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As Of Filer Filing For·On·As Docs:Size Issuer Filing Agent 10/14/21 Mill City Ventures III, Ltd. 10-Q/A 6/30/21 52:5.5M Toppan Merrill/FA |
Document/Exhibit Description Pages Size
1: 10-Q/A Amendment to Quarterly Report HTML 820K
2: EX-31.1 Certification -- §302 - SOA'02 HTML 16K
3: EX-31.2 Certification -- §302 - SOA'02 HTML 16K
4: EX-32.1 Certification -- §906 - SOA'02 HTML 18K
11: R1 Document and Entity Information HTML 67K
12: R2 Condensed Balance Sheets HTML 93K
13: R3 Condensed Balance Sheets (Parenthetical) HTML 23K
14: R4 Condensed Statements of Operations (Unaudited) HTML 66K
15: R5 Condensed Statements of Shareholders Equity HTML 62K
(Unaudited)
16: R6 Condensed Statements of Cash Flows (Unaudited) HTML 69K
17: R7 Condensed Schedule of Investments HTML 108K
18: R8 Organization HTML 19K
19: R9 Significant Accounting Policies HTML 37K
20: R10 Investments HTML 102K
21: R11 Fair Value of Financial Instruments HTML 181K
22: R12 Related-Party Transactions HTML 19K
23: R13 Income Taxes HTML 22K
24: R14 Shareholders' Equity HTML 22K
25: R15 Per-Share Information HTML 39K
26: R16 Operating Leases HTML 47K
27: R17 Financial Highlights HTML 86K
28: R18 General Uncertainty HTML 17K
29: R19 Subsequent Events HTML 18K
30: R20 Significant Accounting Policies (Policies) HTML 59K
31: R21 Investments (Tables) HTML 103K
32: R22 Fair Value of Financial Instruments (Tables) HTML 185K
33: R23 Per-Share Information (Tables) HTML 38K
34: R24 Operating Leases (Tables) HTML 49K
35: R25 Financial Highlights (Tables) HTML 86K
36: R26 Significant Accounting Policies (Details) HTML 22K
37: R27 INVESTMENTS Composition of our investments by HTML 56K
major class (Details)
38: R28 Fair Value of Financial Instruments (Details) HTML 63K
39: R29 Related-Party Transactions (Details) HTML 25K
40: R30 Income Taxes (Details) HTML 31K
41: R31 Shareholders' Equity (Details) HTML 25K
42: R32 Per-Share Information (Details) HTML 36K
43: R33 OPERATING LEASES - Additional Information HTML 24K
(Details)
44: R34 OPERATING LEASES - components of our operating HTML 24K
lease (Details)
45: R35 OPERATING LEASES - Supplemental balance sheet HTML 21K
information (Details)
46: R36 OPERATING LEASES - Maturity analysis under lease HTML 26K
agreements (Details)
47: R37 Financial Highlights (Details) HTML 57K
48: R38 Subsequent Events (Details) HTML 21K
50: XML IDEA XML File -- Filing Summary XML 88K
10: XML XBRL Instance -- mcvt-20210630x10qa_htm XML 1.57M
49: EXCEL IDEA Workbook of Financial Reports XLSX 58K
6: EX-101.CAL XBRL Calculations -- mcvt-20210630_cal XML 95K
7: EX-101.DEF XBRL Definitions -- mcvt-20210630_def XML 198K
8: EX-101.LAB XBRL Labels -- mcvt-20210630_lab XML 713K
9: EX-101.PRE XBRL Presentations -- mcvt-20210630_pre XML 492K
5: EX-101.SCH XBRL Schema -- mcvt-20210630 XSD 112K
51: JSON XBRL Instance as JSON Data -- MetaLinks 221± 313K
52: ZIP XBRL Zipped Folder -- 0001104659-21-126207-xbrl Zip 152K
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM i 10-Q/A
(Mark One)
| |
i ☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended i June 30, 2021 |
or
| |
i ☐ | 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 i 811-22778
i MILL CITY VENTURES III, LTD.
(Exact name of registrant as specified in its charter)
i Minnesota |
| i 90-0316651 |
(State or other jurisdiction of incorporation or organization) |
| (I.R.S. Employer Identification No.) |
|
|
|
i 1907 Wayzata Blvd, i #205, i Wayzata, i Minnesota |
| i 55391 |
(Address of principal executive offices) |
| (Zip Code) |
( i 952) i 479-1923
(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
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. ⌧ i Yes ◻ No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, 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). ⌧ i Yes ◻ No
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 ◻ |
i Non-accelerated filer ⌧ | Smaller reporting company i ☒ |
| Emerging growth company i ☐ |
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). i ☐ Yes ⌧ No
As of October 8, 2021, Mill City Ventures III, Ltd. had i 10,790,413 shares of common stock, and no other classes of capital stock, outstanding.
NOTE OF EXPLANATION
i This Amendment No. 1 to the Quarterly Report on Form 10-Q (this “Amendment”) of Mill City Ventures III, Ltd. (the “Company”) amends the Company’s Quarterly Report on Form 10-Q for the three-month period ended June 30, 2021 originally filed with the SEC on August 16, 2021. The Company is filing this Amendment to (i) include the inline XBRL files required as Exhibit 101, and (ii) update the Exhibit Index (Part II, Item 6). In addition, new Section 302 and 907 certifications are being filed with this Amendment, as required under Rule 12b- 15 under the Securities Exchange of 1934. No other changes to the report, including the financial statements and accompanying notes thereto, are being made pursuant to this Amendment.
MILL CITY VENTURES III, LTD.
Index to Form 10-Q
for the Quarter Ended June 30, 2021
- 2 -
PART I. FINANCIAL INFORMATION
ITEM 1.FINANCIAL STATEMENTS
MILL CITY VENTURES III, LTD.
CONDENSED BALANCE SHEETS
| | | | | | |
|
|
| | | ||
|
| (unaudited) |
| |||
ASSETS | |
| | |
| |
Investments, at fair value: | | $ | i 13,133,933 | | $ | i 6,667,897 |
Non-control/non-affiliate investments (cost: $ i 11,864,762 and $ i 4,968,576 respectively) | |
|
| |
|
|
Cash | |
| i 1,515,005 | |
| i 5,440,579 |
Note receivable | |
| i 250,000 | |
| i 250,000 |
Prepaid expenses | |
| i 188,838 | |
| i 43,838 |
Receivable for sale of investments | |
| i 94,778 | |
| i 19,313 |
Interest and dividend receivables | |
| i 331,415 | |
| i 65,911 |
Right-of-use lease asset | |
| i 14,279 | |
| i 23,345 |
Total Assets | | $ | i 15,528,248 | | $ | i 12,510,883 |
| | | | | | |
LIABILITIES | |
|
| |
|
|
Accounts payable | | $ | i 40,687 | | $ | i 32,917 |
Dividend payable | |
| — | |
| i 539,296 |
Lease liability | |
| i 15,973 | |
| i 26,061 |
Accrued income tax expense | |
| i 920,000 | |
| i 13,722 |
Deferred taxes | |
| i 363,000 | |
| i 258,000 |
Total Liabilities | |
| i 1,339,660 | |
| i 869,996 |
Commitments and Contingencies | |
|
| |
|
|
| | | | | | |
SHAREHOLDERS EQUITY (NET ASSETS) | |
|
| |
|
|
Common stock, par value $ i i 0.001 / per share ( i i 250,000,000 / authorized; i 10,790,413 and i 10,785,913 outstanding) | |
| i 10,790 | |
| i 10,786 |
Additional paid-in capital | |
| i 10,694,163 | |
| i 10,673,014 |
Accumulated deficit | |
| ( i 1,159,665) | |
| ( i 1,159,665) |
Accumulated undistributed investment loss | |
| ( i 2,697,320) | |
| ( i 2,124,419) |
Accumulated undistributed net realized gains on investment transactions | |
| i 6,071,449 | |
| i 2,541,850 |
Net unrealized appreciation in value of investments | |
| i 1,269,171 | |
| i 1,699,321 |
Total Shareholders' Equity (Net Assets) | |
| i 14,188,588 | |
| i 11,640,887 |
Total Liabilities and Shareholders' Equity | | $ | i 15,528,248 | | $ | i 12,510,883 |
Net Asset Value Per Common Share | | $ | i 1.31 | | $ | i 1.08 |
See accompanying Notes to Financial Statements
- 3 -
MILL CITY VENTURES III, LTD.
CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)
| | | | | | | | | | | | |
|
| Three Months Ended |
| Six Months Ended | ||||||||
| | June 30, | | June 30, | | June 30, | | |||||
|
| 2021 |
| 2020 |
| 2021 |
| 2020 | ||||
Investment Income |
| |
|
| |
|
| |
|
| |
|
Interest income | | $ | i 675,549 | | $ | i 276,425 | | $ | i 1,222,391 | | $ | i 454,670 |
Dividend income | |
| — | |
| i 7,031 | |
| — | |
| i 13,765 |
Total Investment Income | |
| i 675,549 | |
| i 283,456 | |
| i 1,222,391 | |
| i 468,435 |
Operating Expenses | |
|
| |
|
| |
|
| |
|
|
Professional fees | |
| i 77,539 | |
| i 90,529 | |
| i 220,347 | |
| i 74,297 |
Payroll | |
| i 85,346 | |
| i 58,080 | |
| i 387,426 | |
| i 116,577 |
Insurance | |
| i 27,854 | |
| i 20,668 | |
| i 52,133 | |
| i 41,121 |
Occupancy | |
| i 16,337 | |
| i 16,569 | |
| i 33,026 | |
| i 33,131 |
Director's fees | |
| i 30,000 | |
| i 22,500 | |
| i 60,000 | |
| i 45,000 |
Depreciation and amortization | |
| — | |
| i 644 | |
| — | |
| i 1,287 |
Other general and administrative | |
| i 13,080 | |
| i 4,920 | |
| i 31,082 | |
| i 7,889 |
Total Operating Expenses | |
| i 250,156 | |
| i 213,910 | |
| i 784,014 | |
| i 319,302 |
Net Investment Gain | |
| i 425,393 | |
| i 69,546 | |
| i 438,377 | | $ | i 149,133 |
Realized and Unrealized Gain on Investments | |
|
| |
|
| |
|
| |
|
|
Net realized gain on investments | |
| i 621,600 | |
| i 175,222 | |
| i 3,529,599 | |
| i 199,724 |
Net change in unrealized appreciation (depreciation) on investments | |
| i 83,100 | |
| i 348,602 | |
| ( i 430,150) | |
| ( i 37,405) |
Net Realized and Unrealized Gain on Investments | |
| i 704,700 | |
| i 523,824 | |
| i 3,099,449 | |
| i 162,319 |
Net Increase in Net Assets Resulting from Operations Before Taxes | | $ | i 1,130,093 | | $ | i 593,370 | | $ | i 3,537,826 | | $ | i 311,452 |
Provision for Income Taxes | |
| i 348,587 | |
| — | |
| i 1,011,278 | |
| — |
Net Increase in Net Assets Resulting from Operations | | $ | i 781,506 | | $ | i 593,370 | | $ | i 2,526,548 | |
| i 311,452 |
Net Increase in Net Assets Resulting from Operations per share: | |
|
| |
|
| |
|
| |
|
|
Basic and diluted | | $ | i 0.07 | | $ | i 0.05 | | $ | i 0.23 | | $ | i 0.03 |
Weighted-average number of common shares outstanding - basic and diluted | |
| i 10,790,413 | |
| i 10,882,039 | |
| i 10,788,175 | |
| i 10,974,721 |
See accompanying Notes to Financial Statements
- 4 -
MILL CITY VENTURES III, LTD.
CONDENSED STATEMENTS OF SHAREHOLDERS’ EQUITY (UNAUDITED)
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | Net | | | | |
| | | | | | | | | | | | | | | | Accumulated | | Unrealized | | | | ||
| | | | | | | | | | | | | Accumulated | | Undistributed | | Appreciation | | | | |||
| | | | | | | | | | | | | Undistributed | | Net | | (Depreciation) | | | | |||
| | | | | | | Additional | | | | | Net | | Realized Gain on | | in value | | Total | |||||
| | Common | | Par | | Paid In | | Accumulated | | Investment | | Investments | | of | | Shareholders' | |||||||
Three Months Ended June 30, 2021 |
| Shares |
| Value |
| Capital |
| Deficit |
| Loss |
| Transactions |
| Investments |
| Equity | |||||||
Balance as of March 31, 2021 | | i 10,786,913 | | $ | i 10,787 | | $ | i 10,678,763 | | $ | ( i 1,159,665) | | $ | ( i 2,774,126) | | $ | i 5,449,849 | | $ | i 1,186,071 | | $ | i 13,391,679 |
Common shares issued in consideration for expense payment |
| i 3,500 |
| | i 3 |
| | i 15,400 |
| | — |
| | — |
| | — |
| | — |
| | i 15,403 |
Undistributed net investment gain |
| — |
| | — |
| | — |
| | — |
| | i 76,806 |
| | — |
| | — |
| | i 76,806 |
Undistributed net realized gain on investment transactions |
| — |
| | — |
| | — |
| | — |
| | — |
| | i 621,600 |
| | — |
| | i 621,600 |
Appreciation in value of investments |
| — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | i 83,100 |
| | i 83,100 |
Balance as of June 30, 2021 |
| i 10,790,413 | | $ | i 10,790 | | $ | i 10,694,163 | | $ | ( i 1,159,665) | | $ | ( i 2,697,320) | | $ | i 6,071,449 | | $ | i 1,269,171 | | $ | i 14,188,588 |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | Accumulated | | Net Unrealized | | | | ||
| | | | | | | | | | | | | | | | Undistributed | | Appreciation | | | | ||
| | | | | | | | | | | | | Accumulated | | Net Realized Gain | | (Depreciation) | | Total | ||||
| | Common | | | | | Additional | | Accumulated | | Undistributed | | on Investments | | in value of | | Shareholders' | ||||||
Three Months Ended June 30, 2020 |
| Shares |
| Par Value |
| Paid In Capital |
| Deficit |
| Net Investment Loss |
| Transactions |
| Investments |
| Equity | |||||||
Balance as of March 31, 2020 | | i 11,067,402 | | $ | i 11,067 | | $ | i 10,774,653 | | $ | ( i 1,159,665) | | $ | ( i 2,318,278) | | $ | i 3,100,318 | | $ | ( i 621,480) | | $ | i 9,786,615 |
Repurchase of shares | | ( i 370,667) | | | ( i 371) | | | ( i 157,896) | | | — | | | — | | | — | | | — | |
| ( i 158,267) |
Undistributed net investment loss |
| |
| | — |
| | — |
| | — |
| | i 69,546 |
| | — |
| | — |
| | i 69,546 |
Undistributed net realized gain on investment transactions |
| |
| | — |
| | — |
| | — |
| | — |
| | i 175,222 |
| | — |
| | i 175,222 |
Appreciation in value of investments |
| |
| | — |
| | — |
| | — |
| | — |
| | — |
| | i 348,602 |
| | i 348,602 |
