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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 10-Q

 

 

(Mark One)

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended March 31, 2024

 

or

 

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from to

 

Commission File Number: 001-39832

 

 

Great Elm Group, Inc.

(Exact name of registrant as specified in its charter)

 

 

Delaware

85-3622015

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

3801 PGA Boulevard, Suite 603, Palm Beach Gardens, FL

33410

(Address of principal executive offices)

(Zip Code)

(617) 375-3006

(Registrant’s telephone number, including area code)

800 South Street, Suite 230, Waltham MA 02453

(Former address, if changed since last report)

 

 

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.001 per share

GEG

The Nasdaq Stock Market LLC

(Nasdaq Global Select Market)

7.25% Notes due 2027

GEGGL

The Nasdaq Stock Market LLC

(Nasdaq Global Select Market)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a 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 Exchange Act.

 

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 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

 

As of May 7, 2024, there were 31,875,285 shares of the registrant’s common stock outstanding.

 


 

 

Table of Contents

 

PART I. FINANCIAL INFORMATION

 

 

 

 

Item 1.

 

Financial Statements

3

 

 

Unaudited Condensed Consolidated Balance Sheets as of March 31, 2024 and June 30, 2023

3

 

 

Unaudited Condensed Consolidated Statements of Operations for the three and nine months ended March 31, 2024 and 2023

4

 

 

Unaudited Condensed Consolidated Statements of Stockholders’ Equity for the three months ended March 31, 2024, December 31, 2023 and September 30, 2023

5

 

 

Unaudited Condensed Consolidated Statements of Stockholders’ Equity and Contingently Redeemable Non-Controlling Interest for the three months ended March 31, 2023, December 31, 2022 and September 30, 2022

6

 

 

Unaudited Condensed Consolidated Statements of Cash Flows for the nine months ended March 31, 2024 and 2023

7

 

 

Unaudited Notes to Condensed Consolidated Financial Statements

9

Item 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

23

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

26

Item 4.

 

Controls and Procedures

26

 

 

 

 

PART II. OTHER INFORMATION

27

 

 

 

 

Item 1.

 

Legal Proceedings

27

Item 1A.

 

Risk Factors

27

Item 5.

 

Other Information

27

Item 6.

 

Exhibits

28

 

 

 

 

SIGNATURES

29

 

Unless the context otherwise requires, “we,” “us,” “our,” “GEG,” the “Company” and terms of similar import refer to Great Elm Group, Inc. and/or its subsidiaries. Our corporate website address is www.greatelmgroup.com. The information contained in, or accessible through, our corporate website does not constitute part of this report.

1


 

Cautionary Statement Regarding Forward-Looking Information

This report and certain information incorporated herein by reference contain forward-looking statements under the Private Securities Litigation Reform Act of 1995. Such statements often include words such as “may,” “will,” “should,” “believe,” “expect,” “seek,” “anticipate,” “intend,” “estimate,” “plan,” “target,” “project,” “forecast,” “envision” and other similar phrases. Although we believe the assumptions and expectations reflected in these forward-looking statements are reasonable, these assumptions and expectations may not prove to be correct, and we may not achieve the financial results or benefits anticipated. These forward-looking statements are not guarantees of actual results. Our actual results may differ materially from those suggested in the forward-looking statements. These forward-looking statements involve a number of risks and uncertainties, some of which are beyond our control, including, without limitation:

the ability of Great Elm Capital Management, Inc. (GECM) to profitably manage Great Elm Capital Corp. (NASDAQ: GECC), a business development company, and Monomoy UpREIT, LLC (Monomoy UpREIT), the operating subsidiary of a private real estate investment trust with a portfolio of diversified net leased industrial assets;
the dividend rate that GECC and Monomoy UpREIT will pay;
the results of our investment management activities;
our ability to sell the real estate properties we develop at a profit;
our ability to raise capital to fund our business plan;
our ability to make acquisitions and manage any businesses we may acquire;
conditions in the equity capital markets and debt capital markets as well as the economy generally, including market uncertainty regarding changes to interest rates and inflationary pressures;
our ability to maintain the security of electronic and other confidential information;
serious disruptions and catastrophic events, including, for example, the potential impact of public health emergencies on the global economy;
competition, mostly from larger, well-financed organizations (both domestic and foreign), including operating companies, global asset managers, investment banks, commercial banks, and private equity funds;
outcomes of litigation and proceedings and the availability of insurance, indemnification and other third-party coverage of any losses suffered in connection therewith;
maintaining our contractual arrangements and relationships with third parties;
our ability to attract, assimilate, develop and retain key personnel;
compliance with laws, regulations and orders;
changes in laws and regulations governing our operations; and
other factors described in our Annual Report on Form 10-K for the fiscal year ended June 30, 2023 under “Risk Factors” or as set forth from time to time in our Securities and Exchange Commission (SEC) filings.

