mcvt_10q.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

_________________________

FORM 10-Q

__________________________

(Mark One)
☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended September 30, 2022

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 001-41472

__________________________

MILL CITY VENTURES III, LTD.

(Exact name of registrant as specified in its charter)

__________________________

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

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

(952) 479-1923

(Registrant’s telephone number, including area code)

__________________________

N/A

(Former name, former address and former fiscal year, if changed since last report)

__________________________

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). ☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-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). ☐ Yes ☒ No

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

MILL CITY VENTURES III, LTD.

Index to Form 10-Q

for the Quarter Ended September 30, 2022

PART I.	FINANCIAL INFORMATION	Page No.

Item 1.	Financial Statements (unaudited)	3

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

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

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

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

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

	Condensed Notes to Financial Statements – September 30, 2022	10

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

Item 4.	Controls and Procedures	22

PART II.	OTHER INFORMATION	23

Item 6.	Exhibits	23

SIGNATURES		24

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Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

MILL CITY VENTURES III, LTD.

CONDENSED BALANCE SHEETS

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

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

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

See accompanying Notes to Financial Statements

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MILL CITY VENTURES III, LTD.

CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)

	Three Months Ended						Nine Months Ended
	September 30, 2022			September 30, 2021			September 30, 2022			September 30, 2021
Investment Income
Interest income	$	1,115,224		$	755,601		$	3,351,935		$	1,977,992
Dividend income		—			—			—			—
Total Investment Income		1,115,224			755,601			3,351,935			1,977,992
Operating Expenses
Professional fees		916,359			79,950			1,309,348			300,297
Payroll		122,477			80,840			433,461			468,266
Insurance		27,016			27,890			84,092			80,023
Occupancy		18,589			16,689			54,542			49,716
Director’s fees		30,000			30,000			147,073			90,000
Interest expense		46,779			—			164,632			—
Other general and administrative		18,572			4,213			34,717			35,294
Total Operating Expenses		1,179,792			239,582			2,227,865			1,023,596
Net Investment Gain (Loss)		(64,568	)		516,019			1,124,070			954,396
Realized and Unrealized Gain (Loss) on Investments
Net realized gain on investments		—			289,138			133,020			3,818,737
Net change in unrealized appreciation (depreciation) on investments		—			(774,169	)		(16,297	)		(1,204,319	)
Net Realized and Unrealized Gain (Loss) on Investments		—			(485,031	)		116,723			2,614,418
Net Increase (Decrease) in Net Assets Resulting from Operations Before Taxes		(64,568	)		30,988			1,240,793			3,568,814

Provision For (Benefit From) Income Taxes		(28,442	)		(300	)		346,800			1,010,978
Net Increase (Decrease) in Net Assets Resulting from Operations	$	(36,126	)	$	31,288		$	893,993			2,557,836

Net Increase (Decrease) in Net Assets Resulting from Operations per share:
Basic and diluted	$	(0.01	)	$	0.01		$	0.18		$	0.53

Weighted-average number of common shares outstanding - basic and diluted		5,512,737			4,795,739			5,045,830			4,795,075

See accompanying Notes to Financial Statements

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MILL CITY VENTURES III, LTD.

CONDENSED STATEMENTS OF SHAREHOLDERS’ EQUITY (UNAUDITED)

Three Months Ended September 30, 2022	Common Shares		Par Value		Additional Paid In Capital		Accumulated Deficit			Accumulated Undistributed Net Investment Loss			Accumulated Undistributed Net Realized Gain on Investments Transactions		Net Unrealized Appreciation (Depreciation) in value of Investments		Total Shareholders’ Equity
Balance as of June 30, 2022		4,824,628	$	10,855	$	10,776,537	$	(1,159,665	)	$	(1,064,271	)	$	5,713,830	$	149,321	$	14,426,607
Common shares issued in public offering		1,250,000		1,250		4,040,545		—			—							4,041,795
Common shares issued in reverse stock split rounding		735		—		—												—
Common shares issued in stock-based compensation		32,115		32		66,844		—			—							66,876
Common shares issued in consideration for expense payment		77,777		78		159,365		—			—							159,443
Undistributed net investment loss				—		—		—			(36,126	)		—		—		(36,126	)
Balance as of September 30, 2022		6,185,255	$	12,215	$	15,043,291	$	(1,159,665	)	$	(1,100,397	)	$	5,713,830	$	149,321	$	18,658,595