Balance as of June 30, 2020 |
| i 10,696,735 | | $ | i 10,696 | | $ | i 10,616,757 | | $ | ( i 1,159,665) | | $ | ( i 2,248,732) | | $ | i 3,275,540 | | $ | ( i 272,878) | | $ | i 10,221,718 |
- 5 -
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | Accumulated | | | | | | | |
| | | | | | | | | | | | | Accumulated | | Undistributed | | Net | | | | |||
| | | | | | | | | | | | | Undistributed | | Net | | Unrealized | | | | |||
| | | | | | | Additional | | | | | Net | | Realized Gain on | | Appreciation | | Total | |||||
| | Common | | Par | | Paid In | | Accumulated | | Investment | | Investments | | in value of | | Shareholders' | |||||||
Six Months Ended June 30, 2021 |
| Shares |
| Value |
| Capital |
| Deficit |
| Loss |
| Transactions |
| Investments |
| Equity | |||||||
Balance as of December 31, 2020 | | i 10,785,913 | | $ | i 10,786 | | $ | i 10,673,014 | | $ | ( i 1,159,665) | | $ | ( i 2,124,419) | | $ | i 2,541,850 | | $ | i 1,699,321 | | $ | i 11,640,887 |
Issuance of shares | | i 4,500 | | | i 4 | | | i 21,149 | | | — | | | — | | | | |
| | |
| i 21,153 |
Undistributed net investment loss | | — | | | — | | | — | | | — | | | ( i 572,901) | | | — | | | — | |
| ( i 572,901) |
Undistributed net realized loss on investment transactions | | — | | | — | | | — | | | — | | | — | | | i 3,529,599 | | | — | |
| i 3,529,599 |
Depreciation in value of investments | | — | | | — | | | — | | | — | | | — | | | — | | | ( i 430,150) | |
| ( i 430,150) |
Balance as of June 30, 2021 |
| i 10,790,413 | | $ | i 10,790 | | $ | i 10,694,163 | | $ | ( i 1,159,665) | | $ | ( i 2,697,320) | | $ | i 6,071,449 | | $ | i 1,269,171 | | $ | i 14,188,588 |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | Accumulated | | | | | | | |
| | | | | | | | | | | | | Accumulated | | Undistributed Net | | | Net Unrealized | | | | ||
| | | | | | | Additional | | | | | Undistributed | | Realized Gain | | Appreciation | | Total | |||||
| | Common | | | | | Paid | | Accumulated | | Net Investment | | on Investments | | in value | | Shareholders' | ||||||
Six Months Ended June 30, 2020 |
| Shares |
| Par Value |
| In Capital |
| Deficit |
| Loss |
| Transactions |
| of Investments |
| Equity | |||||||
Balance as of December 31, 2019 | | i 11,067,402 | | $ | i 11,067 | | $ | i 10,774,653 | | $ | ( i 1,159,665) | | $ | ( i 2,397,865) | | $ | i 3,075,816 | | $ | ( i 235,473) | | $ | i 10,068,533 |
Repurchase of shares | | ( i 370,667) | | | ( i 371) | | | ( i 157,896) | | | — | | | — | | | — | | | — | |
| ( i 158,267) |
Undistributed net investment loss |
| |
| | — |
| | — |
| | — |
| | i 149,133 |
| | — |
| | — |
| | i 149,133 |
Undistributed net realized loss on investment transactions |
| |
| | — |
| | — |
| | — |
| | — |
| | i 199,724 |
| | — |
| | i 199,724 |
Depreciation in value of investments |
| |
| | — |
| | — |
| | — |
| | — |
| | — |
| | ( i 37,405) |
| | ( i 37,405) |
Balance as of June 30, 2020 |
| i 10,696,735 | | $ | i 10,696 | | $ | i 10,616,757 | | $ | ( i 1,159,665) | | $ | ( i 2,248,732) | | $ | i 3,275,540 | | $ | ( i 272,878) | | $ | i 10,221,718 |
See accompanying Notes to Financial Statements
- 6 -
MILL CITY VENTURES III, LTD.
CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
| | | | | | |
|
| Six Months Ended | ||||
| | |
| | ||
Cash flows from operating activities: |
| |
|
| |
|
Net increase (decrease) in net assets resulting from operations | | $ | i 2,526,548 | | $ | i 311,452 |
Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net cash provided (used) in operating activities: | |
|
| |
|
|
Net change in unrealized depreciation on investments | |
| i 430,150 | |
| i 37,405 |
Net realized gain on investments | |
| ( i 3,529,599) | |
| ( i 199,724) |
Purchases of investments | |
| ( i 13,250,664) | |
| ( i 6,217,296) |
Proceeds from sales of investments | |
| i 9,889,827 | |
| i 1,192,824 |
Depreciation & amortization expense | |
| — | |
| i 1,287 |
Deferred income taxes | |
| i 1,011,278 | |
| — |
Common shares issued as consideration for expense payment | |
| i 15,403 | |
| — |
Changes in operating assets and liabilities: | |
|
| |
|
|
Prepaid expenses and other assets | |
| ( i 135,934) | |
| ( i 32,007) |
Interest and dividends receivable | |
| ( i 265,504) | |
| ( i 62,644) |
Receivable for investment sales | |
| ( i 75,465) | |
| ( i 158,649) |
Payable for investment purchase | |
| — | |
| i 1,680,000 |
Accounts payable and other liabilities | |
| ( i 2,318) | |
| ( i 10,047) |
Deferred interest income | |
| — | |
| — |
Payable for investment purchase | |
| — | |
| — |
Net cash used in operating activities | |
| ( i 3,386,278) | |
| ( i 3,457,399) |
Cash flows from financing activities: | |
|
| |
|
|
Payments for repurchase of common stock | |
| — | |
| ( i 158,267) |
Payments for common stock dividend | |
| ( i 539,296) | |
| — |
Net cash used by financing activities | |
| ( i 539,296) | |
| ( i 158,267) |
Net decrease in cash | |
| ( i 3,925,574) | |
| ( i 3,615,666) |
Cash, beginning of period | |
| i 5,440,579 | |
| i 8,066,656 |
Cash, end of period | | $ | i 1,515,005 | | $ | i 4,450,990 |
| | | | | | |
Non-cash financing activities: | |
|
| |
|
|
Common shares issued as consideration for investment | | $ | i 5,750 | |
| — |
See accompanying Notes to Financial Statements
- 7 -
MILL CITY VENTURES III, LTD.
