What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2022-05-13 compared with 2021-11-12 · 190 added, 198 removed, 322 unchanged (55% of the section changed)

2 unchanged sentences

CONDENSED BALANCE SHEETS

September 30, 2021

March 31, 2022

December 31, 2021

4 unchanged sentences

Prepaid expenses

Receivable for sale of investments

Interest and dividend receivables

Right-of-use lease asset

Line of credit

Accounts payable

2 unchanged sentences

Lease liability

Accrued income tax expense

Deferred interest income

Accrued income tax

Deferred taxes

Total Liabilities

Commitments and Contingencies

SHAREHOLDERS EQUITY (NET ASSETS)

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

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

10,790,413 outstanding )

Additional paid-in capital

14 unchanged sentences

Three Months Ended

Nine Months Ended

September 30,

Investment Income

Interest income

Dividend income

Total Investment Income

2 unchanged sentences

Director’s fees

Depreciation and amortization

Interest expense

Other general and administrative

3 unchanged sentences

Net realized gain on investments

Net change in unrealized appreciation (depreciation) on investments

( 1,204,319 )

Net Realized and Unrealized Gain (Loss) on Investments

Net change in unrealized depreciation on investments

Net Realized and Unrealized Gain on Investments

Net Increase in Net Assets Resulting from Operations Before Taxes

Provision For (Benefit From) Income Taxes

Net Increase (Decrease) in Net Assets Resulting from Operations

Provision for Income Taxes

Net Increase in Net Assets Resulting from Operations

Net Increase in Net Assets Resulting from Operations per share:

12 unchanged sentences

Shareholders’

Three Months Ended September 30, 2021

Balance as of June 30, 2021

( 1,159,665 )

( 2,697,320 )

Dividend Declared

Three Months Ended March 31, 2022

Balance as of December 31, 2021

( 1,159,665 )

( 1,877,667 )

Undistributed net investment gain

Undistributed net realized gain on investment transactions

Net investment gain, net of tax of $ 159,000

Net realized gain on investment transactions

Depreciation in value of investments

Balance as of September 30, 2021

Balance as of March 31, 2022

( 1,159,665 )

8 unchanged sentences

Shareholders’

Three Months Ended September 30, 2020

Balance as of June 30, 2020

( 1,159,665 )

( 2,248,732 )

Undistributed net investment gain

Undistributed net realized gain on investment transactions

Appreciation in value of investments

Balance as of September 30, 2020

( 1,159,665 )

( 2,142,644 )

Undistributed

Net Realized Gain

Net Investment

on Investments

Shareholders'

Nine Months Ended September 30, 2021

Three Months Ended March 31, 2021

Balance as of December 31, 2020

1 unchanged sentence

( 2,124,419 )

Common shares issued in consideration for expense payment

Dividend declared

( 1,079,041 )

Undistributed net investment loss

Undistributed net realized gain on investment transactions

Issuance of shares

Net investment loss, net of tax of $ 662,691

Net realized gain on investment transactions

Depreciation in value of investments

( 1,204,319 )

Balance as of September 30, 2021

( 1,159,665 )

( 2,181,001 )

Undistributed

Net Unrealized

Undistributed

Net Realized Gain

Net Investment

on Investments

Shareholders'

Nine Months Ended September 30, 2020

of Investments

Balance as of December 31, 2019

( 1,159,665 )

( 2,397,865 )

Repurchase of shares

Undistributed net investment gain

Undistributed net realized gain on investment transactions

Appreciation in value of investments

Balance as of September 30, 2020

Balance as of March 31, 2021

( 1,159,665 )

3 unchanged sentences

CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)

Nine Months Ended

September 30, 2021

September 30, 2020

Three Months Ended

March 31, 2022

March 31, 2021

Cash flows from 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 on investments

Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net cash provided (used) in operating activities:

Net change in unrealized depreciation on investments

Net realized gain on investments

4 unchanged sentences

Proceeds from sales of investments

Depreciation & amortization expense

Income taxes payable

Common shares issued as consideration for expense payment

Deferred income taxes

Changes in operating assets and liabilities:

2 unchanged sentences

Receivable for investment sales

Payable for investment purchase

Accounts payable and other liabilities

Deferred interest income

Accrued income taxes

Payable for investment purchase

( 1,900,000 )

Net cash used in operating activities

2 unchanged sentences

Cash flows from financing activities:

Payments for repurchase of common stock

Proceeds from line of credit

Payments for common stock dividend

Net cash used by financing activities

Net cash provided (used) by financing activities

Net decrease in cash

5 unchanged sentences

Common shares issued as consideration for investment

Dividend declared to common stock shareholders

See accompanying Notes to Financial Statements

1 unchanged sentence

CONDENSED SCHEDULE OF INVESTMENTS

SEPTEMBER 30, 2021

MARCH 31, 2022

Investment / Industry

2 unchanged sentences

AirDog Supplies, Inc.

