S-1/A

As filed with the Securities and Exchange Commission on July 27, 2022

Registration No. 333-264474

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Amendment No. 2 to

FORM S-1

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

Mill City Ventures III, Ltd.

(Exact name of registrant as specified in its charter)

Minnesota	6153	90-0316551
(State or other jurisdiction of incorporation or organization).	(Primary Standard Industrial Classification Code Number)	(I.R.S. Employer Identification Number)

1907 Wayzata Boulevard, Suite 205

Wayzata, MN 55391

Telephone: (952) 479-1923

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

Douglas M. Polinsky

Chief Executive Officer

1907 Wayzata Boulevard, Suite 205

Wayzata, MN 55391

Telephone: (952) 479-1923

(Name, address, including zip code, and telephone number, including area code, of agent for service)

Copies to:

Joseph M. Lucosky, Esq. Lahdan S. Rahmati, Esq.	Christopher J. Bellini, Esq. Seth Popick, Esq.
Lucosky Brookman LLP	Cozen O’Connor P.C.
101 Wood Avenue South, 5th Floor	33 South 6th Street, Suite 3800
Woodbridge, New Jersey 08830	Minneapolis, Minnesota 55402
(732) 395-4400	(612) 260-9000

Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this registration statement.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the following box. ☐

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Securities Exchange Act of 1934.

Large accelerated filer ☐	Accelerated filer ☐
Non-accelerated filer ☒	Smaller reporting company☒
	Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. ☐

In accordance with Rule 416(a) under the Securities Act, the registrant is also registering hereunder an indeterminate number of shares that may be issued and resold resulting from stock splits, stock dividends or similar transactions.

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said section 8(a), may determine.

The information in this preliminary prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and we are not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

SUBJECT TO COMPLETION, DATED JULY 27, 2022

PROSPECTUS

Mill City Ventures III, Ltd.

     666,667 Shares

Common Stock

We are offering 666,667 shares of common stock, par value $0.001 (“common stock”, and each a “Share” and collectively, the “Shares”) of Mill City Ventures III, Ltd. (the “Company,” “Mill City Ventures III,” “we,” “our” or “us”) at $7.50 per share of common stock. Shares of our common stock are currently traded on the OTCQB of the OTC Markets Group under the symbol “MCVT”. On July 26, 2022, the last reported sale of our common stock as quoted on the OTCQB, was $3.22 per share. We have applied to list shares of our common stock on the Nasdaq Capital Market (“Nasdaq”) under the symbol “MCVT”. We will not proceed with this offering in the event that shares of our common stock are not approved for listing on Nasdaq. After the completion of this offering, five of our shareholders presently holding as a group 63.42% of our issued and outstanding stock may be deemed to control in excess of 50% of the voting power of our common stock, and as a result, we may be deemed to be a “controlled company” within the meaning of the corporate governance standards of the Nasdaq.  See “Directors, Executive Officers, and Corporate Governance – Controlled Company Exemption.”

We expect to effect a 1-for-2 reverse stock split prior to or upon effectiveness of the registration statement of which this prospectus forms a part, whereupon our common stock will begin to trade on a reverse split adjusted basis. All common stock per share numbers and prices included herein have been adjusted to reflect this reverse stock split, unless stated otherwise, and other than unaudited and audited financial statements and other historical share disclosures which indicate they are not adjusted for the reverse stock split.

Investing in our securities involves a high degree of risk. See “Risk Factors” beginning on page 12 of this prospectus. You should carefully consider these risk factors, as well as the information contained in this prospectus, before purchasing any of the securities offered by this prospectus.

	Per Share		Total
Offering price	$	7.50	$	5,000,002.50
Underwriters’ discounts and commissions (1)	$	0.60	$	400,000.20
Proceeds to our company before expenses (2)	$	6.90	$	4,600,002.30

(1) We have also agreed to issue the Representative warrants to purchase shares of our common stock (the “Representative’s Warrants”), to pay the Representative 1.0% of the gross proceeds of this offering as a non-accountable expense, to reimburse the underwriters for certain accountable expenses up to $150,000, and to provide other rights to the Representative. See “Underwriting” beginning on page 51 for additional information regarding underwriting compensation.

(2) The amount of offering proceeds presented in this table does not give effect to the underwriters’ over-allotment option we have granted to the underwriters as described below, the shares of common stock underlying the Representative’s Warrants, or proceeds from the exercise of Representative’s Warrants.

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

We have granted a 45-day option to the representative of the underwriters, exercisable one or more times in whole or in part, to purchase up to 100,000 additional shares of common stock to cover over-allotments, at the public offering price per share of common stock, less, in each case, the underwriting discounts payable by us. The shares issuable upon exercise of this overallotment option are identical to those offered by this prospectus and have been registered under the registration statement of which this prospectus forms a part.

The underwriters expect to deliver the securities against payment in New York, New York on or about     , 2022.

Alexander Capital, L.P.

The date of this prospectus is     , 2022

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TABLE OF CONTENTS

	Page
About this Prospectus	4
Cautionary Note Regarding Forward-Looking Statements	5
Prospectus Summary	6
Risk Factor Summary	13
Risk Factors	15
Use of Proceeds	24
Dividend Policy	25
Capitalization	26
Dilution	26
Management’s Discussion and Analysis of Financial Condition and Results of Operations	27
Business	33
Directors, Executive Officers and Corporate Governance	39
Executive Compensation	44
Certain Relationships and Related Transactions	46
Principal Shareholders	48
Description of Securities	49
Shares Eligible for Future Sale	52
Material U.S. Federal Income Tax Considerations	53
Underwriting	58
Selling Restrictions	61
Legal Matters	62
Experts	62
Where You Can Find More Information	62
Index to Consolidated Financial Statements	F-1

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ABOUT THIS PROSPECTUS

No dealer, salesperson or other person is authorized to give any information or to represent anything not contained in this prospectus. You must not rely on any unauthorized information or representations. This prospectus is an offer to sell only the shares of common stock offered hereby, but only under circumstances and in jurisdictions where it is lawful to do so. The information contained in this prospectus is current only as of its date.

You should rely only on the information contained in this prospectus. Neither we nor the placement agent have authorized anyone to provide any information or to make any representations other than those contained in this prospectus we have prepared. We take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. This prospectus is an offer to sell only the securities offered hereby, but only under circumstances and in jurisdictions where it is lawful to do so. The information contained in this prospectus is current only as of its date. You should also read this prospectus together with the additional information described under “Additional Information.”

Unless the context otherwise requires, we use the terms “we,” “us,” “the Company,” “Mill City Ventures III,” or “our” to refer to Mill City Ventures III, Ltd.

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements. Forward-looking statements give our current expectations or forecasts of future events. You can identify these statements by the fact that they do not relate strictly to historical or current facts. Forward-looking statements involve risks and uncertainties and include statements regarding, among other things, our projected revenue growth and profitability, our growth strategies and opportunity, anticipated trends in our market and our anticipated needs for working capital. They are generally identifiable by use of the words “may,” “will,” “should,” “anticipate,” “estimate,” “plans,” “potential,” “projects,” “continuing,” “ongoing,” “expects,” “management believes,” “we believe,” “we intend” or the negative of these words or other variations on these words or comparable terminology. These statements may be found under the sections entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business,” as well as in this prospectus generally. In particular, these include statements relating to future actions, prospective products, market acceptance, future performance or results of current and anticipated products, sales efforts, expenses, and the outcome of contingencies such as legal proceedings and financial results.

Examples of forward-looking statements in this prospectus include, but are not limited to, our expectations regarding our business strategy, business prospects, operating results, operating expenses, working capital, liquidity and capital expenditure requirements. Important assumptions relating to the forward-looking statements include, among others, assumptions regarding demand for our products, the cost, terms and availability of components, pricing levels, the timing and cost of capital expenditures, competitive conditions and general economic conditions. These statements are based on our management’s expectations, beliefs and assumptions concerning future events affecting us, which in turn are based on currently available information. These assumptions could prove inaccurate. Although we believe that the estimates and projections reflected in the forward-looking statements are reasonable, our expectations may prove to be incorrect.

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Should one or more of these risks or uncertainties materialize or should any of the assumptions made by our management prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements. You should not place undue reliance on these forward-looking statements, which speak only as of the date of this report. Except as required by law, we do not undertake to update or revise any of the forward-looking statements to conform these statements to actual results, whether as a result of new information, future events or otherwise.

We operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for us to predict all of those risks, nor can we assess the impact of all of those risks on our business or the extent to which any factor may cause actual results to differ materially from those contained in any forward-looking statement. The forward-looking statements in this prospectus are based on assumptions management believes are reasonable. However, due to the uncertainties associated with forward-looking statements, you should not place undue reliance on any forward-looking statements. Further, forward-looking statements speak only as of the date they are made, and unless required by law, we expressly disclaim any obligation or undertaking to publicly update any of them in light of new information, future events, or otherwise.

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PROSPECTUS SUMMARY

This summary highlights selected information appearing elsewhere in this prospectus. While this summary highlights what we consider to be important information about us, you should carefully read this entire prospectus before investing in shares of our common stock, especially the risks and other information we discuss under the headings “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operation” and our financial statements and related notes beginning on page F-1. Our fiscal year end is December 31 and our fiscal years ended December 31, 2021 and 2020 are sometimes referred to herein as fiscal years 2021 and 2020, respectively. Some of the statements made in this prospectus discuss future events and developments, including our future strategy and our ability to generate revenue, income and cash flow. These forward-looking statements involve risks and uncertainties which could cause actual results to differ materially from those contemplated in these forward-looking statements. See “Cautionary Note Regarding Forward-Looking Statements”. Unless otherwise indicated or the context requires otherwise, the words “we,” “us,” “our”, the “Company” or “our Company” or “Mill City Ventures III” refer to Mill City Ventures III Ltd., a Minnesota corporation.

Our Company

Mill City Ventures III, Ltd. is a Minnesota corporation incorporated in January 2006. In 2013, we elected to become a business development company (“BDC”) under the Investment Company Act of 1940 (the “1940 Act”). We operated as a BDC until we withdrew our BDC election on December 27, 2019. Since 2019, we have engaged in the business of providing short-term specialty finance solutions primarily to private businesses, micro- and small-cap public companies and high-net-worth individuals. To avoid again becoming subject to regulation under the 1940 Act, we generally seek to structure our transactions so they do not constitute “investment securities” for purposes of federal securities law, and we monitor our holdings as a whole to ensure that no more than 40% of our total assets may consist of investment securities.

The principal specialty finance solutions we provide are high-interest short-term lending arrangements. These lending arrangements ordinarily involve us obtaining collateral as security for the borrower’s repayment of funds to us. In some circles, short-term high-interest collateralized lending is referred to as “hard-money lending.”

We believe we are generally able to charge high interest for our specialty finance solutions because: (i) banks and other traditional providers of credit may have neither the expertise nor the infrastructure needed to evaluate creditworthiness and risks in a timeframe suitable for a potential borrower, preferring instead to process transactions and structures that present few novel issues or risks; and (ii) we will often be able to devote time and attention to transactions involving a smaller dollar amount than an institutional lender will view as worthwhile. These beliefs essentially explain why we refer to our business as “specialty finance”— financing that may involve structures that are unique, creative, and often bespoke; and that may involve dollar amounts that are not suitable for institutional lenders.

We generally provide specialty finance solutions that are short-term in nature. By this, we mean lending arrangements that mature or come due within nine months of the lending date. We view the provision of short-term finance as desirable for two principal reasons: (i) it helps minimize the risk of non-performance; and (ii) it helps minimize regulatory risk.

In terms of non-performance risk, short-term lending requires us to focus upon, and a potential borrower to identify to us, a near-term source of liquidity for repayment of the funds they borrow from us. This permits us to evaluate that source of repayment clearly and carefully, thus helping identify the potential risks involved in a particular transaction and how we may be able to include structural terms, such as specific collateral and collateral arrangements, guarantees, or other types of covenants that mitigate these risks.

In terms of regulatory risk, short-term lending permits us to avail ourselves of a court-recognized exception for treating promissory notes (evidencing a loan) as “investment securities” under federal securities law. In sum, this exception generally applies to promissory notes with short-term maturities of nine months or less. Our ability to avail ourselves of this exception, and to more generally structure our transactions in such a way as to avoid them being properly considered as “investment securities” under federal securities laws, is important to our ability to avoid once again becoming subject to regulation under the 1940 Act. Below we discuss our process for evaluating transactional terms and structures with a view to remaining outside of the regulatory regime of the 1940 Act (please refer to “Investment Process” below).

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Examples of the kinds of the specialty finance solutions we have considered or provided to date, and may continue to provide in the future, include:

● Short-term secured loans for real estate development (with a mortgage serving as security);

● Short-term unsecured loans (with an option to acquire collateral security) to a business;

● Short-term secured loans to a business for operating capital; and

● Short-term secured loans to an individual owed a forthcoming tax refund.

In addition, we are presently exploring and evaluating our ability to enter into other kinds of short-term specialty finance transactions. Examples include the expansion of our efforts to purchase adjudicated settlements, the purchase (at discounted rates) of receivables owing to professionals on account of certain workers’ compensation claim, and short-term consumer finance lending.

Sourcing Transactions

We believe that our management’s strong combination of experience and contacts in the securities and investment finance sector, including the experience and contacts of our independent directors, should be sufficient to continue attracting suitable prospective investment opportunities. To date, the network of contacts of our management and directors has been successful thus far in sourcing all of the transactions in which we have participated. Accordingly, we presently do not have any plans to hire any business development professionals to assist us with transactional volume.

Experience and Competitive Strengths

The market for specialty finance is competitive, largely as a result of the participation of various types of professionally managed pooled investment funds such as private equity funds, debt and mezzanine-debt funds, and other types of professional finance companies seeking the high returns that are possible in specialty finance and hard-money lending. Nevertheless, we believe we are well positioned to compete successfully in this market because of our entrepreneurial, creative and flexible approach to specialty finance opportunities, and our management’s experience in entrepreneurial ventures and finance.

Throughout our history and in particular after ceasing to be a business development company (“BDC”), we have approached investment opportunities flexibly and creatively in terms of transactional structures and terms. In part, we are able to be flexible and creative because we are not subject to many of the regulatory limitations that govern our other more traditional or institutional competitors. Those competitors are often subject to limitations on the type transactions they undertake, the amount that may be invested in a specific transaction or a particular type of transaction, the markets in which they operate, the maturity or time horizon of their investment, uses of proceeds, or otherwise. These limitations are often imposed by the agreements and documents governing the pooled investment vehicles, or otherwise self-imposed in order to facilitate the investment vetting and diligence process, and the documentation and structuring process. More rarely, these limitations may arise from governing regulations or interpretations thereof. For our part, we believe that approaching investment opportunities flexibly expands our overall transactional opportunities, diversifies our risk by avoiding dependence in any material way on a particular borrower, type of transaction, or market or industry niche permits us to avail ourselves of the maximum number of relationships from which we source investment opportunities. Moreover, we believe that this flexible approach to structuring our transactions and investments will facilitate the development of positive long-term relationships with our borrowers.

We believe that the only significant limitation on our ability to flexibly structure transactions arises from our desire to remain outside the regulation of the 1940 Act. In order to meet this goal, we intend and aim to structure the vast majority of our transactions (by dollar amount) in ways such that they are not properly considered “investment securities” under federal securities laws, including the 1940 Act.

For our investors, the freedom afforded to us through the lack of substantive regulation governing the types of transactions we enter into and our methods of operation permits us to allocate our resources, at any given point in time, to those types of transactions that we believe may lead to the highest risk-adjusted returns or the steadiest stream of such returns.

Our management team and board of directors has significant experience in a variety of entrepreneurial ventures, including service as management and directors for small and large public companies, private businesses, start-up and development-stage businesses, and the securities and finance industries. As a result of this diverse general experience and particular experience in transactional finance, we

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believe we are able to manage the evaluation and due-diligence process involved in our investment opportunities swiftly and efficiently, by collaborating with our professional advisers and focusing on high-level and material issues.

Investment Process

We have identified several criteria that we believe are generally important guidelines for us to meet our financial objectives. These criteria are, however, only general guidelines for our investment decisions and, in the case of some transactions in which we invest, fewer than all—or even none—of these criteria will be met.

● Existing Liquidity Source. Because the vast majority of our transactions involve short-term maturities, we typically seek to identify a liquidity source for the borrower to repay us. Examples of sources of potential liquidity may include accounts receivable, another valuable asset, or a pending payment (e.g., a tax refund, or a litigation judgment or settlement payment) that is reasonably expected to pay out prior to the maturity of the credit we provide.

● Collateral Value. We will often, but not always, seek to collateralize the obligations owing to us. Our ability to identify valuable collateral is a significant factor in our credit analysis and determination of the attractiveness of a potential transaction. This analysis will often involve legal counsel, both to assist in the identification of potential collateral assets, and to better understand the ease with which a security interest in the collateral may be granted, perfected and, if necessary, foreclosed upon and the relevant jurisdiction(s) involved.

● Experienced and Capable Management. In transactions involving business borrowers, we seek businesses that have an experienced, knowledgeable and capable management team.

● Competitive Position. In transactions involving business borrowers, we will seek to invest in transactions with businesses that have developed, or appear poised to develop, a strong competitive position within their respective industry sector or niche.

● Cash Flow. In transactions involving business borrowers, we will seek to invest in businesses that are profitable or nearly profitable on an operating cash flow basis, principally so that the business’ operating cash flow may serve as another source of liquidity from which we may ultimately be repaid.

If we believe that a potential transaction generally meets the characteristics described above or if we otherwise determine that a potential transaction may be desirable to enter into, we may perform a more rigorous due-diligence examination of the prospective borrower, the likely source or sources of liquidity for their repayment to us, and other aspects of the borrower or its assets (e.g., assets of the borrower that may serve as collateral security for the obligations that may be owing to us). Our due-diligence examination for each transaction will necessarily be unique and tailored to the specific transaction, but will generally be undertaken in light of the following facts and circumstances:

● our familiarity with the borrower (or, in the case of a business borrower, our familiarity with management or other persons such as directors involved with the borrower);

● in the case of a business borrower, our review and assessment of the potential borrower’s financing history, as well as the likely need for additional financings after our transaction;

● the industry in which the borrower operates, our knowledge and familiarity with that industry, our assessment of the complexity of the business, any regulatory matters or other unique aspects presenting special risks, and the competitive landscape faced by the borrower;

● the amount of potential dollars involved in the potential transaction;

● where the borrower is located, how it is organized as an entity, as well as its management and ownership structure and profile;

● whether we might have been involved with a transaction of the same or similar kind before;

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● the ease with which we can evaluate the borrower’s source or sources of liquidity;

● the ease with which we can apprehend the process involved with taking collateral security in some or all of the borrower’s assets; and

● the ease with which we could foreclose on that collateral if repayment were not otherwise forthcoming.

The assessments described above outline our general approach for our investment decisions, although not all of such activities will be followed in each instance, or some may be stressed more than others depending on facts and circumstances. Upon successful completion of this preliminary evaluation, we will typically (1) evaluate our own regulatory concerns (i.e., to what extent the potential transaction may properly be considered an investment in an “investment security” for purposes of the 1940 Act and, if necessary, consider alternative structures to alleviate any risks to our company relating thereto), and (2) decide whether to move forward towards negotiating a letter of intent and, thereafter, definitive documentation for our transaction. Depending on timing, we may not use a letter of intent and will instead proceed directly to definitive documentation.

Reverse Stock Split

We expect to effect a reverse stock split of our common stock at a ratio of 1-for-2 prior to or upon effectiveness of the registration statement of which this prospectus forms a part. No fractional shares will be issued in connection with the reverse stock split and all such fractional interests will be rounded up to the nearest whole number of shares of common stock. Share information presented in this prospectus, other than where noted and in our consolidated financial statements and the notes thereto and other historical discussions of share issuances, such as shares issued in connection with acquisitions, have been adjusted to give effect to such reverse stock split.

Corporate Information

Our executive offices are located at 1907 Wayzata Boulevard, Suite 205, Wayzata, Minnesota 55391, and our telephone number is: (952) 479-1923. Our corporate website address is www.millcityventures3.com. Our website and the information contained on, or that can be accessed through, the website is not deemed to be incorporated by reference in, and is not considered part of, this prospectus. You should not rely on any such information in making your decision whether to invest in our securities.

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Summary of the Offering

We expect to effect a reverse stock split of our common stock at a ratio of 1-for-2 prior to or upon effectiveness of the registration statement of which this prospectus forms a part. Share information below is presented on a post-reverse stock split basis.

Issuer:	Mill City Ventures III, Ltd.
Securities to be offered:	666,667 shares of common stock, at a public offering price of $7.50 per share.
Over-allotment option:	We have granted to the representative of the underwriters a 45-day option to purchase up to 100,000 additional shares of our common stock at the public offering price of $7.50 per share, less the underwriting discounts payable by us, solely to cover over-allotments, if any.
Common stock outstanding prior to this offering: (1) Common stock to be outstanding after the offering: (1)	5,427,749 shares 6,094,416 shares
Use of proceeds:	We estimate that the net proceeds to us from this offering will be approximately $4,100,000, or approximately $     million if the underwriters exercise their over-allotment option in full, assuming an offering price of $7.50 per share, after deducting underwriting discounts and commissions and estimated offering expenses payable by us. We intend to use the net proceeds of this offering primarily for general corporate purposes, including working capital, expanded sales and marketing activities, and providing additional specialty short-term loans. See “Use of Proceeds” for additional information.
Proposed Nasdaq Capital Market Trading Symbol and Listing:	We have applied to list our common stock on the Nasdaq Capital Market under the symbol “MCVT”. We will not proceed with this offering in the event our common stock is not approved for listing on Nasdaq.
Controlled Company Exemption	After the completion of this offering, five of our shareholders presently holding as a group 63.42% of our issued and outstanding stock may be deemed to control in excess of 50% of the voting power of our common stock, and as a result, we may be deemed to be a “controlled company” within the meaning of the corporate governance standards of the Nasdaq. However, whether or not we are deemed to be a “controlled company” following this offering, we do not intend to avail ourselves of the controlled company exemption under the corporate governance standards of the Nasdaq.
Dividend Policy Risk factors:	We have on occasion paid cash dividends on our common stock. We currently intend to retain any future earnings to finance the growth and development of our business, and we do not anticipate that we will declare or pay any cash dividends in the foreseeable future. See “Dividend Policy.” Investing in our securities is highly speculative and involves a high degree of risk. You should carefully consider the information set forth in the “Risk Factors” section beginning on page 12 before deciding to invest in our securities.

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Representative’s Warrants:

We will issue to Alexander Capital, L.P., the representative of the underwriters, as compensation warrants to purchase up to 6% of the number of shares of common stock sold in this offering (excluding any additional shares of common stock issuable upon exercise by the underwriters of the option to purchase additional securities). The representative’s warrants will have an exercise price of 125% of the initial public offering price per share of common stock and will be exercisable commencing on a date which is 180 days from the effective date of this registration statement pursuant to this offering.

Lock-up agreements:

We, our directors, executive officers, and shareholders who own 5% or more of the outstanding shares of our common stock have agreed with the underwriters not to offer for sale, issue, sell, contract to sell, pledge or otherwise dispose of any of our common stock or securities convertible into common stock for a period of 365 days, commencing on the date of this prospectus. See “Underwriting” on page 51 for additional information.

The number of shares of our common stock outstanding prior to and to be outstanding immediately after this offering, as set forth in the table above, is based on 5,427,749 shares outstanding as of July 13, 2022 (giving effect to a 1-for-2 reverse stock split). Unless otherwise indicated, the shares outstanding after this offering excludes any shares of Common Stock issuable upon exercise of the Representative’s over-allotment option.

Summary Financial Information

The following summary financial information at and for the years ended December 31, 2021 and 2020 have been derived from our audited financial statements included elsewhere in this prospectus. The historical financial data presented below is not necessarily indicative of our financial results in future periods. You should read the summary financial data in conjunction with those financial statements and the accompanying notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Our financial statements are prepared and presented in accordance with United States generally accepted accounting principles, or U.S. GAAP. Our financial statements have been prepared on a basis consistent with our audited financial statements and include all adjustments, consisting of normal and recurring adjustments that we consider necessary for a fair presentation of the financial position and results of operations as of and for such periods. The share and per share information in the following discussion does not reflect the reverse stock split of our outstanding common stock expected to occur prior to or upon the effectiveness of the registration statement of which this prospectus forms a part.

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Consolidated Statements of Operations

	Year Ended
	December 31,		December 31,
	2021		2020
Investment Income
Interest income	$	2,656,201	$	1,282,175
Dividend income		—		15,462
Total Investment Income		2,656,201		1,297,637
Operating Expenses
Professional fees		453,440		175,612
Payroll		556,432		301,494
Insurance		108,165		85,237
Occupancy		66,459		66,307
Director’s fees		120,000		90,000
Depreciation and amortization		—		2,071
Other general and administrative		50,255		15,069
Total Operating Expenses		1,354,751		735,790
Net Investment Gain		1,301,450		561,847
Realized and Unrealized Gain (Loss) on Investments
Net realized gain on investments		4,118,001		5,330
Net change in unrealized appreciation (depreciation) on investments		(1,533,703)		1,934,794
Net Realized and Unrealized Gain (Loss) on Investments		2,584,298		1,940,124
Net Increase in Net Assets Resulting from Operations Before Taxes	$	3,885,748	$	2,501,971
Provision for Income Taxes		1,054,698		288,401
Net Increase in Net Assets Resulting from Operations	$	2,831,050	$	2,213,570
Net Increase in Net Assets Resulting from Operations per share:
Basic and diluted	$	0.26	$	0.20
Weighted-average number of common shares outstanding – basic and diluted		10,789,294		10,869,054

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RISK FACTOR SUMMARY

Investing in shares of our common stock involves certain risks. Set forth below is a summary of the principal risks associated with an investment in our common stock. You should consider carefully the following discussion of risks, as well as the discussion of risks included in this prospectus including in the section “Risk Factors” starting on page 12, before you decide that an investment in our shares is appropriate for you.

● We have little operating history upon which to evaluate our current business.

● We may need to raise additional capital to fund our operations, and such capital may not be available to us in sufficient amounts or on acceptable terms.

● If we are unable to maintain diverse and robust sources of capital, our growth prospectus, business, financial condition and results of operations could be adversely affected.

● Our search for and ability to consummate specialty finance investment opportunities may be materially and adversely affected by COVID-19.

● Changes in consumer finance and other applicable laws and regulations, as well as changes in government enforcement policies and priorities, may negatively impact the management of our business, results of operations, ability to offer certain products or the terms and conditions upon which they are offered, and ability to compete.

● Although we have identified general guidelines that we believe are important in evaluating prospective investment opportunities, we may enter into transactions with borrowers that do not meet such guidelines, increasing the risk that the price of our publicly traded securities could be volatile.

● We may provide specialty finance solutions to early-stage companies, financially unstable businesses, or a borrower lacking an established record of revenue or earnings, which could adversely affect the price of our publicly traded securities.

● Many of our specialty finance investment transactions involve borrowers about which little, if any, information is publicly available, which may impair our ability to identify borrowers able to repay our loans and adversely affect the price of our publicly traded securities.

● The industries in which we compete are highly competitive, which could adversely affect our results of operations.

● If we are deemed to be an investment company under the 1940 Act, we may be required to institute burdensome compliance requirements and our activities may be restricted. In such an event, our business would likely be materially and adversely affected.

● We may engage in transactions with businesses that may be affiliated with our officers, directors or significant shareholders, and which may involve actual or potential conflicts of interest.

● A limited number of shareholders control substantially all of our voting stock and, as a result, control the election of our board of directors. As a result, these shareholders may exert an influence on actions requiring a shareholder vote, potentially in a manner that you do not support.

● Our ability to identify and consummate investment opportunities, and any need we may have for additional capital, will almost certainly be affected by general economic conditions.

● Our reputation and brand are important to our success, and if we are unable to continue developing our reputation and brand, our ability to retain existing and attract new capital sources, our ability to attract borrowers and our ability to maintain and improve our relationship with regulators of our industry could be adversely affected.

● We are highly dependent on the services provided by certain executives and key personnel.

● Our articles of incorporation grant our board of directors the power to designate and issue additional shares and classes of common and preferred stock.

● There is currently limited liquidity of shares of our common stock.

● Our stock price may be volatile, or may decline regardless of our operating performance and you could lose all or part of your investment as a result.

● We do not intend to pay dividends on our common shares.

● Future sales, or the perception of future sales, of our common stock may depress the price of our common stock.

● Investors in this offering will experience immediate and substantial dilution in net tangible book value.

● There can be no assurances that our common stock, once listed on the Nasdaq, will not be subject to potential delisting if we do not continue to maintain the listing requirements of the Nasdaq.

● If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, our stock price and trading volume could decline.

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● If our shares of common stock become subject to the penny stock rules, it would become more difficult to trade our shares.

● Minnesota law does not require us to hold an annual meeting of shareholders, which could delay the opportunity for our shareholders to elect directors.

● We may issue additional common stock or preferred shares without the approval of our shareholders. Any such issuances would dilute the interest of our shareholders and likely present other risks.

● Cyber incidents or attacks directed at us could result in information theft, data corruption, operational disruption and/or financial loss.

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RISK FACTORS

An investment in shares of our Common Stock involves a high degree of risk. Before making a decision to invest in shares of our Common Stock, you should carefully consider the risks that are described in this section, in our most recent Annual Report on Form 10-K and in the other information that we file from time to time with the SEC. Additional risks not presently known or that we currently deem immaterial could also materially and adversely affect us. You should consult your own financial and legal advisors as to the risks entailed by an investment in shares of our Common Stock and the suitability of investing in our shares in light of your particular circumstances. If any of the risks contained in this prospectus develop into actual events, our assets, business, cash flows, condition (financial or otherwise), credit quality, financial performance, liquidity, long-term performance goals, prospects, and/or results of operations could be materially and adversely affected, the trading price of our Common Stock could decline and you may lose all or part of your investment. Some statements in this prospectus, including such statements in the following risk factors, constitute forward-looking statements. See the section entitled “Cautionary Note Regarding Forward-Looking Statements” on page 4 of this prospectus.

RISKS RELATING TO OUR BUSINESS

We have little operating history upon which to evaluate our current business.

We withdrew our election to be treated as a BDC under the 1940 Act at the end of 2019, and during the two years since that time have refocused our business on providing short-term specialty finance to private businesses, small-cap public companies and high-net-worth individuals. Given that our current business has been developed and pursued over the two years prior to this prospectus, and the comparative prior-year financials included in this prospectus reflect, in part, the results of operations for a different business, investors have little means to evaluate the likelihood of our future success.

We may need to raise additional capital to fund our operations, and such capital may not be available to us in sufficient amounts or on acceptable terms.

For the time being, management believes that our current cash is sufficient to continue operations for the foreseeable future, and has no potential or actual plans to seek additional financing. Nevertheless, various future developments may cause us to seek or require additional financing. For instance, we may determine to seek additional financing to avail ourselves of additional opportunities to provide specialty finance solutions to borrowers. Alternatively, we may seek additional financing in the event that a material portion of our investments default, leaving us with little means to pay for our operations and continue making investments.

In any event, additional financing could be sought from a number of sources, including but not limited to additional sales of equity or debt securities, or loans from financial institutions or our affiliates. We cannot, however, be certain that any such financing will be available on terms favorable or acceptable to us, if at all. If additional funds are raised by the issuance of our equity securities, such as through the issuance of stock, convertible securities, or the issuance and exercise of warrants, then the ownership interest of our existing shareholders will be diluted. If additional funds are raised by the issuance of debt or other equity instruments, we may become subject to certain operational limitations, and such securities may have rights senior to the rights of our common shareholders. If adequate funds are not available on acceptable terms, we may be unable to consummate acquisitions or investments desired by our management and board.

If we are unable to maintain diverse and robust sources of capital, our growth prospects, business, financial condition and results of operations could be adversely affected.

Our business depends on maintaining diverse and robust sources of capital to originate loans. 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”). Mr. 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. See “Certain Relationships and Related

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Transactions”. We cannot be sure that this funding sources, or others, will continue to be available on reasonable terms or at all beyond the current maturity dates of our existing credit facilities.

Events of default or breaches of financial, performance or other covenants, or worse than expected performance of certain pools of loans underpinning our credit facilities, could reduce or terminate our access to funding from such facilities. The availability and capacity of sources of capital also depends on many factors that are outside of our control, such as credit market volatility and regulatory reforms. In the event that we do not maintain adequate sources of capital, we may not be able to maintain the necessary levels of funding to retain current loan volume, which could adversely affect our business, financial condition and results of operations.

Our search for and ability to consummate specialty finance investment opportunities may be materially and adversely affected by COVID-19.

The global spread of the novel strain of coronavirus known as COVID-19 and its variants, declared a global pandemic by the World Health Organization on March 11, 2020, has resulted in governmental impositions of mandatory closures, quarantines and other restrictions on, or advisories with respect to, travel, business operations and public gatherings or interactions. It is unclear whether the pandemic may significantly worsen during the upcoming months, which may result in further restrictions on business, travel, and other activities.

The COVID-19 pandemic has adversely affected the domestic and global economies and financial markets, and the business of our potential borrowers could be materially and adversely affected, decreasing our appetite to consummate transactions that we might have otherwise concluded were attractive. Furthermore, we may be unable to complete an investment if continued concerns relating to COVID-19 continue to restrict travel, limit the ability to have meetings or access a potential borrower’s personnel. The extent to which COVID-19 impacts our search for new investment opportunities will depend on future developments, which are highly uncertain and cannot be predicted. If the disruptions posed by COVID-19 or other matters of domestic or global concern continue for an extensive period of time, our ability to consummate investments, or the operations of our potential and actual borrowers, may be materially adversely affected. Of course, materially adverse effects upon the operations of our actual borrowers could impair their ability to pay us all of the amounts owing to us, or to pay us in a timely manner.

Finally, our ability to consummate additional transactions may be dependent on our ability to raise equity and debt financing. This ability may be impacted by COVID-19 and other events, including as a result of increased market volatility, decreased market liquidity and third-party financing being unavailable on terms acceptable to us or at all. Overall, the COVID-19 pandemic may generally have the effect of heightening many of the other risks described in this “Risk Factors” section by increasing their likelihood or amplifying their magnitude.

Changes in consumer finance and other applicable laws and regulations, as well as changes in government enforcement policies and priorities, may negatively impact the management of our business, results of operations, ability to offer certain products or the terms and conditions upon which they are offered, and ability to compete.

Consumer finance regulation is constantly changing, and new laws or regulations, or new interpretations of existing laws or regulations, could have a materially adverse impact on our ability to operate as currently intended, and cause us to incur significant expense in order to ensure compliance. Federal and state financial services regulators are also enforcing existing laws, regulations, and rules aggressively and enhancing their supervisory expectations regarding the management of legal and regulatory compliance risks. These regulatory changes and uncertainties make our business planning more difficult and could result in changes to our business model and potentially adversely impact our results of operations. As to the parts of our business that operate as a non-bank lender, we are subject to state licensing and usury laws. Furthermore, to the extent applicable, these laws can impose specific statutory liabilities upon creditors who fail to comply with their provisions and may affect the enforceability of a loan. If the application of consumer protection laws were to cause our loans, or any of the terms of our loans, to be unenforceable against the relevant borrowers, our business may be materially adversely affected. Even if we seek to comply with licensing and other requirements that we believe may be applicable to us, if we are found to not have complied with applicable laws, we could lose one or more of our licenses or authorizations or face other sanctions or penalties or be required to obtain a license in one or more such jurisdictions, which may have an adverse effect on our business.

Proposals to change the statutes affecting financial services companies are frequently introduced in Congress and state legislatures that, if enacted, may affect their operating environment in substantial and unpredictable ways. In addition, numerous federal

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and state regulators have the authority to promulgate or change regulations that could have a similar effect on our operating environment. We cannot determine with any degree of certainty whether any such legislative or regulatory proposals will be enacted and, if enacted, the ultimate impact that any such potential legislation or implementing regulations, or any such potential regulatory actions by federal or state regulators, would have upon our business.

New laws, regulations, policy or changes in enforcement of existing laws or regulations applicable to our business, or reexamination of current practices, could adversely impact our profitability, limit our ability to continue existing or pursue new business activities, require us to change certain of our business practices, affect retention of key personnel, or expose us to additional costs (including increased compliance costs and/or customer remediation). These changes also may require us to invest significant resources, and devote significant management attention, to make any necessary changes and could adversely affect our business.

Although we have identified general guidelines that we believe are important in evaluating prospective investment opportunities, we may enter into transactions with borrowers that do not meet such guidelines, increasing the risk that the price of our publicly traded securities could be volatile.

Although we have identified general guidelines for evaluating prospective investment opportunities, it is possible that a borrower with which we enter into a transaction will not have all, or any, of the attributes outlined in those guidelines. If we complete transactions with borrowers that do not meet some or any of these guidelines, it is possible that such an investment may not be as successful as an alternative opportunity that were to satisfy some or all of those guidelines. Investments that do not perform as well as imagined, or as well as they otherwise might have, in combination with the public knowledge that we may stray, or have strayed, from strict implementation of our investment guidelines, could affect the volatility of the trading price of our publicly traded securities.

We may provide specialty finance solutions to early-stage companies, financially unstable businesses, or a borrower lacking an established record of revenue or earnings, which could adversely affect the price of our publicly traded securities.

While we believe that being entrepreneurial in our approach to specialty finance is a strength, we may complete investments with an early-stage company, a financially unstable business or an entity lacking an established record of revenues, cash flows or earnings. These kinds of transactions present numerous risks associated with investing in a business without a proven business model and with limited historical financial data, volatile revenues, cash flows or earnings and difficulties in obtaining and retaining key personnel. Although our management endeavors to evaluate the risks inherent in each particular investment we consider and make, we may not be able to properly ascertain or assess all of the significant risk factors and we may not have adequate time to complete a full evaluation of those risks. Furthermore, some of these risks may be outside of our control and leave us with no ability to control or reduce the chances that those risks will adversely impact a target business. The manifestation of any of these risks could adversely affect the trading price of our publicly traded securities.

Many of our specialty finance investment transactions involve borrowers about which little, if any, information is publicly available, which may impair our ability to identify borrowers able to repay our loans and adversely affect the price of our publicly traded securities.

In pursuing our business, we often interact with privately held companies about which very little public information exists. As a result, we are often required to make our investment decision on the basis of limited information, nearly all of which is obtained from the business itself, which may result in our consummating an investment with a borrower that is not as solvent or profitable as we suspected, if at all. These risks could affect our results of operations and, ultimately, the trading price of our publicly traded securities.

The industries in which we compete are highly competitive, which could adversely affect our results of operations.

The industries in which we compete are highly competitive and subject to rapid and significant changes. We compete against companies and financial institutions across the retail banking, financial services, consumer technology and financial technology services industries, as well as other nonbank lenders serving credit-challenged consumers, including online marketplace lenders, check cashers, point-of-sale lenders and payday lenders. We may compete with others in the market who may in the future provide offerings similar to ours, particularly companies who may provide money management, lending and other services. These and other competitors in the banking and financial technology industries are introducing innovative products and services that may compete with ours. We expect that this competition will continue as banking and financial technology industries continue to evolve, particularly if non-traditional non-recourse advance providers and other parties gain greater market share in these industries. If we are unable to differentiate

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our products and successfully compete with those of our competitors, our business, results of operations and financial condition will be materially and adversely affected.

Many existing and potential competitors are entities substantially larger in size, have more resources, are more highly diversified in revenue and substantially more established with significantly more brand awareness than ours. As such, many of our competitors can leverage their size, robust networks, financial wherewithal, brand awareness, pricing power and technological assets to compete with us. To the extent new entrants gain market share, the demand for our services would decline. If price competition materially intensifies, we may have to decrease the prices of our products and services, which would likely adversely affect the results of operations.

Our long-term success depends on our ability to compete effectively against existing and potential competitors that seek to provide banking and financial technology services. If we fail to compete effectively against these competitors, our revenues, results of operations, prospects for future growth and overall business will be materially and adversely affected.

If we are deemed to be an investment company under the 1940 Act, we may be required to institute burdensome compliance requirements and our activities may be restricted. In such an event, our business would likely be materially and adversely affected.

If we are deemed to be an investment company under the 1940 Act, then our activities may be restricted, including:

● restrictions on the nature of our investments;

● restrictions on the issuance of securities;

● a requirement to register as an investment company;

● adoption of a specific form of corporate structure and changes in corporate governance;

● the hiring of a chief compliance officer, and adoption and implementation of various policies and requirements;

● additional reporting, record-keeping, voting, proxy and disclosure requirements, together with other rules and regulations.

In order not to be regulated as an investment company under the 1940 Act, unless we can qualify for an exclusion or exemption, we must ensure that we are engaged primarily in a business other than investing, reinvesting or trading of “securities” and that our activities do not include investing, reinvesting, owning, holding or trading “investment securities” constituting more than 40% of our assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis.

We do not believe that our principal activities will subject us to the 1940 Act. To this end, we hold in reserve un-invested assets in cash or United States “government securities” within the meaning of Section 2(a)(16) of the Investment Company Act having a maturity of 185 days or less or in money market funds meeting certain conditions under Rule 2a-7 promulgated under the 1940 Act, which invest only in direct U.S. government treasury obligations. Furthermore, we monitor our investment holdings as a whole to ensure that investments and other holdings which may be considered “investment securities” do not comprise more than 40% of our total assets. We undertake this analysis (1) on a quarterly basis and in connection with the review and preparation of our financial statements filed as part of our quarterly and annual reports with the SEC, and (2) at other times when we are considering how to structure a new transaction that is of a significant size—with “significance” largely based on the outcome of our most recent quarterly review. This review is generally undertaken by our Chief Financial Officer and may involve outside legal counsel, in particular in a case where we are considering the structure of a potential new transaction.

If, however, we do not invest as discussed above or are otherwise unsuccessful in ensuring that no more than 40% of our total assets consist of “investment securities,” then we may be deemed to be subject to the 1940 Act. If that were to be the case, compliance with the additional regulatory burdens imposed under the 1940 Act would require additional expenses for which we have not allotted funds, and would surely hinder our ability to operate as profitably as we have since the withdrawal of our BDC election. This outcome would likely adversely affect the trading price of our publicly traded securities, potentially jeopardize the viability and enforceability of contracts to which we are a party and, depending on the circumstances could involve litigation that would likely prove costly to us financially and materially and adversely affect our prospects and the market and price for our common stock.

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We may engage in transactions with businesses that may be affiliated with our officers, directors or significant shareholders, and which may involve actual or potential conflicts of interest.

We may decide to make investments in one or more businesses affiliated with our officers, directors or significant shareholders. Such investment opportunities may compete with other opportunities for our investment dollars. Although we are not specifically focusing on, or targeting, any particular transaction with any affiliates or affiliated entities, we would pursue such a transaction if we determined that such an affiliated investment were attractive from a risk-adjusted return perspective, and such transaction were approved by a majority of our independent and disinterested directors. Any such activity would involve actual or potential conflicts of interest. Although we are confident that we can navigate these conflicts consistent with best practices and applicable law, the existence or appearance of such conflicts of interest could make our publicly traded securities less attractive and thereby reduce their trading prices.

A limited number of shareholders control substantially all of our voting stock and, as a result, control the election of our board of directors. As a result, these shareholders may exert an influence on actions requiring a shareholder vote, potentially in a manner that you do not support.

Five shareholders own shares representing approximately 63.42% of our issued and outstanding common stock. As a result, investors in our common stock cannot reasonably expect to have any influence over the election of our directors or other matters submitted to a vote of our shareholders. Instead, our existing significant shareholders will exert a substantial influence on the election of our directors and any actions requiring or otherwise put to a shareholder vote, potentially in a manner that you do not support. Examples of such voting matters, apart from the election of our directors, includes amendments to our articles of incorporation, bylaws, and approval of major corporate transactions. The concentrated amount of control over our affairs held by a relatively few number of significant investors could serve to reduce the attractiveness or liquidity of our common stock, and thereby depress its trading price.

Our ability to identify and consummate investment opportunities, and any need we may have for additional capital, may be affected by general economic conditions.

General economic conditions may impact our ability to (i) identify and pursue and consummate investment opportunities, and (ii) if necessary, seek and obtain additional financing on terms acceptable or favorable to us, if at all. Therefore, a deterioration in general economic conditions may adversely affect our business or slow the growth of our business.

Our reputation and brand are important to our success, and if we are unable to continue developing our reputation and brand, our ability to retain existing capital sources, our ability to attract borrowers and our ability to maintain and improve our relationship with regulators of our industry could be adversely affected.

We believe that maintaining a strong brand and trustworthy reputation is critical to our success and our ability to attract borrowers, attract new capital sources and maintain good relations with regulators and existing capital sources. Factors that affect our brand and reputation include: our industry and our company, including the quality and reliability of our Investment Process, see “Business – Investment Process”; the accuracy of our Investment Process; our loan funding programs; our ability to effectively manage and resolve borrower complaints; collection practices; privacy and security practices; litigation; regulatory activity; and the overall customer experience. Negative publicity or negative public perception of these factors, even if inaccurate, could adversely affect our brand and reputation.

For example, consumer advocacy groups, politicians and certain government and media reports have, in the past, advocated governmental action to prohibit or severely restrict consumer loan arrangements where banks contract with a third-party such as ours to provide origination assistance services to bank customers. Such criticism has frequently been levied in the context of payday loan marketers, though other entities operating programs through which loans similar to loans facilitated by us are originated have also faced criticism. The perceived improper use of a bank charter by these entities has been challenged by both governmental authorities and private litigants, in part because of the higher rates and fees a bank is permitted to charge consumers in certain payday and small-dollar lending programs relative to non-bank lenders. State regulators have made statements in the past threatening regulatory action against lenders like us related to loans originated by state chartered-banks, and such statements and the perception of possible regulatory action could adversely affect our reputation and the willingness of new or existing capital sources to work with us. Bank regulators have also required banks to exit third-party programs that the regulators determined involved unsafe and unsound practices or present other risks to the bank. If we are associated with such payday or small-dollar consumer loans, or if we are associated with increased criticism of non-payday loan programs involving relationships between bank originators and non-bank lending platforms and program managers,

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demand for loans facilitated by us could significantly decrease, which could cause our new or existing capital sources to terminate their arrangements with us, impede our ability to attract capital sources or reduce the number of potential borrowers. In addition, the increased focus on environmental, social and governance (“ESG”) issues could damage our reputation or prospects if customers, prospective customers, investors or third parties assigning ESG ratings to us are of the opinion that our practices, including without limitation our lending practices, are not sufficiently robust from an ESG perspective. Any of the foregoing could adversely affect our results of operations and financial condition.

Any negative publicity or negative public perception of loans facilitated by us or other similar consumer loans or the consumer lending service we provide may also result in us being subject to more restrictive interpretation or application of laws and regulations and potential investigations and enforcement actions. We may also become subject to additional lawsuits, including class action lawsuits, or other challenges such as government enforcement or arbitration. If there are changes in the laws or in the interpretation or enforcement of existing laws affecting consumer loans similar to those offered by us, or our servicing of such loans, or if we become subject to such lawsuits, our business, financial condition and results of operations would be adversely affected.

Harm to our reputation can also arise from many other sources, including employee or former employee misconduct, misconduct by outsourced service providers or other counterparties, failure by us to meet minimum standards of service and quality, and inadequate protection of borrower information and compliance failures and claims. If we are unable to protect our reputation, our business, financial condition and results of operations would be adversely affected.

We are highly dependent on the services provided by certain executives and key personnel.

Our success depends in significant part upon the continued service of our senior management personnel. In particular, we are materially dependent upon the services of Douglas M. Polinsky, our Chief Executive Officer and Chairman, and Joseph A. Geraci, II, our Chief Financial Officer and a director of our company. Although we currently have employment agreements with these individuals, these agreements will not necessarily prevent the departure of these executives, whether due to death, disability, retirement or otherwise. Any loss of the services provided by these executives would likely have a material and adverse effect on our operations and ability to execute our business plans.

Our articles of incorporation grant our board of directors the power to designate and issue additional shares and classes of common and preferred stock.

Our authorized capital consists of 250,000,000 shares of capital stock (or 125,000,000 shares of capital stock on a post-split basis). Pursuant to authority granted by our articles of incorporation, our board of directors, without any action by our shareholders, may designate and issue shares in such classes or series (including other classes or series of preferred stock) as it deems appropriate, and may establish the rights, preferences and privileges of such shares, including dividends, liquidation and voting rights. The rights of holders of new classes or series of stock that may be so designated and issued could be superior to the rights of holders of our common shares. The designation and issuance of shares of capital stock having preferential rights could adversely affect other rights appurtenant to shares of our common stock. Furthermore, any issuances of additional stock—common or preferred—will dilute the ownership interests of then-current holders of our common stock and may dilute our book value per share.

We may issue additional common stock or preferred shares without the approval of our shareholders. Any such issuances would dilute the interest of our shareholders and likely present other risks.

Our articles of incorporation authorize the issuance of up to 250,000,000 shares of capital stock (or 125,000,000 shares of capital stock on a post-split basis). Because we have only 5,427,749 shares of common stock issued and outstanding as of July 13, 2022, our board of directors has the power and authority to issue a substantial number of additional shares of common stock or preferred shares. The issuance of additional common stock or preferred shares:

● may significantly dilute the equity interest of investors in this offering;

● may subordinate the rights of holders of common stock if preferred shares are issued with rights senior to those afforded our common stock;

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● could cause a change in control if a substantial number of shares of common stock are issued, which could result in the resignation or removal of our present officers and directors; and

● may adversely affect prevailing market prices for our shares of common stock.

Cyber incidents or attacks directed at us could result in information theft, data corruption, operational disruption and/or financial loss.

We depend on digital technologies, including information systems, infrastructure and cloud applications and services, including those of third parties with which we may deal. Sophisticated and deliberate attacks on, or security breaches in, our systems or infrastructure, or the systems or infrastructure of third parties or the cloud, could lead to corruption or misappropriation of our assets, proprietary information and sensitive or confidential data. We have not made a significant investment in data security protection, and we may not be sufficiently protected against such occurrences. We may not have sufficient resources to adequately protect against, or to investigate and remediate any vulnerability to, cyber incidents. It is possible that any of these occurrences, or a combination of them, could have adverse consequences on our business and lead to financial loss.

RISKS RELATING TO OUR OFFERING

There has been a limited public market for our common stock prior to this offering, and you may not be able to resell our shares at or above the price you paid, or at all.

We can give no assurance that an active trading market for shares of our common stock will develop on Nasdaq or if its develops, will be sustained, or that the shares of common stock will trade at or above the public offering price. Failure to develop or maintain a trading market could negatively affect the market value of our common stock and make it difficult or impossible for you to sell your shares. The liquidity of the shares of our common stock may also be affected adversely by a reverse stock split given the increased number of shares that will be outstanding following a reverse stock split, especially if the market price of our common stock does not increase as a result of the stock split.

Our stock price may be volatile, or may decline regardless of our operating performance, and you could lose all or part of your investment as a result.

You should consider an investment in our common stock to be risky, and you should invest in our common stock only if you can withstand a significant loss and wide fluctuation in the market value of your investment. The market price of our common stock could be subject to significant fluctuations in response to the factors described in this section and other factors, many of which are beyond our control. Among the factors that could affect our stock price are:

● Actual or anticipated variations in our quarterly and annual operating results or those of companies perceived to be similar to us;

● Changes in expectations as to our future financial performance, including financial estimates by securities analysts and investors, or differences between our actual results and those expected by investors and securities analysts;

● Fluctuations in the market valuations of companies perceived by investors to be comparable to us;

● The public’s response to our or our competitors’ filings with the SEC or announcements regarding new products or services, enhancements, significant contracts, acquisitions, strategic investments, litigation, restructurings or other significant matters;

● Speculation about our business in the press or the investment community;

● Future sales of our shares;

● Actions by our competitors;

● Additions or departures of members of our senior management or other key personnel; and

● The passage of legislation or other regulatory developments affecting us or our industry.

In addition, the securities markets have experienced significant price and volume fluctuations that have affected and continue to affect market price of equity securities of many companies. These fluctuations have often been unrelated or disproportionate to the operating performance of particular companies. These broad market fluctuations, as well as general economic, systemic, political and

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market conditions, such as recessions, loss of investor confidence, interest rate changes, or international currency fluctuations, may negatively affect the market price of our shares.

If any of the foregoing occurs, it could cause our stock price to fall and may expose us to securities class action litigation that, even if unsuccessful, could be costly to defend and a distraction to management.

We do not intend to pay dividends on our common stock.

We intend to retain all of our earnings, if any, for the foreseeable future to finance the operation and expansion of our business and do not anticipate paying cash dividends. Any future determination to pay dividends will be at the discretion of our board of directors, subject to compliance with applicable law and any contractual provisions, and will depend on, among other factors, our results of operations, financial condition, capital requirements and other factors that our board of directors deems relevant. As a result, you should expect to receive a return on your investment in our common shares only if the market price of the common shares increases, which may never occur.

We may be a “controlled company” within the meaning of the rules of the Nasdaq and the rules of the SEC and, as a result, may qualify for, but do not intend to rely on, exemptions from certain corporate governance requirements.

After the completion of this offering and the application of net proceeds therefrom, five of our shareholders presently holding as a group 63.42% of our issued and outstanding stock may be deemed to control in excess of 50% of the voting power of our common stock, and as a result, we may be deemed to be a “controlled company” within the meaning of the corporate governance standards of the Nasdaq.  Under these rules, a company of which more than 50% of the voting power is held by an individual, group or another company is a “controlled company” and may elect not to comply with certain corporate governance requirements, including the requirement that:

● a majority of our board of directors consists of “independent directors” as defined under the rules of the Nasdaq;

● our director nominees be selected, or recommended for our board of directors’ selection, by a nominating/corporate governance committee comprised solely of independent directors; and

● the compensation of our executive officers be determined, or recommended to our board of directors for determination, by a compensation committee comprised solely of independent directors.

If the Company were to rely on the foregoing exemptions, we may not have a majority of independent directors, and our compensation committee and nominating/corporate governance committee may not consist entirely of independent directors, and therefore you may not have the same protections afforded to stockholders of companies that are subject to all of the corporate governance requirements of the Nasdaq. However, following this offering, we do not intend to utilize any of the foregoing corporate governance exemptions.

Future sales, or the perception of future sales, of our common stock may depress the price of our common stock.

As of July 13, 2022, we have 10,855,413 outstanding common shares (prior to giving effect to the 1-for-2 reverse stock split). Of these shares, 9,559,062 shares of common stock on a pre-split basis are in the public float or are eligible for re-sale under Rule 144. The remaining 1,296,351 shares common stock outstanding are “restricted securities” within the meaning of Rule 144. On February 11, 2022, we filed a registration statement with the SEC to register an additional 2,697,603 shares of common stock on a pre-split basis to be purchasable pursuant to warrants issued as a divend to shareholders as of record date that has not yet been established. Additional sales of our common shares in the public market after the date of effectiveness of this registration statement, or the perception that these sales could occur, could cause the market price of our common shares to decline.

Investors in this offering will experience immediate and substantial dilution in net tangible book value.

The public offering price per share is substantially higher than the net tangible book value per share of our outstanding shares of common stock. As a result, investors in this offering will incur immediate dilution of $     per share, based on the assumed public offering price of $7.50 per share. Investors in this offering will pay a price per share that substantially exceeds the book value of our

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assets after subtracting our liabilities. See “Dilution” for a more complete description of how the value of your investment will be diluted upon the completion of this offering.

There can be no assurances that our common stock, once listed on Nasdaq, will not be subject to potential delisting if we do not continue to maintain the listing requirements of Nasdaq.

We have applied to list the shares of our common stock on the Nasdaq, under the symbol “MCVT.” An approval of our listing application by Nasdaq will be subject to, among other things, our fulfilling all of the listing requirements of Nasdaq. In addition, Nasdaq has rules for continued listing, including, without limitation, minimum market capitalization and other requirements. Failure to maintain our listing (i.e., being de-listed from Nasdaq), would make it more difficult for shareholders to sell our common stock and more difficult to obtain accurate price quotations on our common stock. This could have an adverse effect on the price of our common stock. Our ability to issue additional securities for financing or other purposes, or otherwise to arrange for any financing we may need in the future, may also be materially and adversely affected if our common stock is not traded on a national securities exchange.

If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, our stock price and trading volume could decline.

The trading market for our common stock will depend in part on the research and reports that securities or industry analysts publish about us or our business. Securities and industry analysts do not currently, and may never, publish research on our company. If no securities or industry analysts commence coverage of our company, the trading price for our stock may be negatively impacted. In the event securities or industry analysts initiate coverage, if one or more of the analysts who covers us downgrades our stock or publishes inaccurate or unfavorable research about our business, our stock price may decline. If one or more of these analysts ceases coverage of our company or fails to publish reports on us regularly, demand for our stock could decrease, which might cause our stock price and trading volume to decline.

If our shares of common stock become subject to the penny stock rules, it would become more difficult to trade our shares.

The SEC has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks. Penny stocks are generally equity securities with a price of less than $5.00, other than securities registered on certain national securities exchanges or authorized for quotation on certain automated quotation systems, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system. If we do not obtain or retain a listing on the Nasdaq and if the price of our common stock is less than $5.00, our common stock will be deemed a penny stock. The penny stock rules require a broker-dealer, before a transaction in a penny stock not otherwise exempt from those rules, to deliver a standardized risk disclosure document containing specified information. In addition, the penny stock rules require that before effecting any transaction in a penny stock not otherwise exempt from those rules, a broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive (i) the purchaser’s written acknowledgment of the receipt of a risk disclosure statement; (ii) a written agreement to transactions involving penny stocks; and (iii) a signed and dated copy of a written suitability statement. These disclosure requirements may have the effect of reducing the trading activity in the secondary market for our common stock, and therefore stockholders may have difficulty selling their shares.

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USE OF PROCEEDS

Based upon an assumed public offering price of $7.50 per share, we estimate that we will receive net proceeds from this offering, after deducting the underwriting discounts and the estimated offering expenses payable by us, of approximately $4,100,000 assuming the Underwriter does not exercise its over-allotment option.

We plan to use the net proceeds we receive from this offering for the following purposes:

	Use of
	Net
	Proceeds
Working Capital	$	100,000
Sales and Marketing	$	100,000
Specialty Short-Term Loans	$	3,900,000

The foregoing represents our current intentions based upon our present plans and business conditions to use and allocate the net proceeds of this offering. However, the nature, amounts and timing of our actual expenditures may vary significantly depending on numerous factors. As a result, our management has and will retain broad discretion over the allocation of the net proceeds from this offering. We may find it necessary or advisable to use the net proceeds from this offering for other purposes, and we will have broad discretion in the application of net proceeds from this offering. To the extent that the net proceeds we receive from this offering are not immediately used for the above purposes, we intend to invest our net proceeds in short-term, interest-bearing bank deposits or debt instruments.

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DIVIDEND POLICY

We have paid cash dividends on our common stock periodically.

On December 8, 2020, our board of directors declared a cash dividend of $0.05 per share to our shareholders of record as of December 21, 2020. The dividend was paid on January 4, 2021. On September 17, 2021, our board of directors declared a cash dividend of $0.10 per share to our shareholders of record as of October 15, 2021. The dividend was paid on October 29, 2021.

We currently intend to retain any future earnings to finance the growth and development of our business, and we do not anticipate that we will declare or pay any cash dividends in the foreseeable future. Our ability to pay dividends to our shareholders in the future will depend upon our liquidity and capital requirements, as well as our earnings and financial condition, the general economic climate, contractual restrictions, our ability to service any equity or debt obligations senior to our common stock, and other factors deemed relevant by our board of directors.

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CAPITALIZATION

Set forth below is our cash and capitalization as of March 31, 2022:

● On an actual basis;

● on a pro forma basis to reflect: (i) the sale of 666,667 shares of common stock on March 31, 2022 for a price per share of $7.50 for total gross proceeds of $5,000,0002 and (ii) the exercise of 40,000 warrant shares on March 31, 2022 for a price per share of $9.37 for total proceeds of $374,800.

● on a pro forma as adjusted basis to reflect the issuance and sale of the shares by us in this offering at the public offering price of $7.50 per share, after deducting the estimated underwriting discounts and the estimated offering expenses payable by us.

You should read the information in the below table together with our financial statements and related notes, and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” each included elsewhere in this prospectus.

	As of March 31, 2022
					Pro Forma
					As
	Actual		Pro Forma		Adjusted
	(unaudited)		(unaudited)		(unaudited)
Cash	$	71,020	$	5,445,823	$	4,545,823
Total debt at face value		5,325,000		5,325,000		5,325,000
Total shareholders’ equity:
Common stock, $0.001 par value, 250,000,000 shares authorized (or 125,000,000 shares on a post-split basis), 5,427,749 issued and outstanding as of July 13, 2022		10,790		11,497		11,497
Additional paid-in capital		10,694,163		16,068,259		15,168,259
Accumulated (deficit)(Net)		3,121,207		3,121,207		3,121,207
Total shareholders’ equity		13,826,160		19,200,963		18,300,963
Capitalization	$	19,151,160	$	24,525,963	$	23,625,963

(1) A $0.50 increase or decrease in the assumed public offering price per share would increase or decrease our as adjusted cash and cash equivalents, additional paid-in capital, total stockholders’ equity and total capitalization by approximately $306,667 assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the underwriting discounts, commissions and estimated offering expenses payable by us. An increase (decrease) of 100,000 shares in the number of shares offered by us, as set forth on the cover page of this prospectus, would increase (decrease) as adjusted cash and cash equivalents, additional paid-in capital, total stockholders’ equity and total capitalization by $690,000, assuming no change in the assumed public offering price per share and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.

DILUTION

If you invest in our shares in this offering, your interest will be diluted to the extent of the difference between the public offering price per share of common stock and the as adjusted net tangible book value per share of common stock immediately after this offering.

Our historical net tangible book value as of March 31, 2022 was $2.55 per share on March 31, 2022 (giving effect to the 1-for-2 reverse stock split, expected to occur prior to or following the effectiveness of the registration statement of which this prospectus forms a part). Our historical net tangible book value is the amount of our total tangible assets less our liabilities. Historical net tangible book value per share of common stock is our historical net tangible book value divided by the number of outstanding shares of common stock as of March 31, 2022.

Our pro forma net tangible book value as of March 31, 2022 was $3.09 (giving effect to the 1-for-2 reverse stock split, that is expected to occur prio to or following the effectiveness of the registration statement of which this prospectus forms a part)per share of common stock. Pro forma net tangible book value per share represents our total tangible assets less our total liabilities, divided by the number of outstanding shares of common stock, after giving effect to the pro forma adjustments referenced under “Capitalization.”

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After giving effect to this offering, at an assumed public offering price of $7.50 per share, after deducting underwriting discounts and commissions and estimated offering expenses payable by us, our net tangible book value on a pro forma as adjusted basis as of March 31, 2022 would have been $2.94 per share of common stock. This amount represents an immediate increase in pro forma as adjusted net tangible book value of $0.39 per share of common stock to our existing shareholders and an immediate dilution of $4.56 per share of common stock to new investors purchasing common stock in this offering. We determine dilution by subtracting the pro forma as adjusted net tangible book value per share after this offering from the amount of cash that a new investor paid for a common stock.

The following table illustrates this dilution:

Assumed public offering price per share	$	7.50
Net tangible book value per common stock as of March 31, 2022	$	2.55
Pro forma net tangible book value per share as of March 31, 2022		3.09
Increase in pro forma net tangible book value per share attributable to this offering		.54
Pro forma as adjusted net tangible book value per share, after this offering		2.94
Dilution per share to new investors in this offering	$	4.56

A $0.50 increase (decrease) in the assumed public offering price of $7.50 per share of common stock, would increase (decrease) the pro forma as adjusted net tangible book value per share by $0.05, and increase (decrease) dilution to new investors by $0.05 per share, in each case assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting underwriting discounts and commissions and estimated offering expenses payable by us.

The foregoing discussion and table do not take into account further dilution to new investors that could occur upon the exercise of outstanding warrants or convertible notes having a per share exercise or conversion price less than the per share offering price to the public in this offering.

If the underwriters exercise in full their option to purchase additional common stock in this offering, the pro forma as adjusted net tangible book value after the offering would be $2.98 per share, the increase in net tangible book value to existing shareholders would be $.44 per share, and the dilution to new investors would be $4.52 per share, in each case assuming an public offering price of $7.50 per share.

The number of shares of common stock that will be outstanding after this offering is based on 10,855,413 shares of common stock outstanding as of July 13, 2022 (prior to giving effect to the 1-for-2 reverse stock split) and excludes any securities issuable upon exercise of the representative’s over-allotment option as of that date:

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with our financial statements and related notes appearing elsewhere in this prospectus. In addition to historical information, this discussion and analysis contains forward-looking statements that involve risks, uncertainties, and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors, including but not limited to those set forth in “Risk Factors.”

All amounts included herein with respect to the fiscal years ended December 31, 2021 and December 31, 2020 are derived from our audited financial statements included elsewhere in this prospectus and all amounts included herein with respect to the three months ended March 31, 2022 and March 31, 2021 are derived from our unaudited financial statements included elsewhere in this prospectus.

Overview

Mill City Ventures III, Ltd. was incorporated in the State of Minnesota on January 10, 2006. We are in the business of providing short-term specialty finance solutions primarily to private businesses, micro- and small-cap public companies and high-net-worth individuals

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The principal specialty finance solutions we provide are high-interest short-term lending arrangements. These lending arrangements ordinarily involve us obtaining collateral as security for the borrower’s repayment of funds to us. In some circles, short-term high-interest collateralized lending is referred to as “hard-money lending.”

We believe we are generally able to charge high interest for our specialty finance solutions because (i) banks and other traditional providers of credit may have neither the expertise nor the infrastructure needed to evaluate creditworthiness and risks in a timeframe suitable for a potential borrower, preferring instead to process transactions and structures that present few novel issues or risks; and (ii) we will often be able to devote time and attention to transactions involving a smaller dollar amount than an institutional lender will view as worthwhile. These beliefs essentially explain why we refer to our business as “specialty finance”— financing that may involve structures that are unique, creative, and often bespoke; and that may involve dollar amounts that are not suitable for institutional lenders.

We generally provide specialty finance solutions that are short-term in nature. By this, we mean lending arrangements that mature or come due within nine months of the lending date. We view the provision of short-term finance as desirable for two principal reasons: (i) it helps minimize the risk of non-performance; and (ii) it helps minimize regulatory risk.

In terms of non-performance risk, short-term lending requires us to focus upon, and a potential borrower to identify to us, us a near-term source of liquidity for repayment of the funds they borrow from us. This permits us to evaluate that source of repayment clearly and carefully, thus helping identify the potential risks involved in a particular transaction and how we may be able to include structural terms, such as specific collateral and collateral arrangements, guarantees, or other types of covenants that mitigate these risks.

In terms of regulatory risk, short-term lending permits us to avail ourselves of a court-recognized exception for treating promissory notes (evidencing a loan) as “investment securities” under federal securities law. In sum, this exception generally applies to promissory notes with short-term maturities of nine months. Our ability to avail ourselves of this exception, and to more generally structure our transactions in such a way as to avoid them being properly considered as “investment securities” under federal securities laws, is important to our ability to avoid once again becoming subject to regulation under the 1940 Act. Below we discuss our process for evaluating transactional terms and structures with a view to remaining outside of the regulatory regime of the 1940 Act (please refer to “Investment Process” below).

Examples of the kinds of the specialty finance solutions we have considered or provided to date, and may continue to provide in the future, include:

● Short-term secured loans for real estate development (with a mortgage serving as security)

● Short-term unsecured loans (with an option to acquire collateral security) to a business

● Short-term secured loans to a business for operating capital

● Short-term secured loans to an individual owed a forthcoming tax refund

Our principal sources of income are interest, dividends and other fees associated with lending such as origination fees, closing fees or exit fees. We may also receive reimbursement of legal costs associated with loan documentation. Our statement of operations also reflect increases and decreases in the carrying value of our asset and investments (i.e., unrealized appreciation and depreciation). Our principal expenses relate to operating expenses, the largest components of which are generally professional fees, payroll, occupancy, and insurance expenses.

Our Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read carefully in addition to our Annual Report on Form 10-K for the year ended December 31, 2021, as well as our reports on Forms 10-Q and 8-K and other publicly available information. All amounts herein are unaudited. In addition, the discussion of our results of operations and financial condition should be read in the context of this overview.

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Results of Operations

Three Months Ended March 31, 2022 compared with the Three Months Ended March 31, 2021

Our operating results for the three months ended March 31, 2022 and March 31, 2021 were as follows:

	For the Three Months Ended
	March 31,
	2022		2021
Investment Income:	$	1,000,206	$	546,842
Operating Expenses:		(545,818)		(533,858)
Net Investment Gain	$	454,388	$	12,984

Investment Income

We generate revenue primarily in the form of interest income and capital gains, if any, on the debt instruments we own. We may also generate revenue from dividends and capital gains on equity investments we make, if any, or on warrants or other equity interests that we may acquire. In some cases, the interest on our investments may accrue or be paid in the form of additional debt. The principal amount of the debt instruments, together with any accrued but unpaid interest thereon, will generally become due at the maturity date of those debt instruments. Finally, we may also generate revenue in the form of commitment, origination, structuring, diligence, or consulting fees. Any such fees will be recognized as earned.

For the three months ended March 31, 2022 and 2021, our total investment income was $1,000,206 and $546,842, respectively. The increase is due to the increase in our short-term non-bank lending activity. Our loan portfolio generates interest income, with an average rate on the loans of 22.4%.

Professional Fees

For the three months ended March 31, 2022 and 2021, we had $198,518 and $142,808 of professional fees expense, respectively. The increase in 2022 is due to an increase in our short-term non-bank lending activity and the legal costs incurred to close those deals.

Net Realized Gain from Investments

For the three months ended March 31, 2022, we had $1,152,898 of proceeds from sale of investments, resulting in $138,770 of realized gains. For the three months ended March 31, 2021, we had $5,036,657 of proceeds from sale of investments, resulting in $2,907,999 of realized gains.

Net Change in Unrealized Appreciation (Depreciation) on Investments

For the three months ended March 31, 2022, our investments included $22,047 of unrealized depreciation. For the three months ended March 31, 2021, our investments included $513,250 of unrealized depreciation.

Changes in Net Assets from Operations

For the three months ended March 31, 2022, we recorded a net increase in net assets from operations of $412,111. Based on the weighted-average number of shares of common stock outstanding for the three months ended March 31, 2022, our per-share net increase in net assets from operations was $0.04. For the three months ended March 31, 2021, we recorded a net increase in net assets from operations of $1,745,042. Based on the weighted-average number of shares of common stock outstanding for the three months ended March 31, 2021, our per-share net increase in net assets from operations was $0.16.

