SUI Group Holdings Ltd 10-Q for FY2023 Q2

SUI Group Holdings Ltd. (SUIG)

10-Q 2023-08-15 For: 2023-06-30

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Added on April 06, 2026

About this 10-Q

SUI Group Holdings Ltd filed this 10-Q on August 15, 2023, covering the quarter ended June 30, 2023 (FY2023 Q2).

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(Mark One)
☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended June 30, 2023

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

Minnesota		90-0316651
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

1907 Wayzata Blvd, #205, Wayzata, Minnesota		55391
(Address of principal executive offices)		(Zip Code)

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

PART I.	FINANCIAL INFORMATION	Page No.

Item 1.	Financial Statements (unaudited)	3

	Condensed Balance Sheets – June 30, 2023 and December 31, 2022	3

	Condensed Statements of Operations – Three and six months ended June 30, 2023 and June 30, 2022	4

	Condensed Statements of Shareholders’ Equity – Three and six months ended June 30, 2023 and June 30, 2022	5

	Condensed Statements of Cash Flows – Six months ended June 30, 2023 and June 30, 2022	6

	Condensed Schedule of Investments – June 30, 2023 and Schedule of Investments – December 31, 2022	8

	Condensed Notes to Financial Statements – June 30, 2023	9

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 5.	Other Information	23

Item 6.	Exhibits	23

SIGNATURES		24


	June 30, 2023 (unaudited)			December 31, 2022
ASSETS
Investments, at fair value:	$	16,528,425		$	16,708,432
Non-control/non-affiliate investments (cost: $16,552,481 and $17,359,804 respectively)
Cash		1,101,527			1,089,641
Note receivable		250,000			250,000
Prepaid expenses		158,839			218,440
Interest and dividend receivables		309,299			250,879
Right-of-use lease asset		5,483			16,398
Deferred taxes		428,000			201,000
Total Assets	$	18,781,573		$	18,734,790

LIABILITIES
Accounts payable	$	77,311		$	776,514
Operating lease liability		5,537			16,562
Deferred interest income		14,279			70,154
Total Liabilities		97,127			863,230

SHAREHOLDERS EQUITY (NET ASSETS)
Common stock, par value $0.001 per share (111,111,111 authorized;		12,215			12,215
6,185,255 outstanding)
Additional paid-in capital		15,043,291			15,043,291
Additional paid-in capital - stock options		1,460,209			—
Accumulated deficit		(1,159,665	)		(1,159,665	)
Accumulated undistributed investment loss		(1,802,749	)		(1,086,739	)
Accumulated undistributed net realized gains on investment transactions		5,155,200			5,713,829
Net unrealized appreciation in value of investments		(24,055	)		(651,371	)
Total Shareholders' Equity (Net Assets)		18,684,446			17,871,560
Total Liabilities and Shareholders' Equity	$	18,781,573		$	18,734,790
Net Asset Value Per Common Share	$	3.02		$	2.89


	Three Months Ended						Six Months Ended
	June 30, 2023			June 30, 2022			June 30, 2023			June 30, 2022
Investment Income
Interest income	$	907,502		$	1,236,505		$	1,771,530		$	2,236,711
Total Investment Income		907,502			1,236,505			1,771,530			2,236,711
Operating Expenses
Professional fees		287,325			197,591			417,176			392,989
Payroll		147,161			114,542			1,277,600			310,984
Insurance		26,522			26,979			53,522			57,076
Occupancy		21,072			19,141			40,115			35,953
Director's fees		30,000			87,073			562,968			117,073
Interest expense		43,333			47,794			78,000			117,853
Other general and administrative		14,632			9,135			32,481			16,145
Total Operating Expenses		570,045			502,255			2,461,862			1,048,073
Net Investment Gain (Loss)		337,457			734,250			(690,332	)	$	1,188,638
Realized and Unrealized Gain (Loss) on Investments
Net realized gain (loss) on investments		41,371			(5,750	)		(558,629	)		133,020
Net change in unrealized appreciation (depreciation) on investments		(21,107	)		5,750			627,316			(16,297	)
Net Realized and Unrealized Gain (Loss) on Investments		20,264			—			68,687			116,723
Net Increase (Decrease) in Net Assets Resulting from Operations Before Taxes	$	357,721		$	734,250		$	(621,645	)	$	1,305,361

