SEC Info - Mill City Ventures III, Ltd.

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		Alternative Formats (Word, et al.) Condensed Balance Sheets -- September 30, 2022 and December 31, 2021 Condensed Notes to Financial Statements -- September 30, 2022 Condensed Schedule of Investments -- September 30, 2022 and Schedule of Investments -- December 31, 2021 Condensed Statements of Cash Flows -- Nine months ended September 30, 2022 and September 30, 2021 Condensed Statements of Operations -- Three and nine months ended September 30, 2022 and September 30, 2021 Condensed Statements of Shareholders' Equity -- Three and nine months ended September 30, 2022 and September 30, 2021 Controls and Procedures December 31, 2021 Financial Information Financial Statements (unaudited) Item 1 Item 2 Item 4 Management's Discussion and Analysis of Financial Condition and Results of Operations Nine months ended September 30, 2022 and September 30, 2021 Other Information Part I Part Ii September 30, 2022 September 30, 2022 and December 31, 2021 September 30, 2022 and Schedule of Investments -- December 31, 2021 Signatures Table of Contents Three and nine months ended September 30, 2022 and September 30, 2021
1	1st Page – Filing Submission
"	Table of Contents
"	Part I
"	Financial Information
"	Item 1
"	Financial Statements (unaudited)
"	Condensed Balance Sheets -- September 30, 2022 and December 31, 2021
"	Condensed Statements of Operations -- Three and nine months ended September 30, 2022 and September 30, 2021
"	Condensed Statements of Shareholders' Equity -- Three and nine months ended September 30, 2022 and September 30, 2021
"	Condensed Statements of Cash Flows -- Nine months ended September 30, 2022 and September 30, 2021
"	Condensed Schedule of Investments -- September 30, 2022 and Schedule of Investments -- December 31, 2021
"	Condensed Notes to Financial Statements -- September 30, 2022
"	Item 2
"	Management's Discussion and Analysis of Financial Condition and Results of Operations
"	Item 4
"	Controls and Procedures
"	Part Ii
"	Other Information
"	Signatures

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(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.

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 November 18, 2022, Mill City Ventures III, Ltd. had i 6,185,255 shares of common stock, and no other classes of capital stock, outstanding.

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:

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 cost plus any accrued interest, unless circumstances warrant a different approach. An example of such circumstances may include a situation in which a portfolio company 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 portfolio 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 portfolio 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 securities 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 applied discount ranges from i 12% to i 53% and approximate rates currently observed in publicly traded debt markets for debt of similar terms issued by companies with comparable credit risk.

On a quarterly basis, our management provides members of our Board of Directors with (i) valuation updates for each investment and loan we hold; (ii) Mill City Ventures’ bank and other statements pertaining to our cash and cash equivalents; (iii) quarter- or period-end statements from custodial firms holding any of our investments; and (iv) recommendations to change any existing valuations of our investments or loans, or hierarchy levels, for purposes of determining the fair value of such investments or loans based upon the foregoing. The board then discusses these materials and, consistent with the policies and approaches outlined above, makes final determinations respecting the valuation and hierarchy levels of our portfolio investments.

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. We do not believe there will be any material changes in our unrecognized tax positions over the next 12 months. Our evaluation was performed for the tax years ended December 31, 2019 through 2021, which were the tax years that remain subject to examination by major tax jurisdictions as of September 30, 2022.

The following table shows the composition of our investments by major class, at amortized cost and fair value, as of December 31, 2021 (together with the corresponding percentage of the fair value of our total investments):

The following table shows the composition of our investments and loans by industry grouping, based on fair value as of September 30, 2022:

The following table shows the composition of our investments by industry grouping, based on fair value as of December 31, 2021:

For the three months ended September 30, 2022, one investment accounted for i 49% of the interest income earned. This investee did not make any cash interest payments during the three months ended September 30, 2022, and owes accrued interest of approximately $ i 650,000 at September 30, 2022. The Company believes it is probable that all interest will be collected from this investee.

