustang Funding.
Current wording
Our $10 million in principal amount loan to Mustang Funding, LLC is subordinated to Senior Lenders in right of payment, in respect of our exercise of rights and remedies, and in right of collateral, with the result that our investment portfolio will for the foreseeable future be highly concentrated in and dependent upon the operational and financing success of Mustang.
Previous wording
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.
Current wording
On December 12, 2022, contemporaneously with our entry into a non-binding letter of intent with Mustang Funding, LLC (“Mustang”) contemplating a combination or merger transaction, we entered into a lending agreement with Mustang pursuant to which we loaned Mustang the principal amount of $5 million maturing in September 2023 (as amended, the “Mustang Litigation Funding”). Among other things, our related loan agreement with Mustang requires us to consent to any additional indebtedness Mustang may incur, subject to certain limitations and exceptions.
Previous wording
Although our loan to Mustang was not secured at the time that it was made, we negotiated for and obtained the right in the governing documents to seek and obtain collateral in the event that there were a default by Mustang or our negotiations for a combination transaction were to break down. At that time, we believed it was important to obtain this right because (i) Mustang was contemporaneously seeking a senior secured lending facility with whom we had no previous working experience, and (ii) a breakdown in combination negotiations, combined with our anticipated subordination (discussed below) could mean that we would need to extend the terms of this loan beyond nine months. In sum, as a creditor we believed that we need to secure our loan on more traditional commercial lending terms in order to better protect our investment.
Current wording
Although our loan to Mustang was not secured at the time that it was made, we negotiated for and obtained the right in the governing documents to seek and obtain collateral in the event that there were a default by Mustang or our negotiations for a combination transaction were to break down. At that time, we believed it was important to obtain this right because (i) Mustang was contemporaneously seeking a senior secured lending facility with whom we had no previous working experience, and (ii) a breakdown in combination negotiations, combined with our anticipated subordination (discussed below) could mean that we would need to extend the terms of this loan beyond nine months. In sum, as a creditor, we believed that we needed to secure our loan on more traditional commercial lending terms in order to better protect our investment.
Previous wording
On December 28, 2022, we entered into a subordination agreement with Orion Pip LLC, in its capacity as administrative and collateral agent for itself and other senior lenders under a senior secured lending agreement with Mustang (collectively, the “Senior Lenders”), 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.
Current wording
On December 28, 2022, we entered into a subordination agreement with Orion Pip LLC, in its capacity as administrative and collateral agent for itself and other Senior Lenders under a senior secured lending agreement with Mustang, pursuant to which we subordinated our right to payment (subject to certain exceptions) and our right to exercise rights and remedies, to Mustang’s prior repayment in full of all amounts owing to the Senior Lenders. The subordination agreement prohibited the Senior Lenders or Mustang from extending the stated maturity of amounts owing under the senior secured lending agreement beyond December 2026. The Senior Lenders are owed $15.675 million in principal amount under the senior secured lending agreement as of December 31, 2025.
Previous wording
Changes in laws or regulations, or a failure to comply with laws and regulations, whether by us or by our borrowers, may adversely affect our business, including our results of operations and ultimately the price of our common stock.
Current wording
Changes in laws or regulations, or a failure to comply with laws and regulations, whether by us or by our borrowers, may adversely affect our portfolio investment business, including our results of operations and ultimately the price of our Common Stock.
Previous wording
Both we and our borrowers are typically subject to various local, state and federal laws and regulations. Compliance with, and monitoring of, applicable laws and regulations may be difficult, time consuming and costly. Those laws and regulations and their interpretation and manner of application or enforcement may also change from time to time and those changes could have a material adverse effect on our business, investments and results of operations. In addition, a failure to comply with applicable laws or regulations, as interpreted and applied, could have a material adverse effect on our business and results of operations. Any of these outcomes would likely adversely affect the trading price of our common stock.