CONDENSED SCHEDULE OF INVESTMENTS
| | | | | | | | | |
| | | | | | | | Percentage |
|
| | | | | | | | of Net | |
Investment / Industry |
| Cost |
| Fair Value |
| Assets | | ||
Short-Term Non-banking Loans | |
| | |
| | |
|
|
Consumer - 20% secured loans | | $ | i 400,000 | | $ | i 400,000 |
| i 2.82 | % |
Financial - 47% secured loans | |
|
| |
|
|
|
| |
Benton Financial, LLC | |
| i 1,133,333 | |
| i 1,133,333 |
| i 7.99 | % |
Financial - 44% secured loans | |
|
| |
|
|
|
| |
Benton Financial, LLC | |
| i 840,000 | |
| i 840,000 |
| i 5.92 | % |
Financial - 42% secured loans | |
| i 313,333 | |
| i 313,333 |
| i 2.21 | % |
Financial - 40% secured loans | |
|
| |
|
|
|
| |
Benton Financial, LLC | |
| i 1,333,334 | |
| i 1,333,334 |
| i 9.40 | % |
Financial - 34% secured loans | |
| i 293,333 | |
| i 293,333 |
| i 2.07 | % |
Financial - 12% secured loans | |
| i 500,000 | |
| i 500,000 |
| i 3.52 | % |
Litigation Financing - 23% secured loans | |
|
| |
|
|
|
| |
The Cross Law Firm, LLC | |
| i 1,805,750 | |
| i 1,800,000 |
| i 12.68 | % |
Real Estate - 15% secured loans | |
|
| |
|
|
|
| |
Alatus Development, LLC | |
| i 1,250,000 | |
| i 1,250,000 |
| i 8.81 | % |
Real Estate - 12% secured loans | |
|
| |
|
|
|
| |
Tailwinds, LLC | |
| i 3,000,000 | |
| i 3,000,000 |
| i 21.14 | % |
Total Short-Term Non-Banking Loans | |
| i 10,869,083 | |
| i 10,863,333 |
| i 76.56 | % |
| | | | | | | | | |
Common Stock | |
|
| |
|
|
|
| |
Consumer | |
|
| |
|
|
|
| |
Ammo, Inc. | |
| i 245,000 | |
| i 1,370,600 |
| i 9.66 | % |
| | | | | | | | | |
Preferred Stock | |
|
| |
|
|
|
| |
Information Technology | |
| i 150,000 | |
| i 300,000 |
| i 2.11 | % |
| | | | | | | | | |
Warrants | |
|
| |
|
|
|
| |
Healthcare | |
| i 679 | |
| — |
| i 0.00 | % |
| | | | | | | | | |
Other Equity | |
|
| |
|
|
|
| |
Financial | |
| i 600,000 | |
| i 600,000 |
| i 4.23 | % |
| | | | | | | | | |
Total Investments | | $ | i 11,864,762 | | $ | i 13,133,933 |
| i 92.56 | % |
| | | | | | | | | |
Total Cash | |
| i 1,515,005 | |
| i 1,515,005 |
| i 10.68 | % |
| | | | | | | | | |
Total Investments and Cash | | $ | i 13,379,767 | | $ | i 14,648,938 |
| i 103.24 | % |
See accompanying Notes to the Financial Statements
- 8 -
MILL CITY VENTURES III, LTD.
SCHEDULE OF INVESTMENTS
| | | | | | | | | |
| | | | | | | | Percentage | |
| | | | | | | | of Net | |
Investment / Industry |
| Cost |
| Fair Value |
| Assets |
| ||
Short-Term Non-banking Loans | |
| | |
| | |
|
|
Consumer - 20% secured loans | | $ | i 400,000 | | $ | i 400,000 |
| i 3.44 | % |
Financial - 44% secured loans | |
| i 400,000 | |
| i 400,000 |
| i 3.44 | % |
Financial - 36% secured loans | |
| i 500,000 | |
| i 500,000 |
| i 4.30 | % |
Real Estate - 15% secured loans | |
|
| |
|
|
|
| |
Alatus Development, LLC | |
| i 1,250,000 | |
| i 1,250,000 |
| i 10.74 | % |
Other | |
| i 239,000 | |
| i 239,000 |
| i 2.05 | % |
Total Short-Term Non-Banking Loans | |
| i 2,789,000 | |
| i 2,789,000 |
| i 23.97 | % |
| | | | | | | | | |
Common Stock | |
|
| |
|
|
|
| |
Consumer | |
|
| |
|
|
|
| |
Ammo, Inc. | |
| i 1,750,000 | |
| i 3,300,000 |
| i 28.34 | % |
| | | | | | | | | |
Preferred Stock | |
|
| |
|
|
|
| |
Information Technology | |
| i 150,000 | |
| i 300,000 |
| i 2.58 | % |
| | | | | | | | | |
Warrants | |
|
| |
|
|
|
| |
Healthcare | |
| i 679 | |
| — |
| i 0.00 | % |
| | | | | | | | | |
Other Equity | |
|
| |
|
|
|
| |
Leisure & Hospitality | |
| i 278,897 | |
| i 278,897 |
| i 2.40 | % |
| | | | | | | | | |
Total Investments | | $ | i 4,968,576 | | $ | i 6,667,897 |
| i 57.30 | % |
| | | | | | | | | |
Total Cash | |
| i 5,440,579 | |
| i 5,440,579 |
| i 46.74 | % |
| | | | | | | | | |
Total Investments and Cash | | $ | i 10,409,155 | | $ | i 12,108,476 |
| i 104.04 | % |
- 9 -
NOTE 1 – ORGANIZATION
In this report, we generally refer to Mill City Ventures III, Ltd. in the first person “we.” On occasion, we refer to our company in the third person as “Mill City Ventures” or the “Company.” The Company follows accounting and reporting guidance in Accounting Standards (“ASC”) 946.
We were incorporated in Minnesota in January 2006. Until December 13, 2012, we were a development-stage company that focused on promoting and placing a proprietary poker game online and into casinos and entertainment facilities nationwide. In 2013, we elected to become a business development company (“BDC”) under the Investment Company Act of 1940 (the “1940 Act”). We operated as a BDC until we withdrew our BDC election on December 27, 2019. As of the time of this filing, we remain a public reporting company that files periodic reports with the SEC. We offer short-term specialty finance solutions primarily to private businesses, small-cap public companies and high-net-worth individuals. To avoid regulation under the 1940 Act, we generally seek to structure our investments so they do not constitute “investment securities” for purposes of federal securities law, and we monitor our investments as a whole to ensure that no more than 40% of our total assets may consist of investment securities.
iNOTE 2 – SIGNIFICANT ACCOUNTING POLICIES
iBasis of presentation: The accompanying unaudited condensed financial statements of Mill City Ventures have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States (GAAP) for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the quarter ended June 30, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021.
The condensed balance sheet as of December 31, 2020 has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by GAAP for complete financial statements. For further information, refer to the financial statements and footnotes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2020.
iUse of estimates: The preparation of financial statements in conformity with GAAP requires management and our Board of Directors 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. Actual results could differ from those estimates, and the differences could be material. For more information, see the “Valuation of portfolio investments” caption below, and “Note 4 – Fair Value of Financial Instruments” below. The Company is an investment company following accounting and reporting guidance in ASC 946.
iCash deposits: We maintain our cash balances in financial institutions and with regulated financial investment brokers. Cash on deposit in excess of FDIC and similar coverage is subject to the usual banking risk of funds in excess of those limits.
iValuation of investments: We carry our investments in accordance with ASC Topic 820, Fair Value Measurements and Disclosures (“ASC 820”), issued by the Financial Accounting Standards Board (“FASB”), which defines fair value, establishes a framework for measuring fair value, and requires disclosures about fair value measurements. Fair value is generally based on quoted market prices provided by independent pricing services, broker or dealer quotations, or alternative price sources. In the absence of quoted market prices, broker or dealer quotations, or alternative price sources, investments are measured at fair value as determined by our Board of Directors, or by the Valuation Committee of our Board of Directors, based on, among other things, the input of our executive management, the Audit Committee of our Board of Directors, and any independent third-party valuation experts that may be engaged by management to assist in the valuation of our investments, but in all cases consistent with our written valuation policies and procedures.
Due to the inherent uncertainties of valuation, certain estimated fair values may differ significantly from the values that would have been realized had a ready market for these investments existed, and these differences could be material. In addition, such investments are generally less liquid than publicly traded securities. If we were required to liquidate an investment in a forced or liquidation sale, we could realize significantly less than the value at which we have recorded it.
