SUI Group Holdings Ltd 10-Q for FY2023 Q1

SUI Group Holdings Ltd. (SUIG)

10-Q 2023-05-22 For: 2023-03-31

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Added on April 06, 2026

About this 10-Q

SUI Group Holdings Ltd filed this 10-Q on May 22, 2023, covering the quarter ended March 31, 2023 (FY2023 Q1).

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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 March 31, 2023

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 – March 31, 2023 and December 31, 2022	3

	Condensed Statements of Operations – Three months ended March 31, 2023 and March 31, 2022	4

	Condensed Statements of Shareholders’ Equity – Three months ended March 31, 2023 and March 31, 2022	5

	Condensed Statements of Cash Flows – Three months ended March 31, 2023 and March 31, 2022	6

	Condensed Schedule of Investments – March 31, 2023 and Schedule of Investments – December 31, 2022	7

	Condensed Notes to Financial Statements – March 31, 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

Item 6.	Exhibits	23

SIGNATURES		24

	March 31, 2023 (unaudited)			December 31, 2022
ASSETS
Investments, at fair value:	$	19,712,356		$	16,708,432
Non-control/non-affiliate investments (cost: $19,715,304 and $17,359,804 respectively)
Cash		439,829			1,089,641
Note receivable, related party		250,000			250,000
Prepaid expenses		267,568			218,440
Interest and dividend receivables		366,391			250,879
Right-of-use operating lease asset		10,903			16,398
Deferred taxes		461,000			201,000
Total Assets	$	21,508,047		$	18,734,790

LIABILITIES
Accounts payable	$	91,038		$	776,514
Line of credit		2,750,000			—
Operating lease liability		11,067			16,562
Deferred interest income		42,217			70,154
Total Liabilities		2,894,322			863,230

SHAREHOLDERS EQUITY (NET ASSETS)
Common stock, par value $0.001 per share (111,111,111 authorized; 6,185,255 outstanding)		12,215			12,215
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		(1,853,206	)		(1,086,739	)
Accumulated undistributed net realized gains on investment transactions		5,113,829			5,713,829
Net unrealized appreciation (depreciation) in value of investments		(2,948	)		(651,371	)
Total Shareholders' Equity (net assets)		18,613,725			17,871,560
Total Liabilities and Shareholders' Equity	$	21,508,047		$	18,734,790
Net Asset Value Per Common Share	$	3.01		$	2.89

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

	Three Months Ended
	March 31, 2023			March 31, 2022
Investment Income
Interest income	$	864,028		$	1,000,206
Total Investment Income		864,028			1,000,206
Operating Expenses
Professional fees		129,851			198,518
Payroll		1,130,439			196,442
Insurance		27,000			30,097
Occupancy		19,043			16,812
Director's fees		532,968			30,000
Interest expense		34,667			66,939
Other general and administrative		15,827			7,010
Total Operating Expenses		1,889,795			545,818
Net Investment Gain (Loss)		(1,025,767	)		454,388
Realized and Unrealized Gain (Loss) on Investments
Net realized gain (loss) on investments		(600,000	)		138,770
Net change in unrealized appreciation (depreciation) on investments		648,423			(22,047	)
Net Realized and Unrealized Gain on Investments		48,423			116,723
Net Increase (Decrease) in Net Assets Resulting from Operations Before Taxes	$	(977,344	)	$	571,111

Provision (Benefit) for Income Taxes		(259,300	)		159,000
Net Increase (Decrease) in Net Assets Resulting from Operations	$	(718,044	)	$	412,111

Net Increase (Decrease) in Net Assets Resulting from Operations per share:
Basic and diluted	$	(0.12	)	$	0.09

Weighted-average number of common shares outstanding - basic and diluted		6,185,255			4,795,739

Three Months Ended March 31, 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 $259,300				—		—		—			(766,467	)		—			—			(766,467	)
Net realized loss on investment transactions				—		—		—			—			(600,000	)		—			(600,000	)
Appreciation in value of investments				—		—		—			—			—			648,423			648,423
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

Three Months Ended March 31, 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		4,795,739	$	10,790	$	10,694,163	$	(1,159,665	)	$	(1,877,667	)	$	5,580,810		$	165,618		$	13,414,049
Net investment gain, net of tax of $159,000				—		—		—			295,388			—			—			295,388
Net realized gain on investment transactions				—		—		—			—			138,770			—			138,770
Depreciation in value of investments				—		—		—			—			—			(22,047	)		(22,047	)
Balance as of March 31, 2022		4,795,739	$	10,790	$	10,694,163	$	(1,159,665	)	$	(1,582,279	)	$	5,719,580		$	143,571		$	13,826,160

