What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2022-03-14 compared with 2021-03-10 · 365 added, 576 removed, 223 unchanged (81% of the section changed)

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Independent Registered Public Accounting Firm

Balance Sheets —

2020 and December 31, 2019

Statements of Operations —

ended December 31, 2020 and December 31, 2019

Statements of Shareholders’

Years ended December 31, 2020 and December 31, 2019

Statements of Cash Flows —

ended December 31, 2020 December 31, 2019

ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Reports of Independent Registered Public Accounting Firm (PCAOB ID is 542 )

Balance Sheets — December 31, 2021 and December 31, 2020

Statements of Operations — Years ended December 31, 2021 and December 31, 2020

Statements of Shareholders’ Equity — Years ended December 31, 2021 and December 31, 2020

Statements of Cash Flows — Years ended December 31, 2021 and December 31, 2020

Notes to Financial Statements

REPORT OF INDEPENDENT REGISTERED PUBLIC

ACCOUNTING FIRM

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and

Shareholders’

of Mill City Ventures III, Ltd.

Shareholders ’ of Mill City Ventures III, Ltd.

Opinion on the Financial Statements

We have audited the accompanying balance

sheets of Mill City Ventures III, Ltd.

(the Company) as of December 31, 2020 and 2019, including the investment schedules

and the related statements of operations, shareholders’

equity, and cash flows for each of the years in the two-year period

ended December 31, 2020 and 2019, and the related notes (collectively referred to as the financial statements).

In our opinion,

the financial statements present fairly, in all material respects, the financial position of the Company as of December 31,

2020 and 2019, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles

generally accepted in the United States of America.

We have audited the accompanying balance sheets of Mill City Ventures III, Ltd.

(the Company) as of December 31, 2021 and 2020, including the investment schedules and the related statements of operations, shareholders ’ equity, and cash flows for each of the years in the two-year period ended December 31, 2021, and the related notes (collectively referred to as the financial statements).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility

of the Company’s management.

Our responsibility is to express an opinion on the Company’s financial statements based

on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB)

and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable

rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with

the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether

the financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have,

nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits, we are required

to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the

effectiveness of the Company’s internal control over financial reporting.

These financial statements are the responsibility of the Company ’ s management.

Our responsibility is to express an opinion on the Company ’ s financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company ’ s internal control over financial reporting.

Accordingly, we express no such opinion.

Our audits included performing procedures

to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures

that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures

in the financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made

by management as well as evaluating the overall presentation of the financial statements.

We believe that our audits provide a

reasonable basis for our opinion.

Emphasis of Matter –

As explained in Note 7 to the financial

statements, the accompanying financial statements include investments valued at $3,367,897 and $834,200 for 2020 and 2019, respectively,

whose fair values have been estimated by the valuation committee and management in absence of readily determinable fair values.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management as well as evaluating the overall presentation of the financial statements.

We believe that our audits provide a reasonable basis for our opinion.

Emphasis of Matter – Investment Valuation

As explained in Note 7 to the financial statements, the accompanying financial statements include investments valued at $13,662,500 and $3,367,897 for 2021 and 2020, respectively, whose fair values have been estimated by the valuation committee and management in absence of readily determinable fair values.

Such estimates are based on financial and other information provided by management in absence of readily determinable fair values.

Such estimates are based on financial and other information provided by management of its portfolio companies and pertinent market

and industry data.

These investments are valued in accordance with FASB ASC 820, “Fair Value Measurement”, which requires

the Company to assume that the portfolio investments are sold in a principal market to market participants.

The Company has considered

its principal market as the market in which the Company exits its portfolio investments with the greatest volume and level of activity.

ASC 820 specifies a hierarchy of valuation techniques based on whether the inputs to these valuation techniques are observable

or unobservable.

The investments are valued based on unobservable inputs as of December 31, 2020 and 2019 of $3,367,897 and

$834,200, respectively.

Because such valuations, and particularly valuations of private investments and private companies, are

inherently uncertain, they may fluctuate significantly over short periods of time.

These determinations of fair value could differ

materially from the values that would have been utilized had a ready market for these investments existed.

Such estimates are based on financial and other information provided by management of its portfolio companies and pertinent market and industry data.

These investments are valued in accordance with FASB ASC 820, “ Fair Value Measurement ” , which requires the Company to assume that the portfolio investments are sold in a principal market to market participants.

The Company has considered its principal market as the market in which the Company exits its portfolio investments with the greatest volume and level of activity.

ASC 820 specifies a hierarchy of valuation techniques based on whether the inputs to these valuation techniques are observable or unobservable.

The investments are valued based on unobservable inputs as of December 31, 2021 and 2020 of $13,662,500 and $3,367,897, respectively.

Because such valuations, and particularly valuations of private investments and private companies, are inherently uncertain, they may fluctuate significantly over short periods of time.

These determinations of fair value could differ materially from the values that would have been utilized had a ready market for these investments existed.

Critical Audit Matters

The critical audit matters communicated

below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated

to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved

our especially, subjective, or complex judgements.

The communication of critical audit matters does not alter in any way our opinion

on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate

opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Valuation of investments which utilize

significant unobservable inputs

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially, subjective, or complex judgements.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Valuation of investments which utilize significant unobservable inputs

Description of the Matter

At December 31, 2020, the balances

of the Company’s investments, at fair value, categorized as Level 3 within the fair value hierarchy totaled approximately

The fair value of these investments is determined by management using the valuation techniques and significant unobservable

inputs described in Notes 6 and 7 to the financial statements.

Auditing the fair value of the Company’s

investments categorized as Level 3 within the fair value hierarchy was complex and involved a high degree of auditor subjectivity

due to the estimation uncertainty resulting from the unobservable nature of the inputs used in the valuations and the limited number

of comparable market transactions for the same or similar investments.

At December 31, 2021, the balances of the Company ’ s investments, at fair value, categorized as Level 3 within the fair value hierarchy totaled $13,663,500.

The fair value of these investments is determined by management using the valuation techniques and significant unobservable inputs described in Notes 6 and 7 to the financial statements.