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Cash Flows for the Three Months Ended March 31, 2022 and 2021

The level of cash flows used in or provided by operating activities is affected by the timing of purchases, redemptions and repayments of portfolio investments, among other factors. For the three months ended March 31, 2022, net cash used in operating activities was $7,190,128. Cash flows used in operating activities for the three months ended March 31, 2022 were primarily related to purchases of investments totaling $7,025,000. For the three months ended March 31, 2021, net cash used in operating activities was $4,402,126. Cash flows provided in operating activities for the three months ended March 31, 2021 were primarily related to purchases of investments totaling $9,430,664, offset by repayments of investments totaling $5,036,657.

Portfolio and Investment Activity

During the three months ended March 31, 2022, we made $7,025,000 of investments and had $1,152,898 of redemptions and repayments, resulting in net investments at amortized cost of $19,943,929 as of March 31, 2022.

During the three months ended March 31, 2021, we made $9,430,664 of investments and had $5,036,657 of redemptions and repayments, resulting in net investments at amortized cost of $12,276,332 as of March 31, 2021.

Our portfolio composition by major class, based on fair value at March 31, 2022, was as follows:

	Investments at		Percentage of
	Fair Value		Fair Value
Short-term Non-banking Loans	$	18,075,000	90.0	%
Equity/Other		2,012,500	10.0
Total	$	20,087,500	100.0	%

Results of Operations

Year Ended Decemeber 31, 2021 compared with Year Ended December 31, 2020

	For the Year Ended December 31,
	2021		2020
Investment Income:
Interest Income	$	2,656,201	$	1,282,175
Dividend Income		—		15,462
		2,656,201		1,297,637
Operating Expenses:
General Operating Expenses		116,714		83,447
Legal and Accounting Expenses		453,440		175,612
Executive Management Compensation		556,432		301,494
Insurance Expense		108,165		85,237
Director's Fees		120,000		90,000
		1,354,751		735,790
Net Investment Gain	$	1,301,450	$	561,847

For the year ended December 31, 2021, we earned $11,480 in interest payments from one investment - DBR Enclave US Investors, LLC; an aggregate of $2,099,684 from 26 other investments; an additional $25,037 in bank interest on cash balances and notes receivable; an aggregate of $467,500 in origination fees; and an additional $52,500 in late fee penalties.

For the year ended December 31, 2020, we earned $44,026 in interest payments from one investment - DBR Enclave US Investors, LLC; an aggregate of $993,795 from six promissory note investments; an aggregate of $26,994 in bank interest on cash balances and notes receivable; an aggregate of $217,360 in origination fees; and an aggregate of $15,462 in dividend payments from four investments-Manning & Napier, Inc., Educational Development Corp., Manhattan Bridge Capital, Inc.; and Windstream Holdings, Inc.

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As the table above indicates, we incurred operating expenses aggregating $1,354,751 for the year ended December 31, 2021, and $735,790 for the year ended December 31, 2020. A discussion of the various components of our operating expenses for these periods is set forth below.

● General Operating Expenses. Our general operating expenses were $116,714 for the year ended December 31, 2021 and $83,447 for the year ended December 31, 2020. The increase in the current period is primarily related to an increase in corporate franchise taxes.

● Legal and Accounting Expenses. Our legal and accounting expenses were $453,440 for the year ended December 31, 2021 and $175,612 for the year ended December 31, 2020. The increase in the current period is primarily related to increased costs incurred on consulting and underwriting endeavors, as well as an increased cost in our audit and tax services.

● Executive Management Compensation. Our executive management compensation was $556,432 for the year ended December 31, 2020 and $301,494 for the year ended December 31, 2020. The increase in the current period is primarily related to a one-time bonus payment made during the year 2021.

For the year ended December 31, 2021 our net investment gain was $1,301,450. For the year ended December 31, 2020, our net investment gain was $561,847. The increased net investment gain during 2021 was primarily the result of higher interest income earned during 2021 from the short-term specialty finance solutions we provided in the form of short-term promissory notes bearing higher rates of interest and return, including related origination fees, than we were able to obtain when operating as a BDC.

Financial Condition

For the year ended December 31, 2021, we had an increase in net assets of $1,773,162. This increase in net assets was primarily due to the increase in our interest income earned from short-term specialty financing. Our net assets increased by $1,572,354 for the year ended December 31, 2020, primarily due to the appreciation of our portfolio holdings.

As of March 31, 2022, we had cash of $71,020, a decrease of $1,865,128 from December 31, 2021. The primary use of our existing funds and any funds raised in the future is expected to be for our short-term investments or for other general corporate purposes, including paying for operating expenses or debt service to the extent we borrow or issue senior securities. Pending investment, our investments may consist of cash, cash equivalents, U.S. government securities or high quality debt securities maturing in one year or less from the time of investment, which we refer to collectively as “temporary investments.” We expect that substantially all of our temporary investments will be redeployed into portfolio company investments by December 31, 2022.

Liquidity and Capital Resources

Summary cash flow data is as follows:

	For the Years Ended December 31,
	2021		2020
Cash flows used by:
Operating activities	$	(1,886,094)	$	(2,463,157)
Financing activities		(1,618,337)		(162,920)
Net decrease in cash		(3,504,431)		(2,626,077)
Cash, beginning of period		5,440,579		8,066,656
Cash, end of period	$	1,936,148	$	5,440,579

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. Mr. Berman is a director of our company. The Loan Agreement provides us with a $5 million revolving line of credit 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. The Loan Agreement, together with our cash, together comprises our sources of liquidity. Management believes that these sources of liquidity, together with cash

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obtained through maturing investments earlier made, will be sufficient for the Company to fund its operations through the entirety of fiscal 2022. Accordingly, at present we have no definitive plans to obtain other sources of liquidity through borrowing.

On February 11, 2022, we filed a registration statement on Form S-1 seeking to register an offering of five-year common stock warrants which we may distribute to our shareholders as a dividend, and up to 2,697,603 shares of our common stock purchasable upon the exercise of those 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 registration statement on Form S-1. At this time, no record date has been established for the dividend. 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.

Capital Expenditures

We did not have any material commitments for capital expenditures in 2021 and we do not anticipate any such capital expenditures for 2022.

Recent Purchases of Securities

During 2020, we engaged in the following repurchases of its common stock, all of which were consummated in private transactions:

● 100,000 shares on May 6, 2020, at a per-share price of $0.50;

● 270,667 shares on May 19, 2020, at a per-share price of $0.40; and

● 10,822 shares in the aggregate on December 1, 2020, at a per-share price of $0.43.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements, nor are we a party to any contract or other obligation not included on its balance sheet that has, or is reasonably likely to have, a current or future effect on our financial condition.

Reverse Stock Split

We expect to effect a reverse stock split of our common stock at a ratio of 1-for-2 prior to or upon the effectiveness of the registration statement of which this prospectus forms a part. No fractional shares will be issued in connection with the reverse stock split and all such fractional interests will be rounded up to the nearest whole number of shares of common stock. Share information presented in this prospectus, other than in our consolidated financial statements and the notes thereto and other historical share amounts, such as those issued in connection with acquisitions, have been adjusted to give effect to such reverse stock split.

Critical Accounting Policies

Critical accounting policies are policies that are both most important to the portrayal of the Company’s financial condition and results, and that require management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. Our critical accounting policies relate to investment valuation and interest and dividend income as an investment company.

Investment Valuation

Investment transactions are recorded on the trade date. Realized gains or losses are measured by the difference between the net proceeds from the repayment or sale and the amortized cost basis of the investment without regard to unrealized gains or losses previously

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recognized, and include investments charged off during the period, net of recoveries. Unrealized gains or losses primarily reflect the change in investment values, including the reversal of previously recorded unrealized gains or losses when gains or losses are realized.

Investments for which market quotations are readily available are typically valued at such market quotations. In order to validate market quotations, we look at a number of factors to determine if the quotations are representative of fair value, including the source and nature of the quotations. Debt and equity securities that are not publicly traded or whose market prices are not readily available are valued at fair value as determined in good faith by the Valuation Committee of our board of directors, based on, among other things, the input of our executive management, Audit Committee and independent third party valuation expert that may be engaged by management to assist in the valuation of our portfolio investments. Valuation determinations are in all cases made in conformity with the written valuation policies and procedures respecting the valuation of Company investments.

Critical Accounting Estimates

Our financial statements are prepared in conformity with accounting principles generally accepted in the United States of America, or U.S. GAAP, which requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Critical accounting policies are those that require the application of management’s most difficult, subjective or complex judgments, often because of the need to make estimates about the effect of matters that are inherently uncertain and that may change in subsequent periods.

In preparing the financial statements, management will make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. In preparing the financial statements, management also will utilize available information, including our past history, industry standards and the current economic environment, among other factors, in forming its estimates and judgments, giving due consideration to materiality. Actual results will almost certainly differ from these estimates. In addition, other companies may utilize different estimates, which may impact the comparability of our results of operations to those of companies in similar businesses. As our expected operating results occur, we will describe additional critical accounting policies in the notes to our financial statements. Our most critical accounting policies relate to the valuation of our portfolio investments, and revenue recognition.

BUSINESS

Overview

Mill City Ventures III, Ltd. is a Minnesota corporation that was incorporated in January 2006. From our inception until December 13, 2012, we were a development-stage company involved in the gaming and entertainment industry. In 2013, we elected to become a business development company (“BDC”) under the Investment Company Act of 1940 (the “1940 Act”). We operated as a BDC until we withdrew our BDC election on December 27, 2019. Since that time, we have engaged in the business of providing short-term specialty finance solutions primarily to private businesses, micro- and small-cap public companies and high-net-worth individuals. To avoid again becoming subject to regulation under the 1940 Act, we generally seek to structure our transactions so they do not constitute “investment securities” for purposes of federal securities law, and we monitor our holdings as a whole to ensure that no more than 40% of our total assets may consist of investment securities.

The principal specialty finance solutions we provide are high-interest short-term lending arrangements. On occasion, these lending arrangements involve us obtaining collateral as security for the borrower’s repayment of funds to us. In some circles, short-term high-interest collateralized lending is referred to as “hard-money lending.”

We believe we are generally able to charge high interest for our specialty finance solutions because: (i) banks and other traditional providers of credit may have neither the expertise nor the infrastructure needed to evaluate creditworthiness and risks in a timeframe suitable for a potential borrower, preferring instead to process transactions and structures that present few novel issues or risks; and (ii) we will often be able to devote time and attention to transactions involving a smaller dollar amount than an institutional lender will view as worthwhile. These beliefs essentially explain why we refer to our business as “specialty finance”— financing that may involve structures that are unique, creative, and often bespoke; and that may involve dollar amounts that are not suitable for institutional lenders.

We generally provide specialty finance solutions that are short-term in nature. By this, we mean lending arrangements that mature or come due within nine months of the lending date. We view the provision of short-term finance as desirable for two principal reasons: (i) it helps minimize the risk of non-performance; and (ii) it helps minimize regulatory risk.

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In terms of non-performance risk, short-term lending requires us to focus upon, and a potential borrower to identify to us, us a near-term source of liquidity for repayment of the funds they borrow from us. This permits us to evaluate that source of repayment clearly and carefully, thus helping identify the potential risks involved in a particular transaction and how we may be able to include structural terms, such as specific collateral and collateral arrangements, guarantees, or other types of covenants that mitigate these risks.

In terms of regulatory risk, short-term lending permits us to avail ourselves of a court-recognized exception for treating promissory notes (evidencing a loan) as “investment securities” under federal securities law. In sum, this exception generally applies to promissory notes with short-term maturities of nine months. Our ability to avail ourselves of this exception, and to more generally structure our transactions in such a way as to avoid them being properly considered as “investment securities” under federal securities laws, is important to our ability to avoid once again becoming subject to regulation under the 1940 Act. Below we discuss our process for evaluating transactional terms and structures with a view to remaining outside of the regulatory regime of the 1940 Act (please refer to “Investment Process” below).

Examples of the kinds of the specialty finance solutions we have considered or provided to date, and may continue to provide in the future, include:

● Short-term secured loans for real estate development (with a mortgage serving as security);

● Short-term unsecured loans (with an option to acquire collateral security) to a business;

● Short-term secured loans to a business for operating capital; and

● Short-term secured loans to an individual owed a forthcoming tax refund

In addition, we are presently exploring and evaluating our ability to enter into other kinds of short-term specialty finance transactions. Examples include the expansion of our efforts to purchase adjudicated settlements, the purchase (at discounted rates) of receivables owing to professionals on account of certain workers’ compensation claim, and short-term consumer finance lending.

Sourcing Transactions

We believe that our management’s strong combination of experience and contacts in the securities and investment finance sector, including the experience and contacts of our independent directors, should be sufficient to continue attracting suitable prospective investment opportunities. To date, the network of contacts of our management and directors has been successful thus far in sourcing all of the transactions in which we have participated. Accordingly, we presently do not have any plans to hire any business development professionals to assist us with transactional volume.

Competition

The market for specialty finance is competitive, largely as a result of the participation of various types of professionally managed pooled investment funds such as private equity funds, debt and mezzanine-debt funds, and other types of professional finance companies seeking the high returns that are possible in specialty finance and hard-money lending. Nevertheless, we believe we are well positioned to compete successfully in this market because of our entrepreneurial, creative and flexible approach to specialty finance opportunities, and our management’s experience in entrepreneurial ventures and finance.

Throughout our history and in particular after ceasing to be a BDC, we have approached investment opportunities flexibly and creatively in terms of transactional structures and terms. In part, we are able to be flexible and creative because we are not subject to many of the regulatory limitations that govern our other more traditional or institutional competitors. Those competitors are often subject to limitations on the type transactions they undertake, the amount that may be invested in a specific transaction or a particular type of transaction, the markets in which they operate, the maturity or time horizon of their investment, uses of proceeds, or otherwise. These limitations are often imposed by the agreements and documents governing the pooled investment vehicles, or otherwise self-imposed in order to facilitate the investment vetting and diligence process, and the documentation and structuring process. More rarely, these limitations may arise from governing regulations or interpretations thereof. For our part, we believe that approaching investment opportunities flexibly expands our overall transactional opportunities, diversifies our risk by avoiding dependence in any material way on a particular borrower, type of transaction, or market or industry niche permits us to avail ourselves of the maximum number of relationships from which we source investment opportunities. Moreover, we believe that this flexible approach to structuring our transactions and investments will facilitate the development of positive long-term relationships with our borrowers.

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We believe that the only significant limitation on our ability to flexibly structure transactions arises from our desire to remain outside the regulation of the 1940 Act. In order to meet this goal, we intend and aim to structure the vast majority of our transactions (by dollar amount) in ways such that they are not properly considered “investment securities” under federal securities laws, including the 1940 Act.

For our investors, the freedom afforded to us through the lack of substantive regulation governing the types of transactions we enter into and our methods of operation permits us to allocate our resources, at any given point in time, to those types of transactions that we believe may lead to the highest risk-adjusted returns or the steadiest stream of such returns.

Our management team and board of directors has significant experience in a variety of entrepreneurial ventures, including service as management and directors for small and large public companies, private businesses, start-up and development-stage businesses, and the securities and finance industries. As a result of this diverse general experience and particular experience in transactional finance, we believe we are able to manage the evaluation and due-diligence process involved in our investment opportunities swiftly and efficiently, by collaborating with our professional advisers and focusing on high-level and material issues.

Other Matters

We do not believe that we are dependent in any material way on any particular borrower, type of specialty finance transaction, or industry.

We do not own or use through license any patents, trademarks, or other intellectual properties and we do not believe that any such assets would be material to our business.

Sometimes the types of transactions we engage in are governed by particular laws, regulations, or rules. For example, lending transactions in which high-net-worth individuals are the borrower will nearly always involve state law usury limitations. Transactions in which we seek and obtain collateral as security for obligations owed to us involve legal issues arising under the Uniform Commercial Code or its various state law iterations. To date, we have not engaged in transactions that require us to obtain state licensure or a permit prior to entering into the transaction—e.g., brokering transactions or engaging in licensed consumer finance activities.

Pending the consummation of transactions and deployment of cash, we generally keep the majority of our assets in cash, cash equivalents such as money-market investments, U.S. government securities or high-quality debt securities maturing in one year or less from the time of investment.

Our Investment Process

We have identified several criteria that we believe are generally important guidelines for us to meet our financial objectives. These criteria are, however, only general guidelines for our investment decisions and, in the case of some transactions in which we invest, fewer than all—or even none—of these criteria will be met.

● Existing Liquidity Source. Because the vast majority of our transactions involve short-term maturities, we typically seek to identify a liquidity source for the borrower to repay us. Examples of sources of potential liquidity may include accounts receivable, another valuable asset, or a pending payment (e.g., a tax refund, or a litigation judgment or settlement payment) that is reasonably expected to pay out prior to the maturity of the credit we provide.

● Collateral Value. We will often, but not always, seek to collateralize the obligations owing to us. Our ability to identify valuable collateral is a significant factor in our credit analysis and determination of the attractiveness of a potential transaction. This analysis will often involve legal counsel, both to assist in the identification of potential collateral assets, and to better understand the ease with which a security interest in the collateral may be granted, perfected and, if necessary, foreclosed upon and the relevant jurisdiction(s) involved.

● Experienced and Capable Management. In transactions involving business borrowers, we seek businesses that have an experienced, knowledgeable and capable management team.

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● Competitive Position. In transactions involving business borrowers, we will seek to invest in transactions with businesses that have developed, or appear poised to develop, a strong competitive position within their respective industry sector or niche.

● Cash Flow. In transactions involving business borrowers, we will seek to invest in businesses that are profitable or nearly profitable on an operating cash flow basis, principally so that the business’ operating cash flow may serve as another source of liquidity from which we may ultimately be repaid.

If we believe that a potential transaction generally meets the characteristics described above or if we otherwise determine that a potential transaction may be desirable to enter into, we may perform a more rigorous due-diligence examination of the prospective borrower, the likely source or sources of liquidity for their repayment to us, and other aspects of the borrower or its assets (e.g., assets of the borrower that may serve as collateral security for the obligations that may be owing to us). Our due-diligence examination for each transaction will necessarily be unique and tailored to the specific transaction, but will generally be undertaken in light of the following facts and circumstances:

● our familiarity with the borrower (or, in the case of a business borrower, our familiarity with management or other persons such as directors involved with the borrower);

● in the case of a business borrower, our review and assessment of the potential borrower’s financing history, as well as the likely need for additional financings after our transaction;

● the industry in which the borrower operates, our knowledge and familiarity with that industry, our assessment of the complexity of the business, any regulatory matters or other unique aspects presenting special risks, and the competitive landscape faced by the borrower;

● the amount of potential dollars involved in the potential transaction;

● where the borrower is located, how it is organized as an entity, as well as its management and ownership structure and profile;

● whether we might have been involved with a transaction of the same or similar kind before;

● the ease with which we can evaluate the borrower’s source or sources of liquidity;

● the ease with which we can apprehend the process involved with taking collateral security in some or all of the borrower’s assets; and

● the ease with which we could realize on that collateral if repayment were not otherwise forthcoming.

The assessments described above outlines our general approach for our investment decisions, although not all of such activities will be followed in each instance, or some may be stressed more than others depending on facts and circumstances. Upon successful completion of this preliminary evaluation, we will typically (1) evaluate our own regulatory concerns (i.e., to what extent the potential transaction may properly be considered an investment in an “investment security” for purposes of the 1940 Act and, if necessary, consider alternative structures to alleviate any risks to our company relating thereto), and (2) decide whether to move forward towards negotiating a letter of intent and, thereafter, definitive documentation for our transaction. Depending on timing, we may not use a letter of intent and will instead proceed directly to definitive documentation.

As indicated above, to avoid becoming subject to the regulatory requirements of the 1940 Act, we monitor our investment holdings as a whole to ensure that investments and other holdings which may be considered “investment securities” do not comprise more than 40% of our total assets. We undertake this analysis (1) on a quarterly basis and in connection with the review and preparation of our financial statements filed as part of our quarterly and annual reports with the SEC, and (2) at other times when we are considering how to structure a new transaction that is of a significant size—with “significance” largely based on the outcome of our most recent quarterly review. This review is generally undertaken by our Chief Financial Officer and may involve our outside legal counsel, in particular in a case where we are considering the structure of a potential new transaction.

In general, our analysis starts with the length or duration of a potential new transaction. Although federal securities laws define “securities” (and “investment securities”) in such a way as to include promissory notes, the U.S. Supreme Court held in Reves v. Ernst & Young, 110 S. Ct. 945 (1990), that certain kinds of promissory notes are not properly considered securities. Over time, court precedent has developed to identify these kinds of promissory notes as generally not constituting investment securities:

● notes that mature in nine months or less;

● notes secured by a mortgage or lien on a home;

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● notes secured by a small business or business assets;

● so-called “character loans” made to a bank customer;

● notes delivered or borrowings entered into through consumer finance;

● commercial loans made to businesses;

● loans secured by accounts receivable (e.g., factoring);

In addition to the types of financing arrangements noted above, court precedent indicates that there may be facts and circumstances surrounding the transaction that may cause other promissory notes to not be considered “securities” or “investment securities” under federal securities laws. For example, it is presumed that a promissory note which matures in more than nine months is a “security,” but this presumption may be rebutted (with the conclusion that such a promissory note is not a properly considered a security) upon an evaluation of the following factors:

● whether the borrower’s motivation is to raise money for general business use, and whether the lender’s motivation is to make a profit, including interest;

● whether the borrower’s plan of distribution for the promissory note resembles the plan of distribution of a security;

● whether the investing public reasonably expects that the note is a security; and

● whether there is a regulatory scheme that protects the investor other than the securities laws (e.g., Federal Deposit Insurance).

While the application of these factors can be helpful in some instances, often the factors and the proper manner of weighting them are unclear. As a result, the analyses we periodically undertake focuses on the more bright-line types of lending arrangements enumerated above—i.e., promissory notes maturing in nine months or less, etc.

Our Prior Business as a BDC

The analysis of our transactions and transactional holdings is undertaken with a view to ensuring that we do not become subject to the 1940 Act. Generally from 2013 through 2019, we were governed by the 1940 Act. During that time, we were a business development company under the 1940 Act, or “BDC,” primarily focused on investing in or lending to private and small-cap public companies and making managerial assistance available to such companies. As a BDC, our investments included stock of or membership interests (typically referred to as units) in private companies, small-cap public company stocks, and promissory notes. In some cases, the stock or membership interests we acquired were preferred stock or units, and in other cases the stock or membership interests acquired were common stock or units. In connection with our investments in promissory notes, we frequently obtained warrants to purchase common stock.

Our Management and Employees

Currently, Mr. Douglas M. Polinsky, the Chief Executive Officer and Chairman of our board of directors, and Joseph A. Geraci, II, our Chief Financial Officer and a director of the company, serve as our senior management team. These are also the only two persons who are employees of our company.

Facilities

Our executive offices are located at 1907 Wayzata Boulevard, Suite 205, Wayzata, Minnesota 55391, and our telephone number is: (952) 479-1923. We are parties to two 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; and they do not contain contingent-rent provisions. The leases do not include options to renew. We consider our current office space adequate for our current operations.

Periodic Reporting and Financial Information

We have registered our common stock under the Exchange Act and have reporting obligations, including the requirement that we file annual, quarterly and current reports with the SEC, and the requirement that we follow Regulation 14D relating to proxy solicitations. As required under the Exchange Act, our annual reports contain financial statements audited and reported on by our independent registered public accountants.

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Legal Proceedings

There is no material litigation, arbitration or governmental proceeding currently pending against us or any members of our management team in their capacity as such.

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DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Directors and Executive Officers

The following table sets forth information about our directors and executive officers.

Name	Age	Positions
Douglas M. Polinsky	63	Chief Executive Officer and Chairman
Joseph A. Geraci, II	53	Chief Financial Officer and Director
Lyle A. Berman	80	Director (independent)
Howard P. Liszt	76	Director (independent)
Laurence S. Zipkin	82	Director (independent)

Biographies

Douglas M. Polinsky:  Mr. Polinsky co-founded Mill City Ventures III, Ltd. in January 2006 and since that time has been the Chairman and Chief Executive Officer of the company. Since 1994, Mr. Polinsky has been the President of Great North Capital Consultants, Inc., a financial advisory and investment company that he founded. Great North Capital Consultants, Inc. primarily engages in the business of investing in hard money lending with collateral on the loans being first or second mortgages in both residential and commercial properties. In addition, Great North Capital Consultants, Inc. makes direct investments into public and private companies. Since 2015, Mr. Polinsky has been an independent director of Liberated Syndication, Inc., a Nevada corporation with its operations in Pennsylvania. Liberated Syndication, Inc. is a host and publisher of podcasts. Mr. Polinsky is a member of the Audit and Compensation Committees of the board of directors of Liberated Syndication. Mr. Polinsky earned a Bachelor of Science degree in hotel administration at the University of Nevada, Las Vegas in 1981.

Joseph A. Geraci, II: Mr. Geraci co-founded Mill City Ventures III, Ltd in January 2006 and has been a director and the Chief Financial Officer of the company since that time. Since February 2002 through the present time, Mr. Geraci has been managing member of Isles Capital, LLC, an advisory and consulting firm that assists small businesses, both public and private, in business development. In March 2005, Mr. Geraci also became the managing member of Mill City Advisors, LLC, the general partner of Mill City Ventures, LP, and Mill City Ventures II, LP, each a Minnesota limited partnership that invested directly into both private and public companies. From January 2005 until August 2005, Mr. Geraci served as the Director of Finance for Gelstat Corporation, a purveyor of homeopathic remedies, based in Bloomington, Minnesota. Mr. Geraci provided investment advice to clients as a stockbroker and Vice President of Oak Ridge Financial Services, Inc., a Minneapolis-based broker-dealer firm, from June 2000 to December 2004. While at Oak Ridge Financial Services, Mr. Geraci’s business was focused on structuring and negotiating debt and equity private placements with both private and publicly held companies. Mr. Geraci was employed at another Minneapolis-based brokerage firms from July 1991 to June 2000. From his career and investment experiences, Mr. Geraci has established networks of colleagues, clients, co-investors, and the officers and directors of public and private companies. These networks offer a range of contacts across a number of sectors and companies that may provide opportunities for investment, including many that meet the company’s screening criteria.

In August 2003, the National Association of Securities Dealers (NASD) found in an administrative hearing that Mr. Geraci, while employed by and affiliated with a NASD member, had violated NASD Conduct Rule 2110 and SEC Rule 10b-5 in August 1999, and barred him from associating with any NASD member in the future.

Howard P. Liszt: Mr. Liszt served as Chief Executive Officer of Campbell Mithun, a national marketing communications agency he joined in 1976, until 2001. Under his leadership, Campbell Mithun grew to be one of the 20 largest agencies in the world. He currently serves on the board of : Eggland’s Best. Mr. Liszt has served as a Board member for several industry-leading companies including Land O’ Lakes, ShuffleMaster, Ocular Sciences, and Coleman Natural Foods. Mr. Liszt holds a Bachelor of Arts in Journalism and Marketing and a Masters of Science in Marketing from the University of Minnesota, Minneapolis.

Lyle A. Berman: Mr. Berman is a 1964 graduate of the University of Minnesota with a degree in Business Administration. Mr. Berman began his career with Berman Buckskin, his family’s leather business. He helped grow the business into a major specialty retailer with 27 outlets. In 1990, Mr. Berman participated in the founding of Grand Casinos, Inc. Mr. Berman is credited as one of the early visionaries in the development of casinos outside of the traditional gaming markets of Las Vegas and Atlantic City. In less than five years, the company opened eight casino resorts in four states. In 1994, Mr. Berman financed the initial development of Rainforest

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Cafe. He served as the Chairman and CEO from 1994 until 2000. In October 1995, Mr. Berman was honored with the B’nai B’rith “Great American Traditions Award.” In April 1996, he received the Gaming Executive of the Year Award; in 2004, Mr. Berman was inducted into the Poker Hall of Fame; and in 2009, he received the Casino Lifetime Achievement Award from Raving Consulting & Casino Journal. In 1998, Lakes Entertainment, Inc. was formed. In 2002, as Chairman of the Board and CEO of Lakes Entertainment, Inc., Mr. Berman was instrumental in creating the World Poker Tour. Since January 2005, Mr. Berman has also served as Chairman of the Board of Pokertek, Inc.

Laurence S. Zipkin: Mr. Zipkin is nationally recognized for his expertise in the gaming industry, restaurants, and emerging small growth companies. From 1996 to 2006, Mr. Zipkin owned Oakridge Securities, Inc. where, as an investment banker, he successfully raised capital for various early growth-stage companies and advising clients with regard to private placements, initial public offerings, mergers, debt offerings, bridge and bank financings, developing business plans and evaluating cash needs and resources. He has extensive experience in the merger and acquisition field and has represented companies on both the buy and sell side. Since 2006, Mr. Zipkin has been self-employed, engaging in various consulting activities, owning and operating two restaurant properties, and purchasing distressed real estate. Mr. Zipkin is a licensed insurance agent for both life and health insurance. Mr. Zipkin attended the University of Pennsylvania Wharton School of Finance.

Under the Company’s bylaws, the directors serve for indefinite terms expiring upon the next annual meeting of the company’s shareholders.

When considering whether directors and nominees have the experience, qualifications, attributes and skills to enable the board of directors to satisfy its oversight responsibilities effectively in light of the company’s business and structure, the board of directors focuses primarily on the industry and transactional experience, and other background, in addition to any unique skills or attributes associated with a director. With regard to Messrs. Polinsky and Geraci, the board of directors considered their significant experience, expertise and background with regard to investing in general and the company in particular. With regard to Mr. Berman, the board of directors considered his background and experience with the public securities markets and his former employment and experience in operational capacities. With regard to Mr. Liszt, the board of directors considered his experience on other boards of public companies, his past experience in the communications and advertising fields, and his organizational experience. With regard to Mr. Zipkin, the board of directors considered his knowledge, experience and skills in the finance, public securities and investment banking fields.

Term of Office

All directors hold office until the next annual meeting of the shareholders of the Company and until their successors have been duly elected and qualified. The Company’s bylaws provide that the board of directors will consist of no less than three members. Officers are elected by and serve at the discretion of the board of directors.

Family Relationships

There are no family relationships among our directors or officers, or persons nominated or chosen to be a director or officer. Other than as described above, we are not aware of any other conflicts of interest with any of our executive officers or directors.

Director Independence

As of the closing of this offering, the Board will have reviewed the independence of our directors based on the listing standards of Nasdaq. At present, our board of directors has determined that Messrs. Zipkin, Liszt and Berman qualify as independent directors in accordance with the published listing requirements of the Nasdaq Capital Market. The Nasdaq independence definition includes a series of objective tests, such as that the director is not, and has not been for at least three years, one of our employees and that neither the director, nor any of his family members has engaged in various types of business dealings with us. In addition, our board of directors has not made a subjective determination as to each director that no relationships exist which, in the opinion of our board of directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director, though such subjective determination is required by Nasdaq rules. Had our board of directors made these determinations, our board of directors would have reviewed and discussed information provided by the directors and us with regard to each director’s business and personal activities and relationships as they may relate to us and our management.

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Limitation on Liability and Indemnification of Officers and Directors

Our articles of incorporation will provide that our officers and directors will be indemnified by us to the fullest extent authorized by Minnesota law, as it now exists or may in the future be amended. In addition, our articles of incorporation provide that our directors will not be personally liable for monetary damages to us or our shareholders for breaches of their fiduciary duty as directors, unless they violated their duty of loyalty to us or our shareholders, acted in bad faith, knowingly or intentionally violated the law, authorized unlawful payments of dividends, unlawful stock purchases or unlawful redemptions, or derived an improper personal benefit from their actions as directors.

Our indemnification obligations may discourage shareholders from bringing a lawsuit against our officers or directors for breach of their fiduciary duty. These provisions also may have the effect of reducing the likelihood of derivative litigation against our officers and directors, even though such an action, if successful, might otherwise benefit us and our stockholders. Furthermore, a shareholder’s investment may be adversely affected to the extent we pay the costs of settlement and damage awards against our officers and directors pursuant to these indemnification provisions.

We believe that these provisions are necessary to attract and retain talented and experienced officers and directors.

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers or persons controlling us pursuant to the foregoing provisions, we have been informed that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.

Board Committees

Each of our independent directors, Laurence S. Zipkin, Howard P. Liszt and Lyle A. Berman, will serve on each committee. Our Board will adopt written charters for each of these committees. Upon completion of this offering, copies of the charters will be available on our website. Our Board may establish other committees as it deems necessary or appropriate from time to time.

Audit Committee

The audit committee will be responsible for, among other matters:

● appointing, compensating, retaining, evaluating, terminating, and overseeing our independent registered public accounting firm;

● discussing with our independent registered public accounting firm the independence of its members from its management;

● reviewing with our independent registered public accounting firm the scope and results of their audit;

● approving all audit and permissible non-audit services to be performed by our independent registered public accounting firm;

● overseeing the financial reporting process and discussing with management and our independent registered public accounting firm the interim and annual financial statements that we file with the SEC;

● discussing with management our major financial risk exposures and the steps management has taken to monitor and control such exposures, including our risk assessment and risk management policies;

● reviewing and monitoring our accounting principles, accounting policies, financial and accounting controls, and compliance with legal and regulatory requirements;

● coordinating the oversight by our Board of our code of business conduct and our disclosure controls and procedures;

● establishing procedures for the confidential and/or anonymous submission of concerns regarding accounting, internal controls or auditing matters; and

● reviewing and approving related-person transactions.

Mr. Berman will serve as chairman of our audit committee. As of the closing of this offering, the Board will have reviewed the independence of our directors based on the listing standards of the Nasdaq. Based on this review, the Board shall have determined that that each of Messrs. Zipkin, Liszt and Berman meet the definition of “independent director” for purposes of serving on an audit committee under Rule 10A-3 and the Nasdaq rules. Moreover, of the directors presently serving on the board, Messrs. Berman, Liszt and Zipkin are “independent” as that term is defined in Section 4200(a)(15) of National Association of Securities Dealers’ listing

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standards. This conclusion is based upon information requested from each such director concerning his background, employment and affiliations.

Our board of directors will determine that Mr. Berman qualifies as an “audit committee financial expert,” as such term is defined in Item 407(d)(5) of Regulation S-K.

Compensation Committee

The compensation committee will be responsible for, among other matters:

● reviewing key employee compensation goals, policies, plans and programs;

● reviewing and approving the compensation of our directors and executive officers;

● reviewing and approving employment agreements and other similar arrangements between us and our executive officers; and

● appointing and overseeing any compensation consultants or advisors.

Mr. Liszt will serve as chairman of our compensation committee.

Nominating and Corporate Governance Committee

The purpose of the nominating and corporate governance committee is to assist the board in identifying qualified individuals to become board members, in determining the composition of the board, in monitoring the process to assess board effectiveness, in conducting annual reviews of corporate governance matters and in making related recommendations to the board of directors and its committees. Mr. Liszt will serve as chairman of our nominating and corporate governance committee.

Board Leadership Structure

Currently, Mr. Polinsky is our principal executive officer and chairman of the board of directors.

Risk Oversight

Our Board will oversee a company-wide approach to risk management. Our Board will determine the appropriate risk level for us generally, assess the specific risks faced by us and review the steps taken by management to manage those risks. While our Board will have ultimate oversight responsibility for the risk management process, its committees will oversee risk in certain specified areas.

Specifically, our compensation committee will be responsible for overseeing the management of risks relating to our executive compensation plans and arrangements, and the incentives created by the compensation awards it administers. Our audit committee will oversee management of enterprise risks and financial risks, as well as potential conflicts of interests. Our board of directors will be responsible for overseeing the management of risks associated with the independence of our board of directors.

Controlled Company Exemption

After the completion of this offering, five of our shareholders presently holding as a group 63.42% of our issued and outstanding stock may be deemed to control in excess of 50% of the voting power of our common stock, and as a result, we may be deemed to be a “controlled company” within the meaning of the corporate governance standards of the Nasdaq.  Under these corporate governance standards, a company of which more than 50% of the voting power is held by an individual, group or another company is a “controlled company” and may elect not to comply with certain corporate governance standards, including the requirements (1) that a majority of our board of directors consists of independent directors, (2) that our board of directors has a compensation committee that is comprised entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities and (3) that our board of directors has a nominating/corporate governance committee that is comprised entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities.

If we were to rely on any of the above-stated exemptions, you may not have the same protections afforded to stockholders of companies that are subject to all of these corporate governance requirements. However, whether or not we are deemed to be a “controlled company”

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following this offering, we do not intend to utilize any of the corporate governance exemptions for a “controlled company”. Furthermore, in the event that we are not found to be a “controlled company” and our shares continue to be listed on the Nasdaq, we will be required to comply with these Nasdaq corporate governance standards.

Code of Business Conduct and Ethics

Our board of directors adopted a Code of Ethics on August 5, 2008, and revised March 6, 2013 in connection with our election to become a BDC. The Code of Ethics includes or covers our principal executive officer and principal financial officer, or persons performing similar functions, as required by Sections 406 and 407 of the Sarbanes-Oxley Act of 2002. We formally revised the Code of Ethics again in March 2021, to reflect the withdrawal of our BDC election. Our Code of Ethics is available at our website, www.millcityventures3.com, or without charge, to any shareholder upon written request made to Mill City Ventures III, Ltd., Attention: Chief Executive Officer, 1907 Wayzata Blvd., Suite 205, Wayzata, MN 55391.

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EXECUTIVE COMPENSATION

Summary Compensation Table

The following table summarizes information concerning the compensation awarded to, earned by, or paid to, our Chief Executive Officer (Principal Executive Officer) and our Chief Financial Officer (Principal Financial Officer) during fiscal years 2021 and 2020 (collectively, the “Named Executive Officers”).

				Cash		Stock		All Other
Name and Principal Position	Year	Salary		Bonus		Awards		Compensation		Total
Douglas M. Polinsky,	2021	$	100,000	$	100,000	$	—	$	34,984	$	234,984
Chief Executive Officer	2020	$	50,000	$		$	30,500	$	31,845	$	112,345
Joseph A. Geraci, II,	2021	$	150,000	$	100,000	$	—	$	41,197	$	291,197
Chief Executive Officer	2020	$	100,000	$		$	30,500	$	37,918	$	168,418

* includes additional compensation of payment of health insurance premiums and 401(k) matching contributions under the employment retirement program.

(1) Mr. Polinsky has served as the Company’s Principal Executive Officer and as Chairman of the Board of Directors since 2006 and has an address at 1907 Wayzata Boulevard, Suite 205, Wayzata, MN 55391.

(2) Mr. Geraci has served as the Company’s Chief Financial Officer since founding the Company and has an address at 1907 Wayzata Boulevard, Suite 205, Wayzata, MN 55391.

(3) Stock awards made in 2020 and reflected in this column were made as grants of restricted stock with an estimated grant date fair value as set forth in the table. For each of Messrs. Polinsky and Geraci, the restricted stock grants comprised 50,000 shares of our common stock.

(4) The share-based awards in the “Stock Awards” column represent the grant date fair value of stock awards issued to officers and executives and was determined in accordance with ASC Topic 718. We expect to effect a reverse stock split of our common stock at a ratio of 1-for-2 prior to or upon the effectiveness of the registration statement of which this prospectus forms a part. Share information in the above compensation table is historical and does not reflect our planned reverse stock split.

Outstanding Equity Awards

We had no outstanding options, warrants, unvested stock awards or equity incentive plan awards as of March 31, 2022, held by any named executive. In addition, we have no options, warrants, unvested stock awards or equity incentive plan awards outstanding and held by any named executive as of the date of this filing apart from an aggregate of 65,000 shares of restricted stock issued in April 2022 and subject to forfeiture through the one-year anniversary of issuance, April 11, 2023. The restricted stock awards granted to Messrs. Polinsky and Geraci during 2020 fully vested by their terms in August 2021.

Director Compensation

The following table sets forth director compensation for the year ended December 31, 2021:

Name	Year	Compensation		Total
Douglas M. Polinsky	2021	$	0	$	0
Joseph A. Geraci, II	2021	$	0	$	0
Lyle A. Berman	2021	$	40,000	$	40,000
Howard P. Liszt	2021	$	40,000	$	40,000
Laurence S. Zipkin	2021	$	40,000	$	40,000

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Securities Authorized for Issuance Under Equity Compensation Plans

As of March 31, 2022, we had no outstanding options, warrants or other rights to purchase any equity securities of the Company under any equity compensation plan or “individual compensation arrangement,” as defined in Item 201 of Regulation S-K. Furthermore, as of the date of this filing, we are not a party to any equity compensation plan, nor are we obligated under any “individual compensation arrangement” to issue any options, warrants, rights or other securities. We are not required by applicable state law or the listing standards of any self-regulatory agency (e.g., the OTCQX, NASD, AMEX or NYSE) to obtain the approval of our security holders prior to issuing any such compensatory options, warrants or other rights to purchase securities of the Company.

In August 2020, the Compensation Committee approved, and the Company issued, 50,000 shares of restricted stock to each of Mr. Douglas M. Polinsky and Joseph A. Geraci, II. The shares vested on the one-year anniversary of their issuance and until such time are subject to forfeiture. In April 2022, the Compensation Committee approved, and the Company issued, an aggregate of 65,000 shares of restricted stock to all directors (15,000 shares to each independent director, and 10,000 shares to each non-independent director), which shares will remain subject to forfeiture in the event of termination of service through the one-year anniversary of their issuance.

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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Transactions with Related Persons and Certain Conflict Disclosures

Our board of directors has adopted a Conflict of Interest and Related Party Transaction Policy to require our disclosure of related person transactions and certain other conflicts in our periodic filings with the SEC. Our related-person transactions requiring disclosure under this policy are as follows:

● 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 outstanding principal amount of 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.

During fiscal 2020 through March 31, 2022, the largest aggregate amount of principal outstanding under the above-described lending arrangement with Ms. Zbikowski was $250,000, which remains the amount outstanding as of May 26, 2022.  During that same time period, the debtor has paid no principal amount owing under the promissory note, but has paid an aggregate of $56,250 in interest thereunder, of which $25,000 was paid in 2020, $25,000 was paid in 2021, and $6,250 was paid in the first quarter of 2022.

● 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”). Mr. 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. 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.

From the date of the Loan Agreement, January 3, 2022, through March 31, 2022, the largest aggregate amount of principal outstanding under the above-described borrowing arrangement with the Lenders was $5,325,000, and the amount outstanding under the Loan Agreement as of May 26, 2022 was $1,325,000 after giving effect to a $4,000,000 principal payment we made to the Lenders on April 20, 2022 (which is all of the principal we have paid under the Loan Agreement). Since the date of the Loan Agreement through March 31, 2022, we paid an aggregate of $70,059 in interest owing thereunder.

Related-Party Transaction Policy

The board of directors has adopted a written Conflict of Interest and Related Party Transaction Policy. That policy governs the approval of all related-party transactions, subject only to certain customary exceptions (e.g., compensation, certain charitable donations, transactions made available to all employees generally, etc.). The policy contains a minimum dollar threshold of $5,000.

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The entire board of directors administers the policy and approves any related-party transactions. In general, after full disclosure of all material facts, review and discussion, the board approves or disapproves related-party transactions by a vote of a majority of the directors who have no interest in such transaction, direct or indirect. Procedurally, no director is allowed vote in any approval of a related-party transaction for which he or she is the related party, except that such a director may otherwise participate in a related discussion and shall provide to the board all material information concerning the related-party transaction and the director’s interest therein. If a related-party transaction will be ongoing, the board may establish guidelines for management to follow in its ongoing dealings with the related party.

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PRINCIPAL SHAREHOLDERS

The following table sets forth certain information, as of July 13, 2022, with respect to any person (including any “group”, as that term is used in Section 13(d)(3) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) who is known to us to be the beneficial owner of more than five percent (5%) of any class of our voting securities, and as to those shares of our equity securities beneficially owned by each of our directors and executive officers and all of our directors and executive officers as a group.

Unless otherwise indicated in the table or its footnotes, the business address of each of the following persons or entities is 1907 Wayzata Blvd., Suite 205, Wayzata, Minnesota 55391, and each such person or entity has sole voting and investment power with respect to the shares of common stock set forth opposite their respective name.

Unless otherwise specified in the table below, such information, other than information with respect to our directors and executive officers, is based on a review of statements filed with the Securities and Exchange commission (the “Commission”) pursuant to Sections 13 (d), 13 (f), and 13 (g) of the Exchange Act with respect to our common stock.

The number of shares of common stock beneficially owned by each person is determined under the rules of the Commission and the information is not necessarily indicative of beneficial ownership for any other purpose. Under such rules, beneficial ownership includes any shares as to which such person has sole or shared voting power or investment power and also any shares which the individual has the right to acquire within sixty (60) days after the date hereof, through the exercise of any stock option, warrant or other right. Unless otherwise indicated, each person has sole investment and voting power (or shares such power with his or her spouse) with respect to the shares set forth in the following table. The inclusion herein of any shares deemed beneficially owned does not constitute an admission of beneficial ownership of those shares.

The following table lists, as at the date hereof, the number of shares of our common stock that are beneficially owned by (i) each person or entity known to our Company to be the beneficial owner of more than 5% of the outstanding common stock; (ii) each officer and director of our Company; and (iii) all officers and directors as a group. Information relating to beneficial ownership of common stock by our principal shareholders and management is based upon information furnished by each person using “beneficial ownership” concepts under the rules of the Securities and Exchange Commission. Under these rules, a person is deemed to be a beneficial owner of a security if that person has or shares voting power, which includes the power to vote or direct the voting of the security, or investment power, which includes the power to vote or direct the voting of the security. The person is also deemed to be a beneficial owner of any security of which that person has a right to acquire beneficial ownership within 60 days. Under the Securities and Exchange Commission rules, more than one person may be deemed to be a beneficial owner of the same securities, and a person may be deemed to be a beneficial owner of securities as to which he or she may not have any pecuniary beneficial interest. Except as noted below, each person has sole voting and investment power.

We expect to effect a reverse stock split of our common stock at a ratio of 1-for-2 prior to or upon the effectiveness of the registration statement of which this prospectus forms a part. Share information in the table below gives effect to our planned reverse stock split.

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		Percentage			Percentage
		of			of
	Common	Common		Common	Common
	Shares	Shares		Shares	Shares
	Beneficially	Beneficially		Beneficially	Beneficially
	Owned	Owned		Owned	Owned
	Before	Before		After	After
Holder	Offering	Offering		Offering	Offering
Douglas M. Polinsky (1)	450,450	8.35	%	450,450	7.39	%
Joseph A. Geraci, II (2)	504,414	9.35	%	504,414	8.28	%
Howard P. Liszt (3)	10,000	*		10,000	*
Lyle A. Berman (4)	10,000	*		10,000	*
Laurence S. Zipkin (5)	33,966	*		33,966	*
All current directors and officers as a group (five persons) (6)	863,801	16.01	%	863,801	14.17	%
Neal Linnihan SEP/IRA	1,250,000	23.17	%	1,250,000	20.51	%
Scott and Elizabeth Zbikowski (7)	880,000	16.31	%	880,000	14.44	%
David Bester	500,000	9.27	%	500,000	8.20	%
Patrick Kinney (8)	466,593	8.65	%	466,593	7.66	%
Susan Hartzell	325,000	6.02	%	325,000	5.33	%

* less than one percent

(1) Mr. Polinsky is our Chairman and Chief Executive Officer. Figure includes 145,028 shares of common stock held by Lantern Advisers, LLC, a Minnesota limited liability company co-owned by Messrs. Polinsky and Geraci; 264,353 shares of common stock held individually and directly by Mr. Polinsky; 34,706 shares of common stock held by or on behalf of Great North Capital Corp.; and 6,364 shares of common stock Mr. Polinsky holds as a custodian for his children (beneficial ownership of which Mr. Polinsky disclaims).

(2) Mr. Geraci is a director our company and our Chief Financial Officer. Figure includes 145,028 shares of common stock held by Lantern Advisers, LLC, a Minnesota limited liability company co-owned by Messrs. Geraci and Polinsky; 350,250 shares of common stock held individually and directly by Mr. Geraci; 8,637 shares of common stock held individually by Mr. Geraci’s spouse, and 500 shares of common stock held by Mr. Geraci’s minor child.

(3) Mr. Liszt is a director of our Company.

(4) Mr. Berman is a director of our Company.

(5) Mr. Zipkin is a director of our Company.

(6) Consists of Messrs. Polinsky, Geraci, Liszt, Berman and Zipkin.

(7) Based upon a Schedule 13G filed by Mr. and Mrs. Zbikowski, Mr. Zbikowski is the beneficial owner of 1,140,000 shares of common stock (or 570,000 shares of common stock on a post-split basis), and Mrs. Zbikowski is the beneficial owner of 625,000 shares of common stock (or 312,500 shares of common stock on a post-split basis). Mr. and Mrs. Zbikowski are husband and wife.

(8) Based upon a Schedule 13G filed by Mr. Kinney on March 19, 2013, Mr. Kinney may be deemed to be the beneficial owner of 933,187 shares of common stock (or 466,594 shares of common stock on a post-split basis), which includes 3,640 shares of common stock (or 1,820 shares of common stock on a post-split basis) shares that are held in custodial accounts for the benefit of his grandchildren.

DESCRIPTION OF SECURITIES

The following discussion is a summary of selected provisions of our articles of incorporation, bylaws and Minnesota law as in effect on the date of this prospectus relating to us and our capital stock. This summary does not purport to be complete. This discussion is subject to the relevant provisions of Minnesota law and is qualified by reference to our articles of incorporation, our bylaws and the provisions of Minnesota law. You should read the provisions of our articles of incorporation and our bylaws as currently in effect for provisions that may be important to you.

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Common Stock

Our articles of incorporation authorize us to issue up to 125,000,000 shares of capital stock, $0.001 par value per share (after giving effect to the 1-for-2 reverse stock split). Unless otherwise specifically approved by our board of directors (see "—Preferred Stock" below), all shares of capital stock we issue are common shares. Immediately after the completion of this offering, 6,094,416 shares of our common stock (or 6,194,416 shares in the event that the underwriters fully exercise their option to purchase additional shares in this offering) will be issued and outstanding (again, after giving effect to the 1-for-2 reverse stock split).

Our common shareholders of record are entitled to one vote for each share held on all matters to be voted on by shareholders. Unless specified in our articles of incorporation or bylaws, or as required by applicable provisions of Minnesota law (or stock exchange rules that may apply to us in the future), the affirmative vote of a majority of our shares of common stock that are voted is required to approve any such matter voted on by our shareholders. There is no cumulative voting with respect to the election of directors, with the result that the holders of more than 50% of the shares voted for the election of directors can elect all of our directors. Our shareholders are entitled to receive ratable dividends when, as and if declared by the board of directors out of funds legally available therefor.

Directors on our board serve a one-year term or such longer period until they are replaced, removed or otherwise leave their office. Nasdaq requires that a listed company hold an annual shareholder meeting no later than 12 months following the end of its fiscal year. Thus, we may hold shareholder meetings, whether annual or regular, from time to time. At any such meeting, our common shareholders, together with any other class of capital stock issued and outstanding at that time and entitling its holders to vote, would elect directors to serve on our board of directors.

In the event of a liquidation, dissolution or winding up of our Company, our shareholders are entitled to share ratably in all assets remaining available for distribution to them after payment of liabilities and after provision is made for each class of stock, if any, having preference over the common stock. Our shareholders have no preemptive or other subscription rights. There are no sinking-fund provisions applicable to the common stock or any other class of capital stock.

Dividend Policy

We have on occasion paid cash dividends on our common stock. Our payment of cash dividends in the future will be dependent upon our revenues and earnings, if any, capital requirements and general financial condition. The declaration and payment of any cash dividends in the future will be determined by our Board of Directors, in its discretion, and will depend on a number of factors, including our earnings, capital requirements, overall financial condition and contractual restrictions, if any.

Market for Shares of Common Stock

Shares of our common stock are quoted on the OTCQB of the OTC Markets Group Inc. under the symbol “MCVT”. On July 26, 2022, the closing price per share of our common stock as reported by OTC Markets Group Inc. was $3.22.

Listing

We have applied to have our common stock listed on the Nasdaq Capital Market under the symbol “MCVT.” We will not proceed with this offering in the event our common stock is not approved for listing on Nasdaq.

Transfer Agent

The transfer agent and registrar for our common stock is Pacific Stock Transfer Co.

Preferred Stock

Our articles of incorporation permit us to issue preferred stock from time to time in one or more series. Our board of directors is authorized to fix the voting rights, if any, designations, powers, preferences, the relative, participating, optional or other special rights and any qualifications, limitations and restrictions thereof, applicable to the shares of each series. Our board of directors will be able to, without shareholder approval, issue preferred stock with voting and other rights that could adversely affect the voting power and other rights of the holders of the common stock and could have anti-takeover effects. The ability of our board of directors to issue preferred

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stock without shareholder approval could have the effect of delaying, deferring or preventing a change of control of us or the removal of existing management. We have no preferred stock outstanding at the date hereof. Although we do not currently intend to issue any shares of preferred stock, we cannot assure you that we will not do so in the future. No shares of preferred stock are being issued or registered in this offering.

Anti-Dilution Adjustments

If the number of outstanding shares of common stock is increased by a stock dividend payable in shares of common stock, or by a split-up of shares of common stock or other similar event, then, on the effective date of such stock dividend, split-up or similar event, the number of shares of common stock issuable on exercise of each warrant will be increased in proportion to such increase in the outstanding shares of common stock.

If the number of outstanding shares of our common stock is decreased by a consolidation, combination, reverse stock split or reclassification of shares of common stock or other similar event, then, on the effective date of such consolidation, combination, reverse stock split, reclassification or similar event, the number of shares of common stock issuable on exercise of each warrant will be decreased in proportion to such decrease in outstanding shares of common stock.

In case of any reclassification or reorganization of the outstanding shares of common stock (other than those described above or that solely affects the par value of such shares of common stock), or in the case of any merger or consolidation of us with or into another entity in which any “person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act) acquires more than 50% of the voting power of our securities, or in the case of any sale or conveyance to another corporation or entity of the assets or other property of us as an entirety or substantially as an entirety, the holders of the warrants will thereafter have the right to purchase and receive, upon the basis and upon the terms and conditions specified in the warrants and in lieu of the shares of our common stock immediately theretofore purchasable and receivable upon the exercise of the rights represented thereby, the kind and amount of shares of stock or other securities or property (including cash) receivable upon such reclassification, reorganization, merger or consolidation, or any such sale or transfer, that the holder of the warrants would have received if such holder had exercised their warrants immediately prior to such event. If less than 70% of the consideration receivable by the holders of common stock in such a transaction is payable in the form of common stock in the successor entity that is listed for trading on a national securities exchange or is quoted in an established over-the-counter market, or is to be so listed for trading or quoted immediately following such event, and if the registered holder of the warrant properly exercises the warrant within 30 days following public disclosure of such transaction, the warrant exercise price will be reduced as specified in the warrant agreement based on the Black-Scholes warrant value (as defined in the warrant agreement) of the warrant. The purpose of such exercise price reduction is to provide additional value to holders of the warrants when an extraordinary transaction occurs during the exercise period of the warrants pursuant to which the holders of the warrants otherwise do not receive the full potential value of the warrants. The warrant exercise price will not be adjusted for other events.

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SHARES ELIGIBLE FOR FUTURE SALE

As of July 13, 2022, we had 5,427,749 shares of common stock outstanding (which reflects the reverse stock split at an assumed ratio of 1-for-2, that is expected to occur prior to or following the effectiveness of the registration statement of which this prospectus forms a part). Any shares purchased by an affiliate may not be resold except pursuant to an effective registration statement or an applicable exemption from registration, including an exemption under Rule 144 under the Securities Act. Of our shares of common stock that are outstanding, 1,296,351 are “restricted,” which means they were originally sold in an offering not registered under the Securities Act. Restricted shares may be sold through registration under the Securities Act or under an applicable exemption from registration, such as provided by Rule 144, which is summarized below.

Rule 144

In general, under Rule 144 as currently in effect, a person (or persons whose shares are aggregated), including an affiliate, who beneficially owns “restricted securities” (i.e. securities that are not registered by an effective registration statement) of a “reporting company” may not sell these securities until the person has beneficially owned them for at least six months. Thereafter, affiliates may not sell within any three-month period a number of shares in excess of the greater of: (i) 1% of the then outstanding shares of common stock as shown by the most recent report or statement published by the issuer; and (ii) the average weekly reported trading volume in such securities during the four preceding calendar weeks.

Sales under Rule 144 by our affiliates will also be subject to restrictions relating to manner of sale, notice and the availability of current public information about us and may be affected only through unsolicited brokers’ transactions.

Persons not deemed to be affiliates who have beneficially owned “restricted securities” for at least six months but for less than one year may sell these securities, provided that current public information about the Company is “available,” which means that, on the date of sale, we have been subject to the reporting requirements of the Exchange Act for at least 90 days and are current in our Exchange Act filings. After beneficially owning “restricted securities” for one year, our non-affiliates may engage in unlimited re-sales of such securities.

Shares received by our affiliates in this offering or upon exercise of stock options or upon vesting of other equity-linked awards may be “control securities” rather than “restricted securities.” “Control securities” are subject to the same volume limitations as “restricted securities” but are not subject to holding period requirements.

Lock-Up Agreements

The Company, each of our directors and executive officers, and our 5% and greater stockholders, have agreed not to, subject to certain limited exceptions, offer, pledge, sell, contract to sell, grant any option to purchase, or otherwise dispose of our common stock or any securities convertible into or exchangeable or exercisable for common stock, or to enter into any hedge or other arrangement or any transaction that transfers, directly or indirectly, the economic consequence of ownership of the shares of our common stock, in the case of the Company for a period of 365 days after the date of this prospectus, and in the case of our directors and executive officers and our 5% and greater stockholders for a period of 180 days after the date of this prospectus, without the prior written consent of the underwriter. See “Underwriting—Lock-up Agreements.”

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MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS

The following is a summary of the material U.S. federal income tax considerations relating to the purchase, ownership and disposition of our Common Stock purchased in this offering, which we refer to collectively as our securities, but is for general information purposes only and does not purport to be a complete analysis of all the potential tax considerations. This summary is based upon the provisions of the Internal Revenue Code of 1986, as amended (the “Code”), final, temporary and proposed Treasury regulations promulgated thereunder, administrative rulings and pronouncements and judicial decisions, all as of the date hereof. These authorities may change, possibly retroactively, resulting in U.S. federal income and estate tax consequences different from those set forth below. There can be no assurance that the Internal Revenue Service (the “IRS”) will not challenge one or more of the tax consequences described herein, and we have not obtained, and do not intend to obtain, an opinion of counsel or ruling from the IRS with respect to the U.S. federal income tax considerations relating to the purchase, ownership or disposition of our securities.

This summary does not address any alternative minimum tax considerations, or the tax considerations arising under the laws of any state, local or non-U.S. jurisdiction, or under any non-income tax laws, including U.S. federal gift and estate tax laws, except to the limited extent set forth below. In addition, this summary does not address all of the tax consequences that may be relevant to investors, nor does it address tax considerations applicable to an investor’s particular circumstances or to investors that may be subject to special tax rules, including, without limitation:

● banks, insurance companies or other financial institutions;

● tax-exempt entities or governmental organizations, including agencies or instrumentalities thereof;

● regulated investment companies and real estate investment trusts;

● controlled foreign corporations, passive foreign investment companies and corporations that accumulate earnings to avoid U.S. federal income tax;

● brokers or dealers in securities or currencies;

● traders in securities that elect to use a mark-to-market method of accounting for their securities holdings;

● persons that own, or are deemed to own, more than five percent of our capital stock (except to the extent specifically set forth below);

● tax-qualified retirement plans;

● certain former citizens or long-term residents of the United States;

● partnerships or entities or arrangements classified as partnerships for U.S. federal income tax purposes and other pass-through entities including S corporations and trusts (and any investors therein);

● persons who hold our securities as a position in a hedging transaction, “straddle,” “conversion transaction” or other risk reduction transaction or integrated investment;

● persons who do not hold our securities as a capital asset within the meaning of Section 1221 of the Code; or

● persons deemed to sell our securities under the constructive sale provisions of the Code, or persons holding the securities as part of a “straddle,” hedge, conversion transaction, integrated transaction or other similar transaction.

In addition, if a partnership (or entity or arrangement classified as a partnership for U.S. federal income tax purposes) holds our securities, the tax treatment of a partner generally will depend on the status of the partner and upon the activities of the partnership. Accordingly, partnerships that hold our securities, and partners in such partnerships, should consult their tax advisors.

You are urged to consult your own tax advisors with respect to the application of the U.S. federal income tax laws to your particular situation, as well as any tax consequences of the purchase, ownership and disposition of our securities arising under the U.S. federal estate or gift tax laws or under the laws of any state, local, non-U.S., or other taxing jurisdiction or under any applicable tax treaty.

Consequences to U.S. Holders

The following is a summary of the U.S. federal income tax consequences that will apply to a U.S. holder of our securities. For purposes of this discussion, you are a U.S. holder if, for U.S. federal income tax purposes, you are a beneficial owner of our securities, other than a partnership, that is:

● an individual citizen or resident of the United States;

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● a corporation or other entity taxable as a corporation created or organized in the United States or under the laws of the United States, any State thereof or the District of Columbia;

● an estate trust whose income is subject to U.S. federal income tax regardless of its source; or

● a trust (x) whose administration is subject to the primary supervision of a U.S. court and which has one or more “United States persons” (within the meaning of Section 7701(a)(30) of the Code) who have the authority to control all substantial decisions of the trust or (y) which has made a valid election to be treated as a “United States person.”

Distributions

We do not anticipate paying any dividends on our common stock in the foreseeable future. However, if we do make distributions in cash or other property on our common stock, those payments will constitute dividends for U.S. tax purposes to the extent paid from our current or accumulated earnings and profits, as determined under U.S. federal income tax principles. To the extent our distributions exceed both our current and our accumulated earnings and profits, the excess will constitute a return of capital that will first reduce your basis in our common stock, but not below zero, and then will be treated as gain from the sale or other disposition of stock as described below under “—Sale, Exchange or Other Taxable Disposition of Common Stock.”

Dividend income may be taxed to an individual U.S. holder at rates applicable to long-term capital gains, provided that a minimum holding period and other limitations and requirements are satisfied with certain exemptions. Any dividends that we pay to a U.S. holder that is a corporation will qualify for the dividends received deduction if the requisite holding period is satisfied, subject to certain limitations. U.S. holders should consult their own tax advisors regarding the holding period and other requirements that must be satisfied in order to qualify for the reduced tax rate on dividends or the dividends-received deduction.

Sale, Exchange or Other Taxable Disposition of Common Stock

A U.S. holder will generally recognize capital gain or loss on the sale, exchange or other taxable disposition of our common stock. The amount of gain or loss will equal the difference between the amount realized on the sale and such U.S. holder’s adjusted tax basis in such common stock. The amount realized will include the amount of any cash and the fair market value of any other property received in exchange for such common stock. A U.S. holder’s adjusted tax basis in its common stock will generally equal the U.S. holder’s acquisition cost or purchase price, less any prior distributions treated as a return of capital. Gain or loss will be long-term capital gain or loss if the U.S. holder has held the common stock for more than one year. Long-term capital gains of non-corporate U.S. holders are generally taxed at preferential rates. The deductibility of capital losses is subject to certain limitations.

Information Reporting and Backup Withholding

In general, information reporting requirements may apply to dividends paid to a U.S. holder and to the proceeds of the sale or other disposition of our common stock, unless the U.S. holder is an exempt recipient. Backup withholding may apply to such payments if the U.S. holder fails to provide a taxpayer identification number, a certification of exempt status or has been notified by the IRS that it is subject to backup withholding (and such notification has not been withdrawn).

Any amounts withheld under the backup withholding rules will be allowed as a refund or a credit against a U.S. holder’s U.S. federal income tax liability provided the required information is timely furnished to the IRS.

Unearned Income Medicare Tax

A 3.8% Medicare contribution tax will generally apply to all or some portion of the net investment income of a U.S. holder that is an individual with adjusted gross income that exceeds a threshold amount ($200,000, or $250,000 if married filing jointly).

Consequences to Non-U.S. Holders

The following is a summary of the U.S. federal income tax consequences that will apply to a non-U.S. holder of our securities. A “non-U.S. holder” is a beneficial owner of our securities (other than a partnership or an entity or arrangement treated as a partnership

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for U.S. federal income tax purposes) that, for U.S. federal income tax purposes, is not a U.S. holder. The term “non-U.S. holder” includes:

● a non-resident alien individual (other than certain former citizens and residents of the U.S. subject to U.S. tax as expatriates);

● a foreign corporation;

● an estate or trust that is not a U.S. holder; and

● any other Person that is not a U.S. holder,

but generally does not include an individual who is present in the U.S. for 183 days or more or who is otherwise treated as a U.S. resident in the taxable year. If you are such an individual, you should consult your tax advisor regarding the U.S. federal income tax consequences of the acquisition, ownership or sale or other disposition of our securities.

Distributions

Subject to the discussion below regarding effectively connected income, any distribution paid to a non-U.S. holder, to the extent paid out of our current or accumulated earnings and profits (as determined under U.S. federal income tax principles) generally will constitute a dividend for U.S. federal income tax purposes and, provided such dividends are not effectively connected with the non-U.S. holder’s conduct of a trade or business within the U.S., will be subject to U.S. withholding tax either at a rate of 30% of the gross amount of the dividend or such lower rate as may be specified by an applicable income tax treaty. In order to receive a reduced treaty rate, a non-U.S. holder must provide us with an IRS Form W-8BEN, IRS Form W-8BEN-E or other applicable IRS Form W-8 properly certifying qualification for the reduced rate. These forms must be provided prior to the payment of dividends and must be updated periodically. A non-U.S. holder eligible for a reduced rate of U.S. withholding tax pursuant to an income tax treaty should consult with its individual tax advisor to determine if you may obtain a refund of any excess amounts withheld by timely filing an appropriate claim for refund with the IRS. If a non-U.S. holder holds our securities through a financial institution or other agent acting on the non-U.S. holder’s behalf, the non-U.S. holder will be required to provide appropriate documentation to the agent, which then may be required to provide certification to us or our paying agent, either directly or through other intermediaries.

Dividends received by a non-U.S. holder that are effectively connected with its conduct of a U.S. trade or business (and, if required by an applicable income tax treaty, attributable to a permanent establishment or fixed base maintained by the non-U.S. holder in the United States) are generally exempt from such withholding tax if the non-U.S. holder satisfies certain certification and disclosure requirements. In order to obtain this exemption, the non-U.S. holder must provide us with an IRS Form W-8ECI or other applicable IRS Form W-8 properly certifying such exemption. Such effectively connected dividends, although not subject to withholding tax, are taxed at the same graduated U.S. federal income tax rates applicable to U.S. holders, net of certain deductions and credits. In addition, dividends received by a corporate non-U.S. holder that are effectively connected with its conduct of a U.S. trade or business may also be subject to a branch profits tax at a rate of 30% or such lower rate as may be specified by an applicable income tax treaty. Non-U.S. holders should consult their own tax advisors regarding any applicable tax treaties that may provide for different rules.

Any distribution not constituting a dividend will be treated first as reducing (but not below zero) the Non-U.S. holder’s adjusted tax basis in its Common Stock and, to the extent such distribution exceeds the Non-U.S. holder’s adjusted tax basis, as gain realized from the sale or other disposition of the common stock, which will be treated as described under “Non-U.S. Holders — Gain on Sale, Exchange or Other Taxable Disposition of Common Stock” below.

Gain on Sale, Exchange or Other Taxable Disposition of Common Stock

Subject to the discussion below regarding backup withholding and foreign accounts, a non-U.S. holder generally will not be required to pay U.S. federal income tax on any gain realized upon the sale, exchange or other taxable disposition of our Common Stock unless:

● the gain is effectively connected with the non-U.S. holder’s conduct of a U.S. trade or business (and, if required by an applicable income tax treaty, the gain is attributable to a permanent establishment or fixed base maintained by the non-U.S. holder in the United States);

● the non-U.S. holder is a non-resident alien individual who is present in the United States for a period or periods aggregating 183 days or more during the calendar year in which the sale or disposition occurs and certain other conditions are met; or

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● shares of our common stock constitute U.S. real property interests by reason of our status as a “United States real property holding corporation” (a USRPHC) for U.S. federal income tax purposes at any time within the shorter of the five-year period preceding the non-U.S. holder’s disposition of, or the non- U.S. holder’s holding period for, our common stock (provided that an exception does not apply), and, in the case where shares of our common stock are regularly traded on an established securities market, the Non-U.S. holder has owned, directly or constructively, more than 5% of our common stock at any time within the shorter of the five-year period preceding the disposition or such Non-U.S. holder’s holding period for the shares of our common stock.

We believe that we are not currently and will not become a USRPHC for U.S. federal income tax purposes, and the remainder of this discussion so assumes. However, because the determination of whether we are a USRPHC depends on the fair market value of our U.S. real property relative to the fair market value of our other business assets, there can be no assurance that we will not become a USRPHC in the future. Even if we become a USRPHC, however, as long as our common stock is regularly traded on an established securities market, such common stock will be treated as U.S. real property interests only if the non-U.S. holder actually or constructively hold more than five percent of such regularly traded common stock at any time during the shorter of the five-year period preceding the non-U.S. holder’s disposition of, or the non-U.S. holder’s holding period for, our common stock.

If the non-U.S. holder is described in the first bullet above, it will be required to pay tax on the net gain derived from the sale, exchange or other taxable disposition under regular graduated U.S. federal income tax rates, and a corporate non-U.S. holder described in the first bullet above also may be subject to the branch profits tax at a rate of 30%, or (in each case) such lower rate as may be specified by an applicable income tax treaty. An individual non-U.S. holder described in the second bullet above will be required to pay a flat 30% tax (or such lower rate specified by an applicable income tax treaty) on the gain derived from the sale, exchange or other taxable disposition, which gain may be offset by U.S. source capital losses for the year (provided the non-U.S. holder has timely filed U.S. federal income tax returns with respect to such losses). Non-U.S. holders should consult their own tax advisors regarding any applicable income tax or other treaties that may apply.

Backup Withholding and Information Reporting

Generally, we must report annually to the IRS the amount of dividends paid to you, your name and address and the amount of tax withheld, if any. A similar report will be sent to you. Pursuant to applicable income tax treaties or other agreements, the IRS may make these reports available to tax authorities in your country of residence.

A Non-U.S. holder may have to comply with certification procedures to establish that it is not a United States person in order to avoid information reporting and backup withholding requirements. The certification procedures required to claim a reduced rate of withholding under a treaty generally will satisfy the certification requirements necessary to avoid the backup withholding as well for example, by properly certifying your non-U.S. status on an IRS Form W-8BEN or IRS Form W-8BEN-E or other applicable IRS Form W-8.Notwithstanding the foregoing, backup withholding and information reporting may apply if either we or our paying agent has actual knowledge, or reason to know, that you are a U.S. person.

Backup withholding is not an additional tax; rather, the U.S. federal income tax liability of persons subject to backup withholding will be reduced by the amount of tax withheld. If withholding results in an overpayment of taxes, a refund or credit may generally be obtained from the IRS, provided that the required information is furnished to the IRS in a timely manner.