The following table presents the fair value measurements of our investments and loans by major class, as of December 31, 2021, according to the fair value hierarchy:

The following table presents a reconciliation of the beginning and ending fair value balances for our Level 3 investment and loan assets for the nine months ended September 30, 2022:

The net change in unrealized appreciation for the nine months ended September 30, 2022 attributable to Level 3 investments and loans still held as of September 30, 2022 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 September 30, 2022 and the unobservable inputs used to determine their valuation:

The following table presents a reconciliation of the beginning and ending fair value balances for our Level 3 investment and loan assets for the year ended December 31, 2021:

The net change in unrealized depreciation for the year ended December 31, 2021 attributable to Level 3 investments and loans still held as of December 31, 2021 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, 2021 and the unobservable inputs used to determine their valuation:

As of September 30, 2022 and December 31, 2021 we had accrued income taxes of $ i 128,800 and $ i 1,269,000, respectively. The change in accrued income taxes was largely driven by $ i 1,536,000 of federal and state tax payments made during 2022. We recorded a benefit from income taxes of $ i 28,442 ( i 27% effective tax rate) and a benefit from income taxes of $ i 300 ( i 27% effective tax rate) during the three months ended September 30, 2022 and September 30, 2021, respectively. We recorded income taxes of approximately $ i 346,000 ( i 27% effective tax rate) and $ i 1,010,978 ( i 30.4% effective tax rate) during the nine months ended September 30, 2022 and September 30, 2021, respectively.

Maturity analysis under lease agreements consisted of the following as of September 30, 2022:

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Our Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is intended to provide a reader of our financial statements with a narrative from the perspective of management on our financial condition, results of operations, liquidity and certain other factors that may affect our future results. In addition, unless expressly stated otherwise, the comparisons presented in this MD&A refer to the same period in the prior year. Our MD&A is presented in seven sections:

Mill City Ventures III, Ltd. was incorporated in the State of Minnesota on January 10, 2006. 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.”

We are engaged in the business of providing short-term non-bank lending and specialty finance solutions to companies and individuals, generally on a secured basis. The loans we provide typically have maturities that are nine months or shorter, highly illiquid, and ordinarily involve a pledge of collateral or, in the case of loans made to companies, personal guarantees by the principals of the borrower. Our loans may be made for real estate acquisitions, renovation and sale, or other projects relating to real estate, title loans, inventory needs, inventory financing, solve for short-term liquidity needs, or for other similar purposes. We intend to remain opportunistic, however, and may occasionally engage in transactions that involve our acquisition of other rights (such as stock, warrants or other equity-linked investments) or that are structured differently or uniquely. Our business objective is to generate revenues from the interest and fees we charge, and capital appreciation from any related investments we make.

Our principal sources of income are interest and fees associated with our loans such as origination fees, closing fees or exit fees. In connection with the short-term non-bank specialty finance loans we provide, we may receive reimbursement of legal costs associated with loan documentation. We occasionally derive income from dividends paid on equity securities we hold from time to time, or from the sale of our equity securities. Our statement of operations also reflect increases and decreases in the carrying value of our assets and investments (i.e., unrealized appreciation and depreciation). Our principal expenses relate to operating expenses, the largest components of which are generally professional fees, payroll, occupancy, and insurance expenses.

Our MD&A should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2021, as well as our reports on Forms 10-Q and 8-K and other publicly available information. All amounts herein are unaudited. In addition, the following discussion of our results of operations and financial condition should be read in the context of this overview.

During the nine months ended September 30, 2022, we made $13,924,333 of investments and loans and had $10,076,483 of redemptions and repayments, resulting in net investments at amortized cost of $17,913,927 at the end of the period.

During the nine months ended September 30, 2021, we made $18,133,352 of investments and loans and had $16,363,964 of redemptions and repayments, resulting in net investments at amortized cost of $10,562,451 at the end of that period.

Our investment composition by major class, based on fair value at September 30, 2022, was as follows:

We generate revenue primarily in the form of interest income derived from the short-term non-banking loans we provide, together with fees we charge in connection with those loans, such as commitment, origination, structuring, diligence, or consulting fees. Any such fees will be recognized as earned. In some cases, the interest payable to us on the short-erm loans we provide may accrue or be paid in the form of additional debt. The principal amount of the debt instruments, together with any accrued but unpaid interest thereon, will generally become due at the maturity date of those debt instruments. On occasion, we may also generate revenue from dividends and capital gains on equity investments we make, if any, or on warrants or other equity interests that we may acquire.