/- 10 -
Accounting guidance establishes a hierarchal disclosure framework that prioritizes and ranks the level of market price observability of inputs used in measuring investments at fair value. Observable inputs must be used when available. Observable inputs are inputs that market participants would use in valuing the asset or liability based on market data obtained from independent sources. Unobservable inputs are inputs that reflect our assumptions about the factors market participants would use in valuing the asset or liability based upon the best information available. Assets and liabilities measured at fair value are to be categorized into one of the three hierarchy levels based on the relative observability of inputs used in the valuation. The three levels are defined as follows:
| ● | Level 1: Observable inputs based on quoted prices (unadjusted) in active markets for identical assets or liabilities. |
| ● | Level 2: Observable inputs based on quoted prices for similar assets and liabilities in active markets, or quoted prices for identical assets and liabilities in inactive markets. |
| ● | Level 3: Unobservable inputs that reflect an entity’s own assumptions about what inputs a market participant would use in pricing the asset or liability based on the best information available in the circumstances. |
Our valuation policy and procedures: Under our valuation policies and procedures, we evaluate the source of inputs, including any markets in which our investments are trading, and then apply the resulting information in determining fair value. For our Level 1 investment assets, our valuation policy generally requires us to use a market approach, considering the last quoted closing price of a security we own that is listed on a securities exchange, and in a case where a security we own is listed on an over-the-counter market, to average the last quoted bid and ask price on the most active market on which the security is quoted. In the case of traded debt securities the prices for which are not readily available, we may value those securities using a present value approach, at their weighted-average yield to maturity.
The estimated fair value of our Level 3 investment assets is determined on a quarterly basis by our Board of Directors, pursuant to our written Valuation Policy and Procedures. These policies and procedures generally require that we value our Level 3 equity investments at fair market value, unless circumstances warrant a different approach. Our Valuation Policy and Procedures provide examples of these circumstances, such as when a company in which we have invested has engaged in a subsequent financing of more than a de minimis size involving sophisticated investors (in which case we may use the price involved in that financing as a determinative input absent other known factors), or when a company is engaged in the process of a transaction that we determine is reasonably likely to occur (in which case we may use the price involved in the pending transaction as a determinative input absent other known factors). Other situations identified in our Valuation Policy and Procedures that may serve as input supporting a change in the valuation of our Level 3 equity investments include (i) a third-party valuation conducted by an independent and qualified professional, (ii) changes in the performance of long-term financial prospects of the company, (iii) a subsequent financing that changes the distribution rights associated with the equity security we hold, or (iv) sale transactions involving comparable companies, but only if further supported by a third-party valuation conducted by an independent and qualified professional.
When valuing preferred equity investments, we generally view intrinsic value as a key input. Intrinsic value means the value of any conversion feature (if the preferred investment is convertible) or the value of any liquidation or other preference. Discounts to intrinsic value may be applied in cases where the issuer’s financial condition is impaired or, in cases where intrinsic value relating to a conversion is determined to be a key input, to account for resale restrictions applicable to the securities issuable upon conversion.
When valuing warrants, our Valuation Policy and Procedures indicate that value will generally be the difference between closing price of the underlying equity security and the exercise price, after applying an appropriate discount for restriction, if applicable, in situations where the underlying security is marketable. If the underlying security is not marketable, then intrinsic value will be considered consistent with the principles described above. Generally, “out-of-the-money” warrants will be valued at cost or zero.
For non-traded (Level 3) debt investments with a residual maturity less than or equal to 60 days, the value will generally be based on a present value approach, considering the straight-line amortized face value of the debt unless justification for impairment exists. The fair value for short-term non-banking loans is determined as the present value of future contractual cash flows discounted at an interest rate that reflects the risks inherent to those cash flows. The discount ranges from i 14% to i 47% and approximate rates currently observed in publicly traded debt markets for debt of similar terms to companies with comparable credit risk.
/- 11 -
On a quarterly basis, our management provides members of our Board of Directors with (i) valuation reports for each investment (which reports include our cost, the most recent prior valuation and any current proposed valuation, and an indication of the valuation methodology used, together with any other supporting materials); (ii) Mill City Ventures’ bank and other statements pertaining to our cash and cash equivalents; (iii) quarter- or period-end statements from our custodial firms holding any of our investments; and (iv) recommendations to change any existing valuations of our investments or hierarchy levels for purposes of determining the fair value of such investments based upon the foregoing. The board or committee then discusses these materials and, consistent with the policies and approaches outlined above, makes final determinations respecting the valuation and hierarchy levels of our investments.
We made no changes to our Valuation Policy and Procedures during the reporting period other than to have our entire Board of Directors involved in implementing and discharging those policies and procedures.
iIncome taxes:
We account for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial statement carrying amount and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.
We record net deferred tax assets to the extent we believe these assets will more likely than not be realized. In making such determination, we consider all available evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies and recent financial operations. In the event we were to determine we would be able to realize our deferred income tax assets in the future in excess of their recorded amount, we would make an adjustment to the valuation allowance, which would reduce the provision for income taxes.
We file income tax returns in the U.S. Federal jurisdiction and various state jurisdictions. The Company does not believe there will be any material changes in its unrecognized tax positions over the next 12 months. Our evaluation was performed for the tax years ended December 31, 2017 through 2020, which are the tax years that remain subject to examination by major tax jurisdictions as of June 30, 2021.
iRevenue recognition: Realized gains or losses on the sale of investments are calculated using the specific investment method.
Interest income, adjusted for amortization of premiums and accretion of discounts, is recorded on an accrual basis. Discounts from and premiums to par value on securities or other instruments purchased are accreted or amortized, as applicable, into interest income over the life of the related security using the effective-yield method. The amortized cost of investments represents the original cost, adjusted for the accretion of discounts and amortization of premiums, if any. Loans are generally placed on non-accrual status when principal or interest payments are past due 30 days or more, or when there is reasonable doubt that principal or interest will be collected in full. Loan origination fees are recognized when loans are issued. Accrued and unpaid interest is generally reversed when a loan is placed on non-accrual status. Interest payments received on non-accrual loans may be recognized as income or applied to principal depending upon management’s judgment regarding collectability. Non-accrual loans are restored to accrual status when past-due principal and interest is paid and, in management’s judgment, are likely to remain current. We may make exceptions to the policy described above if a loan has sufficient collateral value and is in the process of collection.
Dividend income on preferred equity securities is recorded as dividend income on an accrual basis to the extent that such amounts are payable by a company in which we have invested and are expected to be collected. Dividend income on common equity securities is recorded on the record date for private companies or on the ex-dividend date for publicly traded companies.
Certain investments may have contractual payment-in-kind (“PIK”) interest or dividends. PIK represents accrued interest or accumulated dividends that are added to the loan principal or stated value of the investment on the respective interest- or dividend-payment dates rather than being paid in cash, and generally becomes due at maturity or upon being repurchased by the issuer. PIK interest or dividends is recorded as interest or dividend income, as applicable. If at any point we believe that PIK interest or dividends is not expected be realized, the PIK-generating investment will be placed on non-accrual status. Accrued PIK interest or dividends are generally reversed through interest or dividend income, respectively, when an investment in placed on non-accrual status.
iAllocation of net gains and losses: All income, gains, losses, deductions and credits for any investment are allocated in a manner proportionate to the shares owned.
