SUIG 10-Q
SUI Group Holdings Ltd. (SUIG)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
__________________________
FORM
__________________________
(Mark One) | |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
| For the quarterly period ended |
or | |
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
__________________________
(Exact name of registrant as specified in its charter) |
__________________________
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(State or other jurisdiction of incorporation or organization) |
| (I.R.S. Employer Identification No.) |
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(Address of principal executive offices) |
| (Zip Code) |
(
(Registrant’s telephone number, including area code)
__________________________
N/A
(Former name, former address and former fiscal year, if changed since last report)
__________________________
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
| Trading Symbol(s) |
| Name of each exchange on which registered |
|
| The (Nasdaq Capital Market) |
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. ☒
Indicate by check mark whether the registrant has submitted electronically 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). ☒
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 | ☐ |
☒ | Smaller reporting company | ||
|
| Emerging growth company |
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).
As of August 14, 2025, Mill City Ventures III, Ltd. had
MILL CITY VENTURES III, LTD.
Index to Form 10-Q
for the Quarter Ended June 30, 2025
| 2 |
| Table of Contents |
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MILL CITY VENTURES III, LTD.
CONDENSED BALANCE SHEETS
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| June 30, 2025 (unaudited) |
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| December 31, 2024 |
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ASSETS |
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Investments, at fair value (cost: $ |
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Cash and cash equivalents |
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Prepaid expenses |
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Interest and dividend receivables |
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Deferred taxes |
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Total Assets |
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LIABILITIES |
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Accounts payable |
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Accrued payroll liabilities |
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Accrued income tax |
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Total Liabilities |
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Commitments and Contingencies |
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SHAREHOLDERS EQUITY (NET ASSETS) |
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Common stock, par value $ |
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Additional paid-in capital |
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Additional paid-in capital - stock options |
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Accumulated deficit |
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Accumulated undistributed investment gain (loss) |
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Accumulated undistributed net realized gains on investment transactions |
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Net unrealized appreciation (depreciation) in value of investments |
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Total Shareholders' Equity (Net Assets) |
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Total Liabilities and Shareholders' Equity |
| $ |
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| $ |
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Net Asset Value Per Common Share |
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| $ |
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See accompanying Notes to Financial Statements
| 3 |
| Table of Contents |
MILL CITY VENTURES III, LTD.
CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)
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| Three Months Ended |
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| Six Months Ended |
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| June 30, 2025 |
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| June 30, 2024 |
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| June 30, 2025 |
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| June 30, 2024 |
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Investment Income |
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Interest income |
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Total Investment Income |
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Operating Expenses |
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Professional fees |
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Payroll |
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Insurance |
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Occupancy |
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Director's fees |
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Interest expense |
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Other general and administrative |
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Total Operating Expenses |
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Net Investment Gain |
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Realized and Unrealized Gain on Investments |
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Net realized gain (loss) on investments |
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Net change in unrealized appreciation (depreciation) on investments |
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Net Realized and Unrealized Gain on Investments |
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Net Increase in Net Assets Resulting from Operations Before Taxes |
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Provision for Income Taxes |
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Net Increase in Net Assets Resulting from Operations |
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Net Increase in Net Assets Resulting from Operations per share: |
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Basic |
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Diluted |
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| $ |
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| $ |
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Weighted-average number of common shares outstanding - basic |
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Weighted-average number of common shares outstanding - diluted |
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See accompanying Notes to Financial Statements
| 4 |
| Table of Contents |
MILL CITY VENTURES III, LTD.
CONDENSED STATEMENTS OF SHAREHOLDERS’ EQUITY (UNAUDITED)
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Three Months Ended June 30, 2025 |
| Common Shares |
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| Par Value |
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| Additional Paid In Capital |
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| Accumulated Deficit |
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| Accumulated Undistributed Net Investment Gain |
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| Accumulated Undistributed Net Realized Gain (Loss) on Investments Transactions |
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| Net Unrealized Appreciation (Depreciation) in Value of Investments |
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| Total Shareholders' Equity |
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Balance as of March 31, 2025 |
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| $ |
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| $ |
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| $ | ( | ) |
| $ |
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| $ |
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| $ | ( | ) |
| $ |
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Undistributed net investment gain |
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Undistributed net realized loss on investment transactions |
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Appreciation in value of investments |
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Balance as of June 30, 2025 |
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| $ |
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| $ |
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| $ | ( | ) |
| $ |
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| $ |
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Three Months Ended June 30, 2024 |
| Common Shares |
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| Par Value |
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| Additional Paid In Capital |
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| Accumulated Deficit |
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| Accumulated Undistributed Net Investment Gain (Loss) |
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| Accumulated Undistributed Net Realized Gain on Investments Transactions |
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| Net Unrealized Depreciation in Value of Investments |
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| Total Shareholders' Equity |
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Balance as of March 31, 2024 |
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| $ |
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| $ |
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| $ | ( | ) |
| $ | ( | ) |
| $ |
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| $ | ( | ) |
| $ |
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Undistributed net investment gain |
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Undistributed net realized gain on investment transactions |
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Depreciation in value of investments |
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Balance as of June 30, 2024 |
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| $ |
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| $ |
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| $ | ( | ) |
| $ | ( | ) |
| $ |
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Six Months Ended June 30, 2025 |
| Common Shares |
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| Par Value |
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| Additional Paid In Capital |
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| Accumulated Deficit |
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| Accumulated Undistributed Net Investment Gain (Loss) |
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| Accumulated Undistributed Net Realized Gain on Investments Transactions |
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| Net Unrealized Appreciation (Depreciation) in value of Investments |
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| Total Shareholders' Equity |
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Balance as of December 31, 2024 |
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| $ |
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| $ |
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| $ | ( | ) |
| $ | ( | ) |
| $ |
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| $ | ( | ) |
| $ |
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Repurchase of common shares |
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Undistributed net investment gain |
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Undistributed net realized gain on investment transactions |
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Appreciation in value of investments |
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Balance as of June 30, 2025 |
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| $ |
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Six Months Ended June 30, 2024 |
| Common Shares |
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| Par Value |
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| Additional Paid In Capital |
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| Accumulated Deficit |
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| Accumulated Undistributed Net Investment Gain (Loss) |
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| Accumulated Undistributed Net Realized Gain on Investments Transactions |
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| Net Unrealized Depreciation in value of Investments |
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| Total Shareholders' Equity |
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Balance as of December 31, 2023 |
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| $ |
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Undistributed net investment gain |
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Undistributed net realized gain on investment transactions |
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Depreciation in value of investments |
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Balance as of June 30, 2024 |
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| $ |
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| $ |
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| $ | ( | ) |
| $ | ( | ) |
| $ |
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| $ | ( | ) |
| $ |
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See accompanying Notes to Financial Statements
| 5 |
| Table of Contents |
MILL CITY VENTURES III, LTD.
CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
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| Six Months Ended |
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| June 30, 2025 |
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| June 30, 2024 |
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Cash flows from operating activities: |
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Net increase in net assets resulting from operations |
| $ |
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| $ |
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Adjustments to reconcile net increase in net assets resulting |
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from operations to net cash provided (used) in operating activities: |
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Net change in unrealized appreciation (depreciation) on investments |
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Net realized gain on investments |
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Purchases of investments |
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Proceeds from sales of investments |
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Deferred income taxes |
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Changes in operating assets and liabilities: |
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Prepaid expenses and other assets |
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Interest and dividends receivable |
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Accounts payable and other liabilities |
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Net cash provided by (used in) operating activities |
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Cash flows from financing activities: |
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Payments for repurchase of common stock |
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Net cash used by financing activities |
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Net increase (decrease) in cash |
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Cash, beginning of period |
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Cash, end of period |
| $ |
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| $ |
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See accompanying Notes to Financial Statements
| 6 |
| Table of Contents |
MILL CITY VENTURES III, LTD.
CONDENSED SCHEDULE OF INVESTMENTS (UNAUDITED)
JUNE 30, 2025
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Investment / Industry |
| Cost |
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| Fair Value |
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| Percentage of Net Assets |
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Short-Term Non-banking Loans |
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Consumer - 18% secured loans |
| $ |
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| $ |
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| % | |||
Consumer - 24% secured loans |
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| % | |||
Real Estate - 15% secured loans |
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Alatus Development Corp |
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Real Estate - 24% secured loans |
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Coventry Holdings LLC |
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| % | |||
Total Short-Term Non-Banking Loans |
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| % | |||
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Commercial Business Loans |
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Business Services - 20% secured loans |
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Mustang Funding, LLC |
| $ |
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| $ |
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| % | |||
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Common Stock |
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Financial |
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| % | |||
Information Technology |
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| % | |||
Technology |
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| % | |||
Total Common Stock |
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| % | |||
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Other Equity |
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Financial |
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| % | |||
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Total Investments |
| $ |
|
| $ |
|
|
| % | |||
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Cash and cash equivalents |
|
|
|
|
|
|
|
| % | |||
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Investments and Cash |
| $ |
|
| $ |
|
|
| % | |||
| 7 |
| Table of Contents |
MILL CITY VENTURES III, LTD.
SCHEDULE OF INVESTMENTS
DECEMBER 31, 2024
|
|
|
|
|
|
|
|
|
| |||
|
|
|
|
|
|
|
|
|
| |||
Investment / Industry |
| Cost |
|
| Fair Value |
|
| Percentage of Net Assets |
| |||
|
|
|
|
|
|
|
|
|
| |||
Short-Term Non-banking Loans |
|
|
|
|
|
|
|
|
| |||
Business Services - 15% secured loans |
|
|
|
|
|
|
|
|
| |||
Mustang Litigation Funding |
| $ |
|
| $ |
|
|
| % | |||
Consumer - 18% secured loans |
|
|
|
|
|
|
|
| % | |||
Real Estate - 15% secured loans |
|
|
|
|
|
|
|
|
|
|
|
|
Alatus Development Corp |
|
|
|
|
|
|
|
| % | |||
Real Estate - 24% secured loans |
|
|
|
|
|
|
|
|
|
|
|
|
Coventry Holdings LLC |
|
|
|
|
|
|
|
| % | |||
Total Short-Term Non-Banking Loans |
|
|
|
|
|
|
|
| % | |||
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock |
|
|
|
|
|
|
|
|
|
|
|
|
Consumer |
|
|
|
|
|
|
|
| % | |||
Financial |
|
|
|
|
|
|
|
| % | |||
Information Technology |
|
|
|
|
|
|
|
| % | |||
Total Common Stock |
|
|
|
|
|
|
|
| % | |||
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Equity |
|
|
|
|
|
|
|
|
|
|
|
|
Financial |
|
|
|
|
|
|
|
| % | |||
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Investments |
| $ |
|
| $ |
|
|
| % | |||
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Cash and cash equivalents |
|
|
|
|
|
|
|
| % | |||
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Investments and Cash |
| $ |
|
| $ |
|
|
| % | |||
| 8 |
| Table of Contents |
MILL CITY VENTURES III, LTD.
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
June 30, 2025
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.” We follow accounting and reporting guidance in Accounting Standards (“ASC”) Topic 946 “Financial Services – Investment Companies”.
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 at the end of December 2019. Since that time, we have remained a public reporting company filing periodic reports with the SEC. We engage in the business of providing short-term specialty finance solutions, typically in the form of short-term loans, primarily to small businesses, both private and public, and high-net-worth individuals. To avoid regulation under the 1940 Act, we generally seek to structure our investments so they do not constitute “securities” for purposes of federal securities laws, and we monitor our investments as a whole to ensure that no more than 40% of our total assets consist of “investment securities” as defined under the 1940 Act.
NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES
Use of estimates: The preparation of financial statements in conformity with generally accepted accounting principles (GAAP) requires management and our independent board members 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. For more information, see the “Valuation of portfolio investments” caption below, and “Note 4 – Fair Value of Financial Instruments” below. The Company presents its financial statements as an investment company following accounting and reporting guidance in ASC 946.
Cash 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.
Valuation of portfolio 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, 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 portfolio 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 a portfolio investment in a forced or liquidation sale, we could realize significantly less than the value at which we have recorded it.
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. |
| 9 |
| Table of Contents |
MILL CITY VENTURES III, LTD.
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
June 30, 2025
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 discounted cash flows 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. In general, we value our Level 3 equity investments at cost unless circumstances warrant a different approach. Examples of these circumstances includes 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 facts and circumstances that may serve as an 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 the 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 instruments with a residual maturity less than or equal to 60 days, we will generally value such instruments based on a discounted cash flows approach, considering the straight-line amortized face value of the debt unless justification for impairment exists. For level 3 non-banking loans with a maturity in excess of 60 days, fair value is determined based on the initial purchase price and adjusted as necessary to reflect any changes in the financial strength of the creditor and changes in interest rates in the high-yield credit markets.
On a quarterly basis, our management provides members of our Board of Directors with recommendations, if any, to change any existing valuations of our portfolio investments or hierarchy levels for purposes of determining the fair value of such investments based upon the foregoing. In such a case, the Board of Directors would then discuss 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 made no changes to our valuation policy and procedures during the reporting period.