Auditing the fair value of the Company ’ s investments categorized as Level 3 within the fair value hierarchy was complex and involved a high degree of auditor subjectivity due to the estimation uncertainty resulting from the unobservable nature of the inputs used in the valuations and the limited number of comparable market transactions for the same or similar investments.

How We Addressed the Matter in Our Audit

We obtained an understanding and evaluated

the design of controls over the Company’s valuation process, including management’s assessment of the significant inputs

and estimates used in the fair value measurements.

We performed the following procedures,

among others, for the Company’s Level 3 investments:

evaluated the valuation techniques used by the Company and considered the consistency in application of the valuation techniques

to each subject investment and investment class.

involved senior, more experienced audit team members to perform audit procedures.

evaluated the reasonableness of the significant unobservable inputs by comparing the inputs used by the Company to third-party

sources, such as market indexes or other market data.

considered other information obtained during the audit that corroborated or contradicted the Company’s inputs or fair value

measurements.

investments sold during the year, we compared the transaction price to the Company’s fair value estimate to assess the reasonableness

of management’s fair value estimates.

We have served as the Company’s auditor

We obtained an understanding and evaluated the design of controls over the Company ’ s valuation process, including management ’ s assessment of the significant inputs and estimates used in the fair value measurements.

We performed the following procedures, among others, for the Company ’ s Level 3 investments:

We evaluated the valuation techniques used by the Company and considered the consistency in application of the valuation techniques to each subject investment and investment class.

We involved senior, more experienced audit team members to perform audit procedures.

We evaluated the reasonableness of the significant unobservable inputs by comparing the inputs used by the Company to third-party sources, if available, such as market indexes or other market data.

We considered other information obtained during the audit that corroborated or contradicted the Company ’ s inputs or fair value measurements.

For investments sold during the year, we compared the transaction price to the Company ’ s fair value estimate to assess the reasonableness of management ’ s fair value estimates.

We have served as the Company ’ s auditor since 2019

Minneapolis, Minnesota

March 14, 2022

Ventures III, Ltd.

Mill City Ventures III, Ltd.

Balance Sheets

December 31, 2021

8 unchanged sentences

Right-of-use lease asset

Property and equipment, net

Accounts payable

Dividend payable

Payable for purchase of investments

Lease liability

Accrued tax expense

Long-term deferred taxes

Accrued income tax expense

Deferred taxes

Total Liabilities

1 unchanged sentence

SHAREHOLDERS EQUITY (NET ASSETS)

Common stock, par value

$0.001 per share (250,000,000 authorized;

Common stock, par value $ 0.001 per share ( 250,000,000 authorized;

10,790,413 and 10,785,913 outstanding)

1 unchanged sentence

Accumulated deficit

( 1,159,665 )

Accumulated undistributed investment loss

( 1,877,667 )

( 2,124,419 )

Accumulated undistributed net realized gains on investment transactions

Net unrealized appreciation (depreciation) in value of investments

Net unrealized appreciation in value of investments

Total Shareholders' Equity (Net Assets)

1 unchanged sentence

Net Asset Value Per Common Share

The accompanying notes are an integral part

of these financial statements.

Ventures III, Ltd.

of Operations

The accompanying notes are an integral part of these financial statements.

Mill City Ventures III, Ltd.

Statements of Operations

Investment Income

8 unchanged sentences

Total Operating Expenses

Net Investment Gain (Loss)

Net Investment Gain

Realized and Unrealized Gain (Loss) on Investments

1 unchanged sentence

Net change in unrealized appreciation (depreciation) on investments

( 1,533,703 )

Net Realized and Unrealized Gain (Loss) on Investments

Net Increase (Decrease) in Net Assets Resulting from Operations Before Taxes

Net Increase in Net Assets Resulting from Operations Before Taxes

Provision For Income Taxes

Net Increase (Decrease) in Net Assets Resulting from Operations

Net Increase (Decrease) in Net Assets Resulting from Operations per share:

Net Increase in Net Assets Resulting from Operations

Net Increase in Net Assets Resulting from Operations per share:

Basic and diluted

Weighted-average number of common shares outstanding - basic and diluted

The accompanying

notes are an integral part of these financial statements.

The accompanying notes are an integral part of these financial statements.

Mill City Ventures III, Ltd.

Statements of Shareholders’

the years ended December 31, 2020 and 2019

Year Ended December 31, 2020

Paid In Capital

Statements of Shareholders’ Equity

For the years ended December 31, 2021 and 2020

Undistributed

Net Investment

Undistributed

Net Unrealized

(Depreciation)

Net Realized Gain

Net Investment

on Investments

Shareholders'

Year Ended December 31, 2021

Balance as of December 31, 2020

1 unchanged sentence

( 2,124,419 )

Repurchase of shares

Stock based compensation

Common shares issued in consideration for expense payment

Dividend declared

Net investment gain, net of tax

Net realized gain on investment transactions

Appreciation in value of investments

( 1,079,041 )

Undistributed net investment gain

Undistributed net realized gain on investment transactions

Depreciation in value of investments

( 1,533,703 )

Balance as of December 31, 2021

1 unchanged sentence

( 1,877,667 )

Year Ended December 31, 2019

Paid In Capital

Undistributed

Net Investment

Undistributed

Net Unrealized

(Depreciation)

Undistributed

Net Realized Gain

Net Investment

on Investments

Shareholders'

Year Ended December 31, 2020

of Investments

Balance as of December 31, 2019

1 unchanged sentence

( 2,397,865 )

Dividend distribution

Net investment loss

Net realized gain on investment transactions

Depreciation in value of investments

Repurchase of shares

Stock based compensation

Dividends declared

Undistributed net investment gain

Undistributed net realized gain on investment transactions

Appreciation in value of investments

Balance as of December 31, 2020

1 unchanged sentence

( 2,124,419 )

The accompanying notes are an integral part

of these financial statements.

City Ventures III, Ltd.

The accompanying notes are an integral part of these financial statements.

Mill City Ventures III, Ltd.

