What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2025-03-10 compared with 2024-04-02 · 84 added, 138 removed, 492 unchanged (31% of the section changed)

13 unchanged sentences

(the Company) as of December 31, 2024 and 2023, 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, 2024, 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, 2023 and 2022, 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.

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

31 unchanged sentences

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 also consulted with our valuation specialist to ascertain that the Company’s valuation method was widely accepted.

We assigned senior, more experienced audit team members to perform audit procedures related to the valuation of investments.

5 unchanged sentences

Minneapolis, Minnesota

April 1, 2024

March 7, 2025

Mill City Ventures III, Ltd.

Balance Sheets

December 31, 2023

December 31, 2022

Investments, at fair value (cost:

8 unchanged sentences

Operating lease liability

Deferred interest income

Accrued income tax

Total Liabilities

2 unchanged sentences

Common stock, par value $ 0.001 per share ( 111,111,111 authorized;

6,385,255 and 6,185,255 issued and outstanding)

6,385,255 issued and outstanding)

Additional paid-in capital

5 unchanged sentences

( 1,052,183 )

( 1,086,739 )

Accumulated undistributed net realized gains on investment transactions

18 unchanged sentences

Realized and Unrealized Gain (Loss) on Investments

Net realized gain (loss) on investments

Net change in unrealized depreciation on investments

Net Realized and Unrealized Loss on Investments

Net realized loss on investments

Net change in unrealized appreciation (depreciation) on investments

Net Realized and Unrealized Gain (Loss) on Investments

( 1,200,062 )

5 unchanged sentences

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

Basic and diluted

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

Weighted-average number of common shares outstanding - basic

Weighted-average number of common shares outstanding - diluted

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

1 unchanged sentence

Statements of Shareholders’ Equity

For the years ended December 31, 2024 and 2023

Year Ended December 31, 2024

2 unchanged sentences

Accumulated Deficit

Accumulated Undistributed Net Investment Loss

Accumulated Undistributed Net Investment Gain (Loss)

Accumulated Undistributed Net Realized Gain (Loss) on Investment Transactions

Net Unrealized Depreciation in value of Investments

Net Unrealized Appreciation (Depreciation) in Value of Investments

Total Shareholders’ Equity

3 unchanged sentences

$ ( 1,292,804 )

Stock-based compensation

Exercise of stock options

Undistributed net investment gain

Undistributed net realized loss on investment transactions

Depreciation in value of investments

Appreciation in value of investments

Balance as of December 31, 2024

6 unchanged sentences

Accumulated Deficit

Accumulated Undistributed Net Investment Loss

Accumulated Undistributed Net Realized Gain on Investment Transactions

Net Unrealized Appreciation (Depreciation) in value of Investments

Accumulated Undistributed Net Investment Gain (Loss)

Accumulated Undistributed Net Realized Gain (Loss) on Investment Transactions

Net Unrealized Depreciation in Value of Investments

Total Shareholders’ Equity

2 unchanged sentences

$ ( 1,086,739 )

Common shares issued in public offering net of underwriting costs and warrants

Warrants issued to underwriter

Common shares issued in reverse stock split rounding

Common shares issued in stock-based compensation

Common shares issued in consideration for expense payment

$ ( 651,371 )

Stock-based compensation

Exercise of stock options

Undistributed net investment gain

Undistributed net realized gain on investment transactions

Undistributed net realized loss on investment transactions

Depreciation in value of investments

11 unchanged sentences

from operations to net cash used in operating activities:

Net change in unrealized depreciation on investments

Net realized (gain) loss on investments

Net change in unrealized (appreciation) depreciation on investments

( 1,029,277 )

Net realized loss on investments

Purchases of investments

4 unchanged sentences

Deferred income taxes

Stock-based compensation to employees and vendors

Changes in operating assets and liabilities:

1 unchanged sentence

Interest and dividends receivable

Payable for investment purchase

( 1,900,000 )

Note receivable

Accounts payable and other liabilities

1 unchanged sentence

Accrued income taxes

( 1,269,000 )

Net cash used in operating activities

( 1,137,617 )

Net cash provided (used) in operating activities

( 1,137,617 )

Cash flows from financing activities:

Proceeds from public offering, net of underwriting discounts and offering costs

Proceeds from stock option exercise

2 unchanged sentences

( 2,750,000 )