Income 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.
| 10 |
| Table of Contents |
MILL CITY VENTURES III, LTD.
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
June 30, 2025
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, 2021 through 2024, which are the tax years that remain subject to examination by major tax jurisdictions as of June 30, 2025.
Revenue 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 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 the portfolio company and are expected to be collected. Dividend income on common equity securities is recorded on the record date for private portfolio companies or on the ex-dividend date for publicly traded portfolio 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 is placed on non-accrual status.
Allocation 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.
Stock-based compensation: The Company’s stock-based compensation consists of stock options issued to certain employees and directors of the Company. The Company recognizes compensation expense based on an estimated grant date fair value using the Black Sholes option-pricing method. If the factors change and different assumptions are used, the Company’s stock-based compensation expense could be materially different in the future. The Company recognizes stock-based compensation expense for these options on a straight-line basis over the requisite service period. The Company has elected to account for forfeitures as they occur.
Management and service fees:
We do not incur expenses related to management and service fees. Our executive management team manages our investments as part of their employment responsibilities.
Segments:
The Company has a single reportable segment based on the nature of its operations. The nature of business and the accounting policies of the segment are the same as described throughout Notes 1 and 2. The Company’s Chief Operating Decision Maker (“CODM”) is its executive team. The CODM assesses the reportable segment’s performance and allocates resources for the reportable segment based on the net income and total assets which are the same amounts in all material respects as those reported on the Statement of Operations and Balance Sheet.
| 11 |
| Table of Contents |
MILL CITY VENTURES III, LTD.
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
June 30, 2025
NOTE 3 – INVESTMENTS
The following table shows the composition of our investment portfolio by major class, at amortized cost and fair value, as of June 30, 2025 (together with the corresponding percentage of the fair value of our total portfolio of investments):
|
| As of June 30, 2025 |
| |||||||||||||
|
| Investments at Amortized Cost |
|
| Percentage of Amortized Cost |
|
| Investments at Fair Value |
|
| Percentage of Fair Value |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Short-term Non-banking Loans |
| $ |
|
|
| % |
| $ |
|
|
| % | ||||
Commercial Business Loans |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Common Stock |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Other Equity |
|
|
|
|
|
|
|
|
|
|
| — |
| |||
Total |
| $ |
|
|
| % |
| $ |
|
|
| % | ||||
The following table shows the composition of our investment portfolio by major class, at amortized cost and fair value, as of December 31, 2024 (together with the corresponding percentage of the fair value of our total portfolio of investments):
|
| As of December 31, 2024 |
| |||||||||||||
|
| Investments at Amortized Cost |
|
| Percentage of Amortized Cost |
|
| Investments at Fair Value |
|
| Percentage of Fair Value |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Short-term Non-banking Loans |
| $ |
|
|
| % |
| $ |
|
|
| % | ||||
Common Stock |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Other Equity |
|
|
|
|
|
|
|
|
|
|
| — |
| |||
Total |
| $ |
|
|
| % |
| $ |
|
|
| % | ||||
The following table shows the composition of our investment portfolio by industry grouping, based on fair value as of June 30, 2025:
|
| As of June 30, 2025 |
| |||||
|
| Investments at Fair Value |
|
| Percentage of Fair Value |
| ||
|
|
|
|
| ||||
Business Services |
| $ |
|
|
| % | ||
Consumer |
|
|
|
|
|
| ||
Financial |
|
|
|
|
|
| ||
Information Technology |
|
|
|
|
| — |
| |
Real Estate |
|
|
|
|
|
| ||
Technology |
|
|
|
|
|
| ||
Total |
| $ |
|
|
| % | ||
The following table shows the composition of our investment portfolio by industry grouping, based on fair value as of December 31, 2024:
|
| As of December 31, 2024 |
| |||||
|
| Investments at Fair Value |
|
| Percentage of Fair Value |
| ||
|
|
|
|
| ||||
Business Services |
| $ |
|
|
| % | ||
Consumer |
|
|
|
|
|
| ||
Financial |
|
|
|
|
|
| ||
Information Technology |
|
|
|
|
| — |
| |
Real Estate |
|
|
|
|
|
| ||
Total |
| $ |
|
|
| % | ||
| 12 |
| Table of Contents |
MILL CITY VENTURES III, LTD.
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
June 30, 2025
NOTE 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 investment portfolio as of June 30, 2025 may differ materially from values that would have been used had a readily available market for those investments existed.
The following table presents the fair value measurements of our portfolio investments by major class, as of June 30, 2025, according to the fair value hierarchy:
|
| As of June 30, 2025 |
| |||||||||||||
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Total |
| ||||
|
|
|
|
|
|
| ||||||||||
Short-term Non-banking Loans |
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||
Commercial Business Loans |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Common Stock |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Other Equity |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Total |
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||
The following table presents the fair value measurements of our portfolio investments by major class, as of December 31, 2024, according to the fair value hierarchy:
|
| As of December 31, 2024 |
| |||||||||||||
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Total |
| ||||
|
|
|
|
|
|
| ||||||||||
Short-term Non-banking Loans |
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||
Common Stock |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Other Equity |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Total |
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||
The following table presents a reconciliation of the beginning and ending fair value balances for our Level 3 portfolio investment assets for the six months ended June 30, 2025:
|
| For the six months ended June 30, 2025 |
| |||||||||||||
|
| ST Non-banking Loans |
|
| Commercial Business Loans |
|
| Common Stock |
|
| Other Equity |
| ||||
|
|
|
|
|
|
| ||||||||||
Balance as of January 1, 2025 |
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||
Net change in unrealized appreciation |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Purchases and other adjustments to cost |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Sales and redemptions |
|
| ( | ) |
|
|
|
|
|
|
|
|
|
| ||
Transfers between investment classifications |
|
| ( | ) |
|
|
|
|
|
|
|
|
| |||
Balance as of June 30, 2025 |
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||
The net change in unrealized appreciation for the six months ended June 30, 2025 attributable to Level 3 portfolio investments still held as of June 30, 2025 was $
The following table lists our Level 3 investments held as of June 30, 2025 and the unobservable inputs used to determine their valuation:
Security Type |
| 6/30/25 FMV |
|
| Valuation Technique |
| Unobservable Inputs |
| Range |
| ||
ST Non-banking Loans |
| $ |
|
| discounted cash flow |
| determining private company interest rate based on changes in market rates of instruments with comparable creditworthiness |
| % | |||
Commercial Business Loan |
|
|
|
| discounted cash flow |
| determining private company interest rate based on changes in market rates of instruments with comparable creditworthiness |
|
| % | ||
Other Equity |
|
|
|
| last secured funding known by company |
|
|
|
|
|
| |
|
| $ |
|
|
|
|
|
|
|
|
| |
| 13 |
| Table of Contents |
MILL CITY VENTURES III, LTD.