Current wording
Both we and our borrowers are typically subject to various local, state and federal laws and regulations. Compliance with, and monitoring of, applicable laws and regulations may be difficult, time consuming and costly. Those laws and regulations and their interpretation and manner of application or enforcement may also change from time to time and those changes could have a material adverse effect on our portfolio investment business, investments and results of operations. In addition, a failure to comply with applicable laws or regulations, as interpreted and applied, could have a material adverse effect on our business and results of operations. Any of these outcomes would likely adversely affect the trading price of our Common Stock.
Previous wording
Consumer finance regulation is constantly changing, and new laws or regulations, or new interpretations of existing laws or regulations, could have a materially adverse impact on our ability to operate as currently intended or as we may intend to expand in the future, and cause us to incur significant expense in order to ensure compliance. Federal and state financial services regulators are also enforcing existing laws, regulations, and rules aggressively and enhancing their supervisory expectations regarding the management of legal and regulatory compliance risks. These regulatory changes and uncertainties make our business planning more difficult and could result in changes to our business model and potentially adversely impact our results of operations. Because we operate as a non-bank lender, we are sometimes subject to state usury laws and other laws and regulations. Furthermore, to the extent applicable, these laws can impose specific statutory liabilities upon creditors who fail to comply with their provisions and may affect the enforceability of a loan. If the application of consumer protection laws were to cause our loans, or any of the terms of our loans, to be unenforceable against the relevant borrowers, our business may be materially adversely affected. Even if we seek to comply with licensing and other requirements that we believe may be applicable to us, if we are found to not have complied with applicable laws, we could lose one or more of our licenses or authorizations or face other sanctions or penalties or be required to obtain a license in one or more such jurisdictions, which may have an adverse effect on our business.
Current wording
Consumer finance regulation is constantly changing, and new laws or regulations, or new interpretations of existing laws or regulations, could have a materially adverse impact on our ability to operate as currently intended or as we may intend to expand in the future, and cause us to incur significant expense in order to ensure compliance. These regulatory changes and uncertainties make our business planning more difficult and could result in changes to our business model and potentially adversely impact our results of operations. Because we operate as a non-bank lender, we are sometimes subject to state usury laws and other laws and regulations. Furthermore, to the extent applicable, these laws can impose specific statutory liabilities upon creditors who fail to comply with their provisions and may affect the enforceability of a loan. If the application of consumer protection laws were to cause our loans, or any of the terms of our loans, to be unenforceable against the relevant borrowers, our specialty finance business may be materially adversely affected. Even if we seek to comply with licensing and other requirements that we believe may be applicable to us, if we are found to not have complied with applicable laws, we could lose one or more of our licenses or authorizations or face other sanctions or penalties or be required to obtain a license in one or more such jurisdictions, which may have an adverse effect on our business.
Previous wording
Our reputation and brand are important to our success, and if we are unable to continue developing our reputation and brand, our ability to retain existing capital sources, and to attract borrowers could be adversely affected.
Current wording
Our reputation and brand are important to our portfolio investment business, and if we are unable to continue developing our reputation and brand, our ability to retain existing capital sources, and to attract borrowers could be adversely affected.
Previous wording
We believe that maintaining a strong brand and trustworthy reputation is critical to our success and our ability to attract borrowers, attract new capital sources and maintain existing capital sources. Factors that we believe affect our brand and reputation include:
Current wording
We believe that maintaining a strong brand and trustworthy reputation is critical to our portfolio investment business and our ability to attract borrowers, attract new capital sources and maintain existing capital sources. Factors that we believe affect our brand and reputation include:
Previous wording
Our success depends in significant part upon the continued service of our senior management personnel. In particular, we are materially dependent upon the services of Douglas M. Polinsky, our Chief Executive Officer and Chairman, and Joseph A. Geraci, II, our Chief Financial Officer and a director of our company. Practically, we cannot prevent the departure of these executives, whether due to death, disability, retirement or otherwise. Any loss of the services provided by these executives would likely have a material and adverse effect on our operations and ability to execute our business plans.
Current wording
Our success depends in significant part upon the continued service of our senior management personnel and directors. In particular, we are materially dependent upon the services of Marius Barnett, our Chairman, Douglas M. Polinsky, our Chief Executive Officer and Joseph A. Geraci, II, our Chief Financial Officer. Practically, we cannot prevent the departure of these directors and executives, whether due to death, disability, retirement or otherwise. Any loss of the services provided by these key personnel would likely have a material and adverse effect on our operations and ability to execute our business plans.
