Executive Summary / Key Takeaways

• Strategic Pivot to Digital Assets: Mill City Ventures (MCVT) has undergone a profound transformation, pivoting from a traditional short-term specialty finance lender to a pioneering public company with a primary treasury allocation to the Sui blockchain's native cryptocurrency, SUI. This bold move aims to provide institutional-grade exposure to a blockchain ecosystem positioned for large-scale adoption and AI workloads.
• Substantial Capital Infusion for SUI Strategy: Post-Q2 2025, MCVT secured approximately $450 million through a private placement and established a $500 million equity line, specifically earmarked to accelerate its SUI treasury strategy. This capital underpins its aggressive accumulation of SUI, reaching 81.87 million tokens valued at $316 million by August 10, 2025.
• Robust Legacy Business & Strong Margins: While transforming, MCVT's core short-term lending business remains fully operational, generating consistent investment income and exhibiting strong profitability. The company reported a 90.50% TTM Gross Profit Margin and 42.43% TTM Net Profit Margin, significantly outperforming many traditional finance peers.
• Unique Competitive Positioning: MCVT asserts itself as the "only publicly traded SUI treasury" and the "largest SUI treasury on the public markets today," leveraging strategic partnerships with the Sui Foundation and Galaxy Digital (GLXY) to solidify its unique position in the evolving digital asset landscape.
• Key Risks and Oversight: Investors must consider the inherent volatility and regulatory uncertainty of digital assets, alongside a disclosed material weakness in internal controls over financial reporting, which the company is actively addressing with external accounting support.

The Dual Mandate: From Specialty Finance to Digital Asset Pioneer

Mill City Ventures III, Ltd. (MCVT) is undergoing a dramatic metamorphosis, evolving from its roots as a niche short-term specialty finance provider into a trailblazing public company with a strategic treasury focused on the Sui blockchain's native cryptocurrency, SUI. This strategic pivot, initiated in July 2025, represents a bold reorientation of capital allocation, aiming to capture the burgeoning opportunities within the digital asset ecosystem while maintaining its established, profitable lending operations.

Historically, MCVT carved out a business providing secured, short-term non-bank loans to small businesses and high-net-worth individuals. These loans, typically with maturities of nine months or shorter, generated substantial interest income, with the portfolio yielding an impressive average rate of 20.00%. The company's objective was to derive revenue from these high-yield loans and associated fees, alongside opportunistic equity-linked investments. This legacy business, characterized by its illiquid nature and collateral-backed structure, has provided a stable foundation, contributing consistent net investment gains.

The strategic landscape for MCVT, however, has fundamentally shifted. The company's Board of Directors approved a new treasury policy to allocate the principal holding in its treasury reserve to SUI. This decision is rooted in a conviction that the Sui blockchain is "well positioned for large-scale adoption with the speed and efficiency institutions require for crypto at scale, plus the technical architecture capable of supporting AI workloads while maintaining security and decentralization." This vision positions MCVT at the intersection of traditional finance and the rapidly expanding digital economy, particularly in areas driven by artificial intelligence.

Technological Edge and Strategic Partnerships in the Digital Realm

MCVT's technological differentiation is not in developing a proprietary blockchain, but in its strategic adoption and leveraging of the Sui blockchain's capabilities. The company's stated belief in Sui's architecture for "AI workloads" and "institutional-grade exposure" highlights its conviction in the platform's underlying technology. Sui's design, emphasizing speed, efficiency, security, and decentralization, forms the bedrock of MCVT's new treasury strategy. While specific quantifiable performance metrics for Sui's technology are not detailed in MCVT's filings, the company's strategic intent is clear: to capitalize on these inherent advantages through direct SUI accumulation.

To execute this ambitious strategy, MCVT has forged critical partnerships. A Strategic Advisor Agreement with Karatage Opportunities provides technical advisory services on the digital asset ecosystem, SUI, crypto gaming, and vendor selection for asset management. Concurrently, an Asset Management Agreement with Galaxy Digital Capital Management LP grants Galaxy Digital exclusive rights to manage the first $750 million of MCVT's digital assets, and at least 50% of assets exceeding that, focusing on a long-only SUI investment strategy that may include staking and restaking for enhanced returns. Furthermore, a Digital Asset Purchase and Sale Agreement with the Sui Foundation secures direct SUI token purchases, complete with preemptive rights for future acquisitions through July 2027. These partnerships are crucial for MCVT to navigate the complex digital asset landscape, providing expertise and operational infrastructure that would be challenging to build internally.

Financial Performance and the Capital Catalyst

MCVT's financial performance for the six months ended June 30, 2025, reflects the strength of its legacy lending operations, even as it prepared for its transformative pivot. Investment income for the six months reached $1.73 million, a slight increase from $1.72 million in the prior year. Net investment gain saw a healthy rise to $1.03 million, up from $962,150 in the same period of 2024. This improvement was partly driven by a reduction in operating expenses, with professional fees decreasing due to lower loan activity and interest expense eliminated following the termination of a $5.00 million line of credit in January 2024.