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
June 30, 2025
The following table presents a reconciliation of the beginning and ending fair value balances for our Level 3 portfolio investment assets for the period ended December 31, 2024:
|
| For the year ended December 31, 2024 |
| |||||||||||||
|
| ST Non-banking Loans |
|
| Preferred Stock |
|
| Common Stock |
|
| Other Equity |
| ||||
|
|
|
|
|
|
| ||||||||||
Balance as of January 1, 2024 |
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||
Net change in unrealized depreciation |
|
|
|
|
|
|
|
| ( | ) |
|
| ( | ) | ||
Purchases and other adjustments to cost |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Sales and redemptions |
|
| ( | ) |
|
|
|
|
|
|
|
|
| |||
Realized gain (loss) |
|
| ( | ) |
|
| ( | ) |
|
|
|
|
|
| ||
Conversion from preferred to common stock |
|
|
|
|
| ( | ) |
|
|
|
|
|
| |||
Transfers between level 3 and level 1 |
|
| ( | ) |
|
|
|
|
|
|
|
|
| |||
Balance as of December 31, 2024 |
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||
The net change in unrealized depreciation for the year ended December 31, 2024 attributable to Level 3 portfolio investments still held as of December 31, 2024 was $
The following table lists our Level 3 investments held as of December 31, 2024 and the unobservable inputs used to determine their valuation:
Security Type |
| 12/31/24 FMV |
|
| Valuation Technique |
| Unobservable Inputs |
| Range | ||
ST Non-banking Loans |
| $ |
|
| discounted cash flow |
| determining private company interest rate based on changes in market rates of instruments with comparable creditworthiness |
| % | ||
Other Equity |
|
|
|
| last secured funding known by company |
| economic changes since last funding |
|
| ||
Common Stock |
|
|
|
| last funding secured by company |
| economic changes since last funding |
|
| ||
|
| $ |
|
|
|
|
|
|
| ||
NOTE 5 – RELATED-PARTY TRANSACTIONS
We maintain a conflicts of interest and related-party transactions policy requiring (i) certain disclosures be made to our Board of Directors in relation to situations where officers, directors, significant shareholders, or any of their affiliates may enter into transactions with us, and (ii) certain disclosures appear in the reports we prepare and file with the SEC. In this regard, during the period covered by this report we entered into, or remained a party to, the following related-party transactions:
| · | We held a promissory note with two shareholders in the principal amount of $ |
|
|
|
| · | As disclosed in Note 7, a component of our now terminated loan agreement was with a director of our Company. |
NOTE 6 – INCOME TAXES
Presently, we are a C-Corporation for tax purposes and have booked an income tax provision for the periods described below. Our tax provision or benefit from income taxes for interim periods is determined using an estimate of our annual effective tax rate.
| 14 |
| Table of Contents |
MILL CITY VENTURES III, LTD.
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
June 30, 2025
As of June 30, 2025 and December 31, 2024, we have a deferred tax asset of $
As of June 30, 2025 and December 31, 2024 we had accrued taxes of $
NOTE 7 – LINE OF CREDIT
We had a Loan and Security Agreement (the “Loan Agreement”) with a third party and director (collectively, the Lenders). Under the Loan Agreement, the Lenders made available to us a $
In January 2024, we terminated the Loan Agreement. Any applicable fees related to early termination of the Agreement were waived.
NOTE 8 – STOCK-BASED COMPENSATION
Our 2022 Stock Incentive Plan (the “Plan”) authorized the issuance of incentives relating to
The following table summarizes the activity for all stock options outstanding for the six months ended June 30, 2025:
|
| Shares |
|
| Weighted Average Exercise Price |
| ||
Options outstanding at beginning of year |
|
|
|
| $ |
| ||
Granted |
|
| — |
|
|
| — |
|
Exercised |
|
| — |
|
|
| — |
|
Forfeited |
|
| — |
|
|
| — |
|
Options outstanding at end of period |
|
|
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
Options exercisable at June 30, 2025: |
|
|
|
| $ |
| ||
The following table summarizes additional information about stock options outstanding and exercisable at June 30, 2025:
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 |
| |||||||
|
|
|
|
|
| $ |
|
| $ |
|
|
|
|
| $ |
|
| $ |
| |||||||
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| Table of Contents |
MILL CITY VENTURES III, LTD.
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
June 30, 2025
The Company recognized stock-based compensation expense for stock options of $
NOTE 9 – SHAREHOLDERS’ EQUITY
At June 30, 2025, we had
During the first quarter we repurchased
In connection with the 2022 public offering, we issued a five-year warrant to the underwriter. The warrant allows the underwriter to purchase up to
NOTE 10 – 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. Diluted net gain per common share is computed by dividing net increase in net assets resulting from operations by the weighted-average number of dilutive common shares outstanding during the period calculated using the Treasury Stock method. The Treasury Stock method assumes that the proceeds received upon exercise of stock options are used to repurchase stock at the average market price during the period, thereby increasing the number of shares to be added in computing diluted earnings per share. For the three and six month periods ended June 30, 2025,
|
| For the Three Months Ended June 30, |
| |||||||||||||
|
| 2025 |
|
| 2024 |
| ||||||||||
|
| Basic |
|
| Diluted |
|
| Basic |
|
| Diluted |
| ||||
Numerator: Net increase in net assets resulting from operations |
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||
Denominator: Weighted-average number of common shares outstanding |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Basic and diluted net gain (loss) per common share |
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| For the Six Months Ended June 30, | ||||||||||||||
|
| 2025 |
|
| 2024 | |||||||||||
|
| Basic |
|
| Diluted |
|
| Basic |
|
| Diluted |
| ||||
Numerator: Net increase (decrease) in net assets resulting from operations |
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||
Denominator: Weighted-average number of common shares outstanding |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Basic and diluted net gain (loss) per common share |
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||
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| Table of Contents |
MILL CITY VENTURES III, LTD.