Previous wording
Our articles of incorporation grant our Board of Directors the power to designate and issue additional shares and classes of common and preferred stock.
Current wording
Our articles of incorporation grant our Board the power to designate and issue additional shares and classes of common and preferred stock without shareholder approval, which could cause significant dilution and adversely affect the rights of existing stockholders.
Previous wording
Our authorized capital consists of 111,111,111 shares of capital stock. Pursuant to authority granted by our articles of incorporation, our Board of Directors, without any action by our shareholders, may designate and issue shares in such classes or series (including other classes or series of preferred stock) as it deems appropriate, and may establish the rights, preferences and privileges of such shares, including dividends, liquidation and voting rights. The rights of holders of new classes or series of stock that may be so designated and issued could be superior to the rights of holders of our common shares. The designation and issuance of shares of capital stock having preferential rights could adversely affect other rights appurtenant to shares of our common stock. Furthermore, any issuances of additional stock—common or preferred—will dilute the ownership interest of then-current holders of our common stock and may dilute our book value per share.
Current wording
Our authorized capital consists of 2,000,000,000 shares of capital stock. As of the date of the Annual Report, we only have 76,802,872 shares of Common Stock issued and outstanding and a further 15,098,076 stock for issuance upon the exercise of various warrants. Pursuant to authority granted by our articles of incorporation, our Board, without any action by our shareholders, may designate and issue shares in such classes or series (including other classes or series of preferred stock) as it deems appropriate, and may establish the rights, preferences and privileges of such shares, including dividends, liquidation and voting rights. The issuance of additional Common Stock or preferred stock:
Previous wording
We intend to retain all of our earnings, if any, for the foreseeable future to finance the operation and expansion of our business and do not anticipate paying cash dividends. Any future determination to pay dividends will be at the discretion of our Board of Directors, subject to compliance with applicable law and any contractual provisions, and will depend on, among other factors, our results of operations, financial condition, capital requirements and other factors that our Board of Directors deems relevant. As a result, investors in our common shares should expect to receive a return on investment only if the market price of the common shares increases, which may never occur.
Current wording
We intend to retain all of our earnings, if any, for the foreseeable future to finance the operation and expansion of our business and do not anticipate paying cash dividends. Any future determination to pay dividends will be at the discretion of our Board, subject to compliance with applicable law and any contractual provisions, and will depend on, among other factors, our results of operations, financial condition, capital requirements and other factors that our Board deems relevant. As a result, investors in our Common Shares should expect to receive a return on investment only if the market price of the Common Shares increases, which may never occur.
Previous wording
One of the manners in which we may seek to grow our company is through acquisition or combination transactions. It is possible that, even after our announcement of a potential acquisition or combination transaction, such transactions may not ultimately close and occur. Our announcement of these potential transactions, and the occasional failure of them to occur, may cause the price of our common stock to be volatile.
Current wording
One of the manners in which we may seek to grow the Company is through acquisition or combination transactions,as well as through the launch of new investment strategies. It is possible that, even after we announce a potential acquisition, combination transaction, or new business initiative, such transactions or initiatives may not ultimately close, materialize, or achieve their intended objectives. Our announcement of these potential transactions or strategies—and the occasional failure of them to proceed as planned—may cause the price of our Common Stock to be volatile.
Previous wording
In prior reports, we have publicly announced our intention to grow our company both organically, including by expanding our specialty finance operations into new markets or niches, and through acquisition or combination transactions such as mergers or similarly structured transactions. In the past, we have announced our execution of non-binding letters of intent for these kinds of acquisition or combination transactions. These announcements may create volatility in the trading volume and price of our common stock, in particular when there is not significant publicly available information about the counterparty to such a transaction. Moreover, the failure of the transactions contemplated in these announcements to close could similarly create volatility in the trading volume and price of our common stock. This volatility could ultimately mean that there are fewer buyers or sellers of our common stock at particular times, which creates the risk that you might not be able to sell any common stock of our company that you own at a time or a price that you believe is fair or desirable.