( 9,793,800 )

Net cash provided by financing activities

Net decrease in cash

Net increase (decrease) in cash

Cash, beginning of period

8 unchanged sentences

Investment / Industry

Percentage of Net Assets

Short-Term Non-banking Loans

2 unchanged sentences

Consumer - 18% secured loans

Intelligent Mapping, LLC

Financial - 12% secured loans

Information Technology - 15% convertible note

Real Estate - 15% secured loans

Tailwind, LLC

Real Estate - 12% secured loans

Alatus Development Corp

Real Estate - 24% secured loans

Coventry Holdings LLC

Total Short-Term Non-Banking Loans

Preferred Stock

Wisdom Gaming, Inc

Information Technology

Total Preferred Stock

Total Common Stock

Total Investments

Total Cash and cash equivalents

Total Investments and Cash

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

Mill City Ventures III, Ltd.

Investment Schedule

4 unchanged sentences

Business Services - 15% secured loans

Liberated Syndication Inc.

Business Services - 15% secured loans

Mustang Litigation Funding

2 unchanged sentences

Financial - 12% secured loans

Benton Financial, LLC

Financial - 12% secured loans

Information Technology - 15% convertible note

Real Estate - 18% secured loans

Tailwind, LLC

Real Estate - 12% secured loans

5 unchanged sentences

Total Preferred Stock

Total Other Equity

Total Investments

17 unchanged sentences

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

The presentation of certain items in the financial statements for the year ended December 31, 2022, has been changed to conform to the classifications used in 2023.

These reclassifications had no effect on shareholders’ equity or net increase in net assets as previously recorded.

Cash deposits:

21 unchanged sentences

In the case of traded debt securities the prices for which are not readily available, we may value those securities using a discounted cash flows approach, at their weighted-average yield to maturity.

The estimated fair value of our Level 3 investment assets is determined on a quarterly basis by our Board of Directors.

The estimated fair value of our Level 3 investment assets is determined on a quarterly basis by the Company.

In general, we value our Level 3 equity investments at cost unless circumstances warrant a different approach.

52 unchanged sentences

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

Recently adopted accounting pronouncements:

In November 2023, the FASB issued ASU 2023-07:

Improvements to Reportable Segment Disclosures.

This ASU, which amends Topic 280:

Segment Reporting, improves disclosure requirements for reportable segments and enhances disclosures for companies with single reportable segments.

The Company has a single reportable segment based on the nature of its operations.

The nature of business and the accounting policies of the segment are the same as described throughout Notes 1 and 2.

The Company’s Chief Operating Decision Maker (“CODM”) is its executive team.

The CODM assesses the reportable segment’s performance and allocates resources for the reportable segment based on the net income and total assets which are the same amounts in all material respects as those reported on the Statement of Operations and Balance Sheet.

The Company adopted the standard on January 1, 2024.

The adoption did not have a material impact on the Company’s financial statements.

NOTE 3 — NET GAIN (LOSS) PER COMMON SHARE

2 unchanged sentences

For the Year Ended December 31,

Net increase (decrease) in net assets resulting from operations

Net increase in net assets resulting from operations

$ ( 1,165,506 )

Weighted-average number of common shares outstanding

3 unchanged sentences

At December 31, 2023, options issued under the plan for the purchase of 670,000 common shares remained outstanding.

For the year ended December 31, 2023, the common shares underlying the stock options have been excluded from the calculation because their effect would be anti-dilutive.

Therefore, the weighted-average shares outstanding used to calculate both basic and diluted loss per common share are the same.

NOTE 4 — LEASES

We are subject to two non-cancelable operating leases for office space expiring May 31, 2024.

These leases do not have significant payment 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.

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, 2023 and December 31, 2022 was 4.5 % and the weighted-average remaining lease term was less than one year, and one year, respectively.

Rent expense for office facilities for the year ended December 31, 2023 and 2022 was $ 68,421 and $ 73,146 , respectively.

The components of our operating leases were as follows for the years ended December 31:

Operating lease costs

Variable lease cost

Short-term lease cost

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

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 December 31:

Total lease payments

Present value discount

Present value of lease liabilities

Supplemental cash flow information related to leases for the years ended December 31:

Operating cash outflow from operating leases

NOTE 4—SHAREHOLDERS’ EQUITY

At December 31, 2023 a total of 6,385,255 shares of common stock were issued and outstanding.