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
June 30, 2025
NOTE 11 – FINANCIAL HIGHLIGHTS
The following is a schedule of financial highlights for the six months ended June 30, 2025 through 2021:
|
| Six Months Ended June 30, |
| |||||||||||||||||
|
| 2025 |
|
| 2024 |
|
| 2023 |
|
| 2022 |
|
| 2021 |
| |||||
Per Share Data (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Net asset value at beginning of period |
| $ |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Net investment income (loss) |
|
|
|
|
|
|
|
| ( | ) |
|
|
|
|
|
| ||||
Net realized and unrealized gains (losses) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
(Provision for) benefit from income taxes |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
Issuance of stock options |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Repurchase of common stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Other changes in equity |
|
| ( | ) |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Net asset value at end of period |
| $ |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratio / Supplemental Data |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per share market value of investments at end of period |
| $ |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Shares outstanding at end of period |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Average weighted shares outstanding for the period - basic |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Average weighted shares outstanding for the period - diluted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Net assets at end of period |
| $ |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Average net assets (2) |
| $ |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Total investment return |
|
| % |
|
| % |
|
| ( | )% |
|
| % |
|
| % | ||||
Portfolio turnover rate (3) |
|
| % |
|
| % |
|
| % |
|
| % |
|
| % | |||||
Ratio of operating expenses to average net assets (3) |
|
| ( | )% |
|
| ( | )% |
|
| ( | )% |
|
| ( | )% |
|
| ( | )% |
Ratio of net investment income (loss) to average net assets (3) |
|
| % |
|
| % |
|
| ( | )% |
|
| % |
|
| % | ||||
Ratio of realized gains (losses) to average net assets (3) |
|
| % |
|
| % |
|
| ( | )% |
|
| % |
|
| % | ||||
(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 12 – SUBSEQUENT EVENTS
Private Placement and SUI Strategy
Securities Purchase Agreements and SUI Strategy
On July 31, 2025, we completed a
The securities offered and sold in the private placement, including the shares of common stock, the pre-funded warrants, the Placement Agent Warrants, Lead Investor Warrants, Foundation Investor Warrants, Management Warrants, and the Advisor Warrants (all as such warrants are defined in the disclosure below), and all of the shares of common stock issuable upon the exercise of all such warrants, were offered and sold in reliance upon the exemption from the registration requirements of the Securities Act, pursuant to Section 4(a)(2) thereof and/or Rule 506(b) of Regulation D promulgated thereunder, and applicable state securities laws. The offer and sale of all of the above-described securities were not registered under the Securities Act, and such securities may not be offered or sold in the United States absent registration or an exemption from registration under the Securities Act and any applicable state securities laws.
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| Table of Contents |
MILL CITY VENTURES III, LTD.
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
June 30, 2025
Simultaneously with the closing of the private placement, we adopted a new treasury policy and strategy under which the principal holding in our treasury reserve on the balance sheet will be allocated to the native cryptocurrency of the Sui blockchain commonly referred to as “SUI.” The Sui Foundation is an independent organization dedicated to the advancement and adoption of the Sui network. The Board of Directors approved our treasury policy on July 27, 2025, authorizing the long-term accumulation of SUI. We believe our position as a public company with an official Sui Foundation relationship provides us institutional-grade exposure to the SUI blockchain, and that Sui is well positioned for large-scale adoption with the speed and efficiency institutions require for crypto at scale, plus the technical architecture capable of supporting AI workloads while maintaining security and decentralization. Our approach involves acquiring SUI directly—both through market purchases and direct purchases from the Sui Foundation. This treasury initiative seeks to enhance our capital allocation strategy and does not affect our core commercial short-term non-bank lending and specialty finance business, which remains fully operational and a central part of our business.
Warrants
At the closing of the private placement, we issued five-year warrants to purchase our common stock as follows:
| (i) | warrants (the “Lead Investor Warrants”) to Karatage Opportunities (“Karatage”), to |
|
|
|
| (ii) | warrants (the “Foundation Investor Warrants”) to the Sui Foundation (the “Foundation Investor”), to |
|
|
|
| (iii) | warrants (the “Management Warrants”) to certain members of the management of the Company to |
|
|
|
| (iv) | warrants (the “Advisor Warrants”) to certain advisors of the Company |
All of the above-described warrants, other than the Advisor Warrants, will vest over a 24-month period starting six months from the Issue Date (as defined therein) in four equal installments (being 25% every six months), and in the case of the Management Warrants, subject to the relevant holder still being employed by the Company at each respective vesting date. In the event that a member of the management team is terminated by the Company other than for cause or resigns for good reason (as defined in the individual’s employment agreement), the vesting of all of such individual’s Management Warrants will immediately accelerate and be fully vested as of the date of such termination. The Advisor Warrants are fully exercisable beginning as of January 31, 2026.
Placement Agency Agreement
On July 27, 2025, and in connection with the private placement, we entered into a Placement Agency Agreement with A.G.P., pursuant to which A.G.P. agreed to serve as our exclusive placement agent in connection with the private placement. Under the terms of the Placement Agency Agreement, we paid A.G.P. a cash fee of $
Registration Rights Agreement
On July 27, 2025, and in connection with the private placement, we entered into a Registration Rights Agreement with the investors and A.G.P. pursuant to which we agreed to file a registration statement, within 10 days of the closing (i.e., on or before August 10, 2025), providing for the resale by the investors of the common shares and shares of common stock issuable upon exercise of the pre-funded warrants, and the shares of common stock issuable upon exercise of the Lead Investor Warrant, Foundation Investor Warrant, Management Warrants and the Placement Agent Warrants, and to have such registration statement declared effective within 30 days of its filing date (or 60 days, if the SEC conducts a full review), and to maintain the effectiveness of such registration statement until all securities registered pursuant thereto (i) shall have been sold, either thereunder or pursuant to Rule 144, or (ii) starting from the third anniversary of the Registration Rights Agreement, may be sold without volume or manner-of-sale restrictions pursuant to Rule 144 under the Securities Act, and without the requirement for our Company to be in compliance with the current public information requirement Rule 144.
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| Table of Contents |
MILL CITY VENTURES III, LTD.
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
June 30, 2025
Strategic Advisor Agreement
On July 27, 2025, we entered into a Strategic Advisor Agreement (the “Strategic Advisor Agreement”) with Karatage to expand and diversify our business operations through the integration of cryptocurrency and digital asset strategies in both our product offerings and as part of our treasury management strategy. Pursuant to the Strategic Advisor Agreement, Karatage will provide us with technical advisory services regarding the digital asset ecosystem, including SUI and related technologies, developments in the digital asset and crypto gaming industries, the selection of third-party vendors with respect to asset management and related digital asset services, and other strategic advice regarding our digital assets treasury operations.