- 12 -
Recently adopted accounting pronouncements
In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740)—Simplifying the Accounting for Income Taxes. ASU 2019-12 is intended to simplify accounting for income taxes. It removes certain exceptions to the general principles in Topic 740 and amends existing guidance to improve consistent application. ASU 2019-12 is effective for fiscal years beginning after December 15, 2020 and interim periods within those fiscal years, which is fiscal 2021 for us, with early adoption permitted. The adoption of the ASU effective January 1, 2021 did not have a material impact on the Company’s financial statements.
iNOTE 3 – INVESTMENTS
iThe following table shows the composition of our investments by major class, at amortized cost and fair value, as of June 30, 2021 (together with the corresponding percentage of the fair value of our total investments):
| | | | | | | | | | | |
|
| As of June 30, 2021 |
| ||||||||
|
| Investments at |
| Percentage of |
| Investments at |
| Percentage of |
| ||
|
| Amortized Cost |
| Amortized Cost |
| Fair Value |
| Fair Value | | ||
Short-term Non-banking Loans | | $ | i 10,869,083 |
| i 91.6 | % | $ | i 10,863,333 |
| i 82.7 | % |
Preferred Stock | |
| i 150,000 |
| i 1.3 | |
| i 300,000 |
| i 2.3 | |
Common Stock | |
| i 245,000 |
| i 2.1 | |
| i 1,370,600 |
| i 10.4 | |
Warrants | |
| i 679 |
| — | |
| — |
| — | |
Other Equity | |
| i 600,000 |
| i 5.0 | |
| i 600,000 |
| i 4.6 | |
Total | | $ | i 11,864,762 |
| i 100.0 | % | $ | i 13,133,933 |
| i 100.0 | % |
The following table shows the composition of our investments by major class, at amortized cost and fair value, as of December 31, 2020 (together with the corresponding percentage of the fair value of our total investments):
| | | | | | | | | | | |
| | As of December 31, 2020 |
| ||||||||
|
| Investments at |
| Percentage of |
| Investments at |
| Percentage of |
| ||
|
| Amortized Cost |
| Amortized Cost |
| Fair Value |
| Fair Value | | ||
Short-term Non-banking Loans | | $ | i 2,789,000 |
| i 56.2 | % | $ | i 2,789,000 |
| i 41.8 | % |
Preferred Stock | |
| i 150,000 |
| i 3.0 | |
| i 300,000 |
| i 4.5 | |
Common Stock | |
| i 1,750,000 |
| i 35.2 | |
| i 3,300,000 |
| i 49.5 | |
Warrants | |
| i 679 |
| — | |
| — |
| — | |
Other Equity | |
| i 278,897 |
| i 5.6 | |
| i 278,897 |
| i 4.2 | |
Total | | $ | i 4,968,576 |
| i 100.0 | % | $ | i 6,667,897 |
| i 100.0 | % |
/ iThe following table shows the composition of our investments by industry grouping, based on fair value as of June 30, 2021:
| | | | | | |
|
| As of June 30, 2021 |
| |||
|
| Investments at |
| Percentage of |
| |
|
| Fair Value |
| Fair Value | | |
Consumer | | $ | i 1,770,600 |
| i 13.5 | % |
Financial | |
| i 6,813,333 |
| i 51.8 | |
Information Technology | |
| i 300,000 |
| i 2.3 | |
Real Estate | |
| i 4,250,000 |
| i 32.4 | |
| |
| — |
| — | |
Total | | $ | i 13,133,933 |
| i 100.0 | % |
/ /- 13 -
The following table shows the composition of our investments by industry grouping, based on fair value as of December 31, 2020:
| | | | | | |
| | As of December 31, 2020 |
| |||
|
| Investments at |
| Percentage of |
| |
|
| Fair Value |
| Fair Value | | |
Consumer | | $ | i 3,700,000 |
| i 55.5 | % |
Financial | |
| i 900,000 |
| i 13.5 | |
Information Technology | |
| i 300,000 |
| i 4.5 | |
Leisure & Hospitality | |
| i 278,897 |
| i 4.2 | |
Real Estate | |
| i 1,489,000 |
| i 22.3 | |
Total | | $ | i 6,667,897 |
| i 100.0 | % |
iNOTE 4 – FAIR VALUE OF FINANCIAL INSTRUMENTS
Level 3 valuation information: Due to the inherent uncertainty in the valuation process, the estimate of the fair value of our investments as of June 30, 2021 may differ materially from values that would have been used had a readily available market for the securities or investments existed.
iThe following table presents the fair value measurements of our investments by major class, as of June 30, 2021, according to the fair value hierarchy:
| | | | | | | | | | | | |
|
| As of June 30, 2021 | ||||||||||
|
| Level 1 |
| Level 2 |
| Level 3 |
| Total | ||||
Short-term Non-banking Loans | | $ | — | | $ | — | | $ | i 10,863,333 | | $ | i 10,863,333 |
Preferred Stock | |
|
| |
|
| |
| i 300,000 | |
| i 300,000 |
Common Stock | |
| i 1,370,600 | |
| — | |
| — | |
| i 1,370,600 |
Warrants | |
| — | |
| — | |
| — | |
| — |
Other Equity | |
| — | |
| — | |
| i 600,000 | |
| i 600,000 |
Total | | $ | i 1,370,600 | | $ | — | | $ | i 11,763,333 | | $ | i 13,133,933 |
The following table presents the fair value measurements of our investments by major class, as of December 31, 2020, according to the fair value hierarchy:
| | | | | | | | | | | | |
|
| As of December 31, 2020 | ||||||||||
|
| Level 1 |
| Level 2 |
| Level 3 |
| Total | ||||
Short-term Non-banking Loans | | $ | — | | $ | — | | $ | i 2,789,000 | | $ | i 2,789,000 |
Preferred Stock | |
| — | |
| — | |
| i 300,000 | |
| i 300,000 |
Common Stock | |
| i 3,300,000 | |
| — | |
| — | |
| i 3,300,000 |
Warrants | |
| — | |
| — | |
| — | |
| — |
Other Equity | |
| — | |
| — | |
| i 278,897 | |
| i 278,897 |
Total | | $ | i 3,300,000 | | $ | — | | $ | i 3,367,897 | | $ | i 6,667,897 |
iThe following table presents a reconciliation of the beginning and ending fair value balances for our Level 3 investment assets for the six months ended June 30, 2021:
| | | | | | | | | | | | | | | |
| | For the six months ended June 30, 2021 | | | | ||||||||||
|
| ST Non- |
| | |
| | |
| | |
| | | |
|
| banking |
| Preferred |
| Common | | | | | | | |||
|
| Loans | | Stock | | Stock | | Warrants | | Other Equity | |||||
Balance as of January 1, 2021 | | $ | i 2,789,000 | | $ | i 300,000 | | $ | — | | $ | — | | $ | i 278,897 |
Net change in unrealized appreciation | |
| — | |
| — | |
| — | |
| — | |
| — |
Purchases and other adjustments to cost | |
| i 12,513,333 | |
| — | |
| — | |
| — | |
| i 600,000 |
Sales and redemptions | |
| ( i 4,439,000) | |
| — | |
| — | |
| — | |
| ( i 278,897) |
Net realized loss | |
| — | |
| — | |
| — | |
| — | |
| — |
Balance as of June 30, 2021 | | $ | i 10,863,333 | | $ | i 300,000 | | $ | — | | $ | — | | $ | i 600,000 |
/- 14 -
The net change in unrealized appreciation for the six months ended June 30, 2021 attributable to Level 3 investments still held as of June 30, 2021 is $ i 0, and is included in net change in unrealized appreciation (depreciation) on investments on the statement of operations.