These forward-looking statements speak only as of the time of filing of this report and we do not undertake to update or revise them as more information becomes available. You are cautioned not to place undue reliance on these forward-looking statements. We do not undertake any obligation to release publicly any revisions to these forward-looking statements to reflect future events or circumstances or to reflect the occurrence of unanticipated events.

2


 

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

Great Elm Group, Inc.

Condensed Consolidated Balance Sheets (Unaudited)

Dollar amounts in thousands (except per share data)

ASSETS

 

March 31, 2024

 

 

June 30, 2023

 

Current assets

 

 

 

 

 

 

Cash and cash equivalents

 

$

44,085

 

 

$

60,165

 

Receivables from managed funds

 

 

4,400

 

 

 

3,308

 

Investments in marketable securities

 

 

24,789

 

 

 

24,595

 

Investments, at fair value (cost $46,199 and $40,387, respectively)

 

 

38,244

 

 

 

32,611

 

Prepaid and other current assets

 

 

2,843

 

 

 

717

 

Real estate under development

 

 

8,104

 

 

 

1,742

 

Assets of Consolidated Funds:

 

 

 

 

 

 

Cash and cash equivalents

 

 

5,414

 

 

 

-

 

Investments, at fair value (cost $8,353)

 

 

8,561

 

 

 

-

 

Other assets

 

 

233

 

 

 

-

 

Total current assets

 

 

136,673

 

 

 

123,138

 

Identifiable intangible assets, net

 

 

11,300

 

 

 

12,115

 

Right-of-use assets

 

 

230

 

 

 

497

 

Other assets

 

 

150

 

 

 

143

 

Total assets

 

$

148,353

 

 

$

135,893

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

Accounts payable

 

$

608

 

 

$

191

 

Accrued expenses and other current liabilities

 

 

4,276

 

 

 

5,418

 

Payable for securities purchased

 

 

4,914

 

 

 

-

 

Current portion of related party payables

 

 

618

 

 

 

1,409

 

Current portion of lease liabilities

 

 

183

 

 

 

359

 

Liabilities of Consolidated Funds:

 

 

 

 

 

 

Payable for securities purchased

 

 

267

 

 

 

-

 

Accrued expenses and other liabilities

 

 

124

 

 

 

-

 

Total current liabilities

 

 

10,990

 

 

 

7,377

 

Lease liabilities, net of current portion

 

 

26

 

 

 

142

 

Long-term debt (face value $26,945)

 

 

26,019

 

 

 

25,808

 

Related party payables, net of current portion

 

 

-

 

 

 

926

 

Convertible notes (face value $38,859 and $37,912, including $15,780 and $15,395 held by related parties, respectively)

 

 

38,164

 

 

 

37,129

 

Other liabilities

 

 

683

 

 

 

669

 

Total liabilities

 

 

75,882

 

 

 

72,051

 

Commitments and contingencies (Note 11)

 

 

 

 

 

 

Stockholders' equity

 

 

 

 

 

 

Preferred stock, $0.001 par value; 5,000,000 authorized and zero outstanding

 

 

-

 

 

 

-

 

Common stock, $0.001 par value; 350,000,000 shares authorized and 31,881,695 shares issued and 30,164,142 outstanding at March 31, 2024; and 30,651,047 shares issued and 29,546,655 outstanding at June 30, 2023

 

 

30

 

 

 

30

 

Additional paid-in-capital

 

 

3,317,212

 

 

 

3,315,378

 

Accumulated deficit

 

 

(3,252,242

)

 

 

(3,251,566

)

Total Great Elm Group, Inc. stockholders' equity

 

 

65,000

 

 

 

63,842

 

Non-controlling interests

 

 

7,471

 

 

 

-

 

Total stockholders' equity

 

 

72,471

 

 

 

63,842

 

Total liabilities and stockholders' equity

 

$

148,353

 

 

$

135,893

 

 

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

3


 

Great Elm Group, Inc.

