SCHEDULE: Mill City Ventures Pivots to Crypto with $25M Raise

Karatage Opportunities and affiliated entities acquire 5.63% of Mill City Ventures III, Ltd. common stock and enter into strategic agreements to expand the Issuer's digital asset operations.

Summary

• Karatage Opportunities and related entities acquired 4,612,547 shares of Mill City Ventures III, Ltd. common stock for an aggregate purchase price of $25,000,004.74.
• This acquisition represents approximately 5.63% of the Issuer's outstanding common stock, based on 81,944,398 shares outstanding as of August 1, 2025.
• The Issuer entered into a private placement offering, selling 75,789,375 shares of common stock at $5.42 per share and pre-funded warrants for 7,236,455 shares at $5.4199 per warrant.
• Karatage also received warrants to purchase an additional 3,113,469 shares of common stock at various exercise prices ranging from $5.42 to $7.046 per share, exercisable for five years and vesting over 24 months.
• Proceeds from the offering are intended to acquire SUI and other cryptocurrencies for the Issuer's treasury operations, with 2% allocated to its short-term lending business.
• Karatage will provide technical advisory services to the Issuer regarding the digital asset ecosystem, including SUI and crypto gaming industries, for a tiered asset-based fee ranging from 0.0% to 0.80% per annum of managed assets.
• The Issuer entered into an Asset Management Agreement with Galaxy Digital Capital Management LP, as recommended by Karatage.
• Karatage is subject to a 12-month lock-up period on its acquired securities, with certain exceptions.

Sentiment

Score: 8

Explanation: The filing indicates a strong positive sentiment due to a significant capital raise and a clear strategic pivot into the high-growth digital asset and cryptocurrency sector, supported by a strategic advisory agreement and new board appointment. This positions the company for potential future growth and diversification.

Positives

• Secured significant capital infusion of over $25 million from Karatage Opportunities, supporting strategic expansion.
• Established a strategic advisory partnership with Karatage Opportunities to integrate cryptocurrency and digital asset strategies, diversifying business operations.
• Appointed Marius Barnett to the Board of Directors, who is expected to serve as Chairman, potentially strengthening governance and strategic oversight.
• Entered into an Asset Management Agreement with Galaxy Digital Capital Management LP, a reputable firm in the digital asset space, for treasury operations.

Negatives

• The strategic advisor agreement with Karatage includes a tiered asset-based fee ranging from 0.0% to 0.80% per annum of managed assets, representing a new operational cost.
• The strategic advisor agreement includes a provision for the Issuer to pay Karatage any fees that would be due for the remainder of the 10-year term if terminated by the Issuer for any reason other than cause, or by Karatage for cause, which could result in significant termination fees.

Risks

• The Common Stock, Pre-Funded Warrants, and Lead Investor Warrants were offered in reliance upon exemptions from registration requirements of the Securities Act of 1933, meaning they have not been registered and may not be offered or sold in the United States absent registration or an exemption.
• Purchasers' ability to exercise Pre-Funded Warrants is subject to certain beneficial ownership limitations.
• The Issuer agreed not to undertake reclassifications of its Common Stock, such as reverse or forward stock splits, for one year without majority purchaser consent, potentially limiting financial flexibility, though an exception exists for Nasdaq listing maintenance.

Future Outlook

The Issuer intends to use the proceeds from the offering to acquire the native cryptocurrency of the Sui blockchain ('SUI') and other cryptocurrencies, establish its cryptocurrency treasury operations, and allocate 2% of net proceeds to fund its short-term lending business. This indicates a significant strategic pivot towards digital assets and blockchain technology.

Management Comments

• The Issuer intends to use the proceeds from the Offering to acquire the native cryptocurrency of the Sui blockchain commonly referred to as 'SUI' and other cryptocurrencies with the Sui layer 1 blockchain protocol and for the establishment of the Issuer's cryptocurrency treasury operations, with 2% of the net proceeds to be used to fund the Issuer's short-term lending business.
• The Issuer agreed not to issue, enter into any agreement to issue, or announce the issuance or proposed issuance of any shares of Common Stock or Common Stock equivalents, or file any registration statement or any amendment or supplement thereto, for a period of 15 days after the effective date of the Resale Registration Statement, subject to certain customary exceptions.
• The Issuer also agreed not to undertake any reclassifications of its Common Stock, such as a reverse or forward stock split, without the written consent of Purchasers holding a majority in interest of the shares issued or issuable to each Purchaser under the Securities Purchase Agreements, for a period of one year following the closing of the Offering, provided such consent will not be required to conduct a reverse stock split to maintain listing of the Common Stock on The Nasdaq Capital Market.

Industry Context

This announcement signifies Mill City Ventures III, Ltd.'s strategic pivot into the rapidly evolving cryptocurrency and digital asset industry, specifically targeting the Sui blockchain ecosystem. This move aligns with a broader trend of traditional companies exploring blockchain technology and digital assets for treasury management and new product offerings, aiming to capitalize on the growth and innovation within the Web3 space.

Management Changes

Corporate Governance

Related Party Transactions

• Karatage Opportunities, as a significant investor, entered into a Strategic Advisor Agreement with the Issuer to provide technical advisory services for digital asset strategies.
• Karatage Opportunities also secured an Investor Rights Agreement, granting it the right to nominate directors to the Issuer's Board, including the Chairman, based on its ownership stake.

Stakeholder Impact

• Shareholders: Potential for increased value through strategic pivot into digital assets and new capital infusion, but also dilution from the private placement.
• Management: New strategic direction and partnership with Karatage will influence operational focus and decision-making.
• Creditors: Capital raise may improve the company's financial position, potentially reducing credit risk.

Next Steps

• The Issuer is required to file a Resale Registration Statement within 10 days of the closing of the Offering.
• The Resale Registration Statement needs to be declared effective within 30 days of its filing date (or 60 days if reviewed by the SEC).
• The Lead Investor Warrants will vest over a period of 24 months, starting six months from the Issue Date, in four equal installments (25% every six months).

Key Dates

Recommendation

The filing details a substantial capital raise and a clear strategic pivot into the high-growth digital asset and cryptocurrency sector, supported by a strategic advisory agreement with Karatage Opportunities and the appointment of a new Chairman. This move positions Mill City Ventures III, Ltd. for significant potential growth and diversification, making it an attractive opportunity for investors seeking exposure to the evolving blockchain and crypto space. The lock-up agreement for Karatage also signals a long-term commitment from a key investor.

Keywords

Mill City Ventures III, Karatage Opportunities, SEC filing, Schedule 13D, Common Stock, Private Placement, Cryptocurrency, Digital Assets, SUI blockchain, Strategic Advisory, Warrants, Beneficial Ownership, Capital Raise, Corporate Governance, Investment