Mill City Ventures III Ltd
For the period ended Dec 31, 2024. Filed Mar 10, 2025.
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FY2024 · Filed Mar 10, 2025
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Reports of Independent Registered Public Accounting Firm
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and
Shareholders’ of Mill City Ventures III, Ltd.
Opinion on the Financial Statements
We have audited the accompanying balance sheets of Mill City Ventures III, Ltd. (the Company) as of December 31, 2024 and 2023, including the investment schedules and the related statements of operations, shareholders’ equity, and cash flows for each of the years in the two-year period ended December 31, 2024, and the related notes (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
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 6 to the financial statements, the accompanying financial statements include investments valued at $13,006,231 and $17,284,676 as of December 31, 2024 and 2023, respectively, whose fair values have been estimated 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. The investments are valued based on unobservable inputs as of December 31, 2024 and 2023. 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 was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, 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, 2024, the balances of the Company’s investments, at fair value, categorized as Level 3 within the fair value hierarchy totaled $13,006,231. The fair values of these investments are determined by management using the valuation techniques and significant unobservable inputs described in Notes 5 and 6 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 and judgement 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. | |
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| 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 assigned senior, more experienced audit team members to perform audit procedures related to the valuation of investments. | |
| · | 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 the other information obtained during the audit that corroborated or contradicted the Company’s inputs or fair value measurements. | |
| · | For investments sold during the year or subsequent to year-end, we compared the transaction price to the Company’s fair value estimate to assess the reasonableness of management’s fair value estimates. |
/s/Boulay PLLP
We have served as the Company’s auditor since 2019.
Minneapolis, Minnesota
March 7, 2025
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