For the three and nine months ended September 30, 2022, interest earned on our loan portfolio was $1,053,714 and $2,840,425, respectively, and our fees charged in connection with the loans was $61,510 and $511,510, respectively. For the three and nine months ended September 30, 2021, interest earned on our loan portfolio was $663,101 and $1,756,492, respectively, and our fees charged in connection with the loans was $92,500 and $221,500, respectively. The increase in the most recent period is primarily due to a combination of strong demand for our short-term loans and our enhanced ability to satisfy that demand with the additional cash resources we have derived from prior loans that have been repaid to us. Our loan portfolio generates interest income, with a weighted-average interest rate on the loans of 26%.

For the three and nine months ended September 30, 2022, we had $916,359 and $1,309,348 professional fees expense, respectively. For the three and nine months ended September 30, 2021, we had $79,950 and $300,297 professional fees expense, respectively. The increase for the nine months in 2022 is due to legal costs incurred to close on several new short-term banking loans, to obtain our listing on the Nasdaq exchange,and our efforts to seek additional financing through a public offering of our common stock to grow our business.

For the three and nine months ended September 30, 2022, we had $2,098,585 and $10,076,483, respectively, of sales of investments, resulting in $0 and $133,020 of realized gains, respectively. For the three and nine months ended September 30, 2021, we had $6,474,137 and $16,363,964, respectively, of sales of investments, resulting in $289,138 and $3,818,737, respectively, of realized gains.

For the three and nine months ended September 30, 2022, our investments had $0 of unrealized appreciation and $16,297 of unrealized depreciation, respectively. For the three and nine months ended September 30, 2021, our investments had $774,169 and $1,204,319 of unrealized depreciation, respectively.

For the three and nine months ended September 30, 2022, we recorded a net decrease in net assets from operations of $36,126 and a net increase in net assets from operations of $893,993, respectively. Based on the weighted-average number of shares of common stock outstanding for the three and nine months ended September 30, 2022, our per-share net decrease in net assets from operations was $0.01 and our per share net increase from operations was $0.18, respectively. For the three and nine months ended September 30, 2021, we recorded a net increase in net assets from operations of $31,288 and $2,557,836, respectively. Based on the weighted-average number of shares of common stock outstanding for the three and nine months ended September 30, 2021, our per-share net increase in net assets from operations was $0.01 and $0.53, respectively.

The level of cash flows used in or provided by operating activities is affected primarily by our provision of short-term loans, purchases of other investments, redemptions and repayments of our loans or investments, and other related factors. For the nine months ended September 30, 2022, net cash used in operating activities was $6,429,293. Cash flows used in operating activities for the nine months ended September 30, 2022 were primarily related to the funding of our short-term loans and purchases of investments aggregating $13,924,333, offset mostly by redemptions and repayments of short-term loans and investments totaling $10,076,483. For the nine months ended September 30, 2021, net cash used in operating activities was $1,306,775. Cash flows used in operating activities for the nine months ended September 30, 2021 were primarily related to the funding of our short-term loans and purchases of investments aggregating $18,133,352, offset mostly by redemptions and repayments of short-term loans and investments totaling $16,363,964.

For the nine months ended September 30, 2022, net cash provided in financing activities was $6,354,795. Cash flows provided in financing activities for the nine months ended September 30, 2022 were primarily related to our public offering and our draw on the available line of credit, offset by payments against the line of credit. For the nine months ended September 30, 2021, net cash used in financing activities was $539,296. Cash flows used in financing activities for the nine months ended September 30, 2021 were related to the payment of our stock dividend to investors.

As of September 30, 2022, we had cash of $1,861,650, a decrease of $74,498 from December 31, 2021. We expect that our existing funds, together with any funds raised in the future, will be used primarily to fund our provision of short-term non-bank loans and specialty finance solutions or for other general corporate purposes, including paying our operating expenses and servicing our existing debt. Pending use of our cash as described, we may invest some portion of our cash in U.S. government securities or other high quality debt securities maturing in one year or less from the time of investment.