Statements of Cash Flows

December 31, 2021

December 31, 2020

Cash flows from operating activities:

Net increase (decrease) in net assets resulting from operations

Adjustments to reconcile net increase (decrease)

in net assets resulting from operations to net cash provided (used) in operating activities:

Net increase in net assets resulting from operations

Adjustments to reconcile net increase in net assets resulting from operations to net cash used in operating activities:

Net change in unrealized (appreciation) depreciation on investments

( 1,934,794 )

Net realized gain on investments

( 4,118,001 )

Purchases of investments

( 27,029,292 )

( 9,405,802 )

Proceeds from sales of investments

Proceeds from sales of investments sold short

Stock-based compensation

Depreciation & amortization expense

Income taxes payable

Deferred income taxes

Common shares issued as consideration for expense payment

Changes in operating assets and liabilities:

2 unchanged sentences

Receivable for investment sales

Payable for investment purchase

Accounts payable and other liabilities

Net cash provided (used) in operating activities

Payable for investment purchase

Net cash used in operating activities

( 1,886,094 )

( 2,463,157 )

Cash flows from financing activities:

1 unchanged sentence

Payments for common stock dividend

( 1,618,337 )

Net cash used by financing activities

Net increase (decrease) in cash

( 1,618,337 )

Net decrease in cash

( 3,504,431 )

( 2,626,077 )

Cash, beginning of period

3 unchanged sentences

Non-cash financing activities:

Dividend to common stock shareholders

The accompanying notes are an integral part

of these financial statements.

Common shares issued as consideration for investment

Dividend declared to common stock shareholders

The accompanying notes are an integral part of these financial statements.

Mill City Ventures III, Ltd.

4 unchanged sentences

Consumer - 15% secured loans

AirDog Supplies, Inc.

Financial - 52% secured loans

Financial - 12% secured loans

Litigation Financing - 23% secured loans

The Cross Law Firm, LLC

Real Estate - 15% secured loans

Tailwinds, LLC

Real Estate - 12% secured loans

Alatus Development, LLC

Total Short-Term Non-Banking Loans

Financial Services

Preferred Stock

Wisdom Gaming, Inc

Information Technology

Leisure & Hospitality

Total Other Equity

Total Investments

Total Investments and Cash

The accompanying notes are an integral part of these financial statements.

Investment Schedule

As of December 31, 2020

(Depreciation)

Realities, Inc.

Spirits of Israel, LLC

Membership Units (8)

Life Sciences Inc.

Enclave US Investors, LLC

Capital Partners I, LP

Partnership Units (8)

Development Corp.

Equity Investments

Investments and Cash

investments and all cash, restricted cash and cash equivalents are “qualifying assets”

under Section 55(a) of

the Investment Company Act of 1940 unless indicated to the contrary in the table or by footnote.

is presented on a per annum basis.

the case of warrants, warrants provide for the right to purchase common equity of the issuer.

the case of preferred stock, this represents the right to annual cumulative dividends calculated on a per annum basis.

the case of warrants, purchase rights under the warrants will expire at the close of business on this date.

is not an income-producing investment.

December 31, 2019, aggregate non-qualifying assets represented approximately 0.9% of our total assets.

December 31, 2019, the estimated net unrealized loss for federal tax purposes was $58,586, based on a tax cost basis

of $1,799,483.

December 31, 2019, the estimated aggregate gross unrealized gain for federal income tax purposes was $300,106 and the

estimated aggregate gross unrealized loss for federal income tax purposes was $358,692

The accompanying notes are an integral part

of these financial statements.

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.”

The Company follows accounting

and reporting guidance in Accounting Standards (“ASC”) 946.

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 1940 Act.

We operated as a BDC until we withdrew our BDC

election on December 27, 2019.

As of the time of this filing, we remain a public reporting company that files periodic reports

with the SEC.

We offer short-term specialty finance solutions primarily to private businesses, small-cap public companies and high-net-worth

To avoid regulation under the 1940 Act, we generally seek to structure our investments so they do not constitute “investment

securities”

for purposes of federal securities law, and we monitor our investments as a whole to ensure that no more than

40% of our total assets may consist of investment securities.

we operated as a BDC or investment company from 2013 through December 27, 2019, the 2019 financial statements in this report

reflect our operations as a BDC subject to the 1940 Act including our December 31, 2019 balance sheet.

During that time, we

were primarily focused on investing in or lending to privately held and small capitalization publicly traded U.S.

companies, and

making managerial assistance available to such companies.

A majority of our investments by dollar amount were structured as purchases

of preferred or common stock or loans evidenced by promissory notes that may have been convertible into stock by their terms or

that may have been accompanied by the issuance to us of warrants or similar rights to purchase stock.

Our investment objective

is to generate income and capital appreciation that ultimately became realized gains.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

of estimates:

The preparation of financial statements in conformity with 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.

Investment / Industry

Short-Term Non-banking Loans

Consumer - 20% secured loans

Financial - 44% secured loans

Financial - 36% secured loans

Real Estate - 15% secured loans

Alatus Development, LLC

Total Short-Term Non-Banking Loans

Preferred Stock

Information Technology

Leisure & Hospitality

Total Investments

Total Investments and Cash

The accompanying notes are an integral part of these financial statements.

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.” The Company follows accounting and reporting guidance in Accounting Standards (“ASC”) 946.

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 1940 Act .

We operated as a BDC until we withdrew our BDC election on December 27, 2019.

As of the time of this filing, we remain a public reporting company that files periodic reports with the SEC.

We offer short-term specialty finance solutions primarily to private businesses, small-cap public companies and high-net-worth individuals.

To avoid regulation under the 1940 Act, we generally seek to structure our investments so they do not constitute “investment securities” for purposes of federal securities law, and we monitor our investments as a whole to ensure that no more than 40 % of our total assets may consist of investment securities.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Use of estimates:

The preparation of financial statements in conformity with 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 7 –

Fair Value of Financial Instruments”

The Company presents

its financial statements as an investment company following accounting and reporting guidance in ASC 946.

For more information, see the “Valuation of portfolio investments” caption below, and “Note 7 – 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.

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 or, during our time as BDC, by the

Valuation Committee of 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

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.

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 the Valuation Committee of 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

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.

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:

Observable inputs based on quoted prices (unadjusted) in active markets for identical assets or liabilities.

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.

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.

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 present value approach,

at their weighted-average yield to maturity.

The estimated fair value of our Level

3 investment assets is determined on a quarterly basis by our Board of Directors, pursuant to our written Valuation Policy

and Procedures.