Foreign Account Tax Compliance

The Foreign Account Tax Compliance Act (“FATCA”) generally imposes withholding tax at a rate of 30% on dividends on and gross proceeds from the sale or other disposition of our securities paid to a “foreign financial institution” (as specially defined under these rules), unless any such institution (1) enters into, and complies with, an agreement with the IRS to report, on an annual basis, information with respect to interests in, and accounts maintained by, the institution that are owned by certain U.S. persons and by certain non-U.S. entities that are wholly or partially owned by U.S. persons and to withhold on certain payments, or (2) if required under an intergovernmental agreement between the United States and an applicable foreign country, reports such information to its local tax authority, which will exchange such information with the U.S. authorities. An intergovernmental agreement between the United States and an applicable foreign country may modify these requirements. Accordingly, the entity through which our securities are held will affect the determination of whether such withholding is required. Similarly, dividends in respect of our securities held by an investor that is a non-financial non-U.S. entity that does not qualify under certain exceptions will generally be subject to withholding at a rate of

56

30%, unless such entity either (1) certifies to us or the applicable withholding agent that such entity does not have any “substantial United States owners” or (2) provides certain information regarding the entity’s “substantial United States owners,” which will in turn be provided to the U.S. Department of Treasury. Non-U.S. holders should consult their own tax advisors regarding the possible implications of this legislation on their investment in our securities.

Each prospective investor should consult its own tax advisor regarding the particular U.S. federal, state and local and non-U.S. tax consequences of purchasing, owning and disposing of our securities, including the consequences of any proposed changes in applicable laws.

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UNDERWRITING

Alexander Capital, L.P. is acting as the book running manager of the offering, and we have entered into an underwriting agreement on the date of this prospectus, with them as representative of the underwriters. Subject to the terms and conditions of the underwriting agreement, we have agreed to sell to each underwriter named below, and each underwriter named below has severally agreed to purchase, at the public offering price less the underwriting discounts set forth on the cover page of this prospectus, the number of shares of Common Stock listed next to its name in the following table:

	Number of
Name of Underwriter	Shares
Alexander Capital, L.P.	666,667
Total	666,667

The underwriters are committed to purchase all the shares of Common Stock offered by us other than those covered by the option to purchase additional shares described below, if they purchase any shares. The obligations of the underwriters may be terminated upon the occurrence of certain events specified in the underwriting agreement. Furthermore, pursuant to the underwriting agreement, the underwriters’ obligations are subject to customary conditions, representations and warranties contained in the underwriting agreement, such as receipt by the underwriters of officers’ certificates and legal opinions.

We have agreed to indemnify the underwriters against specified liabilities, including liabilities under the Securities Act, and to contribute to payments the underwriters may be required to make in respect thereof.

The underwriters are offering the shares, subject to prior sale, when, as and if issued to and accepted by them, subject to approval of legal matters by their counsel and other conditions specified in the underwriting agreement. The underwriters reserve the right to withdraw, cancel or modify offers to the public and to reject orders in whole or in part.

Over-allotment Option

We have granted the underwriters an over-allotment option. This option, which is exercisable for up to 45 days after the date of this prospectus, permits the underwriters to purchase a maximum of 100,000 additional shares (15% of the shares sold in this offering). If the underwriters exercise all or part of this option, it will purchase shares covered by the option at the public offering price per share that appears on the cover page of this prospectus, less the underwriting discount. If this option is exercised in full, the total offering price to the public will be $750,000 and the total net proceeds, before expenses, to us will be $690,000.

Discount

The following table shows the public offering price, underwriting discount and proceeds, before expenses, to us. The information assumes either no exercise or full exercise by the underwriters of their over-allotment option.

			Total	Total
			Without	With
	Per		Over- Allotment	Over- Allotment
	Share		Option	Option
Public offering price	$	7.50	5,000,002.50	5,750,002.50
Underwriting discount (8.0%)	$	0.60	400,000.20	460,000.20
Proceeds, before expenses, to us	$	6.90	4,600,002.30	5,290,002.30

The underwriters propose to offer the shares offered by us to the public at the public offering price per share set forth on the cover of this prospectus. In addition, the underwriters may offer some of the shares to other securities dealers at such price less a concession of $0.30 per share. If all of the shares offered by us are not sold at the public offering price per share, the underwriters may change the offering price per share and other selling terms by means of a supplement to this prospectus.

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We will pay the out-of-pocket accountable expenses of the underwriters in connection with this offering. The underwriting agreement, however, provides that in the event the offering is terminated, any advance expense deposits paid to the underwriters will be returned to the extent that offering expenses are not actually incurred in accordance with FINRA Rule 5110(f)(2)(C).

We have agreed to pay the underwriters’ non-accountable expenses allowance equal to 1% of the public offering price of the shares (excluding shares that we may sell to the underwriters to cover over-allotments). We have also agreed to pay the underwriters’ expenses relating to the offering, including (a) all filing fees incurred in clearing this offering with FINRA; (b) fees, expenses and disbursements relating to background checks of our officers and directors; (c) all fees, expenses and disbursements relating to the registration, qualification or exemption of securities offered under the securities laws of foreign jurisdictions designated by the underwriters; (d) stock transfer and/or stamp taxes, if any, payable upon the transfer of shares of our Common Stock to the underwriters; (e) the costs associated with bound volumes of the public offering materials as well as Lucite cube mementos; (f) the cost associated with the underwriter’s use of book-building and compliance software for the offering, (g) the underwriters’ actual accountable road show expenses for the offering; and (h) up to $75,000 for the fees of the underwriters’ counsel; provided, the maximum amount we have agreed to pay the underwriters for items (b), (e), (f), (g) and (h) above is $150,000. We have agreed to pay an expense deposit of $25,000, or the Advance, to the underwriters, which will be applied against the out-of-pocket accountable expenses that will be payable by us to the underwriters in connection with this offering. Any portion of the Advance will be returned to us in the event it is not actually incurred.

We estimate that the total expenses of the offering payable by us, excluding underwriting discounts and commissions, will be approximately $_______.

Discretionary Accounts

The underwriters do not intend to confirm sales of the securities offered hereby to any accounts over which they have discretionary authority.

Underwriter Warrants

We have agreed to issue to the underwriters warrants to purchase up to a total of 40,000 shares of Common Stock (6% of the shares of Common Stock sold in this offering (excluding the shares sold through the exercise of the over-allotment option)). The warrants are exercisable at $9.37 per share (125% of the public offering price) commencing on a date which is 180 days from the effective date of the offering under this registration statement and expiring on a date which is no more than five (5) years from the effective date of the offering in compliance with FINRA Rule 5110(f)(2)(G). The warrants have been deemed compensation by FINRA and are therefore subject to a 180-day lock-up pursuant to Rule 5110(g)(1) of FINRA. The underwriters (or their permitted assignees under the Rule) will not sell, transfer, assign, pledge, or hypothecate these warrants or the securities underlying these warrants, nor will it engage in any hedging, short sale, derivative, put, or call transaction that would result in the effective economic disposition of the warrants or the underlying securities for a period of 180 days from effectiveness. In addition, the warrants provide for “piggy-back” registration rights with respect to the shares underlying the warrants, exercisable in certain cases for a period of no more than seven (7) years from the effective date of the offering. We will bear all fees and expenses attendant to registering the securities issuable on exercise of the warrants other than underwriting commissions incurred and payable by the holders. The exercise price and number of shares issuable upon exercise of the warrants may be adjusted in certain circumstances including in the event of a stock dividend, extraordinary cash dividend or our recapitalization, reorganization, merger or consolidation. However, the warrant exercise price or underlying shares will not be adjusted for issuances of shares of common stock at a price below the warrant exercise price.

Electronic Offer, Sale and Distribution of Shares

A prospectus in electronic format may be made available on the websites maintained by the underwriters, if any, participating in this offering and the underwriters participating in this offering may distribute prospectuses electronically. The underwriters may agree to allocate a number of shares for sale to its online brokerage account holders. Internet distributions will be allocated by the underwriters that will make internet distributions on the same basis as other allocations. Other than the prospectus in electronic format, the information on these websites is not part of, nor incorporated by reference into, this prospectus or the rregistration sstatement of which this prospectus forms a part, has not been approved or endorsed by us or the underwriters in their capacity as underwriters, and should not be relied upon by investors.

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Stabilization

In connection with this offering, the underwriters may engage in stabilizing transactions, over-allotment transactions, syndicate-covering transactions, penalty bids and purchases to cover positions created by short sales.

● Stabilizing transactions permit bids to purchase shares so long as the stabilizing bids do not exceed a specified maximum and are engaged in for the purpose of preventing or retarding a decline in the market price of the shares while the offering is in progress.

● Over-allotment transactions involve sales by the underwriters of shares in excess of the number of shares the underwriters are obligated to purchase. This creates a syndicate short position which may be either a covered short position or a naked short position. In a covered short position, the number of shares over-allotted by the underwriters is not greater than the number of shares that they may purchase in the over-allotment option. In a naked short position, the number of shares involved is greater than the number of shares in the over-allotment option. The underwriters may close out any short position by exercising their over-allotment option and/or purchasing shares in the open market.

● Syndicate covering transactions involve purchases of shares in the open market after the distribution has been completed in order to cover syndicate short positions. In determining the source of shares to close out the short position, the underwriters will consider, among other things, the price of shares available for purchase in the open market as compared with the price at which they may purchase shares through exercise of the over- allotment option. If the underwriters sell more shares than could be covered by exercise of the over-allotment option and, therefore, have a naked short position, the position can be closed out only by buying shares in the open market. A naked short position is more likely to be created if the underwriters are concerned that after pricing there could be downward pressure on the price of the shares in the open market that could adversely affect investors who purchase in the offering.

● Penalty bids permits the underwriters to reclaim a selling concession from a syndicate member when the shares originally sold by that syndicate member are purchased in stabilizing or syndicate covering transactions to cover syndicate short positions.

These stabilizing transactions, syndicate covering transactions and penalty bids may have the effect of raising or maintaining the market price of our shares of common stock or preventing or retarding a decline in the market price of our shares of common stock. As a result, the price of our common stock or warrants in the open market may be higher than it would otherwise be in the absence of these transactions. Neither we nor the underwriters make any representation or prediction as to the effect that the transactions described above may have on the price of our Common Stock. These transactions may be effected on The Nasdaq Capital Market, in the over-the-counter market or otherwise and, if commenced, may be discontinued at any time.

Passive Market Making

In connection with this offering, the underwriters may engage in passive market making transactions in our Common Stock on the Nasdaq Capital Market in accordance with Rule 103 of Regulation M under the Exchange Act, during a period before the commencement of offers or sales of the shares and extending through the completion of the distribution. A passive market maker must display its bid at a price not in excess of the highest independent bid of that security. However, if all independent bids are lowered below the passive market maker’s bid, then that bid must then be lowered when specified purchase limits are exceeded.

Other Relationships

The underwriters and their respective affiliates may, in the future provide various investment banking, commercial banking and other financial services for us and our affiliates for which they have received, and may in the future receive, customary fees. However, except as disclosed in this prospectus, we have no present arrangements with the underwriters for any further services.

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Offer Restrictions Outside the United States

Other than in the United States, no action has been taken by us or the underwriters that would permit a public offering of the securities offered by this prospectus in any jurisdiction where action for that purpose is required. The securities offered by this prospectus may not be offered or sold, directly or indirectly, nor may this prospectus or any other offering material or advertisements in connection with the offer and sale of any such securities be distributed or published in any jurisdiction, except under circumstances that will result in compliance with the applicable rules and regulations of that jurisdiction. Persons into whose possession this prospectus comes are advised to inform themselves about and to observe any restrictions relating to the offering and the distribution of this prospectus. This prospectus does not constitute an offer to sell or a solicitation of an offer to buy any securities offered by this prospectus in any jurisdiction in which such an offer or a solicitation is unlawful.

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LEGAL MATTERS

The validity of the shares of common stock offered hereby will be passed upon for us by Lucosky Brookman LLP. Certain legal matters will be passed upon for the underwriters by Cozen O’Connor P.C.

EXPERTS

Our balance sheets as of December 31, 2021 and 2020, and the related statements of operations, shareholders’ equity, and cash flows for the years ended December 31, 2021 and 2020 included elsewhere in this prospectus, have been audited by Boulay PLLP, an independent registered public accounting firm, as set forth in its report appearing herein and are included in reliance upon such report given on the authority of such firm as experts in accounting and auditing.

WHERE YOU CAN FIND MORE INFORMATION

We are a reporting company and file annual, quarterly and current reports, and other information with the Securities and Exchange Commission. You may read and copy any document we file with the SEC at the SEC’s public reference room at 100 F Street N.E., Washington, D.C. 20549. You can request copies of such documents by writing to the SEC and paying a fee for the copying cost. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. Our filings are also available to the public from the SEC’s website at www.sec.gov. The SEC’s website contains reports, proxy and information statements and other information regarding registrants that file electronically with the SEC.

This prospectus is part of a registration statement on Form S-1 that we filed with the SEC to register the securities offered hereby under the Securities Act. This prospectus does not contain all of the information included in the registration statement, including certain exhibits and schedules. For further information with respect to our company and the securities offered by this prospectus, as well as the exhibits and schedules to the registration statement, we refer you to the registration statement, those exhibits and schedules, and to the information incorporated by reference in this Prospectus. You may obtain the registration statement and exhibits to the registration statement from the SEC at the address listed above or from the SEC’s website.

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INDEX TO FINANCIAL STATEMENTS

	Page
Condensed Balance Sheets as of March 31, 2022 (Unaudited) and December 31, 2021	F-2
Condensed Statements of Operations for Three Months Ended March 31, 2022 and March 31, 2021 (Unaudited)	F-3
Condensed Statements of Shareholders’ Equity for Three Months Ended March 31, 2022 and March 31, 2021 (Unaudited)	F-4
Condensed Statements of Cash Flows for Three Months Ended March 31, 2022 and March 31, 2021 (Unaudited)	F-5
Condensed Schedule of Investments as of March 31, 2022 (Unaudited) and December 31, 2021	F-6
Notes to Unaudited Condensed Financial Statements for Three Months Ended March 31, 2022 and March 31, 2021	F-9
Report of Independent Registered Accounting Firm	F-18
Balance Sheets as of December 31, 2021 and December 31, 2020	F-20
Statements of Operations for Years Ended December 31, 2021 and December 31, 2020	F-21
Statements of Shareholders’ Equity for the Years Ended December 31, 2021 and December 31, 2020	F-22
Statements of Cash Flows for the Years Ended December 31, 2021 and December 31, 2020	F-23
Schedule of Investments for the Years Ended December 31, 2021 and December 31, 2020	F-24
Notes to Financial Statements for the Years Ended December 31, 2021 and December 31, 2020	F-26

F-1

MILL CITY VENTURES III, LTD.

CONDENSED BALANCE SHEETS

	March 31, 2022
	(unaudited)			December 31, 2021
ASSETS
Investments, at fair value:	$	20,087,500	$	14,098,675
Non-control/non-affiliate investments (cost: $19,943,929 and $13,933,057 respectively)
Cash		71,020		1,936,148
Note receivable		250,000		250,000
Prepaid expenses		29,658		83,674
Interest and dividend receivables		562,993		324,350
Right-of-use lease asset		—		4,984
Total Assets	$	21,001,171	$	16,697,831
LIABILITIES
Line of credit	$	5,325,000	$	—
Accounts payable		104,911		64,028
Dividend payable		100		100
Payable for purchase of investments		—		1,900,000
Lease liability		—		5,654
Deferred interest income		272,000		—
Accrued income tax		1,434,000		1,269,000
Deferred taxes		39,000		45,000
Total Liabilities		7,175,011		3,283,782
SHAREHOLDERS EQUITY (NET ASSETS)
Common stock, par value $0.001 per share (250,000,000 authorized; 10,790,413 outstanding)		10,790		10,790
Additional paid-in capital		10,694,163		10,694,163
Accumulated deficit		(1,159,665)		(1,159,665)
Accumulated undistributed investment loss		(1,582,279)		(1,877,667)
Accumulated undistributed net realized gains on investment transactions		5,719,580		5,580,810
Net unrealized appreciation in value of investments		143,571		165,618
Total Shareholders’ Equity (net assets)		13,826,160		13,414,049
Total Liabilities and Shareholders’ Equity	$	21,001,171	$	16,697,831
Net Asset Value Per Common Share	$	1.28	$	1.24

See accompanying Notes to Financial Statements

F-2

MILL CITY VENTURES III, LTD.

CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)

	Three Months Ended
	March 31,		March 31,
	2022		2021
Investment Income
Interest income	$	1,000,206	$	546,842
Total Investment Income		1,000,206		546,842
Operating Expenses
Professional fees		198,518		142,808
Payroll		196,442		302,080
Insurance		30,097		24,279
Occupancy		16,812		16,689
Director’s fees		30,000		30,000
Interest expense		66,939		—
Other general and administrative		7,010		18,002
Total Operating Expenses		545,818		533,858
Net Investment Gain		454,388		12,984
Realized and Unrealized Gain (Loss) on Investments
Net realized gain on investments		138,770		2,907,999
Net change in unrealized depreciation on investments		(22,047)		(513,250)
Net Realized and Unrealized Gain on Investments		116,723		2,394,749
Net Increase in Net Assets Resulting from Operations Before Taxes	$	571,111	$	2,407,733
Provision for Income Taxes		159,000		662,691
Net Increase in Net Assets Resulting from Operations	$	412,111	$	1,745,042
Net Increase in Net Assets Resulting from Operations per share:
Basic and diluted	$	0.04	$	0.16
Weighted-average number of common shares outstanding - basic and diluted		10,790,413		10,785,913

See accompanying Notes to Financial Statements

F-3

MILL CITY VENTURES III, LTD.

CONDENSED STATEMENTS OF SHAREHOLDERS’ EQUITY (UNAUDITED)

										Accumulated		Net Unrealized
								Accumulated		Undistributed		Appreciation
				Additional				Undistributed		Net Realized Gain		(Depreciation)		Total
	Common			Paid In		Accumulated		Net Investment		on Investments		in Value of		Shareholders’
Three Months Ended March 31, 2022	Shares	Par Value		Capital		Deficit		Loss		Transactions		Investments		Equity
Balance as of December 31, 2021	10,790,413	$	10,790	$	10,694,163	$	(1,159,665)	$	(1,877,667)	$	5,580,810	$	165,618	$	13,414,049
Net investment gain, net of tax of $159,000	—		—		—		—		295,388		—		—		295,388
Net realized gain on investment transactions	—		—		—		—		—		138,770		—		138,770
Depreciation in value of investments	—		—		—		—		—		—		(22,047)		(22,047)
Balance as of March 31, 2022	10,790,413	$	10,790	$	10,694,163	$	(1,159,665)	$	(1,582,279)	$	5,719,580	$	143,571	$	13,826,160

										Accumulated		Net Unrealized
								Accumulated		Undistributed		Appreciation
				Additional				Undistributed		Net Realized Gain		(Depreciation)		Total
	Common			Paid In		Accumulated		Net Investment		on Investments		in Value of		Shareholders’
Three Months Ended March 31, 2021	Shares	Par Value		Capital		Deficit		Loss		Transactions		Investments		Equity
Balance as of December 31, 2020	10,785,913	$	10,786	$	10,673,014	$	(1,159,665)	$	(2,124,419)	$	2,541,850	$	1,699,321	$	11,640,887
Issuance of shares	1,000		1		5,749		—		—		—		—		5,750
Net investment loss, net of tax of $662,691	—		—		—		—		(649,707)		—		—		(649,707)
Net realized gain on investment transactions	—		—		—		—		—		2,907,999		—		2,907,999
Depreciation in value of investments	—		—		—		—		—		—		(513,250)		(513,250)
Balance as of March 31, 2021	10,786,913	$	10,787	$	10,678,763	$	(1,159,665)	$	(2,774,126)	$	5,449,849	$	1,186,071	$	13,391,679

See accompanying Notes to Financial Statements

F-4

MILL CITY VENTURES III, LTD.

CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)

	Three Months Ended
	March 31, 2022		March 31, 2021
Cash flows from operating activities:
Net increase in net assets resulting from operations	$	412,111	$	1,745,042
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		22,047		513,250
Net realized gain on investments		(138,770)		(2,907,999)
Purchases of investments		(7,025,000)		(9,430,664)
Proceeds from sales of investments		1,152,898		5,036,657
Deferred income taxes		(6,000)		662,691
Changes in operating assets and liabilities:
Prepaid expenses and other assets		59,000		(62,043)
Interest and dividends receivable		(238,643)		(144,136)
Receivable for investment sales		—		19,313
Accounts payable and other liabilities		35,229		21,763
Deferred interest income		272,000		144,000
Accrued income taxes		165,000		—
Payable for investment purchase		(1,900,000)		—
Net cash used in operating activities		(7,190,128)		(4,402,126)
Cash flows from financing activities:
Proceeds from line of credit		5,325,000		—
Payments for common stock dividend		—		(539,296)
Net cash provided (used) by financing activities		5,325,000		(539,296)
Net decrease in cash		(1,865,128)		(4,941,422)
Cash, beginning of period		1,936,148		5,440,579
Cash, end of period	$	71,020	$	499,157
Non-cash financing activities:
Common shares issued as consideration for investment	$	—	$	5,750

See accompanying Notes to Financial Statements

F-5

MILL CITY VENTURES III, LTD.

CONDENSED SCHEDULE OF INVESTMENTS

MARCH 31, 2022

					Percentage
					of Net
Investment / Industry	Cost		Fair Value		Assets
Short-Term Non-banking Loans
Consumer - 15% secured loans
AirDog Supplies, Inc.	$	1,250,000	$	1,250,000	9.04	%
Intelligent Mapping, LLC		2,500,000		2,500,000	18.08	%
Financial - 33.33% secured loans
Benton Financial, LLC		1,125,000		1,125,000	8.14	%
Financial - 12% secured loans		500,000		500,000	3.61	%
Litigation Financing - 23% secured loans
The Cross Law Firm, LLC		1,805,750		1,800,000	13.02	%
Real Estate - 15% secured loans		600,000		600,000	4.34	%
Tailwinds, LLC		3,000,000		3,000,000	21.70	%
Real Estate - 12% secured loans
Alatus Development, LLC		3,900,000		3,900,000	28.21	%
Real Estate - 48% secured loans
Villas at 79th, LLC		3,400,000		3,400,000	24.59	%
Total Short-Term Non-Banking Loans		18,080,750		18,075,000	130.73	%
Preferred Stock
Consumer
Wisdom Gaming, Inc		900,000		900,000	6.51	%
Information Technology		150,000		300,000	2.17	%
Total Other Equity		1,050,000		1,200,000	8.68	%
Warrants
Healthcare		679		—	0.00	%
Other Equity
Consumer		212,500		212,500	1.54	%
Financial		600,000		600,000	4.34	%
Total Other Equity		812,500		812,500	5.88	%
Total Investments	$	19,943,929	$	20,087,500	145.29	%
Total Cash		71,020		71,020	0.51	%
Total Investments and Cash	$	20,014,949	$	20,158,520	145.80	%

F-6

MILL CITY VENTURES III, LTD.

SCHEDULE OF INVESTMENTS

DECEMBER 31, 2021

					Percentage
					of Net
	Cost		Fair Value		Assets
Short-Term Non-banking Loans
Consumer - 15% secured loans
AirDog Supplies, Inc.	$	1,250,000	$	1,250,000	9.32	%
Financial - 52% secured loans		500,000		500,000	3.73	%
Financial - 12% secured loans		500,000		500,000	3.73	%
Litigation Financing - 23% secured loans
The Cross Law Firm, LLC		1,805,750		1,800,000	13.42	%
Real Estate - 15% secured loans		700,000		700,000	5.22	%
Tailwinds, LLC		3,000,000		3,000,000	22.36	%
Real Estate - 12% secured loans
Alatus Development, LLC		3,900,000		3,900,000	29.07	%
Total Short-Term Non-Banking Loans		11,655,750		11,650,000	86.85	%
Common Stock
Financial Services		414,128		436,175	3.25	%
Preferred Stock
Consumer
Wisdom Gaming, Inc		900,000		900,000	6.71	%
Information Technology		150,000		300,000	2.24	%
Total Other Equity		1,050,000		1,200,000	8.95	%
Warrants
Healthcare		679		—	0.00	%
Other Equity
Consumer		212,500		212,500	1.58	%
Financial		600,000		600,000	4.47	%
Total Other Equity		812,500		812,500	6.05	%
Total Investments	$	13,933,057	$	14,098,675	105.10	%
Total Cash		1,936,148		1,936,148	14.43	%
Total Investments and Cash	$	15,869,205	$	16,034,823	119.53	%

F-7

MILL CITY VENTURES III, LTD.

NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

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 Investment Company Act of 1940 (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 – SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation: The accompanying unaudited condensed financial statements of Mill City Ventures have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States (GAAP) for complete financial statements. 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 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.

Use of estimates: The preparation of financial statements in conformity with GAAP requires management and our Board of Directors 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, and the differences could be material. For more information, see the “Valuation of portfolio investments” caption below, and “Note 4 – Fair Value of Financial Instruments” below. The Company is an investment company following accounting and reporting guidance in ASC 946.

Cash deposits: We maintain our cash balances in financial institutions and with regulated financial investment brokers. Cash on deposit in excess of FDIC and similar coverage is subject to the usual banking risk of funds in excess of those limits.

Valuation of portfolio investments: We carry our investments in accordance with ASC Topic 820, Fair Value Measurements and Disclosures (“ASC 820”), issued by the Financial Accounting Standards Board (“FASB”), which defines fair value, establishes a framework for measuring fair value, and requires disclosures about fair value measurements. Fair value is generally based on quoted market prices provided by independent pricing services, broker or dealer quotations, or alternative price sources. In the absence of quoted market prices, broker or dealer quotations, or alternative price sources, investments are measured at fair value as determined by our Board of Directors, based on, among other things, the input of our executive management, the Audit Committee of our Board of Directors, and any independent third-party valuation experts that may be engaged by management to assist in the valuation of our portfolio investments, but in all cases consistent with our written valuation policies and procedures.

Due to the inherent uncertainties of valuation, certain estimated fair values may differ significantly from the values that would have been realized had a ready market for these investments existed, and these differences could be material. In addition, such investments are generally less liquid than publicly traded securities. If we were required to liquidate a portfolio investment in a forced or liquidation sale, we could realize significantly less than the value at which we have recorded it.

F-9

MILL CITY VENTURES III, LTD.

NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

Accounting guidance establishes a hierarchal disclosure framework that prioritizes and ranks the level of market price observability of inputs used in measuring investments at fair value. Observable inputs must be used when available. Observable inputs are inputs that market participants would use in valuing the asset or liability based on market data obtained from independent sources. Unobservable inputs are inputs that reflect our assumptions about the factors market participants would use in valuing the asset or liability based upon the best information available. Assets and liabilities measured at fair value are to be categorized into one of the three hierarchy levels based on the relative observability of inputs used in the valuation. The three levels are defined as follows:

● Level 1: Observable inputs based on quoted prices (unadjusted) in active markets for identical assets or liabilities.

● Level 2: Observable inputs based on quoted prices for similar assets and liabilities in active markets, or quoted prices for identical assets and liabilities in inactive markets.

● Level 3: Unobservable inputs that reflect an entity’s own assumptions about what inputs a market participant would use in pricing the asset or liability based on the best information available in the circumstances.

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 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. 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.

F-10

MILL CITY VENTURES III, LTD.

NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

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 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:

We account for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial statement carrying amount and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.

We record net deferred tax assets to the extent we believe these assets will more likely than not be realized. In making such determination, we consider all available evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies and recent financial operations. In the event we were to determine we would be able to realize our deferred income tax assets in the future in excess of their recorded amount, we would make an adjustment to the valuation allowance, which would reduce the provision for income taxes.

We file income tax returns in the U.S. Federal jurisdiction and various state jurisdictions. We do not believe there will be any material changes in 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: Realized gains or losses on the sale of investments are calculated using the specific investment method.

Interest income, adjusted for amortization of premiums and accretion of discounts, is recorded on an accrual basis. Discounts from and premiums to par value on securities purchased are accreted or amortized, as applicable, into interest income over the life of the related security using the effective-yield method. The amortized cost of investments represents the original cost, adjusted for the accretion of discounts and amortization of premiums, if any. Loans are generally placed on non-accrual status when principal or interest payments are past due 30 days or more, or when there is reasonable doubt that principal or interest will be collected in full. Loan origination fees are recognized when loans are issued. Accrued and unpaid interest is generally reversed when a loan is placed on non-accrual status. Interest payments received on non-accrual loans may be recognized as income or applied to principal depending upon management’s judgment regarding collectability. Non-accrual loans are restored to accrual status when past-due principal and interest is paid and, in management’s judgment, are likely to remain current. We may make exceptions to the policy described above if a loan has sufficient collateral value and is in the process of collection.

Dividend income on preferred equity securities is recorded as dividend income on an accrual basis to the extent that such amounts are payable by the portfolio company and are expected to be collected. Dividend income on common equity securities is recorded on the record date for private portfolio companies or on the ex-dividend date for publicly traded portfolio companies.

Certain investments may have contractual payment-in-kind (“PIK”) interest or dividends. PIK represents accrued interest or accumulated dividends that are added to the loan principal or stated value of the investment on the respective interest- or dividend-payment dates rather than being paid in cash, and generally becomes due at maturity or upon being repurchased by the issuer. PIK interest or dividends is recorded as interest or dividend income, as applicable. If at any point we believe that PIK interest or dividends is not expected be realized, the PIK-generating investment will be placed on non-accrual status. Accrued PIK interest or dividends are generally reversed through interest or dividend income, respectively, when an investment 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.

F-11

MILL CITY VENTURES III, LTD.

NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

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 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		Percentage of		Investments at		Percentage of
	Amortized Cost		Amortized Cost		Fair Value		Fair Value
Short-term Non-banking Loans	$	18,080,750	90.6	%	$	18,075,000	90.0	%
Preferred Stock		1,050,000	5.3			1,200,000	5.9
Warrants		679	—			—	—
Other Equity		812,500	4.1			812,500	4.1
Total	$	19,943,929	100.0	%	$	20,087,500	100.0	%

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		Percentage of		Investments at		Percentage of
	Amortized Cost		Amortized Cost		Fair Value		Fair Value
Short-term Non-banking Loans	$	11,655,750	83.7	%	$	11,650,000	82.6	%
Preferred Stock		1,050,000	7.5			1,200,000	8.5
Common Stock		414,128	3.0			436,175	3.1
Warrants		679	—			—	—
Other Equity		812,500	5.8			812,500	5.8
Total	$	13,933,057	100.0	%	$	14,098,675	100.0	%

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		Percentage of
	Fair Value		Fair Value
Consumer	$	4,862,500	24.2	%
Financial		4,025,000	20.0
Information Technology		300,000	1.5
Real Estate		10,900,000	54.3
Total	$	20,087,500	100.0	%

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
	Investments at		Percentage of
	Fair Value		Fair Value
Consumer	$	2,362,500	16.8	%
Financial		3,836,175	27.2
Information Technology		300,000	2.1
Real Estate		7,600,000	53.9
Total	$	14,098,675	100.0	%

F-12

MILL CITY VENTURES III, LTD.

NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 4 – FAIR VALUE OF FINANCIAL INSTRUMENTS

Level 3 valuation information: Due to the inherent uncertainty in the valuation process, the estimate of the fair value of our investment portfolio as of 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
	Level 1		Level 2		Level 3		Total
Short-term Non-banking Loans	$	—	$	—	$	18,075,000	$	18,075,000
Preferred Stock		—		—		1,200,000		1,200,000
Other Equity		—		—		812,500		812,500
Total	$	—	$	—	$	20,087,500	$	20,087,500

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
	Level 1		Level 2		Level 3		Total
Short-term Non-banking Loans	$	—	$	—	$	11,650,000	$	11,650,000
Preferred Stock		—		—		1,200,000		1,200,000
Common Stock		436,175		—		—		436,175
Other Equity		—		—		812,500		812,500
Total	$	436,175	$	—	$	13,662,500	$	14,098,675

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				Common
	Loans		Preferred Stock		Stock		Warrants		Other Equity
Balance as of January 1, 2022	$	11,650,000	$	1,200,000	$	—	$	—	$	812,500
Net change in unrealized appreciation		—		—		—		—		—
Purchases and other adjustments to cost		7,025,000		—		—		—		—
Sales and redemptions		(600,000)		—		—		—		—
Net realized loss		—		—		—		—		—
Balance as of March 31, 2022	$	18,075,000	$	1,200,000	$	—	$	—	$	812,500

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.

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	3/31/22 FMV		Valuation Technique	Unobservable Inputs	Range
ST Non-banking Loans	$	18,075,000	discounted cash flow	determining private company credit rating	12-48	%
Other Equity		812,500	last secured funding known by company	economic changes since last funding
Preferred Stock		1,200,000	last funding secured by company	economic changes since last funding
	$	20,087,500

F-13

MILL CITY VENTURES III, LTD.

NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

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		Preferred		Common
	Loans		Stock		Stock		Warrants		Other Equity
Balance as of January 1, 2021	$	2,789,000	$	300,000	$	—	$	—	$	278,897
Net change in unrealized appreciation		—		—		—		—		—
Purchases and other adjustments to cost		24,765,333		900,000		—		—		812,500
Sales and redemptions		(15,904,333)		—		—		—		(278,897)
Net realized loss		—		—		—		—		—
Balance as of December 31, 2021	$	11,650,000	$	1,200,000	$	—	$	—	$	812,500

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:

Security Type	12/31/21 FMV		Valuation Technique	Unobservable Inputs	Range
ST Non-banking Loans	$	11,650,000	discounted cash flow	determining private company credit rating	12-44	%
Other Equity		812,500	last secured funding known by company	economic changes since last funding
Preferred Stock		1,200,000	last funding secured by company	economic changes since last funding
	$	13,662,500

NOTE 5 – 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”). Mr. 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 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

F-14

MILL CITY VENTURES III, LTD.

NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

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 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.

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

NOTE 9 – PER-SHARE INFORMATION

Basic net gain per common share is computed by dividing net increase in net assets resulting from operations by the weighted-average number of common shares outstanding during the period. A reconciliation of the numerator and denominator used in the calculation of basic and diluted net gain (loss) per common share is set forth below:

	For the Three Months Ended
	March 31,
	2022		2021
Numerator: Net increase (decrease) in net assets resulting from operations	$	412,111	$	1,745,042
Denominator: Weighted-average number of common shares outstanding		10,790,413		10,785,913
Basic and diluted net gain (loss) per common share	$	0.04	$	0.16

F-15

MILL CITY VENTURES III, LTD.

NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 10 – OPERATING LEASES

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, 2021 was 4.5%.

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	$	4,779	$	4,779
Variable lease cost		4,601		4,478
Short-term lease cost		7,432		7,432
Total	$	16,812	$	16,689

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:

	Operating
	Leases
2022	$	18,164
2023		14,859
Total lease payments		33,023
Less: interest		(1,035)
Present value of lease liabilities	$	31,988

F-16

MILL CITY VENTURES III, LTD.

NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 11 – FINANCIAL HIGHLIGHTS

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

	Three Months Ended March 31,
	2022			2021		2020		2019		2018
Per Share Data (1)
Net asset value at beginning of period	$	1.24		1.08		0.91		1.02		0.87
Net investment income (loss)		0.04		0.00		0.00		(0.02)		(0.01)
Net realized and unrealized gains (losses)		0.01		0.22		(0.03)		0.12		0.06
Provision for income taxes		(0.01)		(0.06)		0.00		0.00		0.00
Payment of common stock dividend		0.00		0.00		0.00		(0.05)		0.00
Net asset value at end of period	$	1.28		1.24		0.88		1.07		0.92
Ratio / Supplemental Data
Per share market value of investments at end of period	$	1.86		1.25		0.41		0.78		0.76
Shares outstanding at end of period		10,790,413		10,786,913		11,067,402		11,067,402		11,067,402
Average weighted shares outstanding for the period		10,790,413		10,785,913		11,067,402		11,067,402		11,863,392
Net assets at end of period	$	13,826,160		13,391,679		9,786,615		11,890,188		9,783,191
Average net assets (2)	$	13,620,104		12,516,283		9,927,574		12,911,895		9,770,410
Total investment return		3.23	%	14.81	%	(3.30)	%	4.90	%	5.75	%
Portfolio turnover rate (3)		8.46	%	40.24	%	0.75	%	0.93	%	0.80	%
Ratio of operating expenses to average net assets (3)		(15.28)	%	(16.20)	%	(7.82)	%	(6.06)	%	(7.52)	%
Ratio of net investment income (loss) to average net assets (3)		14.24	%	0.42	%	0.87	%	(4.87)	%	(6.16)	%
Ratio of realized gains (losses) to average net assets (3)		4.20	%	133.32	%	1.00	%	137.57	%	2.17	%

(1) Per-share data was derived using the ending number of shares outstanding for the period.

(2) Based on the monthly average of net assets as of the beginning and end of each period presented.

(3) Ratios are annualized.

NOTE 12 – Subsequent Events

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.

F-17

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and

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, 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. 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 – 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, 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

F-18

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, 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: · 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.

Boulay PLLP

We have served as the Company’s auditor since 2019

PCAOB ID 542

Minneapolis, Minnesota

March 14, 2022

F-19

Mill City Ventures III, Ltd.

Balance Sheets

	December 31, 2021		December 31, 2020
ASSETS
Investments, at fair value:	$	14,098,675	$	6,667,897
Non-control/non-affiliate investments (cost: $13,933,057 and $4,968,576 respectively)
Cash		1,936,148		5,440,579
Note receivable		250,000		250,000
Prepaid expenses		83,674		43,838
Receivable for sale of investments		—		19,313
Interest and dividend receivables		324,350		65,911
Right-of-use lease asset		4,984		23,345
Total Assets	$	16,697,831	$	12,510,883
LIABILITIES
Accounts payable	$	64,028	$	32,917
Dividend payable		100		539,296
Payable for purchase of investments		1,900,000		—
Lease liability		5,654		26,061
Accrued income tax expense		1,269,000		13,722
Deferred taxes		45,000		258,000
Total Liabilities		3,283,782		869,996
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		10,786
Additional paid-in capital		10,694,163		10,673,014
Accumulated deficit		(1,159,665)		(1,159,665)
Accumulated undistributed investment loss		(1,877,667)		(2,124,419)
Accumulated undistributed net realized gains on investment transactions		5,580,810		2,541,850
Net unrealized appreciation in value of investments		165,618		1,699,321
Total Shareholders' Equity (Net Assets)		13,414,049		11,640,887
Total Liabilities and Shareholders' Equity	$	16,697,831	$	12,510,883
Net Asset Value Per Common Share	$	1.24	$	1.08

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

F-20

Mill City Ventures III, Ltd.

Statements of Operations

	Year Ended
	December 31,		December 31,
	2021		2020
Investment Income
Interest income	$	2,656,201	$	1,282,175
Dividend income		—		15,462
Total Investment Income		2,656,201		1,297,637
Operating Expenses
Professional fees		453,440		175,612
Payroll		556,432		301,494
Insurance		108,165		85,237
Occupancy		66,459		66,307
Director's fees		120,000		90,000
Depreciation and amortization		—		2,071
Other general and administrative		50,255		15,069
Total Operating Expenses		1,354,751		735,790
Net Investment Gain		1,301,450		561,847
Realized and Unrealized Gain (Loss) on Investments
Net realized gain on investments		4,118,001		5,330
Net change in unrealized appreciation (depreciation) on investments		(1,533,703)		1,934,794
Net Realized and Unrealized Gain (Loss) on Investments		2,584,298		1,940,124
Net Increase in Net Assets Resulting from Operations Before Taxes		3,885,748		2,501,971
Provision For Income Taxes		1,054,698		288,401
Net Increase in Net Assets Resulting from Operations	$	2,831,050	$	2,213,570
Net Increase in Net Assets Resulting from Operations per share:
Basic and diluted	$	0.26	$	0.20
Weighted-average number of common shares outstanding - basic and diluted		10,789,294		10,869,054

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

F-21

Mill City Ventures III, Ltd.

Statements of Shareholders’ Equity

For the years ended December 31, 2021 and 2020

										Accumulated		Net
								Accumulated		Undistributed		Unrealized
				Additional				Undistributed		Net Realized Gain		Appreciation		Total
	Common			Paid In		Accumulated		Net Investment		on Investments		in value of		Shareholders'
Year Ended December 31, 2021	Shares	Par Value		Capital		Deficit		Loss		Transactions		Investments		Equity
Balance as of December 31, 2020	10,785,913	$	10,786	$	10,673,014	$	(1,159,665)	$	(2,124,419)	$	2,541,850	$	1,699,321	$	11,640,887
Common shares issued in consideration for expense payment	4,500		4		21,149		—		—		—		—		21,153
Dividend declared	—		—		—		—		—		(1,079,041)		—		(1,079,041)
Undistributed net investment gain	—		—		—		—		246,752		—		—		246,752
Undistributed net realized gain on investment transactions	—		—		—		—		—		4,118,001		—		4,118,001
Depreciation in value of investments	—		—		—		—		—		—		(1,533,703)		(1,533,703)
Balance as of December 31, 2021	10,790,413	$	10,790	$	10,694,163	$	(1,159,665)	$	(1,877,667)	$	5,580,810	$	165,618	$	13,414,049

										Accumulated
								Accumulated		Undistributed		Net Unrealized
				Additional				Undistributed		Net Realized Gain		Appreciation		Total
	Common			Paid In		Accumulated		Net Investment		on Investments		in value		Shareholders'
Year Ended December 31, 2020	Shares	Par Value		Capital		Deficit		Loss		Transactions		of Investments		Equity
Balance as of December 31, 2019	11,067,402	$	11,067	$	10,774,653	$	(1,159,665)	$	(2,397,865)	$	3,075,816	$	(235,473)	$	10,068,533
Repurchase of shares	(381,489)		(381)		(162,539)		—		—		—		—		(162,920)
Stock based compensation	100,000		100		60,900		—		—		—		—		61,000
Dividends declared	—		—		—				—		(539,296)		—		(539,296)
Undistributed net investment gain	—		—		—		—		273,446		—		—		273,446
Undistributed net realized gain on investment transactions	—		—		—		—		—		5,330		—		5,330
Appreciation in value of investments	—		—		—		—		—		—		1,934,794		1,934,794
Balance as of December 31, 2020	10,785,913	$	10,786	$	10,673,014	$	(1,159,665)	$	(2,124,419)	$	2,541,850	$	1,699,321	$	11,640,887

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

F-22

Mill City Ventures III, Ltd.

Statements of Cash Flows

	Year Ended
	December 31, 2021		December 31, 2020
Cash flows from operating activities:
Net increase in net assets resulting from operations	$	2,831,050	$	2,213,570
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		1,533,703		(1,934,794)
Net realized gain on investments		(4,118,001)		(5,330)
Purchases of investments		(27,029,292)		(9,405,802)
Proceeds from sales of investments		22,188,562		6,418,926
Stock-based compensation		—		61,000
Depreciation & amortization expense		—		2,071
Income taxes payable		1,255,278		—
Deferred income taxes		(213,000)		271,722
Common shares issued as consideration for expense payment		15,403		—
Changes in operating assets and liabilities:
Prepaid expenses and other assets		(21,475)		5,197
Interest and dividends receivable		(258,439)		(59,411)
Receivable for investment sales		19,313		(19,313)
Accounts payable and other liabilities		10,804		(10,993)
Payable for investment purchase		1,900,000		—
Net cash used in operating activities		(1,886,094)		(2,463,157)
Cash flows from financing activities:
Payments for repurchase of common stock		—		(162,920)
Payments for common stock dividend		(1,618,337)		—
Net cash used by financing activities		(1,618,337)		(162,920)
Net decrease in cash		(3,504,431)		(2,626,077)
Cash, beginning of period		5,440,579		8,066,656
Cash, end of period	$	1,936,148	$	5,440,579
Supplemental disclosure of cash flow information:
Cash paid for income taxes	$	32,398	$	16,679
Non-cash financing activities:
Common shares issued as consideration for investment	$	5,750	$	—
Dividend declared to common stock shareholders		—		539,296

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

F-23

Mill City Ventures III, Ltd.

Investment Schedule

As of December 31, 2021

					Percentage
					of Net
Investment / Industry	Cost		Fair Value		Assets
Short-Term Non-banking Loans
Consumer - 15% secured loans
AirDog Supplies, Inc.	$	1,250,000	$	1,250,000	9.32	%
Financial - 52% secured loans		500,000		500,000	3.73	%
Financial - 12% secured loans		500,000		500,000	3.73	%
Litigation Financing - 23% secured loans
The Cross Law Firm, LLC		1,805,750		1,800,000	13.42	%
Real Estate - 15% secured loans		700,000		700,000	5.22	%
Tailwinds, LLC		3,000,000		3,000,000	22.36	%
Real Estate - 12% secured loans
Alatus Development, LLC		3,900,000		3,900,000	29.07	%
Total Short-Term Non-Banking Loans		11,655,750		11,650,000	86.85	%
Common Stock
Financial Services		414,128		436,175	3.25	%
Preferred Stock
Consumer
Wisdom Gaming, Inc		900,000		900,000	6.71	%
Information Technology		150,000		300,000	2.24	%
Total Other Equity		1,050,000		1,200,000	8.95	%
Warrants
Healthcare		679		—	0.00	%
Other Equity
Consumer		212,500		212,500	1.58	%
Financial		600,000		600,000	4.47	%
Total Other Equity		812,500		812,500	6.05	%
Total Investments	$	13,933,057	$	14,098,675	105.10	%
Total Cash		1,936,148		1,936,148	14.43	%
Total Investments and Cash	$	15,869,205	$	16,034,823	119.53	%

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

F-24

Investment Schedule

As of December 31, 2020

					Percentage
					of Net
Investment / Industry	Cost		Fair Value		Assets
Short-Term Non-banking Loans
Consumer - 20% secured loans	$	400,000	$	400,000	3.44	%
Financial - 44% secured loans		400,000		400,000	3.44	%
Financial - 36% secured loans		500,000		500,000	4.30	%
Real Estate - 15% secured loans
Alatus Development, LLC		1,250,000		1,250,000	10.74	%
Other		239,000		239,000	2.05	%
Total Short-Term Non-Banking Loans		2,789,000		2,789,000	23.97	%
Common Stock
Consumer
Ammo, Inc.		1,750,000		3,300,000	28.34	%
Preferred Stock
Information Technology		150,000		300,000	2.58	%
Warrants
Healthcare		679		—	0.00	%
Other Equity
Leisure & Hospitality		278,897		278,897	2.40	%
Total Investments	$	4,968,576	$	6,667,897	57.30	%
Total Cash		5,440,579		5,440,579	46.74	%
Total Investments and Cash	$	10,409,155	$	12,108,476	104.04	%

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

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

Cash deposits: We maintain our cash balances in financial institutions and with regulated financial investment brokers. Cash on deposit in excess of FDIC and similar coverage is subject to the usual banking risk of funds in excess of those limits.

Valuation of portfolio investments: We carry our investments in accordance with ASC Topic 820, Fair Value Measurements and Disclosures (“ASC 820”), issued by the Financial Accounting Standards Board (“FASB”), which defines fair value, establishes a framework for measuring fair value, and requires disclosures about fair value measurements. Fair value is generally based on quoted market prices provided by independent pricing services, broker or dealer quotations, or alternative price sources. In the absence of quoted market prices, broker or dealer quotations, or alternative price sources, investments are measured at fair value as determined by 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 available. Assets and liabilities measured at fair value are to be categorized into one of the three hierarchy levels based on the relative observability of inputs used in the valuation. The three levels are defined as follows:

● Level 1: Observable inputs based on quoted prices (unadjusted) in active markets for identical assets or liabilities.

● Level 2: Observable inputs based on quoted prices for similar assets and liabilities in active markets, or quoted prices for identical assets and liabilities in inactive markets.

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● Level 3: Unobservable inputs that reflect an entity’s own assumptions about what inputs a market participant would use in pricing the asset or liability based on the best information available in the circumstances.

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:

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

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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, 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.

Interest income, adjusted for amortization of premiums and accretion of discounts, is recorded on an accrual basis. Discounts from and premiums to par value on securities purchased are accreted or amortized, as applicable, into interest income over the life of the related security using the effective-yield method. The amortized cost of investments represents the original cost, adjusted for the accretion of discounts and amortization of premiums, if any. Loans are generally placed on non-accrual status when principal or interest payments are past due 30 days or more, or when there is reasonable doubt that principal or interest will be collected in full. Loan origination fees are recognized when loans are issued. Accrued and unpaid interest is generally reversed when a loan is placed on non-accrual status. Interest payments received on non-accrual loans may be recognized as income or applied to principal depending upon management’s judgment regarding collectability. Non-accrual loans are restored to accrual status when past-due principal and interest is paid and, in management’s judgment, are likely to remain current. We may make exceptions to the policy described above if a loan has sufficient collateral value and is in the process of collection.

Dividend income on preferred equity securities is recorded as dividend income on an accrual basis to the extent that such amounts are payable by the portfolio company and are expected to be collected. Dividend income on common equity securities is recorded on the record date for private portfolio companies or on the ex-dividend date for publicly traded portfolio companies.

Certain investments may have contractual payment-in-kind (“PIK”) interest or dividends. PIK represents accrued interest or accumulated dividends that are added to the loan principal or stated value of the investment on the respective interest- or dividend-payment dates rather than being paid in cash, and generally becomes due at maturity or upon being repurchased by the issuer. PIK interest or dividends is recorded as interest or dividend income, as applicable. If at any point we believe that PIK interest or dividends is not expected be realized, the PIK-generating investment will be placed on non-accrual status. Accrued PIK interest or dividends are generally reversed through interest or dividend income, respectively, when an investment 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.

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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:

	For the Year Ended December 31,
	2021		2020
Numerator: Net increase in net assets resulting from operations	$	2,831,050	$	2,213,570
Denominator: Weighted-average number of common shares outstanding		10,789,294		10,869,054
Basic and diluted net gain per common share	$	0.26	$	0.20

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 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:

	Year Ended		Year Ended
	December 31,		December 31,
	2021		2020
Operating lease costs	$	19,116	$	19,116
Variable lease cost		17,613		17,461
Short-term lease cost		29,730		29,730
Total	$	66,459	$	66,307

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

Operating Lease
Right-of-use assets	$	4,984
Operating Lease Liability	$	5,654
Less: short term portion		(5,654)
Long term portion	$	—

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

	Operating
	Leases
2022	$	5,449
Total lease payments		5,449
Plus: interest		205
Present value of lease liabilities	$	5,654

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.

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		Percentage of		Investments at		Percentage of
	Amortized Cost		Amortized Cost		Fair Value		Fair Value
Short-term Non-banking Loans	$	11,655,750	83.7	%	$	11,650,000	82.6	%
Preferred Stock		1,050,000	7.5			1,200,000	8.5
Common Stock		414,128	3.0			436,175	3.1
Warrants		679	—			—	—
Other Equity		812,500	5.8			812,500	5.8
Total	$	13,933,057	100.0	%	$	14,098,675	100.0	%

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		Percentage of		Investments at		Percentage of
	Amortized Cost		Amortized Cost		Fair Value		Fair Value
Short-term Non-banking Loans	$	2,789,000	56.2	%	$	2,789,000	41.8	%
Preferred Stock		150,000	3.0			300,000	4.5
Common Stock		1,750,000	35.2			3,300,000	49.5
Warrants		679	—			—	—
Other Equity		278,897	5.6			278,897	4.2
Total	$	4,968,576	100.0	%	$	6,667,897	100.0	%

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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
	Investments at		Percentage of
	Fair Value		Fair Value
Consumer	$	2,362,500	16.8	%
Financial		3,836,175	27.2
Information Technology		300,000	2.1
Real Estate		7,600,000	53.9
Total	$	14,098,675	100.0	%

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
	Investments at		Percentage of
	Fair Value		Fair Value
Consumer	$	3,700,000	55.5	%
Financial		900,000	13.5
Information Technology		300,000	4.5
Leisure & Hospitality		278,897	4.2
Real Estate		1,489,000	22.3
Total	$	6,667,897	100.0	%

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
	Level 1		Level 2		Level 3		Total
Short-term Non-banking Loans	$	—	$	—	$	11,650,000	$	11,650,000
Preferred Stock		—		—		1,200,000		1,200,000
Common Stock		436,175		—		—		436,175
Other Equity		—		—		812,500		812,500
Total	$	436,175	$	—	$	13,662,500	$	14,098,675

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
	Level 1		Level 2		Level 3		Total
Short-term Non-banking Loans	$	—	$	—	$	2,789,000	$	2,789,000
Preferred Stock		—		—		300,000		300,000
Common Stock		3,300,000		—		—		3,300,000
Other Equity		—		—		278,897		278,897
Total	$	3,300,000	$	—	$	3,367,897	$	6,667,897

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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		Preferred		Common
	Loans		Stock		Stock		Warrants		Other Equity
Balance as of January 1, 2021	$	2,789,000	$	300,000	$	—	$	—	$	278,897
Net change in unrealized appreciation		—		—		—		—		—
Purchases and other adjustments to cost		24,765,333		900,000		—		—		812,500
Sales and redemptions		(15,904,333)		—		—		—		(278,897)
Net realized loss		—		—		—		—		—
Balance as of December 31, 2021	$	11,650,000	$	1,200,000	$	—	$	—	$	812,500

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
	ST Non-banking		Preferred		Common
	Loans		Stock		Stock		Warrants		Other Equity
Balance as of January 1, 2020	$	—	$	300,000	$	—	$	—	$	534,200
Net change in unrealized appreciation		—		—		—		—		486,018
Purchases and other adjustments to cost		7,543,000		—		—		—		—
Sales and redemptions		(4,754,000)		—		—		—		(91,313)
Net realized loss		—		—		—		—		(650,008)
Balance as of December 31, 2020	$	2,789,000	$	300,000	$	—	$	—	$	278,897

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.

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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	12/31/21 FMV		Valuation Technique	Unobservable Inputs	Range
ST Non-banking Loans	$	11,650,000	discounted cash flow	determining private company interest rate based on credit	12-44	%
Other Equity		812,500	last secured funding known by company	economic changes since last funding
Preferred Stock		1,200,000	last funding secured by company	economic changes since last funding
	$	13,662,500

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	12/31/20 FMV		Valuation Technique	Unobservable Inputs	Range
ST Non-banking Loans	$	2,789,000	discounted cash flow	determining private company interest rate based on credit	14-44	%
Other Equity		278,897	last secured funding known by company	economic changes since purchase
Preferred Stock		300,000	last funding secured by company	economic changes since last funding
	$	3,367,897

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"). Mr. 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

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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.

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
	2021		2020
Current taxes
Federal	$	909,530	$	—
State		357,168		16,679
Deferred taxes
Federal		(212,000)		258,000
State		—		13,722
Provision for income taxes	$	1,054,698	$	288,401

A reconciliation of income tax provisions at the U.S. statutory rate for fiscal year 2021 and 2020 is as follows:

	2021		2020
Rate reconciliation:
Tax expense at U.S.statutory rate	$	1,017,417	$	716,966
Change in valuation allowance		—		(446,000)
Provision-to-return reconciliation		(14,743)		21,657
Other		(1,976)		(4,222)
Income tax provision	$	1,054,698	$	288,401

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:

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	December 31, 2021
	2021		2020
Deferred tax components
Unrealized (gain) loss on marketable securities	$	(46,552)	$	(488,419)
Depreciation		2,458		3,002
Net operating loss carryforwards		—		180,460
R&D and foreign credits		—		46,957
Other		(906)		—
Net deferred tax asset (liability)	$	(45,000)	$	(258,000)

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,
	2021			2020		2019		2018		2017
Per Share Data (1)
Net asset value at beginning of period	$	1.08		0.91		1.02		0.87		0.77
Net investment gain (loss)		0.12		0.05		(0.06)		(0.05)		(0.05)
Net realized and unrealized gains (losses)		0.24		0.18		0.00		0.20		0.11
Provision for income taxes		(0.10)		(0.02)		0.00		0.00		0.00
Stock based compensation		0.00		(0.01)		0.00		0.00		0.00
Repurchase of common stock		0.00		0.02		0.00		0.00		0.04
Payment of common stock dividend		(0.10)		(0.05)		(0.05)		0.00		0.00
Net asset value at end of period	$	1.24		1.08		0.91		1.02		0.87
Ratio / Supplemental Data
Per share market value of investments at end of period	$	1.31		0.62		0.16		0.90		0.65
Shares outstanding at end of period		10,790,413		10,785,913		11,067,402		11,067,402		11,067,402
Average weighted shares outstanding for the period		10,789,294		10,869,054		11,067,402		11,067,402		11,863,392
Net assets at end of period	$	13,414,049		11,640,887		10,068,533		11,278,889		9,629,215
Average net assets (2)	$	13,155,207		10,504,563		11,473,535		10,341,702		9,444,440
Total investment return		24.07	%	23.08	%	(5.88)	%	17.24	%	7.79	%
Portfolio turnover rate (3)		168.67	%	61.11	%	7.63	%	26.93	%	35.03	%
Ratio of operating expenses to average net assets (3)		(10.30)	%	(7.16)	%	(7.27)	%	(6.59)	%	(7.30)	%
Ratio of net investment income (loss) to average net assets (3)		9.89	%	5.35	%	(5.86)	%	(5.13)	%	(5.45)	%
Ratio of realized gains (losses) to average net assets (3)		31.30	%	0.05	%	28.35	%	(5.62)	%	5.71	%

(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”). Mr. 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 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.

F-35

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 which we may distribute to our shareholders as a dividend, and up to 2,697,603 shares of our common stock purchasable upon the exercise of those 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. At this time, no record date has been established for the dividend. 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.

F-36

666,667 Shares

Common Stock

PROSPECTUS

Alexander Capital, L.P.

July ___, 2022

Through and including August , 2022 (the 25th day after the date of this prospectus), all dealers effecting transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to a dealer’s obligation to deliver a prospectus when acting as an underwriter and with respect to an unsold allotment or subscription.

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PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 13. Other Expenses of Issuance and Distribution.

The following table sets forth the costs and expenses payable in connection with the sale and distribution of the securities being registered. All amounts are estimated except the SEC registration fee and FINRA filing fee. Except as otherwise noted, all the expenses below will be paid by us.

SEC registration fee	$	1,000
FINRA fee		2,225
Nasdaq listing and filing fees		10,000
Transfer agent fee		5,000
Printing expenses		15,000
Legal fees and expenses		185,000
Accounting fees and expenses		30,000
Miscellaneous expenses		51,775
Total	$	300,000

Item 14. Indemnification of Directors and Officers.

Minnesota law permits a corporation to indemnify its directors and officers, except for any act of dishonesty. The company has provided in its bylaws for the indemnification of officers and directors to the fullest extent possible under Minnesota law against expenses (including attorney’s fees), judgments, fines, settlements and other amounts actually and reasonably incurred in connection with any proceeding, arising by reason of the fact that such person is or was an agent of the company. In addition, the company has the power, to the maximum extent and in the manner permitted by Minnesota Business Corporation Act, to indemnify each of our employees and agents (other than directors and officers) against expenses (including attorneys’ fees), judgments, fines, settlements and other amounts actually and reasonably incurred in connection with any proceeding arising by reason of the fact that such person is or was an agent of the company.

The company’s articles of incorporation limit or eliminate the personal liability of its officers and directors for damages resulting from breaches of their fiduciary duty for acts or omissions except for damages resulting from acts or omissions which involve intentional misconduct, fraud, a knowing violation of law, or the inappropriate payment of dividends in violation of the Minnesota Business Corporation Act.

Insofar as indemnification for liabilities arising under the Securities Act pursuant to the foregoing provisions, or otherwise, the company has been advised that, in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the company of expenses incurred or paid by a director, officer or controlling person of the company in the successful defense of any such action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the company will, unless in the opinion of counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act, and will be governed by the final adjudication of such issue.

Item 15. Recent Sales of Unregistered Securities.

In August 2020, the company issued 50,000 shares of restricted stock to each of Messrs. Douglas M. Polinsky and Joseph A. Geraci, II. Under their terms, the shares vested on the one-year anniversary of their issuance and, until such time, were subject to forfeiture. These restricted shares were issued in a private offering exempt from registration under Section 4(a)(2) the Securities Act of 1933 and Rule 506 of Regulation D promulgated thereunder. No proceeds were received in connection with the issuance of these restricted shares, as they were issued for compensatory purposes upon the approval of the Compensation Committee of the board of directors.

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In April 2022, the company issued an aggregate of 65,000 shares of restricted stock to the directors (15,000 shares to each of the three independent directors, and 10,000 shares to each of the non-independent directors). Under their terms, the shares vest on the one-year anniversary of their issuance and, until such time, were subject to forfeiture. These restricted shares were issued in a private offering exempt from registration under Section 4(a)(2) the Securities Act of 1933 and Rule 506 of Regulation D promulgated thereunder. No proceeds were received in connection with the issuance of these restricted shares, as they were issued for compensatory purposes upon the approval of the Compensation Committee of the board of directors. The share information above is historical and does not reflect the Company's proposed reverse stock split.

Item 16. Exhibits and Financial Statements.

We have filed the exhibits listed on the accompanying Exhibit Index of this registration statement and below in this Item 16:

EXHIBIT INDEX

Exhibit		Incorporated by Reference			Filed or Furnished
No.	Exhibit Description	Form	Date	Number	Herewith
1.1	Underwriting Agreement				X
3.1	Amended and Restated Articles of Incorporation	8-K	01/23/2013	3.1
3.2	Amended and Restated Bylaws	10-SB	01/29/2008	3.2
4.1	Form of Common Stock Certificate	10-SB	01/29/2008	4.1
5.1	Opinion of Lucosky Brookman LLP				X
10.1	Loan and Security Agreement with Eastman Investment, Inc. and Lyle A. Berman as trustee of the Lyle A. Berman Revocable Trust, dated January 3, 2022	8-K	01/10/2022	10.1
10.2	Employment Agreement with Douglas M. Polinsky*	8-K	02/01/2019	10.1
10.3	Employment Agreement with Joseph A. Geraci, II*	8-K	02/01/2019	10.2
14.1	Code of Ethics				X
23.1	Consent of Boulay PLLP				X
23.2	Consent of Lucosky Brookman LLP (included in Exhibit 5.1)				X
24.1	Power of Attorney (included on the signature page to the registration statement).				X
99.1	Audit Committee Charter				X
99.2	Compensation Committee Charter				X
99.3	Nominating and Corporate Governance Charter				X
101.INS	Inline XBRL Instance Document
101.SCH	Inline XBRL Taxonomy Extension Schema Document
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Definition
104	Cover Page Interactive Data File (Embedded within the Inline XBRL document and included in Exhibit)
107	Filing Fee Table				X

* Management contract or compensatory plan or arrangement

61

Item 17. Undertakings.

The undersigned registrant hereby undertakes that:

(1) insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.

(2) for purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.

(3) for the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

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SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Minneapolis, State of Minnesota on July 27, 2022.

MILL CITY VENTURES III, LTD.
By:	/s/ Douglas M. Polinsky
	Douglas M. Polinsky
	Chief Executive Officer (Principal Executive Officer)
By:	/s/ Joseph A. Geraci, II
	Joseph A. Geraci, II
	Chief Financial Officer (Principal Financial and Accounting Officer)

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS that each individual whose signature appears below constitutes and appoints Douglas M. Polinsky, his true and lawful attorneys-in-fact and agents with full power of substitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this Registration Statement, and to sign any registration statement for the same offering covered by the Registration Statement that is to be effective upon filing pursuant to Rule 462(b) promulgated under the Securities Act, and all post-effective amendments thereto, and to file the same, with all exhibits thereto and all documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or his, her or their substitute or substitutes, may lawfully do or cause to be done or by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.

Signature	Title	Date
/s/ Douglas M. Polinsky	Chief Executive Officer and Chairman	July 27, 2022
Douglas M. Polinsky
/s/ Joseph A. Geraci, II	Chief Financial Officer and Director	July 27, 2022
Joseph A. Geraci, II
/s/ Lyle A. Berman	Director	July 27, 2022
Lyle A. Berman
/s/ Howard P. Liszt	Director	July 27, 2022
Howard P. Liszt
/s/ Laurence S. Zipkin	Director	July 27, 2022
Laurence S. Zipkin

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EX-1.1

Exhibit 1.1

UNDERWRITING AGREEMENT

among

MILL CITY VENTURES III, LTD.

and

ALEXANDER CAPITAL, L.P.,

as Representative of the Several Underwriters

MILL CITY VENTURES III, LTD.

UNDERWRITING AGREEMENT

New York, New York

[●], 2022

Alexander Capital, L.P.

As Representative of the several Underwriters named on Schedule 1 attached hereto

c/o Alexander Capital, L.P.

17 State Street, 5^th Floor

New York, NY 10004

Ladies and Gentlemen:

The undersigned, Mill City Ventures III, Ltd., a corporation formed under the laws of the State of Minnesota (collectively with its subsidiaries and affiliates, including, without limitation, all entities disclosed or described in the Registration Statement (as hereinafter defined) and set forth on Schedule 4 attached hereto, as being subsidiaries or affiliates of Mill City Ventures III, Ltd., the “Company”), hereby confirms its agreement (this “Agreement”) with the Underwriters named in Schedule 1 hereto (the “Representative” and such other underwriters being collectively called the “Underwriters” or, individually, an “Underwriter”) as follows:

1.Purchase and Sale of Shares.

1.1Firm Shares.

1.1.1Nature and Purchase of Firm Shares.

(i)On the basis of the representations and warranties herein contained, but subject to the terms and conditions herein set forth, the Company agrees to issue and sell to the several Underwriters, an aggregate of [●] shares (the “Firm Shares”) of the Company’s common stock, par value $0.001 per share (the “Common Stock”).

(ii)The Underwriters, severally and not jointly, agree to purchase from the Company the number of Firm Shares set forth opposite their respective names on Schedule 1 attached hereto and made a part hereof at a purchase price of $[●] per share (92% of the per Firm Share offering price).  The Firm Shares are to be offered initially to the public at the offering price set forth on the cover page of the Prospectus (as defined in Section 2.1.1 hereof).

1.1.2Shares Payment and Delivery.

(i)Delivery and payment for the Firm Shares shall be made no later than 10:00 a.m., Eastern time, on the third (3^rd) Business Day following the effective date (the “Effective Date”) of the Registration Statement (as defined in Section 2.1.1 below) (or the fourth (4^th) Business Day following the Effective Date if the Registration Statement is declared effective after 4:01 p.m., Eastern time) or at such earlier time as shall be agreed upon by the Representative and the Company, at the offices of Cozen O’Connor, 33 South 6^th Street, Suite 3800, Minneapolis,

Minnesota 55402 (“Representative Counsel”), or at such other place (or remotely by other electronic transmission) as shall be agreed upon by the Representative and the Company. The hour and date of delivery and payment for the Firm Shares is called the “Closing Date.”

(ii)Payment for the Firm Shares shall be made on the Closing Date by wire transfer in Federal (same day) funds, payable to the order of the Company, upon delivery of the certificates (in form and substance satisfactory to the Underwriters) representing the Firm Shares (or through the facilities of the Depository Trust Company (“DTC”)) for the account of the Underwriters. The Firm Shares shall be registered in such name or names and in such authorized denominations as the Representative may request in writing at least two (2) full Business Days prior to the Closing Date. The Company shall not be obligated to sell or deliver the Firm Shares except upon tender of payment by the Representative for all of the Firm Shares. The term “Business Day” means any day other than Saturday, Sunday or other day on which commercial banks in The City of New York are authorized or required by law to remain closed; provided, however, for clarification, commercial banks shall not be deemed to be authorized or required by law to remain closed due to “stay-at-home,” “shelter-in-place,” “non-essential employee” or any other similar orders or restrictions or the closure of any physical branch locations at the direction of any governmental authority so long as the electronic funds transfer systems (including for wire transfers) of commercial banks in The City of New York generally are open for use by customers on such day .

1.2Over-allotment Option.

1.2.1Option Shares. For the purposes of covering any over-allotments in connection with the distribution and sale of the Firm Shares, the Company hereby grants to the Underwriters an option to purchase up to [●] additional shares of Common Stock, representing fifteen percent (15%) of the Firm Shares sold in the offering, from the Company (the “Over-allotment Option”). Such [●] additional shares of Common Stock, the net proceeds of which will be deposited with the Company’s account, are hereinafter referred to as “Option Shares.” The purchase price to be paid per Option Share shall be equal to the price per Firm Share set forth in Section 1.1.1 hereof. The Firm Shares and the Option Shares are hereinafter referred to together as the “Public Securities.” The Public Securities shall be issued directly by the Company and shall have the rights and privileges described in the Registration Statement, the Pricing Disclosure Package and the Prospectus referred to below. The offering and sale of the Public Securities is hereinafter referred to as the “Offering.”

1.2.2Exercise of Option. The Over-allotment Option granted pursuant to Section 1.2.1 hereof may be exercised by the Representative as to all (at any time) or any part (from time to time) of the Option Shares within 45 days after the Effective Date. The Underwriters shall not be under any obligation to purchase any Option Shares prior to the exercise of the Over-allotment Option. The Over-allotment Option granted hereby may be exercised by the giving of oral notice to the Company from the Representative, which must be confirmed in writing by overnight mail or electronic transmission setting forth the number of Option Shares to be purchased and the date and time for delivery of and payment for the Option Shares (the “Option Closing Date”), which shall not be later than five (5) full Business Days after the date of the notice or such other time as shall be agreed upon by the Company and the Representative, at the offices of Representative Counsel or at such other place (including remotely other electronic transmission) as shall be agreed

2

upon by the Company and the Representative. If such delivery and payment for the Option Shares does not occur on the Closing Date, the Option Closing Date will be as set forth in the notice. Upon exercise of the Over-allotment Option with respect to all or any portion of the Option Shares, subject to the terms and conditions set forth herein, (i) the Company shall become obligated to sell to the Underwriters the number of Option Shares specified in such notice and (ii) each of the Underwriters, acting severally and not jointly, shall purchase that portion of the total number of Option Shares then being purchased as set forth in Schedule 1 opposite the name of such Underwriter.

1.2.3Payment and Delivery. Payment for the Option Shares shall be made on the Option Closing Date by wire transfer in Federal (same day) funds, payable to the order of the Company upon delivery to you of certificates (in form and substance satisfactory to the Underwriters) representing the Option Shares (or through the facilities of DTC) for the account of the Underwriters. The Option Shares shall be registered in such name or names and in such authorized denominations as the Representative may request in writing at least two (2) full Business Days prior to the Option Closing Date. The Company shall not be obligated to sell or deliver the Option Shares except upon tender of payment by the Representative for applicable Option Shares.  The Option Closing Date may be simultaneous with, but not earlier than, the Closing Date; and in the event that such time and date are simultaneous with the Closing Date, the term “Closing Date” shall refer to the time and date of delivery of the Firm Shares and Option Shares.

1.3Representative’s Warrants.