iThe following table lists our Level 3 investments held as of June 30, 2021 and the unobservable inputs used to determine their valuation:
| | | | | | | | | | |
Security Type |
| 6/30/21 FMV |
| Valuation Technique |
| Unobservable Inputs |
| Range |
| |
ST Non-banking Loans | | $ | i 10,863,333 | | discounted cash flow | | determining private company interest rate based on credit | | i 12- i 47 | % |
Other Equity |
| | i 600,000 |
| last secured funding known by company |
| economic changes since last funding |
|
| |
Preferred Stock |
| | i 300,000 |
| last funding secured by company |
| economic changes since last funding |
|
| |
| | $ | i 11,763,333 |
|
|
|
|
|
| |
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, 2020:
| | | | | | | | | | | | | | | |
| | For the year ended December 31, 2020 | | | | ||||||||||
|
| ST Non-banking |
| Preferred |
| Common |
| |
| | |||||
| | Loans | | Stock | | Stock | | Warrants | | Other Equity | |||||
Balance as of January 1, 2020 | | $ | — | | $ | i 300,000 | | $ | — | | $ | — | | $ | i 534,200 |
Net change in unrealized appreciation | |
| — | |
| — | |
| — | |
| — | |
| i 486,018 |
Purchases and other adjustments to cost | |
| i 7,543,000 | |
| — | |
| — | |
| — | |
| — |
Sales and redemptions | |
| ( i 4,754,000) | |
| — | |
| — | |
| — | |
| ( i 91,313) |
Net realized loss | |
| — | |
| — | |
| — | |
| — | |
| ( i 650,008) |
Balance as of December 31, 2020 | | $ | i 2,789,000 | | $ | i 300,000 | | $ | — | | $ | — | | $ | i 278,897 |
The net change in unrealized depreciation for the year ended December 31, 2020 attributable to Level 3 investments still held as of December 31, 2020 is $ i 0, and is included in net change in unrealized appreciation (depreciation) on investments on the statement of operations.
The following table lists our Level 3 investments held as of December 31, 2020 and the unobservable inputs used to determine their valuation:
| | | | | | | | | | |
Security Type |
| 12/31/20 FMV |
| Valuation Technique |
| Unobservable Inputs |
| Range |
| |
ST Non-banking Loans | | $ | i 2,789,000 |
| discounted cash flow |
| determining private company interest rate based on credit |
| i 14- i 44 | % |
Other Equity | |
| i 278,897 |
| last secured funding known by company |
| economic changes since purchase |
|
| |
Preferred Stock | |
| i 300,000 |
| last funding secured by company |
| economic changes since last funding |
|
| |
| | $ | i 3,367,897 | | | | | | | |
- 15 -
NOTE 5 – RELATED-PARTY TRANSACTIONS
We maintain a Code of Ethics and certain other policies relating to conflicts of interest and related-party transactions, as well as policies and procedures relating to what regulations applicable. Nevertheless, from time to time we may hold investments in portfolio companies in which certain members of our management, our Board of Directors, or significant shareholders of ours, are also directly or indirectly invested. Our Board of Directors has adopted a policy to require our disclosure of these instances in our periodic filings with the SEC. Our only related-party transaction requiring disclosure under this policy relates to an August 10, 2018 loan transaction we entered into with Elizabeth Zbikowski. Ms. Zbikowski, along with her husband Scott Zbikowski, owns approximately i 1,765,000 shares of our common stock. In the transaction, we obtained a i two-year promissory note in the principal amount of $ i 250,000. The promissory note was subsequently amended such that it matures in August 2021. The note bears interest payable monthly at the rate of i 10% per annum and is secured by the debtors’ pledge to us of i 625,000 shares of our common stock. The pledged shares are held in physical custody for us by our custodial agent Millennium Trust Company.
/ iNOTE 6 – INCOME TAXES
Presently, we are a C-Corporation for tax purposes and have booked an income tax provision for the periods described below.
As of June 30, 2021 and December 31, 2020, we have a deferred tax liability of $ i 363,000 and $ i 258,000, respectively. Our determination of the realizable deferred tax assets and liabilities requires the exercise of significant judgment, based in part on business plans and expectations about future outcomes. In the event the actual results differ from these estimates in future periods, we may need to adjust the valuation allowance, which could materially impact our financial position and results of operations. We will continue to assess the need for a valuation allowance in future periods.
As of June 30, 2021 and December 31, 2020 we had accrued income taxes of $ i 920,000 and $ i 13,722 respectively. We recorded income taxes of approximately $ i 349,000 ( i 28.9 percent effective tax rate) and $ i 0 ( i 0 percent effective tax rate) during the three months ended June 20, 2021 and June 30, 2020, respectively. We recorded income taxes of approximately $ i 1,011,000 ( i 28.8 percent effective tax rate) and $ i 0 ( i 0 percent effective tax rate) during the six months ended June 30, 2021 and June 30, 2020, respectively. Due to the full valuation allowances in periods prior to December 31, 2020, our effective tax rate was expected to be near zero percent, therefore income tax accruals and expense were not material for those prior periods presented.
As of December 31, 2020, we had a federal NOL of approximately $ i 371,000. The federal NOL is expected to be completely used and offset taxable income by June 30, 2021. The federal NOL may be carried forward to offset future taxable income, subject to applicable provisions of the Internal Revenue Code. Due to tax reform enacted in 2017, NOLs created after 2017 carry forward indefinitely. The estimated federal NOL that does not expire included in the total above is $ i 356,000. States may vary in their treatment of post-2017 NOLs. We lost some state NOL carryforwards when we filed final 2019 tax returns in several states. The remaining state NOLs are expected to be completely used and offset taxable income by June 30, 2021. The remaining state NOL carryforwards may expire in 2036 and 2037 if not used.
/ iNOTE 7 – SHAREHOLDERS’ EQUITY
At June 30, 2021, we had i 10,790,413 shares of common stock issued and outstanding.
On December 8, 2020 we announced that our Board of Directors had approved a cash dividend of $ i 0.05 per common share. The dividend was paid on January 4, 2021 to shareholders of record as of the close of business on December 21, 2020.
/- 16 -
NOTE 8 – PER-SHARE INFORMATION
Basic net gain per common share is computed by dividing net increase in net assets resulting from operations by the weighted-average number of common shares outstanding during the period. A reconciliation of the numerator and denominator used in the calculation of basic and diluted net gain (loss) per common share is set forth below:
i
| | | | | | |
|
| For the Three Months Ended | ||||
|
| |||||
|
| | 2021 |
| | 2020 |
Numerator: Net increase (decrease) in net assets resulting from operations | | $ | i 781,506 | | $ | i 593,370 |
Denominator: Weighted-average number of common shares outstanding | |
| i 10,790,413 | |
| i 10,882,039 |
Basic and diluted net gain (loss) per common share | | $ | i 0.07 | | $ | i 0.05 |
| | | | | | |
| | For the Six Months Ended June 30, | ||||
|
| 2021 |
| 2020 | ||
Numerator: Net increase (decrease) in net assets resulting from operations | | $ | i 2,526,548 | | $ | i 311,452 |
Denominator: Weighted-average number of common shares outstanding | |
| i 10,788,175 | |
| i 10,974,721 |
Basic and diluted net gain (loss) per common share | | $ | i 0.23 | | $ | i 0.03 |
/
iNOTE 9 – OPERATING LEASES
We are subject to i two non-cancelable operating leases for office space expiring March 31, 2022. These leases do not have significant lease escalations, holidays, concessions, leasehold improvements, or other build-out clauses. Further, the leases do not contain contingent rent provisions. The leases do not include options to renew.
Because our lease does not provide an implicit rate, we use our incremental borrowing rate in determining the present value of the lease payments. The incremental borrowing rate represents an estimate of the interest rate we would incur at lease commencement to borrow an amount equal to the lease payments on a collateralized basis over the term of a lease. The weighted-average discount rate as of December 31, 2020 was i 4.5% and the weighted-average remaining lease term is i one year.