During our time as a BDC, this function was performed by a Valuation Committee of our Board of Directors.

These policies and procedures generally require that we value our Level 3 equity investments at cost plus any accrued

interest, unless circumstances warrant a different approach.

Our Valuation Policy and Procedures provide examples of these

circumstances, such as when a portfolio company has engaged in a subsequent financing of more than a de minimis size

involving sophisticated investors (in which case we may use the price involved in that financing as a determinative input

absent other known factors), or when a portfolio company is engaged in the process of a transaction that we determine is

reasonably likely to occur (in which case we may use the price involved in the pending transaction as a determinative input

absent other known factors).

Other situations identified in our Valuation Policy and Procedures that may serve as input

supporting a change in the valuation of our Level 3 equity investments include (i) a third-party valuation conducted by

an independent and qualified professional, (ii) changes in the performance of long-term financial prospects of the

portfolio company, (iii) a subsequent financing that changes the distribution rights associated with the equity security

we hold, or (iv) sale transactions involving comparable companies, but only if further supported by a third-party

valuation conducted by an independent and qualified professional.

When valuing preferred equity investments,

we generally view intrinsic value as a key input.

Intrinsic value means the value of any conversion feature (if the preferred investment

is convertible) or the value of any liquidation or other preference.

Discounts to intrinsic value may be applied in cases where

the issuer’s financial condition is impaired or, in cases where intrinsic value relating to a conversion is determined to

be a key input, to account for resale restrictions applicable to the securities issuable upon conversion.

When valuing warrants, our Valuation Policy

and Procedures indicate that value will generally be the difference between closing price of the underlying equity security and

the exercise price, after applying an appropriate discount for restriction, if applicable, in situations where the underlying security

is marketable.

If the underlying security is not marketable, then intrinsic value will be considered consistent with the principles

described above.

Generally, “out-of-the-money”

warrants will be valued at cost or zero.

For non-traded (Level 3) debt securities

with a residual maturity less than or equal to 60 days, the value will generally be based on a present value approach, considering

the straight-line amortized face value of the debt unless justification for impairment exists.

On a quarterly basis, our management

provides members of our Board of Directors (or Valuation Committee, prior to 2020) with (i) valuation reports for each

portfolio investment (which reports include our cost,, the most recent prior valuation and any current proposed valuation,

and an indication of the valuation methodology used, together with any other supporting materials);

(ii) Mill City

Ventures’

bank and other statements pertaining to our cash and cash equivalents;

(iii) quarter- or period-end

statements from our custodial firms holding any of our portfolio investments;

and (iv) recommendations 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.

The board or committee then discusses these materials and, consistent with the policies

and approaches outlined above, makes final determinations respecting the valuation and hierarchy levels of our portfolio

We made no changes to our Valuation

Policy and Procedures during the reporting period other than to have our entire Board of Directors involved in implementing

and discharging those policies and procedures.

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.

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.

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 present value approach, at their weighted-average yield to maturity.

The estimated fair value of our Level 3 investment assets is determined on a quarterly basis by the Valuation Committee of our Board of Directors, pursuant to our written Valuation Policy and Procedures.

These policies and procedures generally require that we value our Level 3 equity investments at cost plus any accrued interest, unless circumstances warrant a different approach.

Our Valuation Policy and Procedures provide examples of these circumstances, such as when a portfolio company has engaged in a subsequent financing of more than a de minimis size involving sophisticated investors (in which case we may use the price involved in that financing as a determinative input absent other known factors), or when a portfolio company is engaged in the process of a transaction that we determine is reasonably likely to occur (in which case we may use the price involved in the pending transaction as a determinative input absent other known factors).

Other situations identified in our Valuation Policy and Procedures that may serve as input supporting a change in the valuation of our Level 3 equity investments include (i) a third-party valuation conducted by an independent and qualified professional, (ii) changes in the performance of long-term financial prospects of the portfolio company, (iii) a subsequent financing that changes the distribution rights associated with the equity security we hold, or (iv) sale transactions involving comparable companies, but only if further supported by a third-party valuation conducted by an independent and qualified professional.

When valuing preferred equity investments, we generally view intrinsic value as a key input.

Intrinsic value means the value of any conversion feature (if the preferred investment is convertible) or the value of any liquidation or other preference.

Discounts to intrinsic value may be applied in cases where the issuer’s financial condition is impaired or, in cases where intrinsic value relating to a conversion is determined to be a key input, to account for resale restrictions applicable to the securities issuable upon conversion.

When valuing warrants, our Valuation Policy and Procedures indicate that value will generally be the difference between closing price of the underlying equity security and the exercise price, after applying an appropriate discount for restriction, if applicable, in situations where the underlying security is marketable.

If the underlying security is not marketable, then intrinsic value will be considered consistent with the principles described above.

Generally, “out-of-the-money” warrants will be valued at cost or zero.

For non-traded (Level 3) debt securities with a residual maturity less than or equal to 60 days, the value will generally be based on a present value approach, considering the straight-line amortized face value of the debt unless justification for impairment exists.

On a quarterly basis, our management provides members of our Valuation Committee with (i) valuation reports for each portfolio investment (which reports include our cost,, the most recent prior valuation and any current proposed valuation, and an indication of the valuation methodology used, together with any other supporting materials);

(ii) Mill City Ventures’ bank and other statements pertaining to our cash and cash equivalents;

(iii) quarter- or period-end statements from our custodial firms holding any of our portfolio investments;

and (iv) recommendations 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.

The committee then discusses these materials and, consistent with the policies and approaches outlined above, makes final determinations respecting the valuation and hierarchy levels of our portfolio investments.

We made no changes to our Valuation Policy and Procedures during the reporting period.

Income taxes:

Due to our change in business model, we now 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

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

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.

income tax returns in the U.S.

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 amounts and

tax basis of assets and liabilities using enacted tax rates in effect for the tax 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 for 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 not be able to realize our deferred income tax assets, we would make an adjustment to the valuation allowance, which would reduce the provision for income taxes.

We file income tax returns in the U.S.

federal jurisdiction and various state jurisdictions.

The Company does not believe there will

be any material changes in its unrecognized tax positions over the next 12 months.