1.3.1Purchase Warrants. The Company hereby agrees to issue and sell to the Representative (and/or its designee) on the Closing Date a warrant (“Representative’s Warrants”) for the purchase of an aggregate of [●] shares of Common Stock, representing 6% of the Firm Shares (excluding the Option Shares), for an aggregate purchase price of $100.00. The Representative’s Warrant agreement, in the form attached hereto as Exhibit A (the “Representative’s Warrant Agreement”), shall be exercisable, in whole or in part, commencing on a date which is one hundred eighty (180) days after the Effective Date and expiring on the five-year anniversary of the Effective Date at an initial exercise price per share of Common Stock of $[●], which is equal to 125% of the initial public offering price of the Firm Shares. The Representative’s Warrant Agreement and the shares of Common Stock issuable upon exercise thereof are hereinafter referred to together as the “Representative’s Securities.” The Representative understands and agrees that there are significant restrictions pursuant to FINRA Rule 5110 against transferring the Representative’s Warrant Agreement and the underlying shares of Common Stock during the one hundred eighty (180) days after the Effective Date and by its acceptance thereof shall agree that it will not sell, transfer, assign, pledge or hypothecate the Representative’s Warrant Agreement, or any portion thereof, or be the subject of any hedging, short sale, derivative, put or call transaction that would result in the effective economic disposition of such securities for a period of one hundred eighty (180) days following the Effective Date to anyone other than (i) an Underwriter or a selected dealer in connection with the Offering, or (ii) a bona fide officer or partner of the Representative or of any such Underwriter or selected dealer; and only if any such transferee agrees to the foregoing lock-up restrictions.

3

1.3.2Delivery. Delivery of the Representative’s Warrant Agreement shall be made on the Closing Date and shall be issued in the name or names and in such authorized denominations as the Representative may request in writing.

2.Representations and Warranties of the Company. The Company represents and warrants to the Underwriters as of the Applicable Time (as defined below), as of the Closing Date and as of the Option Closing Date, if any, as follows:

2.1Filing of Registration Statement.

2.1.1Pursuant to the Securities Act. The Company has filed with the U.S. Securities and Exchange Commission (the “Commission”) a registration statement, and an amendment or amendments thereto, on Form S-1 (File No. 333-264474), including any related prospectus or prospectuses, for the registration of the Public Securities and the Representative’s Securities under the Securities Act of 1933, as amended (the “Securities Act”), which registration statement and amendment or amendments have been prepared by the Company in all material respects in conformity with the requirements of the Securities Act and the rules and regulations of the Commission under the Securities Act (the “Securities Act Regulations”) and will contain all material statements that are required to be stated therein in accordance with the Securities Act and the Securities Act Regulations. Except as the context may otherwise require, such registration statement, as amended, on file with the Commission at the time the registration statement became effective (including the Preliminary Prospectus included in the registration statement, financial statements, schedules, exhibits and all other documents filed as a part thereof or incorporated therein and all information deemed to be a part thereof as of the Effective Date pursuant to paragraph (b) of Rule 430A of the Securities Act Regulations (the “Rule 430A Information”)), is referred to herein as the “Registration Statement.” If the Company files any registration statement pursuant to Rule 462(b) of the Securities Act Regulations, then after such filing, the term “Registration Statement” shall include such registration statement filed pursuant to Rule 462(b). The Registration Statement has been declared effective by the Commission on the date hereof.

Each prospectus used prior to the effectiveness of the Registration Statement, and each prospectus that omitted the Rule 430A Information that was used after such effectiveness and prior to the execution and delivery of this Agreement, is herein called a “Preliminary Prospectus.” The Preliminary Prospectus, subject to completion, dated [●], 2022, that was included in the Registration Statement immediately prior to the Applicable Time is hereinafter called the “Pricing Prospectus.” The final prospectus in the form first furnished to the Underwriters for use in the Offering is hereinafter called the “Prospectus.” Any reference to the “most recent Preliminary Prospectus” shall be deemed to refer to the latest Preliminary Prospectus included in the Registration Statement.

“Applicable Time” means 5:30, Eastern time, on the date of this Agreement.

“Issuer Free Writing Prospectus” means any “issuer free writing prospectus,” as defined in Rule 433 of the Securities Act Regulations (“Rule 433”), including without limitation any “free writing prospectus” (as defined in Rule 405 of the Securities Act Regulations) relating to the Public Securities that is (i) required to be filed with the Commission by the Company, (ii) a “road show that is a written communication” within the meaning of Rule 433(d)(8)(i), whether or not required

4

to be filed with the Commission, or (iii) exempt from filing with the Commission pursuant to Rule 433(d)(5)(i) because it contains a description of the Public Securities or of the Offering that does not reflect the final terms, in each case in the form filed or required to be filed with the Commission or, if not required to be filed, in the form retained in the Company’s records pursuant to Rule 433(g).

“Issuer General Use Free Writing Prospectus” means any Issuer Free Writing Prospectus that is intended for general distribution to prospective investors (other than a “bona fide electronic road show,” as defined in Rule 433 (the “Bona Fide Electronic Road Show”))

“Issuer Limited Use Free Writing Prospectus” means any Issuer Free Writing Prospectus that is not an Issuer General Use Free Writing Prospectus.

“Pricing Disclosure Package” means the Pricing Prospectus and the information included on Schedule 2-A hereto, all considered together.

2.1.2Pursuant to the Exchange Act. The Company has filed with the Commission a Form 8-A (File Number 001-[●]) providing for the registration pursuant to Section 12(b) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), of the shares of Common Stock. The registration of the shares of Common Stock under the Exchange Act has been declared effective by the Commission on or prior to the date hereof. The Company has taken no action designed to, or likely to have the effect of, terminating the registration of the shares of Common Stock under the Exchange Act, nor has the Company received any notification that the Commission is contemplating terminating such registration.

2.2Stock Exchange Listing. The shares of Common Stock have been approved for listing on the NASDAQ Capital Market (the “Exchange”) subject only to official notice of issuance, and the Company has taken no action designed to, or likely to have the effect of, delisting the shares of Common Stock from the Exchange, nor has the Company received any notification that the Exchange is contemplating terminating such listing except as described in the Registration Statement, the Pricing Disclosure Package and the Prospectus.

2.3No Stop Orders, etc. Neither the Commission nor, to the Company’s knowledge, any state regulatory authority has issued any order preventing or suspending the use of the Registration Statement, any Preliminary Prospectus or the Prospectus or has instituted or, to the Company’s knowledge, threatened to institute, any proceedings with respect to such an order. The Company has complied with each request (if any) from the Commission for additional information.

2.4Disclosures in Registration Statement.

2.4.1Compliance with Securities Act and 10b-5 Representation.

(i)Each of the Registration Statement and any post-effective amendment thereto, at the time it became effective, complied in all material respects with the requirements of the Securities Act and the Securities Act Regulations. Each Preliminary Prospectus, including the prospectus filed as part of the Registration Statement as originally filed or as part of any amendment or supplement thereto, and the Prospectus, at the time each was filed with the Commission, complied in all material respects with the requirements of the Securities Act

5

and the Securities Act Regulations. Each Preliminary Prospectus delivered to the Underwriters for use in connection with this Offering and the Prospectus was or will be identical to the electronically transmitted copies thereof filed with the Commission pursuant to the Commission’s EDGAR filing system (“EDGAR”), except to the extent permitted by Regulation S-T promulgated under the Securities Act (“Regulation S-T”).

(ii)Neither the Registration Statement nor any amendment thereto, at its effective time, as of the Applicable Time, at the Closing Date or at any Option Closing Date (if any), contained, contains or will contain an untrue statement of a material fact or omitted, omits or will omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading.

(iii)The Pricing Disclosure Package, as of the Applicable Time, at the Closing Date or at any Option Closing Date (if any), did not, does not and will not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; and each Issuer Limited Use Free Writing Prospectus does not conflict in any material respect with the information contained in the Registration Statement, any Preliminary Prospectus, the Pricing Prospectus or the Prospectus, and each such Issuer Limited Use Free Writing Prospectus, as supplemented by and taken together with the Pricing Prospectus as of the Applicable Time, did not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading; provided, however, that this representation and warranty shall not apply to statements made or statements omitted in reliance upon and in conformity with written information furnished to the Company with respect to the Underwriters by the Representative expressly for use in the Registration Statement, the Pricing Prospectus or the Prospectus or any amendment thereof or supplement thereto. The parties acknowledge and agree that such information provided by or on behalf of any Underwriter consists solely of the disclosure contained in the “Underwriting” section of the Prospectus (the “Underwriters’ Information”).

(iv)Neither the Prospectus nor any amendment or supplement thereto (including any prospectus wrapper), as of its issue date, at the time of any filing with the Commission pursuant to Rule 424(b), at the Closing Date or at any Option Closing Date, included, includes or will include an untrue statement of a material fact or omitted, omits or will omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, however, that this representation and warranty shall not apply to the Underwriters’ Information.

2.4.2Disclosure of Agreements. The agreements and documents described in the Registration Statement, the Pricing Disclosure Package and the Prospectus conform in all material respects to the descriptions thereof contained therein and there are no agreements or other documents required by the Securities Act and the Securities Act Regulations to be described in the Registration Statement, the Pricing Disclosure Package and the Prospectus or to be filed with the Commission as exhibits to the Registration Statement, that have not been so described or filed. Each agreement or other instrument (however characterized or described) to which the Company is a party or by which it is or may be bound or affected and (i) that is referred to in the Registration Statement, the Pricing Disclosure Package and the Prospectus, or (ii) is material to the Company’s

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business, has been duly authorized and validly executed by the Company, is in full force and effect in all material respects and is enforceable against the Company and, to the Company’s knowledge, the other parties thereto, in accordance with its terms, except (x) as such enforceability may be limited by bankruptcy, insolvency, reorganization or similar laws affecting creditors’ rights generally, (y) as enforceability of any indemnification or contribution provision may be limited under the federal and state securities laws, and (z) that the remedy of specific performance and injunctive and other forms of equitable relief may be subject to the equitable defenses and to the discretion of the court before which any proceeding therefor may be brought. Except as disclosed in the Registration Statement, the Pricing Disclosure Package and the Prospectus, none of such agreements or instruments has been assigned by the Company, and neither the Company nor, to the Company’s knowledge, any other party is in material default thereunder and, to the Company’s knowledge, no event has occurred that, with the lapse of time or the giving of notice, or both, would constitute a material default thereunder except for such defaults that would not reasonably be expected to result in a Material Adverse Change (as defined in Section 2.5.1 below). To the best of the Company’s knowledge, performance by the Company of the material provisions of such agreements or instruments will not result in a violation of any existing applicable law, rule, regulation, judgment, order or decree of any governmental agency or court, domestic or foreign, having jurisdiction over the Company or any of its assets or businesses (each, a “Governmental Entity”), including, without limitation, those relating to environmental laws and regulations, except for such violations that would not reasonably be expected to result, individually or in the aggregate, in a Material Adverse Change.

2.4.3Prior Securities Transactions. Since January 1, 2020, no securities of the Company have been sold by the Company or by or on behalf of, or for the benefit of, any person or persons controlling, controlled by or under common control with the Company, except as disclosed in the Registration Statement, the Pricing Disclosure Package and the Preliminary Prospectus.

2.4.4Regulations. The disclosures in the Registration Statement, the Pricing Disclosure Package and the Prospectus concerning the effects of federal, state, local and all foreign regulations on the Offering and the Company’s business as currently contemplated are correct in all material respects and no other such regulations are required to be disclosed in the Registration Statement, the Pricing Disclosure Package and the Prospectus which are not so disclosed.

2.4.5No Other Distribution of Offering Materials. The Company has not, directly or indirectly, distributed and will not distribute any offering material in connection with the Offering other than any Preliminary Prospectus, any Issuer Free Writing Prospectus, the Prospectus and other materials, if any, permitted under the Securities Act and consistent with Section 3.2 below.

2.5Changes After Dates in Registration Statement.

2.5.1No Material Adverse Change. Since the respective dates as of which information is given in the Registration Statement, the Pricing Disclosure Package and the Prospectus, except as otherwise specifically stated therein: (i) there has been no material adverse change in the financial position or results of operations of the Company, nor to the Company’s knowledge, any change or development that, singularly or in the aggregate, would involve a

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material adverse change, in or affecting the condition (financial or otherwise), results of operations, business, assets or prospects of the Company, taken as a whole (a “Material Adverse Change”); (ii) there have been no material transactions entered into by the Company not in the ordinary course of business, other than as contemplated pursuant to this Agreement; and (iii) no officer or director of the Company has resigned from any position with the Company.

2.5.2Recent Securities Transactions, etc. Subsequent to the respective dates as of which information is given in the Registration Statement, the Pricing Disclosure Package and the Prospectus, and except as may otherwise be indicated or contemplated herein or disclosed in the Registration Statement, the Pricing Disclosure Package and the Prospectus, the Company has not: (i) issued any securities, other than securities issued pursuant to the Company’s existing equity incentive plans or shares issuable upon the exercise of then outstanding options, warrants and convertible securities, which in each case were disclosed in the Prospectus, Pricing Disclosure Package or the Registration Statement, or incurred any liability or obligation, direct or contingent, for borrowed money; or (ii) declared or paid any dividend or made any other distribution on or in respect to its capital stock.

2.6Independent Accountants. Boulay PLLP (the “Auditor”), whose report is filed with the Commission as part of the Registration Statement, the Pricing Disclosure Package and the Prospectus, is an independent registered public accounting firm as required by the Securities Act and the Securities Act Regulations and the Public Company Accounting Oversight Board. Except as disclosed in the Registration Statement, the Pricing Disclosure Package and the Prospectus, the Auditor has not, during the periods covered by the financial statements included in the Registration Statement, the Pricing Disclosure Package and the Prospectus, provided to the Company any non-audit services, as such term is used in Section 10A(g) of the Exchange Act.

2.7Financial Statements, etc. The financial statements, including the notes thereto and supporting schedules, if any, included in the Registration Statement, the Pricing Disclosure Package and the Prospectus, fairly in all material respects present the financial position and the results of operations of the Company at the dates and for the periods to which they apply; and such financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“GAAP”), consistently applied throughout the periods involved (provided that unaudited interim financial statements are subject to year-end audit adjustments that are not expected to be material in the aggregate and do not contain all footnotes required by GAAP); and any supporting schedules included in the Registration Statement present fairly in all material respects the information required to be stated therein. Except as included therein, no historical or pro forma financial statements are required to be included in the Registration Statement, the Pricing Disclosure Package or the Prospectus under the Securities Act or the Securities Act Regulations. The pro forma and pro forma as adjusted financial information and the related notes, if any, included in the Registration Statement, the Pricing Disclosure Package and the Prospectus have been properly compiled and prepared in accordance with the applicable requirements of the Securities Act and the Securities Act Regulations and present fairly in all material respects the information shown therein, and the assumptions used in the preparation thereof are reasonable and the adjustments used therein are appropriate to give effect to the transactions and circumstances referred to therein. All disclosures contained in the Registration Statement, the Pricing Disclosure Package or the Prospectus regarding “non-GAAP financial measures” (as such term is defined by the rules and regulations of the Commission), if any, comply with Regulation G of the Exchange

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Act and Item 10 of Regulation S-K of the Securities Act, to the extent applicable. Each of the Registration Statement, the Pricing Disclosure Package and the Prospectus discloses all material off-balance sheet transactions, arrangements, obligations (including contingent obligations), and other relationships of the Company with unconsolidated entities or other persons that may have a material current or future effect on the Company’s financial condition, changes in financial condition, results of operations, liquidity, capital expenditures, capital resources, or significant components of revenues or expenses. Except as disclosed in the Registration Statement, the Pricing Disclosure Package and the Prospectus, (a) neither the Company nor any of its direct and indirect subsidiaries, including each entity disclosed or described in the Registration Statement, the Pricing Disclosure Package and the Prospectus as being a subsidiary of the Company (each, a “Subsidiary” and, collectively, the “Subsidiaries”), has incurred any material liabilities or obligations, direct or contingent, or entered into any material transactions other than in the ordinary course of business, (b) the Company has not declared or paid any dividends or made any distribution of any kind with respect to its capital stock, (c) there has not been any change in the capital stock of the Company or any of its Subsidiaries, or, other than in the course of business, any grants under any stock compensation plan, and (d) there has not been any Material Adverse Change in the Company’s long-term or short-term debt. The Company represents that it has no direct or indirect subsidiaries other than those listed in the Registration Statement.

2.8Authorized Capital; Options, etc. The Company had, at the date or dates indicated in the Registration Statement, the Pricing Disclosure Package and the Prospectus, the duly authorized, issued and outstanding capitalization as set forth therein. Based on the assumptions stated in the Registration Statement, the Pricing Disclosure Package and the Prospectus, the Company will have on the Closing Date the adjusted stock capitalization set forth therein. Except as set forth in, or contemplated by, the Registration Statement, the Pricing Disclosure Package and the Prospectus, on the Effective Date, as of the Applicable Time and on the Closing Date and any Option Closing Date, there will be no stock options, warrants, or other rights to purchase or otherwise acquire any authorized, but unissued shares of Common Stock of the Company or any security convertible or exercisable into shares of Common Stock of the Company, or any contracts or commitments to issue or sell shares of Common Stock or any such options, warrants, rights or convertible securities. The information set forth under the caption “Capitalization” in the Registration Statement and the Prospectus (and any similar section or information contained in the Pricing Disclosure Package) is true and correct. All of the Public Securities conform to the description thereof contained in the Registration Statement, the Pricing Disclosure Package and the Prospectus. The form of certificates for the Public Securities conforms to U.S. federal and applicable state laws and to any requirements of the Company’s organizational documents. Subsequent to the respective dates as of which information is given in the Registration Statement, the Pricing Disclosure Package and the Prospectus, except as otherwise specifically stated therein or in this Agreement, the Company has not: (A) issued any securities; (B) incurred any liability or obligation, direct or contingent, for borrowed money; or (C) declared or paid any dividend or made any other distribution on or in respect to its capital stock.

2.9Valid Issuance of Securities, etc.

2.9.1Outstanding Securities. All issued and outstanding securities of the Company issued prior to the transactions contemplated by this Agreement have been duly authorized and validly issued and are fully paid and non-assessable; the holders thereof have no

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rights of rescission with respect thereto, and are not subject to personal liability by reason of being such holders; and none of such securities were issued in violation of the preemptive rights of any holders of any security of the Company or similar contractual rights granted by the Company. The authorized shares of Common Stock conform in all material respects to all statements relating thereto contained in the Registration Statement, the Pricing Disclosure Package and the Prospectus. The offers and sales of the outstanding shares of Common Stock were at all relevant times either registered under the Securities Act and the applicable state securities or “blue sky” laws or, based in part on the representations and warranties of the purchasers of such Shares, exempt from such registration requirements.

2.9.2Securities Sold Pursuant to this Agreement. The Public Securities and Representative’s Securities have been duly authorized for issuance and sale and, when issued and paid for in accordance with the terms of this Agreement, will be validly issued, fully paid and non-assessable; the holders thereof are not and will not be subject to personal liability by reason of being such holders; the Public Securities and Representative’s Securities are not and will not be subject to the preemptive rights of any holders of any security of the Company or similar contractual rights granted by the Company; and all corporate action required to be taken for the authorization, issuance and sale of the Public Securities and Representative’s Securities has been duly and validly taken. The Public Securities and Representative’s Securities conform in all material respects to all statements with respect thereto contained in the Registration Statement, the Pricing Disclosure Package and the Prospectus. All corporate action required to be taken for the authorization, issuance and sale of the Representative’s Warrant Agreement has been duly and validly taken; the shares of Common Stock issuable upon exercise of the Representative’s Warrant have been duly authorized and reserved for issuance by all necessary corporate action on the part of the Company and when paid for and issued in accordance with the Representative’s Warrant and the Representative’s Warrant Agreement, such shares of Common Stock will be validly issued, fully paid and non-assessable; the holders thereof are not and will not be subject to personal liability by reason of being such holders; and such shares of Common Stock are not and will not be subject to the preemptive rights of any holders of any security of the Company or similar contractual rights granted by the Company.

2.10Registration Rights of Third Parties. Except as set forth in the Registration Statement, the Pricing Disclosure Package and the Prospectus, no holders of any securities of the Company or any rights exercisable for or convertible or exchangeable into securities of the Company have the right to require the Company to register any such securities of the Company under the Securities Act or to include any such securities in a registration statement to be filed by the Company.

2.11Validity and Binding Effect of Agreements. This Agreement and the Representative’s Warrant Agreement have been duly and validly authorized by the Company, and, when executed and delivered, will constitute, the valid and binding agreements of the Company, enforceable against the Company in accordance with their respective terms, except: (i) as such enforceability may be limited by bankruptcy, insolvency, reorganization or similar laws affecting creditors’ rights generally; (ii) as enforceability of any indemnification or contribution provision may be limited under the federal and state securities laws; and (iii) that the remedy of specific performance and injunctive and other forms of equitable relief may be subject to the equitable defenses and to the discretion of the court before which any proceeding therefor may be brought.

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2.12No Conflicts, etc. The execution, delivery and performance by the Company of this Agreement, the Representative’s Warrant Agreement and all ancillary documents, the consummation by the Company of the transactions herein and therein contemplated and the compliance by the Company with the terms hereof and thereof do not and will not, with or without the giving of notice or the lapse of time or both: (i) result in a material breach of, or conflict in any material respect with any of the terms and provisions of, or constitute a material default under, or result in the creation, modification, termination or imposition of any material lien, charge or encumbrance upon any property or assets of the Company pursuant to the terms of any agreement or instrument to which the Company is a party; (ii) result in any violation of the provisions of the Company’s Certificate of Incorporation (as the same may be amended or restated from time to time, the “Charter”) or the by-laws of the Company; or (iii) violate any existing applicable law, rule, regulation, judgment, order or decree of any Governmental Entity as of the date hereof having jurisdiction over the Company.

2.13No Defaults; Violations. Except as described in the Registration Statement, the Pricing Disclosure Package and the Prospectus, no material default exists in the due performance and observance of any term, covenant or condition of any material license, contract, indenture, mortgage, deed of trust, note, loan or credit agreement, or any other agreement or instrument evidencing an obligation for borrowed money, or any other material agreement or instrument to which the Company is a party or by which the Company may be bound or to which any of the properties or assets of the Company is subject. The Company is not in violation of any term or provision of its Charter or by-laws.  The Company is not in violation of any franchise, license, permit, applicable law, rule, regulation, judgment or decree of any Governmental Entity, except for such violations that would not reasonably be expected to result in a Material Adverse Change.

2.14Corporate Power; Licenses; Consents.

2.14.1Conduct of Business. Except as described in the Registration Statement, the Pricing Disclosure Package and the Prospectus, the Company has all requisite corporate power and authority, and has all necessary authorizations, approvals, orders, licenses, certificates and permits (“Permits”) of and from any Governmental Entity that it needs as of the date hereof to conduct its business purpose as described in the Registration Statement, the Pricing Disclosure Package and the Prospectus, except for such Permits, the absence of which would not reasonably be expected to have a Material Adverse Change.

2.14.2Transactions Contemplated Herein. The Company has all corporate power and authority to enter into this Agreement and to carry out the provisions and conditions hereof, and all consents, authorizations, approvals and orders required in connection therewith have been obtained. No consent, authorization or order of, and no filing with, any court, government agency or other body is required for the valid issuance, sale and delivery of the Public Securities and the consummation of the transactions and agreements contemplated by this Agreement and the Representative’s Warrant Agreement and as contemplated by the Registration Statement, the Pricing Disclosure Package and the Prospectus, except with respect to applicable federal and state securities laws and the rules and regulations of the Financial Industry Regulatory Authority, Inc. (“FINRA”) and the rules and regulations of the Exchange, and except with respect to such consent, authorization, order or filing that would not reasonably be expected to have a Material Adverse Change.

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2.15D&O Questionnaires. To the Company’s knowledge, all information contained in the questionnaires (the “Questionnaires”) completed by each of the Company’s directors and officers immediately prior to the Offering (the “Insiders”) as supplemented by all information concerning the Company’s directors, officers and principal stockholders as described in the Registration Statement, the Pricing Disclosure Package and the Prospectus, as well as in the Lock-Up Agreement (as defined in Section 2.24 below), provided to the Underwriters, is true and correct in all material respects and the Company has not become aware of any information which would cause the information disclosed in the Questionnaires to become materially inaccurate or incorrect in any material respect.

2.16Litigation; Governmental Proceedings. There is no action, suit, proceeding, inquiry, arbitration, investigation, litigation or governmental proceeding pending or, to the Company’s knowledge, threatened against, or involving the Company or, to the Company’s knowledge, any executive officer or director which has not been disclosed in the Registration Statement, the Pricing Disclosure Package and the Prospectus or in connection with the Company’s listing application for the listing of the Public Securities on the Exchange, which individually or in the aggregate, if determined adversely to the Company would reasonably be expected to have a Material Adverse Change.

2.17Good Standing. The Company has been duly organized and is validly existing as a corporation and is in good standing under the laws of the State of Minnesota as of the date hereof, and is duly qualified to do business and is in good standing in each other jurisdiction in which its ownership or lease of property or the conduct of business requires such qualification, except where the failure to qualify, singularly or in the aggregate, would not have or reasonably be expected to result in a Material Adverse Change.

2.18Insurance. The Company carries or is entitled to the benefits of insurance, with reputable insurers, in such amounts and covering such risks which the Company believes are adequate, and all such insurance is in full force and effect. The Company has no reason to believe that it will not be able (i) to renew its existing insurance coverage as and when such policies expire or (ii) to obtain comparable coverage from similar institutions as may be necessary or appropriate to conduct its business as now conducted and at a cost that would not reasonably be expected to result in a Material Adverse Change.

2.19Transactions Affecting Disclosure to FINRA.

2.19.1Finder’s Fees. Except as described in the Registration Statement, the Pricing Disclosure Package and the Prospectus, there are no claims, payments, arrangements, agreements or understandings relating to the payment of a finder’s, consulting or origination fee by the Company or any Insider with respect to the sale of the Public Securities hereunder or any other arrangements, agreements or understandings of the Company or, to the Company’s knowledge, any of its stockholders that may affect the Underwriters’ compensation, as determined by FINRA.

2.19.2Payments Within Twelve (12) Months. Except as described in the Registration Statement, the Pricing Disclosure Package and the Prospectus, the Company has not made any direct or indirect payments (in cash, securities or otherwise) in connection with the Offering to: (i) any person, as a finder’s fee, consulting fee or otherwise, in consideration of such

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person raising capital for the Company or introducing to the Company persons who raised or provided capital to the Company; (ii) any FINRA member; or (iii) any person or entity that has any direct or indirect affiliation or association with any FINRA member, within the twelve (12) months prior to the Effective Date, other than the payment to the Underwriters as provided hereunder.

2.19.3Use of Proceeds. None of the net proceeds of the Offering will be paid by the Company to any participating FINRA member or its affiliates, except as specifically authorized herein.

2.19.4FINRA Affiliation. There is no (i) officer or director of the Company, (ii) beneficial owner of 5% or more of any class of the Company’s securities or (iii) beneficial owner of the Company’s unregistered equity securities which were acquired during the 180-day period immediately preceding the filing of the Registration Statement that is an affiliate or associated person of a FINRA member participating in the Offering (as determined in accordance with the rules and regulations of FINRA).

2.19.5Information. All information provided by the Company in its FINRA questionnaire to Representative Counsel specifically for use by Representative Counsel in connection with its Public Offering System filings (and related disclosure) with FINRA is true, correct and complete in all material respects.

2.20Foreign Corrupt Practices Act. None of the Company and its Subsidiaries or, to the Company’s knowledge, any director, officer, agent, employee or affiliate of the Company and its Subsidiaries or any other person acting on behalf of the Company and its Subsidiaries, has, directly or indirectly, given or agreed to give any money, gift or similar benefit (other than legal price concessions to customers in the ordinary course of business) to any customer, supplier, employee or agent of a customer or supplier, or official or employee of any Governmental Entity or any political party or candidate for office (domestic or foreign) or other person who was, is, or may be in a position to help or hinder the business of the Company (or assist it in connection with any actual or proposed transaction) that (i) might subject the Company to any damage or penalty in any civil, criminal or governmental litigation or proceeding, (ii) if not given in the past, might have caused a Material Adverse Change or (iii) if not continued in the future, might adversely affect the assets, business, operations or prospects of the Company. The Company has taken reasonable steps to ensure that its accounting controls and procedures are sufficient to cause the Company to comply in all material respects with the Foreign Corrupt Practices Act of 1977, as amended.

2.21Compliance with OFAC. None of the Company and its Subsidiaries or, to the Company’s knowledge, any director, officer, agent, employee or affiliate of the Company and its Subsidiaries or any other person acting on behalf of the Company and its Subsidiaries, is currently subject to any U.S. sanctions administered by the Office of Foreign Assets Control of the U.S. Department of the Treasury (“OFAC”), and the Company will not knowingly, directly or indirectly, use the proceeds of the Offering hereunder, or lend, contribute or otherwise make available such proceeds to any Subsidiary, joint venture partner or other person or entity, for the purpose of financing the activities of any person currently subject to any U.S. sanctions administered by OFAC.

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2.22Money Laundering Laws. The operations of the Company and its Subsidiaries are and have been conducted at all times in compliance in all material respects with applicable financial recordkeeping and reporting requirements of the Currency and Foreign Transactions Reporting Act of 1970, as amended, the money laundering statutes of all applicable jurisdictions, the rules and regulations thereunder and any related or similar rules, regulations or guidelines, issued, administered or enforced by any Governmental Entity (collectively, the “Money Laundering Laws”); and no action, suit or proceeding by or before any Governmental Entity involving the Company with respect to the Money Laundering Laws is pending or, to the best knowledge of the Company, threatened.

2.23Officers’ Certificate. Any certificate signed by any duly authorized officer of the Company and delivered to you or to Representative Counsel shall be deemed a representation and warranty by the Company to the Underwriters as to the matters covered thereby.

2.24Lock-Up Agreements. Schedule 3 hereto contains a complete and accurate list of the Company’s officers, directors and each owner of at least 5% of the Company’s outstanding shares of Common Stock (or securities convertible or exercisable into shares of Common Stock) (collectively, the “Lock-Up Parties”). The Company has caused each of the Lock-Up Parties to deliver to the Representative an executed Lock-Up Agreement, in the form attached hereto as Exhibit B (the “Lock-Up Agreement”), prior to the execution of this Agreement.

2.25Subsidiaries. All direct and indirect Subsidiaries of the Company are duly organized and in good standing under the laws of the place of organization or incorporation, and each Subsidiary is in good standing in each jurisdiction in which its ownership or lease of property or the conduct of business requires such qualification, except where the failure to qualify would not have a Material Adverse Change. The Company’s ownership and control of each Subsidiary is as described in the Registration Statement, the Pricing Disclosure Package and the Prospectus.

2.26Related Party Transactions. There are no business relationships or related party transactions involving the Company or any other person required to be described in the Registration Statement, the Pricing Disclosure Package and the Prospectus that have not been described as required.

2.27Board of Directors. The Board of Directors of the Company is comprised of the persons set forth under the heading of the Pricing Prospectus and the Prospectus captioned “Directors, Executive Officers and Corporate Governance.” The qualifications of the persons serving as board members and the overall composition of the board comply with the Exchange Act, the Exchange Act Regulations, the Sarbanes-Oxley Act of 2002 and the rules promulgated thereunder (the “Sarbanes-Oxley Act”) applicable to the Company and the listing rules of the Exchange. At least one member of the Audit Committee of the Board of Directors of the Company qualifies as an “audit committee financial expert,” as such term is defined under Regulation S-K and the listing rules of the Exchange. In addition, at least a majority of the persons serving on the Board of Directors qualify as “independent,” as defined under the listing rules of the Exchange.

2.28Sarbanes-Oxley Compliance.

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2.28.1Disclosure Controls. The Company has developed and currently maintains disclosure controls and procedures that comply in all material respects with Rule 13a-15 or 15d-15 under the Exchange Act Regulations, and such controls and procedures are effective to ensure that all material information concerning the Company will be made known on a timely basis to the individuals responsible for the preparation of the Company’s Exchange Act filings and other public disclosure documents.

2.28.2Compliance. The Company is, or at the Applicable Time and on the Closing Date will be, in material compliance with the provisions of the Sarbanes-Oxley Act applicable to it, and has implemented or will implement such programs and taken reasonable steps to ensure the Company’s future compliance (not later than the relevant statutory and regulatory deadlines therefor) with all of the material provisions of the Sarbanes-Oxley Act.

2.29Accounting Controls. The Company and its Subsidiaries maintain systems of “internal control over financial reporting” (as defined under Rules 13a-15 and 15d-15 under the Exchange Act Regulations) that comply in all material respects with the requirements of the Exchange Act and have been designed by, or under the supervision of, their respective principal executive and principal financial officers, or persons performing similar functions, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP, including, but not limited to, internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management’s general or specific authorizations; (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain asset accountability; (iii) access to assets is permitted only in accordance with management’s general or specific authorization; and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. Except as disclosed in the Registration Statement, the Pricing Disclosure Package and the Prospectus, the Company has no knowledge of any material weaknesses in its internal controls. The Auditor and the Audit Committee of the Board of Directors of the Company have been advised of: (i) all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are known to the Company’s management and that have adversely affected or are reasonably likely to adversely affect the Company’ ability to record, process, summarize and report financial information; and (ii) any fraud known to the Company’s management, whether or not material, that involves management or other employees who have a significant role in the Company’s internal controls over financial reporting.

2.30No Investment Company Status. The Company is not and, after giving effect to the Offering and the application of the proceeds thereof as described in the Registration Statement, the Pricing Disclosure Package and the Prospectus, will not be, required to register as an “investment company,” as defined in the Investment Company Act of 1940, as amended.

2.31No Labor Disputes. No labor dispute with the employees of the Company or any of its Subsidiaries exists or, to the knowledge of the Company, is imminent.

2.32Intellectual Property Rights. The Company and each of its Subsidiaries owns or possesses or has valid rights to use all patents, patent applications, trademarks, service marks, trade names, trademark registrations, service mark registrations, copyrights, licenses, inventions, trade

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secrets and similar rights (“Intellectual Property Rights”) necessary for the conduct of the business of the Company and its Subsidiaries as currently carried on and as described in the Registration Statement, the Pricing Disclosure Package and the Prospectus. To the knowledge of the Company, no action or use by the Company or any of its Subsidiaries necessary for the conduct of its business as currently carried on and as described in the Registration Statement and the Prospectus will involve or give rise to any infringement of, or license or similar fees for, any Intellectual Property Rights of others (other than license or similar fees described or contemplated in the Registration Statement, the Pricing Disclosure Package and the Prospectus). Neither the Company nor any of its Subsidiaries has received any notice alleging any such infringement, fee or conflict with asserted Intellectual Property Rights of others. Except as described in the Registration Statement, the Pricing Disclosure Package and the Prospectus and except as would not reasonably be expected to result, individually or in the aggregate, in a Material Adverse Change (A) to the knowledge of the Company, there is no infringement, misappropriation or violation by third parties of any of the Intellectual Property Rights owned by the Company; (B) there is no pending or, to the knowledge of the Company, threatened action, suit, proceeding or claim by others challenging the rights of the Company in or to any such Intellectual Property Rights, and the Company is unaware of any facts which would form a reasonable basis for any such claim, that would, individually or in the aggregate, together with any other claims referred to in this Section 2.32, reasonably be expected to result in a Material Adverse Change; (C) the Intellectual Property Rights owned by the Company and, to the knowledge of the Company, the Intellectual Property Rights licensed to the Company have not been adjudged by a court of competent jurisdiction invalid or unenforceable, in whole or in part, and there is no pending or, to the Company’s knowledge, threatened action, suit, proceeding or claim by others challenging the validity or scope of any such Intellectual Property Rights, and the Company is unaware of any facts which would form a reasonable basis for any such claim that would, individually or in the aggregate, together with any other claims referred to in this Section 2.32, reasonably be expected to result in a Material Adverse Change; (D) there is no pending or, to the Company’s knowledge, threatened action, suit, proceeding or claim by others that the Company infringes, misappropriates or otherwise violates any Intellectual Property Rights or other proprietary rights of others, the Company has not received any written notice of such claim and the Company is unaware of any other facts which would form a reasonable basis for any such claim that would, individually or in the aggregate, together with any other claims referred to in this Section 2.32, reasonably be expected to result in a Material Adverse Change; and (E) to the Company’s knowledge, no employee of the Company is in or has ever been in violation in any material respect of any term of any employment contract, patent disclosure agreement, invention assignment agreement, non-competition agreement, non-solicitation agreement, nondisclosure agreement or any restrictive covenant to or with a former employer where the basis of such violation relates to such employee’s employment with the Company, or actions undertaken by the employee while employed with the Company and could reasonably be expected to result, individually or in the aggregate, in a Material Adverse Change. To the Company’s knowledge, all material technical information developed by and belonging to the Company which has not been patented has been kept confidential. The Company is not a party to or bound by any options, licenses or agreements with respect to the Intellectual Property Rights of any other person or entity that are required to be set forth in the Registration Statement, the Pricing Disclosure Package and the Prospectus and are not described therein. The Registration Statement, the Pricing Disclosure Package and the Prospectus contain in all material respects the same description of the matters set forth in the preceding sentence. None of the technology employed by the Company has been

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obtained or is knowingly being used by the Company in material violation of any contractual obligation binding on the Company or, to the Company’s knowledge, any of its officers, directors or employees, or otherwise in material violation of the rights of any persons.

2.33Taxes. Each of the Company and its Subsidiaries has filed all material returns (as hereinafter defined) required to be filed with taxing authorities prior to the date hereof or has duly obtained extensions of time for the filing thereof. Each of the Company and its Subsidiaries has paid all taxes (as hereinafter defined) shown as due on such returns that were filed and has paid all taxes imposed on or assessed against the Company or such respective Subsidiary. The provisions for taxes payable, if any, shown on the financial statements filed with or as part of the Registration Statement are sufficient for all material accrued and unpaid taxes, whether or not disputed, and for all periods to and including the dates of such consolidated financial statements. Except as disclosed in writing to the Underwriters, (i) no material issues have been raised (and are currently pending) by any taxing authority in connection with any of the returns or taxes asserted as due from the Company or its Subsidiaries, and (ii) no waivers of statutes of limitation with respect to the returns or collection of taxes have been given by or requested from the Company or its Subsidiaries. The term “taxes” means all federal, state, local, foreign and other net income, gross income, gross receipts, sales, use, ad valorem, transfer, franchise, profits, license, lease, service, service use, withholding, payroll, employment, excise, severance, stamp, occupation, premium, property, windfall profits, customs, duties or other taxes, fees, assessments or charges of any kind whatever, together with any interest and any penalties, additions to tax or additional amounts with respect thereto. The term “returns” means all returns, declarations, reports, statements and other documents required to be filed in respect to taxes.

2.34ERISA Compliance. The Company and any “employee benefit plan” (as defined under the Employee Retirement Income Security Act of 1974, as amended, and the regulations and published interpretations thereunder (collectively, “ERISA”)) established or maintained by the Company or its “ERISA Affiliates” (as defined below) are in compliance in all material respects with ERISA. “ERISA Affiliate” means, with respect to the Company, any member of any group of organizations described in Sections 414(b),(c),(m) or (o) of the Internal Revenue Code of 1986, as amended, and the regulations and published interpretations thereunder (the “Code”) of which the Company is a member.  No “reportable event” (as defined under ERISA) has occurred or is reasonably expected to occur with respect to any “employee benefit plan” established or maintained by the Company or any of its ERISA Affiliates. No “employee benefit plan” established or maintained by the Company or any of its ERISA Affiliates, if such “employee benefit plan” were terminated, would have any “amount of unfunded benefit liabilities” (as defined under ERISA). Neither the Company nor any of its ERISA Affiliates has incurred or reasonably expects to incur any material liability under (i) Title IV of ERISA with respect to termination of, or withdrawal from, any “employee benefit plan” or (ii) Sections 412, 4971, 4975 or 4980B of the Code. Each “employee benefit plan” established or maintained by the Company or any of its ERISA Affiliates that is intended to be qualified under Section 401(a) of the Code is so qualified and, to the knowledge of the Company, nothing has occurred, whether by action or failure to act, which would cause the loss of such qualification.

2.35Compliance with Laws. Each of the Company and its Subsidiaries: (A) is and at all times has been in compliance with all statutes, rules, or regulations applicable to the ownership, testing, development, manufacture, packaging, processing, use, distribution, marketing, labeling,

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promotion, sale, offer for sale, storage, import, export or disposal of any product manufactured or distributed by the Company (“Applicable Laws”), except as could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Change; (B) has not received any warning letter, untitled letter or other written correspondence or notice from any other Governmental Entity alleging or asserting noncompliance with any Applicable Laws or any licenses, certificates, approvals, clearances, authorizations, permits and supplements or amendments thereto required by any such Applicable Laws (“Authorizations”); (C) possesses all material Authorizations and such material Authorizations are valid and in full force and effect and are not in material violation of any term of any such Authorizations; (D) has not received written notice of any claim, action, suit, proceeding, hearing, enforcement, investigation, arbitration or other action from any Governmental Entity or third party alleging that any product operation or activity is in violation of any Applicable Laws or Authorizations and has no knowledge that any such Governmental Entity or third party is considering any such claim, litigation, arbitration, action, suit, investigation or proceeding that if brought would result in a Material Adverse Change; (E) has not received written notice that any Governmental Entity has taken, is taking or intends to take action to limit, suspend, modify or revoke any Authorizations and has no knowledge that any such Governmental Entity is considering such action; (F) has filed, obtained, maintained or submitted all material reports, documents, forms, notices, applications and records, as required by any Applicable Laws or Authorizations and that all such reports, documents, forms, notices, applications, and records, were complete and correct in all material respects on the date filed (or were corrected or supplemented by a subsequent submission); and (G) has not, either voluntarily or involuntarily, initiated, conducted, or issued or caused to be initiated, conducted or issued, any recall, market withdrawal or replacement, safety alert, post-sale warning, or other notice or action relating to the alleged lack of safety or any alleged product defect or violation and, to the Company’s knowledge, no third party has initiated, conducted or intends to initiate any such notice or action.

2.36Environmental Matters.

2.36.1The business and operations of the Company, and each of its Subsidiaries, have been and are being conducted in compliance with all applicable laws, ordinances, rules, regulations, licenses, permits, approvals, plans, authorizations or requirements relating to occupational safety and health, or pollution, or protection of health or the environment (including, without limitation, those relating to emissions, discharges, releases or threatened releases of pollutants, contaminants or hazardous or toxic substances, materials or wastes into ambient air, surface water, groundwater or land, or relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of chemical substances, pollutants, contaminants or hazardous or toxic substances, materials or wastes, whether solid, gaseous or liquid in nature) of any governmental department, commission, board, bureau, agency or instrumentality of the United States, any state or political subdivision thereof, or to the knowledge of the Company, any foreign jurisdiction (“Environmental Laws”), and all applicable judicial or administrative agency or regulatory decrees, awards, judgments and orders relating thereto, except where the failure to be in such compliance would not be reasonably expected, individually or in the aggregate, to have a Material Adverse Change; and neither the Company nor any of its Subsidiaries has received any written notice from any governmental instrumentality or any third party alleging any material violation thereof or liability thereunder (including, without limitation, liability for costs of

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investigating or remediating sites containing hazardous substances and/or damages to natural resources).

2.36.2There has been no storage, generation, transportation, use, handling, treatment, Release or threat of Release of Hazardous Materials (as defined below) by or caused by the Company or any of its Subsidiaries (or, to the knowledge of the Company, any other entity (including any predecessor) for whose acts or omissions the Company or any of its Subsidiaries is or could reasonably be expected to be liable) at, on, under or from any property or facility now or previously owned, operated or leased by the Company or any of its Subsidiaries, or at, on, under or from any other property or facility, in violation of any Environmental Laws or in a manner or amount or to a location that could reasonably be expected to result in any liability under any Environmental Law, except for any violation or liability which would not, individually or in the aggregate, have a Material Adverse Change. “Hazardous Materials” means any material, chemical, substance, waste, pollutant, contaminant, compound, mixture, or constituent thereof, in any form or amount, including petroleum (including crude oil or any fraction thereof) and petroleum products, natural gas liquids, asbestos and asbestos containing materials, naturally occurring radioactive materials, brine, and drilling mud, regulated or which can give rise to liability under any Environmental Law.  “Release” means any spilling, leaking, seepage, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping, disposing, depositing, dispersing, or migrating in, into or through the environment, or in, into from or through any building or structure.

2.37Ineligible Issuer. At the time of filing the Registration Statement and any post-effective amendment thereto, at the time of effectiveness of the Registration Statement and any amendment thereto, at the earliest time thereafter that the Company or another offering participant made a bona fide offer (within the meaning of Rule 164(h)(2) of the Securities Act Regulations) of the Public Securities and at the date hereof, the Company was not and is not an “ineligible issuer,” as defined in Rule 405, without taking account of any determination by the Commission pursuant to Rule 405 that it is not necessary that the Company be considered an ineligible issuer.

2.38Real and Personal Property. Except as set forth in the Registration Statement, the Pricing Disclosure Package and the Prospectus, the Company and its Subsidiaries have good and marketable title in fee simple to, or have valid rights to lease or otherwise use, all items of real or personal property which are material to the business of the Company and its Subsidiaries taken as a whole, in each case free and clear of all liens, encumbrances, security interests, claims and defects that do not, singly or in the aggregate, materially affect the value of such property and do not interfere with the use made and proposed to be made of such property by the Company or its Subsidiaries; and all of the leases and subleases material to the business of the Company and its Subsidiaries, considered as one enterprise, and under which the Company or any of its Subsidiaries holds properties described in the Registration Statement, the Pricing Disclosure Package and the Prospectus, are in full force and effect, and neither the Company nor any Subsidiary has received any written notice of any material claim of any sort that has been asserted by anyone adverse to the rights of the Company or any Subsidiary under any of the leases or subleases mentioned above, or affecting or questioning the rights of the Company or such Subsidiary to the continued possession of the leased or subleased premises under any such lease or sublease.

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2.39Contracts Affecting Capital. There are no transactions, arrangements or other relationships between and/or among the Company, any of its affiliates (as such term is defined in Rule 405 of the Securities Act Regulations) and any unconsolidated entity, including, but not limited to, any structured finance, special purpose or limited purpose entity that could reasonably be expected to materially affect the Company’s or its Subsidiaries’ liquidity or the availability of or requirements for their capital resources required to be described or incorporated by reference in the Registration Statement, the Pricing Disclosure Package and the Prospectus which have not been described or incorporated by reference as required.

2.40Loans to Directors or Officers. There are no outstanding loans, advances (except normal advances for business expenses in the ordinary course of business) or guarantees or indebtedness by the Company or its Subsidiaries to or for the benefit of any of the officers or directors of the Company, its Subsidiaries or any of their respective family members, except as disclosed in the Registration Statement, the Pricing Disclosure Package and the Prospectus.

2.41Smaller Reporting Company. As of the time of filing of the Registration Statement, the Company was a “smaller reporting company,” as defined in Rule 12b-2 of the Exchange Act Regulations.

2.42Industry Data. The statistical and market-related data included in each of the Registration Statement, the Pricing Disclosure Package and the Prospectus are based on or derived from sources that the Company reasonably and in good faith believes are reliable and accurate or represent the Company’s good faith estimates that are made on the basis of data derived from such sources.

2.43Testing-the-Waters Communications. The Company has not (i) alone engaged in any Testing-the-Waters Communications, other than Testing-the-Waters Communications with the written consent of the Representative and with entities that are qualified institutional buyers within the meaning of Rule 144A under the Securities Act or institutions that are accredited investors within the meaning of Rule 501 under the Securities Act and (ii) authorized anyone other than the Representative to engage in Testing-the-Waters Communications. “Testing-the-Waters Communication” means any oral or written communication with potential investors undertaken in reliance on Section 5(d) of the Securities Act. The Company confirms that the Representative has been authorized to act on its behalf in undertaking Testing-the-Waters Communications. The Company has not distributed any Written Testing-the-Waters Communications other than those listed on Schedule 2-B hereto. “Written Testing-the-Waters Communication” means any Testing-the-Waters Communication that is a written communication within the meaning of Rule 405 under the Securities Act.

3.Covenants of the Company. The Company covenants and agrees as follows:

3.1Amendments to Registration Statement. Until the later of the Closing Date and the exercise in full or expiration of the Over-allotment Option specified in Section 1.2 hereof, the Company shall deliver to the Representative, prior to filing, any amendment or supplement to the Registration Statement or Prospectus proposed to be filed after the Effective Date and not file any such amendment or supplement to which the Representative shall reasonably object in writing.

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3.2Federal Securities Laws.

3.2.1Compliance. Until the later of the Closing Date and the exercise in full or expiration of the Over-allotment Option specified in Section 1.2 hereof, the Company, subject to Section 3.2.2, shall comply in all material respects with the requirements of Rule 430A of the Securities Act Regulations, and will notify the Representative promptly, and confirm the notice in writing, (i) when any post-effective amendment to the Registration Statement shall become effective or any amendment or supplement to the Prospectus shall have been filed; (ii) of the receipt of any comments from the Commission related to the Prospectus or the Offering; (iii) of any request by the Commission for any amendment to the Registration Statement or any amendment or supplement to the Prospectus or for additional information; (iv) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or any post-effective amendment or of any order preventing or suspending the use of any Preliminary Prospectus or the Prospectus, or of the suspension of the qualification of the Public Securities and Representative’s Securities for offering or sale in any jurisdiction, or of the initiation or threatening of any proceedings for any of such purposes or of any examination pursuant to Section 8(d) or 8(e) of the Securities Act concerning the Registration Statement; and (v) if the Company becomes the subject of a proceeding under Section 8A of the Securities Act in connection with the Offering of the Public Securities and Representative’s Securities. The Company shall effect all filings required under Rule 424(b) of the Securities Act Regulations, in the manner and within the time period required by Rule 424(b) (without reliance on Rule 424(b)(8)), and shall take such steps as it deems reasonably necessary to ascertain promptly whether the form of prospectus transmitted for filing under Rule 424(b) was received for filing by the Commission and, in the event that it was not, it will promptly file such prospectus. The Company shall use its commercially reasonable efforts to prevent the issuance of any stop order, prevention or suspension and, if any such order is issued, to obtain the lifting thereof at the earliest possible moment.

3.2.2Continued Compliance. Until the later of the Closing Date and the exercise in full or expiration of the Over-allotment Option specified in Section 1.2 hereof, the Company shall comply in all material respects with the Securities Act, the Securities Act Regulations, the Exchange Act and the Exchange Act Regulations so as to permit the completion of the distribution of the Public Securities as contemplated in this Agreement and in the Registration Statement, the Pricing Disclosure Package and the Prospectus. If at any time when a prospectus relating to the Public Securities is (or, but for the exception afforded by Rule 172 of the Securities Act Regulations (“Rule 172”), would be) required by the Securities Act to be delivered in connection with sales of the Public Securities, any event shall occur or condition shall exist as a result of which it is necessary, in the opinion of counsel for the Underwriters or for the Company, to (i) amend the Registration Statement in order that the Registration Statement will not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading; (ii) amend or supplement the Pricing Disclosure Package or the Prospectus in order that the Pricing Disclosure Package or the Prospectus, as the case may be, will not include any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein not misleading in the light of the circumstances existing at the time it is delivered to a purchaser; or (iii) amend the Registration Statement or amend or supplement the Pricing Disclosure Package or the Prospectus, as the case may be, in order to comply with the requirements of the Securities Act or the Securities Act Regulations, the Company will promptly (A) give the Representative notice of such event; (B) prepare any amendment or

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supplement as may be necessary to correct such statement or omission or to make the Registration Statement, the Pricing Disclosure Package or the Prospectus comply with such requirements and, a reasonable amount of time prior to any proposed filing or use, furnish the Representative with copies of any such amendment or supplement and (C) file with the Commission any such amendment or supplement; provided that the Company shall not file or use any such amendment or supplement to which the Representative or Representative Counsel shall reasonably object. The Company will furnish to the Underwriters such number of copies of such amendment or supplement as the Underwriters may reasonably request. The Company has given the Representative notice of any filings made pursuant to the Exchange Act or the Exchange Act Regulations within 48 hours prior to the Applicable Time. The Company shall give the Representative notice of its intention to make any such filing from the Applicable Time until the later of the Closing Date and the exercise in full or expiration of the Over-allotment Option specified in Section 1.2 hereof and will furnish the Representative with copies of the related document(s) a reasonable amount of time prior to such proposed filing, as the case may be, and will not file or use any such document to which the Representative or counsel for the Underwriters shall reasonably object.

3.2.3Exchange Act Registration. For a period of three (3) years after the date of this Agreement, the Company shall use its commercially reasonable efforts to maintain the registration of the shares of Common Stock under the Exchange Act. The Company shall not deregister the shares of Common Stock under the Exchange Act without the prior written consent of the Representative.

3.2.4Free Writing Prospectuses. The Company agrees that it is an “ineligible issuer” within the meaning of Rule 164 and  it shall not make any offer relating to the Public Securities that would constitute an Issuer Free Writing Prospectus or that would otherwise constitute a “free writing prospectus,” or a portion thereof, required to be filed by the Company with the Commission or retained by the Company under Rule 433.

3.2.5Testing-the-Waters Communications. If at any time following the distribution of any Written Testing-the-Waters Communication there occurred or occurs an event or development as a result of which such Written Testing-the-Waters Communication included or would include an untrue statement of a material fact or omitted or would omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances existing at that subsequent time, not misleading, the Company shall promptly notify the Representative and shall promptly amend or supplement, at its own expense, such Written Testing-the-Waters Communication to eliminate or correct such untrue statement or omission.

3.3Delivery to the Underwriters of Registration Statements. The Company has delivered or made available or shall deliver or make available to the Representative and Representative Counsel, without charge, signed copies of the Registration Statement as originally filed and each amendment thereto (including exhibits filed therewith) and signed copies of all consents and certificates of experts, and will also deliver to the Underwriters, upon request and without charge, a conformed copy of the Registration Statement as originally filed and each amendment thereto (without exhibits) for each of the Underwriters. The copies of the Registration Statement and each amendment thereto furnished to the Underwriters will be identical to the

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electronically transmitted copies thereof filed with the Commission pursuant to EDGAR, except to the extent permitted by Regulation S-T.

3.4Delivery to the Underwriters of Prospectuses. The Company has delivered or made available or will deliver or make available to each Underwriter, without charge, as many copies of each Preliminary Prospectus as such Underwriter reasonably requested, and the Company hereby consents to the use of such copies for purposes permitted by the Securities Act. The Company will furnish to each Underwriter, without charge, during the period when a prospectus relating to the Public Securities is (or, but for the exception afforded by Rule 172, would be) required to be delivered under the Securities Act, such number of copies of the Prospectus (as amended or supplemented) as such Underwriter may reasonably request. The Prospectus and any amendments or supplements thereto furnished to the Underwriters will be identical to the electronically transmitted copies thereof filed with the Commission pursuant to EDGAR, except to the extent permitted by Regulation S-T.

3.5Events Requiring Notice to the Representative. The Company shall notify the Representative promptly and confirm the notice in writing: (i) of the issuance by any state securities commission of any proceedings for the suspension of the qualification of the Public Securities for offering or sale in any jurisdiction or of the initiation, or the threatening, of any proceeding for that purpose; (ii) of the mailing and delivery to the Commission for filing of any amendment or supplement to the Registration Statement or Prospectus; (iii) of the receipt of any comments or request for any additional information from the Commission related to the Prospectus or the Offering; and (iv) of the happening of any event during the period described in this Section 3.5 that, in the judgment of the Company, makes any statement of a material fact made in the Registration Statement, the Pricing Disclosure Package or the Prospectus untrue or that requires the making of any changes in (a) the Registration Statement in order to make the statements therein not misleading, or (b) in the Pricing Disclosure Package or the Prospectus in order to make the statements therein, in light of the circumstances under which they were made, not misleading.

3.6Review of Financial Statements. For a period of three (3) years after the date of this Agreement, the Company, at its expense, shall cause its regularly engaged independent registered public accounting firm to review (but not audit) the Company’s financial statements for each of the three fiscal quarters immediately preceding the announcement of any quarterly financial information.

3.7Listing. The Company shall use its commercially reasonable efforts to maintain the listing of the shares of Common Stock (including the Public Securities) on the Exchange for at least three (3) years from the date of this Agreement.

3.8Reports to the Representative.

3.8.1Periodic Reports, etc. For a period of three (3) years after the date of this Agreement, the Company shall furnish or make available to the Representative copies of such financial statements and other periodic and special reports as the Company from time to time furnishes generally to holders of any class of its securities and also promptly furnish to the Representative: (i) a copy of each periodic report the Company shall be required to file with the Commission under the Exchange Act and the Exchange Act Regulations; (ii) a copy of every press

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release and every news item and article with respect to the Company or its affairs which was released by the Company; (iii) a copy of each Form 8-K filed by the Company; (iv) five copies of each registration statement filed by the Company under the Securities Act; and (v) such additional documents and information with respect to the Company and the affairs of any future subsidiaries of the Company as the Representative may from time to time reasonably request; provided the Representative shall sign, if requested by the Company, a Regulation FD compliant confidentiality agreement which is reasonably acceptable to the Representative and Representative Counsel in connection with the Representative’s receipt of such information. Documents filed with the Commission pursuant to its EDGAR system shall be deemed to have been delivered to the Representative pursuant to this Section 3.8.1.

3.8.2Transfer Agent; Transfer Sheets. For a period of one (1) year after the date of this Agreement, the Company shall retain a transfer agent and registrar acceptable to the Representative (the “Transfer Agent”) and shall furnish to the Representative at the Company’s sole cost and expense such transfer sheets of the Company’s securities as the Representative may reasonably request, including the daily and monthly consolidated transfer sheets of the Transfer Agent and DTC. Computershare Trust Company, N.A. is acceptable to the Representative to act as Transfer Agent for the shares of Common Stock.

3.9Payment of Expenses

3.9.1General Expenses Related to the Offering. The Company hereby agrees to pay on each of the Closing Date and the Option Closing Date, if any, to the extent not paid at the Closing Date, all expenses incident to the performance of the obligations of the Company under this Agreement, including, but not limited to: (a) all filing fees and communication expenses relating to the registration of the shares of Common Stock to be sold in the Offering (including the Option Shares) with the Commission; (b) all Public Filing System filing fees associated with the review of the Offering by FINRA; (c) all fees and expenses relating to the listing of such Public Securities on the Exchange and such other stock exchanges as the Company and the Representative together determine; (d) all fees, expenses and disbursements relating to background checks of the Company’s officers and directors; (e) all fees, expenses and disbursements, if any, relating to the registration or qualification of the Public Securities under the “blue sky” securities laws of such states and other jurisdictions as the Representative may reasonably designate if the Offering is commenced on the Over-the-Counter Bulletin Board; (f) all fees, expenses and disbursements relating to the registration, qualification or exemption of the Public Securities under the securities laws of such foreign jurisdictions as the Representative may reasonably designate; (g) the costs of all mailing and printing of the underwriting documents (including, without limitation, the Underwriting Agreement, any Blue Sky Surveys and, if appropriate, any Agreement Among Underwriters, Selected Dealers’ Agreement, Underwriters’ Questionnaire and Power of Attorney), Registration Statements, Prospectuses and all amendments, supplements and exhibits thereto and as many preliminary and final Prospectuses as the Representative may reasonably deem necessary; (h) the costs of preparing, printing and delivering certificates representing the Public Securities; (i) fees and expenses of the transfer agent for the shares of Common Stock; (j) stock transfer and/or stamp taxes, if any, payable upon the transfer of securities from the Company to the Underwriters; (k) the cost associated with the Underwriter’s use of book-building and compliance software for the Offering (l) the costs associated with one set of bound volumes of the public offering materials as well as commemorative lucite mementos, each of which the Company or its designee shall

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provide within a reasonable time after the Closing Date in such quantities as the Representative may reasonably request; (m) the fees and expenses of the Company’s accountants; (n) the fees and expenses of the Company’s legal counsel and other agents and representatives; (o) the fees and expenses of the Representative Counsel not to exceed $75,000; and (p) the Underwriter’s actual accountable “road show” expenses for the Offering; provided, that the maximum amount that the Company shall pay for items (d), (k), (l), (o) and (p) and shall be $150,000. The Representative may deduct from the net proceeds of the Offering payable to the Company on the Closing Date, or the Option Closing Date, if any, the expenses set forth herein to be paid by the Company to the Underwriters, other than amounts already advanced to the Representative as of the date of this Underwriting Agreement.

3.9.2Non-accountable Expenses. The Company further agrees that, in addition to the expenses payable pursuant to Section 3.9.1, on the Closing Date it shall pay to the Representative, by deduction from the net proceeds of the Offering contemplated herein, a non-accountable expense allowance equal to one percent (1%) of the gross proceeds received by the Company from the sale of the Firm Shares (excluding the Option Shares), less the Advance (as such term is defined in Section 8.3 hereof), provided, however, that in the event that the Offering is terminated, the Company agrees to reimburse the Underwriters pursuant to Section 8.3 hereof.

3.10Application of Net Proceeds. The Company shall apply the net proceeds from the Offering received by it in a manner consistent with the application thereof described under the caption “Use of Proceeds” in the Registration Statement, the Pricing Disclosure Package and the Prospectus.

3.11Delivery of Earnings Statements to Security Holders. The Company shall make generally available to its security holders as soon as practicable, but not later than the first day of the fifteenth (15^th) full calendar month following the date of this Agreement, an earnings statement (which need not be certified by independent registered public accounting firm unless required by the Securities Act or the Securities Act Regulations, but which shall satisfy the provisions of Rule 158(a) under Section 11(a) of the Securities Act) covering a period of at least twelve (12) consecutive months beginning after the date of this Agreement.

3.12Stabilization. Neither the Company nor, to its knowledge, any of its employees, directors or stockholders (without the consent of the Representative) has taken or shall take, directly or indirectly, any action designed to or that has constituted or that might reasonably be expected to cause or result in, under Regulation M of the Exchange Act, or otherwise, stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of the Public Securities.

3.13Internal Controls. The Company shall use its best efforts to maintain a system of internal accounting controls sufficient to provide reasonable assurances that: (i) transactions are executed in accordance with management’s general or specific authorization; (ii) transactions are recorded as necessary in order to permit preparation of financial statements in accordance with GAAP and to maintain accountability for assets; (iii) access to assets is permitted only in accordance with management’s general or specific authorization; and (iv) the recorded accountability for assets is compared with existing assets at reasonable intervals and appropriate action is taken with respect to any differences.

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3.14Accountants. As of the date of this Agreement, the Company has retained an independent registered public accounting firm reasonably acceptable to the Representative, and the Company shall continue to retain a nationally recognized independent registered public accounting firm for a period of at least three (3) years after the date of this Agreement. The Representative acknowledges that the Auditor is acceptable to the Representative.

3.15FINRA. The Company shall advise the Representative (who shall make an appropriate filing with FINRA) if it is or becomes aware that (i) any officer or director of the Company, (ii) any beneficial owner of 5% or more of any class of the Company’s securities or (iii) any beneficial owner of the Company’s unregistered equity securities which were acquired during the 180 days immediately preceding the filing of the Registration Statement is or becomes an affiliate or associated person of a FINRA member participating in the Offering (as determined in accordance with the rules and regulations of FINRA).

3.16No Fiduciary Duties. The Company acknowledges and agrees that the Underwriters’ responsibility to the Company is solely contractual in nature and that none of the Underwriters or their affiliates or any selling agent shall be deemed to be acting in a fiduciary capacity, or otherwise owes any fiduciary duty to the Company or any of its affiliates in connection with the Offering and the other transactions contemplated by this Agreement.

3.17Company Lock-Up Agreements.

3.17.1Restriction on Sales of Capital Stock. The Company, on behalf of itself and any successor entity, agrees that, without the prior written consent of the Representative, it will not, for a period of one year after the date of this Agreement (the “Lock-Up Period”), (i) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend, or otherwise transfer or dispose of, directly or indirectly, any shares of capital stock of the Company or any securities convertible into or exercisable or exchangeable for shares of capital stock of the Company; (ii) file or cause to be filed any registration statement with the Commission relating to the offering of any shares of capital stock of the Company or any securities convertible into or exercisable or exchangeable for shares of capital stock of the Company other than a registration statement on Form S-8; or (iii) complete any offering of debt securities of the Company (other than debt securities convertible into shares of Common Stock of the Company); or (iv) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of capital stock of the Company, whether any such transaction described in clause (i), (ii) or (iii) above is to be settled by delivery of shares of capital stock of the Company or such other securities, in cash or otherwise.

The restrictions contained in this Section 3.17.1 shall not apply to (i) the shares of Common Stock to be sold hereunder, (ii) the issuance by the Company of shares of Common Stock upon the exercise of a stock option or warrant or the conversion of a security outstanding on the date hereof, of which the Representative has been advised in writing or (iii) the issuance by the Company of stock options or shares of capital stock of the Company under any equity compensation plan of the Company.

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Notwithstanding the foregoing, if (i) during the last 17 days of the Lock-Up Period, the Company issues an earnings release or material news or a material event relating to the Company occurs, or (ii) prior to the expiration of the Lock-Up Period, the Company announces that it will release earnings results or becomes aware that material news or a material event will occur during the 16-day period beginning on the last day of the Lock-Up Period, the restrictions imposed by this Section 3.17.1 shall continue to apply until the expiration of the 18-day period beginning on the issuance of the earnings release or the occurrence of such material news or material event, as applicable, unless the Representative waives, in writing, such extension; provided, however, that this extension of the Lock-Up Period shall not apply to the extent that FINRA has amended or repealed NASD Rule 2711(f)(4), or has otherwise provided written interpretive guidance regarding such rule, in each case, so as to eliminate the prohibition of any broker, dealer, or member of a national securities association from publishing or distributing any research report, with respect to the securities of an Emerging Growth Company prior to or after the expiration of any agreement between the broker, dealer, or member of a national securities association and the Emerging Growth Company or its stockholders that restricts or prohibits the sale of securities held by the Emerging Growth Company or its stockholders after the initial public offering date.

3.17.2Restriction on Continuous Offerings. Except as set forth in the Registration Statement, notwithstanding the restrictions contained in Section 3.17.1, the Company, on behalf of itself and any successor entity, agrees that, without the prior written consent of the Representative, it will not, for a period of 12 months after the date of this Agreement, directly or indirectly in any “at-the-market” or continuous equity transaction, offer to sell, sell, contract to sell, grant any option to sell or otherwise dispose of shares of capital stock of the Company or any securities convertible into or exercisable or exchangeable for shares of capital stock of the Company.

3.18Release of D&O Lock-up Period. If the Representative, in its sole discretion, agrees to release or waive the restrictions set forth in the Lock-Up Agreements described in Section 2.24 hereof for an officer or director of the Company and provides the Company with notice of the impending release or waiver at least three (3) Business Days before the effective date of the release or waiver, the Company agrees to announce the impending release or waiver by a press release substantially in the form of Exhibit C hereto through a major news service at least two (2) Business Days before the effective date of the release or waiver.

3.19Blue Sky Qualifications. The Company shall use its commercially reasonable efforts, in cooperation with the Underwriters, if necessary, to qualify the Public Securities for offering and sale under the applicable securities laws of such states and other jurisdictions (domestic or foreign) as the Representative may designate and to maintain such qualifications in effect so long as required to complete the distribution of the Public Securities; provided, however, that the Company shall not be obligated to file any general consent to service of process or to qualify as a foreign corporation or as a dealer in securities in any jurisdiction in which it is not so qualified or to subject itself to taxation in respect of doing business in any jurisdiction in which it is not otherwise so subject.

3.20Reporting Requirements. The Company, during the period when a prospectus relating to the Public Securities is (or, but for the exception afforded by Rule 172, would be) required to be delivered under the Securities Act, will use its commercially reasonable efforts to

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file all documents required to be filed with the Commission pursuant to the Exchange Act within the time periods required by the Exchange Act and Exchange Act Regulations. Additionally, the Company shall report the use of proceeds from the issuance of the Public Securities as may be required under Rule 463 under the Securities Act Regulations.

3.21IRS Forms. If requested by the Representative, the Company shall deliver to each Underwriter (or its agent), prior to or at the Closing Date, a properly completed and executed Internal Revenue Service (“IRS”) Form W-9 or an IRS Form W-8, as appropriate, together with all required attachments to such form.

4.Conditions of Underwriters’ Obligations. The obligations of the Underwriters to purchase and pay for the Public Securities, as provided herein, shall be subject to (i) the continuing accuracy of the representations and warranties of the Company as of the date hereof and as of each of the Closing Date and the Option Closing Date, if any; (ii) the accuracy of the statements of officers of the Company made pursuant to the provisions hereof; (iii) the performance by the Company of its obligations hereunder; and (iv) the following conditions:

4.1Regulatory Matters.

4.1.1Effectiveness of Registration Statement; Rule 430A Information. The Registration Statement has become effective not later than 5:00 p.m., Eastern time, on the date of this Agreement or such later date and time as shall be consented to in writing by you, and, at each of the Closing Date and any Option Closing Date, no stop order suspending the effectiveness of the Registration Statement or any post-effective amendment thereto has been issued under the Securities Act, no order preventing or suspending the use of any Preliminary Prospectus or the Prospectus has been issued and no proceedings for any of those purposes have been instituted or are pending or, to the Company’s knowledge, contemplated by the Commission. The Company has complied with each request (if any) from the Commission for additional information. The Prospectus containing the Rule 430A Information shall have been filed with the Commission in the manner and within the time frame required by Rule 424(b) (without reliance on Rule 424(b)(8)) or a post-effective amendment providing such information shall have been filed with, and declared effective by, the Commission in accordance with the requirements of Rule 430A.

4.1.2FINRA Clearance. On or before the date of this Agreement, the Representative shall have received clearance from FINRA as to the amount of compensation allowable or payable to the Underwriters as described in the Registration Statement.

4.1.3Exchange Stock Market Clearance. On the Closing Date, the Company’s shares of Common Stock, including the Firm Shares, shall have been approved for listing on the Exchange, subject only to official notice of issuance. On the first Option Closing Date (if any), the Company’s shares of Common Stock, including the Option Shares, shall have been approved for listing on the Exchange, subject only to official notice of issuance.

4.2Company Counsel Matters.

4.2.1Closing Date Opinion of Counsel. On the Closing Date, the Representative shall have received the favorable opinion of Lucosky Brookman LLP, counsel to the Company,

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dated the Closing Date and addressed to the Representative, substantially in the form of Exhibit D attached hereto.

4.2.2Option Closing Date Opinions of Counsel. On the Option Closing Date, if any, the Representative shall have received the favorable opinions of each counsel listed in Section 4.2.1, dated the Option Closing Date, addressed to the Representative and in form and substance reasonably satisfactory to the Representative, confirming as of the Option Closing Date, the statements made by such counsels in their respective opinions delivered on the Closing Date.