On August 9, 2022, we effected a stock combination (reverse stock split) of our common shares on a 1-for-2.25 basis such that every 2.25 shares of common stock issued and outstanding on that date were combined into one share of common stock. Any fractional share resulting from the reverse stock split was rounded up to the nearest whole share. The reverse stock split was approved by our Board of Directors in accordance with Minnesota law, and resulted in a proportionate reduction in the number of authorized shares of capital stock available for issuance under our articles of incorporation. On a post-reverse-split basis, we are authorized to issue up to 111,111,111 shares of capital stock.

On August 11, 2022, we completed a public offer and sale of 1,250,000 common shares pursuant to a registration statement filed with the SEC and declared effective on August 9, 2022. We sold these shares at $4.00 per share, resulting in gross proceeds of $5,000,000. As part of the registered public offering, we granted the underwriters a 45-day option to purchase up to 187,500 additional common shares at the offering price, less underwriting discounts, which option was not exercised. In connection with the offering, we issued the underwriter a five-year warrant to purchase up to 75,000 common shares at the per-share price of $5.00. Our net proceeds after the payment of underwriting discounts, underwriting expenses, and offering-related expenses we incurred were otherwise obligated to pay, were approximately $4,041,000.

Our financial statements are prepared in conformity with accounting principles generally accepted in the United States of America, or U.S. GAAP, which requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Critical accounting policies are those that require the application of management’s most difficult, subjective or complex judgments, often because of the need to make estimates about the effect of matters that are inherently uncertain and that may change in subsequent periods.

In preparing the financial statements, management will make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. In preparing the financial statements, management also will utilize available information, including our past history, industry standards and the current economic environment, among other factors, in forming its estimates and judgments, giving due consideration to materiality. Actual results will almost certainly differ from these estimates. In addition, other companies may utilize different estimates, which may impact the comparability of our results of operations to those of companies in similar businesses. As our expected operating results occur, we will describe additional critical accounting policies in the notes to our financial statements. Our most critical accounting policies relate to the valuation of our portfolio investments, and revenue recognition. For more information, refer to our Annual Report on Form 10-K for the year ended December 31, 2021.

During the nine months ended September 30, 2022, we did not engage in any off-balance sheet arrangements as described in Item 303(a)(4) of Regulation S-K.

Some of the statements made in this section of our report are forward-looking statements based on our management’s current expectations for our company. These expectations involve assumptions and are subject to substantial risks and uncertainties that could cause actual results to differ materially from the results expressed in, or implied by, these forward-looking statements. Forward-looking statements relate to future events or our future financial performance, and can ordinarily be identified by terminology such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “targets,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of these terms or other similar words. Important assumptions include our ability to identify and consummate new investments, achieve certain margins and levels of profitability, the availability of any needed additional capital, and the ability to maintain compliance with regulations applicable to us. Some of the forward-looking statements contained in this report relate to, and are based our current assumptions regarding, the following:

The foregoing list is not exhaustive. For a more complete summary of the risks and uncertainties facing our company and its business and relating to our forward-looking statements, please refer to our Annual Report on Form 10-K filed on March 10, 2021 (related to our year ended December 31, 2021) and in particular the section thereof entitled “Risk Factors.” Because of the significant uncertainties inherent in forward-looking statements pertaining to our company, the inclusion of those statements should not be regarded as a representation or warranty by us or any other person that our objectives, plans, expectations or projections that are contained in this filing will be achieved in any specified time frame, if ever. We undertake no obligation to update any forward-looking statement to reflect events or circumstances occurring after the date of this filing. The forward-looking statements made in this report relate only to events as of the date on which the statements are made, and are excluded from the safe harbor protection provided by Section 21E of the Securities Exchange Act of 1934.

We maintain disclosure controls and procedures designed to provide reasonable assurance that information required to be disclosed in our reports filed pursuant to the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer as appropriate, to allow timely decisions regarding required disclosure. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance the objectives of the control system are met.