We will pay Karatage a tiered asset-based fee ranging from
The Strategic Advisor Agreement will, unless earlier terminated in accordance with its terms, continue in effect for a period of ten years beginning on July 27, 2025, after which time the Strategic Advisor Agreement will automatically renew for a successive period of five years each, subject to the mutual agreement between the parties. Either the Company or Karatage may terminate the Strategic Advisor Agreement for cause immediately upon written notice if the other party: (i) materially breaches the Strategic Advisor Agreement; and (ii) fails to cure such breach within 30 days after receiving written notice of the breach. If the Strategic Advisor Agreement is terminated by the Company for cause or by Karatage other than for cause, Karatage will cease providing such technical advisory services and the Company will pay Karatage any fees due and payable under the Strategic Advisor Agreement up to the date of termination, provided that if the Strategic Advisor Agreement is terminated by the Company for any other reason or by the Advisor for cause, Karatage will cease providing such technical advisory services and the Company will pay Karatage any fees that would be due and payable under the Strategic Advisor Agreement for the remainder of the term of the agreement, as if the Strategic Advisor Agreement had not been terminated.
Asset Management Agreement
On July 27, 2025, we entered into an Asset Management Agreement (the “Asset Management Agreement”) with Galaxy Digital Capital Management LP (the “Asset Manager”). The Asset Manager will provide discretionary investment management services with respect to, among other assets (including without limitation certain subsequently raised funds), our proceeds from the private placement (the “Account Assets”), and will have exclusive right to manage
We will pay the Asset Manager a tiered asset-based fee (the “Asset-based Fee”) ranging from
The Asset Management Agreement will, unless terminated earlier in accordance with its terms, remain in effect for five years, after which time it will automatically renew for one-year terms, subject to mutual agreement between the Company and the Asset Manager. Beginning on the second anniversary of the Asset Management Agreement, such agreement may be terminated by us upon at least 90 days prior written notice to the Asset Manager at the good faith discretion of our Chief Investment Officer (“CIO”) or our Board of Directors if the Asset Manager has underperformed according to such CIO’s internal objective metrics, as agreed with the Asset Manager. Additionally, the Asset Management Agreement may be terminated at any time for cause by us or the Asset Manager upon at least 30 days prior written notice to the other party. Additionally, the Asset Management Agreement may be terminated immediately by us if we determine in good faith after consultation with counsel, reasonably acceptable to the Asset Manager, that the Asset Management Agreement is prohibited or otherwise required to be terminated by applicable law.
Digital Asset Purchase and Sale Agreement
On July 27, 2025, we also entered into a Digital Asset Purchase and Sale Agreement (the “Digital Asset Purchase and Sale Agreement”) with the Foundation Investor, pursuant to which we agreed to purchase and the Foundation Investor agreed to sell and transfer certain SUI tokens as set forth in one or more confirmations. The USD price per SUI token purchased pursuant to the Digital Asset Purchase and Sale Agreement will be equal to the product of (i) 0.85 multiplied by (ii) the 24-hour time weighted-average price on the closing date (as defined in the securities purchase agreements entered into in the private placement), as reasonably calculated by the Company. Pursuant to the terms of the Digital Asset Purchase and Sale Agreement, the SUI tokens purchased will be subject to transfer restrictions for a period of two years following purchase. Notwithstanding the foregoing, the transfer restrictions will not apply to the extent necessary to enable us to comply, or to be in compliance with, the provisions of the U.S. Investment Company Act of 1940, as amended. The Digital Asset Purchase and Sale Agreement also provides us with certain preemptive rights to purchase additional SUI tokens through July 31, 2027.
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| Table of Contents |
MILL CITY VENTURES III, LTD.
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
June 30, 2025
Executive Employment Agreements
On July 31, 2025, we entered into new executive employments with Douglas M. Polinsky, our Chief Executive Officer, and Joseph A. Geraci II, our Chief Financial Officer. Each new employment agreement has a three-year term (subject to certain early-termination rights). Each employment agreement provides the executive with a base annual salary of $
Each employment agreement contains a non-solicitation covenant effective during the term of the agreement and one year thereafter, as well as customary confidentiality covenants relating to the confidentiality of the Company information. In the event that an executive is terminated for cause, as defined in the employment agreements, or in the event that an executive’s services are terminated due to death or disability, the terminated executive will be entitled to receive only his base annual salary through the date of termination. In the event of other non-cause terminations, or in the event the executive resigns for good reason, as defined in the employment agreements, the Company will be obligated to pay the terminated executive’s base annual salary through the remainder of the employment term.
Change in Directors
On July 27, 2025, Mr. Lyle Berman resigned his position as a director on our Board of Directors. On the same day, the Board approved, subject to the closing of the private placement (which occurred on July 31, 2025), to set the size of the Board of Directors to five members, and appoint Messrs. Marius Barnett and Dana Wagner to serve as directors. Mr. Barnett is expected to serve as Chairman of the Board, and Mr. Wagner is expected to serve as a member of the Audit Committee of the Board. The Board believes that Messrs. Wagner and Barnett are qualified to serve as directors due to their extensive experience with SUI and cryptocurrency technology. Messrs. Wagner and Barnett are also regarded as leaders in financial investments and treasury strategies.
As compensation for his services on the Board, Mr. Wagner will receive an annual director fee of $
Amended and Restated Bylaws
On July 27, 2025, the Board of Directors amended and restated our Company’s bylaws, effective immediately. The principal changes to the bylaws are to:
| · | permit the Board to take action without a meeting by less than unanimous written consent; |
|
|
|
| · | establish the rights of shareholders to nominate directors for election at shareholder meetings pursuant to a written agreement, approved by the Board, as well as to include supporting materials in the Company’s proxy statement; and |
|
|
|
| · | provide for the ability of the Board to increase or decrease the size of the Board. |
Common Stock Purchase Agreement
On August 1, 2025, we entered into a Common Stock Purchase Agreement
Any purchases and sales under the Purchase Agreement will be at a per-share purchase price equal 95% of the volume-weighted average price for the applicable period, as calculated pursuant to the Purchase Agreement.
Any proceeds from sales of common stock under the Purchase Agreement will be used in the manner set forth in the prospectus included in the related registration statement (and any post-effective amendment thereto), and any prospectus supplement thereto, filed pursuant to the registration rights agreement.
| 20 |
| Table of Contents |
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:
| · | Overview |
| · | Portfolio and Investment Activity |
| · | Results of Operations |
| · | Financial Condition |
| · | Critical Accounting Estimates |
| · | Off-Balance Sheet Arrangements |
| · | Forward Looking Statements |
OVERVIEW
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, 2024, 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.
PORTFOLIO AND INVESTMENT ACTIVITY
During the six months ended June 30, 2025, we made $4,428,530 of investment purchases and had $504,116 of redemptions and repayments, resulting in net investments at amortized cost of $17,641,707 as of June 30, 2025.