4.2.3Reliance. In rendering such opinions, such counsel may rely: (i) as to matters involving the application of laws other than the laws of the United States and jurisdictions in which they are admitted, to the extent such counsel deems proper and to the extent specified in such opinion, if at all, upon an opinion or opinions (in form and substance reasonably satisfactory to the Representative) of other counsel reasonably acceptable to the Representative, familiar with the applicable laws; and (ii) as to matters of fact, to the extent they deem proper, on certificates or other written statements of officers of the Company and officers of departments of various jurisdictions having custody of documents respecting the corporate existence or good standing of the Company, provided that copies of any such statements or certificates shall be delivered to Representative Counsel if requested. The opinion of Lucosky Brookman LLP and any opinion relied upon by Lucosky Brookman LLP shall include a statement to the effect that it may be relied upon by Representative Counsel in its opinion delivered to the Underwriters.

4.3Comfort Letters.

4.3.1Cold Comfort Letter. Prior to the Closing Date the Representative shall have received a cold comfort letter containing statements and information of the type customarily included in accountants’ comfort letters with respect to the financial statements and certain financial information contained in the Registration Statement, the Pricing Disclosure Package and the Prospectus, addressed to the Representative and in form and substance satisfactory in all respects to you and to the Auditor, dated as of the date of this Agreement.

4.3.2Bring-down Comfort Letter. At each of the Closing Date and the Option Closing Date, if any, the Representative shall have received from the Auditor a letter, dated as of the Closing Date or the Option Closing Date, as applicable, to the effect that the Auditor reaffirms the statements made in the letter furnished pursuant to Section 4.3.1, except that the specified date referred to shall be a date not more than three (3) business days prior to the Closing Date or the Option Closing Date, as applicable.

4.4Officers’ Certificates.

4.4.1Officers’ Certificate. The Company shall have furnished to the Representative a certificate, dated the Closing Date and any Option Closing Date (if such date is other than the Closing Date), of its Chief Executive Officer and its Chief Financial Officer stating (on behalf of the Company and not in an individual capacity) that (i) such officers have carefully examined the Registration Statement, the Pricing Disclosure Package, any Issuer Free Writing Prospectus and the Prospectus and, in their opinion, the Registration Statement and each amendment thereto, as of the Applicable Time and as of the Closing Date (or any Option Closing

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Date if such date is other than the Closing Date) did not include any untrue statement of a material fact and did not omit a material fact required to be stated therein or necessary to make the statements therein not misleading, and the Pricing Disclosure Package, as of the Applicable Time and as of the Closing Date (or any Option Closing Date if such date is other than the Closing Date), any Issuer Free Writing Prospectus as of its date and as of the Closing Date (or any Option Closing Date if such date is other than the Closing Date), the Prospectus and each amendment or supplement thereto, as of the respective date thereof and as of the Closing Date, did not include any untrue statement of a material fact and did not omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances in which they were made, not misleading, (ii) since the effective date of the Registration Statement, no event has occurred which should have been set forth in a supplement or amendment to the Registration Statement, the Pricing Disclosure Package or the Prospectus, (iii) to the best of their knowledge, after reasonable inquiry, as of the Closing Date (or any Option Closing Date if such date is other than the Closing Date), the representations and warranties of the Company in this Agreement are true and correct and the Company has complied with all agreements and satisfied all conditions on its part to be performed or satisfied hereunder at or prior to the Closing Date (or any Option Closing Date if such date is other than the Closing Date), and (iv) there has not been, subsequent to the date of the most recent audited financial statements included or incorporated by reference in the Pricing Disclosure Package, any material adverse change in the financial position or results of operations of the Company, or any change or development that, singularly or in the aggregate, would involve a Material Adverse Change or a prospective Material Adverse Change, in or affecting the condition (financial or otherwise), results of operations, business, assets or prospects of the Company, except as set forth in the Prospectus.

4.4.2Secretary’s Certificate. At each of the Closing Date and the Option Closing Date, if any, the Representative shall have received a certificate of the Company signed by the Secretary of the Company, dated the Closing Date or the Option Date, as the case may be, respectively, certifying: (i) that each of the Charter and Bylaws is true and complete, has not been modified and is in full force and effect; (ii) that the resolutions of the Company’s Board of Directors relating to the Offering are in full force and effect and have not been modified; (iii) as to the accuracy and completeness of all correspondence between the Company or its counsel and the Commission; and (iv) as to the incumbency of the officers of the Company. The documents referred to in such certificate shall be attached to such certificate.

4.5No Material Changes. Prior to and on each of the Closing Date and each Option Closing Date, if any: (i) there shall have been no material adverse change or development involving a prospective material adverse change in the condition or prospects or the business activities, financial or otherwise, of the Company from the latest dates as of which such condition is set forth in the Registration Statement, the Pricing Disclosure Package and the Prospectus; (ii) no action, suit or proceeding, at law or in equity, shall have been pending or threatened against the Company or any Insider before or by any court or federal or state commission, board or other administrative agency wherein an unfavorable decision, ruling or finding may materially adversely affect the business, operations, prospects or financial condition or income of the Company, except as set forth in the Registration Statement, the Pricing Disclosure Package and the Prospectus; (iii) no stop order shall have been issued under the Securities Act and no proceedings therefor shall have been initiated or threatened by the Commission; and (iv) the Registration Statement, the Pricing Disclosure Package and the Prospectus and any amendments or supplements thereto shall contain

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all material statements which are required to be stated therein in accordance with the Securities Act and the Securities Act Regulations and shall conform in all material respects to the requirements of the Securities Act and the Securities Act Regulations, and neither the Registration Statement, the Pricing Disclosure Package nor the Prospectus nor any amendment or supplement thereto shall contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading.

4.6Delivery of Agreements.

4.6.1Lock-Up Agreements. On or before the date of this Agreement, the Company shall have delivered to the Representative executed copies of the Lock-Up Agreements from each of the persons listed in Schedule 3 hereto.

4.6.2Representative’s Warrant Agreement. On the Closing Date, the Company shall have delivered to the Representative executed copies of the Representative’s Warrant Agreement.

4.7Additional Documents. At the Closing Date and at each Option Closing Date (if any) Representative Counsel shall have been furnished with such documents and opinions as they may reasonably require for the purpose of enabling Representative Counsel to deliver an opinion to the Underwriters, or in order to evidence the accuracy of any of the representations or warranties, or the fulfillment of any of the conditions, herein contained; and all proceedings taken by the Company in connection with the issuance and sale of the Public Securities and the Representative’s Securities as herein contemplated shall be satisfactory in form and substance to the Representative and Representative Counsel.

5.Indemnification.

5.1Indemnification of the Underwriters.

5.1.1General. Subject to the conditions set forth below, the Company agrees to indemnify and hold harmless each Underwriter, its affiliates and each of its and their respective directors, officers, members, employees, representatives and agents and each person, if any, who controls any such Underwriter within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act (collectively the “Underwriter Indemnified Parties,” and each an “Underwriter Indemnified Party”), against any and all loss, liability, claim, damage and expense whatsoever (including but not limited to any and all legal or other expenses reasonably incurred in investigating, preparing or defending against any litigation, commenced or threatened, or any claim whatsoever, whether arising out of any action between any of the Underwriter Indemnified Parties and the Company or between any of the Underwriter Indemnified Parties and any third party, or otherwise) to which they or any of them may become subject under the Securities Act, the Exchange Act or any other statute or at common law or otherwise or under the laws of foreign countries, arising out of or based upon any untrue statement or alleged untrue statement of a material fact contained in (i) the Registration Statement, the Pricing Disclosure Package, the Preliminary Prospectus, the Prospectus, or in any Issuer Free Writing Prospectus or in any Written Testing-the-Waters Communication (as from time to time each may be amended and

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supplemented); (ii) any materials or information provided to investors by, or with the approval of, the Company in connection with the marketing of the Offering, including any “road show” or investor presentations made to investors by the Company (whether in person or electronically); or (iii) any application or other document or written communication (in this Section 5, collectively called “application”) executed by the Company or based upon written information furnished by the Company in any jurisdiction in order to qualify the Public Securities and Representative’s Securities under the securities laws thereof or filed with the Commission, any state securities commission or agency, the Exchange or any other national securities exchange; or the omission or alleged omission therefrom of a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, unless such statement or omission was made in reliance upon, and in conformity with, the Underwriters’ Information. With respect to any untrue statement or omission or alleged untrue statement or omission made in the Pricing Disclosure Package, the indemnity agreement contained in this Section 5.1.1 shall not inure to the benefit of any Underwriter Indemnified Party to the extent that any loss, liability, claim, damage or expense of such Underwriter Indemnified Party results from the fact that a copy of the Prospectus was not given or sent to the person asserting any such loss, liability, claim or damage at or prior to the written confirmation of sale of the Public Securities to such person as required by the Securities Act and the Securities Act Regulations, and if the untrue statement or omission has been corrected in the Prospectus, unless such failure to deliver the Prospectus was a result of non-compliance by the Company with its obligations under Section 3.3 hereof.

5.1.2Procedure. If any action is brought against an Underwriter Indemnified Party in respect of which indemnity may be sought against the Company pursuant to Section 5.1.1, such Underwriter Indemnified Party shall promptly notify the Company in writing of the institution of such action and the Company shall assume the defense of such action, including the employment and fees of counsel (subject to the reasonable approval of such Underwriter Indemnified Party) and payment of actual expenses. Such Underwriter Indemnified Party shall have the right to employ its or their own counsel in any such case, but the fees and expenses of such counsel shall be at the expense of such Underwriter Indemnified Party unless (i) the employment of such counsel at the expense of the Company shall have been authorized in writing by the Company in connection with the defense of such action, or (ii) the Company shall not have employed counsel to have charge of the defense of such action, or (iii) such indemnified party or parties shall have reasonably concluded that there may be defenses available to it or them which are different from or additional to those available to the Company (in which case the Company shall not have the right to direct the defense of such action on behalf of the indemnified party or parties), in any of which events the reasonable fees and expenses of not more than one additional firm of attorneys selected by the Underwriter Indemnified Party (in addition to local counsel) shall be borne by the Company. Notwithstanding anything to the contrary contained herein, if any Underwriter Indemnified Party shall assume the defense of such action as provided above, the Company shall have the right to approve the terms of any settlement of such action, which approval shall not be unreasonably withheld.

5.2Indemnification of the Company. Each Underwriter, severally and not jointly, agrees to indemnify and hold harmless the Company, its directors, its officers who signed the Registration Statement and persons who control the Company within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, against any and all loss, liability, claim,

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damage and expense described in the foregoing indemnity from the Company to the several Underwriters, as incurred, but only with respect to untrue statements or omissions made in the Registration Statement, any Preliminary Prospectus, the Pricing Disclosure Package or Prospectus or any amendment or supplement thereto or in any application, in reliance upon, and in strict conformity with, the Underwriters’ Information. In case any action shall be brought against the Company or any other person so indemnified based on any Preliminary Prospectus, the Registration Statement, the Pricing Disclosure Package or Prospectus or any amendment or supplement thereto or any application, and in respect of which indemnity may be sought against any Underwriter, such Underwriter shall have the rights and duties given to the Company, and the Company and each other person so indemnified shall have the rights and duties given to the several Underwriters by the provisions of Section 5.1.2. The Company agrees to promptly notify the Representative of the commencement of any litigation or proceedings against the Company or any of its officers, directors or any person, if any, who controls the Company within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, in connection with the issuance and sale of the Public Securities or in connection with the Registration Statement, the Pricing Disclosure Package, the Prospectus, or any Issuer Free Writing Prospectus or any Written Testing-the-Waters Communication; provided that failure by the Company so to notify the Representative shall not relieve any Underwriter from any obligation or liability which such Underwriter may have on account of this Section 5 or otherwise to the Company, except to the extent such Underwriter is materially prejudiced as a proximate result of such failure.

5.3Contribution.

5.3.1Contribution Rights. If the indemnification provided for in this Section 5 shall for any reason be unavailable to or insufficient to hold harmless an indemnified party under Section 5.1 or 5.2 in respect of any loss, claim, damage or liability, or any action in respect thereof, referred to therein, then each indemnifying party shall, in lieu of indemnifying such indemnified party, contribute to the amount paid or payable by such indemnified party as a result of such loss, claim, damage or liability, or action in respect thereof, (i) in such proportion as shall be appropriate to reflect the relative benefits received by the Company, on the one hand, and the Underwriters, on the other, from the Offering of the Public Securities, or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company, on the one hand, and the Underwriters, on the other, with respect to the statements or omissions that resulted in such loss, claim, damage or liability, or action in respect thereof, as well as any other relevant equitable considerations. The relative benefits received by the Company, on the one hand, and the Underwriters, on the other, with respect to such Offering shall be deemed to be in the same proportion as the total net proceeds from the Offering of the Public Securities purchased under this Agreement (after deducting all underwriting discounts, commissions and other fees but before deducting expenses) received by the Company bear to the total underwriting discount, fees and commissions actually received by the Underwriters in connection with the Offering, in each case, as set forth in the table on the cover page of the Prospectus, on the one hand, and the total underwriting discounts and commissions received by the Underwriters with respect to the shares of the Common Stock purchased under this Agreement, as set forth in the table on the cover page of the Prospectus, on the other hand. The relative fault shall be determined by reference to whether the untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact relates to information supplied by the Company or the Underwriters, the intent of the

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parties and their relative knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company and the Underwriters agree that it would not be just and equitable if contributions pursuant to this Section 5.3.1 were to be determined by pro rata allocation (even if the Underwriters were treated as one entity for such purpose) or by any other method of allocation that does not take into account the equitable considerations referred to herein. The amount paid or payable by an indemnified party as a result of the loss, claim, damage or liability, or action in respect thereof, referred to above in this Section 5.3.1 shall be deemed to include, for purposes of this Section 5.3.1, any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 5.3.1 in no event shall an Underwriter be required to contribute any amount in excess of the amount by which the total underwriting discounts and commissions received by such Underwriter with respect to the Offering of the Public Securities exceeds the amount of any damages that such Underwriter has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation.

5.3.2Contribution Procedure. Within fifteen (15) days after receipt by any party to this Agreement (or its representative) of notice of the commencement of any action, suit or proceeding, such party will, if a claim for contribution in respect thereof is to be made against another party (“contributing party”), notify the contributing party of the commencement thereof, but the failure to so notify the contributing party will not relieve it from any liability which it may have to any other party other than for contribution hereunder. In case any such action, suit or proceeding is brought against any party, and such party notifies a contributing party or its representative of the commencement thereof within the aforesaid 15 days, the contributing party will be entitled to participate therein with the notifying party and any other contributing party similarly notified. Any such contributing party shall not be liable to any party seeking contribution on account of any settlement of any claim, action or proceeding affected by such party seeking contribution on account of any settlement of any claim, action or proceeding affected by such party seeking contribution without the written consent of such contributing party. The contribution provisions contained in this Section 5.3.2 are intended to supersede, to the extent permitted by law, any right to contribution under the Securities Act, the Exchange Act or otherwise available. Each Underwriter’s obligations to contribute pursuant to this Section 5.3 are several and not joint.

6.Defaults.

6.1Default by an Underwriter.

6.1.1Default Not Exceeding 10% of Firm Shares or Option Shares. If any Underwriter or Underwriters shall default in its or their obligations to purchase the Firm Shares or the Option Shares, if the Over-allotment Option is exercised hereunder, and if the number of the Firm Shares or Option Shares with respect to which such default relates does not exceed in the aggregate 10% of the number of Firm Shares or Option Shares that all Underwriters have agreed to purchase hereunder, then such Firm Shares or Option Shares to which the default relates shall be purchased by the non-defaulting Underwriters in proportion to their respective commitments hereunder.

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6.1.2Default Exceeding 10% of Firm Shares or Option Shares. In the event that the default addressed in Section 6.1 relates to more than 10% of the Firm Shares or Option Shares, the Representative may in its discretion arrange for themselves or for another party or parties to purchase such Firm Shares or Option Shares to which such default relates on the terms contained herein. If, within one (1) Business Day after such default relating to more than 10% of the Firm Shares or Option Shares, the Representative does not arrange for the purchase of such Firm Shares or Option Shares, then the Company shall be entitled to a further period of one (1) Business Day within which to procure another party or parties reasonably satisfactory to the Representative to purchase said Firm Shares or Option Shares on such terms. In the event that neither the Representative nor the Company arrange for the purchase of the Firm Shares or Option Shares to which a default relates as provided in this Section 6, this Agreement will automatically be terminated by the Representative or the Company without liability on the part of the Company (except as provided in Sections 3.8 and 5 hereof) or the several Underwriters (except as provided in Section 5 hereof); provided, however, that if such default occurs with respect to the Option Shares, this Agreement will not terminate as to the Firm Shares; and provided, further, that nothing herein shall relieve a defaulting Underwriter of its liability, if any, to the other Underwriters and to the Company for damages occasioned by its default hereunder.

6.1.3Postponement of Closing Date. In the event that the Firm Shares or Option Shares to which the default relates are to be purchased by the non-defaulting Underwriters, or are to be purchased by another party or parties as aforesaid, the Representative or the Company shall have the right to postpone the Closing Date or Option Closing Date for a reasonable period, but not in any event exceeding five (5) Business Days, in order to effect whatever changes may thereby be made necessary in the Registration Statement, the Pricing Disclosure Package or the Prospectus or in any other documents and arrangements, and the Company agrees to file promptly any amendment to the Registration Statement, the Pricing Disclosure Package or the Prospectus that in the opinion of counsel for the Underwriter may thereby be made necessary. The term “Underwriter” as used in this Agreement shall include any party substituted under this Section 6 with like effect as if it had originally been a party to this Agreement with respect to such shares of Common Stock.

7.Additional Covenants.

7.1Board Composition and Board Designations. The Company shall ensure that: (i) the qualifications of the persons serving as members of the Board of Directors and the overall composition of the Board comply with the Sarbanes-Oxley Act, with the Exchange Act and with the listing rules of the Exchange or any other national securities exchange, as the case may be, in the event the Company seeks to have its Public Securities listed on another exchange or quoted on an automated quotation system, and (ii) if applicable, at least one member of the Audit Committee of the Board of Directors qualifies as an “audit committee financial expert,” as such term is defined under Regulation S-K and the listing rules of the Exchange.

7.2Prohibition on Press Releases and Public Announcements. The Company shall not issue press releases or engage in any other publicity, without the Representative’s prior written consent (which consent shall not be unreasonably withheld), for a period ending at 5:00 p.m., Eastern time, on the first (1^st) Business Day following the forty-fifth (45^th) day after the Closing

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Date, other than normal and customary releases issued in the ordinary course of the Company’s business or such press release or communication as required by law.

8.Effective Date of this Agreement and Termination Thereof.

8.1Effective Date. This Agreement shall become effective when both the Company, and the Representative have executed the same and delivered counterparts of such signatures to the other party.

8.2Termination. The Representative shall have the right to terminate this Agreement at any time prior to any Closing Date, (i) if any domestic or international event or act or occurrence has materially disrupted, or in your reasonable opinion will in the immediate future materially disrupt, general securities markets in the United States; or (ii) if trading on the New York Stock Exchange or the Nasdaq Stock Market LLC shall have been suspended or materially limited, or minimum or maximum prices for trading shall have been fixed, or maximum ranges for prices for securities shall have been required by FINRA or by order of the Commission or any other government authority having jurisdiction; or (iii) if the United States shall have become involved in a new war or an increase in major hostilities; or (iv) if a banking moratorium has been declared by a New York State or federal authority; or (v) if a moratorium on foreign exchange trading has been declared which materially adversely impacts the United States securities markets; or (vi) if the Company shall have sustained a material loss by fire, flood, accident, hurricane, earthquake, theft, sabotage or other calamity or malicious act which, whether or not such loss shall have been insured, will, in your reasonable opinion, make it inadvisable to proceed with the delivery of the Firm Shares or Option Shares; or (vii) if the Company is in material breach of any of its representations, warranties or covenants hereunder; or (viii) if the Representative shall have become aware after the date hereof of such a material adverse change in the conditions or prospects of the Company, or such adverse material change in general market conditions, in each case, as in the Representative’s reasonable judgment would make it impracticable to proceed with the offering, sale and/or delivery of the Public Securities or to enforce contracts made by the Underwriters for the sale of the Public Securities.

8.3Expenses. Notwithstanding anything to the contrary in this Agreement, except in the case of a default by the Underwriters, pursuant to Section 6.1.2 above, in the event that this Agreement shall not be carried out for any reason whatsoever, within the time specified herein or any extensions thereof pursuant to the terms herein, the Company shall be obligated to pay to the Underwriters their actual and accountable out-of-pocket expenses related to the transactions contemplated herein then due and payable (including the fees and disbursements of Representative Counsel) up to $150,000, inclusive of any advance for accountable expenses previously paid by the Company to the Representative (the “Advance”) and upon demand the Company shall pay the full amount thereof to the Representative on behalf of the Underwriters; provided, however, that such expense cap in no way limits or impairs the indemnification and contribution provisions of this Agreement. Notwithstanding the foregoing, any advance received by the Representative will be reimbursed to the Company to the extent not actually incurred in compliance with FINRA Rule 5110(f)(2)(C).

8.4Indemnification. Notwithstanding any contrary provision contained in this Agreement, any election hereunder or any termination of this Agreement, and whether or not this

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Agreement is otherwise carried out, the provisions of Section 5 shall remain in full force and effect and shall not be in any way affected by, such election or termination or failure to carry out the terms of this Agreement or any part hereof.

8.5Representations, Warranties, Agreements to Survive. All representations, warranties and agreements contained in this Agreement or in certificates of officers of the Company submitted pursuant hereto, shall remain operative and in full force and effect regardless of (i) any investigation made by or on behalf of any Underwriter or its Affiliates or selling agents, any person controlling any Underwriter, its officers or directors or any person controlling the Company or (ii) delivery of and payment for the Public Securities.

9.Miscellaneous.

9.1Notices. All communications hereunder, except as herein otherwise specifically provided, shall be in writing and shall be mailed (registered or certified mail, return receipt requested), personally delivered or sent by facsimile transmission or email with confirmation and shall be deemed given when so delivered or faxed or emailed with confirmation or if mailed, two (2) days after such mailing.

If to the Representative:

Alexander Capital, L.P.

17 State Street, 5th Floor

New York, NY 10004

with a copy (which shall not constitute notice) to:

Cozen O’Connor

33 South 6^th Street, Suite 3800

Minneapolis, Minnesota 55402

Attn: Christopher J. Bellini, Esq.

Email: cbellini@cozen.com

If to the Company:

1907 Wayzata Boulevard, Suite 205

Wayzata, MN 55391

Attention: Douglas M. Polinsky, Chief Executive Officer

Email: dp@millcityventures3.com

with a copy (which shall not constitute notice) to:

Lucosky Brookman LLP

101 Wood Avenue South

Woodbridge, New Jersey 08830

Attention: Joseph M. Lucosky, Esq.

Email: jlucosky@lucbro.com

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9.2Headings. The headings contained herein are for the sole purpose of convenience of reference, and shall not in any way limit or affect the meaning or interpretation of any of the terms or provisions of this Agreement.

9.3Amendment. This Agreement may only be amended by a written instrument executed by each of the parties hereto.

9.4Entire Agreement. This Agreement (together with the other agreements and documents being delivered pursuant to or in connection with this Agreement) constitutes the entire agreement of the parties hereto with respect to the subject matter hereof and thereof, and supersedes all prior agreements and understandings of the parties, oral and written, with respect to the subject matter hereof. Notwithstanding anything to the contrary set forth herein, it is understood and agreed by the parties hereto that all other terms and conditions of that certain engagement letter between the Company and the Representative, dated March 4, 2022 shall remain in full force and effect.

9.5Binding Effect. This Agreement shall inure solely to the benefit of and shall be binding upon the Representative, the Underwriters, the Company, the controlling persons, directors and officers referred to in Section 5 hereof, and their respective successors, legal representatives, heirs and assigns, and no other person shall have or be construed to have any legal or equitable right, remedy or claim under or in respect of or by virtue of this Agreement or any provisions herein contained. The term “successors and assigns” shall not include a purchaser, in its capacity as such, of securities from any of the Underwriters.

9.6Governing Law; Consent to Jurisdiction; Trial by Jury. This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of New York, without giving effect to conflict of laws principles thereof. The Company hereby agrees that any action, proceeding or claim against it arising out of, or relating in any way to this Agreement shall be brought and enforced in the New York Supreme Court, County of New York, or in the United States District Court for the Southern District of New York, and irrevocably submits to such jurisdiction, which jurisdiction shall be exclusive. The Company hereby waives any objection to such exclusive jurisdiction and that such courts represent an inconvenient forum. Any such process or summons to be served upon the Company may be served by transmitting a copy thereof by registered or certified mail, return receipt requested, postage prepaid, addressed to it at the address set forth in Section 9.1 hereof. Such mailing shall be deemed personal service and shall be legal and binding upon the Company in any action, proceeding or claim. The Company agrees that the prevailing party(ies) in any such action shall be entitled to recover from the other party(ies) all of its reasonable attorneys’ fees and expenses relating to such action or proceeding and/or incurred in connection with the preparation therefor. The Company (on its behalf and, to the extent permitted by applicable law, on behalf of its stockholders and affiliates) and each of the Underwriters hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Agreement or the transactions contemplated hereby.

9.7Execution in Counterparts. This Agreement may be executed in one or more counterparts, and by the different parties hereto in separate counterparts, each of which shall be deemed to be an original, but all of which taken together shall constitute one and the same

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agreement, and shall become effective when one or more counterparts has been signed by each of the parties hereto and delivered to each of the other parties hereto. Delivery of a signed counterpart of this Agreement by facsimile or email/pdf transmission shall constitute valid and sufficient delivery thereof.

9.8Waiver, etc. The failure of any of the parties hereto to at any time enforce any of the provisions of this Agreement shall not be deemed or construed to be a waiver of any such provision, nor to in any way effect the validity of this Agreement or any provision hereof or the right of any of the parties hereto to thereafter enforce each and every provision of this Agreement. No waiver of any breach, non-compliance or non-fulfillment of any of the provisions of this Agreement shall be effective unless set forth in a written instrument executed by the party or parties against whom or which enforcement of such waiver is sought; and no waiver of any such breach, non-compliance or non-fulfillment shall be construed or deemed to be a waiver of any other or subsequent breach, non-compliance or non-fulfillment.

[Signature Page Follows]

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If the foregoing correctly sets forth the understanding between the Underwriters and the Company, please so indicate in the space provided below for that purpose, whereupon this letter shall constitute a binding agreement between us.

Very truly yours,
MILL CITY VENTURES III, LTD.
By:
	Douglas M. Polinsky
	Chief Executive Officer

Confirmed as of the date first written above mentioned,

on behalf of itself and as Representative of the several

Underwriters named on Schedule 1 hereto:

ALEXANDER CAPITAL, L.P.
By:
	Jonathan Gazdak
	Managing Director

[SIGNATURE PAGE]

[Mill City Ventures III, Ltd. – Underwriting Agreement Signature Page]

SCHEDULE 1

Underwriter	Total Number of Firm Shares to be Purchased	Number of Additional Shares to be Purchased if the Over- Allotment Option is Fully Exercised
Alexander Capital, L.P.
TOTAL

SCHEDULE 2-A

Pricing Information

Number of Firm Shares:  [●]

Number of Option Shares:  [●]

Public Offering Price per Share:  $[●]

Underwriting Discount per Share:  $[●]

Underwriting Non-accountable expense allowance per Share:  $[●]

Proceeds to Company per Share (before expenses):  $[●]

SCHEDULE 2-B

Written Testing-the-Waters Communications

None.

SCHEDULE 3

List of Lock-Up Parties

Directors & Officers:

Douglas M. Polinsky

Joseph A. Geraci, II

Lyle A. Berman

Howard P. Liszt

Laurence S. Zipkin

Stockholders:

Neal Linnihan SEP/IRA

Scott and Elizabeth Zbikowski

David Bester

Patrick Kinney

William Hartzell

SCHEDULE 4

Subsidiaries and Affiliates

EXHIBIT A

Form of Representative’s Warrant Agreement

THE REGISTERED HOLDER OF THIS PURCHASE WARRANT BY ITS ACCEPTANCE HEREOF, AGREES THAT IT WILL NOT SELL, TRANSFER OR ASSIGN THIS PURCHASE WARRANT EXCEPT AS HEREIN PROVIDED AND THE REGISTERED HOLDER OF THIS PURCHASE WARRANT AGREES THAT IT WILL NOT SELL, TRANSFER, ASSIGN, PLEDGE OR HYPOTHECATE THIS PURCHASE WARRANT OR CAUSE IT TO BE THE SUBJECT OF ANY HEDGING, SHORT SALE, DERIVATIVE, PUT, OR CALL TRANSACTION THAT WOULD RESULT IN THE EFFECTIVE ECONOMIC DISPOSITION OF THE PURCHASE WARRANT BY ANY PERSON FOR A PERIOD OF ONE HUNDRED EIGHTY (180) DAYS FOLLOWING THE EFFECTIVE DATE (DEFINED BELOW) TO ANYONE OTHER THAN (I) ALEXANDER CAPITAL, L.P. OR AN UNDERWRITER OR A SELECTED DEALER IN CONNECTION WITH THE OFFERING, OR (II) A BONA FIDE OFFICER OR PARTNER OF ALEXANDER CAPITAL, L.P. OR OF ANY SUCH UNDERWRITER OR SELECTED DEALER AND IN ACCORDANCE WITH FINRA RULE 5110(G)(2).

THIS PURCHASE WARRANT IS NOT EXERCISABLE PRIOR TO [●] [DATE THAT IS ONE HUNDRED EIGHTY (180) DAYS FROM THE EFFECTIVE DATE OF THE OFFERING]. VOID AFTER 5:00 P.M., EASTERN TIME, [●] [DATE THAT IS FIVE (5) YEARS FROM THE EFFECTIVE DATE OF THE OFFERING].

COMMON STOCK PURCHASE WARRANT

For the Purchase of [         ] Shares of Common Stock

of

MILL CITY VENTURES III, LTD.

1.Purchase Warrant. THIS CERTIFIES THAT, in consideration of funds duly paid by or on behalf of [               ] (“Holder”), as registered owner of this Purchase Warrant, to Mill City Ventures III, Ltd., a Minnesota corporation (the “Company”), Holder is entitled, at any time or from time to time from [●] [DATE THAT IS ONE HUNDRED EIGHTY (180) DAYS FROM THE EFFECTIVE DATE OF THE OFFERING] (the “Commencement Date”), and at or before 5:00 p.m., Eastern time, [●] [DATE THAT IS FIVE (5) YEARS FROM THE EFFECTIVE DATE OF THE OFFERING] (the “Expiration Date”), but not thereafter, to subscribe for, purchase and receive, in whole or in part, up to [                              ] shares of common stock of the Company, par value $0.001 per share (the “Shares”), subject to adjustment as provided in Section 5 hereof. If the Expiration Date is a day on which banking institutions are authorized by law to close, then this Purchase Warrant may be exercised on the next succeeding day which is not such a day in accordance with the terms herein. During the period ending on the Expiration Date, the Company agrees not to take any action that would terminate this Purchase Warrant. This Purchase Warrant is initially exercisable at $[●] per Share [125% of the price of the Shares sold in the Offering]; provided, however, that upon the occurrence of any of the events specified in Section 5 hereof, the rights granted by this Purchase Warrant, including the exercise price per Share and the number of Shares to be received upon such exercise, shall be adjusted as

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therein specified. This Warrant is being issued pursuant to the certain Underwriting Agreement (the “Underwriting Agreement”), dated [●], 2022, by and among the Company, the Holder and other underwriters named therein, providing for the public offering (the “Offering”) of shares of common stock, par value $0.001 per share, of the Company. The term “Effective Date” shall mean the effective date of the Registration Statement on Form S-1 (File No. 333-264474). The term “Exercise Price” shall mean the initial exercise price or the adjusted exercise price, depending on the context.

2.Exercise.

2.1Exercise Form. In order to exercise this Purchase Warrant, the exercise form attached hereto must be duly executed and completed and delivered to the Company, together with this Purchase Warrant and payment of the Exercise Price for the Shares being purchased payable in cash by wire transfer of immediately available funds to an account designated by the Company or by certified check or official bank check. If the subscription rights represented hereby shall not be exercised at or before 5:00 p.m., Eastern time, on the Expiration Date, this Purchase Warrant shall become and be void without further force or effect, and all rights represented hereby shall cease and expire.

2.2Cashless Exercise. In lieu of exercising this Purchase Warrant by payment of cash or check payable to the order of the Company pursuant to Section 1.1 above, Holder may elect to receive the number of Shares equal to the value of this Purchase Warrant (or the portion thereof being exercised), by surrender of this Purchase Warrant to the Company, together with the exercise form attached hereto, in which event the Company shall issue to Holder, Shares in accordance with the following formula:

X =	Y(A-B)
	A

Where,

X = The number of Shares to be issued to Holder;

Y = The number of Shares for which the Purchase Warrant is being exercised;

A = The fair market value of one Share; and

B = The Exercise Price.

For purposes of this Section 1.2, the fair market value of a Share is defined as follows:

(i)if the Company’s common stock is traded on a securities exchange, the fair market value shall be deemed to be the closing price on such exchange on the trading day immediately prior to the date the exercise form is submitted to the Company in connection with the exercise of the Purchase Warrant; or

(ii)if the Company’s common stock is actively traded over-the-counter, the fair market value shall be deemed to be the closing bid price on the trading day immediately prior to the date the exercise form is submitted to the Company in connection with the exercise of the Purchase Warrant; or

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(iii)if there is no active public market, the value shall be the fair market value thereof, as determined in good faith by the Company’s Board of Directors.

2.3Legend. Each certificate for the securities purchased under this Purchase Warrant shall bear a legend as follows unless such securities have been registered under the Securities Act of 1933, as amended (the “Act”):

“The securities represented by this certificate have not been registered under the Securities Act of 1933, as amended (the “Act”), or applicable state law. Neither the securities nor any interest therein may be offered for sale, sold or otherwise transferred except pursuant to an effective registration statement under the Securities Act, or pursuant to an exemption from registration under the Securities Act and applicable state law which, in the opinion of counsel to the Company, is available.”

2.4No Obligation to Net Cash Settle. Notwithstanding anything to the contrary contained in this Purchase Warrant, in no event will the Company be required to net cash settle the exercise of the Purchase Warrant. The holder of the Purchase Warrant will not be entitled to exercise the Purchase Option unless it exercises such Purchase Warrant pursuant to the cashless exercise right or a registration statement is effective, or an exemption from the registration requirements is available at such time and, if the Holder is not able to exercise the Purchase Warrant, the Purchase Warrant will expire worthless.

3.Transfer.

3.1General Restrictions. The registered Holder of this Purchase Warrant agrees by his, her or its acceptance hereof, that such Holder will not: (a) sell, transfer, assign, pledge or hypothecate this Purchase Warrant for a period of one hundred eighty (180) days following the Effective Date to anyone other than: (i) Alexander Capital, L.P. (“Alexander Capital”) or another underwriter or a selected dealer participating in the Offering, or (ii) a bona fide officer or partner of Alexander Capital or of any such underwriter or selected dealer, in each case in accordance with FINRA Conduct Rule 5110(g)(1), or (b) cause this Purchase Warrant or the securities issuable hereunder to be the subject of any hedging, short sale, derivative, put or call transaction that would result in the effective economic disposition of this Purchase Warrant or the securities hereunder, except as provided for in FINRA Rule 5110(g)(2). On and after one (1) year after the Effective Date, transfers to others may be made subject to compliance with or exemptions from applicable securities laws. In order to make any permitted assignment, the Holder must deliver to the Company the assignment form attached hereto duly executed and completed, together with the Purchase Warrant and payment of all transfer taxes, if any, payable in connection therewith. The Company shall within five (5) Business Days transfer this Purchase Warrant on the books of the Company and shall execute and deliver a new Purchase Warrant or Purchase Warrants of like tenor to the appropriate assignee(s) expressly evidencing the right to purchase the aggregate number of Shares purchasable hereunder or such portion of such number as shall be contemplated by any such assignment.

3.2Restrictions Imposed by the Securities Act. The securities evidenced by this Purchase Warrant shall not be transferred unless and until: (i) the Company has received the opinion of counsel for the Holder that the securities may be transferred pursuant to an exemption

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from registration under the Securities Act and applicable state securities laws, the availability of which is established to the reasonable satisfaction of the Company (the Company hereby agreeing that the opinion of Cozen O’Connor shall be deemed satisfactory evidence of the availability of an exemption), or (ii) a registration statement or a post-effective amendment to the Registration Statement relating to the offer and sale of such securities has been filed by the Company and declared effective by the U.S. Securities and Exchange Commission (the “Commission”) and compliance with applicable state securities law has been established.

4.Registration Rights.

4.1“Piggy-Back” Registration.

4.1.1Grant of Right. The Holder shall have the right, for a period of no more than seven (7) years from the Effective Date in accordance with FINRA Rule 5110(f)(2)(G)(v), to include any portion of the Shares underlying the Purchase Warrants (collectively, the “Registrable Securities”) as part of any other registration of securities filed by the Company (other than in connection with a transaction contemplated by Rule 145(a) promulgated under the Securities Act or pursuant to Form S-8 or any equivalent form); provided, however, that if, solely in connection with any primary underwritten public offering for the account of the Company, the managing underwriter(s) thereof shall, in its reasonable discretion, impose a limitation on the number of shares of common stock which may be included in the Registration Statement because, in such underwriter(s)’ judgment, marketing or other factors dictate such limitation is necessary to facilitate public distribution, then the Company shall be obligated to include in such Registration Statement only such limited portion of the Registrable Securities with respect to which the Holder requested inclusion hereunder as the underwriter shall reasonably permit. Any exclusion of Registrable Securities shall be made pro rata among the Holders seeking to include Registrable Securities in proportion to the number of Registrable Securities sought to be included by such Holders; provided, however, that the Company shall not exclude any Registrable Securities unless the Company has first excluded all outstanding securities, the holders of which are not entitled to inclusion of such securities in such Registration Statement or are not entitled to pro rata inclusion with the Registrable Securities.

4.1.2Terms. The Company shall bear all fees and expenses attendant to registering the Registrable Securities pursuant to Section 4.1.1 hereof, but the Holders shall pay any and all underwriting commissions and the expenses of any legal counsel selected by the Holders to represent them in connection with the sale of the Registrable Securities. In the event of such a proposed registration, the Company shall furnish the then Holders of outstanding Registrable Securities with not less than thirty (30) days written notice prior to the proposed date of filing of such registration statement. Such notice to the Holders shall continue to be given for each registration statement filed by the Company until such time as all of the Registrable Securities have been sold by the Holder. The holders of the Registrable Securities shall exercise the “piggy-back” rights provided for herein by giving written notice within ten (10) days of the receipt of the Company’s notice of its intention to file a registration statement. Except as otherwise provided in this Purchase Warrant, there shall be no limit on the number of times the Holder may request registration under this Section 4.1.2; provided, however, that such registration rights shall terminate upon on the sixth anniversary of the Commencement Date.

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4.2General Terms.

4.2.1Indemnification. The Company shall indemnify the Holder(s) of the Registrable Securities to be sold pursuant to any registration statement hereunder and each person, if any, who controls such Holders within the meaning of Section 15 of the Securities Act or Section 20(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), against all loss, claim, damage, expense or liability (including all reasonable attorneys’ fees and other expenses reasonably incurred in investigating, preparing or defending against any claim whatsoever) to which any of them may become subject under the Securities Act, the Exchange Act or otherwise, arising from such registration statement but only to the same extent and with the same effect as the provisions pursuant to which the Company has agreed to indemnify the Underwriters contained in Section 5.1 of the Underwriting Agreement between the Underwriters and the Company, dated as of [●], 2022. The Holder(s) of the Registrable Securities to be sold pursuant to such registration statement, and their successors and assigns, shall severally, and not jointly, indemnify the Company and its affiliates, against all loss, claim, damage, expense or liability (including all reasonable attorneys’ fees and other expenses reasonably incurred in investigating, preparing or defending against any claim whatsoever) to which they may become subject under the Securities Act, the Exchange Act or otherwise, arising from information furnished by or on behalf of such Holders, or their successors or assigns, in writing, for specific inclusion in such registration statement to the same extent and with the same effect as the provisions contained in Section 5.2 of the Underwriting Agreement pursuant to which the Underwriters have agreed to indemnify the Company.

4.2.2Exercise of Purchase Warrants. Nothing contained in this Purchase Warrant shall be construed as requiring the Holder(s) to exercise their Purchase Warrants prior to or after the initial filing of any registration statement or the effectiveness thereof.

4.2.3Documents Delivered to Holders. The Company shall furnish to each Holder participating in any underwritten offerings and to each underwriter of any such offering, a signed counterpart, addressed to such Holder and underwriter, of: (i) an opinion of counsel to the Company, dated the effective date of such registration statement (and an opinion dated the date of the closing under any underwriting agreement related thereto), and (ii) a “cold comfort” letter dated the effective date of such registration statement (and a letter dated the date of the closing under the underwriting agreement) signed by the independent registered public accounting firm which has issued a report on the Company’s financial statements included in such registration statement, in each case covering substantially the same matters with respect to such registration statement (and the prospectus included therein) and, in the case of such accountants’ letter, with respect to events subsequent to the date of such financial statements, as are customarily covered in opinions of issuer’s counsel and in accountants’ letters delivered to underwriters in underwritten public offerings of securities. The Company shall also deliver promptly to each Holder participating in the underwritten offering requesting the correspondence and memoranda described below and to the managing underwriter copies of all correspondence between the Commission and the Company, its counsel or auditors and all memoranda relating to discussions with the Commission or its staff with respect to the registration statement and permit each Holder and underwriter to do such investigation, upon reasonable advance notice, with respect to information contained in or omitted from the registration statement as it deems reasonably necessary to comply with applicable securities laws or rules of FINRA. Such investigation shall include access to books, records and

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properties and opportunities to discuss the business of the Company with its officers and independent auditors, all to such reasonable extent and at such reasonable times as any such Holder shall reasonably request.

4.2.4Underwriting Agreement. In the event the Company shall enter into an underwriting agreement with any managing underwriter(s), if any, selected by the Company with respect to the Registrable Securities that are being registered pursuant to this Section 3, which managing underwriter shall be reasonably satisfactory to the Majority Holders. Such agreement shall be reasonably satisfactory in form and substance to the Company and such managing underwriters, and shall contain such representations, warranties and covenants by the Company and such other terms as are customarily contained in agreements of that type used by the managing underwriter. The Holders shall be parties to any underwriting agreement relating to an underwritten sale of their Registrable Securities and may, at their option, require that any or all the representations, warranties and covenants of the Company to or for the benefit of such underwriters shall also be made to and for the benefit of such Holders. Such Holders shall not be required to make any representations or warranties to or agreements with the Company or the underwriters except as they may relate to such Holders, their Shares and their intended methods of distribution.

4.2.5Documents to be Delivered by Holder(s). Each of the Holder(s) participating in any of the foregoing offerings shall furnish to the Company a completed and executed questionnaire provided by the Company requesting information customarily sought of selling security holders.

4.2.6Damages. Should the registration or the effectiveness thereof required by Section 3.1 hereof be delayed by the Company or the Company otherwise fails to comply with such provisions, the Holder(s) shall, in addition to any other legal or other relief available to the Holder(s), be entitled to seek specific performance or other equitable (including injunctive) relief against the threatened breach of such provisions or the continuation of any such breach, without the necessity of proving actual damages and without the necessity of posting bond or other security.

5.New Purchase Warrants to be Issued.

5.1Partial Exercise or Transfer. Subject to the restrictions in Section 2 hereof, this Purchase Warrant may be exercised or assigned in whole or in part. In the event of the exercise or assignment hereof in part only, upon surrender of this Purchase Warrant for cancellation, together with the duly executed exercise or assignment form and funds sufficient to pay any Exercise Price and/or transfer tax if exercised pursuant to Section 1.1 hereto, the Company shall cause to be delivered to the Holder without charge a new Purchase Warrant of like tenor to this Purchase Warrant in the name of the Holder evidencing the right of the Holder to purchase the number of Shares purchasable hereunder as to which this Purchase Warrant has not been exercised or assigned.

5.2Lost Certificate. Upon receipt by the Company of evidence satisfactory to it of the loss, theft, destruction or mutilation of this Purchase Warrant and of reasonably satisfactory indemnification or the posting of a bond, the Company shall execute and deliver a new Purchase Warrant of like tenor and date. Any such new Purchase Warrant executed and delivered as a result

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of such loss, theft, mutilation or destruction shall constitute a substitute contractual obligation on the part of the Company.

6.Adjustments.

6.1Adjustments to Exercise Price and Number of Securities. The Exercise Price and the number of Shares underlying the Purchase Warrant shall be subject to adjustment from time to time as hereinafter set forth:

6.1.1Share Dividends; Split Ups. If, after the date hereof, and subject to the provisions of Section 6.3 below, the number of outstanding Shares is increased by a stock dividend payable in Shares or by a split up of Shares or other similar event, then, on the effective day thereof, the number of Shares purchasable hereunder shall be increased in proportion to such increase in outstanding Shares, and the Exercise Price shall be proportionately decreased.

6.1.2Aggregation of Shares. If, after the date hereof, and subject to the provisions of Section 6.3 below, the number of outstanding Shares is decreased by a consolidation, combination or reclassification of Shares or other similar event, then, on the effective date thereof, the number of Shares purchasable hereunder shall be decreased in proportion to such decrease in outstanding Shares, and the Exercise Price shall be proportionately increased.

6.1.3Replacement of Securities upon Reorganization, etc. In case of any reclassification or reorganization of the outstanding Shares other than a change covered by Section 6.1.1 or 6.1.2 hereof or that solely affects the par value of such Shares, or in the case of any share reconstruction or amalgamation or consolidation of the Company with or into another corporation or other entity (other than a consolidation or share reconstruction or amalgamation in which the Company is the continuing corporation and that does not result in any reclassification or reorganization of the outstanding Shares), or in the case of any sale or conveyance to another corporation or entity of the property of the Company as an entirety or substantially as an entirety in connection with which the Company is dissolved, the Holder of this Purchase Warrant shall have the right thereafter (until the expiration of the right of exercise of this Purchase Warrant) to receive upon the exercise hereof, for the same aggregate Exercise Price payable hereunder immediately prior to such event, the kind and amount of shares of stock or other securities or property (including cash) receivable upon such reclassification, reorganization, share reconstruction or amalgamation, or consolidation, or upon a dissolution following any such sale or transfer, by a Holder of the number of Shares of the Company obtainable upon exercise of this Purchase Warrant immediately prior to such event; and if any reclassification also results in a change in Shares covered by Section 6.1.1 or 6.1.2, then such adjustment shall be made pursuant to Sections 6.1.1, 6.1.2 and this Section 6.1.3. The provisions of this Section 6.1.3 shall similarly apply to successive reclassifications, reorganizations, share reconstructions or amalgamations, or consolidations, sales or other transfers.

6.1.4Changes in Form of Purchase Warrant. This form of Purchase Warrant need not be changed because of any change pursuant to this Section 6.1, and Purchase Warrants issued after such change may state the same Exercise Price and the same number of Shares as are stated in the Purchase Warrants initially issued pursuant to this Agreement. The acceptance by any Holder of the issuance of new Purchase Warrants reflecting a required or permissive change shall

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not be deemed to waive any rights to an adjustment occurring after the Commencement Date or the computation thereof.

6.2Substitute Purchase Warrant. In case of any consolidation of the Company with, or share reconstruction or amalgamation of the Company with or into, another corporation or other entity (other than a consolidation or share reconstruction or amalgamation which does not result in any reclassification or change of the outstanding Shares), the corporation or other entity formed by such consolidation or share reconstruction or amalgamation shall execute and deliver to the Holder a supplemental Purchase Warrant providing that the holder of each Purchase Warrant then outstanding or to be outstanding shall have the right thereafter (until the stated expiration of such Purchase Warrant) to receive, upon exercise of such Purchase Warrant, the kind and amount of shares of stock and other securities and property receivable upon such consolidation or share reconstruction or amalgamation, by a holder of the number of Shares of the Company for which such Purchase Warrant might have been exercised immediately prior to such consolidation, share reconstruction or amalgamation, sale or transfer. Such supplemental Purchase Warrant shall provide for adjustments which shall be identical to the adjustments provided for in this Section 6. The above provision of this Section shall similarly apply to successive consolidations or share reconstructions or amalgamations.

6.3Elimination of Fractional Interests. The Company shall not be required to issue certificates representing fractions of Shares upon the exercise of the Purchase Warrant, nor shall it be required to issue scrip or pay cash in lieu of any fractional interests, it being the intent of the parties that all fractional interests shall be eliminated by rounding any fraction up or down, as the case may be, to the nearest whole number of Shares or other securities, properties or rights.

7.Reservation and Listing. The Company shall at all times reserve and keep available out of its authorized Shares, solely for the purpose of issuance upon exercise of the Purchase Warrants, such number of Shares or other securities, properties or rights as shall be issuable upon the exercise thereof. The Company covenants and agrees that, upon exercise of the Purchase Warrants and payment of the Exercise Price therefor, in accordance with the terms hereby, all Shares and other securities issuable upon such exercise shall be duly and validly issued, fully paid and non-assessable and not subject to preemptive rights of any stockholder. The Company further covenants and agrees that upon exercise of the Purchase Warrants and payment of the exercise price therefor, all Shares and other securities issuable upon such exercise shall be duly and validly issued, fully paid and non-assessable and not subject to preemptive rights of any stockholder. As long as the Purchase Warrants shall be outstanding, the Company shall use its commercially reasonable efforts to cause all Shares issuable upon exercise of the Purchase Warrants to be listed (subject to official notice of issuance) on all national securities exchanges (or, if applicable, on the OTC Bulletin Board or any successor trading market) on which the Shares issued to the public in the Offering may then be listed and/or quoted.

8.Certain Notice Requirements.

8.1Holder’s Right to Receive Notice. Nothing herein shall be construed as conferring upon the Holders the right to vote or consent or to receive notice as a stockholder for the election of directors or any other matter, or as having any rights whatsoever as a stockholder of the Company. If, however, at any time prior to the expiration of the Purchase Warrants and their

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exercise, any of the events described in Section 8.2 shall occur, then, in one or more of said events, the Company shall give written notice of such event at least fifteen (15) days prior to the date fixed as a record date or the date of closing the transfer books for the determination of the stockholders entitled to such dividend, distribution, conversion or exchange of securities or subscription rights, or entitled to vote on such proposed dissolution, liquidation, winding up or sale. Such notice shall specify such record date or the date of the closing of the transfer books, as the case may be. Notwithstanding the foregoing, the Company shall deliver to each Holder a copy of each notice given to the other stockholders of the Company at the same time and in the same manner that such notice is given to the stockholders.

8.2Events Requiring Notice. The Company shall be required to give the notice described in this Section 8 upon one or more of the following events: (i) if the Company shall take a record of the holders of its Shares for the purpose of entitling them to receive a dividend or distribution payable otherwise than in cash, or a cash dividend or distribution payable otherwise than out of retained earnings, as indicated by the accounting treatment of such dividend or distribution on the books of the Company, (ii) the Company shall offer to all the holders of its Shares any additional shares of capital stock of the Company or securities convertible into or exchangeable for shares of capital stock of the Company, or any option, right or warrant to subscribe therefor, or (iii) a dissolution, liquidation or winding up of the Company (other than in connection with a consolidation or share reconstruction or amalgamation) or a sale of all or substantially all of its property, assets and business shall be proposed.

8.3Notice of Change in Exercise Price. The Company shall, promptly after an event requiring a change in the Exercise Price pursuant to Section 6 hereof, send notice to the Holders of such event and change (“Price Notice”). The Price Notice shall describe the event causing the change and the method of calculating same and shall be certified as being true and accurate by the Company’s Chief Financial Officer.

8.4Transmittal of Notices. All notices, requests, consents and other communications under this Purchase Warrant shall be in writing and shall be deemed to have been duly made when hand delivered, or mailed by express mail or private courier service: (i) if to the registered Holder of the Purchase Warrant, to the address of such Holder as shown on the books of the Company, or (ii) if to the Company, to following address or to such other address as the Company may designate by notice to the Holders:

If to the Holder:

Attn: [●]

with a copy (which shall not constitute notice) to:

Cozen O’Connor

33 South 6^th Street, Suite 3800

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Minneapolis, Minnesota 55402

Attn: Christopher J. Bellini, Esq.

Email: cbellini@cozen.com

If to the Company:

Mill City Ventures III, Ltd.

1907 Wayzata Boulevard, Suite 205

Wayzata, MN 55391

Attention: Douglas M. Polinsky, Chief Executive Officer

Email: dp@millcityventures3.com

with a copy (which shall not constitute notice) to:

Lucosky Brookman LLP

101 Wood Avenue South

Woodbridge, New Jersey 08830

Attention: Joseph M. Lucosky, Esq.

Email: jlucosky@lucbro.com

9.Miscellaneous.

9.1Amendments. The Company and Alexander Capital may from time to time supplement or amend this Purchase Warrant without the approval of any of the Holders in order to cure any ambiguity, to correct or supplement any provision contained herein that may be defective or inconsistent with any other provisions herein, or to make any other provisions in regard to matters or questions arising hereunder that the Company and Alexander Capital may deem necessary or desirable and that the Company and Alexander Capital deem shall not adversely affect the interest of the Holders. All other modifications or amendments shall require the written consent of and be signed by the party against whom enforcement of the modification or amendment is sought.

9.2Headings. The headings contained herein are for the sole purpose of convenience of reference, and shall not in any way limit or affect the meaning or interpretation of any of the terms or provisions of this Purchase Warrant.

9.3Entire Agreement. This Purchase Warrant (together with the other agreements and documents being delivered pursuant to or in connection with this Purchase Warrant) constitutes the entire agreement of the parties hereto with respect to the subject matter hereof, and supersedes all prior agreements and understandings of the parties, oral and written, with respect to the subject matter hereof.

9.4Binding Effect. This Purchase Warrant shall inure solely to the benefit of and shall be binding upon, the Holder and the Company and their permitted assignees, respective successors, legal representative and assigns, and no other person shall have or be construed to have any legal or equitable right, remedy or claim under or in respect of or by virtue of this Purchase Warrant or any provisions herein contained.

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9.5Governing Law; Submission to Jurisdiction; Trial by Jury. This Purchase Warrant shall be governed by and construed and enforced in accordance with the laws of the State of New York, without giving effect to conflict of laws principles thereof. The Company hereby agrees that any action, proceeding or claim against it arising out of, or relating in any way to this Purchase Warrant shall be brought and enforced in the New York Supreme Court, County of New York, or in the United States District Court for the Southern District of New York, and irrevocably submits to such jurisdiction, which jurisdiction shall be exclusive. The Company hereby waives any objection to such exclusive jurisdiction and that such courts represent an inconvenient forum. Any process or summons to be served upon the Company may be served by transmitting a copy thereof by registered or certified mail, return receipt requested, postage prepaid, addressed to it at the address set forth in Section 7 hereof. Such mailing shall be deemed personal service and shall be legal and binding upon the Company in any action, proceeding or claim. The Company and the Holder agree that the prevailing party(ies) in any such action shall be entitled to recover from the other party(ies) all of its reasonable attorneys’ fees and expenses relating to such action or proceeding and/or incurred in connection with the preparation therefor. The Company (on its behalf and, to the extent permitted by applicable law, on behalf of its stockholders and affiliates) and the Holder hereby irrevocably waive, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Agreement or the transactions contemplated hereby.

9.6Waiver, etc. The failure of the Company or the Holder to at any time enforce any of the provisions of this Purchase Warrant shall not be deemed or construed to be a waiver of any such provision, nor to in any way affect the validity of this Purchase Warrant or any provision hereof or the right of the Company or any Holder to thereafter enforce each and every provision of this Purchase Warrant. No waiver of any breach, non-compliance or non-fulfillment of any of the provisions of this Purchase Warrant shall be effective unless set forth in a written instrument executed by the party or parties against whom or which enforcement of such waiver is sought; and no waiver of any such breach, non-compliance or non-fulfillment shall be construed or deemed to be a waiver of any other or subsequent breach, non-compliance or non-fulfillment.

9.7Execution in Counterparts. This Purchase Warrant may be executed in one or more counterparts, and by the different parties hereto in separate counterparts, each of which shall be deemed to be an original, but all of which taken together shall constitute one and the same agreement, and shall become effective when one or more counterparts has been signed by each of the parties hereto and delivered to each of the other parties hereto. Such counterparts may be delivered by facsimile transmission or other electronic transmission.

[Signature Page Follows]

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IN WITNESS WHEREOF, the Company has caused this Purchase Warrant to be signed by its duly authorized officer as of the             day of                       , 2022.

MILL CITY VENTURES III, LTD.
By:
	Name:
	Title:

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[Form to be used to exercise Purchase Warrant]

Date:                          , 20      

The undersigned hereby elects irrevocably to exercise the Purchase Warrant for  shares of common stock, par value $0.0001 per share (the “Shares”), of Mill City Ventures III, Ltd., a Minnesota corporation (the “Company”), and hereby makes payment of $              (at the rate of $[●] per Share) in payment of the Exercise Price pursuant thereto. Please issue the Shares as to which this Purchase Warrant is exercised in accordance with the instructions given below and, if applicable, a new Purchase Warrant representing the number of Shares for which this Purchase Warrant has not been exercised.

or

The undersigned hereby elects irrevocably to convert its right to purchase       Shares of the Company under the Purchase Warrant for            Shares, as determined in accordance with the following formula:

X =	Y(A-B)
	A

Where,

X = The number of Shares to be issued to Holder;

Y = The number of Shares for which the Purchase Warrant is being exercised;

A = The fair market value of one Share which is equal to $_____; and

B = The Exercise Price which is equal to $______ per share

The undersigned agrees and acknowledges that the calculation set forth above is subject to confirmation by the Company and any disagreement with respect to the calculation shall be resolved by the Company in its sole discretion.

Please issue the Shares as to which this Purchase Warrant is exercised in accordance with the instructions given below and, if applicable, a new Purchase Warrant representing the number of Shares for which this Purchase Warrant has not been converted.

Signature

Signature Guaranteed                                             

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INSTRUCTIONS FOR REGISTRATION OF SECURITIES

Name:
	(Print in Block Letters)
Address:

NOTICE: The signature to this form must correspond with the name as written upon the face of the Purchase Warrant without alteration or enlargement or any change whatsoever, and must be guaranteed by a bank, other than a savings bank, or by a trust company or by a firm having membership on a registered national securities exchange.

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[Form to be used to assign Purchase Warrant]

ASSIGNMENT

(To be executed by the registered Holder to effect a transfer of the within Purchase Warrant):

FOR VALUE RECEIVED,                               does hereby sell, assign and transfer unto the right to purchase shares of common stock, par value $0.0001 per share, of Mill City Ventures III, Ltd., a Minnesota corporation (the “Company”), evidenced by the Purchase Warrant and does hereby authorize the Company to transfer such right on the books of the Company.

Dated:                  , 20     

Signature

Signature Guaranteed                                             

NOTICE: The signature to this form must correspond with the name as written upon the face of the within Purchase Warrant without alteration or enlargement or any change whatsoever, and must be guaranteed by a bank, other than a savings bank, or by a trust company or by a firm having membership on a registered national securities exchange.

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EXHIBIT B

Form of Lock-Up Agreement

[●], 2022

Alexander Capital, L.P.

As Representative of the several Underwriters named on Schedule 1 attached hereto

c/o Alexander Capital, L.P.

17 State Street, 5^th Floor

New York, NY 10004

Ladies and Gentlemen:

The undersigned understands that you, as representative (the “Representative”), propose to enter into an Underwriting Agreement (the “Underwriting Agreement”) with Mill City Ventures III, Ltd., a Minnesota corporation (the “Company”), providing for the public offering (the “Public Offering”) of shares of common stock, par value $0.001 per share, of the Company (the “Shares”).

To induce the Representative to continue its efforts in connection with the Public Offering, the undersigned hereby agrees that, without the prior written consent of the Representative, the undersigned will not, during the period commencing on the date hereof and ending six months after the date of the final prospectus (the “Prospectus”) relating to the Public Offering (the “Lock-Up Period”), (1) offer, pledge, sell, contract to sell, grant, lend, or otherwise transfer or dispose of, directly or indirectly, any Shares or any securities convertible into or exercisable or exchangeable for Shares, whether now owned or hereafter acquired by the undersigned or with respect to which the undersigned has or hereafter acquires the power of disposition (collectively, the “Lock-Up Securities”); (2) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of the Lock-Up Securities, whether any such transaction described in clause (1) or (2) above is to be settled by delivery of Lock-Up Securities, in cash or otherwise; (3) make any demand for or exercise any right with respect to the registration of any Lock-Up Securities; or (4) publicly disclose the intention to make any offer, sale, pledge or disposition, or to enter into any transaction, swap, hedge or other arrangement relating to any Lock-Up Securities. Notwithstanding the foregoing, and subject to the conditions below, the undersigned may transfer Lock-Up Securities without the prior written consent of the Representative in connection with (a) transactions relating to Lock-Up Securities acquired in open market transactions after the completion of the Public Offering; provided that no filing under Section 16(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), shall be required or shall be voluntarily made in connection with subsequent sales of Lock-Up Securities acquired in such open market transactions; (b) transfers of Lock-Up Securities as a bona fide gift, by will or intestacy or to a family member or trust for the benefit of a family member (for purposes of this lock-up agreement, “family member” means any relationship by blood, marriage or adoption, not more remote than first cousin); (c) transfers of Lock-Up Securities to a charity or educational institution; (d) if the undersigned, directly or indirectly, controls a corporation, partnership, limited liability company or other business entity, any transfers of Lock-Up Securities to any stockholder, partner or

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member of, or owner of similar equity interests in, the undersigned, as the case may be, (e) if required by the terms of a qualified domestic relations order or (f) in transactions relating to shares of Common Stock that the undersigned may purchase (A) from the Underwriters in the Public Offering or (B) in open market transactions after the Public Offering Date; provided that in the case of any transfer pursuant to the foregoing clauses (b), (c) or (d), (i) any such transfer shall not involve a disposition for value, (ii) each transferee shall sign and deliver to the Representative a lock-up agreement substantially in the form of this lock-up agreement and (iii) no filing under Section 16(a) of the Exchange Act shall be required or shall be voluntarily made. The undersigned also agrees and consents to the entry of stop transfer instructions with the Company’s transfer agent and registrar against the transfer of the undersigned’s Lock-Up Securities except in compliance with this lock-up agreement.

If (i) during the last 17 days of the Lock-Up Period, the Company issues an earnings release or material news or a material event relating to the Company occurs, or (ii) prior to the expiration of the Lock-Up Period, the Company announces that it will release earnings results or becomes aware that material news or a material event will occur during the 16-day period beginning on the last day of the Lock-Up Period, the restrictions imposed by this lock-up agreement shall continue to apply until the expiration of the 18-day period beginning on the issuance of the earnings release or the occurrence of such material news or material event, as applicable, unless the Representative waives, in writing, such extension; provided, however, that this extension of the Lock-Up Period shall not apply to the extent that FINRA has amended or repealed NASD Rule 2711(f)(4), or has otherwise provided written interpretive guidance regarding such rule, in each case, so as to eliminate the prohibition of any broker, dealer, or member of a national securities association from publishing or distributing any research report, with respect to the securities of an Emerging Growth Company prior to or after the expiration of any agreement between the broker, dealer, or member of a national securities association and the Emerging Growth Company or its stockholders that restricts or prohibits the sale of securities held by the Emerging Growth Company or its stockholders after the initial public offering date.

The Representative agrees that, at least three (3) business days before the effective date of any release or waiver of the foregoing restrictions in connection with a transfer of Lock-Up Securities, the Representative will notify the Company of the impending release or waiver; and the Company has agreed in the Underwriting Agreement to announce the impending release or waiver by press release through a major news service at least two (2) business days before the effective date of the release or waiver. Any release or waiver granted by the Representative hereunder to any such officer or director shall only be effective two (2) business days after the publication date of such press release. The provisions of this paragraph will not apply if (a) the release or waiver is effected solely to permit a transfer of Lock-Up Securities not for consideration and (b) the transferee has agreed in writing to be bound by the same terms described in this lock-up agreement to the extent and for the duration that such terms remain in effect at the time of such transfer.

No provision in this agreement shall be deemed to restrict or prohibit the exercise, exchange or conversion by the undersigned of any securities exercisable or exchangeable for or convertible into Shares, as applicable; provided that the undersigned does not transfer the Shares acquired on such exercise, exchange or conversion during the Lock-Up Period, unless otherwise permitted pursuant to the terms of this lock-up agreement. In addition, no provision herein shall be deemed

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to restrict or prohibit the entry into or modification of a so-called “10b5-1” plan at any time (other than the entry into or modification of such a plan in such a manner as to cause the sale of any Lock-Up Securities within the Lock-Up Period).

The undersigned understands that the Company and the Representative are relying upon this lock-up agreement in proceeding toward consummation of the Public Offering. The undersigned further understands that this lock-up agreement is irrevocable and shall be binding upon the undersigned’s heirs, legal representatives, successors and assigns.

Notwithstanding anything to the contrary contained herein, this Agreement will automatically terminate and the undersigned shall be released from all obligations under this Agreement upon the earliest to occur, if any, of (i) the Underwriting Agreement is executed but is terminated (other than the provisions thereof which survive termination) by the Representative prior to payment for and delivery of the Common Stock to be sold thereunder, or (ii) [●], 2022, if the Underwriting Agreement does not become effective by such date; provided, however, that the Representative may, by written notice to the undersigned prior to such date, extend such date for a period of up to three additional months.

Whether or not the Public Offering actually occurs depends on a number of factors, including market conditions. Any Public Offering will only be made pursuant to an Underwriting Agreement, the terms of which are subject to negotiation between the Company and the Representative.

Very truly yours,

(Name - Please Print)

(Signature)

(Name of Signatory, in the case of entities - Please Print)

(Title of Signatory, in the case of entities - Please Print)

Address:

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EXHIBIT C

Form of Press Release

Mill City Ventures III, Ltd.

[Date]

Mill City Ventures III, Ltd. (the “Company”) announced today that Alexander Capital, L.P., acting as representative for the underwriters in the Company’s recent public offering of             shares of the Company’s common stock, is [waiving] [releasing] a lock-up restriction with respect to                shares of the Company’s common stock held by [certain officers or directors] [an officer or director] of the Company. The [waiver] [release] will take effect on                , 20       , and the shares may be sold on or after such date.

This press release is not an offer or sale of the securities in the United States or in any other jurisdiction where such offer or sale is prohibited, and such securities may not be offered or sold in the United States absent registration or an exemption from registration under the Securities Act of 1933, as amended.

EXHIBIT D

Form of Opinion of Counsel to the Company

EX-5.1

Exhibit 5.1

July 26, 2022

Mill City Ventures III, Ltd.

1907 Wayzata Boulevard, Suite 205

Wayzata, MN 55391

Re: Registration Statement on Form S-1, 666,667 shares of common stock, par value $0.001 per share, of Mill City Ventures III, Ltd.

Ladies and Gentlemen:

We have acted as counsel to you, Mill City Ventures III, Ltd. (the “Company”), a Minnesota corporation, in connection with the public offering contemplated by the registration statement on Form S-1 filed by the Company on April 25, 2022 (as amended to date, the “Registration Statement”) with the Securities and Exchange Commission (the “Commission”) under the Securities Act of 1933, as amended (the “Securities Act”), for an offering of up to 666,667 shares of the Company’s common stock, $0.001 par value per share (the “Common Stock”).

This opinion is being furnished in accordance with the requirements of Item 601(b)(5) of Regulation S-K under the Securities Act.

In connection with this opinion, we have examined the originals or copies certified or otherwise identified to our satisfaction of the following: (a) the articles of incorporation of the Company, as amended to date; (b) the bylaws of the Company, as amended to date, and (c) the Registration Statement and all exhibits thereto. In addition to the foregoing, we also have relied as to matters of fact upon the representations made by the Company and its representatives and we have assumed the genuineness of all signatures, the authenticity of all documents submitted to us as originals, and the conformity to original documents of all documents submitted to us certified or photostatic copies.

Based upon the foregoing and in reliance thereon, and subject to the qualifications, limitations, exceptions and assumptions set forth herein, we are of the opinion that the shares of Common Stock, when issued, will be validly issued, fully paid and non-assessable.

We are opining herein as to the Minnesota Business Corporation Act, and we express no opinion with respect to any other laws. This opinion is limited to the laws in effect as of the date the Registration Statement is declared effective by the Commission and is provided exclusively in connection with the public offering contemplated by the Registration Statement.

This opinion letter speaks only as of the date hereof and we assume no obligation to update or supplement this opinion letter if any applicable laws change after the date of this opinion letter or if we become aware after the date of this opinion letter of any facts, whether existing before or arising after the date hereof, that might change the opinions expressed above.

This opinion letter is furnished in connection with the filing of the Registration Statement and may not be relied upon for any other purpose without our prior written consent in each instance. Further, no portion of this letter may be quoted, circulated or referred to in any other document for any other purpose without our prior written consent.

We hereby consent to the filing of this opinion with the Commission as an exhibit to the Registration Statement and to the use of our name as it appears in the prospectus included in the Registration Statement. In giving such consent, we do not thereby admit that we come within the category of persons whose consent is required under Section 7 of the Securities Act or the rules and regulations of the Commission promulgated thereunder.

Very truly yours,

/s/ Lucosky Brookman LLP

Lucosky Brookman LLP

EX-14.1

Exhibit 14.1

MILL CITY VENTURES III, LTD.

CODE OF CONDUCT AND ETHICS

(Approved on March 5, 2021)

Introduction

This Code of Conduct and Ethics (this “Code”) sets forth the commitment of Mill City Ventures III, Ltd., together with its subsidiary entities (collectively, the “Company”) to high ethical standards and full compliance with applicable laws, rules and regulations. This Code applies to all of our employees and all of our officers, specifically including but not limited to the principal executive officer (CEO), principal financial officer (CFO), principal accounting officer, and all other members of management (collectively referred to as “covered persons”). All covered persons must conduct themselves in accordance with this Code, applicable law, and the Company’s policies. This Code covers a wide range of business practices and procedures. It is not intended to cover every issue that may arise, but it sets out basic principles to guide covered persons.

In the event of a conflict between applicable law and this Code, you must comply with the law. If you have any questions or concerns about a conflict or this Code, you should ask a member of management about how to handle the situation.

Violation of this Code will result in disciplinary action, up to and including immediate termination of employment. If you are in a situation that you believe may violate or lead to a violation of this Code, you must inform the Company and follow the procedures in Section 10. Any reporting procedure described in this Code does not limit you from taking any additional reporting measures you may deem necessary or appropriate. Please note this Code does not prohibit covered persons from discussing and disclosing information regarding the terms and conditions of their employment or otherwise engaging in protected activity permitted by law.

1. Compliance with Laws, Rules and Regulations

The Company is committed to complying with applicable laws, rules and regulations where the Company does business. Obeying the law, both in letter and in spirit, is the foundation on which the Company’s ethical standards are built. All covered persons must, in the course of the Company’s business, respect and obey the laws of the cities and states in which we operate. Although covered persons are not expected to be legal experts, it is important that covered persons know enough to determine when to seek advice from appropriate personnel.