Condensed Consolidated Statements of Operations (Unaudited)

Amounts in thousands (except per share data)

 

 

For the three months ended March 31,

 

 

For the nine months ended March 31,

 

 

 

2024

 

 

2023

 

 

2024

 

 

2023

 

Revenues

 

$

2,787

 

 

$

1,898

 

 

$

8,916

 

 

$

5,637

 

Operating costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Investment management expenses

 

 

2,733

 

 

 

2,593

 

 

 

8,334

 

 

 

6,893

 

Depreciation and amortization

 

 

271

 

 

 

281

 

 

 

837

 

 

 

870

 

Selling, general and administrative

 

 

1,630

 

 

 

1,893

 

 

 

5,738

 

 

 

5,441

 

Expenses of Consolidated Funds

 

 

22

 

 

 

-

 

 

 

22

 

 

 

46

 

Total operating costs and expenses

 

 

4,656

 

 

 

4,767

 

 

 

14,931

 

 

 

13,250

 

Operating loss

 

 

(1,869

)

 

 

(2,869

)

 

 

(6,015

)

 

 

(7,613

)

Dividends and interest income

 

 

2,359

 

 

 

1,520

 

 

 

6,417

 

 

 

4,432

 

Net realized and unrealized gain (loss) on investments

 

 

(2,753

)

 

 

1,989

 

 

 

1,735

 

 

 

17,434

 

Net realized and unrealized gain (loss) on investments of Consolidated Funds

 

131

 

 

 

-

 

 

 

245

 

 

 

(16

)

Interest and other income of Consolidated Funds

 

 

323

 

 

 

-

 

 

 

451

 

 

 

-

 

Gain on sale of controlling interest in subsidiary

 

 

-

 

 

 

-

 

 

 

-

 

 

 

10,524

 

Interest expense

 

 

(1,074

)

 

 

(1,095

)

 

 

(3,197

)

 

 

(5,024

)

(Loss) income before income taxes from continuing operations

 

 

(2,883

)

 

 

(455

)

 

 

(364

)

 

 

19,737

 

Income tax benefit (expense)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(2

)

Net (loss) income from continuing operations

 

 

(2,883

)

 

 

(455

)

 

 

(364

)

 

 

19,735

 

Discontinued operations:

 

 

 

 

 

 

 

 

 

 

 

 

Net income from discontinued operations

 

 

-

 

 

 

12,203

 

 

 

16

 

 

 

13,202

 

Net (loss) income

 

$

(2,883

)

 

$

11,748

 

 

$

(348

)

 

$

32,937

 

Less: net income (loss) attributable to non-controlling interest, continuing operations

 

 

217

 

 

 

-

 

 

 

328

 

 

 

(1,554

)

Less: net income attributable to non-controlling interest, discontinued operations

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1,504

 

Net (loss) income attributable to Great Elm Group, Inc.

 

$

(3,100

)

 

$

11,748

 

 

$

(676

)

 

$

32,987

 

Basic net income (loss) per share from:

 

 

 

 

 

 

 

 

 

 

 

 

Continuing operations

 

$

(0.10

)

 

$

(0.02

)

 

$

(0.02

)

 

$

0.74

 

Discontinued operations

 

 

-

 

 

 

0.42

 

 

 

-

 

 

 

0.41

 

Basic net income (loss) per share

 

$

(0.10

)

 

$

0.40

 

 

$

(0.02

)

 

$

1.15

 

Diluted net income (loss) per share from:

 

 

 

 

 

 

 

 

 

 

 

 

Continuing operations

 

$

(0.10

)

 

$

(0.02

)

 

$

(0.02

)

 

$

0.56

 

Discontinued operations

 

 

-

 

 

 

0.42

 

 

 

-

 

 

 

0.29

 

Diluted net income (loss) per share

 

$

(0.10

)

 

$

0.40

 

 

$

(0.02

)

 

$

0.85

 

Weighted average shares outstanding

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

30,066

 

 

 

28,997

 

 

 

29,844

 

 

 

28,779

 

Diluted

 

 

30,066

 

 

 

28,997

 

 

 

29,844

 

 

 

40,673

 

 

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

4


 

Great Elm Group, Inc.

Condensed Consolidated Statements of Stockholders’ Equity (Unaudited)

Amounts in thousands

 

 

 

Common Stock

 

 

Additional
Paid-in

 

 

Accumulated

 

 

 

Total Great Elm Group, Inc. Stockholders'

 

 

Non-
controlling

 

 

Total Stockholders'

 

 

Shares

 

Amount

 

Capital

 

Deficit

 

 

 

Equity

 

 

Interest

 

 

Equity

 

BALANCE, June 30, 2023

 

 

29,547

 

 

$

30

 

 

$

3,315,378

 

 

$

(3,251,566

)

 

 

$

63,842

 

 

$

-

 

 

$

63,842

 

Net income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

2,774

 

 

 

 

2,774

 

 

 

-

 

 

 

2,774

 

Issuance of common stock related to vesting of restricted stock

 

 

322

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

-

 

 

 

-

 

 

 

-

 

Stock-based compensation

 

 

-

 

 

 

-

 

 

 

705

 

 

 

-

 

 

 

 

705

 

 

 

-

 

 

 

705

 

BALANCE, September 30, 2023

 

 

29,869

 

 

$

30

 

 

$

3,316,083

 

 

$

(3,248,792

)

 

 

$

67,321

 

 

$

-

 

 