Investment / Industry	Cost		Fair Value		Percentage of Net Assets

Short-Term Non-banking Loans
Business Services - 15% secured loans
Mustang Litigation Funding	$	5,000,000	$	5,000,678		27.26	%
Consumer - 15% secured loans		408,000		406,994		2.22	%
Intelligent Mapping, LLC		2,900,000		2,892,010		15.77	%
Financial - 33% secured loans
Benton Financial, LLC		1,986,625		1,984,769		10.82	%
Financial - 34% secured loans
Benton Financial, LLC		1,165,000		1,163,911		6.35	%
Financial - 36% secured loans
Benton Financial, LLC		1,025,000		1,024,042		5.58	%
Financial - 12% secured loans		500,000		366,079		1.99	%
Information Technology - 15% convertible note		212,500		213,456		1.16	%
Real Estate - 18% secured loans		2,500,000		2,492,891		13.59	%
Real Estate - 15% secured loans		745,000		747,786		4.07	%
Real Estate - 12% secured loans
Alatus Development Corp		2,000,000		2,000,418		10.91	%
Total Short-Term Non-Banking Loans		18,442,125		18,293,034		99.72	%

Preferred Stock
Consumer
Wisdom Gaming, Inc		900,000		900,000		4.91	%
Information Technology		150,000		300,000		1.64	%
Total Preferred Stock		1,050,000		1,200,000		6.55	%

Common Stock
Consumer		212,500		209,322		1.14	%

Warrants
Healthcare		679		-		0.00	%

Other Equity
Financial		10,000		10,000		0.05	%

Total Investments	$	19,715,304	$	19,712,356		107.46	%

Total Cash		439,829		439,829		2.40	%

Total Investments and Cash	$	$20,155,133	$	$20,152,185		109.86	%

	Investments at Amortized Cost		Percentage of Amortized Cost			Investments at Fair Value		Percentage of Fair Value

Short-term Non-banking Loans	$	18,442,125		93.5	%	$	18,293,034		92.8	%
Preferred Stock		1,050,000		5.3			1,200,000		6.1
Common Stock		212,500		1.1			209,322		1.1
Warrants		679		—			—		—
Other Equity		10,000		0.1			10,000		—
Total	$	19,715,304		100.0	%	$	19,712,356		100.0	%

	Investments at Fair Value		Percentage of Fair Value

Business Services	$	5,000,678		25.3	%
Consumer		4,408,326		22.4
Financial		4,548,801		23.1
Information Technology		513,456		2.6
Real Estate		5,241,095		26.6
Total	$	19,712,356		100.0	%

	As of March 31, 2023
	Level 1		Level 2		Level 3		Total

Short-term Non-banking Loans	$	—	$	—	$	18,293,034	$	18,293,034
Preferred Stock		—		—		1,200,000		1,200,000
Common Stock		61,645		147,677		—		209,322
Other Equity		—		—		10,000		10,000
Total	$	61,645	$	147,677	$	19,503,034	$	19,712,356

	As of December 31, 2022
	Level 1		Level 2		Level 3		Total

Short-term Non-banking Loans	$	—	$	—	$	15,285,932	$	15,285,932
Preferred Stock		—		—		1,200,000		1,200,000
Common Stock		—		—		—		—
Other Equity		—		—		222,500		222,500
Total	$	—	$	—	$	16,708,432	$	16,708,432

	For the three months ended March 31, 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		51,602			—		—		—		600,000
Purchases and other adjustments to cost		6,900,500			—		—		—		—
Sales and redemptions		(3,945,000	)		—		—		—		—
Net realized loss		—			—		—		—		(600,000	)
Transfers out of level 3		—			—		—		—		(212,500	)
Balance as of March 31, 2023	$	18,293,034		$	1,200,000	$	—	$	—	$	10,000

Security Type	3/31/23 FMV		Valuation Technique	Unobservable Inputs	Range
ST Non-banking Loans	$	18,293,034	discounted cash flow	determining private company interest rate based on changes in market rates of instruments with comparable creditworthiness	12-36	%
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
	$	19,503,034