2. Conflicts of Interest

Covered persons must comply with the Company’s Conflicts of Interest and Related Party Transaction Policy. The Company prohibits conflicts of interests by covered persons. A “conflict of interest” exists when a person’s private interest interferes or appears to interfere in more than a

1

de minimis way with the employee’s ability to make sound business decisions on behalf of the Company and the interests of the Company. A conflict situation can arise when a covered person takes actions or has interests that may make it difficult to perform his or her Company work objectively and effectively. Conflicts of interest may also arise when a covered person (or one or more members of his or her family) receives improper and unauthorized personal benefits as a result of the covered person’s position in the Company. Loans to, or guarantees of obligations of, covered persons and their family members may create conflicts of interest. Furthermore, for so long as the Company remains subject to the provisions of the Securities Exchange Act of 1934, loans and any extensions of credit to executive officers are prohibited by federal law.

It is almost always a conflict of interest to work simultaneously for a competitor, customer or supplier. You are not allowed to work for a competitor as a consultant or board member. Transactions or roles involving conflicts of interest are prohibited as a matter of Company policy, except as specifically approved by the Board of Directors or consistent with approved guidance or policy of the Board, and in any event compliant with applicable state law and other rules and regulations that may apply to the Company. Conflicts of interest may not always be clear-cut, so if you have a question or concern, you may promptly consult with management or the Company’s legal counsel. Any covered person who becomes aware of a conflict or potential conflict must promptly disclose it and bring it to the attention of our Chief Financial Officer or the Chair of the Audit Committee.

3. Insider Trading

No covered person, including members of the Board of Directors, with access to material non-public information is permitted to use or share that information for securities trading purposes or for any other purpose except the conduct of Company business. Using non-public information for personal financial benefit or “tipping” others who might make an investment decision on the basis of that information is not only unethical but also illegal. In order to assist with compliance with laws against insider trading and related laws, the Company has adopted an insider trading policy. Please consult the policy for more specific information, including detailed guidance on the Company’s “blackout periods” (periodic prohibitions on trading in Company securities).

4. Corporate Opportunities

Covered persons are prohibited from taking for themselves, in their personal capacity, opportunities that are discovered through the use of Company property, information or the person’s position with the Company without the prior written consent of the Board of Directors. Covered persons owe a duty to the Company to advance the Company’s legitimate interests, and not their own, when such an opportunity arises.

5. Competition and Fair Dealing

We seek to compete in our markets fairly and honestly and in compliance with applicable law. Stealing proprietary information, possessing trade secret information that was obtained without

2

the owner’s consent, or inducing such disclosures by past or present employees of other companies is prohibited. Each covered person must endeavor to respect the rights of and deal fairly with the Company’s customers, suppliers, competitors and employees. Covered persons must not take unfair advantage of anyone through manipulation, concealment, abuse of privileged information, misrepresentation of material facts, or any other unfair-dealing practice in conducting their duties for the Company.

6. Confidentiality

Covered persons must maintain the confidentiality of confidential information and trade secrets entrusted to them by the Company or its customers or suppliers, except as required in the performance of duties for the Company or when disclosure is authorized by management, legal counsel to the Company, or otherwise required by applicable laws or regulations. Confidential information includes all non-public information that derives independent economic value from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use or is harmful to the Company or its customers, if disclosed. The obligation to preserve and not use confidential information and trade secrets continues even after employment ends in accordance with applicable law.

7. Protection and Proper Use of Company Assets

All covered persons must endeavor to protect the Company’s assets and ensure their efficient use. Theft, carelessness, and waste have a direct impact on the Company’s profitability. Any suspected incident of fraud or theft must be immediately reported to the Chief Financial Officer or Human Resources for investigation. Company equipment should not be used for any purpose other than Company business, though incidental and de minimis personal use may be permitted as long as such use does not interfere with the covered person’s performance of duties for the Company or otherwise negatively impact the Company’s business.

The obligation of covered persons to protect the Company’s assets includes its proprietary information. Proprietary information includes intellectual property, as well as business, marketing plans, databases, records, and any unpublished financial data and reports. Unauthorized use or distribution of this information would violate Company policy. Under certain circumstances, such use or distribution could also be illegal and result in civil or even criminal penalties.

8. Payments to Government Personnel

The U.S. Foreign Corrupt Practices Act prohibits giving anything of value, directly or indirectly, to officials of foreign governments or foreign political candidates in order to obtain or retain business. It is strictly prohibited to make illegal payments to government officials of any country.

In addition, the U.S. government has a number of laws and regulations regarding business gratuities which may be accepted by U.S. government personnel. The promise, offer or delivery to an official or employee of the U.S. government of a gift, favor or other gratuity in violation of

3

these rules would not only violate Company policy but could also be a criminal offense. State and local governments, as well as foreign governments, may have similar rules. The Company’s legal counsel can provide guidance to you in this area.

9. Accurate Public Disclosures

Full, fair, accurate, timely and understandable disclosures in the Company’s periodic reports filed with the SEC and press releases is legally required and is essential to the success of our business. Our management is required to exercise the highest standard of care in preparing such public disclosures. Furthermore, we expect all covered persons to provide members of our management with accurate, complete, and clear information whenever they are asked to provide any information in connection with such public disclosures (or whenever they reasonably believe such information will be used in such public disclosures). The Company complies with the following general requirements:

● All Company accounting records, as well as reports produced from those records, must comply with applicable laws, regulations and industry standards.

● All records, including accounting records, must fairly and accurately reflect the transactions or occurrences to which they relate.

● All accounting records must fairly and accurately reflect, in reasonable detail, the Company’s assets, liabilities, revenues and expenses.

● The Company’s accounting records must not contain any false or intentionally misleading entries.

● All transactions must be supported by accurate documentation in reasonable detail and recorded in the proper account and in the proper accounting period.

● No information should be concealed from the independent auditors.

10. Reporting Code Violations and General Compliance Procedures

Your conduct can reinforce an ethical atmosphere and positively influence the conduct of fellow employees. If you suspect a violation of this Code or other misconduct, you should consider the following guidelines. In some situations it is difficult to know if a violation has occurred. Since we cannot anticipate every situation that will arise, it is important that we have a way to approach a new question or problem. Subject in all events to applicable law, these are the steps to keep in mind:

● Try to obtain all the facts. In order to reach the right solutions, we must be as fully informed as possible.

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● If you are being asked to do something, then ask yourself: What specifically am I being asked to do? Does it seem unethical or improper? This will enable you to focus on the specific question you are faced with, and the alternatives you have. Use your judgment and common sense.

● Clarify your responsibility and role. In most situations, there is shared responsibility. Are your colleagues informed? It may help to get others involved and discuss the problem.

● If you are an employee, consider promptly discussing the matter with your immediate supervisor or with our Chief Financial Officer.

If you speak with our Chief Financial Officer but remain concerned, or if you feel uncomfortable speaking with the Chief Financial officer, you must (anonymously, if you wish) send a detailed note, with relevant documents, to: Mill City Ventures III, Ltd., at 1907 Wayzata Blvd., Suite 205, Wayzata, MN 55391 (attention: Audit Committee Chair). Your calls, detailed notes and emails will be dealt with confidentially to the extent possible to conduct an investigation (if necessary) into the matter and take appropriate action.

The Company strictly prohibits retaliation for making a report or for participating in an investigation. You have the commitment of the Company and its Board of Directors that you will be protected from retaliation for any report of alleged misconduct submitted in good faith. Retaliation by anyone against any such reporting person will not be tolerated and will result in disciplinary action.

You may be asked to provide information in an investigation. The Company expects and requires that you will fully cooperate with any internal investigations, including any such investigations relating to accounting, financial and audit matters.

11. Waivers of the Code

Any waiver of or exception to this Code for our management may be made only by the Board of Directors or a board committee and must be promptly disclosed as required by law or applicable stock exchange regulation.

12. Violations

The Board of Directors shall determine, or designate appropriate persons to determine, appropriate actions to be taken in the event of violations of this Code or any required procedures under this Code. Such actions shall be reasonably designed to deter wrongdoing and to promote accountability for adherence to the Code and its prescribed procedures, and may include one or more of the following in any order: written notices to the individual involved that the Board has determined that there has been a violation, censure by the Board, demotion or re-assignment of the individual involved, suspension with or without pay or benefits (as determined by the Board) and/or immediate termination of the individual’s employment.

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In determining what action is appropriate in a particular case, the Board of Directors or such designee shall take into account all relevant information, including but not limited to the nature and severity of the violation, whether the violation was a single occurrence or repeated occurrences, whether the violation appears to have been intentional or inadvertent, whether the individual in question had been advised prior to the violation as to the proper course of action, whether or not the individual in question had committed other violations in the past, and any other factors the Board deems important.

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MILL CITY VENTURES III, LTD.

CODE OF BUSINESS CONDUCT AND ETHICS

CERTIFICATION

I certify that I have received and reviewed the Company’s Code of Business Conduct and Ethics.  I understand that the Chief Financial Officer is available to answer to any questions I have regarding the Code.

Signature:

Date:

Print name:

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EX-23.1

Exhibit 23.1

Consent of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders of

Mill City Ventures III, Ltd.

We hereby consent to the use in this Registration Statement on amendment No.2 to Form S-1 of Mill City Ventures III Ltd. of our report dated March 14, 2022, relating to the financial statements of Mill City Ventures III, Ltd., which appears in this Registration Statement.  We also consent to the reference to us under the heading “Experts” in such Registration Statement.

Minneapolis, Minnesota

July 27, 2022

7500 Flying Cloud Drive Suite 800 Minneapolis, MN 55344 (t) 952.893.9320 | 2180 Immokalee Road Suite 308 Naples, FL 34110 (t) 239.325.1100

BoulayGroup.com

Member of Prime Global, An Association of Independent Accounting Firms

EX-99.1

Exhibit 99.1

Mill City Ventures III, Ltd.

AUDIT COMMITTEE CHARTER

There shall be a Committee of the Board of Directors (the "Board") of Mill City Ventures III, Ltd. (the “Corporation” or “Company”) to be known as the Audit Committee (“Committee) with purpose, composition, duties, authority, and responsibilities, as follows:

I. Purpose of the Committee. The primary purpose of the Committee is to assist the Board in fulfilling its fiduciary duties of oversight and monitoring as they relate to:

(1) the Corporation’s financial statements and other financial information provided by the Corporation to its stockholders, and others;

(2) Compliance with legal and regulatory requirements;

(3) The independent auditors, including their qualifications and independence;

(4) The Corporation’s systems of internal controls, including the Internal Audit function; and

(5) The auditing, accounting, and financial reporting process generally. The Committee shall prepare the report required by the rules of the U.S. Securities and Exchange Commission ("SEC") to be included in the Corporation’s annual proxy statement. The Committee does not itself prepare financial statements or perform audits, and its members are not auditors or certifiers of the Corporation’s financial statements. It is not the duty of the Committee to conduct audits or to determine that the Corporation’s financial statements and disclosures are complete and accurate and are in accordance with Generally Accepted Accounting Principles and applicable rules and regulations. These are the responsibilities of management and the independent auditors.

II. Composition of the Committee.

(1) The members of the Committee shall be appointed by the Board. Any vacancy on the Committee shall be filled by majority vote of the Board. No member of the Committee shall be removed except by majority vote of the Board.

(2) The Committee will be composed of not less than three members and shall be composed of directors satisfying the independence requirements of applicable Nasdaq Capital Market (“Nasdaq”) and the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”).

(3) The chairman of the Committee shall be designated by the Board. The chairman of the Committee shall be designated by the Board, provided, however, that if the Board does not designate a chairman, the members of the Committee, by a majority vote, may designate a

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chairman. The chairman will set the agenda for, preside over and conduct the proceedings of Committee meetings.

(4) Each member of the Committee must be financially literate, as determined by the Board. At least one member of the Committee must have accounting or related financial management expertise, as determined by the Board. At least one member of the Committee must be an "audit committee financial expert" as defined in Item 407(d)(5)(ii) of Regulation S-K. A person who satisfies this definition of audit committee financial expert will also be presumed to have accounting or related financial management expertise.

(5) No member of the Committee may serve simultaneously on the audit committee of more than two other publicly-held companies. In addition, the chairman of the Committee may not serve simultaneously on the audit committee of more than two other publicly-held companies.

III. Committee Meetings.

(1) The Committee shall meet at least quarterly, or more frequently as circumstances dictate.

(2) The Committee shall meet at least quarterly with management, the Director of Internal Audit, and the independent auditors in separate executive sessions to discuss any matters that the Committee or each of these groups believe should be discussed privately.

(3) The Committee shall meet with the independent auditors and management quarterly to review the Corporation’s financial information.

(4) The Committee shall report to the full Board with respect to its meetings. The chairman of the Board, any member of the Committee, or the Secretary of the Corporation may call meetings of the Committee.

(5) The Committee will maintain written minutes of its meetings, which minutes will be filed with the minutes of the meetings of the Board.

(6) The Committee will regularly report to the Board on its activities.

IV. Authority and Resources.

The Committee may request any officer or employee of the Corporation or the Corporation’s outside counsel or independent auditor to attend a Committee meeting or to meet with any members of, or consultants to, the Committee. The Committee shall have the power to conduct or authorize investigations into any matters within the Committee’s scope of responsibilities. The Committee shall be empowered to retain independent counsel, accountants, or other advisors and experts to assist in any investigation and performance of its functions at the Corporation’s expense.

V. Duties and Responsibilities.

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To carry out its responsibilities and duties the Committee shall, consistent with and subject to applicable law and rules and regulations promulgated by the SEC, Nasdaq, or any other applicable regulatory authority:

1. Review and discuss the annual audited financial statements and the Company’s disclosures under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” with management and the independent registered public accounting firm.  In connection with such review, the Committee will:

(a) Discuss with the independent registered public accounting firm the matters required to be discussed by Statement on Auditing Standards No. 1301, Communications with Audit Committees (as may be modified or supplemented) and the matters in the written disclosures required by the applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountant’s communications with the audit committee concerning independence;

(b) Review significant changes in accounting or auditing policies;

(c) Review with the independent registered public accounting firm any problems or difficulties encountered in the course of their audit, including any change in the scope of the planned audit work and any restrictions placed on the scope of such work and management’s response to such problems or difficulties;

(d) Review with the independent registered public accounting firm, management and the senior internal auditing executive the adequacy of the Company’s internal controls, and any significant findings and recommendations with respect to such controls;

(e) Review reports required to be submitted by the independent registered public accounting firm concerning: (i) all critical accounting policies and practices used; (ii) all alternative treatments of financial information within generally accepted accounting principles (“GAAP”) that have been discussed with management, the ramifications of such alternatives, and the accounting treatment preferred by the independent registered public accounting firm; (iii) any other material written communications with management; and (iv) any material financial arrangements of the Company which do not appear on the financial statements of the Company

(f) Review (a) major issues regarding accounting principles and financial statement presentations, including any significant changes in the Company’s selection or application of accounting principles, and major issues as to the adequacy of the Company’s internal controls and any special audit steps adopted in light of material control deficiencies; and (b) analyses prepared by management and/or the independent registered public accounting firm setting forth significant financial reporting issues and judgments made in connection with the preparation of the financial statements, including analysis of the effects of alternative GAAP methods on the financial

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statements and the effects of regulatory and accounting initiatives, as well as off-balance sheet structures, on the financial statements of the Company; and

(g) Discuss policies and procedures concerning earnings press releases and review the type and presentation of information to be included in earnings press releases (paying particular attention to any use of “pro forma” or “adjusted” non-GAAP information), as well as financial information and earnings guidance provided to analysts and rating agencies.

2. Review and discuss the quarterly financial statements and the Company’s disclosures provided in periodic quarterly reports including “Management’s Discussion and Analysis of Financial Condition and Results of Operations” with management, the senior internal auditing executive and the independent registered public accounting firm.

3. Oversee the external audit coverage: The Company’s independent registered public accounting firm is ultimately accountable to the Committee, which has the direct authority and responsibility to appoint, retain, compensate, terminate, select, evaluate and, where appropriate, replace the independent registered public accounting firm. In connection with its oversight of the external audit coverage, the Committee will have authority to:

(i) Appoint and replace (subject to stockholder approval, if deemed advisable by the Board) the independent registered public accounting firm;

(ii) Approve the engagement letter and the fees to be paid to the independent registered public accounting firm;

(iii) Pre-approve all audit and non-audit services to be performed by the independent registered public accounting firm or any other registered public accounting firm engaged by the Company and the related fees for such services other than prohibited non-auditing services as promulgated under rules and regulations of the SEC, subject to the inadvertent de minimis exceptions set forth in the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”) and the SEC rules;

(iv) Monitor and obtain confirmation and assurance as to the independent registered public accounting firm’s independence, including ensuring that they submit on a periodic basis (not less than annually) to the Committee a formal written statement delineating all relationships between the independent registered public accounting firm and the Company consistent with the Public Company Accounting Oversight Board Rule 3526. The Committee is responsible for actively engaging in a dialogue with the independent registered public accounting firm with respect to any disclosed relationships or services that may impact the objectivity and independence of the independent registered public accounting firm and for taking appropriate action in response to the independent registered public accounting firm’s report to satisfy itself of their independence;

(v) At least annually, obtain and review a report by the independent registered public accounting firm describing: the firm’s internal quality-control procedures; any material issues raised by the most recent internal quality-control review, or peer review, of the

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firm, or by any inquiry or investigation by governmental or professional authorities, within the preceding five years, respecting one or more independent audits carried out by the firm, and any steps taken to deal with any such issues; and to assess the independent registered public accounting firm independence, all relationships between the independent registered public accounting firm and the Company;

(vi) Meet with the independent registered public accounting firm prior to the annual audit to discuss planning and staffing of the audit;

(vii) Review and evaluate the performance of the independent registered public accounting firm, as the basis for a decision to reappoint or replace the independent registered public accounting firm;

(viii) Set clear hiring policies for employees or former employees of the independent registered public accounting firm, including but not limited to, as required by all applicable laws and listing rules;

(ix) Set clear policies for audit partner rotation in compliance with applicable laws and regulations;

(x) Assure regular rotation of the lead (or coordinating) audit partner having primary responsibility for the audit and the audit partner responsible for reviewing the audit, as required by the Sarbanes-Oxley Act, and consider whether rotation of the independent registered public accounting firm is required to ensure independence;

(xi) Engage in a dialogue with the independent registered public accounting firm to confirm that audit partner compensation is consistent with applicable SEC rules;

(xii) Review and discuss with the independent registered public accounting firm the results of the year-end audit of the Company, including any identified audit matters under AS 3101, any comments or recommendations of the Company’s independent registered public accounting firm and, based on such review and discussions and on such other considerations as it determines appropriate, recommend to the Board whether the Company’s audited financial statements should be included in the Annual Report on Form 10-K;

(xiii) Take, or recommend that the Board take, appropriate action to oversee the independence of the Company’s independent registered public accounting firm; and

(xiv) Monitor compliance by the Company of the employee conflict of interest requirements contained in the Sarbanes-Oxley Act and the rules and regulations promulgated by the SEC thereunder.

4. Oversee internal audit coverage. In connection with its oversight responsibilities, the Committee will:

(i) Review the appointment or replacement of the senior internal auditing executive;

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(ii) Review, in consultation with management, the independent auditors and the senior internal auditing executive, the plan and scope of internal audit activities, and, when deemed necessary or appropriate by the Committee, assign additional internal audit projects to appropriate personnel;

(iii) Review the Committee’s level of involvement and interaction with the Company’s internal audit function, if any, including the Committee’s line of authority and role in appointing and compensating employees in the internal audit function;

(iv) Review internal audit activities, budget, compensation and staffing; and

(v) Review significant reports to management prepared by the internal auditing department and management’s responses to such reports.

5. Receive periodic reports from the Company’s independent registered public accounting firm, management and director of the Company’s internal auditing department to assess the impact on the Company of significant accounting or financial reporting developments that may have a bearing on the Company.

6. Review with the independent registered public accounting firm and the senior internal auditing executive the adequacy and effectiveness of the Company’s accounting and internal control policies and procedures and any significant findings and recommendations with respect to such controls;

7. Review with the chief executive officer, chief financial officer and independent registered public accounting firm, periodically, the following:

(i) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information; and

(ii) any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting.

8. Resolve any differences in financial reporting between management and the independent registered public accounting firm.

9. Establish procedures for (i) the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting controls or auditing matters and (ii) the confidential, anonymous submission by employees of concerns regarding questionable accounting or auditing matters.

10. Establish procedures for the receipt, retention and treatment of reports of evidence of a material violation made by attorneys appearing and practicing before the SEC in the representation of the Company or any of its subsidiaries, or reports made by the Company’s chief executive officer in relation thereto.

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11. Discuss policies and guidelines to govern the process by which risk assessment and risk management is undertaken.

12. Meet periodically and at least four times per year with management to review and assess the Company’s major financial risk exposures and the manner in which such risks are being monitored and controlled.

13. Meet periodically, and not less than annually, in separate executive session with each of the chief financial officer, the senior internal auditing executive, and the independent registered public accounting firm.

14. Review and approve all “related party transactions” requiring disclosure under SEC Regulation S-K, Item 404, in accordance with the policy set forth in Section VI below.

15. Review the Company’s policies relating to the ethical handling of conflicts of interest and review past or proposed transactions between the Company and members of management as well as policies and procedures with respect to officers’ expense accounts and perquisites, including the use of corporate assets.  The Committee shall consider the results of any review of these policies and procedures by the Company’s independent registered public accounting firm.

16. Review and approve in advance any services provided by the Company’s independent registered public accounting firm to the Company’s executive officers or members of their immediate family.

17. Review the Company’s program to monitor compliance with the Company’s Code of Ethics, and meet periodically with the Company’s Compliance Committee to discuss compliance with the Code of Ethics.

18. Approve reimbursement of expenses incurred by management in connection with certain activities on our behalf, such as identifying potential target businesses opportunities.

19. Review periodically with the Company’s outside legal counsel (i) legal and regulatory matters which may have a material effect on the financial statements, and (ii) corporate compliance policies or codes of conduct.

20. As it determines necessary to carry out its duties, engage and obtain advice and assistance from outside legal, accounting or other advisers, the cost of such independent expert advisors to be borne by the Company.

21. Report regularly to the Board with respect to Committee activities.

22. Prepare the report of the Committee required by the rules of the SEC to be included in the proxy statement for each annual meeting.

23. Review and reassess annually the adequacy of this Charter and recommend any proposed changes to the Board.

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24. Review with management, the independent registered accounting firm, and the Company’s legal advisors, as appropriate, any legal, regulatory or compliance matters, including any correspondence with regulators or government agencies and any employee complaints or published reports that raise material issues regarding our financial statements or accounting policies and any significant changes in accounting standards or rules promulgated by the Financial Accounting Standards Board, the SEC or other regulatory authorities.

25. Inquire and discuss with management the Company’s compliance with applicable laws and regulations.

26. Determine the compensation and oversight of the work of the independent registered public accounting firm (including resolution of disagreements between management and the independent registered public accounting firm regarding financial reporting) for the purpose of preparing or issuing an audit report or related work.

27. On a quarterly basis, review and approve all payments made to the Company’s officers or directors or any of their respective affiliates.

VI. Procedures.

1. Action.  A majority of the members of the entire Committee shall constitute a quorum. The Committee shall act on the affirmative vote a majority of members present at a meeting at which a quorum is present. A majority of the members of the Committee present in person or by means of a conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other shall constitute a quorum.

2. Fees. The Company shall provide for appropriate funding, as determined by the Committee, for payment of compensation: (a) to outside legal, accounting or other advisors employed by the Committee; and (b) for ordinary administrative expenses of the Committee that are necessary or appropriate in carrying out its duties.

3. Limitations. While the Committee has the responsibilities and powers set forth in this Charter, it is not the duty of the Committee to plan or conduct audits or to determine that the Company’s financial statements are complete and accurate and are in accordance with GAAP--rather, such is the responsibility of management and the independent registered public accounting firm.

VII. Related Party Transactions Policy.

1. Definitions.

A “Related Party Transaction” is any transaction directly or indirectly involving any Related Party, as defined below, that would need to be disclosed under Item 404(a) of Regulation S-K. Under Item 404(a), the Company is required to disclose any transaction occurring since the beginning of the Company’s last fiscal year, and, in addition, for as

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long as the Company is a “smaller reporting company” as defined by Item 10(f) of Regulation S-K, the fiscal year preceding the small reporting company's last fiscal year. or any currently proposed transaction, involving the Company where the amount involved exceeds the lesser of $120,000 or, for as long as the Company is a “smaller reporting company” one percent (1%) of the average of the Company’s total assets at year end for the last two completed fiscal years, and in which any related person had or will have a direct or indirect material interest. “Related Party Transaction” also includes any material amendment or modification to an existing Related Party Transaction.

“Related Party” means any of the following:

· a director (which term when used herein includes any director nominee);

· an executive officer;

· a person known by the Company to be the beneficial owner of more than 5% of the Company’s common stock (a “5% stockholder”); or

· a person known by the Company to be an immediate family member of any of the foregoing.

“Immediate family member” means a child, stepchild, parent, stepparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law of such director, executive officer, nominee for director or beneficial owner, and any person (other than a tenant or employee) sharing the household of such director, executive officer, nominee for director or beneficial owner.

2. Identification of Potential Related Party Transactions.  Related Party Transactions may be brought to management’s and the Board’s attention in a number of ways. Each of the Company’s directors and executive officers will inform the chairman of the Committee of any potential Related Party Transactions. In addition, each such director and executive officer shall complete a questionnaire on an annual basis designed to elicit information about any potential Related Party Transactions.  Any potential Related Party Transactions that are brought to the Committee’s attention shall be analyzed by the Committee, in consultation with outside counsel or members of management, as appropriate, to determine whether the transaction or relationship does, in fact, constitute a Related Party Transaction requiring compliance with this Policy.

3. Review and Approval. At each of its meetings, the Committee shall be provided with the details of each new, existing or proposed Related Party Transaction, including the terms of the transaction, any contractual restrictions that the Company has already committed to, the business purpose of the transaction, and the benefits to the Company and to the relevant Related Party. In determining whether to approve a Related Party Transaction, the Committee shall consider, among other factors, the following factors to the extent relevant to the Related Party Transaction:

(h) whether the terms of the Related Party Transaction are fair to the Company and on the same basis as would apply if the transaction did not involve a Related Party;

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(i) whether the Related Party Transaction would impair the independence of an outside director;

(j) whether the Related Party Transaction would present an improper conflict of interest for any director or executive officer of the Company, taking into account the size of the transaction, the overall financial position of the director, executive officer or Related Party, the direct or indirect nature of the director’s, executive officer’s or Related Party’s interest in the transaction and the ongoing nature of any proposed relationship, and any other factors the Committee deems relevant; and

(k) any pre-existing contractual obligations.

4. Any member of the Committee who has an interest in the transaction under discussion shall abstain from voting on the approval of the Related Party Transaction.

5. A Related Party Transaction entered into without pre-approval of the Committee shall not be deemed to violate this Policy, or be invalid or unenforceable, so long as the transaction is brought to the Committee as promptly as reasonably practical after it is entered into or after it becomes reasonably apparent that the transaction is covered by this Policy.

DATE: May        , 2022

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EX-99.2

Exhibit 99.2

Mill City Ventures III, Ltd.

COMPENSATION COMMITTEE CHARTER

There shall be a Committee of the Board of Directors (the “Board”) of Mill City Ventures III, Ltd. (the “Company”) to be known as the Compensation Committee (“Committee) with purpose, composition, duties, authority, and responsibilities, as follows:

I. Purpose of the Committee.

The purposes of the Committee shall be to:

(1) oversee the Company’s compensation and employee benefit plans and practices, including its executive compensation plans, and its incentive-compensation and equity-based plans;

(2) review and discuss with management the Company’s compensation discussion and analysis (“CD&A”) to be included in the Company’s annual proxy statement or annual report on Form 10-K filed with the U.S. Securities and Exchange Commission (the “SEC”);

(3) prepare the Compensation Committee Report as required by the rules of the SEC; and

(4) perform such further functions as may be consistent with this charter (“Charter”) or assigned by applicable law, the Company’s articles of incorporation (as amended from time to time, the “Articles of Incorporation”) and bylaws, or the Board.

While the members of the Committee have the duties and responsibilities set forth in this Charter, nothing contained in this Charter is intended to create, or should be construed as creating, any responsibility or liability of members of the Committee, except to the extent otherwise provided under applicable federal or state law.

II. Organization.

(i) The Committee shall consist of two or more independent directors as determined from time to time by the Board. Each member of the Committee shall be “independent” and qualified to serve on the Committee pursuant to the requirements of the Nasdaq Capital Market (“Nasdaq”), subject to the applicable phase-in periods permitted by the rules of Nasdaq, and any additional requirements that the Board deems appropriate. Members of the Committee shall also qualify as “non-employee directors” within the meaning of Rule 16b-3 promulgated under the U.S. Securities Exchange Act of 1934, as amended (the “Exchange Act”).

(ii) The chairman of the Committee shall be designated by the Board; provided that if the Board does not so designate a chairman, the members of the Committee, by a majority vote, may designate a chairperson.

(iii) Any vacancy on the Committee shall be filled by majority vote of the Board. No member of the Committee shall be removed except by majority vote of the Board.

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III. Meetings.

(i) The Committee shall meet as often as it determines necessary to carry out its duties and responsibilities, but at least once annually. The Committee, in its discretion, may ask members of management or others to attend its meetings, or portions thereof, and to provide pertinent information as necessary; provided that the Chief Executive Officer of the Company may not be present during any portion of a Committee meeting in which deliberation or any vote regarding his or her compensation occurs.

(ii) A majority of the members of the Committee present in person or by means of a conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other shall constitute a quorum.

(iii) The Committee shall maintain minutes of its meetings and records relating to those meetings and shall report regularly to the Board on its activities, as appropriate.

IV. Authority and Responsibilities.

A.Executive Compensation

The Committee shall have the following duties and responsibilities with respect to the Company’s executive compensation plans:

(1) To review at least annually the goals and objectives of the Company’s executive compensation plans, and amend, or recommend that the Board amend, these goals and objectives if the Committee deems it appropriate.

(2) To review at least annually the Company’s executive compensation plans in light of the Company’s goals and objectives with respect to such plans, and, if the Committee deems it appropriate, adopt, or recommend to the Board the adoption of, new, or the amendment of existing, executive compensation plans.

(3) To evaluate annually the performance of the Chief Executive Officer in light of the goals and objectives of the Company’s executive compensation plans, and, either as a Committee or together with the other independent directors (as directed by the Board), determine and approve the Chief Executive Officer’ compensation level based on this evaluation. In determining the long-term incentive component of the Chief Executive Officer’s compensation, the Committee shall consider factors as it determines relevant, which may include, for example, the Company’s performance and relative stockholder return, the value of similar awards to chief executive officers of comparable companies, and the awards given to the Chief Executive Officer of the Company in past years. The Committee may discuss the Chief Executive Officer’s compensation with the Board if it chooses to do so.

(4) To evaluate annually the performance of the other executive officers of the Company in light of the goals and objectives of the Company’s executive compensation plans, and either as a Committee or together with the other independent directors (as directed by the Board), determine and approve the compensation of such other executive officers. To the extent that long-term incentive compensation is a component of such executive officer’s compensation, the Committee shall consider all relevant factors in determining the appropriate

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level of such compensation, including the factors applicable with respect to the Chief Executive Officer as mentioned in this Article IV(A)(3).

(5) To evaluate annually the appropriate level of compensation for Board and Committee service by non-employee directors, and to make recommendations to the Board regarding such compensation.

(6) To review and approve any employment agreements, severance or termination arrangements and any other compensatory contracts or arrangements to be made with any executive officer of the Company.

(7) To perform such duties and responsibilities as may be assigned to the Board or the Committee under the terms of any executive compensation plan.

(8) To review perquisites or other personal benefits to the Company’s executive officers and directors and recommend any changes to the Board.

(9) To consider the results of the most recent stockholder advisory vote on executive compensation as required by Section 14A of the Exchange Act and, to the extent the Committee determines it appropriate to do so, take such results into consideration in connection with the review and approval of executive officer compensation.

(10) To review and discuss with management the Company’s CD&A, and based on that review and discussion, to recommend to the Board that the CD&A be included in the Company’s annual proxy statement or annual report on Form 10-K, as applicable.

(11) To review compensation arrangements for the Company’s employees to evaluate whether incentive and other forms of pay encourage unnecessary or excessive risk taking, and review and discuss, at least annually, the relationship between risk management policies and practices, corporate strategy and the Company’s compensation arrangements.

(12) To the extent it deems necessary, review and approve the terms of any compensation “clawback” or similar policy or agreement between the Company and the Company’s executive officers or other employees subject to Section 16 of the Exchange Act.

(13) To prepare the Compensation Committee Report in accordance with the rules and regulations of the SEC for inclusion in the Company’s annual proxy statement or annual report on Form 10-K, as applicable.

(14) To perform such other functions as assigned by law, the Articles of Incorporation or the Board.

B. General Compensation and Employee Benefit Plans

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The Committee shall have the following duties and responsibilities with respect to the Company’s general compensation and employee benefit plans, including incentive-compensation and equity-based plans:

(1) To review at least annually the goals and objectives of the Company’s general compensation plans and other employee benefit plans, including incentive-compensation and equity-based plans, and amend, or recommend that the Board amend, these goals and objectives if the Committee deems it appropriate.

(2) To review at least annually the Company’s general compensation plans and other employee benefit plans, including incentive-compensation and equity-based plans, in light of the goals and objectives of these plans, and recommend that the Board amend these plans if the Committee deems it appropriate.

(3) To review all equity-compensation plans to be submitted for stockholder approval under the Nasdaq listing standards, and to review and, in the Committee’s sole discretion, approve all equity-compensation plans that are exempt from such stockholder approval requirement.

(4) To perform such duties and responsibilities as may be assigned to the Board or the Committee under the terms of any compensation or other employee benefit plan, including any incentive-compensation or equity-based plan

V. Delegation of Authority.

The Committee may form subcommittees for any purpose that the Committee deems appropriate and may delegate to such subcommittees such power and authority as the Committee deems appropriate; provided, however, that no subcommittee shall consist of fewer than two members; and provided further that the Committee shall not delegate to a subcommittee any power or authority required by any law, regulation or listing standard to be exercised by the Committee as a whole.

VI. Reporting.

(i) The Committee shall, no less frequently than annually, evaluate its performance. In conducting this review, the Committee shall evaluate whether this Charter appropriately addresses the matters that are or should be within its scope and shall recommend such changes as it deems necessary or appropriate.

(ii) The Committee shall address all matters that the Committee considers relevant to its performance, including at least the following: the adequacy, appropriateness and quality of the information and recommendations presented by the Committee to the Board, the manner in which they were discussed or debated, and whether the number and length of meetings of the Committee were adequate for the Committee to complete its work in a thorough and thoughtful manner.

(iii) The Committee shall deliver to the Board a report, which may be oral, setting forth the results of its evaluation, including any recommended amendments to this Charter and any recommended changes to the Company’s or the Board’s policies or procedures, which the Board may approve and implement.

4

VII. Resources.

The Committee may conduct or authorize investigations into or studies of matters within the Committee’s scope of responsibilities, and may, in its sole discretion, retain or obtain the advice of a compensation consultant, legal counsel or other adviser. The Committee shall be directly responsible for the appointment, compensation and oversight of the work of any compensation consultant, legal counsel or other adviser retained by the Committee, the expense of which shall be borne by the Company. The Committee shall select an independent compensation consultant, legal counsel or other adviser to the Committee and may take into consideration all factors relevant to that person’s independence from management, including the following:

(i) The provision of other services to the Company by the person that employs the compensation consultant, legal counsel or other adviser;

(ii) The amount of fees received from the Company by the person that employs the compensation consultant, legal counsel or other adviser, as a percentage of the total revenue of the person that employs the compensation consultant, legal counsel or other adviser;

(iii) The policies and procedures of the person that employs the compensation consultant, legal counsel or other adviser that are designed to prevent conflicts of interest;

(iv) Any business or personal relationship of the compensation consultant, legal counsel or other adviser with a member of the Committee or the Board;

(v) Any stock or other securities of the Company owned by the compensation consultant, legal counsel or other adviser; and

(vi) Any business or personal relationship of the compensation consultant, legal counsel, other adviser or the person employing the adviser with an executive officer or other significant stockholder of the Company.

The Committee shall conduct the independence assessment with respect to any compensation consultant, legal counsel or other adviser that provides advice to the Committee, other than: (i) in-house legal counsel; and (ii) any compensation consultant, legal counsel or other adviser whose role is limited to the following activities for which no disclosure would be required under Item 407(e)(3)(iii) of Regulation S-K: (x) consulting on any broad-based plan that does not discriminate in scope, terms, or operation, in favor of executive officers or directors of the Company, and that is available generally to all salaried employees; or (y) providing information that either is not customized for the Company or that is customized based on parameters that are not developed by the compensation consultant, and about which the compensation consultant does not provide advice.

Nothing herein shall be construed to require the Committee to implement or act consistently with the advice or recommendations of the compensation consultant, legal counsel or other adviser to the Committee.

5

DATE: May      , 2022

6

EX-99.3

Exhibit 99.3

Mill City Ventures III, Ltd.

CORPORATE GOVERNANCE AND NOMINATING COMMITTEE CHARTER

There shall be a Committee of the Board of Directors (the “Board”) of Mill City Ventures III, Ltd. (the “Company”) to be known as the Nominating and Corporate Governance Committee (“Committee) with purpose, composition, duties, authority, and responsibilities, as follows:

I. Purpose of the Committee.

The purpose of the Committee is to:

(1)identify and to recommend individuals qualified to serve as directors of the Company and on committees of the Board and, if requested by the Board, identify and recommend individuals qualified to serve as officers of the Company;

(2)advise the Board with respect to the Board composition, procedures and committees;

(3)develop and recommend to the Board a set of corporate governance guidelines (the “Guidelines”) applicable to the Company; and

(4)oversee the evaluation of the Board and the Company’s management.

While the members of the Committee have the duties and responsibilities set forth in this charter (this “Charter”), nothing contained in this Charter is intended to create, or should be construed as creating, any responsibility or liability of members of the Committee, except to the extent otherwise provided under applicable federal or state law.

II.  Organization.

(1) The Committee shall consist of two or more independent directors as determined from time to time by the Board. Each member of the Committee shall be “independent” and qualified to serve on the Committee pursuant to the requirements of the Nasdaq Capital Market (“Nasdaq”), subject to the applicable phase-in periods permitted by the rules of Nasdaq, and any additional requirements that the Board deems appropriate.

(2) The chairman of the Committee shall be designated by the Board; provided that if the Board does not so designate a chairman, the members of the Committee, by a majority vote, may designate a chairman.

(3) Any vacancy on the Committee shall be filled by majority vote of the Board. No member of the Committee shall be removed except by majority vote of the Board.

III. Meetings.

(1) The Committee shall meet throughout the year and as often as it determines necessary to carry out its duties and responsibilities, but at least once annually. The Committee, in its discretion, may ask members of management or others to attend its meetings (or portions thereof) and to provide pertinent information as necessary.

1

(2) A majority of the members of the Committee present in person or by means of a conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other shall constitute a quorum.

(3) The Committee shall maintain minutes of its meetings and records relating to those meetings and shall report regularly to the Board on its activities, as appropriate.

IV. Authority and Responsibilities.

A.Board Candidates and Nominees

The Committee shall have the following duties and responsibilities with respect to Board candidates and nominees:

(a) To assist in identifying, recruiting and, if appropriate, interviewing candidates to fill positions on the Board, including persons suggested by stockholders or others. The Committee may, if it deems appropriate, establish procedures to be followed by stockholders in submitting recommendations for Board candidates.

(b) To review the background and qualifications of individuals being considered as director candidates. Among the qualifications considered in the selection of candidates, the Committee shall look at the following attributes and criteria of candidates: educational background, diversity of professional experience, knowledge of our business, integrity, professional reputation, independence, wisdom, and the ability to represent the best interests of our stockholders and such other relevant factors that the Committee considers appropriate in the context of the needs of the Board.

(c) To recommend to the Board the director nominees for election by the stockholders or appointment by the Board, as the case may be, pursuant to the Company’s certificate of incorporation and bylaws, as amended from time to time, which recommendations shall be consistent with the criteria for selecting directors established by the Board from time to time.

(d) To review the suitability for continued service as a director of each Board member when his or her term expires and when he or she has a change in status, and to recommend whether or not the director should be re-nominated.

B.Board Composition and Procedures

The Committee shall have the following duties and responsibilities with respect to the composition and procedures of the Board as a whole:

(a) To review annually with the Board the composition of the Board as a whole and to recommend, if necessary, measures to be taken so that the Board reflects the appropriate balance of knowledge, experience, skills, expertise and diversity required for the Board as a whole and contains at least the minimum number of independent directors required by Nasdaq.

(b) To review periodically the size of the Board and to recommend to the Board any appropriate changes.

2

(c) To make recommendations on the frequency and structure of Board meetings.

(d) To make recommendations concerning any other aspect of the procedures of the Board that the Committee considers warranted.

C.Board Committees

The Committee shall have the following duties and responsibilities with respect to the committee structure of the Board:

(a) After consultation with the chairman of the Board and Chief Executive Officer, and after taking into account the experiences and expertise of individual directors, to make recommendations to the Board regarding the size and composition of each standing committee of the Board, including the identification of individuals qualified to serve as members of a committee, including the Committee, and to recommend individual directors to fill any vacancy that might occur on a committee, including the Committee.

(b) To monitor the functioning of the committees of the Board and to make recommendations for any changes, including the creation and elimination of committees.

(c) To review annually committee assignments and the policy with respect to the rotation of committee memberships and/or chairpersons, and to report any recommendations to the Board.

(d) To recommend that the Board establish such special committees as may be desirable or necessary from time to time in order to address ethical, legal or other matters that may arise. The Committee’s power to make such a recommendation under this Charter shall be without prejudice to the right of any other committee of the Board, or any individual director, to make such a recommendation at any time.

D.Corporate Governance

The Committee shall have the following duties and responsibilities with respect to corporate governance:

(a) To develop and recommend to the Board the Guidelines for the Company, which shall be consistent with any applicable laws, regulations and listing standards. At a minimum, the Guidelines developed and recommended by the Committee shall address the following:

i. Director qualification standards.

ii. Director responsibilities.

iii. Director access to management and, as necessary and appropriate, independent advisors.

v. Director orientation and continuing education.

3

vi. Management succession, including policies and principles for the selection and performance review of the Chief Executive Officer, as well as policies regarding succession in the event of an emergency or the retirement of the Chief Executive Officer.

vii. Annual performance evaluation of the Board.

(b) To review periodically, and at least annually, the Guidelines adopted by the Board to assure that they are appropriate for the Company and comply with the requirements of Nasdaq, and to recommend any desirable changes to the Board.

(c) To consider any other corporate governance issues that arise from time to time, and to develop appropriate recommendations for the Board.

E.Evaluation of the Board and Management

The Committee shall be responsible for overseeing an annual evaluation of the Board as a whole and management, and shall evaluate and report to the Board on the performance and effectiveness of the Board. The Committee shall establish procedures to allow it to exercise this oversight function.

V. Delegation of Authority.

The Committee may form subcommittees for any purpose that the Committee deems appropriate and may delegate to such subcommittees such power and authority as the Committee deems appropriate; provided, however, that no subcommittee shall consist of fewer than two members; and provided further that the Committee shall not delegate to a subcommittee any power or authority required by any law, regulation or listing standard to be exercised by the Committee as a whole.

VI.  Reporting.

The Committee shall, on an annual basis, evaluate its performance. In conducting this review, the Committee shall evaluate whether this Charter appropriately addresses the matters that are or should be within its scope and shall recommend such changes as it deems necessary or appropriate. The Committee shall address all matters that the Committee considers relevant to its performance, including at least the following: the adequacy, appropriateness and quality of the information and recommendations presented by the Committee to the Board, the manner in which they were discussed or debated and whether the number and length of meetings of the Committee were adequate for the Committee to complete its work in a thorough and thoughtful manner.

The Committee shall deliver to the Board a report, which may be oral, setting forth the results of its evaluation, including any recommended amendments to this Charter and any recommended changes to the Company’s or the Board’s policies or procedures, which the Board may approve and implement.

VII. Resources.

The Committee shall have the sole authority to retain and terminate advisors, at the Company’s expense, such as independent counsel, other consultants or advisors as it deems necessary or appropriate in carrying out its duties. The Committee shall have the sole authority to retain or

4

terminate any search firm to be used to identify director candidates, including sole authority to approve the search firm’s fees and other retention terms, such fees to be borne by the Company.

DATE: May     , 2022

5

XML

Document and Entity Information	12 Months Ended
	Dec. 31, 2021
Document and Entity Information
Document Type	S-1/A
Entity Registrant Name	Mill City Ventures III, Ltd.
Amendment Description	Amendment No. 2
Entity Filer Category	Non-accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Central Index Key	0001425355
Amendment Flag	true

XML

CONDENSED BALANCE SHEETS - USD ($)	Mar. 31, 2022	Dec. 31, 2021
ASSETS
Investments, at fair value:	$ 20,087,500	$ 14,098,675
Cash	71,020	1,936,148
Note receivable	250,000	250,000
Prepaid expenses	29,658	83,674
Interest and dividend receivables	562,993	324,350
Right-of-use lease asset		4,984
Total Assets	21,001,171	16,697,831
LIABILITIES
Line of credit	5,325,000
Accounts payable	104,911	64,028
Dividend payable	100	100
Payable for purchase of investments		1,900,000
Lease liability		5,654
Deferred interest income	272,000
Accrued income tax	1,434,000	1,269,000
Deferred taxes	39,000	45,000
Total Liabilities	7,175,011	3,283,782
SHAREHOLDERS EQUITY (NET ASSETS)
Common stock, par value $0.001 per share (250,000,000 authorized; 10,790,413 and 10,786,913 outstanding)	10,790	10,790
Additional paid-in capital	10,694,163	10,694,163
Accumulated deficit	(1,159,665)	(1,159,665)
Accumulated undistributed investment loss	(1,582,279)	(1,877,667)
Accumulated undistributed net realized gains on investment transactions	5,719,580	5,580,810
Net unrealized appreciation in value of investments	143,571	165,618
Total Shareholders' Equity (net assets)	13,826,160	13,414,049
Total Liabilities and Shareholders' Equity	$ 21,001,171	$ 16,697,831
Net Asset Value Per Common Share	$ 1.28	$ 1.24

XML

CONDENSED BALANCE SHEETS (Parenthetical) - USD ($)	Mar. 31, 2022	Dec. 31, 2021	Mar. 31, 2021	Dec. 31, 2020	Mar. 31, 2020	Sep. 30, 2019	Mar. 31, 2019	Sep. 30, 2018	Mar. 31, 2018	Sep. 30, 2017
CONDENSED BALANCE SHEETS
Investments at Amortized Cost	$ 19,943,929	$ 13,933,057		$ 4,968,576
Common stock, par value	$ 0.001	$ 0.001		$ 0.001
Common stock, shares authorized	250,000,000	250,000,000		250,000,000
Common stock, shares outstanding	10,790,413	10,790,413	10,786,913	10,785,913	11,067,402	11,067,402	11,067,402	11,067,402	11,067,402	11,067,402

XML

CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED) - USD ($)	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Investment Income
Interest income	$ 1,000,206	$ 546,842
Total Investment Income	1,000,206	546,842
Operating Expenses
Professional fees	198,518	142,808
Payroll	196,442	302,080
Insurance	30,097	24,279
Occupancy	16,812	16,689
Director's fees	30,000	30,000
Interest expense	66,939	0
Other general and administrative	7,010	18,002
Total Operating Expenses	545,818	533,858
Net Investment Gain	454,388	12,984
Realized and Unrealized Gain (Loss) on Investments
Net realized gain on investments	138,770	2,907,999
Net change in unrealized depreciation on investments	(22,047)	(513,250)
Net Realized and Unrealized Gain on Investments	116,723	2,394,749
Net Increase in Net Assets Resulting from Operations Before Taxes	571,111	2,407,733
Provision for Income Taxes	159,000	662,691
Net Increase in Net Assets Resulting from Operations	$ 412,111	$ 1,745,042
Net Increase in Net Assets Resulting from Operations per share:
Basic net income per share	$ 0.04	$ 0.16
Diluted net income per share	$ 0.04	$ 0.16
Weighted-average number of common shares outstanding - basic	10,790,413	10,785,913
Weighted-average number of common shares outstanding - diluted	10,790,413	10,785,913

XML

CONDENSED STATEMENTS OF SHAREHOLDERS EQUITY (UNAUDITED) - USD ($)	Common Stock	Additional Paid In Capital.	Accumulated Deficit	Accumulated Undistributed Net Investment Loss	Accumulated Undistributed Net Realized Gain on Investments Transactions	Net Unrealized Appreciation (Depreciation) in Value of Investments	Total
Balance as of beginning at Dec. 31, 2019	$ 11,067	$ 10,774,653	$ (1,159,665)	$ (2,397,865)	$ 3,075,816	$ (235,473)	$ 10,068,533
Balance as of beginning (in shares) at Dec. 31, 2019	11,067,402
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net realized gain on investment transactions					5,330		5,330
Depreciation in value of investments						1,934,794	1,934,794
Balance as of ending at Dec. 31, 2020	$ 10,786	10,673,014	(1,159,665)	(2,124,419)	2,541,850	1,699,321	$ 11,640,887
Balance as of ending (in shares) at Dec. 31, 2020	10,785,913						10,785,913
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net investment gain (loss), net of tax				(649,707)			$ (649,707)
Net realized gain on investment transactions					2,907,999		2,907,999
Depreciation in value of investments						(513,250)	(513,250)
Issuance of shares	$ 1	5,749					5,750
Issuance of shares (in shares)	1,000
Balance as of ending at Mar. 31, 2021	$ 10,787	10,678,763	(1,159,665)	(2,774,126)	5,449,849	1,186,071	$ 13,391,679
Balance as of ending (in shares) at Mar. 31, 2021	10,786,913						10,786,913
Balance as of beginning at Dec. 31, 2020	$ 10,786	10,673,014	(1,159,665)	(2,124,419)	2,541,850	1,699,321	$ 11,640,887
Balance as of beginning (in shares) at Dec. 31, 2020	10,785,913						10,785,913
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net realized gain on investment transactions					4,118,001		$ 4,118,001
Depreciation in value of investments						(1,533,703)	$ (1,533,703)
Issuance of shares (in shares)							4,500
Balance as of ending at Dec. 31, 2021	$ 10,790	10,694,163	(1,159,665)	(1,877,667)	5,580,810	165,618	$ 13,414,049
Balance as of ending (in shares) at Dec. 31, 2021	10,790,413						10,790,413
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net investment gain (loss), net of tax				295,388			$ 295,388
Net realized gain on investment transactions					138,770		138,770
Depreciation in value of investments						(22,047)	(22,047)
Balance as of ending at Mar. 31, 2022	$ 10,790	$ 10,694,163	$ (1,159,665)	$ (1,582,279)	$ 5,719,580	$ 143,571	$ 13,826,160
Balance as of ending (in shares) at Mar. 31, 2022	10,790,413						10,790,413

XML

CONDENSED STATEMENTS OF SHAREHOLDERS' EQUITY (UNAUDITED) (Parenthetical) - USD ($)	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
CONDENSED STATEMENTS OF SHAREHOLDERS' EQUITY (UNAUDITED)
Net investment gain (loss), net of tax	$ 159,000	$ 662,691

XML

CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED) - USD ($)	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Cash flows from operating activities:
Net increase in net assets resulting from operations	$ 412,111	$ 1,745,042
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	22,047	513,250
Net realized gain on investments	(138,770)	(2,907,999)
Purchases of investments	(7,025,000)	(9,430,664)
Proceeds from sales of investments	1,152,898	5,036,657
Deferred income taxes	(6,000)	662,691
Changes in operating assets and liabilities:
Prepaid expenses and other assets	59,000	(62,043)
Interest and dividends receivable	(238,643)	(144,136)
Receivable for investment sales		19,313
Accounts payable and other liabilities	35,229	21,763
Deferred interest income	272,000	144,000
Accrued income taxes	165,000
Payable for investment purchase	(1,900,000)
Net cash used in operating activities	(7,190,128)	(4,402,126)
Cash flows from financing activities:
Proceeds from line of credit	5,325,000
Payments for common stock dividend		(539,296)
Net cash provided (used) by financing activities	5,325,000	(539,296)
Net decrease in cash	(1,865,128)	(4,941,422)
Cash, beginning of period	1,936,148	5,440,579
Cash, end of period	$ 71,020	499,157
Non-cash financing activities:
Common shares issued as consideration for investment		$ 5,750

XML

CONDENSED SCHEDULE OF INVESTMENTS - USD ($)	3 Months Ended	12 Months Ended
	Mar. 31, 2022	Dec. 31, 2021	Dec. 31, 2020
Investment Holdings [Line Items]
Total Investments, Cost	$ 19,943,929	$ 13,933,057	$ 4,968,576
Investments at Fair Value	$ 20,087,500	$ 14,098,675	$ 6,667,897
Total Investments, Percentage of Net Assets	145.29%	105.10%	57.30%
Total Cash, Cost	$ 71,020	$ 1,936,148	$ 5,440,579
Total Cash, Fair Value	$ 71,020	$ 1,936,148	$ 5,440,579
Total Cash, Percentage of Net Assets	0.51%	14.43%	46.74%
Total Investments and Cash, Cost	$ 20,014,949	$ 15,869,205	$ 10,409,155
Total Investments and Cash, Fair Value	$ 20,158,520	$ 16,034,823	$ 12,108,476
Total Investments and Cash, Percentage of Net Assets	145.80%	119.53%	104.04%
Consumer
Investment Holdings [Line Items]
Investments at Fair Value	$ 4,862,500	$ 2,362,500	$ 3,700,000
Consumer | Other
Investment Holdings [Line Items]
Total Investments, Cost	212,500	212,500
Investments at Fair Value	$ 212,500	$ 212,500
Total Investments, Percentage of Net Assets	1.54%	1.58%
Financial
Investment Holdings [Line Items]
Investments at Fair Value	$ 4,025,000	$ 3,836,175	900,000
Total Investments, Percentage of Net Assets		4.47%
Financial | Other
Investment Holdings [Line Items]
Total Investments, Cost	600,000	$ 600,000
Investments at Fair Value	$ 600,000	$ 600,000
Total Investments, Percentage of Net Assets	4.34%	4.47%
Information Technology
Investment Holdings [Line Items]
Investments at Fair Value	$ 300,000	$ 300,000	300,000
Real Estate
Investment Holdings [Line Items]
Investments at Fair Value	10,900,000	7,600,000	1,489,000
Leisure & Hospitality
Investment Holdings [Line Items]
Investments at Fair Value			278,897
Short-Term Non-banking Loans
Investment Holdings [Line Items]
Total Investments, Cost	18,080,750	11,655,750	2,789,000
Investments at Fair Value	$ 18,075,000	$ 11,650,000	$ 2,789,000
Total Investments, Percentage of Net Assets	130.73%	86.85%	23.97%
Short-Term Non-banking Loans | Tailwinds, LLC
Investment Holdings [Line Items]
Total Investments, Cost	$ 3,000,000	$ 3,000,000
Investments at Fair Value	$ 3,000,000	$ 3,000,000
Total Investments, Percentage of Net Assets	21.70%	22.36%
Short-Term Non-banking Loans | 15% secured loans | Consumer | AirDog Supplies, Inc
Investment Holdings [Line Items]
Total Investments, Cost	$ 1,250,000	$ 1,250,000
Investments at Fair Value	$ 1,250,000	$ 1,250,000
Total Investments, Percentage of Net Assets	9.04%	9.32%
Short-Term Non-banking Loans | 15% secured loans | Consumer | Intelligent Mapping, LLC
Investment Holdings [Line Items]
Total Investments, Cost	$ 2,500,000
Investments at Fair Value	$ 2,500,000
Total Investments, Percentage of Net Assets	18.08%
Short-Term Non-banking Loans | 15% secured loans | Real Estate
Investment Holdings [Line Items]
Total Investments, Cost	$ 600,000	$ 700,000
Investments at Fair Value	$ 600,000	$ 700,000
Total Investments, Percentage of Net Assets	4.34%	5.22%
Short-Term Non-banking Loans | 15% secured loans | Real Estate | Alatus Development, LLC
Investment Holdings [Line Items]
Total Investments, Cost		$ 3,900,000	$ 1,250,000
Investments at Fair Value		$ 3,900,000	$ 1,250,000
Total Investments, Percentage of Net Assets		29.07%	10.74%
Short-Term Non-banking Loans | 15% secured loans | Real Estate | Tailwinds, LLC
Investment Holdings [Line Items]
Total Investments, Cost		$ 3,000,000
Investments at Fair Value		$ 3,000,000
Total Investments, Percentage of Net Assets		22.36%
Short-Term Non-banking Loans | 15% secured loans | Real Estate | Other
Investment Holdings [Line Items]
Total Investments, Cost			$ 239,000
Investments at Fair Value			$ 239,000
Total Investments, Percentage of Net Assets			2.05%
Short-Term Non-banking Loans | 20% secured loans | Consumer
Investment Holdings [Line Items]
Total Investments, Cost			$ 400,000
Investments at Fair Value			$ 400,000
Total Investments, Percentage of Net Assets			3.44%
Short-Term Non-banking Loans | 44% secured loans | Financial
Investment Holdings [Line Items]
Total Investments, Cost			$ 400,000
Investments at Fair Value			$ 400,000
Total Investments, Percentage of Net Assets			3.44%
Short-Term Non-banking Loans | 36% secured loans | Financial
Investment Holdings [Line Items]
Total Investments, Cost			$ 500,000
Investments at Fair Value			$ 500,000
Total Investments, Percentage of Net Assets			4.30%
Short-Term Non-banking Loans | 33.33% secured loans | Financial | Benton Financial, LLC
Investment Holdings [Line Items]
Total Investments, Cost	$ 1,125,000
Investments at Fair Value	$ 1,125,000
Total Investments, Percentage of Net Assets	8.14%
Short-Term Non-banking Loans | 12% secured loans | Financial
Investment Holdings [Line Items]
Total Investments, Cost	$ 500,000	$ 500,000
Investments at Fair Value	$ 500,000	$ 500,000
Total Investments, Percentage of Net Assets	3.61%	3.73%
Short-Term Non-banking Loans | 12% secured loans | Real Estate | Alatus Development, LLC
Investment Holdings [Line Items]
Total Investments, Cost	$ 3,900,000	$ 3,900,000
Investments at Fair Value	$ 3,900,000	$ 3,900,000
Total Investments, Percentage of Net Assets	28.21%	29.07%
Short-Term Non-banking Loans | 23% secured loans | Litigation Financing | The Cross Law Firm, LLC
Investment Holdings [Line Items]
Total Investments, Cost	$ 1,805,750	$ 1,805,750
Investments at Fair Value	$ 1,800,000	$ 1,800,000
Total Investments, Percentage of Net Assets	13.02%	13.42%
Short-Term Non-banking Loans | 48% secured loans | Real Estate | Villas at 79th LLC
Investment Holdings [Line Items]
Total Investments, Cost	$ 3,400,000
Investments at Fair Value	$ 3,400,000
Total Investments, Percentage of Net Assets	24.59%
Short-Term Non-banking Loans | 52% secured loans | Financial
Investment Holdings [Line Items]
Total Investments, Cost		$ 500,000
Investments at Fair Value		$ 500,000
Total Investments, Percentage of Net Assets		3.73%
Common Stock
Investment Holdings [Line Items]
Total Investments, Cost		$ 414,128	$ 1,750,000
Investments at Fair Value		436,175	3,300,000
Common Stock | Consumer | Ammo, Inc
Investment Holdings [Line Items]
Total Investments, Cost			1,750,000
Investments at Fair Value			$ 3,300,000
Total Investments, Percentage of Net Assets			28.34%
Common Stock | Financial
Investment Holdings [Line Items]
Total Investments, Cost		414,128
Investments at Fair Value		$ 436,175
Total Investments, Percentage of Net Assets		3.25%
Preferred Stock
Investment Holdings [Line Items]
Total Investments, Cost	$ 1,050,000	$ 1,050,000	$ 150,000
Investments at Fair Value	1,200,000	$ 1,200,000	300,000
Total Investments, Percentage of Net Assets		8.95%
Preferred Stock | Wisdom Gaming, Inc
Investment Holdings [Line Items]
Total Investments, Cost		$ 900,000
Investments at Fair Value		$ 900,000
Total Investments, Percentage of Net Assets		6.71%
Preferred Stock | Consumer | Other
Investment Holdings [Line Items]
Total Investments, Cost	1,050,000
Investments at Fair Value	$ 1,200,000
Total Investments, Percentage of Net Assets	8.68%
Preferred Stock | Consumer | Wisdom Gaming, Inc
Investment Holdings [Line Items]
Total Investments, Cost	$ 900,000	$ 900,000
Investments at Fair Value	$ 900,000	$ 900,000
Total Investments, Percentage of Net Assets	6.51%	6.71%
Preferred Stock | Information Technology
Investment Holdings [Line Items]
Total Investments, Cost	$ 150,000	$ 150,000	150,000
Investments at Fair Value	$ 300,000	$ 300,000	$ 300,000
Total Investments, Percentage of Net Assets	2.17%	2.24%	2.58%
Warrants
Investment Holdings [Line Items]
Total Investments, Cost	$ 679	$ 679	$ 679
Warrants | Healthcare
Investment Holdings [Line Items]
Total Investments, Cost	$ 679	$ 679	$ 679
Total Investments, Percentage of Net Assets	0.00%	0.00%	0.00%
Other Equity
Investment Holdings [Line Items]
Total Investments, Cost	$ 812,500	$ 812,500	$ 278,897
Investments at Fair Value	$ 812,500	$ 812,500	278,897
Total Investments, Percentage of Net Assets	5.88%	6.05%
Other Equity | Consumer
Investment Holdings [Line Items]
Total Investments, Cost		$ 212,500
Investments at Fair Value		$ 212,500
Total Investments, Percentage of Net Assets		1.58%
Other Equity | Consumer | Other
Investment Holdings [Line Items]
Total Investments, Cost		$ 1,050,000
Investments at Fair Value		$ 1,200,000
Total Investments, Percentage of Net Assets		8.95%
Other Equity | Financial
Investment Holdings [Line Items]
Total Investments, Cost		$ 600,000
Investments at Fair Value		$ 600,000
Other Equity | Leisure & Hospitality
Investment Holdings [Line Items]
Total Investments, Cost			278,897
Investments at Fair Value			$ 278,897
Total Investments, Percentage of Net Assets			2.40%

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ORGANIZATION

3 Months Ended

12 Months Ended

Mar. 31, 2022

Dec. 31, 2021

ORGANIZATION

ORGANIZATION

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 Investment Company Act of 1940 (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 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.

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SIGNIFICANT ACCOUNTING POLICIES

3 Months Ended

12 Months Ended

Mar. 31, 2022

Dec. 31, 2021

SIGNIFICANT ACCOUNTING POLICIES

SIGNIFICANT ACCOUNTING POLICIES

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation: The accompanying unaudited condensed financial statements of Mill City Ventures have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States (GAAP) for complete financial statements. 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 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.

Use of estimates: The preparation of financial statements in conformity with GAAP requires management and our Board of Directors 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, and the differences could be material. For more information, see the “Valuation of portfolio investments” caption below, and “Note 4 – Fair Value of Financial Instruments” below. The Company is an investment company following accounting and reporting guidance in ASC 946.

Cash deposits: We maintain our cash balances in financial institutions and with regulated financial investment brokers. Cash on deposit in excess of FDIC and similar coverage is subject to the usual banking risk of funds in excess of those limits.

Valuation of portfolio investments: We carry our investments in accordance with ASC Topic 820, Fair Value Measurements and Disclosures (“ASC 820”), issued by the Financial Accounting Standards Board (“FASB”), which defines fair value, establishes a framework for measuring fair value, and requires disclosures about fair value measurements. Fair value is generally based on quoted market prices provided by independent pricing services, broker or dealer quotations, or alternative price sources. In the absence of quoted market prices, broker or dealer quotations, or alternative price sources, investments are measured at fair value as determined by our Board of Directors, based on, among other things, the input of our executive management, the Audit Committee of our Board of Directors, and any independent third-party valuation experts that may be engaged by management to assist in the valuation of our portfolio investments, but in all cases consistent with our written valuation policies and procedures.

Due to the inherent uncertainties of valuation, certain estimated fair values may differ significantly from the values that would have been realized had a ready market for these investments existed, and these differences could be material. In addition, such investments are generally less liquid than publicly traded securities. If we were required to liquidate a portfolio investment in a forced or liquidation sale, we could realize significantly less than the value at which we have recorded it.

Accounting guidance establishes a hierarchal disclosure framework that prioritizes and ranks the level of market price observability of inputs used in measuring investments at fair value. Observable inputs must be used when available. Observable inputs are inputs that market participants would use in valuing the asset or liability based on market data obtained from independent sources. Unobservable inputs are inputs that reflect our assumptions about the factors market participants would use in valuing the asset or liability based upon the best information available. Assets and liabilities measured at fair value are to be categorized into one of the three hierarchy levels based on the relative observability of inputs used in the valuation. The three levels are defined as follows:

● Level 1: Observable inputs based on quoted prices (unadjusted) in active markets for identical assets or liabilities.

● Level 2: Observable inputs based on quoted prices for similar assets and liabilities in active markets, or quoted prices for identical assets and liabilities in inactive markets.

● Level 3: Unobservable inputs that reflect an entity’s own assumptions about what inputs a market participant would use in pricing the asset or liability based on the best information available in the circumstances.

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 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. 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 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 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:

We account for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial statement carrying amount and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.

We record net deferred tax assets to the extent we believe these assets will more likely than not be realized. In making such determination, we consider all available evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies and recent financial operations. In the event we were to determine we would be able to realize our deferred income tax assets in the future in excess of their recorded amount, we would make an adjustment to the valuation allowance, which would reduce the provision for income taxes.

We file income tax returns in the U.S. Federal jurisdiction and various state jurisdictions. We do not believe there will be any material changes in 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: Realized gains or losses on the sale of investments are calculated using the specific investment method.

Interest income, adjusted for amortization of premiums and accretion of discounts, is recorded on an accrual basis. Discounts from and premiums to par value on securities purchased are accreted or amortized, as applicable, into interest income over the life of the related security using the effective-yield method. The amortized cost of investments represents the original cost, adjusted for the accretion of discounts and amortization of premiums, if any. Loans are generally placed on non-accrual status when principal or interest payments are past due 30 days or more, or when there is reasonable doubt that principal or interest will be collected in full. Loan origination fees are recognized when loans are issued. Accrued and unpaid interest is generally reversed when a loan is placed on non-accrual status. Interest payments received on non-accrual loans may be recognized as income or applied to principal depending upon management’s judgment regarding collectability. Non-accrual loans are restored to accrual status when past-due principal and interest is paid and, in management’s judgment, are likely to remain current. We may make exceptions to the policy described above if a loan has sufficient collateral value and is in the process of collection.

Dividend income on preferred equity securities is recorded as dividend income on an accrual basis to the extent that such amounts are payable by the portfolio company and are expected to be collected. Dividend income on common equity securities is recorded on the record date for private portfolio companies or on the ex-dividend date for publicly traded portfolio companies.

Certain investments may have contractual payment-in-kind (“PIK”) interest or dividends. PIK represents accrued interest or accumulated dividends that are added to the loan principal or stated value of the investment on the respective interest- or dividend-payment dates rather than being paid in cash, and generally becomes due at maturity or upon being repurchased by the issuer. PIK interest or dividends is recorded as interest or dividend income, as applicable. If at any point we believe that PIK interest or dividends is not expected be realized, the PIK-generating investment will be placed on non-accrual status. Accrued PIK interest or dividends are generally reversed through interest or dividend income, respectively, when an investment 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.

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

Cash deposits: We maintain our cash balances in financial institutions and with regulated financial investment brokers. Cash on deposit in excess of FDIC and similar coverage is subject to the usual banking risk of funds in excess of those limits.

Valuation of portfolio investments: We carry our investments in accordance with ASC Topic 820, Fair Value Measurements and Disclosures (“ASC 820”), issued by the Financial Accounting Standards Board (“FASB”), which defines fair value, establishes a framework for measuring fair value, and requires disclosures about fair value measurements. Fair value is generally based on quoted market prices provided by independent pricing services, broker or dealer quotations, or alternative price sources. In the absence of quoted market prices, broker or dealer quotations, or alternative price sources, investments are measured at fair value as determined by 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 available. Assets and liabilities measured at fair value are to be categorized into one of the three hierarchy levels based on the relative observability of inputs used in the valuation. The three levels are defined as follows:

● Level 1: Observable inputs based on quoted prices (unadjusted) in active markets for identical assets or liabilities.

● Level 2: Observable inputs based on quoted prices for similar assets and liabilities in active markets, or quoted prices for identical assets and liabilities in inactive markets.

● Level 3: Unobservable inputs that reflect an entity’s own assumptions about what inputs a market participant would use in pricing the asset or liability based on the best information available in the circumstances.

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:

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, 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.

Interest income, adjusted for amortization of premiums and accretion of discounts, is recorded on an accrual basis. Discounts from and premiums to par value on securities purchased are accreted or amortized, as applicable, into interest income over the life of the related security using the effective-yield method. The amortized cost of investments represents the original cost, adjusted for the accretion of discounts and amortization of premiums, if any. Loans are generally placed on non-accrual status when principal or interest payments are past due 30 days or more, or when there is reasonable doubt that principal or interest will be collected in full. Loan origination fees are recognized when loans are issued. Accrued and unpaid interest is generally reversed when a loan is placed on non-accrual status. Interest payments received on non-accrual loans may be recognized as income or applied to principal depending upon management’s judgment regarding collectability. Non-accrual loans are restored to accrual status when past-due principal and interest is paid and, in management’s judgment, are likely to remain current. We may make exceptions to the policy described above if a loan has sufficient collateral value and is in the process of collection.

Dividend income on preferred equity securities is recorded as dividend income on an accrual basis to the extent that such amounts are payable by the portfolio company and are expected to be collected. Dividend income on common equity securities is recorded on the record date for private portfolio companies or on the ex-dividend date for publicly traded portfolio companies.

Certain investments may have contractual payment-in-kind (“PIK”) interest or dividends. PIK represents accrued interest or accumulated dividends that are added to the loan principal or stated value of the investment on the respective interest- or dividend-payment dates rather than being paid in cash, and generally becomes due at maturity or upon being repurchased by the issuer. PIK interest or dividends is recorded as interest or dividend income, as applicable. If at any point we believe that PIK interest or dividends is not expected be realized, the PIK-generating investment will be placed on non-accrual status. Accrued PIK interest or dividends are generally reversed through interest or dividend income, respectively, when an investment 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.