Our evaluation was performed for the tax years

ended December 31, 2017 through 2020, which are the tax years that remain subject to examination by major tax jurisdictions

as of December 31, 2020.

recognition :

The Company does not believe there will be any material changes in its unrecognized tax positions over the next 12 months.

Our evaluation was performed for the tax years ended December 31, 2018 through 2020, which are the tax years that remain subject to examination by the tax jurisdictions as of December 31, 2021.

Revenue recognition :

Realized gains or losses on the sale of investments are calculated using the specific investment method.

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.

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.

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.

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.

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 in placed on non-accrual status.

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.

and service fees:

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 in 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.

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.

Adopted Accounting Pronouncements:

In August 2018,

the FASB issued ASU No.

2018-13, Disclosure Framework –

Changes to the Disclosure Requirements for Fair Value Measurement.

This ASU removes, modifies and adds certain disclosure requirements for fair value measurements.

Among other changes, entities

will no longer be required to disclose the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy,

the policy for timing of transfers between levels and the valuation processes for Level 3 fair value measurements, but will be

required to disclose the range and weighted average of significant observable inputs used to develop Level 3 fair value measurements

held at the end of the reporting period.

The amendments in this ASU are effective for all entities for fiscal years, and interim

periods within those fiscal years, beginning after December 15, 2019.

Early adoption is permitted upon issuance of the ASU.

The adoption of the ASU effective January 1, 2020 did not have a material impact on our financial statements.

Accounting Standards Not Yet Adopted:

In December 2019,

the FASB issued ASU No.

2019-12, Income Taxes (Topic 740)—Simplifying the Accounting for Income Taxes .

is intended to simplify accounting for income taxes.

It removes certain exceptions to the general principles in Topic 740 and amends

existing guidance to improve consistent application.

ASU 2019-12 is effective for fiscal years beginning after December 15,

2020 and interim periods within those fiscal years, which is fiscal 2021 for us, with early adoption permitted.

We do not expect

adoption of the new guidance to have a significant impact on our financial statements.

NOTE 3 —

NET GAIN PER COMMON SHARE

Basic net gain (loss) per common share is computed by dividing

net increase (decrease) in net assets resulting from operations by the weighted-average number of vested common shares outstanding

during the period.

A reconciliation of the numerator and denominator used in the calculation of basic and diluted net gain per

common share follows:

Our executive management team manages our investments as part of their employment responsibilities.

NOTE 3 – NET GAIN PER COMMON SHARE

Basic net gain (loss) per common share is computed by dividing net increase (decrease) in net assets resulting from operations by the weightedaverage number of vested common shares outstanding during the period.

A reconciliation of the numerator and denominator used in the calculation of basic and diluted net gain per common share follows:

For the Year Ended December 31,

Net increase (decrease) in net assets resulting from operations

Net increase in net assets resulting from operations

Weighted-average number of common shares outstanding

Basic and diluted net gain (loss) per common share

At December 31,

2020 and 2019, the Company did not have any options or warrants outstanding or any other dilutive common equivalent shares.

4—LEASES

We are subject to two non-cancelable operating leases for office

space expiring March 31, 2022.

These leases do not have significant lease escalations, holidays, concessions, leasehold improvements,

or other build-out clauses.

Basic and diluted net gain per common share

At December 31, 2021 and 2020, the Company did not have any options or warrants outstanding or any other dilutive common equivalent shares.

NOTE 4—LEASES

We are subject to two non-cancelable operating leases for office space expiring March 31, 2022.

These leases do not have significant lease escalations, holidays, concessions, leasehold improvements, or other build-out clauses.

Further, the leases do not contain contingent rent provisions.

The leases do not include options to

our lease does not provide an implicit rate, we use our incremental borrowing rate in determining the present value of the lease

The incremental borrowing rate represents an estimate of the interest rate we would incur at lease commencement to borrow

an amount equal to the lease payments on a collateralized basis over the term of a lease.

The weighted average discount rate as

of December 31, 2020 was 4.5% and the weighted average remaining lease term is one year.

ASC 840, rent expense for office facilities for the year ended December 31, 2020 and December 31, 2019 was $66,307 and

$73,685, respectively.

The components

of our operating leases were as follows for the twelve months ended December 31, 2020 and 2019:

The leases do not include options to renew.

Because our lease does not provide an implicit rate, we use our incremental borrowing rate in determining the present value of the lease payments.

The incremental borrowing rate represents an estimate of the interest rate we would incur at lease commencement to borrow an amount equal to the lease payments on a collateralized basis over the term of a lease.

The weighted average discount rate as of December 31, 2021 was 4.5 % and the weighted average remaining lease term is one year .

Under ASC 840, rent expense for office facilities for the year ended December 31, 2021 and December 31, 2020 was $ 66,459 and $ 66,307 , respectively.

The components of our operating leases were as follows for the three and twelve months ended December 31, 2021:

Operating lease costs

1 unchanged sentence

Short-term lease cost

balance sheet information consisted of the following at December 31, 2020:

Supplemental balance sheet information consisted of the following at December 31, 2021:

Operating Lease

3 unchanged sentences

Long term portion

Maturity analysis under lease agreements

consisted of the following as of December 31, 2020:

Total minimum lease payments

present value discount

Present value of net minimum lease payments

NOTE 5—SHAREHOLDERS’

At December 31,

2020 a total of 10,785,913 shares of common stock were issued and outstanding.

At December 31, 2019 a total of 11,067,402

shares of common stock were issued and outstanding.

2020, there were 381,489 shares repurchased and 100,000 shares issued by the Company.

On October 26,

2020, the Board of Directors approved a stock repurchase program of up to $400,000 of the Company’s outstanding shares of

common stock.

Maturity analysis under lease agreements consisted of the following as of December 31, 2021:

Total lease payments

Present value of lease liabilities

NOTE 5—SHAREHOLDERS’ EQUITY

At December 31, 2021 a total of 10,790,413 shares of common stock were issued and outstanding.

At December 31, 2020 a total of 10,785,913 shares of common stock were issued and outstanding.

During 2021, there were 4,500 shares issued by the Company.

On October 26, 2020, the Board of Directors approved a stock repurchase program of up to $ 400,000 of the Company’s outstanding shares of common stock.