Provision for Income Taxes		287,000			216,242			25,678			375,242
Net Increase (Decrease) in Net Assets Resulting from Operations	$	70,721		$	518,008		$	(647,323	)		930,119

Net Increase (Decrease) in Net Assets Resulting from Operations per share:
Basic and diluted	$	0.01		$	0.11		$	(0.10	)	$	0.19

Weighted-average number of common shares outstanding - basic and diluted		6,185,255			4,821,136			6,185,255			4,808,508

Three Months Ended June 30, 2023	Common Shares		Par Value		Additional Paid In Capital		Accumulated Deficit			Accumulated Undistributed Net Investment Loss			Accumulated Undistributed Net Realized Gain (Loss) on Investments Transactions			Net Unrealized Appreciation in value of Investments			Total Shareholders' Equity
Balance as of March 31, 2023		6,185,255	$	12,215	$	16,503,500	$	(1,159,665	)	$	(1,853,206	)	$	5,113,829		$	(2,948	)	$	18,613,725
Dividend Distribution				—		—		—			—			—			—			—
Issuance of stock options		—		—		—		—			—			—						—
Undistributed net investment gain				—		—		—			50,457			—			—			50,457
Undistributed net realized gain on investment transactions				—		—		—			—			41,371			—			41,371
Depreciation in value of investments				—		—		—			—			—			(21,107	)		(21,107	)
Balance as of June 30, 2023		6,185,255	$	12,215	$	16,503,500	$	(1,159,665	)	$	(1,802,749	)	$	5,155,200		$	(24,055	)	$	18,684,446

Three Months Ended June 30, 2022	Common Shares		Par Value		Additional Paid In Capital		Accumulated Deficit			Accumulated Undistributed Net Investment Loss			Accumulated Undistributed Net Realized Gain on Investments Transactions			Net Unrealized Appreciation in value of Investments			Total Shareholders' Equity
Balance as of March 31, 2022		10,790,413	$	10,790	$	10,694,163	$	(1,159,665	)	$	(1,582,279	)	$	5,719,580		$	143,571		$	13,826,160
Common shares issued in stock based compensation		65,000		65		82,374		—			—									82,439
Undistributed net investment gain				—		—		—			518,008			—			—			518,008
Undistributed net realized loss on investment transactions				—		—		—			—			(5,750	)		—			(5,750	)
Appreciation in value of investments				—		—		—			—			—			5,750			5,750
Balance as of June 30, 2022		10,855,413	$	10,855	$	10,776,537	$	(1,159,665	)	$	(1,064,271	)	$	5,713,830		$	149,321		$	14,426,607

Six Months Ended June 30, 2023	Common Shares		Par Value		Additional Paid In Capital		Accumulated Deficit			Accumulated Undistributed Net Investment Loss			Accumulated Undistributed Net Realized Gain on Investments Transactions			Net Unrealized Appreciation (Depreciation) in value of Investments			Total Shareholders' Equity

Balance as of December 31, 2022		6,185,255	$	12,215	$	15,043,291	$	(1,159,665	)	$	(1,086,739	)	$	5,713,829		$	(651,371	)	$	17,871,560
Issuance of stock options						1,460,209		—			—			—			—			1,460,209
Net investment loss, net of tax benefit of $139,300				—		—		—			(716,010	)		—			—			(716,010	)
Undistributed net realized loss on investment transactions				—		—		—			—			(558,629	)		—			(558,629	)
Appreciation in value of investments				—		—		—			—			—			627,316			627,316
Balance as of June 30, 2022		6,185,255	$	12,215	$	16,503,500	$	(1,159,665	)	$	(1,802,749	)	$	5,155,200		$	(24,055	)	$	18,684,446

Six Months Ended June 30, 2022	Common Shares		Par Value		Additional Paid In Capital		Accumulated Deficit			Accumulated Undistributed Net Investment Loss			Accumulated Undistributed Net Realized Gain on Investments Transactions			Net Unrealized Appreciation (Depreciation) in value of Investments			Total Shareholders' Equity