Three Months Ended September 30, 2021	Common Shares		Par Value		Additional Paid In Capital		Accumulated Deficit			Accumulated Undistributed Net Investment Loss			Accumulated Undistributed Net Realized Gain on Investments Transactions			Net Unrealized Appreciation (Depreciation) in value of Investments			Total Shareholders’ Equity
Balance as of June 30, 2021		4,795,739	$	10,790	$	10,694,163	$	(1,159,665	)	$	(2,697,320	)	$	6,071,449		$	1,269,171		$	14,188,588
Dividend Declared				—		—		—			—			(1,079,041	)		—			(1,079,041	)
Common shares issued in consideration for expense payment				—		—		—			—									—
Undistributed net investment gain				—		—		—			516,319			—			—			516,319
Undistributed net realized gain on investment transactions				—		—		—			—			289,138			—			289,138
Depreciation in value of investments				—		—		—			—			—			(774,169	)		(774,169	)
Balance as of September 30, 2021		4,795,739	$	10,790	$	10,694,163	$	(1,159,665	)	$	(2,181,001	)	$	5,281,546		$	495,002		$	13,140,835

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Nine Months Ended September 30, 2022	Common Shares		Par Value		Additional Paid In Capital		Accumulated Deficit			Accumulated Undistributed Net Investment Loss			Accumulated Undistributed Net Realized Gain on Investments Transactions		Net Unrealized Appreciation in value of Investments			Total Shareholders’ Equity
Balance as of December 31, 2021		4,795,739	$	10,790	$	10,694,163	$	(1,159,665	)	$	(1,877,667	)	$	5,580,810	$	165,618		$	13,414,049
Common shares issued in public offering		1,250,000		1,250		4,040,545		—			—								4,041,795
Common shares issued in reverse stock split rounding		735		—		—													—
Common shares issued in stock-based compensation		31,248		97		149,218		—			—								149,315
Common shares issued in consideration for expense payment		107,533		78		159,365		—			—			—		—			159,443
Undistributed net investment gain				—		—		—			777,270			—		—			777,270
Undistributed net realized gain on investment transactions				—		—		—			—			133,020		—			133,020
Depreciation in value of investments				—		—		—			—			—		(16,297	)		(16,297	)
Balance as of September 30, 2022		6,185,255	$	12,215	$	15,043,291	$	(1,159,665	)	$	(1,100,397	)	$	5,713,830	$	149,321		$	18,658,595

Nine Months Ended September 30, 2021	Common Shares		Par Value		Additional Paid In Capital		Accumulated Deficit			Accumulated Undistributed Net Investment Loss			Accumulated Undistributed Net Realized Gain on Investments Transactions			Net Unrealized Appreciation in value of Investments			Total Shareholders’ Equity
Balance as of December 31, 2020		4,793,739	$	10,786	$	10,673,014	$	(1,159,665	)	$	(2,124,419	)	$	2,541,850		$	1,699,321		$	11,640,887
Common shares issued in consideration for expense payment		2,000		4		21,149		—			—									21,153
Dividend declared				—		—		—			—			(1,079,041	)		—			(1,079,041	)
Undistributed net investment loss				—		—		—			(56,582	)		—			—			(56,582	)
Undistributed net realized gain on investment transactions														3,818,737						3,818,737
Depreciation in value of investments				—		—		—			—			—			(1,204,319	)		(1,204,319	)
Balance as of September 30, 2021		4,795,739	$	10,790	$	10,694,163	$	(1,159,665	)	$	(2,181,001	)	$	5,281,546		$	495,002		$	13,140,835

See accompanying Notes to Financial Statements

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MILL CITY VENTURES III, LTD.

CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)

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

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

See accompanying Notes to Financial Statements

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MILL CITY VENTURES III, LTD.

CONDENSED SCHEDULE OF INVESTMENTS

SEPTEMBER 30, 2022

Investment / Industry	Cost		Fair Value		Percentage of Net Assets

Short-Term Non-banking Loans
Consumer - 15% secured loans	$	$400,000	$	$400,000		2.14	%
AirDog Supplies, Inc.		1,250,000		1,250,000		6.70	%
Intelligent Mapping, LLC		2,900,000		2,900,000		15.54	%
Financial - 53% secured loans		635,086		635,086		3.40	%
Financial - 33% secured loans
Benton Financial, LLC		1,976,667		1,976,667		10.59	%
Financial - 36% secured loans		550,000		550,000		2.95	%
Financial - 12% secured loans

SEC Form 10-Q filed by Mill City Ventures III Ltd.