Consumer - 20% secured loans

Financial - 44% secured loans

Benton Financial, LLC

Intelligent Mapping, LLC

Financial - 33.33% secured loans

4 unchanged sentences

Real Estate - 15% secured loans

Tailwinds, LLC

Real Estate - 12% secured loans

Alatus Development, LLC

Real Estate - 48% secured loans

Villas at 79th, LLC

Total Short-Term Non-Banking Loans

Financial Services

Total Common Stock

Preferred Stock

Wisdom Gaming, Inc

Information Technology

Total Other Equity

Total Investments

Total Investments and Cash

See accompanying Notes to the Financial Statements

MILL CITY VENTURES III, LTD.

1 unchanged sentence

DECEMBER 31, 2021

Investment / Industry

Short-Term Non-banking Loans

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

MILL CITY VENTURES III, LTD.

NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

March 31, 2022

NOTE 1 – ORGANIZATION

6 unchanged sentences

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

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

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.

4 unchanged sentences

In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included.

Operating results for the quarter ended September 30, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021.

The condensed balance sheet as of December 31, 2020 has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by GAAP for complete financial statements.

Operating results for the quarter ended March 31, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022.

The condensed balance sheet as of December 31, 2021 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by GAAP for complete financial statements.

For further information, refer to the financial statements and footnotes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2021.

7 unchanged sentences

Cash on deposit in excess of FDIC and similar coverage is subject to the usual banking risk of funds in excess of those limits.

Valuation of investments:

Valuation of portfolio investments:

We carry our investments in accordance with ASC Topic 820, Fair Value Measurements and Disclosures (“ASC 820”), issued by the Financial Accounting Standards Board (“FASB”), which defines fair value, establishes a framework for measuring fair value, and requires disclosures about fair value measurements.

Fair value is generally based on quoted market prices provided by independent pricing services, broker or dealer quotations, or alternative price sources.

In the absence of quoted market prices, broker or dealer quotations, or alternative price sources, investments are measured at fair value as determined by our Board of Directors, or 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 investments, but in all cases consistent with our written valuation policies and procedures.

In the absence of quoted market prices, broker or dealer quotations, or alternative price sources, investments are measured at fair value as determined by our Board of Directors, based on, among other things, the input of our executive management, the Audit Committee of our Board of Directors, and any independent third-party valuation experts that may be engaged by management to assist in the valuation of our portfolio investments, but in all cases consistent with our written valuation policies and procedures.

Due to the inherent uncertainties of valuation, certain estimated fair values may differ significantly from the values that would have been realized had a ready market for these investments existed, and these differences could be material.

In addition, such investments are generally less liquid than publicly traded securities.

If we were required to liquidate an investment in a forced or liquidation sale, we could realize significantly less than the value at which we have recorded it.

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.

MILL CITY VENTURES III, LTD.

NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

March 31, 2022

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.

12 unchanged sentences

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.

These policies and procedures generally require that we value our Level 3 equity investments at fair market value, unless circumstances warrant a different approach.

Our Valuation Policy and Procedures provide examples of these circumstances, such as when a company in which we have invested 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 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 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.

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.

4 unchanged sentences

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

For non-traded (Level 3) debt and loan investments 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.

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.

The fair value for short-term non-banking loans is determined as the present value of future contractual cash flows discounted at an interest rate that reflects the risks inherent to those cash flows.

The discount ranges from 12 % to 48 % and approximate rates currently observed in publicly traded debt markets for debt of similar terms to companies with comparable credit risk.

On a quarterly basis, our management provides members of our Board of Directors with (i) valuation reports for each 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);

MILL CITY VENTURES III, LTD.

NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

March 31, 2022

On a quarterly basis, our management provides members of our Board of Directors with (i) valuation updates for each portfolio investment;

(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 investments;

and (iv) recommendations to change any existing valuations of our investments or hierarchy levels for purposes of determining the fair value of such investments based upon the foregoing.

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

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.

(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 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.

Income taxes:

7 unchanged sentences

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 September 30, 2021.

We do 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, 2019 through 2021, which are the tax years that remain subject to examination by major tax jurisdictions as of March 31, 2022.

Revenue recognition :

1 unchanged sentence

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 or other instruments purchased are accreted or amortized, as applicable, into interest income over the life of the related security using the effective-yield method.

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.

5 unchanged sentences

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 a company in which we have invested and are expected to be collected.

Dividend income on common equity securities is recorded on the record date for private companies or on the ex-dividend date for publicly traded companies.

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.

5 unchanged sentences

All income, gains, losses, deductions and credits for any investment are allocated in a manner proportionate to the shares owned.

Recently adopted accounting pronouncements:

In December 2019, the FASB issued ASU No.

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

ASU 2019-12 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.

The adoption of the ASU effective January 1, 2021 did not have a material impact on the Company’s financial statements.

MILL CITY VENTURES III, LTD.

NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

March 31, 2022

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.

NOTE 3 – INVESTMENTS

The following table shows the composition of our investments by major class, at amortized cost and fair value, as of September 30, 2021 (together with the corresponding percentage of the fair value of our total investments):

As of September 30, 2021

The following table shows the composition of our investment portfolio by major class, at amortized cost and fair value, as of March 31, 2022 (together with the corresponding percentage of the fair value of our total portfolio of investments):

Investments at

6 unchanged sentences

Preferred Stock

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

As of December 31, 2020

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 the fair value of our total portfolio of investments):

Investments at

6 unchanged sentences

Preferred Stock

The following table shows the composition of our investments by industry grouping, based on fair value as of September 30, 2021:

The following table shows the composition of our investment portfolio by industry grouping, based on fair value as of March 31, 2022:

As of March 31, 2022

Investments at

1 unchanged sentence

Information Technology

The following table shows the composition of our investments 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

MILL CITY VENTURES III, LTD.

NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

March 31, 2022

NOTE 4 – FAIR VALUE OF FINANCIAL INSTRUMENTS

Level 3 valuation information :

Due to the inherent uncertainty in the valuation process, the estimate of the fair value of our investments as of September 30, 2021 may differ materially from values that would have been used had a readily available market for the securities or investments existed.

The following table presents the fair value measurements of our investments by major class, as of September 30, 2021, according to the fair value hierarchy:

As of September 30, 2021

Due to the inherent uncertainty in the valuation process, the estimate of the fair value of our investment portfolio as of March 31, 2022 may differ materially from values that would have been used had a readily available market for those investments existed.

The following table presents the fair value measurements of our portfolio investments by major class, as of March 31, 2022, according to the fair value hierarchy:

As of March 31, 2022

Short-term Non-banking Loans

Preferred Stock

The following table presents the fair value measurements of our investments by major class, as of December 31, 2020, 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, 2021, according to the fair value hierarchy:

As of December 31, 2021

1 unchanged sentence

Preferred Stock

The following table presents a reconciliation of the beginning and ending fair value balances for our Level 3 investment assets for the nine months ended September 30, 2021:

For the nine months ended September 30, 2021

The following table presents a reconciliation of the beginning and ending fair value balances for our Level 3 portfolio investment assets for the three months ended March 31, 2022:

For the three months ended March 31, 2022

ST Non-banking

Preferred Stock

Balance as of January 1, 2022

2 unchanged sentences

Sales and redemptions

( 10,519,000 )

Net realized loss

Balance as of June 30, 2021

The net change in unrealized appreciation for the nine months ended September 30, 2021 attributable to Level 3 investments still held as of September 30, 2021 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 September 30, 2021 and the unobservable inputs used to determine their valuation:

Balance as of March 31, 2022

The net change in unrealized depreciation for the three months ended March 31, 2022 attributable to Level 3 portfolio investments still held as of March 31, 2022 was $ 0 .

MILL CITY VENTURES III, LTD.

NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

March 31, 2022

The following table lists our Level 3 investments held as of March 31, 2022 and the unobservable inputs used to determine their valuation:

Security Type

3 unchanged sentences

discounted cash flow

determining private company interest rate based on credit

determining private company credit rating

last secured funding known by company

3 unchanged sentences

economic changes since last funding

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

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

For the year ended December 31, 2021

ST Non-banking

Balance as of January 1, 2021

5 unchanged sentences

Balance as of December 31, 2021

The net change in unrealized depreciation for the year ended December 31, 2020 attributable to Level 3 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 net change in unrealized depreciation for the year ended December 31, 2021 attributable to Level 3 portfolio investments still held as of December 31, 2021 was $ 0 .

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

4 unchanged sentences

discounted cash flow

determining private company interest rate based on credit

determining private company credit rating

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

MILL CITY VENTURES III, LTD.

NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

March 31, 2022

NOTE 5 – RELATED-PARTY TRANSACTIONS

We maintain a Code of Ethics and certain other policies relating to conflicts of interest.

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

Our Board 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.

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 2022.

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.

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.

See note 7 for further details.

NOTE 6 – INCOME TAXES

Presently, we are a c-Corporation for tax purposes and have booked an income tax provision for the periods described below.

As of September 30, 2021 and December 31, 2020, we have a deferred tax liability of $ 141,000 and $ 258,000 , respectively.

As of March 31, 2022 and December 31, 2021, we have a net deferred tax liability of $ 39,000 and $ 45,000 , respectively.

Our determination of the realizable deferred tax assets and liabilities requires the exercise of significant judgment, based in part on business plans and expectations about future outcomes.

In the event the actual results differ from these estimates in future periods, we may need to adjust the valuation allowance, which could materially impact our financial position and results of operations.

In the event the actual results differ from these estimates in future periods, we may need to record a valuation allowance, which could materially impact our financial position and results of operations.

We will continue to assess the need for a valuation allowance in future periods.

As of September 30, 2021 and December 31, 2020, we had accrued income taxes of $ 1,141,700 and $ 13,722 respectively.

We recorded a benefit from income taxes of approximately $ 300 ( 28.9 percent effective tax rate) and $ 0 ( 0 percent effective tax rate) during the three months ended September 30, 2021 and September 30, 2020, respectively.

We recorded income taxes of approximately $ 1,010,978 ( 30.4 percent effective tax rate) and $ 0 ( 0 percent effective tax rate) during the nine months ended September 30, 2021 and September 30, 2020, respectively.

Due to the full valuation allowances in periods prior to December 31, 2020, our effective tax rate was expected to be near zero percent, and therefore income tax accruals and expense were not material for those prior periods presented.

As of December 31, 2020, we had a federal net operating loss carryfoward (NOL) of approximately $ 351,000 .

The federal NOL was completely utilized and offset taxable income as of September 30, 2021.

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

The remaining state NOLs are expected to be completely used and offset taxable income by September 30, 2021.

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

As of March 31, 2022 and December 31, 2021 we had accrued income taxes of $ 1,434,000 and $ 1,269,000 , respectively.

We recorded income taxes of $ 159,000 ( 28 percent effective tax rate) and $ 662,691 ( 29 percent effective tax rate) during the three months ended March 31, 2022 and March 31, 2021, respectively.

$ 1,362,000 of federal and state tax payments were made after March 31, 2022.

As of December 31, 2020, we had a federal NOL of approximately $ 350,000 .

The remaining federal NOL was used in its entirety to offset taxable income during the 2021 tax year.

At March 31, 2022, we have no federal or state NOLs available to offset taxable income, all NOLs have been exhausted.

Due to tax reform enacted in 2017, any newly created NOLs will carry forward indefinitely.

MILL CITY VENTURES III, LTD.

NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

March 31, 2022

NOTE 7 – LINE OF CREDIT

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.

At March 31, 2022, the balance outstanding on the line was $ 5,325,000 with a maturity date of January 3, 2027 .

NOTE 8 – SHAREHOLDERS’ EQUITY

At September 30, 2021, we had 10,790,413 shares of common stock issued and outstanding .

On September 27, 2021 we announced that our Board of Directors had approved a cash dividend of $ 0.10 per common share.

The dividend was paid on October 29, 2021 to shareholders of record as of the close of business on October 15, 2021.