At December 31, 2022 a total of 6,185,255 shares of common stock were issued and outstanding.

On August 9, 2022, the Company effected a stock combination (reverse stock split) of its common shares on a 1-for-2.25 basis such that every 2.25 shares of common stock issued and outstanding on that date were combined into one share of common stock .

Any fractional share resulting from the reverse stock split was rounded up to the nearest whole share.

The reverse stock split was retroactively applied to prior periods, which reduced common stock by approximately $6,000 as part of the reverse stock split for the reduction in common shares outstanding, and increased additional paid-in capital by approximately $6,000 as of December 31, 2021.

The reverse stock split was approved by the Company's Board of Directors in accordance with Minnesota law and resulted in a proportionate reduction in the number of authorized shares of capital stock available for issuance under the Company's articles of incorporation.

This reduction was affected pursuant to the filing of articles of amendment with the Minnesota Secretary of State indicating that the Company, on a post-reverse-split basis, is authorized to issue up to 111,111,111 shares of capital stock.

On August 11, 2022, the Company completed its public offer and sale of 1,250,000 common shares pursuant to a registration statement filed with the SEC and declared effective on August 9, 2022.

Shares were sold by the Company at $ 4.00 per share, resulting in gross proceeds of $ 5,000,000 .

As part of the registered public offering, the Company granted the underwriters a 45-day option to purchase up to 187,500 additional common shares at the offering price, less underwriting discounts which option was not exercised.

In connection with the offering, the Company issued the underwriter a five-year warrant to purchase up to 75,000 common shares at the per-share price of $ 5.00 .

Net proceeds to the Company after the payment of underwriting discounts, underwriting expenses, and the Company's own offering-related expenses were approximately $ 4,041,000 .

In connection with the public offering, the Company issued a five-year warrant to the underwriter.

At December 31, 2024 and 2023, a total of 6,385,255 shares of common stock were issued and outstanding.

In connection with a public offering on August 11, 2022, the Company issued a five-year warrant to the underwriter.

The warrant allows the underwriter to purchase up to 75,000 common shares at $ 5.00 per share.

This warrant is exercisable after 180 days, and expires on August 8, 2027 .

This warrant is equity-classified and the fair value was $ 201,173 on the offering date.

During 2023 there were 200,000 shares issued related to the exercise of stock options.

During 2022, there were 1,389,516 shares issued by the Company.

This warrant is equity-classified.

During 2024, there were no shares issued related to the exercise of stock options or warrants.

During 2023 there were 200,000 shares issued related to the exercise of stock options and no shares issued related to the exercise of warrants.

NOTE 5 — INVESTMENTS

6 unchanged sentences

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, 2023 (together with the corresponding percentage of total portfolio investments):

24 unchanged sentences

Short-term Non-banking Loans

Preferred Stock

The following table presents the fair value measurements of our portfolio investments by major class, as of December 31, 2023, according to the fair value hierarchy:

7 unchanged sentences

Balance as of January 1, 2024

Net change in unrealized depreciation

Net change in unrealized appreciation (depreciation)

Purchases and other adjustments to cost

1 unchanged sentence

( 8,720,000 )

Realized gain (loss)

Realized loss

Conversion from preferred to common stock

Transfers between level 3 and level 1

6 unchanged sentences

Balance as of January 1, 2023

Net change in unrealized depreciation

Net change in unrealized appreciation (depreciation)

Purchases and other adjustments to cost

1 unchanged sentence

( 11,029,625 )

Realized loss

Transfers between level 3 and level 1

Balance as of December 31, 2023

8 unchanged sentences

last secured funding known by company

Preferred Stock

economic changes since last funding

last funding secured by company

15 unchanged sentences

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

As a Lender, Mr.

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

The Loan Agreement had a five-year term ending on January 3, 2027, at which time all amounts owing under the Loan Agreement were to 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.

During the period January 3 to June 30, 2022, the Loan Agreement provided 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 initially required 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.

Beginning July 1, 2022, however, we became obligated under the Loan Agreement to pay the quarterly unused commitment fee in cash.

At December 31, 2023 and 2022, the balance outstanding on the line was $0.

In January 2024, we terminated the Loan Agreement having earlier satisfied all amounts owing thereunder.