During the six months ended June 30, 2024, we made $973,438 of investment purchases and had $5,461,479 of redemptions and repayments, resulting in net investments at amortized cost of $14,460,679 as of June 30, 2024.
Our portfolio composition by major class, based on fair value at June 30, 2025, was as follows:
|
| Investments at Fair Value |
|
| Percentage of Fair Value |
| ||
|
|
|
|
| ||||
Short-term Non-banking Loans |
| $ | 6,685,295 |
|
|
| 37.4 | % |
Commercial Business Loans |
|
| 10,314,787 |
|
|
| 57.8 |
|
Common Stock |
|
| 854,879 |
|
|
| 4.8 |
|
Other Equity |
|
| — |
|
|
| — |
|
Total |
| $ | 17,854,961 |
|
|
| 100.0 | % |
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| Table of Contents |
RESULTS OF OPERATIONS
Our operating results for the three and six months ended June 30, 2025 and June 30, 2024 were as follows:
:
|
| For the Three Months Ended June 30, |
|
| For the Six Months Ended June 30, |
| ||||||||||
|
| 2025 |
|
| 2024 |
|
| 2025 |
|
| 2024 |
| ||||
Investment Income: |
| $ | 948,034 |
|
| $ | 888,629 |
|
| $ | 1,726,061 |
|
| $ | 1,721,296 |
|
Operating Expenses: |
|
| (316,183 | ) |
|
| (398,059 | ) |
|
| (695,966 | ) |
|
| (759,146 | ) |
Net Investment Gain |
| $ | 631,851 |
|
| $ | 490,570 |
|
| $ | 1,030,095 |
|
| $ | 962,150 |
|
Investment Income
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-term 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 six months ended June 30, 2025, our total investment income was $948,034 and $1,726,061, respectively. For the three and six months ended June 30, 2024 our total investment income was $888,629 and $1,721,296, respectively. Our loan portfolio generates interest income, with an average rate on the loans of 20%.
Professional Fees
For the three and six months ended June 30, 2025, we had $98,764 and $241,420 professional fees expense, respectively. For the three and six months ended June 30, 2024, we had $174,098 and $312,469 professional fees expense, respectively. The decrease is due to the decrease in loan activity during the current year.
Payroll and Directors Fees
For the three and six months ended June 30, 2025, we had $160,230 and $323,499 of payroll expense, respectively, and we had $30,000 and $60,000 of directors fees, respectively. For the three and six months ended June 30, 2024, we had $145,859 and $296,925 of payroll expense, respectively, and we had $30,000 and $60,000 of directors fees, respectively.
Interest Expense
For the three and six months ended June 30, 2025, we had $0 and $0 of interest expense, respectively. For the three and six months ended June 30, 2024, we had $0 and $320 of interest expense, respectively. The decrease is due to the termination of the line of credit agreement in January 2024.
Net Realized Gain (Loss) from Investments
For the three and six months ended June 30, 2025, we had $500,017 and $504,116, respectively, of sales of investments resulting in $31 of realized losses and $205 of realized gains, respectively. For the three and six months ended June 30, 2024, we had $5,152,682 and $5,461,479, respectively, of sales of investments resulting in $346,745 and $371,240 of realized gains, respectively.
Net Change in Unrealized Appreciation (Depreciation) on Investments
For the three and six months ended June 30, 2025, our investments had $314,515 and $476,781 of unrealized appreciation, respectively. For the three and six months ended June 30, 2024, our investments had $289,641 and $237,890 of unrealized depreciation, respectively.
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Changes in Net Assets from Operations
For the three and six months ended June 30, 2025, we recorded a net increase in net assets from operations of $677,035 and $1,128,781, respectively. Based on the weighted-average number of shares of common stock outstanding for the three and six months ended June 30, 2025, our per-share net increase in net assets from operations was $0.11 and $0.18, respectively. For the three and six months ended June 30, 2024, we recorded a net increase in net assets from operations of $412,936 and $795,039, respectively. Based on the weighted-average number of shares of common stock outstanding for the three and six months ended June 30, 2024, our per-share net increase in net assets from operations was $0.06 and $0.12, respectively.
Cash Flows for the Six Months Ended June 30, 2025 and 2024
The level of cash flows used in or provided by operating activities is affected by the timing of purchases, redemptions and repayments of portfolio investments, among other factors. For the six months ended June 30, 2025, net cash used in operating activities was $3,898,665. Cash flows used in operating activities for the six months ended June 30, 2025 were primarily related to purchasing of investments totaling $4,428,530. Cash flows used in our financing activities for the six months ended June 30, 2025 were due to the repurchase and retirement of 322,482 of our common shares for $630,436. For the six months ended June 30, 2024, net cash provided in operating activities was $5,048,587. Cash flows provided in operating activities for the six months ended June 30, 2024 were primarily related to the funding of our short-term loans and purchases of investments aggregating $973,438, offset mostly by redemptions and repayments of short-term loans and investments totaling $5,461,479.
FINANCIAL CONDITION
As of June 30, 2025, we had cash of $1,497,009, a decrease of $4,529,101 from December 31, 2024. The primary use of our existing funds and any funds raised in the future is expected to be for our investments in portfolio companies or for other general corporate purposes, including paying for operating expenses or debt service to the extent we borrow or issue senior securities. Pending investment in portfolio companies, our investments may consist of cash, cash equivalents, U.S. government securities or high-quality debt securities maturing in one year or less from the time of investment, which we refer to collectively as “temporary investments.”
Private Placement of Securities and SUI Strategy
On July 31, 2025, we closed on a private placement offer and sale of 75,881,625 shares of our common stock at an offering price of $5.42 per share, and pre-funded warrants to purchase up to 7,144,205 shares of our common stock at an offering price of $5.4199 per share, exercisable at a per-share price of $0.0001.
On July 27, 2025, and in connection with the private placement, we entered into a Placement Agency Agreement with A.G.P., pursuant to which A.G.P. agreed to serve as our exclusive placement agent in connection with the private placement. Pursuant to the Placement Agency Agreement, we paid A.G.P. a cash placement agent fee of $18,000,000. We also issued to A.G.P. warrants (the “Placement Agent Warrants”) to purchase up to 3,113,469 shares of our common stock (equal to 3.75% of the securities sold in the private placement). The Placement Agent Warrants will become exercisable six months following the issuance date and will be exercisable for a period of five years following the issuance date, at an exercise price of $5.962 per share. In addition, we agreed to reimburse A.G.P. for accountable expenses in an amount of $200,000 for its legal fees in connection with the private placement, as well as non-accountable expenses incurred by A.G.P. for up to $25,000 in connection with the private placement.