Repurchases may be completed in public or private transactions.

The repurchase program does not require the Company

to acquire any specific number of shares, and may be suspended from time to time in accordance with the Company's insider trading

policy and existing best practices, or it may be discontinued.

Repurchases completed under the program are expected to be funded

from available working capital.

6—INVESTMENTS

The following table shows the composition of our investment

portfolio by major class, at amortized cost and fair value, as of December 31, 2020 (together with the corresponding percentage

of total portfolio investments):

The repurchase program does not require the Company to acquire any specific number of shares, and may be suspended from time to time in accordance with the Company's insider trading policy and existing best practices, or it may be discontinued.

Repurchases completed under the program are expected to be funded from available working capital.

NOTE 6— INVESTMENTS

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

As of December 31, 2021

Investments at

Amortized Cost

Percentage of

Amortized Cost

Investments at

Percentage of

Amortized Cost

Short-term Non-banking Loans

Preferred Stock

The following table shows the composition of our investment

portfolio by major class, at amortized cost and fair value, as of December 31, 2019 (together with the corresponding percentage

of total portfolio investments):

The following table shows the composition of our investment portfolio by major class, at amortized cost and fair value, as of December 31, 2020 (together with the corresponding percentage of total portfolio investments):

As of December 31, 2020

Investments at

Amortized Cost

Percentage of

Amortized Cost

Investments at

Percentage of

Amortized Cost

Short-term Non-banking Loans

Preferred Stock

The following table shows the composition of our investment

portfolio by industry grouping, based on fair value as of December 31, 2020:

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

As of December 31, 2021

2 unchanged sentences

Information Technology

Leisure & Hospitality

The following table shows the composition of our investment

portfolio by industry grouping, based on fair value as of December 31, 2019:

The following table shows the composition of our investment portfolio by industry grouping, based on fair value as of December 31, 2020:

As of December 31, 2020

3 unchanged sentences

Leisure & Hospitality

We did not and do not, “control,”

and we were not and are not, an “affiliate”

(as each of those terms is defined in the 1940 Act), of any of our portfolio

companies as of December 31, 2020 or 2019.

Under the 1940 Act, we would generally be presumed to have had “control”

over a portfolio company if we owned more than 25% of its voting securities, and to have been an “affiliate”

of a portfolio

company in which we owned at least 5% and up to 25% of its voting securities.

NOTE 7 —

FAIR VALUE OF FINANCIAL INSTRUMENTS

3 valuation information :

Due to the inherent uncertainty in the valuation process, the estimate of the fair value of

our investment portfolio as of December 31, 2020 and 2019 may differ materially from values that would have been used had

a readily available market for the securities existed.

The following table presents the fair value

measurements of our portfolio investments by major class, as of December 31, 2020, according to the fair value hierarchy:

NOTE 7 – 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 December 31, 2021 and 2020 may differ materially from values that would have been used had a readily available market for the securities existed.

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

As of December 31, 2021

1 unchanged sentence

Preferred Stock

The following table presents the fair value

measurements of our portfolio investments by major class, as of December 31, 2019, according to the fair value hierarchy:

The following table presents the fair value measurements of our portfolio investments by major class, as of December 31, 2020, according to the fair value hierarchy:

As of December 31, 2020

Short-term Non-banking Loans

Preferred Stock

The following table presents a reconciliation

of the beginning and ending fair value balances for our Level 3 portfolio investment assets for the year ended December 31,

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

For the year ended December 31, 2021

ST Non-banking

Balance as of January 1, 2021

2 unchanged sentences

Sales and redemptions

( 15,904,333 )

Net realized loss

Balance as of December 31, 2021

The net change in unrealized appreciation

for the year ended December 31, 2020 attributable to Level 3 portfolio investments still held as of December 31, 2020

is $0, and is included in net change in unrealized appreciation (depreciation) on investments on the statement of operations.

The following table presents a reconciliation

of the beginning and ending fair value balances for our Level 3 portfolio investment assets for the year ended December 31,

The net change in unrealized appreciation for the year ended December 31, 2021 attributable to Level 3 portfolio investments still held as of December 31, 2021 is $ 0 , and is included in net change in unrealized appreciation (depreciation) on investments on the statement of operations.

The following table presents a reconciliation of the beginning and ending fair value balances for our Level 3 portfolio investment assets for the year ended December 31, 2020:

For the year ended December 31, 2020

Preferred Stock

ST Non-banking

Balance as of January 1, 2020

Net change in unrealized appreciation (depreciation)

Net change in unrealized appreciation

Purchases and other adjustments to cost

Sales and redemptions

Net realized gain (loss)

( 4,754,000 )

Net realized loss

Balance as of December 31, 2020

The net change in unrealized appreciation

for the year ended December 31, 2019 attributable to Level 3 portfolio investments still held as of December 31, 2019

is $348,629, and is included in net change in unrealized appreciation (depreciation) on investments on the statement of operations.

The following table lists our Level 3 investments

held as of December 31, 2020 and the unobservable inputs used to determine their valuation:

The net change in unrealized appreciation for the year ended December 31, 2020 attributable to Level 3 portfolio investments still held as of December 31, 2020 is $ 0 , and is included in net change in unrealized appreciation (depreciation) on investments on the statement of operations.

The following table lists our Level 3 investments held as of December 31, 2021 and the unobservable inputs used to determine their valuation:

Security Type

3 unchanged sentences

discounted cash flow

determining private company credit rating

determining private company interest rate based on credit

last secured funding known by company

economic changes since purchase

economic changes since last funding

Preferred Stock

1 unchanged sentence

economic changes since last funding

The following table presents a reconciliation

of the beginning and ending fair value balances for our Level 3 portfolio investment assets for the year ended December 31,

The following table presents a reconciliation of the beginning and ending fair value balances for our Level 3 portfolio investment assets for the year ended December 31, 2020:

Security Type

1 unchanged sentence

Unobservable Inputs

last secured funding known by company

economic changes since last funding

ST Non-banking Loans

discounted cash flow

cash flow based on oil market price per barrel

$35 - $45 per barrel

determining private company interest rate based on credit

last secured funding known by company

economic changes since purchase

Preferred Stock

1 unchanged sentence

economic changes since last funding

There were no transfers between levels

during the years ended December 31, 2020 and 2019.