As of September 30, 2022, our Chief Executive Officer and Chief Financial Officer carried out an evaluation of the effectiveness of our disclosure controls and procedures as such term is defined in Rule 13a-15(e) under the Securities and Exchange Act of 1934. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded our disclosure controls and procedures are effective as of September 30, 2022.

There were no significant changes in our internal controls over financial reporting that occurred during the fiscal quarter covered by this report that materially affected, or were reasonably likely to materially affect such controls.

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.

(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 September 30, 2022

or

i ☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from _______________________ to ___________________

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)

Large accelerated filer	☐	Accelerated filer	☐
i Non-accelerated filer	☒	Smaller reporting company	i ☒
		Emerging growth company	i ☐

PART I.	FINANCIAL INFORMATION	Page No.

Item 1.	Financial Statements (unaudited)	3

	Condensed Balance Sheets – September 30, 2022 and December 31, 2021	3

	Condensed Statements of Operations – Three and nine months ended September 30, 2022 and September 30, 2021	4

	Condensed Statements of Shareholders’ Equity – Three and nine months ended September 30, 2022 and September 30, 2021	5

	Condensed Statements of Cash Flows – Nine months ended September 30, 2022 and September 30, 2021	7

	Condensed Schedule of Investments – September 30, 2022 and Schedule of Investments – December 31, 2021	8

	Condensed Notes to Financial Statements – September 30, 2022	10

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19

Item 4.	Controls and Procedures	22

PART II.	OTHER INFORMATION	23

Item 6.	Exhibits	23

SIGNATURES		24

	September 30, 2022 (unaudited)			December 31, 2021
ASSETS
Investments, at fair value:	$	i 18,063,248		$	i 14,098,675
Non-control/non-affiliate investments (cost: $ i 17,913,927 and $ i 13,933,057 respectively)
Cash		i 1,861,650			i 1,936,148
Note receivable, related party		i 250,000			i 250,000
Prepaid expenses		i 116,307			i 83,674
Receivable for sale of investments		i —			i —
Interest and dividend receivables		i 939,299			i 324,350
Right-of-use lease asset		i 21,563			i 4,984
Deferred taxes		i 4,000			i —
Total Assets	$	i 21,256,067		$	i 16,697,831

LIABILITIES
Line of credit	$	i 2,313,000		$	i —
Accounts payable		i 134,000			i 64,028
Dividend payable		i —			i 100
Payable for purchase of investments		i —			i 1,900,000
Lease liability		i 21,672			i 5,654
Accrued income tax		i 128,800			i 1,269,000
Deferred taxes		i —			i 45,000
Total Liabilities		i 2,597,472			i 3,283,782
Commitments and Contingencies

SHAREHOLDERS EQUITY (NET ASSETS)
Common stock, par value $ i 0.001 per share ( i 111,111,111 authorized; i 6,185,255 and i 4,795,739 outstanding)		i 12,215			i 10,790
Additional paid-in capital		i 15,043,291			i 10,694,163
Accumulated deficit		( i 1,159,665	)		( i 1,159,665	)
Accumulated undistributed investment loss		( i 1,100,397	)		( i 1,877,667	)
Accumulated undistributed net realized gains on investment transactions		i 5,713,830			i 5,580,810
Net unrealized appreciation in value of investments		i 149,321			i 165,618
Total Shareholders’ Equity (Net Assets)		i 18,658,595			i 13,414,049
Total Liabilities and Shareholders’ Equity	$	i 21,256,067		$	i 16,697,831
Net Asset Value Per Common Share	$	i 3.02		$	i 2.80

Mill City Ventures III, Ltd. – ‘10-Q’ for 9/30/22

On: Friday, 11/18/22, at 5:29pm ET · For: 9/30/22 · Accession #: 1654954-22-15573 · File #: 1-41472

Previous ‘10-Q’: ‘10-Q’ on 8/15/22 for 6/30/22 · Next: ‘10-Q’ on 5/22/23 for 3/31/23 · Latest: ‘10-Q’ on 11/17/23 for 9/30/23 · 2 References:

Quarterly Report — Form 10-Q

Filing Table of Contents

‘10-Q’ — Quarterly Report

Document Table of Contents

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Dates Referenced Herein and Documents Incorporated by Reference