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INVESTMENTS

3 Months Ended

12 Months Ended

Mar. 31, 2022

Dec. 31, 2021

INVESTMENTS

INVESTMENTS

NOTE 3 – INVESTMENTS

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		Percentage of		Investments at		Percentage of
	Amortized Cost		Amortized Cost		Fair Value		Fair Value
Short-term Non-banking Loans	$	18,080,750	90.6	%	$	18,075,000	90.0	%
Preferred Stock		1,050,000	5.3			1,200,000	5.9
Warrants		679	—			—	—
Other Equity		812,500	4.1			812,500	4.1
Total	$	19,943,929	100.0	%	$	20,087,500	100.0	%

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		Percentage of		Investments at		Percentage of
	Amortized Cost		Amortized Cost		Fair Value		Fair Value
Short-term Non-banking Loans	$	11,655,750	83.7	%	$	11,650,000	82.6	%
Preferred Stock		1,050,000	7.5			1,200,000	8.5
Common Stock		414,128	3.0			436,175	3.1
Warrants		679	—			—	—
Other Equity		812,500	5.8			812,500	5.8
Total	$	13,933,057	100.0	%	$	14,098,675	100.0	%

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		Percentage of
	Fair Value		Fair Value
Consumer	$	4,862,500	24.2	%
Financial		4,025,000	20.0
Information Technology		300,000	1.5
Real Estate		10,900,000	54.3
Total	$	20,087,500	100.0	%

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
	Investments at		Percentage of
	Fair Value		Fair Value
Consumer	$	2,362,500	16.8	%
Financial		3,836,175	27.2
Information Technology		300,000	2.1
Real Estate		7,600,000	53.9
Total	$	14,098,675	100.0	%

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		Percentage of		Investments at		Percentage of
	Amortized Cost		Amortized Cost		Fair Value		Fair Value
Short-term Non-banking Loans	$	11,655,750	83.7	%	$	11,650,000	82.6	%
Preferred Stock		1,050,000	7.5			1,200,000	8.5
Common Stock		414,128	3.0			436,175	3.1
Warrants		679	—			—	—
Other Equity		812,500	5.8			812,500	5.8
Total	$	13,933,057	100.0	%	$	14,098,675	100.0	%

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		Percentage of		Investments at		Percentage of
	Amortized Cost		Amortized Cost		Fair Value		Fair Value
Short-term Non-banking Loans	$	2,789,000	56.2	%	$	2,789,000	41.8	%
Preferred Stock		150,000	3.0			300,000	4.5
Common Stock		1,750,000	35.2			3,300,000	49.5
Warrants		679	—			—	—
Other Equity		278,897	5.6			278,897	4.2
Total	$	4,968,576	100.0	%	$	6,667,897	100.0	%

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
	Investments at		Percentage of
	Fair Value		Fair Value
Consumer	$	2,362,500	16.8	%
Financial		3,836,175	27.2
Information Technology		300,000	2.1
Real Estate		7,600,000	53.9
Total	$	14,098,675	100.0	%

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
	Investments at		Percentage of
	Fair Value		Fair Value
Consumer	$	3,700,000	55.5	%
Financial		900,000	13.5
Information Technology		300,000	4.5
Leisure & Hospitality		278,897	4.2
Real Estate		1,489,000	22.3
Total	$	6,667,897	100.0	%

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FAIR VALUE OF FINANCIAL INSTRUMENTS

3 Months Ended

12 Months Ended

Mar. 31, 2022

Dec. 31, 2021

FAIR VALUE OF FINANCIAL INSTRUMENTS

FAIR VALUE OF FINANCIAL INSTRUMENTS

NOTE 4 – FAIR VALUE OF FINANCIAL INSTRUMENTS

Level 3 valuation information: Due to the inherent uncertainty in the valuation process, the estimate of the fair value of our investment portfolio as of 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
	Level 1		Level 2		Level 3		Total
Short-term Non-banking Loans	$	—	$	—	$	18,075,000	$	18,075,000
Preferred Stock		—		—		1,200,000		1,200,000
Other Equity		—		—		812,500		812,500
Total	$	—	$	—	$	20,087,500	$	20,087,500

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
	Level 1		Level 2		Level 3		Total
Short-term Non-banking Loans	$	—	$	—	$	11,650,000	$	11,650,000
Preferred Stock		—		—		1,200,000		1,200,000
Common Stock		436,175		—		—		436,175
Other Equity		—		—		812,500		812,500
Total	$	436,175	$	—	$	13,662,500	$	14,098,675

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				Common
	Loans		Preferred Stock		Stock		Warrants		Other Equity
Balance as of January 1, 2022	$	11,650,000	$	1,200,000	$	—	$	—	$	812,500
Net change in unrealized appreciation		—		—		—		—		—
Purchases and other adjustments to cost		7,025,000		—		—		—		—
Sales and redemptions		(600,000)		—		—		—		—
Net realized loss		—		—		—		—		—
Balance as of March 31, 2022	$	18,075,000	$	1,200,000	$	—	$	—	$	812,500

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.

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	3/31/22 FMV		Valuation Technique	Unobservable Inputs	Range
ST Non-banking Loans	$	18,075,000	discounted cash flow	determining private company credit rating	12-48	%
Other Equity		812,500	last secured funding known by company	economic changes since last funding
Preferred Stock		1,200,000	last funding secured by company	economic changes since last funding
	$	20,087,500

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		Preferred		Common
	Loans		Stock		Stock		Warrants		Other Equity
Balance as of January 1, 2021	$	2,789,000	$	300,000	$	—	$	—	$	278,897
Net change in unrealized appreciation		—		—		—		—		—
Purchases and other adjustments to cost		24,765,333		900,000		—		—		812,500
Sales and redemptions		(15,904,333)		—		—		—		(278,897)
Net realized loss		—		—		—		—		—
Balance as of December 31, 2021	$	11,650,000	$	1,200,000	$	—	$	—	$	812,500

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:

Security Type	12/31/21 FMV		Valuation Technique	Unobservable Inputs	Range
ST Non-banking Loans	$	11,650,000	discounted cash flow	determining private company credit rating	12-44	%
Other Equity		812,500	last secured funding known by company	economic changes since last funding
Preferred Stock		1,200,000	last funding secured by company	economic changes since last funding
	$	13,662,500

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
	Level 1		Level 2		Level 3		Total
Short-term Non-banking Loans	$	—	$	—	$	11,650,000	$	11,650,000
Preferred Stock		—		—		1,200,000		1,200,000
Common Stock		436,175		—		—		436,175
Other Equity		—		—		812,500		812,500
Total	$	436,175	$	—	$	13,662,500	$	14,098,675

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
	Level 1		Level 2		Level 3		Total
Short-term Non-banking Loans	$	—	$	—	$	2,789,000	$	2,789,000
Preferred Stock		—		—		300,000		300,000
Common Stock		3,300,000		—		—		3,300,000
Other Equity		—		—		278,897		278,897
Total	$	3,300,000	$	—	$	3,367,897	$	6,667,897

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		Preferred		Common
	Loans		Stock		Stock		Warrants		Other Equity
Balance as of January 1, 2021	$	2,789,000	$	300,000	$	—	$	—	$	278,897
Net change in unrealized appreciation		—		—		—		—		—
Purchases and other adjustments to cost		24,765,333		900,000		—		—		812,500
Sales and redemptions		(15,904,333)		—		—		—		(278,897)
Net realized loss		—		—		—		—		—
Balance as of December 31, 2021	$	11,650,000	$	1,200,000	$	—	$	—	$	812,500

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
	ST Non-banking		Preferred		Common
	Loans		Stock		Stock		Warrants		Other Equity
Balance as of January 1, 2020	$	—	$	300,000	$	—	$	—	$	534,200
Net change in unrealized appreciation		—		—		—		—		486,018
Purchases and other adjustments to cost		7,543,000		—		—		—		—
Sales and redemptions		(4,754,000)		—		—		—		(91,313)
Net realized loss		—		—		—		—		(650,008)
Balance as of December 31, 2020	$	2,789,000	$	300,000	$	—	$	—	$	278,897

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	12/31/21 FMV		Valuation Technique	Unobservable Inputs	Range
ST Non-banking Loans	$	11,650,000	discounted cash flow	determining private company interest rate based on credit	12-44	%
Other Equity		812,500	last secured funding known by company	economic changes since last funding
Preferred Stock		1,200,000	last funding secured by company	economic changes since last funding
	$	13,662,500

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	12/31/20 FMV		Valuation Technique	Unobservable Inputs	Range
ST Non-banking Loans	$	2,789,000	discounted cash flow	determining private company interest rate based on credit	14-44	%
Other Equity		278,897	last secured funding known by company	economic changes since purchase
Preferred Stock		300,000	last funding secured by company	economic changes since last funding
	$	3,367,897

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

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RELATED-PARTY TRANSACTIONS

3 Months Ended

12 Months Ended

Mar. 31, 2022

Dec. 31, 2021

RELATED-PARTY TRANSACTIONS

RELATED-PARTY TRANSACTIONS

NOTE 5 – 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”). Mr. 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 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"). Mr. 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.

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INCOME TAXES

3 Months Ended

12 Months Ended

Mar. 31, 2022

Dec. 31, 2021

INCOME TAXES

INCOME TAXES

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 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 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 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.

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
	2021		2020
Current taxes
Federal	$	909,530	$	—
State		357,168		16,679
Deferred taxes
Federal		(212,000)		258,000
State		—		13,722
Provision for income taxes	$	1,054,698	$	288,401

A reconciliation of income tax provisions at the U.S. statutory rate for fiscal year 2021 and 2020 is as follows:

	2021		2020
Rate reconciliation:
Tax expense at U.S.statutory rate	$	1,017,417	$	716,966
Change in valuation allowance		—		(446,000)
Provision-to-return reconciliation		(14,743)		21,657
Other		(1,976)		(4,222)
Income tax provision	$	1,054,698	$	288,401

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
	2021		2020
Deferred tax components
Unrealized (gain) loss on marketable securities	$	(46,552)	$	(488,419)
Depreciation		2,458		3,002
Net operating loss carryforwards		—		180,460
R&D and foreign credits		—		46,957
Other		(906)		—
Net deferred tax asset (liability)	$	(45,000)	$	(258,000)

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LINE OF CREDIT

3 Months Ended

Mar. 31, 2022

LINE OF CREDIT

LINE OF CREDIT

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”). Mr. 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.

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SHAREHOLDERS' EQUITY

3 Months Ended

12 Months Ended

Mar. 31, 2022

Dec. 31, 2021

SHAREHOLDERS' EQUITY

SHAREHOLDERS' EQUITY

NOTE 8 – SHAREHOLDERS’ EQUITY

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

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.

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PER-SHARE INFORMATION

3 Months Ended

12 Months Ended

Mar. 31, 2022

Dec. 31, 2021

PER-SHARE INFORMATION

PER-SHARE INFORMATION

NOTE 9 – PER-SHARE INFORMATION

Basic net gain per common share is computed by dividing net increase in net assets resulting from operations by the weighted-average number of common shares outstanding during the period. A reconciliation of the numerator and denominator used in the calculation of basic and diluted net gain (loss) per common share is set forth below:

	For the Three Months Ended
	March 31,
	2022		2021
Numerator: Net increase (decrease) in net assets resulting from operations	$	412,111	$	1,745,042
Denominator: Weighted-average number of common shares outstanding		10,790,413		10,785,913
Basic and diluted net gain (loss) per common share	$	0.04	$	0.16

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:

	For the Year Ended December 31,
	2021		2020
Numerator: Net increase in net assets resulting from operations	$	2,831,050	$	2,213,570
Denominator: Weighted-average number of common shares outstanding		10,789,294		10,869,054
Basic and diluted net gain per common share	$	0.26	$	0.20

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

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OPERATING LEASES

3 Months Ended

12 Months Ended

Mar. 31, 2022

Dec. 31, 2021

OPERATING LEASES

OPERATING LEASES

NOTE 10 – OPERATING LEASES

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, 2021 was 4.5%.

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	$	4,779	$	4,779
Variable lease cost		4,601		4,478
Short-term lease cost		7,432		7,432
Total	$	16,812	$	16,689

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:

	Operating
	Leases
2022	$	18,164
2023		14,859
Total lease payments		33,023
Less: interest		(1,035)
Present value of lease liabilities	$	31,988

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 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:

	Year Ended		Year Ended
	December 31,		December 31,
	2021		2020
Operating lease costs	$	19,116	$	19,116
Variable lease cost		17,613		17,461
Short-term lease cost		29,730		29,730
Total	$	66,459	$	66,307

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

Operating Lease
Right-of-use assets	$	4,984
Operating Lease Liability	$	5,654
Less: short term portion		(5,654)
Long term portion	$	—

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

	Operating
	Leases
2022	$	5,449
Total lease payments		5,449
Plus: interest		205
Present value of lease liabilities	$	5,654

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FINANCIAL HIGHLIGHTS

3 Months Ended

12 Months Ended

Mar. 31, 2022

Dec. 31, 2021

FINANCIAL HIGHLIGHTS

FINANCIAL HIGHLIGHTS

NOTE 11 – FINANCIAL HIGHLIGHTS

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

	Three Months Ended March 31,
	2022			2021		2020		2019		2018
Per Share Data (1)
Net asset value at beginning of period	$	1.24		1.08		0.91		1.02		0.87
Net investment income (loss)		0.04		0.00		0.00		(0.02)		(0.01)
Net realized and unrealized gains (losses)		0.01		0.22		(0.03)		0.12		0.06
Provision for income taxes		(0.01)		(0.06)		0.00		0.00		0.00
Payment of common stock dividend		0.00		0.00		0.00		(0.05)		0.00
Net asset value at end of period	$	1.28		1.24		0.88		1.07		0.92
Ratio / Supplemental Data
Per share market value of investments at end of period	$	1.86		1.25		0.41		0.78		0.76
Shares outstanding at end of period		10,790,413		10,786,913		11,067,402		11,067,402		11,067,402
Average weighted shares outstanding for the period		10,790,413		10,785,913		11,067,402		11,067,402		11,863,392
Net assets at end of period	$	13,826,160		13,391,679		9,786,615		11,890,188		9,783,191
Average net assets (2)	$	13,620,104		12,516,283		9,927,574		12,911,895		9,770,410
Total investment return		3.23	%	14.81	%	(3.30)	%	4.90	%	5.75	%
Portfolio turnover rate (3)		8.46	%	40.24	%	0.75	%	0.93	%	0.80	%
Ratio of operating expenses to average net assets (3)		(15.28)	%	(16.20)	%	(7.82)	%	(6.06)	%	(7.52)	%
Ratio of net investment income (loss) to average net assets (3)		14.24	%	0.42	%	0.87	%	(4.87)	%	(6.16)	%
Ratio of realized gains (losses) to average net assets (3)		4.20	%	133.32	%	1.00	%	137.57	%	2.17	%

(1) Per-share data was derived using the ending number of shares outstanding for the period.

(2) Based on the monthly average of net assets as of the beginning and end of each period presented.

(3) Ratios are annualized.

NOTE 11 – FINANCIAL HIGHLIGHTS

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

	Year Ended December 31,
	2021			2020		2019		2018		2017
Per Share Data (1)
Net asset value at beginning of period	$	1.08		0.91		1.02		0.87		0.77
Net investment gain (loss)		0.12		0.05		(0.06)		(0.05)		(0.05)
Net realized and unrealized gains (losses)		0.24		0.18		0.00		0.20		0.11
Provision for income taxes		(0.10)		(0.02)		0.00		0.00		0.00
Stock based compensation		0.00		(0.01)		0.00		0.00		0.00
Repurchase of common stock		0.00		0.02		0.00		0.00		0.04
Payment of common stock dividend		(0.10)		(0.05)		(0.05)		0.00		0.00
Net asset value at end of period	$	1.24		1.08		0.91		1.02		0.87
Ratio / Supplemental Data
Per share market value of investments at end of period	$	1.31		0.62		0.16		0.90		0.65
Shares outstanding at end of period		10,790,413		10,785,913		11,067,402		11,067,402		11,067,402
Average weighted shares outstanding for the period		10,789,294		10,869,054		11,067,402		11,067,402		11,863,392
Net assets at end of period	$	13,414,049		11,640,887		10,068,533		11,278,889		9,629,215
Average net assets (2)	$	13,155,207		10,504,563		11,473,535		10,341,702		9,444,440
Total investment return		24.07	%	23.08	%	(5.88)	%	17.24	%	7.79	%
Portfolio turnover rate (3)		168.67	%	61.11	%	7.63	%	26.93	%	35.03	%
Ratio of operating expenses to average net assets (3)		(10.30)	%	(7.16)	%	(7.27)	%	(6.59)	%	(7.30)	%
Ratio of net investment income (loss) to average net assets (3)		9.89	%	5.35	%	(5.86)	%	(5.13)	%	(5.45)	%
Ratio of realized gains (losses) to average net assets (3)		31.30	%	0.05	%	28.35	%	(5.62)	%	5.71	%

(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.

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SUBSEQUENT EVENTS

3 Months Ended

12 Months Ended

Mar. 31, 2022

Dec. 31, 2021

SUBSEQUENT EVENTS

SUBSEQUENT EVENTS

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.

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”). Mr. 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 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 which we may distribute to our shareholders as a dividend, and up to 2,697,603 shares of our common stock purchasable upon the exercise of those 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. At this time, no record date has been established for the dividend. 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.

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SIGNIFICANT ACCOUNTING POLICIES (Policies)

3 Months Ended

12 Months Ended

Mar. 31, 2022

Dec. 31, 2021

SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation:

Basis of presentation: The accompanying unaudited condensed financial statements of Mill City Ventures have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States (GAAP) for complete financial statements. 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 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.

Use of estimates:

Use of estimates: The preparation of financial statements in conformity with GAAP requires management and our Board of Directors 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, and the differences could be material. For more information, see the “Valuation of portfolio investments” caption below, and “Note 4 – Fair Value of Financial Instruments” below. The Company is an investment company following accounting and reporting guidance in ASC 946.

Cash deposits:

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.

Cash deposits: We maintain our cash balances in financial institutions and with regulated financial investment brokers. Cash on deposit in excess of FDIC and similar coverage is subject to the usual banking risk of funds in excess of those limits.

Valuation of portfolio investments:

Valuation of portfolio investments: We carry our investments in accordance with ASC Topic 820, Fair Value Measurements and Disclosures (“ASC 820”), issued by the Financial Accounting Standards Board (“FASB”), which defines fair value, establishes a framework for measuring fair value, and requires disclosures about fair value measurements. Fair value is generally based on quoted market prices provided by independent pricing services, broker or dealer quotations, or alternative price sources. In the absence of quoted market prices, broker or dealer quotations, or alternative price sources, investments are measured at fair value as determined by our Board of Directors, based on, among other things, the input of our executive management, the Audit Committee of our Board of Directors, and any independent third-party valuation experts that may be engaged by management to assist in the valuation of our portfolio investments, but in all cases consistent with our written valuation policies and procedures.

Due to the inherent uncertainties of valuation, certain estimated fair values may differ significantly from the values that would have been realized had a ready market for these investments existed, and these differences could be material. In addition, such investments are generally less liquid than publicly traded securities. If we were required to liquidate a portfolio investment in a forced or liquidation sale, we could realize significantly less than the value at which we have recorded it.

Accounting guidance establishes a hierarchal disclosure framework that prioritizes and ranks the level of market price observability of inputs used in measuring investments at fair value. Observable inputs must be used when available. Observable inputs are inputs that market participants would use in valuing the asset or liability based on market data obtained from independent sources. Unobservable inputs are inputs that reflect our assumptions about the factors market participants would use in valuing the asset or liability based upon the best information available. Assets and liabilities measured at fair value are to be categorized into one of the three hierarchy levels based on the relative observability of inputs used in the valuation. The three levels are defined as follows:

● Level 1: Observable inputs based on quoted prices (unadjusted) in active markets for identical assets or liabilities.

● Level 2: Observable inputs based on quoted prices for similar assets and liabilities in active markets, or quoted prices for identical assets and liabilities in inactive markets.

● Level 3: Unobservable inputs that reflect an entity’s own assumptions about what inputs a market participant would use in pricing the asset or liability based on the best information available in the circumstances.

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 available. Assets and liabilities measured at fair value are to be categorized into one of the three hierarchy levels based on the relative observability of inputs used in the valuation. The three levels are defined as follows:

● Level 1: Observable inputs based on quoted prices (unadjusted) in active markets for identical assets or liabilities.

● Level 2: Observable inputs based on quoted prices for similar assets and liabilities in active markets, or quoted prices for identical assets and liabilities in inactive markets.

● Level 3: Unobservable inputs that reflect an entity’s own assumptions about what inputs a market participant would use in pricing the asset or liability based on the best information available in the circumstances.

Our valuation policy and procedures:

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 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. 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 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 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.

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:

Income taxes:

We account for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial statement carrying amount and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.

We record net deferred tax assets to the extent we believe these assets will more likely than not be realized. In making such determination, we consider all available evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies and recent financial operations. In the event we were to determine we would be able to realize our deferred income tax assets in the future in excess of their recorded amount, we would make an adjustment to the valuation allowance, which would reduce the provision for income taxes.

We file income tax returns in the U.S. Federal jurisdiction and various state jurisdictions. We do not believe there will be any material changes in 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.

Income taxes:

We account for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements.  Deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial statement carrying 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, 2018 through 2020, which are the tax years that remain subject to examination by the tax jurisdictions as of December 31, 2021.

Revenue recognition:

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

Interest income, adjusted for amortization of premiums and accretion of discounts, is recorded on an accrual basis. Discounts from and premiums to par value on securities purchased are accreted or amortized, as applicable, into interest income over the life of the related security using the effective-yield method. The amortized cost of investments represents the original cost, adjusted for the accretion of discounts and amortization of premiums, if any. Loans are generally placed on non-accrual status when principal or interest payments are past due 30 days or more, or when there is reasonable doubt that principal or interest will be collected in full. Loan origination fees are recognized when loans are issued. Accrued and unpaid interest is generally reversed when a loan is placed on non-accrual status. Interest payments received on non-accrual loans may be recognized as income or applied to principal depending upon management’s judgment regarding collectability. Non-accrual loans are restored to accrual status when past-due principal and interest is paid and, in management’s judgment, are likely to remain current. We may make exceptions to the policy described above if a loan has sufficient collateral value and is in the process of collection.

Dividend income on preferred equity securities is recorded as dividend income on an accrual basis to the extent that such amounts are payable by the portfolio company and are expected to be collected. Dividend income on common equity securities is recorded on the record date for private portfolio companies or on the ex-dividend date for publicly traded portfolio companies.

Certain investments may have contractual payment-in-kind (“PIK”) interest or dividends. PIK represents accrued interest or accumulated dividends that are added to the loan principal or stated value of the investment on the respective interest- or dividend-payment dates rather than being paid in cash, and generally becomes due at maturity or upon being repurchased by the issuer. PIK interest or dividends is recorded as interest or dividend income, as applicable. If at any point we believe that PIK interest or dividends is not expected be realized, the PIK-generating investment will be placed on non-accrual status. Accrued PIK interest or dividends are generally reversed through interest or dividend income, respectively, when an investment in placed on non-accrual status.

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

Interest income, adjusted for amortization of premiums and accretion of discounts, is recorded on an accrual basis. Discounts from and premiums to par value on securities purchased are accreted or amortized, as applicable, into interest income over the life of the related security using the effective-yield method. The amortized cost of investments represents the original cost, adjusted for the accretion of discounts and amortization of premiums, if any. Loans are generally placed on non-accrual status when principal or interest payments are past due 30 days or more, or when there is reasonable doubt that principal or interest will be collected in full. Loan origination fees are recognized when loans are issued. Accrued and unpaid interest is generally reversed when a loan is placed on non-accrual status. Interest payments received on non-accrual loans may be recognized as income or applied to principal depending upon management’s judgment regarding collectability. Non-accrual loans are restored to accrual status when past-due principal and interest is paid and, in management’s judgment, are likely to remain current. We may make exceptions to the policy described above if a loan has sufficient collateral value and is in the process of collection.

Dividend income on preferred equity securities is recorded as dividend income on an accrual basis to the extent that such amounts are payable by the portfolio company and are expected to be collected. Dividend income on common equity securities is recorded on the record date for private portfolio companies or on the ex-dividend date for publicly traded portfolio companies.

Certain investments may have contractual payment-in-kind (“PIK”) interest or dividends. PIK represents accrued interest or accumulated dividends that are added to the loan principal or stated value of the investment on the respective interest- or dividend-payment dates rather than being paid in cash, and generally becomes due at maturity or upon being repurchased by the issuer. PIK interest or dividends is recorded as interest or dividend income, as applicable. If at any point we believe that PIK interest or dividends is not expected be realized, the PIK-generating investment will be placed on non-accrual status. Accrued PIK interest or dividends are generally reversed through interest or dividend income, respectively, when an investment in placed on non-accrual status.

Allocation of net gains and losses:

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.

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

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.

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.

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INVESTMENTS (Tables)

3 Months Ended

12 Months Ended

Mar. 31, 2022

Dec. 31, 2021

INVESTMENTS

Schedule of investments by major class, at amortized cost and fair value

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		Percentage of		Investments at		Percentage of
	Amortized Cost		Amortized Cost		Fair Value		Fair Value
Short-term Non-banking Loans	$	18,080,750	90.6	%	$	18,075,000	90.0	%
Preferred Stock		1,050,000	5.3			1,200,000	5.9
Warrants		679	—			—	—
Other Equity		812,500	4.1			812,500	4.1
Total	$	19,943,929	100.0	%	$	20,087,500	100.0	%

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		Percentage of		Investments at		Percentage of
	Amortized Cost		Amortized Cost		Fair Value		Fair Value
Short-term Non-banking Loans	$	11,655,750	83.7	%	$	11,650,000	82.6	%
Preferred Stock		1,050,000	7.5			1,200,000	8.5
Common Stock		414,128	3.0			436,175	3.1
Warrants		679	—			—	—
Other Equity		812,500	5.8			812,500	5.8
Total	$	13,933,057	100.0	%	$	14,098,675	100.0	%

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		Percentage of		Investments at		Percentage of
	Amortized Cost		Amortized Cost		Fair Value		Fair Value
Short-term Non-banking Loans	$	11,655,750	83.7	%	$	11,650,000	82.6	%
Preferred Stock		1,050,000	7.5			1,200,000	8.5
Common Stock		414,128	3.0			436,175	3.1
Warrants		679	—			—	—
Other Equity		812,500	5.8			812,500	5.8
Total	$	13,933,057	100.0	%	$	14,098,675	100.0	%

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		Percentage of		Investments at		Percentage of
	Amortized Cost		Amortized Cost		Fair Value		Fair Value
Short-term Non-banking Loans	$	2,789,000	56.2	%	$	2,789,000	41.8	%
Preferred Stock		150,000	3.0			300,000	4.5
Common Stock		1,750,000	35.2			3,300,000	49.5
Warrants		679	—			—	—
Other Equity		278,897	5.6			278,897	4.2
Total	$	4,968,576	100.0	%	$	6,667,897	100.0	%

Schedule of investments by industry grouping, based on fair value

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		Percentage of
	Fair Value		Fair Value
Consumer	$	4,862,500	24.2	%
Financial		4,025,000	20.0
Information Technology		300,000	1.5
Real Estate		10,900,000	54.3
Total	$	20,087,500	100.0	%

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
	Investments at		Percentage of
	Fair Value		Fair Value
Consumer	$	2,362,500	16.8	%
Financial		3,836,175	27.2
Information Technology		300,000	2.1
Real Estate		7,600,000	53.9
Total	$	14,098,675	100.0	%

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
	Investments at		Percentage of
	Fair Value		Fair Value
Consumer	$	2,362,500	16.8	%
Financial		3,836,175	27.2
Information Technology		300,000	2.1
Real Estate		7,600,000	53.9
Total	$	14,098,675	100.0	%

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
	Investments at		Percentage of
	Fair Value		Fair Value
Consumer	$	3,700,000	55.5	%
Financial		900,000	13.5
Information Technology		300,000	4.5
Leisure & Hospitality		278,897	4.2
Real Estate		1,489,000	22.3
Total	$	6,667,897	100.0	%

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FAIR VALUE OF FINANCIAL INSTRUMENTS (Tables)

3 Months Ended

12 Months Ended

Mar. 31, 2022

Dec. 31, 2021

FAIR VALUE OF FINANCIAL INSTRUMENTS

Schedule of fair value measurements of our investments by major class according to the fair value hierarchy

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
	Level 1		Level 2		Level 3		Total
Short-term Non-banking Loans	$	—	$	—	$	18,075,000	$	18,075,000
Preferred Stock		—		—		1,200,000		1,200,000
Other Equity		—		—		812,500		812,500
Total	$	—	$	—	$	20,087,500	$	20,087,500

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
	Level 1		Level 2		Level 3		Total
Short-term Non-banking Loans	$	—	$	—	$	11,650,000	$	11,650,000
Preferred Stock		—		—		1,200,000		1,200,000
Common Stock		436,175		—		—		436,175
Other Equity		—		—		812,500		812,500
Total	$	436,175	$	—	$	13,662,500	$	14,098,675

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
	Level 1		Level 2		Level 3		Total
Short-term Non-banking Loans	$	—	$	—	$	11,650,000	$	11,650,000
Preferred Stock		—		—		1,200,000		1,200,000
Common Stock		436,175		—		—		436,175
Other Equity		—		—		812,500		812,500
Total	$	436,175	$	—	$	13,662,500	$	14,098,675

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
	Level 1		Level 2		Level 3		Total
Short-term Non-banking Loans	$	—	$	—	$	2,789,000	$	2,789,000
Preferred Stock		—		—		300,000		300,000
Common Stock		3,300,000		—		—		3,300,000
Other Equity		—		—		278,897		278,897
Total	$	3,300,000	$	—	$	3,367,897	$	6,667,897

Schedule of reconciliation of the beginning and ending fair value balances for our Level 3 investment assets

	For the three months ended March 31, 2022
	ST Non-banking				Common
	Loans		Preferred Stock		Stock		Warrants		Other Equity
Balance as of January 1, 2022	$	11,650,000	$	1,200,000	$	—	$	—	$	812,500
Net change in unrealized appreciation		—		—		—		—		—
Purchases and other adjustments to cost		7,025,000		—		—		—		—
Sales and redemptions		(600,000)		—		—		—		—
Net realized loss		—		—		—		—		—
Balance as of March 31, 2022	$	18,075,000	$	1,200,000	$	—	$	—	$	812,500

	For the year ended December 31, 2021
	ST
	Non-banking		Preferred		Common
	Loans		Stock		Stock		Warrants		Other Equity
Balance as of January 1, 2021	$	2,789,000	$	300,000	$	—	$	—	$	278,897
Net change in unrealized appreciation		—		—		—		—		—
Purchases and other adjustments to cost		24,765,333		900,000		—		—		812,500
Sales and redemptions		(15,904,333)		—		—		—		(278,897)
Net realized loss		—		—		—		—		—
Balance as of December 31, 2021	$	11,650,000	$	1,200,000	$	—	$	—	$	812,500

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		Preferred		Common
	Loans		Stock		Stock		Warrants		Other Equity
Balance as of January 1, 2021	$	2,789,000	$	300,000	$	—	$	—	$	278,897
Net change in unrealized appreciation		—		—		—		—		—
Purchases and other adjustments to cost		24,765,333		900,000		—		—		812,500
Sales and redemptions		(15,904,333)		—		—		—		(278,897)
Net realized loss		—		—		—		—		—
Balance as of December 31, 2021	$	11,650,000	$	1,200,000	$	—	$	—	$	812,500

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
	ST Non-banking		Preferred		Common
	Loans		Stock		Stock		Warrants		Other Equity
Balance as of January 1, 2020	$	—	$	300,000	$	—	$	—	$	534,200
Net change in unrealized appreciation		—		—		—		—		486,018
Purchases and other adjustments to cost		7,543,000		—		—		—		—
Sales and redemptions		(4,754,000)		—		—		—		(91,313)
Net realized loss		—		—		—		—		(650,008)
Balance as of December 31, 2020	$	2,789,000	$	300,000	$	—	$	—	$	278,897

Schedule of Level 3 investments held and the unobservable inputs used to determine their valuation

Security Type	12/31/21 FMV		Valuation Technique	Unobservable Inputs	Range
ST Non-banking Loans	$	11,650,000	discounted cash flow	determining private company interest rate based on credit	12-44	%
Other Equity		812,500	last secured funding known by company	economic changes since last funding
Preferred Stock		1,200,000	last funding secured by company	economic changes since last funding
	$	13,662,500

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	12/31/21 FMV		Valuation Technique	Unobservable Inputs	Range
ST Non-banking Loans	$	11,650,000	discounted cash flow	determining private company interest rate based on credit	12-44	%
Other Equity		812,500	last secured funding known by company	economic changes since last funding
Preferred Stock		1,200,000	last funding secured by company	economic changes since last funding
	$	13,662,500

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	12/31/20 FMV		Valuation Technique	Unobservable Inputs	Range
ST Non-banking Loans	$	2,789,000	discounted cash flow	determining private company interest rate based on credit	14-44	%
Other Equity		278,897	last secured funding known by company	economic changes since purchase
Preferred Stock		300,000	last funding secured by company	economic changes since last funding
	$	3,367,897

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INCOME TAXES (Tables)

12 Months Ended

Dec. 31, 2021

INCOME TAXES

Schedule of components of income tax provision

	December 31, 2021
	2021		2020
Current taxes
Federal	$	909,530	$	—
State		357,168		16,679
Deferred taxes
Federal		(212,000)		258,000
State		—		13,722
Provision for income taxes	$	1,054,698	$	288,401

Schedule of reconciliation of income tax provision

	2021		2020
Rate reconciliation:
Tax expense at U.S.statutory rate	$	1,017,417	$	716,966
Change in valuation allowance		—		(446,000)
Provision-to-return reconciliation		(14,743)		21,657
Other		(1,976)		(4,222)
Income tax provision	$	1,054,698	$	288,401

Schedule of components of deferred tax assets and liabilities

	December 31, 2021
	2021		2020
Deferred tax components
Unrealized (gain) loss on marketable securities	$	(46,552)	$	(488,419)
Depreciation		2,458		3,002
Net operating loss carryforwards		—		180,460
R&D and foreign credits		—		46,957
Other		(906)		—
Net deferred tax asset (liability)	$	(45,000)	$	(258,000)

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PER-SHARE INFORMATION (Tables)

3 Months Ended

12 Months Ended

Mar. 31, 2022

Dec. 31, 2021

PER-SHARE INFORMATION

Summary of reconciliation of the numerator and denominator used in the calculation of basic and diluted net gain (loss) per common share

	For the Three Months Ended
	March 31,
	2022		2021
Numerator: Net increase (decrease) in net assets resulting from operations	$	412,111	$	1,745,042
Denominator: Weighted-average number of common shares outstanding		10,790,413		10,785,913
Basic and diluted net gain (loss) per common share	$	0.04	$	0.16

	For the Year Ended December 31,
	2021		2020
Numerator: Net increase in net assets resulting from operations	$	2,831,050	$	2,213,570
Denominator: Weighted-average number of common shares outstanding		10,789,294		10,869,054
Basic and diluted net gain per common share	$	0.26	$	0.20

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OPERATING LEASES (Tables)

3 Months Ended

12 Months Ended

Mar. 31, 2022

Dec. 31, 2021

OPERATING LEASES

Summary of components of our operating lease

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	$	4,779	$	4,779
Variable lease cost		4,601		4,478
Short-term lease cost		7,432		7,432
Total	$	16,812	$	16,689

	Year Ended		Year Ended
	December 31,		December 31,
	2021		2020
Operating lease costs	$	19,116	$	19,116
Variable lease cost		17,613		17,461
Short-term lease cost		29,730		29,730
Total	$	66,459	$	66,307

Summary of supplemental balance sheet information

Operating Lease
Right-of-use assets	$	4,984
Operating Lease Liability	$	5,654
Less: short term portion		(5,654)
Long term portion	$	—

Summary of maturity analysis under lease agreements

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

	Operating
	Leases
2022	$	18,164
2023		14,859
Total lease payments		33,023
Less: interest		(1,035)
Present value of lease liabilities	$	31,988

	Operating
	Leases
2022	$	5,449
Total lease payments		5,449
Plus: interest		205
Present value of lease liabilities	$	5,654

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FINANCIAL HIGHLIGHTS (Tables)

3 Months Ended

12 Months Ended

Mar. 31, 2022

Dec. 31, 2021

FINANCIAL HIGHLIGHTS

Schedule of financial highlights

	Three Months Ended March 31,
	2022			2021		2020		2019		2018
Per Share Data (1)
Net asset value at beginning of period	$	1.24		1.08		0.91		1.02		0.87
Net investment income (loss)		0.04		0.00		0.00		(0.02)		(0.01)
Net realized and unrealized gains (losses)		0.01		0.22		(0.03)		0.12		0.06
Provision for income taxes		(0.01)		(0.06)		0.00		0.00		0.00
Payment of common stock dividend		0.00		0.00		0.00		(0.05)		0.00
Net asset value at end of period	$	1.28		1.24		0.88		1.07		0.92
Ratio / Supplemental Data
Per share market value of investments at end of period	$	1.86		1.25		0.41		0.78		0.76
Shares outstanding at end of period		10,790,413		10,786,913		11,067,402		11,067,402		11,067,402
Average weighted shares outstanding for the period		10,790,413		10,785,913		11,067,402		11,067,402		11,863,392
Net assets at end of period	$	13,826,160		13,391,679		9,786,615		11,890,188		9,783,191
Average net assets (2)	$	13,620,104		12,516,283		9,927,574		12,911,895		9,770,410
Total investment return		3.23	%	14.81	%	(3.30)	%	4.90	%	5.75	%
Portfolio turnover rate (3)		8.46	%	40.24	%	0.75	%	0.93	%	0.80	%
Ratio of operating expenses to average net assets (3)		(15.28)	%	(16.20)	%	(7.82)	%	(6.06)	%	(7.52)	%
Ratio of net investment income (loss) to average net assets (3)		14.24	%	0.42	%	0.87	%	(4.87)	%	(6.16)	%
Ratio of realized gains (losses) to average net assets (3)		4.20	%	133.32	%	1.00	%	137.57	%	2.17	%

(1) Per-share data was derived using the ending number of shares outstanding for the period.

(2) Based on the monthly average of net assets as of the beginning and end of each period presented.

(3) Ratios are annualized.

	Year Ended December 31,
	2021			2020		2019		2018		2017
Per Share Data (1)
Net asset value at beginning of period	$	1.08		0.91		1.02		0.87		0.77
Net investment gain (loss)		0.12		0.05		(0.06)		(0.05)		(0.05)
Net realized and unrealized gains (losses)		0.24		0.18		0.00		0.20		0.11
Provision for income taxes		(0.10)		(0.02)		0.00		0.00		0.00
Stock based compensation		0.00		(0.01)		0.00		0.00		0.00
Repurchase of common stock		0.00		0.02		0.00		0.00		0.04
Payment of common stock dividend		(0.10)		(0.05)		(0.05)		0.00		0.00
Net asset value at end of period	$	1.24		1.08		0.91		1.02		0.87
Ratio / Supplemental Data
Per share market value of investments at end of period	$	1.31		0.62		0.16		0.90		0.65
Shares outstanding at end of period		10,790,413		10,785,913		11,067,402		11,067,402		11,067,402
Average weighted shares outstanding for the period		10,789,294		10,869,054		11,067,402		11,067,402		11,863,392
Net assets at end of period	$	13,414,049		11,640,887		10,068,533		11,278,889		9,629,215
Average net assets (2)	$	13,155,207		10,504,563		11,473,535		10,341,702		9,444,440
Total investment return		24.07	%	23.08	%	(5.88)	%	17.24	%	7.79	%
Portfolio turnover rate (3)		168.67	%	61.11	%	7.63	%	26.93	%	35.03	%
Ratio of operating expenses to average net assets (3)		(10.30)	%	(7.16)	%	(7.27)	%	(6.59)	%	(7.30)	%
Ratio of net investment income (loss) to average net assets (3)		9.89	%	5.35	%	(5.86)	%	(5.13)	%	(5.45)	%
Ratio of realized gains (losses) to average net assets (3)		31.30	%	0.05	%	28.35	%	(5.62)	%	5.71	%

(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.

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ORGANIZATION (Details)	3 Months Ended	12 Months Ended
	Mar. 31, 2022	Dec. 31, 2021
ORGANIZATION
Maximum percentage of total assets of investment securities	40.00%	40.00%

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SIGNIFICANT ACCOUNTING POLICIES (Details) - Discount rate	Mar. 31, 2022
Minimum
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Measurement input	12
Maximum
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Measurement input	48

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INVESTMENTS - Composition of our investments by major class (Details) - USD ($)	3 Months Ended	12 Months Ended
	Mar. 31, 2022	Dec. 31, 2021	Dec. 31, 2020
Investment Holdings [Line Items]
Investments at Amortized Cost	$ 19,943,929	$ 13,933,057	$ 4,968,576
Percentage of Amortized Cost	100.00%	100.00%	100.00%
Investments at Fair Value	$ 20,087,500	$ 14,098,675	$ 6,667,897
Percentage of Fair Value	100.00%	100.00%	100.00%
Consumer
Investment Holdings [Line Items]
Investments at Fair Value	$ 4,862,500	$ 2,362,500	$ 3,700,000
Percentage of Fair Value	24.20%	16.80%	55.50%
Financial
Investment Holdings [Line Items]
Investments at Fair Value	$ 4,025,000	$ 3,836,175	$ 900,000
Percentage of Fair Value	20.00%	27.20%	13.50%
Information Technology
Investment Holdings [Line Items]
Investments at Fair Value	$ 300,000	$ 300,000	$ 300,000
Percentage of Fair Value	1.50%	2.10%	4.50%
Leisure & Hospitality
Investment Holdings [Line Items]
Investments at Fair Value			$ 278,897
Percentage of Fair Value			4.20%
Real Estate
Investment Holdings [Line Items]
Investments at Fair Value	$ 10,900,000	$ 7,600,000	$ 1,489,000
Percentage of Fair Value	54.30%	53.90%	22.30%
Short-Term Non-banking Loans
Investment Holdings [Line Items]
Investments at Amortized Cost	$ 18,080,750	$ 11,655,750	$ 2,789,000
Percentage of Amortized Cost	90.60%	83.70%	56.20%
Investments at Fair Value	$ 18,075,000	$ 11,650,000	$ 2,789,000
Percentage of Fair Value	90.00%	82.60%	41.80%
Preferred Stock
Investment Holdings [Line Items]
Investments at Amortized Cost	$ 1,050,000	$ 1,050,000	$ 150,000
Percentage of Amortized Cost	5.30%	7.50%	3.00%
Investments at Fair Value	$ 1,200,000	$ 1,200,000	$ 300,000
Percentage of Fair Value	5.90%	8.50%	4.50%
Preferred Stock | Information Technology
Investment Holdings [Line Items]
Investments at Amortized Cost	$ 150,000	$ 150,000	$ 150,000
Investments at Fair Value	300,000	300,000	300,000
Common Stock
Investment Holdings [Line Items]
Investments at Amortized Cost		$ 414,128	$ 1,750,000
Percentage of Amortized Cost		3.00%	35.20%
Investments at Fair Value		$ 436,175	$ 3,300,000
Percentage of Fair Value		3.10%	49.50%
Common Stock | Financial
Investment Holdings [Line Items]
Investments at Amortized Cost		$ 414,128
Investments at Fair Value		436,175
Warrants
Investment Holdings [Line Items]
Investments at Amortized Cost	679	679	$ 679
Other Equity
Investment Holdings [Line Items]
Investments at Amortized Cost	$ 812,500	$ 812,500	$ 278,897
Percentage of Amortized Cost	4.10%	5.80%	5.60%
Investments at Fair Value	$ 812,500	$ 812,500	$ 278,897
Percentage of Fair Value	4.10%	5.80%	4.20%
Other Equity | Consumer
Investment Holdings [Line Items]
Investments at Amortized Cost		$ 212,500
Investments at Fair Value		212,500
Other Equity | Financial
Investment Holdings [Line Items]
Investments at Amortized Cost		600,000
Investments at Fair Value		$ 600,000
Other Equity | Leisure & Hospitality
Investment Holdings [Line Items]
Investments at Amortized Cost			$ 278,897
Investments at Fair Value			$ 278,897

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FAIR VALUE OF FINANCIAL INSTRUMENTS (Details)	3 Months Ended	12 Months Ended
	Mar. 31, 2022 USD ($)	Dec. 31, 2021 USD ($)	Dec. 31, 2020 USD ($)
FAIR VALUE OF FINANCIAL INSTRUMENTS
Investments at Fair Value	$ 20,087,500	$ 14,098,675	$ 6,667,897
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Net change in unrealized appreciation attributable to Level 3 investments still held		0	0
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset Transfers Into Level 3		0	0
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset, Transfers out of Level 3		0	0
Short-Term Non-banking Loans
FAIR VALUE OF FINANCIAL INSTRUMENTS
Investments at Fair Value	18,075,000	11,650,000	2,789,000
Common Stock
FAIR VALUE OF FINANCIAL INSTRUMENTS
Investments at Fair Value		436,175	3,300,000
Preferred Stock
FAIR VALUE OF FINANCIAL INSTRUMENTS
Investments at Fair Value	1,200,000	1,200,000	300,000
Other Equity
FAIR VALUE OF FINANCIAL INSTRUMENTS
Investments at Fair Value	812,500	812,500	278,897
Level 1
FAIR VALUE OF FINANCIAL INSTRUMENTS
Investments at Fair Value		436,175	3,300,000
Level 1 | Common Stock
FAIR VALUE OF FINANCIAL INSTRUMENTS
Investments at Fair Value		436,175	3,300,000
Level 3
FAIR VALUE OF FINANCIAL INSTRUMENTS
Investments at Fair Value	20,087,500	13,662,500	3,367,897
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Net change in unrealized appreciation attributable to Level 3 investments still held	0	0
Level 3 | Short-Term Non-banking Loans
FAIR VALUE OF FINANCIAL INSTRUMENTS
Investments at Fair Value	18,075,000	11,650,000	2,789,000
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Balance at the beginning	11,650,000	2,789,000
Purchases and other adjustments to cost	7,025,000	24,765,333	7,543,000
Sales and redemptions	(600,000)	(15,904,333)	(4,754,000)
Balance at the end	$ 18,075,000	$ 11,650,000	$ 2,789,000
Level 3 | Short-Term Non-banking Loans | Interest rate | Minimum
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Interest rate	12	12	14
Level 3 | Short-Term Non-banking Loans | Interest rate | Maximum
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Interest rate	48	44	44
Level 3 | Preferred Stock
FAIR VALUE OF FINANCIAL INSTRUMENTS
Investments at Fair Value	$ 1,200,000	$ 1,200,000	$ 300,000
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Balance at the beginning	1,200,000	300,000	300,000
Purchases and other adjustments to cost		900,000
Balance at the end	1,200,000	1,200,000	300,000
Level 3 | Other Equity
FAIR VALUE OF FINANCIAL INSTRUMENTS
Investments at Fair Value	812,500	812,500	278,897
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Balance at the beginning	812,500	278,897	534,200
Net change in unrealized appreciation			486,018
Purchases and other adjustments to cost		812,500
Sales and redemptions		(278,897)	(91,313)
Net realized loss			(650,008)
Balance at the end	$ 812,500	$ 812,500	$ 278,897

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RELATED-PARTY TRANSACTIONS (Details) - USD ($)	Jan. 03, 2022	Aug. 10, 2018	Mar. 07, 2022
Subsequent events.
Related Party Transaction [Line Items]
Interest rate per annum			48.00%
Loan Agreement | Subsequent events.
Related Party Transaction [Line Items]
Quarterly unused capacity commitment fee (in percentage)	1.00%
Ms. Zbikowski, along with her husband Scott Zbikowski
Related Party Transaction [Line Items]
Shares of common stock owned by related party		1,765,000
Promissory note term		2 years
Principal amount of note obtained		$ 250,000
Interest payable monthly (as a percent)		10.00%
Debtors' pledge in number of common stock		625,000
Lenders | Loan Agreement | Subsequent events.
Related Party Transaction [Line Items]
Maximum borrowing capacity	$ 5,000,000
Obligation to provide funds in aggregate loan amount (in percentage)	0.50%
Loan agreement term	5 years
Lyle A. Berman | Revolving line of credit
Related Party Transaction [Line Items]
Maximum borrowing capacity	$ 5,000,000
Lyle A. Berman | Revolving line of credit | Subsequent events.
Related Party Transaction [Line Items]
Maximum borrowing capacity	5,000,000
Lyle A. Berman | Loan Agreement | Subsequent events.
Related Party Transaction [Line Items]
Maximum borrowing capacity	$ 5,000,000
Interest rate per annum	8.00%
Obligation to provide funds in aggregate loan amount (in percentage)	0.50%
Loan agreement term	5 years

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INCOME TAXES (Details) - USD ($)	3 Months Ended		12 Months Ended
	Mar. 31, 2022	Mar. 31, 2021	Dec. 31, 2021	Dec. 31, 2020
INCOME TAXES
Deferred tax liability	$ 39,000		$ 45,000	$ 258,000
Accrued income taxes	1,434,000		1,269,000
Income taxes payable	$ 159,000	$ 662,691	$ 1,054,698	288,401
Effective tax rate	28.00%	29.00%
Federal NOL				350,000
Federal and state tax payments	$ 1,362,000
Federal NOL that does not expire				$ 350,000

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LINE OF CREDIT - Additional Information (Details) - USD ($)		3 Months Ended
	Jan. 03, 2022	Mar. 31, 2022
LINE OF CREDIT
Line of credit, outstanding		$ 5,325,000
Line of credit, maturity date		Jan. 03, 2027
Loan Agreement | Eastman Investment, Inc. | Revolving line of credit
LINE OF CREDIT
Line of credit facility maximum borrowing capacity	$ 5,000,000
Interest rate at per annum	8.00%
Line of credit facility term	5 years

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SHAREHOLDERS' EQUITY (Details) - shares	12 Months Ended
	Dec. 31, 2021	Mar. 31, 2022	Mar. 31, 2021	Dec. 31, 2020	Oct. 26, 2020	Mar. 31, 2020	Sep. 30, 2019	Mar. 31, 2019	Sep. 30, 2018	Mar. 31, 2018	Sep. 30, 2017
SHAREHOLDERS' EQUITY
Common stock issued	10,790,413	10,790,413		10,785,913
Common stock, shares outstanding	10,790,413	10,790,413	10,786,913	10,785,913		11,067,402	11,067,402	11,067,402	11,067,402	11,067,402	11,067,402
Number of shares issued during the period	4,500
Number of shares authorized to repurchase under stock repurchase program					400,000

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PER-SHARE INFORMATION (Details) - USD ($)	3 Months Ended					9 Months Ended			12 Months Ended
	Mar. 31, 2022	Mar. 31, 2021	Mar. 31, 2020	Mar. 31, 2019	Mar. 31, 2018	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2017	Dec. 31, 2021	Dec. 31, 2020
PER-SHARE INFORMATION
Numerator: Net increase in net assets resulting from operations	$ 412,111	$ 1,745,042							$ 2,831,050	$ 2,213,570
Denominator: Weighted-average number of common shares outstanding, basic	10,790,413	10,785,913							10,789,294	10,869,054
Weighted-average number of common shares outstanding - diluted	10,790,413	10,785,913	11,067,402	11,067,402	11,863,392	11,067,402	11,067,402	11,863,392	10,789,294	10,869,054
Basic net gain per common share	$ 0.04	$ 0.16							$ 0.26	$ 0.20
Diluted net gain per common share	$ 0.04	$ 0.16							$ 0.26	$ 0.20

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OPERATING LEASES - Additional Information (Details)	3 Months Ended		12 Months Ended
	Mar. 31, 2022 USD ($) lease	Mar. 31, 2021 USD ($)	Dec. 31, 2021 USD ($) lease	Dec. 31, 2020 USD ($)
OPERATING LEASES
Number of non-cancelable operating leases | lease	2		2
Weighted-average discount rate			4.50%
Weighted-average remaining lease term			1 year
Rent expense under ASC 840 | $	$ 16,812	$ 16,689	$ 66,459	$ 66,307

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OPERATING LEASES - components of our operating lease (Details) - USD ($)	3 Months Ended		12 Months Ended
	Mar. 31, 2022	Mar. 31, 2021	Dec. 31, 2021	Dec. 31, 2020
Components of our operating lease
Operating lease costs	$ 4,779	$ 4,779	$ 19,116	$ 19,116
Variable lease cost	4,601	4,478	17,613	17,461
Short-term lease cost	7,432	7,432	29,730	29,730
Total	$ 16,812	$ 16,689	$ 66,459	$ 66,307

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OPERATING LEASES - Maturity analysis under lease agreements (Details) - USD ($)	Mar. 31, 2022	Dec. 31, 2021	Dec. 31, 2020
Maturity analysis under lease agreements
2022	$ 18,164	$ 5,449
2023	14,859
Total lease payments	33,023	5,449
Plus: interest		205
Less: interest	(1,035)
Present value of lease liabilities	$ 31,988	$ 5,654	$ 26,061

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FINANCIAL HIGHLIGHTS (Details) - USD ($)	3 Months Ended					9 Months Ended			12 Months Ended
	Mar. 31, 2022	Mar. 31, 2021	Mar. 31, 2020	Mar. 31, 2019	Mar. 31, 2018	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2017	Dec. 31, 2021	Dec. 31, 2020
Per Share Data (1)
Net asset value at beginning of period	$ 1.24	$ 1.08	$ 0.91	$ 1.02	$ 0.87	$ 1.02	$ 0.87	$ 0.77	$ 1.08	$ 0.91
Net investment income (loss)	0.04	0.00	0.00	(0.02)	(0.01)	(0.06)	(0.05)	(0.05)	0.12	0.05
Net realized and unrealized gains (losses)	0.01	0.22	(0.03)	0.12	0.06	0.00	0.20	0.11	0.24	0.18
Provision for income taxes	(0.01)	(0.06)	0.00	0.00	0.00	0.00	0.00	0.00	(0.10)	(0.02)
Stock based compensation						0.00	0.00	0.00	0.00	(0.01)
Repurchase of common stock						0.00	0.00	0.04	0.00	0.02
Payment of common stock dividend	(0.00)	(0.00)	(0.00)	(0.05)	(0.00)	(0.05)	(0.00)	(0.00)	(0.10)	(0.05)
Net asset value at end of period	1.28	1.24	0.88	1.07	0.92	0.91	1.02	0.87	1.24	1.08
Ratio / Supplemental Data
Per share market value of investments at end of period	$ 1.86	$ 1.25	$ 0.41	$ 0.78	$ 0.76	$ 0.16	$ 0.90	$ 0.65	$ 1.31	$ 0.62
Shares outstanding at end of period	10,790,413	10,786,913	11,067,402	11,067,402	11,067,402	11,067,402	11,067,402	11,067,402	10,790,413	10,785,913
Average weighted shares outstanding for the period	10,790,413	10,785,913	11,067,402	11,067,402	11,863,392	11,067,402	11,067,402	11,863,392	10,789,294	10,869,054
Net assets at end of period	$ 13,826,160	$ 13,391,679	$ 9,786,615	$ 11,890,188	$ 9,783,191	$ 10,068,533	$ 11,278,889	$ 9,629,215	$ 13,414,049	$ 11,640,887
Average net assets	$ 13,620,104	$ 12,516,283	$ 9,927,574	$ 12,911,895	$ 9,770,410	$ 11,473,535	$ 10,341,702	$ 9,444,440	$ 13,155,207	$ 10,504,563
Total investment return	3.23%	14.81%	(3.30%)	4.90%	5.75%	(5.88%)	17.24%	7.79%	24.07%	23.08%
Portfolio turnover rate	8.46	40.24	0.75	0.93	0.80	7.63	26.93	35.03	168.67	61.11
Ratio of operating expenses to average net assets	(15.28%)	(16.20%)	(7.82%)	(6.06%)	(7.52%)	(7.27%)	(6.59%)	(7.30%)	(10.30%)	(7.16%)
Ratio of net investment income (loss) to average net assets	14.24%	0.42%	0.87%	(4.87%)	(6.16%)	(5.86%)	(5.13%)	(5.45%)	9.89%	5.35%
Ratio of realized gains (losses) to average net assets	4.20	133.32	1.00	137.57	2.17	28.35	(5.62)	5.71	31.30	0.05

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SUBSEQUENT EVENTS (Details)				12 Months Ended
	Apr. 11, 2022 shares	Mar. 07, 2022 item	Jan. 26, 2022 USD ($)	Dec. 31, 2021 shares	Apr. 18, 2022 USD ($)	Apr. 12, 2022 USD ($)	Feb. 11, 2022 $ / shares shares
Subsequent Event [Line Items]
Issuance of shares (in shares)				4,500
Three Independent directors
Subsequent Event [Line Items]
Issuance of shares (in shares)	15,000
Two Non Independent directors
Subsequent Event [Line Items]
Issuance of shares (in shares)	10,000
Subsequent events.
Subsequent Event [Line Items]
Interest rate per annum		48.00%
Warrants exercisable price | $ / shares							$ 4.00
Number of Townhouse Units Expected to be Developed by Borrower | item		139
Subsequent events. | Maximum
Subsequent Event [Line Items]
Shares of common stock purchasable upon the exercise of the warrants							2,697,603
Subsequent events. | 33.33% Promissory Note
Subsequent Event [Line Items]
Face value of investment | $			$ 1,125,000
Interest rate			33.33%
Promissory note term			120 days
Subsequent events. | Loan payable
Subsequent Event [Line Items]
Advanced principal repayment of short-term loan | $					$ 1,800,000	$ 3,900,000
Short term debt, interest rate					23.00%	12.00%

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Balance Sheets - USD ($)	Dec. 31, 2021	Dec. 31, 2020
ASSETS
Investments, at fair value:	$ 14,098,675	$ 6,667,897
Cash	1,936,148	5,440,579
Note receivable	250,000	250,000
Prepaid expenses	83,674	43,838
Receivable for sale of investments		19,313
Interest and dividend receivables	324,350	65,911
Right-of-use lease asset	4,984	23,345
Total Assets	16,697,831	12,510,883
LIABILITIES
Accounts payable	64,028	32,917
Dividend payable	100	539,296
Payable for purchase of investments	1,900,000
Lease liability	5,654	26,061
Accrued income tax expense	1,269,000	13,722
Deferred taxes	45,000	258,000
Total Liabilities	3,283,782	869,996
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	10,786
Additional paid-in capital	10,694,163	10,673,014
Accumulated deficit	(1,159,665)	(1,159,665)
Accumulated undistributed investment loss	(1,877,667)	(2,124,419)
Accumulated undistributed net realized gains on investment transactions	5,580,810	2,541,850
Net unrealized appreciation in value of investments	165,618	1,699,321
Total Shareholders' Equity (net assets)	13,414,049	11,640,887
Total Liabilities and Shareholders' Equity	$ 16,697,831	$ 12,510,883
Net Asset Value Per Common Share	$ 1.24	$ 1.08

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Balance Sheets (Parenthetical) - USD ($)	Mar. 31, 2022	Dec. 31, 2021	Mar. 31, 2021	Dec. 31, 2020	Mar. 31, 2020	Sep. 30, 2019	Mar. 31, 2019	Sep. 30, 2018	Mar. 31, 2018	Sep. 30, 2017
CONDENSED BALANCE SHEETS
Investments at Amortized Cost	$ 19,943,929	$ 13,933,057		$ 4,968,576
Common stock, par value	$ 0.001	$ 0.001		$ 0.001
Common stock, shares authorized	250,000,000	250,000,000		250,000,000
Common stock, shares outstanding	10,790,413	10,790,413	10,786,913	10,785,913	11,067,402	11,067,402	11,067,402	11,067,402	11,067,402	11,067,402

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Statements of Operations - USD ($)	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020
Investment Income
Interest income	$ 2,656,201	$ 1,282,175
Dividend income	0	15,462
Total Investment Income	2,656,201	1,297,637
Operating Expenses
Professional fees	453,440	175,612
Payroll	556,432	301,494
Insurance	108,165	85,237
Occupancy	66,459	66,307
Director's fees	120,000	90,000
Depreciation and amortization	0	2,071
Other general and administrative	50,255	15,069
Total Operating Expenses	1,354,751	735,790
Net Investment Gain	1,301,450	561,847
Realized and Unrealized Gain (Loss) on Investments
Net realized gain on investments	4,118,001	5,330
Net change in unrealized depreciation on investments	(1,533,703)	1,934,794
Net Realized and Unrealized Gain on Investments	2,584,298	1,940,124
Net Increase in Net Assets Resulting from Operations Before Taxes	3,885,748	2,501,971
Provision for Income Taxes	1,054,698	288,401
Net Increase in Net Assets Resulting from Operations	$ 2,831,050	$ 2,213,570
Net Increase in Net Assets Resulting from Operations per share:
Basic net income per share	$ 0.26	$ 0.20
Diluted net income per share	$ 0.26	$ 0.20
Weighted-average number of common shares outstanding - basic	10,789,294	10,869,054
Weighted-average number of common shares outstanding - diluted	10,789,294	10,869,054

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Statements of Shareholders' Equity - USD ($)	Common Stock	Additional Paid In Capital.	Accumulated Deficit	Accumulated Undistributed Net Investment Loss	Accumulated Undistributed Net Realized Gain on Investments Transactions	Net Unrealized Appreciation (Depreciation) in Value of Investments	Total
Balance as of beginning at Dec. 31, 2019	$ 11,067	$ 10,774,653	$ (1,159,665)	$ (2,397,865)	$ 3,075,816	$ (235,473)	$ 10,068,533
Balance as of beginning (in shares) at Dec. 31, 2019	11,067,402
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Stock based compensation (in shares)	100,000
Stock based compensation	$ 100	60,900					61,000
Dividend Declared					(539,296)		(539,296)
Repurchase of shares	$ (381)	(162,539)					(162,920)
Repurchase of shares (in shares)	(381,489)
Undistributed net investment gain				273,446			273,446
Net realized gain on investment transactions					5,330		5,330
Depreciation in value of investments						1,934,794	1,934,794
Balance as of ending at Dec. 31, 2020	$ 10,786	10,673,014	(1,159,665)	(2,124,419)	2,541,850	1,699,321	$ 11,640,887
Balance as of ending (in shares) at Dec. 31, 2020	10,785,913						10,785,913
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Number of shares issued during the period	1,000
Net realized gain on investment transactions					2,907,999		$ 2,907,999
Depreciation in value of investments						(513,250)	(513,250)
Balance as of ending at Mar. 31, 2021	$ 10,787	10,678,763	(1,159,665)	(2,774,126)	5,449,849	1,186,071	$ 13,391,679
Balance as of ending (in shares) at Mar. 31, 2021	10,786,913						10,786,913
Balance as of beginning at Dec. 31, 2020	$ 10,786	10,673,014	(1,159,665)	(2,124,419)	2,541,850	1,699,321	$ 11,640,887
Balance as of beginning (in shares) at Dec. 31, 2020	10,785,913						10,785,913
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Dividend Declared					(1,079,041)		$ (1,079,041)
Common shares issued in consideration for expense payment	$ 4	21,149					$ 21,153
Common shares issued in consideration for expense payment (in shares)	4,500
Number of shares issued during the period							4,500
Undistributed net investment gain				246,752			$ 246,752
Net realized gain on investment transactions					4,118,001		4,118,001
Depreciation in value of investments						(1,533,703)	(1,533,703)
Balance as of ending at Dec. 31, 2021	$ 10,790	10,694,163	(1,159,665)	(1,877,667)	5,580,810	165,618	$ 13,414,049
Balance as of ending (in shares) at Dec. 31, 2021	10,790,413						10,790,413
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net realized gain on investment transactions					138,770		$ 138,770
Depreciation in value of investments						(22,047)	(22,047)
Balance as of ending at Mar. 31, 2022	$ 10,790	$ 10,694,163	$ (1,159,665)	$ (1,582,279)	$ 5,719,580	$ 143,571	$ 13,826,160
Balance as of ending (in shares) at Mar. 31, 2022	10,790,413						10,790,413

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Statements of Cash Flows - USD ($)	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020
Cash flows from operating activities:
Net increase in net assets resulting from operations	$ 2,831,050	$ 2,213,570
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	1,533,703	(1,934,794)
Net realized gain on investments	(4,118,001)	(5,330)
Purchases of investments	(27,029,292)	(9,405,802)
Proceeds from sales of investments	22,188,562	6,418,926
Stock-based compensation		61,000
Depreciation & amortization expense	0	2,071
Income taxes payable	1,255,278
Deferred income taxes	(213,000)	271,722
Common shares issued as consideration for expense payment	15,403
Changes in operating assets and liabilities:
Prepaid expenses and other assets	(21,475)	5,197
Interest and dividends receivable	(258,439)	(59,411)
Receivable for investment sales	19,313	(19,313)
Accounts payable and other liabilities	10,804	(10,993)
Payable for investment purchase	1,900,000
Net cash used in operating activities	(1,886,094)	(2,463,157)
Cash flows from financing activities:
Payments for repurchase of common stock		(162,920)
Payments for common stock dividend	(1,618,337)
Net cash provided (used) by financing activities	(1,618,337)	(162,920)
Net decrease in cash	(3,504,431)	(2,626,077)
Cash, beginning of period	5,440,579	8,066,656
Cash, end of period	1,936,148	5,440,579
Supplemental disclosure of cash flow information:
Cash paid for income taxes	32,398	16,679
Non-cash financing activities:
Common shares issued as consideration for investment	$ 5,750
Dividend declared to common stock shareholders		$ 539,296

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Investment Schedule - USD ($)	3 Months Ended	12 Months Ended
	Mar. 31, 2022	Dec. 31, 2021	Dec. 31, 2020
Investment Holdings [Line Items]
Total Investments, Cost	$ 19,943,929	$ 13,933,057	$ 4,968,576
Investments at Fair Value	$ 20,087,500	$ 14,098,675	$ 6,667,897
Total Investments, Percentage of Net Assets	145.29%	105.10%	57.30%
Total Cash, Cost	$ 71,020	$ 1,936,148	$ 5,440,579
Total Cash, Fair Value	$ 71,020	$ 1,936,148	$ 5,440,579
Total Cash, Percentage of Net Assets	0.51%	14.43%	46.74%
Total Investments and Cash, Cost	$ 20,014,949	$ 15,869,205	$ 10,409,155
Total Investments and Cash, Fair Value	$ 20,158,520	$ 16,034,823	$ 12,108,476
Total Investments and Cash, Percentage of Net Assets	145.80%	119.53%	104.04%
Consumer
Investment Holdings [Line Items]
Investments at Fair Value	$ 4,862,500	$ 2,362,500	$ 3,700,000
Consumer | Other
Investment Holdings [Line Items]
Total Investments, Cost	212,500	212,500
Investments at Fair Value	$ 212,500	$ 212,500
Total Investments, Percentage of Net Assets	1.54%	1.58%
Financial
Investment Holdings [Line Items]
Investments at Fair Value	$ 4,025,000	$ 3,836,175	900,000
Total Investments, Percentage of Net Assets		4.47%
Financial | Other
Investment Holdings [Line Items]
Total Investments, Cost	600,000	$ 600,000
Investments at Fair Value	$ 600,000	$ 600,000
Total Investments, Percentage of Net Assets	4.34%	4.47%
Information Technology
Investment Holdings [Line Items]
Investments at Fair Value	$ 300,000	$ 300,000	300,000
Real Estate
Investment Holdings [Line Items]
Investments at Fair Value	10,900,000	7,600,000	1,489,000
Leisure & Hospitality
Investment Holdings [Line Items]
Investments at Fair Value			278,897
Short-Term Non-banking Loans
Investment Holdings [Line Items]
Total Investments, Cost	18,080,750	11,655,750	2,789,000
Investments at Fair Value	$ 18,075,000	$ 11,650,000	$ 2,789,000
Total Investments, Percentage of Net Assets	130.73%	86.85%	23.97%
Short-Term Non-banking Loans | Tailwinds, LLC
Investment Holdings [Line Items]
Total Investments, Cost	$ 3,000,000	$ 3,000,000
Investments at Fair Value	$ 3,000,000	$ 3,000,000
Total Investments, Percentage of Net Assets	21.70%	22.36%
Short-Term Non-banking Loans | 15% secured loans | Consumer | AirDog Supplies, Inc
Investment Holdings [Line Items]
Total Investments, Cost	$ 1,250,000	$ 1,250,000
Investments at Fair Value	$ 1,250,000	$ 1,250,000
Total Investments, Percentage of Net Assets	9.04%	9.32%
Short-Term Non-banking Loans | 15% secured loans | Real Estate
Investment Holdings [Line Items]
Total Investments, Cost	$ 600,000	$ 700,000
Investments at Fair Value	$ 600,000	$ 700,000
Total Investments, Percentage of Net Assets	4.34%	5.22%
Short-Term Non-banking Loans | 15% secured loans | Real Estate | Alatus Development, LLC
Investment Holdings [Line Items]
Total Investments, Cost		$ 3,900,000	$ 1,250,000
Investments at Fair Value		$ 3,900,000	$ 1,250,000
Total Investments, Percentage of Net Assets		29.07%	10.74%
Short-Term Non-banking Loans | 15% secured loans | Real Estate | Tailwinds, LLC
Investment Holdings [Line Items]
Total Investments, Cost		$ 3,000,000
Investments at Fair Value		$ 3,000,000
Total Investments, Percentage of Net Assets		22.36%
Short-Term Non-banking Loans | 15% secured loans | Real Estate | Other
Investment Holdings [Line Items]
Total Investments, Cost			$ 239,000
Investments at Fair Value			$ 239,000
Total Investments, Percentage of Net Assets			2.05%
Short-Term Non-banking Loans | 20% secured loans | Consumer
Investment Holdings [Line Items]
Total Investments, Cost			$ 400,000
Investments at Fair Value			$ 400,000
Total Investments, Percentage of Net Assets			3.44%
Short-Term Non-banking Loans | 44% secured loans | Financial
Investment Holdings [Line Items]
Total Investments, Cost			$ 400,000
Investments at Fair Value			$ 400,000
Total Investments, Percentage of Net Assets			3.44%
Short-Term Non-banking Loans | 36% secured loans | Financial
Investment Holdings [Line Items]
Total Investments, Cost			$ 500,000
Investments at Fair Value			$ 500,000
Total Investments, Percentage of Net Assets			4.30%
Short-Term Non-banking Loans | 12% secured loans | Financial
Investment Holdings [Line Items]
Total Investments, Cost	$ 500,000	$ 500,000
Investments at Fair Value	$ 500,000	$ 500,000
Total Investments, Percentage of Net Assets	3.61%	3.73%
Short-Term Non-banking Loans | 12% secured loans | Real Estate | Alatus Development, LLC
Investment Holdings [Line Items]
Total Investments, Cost	$ 3,900,000	$ 3,900,000
Investments at Fair Value	$ 3,900,000	$ 3,900,000
Total Investments, Percentage of Net Assets	28.21%	29.07%
Short-Term Non-banking Loans | 23% secured loans | Litigation Financing | The Cross Law Firm, LLC
Investment Holdings [Line Items]
Total Investments, Cost	$ 1,805,750	$ 1,805,750
Investments at Fair Value	$ 1,800,000	$ 1,800,000
Total Investments, Percentage of Net Assets	13.02%	13.42%
Short-Term Non-banking Loans | 52% secured loans | Financial
Investment Holdings [Line Items]
Total Investments, Cost		$ 500,000
Investments at Fair Value		$ 500,000
Total Investments, Percentage of Net Assets		3.73%
Common Stock
Investment Holdings [Line Items]
Total Investments, Cost		$ 414,128	$ 1,750,000
Investments at Fair Value		436,175	3,300,000
Common Stock | Consumer | Ammo, Inc
Investment Holdings [Line Items]
Total Investments, Cost			1,750,000
Investments at Fair Value			$ 3,300,000
Total Investments, Percentage of Net Assets			28.34%
Common Stock | Financial
Investment Holdings [Line Items]
Total Investments, Cost		414,128
Investments at Fair Value		$ 436,175
Total Investments, Percentage of Net Assets		3.25%
Preferred Stock
Investment Holdings [Line Items]
Total Investments, Cost	$ 1,050,000	$ 1,050,000	$ 150,000
Investments at Fair Value	1,200,000	$ 1,200,000	300,000
Total Investments, Percentage of Net Assets		8.95%
Preferred Stock | Wisdom Gaming, Inc
Investment Holdings [Line Items]
Total Investments, Cost		$ 900,000
Investments at Fair Value		$ 900,000
Total Investments, Percentage of Net Assets		6.71%
Preferred Stock | Consumer | Other
Investment Holdings [Line Items]
Total Investments, Cost	1,050,000
Investments at Fair Value	$ 1,200,000
Total Investments, Percentage of Net Assets	8.68%
Preferred Stock | Consumer | Wisdom Gaming, Inc
Investment Holdings [Line Items]
Total Investments, Cost	$ 900,000	$ 900,000
Investments at Fair Value	$ 900,000	$ 900,000
Total Investments, Percentage of Net Assets	6.51%	6.71%
Preferred Stock | Information Technology
Investment Holdings [Line Items]
Total Investments, Cost	$ 150,000	$ 150,000	150,000
Investments at Fair Value	$ 300,000	$ 300,000	$ 300,000
Total Investments, Percentage of Net Assets	2.17%	2.24%	2.58%
Warrants
Investment Holdings [Line Items]
Total Investments, Cost	$ 679	$ 679	$ 679
Warrants | Healthcare
Investment Holdings [Line Items]
Total Investments, Cost	$ 679	$ 679	$ 679
Total Investments, Percentage of Net Assets	0.00%	0.00%	0.00%
Other Equity
Investment Holdings [Line Items]
Total Investments, Cost	$ 812,500	$ 812,500	$ 278,897
Investments at Fair Value	$ 812,500	$ 812,500	278,897
Total Investments, Percentage of Net Assets	5.88%	6.05%
Other Equity | Consumer
Investment Holdings [Line Items]
Total Investments, Cost		$ 212,500
Investments at Fair Value		$ 212,500
Total Investments, Percentage of Net Assets		1.58%
Other Equity | Consumer | Other
Investment Holdings [Line Items]
Total Investments, Cost		$ 1,050,000
Investments at Fair Value		$ 1,200,000
Total Investments, Percentage of Net Assets		8.95%
Other Equity | Financial
Investment Holdings [Line Items]
Total Investments, Cost		$ 600,000
Investments at Fair Value		$ 600,000
Other Equity | Leisure & Hospitality
Investment Holdings [Line Items]
Total Investments, Cost			278,897
Investments at Fair Value			$ 278,897
Total Investments, Percentage of Net Assets			2.40%

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ORGANIZATION

3 Months Ended

12 Months Ended

Mar. 31, 2022

Dec. 31, 2021

ORGANIZATION

ORGANIZATION

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 Investment Company Act of 1940 (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 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.