RELATED-PARTY TRANSACTIONS

We maintain a Code of Ethics and certain

other policies relating to conflicts of interest and related-party transactions, as well as policies and procedures relating to

what regulations applicable.

Nevertheless, from time to time we may hold investments in portfolio companies in which certain members

of our manageme, our Board of Directors, or significant shareholders of ours, are also directly or indirectly invested.

of Directors has adopted a policy to require our disclosure of these instances in our periodic filings with the SEC.

Our only related-party

transaction requiring disclosure under this policy relates to an August 10, 2018 loan transaction we entered into with Elizabeth

Zbikowski, along with her husband Scott Zbikowski, owns approximately 1,765,000 shares of our common stock.

In the transaction, we obtained a two-year promissory note in the principal amount of $250,000.

The promissory note was subsequently

amended such that it matures in August 2021.

The note bears interest payable monthly at the rate of 10% per annum and is secured

by the debtors’

pledge to us of 625,000 shares of our common stock.

The pledged shares are held in physical custody

for us by our custodial agent Millennium Trust Company.

RETIREMENT SAVINGS PLANS

employees, Messrs.

Geraci and Polinsky, are eligible to participate in a qualified defined contribution 401(k) plan whereby

they may elect to have a specified portion of their salary contributed to the plan.

We will make a safe harbor match equal to 100%

of their elective deferrals up to 5% of eligible earnings in addition to our option to make discretionary contributions to the

There were no transfers between levels during the years ended December 31, 2021 and 2020.

NOTE 8 – RELATED-PARTY TRANSACTIONS

We maintain a conflicts of interest and related-party transactions policy.

Nevertheless, from time to time we may hold investments in portfolio companies in which certain members of our management, our Board of Directors, or significant shareholders of ours, are also directly or indirectly invested.

In this regard, during the period covered by this report we entered into the following related-party transactions:

● On August 10, 2018, we entered into a loan transaction with Elizabeth Zbikowski who, along with her husband Scott Zbikowski, owned and continues to own approximately 1,765,000 shares of our common stock.

In the transaction, we obtained a two-year promissory note in the principal amount of $ 250,000 ,which was subsequently amended such that the note presently matures in August 2022.

The promissory note bears interest payable monthly at the rate of 10 % per annum.

The note is secured by the debtors’ pledge to us of 625,000 shares of our common stock.

The pledged shares are held in physical custody for us by Millennium Trust Company, as our custodial agent.

● On January 3, 2022, we entered into a Loan and Security Agreement (the "Loan Agreement") with Eastman Investment, Inc., a Nevada corporation, and Lyle A.

Berman, as trustee of the Lyle A.

Berman Revocable Trust (collectively, the "Lenders").

Berman is a director of our company.

Under the Loan Agreement, the Lenders made available to us a $ 5 million revolving line of credit for us to use in the ordinary course of our short-term specialty finance business.

Amounts drawn under the Loan Agreement accrue interest at the per annum rate of 8 %, and all our obligations under the Loan Agreement are secured by a grant of a collateral security interest in substantially all of our assets.

● As a Lender, Mr.

Berman is obligated to furnish only one-half of the aggregate $ 5 million available under the Loan Agreement.

The Loan Agreement has a five-year term ending on January 3, 2027, at which time all amounts owing under

the Loan Agreement will become due and payable;

subject, however, to each Lender's right, including Mr.

Berman, to terminate the Loan Agreement, solely with respect to such Lender's obligation to provide further credit, at any time after January 3, 2023.

In the event that a Lender, including Mr.

Berman, terminates its lending obligations, the Loan Agreement requires that we repay such Lender, prior to the five-year maturity date, with the proceeds derived from specified investments.

● The Loan Agreement provides for us to pay a quarterly unused commitment fee equal to one-quarter of one percent of the amount of credit available but unused under the Loan Agreement, and requires us to pay such fee in the form of shares of our common stock based on our net asset value per share on the last day of the applicable fiscal quarter.

The Loan Agreement grants the Lenders piggyback registration rights subject to customary terms, conditions and exceptions.

NOTE 9 - RETIREMENT SAVINGS PLANS

Our two employees, Messrs.

Geraci and Polinsky, are eligible to participate in a qualified defined contribution 401(k) plan whereby they may elect to have a specified portion of their salary contributed to the plan.

We will make a safe harbor match equal to 100 % of their elective deferrals up to 5 % of eligible earnings in addition to our option to make discretionary contributions to the plan.

We made contributions totaling $ 11,250 and $ 10,550 to the plans for the years ended 2021 and 2020, respectively.

to December 27, 2019, before we withdrew our election to be treated as a BDC, w e planned to be taxed as a regulated

investment company (RIC) .

Compliance with the requirements of the Internal Revenue Code applicable

to RICs require d us to distribute at least 90% of our investment company taxable income to

shareholders.

Our intention w as to distribute (or retain through a deemed distribution) all

of our investment company taxable income and net capital gain, therefore we made no provision for income taxes prior

to December 27, 2019 .

We never made an election to be a RIC, and our ability to do so expired with the withdrawal of

our BDC election on December 27, 2019.

Presently, we are a C-corporation for tax purposes and

have booked an income tax provision for the year ended December 31, 2020.

Income taxes as of December 31, 2020 and 2019

are described below.

NOTE 10 – INCOME TAXES

Presently, we are a “C-corporation” for tax purposes and have booked an income tax provision for the year ended December 31, 2021.

Income taxes as of December 31, 2021, and 2020 are described below.

December 31, 2021

Current taxes

Deferred taxes

Valuation allowance

Provision for (benefit from) income taxes

A reconciliation of income tax provisions at the U.S.

rate for fiscal 2020 and 2019 is as follows:

statutory rate for fiscal year 2021 and 2020 is as follows:

Rate reconciliation:

Tax expense at U.S.

statutory rate

Tax expense at U.S.statutory rate

Change in valuation allowance

1 unchanged sentence

Income tax provision

had Federal net operating loss carryforwards of approximately $371,000 at December 31, 2020 that do not expire.

had Minnesota net operating loss carryforwards of approximately $1,325,000 at December 31, 2020 expiring from 2021 through

income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial

reporting purposes and the amounts used for income tax purposes.