The company's investment portfolio, as of June 30, 2025, comprised $17.85 million at fair value, predominantly in commercial business loans ($10.31 million, 57.80%) and short-term non-banking loans ($6.69 million, 37.40%). A significant shift was observed in investment performance, with $476,781 in unrealized appreciation for the six months ended June 30, 2025, a stark contrast to the $237,890 in unrealized depreciation during the comparable period in 2024. This contributed to a net increase in net assets from operations of $1.13 million, or $0.18 per share, for the first half of 2025, compared to $795,039, or $0.12 per share, in 2024.

The true financial catalyst for MCVT's new direction came post-reporting period. On July 31, 2025, the company completed a private placement, raising approximately $450 million through the issuance of 75.88 million common shares and pre-funded warrants. This was further bolstered by an August 1, 2025, equity line agreement allowing the sale of up to an additional $500 million in common stock. These capital raises are explicitly intended to fuel the SUI treasury strategy. By August 10, 2025, MCVT had already accumulated 81.87 million SUI tokens, valued at $316 million based on a $3.85 per SUI price, translating to approximately $3.38 of SUI per common share. This rapid accumulation underscores the company's commitment and the significant scale of its digital asset ambitions.

Competitive Landscape: A Dual-Front Battle

MCVT now operates in two distinct, yet potentially synergistic, competitive arenas. In its legacy short-term lending business, it competes with established specialty finance firms such as Horizon Technology Finance Corporation (HRZN), Hercules Capital, Inc. (HTGC), Main Street Capital Corporation (MAIN), and Gladstone Capital Corporation (GLAD). MCVT's TTM Gross Profit Margin of 90.50% and Net Profit Margin of 42.43% are notably higher than those of its traditional peers (HRZN: 1.00% Gross, -3.34% Net; HTGC: 87% Gross, 63% Net; MAIN: 1.11% Gross, 94% Net; GLAD: 78% Gross, 98% Net). While MCVT's revenue base is smaller, its high margins suggest efficient operations in its niche. Its debt/equity ratio of 0.00 further highlights a conservative balance sheet compared to HRZN (1.39), HTGC (0.90), MAIN (0.76), and GLAD (0.68). MCVT differentiates itself with a hands-on advisory approach, fostering deeper client relationships, which can be a competitive advantage against more transactional lenders.

However, the more transformative competitive front is in the digital asset space. Here, MCVT positions itself as a market leader, claiming to be the "only publicly traded SUI treasury" and the "largest SUI treasury on the public markets today." This unique status, coupled with its official relationship with the Sui Foundation and the asset management expertise of Galaxy Digital, provides a significant first-mover advantage. While direct comparisons with other public companies primarily focused on SUI treasury management are currently limited due to its novel approach, MCVT's strategy aims to attract institutional investors seeking exposure to the Sui blockchain without direct crypto custody or operational complexities. The company's ability to leverage its public listing for capital raises, as demonstrated by the recent private placement and equity line, further strengthens its competitive stance in this emerging sector.

Outlook, Risks, and the Path Forward

The outlook for MCVT is fundamentally tied to the success of its SUI treasury strategy and the broader adoption of the Sui blockchain. The substantial capital raised and the ongoing equity line provide significant resources for continued SUI accumulation. Management's rationale, emphasizing Sui's suitability for institutional adoption and AI workloads, suggests a long-term vision for value creation in the digital economy. The minimum annual fee of $1 million to Galaxy Digital for asset management underscores the commitment to professional oversight of its digital asset holdings.

However, this ambitious pivot is not without significant risks. The digital asset market is inherently volatile, subject to rapid price fluctuations, regulatory changes, and technological disruptions. The valuation of SUI, like other cryptocurrencies, can be highly subjective and may differ materially from realized values. Furthermore, MCVT has disclosed a material weakness in its internal control over financial reporting as of June 30, 2025. While the company is actively addressing this by retaining an accounting firm and implementing remedial procedures, this remains a critical area for investor monitoring. The company's strategy to avoid regulation under the 1940 Act by limiting investment securities to 40% of total assets also adds a layer of complexity and compliance risk.

Conclusion

Mill City Ventures stands at a pivotal juncture, having boldly embraced a dual strategy that combines its established, high-margin specialty finance business with an aggressive, first-of-its-kind SUI digital asset treasury. The company's transformation, backed by significant capital raises and strategic partnerships, positions it as a unique vehicle for investors seeking institutional-grade exposure to the Sui blockchain, particularly given its perceived advantages for AI workloads and large-scale adoption.

While the legacy lending operations provide a stable, profitable base, the core investment thesis now hinges on MCVT's ability to effectively execute its SUI strategy, manage the inherent volatility of digital assets, and successfully navigate the evolving regulatory landscape. The company's claim of market leadership in publicly traded SUI treasuries, coupled with its robust balance sheet and high profitability in its traditional segment, presents a compelling, albeit high-risk, high-reward proposition. Investors will need to closely monitor the remediation of internal control weaknesses and the continued growth and stability of its SUI holdings as MCVT forges its path in this new digital frontier.