Balance as of December 31, 2021		10,790,413	$	10,790	$	10,694,163	$	(1,159,665	)	$	(1,877,667	)	$	5,580,810		$	165,618		$	13,414,049
Common shares issued in stock based compensation		65,000		65		82,374		—			—									82,439
Undistributed net investment gain				—		—		—			813,396			—			—			813,396
Undistributed net realized gain on investment transactions				—		—		—			—			133,020			—			133,020
Depreciation in value of investments				—		—		—			—			—			(16,297	)		(16,297	)
Balance as of June 30, 2022		10,855,413	$	10,855	$	10,776,537	$	(1,159,665	)	$	(1,064,271	)	$	5,713,830		$	149,321		$	14,426,607

Investment / Industry	Cost		Fair Value		Percentage of Net Assets

Short-Term Non-banking Loans
Business Services - 15% secured loans

Mustang Litigation Funding	$	7,000,000	$	7,012,891		37.53	%
Consumer - 18% secured loans

Intelligent Mapping, LLC		2,900,000		2,900,324		15.52	%
Financial - 33% secured loans

Benton Financial, LLC		1,202,500		1,202,361		6.44	%
Financial - 34% secured loans

Benton Financial, LLC		772,500		773,022		4.14	%

Financial - 12% secured loans		500,000		389,831		2.08	%

Information Technology - 15% convertible note		212,500		212,482		1.14	%

Real Estate - 15% secured loans		745,000		747,178		4.00	%
Real Estate - 12% secured loans

Alatus Development Corp		2,000,000		2,002,214		10.72	%

Total Short-Term Non-Banking Loans		15,332,500		15,240,303		81.57	%

Preferred Stock
Consumer

Wisdom Gaming, Inc		900,000		900,000		4.82	%

Information Technology		150,000		300,000		1.61	%

Total Preferred Stock		1,050,000		1,200,000		6.43	%

Common Stock

Consumer		159,302		78,122		0.42	%

Warrants
Healthcare		679		—		0.00	%

Other Equity
Financial		10,000		10,000		0.05	%

Total Investments	$	16,552,481	$	16,528,425		88.47	%

Total Cash		1,101,527		1,101,527		5.90	%

Total Investments and Cash	$	$17,654,008	$	$17,629,952		94.37	%

	·	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 June 30, 2023
	Investments at Amortized Cost		Percentage of Amortized Cost			Investments at Fair Value		Percentage of Fair Value

Short-term Non-banking Loans	$	15,332,500		92.6	%	$	15,240,303		92.2	%
Preferred Stock		1,050,000		6.3			1,200,000		7.2
Common Stock		159,302		1.0			78,122		0.5
Warrants		679		—			—		—
Other Equity		10,000		0.1			10,000		0.1
Total	$	16,552,481		100.0	%	$	16,528,425		100.0	%

	As of December 31, 2022
	Investments at Amortized Cost		Percentage of Amortized Cost			Investments at Fair Value		Percentage of Fair Value

Short-term Non-banking Loans	$	15,486,625		89.2	%	$	15,285,932		91.5	%
Preferred Stock		1,050,000		6.1			1,200,000		7.2
Common Stock		—		—			—		—
Warrants		679		—			—		—
Other Equity		822,500		4.7			222,500		1.3
Total	$	17,359,804		100.0	%	$	16,708,432		100.0	%

	As of June 30, 2023
	Level 1		Level 2		Level 3		Total

Short-term Non-banking Loans	$	—	$	—	$	15,240,303	$	15,240,303
Preferred Stock						1,200,000		1,200,000
Common Stock *				78,122		—		78,122
Warrants		—		—		—		—
Other Equity		—		—		10,000		10,000
Total	$	—	$	78,122	$	16,450,303	$	16,528,425

	For the six months ended June 30, 2023
	ST Non-banking Loans			Preferred Stock		Common Stock		Warrants		Other Equity