	Three Months Ended
	March 31, 2023			March 31, 2022
Cash flows from operating activities:
Net increase (decrease) in net assets resulting from operations	$	(718,044	)	$	412,111
Adjustments to reconcile net increase (decrease) in net assets resulting
from operations to net cash provided (used) in operating activities:
Net change in unrealized (appreciation) depreciation on investments		(648,423	)		22,047
Net realized (gain) loss on investments		600,000			(138,770	)
Purchases of investments		(6,900,500	)		(7,025,000	)
Proceeds from sales of investments		3,945,000			1,152,898
Issuance of stock options		1,460,209			—
Deferred income taxes		(260,000	)		(6,000	)
Changes in operating assets and liabilities:
Prepaid expenses and other assets		(43,633	)		59,000
Interest and dividends receivable		(115,512	)		(238,643	)
Accounts payable and other liabilities		(690,971	)		35,229
Deferred interest income		(27,938	)		272,000
Accrued income taxes		—			165,000
Payable for investment purchase		—			(1,900,000	)
Net cash used in operating activities		(3,399,812	)		(7,190,128	)
Cash flows from financing activities:
Proceeds from line of credit		2,750,000			5,325,000
Net cash provided by financing activities		2,750,000			5,325,000
Net decrease in cash		(649,812	)		(1,865,128	)
Cash, beginning of period		1,089,641			1,936,148
Cash, end of period	$	439,829		$	71,020

	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

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

	·	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 8 above for further details.

	Shares		Weighted Average Exercise Price
Options outstanding at beginning of year		—	$	—
Granted		870,000		2.11
Exercised		—		—
Forfeited		—		—
Balance at March 31		870,000	$	2.11

Options exercisable at March 31:		870,000	$	2.11

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

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

	For the Three Months Ended March 31,
	2023			2022
Numerator: Net increase (decrease) in net assets resulting from operations	$	(718,044	)	$	412,111
Denominator: Weighted-average number of common shares outstanding		6,185,255			4,795,739
Basic and diluted net gain (loss) per common share	$	(0.12	)	$	0.09

Operating Lease	2023			2022
Right-of-use assets	$	10,903		$	—

Operating Lease Liability	$	11,067		$	—
Less: short term portion		(11,067	)		—
Long term portion	$	—		$	—

	Three Months Ended March 31,
	2023			2022			2021			2020			2019
Per Share Data ⁽¹⁾
Net asset value at beginning of period	$	2.89			2.79			2.43			2.05			2.30
Net investment income (loss)		(0.17	)		0.09			0.00			0.00			(0.05	)
Net realized and unrealized gains (losses)		0.01			0.02			0.50			(0.07	)		0.27
Provision for income taxes		0.04			(0.02	)		(0.14	)		0.00			0.00
Issuance of stock options		0.24			0.00			0.00			0.00			0.00
Repurchase of common stock		0.00			0.00			0.00			0.00			0.00
Payment of common stock dividend		0.00			0.00			0.00			0.00			(0.11	)
Net asset value at end of period	$	3.01			2.88			2.79			1.98			2.41

Ratio / Supplemental Data
Per share market value of investments at end of period	$	3.19			4.19			2.81			0.92			1.76
Shares outstanding at end of period		6,185,255			4,795,739			4,794,184			4,918,845			4,918,845
Average weighted shares outstanding for the period		6,185,255			4,795,739			4,793,739			4,918,845			4,918,845
Net assets at end of period	$	18,613,725			13,826,160			13,391,679			9,786,615			11,890,188
Average net assets ⁽²⁾	$	18,242,642			13,620,104			12,516,283			9,927,574			12,911,895
Total investment return		(4.15	)%		3.23	%		14.81	%		(3.30	)%		4.90	%
Portfolio turnover rate (3)		21.63	%		8.46	%		40.24	%		0.75	%		0.93	%
Ratio of operating expenses to average net assets ⁽³⁾		(35.82	)%		(15.28	)%		(16.20	)%		(7.82	)%		(6.06	)%
Ratio of net investment income (loss) to average net assets⁽³⁾		(20.92	)%		14.24	%		0.42	%		0.87	%		(4.87	)%
Ratio of realized gains (losses) to average net assets ⁽³⁾		(12.68	)%		4.20	%		133.32	%		1.00	%		137.57	%

(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 March 31,
	2023			2022
Investment Income:	$	864,029		$	1,000,206
Operating Expenses:		(1,889,796	)		(545,818	)
Net Investment Gain (Loss)	$	(1,025,767	)	$	454,388

	·	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: May 22, 2023	By:	/s/ Douglas M. Polinsky
		DOUGLAS M. POLINSKY
		Chief Executive Officer

Date: May 22, 2023	By:	/s/ Joseph A. Geraci, II
		JOSEPH A. GERACI, II
		Chief Financial Officer


Date: May 22, 2023		/s/ Douglas M. Polinsky
		Chief Executive Officer


Date: May 22, 2023		/s/ Joseph A. Geraci, II
		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.