Under ASC 840, rent expense for office facilities for the three months ended June 30, 2021 and June 30, 2020 was $ i 16,337 and $ i 16,569, respectively.
iThe components of our operating lease were as follows for the three and six months ended June 30, 2021:
| | | | | | |
| | Three Months | | Six Months | ||
| | Ended | | Ended | ||
|
|
| ||||
Operating lease costs | | $ | i 4,779 | | $ | i 9,558 |
Variable lease cost | |
| i 4,125 | |
| i 8,603 |
Short-term lease cost | |
| i 7,433 | |
| i 14,865 |
Total | | $ | i 16,337 | | $ | i 33,026 |
iSupplemental balance sheet information consisted of the following at June 30, 2021:
| | | |
Operating Lease |
| | |
Right-of-use assets | | $ | i 14,279 |
| |
| |
Operating Lease Liability | | $ | i 15,973 |
Less: short term portion | |
| ( i 15,973) |
Long term portion | | $ | — |
/ /- 17 -
Maturity analysis under lease agreements consisted of the following as of June 30, 2021:
| | | |
|
| Operating | |
| | Leases | |
2021 | | $ | i 10,581 |
2022 | |
| i 5,449 |
Total lease payments | |
| i 16,030 |
Less: interest | |
| ( i 57) |
Present value of lease liabilities | | $ | i 15,973 |
iNOTE 10 – FINANCIAL HIGHLIGHTS
The following is a schedule of financial highlights for the six months ended June 30, 2021 through 2017:
i
a | | | | | | | | | | | | |
| | Six Months Ended June 30, |
| |||||||||
|
| 2021 |
| 2020 |
| 2019 |
| 2018 |
| 2017 |
| |
Per Share Data (1) |
| |
|
|
|
|
|
|
|
|
| |
Net asset value at beginning of period | | $ | i 1.08 |
| i 0.91 |
| i 1.02 |
| i 0.87 |
| i 0.77 | |
Net investment income (loss) | |
| i 0.04 |
| i 0.01 |
| ( i 0.03) |
| ( i 0.02) |
| ( i 0.02) | |
Net realized and unrealized gains (losses) | |
| i 0.28 |
| i 0.02 |
| i 0.02 |
| i 0.09 |
| i 0.04 | |
Provision for income taxes | |
| ( i 0.09) |
| i 0.00 |
| i 0.00 |
| i 0.00 |
| i 0.00 | |
Repurchase of common stock | |
| i 0.00 |
| i 0.02 |
| i 0.00 |
| i 0.00 |
| i 0.00 | |
Payment of common stock dividend | |
| i 0.00 |
| i 0.00 |
| ( i 0.05) |
| i 0.00 |
| i 0.00 | |
Net asset value at end of period | | $ | i 1.31 |
| i 0.96 |
| i 0.96 |
| i 0.94 |
| i 0.79 | |
| |
|
|
|
|
|
|
|
|
|
| |
Ratio / Supplemental Data | |
|
|
|
|
|
|
|
|
|
| |
Per share market value of investments at end of period | | $ | i 1.22 |
| i 0.65 |
| i 0.70 |
| i 0.82 |
| i 0.51 | |
Shares outstanding at end of period | |
| i 10,790,413 |
| i 10,696,735 |
| i 11,067,402 |
| i 11,067,402 |
| i 12,151,493 | |
Average weighted shares outstanding for the period | |
| i 10,788,175 |
| i 10,974,721 |
| i 11,067,402 |
| i 11,067,402 |
| i 12,151,493 | |
Net assets at end of period | | $ | i 14,188,588 |
| i 10,221,718 |
| i 10,588,689 |
| i 11,278,889 |
| i 9,555,551 | |
Average net assets (2) | | $ | i 13,073,718 |
| i 10,025,622 |
| i 12,304,975 |
| i 9,955,674 |
| i 9,504,851 | |
Total investment return | |
| i 21.30 | % | i 3.30 | % | ( i 5.88) | % | i 8.05 | % | i 2.60 | % |
Portfolio turnover rate (3) | |
| i 75.65 | % | i 11.90 | % | i 7.11 | % | i 11.55 | % | i 11.87 | % |
Ratio of operating expenses to average net assets (3) | |
| ( i 11.72) | % | ( i 9.41) | % | ( i 7.70) | % | ( i 6.98) | % | ( i 7.38) | % |
Ratio of net investment income (loss) to average net assets (3) | |
| i 6.88 | % | i 3.02 | % | ( i 6.40) | % | ( i 5.53) | % | ( i 5.89) | % |
Ratio of realized gains (losses) to average net assets (3) | |
| i 61.92 | % | i 4.06 | % | i 57.36 | % | ( i 12.79) | % | i 16.51 | % |
| (1) | Per-share data was derived using the ending number of shares outstanding for the period. |
| (2) | Based on the monthly average of net assets as of the beginning and end of each period presented. |
| (3) | Ratios are annualized. |
NOTE 11 – General Uncertainty
On March 11, 2020, the World Health Organization declared the outbreak of the coronavirus (COVID-19) a pandemic. As a result, economic uncertainties and market volatility have arisen which are likely to negatively impact our investment valuations and net increase or decrease in net assets resulting from operations. Other financial impacts could occur though such potential impact is difficult to determine at this time.
iNOTE 12 – Subsequent Events
On August 2, 2021, Tailwind Real Estate, LLC pre-paid in full all of their obligations owing to us, including $ i 3,000,000 of loan principal provided at March 31, 2021, and $ i 18,500 of accrued but unpaid interest thereon.
/
- 18 -
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS
| Exhibit |
| Description |
| 3.1 |
| |
| 3.2 |
| |
| 31.1 | * | |
| 31.2 | * | |
| 32.1 | * | |
| 101.INS | * | Inline XBRL Instance Document |
| 101.SCH | * | Inline XBRL Schema Document |
| 101.CAL | * | Inline XBRL Calculation Linkbase Document |
| 101.DEF | * | Inline XBRL Definition Linkbase Document |
| 101.LAB | * | Inline XBRL Label Linkbase Document |
| 101.PRE | * | Inline XBRL Presentation Linkbase Document |
| 104* | | Cover Page Interactive Data File (Embedded within the Inline XBRL document and included in Exhibit) |
* |
- 19 -
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.
| MILL CITY VENTURES III, LTD. | |
|
| |
Date: October 14, 2021 | By: | |
|
| |
|
| Chief Executive Officer |
|
| |
|
| |
Date: October 14, 2021 | By: | |
|
| |
|
| Chief Financial Officer |
- 20 -
| This ‘10-Q/A’ Filing | Date | Other Filings | ||
|---|---|---|---|---|
 | ||||
| 3/31/22 | 10-Q | |||
| 12/31/21 | 10-K | |||
| Filed on: | 10/14/21 | |||
| 10/8/21 | ||||
| 8/16/21 | 10-Q | |||
| 8/2/21 | ||||
| For Period end: | 6/30/21 | 10-Q | ||
| 6/20/21 | ||||
| 3/31/21 | 10-Q | |||
| 1/4/21 | ||||
| 1/1/21 | ||||
| 12/31/20 | 10-K | |||
| 12/21/20 | ||||
| 12/15/20 | ||||
| 12/8/20 | 4 | |||
| 6/30/20 | 10-Q | |||
| 3/31/20 | 10-Q | |||
| 3/11/20 | ||||
| 1/1/20 | ||||
| 12/31/19 | 10-K | |||
| 12/27/19 | N-54C | |||
| 8/10/18 | 10-Q | |||
| 12/31/17 | 10-K | |||
| 12/13/12 | N-8A | |||
| List all Filings | ||||
As Of Filer Filing For·On·As Docs:Size Issuer Filing Agent 1/23/13 Mill City Ventures III, Ltd. 8-K:5,7,9 1/17/13 3:37K Toppan Merrill/FA 1/29/08 Mill City Ventures III, Ltd. 10SB12G 6:1.3M Toppan Merrill/FA |