Business Context and Reporting Period
This Form 8-K is filed by Mill City Ventures III, Ltd. (not SUI Group Holdings Ltd.) on May 19, 2023. The report addresses a material accounting error discovered during the review of the Company's Form 10-Q for the period ended March 31, 2023, which necessitates a restatement of the audited consolidated financial statements for the year ended December 31, 2022.
Key Financial Metrics and Adjustments
The filing details specific adjustments required to correct the financial statements for the Non-Reliance Period (ended December 31, 2022). The error involved the failure to accrue $640,000 in cash bonuses declared and paid in January 2023 but relating to the prior period.
- Expense Adjustments: Payroll expenses will increase by $400,000 and director's fees by $240,000.
- Net Assets Impact: Net increase in net assets resulting from operations before taxes will decrease by $640,000.
- Tax Impact: Provision for income taxes will decrease by $168,958.
- Net Income Impact: Net increase in net assets resulting from operations will decrease by $470,779.
- Per Share Impact: Net increase in net assets per share will decrease by $0.09; Net asset value per common share will decrease by $0.08.
- Balance Sheet Impact: Accounts payable will increase by $640,000; accumulated undistributed investment loss will increase by $470,779; total shareholders' equity will decrease by $470,779.
- Cash Flow: The restatement will have no effect on the statement of cash flows.
Material Changes and Restatement
The primary material change is the identification of a material weakness in internal controls over financial reporting. The Company failed to accrue compensation in accordance with GAAP. Consequently, the Company will file an amendment to its Annual Report on Form 10-K for the year ended December 31, 2022, expected on May 22, 2023, to restate the financials. Investors are advised not to rely on the previously issued audited financial statements for the period ended December 31, 2022.
Management Commentary and Risks
Management has concluded that the control deficiency constitutes a material weakness relating to the design and maintenance of internal controls over the completeness and accuracy of accounting for accruing compensation. These matters have been discussed with the Audit Committee and the independent registered public accounting firm, Boulay PLLP. The filing does not provide forward-looking guidance or outlook beyond the immediate restatement process.
Investor Verification Checklist
- Verify the filing of the amended Form 10-K for the year ended December 31, 2022, expected on May 22, 2023.
- Confirm the updated Net Asset Value (NAV) per share reflecting the $0.08 decrease.
- Review the Company's remediation plan for the identified material weakness in internal controls over compensation accruals.
- Note that the registrant name in the filing is Mill City Ventures III, Ltd., not SUI Group Holdings Ltd.