Balance as of January 1, 2023	$	15,285,932		$	1,200,000	$	—	$	—	$	222,500
Net change in unrealized appreciation		108,496			—		—		—		600,000
Purchases and other adjustments to cost		8,900,500			—		—		—		—
Sales and redemptions		(9,054,625	)		—		—		—
Net realized loss		—			—		—		—		(600,000	)
Transfers out of level 3		—			—		—		—		(212,500	)
Balance as of June 30, 2023	$	15,240,303		$	1,200,000	$	—	$	—	$	10,000

Security Type		6/30/23 FMV	Valuation Technique	Unobservable Inputs	Range
ST Non-banking Loans	$	15,240,303	discounted cash flow	determining private company interest rate based on changes in market rates of instruments with comparable creditworthiness	12-34	%
Other Equity		10,000	last secured funding known by company	economic changes since last funding
Preferred Stock		1,200,000	last funding secured by company	economic changes since last funding
	$	16,450,303

	For the year ended December 31, 2022
	ST Non-banking Loans			Preferred Stock		Common Stock		Warrants		Other Equity

Balance as of January 1, 2022	$	11,650,000		$	1,200,000	$	—	$	—	$	812,500
Net change in unrealized depreciation		(200,693	)		—		—		—		(600,000	)
Purchases and other adjustments to cost		23,548,458			—		—		—		10,000
Sales and redemptions		(19,711,833	)		—		—		—		—
Balance as of December 31, 2022	$	15,285,932		$	1,200,000	$	—	$	—	$	222,500


	Six Months Ended
	June 30, 2023			June 30, 2022
Cash flows from operating activities:
Net increase (decrease) in net assets resulting from operations	$	(647,323	)	$	930,119
Adjustments to reconcile net increase (decrease) in net assets resulting
from operations to net cash used in operating activities:
Net change in unrealized (appreciation) depreciation on investments		(627,316	)		16,297
Net realized (gain) loss on investments		558,629			(133,020	)
Purchases of investments		(8,900,500	)		(9,103,580	)
Proceeds from sales of investments		9,149,194			7,977,898
Issuance of stock options		1,460,209			—
Deferred income taxes		(227,000	)		(1,073,758	)
Common shares issued as consideration for expense payment		—			82,439
Changes in operating assets and liabilities:
Prepaid expenses and other assets		70,516			(39,772	)
Interest and dividends receivable		(58,420	)		(115,072	)
Payable for investment purchase		—			(1,900,000	)
Accounts payable and other liabilities		(710,228	)		(23,127	)
Deferred interest income		(55,875	)		—
Net cash provided (used) in operating activities		11,886			(3,381,576	)
Cash flows from financing activities:
Proceeds from line of credit		2,750,000			6,075,000
Repayments on line of credit		(2,750,000	)		(4,000,000	)
Net cash provided by financing activities		—			2,075,000
Net increase (decrease) in cash		11,886			(1,306,576	)
Cash, beginning of period		1,089,641			1,936,148
Cash, end of period	$	1,101,527		$	629,572

	·	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 534,445 shares of our common stock. In the transaction, we obtained a two-year promissory note in the principal amount of $250,000, which was subsequently amended such that the note presently matures on August 30, 2023. The promissory note bears interest payable monthly at the rate of 10% per annum. The note is secured by the debtors’ pledge to us of 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 $5 million revolving line of credit for us to use in the ordinary course of our short-term specialty finance business. See note 7 below for further details.

	Shares		Weighted Average Exercise Price
Options outstanding at beginning of year		—	$	—
Granted		870,000		2.11
Exercised		—		—
Forfeited		—		—
Balance at June 30, 2023		870,000	$	2.11

Options exercisable at June 30:		870,000	$	2.11

Weighted Average Grant Date Fair Value for options granted during the period:			$	1,242,902

Security Type		12/31/22 FMV	Valuation Technique	Unobservable Inputs	Range
ST Non-banking Loans	$	15,285,932	discounted cash flow	determining private company interest rate based on changes in market rates of instruments with comparable creditworthiness	12-33%
Other Equity		222,500	last secured funding known by company
Preferred Stock		1,200,000	last funding secured by company	economic changes since last funding
	$	16,708,432

Options Outstanding								Options Exercisable
Options Outstanding		Weighted Average Remaining Contractual Life		Weighted Average Exercise Price		Aggregate Intrinsic Value		Options Exercisable		Weighted Average Exercise Price		Aggregate Intrinsic Value
	870,000		9.42	$	2.11	$	262,100		870,000	$	2.11	$	262,100