On December 8, 2020 we announced that our Board of Directors had approved a cash dividend of $ 0.05 per common share.

The dividend was paid on January 4, 2021 to shareholders of record as of the close of business on December 21, 2020.

At March 31, 2022, we had 10,790,413 shares of common stock issued and outstanding .

NOTE 9 – PER-SHARE INFORMATION

2 unchanged sentences

For the Three Months Ended

September 30,

Net increase in net assets resulting from operations

Weighted-average number of common shares outstanding

Basic and diluted net gain per common share

For the Nine Months Ended

September 30,

Net increase in net assets resulting from operations

Net increase (decrease) in net assets resulting from operations

Weighted-average number of common shares outstanding

Basic and diluted net gain per common share

Basic and diluted net gain (loss) per common share

NOTE 10 – OPERATING 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 renew.

We were subject to two non-cancelable operating leases for office space which expired March 31, 2022.

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

Further, the leases did not contain contingent rent provisions.

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

Under ASC 840, rent expense for office facilities for the three months ended September 30, 2021 and September 30, 2020 was $ 16,689 and $ 16,562 , respectively.

The components of our operating lease were as follows for the three and nine months ended September 30, 2021:

September 30, 2021

The weighted average discount rate as of December 31, 2021 was 4.5 %.

MILL CITY VENTURES III, LTD.

NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

March 31, 2022

Under ASC 840, rent expense for office facilities for the three months ended March 31, 2022 and March 31, 2021 was $ 16,812 and $ 16,689 , respectively.

The components of our operating lease were as follows for the three months ended March 31, 2022 and 2021:

Three Months Ended

March 31, 2022

March 31, 2021

Operating lease costs

1 unchanged sentence

Short-term lease cost

Supplemental balance sheet information consisted of the following at September 30, 2021:

Operating Lease

Right-of-use assets

Operating Lease Liability

short term portion

Long term portion

Maturity analysis under lease agreements consisted of the following as of September 30, 2021:

On March 22, 2022, we signed an extension to our operating lease for office space which begins April 2, 2022 and expires October 2, 2023.

The lease does not have significant lease escalations, holidays, concessions, leasehold improvements, or other build-out clauses.

Further, the lease does not contain contingent rent provisions.

Maturity analysis under this lease extension agreement consists of the following as of March 31, 2022:

Total lease payments

Present value of lease liabilities

MILL CITY VENTURES III, LTD.

NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

March 31, 2022

NOTE 11 – FINANCIAL HIGHLIGHTS

The following is a schedule of financial highlights for the nine months ended September 30, 2021 through 2017:

Nine Months Ended June 30,

The following is a schedule of financial highlights for the three months ended March 31, 2022 through 2018:

Three Months Ended March 31,

Per Share Data (1)

Net asset value at beginning of period

Net investment gain (loss)

Net investment income (loss)

Net realized and unrealized gains (losses)

Provision for income taxes

Repurchase of common stock

Payment of common stock dividend

14 unchanged sentences

(3) Ratios are annualized.

NOTE 11 – General Uncertainty

On March 11, 2020, the World Health Organization declared the outbreak of the coronavirus (COVID-19) a pandemic.

As a result, economic uncertainties and market volatility have arisen which may negatively impact our investment valuations and net increase or decrease in net assets resulting from operations.

Other financial impacts could occur though such potential impact is difficult to determine at this time.

NOTE 12 – Subsequent Events

On April 11, 2022, we issued 15,000 shares of restricted common stock to each of our three independent directors, and 10,000 shares of restricted common stock to our two non-independent directors.

The shares are subject to forfeiture in the event the recipients are terminated from their board positions or employment, if applicable, on or prior to January 23, 2023.

On April 12, 2022 we received $ 3,900,000 in advanced principal repayment of a short-term loan that had a maturity date of September 27, 2022.

The note bore interest at a rate of 12 %.

On April 18, 2022 we received $ 1,800,000 in advanced principal repayment of a short-term loan that had a maturity date of September 30, 2022.

The note bore interest at a rate of 23 %.

On April 26, 2022, we filed a registration statement on Form S-1 with the U.S.

Securities and Exchange Commission seeking to register an offer and sale of shares of our common stock in a firm-commitment underwritten offering.

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-Q

Item 1. Financial Statements