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SIGNIFICANT ACCOUNTING POLICIES

3 Months Ended

12 Months Ended

Mar. 31, 2022

Dec. 31, 2021

SIGNIFICANT ACCOUNTING POLICIES

SIGNIFICANT ACCOUNTING POLICIES

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation: The accompanying unaudited condensed financial statements of Mill City Ventures have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States (GAAP) for complete financial statements. 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 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.

Use of estimates: The preparation of financial statements in conformity with GAAP requires management and our Board of Directors 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, and the differences could be material. For more information, see the “Valuation of portfolio investments” caption below, and “Note 4 – Fair Value of Financial Instruments” below. The Company is an investment company following accounting and reporting guidance in ASC 946.

Cash deposits: We maintain our cash balances in financial institutions and with regulated financial investment brokers. Cash on deposit in excess of FDIC and similar coverage is subject to the usual banking risk of funds in excess of those limits.

Valuation of portfolio investments: We carry our investments in accordance with ASC Topic 820, Fair Value Measurements and Disclosures (“ASC 820”), issued by the Financial Accounting Standards Board (“FASB”), which defines fair value, establishes a framework for measuring fair value, and requires disclosures about fair value measurements. Fair value is generally based on quoted market prices provided by independent pricing services, broker or dealer quotations, or alternative price sources. In the absence of quoted market prices, broker or dealer quotations, or alternative price sources, investments are measured at fair value as determined by our Board of Directors, based on, among other things, the input of our executive management, the Audit Committee of our Board of Directors, and any independent third-party valuation experts that may be engaged by management to assist in the valuation of our portfolio investments, but in all cases consistent with our written valuation policies and procedures.

Due to the inherent uncertainties of valuation, certain estimated fair values may differ significantly from the values that would have been realized had a ready market for these investments existed, and these differences could be material. In addition, such investments are generally less liquid than publicly traded securities. If we were required to liquidate a portfolio investment in a forced or liquidation sale, we could realize significantly less than the value at which we have recorded it.

Accounting guidance establishes a hierarchal disclosure framework that prioritizes and ranks the level of market price observability of inputs used in measuring investments at fair value. Observable inputs must be used when available. Observable inputs are inputs that market participants would use in valuing the asset or liability based on market data obtained from independent sources. Unobservable inputs are inputs that reflect our assumptions about the factors market participants would use in valuing the asset or liability based upon the best information available. Assets and liabilities measured at fair value are to be categorized into one of the three hierarchy levels based on the relative observability of inputs used in the valuation. The three levels are defined as follows:

● Level 1: Observable inputs based on quoted prices (unadjusted) in active markets for identical assets or liabilities.

● Level 2: Observable inputs based on quoted prices for similar assets and liabilities in active markets, or quoted prices for identical assets and liabilities in inactive markets.

● Level 3: Unobservable inputs that reflect an entity’s own assumptions about what inputs a market participant would use in pricing the asset or liability based on the best information available in the circumstances.

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 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. 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 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 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:

We account for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial statement carrying amount and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.

We record net deferred tax assets to the extent we believe these assets will more likely than not be realized. In making such determination, we consider all available evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies and recent financial operations. In the event we were to determine we would be able to realize our deferred income tax assets in the future in excess of their recorded amount, we would make an adjustment to the valuation allowance, which would reduce the provision for income taxes.

We file income tax returns in the U.S. Federal jurisdiction and various state jurisdictions. We do not believe there will be any material changes in 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: Realized gains or losses on the sale of investments are calculated using the specific investment method.

Interest income, adjusted for amortization of premiums and accretion of discounts, is recorded on an accrual basis. Discounts from and premiums to par value on securities purchased are accreted or amortized, as applicable, into interest income over the life of the related security using the effective-yield method. The amortized cost of investments represents the original cost, adjusted for the accretion of discounts and amortization of premiums, if any. Loans are generally placed on non-accrual status when principal or interest payments are past due 30 days or more, or when there is reasonable doubt that principal or interest will be collected in full. Loan origination fees are recognized when loans are issued. Accrued and unpaid interest is generally reversed when a loan is placed on non-accrual status. Interest payments received on non-accrual loans may be recognized as income or applied to principal depending upon management’s judgment regarding collectability. Non-accrual loans are restored to accrual status when past-due principal and interest is paid and, in management’s judgment, are likely to remain current. We may make exceptions to the policy described above if a loan has sufficient collateral value and is in the process of collection.

Dividend income on preferred equity securities is recorded as dividend income on an accrual basis to the extent that such amounts are payable by the portfolio company and are expected to be collected. Dividend income on common equity securities is recorded on the record date for private portfolio companies or on the ex-dividend date for publicly traded portfolio companies.

Certain investments may have contractual payment-in-kind (“PIK”) interest or dividends. PIK represents accrued interest or accumulated dividends that are added to the loan principal or stated value of the investment on the respective interest- or dividend-payment dates rather than being paid in cash, and generally becomes due at maturity or upon being repurchased by the issuer. PIK interest or dividends is recorded as interest or dividend income, as applicable. If at any point we believe that PIK interest or dividends is not expected be realized, the PIK-generating investment will be placed on non-accrual status. Accrued PIK interest or dividends are generally reversed through interest or dividend income, respectively, when an investment 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.

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

Cash deposits: We maintain our cash balances in financial institutions and with regulated financial investment brokers. Cash on deposit in excess of FDIC and similar coverage is subject to the usual banking risk of funds in excess of those limits.

Valuation of portfolio investments: We carry our investments in accordance with ASC Topic 820, Fair Value Measurements and Disclosures (“ASC 820”), issued by the Financial Accounting Standards Board (“FASB”), which defines fair value, establishes a framework for measuring fair value, and requires disclosures about fair value measurements. Fair value is generally based on quoted market prices provided by independent pricing services, broker or dealer quotations, or alternative price sources. In the absence of quoted market prices, broker or dealer quotations, or alternative price sources, investments are measured at fair value as determined by 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 available. Assets and liabilities measured at fair value are to be categorized into one of the three hierarchy levels based on the relative observability of inputs used in the valuation. The three levels are defined as follows:

● Level 1: Observable inputs based on quoted prices (unadjusted) in active markets for identical assets or liabilities.

● Level 2: Observable inputs based on quoted prices for similar assets and liabilities in active markets, or quoted prices for identical assets and liabilities in inactive markets.

● Level 3: Unobservable inputs that reflect an entity’s own assumptions about what inputs a market participant would use in pricing the asset or liability based on the best information available in the circumstances.

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:

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, 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.

Interest income, adjusted for amortization of premiums and accretion of discounts, is recorded on an accrual basis. Discounts from and premiums to par value on securities purchased are accreted or amortized, as applicable, into interest income over the life of the related security using the effective-yield method. The amortized cost of investments represents the original cost, adjusted for the accretion of discounts and amortization of premiums, if any. Loans are generally placed on non-accrual status when principal or interest payments are past due 30 days or more, or when there is reasonable doubt that principal or interest will be collected in full. Loan origination fees are recognized when loans are issued. Accrued and unpaid interest is generally reversed when a loan is placed on non-accrual status. Interest payments received on non-accrual loans may be recognized as income or applied to principal depending upon management’s judgment regarding collectability. Non-accrual loans are restored to accrual status when past-due principal and interest is paid and, in management’s judgment, are likely to remain current. We may make exceptions to the policy described above if a loan has sufficient collateral value and is in the process of collection.

Dividend income on preferred equity securities is recorded as dividend income on an accrual basis to the extent that such amounts are payable by the portfolio company and are expected to be collected. Dividend income on common equity securities is recorded on the record date for private portfolio companies or on the ex-dividend date for publicly traded portfolio companies.

Certain investments may have contractual payment-in-kind (“PIK”) interest or dividends. PIK represents accrued interest or accumulated dividends that are added to the loan principal or stated value of the investment on the respective interest- or dividend-payment dates rather than being paid in cash, and generally becomes due at maturity or upon being repurchased by the issuer. PIK interest or dividends is recorded as interest or dividend income, as applicable. If at any point we believe that PIK interest or dividends is not expected be realized, the PIK-generating investment will be placed on non-accrual status. Accrued PIK interest or dividends are generally reversed through interest or dividend income, respectively, when an investment 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.

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NET GAIN PER COMMON SHARE

3 Months Ended

12 Months Ended

Mar. 31, 2022

Dec. 31, 2021

PER-SHARE INFORMATION

PER-SHARE INFORMATION

NOTE 9 – PER-SHARE INFORMATION

Basic net gain per common share is computed by dividing net increase in net assets resulting from operations by the weighted-average number of common shares outstanding during the period. A reconciliation of the numerator and denominator used in the calculation of basic and diluted net gain (loss) per common share is set forth below:

	For the Three Months Ended
	March 31,
	2022		2021
Numerator: Net increase (decrease) in net assets resulting from operations	$	412,111	$	1,745,042
Denominator: Weighted-average number of common shares outstanding		10,790,413		10,785,913
Basic and diluted net gain (loss) per common share	$	0.04	$	0.16

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:

	For the Year Ended December 31,
	2021		2020
Numerator: Net increase in net assets resulting from operations	$	2,831,050	$	2,213,570
Denominator: Weighted-average number of common shares outstanding		10,789,294		10,869,054
Basic and diluted net gain per common share	$	0.26	$	0.20

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

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LEASES

3 Months Ended

12 Months Ended

Mar. 31, 2022

Dec. 31, 2021

OPERATING LEASES

LEASES

NOTE 10 – OPERATING LEASES

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, 2021 was 4.5%.

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	$	4,779	$	4,779
Variable lease cost		4,601		4,478
Short-term lease cost		7,432		7,432
Total	$	16,812	$	16,689

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:

	Operating
	Leases
2022	$	18,164
2023		14,859
Total lease payments		33,023
Less: interest		(1,035)
Present value of lease liabilities	$	31,988

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 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:

	Year Ended		Year Ended
	December 31,		December 31,
	2021		2020
Operating lease costs	$	19,116	$	19,116
Variable lease cost		17,613		17,461
Short-term lease cost		29,730		29,730
Total	$	66,459	$	66,307

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

Operating Lease
Right-of-use assets	$	4,984
Operating Lease Liability	$	5,654
Less: short term portion		(5,654)
Long term portion	$	—

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

	Operating
	Leases
2022	$	5,449
Total lease payments		5,449
Plus: interest		205
Present value of lease liabilities	$	5,654

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SHAREHOLDERS' EQUITY

3 Months Ended

12 Months Ended

Mar. 31, 2022

Dec. 31, 2021

SHAREHOLDERS' EQUITY

SHAREHOLDERS' EQUITY

NOTE 8 – SHAREHOLDERS’ EQUITY

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

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.

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INVESTMENTS

3 Months Ended

12 Months Ended

Mar. 31, 2022

Dec. 31, 2021

INVESTMENTS

INVESTMENTS

NOTE 3 – INVESTMENTS

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		Percentage of		Investments at		Percentage of
	Amortized Cost		Amortized Cost		Fair Value		Fair Value
Short-term Non-banking Loans	$	18,080,750	90.6	%	$	18,075,000	90.0	%
Preferred Stock		1,050,000	5.3			1,200,000	5.9
Warrants		679	—			—	—
Other Equity		812,500	4.1			812,500	4.1
Total	$	19,943,929	100.0	%	$	20,087,500	100.0	%

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		Percentage of		Investments at		Percentage of
	Amortized Cost		Amortized Cost		Fair Value		Fair Value
Short-term Non-banking Loans	$	11,655,750	83.7	%	$	11,650,000	82.6	%
Preferred Stock		1,050,000	7.5			1,200,000	8.5
Common Stock		414,128	3.0			436,175	3.1
Warrants		679	—			—	—
Other Equity		812,500	5.8			812,500	5.8
Total	$	13,933,057	100.0	%	$	14,098,675	100.0	%

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		Percentage of
	Fair Value		Fair Value
Consumer	$	4,862,500	24.2	%
Financial		4,025,000	20.0
Information Technology		300,000	1.5
Real Estate		10,900,000	54.3
Total	$	20,087,500	100.0	%

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
	Investments at		Percentage of
	Fair Value		Fair Value
Consumer	$	2,362,500	16.8	%
Financial		3,836,175	27.2
Information Technology		300,000	2.1
Real Estate		7,600,000	53.9
Total	$	14,098,675	100.0	%

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		Percentage of		Investments at		Percentage of
	Amortized Cost		Amortized Cost		Fair Value		Fair Value
Short-term Non-banking Loans	$	11,655,750	83.7	%	$	11,650,000	82.6	%
Preferred Stock		1,050,000	7.5			1,200,000	8.5
Common Stock		414,128	3.0			436,175	3.1
Warrants		679	—			—	—
Other Equity		812,500	5.8			812,500	5.8
Total	$	13,933,057	100.0	%	$	14,098,675	100.0	%

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		Percentage of		Investments at		Percentage of
	Amortized Cost		Amortized Cost		Fair Value		Fair Value
Short-term Non-banking Loans	$	2,789,000	56.2	%	$	2,789,000	41.8	%
Preferred Stock		150,000	3.0			300,000	4.5
Common Stock		1,750,000	35.2			3,300,000	49.5
Warrants		679	—			—	—
Other Equity		278,897	5.6			278,897	4.2
Total	$	4,968,576	100.0	%	$	6,667,897	100.0	%

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
	Investments at		Percentage of
	Fair Value		Fair Value
Consumer	$	2,362,500	16.8	%
Financial		3,836,175	27.2
Information Technology		300,000	2.1
Real Estate		7,600,000	53.9
Total	$	14,098,675	100.0	%

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
	Investments at		Percentage of
	Fair Value		Fair Value
Consumer	$	3,700,000	55.5	%
Financial		900,000	13.5
Information Technology		300,000	4.5
Leisure & Hospitality		278,897	4.2
Real Estate		1,489,000	22.3
Total	$	6,667,897	100.0	%

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FAIR VALUE OF FINANCIAL INSTRUMENTS

3 Months Ended

12 Months Ended

Mar. 31, 2022

Dec. 31, 2021

FAIR VALUE OF FINANCIAL INSTRUMENTS

FAIR VALUE OF FINANCIAL INSTRUMENTS

NOTE 4 – FAIR VALUE OF FINANCIAL INSTRUMENTS

Level 3 valuation information: Due to the inherent uncertainty in the valuation process, the estimate of the fair value of our investment portfolio as of 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
	Level 1		Level 2		Level 3		Total
Short-term Non-banking Loans	$	—	$	—	$	18,075,000	$	18,075,000
Preferred Stock		—		—		1,200,000		1,200,000
Other Equity		—		—		812,500		812,500
Total	$	—	$	—	$	20,087,500	$	20,087,500

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
	Level 1		Level 2		Level 3		Total
Short-term Non-banking Loans	$	—	$	—	$	11,650,000	$	11,650,000
Preferred Stock		—		—		1,200,000		1,200,000
Common Stock		436,175		—		—		436,175
Other Equity		—		—		812,500		812,500
Total	$	436,175	$	—	$	13,662,500	$	14,098,675

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				Common
	Loans		Preferred Stock		Stock		Warrants		Other Equity
Balance as of January 1, 2022	$	11,650,000	$	1,200,000	$	—	$	—	$	812,500
Net change in unrealized appreciation		—		—		—		—		—
Purchases and other adjustments to cost		7,025,000		—		—		—		—
Sales and redemptions		(600,000)		—		—		—		—
Net realized loss		—		—		—		—		—
Balance as of March 31, 2022	$	18,075,000	$	1,200,000	$	—	$	—	$	812,500

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.

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	3/31/22 FMV		Valuation Technique	Unobservable Inputs	Range
ST Non-banking Loans	$	18,075,000	discounted cash flow	determining private company credit rating	12-48	%
Other Equity		812,500	last secured funding known by company	economic changes since last funding
Preferred Stock		1,200,000	last funding secured by company	economic changes since last funding
	$	20,087,500

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		Preferred		Common
	Loans		Stock		Stock		Warrants		Other Equity
Balance as of January 1, 2021	$	2,789,000	$	300,000	$	—	$	—	$	278,897
Net change in unrealized appreciation		—		—		—		—		—
Purchases and other adjustments to cost		24,765,333		900,000		—		—		812,500
Sales and redemptions		(15,904,333)		—		—		—		(278,897)
Net realized loss		—		—		—		—		—
Balance as of December 31, 2021	$	11,650,000	$	1,200,000	$	—	$	—	$	812,500

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:

Security Type	12/31/21 FMV		Valuation Technique	Unobservable Inputs	Range
ST Non-banking Loans	$	11,650,000	discounted cash flow	determining private company credit rating	12-44	%
Other Equity		812,500	last secured funding known by company	economic changes since last funding
Preferred Stock		1,200,000	last funding secured by company	economic changes since last funding
	$	13,662,500

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
	Level 1		Level 2		Level 3		Total
Short-term Non-banking Loans	$	—	$	—	$	11,650,000	$	11,650,000
Preferred Stock		—		—		1,200,000		1,200,000
Common Stock		436,175		—		—		436,175
Other Equity		—		—		812,500		812,500
Total	$	436,175	$	—	$	13,662,500	$	14,098,675

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
	Level 1		Level 2		Level 3		Total
Short-term Non-banking Loans	$	—	$	—	$	2,789,000	$	2,789,000
Preferred Stock		—		—		300,000		300,000
Common Stock		3,300,000		—		—		3,300,000
Other Equity		—		—		278,897		278,897
Total	$	3,300,000	$	—	$	3,367,897	$	6,667,897

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		Preferred		Common
	Loans		Stock		Stock		Warrants		Other Equity
Balance as of January 1, 2021	$	2,789,000	$	300,000	$	—	$	—	$	278,897
Net change in unrealized appreciation		—		—		—		—		—
Purchases and other adjustments to cost		24,765,333		900,000		—		—		812,500
Sales and redemptions		(15,904,333)		—		—		—		(278,897)
Net realized loss		—		—		—		—		—
Balance as of December 31, 2021	$	11,650,000	$	1,200,000	$	—	$	—	$	812,500

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
	ST Non-banking		Preferred		Common
	Loans		Stock		Stock		Warrants		Other Equity
Balance as of January 1, 2020	$	—	$	300,000	$	—	$	—	$	534,200
Net change in unrealized appreciation		—		—		—		—		486,018
Purchases and other adjustments to cost		7,543,000		—		—		—		—
Sales and redemptions		(4,754,000)		—		—		—		(91,313)
Net realized loss		—		—		—		—		(650,008)
Balance as of December 31, 2020	$	2,789,000	$	300,000	$	—	$	—	$	278,897

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	12/31/21 FMV		Valuation Technique	Unobservable Inputs	Range
ST Non-banking Loans	$	11,650,000	discounted cash flow	determining private company interest rate based on credit	12-44	%
Other Equity		812,500	last secured funding known by company	economic changes since last funding
Preferred Stock		1,200,000	last funding secured by company	economic changes since last funding
	$	13,662,500

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	12/31/20 FMV		Valuation Technique	Unobservable Inputs	Range
ST Non-banking Loans	$	2,789,000	discounted cash flow	determining private company interest rate based on credit	14-44	%
Other Equity		278,897	last secured funding known by company	economic changes since purchase
Preferred Stock		300,000	last funding secured by company	economic changes since last funding
	$	3,367,897

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

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RELATED-PARTY TRANSACTIONS

3 Months Ended

12 Months Ended

Mar. 31, 2022

Dec. 31, 2021

RELATED-PARTY TRANSACTIONS

RELATED-PARTY TRANSACTIONS

NOTE 5 – 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”). Mr. 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 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"). Mr. 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.

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RETIREMENT SAVINGS PLANS

12 Months Ended

Dec. 31, 2021

RETIREMENT SAVINGS PLANS

RETIREMENT SAVINGS PLANS

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.

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INCOME TAXES

3 Months Ended

12 Months Ended

Mar. 31, 2022

Dec. 31, 2021

INCOME TAXES

INCOME TAXES

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 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 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 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.

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
	2021		2020
Current taxes
Federal	$	909,530	$	—
State		357,168		16,679
Deferred taxes
Federal		(212,000)		258,000
State		—		13,722
Provision for income taxes	$	1,054,698	$	288,401

A reconciliation of income tax provisions at the U.S. statutory rate for fiscal year 2021 and 2020 is as follows:

	2021		2020
Rate reconciliation:
Tax expense at U.S.statutory rate	$	1,017,417	$	716,966
Change in valuation allowance		—		(446,000)
Provision-to-return reconciliation		(14,743)		21,657
Other		(1,976)		(4,222)
Income tax provision	$	1,054,698	$	288,401

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
	2021		2020
Deferred tax components
Unrealized (gain) loss on marketable securities	$	(46,552)	$	(488,419)
Depreciation		2,458		3,002
Net operating loss carryforwards		—		180,460
R&D and foreign credits		—		46,957
Other		(906)		—
Net deferred tax asset (liability)	$	(45,000)	$	(258,000)

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FINANCIAL HIGHLIGHTS

3 Months Ended

12 Months Ended

Mar. 31, 2022

Dec. 31, 2021

FINANCIAL HIGHLIGHTS

FINANCIAL HIGHLIGHTS

NOTE 11 – FINANCIAL HIGHLIGHTS

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

	Three Months Ended March 31,
	2022			2021		2020		2019		2018
Per Share Data (1)
Net asset value at beginning of period	$	1.24		1.08		0.91		1.02		0.87
Net investment income (loss)		0.04		0.00		0.00		(0.02)		(0.01)
Net realized and unrealized gains (losses)		0.01		0.22		(0.03)		0.12		0.06
Provision for income taxes		(0.01)		(0.06)		0.00		0.00		0.00
Payment of common stock dividend		0.00		0.00		0.00		(0.05)		0.00
Net asset value at end of period	$	1.28		1.24		0.88		1.07		0.92
Ratio / Supplemental Data
Per share market value of investments at end of period	$	1.86		1.25		0.41		0.78		0.76
Shares outstanding at end of period		10,790,413		10,786,913		11,067,402		11,067,402		11,067,402
Average weighted shares outstanding for the period		10,790,413		10,785,913		11,067,402		11,067,402		11,863,392
Net assets at end of period	$	13,826,160		13,391,679		9,786,615		11,890,188		9,783,191
Average net assets (2)	$	13,620,104		12,516,283		9,927,574		12,911,895		9,770,410
Total investment return		3.23	%	14.81	%	(3.30)	%	4.90	%	5.75	%
Portfolio turnover rate (3)		8.46	%	40.24	%	0.75	%	0.93	%	0.80	%
Ratio of operating expenses to average net assets (3)		(15.28)	%	(16.20)	%	(7.82)	%	(6.06)	%	(7.52)	%
Ratio of net investment income (loss) to average net assets (3)		14.24	%	0.42	%	0.87	%	(4.87)	%	(6.16)	%
Ratio of realized gains (losses) to average net assets (3)		4.20	%	133.32	%	1.00	%	137.57	%	2.17	%

(1) Per-share data was derived using the ending number of shares outstanding for the period.

(2) Based on the monthly average of net assets as of the beginning and end of each period presented.

(3) Ratios are annualized.

NOTE 11 – FINANCIAL HIGHLIGHTS

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

	Year Ended December 31,
	2021			2020		2019		2018		2017
Per Share Data (1)
Net asset value at beginning of period	$	1.08		0.91		1.02		0.87		0.77
Net investment gain (loss)		0.12		0.05		(0.06)		(0.05)		(0.05)
Net realized and unrealized gains (losses)		0.24		0.18		0.00		0.20		0.11
Provision for income taxes		(0.10)		(0.02)		0.00		0.00		0.00
Stock based compensation		0.00		(0.01)		0.00		0.00		0.00
Repurchase of common stock		0.00		0.02		0.00		0.00		0.04
Payment of common stock dividend		(0.10)		(0.05)		(0.05)		0.00		0.00
Net asset value at end of period	$	1.24		1.08		0.91		1.02		0.87
Ratio / Supplemental Data
Per share market value of investments at end of period	$	1.31		0.62		0.16		0.90		0.65
Shares outstanding at end of period		10,790,413		10,785,913		11,067,402		11,067,402		11,067,402
Average weighted shares outstanding for the period		10,789,294		10,869,054		11,067,402		11,067,402		11,863,392
Net assets at end of period	$	13,414,049		11,640,887		10,068,533		11,278,889		9,629,215
Average net assets (2)	$	13,155,207		10,504,563		11,473,535		10,341,702		9,444,440
Total investment return		24.07	%	23.08	%	(5.88)	%	17.24	%	7.79	%
Portfolio turnover rate (3)		168.67	%	61.11	%	7.63	%	26.93	%	35.03	%
Ratio of operating expenses to average net assets (3)		(10.30)	%	(7.16)	%	(7.27)	%	(6.59)	%	(7.30)	%
Ratio of net investment income (loss) to average net assets (3)		9.89	%	5.35	%	(5.86)	%	(5.13)	%	(5.45)	%
Ratio of realized gains (losses) to average net assets (3)		31.30	%	0.05	%	28.35	%	(5.62)	%	5.71	%

(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.

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SUBSEQUENT EVENTS

3 Months Ended

12 Months Ended

Mar. 31, 2022

Dec. 31, 2021

SUBSEQUENT EVENTS

SUBSEQUENT EVENTS

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.

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”). Mr. 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 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 which we may distribute to our shareholders as a dividend, and up to 2,697,603 shares of our common stock purchasable upon the exercise of those 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. At this time, no record date has been established for the dividend. 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.

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SIGNIFICANT ACCOUNTING POLICIES (Policies)

3 Months Ended

12 Months Ended

Mar. 31, 2022

Dec. 31, 2021

SIGNIFICANT ACCOUNTING POLICIES

Use of estimates:

Use of estimates: The preparation of financial statements in conformity with GAAP requires management and our Board of Directors 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, and the differences could be material. For more information, see the “Valuation of portfolio investments” caption below, and “Note 4 – Fair Value of Financial Instruments” below. The Company is an investment company following accounting and reporting guidance in ASC 946.

Cash deposits:

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.

Cash deposits: We maintain our cash balances in financial institutions and with regulated financial investment brokers. Cash on deposit in excess of FDIC and similar coverage is subject to the usual banking risk of funds in excess of those limits.

Valuation of 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, based on, among other things, the input of our executive management, the Audit Committee of our Board of Directors, and any independent third-party valuation experts that may be engaged by management to assist in the valuation of our portfolio investments, but in all cases consistent with our written valuation policies and procedures.

Due to the inherent uncertainties of valuation, certain estimated fair values may differ significantly from the values that would have been realized had a ready market for these investments existed, and these differences could be material. In addition, such investments are generally less liquid than publicly traded securities. If we were required to liquidate a portfolio investment in a forced or liquidation sale, we could realize significantly less than the value at which we have recorded it.

Accounting guidance establishes a hierarchal disclosure framework that prioritizes and ranks the level of market price observability of inputs used in measuring investments at fair value. Observable inputs must be used when available. Observable inputs are inputs that market participants would use in valuing the asset or liability based on market data obtained from independent sources. Unobservable inputs are inputs that reflect our assumptions about the factors market participants would use in valuing the asset or liability based upon the best information available. Assets and liabilities measured at fair value are to be categorized into one of the three hierarchy levels based on the relative observability of inputs used in the valuation. The three levels are defined as follows:

● Level 1: Observable inputs based on quoted prices (unadjusted) in active markets for identical assets or liabilities.

● Level 2: Observable inputs based on quoted prices for similar assets and liabilities in active markets, or quoted prices for identical assets and liabilities in inactive markets.

● Level 3: Unobservable inputs that reflect an entity’s own assumptions about what inputs a market participant would use in pricing the asset or liability based on the best information available in the circumstances.

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 available. Assets and liabilities measured at fair value are to be categorized into one of the three hierarchy levels based on the relative observability of inputs used in the valuation. The three levels are defined as follows:

● Level 1: Observable inputs based on quoted prices (unadjusted) in active markets for identical assets or liabilities.

● Level 2: Observable inputs based on quoted prices for similar assets and liabilities in active markets, or quoted prices for identical assets and liabilities in inactive markets.

● Level 3: Unobservable inputs that reflect an entity’s own assumptions about what inputs a market participant would use in pricing the asset or liability based on the best information available in the circumstances.

Our valuation policy and procedures:

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 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. 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 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 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.

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:

Income taxes:

We account for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial statement carrying amount and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.

We record net deferred tax assets to the extent we believe these assets will more likely than not be realized. In making such determination, we consider all available evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies and recent financial operations. In the event we were to determine we would be able to realize our deferred income tax assets in the future in excess of their recorded amount, we would make an adjustment to the valuation allowance, which would reduce the provision for income taxes.

We file income tax returns in the U.S. Federal jurisdiction and various state jurisdictions. We do not believe there will be any material changes in 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.

Income taxes:

We account for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements.  Deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial statement carrying 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, 2018 through 2020, which are the tax years that remain subject to examination by the tax jurisdictions as of December 31, 2021.

Revenue recognition:

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

Interest income, adjusted for amortization of premiums and accretion of discounts, is recorded on an accrual basis. Discounts from and premiums to par value on securities purchased are accreted or amortized, as applicable, into interest income over the life of the related security using the effective-yield method. The amortized cost of investments represents the original cost, adjusted for the accretion of discounts and amortization of premiums, if any. Loans are generally placed on non-accrual status when principal or interest payments are past due 30 days or more, or when there is reasonable doubt that principal or interest will be collected in full. Loan origination fees are recognized when loans are issued. Accrued and unpaid interest is generally reversed when a loan is placed on non-accrual status. Interest payments received on non-accrual loans may be recognized as income or applied to principal depending upon management’s judgment regarding collectability. Non-accrual loans are restored to accrual status when past-due principal and interest is paid and, in management’s judgment, are likely to remain current. We may make exceptions to the policy described above if a loan has sufficient collateral value and is in the process of collection.

Dividend income on preferred equity securities is recorded as dividend income on an accrual basis to the extent that such amounts are payable by the portfolio company and are expected to be collected. Dividend income on common equity securities is recorded on the record date for private portfolio companies or on the ex-dividend date for publicly traded portfolio companies.

Certain investments may have contractual payment-in-kind (“PIK”) interest or dividends. PIK represents accrued interest or accumulated dividends that are added to the loan principal or stated value of the investment on the respective interest- or dividend-payment dates rather than being paid in cash, and generally becomes due at maturity or upon being repurchased by the issuer. PIK interest or dividends is recorded as interest or dividend income, as applicable. If at any point we believe that PIK interest or dividends is not expected be realized, the PIK-generating investment will be placed on non-accrual status. Accrued PIK interest or dividends are generally reversed through interest or dividend income, respectively, when an investment in placed on non-accrual status.

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

Interest income, adjusted for amortization of premiums and accretion of discounts, is recorded on an accrual basis. Discounts from and premiums to par value on securities purchased are accreted or amortized, as applicable, into interest income over the life of the related security using the effective-yield method. The amortized cost of investments represents the original cost, adjusted for the accretion of discounts and amortization of premiums, if any. Loans are generally placed on non-accrual status when principal or interest payments are past due 30 days or more, or when there is reasonable doubt that principal or interest will be collected in full. Loan origination fees are recognized when loans are issued. Accrued and unpaid interest is generally reversed when a loan is placed on non-accrual status. Interest payments received on non-accrual loans may be recognized as income or applied to principal depending upon management’s judgment regarding collectability. Non-accrual loans are restored to accrual status when past-due principal and interest is paid and, in management’s judgment, are likely to remain current. We may make exceptions to the policy described above if a loan has sufficient collateral value and is in the process of collection.

Dividend income on preferred equity securities is recorded as dividend income on an accrual basis to the extent that such amounts are payable by the portfolio company and are expected to be collected. Dividend income on common equity securities is recorded on the record date for private portfolio companies or on the ex-dividend date for publicly traded portfolio companies.

Certain investments may have contractual payment-in-kind (“PIK”) interest or dividends. PIK represents accrued interest or accumulated dividends that are added to the loan principal or stated value of the investment on the respective interest- or dividend-payment dates rather than being paid in cash, and generally becomes due at maturity or upon being repurchased by the issuer. PIK interest or dividends is recorded as interest or dividend income, as applicable. If at any point we believe that PIK interest or dividends is not expected be realized, the PIK-generating investment will be placed on non-accrual status. Accrued PIK interest or dividends are generally reversed through interest or dividend income, respectively, when an investment in placed on non-accrual status.

Allocation of net gains and losses:

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.

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

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.

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.

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NET GAIN PER COMMON SHARE (Tables)

3 Months Ended

12 Months Ended

Mar. 31, 2022

Dec. 31, 2021

PER-SHARE INFORMATION

Summary of reconciliation of the numerator and denominator used in the calculation of basic and diluted net gain (loss) per common share

	For the Three Months Ended
	March 31,
	2022		2021
Numerator: Net increase (decrease) in net assets resulting from operations	$	412,111	$	1,745,042
Denominator: Weighted-average number of common shares outstanding		10,790,413		10,785,913
Basic and diluted net gain (loss) per common share	$	0.04	$	0.16

	For the Year Ended December 31,
	2021		2020
Numerator: Net increase in net assets resulting from operations	$	2,831,050	$	2,213,570
Denominator: Weighted-average number of common shares outstanding		10,789,294		10,869,054
Basic and diluted net gain per common share	$	0.26	$	0.20

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LEASES (Tables)

3 Months Ended

12 Months Ended

Mar. 31, 2022

Dec. 31, 2021

OPERATING LEASES

Summary of components of our operating lease

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	$	4,779	$	4,779
Variable lease cost		4,601		4,478
Short-term lease cost		7,432		7,432
Total	$	16,812	$	16,689

	Year Ended		Year Ended
	December 31,		December 31,
	2021		2020
Operating lease costs	$	19,116	$	19,116
Variable lease cost		17,613		17,461
Short-term lease cost		29,730		29,730
Total	$	66,459	$	66,307

Summary of supplemental balance sheet information

Operating Lease
Right-of-use assets	$	4,984
Operating Lease Liability	$	5,654
Less: short term portion		(5,654)
Long term portion	$	—

Summary of maturity analysis under lease agreements

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

	Operating
	Leases
2022	$	18,164
2023		14,859
Total lease payments		33,023
Less: interest		(1,035)
Present value of lease liabilities	$	31,988

	Operating
	Leases
2022	$	5,449
Total lease payments		5,449
Plus: interest		205
Present value of lease liabilities	$	5,654

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INVESTMENTS (Tables)

3 Months Ended

12 Months Ended

Mar. 31, 2022

Dec. 31, 2021

INVESTMENTS

Schedule of investments by major class, at amortized cost and fair value

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		Percentage of		Investments at		Percentage of
	Amortized Cost		Amortized Cost		Fair Value		Fair Value
Short-term Non-banking Loans	$	18,080,750	90.6	%	$	18,075,000	90.0	%
Preferred Stock		1,050,000	5.3			1,200,000	5.9
Warrants		679	—			—	—
Other Equity		812,500	4.1			812,500	4.1
Total	$	19,943,929	100.0	%	$	20,087,500	100.0	%

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		Percentage of		Investments at		Percentage of
	Amortized Cost		Amortized Cost		Fair Value		Fair Value
Short-term Non-banking Loans	$	11,655,750	83.7	%	$	11,650,000	82.6	%
Preferred Stock		1,050,000	7.5			1,200,000	8.5
Common Stock		414,128	3.0			436,175	3.1
Warrants		679	—			—	—
Other Equity		812,500	5.8			812,500	5.8
Total	$	13,933,057	100.0	%	$	14,098,675	100.0	%

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		Percentage of		Investments at		Percentage of
	Amortized Cost		Amortized Cost		Fair Value		Fair Value
Short-term Non-banking Loans	$	11,655,750	83.7	%	$	11,650,000	82.6	%
Preferred Stock		1,050,000	7.5			1,200,000	8.5
Common Stock		414,128	3.0			436,175	3.1
Warrants		679	—			—	—
Other Equity		812,500	5.8			812,500	5.8
Total	$	13,933,057	100.0	%	$	14,098,675	100.0	%

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		Percentage of		Investments at		Percentage of
	Amortized Cost		Amortized Cost		Fair Value		Fair Value
Short-term Non-banking Loans	$	2,789,000	56.2	%	$	2,789,000	41.8	%
Preferred Stock		150,000	3.0			300,000	4.5
Common Stock		1,750,000	35.2			3,300,000	49.5
Warrants		679	—			—	—
Other Equity		278,897	5.6			278,897	4.2
Total	$	4,968,576	100.0	%	$	6,667,897	100.0	%

Schedule of investments by industry grouping, based on fair value

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		Percentage of
	Fair Value		Fair Value
Consumer	$	4,862,500	24.2	%
Financial		4,025,000	20.0
Information Technology		300,000	1.5
Real Estate		10,900,000	54.3
Total	$	20,087,500	100.0	%

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
	Investments at		Percentage of
	Fair Value		Fair Value
Consumer	$	2,362,500	16.8	%
Financial		3,836,175	27.2
Information Technology		300,000	2.1
Real Estate		7,600,000	53.9
Total	$	14,098,675	100.0	%

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
	Investments at		Percentage of
	Fair Value		Fair Value
Consumer	$	2,362,500	16.8	%
Financial		3,836,175	27.2
Information Technology		300,000	2.1
Real Estate		7,600,000	53.9
Total	$	14,098,675	100.0	%

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
	Investments at		Percentage of
	Fair Value		Fair Value
Consumer	$	3,700,000	55.5	%
Financial		900,000	13.5
Information Technology		300,000	4.5
Leisure & Hospitality		278,897	4.2
Real Estate		1,489,000	22.3
Total	$	6,667,897	100.0	%

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FAIR VALUE OF FINANCIAL INSTRUMENTS (Tables)

3 Months Ended

12 Months Ended

Mar. 31, 2022

Dec. 31, 2021

FAIR VALUE OF FINANCIAL INSTRUMENTS

Schedule of fair value measurements of our investments by major class according to the fair value hierarchy

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
	Level 1		Level 2		Level 3		Total
Short-term Non-banking Loans	$	—	$	—	$	18,075,000	$	18,075,000
Preferred Stock		—		—		1,200,000		1,200,000
Other Equity		—		—		812,500		812,500
Total	$	—	$	—	$	20,087,500	$	20,087,500

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
	Level 1		Level 2		Level 3		Total
Short-term Non-banking Loans	$	—	$	—	$	11,650,000	$	11,650,000
Preferred Stock		—		—		1,200,000		1,200,000
Common Stock		436,175		—		—		436,175
Other Equity		—		—		812,500		812,500
Total	$	436,175	$	—	$	13,662,500	$	14,098,675

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
	Level 1		Level 2		Level 3		Total
Short-term Non-banking Loans	$	—	$	—	$	11,650,000	$	11,650,000
Preferred Stock		—		—		1,200,000		1,200,000
Common Stock		436,175		—		—		436,175
Other Equity		—		—		812,500		812,500
Total	$	436,175	$	—	$	13,662,500	$	14,098,675

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
	Level 1		Level 2		Level 3		Total
Short-term Non-banking Loans	$	—	$	—	$	2,789,000	$	2,789,000
Preferred Stock		—		—		300,000		300,000
Common Stock		3,300,000		—		—		3,300,000
Other Equity		—		—		278,897		278,897
Total	$	3,300,000	$	—	$	3,367,897	$	6,667,897

Schedule of reconciliation of the beginning and ending fair value balances for our Level 3 investment assets

	For the three months ended March 31, 2022
	ST Non-banking				Common
	Loans		Preferred Stock		Stock		Warrants		Other Equity
Balance as of January 1, 2022	$	11,650,000	$	1,200,000	$	—	$	—	$	812,500
Net change in unrealized appreciation		—		—		—		—		—
Purchases and other adjustments to cost		7,025,000		—		—		—		—
Sales and redemptions		(600,000)		—		—		—		—
Net realized loss		—		—		—		—		—
Balance as of March 31, 2022	$	18,075,000	$	1,200,000	$	—	$	—	$	812,500

	For the year ended December 31, 2021
	ST
	Non-banking		Preferred		Common
	Loans		Stock		Stock		Warrants		Other Equity
Balance as of January 1, 2021	$	2,789,000	$	300,000	$	—	$	—	$	278,897
Net change in unrealized appreciation		—		—		—		—		—
Purchases and other adjustments to cost		24,765,333		900,000		—		—		812,500
Sales and redemptions		(15,904,333)		—		—		—		(278,897)
Net realized loss		—		—		—		—		—
Balance as of December 31, 2021	$	11,650,000	$	1,200,000	$	—	$	—	$	812,500

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		Preferred		Common
	Loans		Stock		Stock		Warrants		Other Equity
Balance as of January 1, 2021	$	2,789,000	$	300,000	$	—	$	—	$	278,897
Net change in unrealized appreciation		—		—		—		—		—
Purchases and other adjustments to cost		24,765,333		900,000		—		—		812,500
Sales and redemptions		(15,904,333)		—		—		—		(278,897)
Net realized loss		—		—		—		—		—
Balance as of December 31, 2021	$	11,650,000	$	1,200,000	$	—	$	—	$	812,500

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
	ST Non-banking		Preferred		Common
	Loans		Stock		Stock		Warrants		Other Equity
Balance as of January 1, 2020	$	—	$	300,000	$	—	$	—	$	534,200
Net change in unrealized appreciation		—		—		—		—		486,018
Purchases and other adjustments to cost		7,543,000		—		—		—		—
Sales and redemptions		(4,754,000)		—		—		—		(91,313)
Net realized loss		—		—		—		—		(650,008)
Balance as of December 31, 2020	$	2,789,000	$	300,000	$	—	$	—	$	278,897

Schedule of Level 3 investments held and the unobservable inputs used to determine their valuation

Security Type	12/31/21 FMV		Valuation Technique	Unobservable Inputs	Range
ST Non-banking Loans	$	11,650,000	discounted cash flow	determining private company interest rate based on credit	12-44	%
Other Equity		812,500	last secured funding known by company	economic changes since last funding
Preferred Stock		1,200,000	last funding secured by company	economic changes since last funding
	$	13,662,500

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	12/31/21 FMV		Valuation Technique	Unobservable Inputs	Range
ST Non-banking Loans	$	11,650,000	discounted cash flow	determining private company interest rate based on credit	12-44	%
Other Equity		812,500	last secured funding known by company	economic changes since last funding
Preferred Stock		1,200,000	last funding secured by company	economic changes since last funding
	$	13,662,500

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	12/31/20 FMV		Valuation Technique	Unobservable Inputs	Range
ST Non-banking Loans	$	2,789,000	discounted cash flow	determining private company interest rate based on credit	14-44	%
Other Equity		278,897	last secured funding known by company	economic changes since purchase
Preferred Stock		300,000	last funding secured by company	economic changes since last funding
	$	3,367,897

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INCOME TAXES (Tables)

12 Months Ended

Dec. 31, 2021

INCOME TAXES

Schedule of components of income tax provision

	December 31, 2021
	2021		2020
Current taxes
Federal	$	909,530	$	—
State		357,168		16,679
Deferred taxes
Federal		(212,000)		258,000
State		—		13,722
Provision for income taxes	$	1,054,698	$	288,401

Schedule of reconciliation of income tax provision

	2021		2020
Rate reconciliation:
Tax expense at U.S.statutory rate	$	1,017,417	$	716,966
Change in valuation allowance		—		(446,000)
Provision-to-return reconciliation		(14,743)		21,657
Other		(1,976)		(4,222)
Income tax provision	$	1,054,698	$	288,401

Schedule of components of deferred tax assets and liabilities

	December 31, 2021
	2021		2020
Deferred tax components
Unrealized (gain) loss on marketable securities	$	(46,552)	$	(488,419)
Depreciation		2,458		3,002
Net operating loss carryforwards		—		180,460
R&D and foreign credits		—		46,957
Other		(906)		—
Net deferred tax asset (liability)	$	(45,000)	$	(258,000)

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FINANCIAL HIGHLIGHTS (Tables)

3 Months Ended

12 Months Ended

Mar. 31, 2022

Dec. 31, 2021

FINANCIAL HIGHLIGHTS

Schedule of financial highlights

	Three Months Ended March 31,
	2022			2021		2020		2019		2018
Per Share Data (1)
Net asset value at beginning of period	$	1.24		1.08		0.91		1.02		0.87
Net investment income (loss)		0.04		0.00		0.00		(0.02)		(0.01)
Net realized and unrealized gains (losses)		0.01		0.22		(0.03)		0.12		0.06
Provision for income taxes		(0.01)		(0.06)		0.00		0.00		0.00
Payment of common stock dividend		0.00		0.00		0.00		(0.05)		0.00
Net asset value at end of period	$	1.28		1.24		0.88		1.07		0.92
Ratio / Supplemental Data
Per share market value of investments at end of period	$	1.86		1.25		0.41		0.78		0.76
Shares outstanding at end of period		10,790,413		10,786,913		11,067,402		11,067,402		11,067,402
Average weighted shares outstanding for the period		10,790,413		10,785,913		11,067,402		11,067,402		11,863,392
Net assets at end of period	$	13,826,160		13,391,679		9,786,615		11,890,188		9,783,191
Average net assets (2)	$	13,620,104		12,516,283		9,927,574		12,911,895		9,770,410
Total investment return		3.23	%	14.81	%	(3.30)	%	4.90	%	5.75	%
Portfolio turnover rate (3)		8.46	%	40.24	%	0.75	%	0.93	%	0.80	%
Ratio of operating expenses to average net assets (3)		(15.28)	%	(16.20)	%	(7.82)	%	(6.06)	%	(7.52)	%
Ratio of net investment income (loss) to average net assets (3)		14.24	%	0.42	%	0.87	%	(4.87)	%	(6.16)	%
Ratio of realized gains (losses) to average net assets (3)		4.20	%	133.32	%	1.00	%	137.57	%	2.17	%

(1) Per-share data was derived using the ending number of shares outstanding for the period.

(2) Based on the monthly average of net assets as of the beginning and end of each period presented.

(3) Ratios are annualized.

	Year Ended December 31,
	2021			2020		2019		2018		2017
Per Share Data (1)
Net asset value at beginning of period	$	1.08		0.91		1.02		0.87		0.77
Net investment gain (loss)		0.12		0.05		(0.06)		(0.05)		(0.05)
Net realized and unrealized gains (losses)		0.24		0.18		0.00		0.20		0.11
Provision for income taxes		(0.10)		(0.02)		0.00		0.00		0.00
Stock based compensation		0.00		(0.01)		0.00		0.00		0.00
Repurchase of common stock		0.00		0.02		0.00		0.00		0.04
Payment of common stock dividend		(0.10)		(0.05)		(0.05)		0.00		0.00
Net asset value at end of period	$	1.24		1.08		0.91		1.02		0.87
Ratio / Supplemental Data
Per share market value of investments at end of period	$	1.31		0.62		0.16		0.90		0.65
Shares outstanding at end of period		10,790,413		10,785,913		11,067,402		11,067,402		11,067,402
Average weighted shares outstanding for the period		10,789,294		10,869,054		11,067,402		11,067,402		11,863,392
Net assets at end of period	$	13,414,049		11,640,887		10,068,533		11,278,889		9,629,215
Average net assets (2)	$	13,155,207		10,504,563		11,473,535		10,341,702		9,444,440
Total investment return		24.07	%	23.08	%	(5.88)	%	17.24	%	7.79	%
Portfolio turnover rate (3)		168.67	%	61.11	%	7.63	%	26.93	%	35.03	%
Ratio of operating expenses to average net assets (3)		(10.30)	%	(7.16)	%	(7.27)	%	(6.59)	%	(7.30)	%
Ratio of net investment income (loss) to average net assets (3)		9.89	%	5.35	%	(5.86)	%	(5.13)	%	(5.45)	%
Ratio of realized gains (losses) to average net assets (3)		31.30	%	0.05	%	28.35	%	(5.62)	%	5.71	%

(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.

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ORGANIZATION (Details)	3 Months Ended	12 Months Ended
	Mar. 31, 2022	Dec. 31, 2021
ORGANIZATION
Maximum percentage of total assets of investment securities	40.00%	40.00%

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NET GAIN PER COMMON SHARE (Details) - USD ($)	3 Months Ended					9 Months Ended			12 Months Ended
	Mar. 31, 2022	Mar. 31, 2021	Mar. 31, 2020	Mar. 31, 2019	Mar. 31, 2018	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2017	Dec. 31, 2021	Dec. 31, 2020
PER-SHARE INFORMATION
Numerator: Net increase in net assets resulting from operations	$ 412,111	$ 1,745,042							$ 2,831,050	$ 2,213,570
Denominator: Weighted-average number of common shares outstanding, basic	10,790,413	10,785,913							10,789,294	10,869,054
Weighted-average number of common shares outstanding - diluted	10,790,413	10,785,913	11,067,402	11,067,402	11,863,392	11,067,402	11,067,402	11,863,392	10,789,294	10,869,054
Basic net gain per common share	$ 0.04	$ 0.16							$ 0.26	$ 0.20
Diluted net gain per common share	$ 0.04	$ 0.16							$ 0.26	$ 0.20

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LEASES - Additional Information (Details)	3 Months Ended		12 Months Ended
	Mar. 31, 2022 USD ($) lease	Mar. 31, 2021 USD ($)	Dec. 31, 2021 USD ($) lease	Dec. 31, 2020 USD ($)
OPERATING LEASES
Number of non-cancelable operating leases | lease	2		2
Weighted-average discount rate			4.50%
Weighted-average remaining lease term			1 year
Rent expense under ASC 840 | $	$ 16,812	$ 16,689	$ 66,459	$ 66,307

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LEASES - components of our operating lease (Details) - USD ($)	3 Months Ended		12 Months Ended
	Mar. 31, 2022	Mar. 31, 2021	Dec. 31, 2021	Dec. 31, 2020
Components of our operating lease
Operating lease costs	$ 4,779	$ 4,779	$ 19,116	$ 19,116
Variable lease cost	4,601	4,478	17,613	17,461
Short-term lease cost	7,432	7,432	29,730	29,730
Total	$ 16,812	$ 16,689	$ 66,459	$ 66,307

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LEASES - Supplemental balance sheet information (Details) - USD ($)	Mar. 31, 2022	Dec. 31, 2021	Dec. 31, 2020
Supplemental balance sheet information
Right-of-use assets		$ 4,984	$ 23,345
Operating Lease Liability	$ 31,988	5,654	$ 26,061
Less: short term portion		$ (5,654)

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LEASES - Maturity analysis under lease agreements (Details) - USD ($)	Mar. 31, 2022	Dec. 31, 2021	Dec. 31, 2020
Maturity analysis under lease agreements
2022	$ 18,164	$ 5,449
Total lease payments	33,023	5,449
Plus: interest		205
Present value of lease liabilities	$ 31,988	$ 5,654	$ 26,061

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SHAREHOLDERS' EQUITY (Details) - shares	12 Months Ended
	Dec. 31, 2021	Mar. 31, 2022	Mar. 31, 2021	Dec. 31, 2020	Oct. 26, 2020	Mar. 31, 2020	Sep. 30, 2019	Mar. 31, 2019	Sep. 30, 2018	Mar. 31, 2018	Sep. 30, 2017
SHAREHOLDERS' EQUITY
Common stock issued	10,790,413	10,790,413		10,785,913
Common stock, shares outstanding	10,790,413	10,790,413	10,786,913	10,785,913		11,067,402	11,067,402	11,067,402	11,067,402	11,067,402	11,067,402
Number of shares issued during the period	4,500
Number of shares authorized to repurchase under stock repurchase program					400,000

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INVESTMENTS - Composition of our investments by major class (Details) - USD ($)	3 Months Ended	12 Months Ended
	Mar. 31, 2022	Dec. 31, 2021	Dec. 31, 2020
Investment Holdings [Line Items]
Investments at Amortized Cost	$ 19,943,929	$ 13,933,057	$ 4,968,576
Percentage of Amortized Cost	100.00%	100.00%	100.00%
Investments at Fair Value	$ 20,087,500	$ 14,098,675	$ 6,667,897
Percentage of Fair Value	100.00%	100.00%	100.00%
Consumer
Investment Holdings [Line Items]
Investments at Fair Value	$ 4,862,500	$ 2,362,500	$ 3,700,000
Percentage of Fair Value	24.20%	16.80%	55.50%
Financial
Investment Holdings [Line Items]
Investments at Fair Value	$ 4,025,000	$ 3,836,175	$ 900,000
Percentage of Fair Value	20.00%	27.20%	13.50%
Information Technology
Investment Holdings [Line Items]
Investments at Fair Value	$ 300,000	$ 300,000	$ 300,000
Percentage of Fair Value	1.50%	2.10%	4.50%
Leisure & Hospitality
Investment Holdings [Line Items]
Investments at Fair Value			$ 278,897
Percentage of Fair Value			4.20%
Real Estate
Investment Holdings [Line Items]
Investments at Fair Value	$ 10,900,000	$ 7,600,000	$ 1,489,000
Percentage of Fair Value	54.30%	53.90%	22.30%
Short-Term Non-banking Loans
Investment Holdings [Line Items]
Investments at Amortized Cost	$ 18,080,750	$ 11,655,750	$ 2,789,000
Percentage of Amortized Cost	90.60%	83.70%	56.20%
Investments at Fair Value	$ 18,075,000	$ 11,650,000	$ 2,789,000
Percentage of Fair Value	90.00%	82.60%	41.80%
Preferred Stock
Investment Holdings [Line Items]
Investments at Amortized Cost	$ 1,050,000	$ 1,050,000	$ 150,000
Percentage of Amortized Cost	5.30%	7.50%	3.00%
Investments at Fair Value	$ 1,200,000	$ 1,200,000	$ 300,000
Percentage of Fair Value	5.90%	8.50%	4.50%
Preferred Stock | Information Technology
Investment Holdings [Line Items]
Investments at Amortized Cost	$ 150,000	$ 150,000	$ 150,000
Investments at Fair Value	300,000	300,000	300,000
Common Stock
Investment Holdings [Line Items]
Investments at Amortized Cost		$ 414,128	$ 1,750,000
Percentage of Amortized Cost		3.00%	35.20%
Investments at Fair Value		$ 436,175	$ 3,300,000
Percentage of Fair Value		3.10%	49.50%
Common Stock | Financial
Investment Holdings [Line Items]
Investments at Amortized Cost		$ 414,128
Investments at Fair Value		436,175
Warrants
Investment Holdings [Line Items]
Investments at Amortized Cost	679	679	$ 679
Other Equity
Investment Holdings [Line Items]
Investments at Amortized Cost	$ 812,500	$ 812,500	$ 278,897
Percentage of Amortized Cost	4.10%	5.80%	5.60%
Investments at Fair Value	$ 812,500	$ 812,500	$ 278,897
Percentage of Fair Value	4.10%	5.80%	4.20%
Other Equity | Consumer
Investment Holdings [Line Items]
Investments at Amortized Cost		$ 212,500
Investments at Fair Value		212,500
Other Equity | Financial
Investment Holdings [Line Items]
Investments at Amortized Cost		600,000
Investments at Fair Value		$ 600,000
Other Equity | Leisure & Hospitality
Investment Holdings [Line Items]
Investments at Amortized Cost			$ 278,897
Investments at Fair Value			$ 278,897

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FAIR VALUE OF FINANCIAL INSTRUMENTS (Details)	3 Months Ended	12 Months Ended
	Mar. 31, 2022 USD ($)	Dec. 31, 2021 USD ($)	Dec. 31, 2020 USD ($)
FAIR VALUE OF FINANCIAL INSTRUMENTS
Investments at Fair Value	$ 20,087,500	$ 14,098,675	$ 6,667,897
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Net change in unrealized appreciation attributable to Level 3 investments still held		0	0
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset Transfers Into Level 3		0	0
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset, Transfers out of Level 3		0	0
Short-Term Non-banking Loans
FAIR VALUE OF FINANCIAL INSTRUMENTS
Investments at Fair Value	18,075,000	11,650,000	2,789,000
Common Stock
FAIR VALUE OF FINANCIAL INSTRUMENTS
Investments at Fair Value		436,175	3,300,000
Preferred Stock
FAIR VALUE OF FINANCIAL INSTRUMENTS
Investments at Fair Value	1,200,000	1,200,000	300,000
Other Equity
FAIR VALUE OF FINANCIAL INSTRUMENTS
Investments at Fair Value	812,500	812,500	278,897
Level 1
FAIR VALUE OF FINANCIAL INSTRUMENTS
Investments at Fair Value		436,175	3,300,000
Level 1 | Common Stock
FAIR VALUE OF FINANCIAL INSTRUMENTS
Investments at Fair Value		436,175	3,300,000
Level 3
FAIR VALUE OF FINANCIAL INSTRUMENTS
Investments at Fair Value	20,087,500	13,662,500	3,367,897
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Net change in unrealized appreciation attributable to Level 3 investments still held	0	0
Level 3 | Short-Term Non-banking Loans
FAIR VALUE OF FINANCIAL INSTRUMENTS
Investments at Fair Value	18,075,000	11,650,000	2,789,000
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Balance at the beginning	11,650,000	2,789,000
Purchases and other adjustments to cost	7,025,000	24,765,333	7,543,000
Sales and redemptions	(600,000)	(15,904,333)	(4,754,000)
Balance at the end	$ 18,075,000	$ 11,650,000	$ 2,789,000
Level 3 | Short-Term Non-banking Loans | Interest rate | Minimum
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Interest rate	12	12	14
Level 3 | Short-Term Non-banking Loans | Interest rate | Maximum
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Interest rate	48	44	44
Level 3 | Preferred Stock
FAIR VALUE OF FINANCIAL INSTRUMENTS
Investments at Fair Value	$ 1,200,000	$ 1,200,000	$ 300,000
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Balance at the beginning	1,200,000	300,000	300,000
Purchases and other adjustments to cost		900,000
Balance at the end	1,200,000	1,200,000	300,000
Level 3 | Other Equity
FAIR VALUE OF FINANCIAL INSTRUMENTS
Investments at Fair Value	812,500	812,500	278,897
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Balance at the beginning	812,500	278,897	534,200
Net change in unrealized appreciation			486,018
Purchases and other adjustments to cost		812,500
Sales and redemptions		(278,897)	(91,313)
Net realized loss			(650,008)
Balance at the end	$ 812,500	$ 812,500	$ 278,897

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RELATED-PARTY TRANSACTIONS (Details) - USD ($)	Jan. 03, 2022	Aug. 10, 2018	Mar. 07, 2022
Subsequent events.
Related Party Transaction [Line Items]
Interest rate per annum			48.00%
Loan Agreement | Subsequent events.
Related Party Transaction [Line Items]
Quarterly unused capacity commitment fee (in percentage)	1.00%
Ms. Zbikowski, along with her husband Scott Zbikowski
Related Party Transaction [Line Items]
Shares of common stock owned by related party		1,765,000
Promissory note term		2 years
Principal amount of note obtained		$ 250,000
Interest payable monthly (as a percent)		10.00%
Debtors' pledge in number of common stock		625,000
Lenders | Loan Agreement | Subsequent events.
Related Party Transaction [Line Items]
Maximum borrowing capacity	$ 5,000,000
Obligation to provide funds in aggregate loan amount (in percentage)	0.50%
Loan agreement term	5 years
Lyle A. Berman | Revolving line of credit
Related Party Transaction [Line Items]
Maximum borrowing capacity	$ 5,000,000
Lyle A. Berman | Revolving line of credit | Subsequent events.
Related Party Transaction [Line Items]
Maximum borrowing capacity	5,000,000
Lyle A. Berman | Loan Agreement | Subsequent events.
Related Party Transaction [Line Items]
Maximum borrowing capacity	$ 5,000,000
Interest rate per annum	8.00%
Obligation to provide funds in aggregate loan amount (in percentage)	0.50%
Loan agreement term	5 years

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RETIREMENT SAVINGS PLANS (Details) - USD ($)	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020
RETIREMENT SAVINGS PLANS
Percentage of safe harbor match	100.00%
Employer contribution percentage	5.00%
Contributions made	$ 11,250	$ 10,550

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INCOME TAXES - Components of income tax provision (Details) - USD ($)	3 Months Ended		12 Months Ended
	Mar. 31, 2022	Mar. 31, 2021	Dec. 31, 2021	Dec. 31, 2020
Current taxes
Federal			$ 909,530
State			357,168	$ 16,679
Deferred taxes
Federal			(212,000)	258,000
State				13,722
Provision for income taxes	$ 159,000	$ 662,691	$ 1,054,698	$ 288,401

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INCOME TAXES - Reconciliation of income tax provision (Details) - USD ($)	3 Months Ended		12 Months Ended
	Mar. 31, 2022	Mar. 31, 2021	Dec. 31, 2021	Dec. 31, 2020
Rate reconciliation:
Tax expense at U.S.statutory rate			$ 1,017,417	$ 716,966
Change in valuation allowance				(446,000)
Provision-to-return reconciliation			(14,743)	21,657
Other			(1,976)	(4,222)
Provision for income taxes	$ 159,000	$ 662,691	$ 1,054,698	$ 288,401

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INCOME TAXES - Additional information (Details)	Dec. 31, 2020 USD ($)
Operating Loss Carryforwards [Line Items]
Federal NOL	$ 1,330,000
Federal Operating loss	350,000
Federal NOL that does not expire	350,000
Domestic Tax Authority
Operating Loss Carryforwards [Line Items]
Federal Operating loss	$ 350,000

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INCOME TAXES - Components of deferred tax assets and liabilities (Details) - USD ($)	Mar. 31, 2022	Dec. 31, 2021	Dec. 31, 2020
Deferred tax components
Unrealized (gain) loss on marketable securities		$ (46,552)	$ (488,419)
Depreciation		2,458	3,002
Net operating loss carryforwards			180,460
R&D and foreign credits			46,957
Other		(906)
Net deferred tax asset (liability)	$ (39,000)	$ (45,000)	$ (258,000)

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FINANCIAL HIGHLIGHTS (Details) - USD ($)	3 Months Ended					9 Months Ended			12 Months Ended
	Mar. 31, 2022	Mar. 31, 2021	Mar. 31, 2020	Mar. 31, 2019	Mar. 31, 2018	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2017	Dec. 31, 2021	Dec. 31, 2020
Per Share Data (1)
Net asset value at beginning of period	$ 1.24	$ 1.08	$ 0.91	$ 1.02	$ 0.87	$ 1.02	$ 0.87	$ 0.77	$ 1.08	$ 0.91
Net investment gain (loss)	0.04	0.00	0.00	(0.02)	(0.01)	(0.06)	(0.05)	(0.05)	0.12	0.05
Net realized and unrealized gains (losses)	0.01	0.22	(0.03)	0.12	0.06	0.00	0.20	0.11	0.24	0.18
Provision for income taxes	(0.01)	(0.06)	0.00	0.00	0.00	0.00	0.00	0.00	(0.10)	(0.02)
Stock based compensation						0.00	0.00	0.00	0.00	(0.01)
Repurchase of common stock						0.00	0.00	0.04	0.00	0.02
Payment of common stock dividend	(0.00)	(0.00)	(0.00)	(0.05)	(0.00)	(0.05)	(0.00)	(0.00)	(0.10)	(0.05)
Net asset value at end of period	1.28	1.24	0.88	1.07	0.92	0.91	1.02	0.87	1.24	1.08
Ratio / Supplemental Data
Per share market value of investments at end of period	$ 1.86	$ 1.25	$ 0.41	$ 0.78	$ 0.76	$ 0.16	$ 0.90	$ 0.65	$ 1.31	$ 0.62
Shares outstanding at end of period	10,790,413	10,786,913	11,067,402	11,067,402	11,067,402	11,067,402	11,067,402	11,067,402	10,790,413	10,785,913
Average weighted shares outstanding for the period	10,790,413	10,785,913	11,067,402	11,067,402	11,863,392	11,067,402	11,067,402	11,863,392	10,789,294	10,869,054
Net assets at end of period	$ 13,826,160	$ 13,391,679	$ 9,786,615	$ 11,890,188	$ 9,783,191	$ 10,068,533	$ 11,278,889	$ 9,629,215	$ 13,414,049	$ 11,640,887
Average net assets	$ 13,620,104	$ 12,516,283	$ 9,927,574	$ 12,911,895	$ 9,770,410	$ 11,473,535	$ 10,341,702	$ 9,444,440	$ 13,155,207	$ 10,504,563
Total investment return	3.23%	14.81%	(3.30%)	4.90%	5.75%	(5.88%)	17.24%	7.79%	24.07%	23.08%
Portfolio turnover rate	8.46	40.24	0.75	0.93	0.80	7.63	26.93	35.03	168.67	61.11
Ratio of operating expenses to average net assets	(15.28%)	(16.20%)	(7.82%)	(6.06%)	(7.52%)	(7.27%)	(6.59%)	(7.30%)	(10.30%)	(7.16%)
Ratio of net investment income (loss) to average net assets	14.24%	0.42%	0.87%	(4.87%)	(6.16%)	(5.86%)	(5.13%)	(5.45%)	9.89%	5.35%
Ratio of realized gains (losses) to average net assets	4.20	133.32	1.00	137.57	2.17	28.35	(5.62)	5.71	31.30	0.05

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SUBSEQUENT EVENTS (Details)					3 Months Ended		12 Months Ended
	Mar. 07, 2022 USD ($) item	Jan. 26, 2022 USD ($)	Jan. 12, 2022 USD ($)	Jan. 03, 2022 USD ($)	Mar. 31, 2022 USD ($)	Mar. 31, 2021 USD ($)	Dec. 31, 2021 USD ($)	Dec. 31, 2020 USD ($)	Feb. 11, 2022 $ / shares shares
Subsequent Event [Line Items]
Advances made					$ 7,025,000	$ 9,430,664	$ 27,029,292	$ 9,405,802
Short-term loan funded					$ 19,943,929		$ 13,933,057	$ 4,968,576
Lyle A. Berman | Revolving line of credit
Subsequent Event [Line Items]
Maximum borrowing capacity				$ 5,000,000
Subsequent events.
Subsequent Event [Line Items]
Interest rate per annum	48.00%
Warrants exercisable price | $ / shares									$ 4.00
Number of Townhouse Units Expected to be Developed by Borrower | item	139
Subsequent events. | Maximum
Subsequent Event [Line Items]
Shares of common stock purchasable upon the exercise of the warrants | shares									2,697,603
Subsequent events. | 33.33% Promissory Note
Subsequent Event [Line Items]
Face value of investment		$ 1,125,000
Interest rate		33.33%
Promissory note term		120 days
Subsequent events. | Short-term Debt.
Subsequent Event [Line Items]
Short-term loan funded	$ 3,400,000
Subsequent events. | Revolving line of credit | $2,500,000 Revolving Credit and Security Loan
Subsequent Event [Line Items]
Face value of investment			$ 2,500,000
Interest rate			15.00%
Advances made		$ 960,000	$ 1,250,000
Subsequent events. | Loan Agreement
Subsequent Event [Line Items]
Quarterly unused capacity commitment fee (in percentage)				1.00%
Subsequent events. | Lenders | Loan Agreement
Subsequent Event [Line Items]
Maximum borrowing capacity				$ 5,000,000
Obligation to provide funds in aggregate loan amount (in percentage)				0.50%
Loan agreement term				5 years
Subsequent events. | Lyle A. Berman | Revolving line of credit
Subsequent Event [Line Items]
Maximum borrowing capacity				$ 5,000,000
Subsequent events. | Lyle A. Berman | Loan Agreement
Subsequent Event [Line Items]
Maximum borrowing capacity				$ 5,000,000
Interest rate per annum				8.00%
Obligation to provide funds in aggregate loan amount (in percentage)				0.50%
Loan agreement term				5 years