2 Previous Filings that this Filing References

	Nine Months Ended
	September 30, 2022			September 30, 2021
Cash flows from operating activities:
Net increase in net assets resulting from operations	$	i 893,993		$	i 2,557,836
Adjustments to reconcile net increase in net assets resulting from operations to net cash used in operating activities:
Net change in unrealized appreciation on investments		i 16,297			i 1,204,319
Net realized gain on investments		( i 133,020	)		( i 3,818,737	)
Purchases of investments		( i 13,924,333	)		( i 18,133,352	)
Proceeds from sales of investments		i 10,076,483			i 16,363,964
Stock-based compensation		i 308,758			i 15,403
Changes in operating assets and liabilities:
Prepaid expenses and other assets		( i 21,225	)		( i 71,160	)
Interest and dividends receivable		( i 614,949	)		( i 405,429	)
Receivable for investment sales		i —			( i 40,767	)
Payable for investment purchase		( i 1,900,000	)		i 30,689
Accounts payable and other liabilities		i 53,903			( i 20,519	)
Income taxes payable		( i 1,185,200	)		i 1,010,978
Net cash used in operating activities		( i 6,429,293	)		( i 1,306,775	)
Cash flows from financing activities:
Proceeds from public offering		i 4,041,795			i —
Proceeds from line of credit		i 8,414,000			i —
Repayments on line of credit		( i 6,101,000	)		i —
Payments for common stock dividend		i —			( i 539,296	)
Net cash provided (used) by financing activities		i 6,354,795			( i 539,296	)
Net decrease in cash		( i 74,498	)		( i 1,846,071	)
Cash, beginning of period		i 1,936,148			i 5,440,579
Cash, end of period	$	i 1,861,650		$	i 3,594,508

Non-cash financing activities:
Common shares issued as consideration	$	i 308,758		$	i 5,750
Dividend declared to common stock shareholders		i —			i 1,079,041

	·	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.

	As of September 30, 2022
	Investments at Fair Value		Percentage of Fair Value
Consumer	$	i 5,662,500		i 31.35	%
Financial		i 4,261,753		i 23.59
Information Technology		i 512,500		i 2.84
Real Estate		i 7,626,495		i 42.2
Total	$	i 18,063,248		i 100.0	%

	As of December 31, 2021
	Investments at Fair Value		Percentage of Fair Value
Consumer	$	i 2,362,500		i 16.8	%
Financial		i 3,836,175		i 27.2
Information Technology		i 300,000		i 2.1
Real Estate		i 7,600,000		i 53.9
Total	$	i 14,098,675		i 100.0	%

	As of December 31, 2021
	Level 1		Level 2		Level 3		Total
Short-term Non-banking Loans	$	—	$	—	$	i 11,650,000	$	i 11,650,000
Preferred Stock		—		—		i 1,200,000		i 1,200,000
Common Stock		i 436,175		—		—		i 436,175
Other Equity		—		—		i 812,500		812,500
Total	$	i 436,175	$	—	$	i 13,662,500	$	i 14,098,675

Security Type	9/30/22 FMV		Valuation Technique	Unobservable Inputs	Range
ST Non-banking Loans	$	i 16,040,748	discounted cash flow	determining private company interest rate based on credit	i 12- i 53	%
Other Equity		i 822,500	last secured funding known by company	economic changes since last funding
Preferred Stock		i 1,200,000	last funding secured by company	economic changes since last funding
	$	i 18,063,248

Security Type	12/31/21 FMV		Valuation Technique	Unobservable Inputs	Range
ST Non-banking Loans	$	i 11,650,000	discounted cash flow	determining private company credit rating	i 12- i 44	%
Other Equity		i 812,500	last secured funding known by company	economic changes since last funding
Preferred Stock		i 1,200,000	last funding secured by company	economic changes since last funding
	$	i 13,662,500

	·	On August 10, 2018, we entered into a loan transaction with Elizabeth Zbikowski who, along with her husband Scott Zbikowski, owned and continues to own approximately i 534,445 shares of our common stock. In the transaction, we obtained a i two-year promissory note in the principal amount of $ i 250,000, which was subsequently amended such that the note presently matures in December 2022. The promissory note bears interest payable monthly at the rate of i 10% per annum. The note is secured by the debtors’ pledge to us of i 277,778 shares of our common stock. The pledged shares are held in physical custody for us by Millennium Trust Company, as our custodial agent.