Significant components of our deferred tax assets and liabilities

as of December 31, 2020 and 2019 were as follows:

The Company had Federal net operating loss carryforwards of approximately $ 350,000 at December 31, 2020.

We expect the Federal net operating loss to be completely used and offset taxable income by December 31, 2021.

The federal NOL may be carried forward to offset future taxable income, subject to applicable provisions of the Internal Revenue Code.

Certain federal NOLs will expire in years 2036 and 2037 if not used.

Due to tax reform enacted in 2017, NOLs created after 2017 carry forward indefinitely.

The estimated federal NOL that does not expire included in the total above is $ 350,000 .

The Company had Minnesota net operating loss carryforwards of approximately $ 1,330,000 at December 31, 2020.

We expect the state net operating loss to be completely used and offset taxable income by December 31, 2021.

States may vary in their treatment of post-2017 NOLs.

We lost some state NOL carryforwards when we filed final 2019 tax returns in several states.

The remaining state NOL carryforwards may expire in 2036 and 2037 if not used.

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.

Significant components of our deferred tax assets and liabilities as of December 31, 2021 and 2020 were as follows:

December 31, 2021

Deferred tax components

1 unchanged sentence

Net operating loss carryforwards

R&D and foreign tax credits

Valuation Allowance

R&D and foreign credits

Net deferred tax asset (liability)

NOTE 11 —

FINANCIAL HIGHLIGHTS

The following

is a schedule of financial highlights for the years ended December 31, 2020 through 2016:

NOTE 11 – FINANCIAL HIGHLIGHTS

The following is a schedule of financial highlights for the years ended December 31, 2021 through 2017:

Year Ended December 31,

1 unchanged sentence

Net asset value at beginning of period

Net investment income (loss)

Net investment gain (loss)

Net realized and unrealized gains (losses)

15 unchanged sentences

Ratio of realized gains (losses) to average net assets (3)

(1) Per-share

data was derived using the weighted-average number of shares outstanding for the period.

on the monthly average of net assets as of the beginning and end of each period presented.

are annualized.

SUBSEQUENT EVENTS

On January 12, 2021, we invested $600,000

in a special purpose acquisition company sponsor by purchasing 150,000 common membership units.

On January 13, 2021, we made a short-term

loan evidenced by a $1.05 million in principal amount promissory note.

The note accrues interest at the per annum rate of 44.44%,

and matures on April 13, 2021.

On January 18, 2021, we made a short-term

loan evidenced by a $720,000 in principal amount promissory note.

The note accrues interest at the per annum rate of 44.44%, and

matures on April 18, 2021.

ITEM 9 CHANGES IN AND DISAGREEMENTS WITH

ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

(1) Per-share data was derived using the weighted-average 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

On January 3, 2022, we entered into a Loan and Security Agreement (the “Loan Agreement”) with Eastman Investment, Inc., a Nevada corporation, and Lyle A.

Berman, as trustee of the Lyle A.

Berman Revocable Trust (collectively, the “Lenders”).

director of our company.

Under the Loan Agreement, the Lenders made available to us a $ 5 million revolving line of credit for us to use in the ordinary course of our short-term specialty finance business.

Amounts drawn under the Loan Agreement will accrue interest at the per annum rate of 8 %, and all our obligations under the Loan Agreement are secured by a grant of a collateral security interest in substantially all of our assets.

Each Lender is obligated to furnish only one -half of the aggregate $ 5 million available under the Loan Agreement.

The Loan Agreement has a five-year term ending on January 3, 2027, at which time all amounts owing under the Loan Agreement will become due and payable;

subject, however, to each Lender’s right to terminate the Loan Agreement, solely with respect to such Lender’s obligation to provide further credit, at any time after January 3, 2023.

In the event that a Lender terminates its lending obligations, the Loan Agreement requires that we repay such Lender, prior to the five-year maturity date, with the proceeds derived from specified investments.

The Loan Agreement provides for us to pay a quarterly unused commitment fee equal to one-quarter of one percent of the amount of credit available but unused under the Loan Agreement, and requires us to pay such fee in the form of shares of our common stock based on our net asset value per share on the last day of the applicable fiscal quarter.

The Loan Agreement grants the Lenders piggyback registration rights subject to customary terms, conditions and exceptions.

The Loan Agreement contains other provisions, such as representations, warranties, terms and conditions, that are customary for revolving credit facilities.

Promissory notes, evidencing amounts owing under the Loan Agreement and conforming to the terms and conditions of the Loan Agreement, were also executed by us and delivered to the Lenders as contemplated under the Loan Agreement.

On January 12, 2022, we entered into a $ 2,500,000 revolving credit and security loan investment bearing interest at 15 %.

On January 12, 2022, we advanced $ 1,250,000 under this loan, and an additional $ 960,000 on January 26, 2022.

On January 26, 2022, we invested $ 1,125,000 in a 120-day promissory note bearing interest at 33.33 %.

On February 11, 2022, we filed a registration statement on Form S-1 seeking to register an offering of five-year common stock warrants we intend to distribute to our shareholders as a dividend, and up to 2,697,603 shares of our common stock purchasable upon the exercise of the warrants.

The warrants are contemplated to be exercisable at a price of $ 4.00 per share of common stock.

We intend to apply to have the warrants listed for trading on the OTC Markets.

The offering is subject to the effectiveness of the S-1 registration statement.

Accordingly, no record date has been established for the associated dividend contemplated as part of the offering.

The warrants will not be issued until the registration statement is declared effective, and the warrants will not be exercisable unless such registration statement remains effective.

If the offering is consummated, we expect to use net proceeds from the offering for general corporate purposes, including but not limited to extending specialty finance solutions and credit to borrowers and repaying credit facility borrowings.

On March 7, 2022, the company funded a $ 3.4 million short-term loan, the proceeds of which will be used to acquire real estate located in Glendale, Arizona, where 139 townhouse units are expected to be developed by the borrower.

The short-term loan accrues interest at the per annum rate of 48 %, and the loan is due on May 30, 2022.

ITEM 9 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data