The Company had a Loan and Security Agreement (the “Loan Agreement”) with a third party and director (collectively, the Lenders).

Under the Loan Agreement, the Lenders made available to us a $ 5 million revolving line of credit for us to use in the ordinary course of our short-term specialty finance business, of which our director was required to fund one half of the amount.

Amounts drawn under the Loan Agreement accrue interest at the per annum rate of 8 %, through January 3, 2027, subject to early termination provisions at the Lender’s right at any time after January 3, 2023.

Our obligations under the Loan Agreement were secured by a grant of a collateral security interest in substantially all of our assets.

At December 31, 2023, the balance outstanding on the line was $ 0 .

In January 2024, we terminated the Loan Agreement.

Any applicable fees related to early termination of the Agreement were waived.

3 unchanged sentences

The Plan was amended by the Board of Directors on August 14, 2023, and a registration statement on Form S-8 respecting the Plan was filed with the SEC on August 23, 2023.

The following table summarizes the activity for all stock options outstanding for the year ended December 31, 2023:

The following table summarizes the activity for all stock options outstanding for the years ended December 31, 2024 and 2023:

Weighted Average Exercise Price

Options outstanding at beginning of year

Balance at December 31, 2023

Options outstanding at end of year

Options exercisable at December 31:

Grant Date Fair Value for options granted during the period:

The following table summarizes additional information about stock options outstanding and exercisable at December 31, 2024:

23 unchanged sentences

In this regard, during the period covered by this report we entered into, or remained a party to, 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 534,000 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 on July 1, 2024.

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

The note is secured by the debtors’ pledge to us of 277,778 shares of our common stock.

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

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

Berman, as trustee of the Lyle A.

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

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.

The Loan Agreement was terminated in January 2024.

See note 8 above for further details.

We held a promissory note with two shareholders in the principal amount of $ 250,000 .

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

The note was secured by the debtors’ pledge to us of 277,778 shares of common stock.

The note was paid in full including all accrued interest on September 26, 2024.

As disclosed in Note 7, a component of our now terminated loan agreement was with a director of our Company.

NOTE 10 — RETIREMENT SAVINGS PLANS

18 unchanged sentences

Provision-to-return reconciliation

Temporary differences

Income tax provision

5 unchanged sentences

Unrealized (gain) loss on marketable securities

Capital loss carryforward

R&D and foreign credits

Lease liability

Stock options

31 unchanged sentences

NOTE 13 — SUBSEQUENT EVENTS

On January 22, 2025, we entered into an Amendment No.

5 to Fourth Short-Term Loan Agreement and Fourth Short-Term Promissory Note with Mustang Funding, LLC, deemed effective January 21, 2025.

The amendment extends the maturity date of our loan to Mustang Funding to March 28, 2027, and increases the per annum rate of interest to 20 %.

The amendment obligates Mustang Funding to continue paying monthly cash interest payments at the pre-amendment rate of 15% per annum, and to pay Mill City the additional 5% per annum interest upon maturity .

Effective January 24, 2025, we entered into a Security Agreement with Mustang Funding, LLC pursuant to which Mustang Funding granted us a security interest in substantially all of Mustang Funding’s assets, subject to certain enumerated exceptions, as collateral security for our $ 10 million principal amount loan.

Also effective January 24, 2025, we entered into an Amended and Restated Subordination and Intercreditor Agreement with Orion Pip, LLC, as administrative agent and collateral agent for senior lenders to Mustang Funding, LLC, and with Mustang Funding.

The agreement contains customary and negotiated terms and conditions relating to the full subordination of our right to payment (subject to certain exceptions), exercise of rights and remedies, and our right to collateral pledged by Mustang Funding in our favor to secure the obligations of Mustang Funding under that certain Fourth Short-Term Loan Agreement and Fourth Short-Term Promissory Note in the original principal amount of $ 10 million, as amended.

On February 1, 2025, we entered into new Executive Employment Agreements with each of Douglas M.

Polinsky, our Chief Executive Officer, and Joseph A.

Geraci II, our Chief Financial Officer.

These new Executive Employment Agreements are substantially identical to the prior executive employment agreements with these executives that had expired on December 31, 2024, each containing the same two-year term and restrictive covenants, and were deemed to be effective as of January 1, 2025.

The new Executive Employment Agreements increase the base salary of each executive to $ 220,000 per year.

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