	2023
Risk-free interest rate		3.48	%
Expected volatility		90.00	%
Expected life (years)		5.0
Expected dividend yield		—	%

	For the Three Months Ended June 30,
	2023		2022
Numerator: Net increase in net assets resulting from operations	$	70,721	$	518,008
Denominator: Weighted-average number of common shares outstanding		6,185,255		4,821,136
Basic and diluted net gain per common share	$	0.01	$	0.11

	For the Six Months Ended June 30,
	2023			2022
Numerator: Net increase (decrease) in net assets resulting from operations	$	(647,323	)	$	930,119
Denominator: Weighted-average number of common shares outstanding		6,185,255			4,808,508
Basic and diluted net gain (loss) per common share	$	(0.10	)	$	0.19

Operating Lease	2023			2022
Right-of-use assets	$	5,483		$	26,804

Operating Lease Liability	$	5,537		$	26,859
Less: short term portion		(5,537	)		(23,832	)
Long term portion	$	—		$	3,027

	Six Months Ended June 30,
	2023			2022			2021			2020			2019
Per Share Data ⁽¹⁾
Net asset value at beginning of period	$	2.89			1.24			1.08			0.91			1.02
Net investment income (loss)		(0.11	)		0.11			0.04			0.01			(0.03	)
Net realized and unrealized gains (losses)		0.01			0.01			0.28			0.02			0.02
Provision for income taxes		(0.01	)		(0.04	)		(0.09	)		0.00			0.00
Issuance of stock options		0.24			0.01			0.00			0.00			0.00
Repurchase of common stock		0.00			0.00			0.00			0.02			0.00
Payment of common stock dividend		0.00			0.00			0.00			0.00			(0.05	)
Net asset value at end of period	$	3.02			1.33			1.31			0.96			0.96

Ratio / Supplemental Data
Per share market value of investments at end of period	$	2.67			1.41			1.22			0.65			0.70
Shares outstanding at end of period		6,185,255			4,824,628			4,795,739			4,754,104			4,918,845
Average weighted shares outstanding for the period		6,185,255			4,808,508			4,794,744			4,877,654			4,918,845
Net assets at end of period	$	18,684,446			14,426,607			14,188,588			10,221,718			10,588,689
Average net assets ⁽²⁾	$	18,389,910			13,888,938			13,073,718			10,025,622			12,304,975
Total investment return (loss)		(3.81	)%		6.45	%		21.30	%		3.30	%		(5.88	)%
Portfolio turnover rate (3)		48.40	%		65.55	%		75.65	%		11.90	%		7.11	%
Ratio of operating expenses to average net assets ⁽³⁾		(25.16	)%		(14.63	)%		(11.72	)%		(9.41	)%		(7.70	)%
Ratio of net investment income (loss) to average net assets⁽³⁾		(7.43	)%		18.01	%		6.88	%		3.02	%		(6.40	)%
Ratio of realized gains (losses) to average net assets ⁽³⁾		(6.03	)%		1.94	%		61.92	%		4.06	%		57.36	%

(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

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2023			2022			2023			2022
Investment Income:	$	907,502		$	1,236,505		$	1,771,530		$	2,236,711
Operating Expenses:		(570,045	)		(502,255	)		(2,461,862	)		(1,048,073	)
Net Investment Gain (Loss)	$	337,457		$	734,250		$	(690,332	)	$	1,188,638

	·	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)
	10.1*		Amendment to 2022 Stock Incentive Plan, dated August ---, 2023
	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: August 15, 2022	By:	/s/ Douglas M. Polinsky
		Douglas M. Polinsky
		Chief Executive Officer

Date: August 15, 2022	By:	/s/ Joseph A. Geraci, II
		Joseph A. Geraci, II
		Chief Financial Officer


Date: August 14, 2023		/s/ Douglas M. Polinsky
		Chief Executive Officer


		/s/ Joseph A. Geraci, II
Date: August 14, 2023		Chief Financial Officer

	1.	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Act of 1934; and

	2.	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.