At the closing of the private placement, we also issued five-year warrants to purchase our common stock as follows:
| (i) | warrants (the “Lead Investor Warrants”) to Karatage Opportunities (“Karatage”), to purchase 3,113,469 shares of common stock at various exercise prices as follows: (i) 1,245,387 common shares at an exercise price of $5.42 per share; (ii) 1,245,387 common shares at an exercise price of $5.962 per share; (iii) 415,129 common shares at an exercise price of $6.504 per share; and (iv) 207,565 common shares at an exercise price of $7.046 per share; |
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| (ii) | warrants (the “Foundation Investor Warrants”) to the Sui Foundation (the “Foundation Investor”), to purchase 3,113,469 shares of common stock at various exercise prices as follows: (i) 1,245,388 common shares at an exercise price of $5.42 per share; (ii) 1,245,387 common shares at an exercise price of $5.962 per share; (iii) 415,129 common shares at an exercise price of $6.504 per share; and (iv) 207,565 common shares at an exercise price of $7.046 per share; |
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| (iii) | warrants (the “Management Warrants”) to certain members of the management of the Company to purchase 1,245,388 shares of common stock at various exercise prices as follows: (i) 622,694 common shares at an exercise price of $5.42 per share; (ii) 415,130 common shares at an exercise price of $6.504 per share; and (iii) 207,564 common shares at an exercise price of $7.046 per share; and |
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| (iv) | warrants (the “Advisor Warrants”) to certain advisors of the Company to purchase 207,565 shares of common stock at an exercise price of $5.962 per share. |
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All of the above-described warrants, other than that Advisor Warrants, will vest over a 24-month period starting six months from the issue date (as defined therein) in four equal installments (being 25% every six months), and in the case of the Management Warrants, subject to the relevant holder still being employed by the Company at each respective vesting date. In the event that a member of the management team is terminated by the Company other than for cause or resigns for good reason (as defined in the individual’s employment agreement), the vesting of all of such individual’s Management Warrants will immediately accelerate and be fully vested as of the date of such termination. The Advisor Warrants are fully exercisable beginning as of January 31, 2026.
On July 27, 2025, and in connection with the private placement, we entered into a Registration Rights Agreement with the investors and A.G.P. pursuant to which we agreed to file a registration statement, within 10 days of the closing (i.e., on or before August 10, 2025), providing for the resale by the investors of the common shares and shares of common stock issuable upon exercise of the pre-funded warrants, and the shares of common stock issuable upon exercise of the Lead Investor Warrant, Foundation Investor Warrant, Management Warrants and the Placement Agent Warrants, and to have such registration statement declared effective within 30 days of its filing date (or 60 days, if the SEC conducts a full review), and to maintain the effectiveness of such registration statement until all securities registered pursuant thereto (i) shall have been sold, either thereunder or pursuant to Rule 144, or (ii) starting from the third anniversary of the registration rights agreement, may be sold without volume or manner-of-sale restrictions pursuant to Rule 144 under the Securities Act, and without the requirement for our Company to be in compliance with the current public information requirement Rule 144.
Common Stock Purchase Agreement
On August 1, 2025, we entered into a Common Stock Purchase Agreement (the “Purchase Agreement”) with A.G.P./Alliance Global Partners (the “Investor”), pursuant to which we have the right, but not the obligation, to direct the Investor to purchase the lesser of (i) $500,000,000 or (ii) a number of shares not to exceed 19.99% of our shares of common stock outstanding on August 1, 2025, unless our shareholders shall have approved the issuance of common stock in excess of such percentage, upon satisfaction of certain terms and conditions contained in the Purchase Agreement, including but not limited to an effective resale registration statement filed with the SEC. In this regard, we also entered into a Registration Rights Agreement with the Investor on August 1, 2025, pursuant to which we agreed to file a resale registration statement registering the resale of shares of common stock that may be purchased by the Investor pursuant to the Purchase Agreement.
Any purchases and sales under the Purchase Agreement will be at a per-share purchase price equal 95% of the volume-weighted average price for the applicable period, as calculated pursuant to the Purchase Agreement.
Any proceeds from sales of common stock under the Purchase Agreement will be used in the manner set forth in the prospectus included in the related registration statement (and any post-effective amendment thereto), and any prospectus supplement thereto, filed pursuant to the registration rights agreement.
CRITICAL ACCOUNTING ESTIMATES
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, 2024.
OFF-BALANCE-SHEET ARRANGEMENTS
During the six months ended June 30, 2025, we did not engage in any off-balance sheet arrangements as described in Item 303(a)(4) of Regulation S-K.
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FORWARD-LOOKING STATEMENTS
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:
| · | 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. |
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 April 17, 2023 (related to our year ended December 31, 2024) 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.
ITEM 4. CONTROLS AND PROCEDURES
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 June 30, 2025, 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 were not effective as of June 30, 2025 due to the material weakness in our internal control over financial reporting identified and disclosed in Item 9A of our Annual Report on Form 10-K for the year ended December 31, 2024. In order to remediate this matter, we have retained the assistance of an accounting firm to assist in the accounting and reporting of transactions as needed, and have implemented other remedial disclosure procedures. We will consider the material weakness to be fully remediated once the applicable controls operate for a sufficient period of time and our management has concluded, through testing, that these controls are operating effectively.
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.
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PART II. OTHER INFORMATION
ITEM 6. EXHIBITS
Exhibit No. |
| Description |
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| Executive Employment Agreement with Douglas M. Polinsky, dated July 31, 2025 | |
| Executive Employment Agreement with Joseph A. Geraci II, dated July 31, 2025 | |
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101.INS * |
| Inline XBRL Instance Document |
101.SCH * |
| Inline XBRL Taxonomy Extension Schema Document |
101.CAL * |
| Inline XBRL Taxonomy Extension Calculation Linkbase Document |
101.DEF * |
| Inline XBRL Taxonomy Extension Definition Linkbase Document |
101.LAB * |
| Inline XBRL Taxonomy Extension Label Linkbase Document |
101.PRE * |
| Inline XBRL Taxonomy Extension Presentation Linkbase Document |
104 * |
| Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
* Filed herewith
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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. |
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Date: August 14, 2025 | By: | /s/ Douglas M. Polinsky |
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| Douglas M. Polinsky Chief Executive Officer |
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Date: August 14, 2025 | By: | /s/ Joseph A. Geraci, II |
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| Joseph A. Geraci, II Chief Financial Officer |
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