	·	On January 3, 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 $ i 5 million revolving line of credit for us to use in the ordinary course of our short-term specialty finance business. See note 7 for further details.

	For the Three Months Ended September 30,
	2022			2021
Numerator: Net increase in net assets resulting from operations	$	( i 36,126	)	$	i 31,288
Denominator: Weighted-average number of common shares outstanding		i 5,512,737			i 4,795,739
Basic and diluted net gain per common share	$	( i 0.01	)	$	i 0.01

	For the Nine Months Ended September 30,
	2022		2021
Numerator: Net increase in net assets resulting from operations	$	i 893,993	$	i 2,557,836
Denominator: Weighted-average number of common shares outstanding		i 5,045,830		i 4,795,075
Basic and diluted net gain per common share	$	i 0.18	$	i 0.53

	Three Months Ended		Nine Months Ended
	September 30, 2022		September 30, 2022

Operating lease costs	$	i 5,504	$	i 15,787
Variable lease cost		i 4,601		i 13,724
Short-term lease cost		i 8,484		i 25,031
Total	$	i 18,589	$	i 54,542

Operating Lease
Right-of-use assets	$	i 21,563

Operating Lease Liability	$	i 21,672
Less: short term portion		( i 21,672	)
Long term portion	$	i —

	Operating Leases
2022	$	i 6,357
2023		i 14,859
Total lease payments		i 21,216
Plus: interest		i 456
Present value of lease liabilities	$	i 21,672

(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.

	·	Overview
	·	Portfolio and Investment Activity
	·	Results of Operations
	·	Financial Condition
	·	Critical Accounting Estimates
	·	Off-Balance Sheet Arrangements
	·	Forward Looking Statements

	·	our future operating results;
	·	the success of our investments;
	·	our relationships with third parties;
	·	the dependence of our success on the general economy and its impact on the industries in which we invest;
	·	the ability of our portfolio companies to achieve their objectives;
	·	our expected financings and investments;
	·	our regulatory structure and tax treatment;
	·	the adequacy of our cash resources and working capital; and
	·	the timing of cash flows, if any, we receive from our investments.

Exhibit Number		Description
3.1		Amended and Restated Articles of Incorporation (incorporated by reference to Exhibit 3.1 to the registrant’s Current Report on Form 8-K filed January 23, 2013)
3.2		Amended and Restated Bylaws of Mill City Ventures III, Ltd. (incorporated by reference to Exhibit 3.2 to the registrant’s registration statement on Form 10-SB filed on January 29, 2008)
31.1	*	Section 302 Certification of the Chief Executive Officer
31.2	*	Section 302 Certification of the Chief Financial Officer
32.1	*	Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. §1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

	MILL CITY VENTURES III, LTD.

Date: November 18, 2022	By:	/s/ *Douglas M. Polinsky*
		Douglas M. Polinsky
		Chief Executive Officer

Date: November 18, 2022	By:	/s/ *Joseph A. Geraci, II*
		Joseph A. Geraci, II
		Chief Financial Officer

This ‘10-Q’ Filing	Date	Other Filings

	1/3/27
	4/2/23
	1/3/23
	12/31/22
Filed on:	11/18/22
For Period end:	9/30/22	NT 10-Q
	8/11/22	4, 4/A, 8-K
	8/9/22	424B4, 8-A12B, 8-K, CERT, EFFECT
	7/1/22
	6/30/22	10-Q
	1/3/22	8-K
	1/1/22
	12/31/21	10-K
	9/30/21	10-Q
	6/30/21	10-Q, 10-Q/A
	3/10/21	10-K
	1/1/21
	12/31/20	10-K
	12/31/19	10-K
	8/10/18	10-Q
	12/13/12	N-8A
	1/10/06
		List all Filings