Current wording
In the past, we have also announced our execution of non-binding letters of intent for acquisition or combination transactions. These announcements may create volatility in the trading volume and price of our Common Stock, particularly where there is limited publicly available information about the counterparty to such a transaction or uncertainty regarding our ability to successfully enter into definitive agreements. Moreover, the failure of the transactions contemplated in these announcements to close could similarly create volatility in the trading volume and price of our Common Stock. Such volatility could ultimately reduce market liquidity for our Common Stock, creating a risk that you may not be able to sell your shares at a time or price you consider favorable.
Previous wording
An historical example of the foregoing is our December 2022 announcement of a non-binding letter of intent with Mustang Funding, LLC, a private litigation-funding business, in which letter we contemplated a merger transaction. Although we negotiated the terms of a definitive agreement with Mustang Funding, we were unable to finalize that agreement and enter into it. Ultimately, we determined to abandon the transaction and to terminate the non-binding letter of intent in August 2024. The volatility in the trading volume and price of our common stock that occurred contemporaneously with our related public announcements of having entered into the non-binding letter of intent, and then having terminated it, together with certain related announcements touching upon amendments to our prior loans made to Mustang Funding, was not insignificant from a comparative standpoint.
Current wording
An historical example of this dynamic is our December 2022 announcement of a non-binding letter of intent with Mustang Funding, LLC, a private litigation‑funding business, contemplating a merger transaction. Although we negotiated a proposed definitive agreement, we were unable to finalize and enter into that agreement, and we ultimately terminated the non-binding letter of intent in August 2024. The volatility in the trading volume and price of our Common Stock contemporaneous with our public announcements regarding the entry into—and subsequent termination of—the non-binding letter of intent, as well as related announcements regarding amendments to our prior loans to Mustang Funding, was not insignificant from a comparative standpoint.
Previous wording
The trading market for our common stock, including the general volume of transactions in our common stock, will depend in part on the research and reports that securities or industry analysts publish about us or our business. Securities and industry analysts do not currently, and may never, publish research on our company. If no securities or industry analysts commence coverage of our company, the trading price for our stock may be negatively impacted. In the event securities or industry analysts initiate coverage, if one or more of the analysts who covers us downgrades our stock or publishes inaccurate or unfavorable research about our business, our stock price may decline. If one or more of these analysts ceases coverage of our company or fails to publish reports on us regularly, demand for our stock could decrease, which might cause our stock price and trading volume to decline.
Current wording
The trading market for our Common Stock, including the general volume of transactions in our Common Stock, will depend in part on the research and reports that securities or industry analysts publish about us or our business. Securities and industry analysts do not currently, and may never, publish research on the Company. If no securities or industry analysts commence coverage of the Company, the trading price for our stock may be negatively impacted. In the event securities or industry analysts initiate coverage, if one or more of the analysts who covers us downgrades our stock or publishes inaccurate or unfavorable research about our business, our stock price may decline. If one or more of these analysts ceases coverage of the Company or fails to publish reports on us regularly, demand for our stock could decrease, which might cause our stock price and trading volume to decline.
Rearranged current paragraphs (1)
Current report — wording carried from elsewhere
A component of our business—our legacy finance business—focuses on providing short-term specialty finance solutions primarily to private businesses, micro- and small-cap public companies and high-net-worth individuals. To avoid becoming subject to regulation under the 1940 Act, we periodically monitor our investment holdings as a whole with a view towards ensuring that investments and other holdings which may be considered “investment securities” do not comprise more than 40% of our total assets. We undertake this analysis (1) on a quarterly basis and in connection with the review and preparation of our financial statements filed as part of our quarterly and annual reports with the SEC, and (2) at other times when we are considering how to structure a new transaction that is of a significant size — with “significance” largely based on the outcome of our most recent quarterly review. We do not currently believe that our legacy finance business will subject us to the 1940 Act, but this may change. This review is generally undertaken by our Chief Financial Officer and may involve outside legal counsel, in particular in a case where we are considering the structure of a potential new transaction.