$

67,321

 

Net income (loss)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(350

)

 

 

 

(350

)

 

 

111

 

 

 

(239

)

Issuance of common stock related to vesting of restricted stock

 

 

181

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

-

 

 

 

-

 

 

 

-

 

Issuance of interests in Consolidated Funds

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

-

 

 

 

6,900

 

 

 

6,900

 

Stock-based compensation

 

 

-

 

 

 

-

 

 

 

625

 

 

 

-

 

 

 

 

625

 

 

 

-

 

 

 

625

 

BALANCE, December 31, 2023

 

 

30,050

 

 

$

30

 

 

$

3,316,708

 

 

$

(3,249,142

)

 

 

$

67,596

 

 

$

7,011

 

 

$

74,607

 

Net income (loss)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(3,100

)

 

 

 

(3,100

)

 

 

217

 

 

 

(2,883

)

Issuance of common stock related to vesting of restricted stock

 

 

114

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

-

 

 

 

-

 

 

 

-

 

Issuance of interests in Consolidated Funds

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

-

 

 

 

350

 

 

 

350

 

Distributions from Consolidated Funds

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

-

 

 

 

(107

)

 

 

(107

)

Stock-based compensation

 

 

-

 

 

 

-

 

 

 

504

 

 

 

-

 

 

 

 

504

 

 

 

-

 

 

 

504

 

BALANCE, March 31, 2024

 

 

30,164

 

 

$

30

 

 

$

3,317,212

 

 

$

(3,252,242

)

 

 

$

65,000

 

 

$

7,471

 

 

$

72,471

 

 

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

5


 

Great Elm Group, Inc.

Condensed Consolidated Statements of Stockholders’ Equity and Contingently Redeemable Non-controlling Interest (Unaudited)

Amounts in thousands

 

 

 

Common Stock

 

 

Additional
Paid-in

 

 

Accumulated

 

 

 

Total Great Elm Group, Inc. Stockholders'

 

 

Non-
controlling

 

 

Total Stockholders'

 

 

 

Contingently Redeemable Non-controlling

 

 

Shares

 

Amount

 

Capital

 

Deficit

 

 

 

Equity

 

 

Interest

 

 

Equity

 

 

 

Interest

 

BALANCE, June 30, 2022

 

 

28,507

 

 

$

29

 

 

$

3,312,763

 

 

$

(3,279,296

)

 

 

$

33,496

 

 

$

6,533

 

 

$

40,029

 

 

 

$

2,225

 

Net (loss) income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(8,291

)

 

 

 

(8,291

)

 

 

(910

)

 

 

(9,201

)

 

 

 

662

 

Distributions to non-controlling interests in Consolidated Funds

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

-

 

 

 

(634

)

 

 

(634

)

 

 

 

-

 

Issuance of common stock related to vesting of restricted stock

 

 

267

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

-

 

Stock-based compensation

 

 

-

 

 

 

-

 

 

 

834

 

 

 

-

 

 

 

 

834

 

 

 

-

 

 

 

834

 

 

 

 

-

 

BALANCE, September 30, 2022

 

 

28,774

 

 

 

29

 

 

$

3,313,597

 

 

$

(3,287,587

)

 

 

$

26,039

 

 

$

4,989

 

 

$

31,028

 

 

 

$

2,887

 

Net income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

29,530

 

 

 

 

29,530

 

 

 

108

 

 

 

29,638

 

 

 

 

90

 

Redemption of non-controlling interests upon sale of controlling interest in subsidiary

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

-

 

 

 

(2,120

)

 

 

(2,120

)

 

 

 

-

 

Issuance of common stock related to vesting of restricted stock

 

 

202

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

-

 

Stock-based compensation

 

 

-

 

 

 

-

 

 

 

576

 

 

 

-

 

 

 

 

576

 

 

 

-

 

 

 

576

 

 

 

 

-

 

BALANCE, December 31, 2022

 

 

28,976

 

 

$

29

 

 

$

3,314,173

 

 

$

(3,258,057

)

 

 

$

56,145

 

 

$

2,977

 

 

$

59,122

 

 

 

$

2,977

 

Net income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

11,748

 

 

 

 

11,748

 

 

 

-

 

 

 

11,748

 

 

 

 

-

 

Redemption of non-controlling interests upon sale of controlling interest in subsidiary

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

-

 

 

 

(2,977

)

 

 

(2,977

)

 

 

 

(2,977

)

Issuance of common stock related to vesting of restricted stock

 

 

170

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

-

 

Stock-based compensation

 

 

-

 

 

 

-

 

 

 

564

 

 

 

-

 

 

 

 

564

 

 

 

-

 

 

 

564

 

 

 

 

-

 

BALANCE, March 31, 2023

 

 

29,146

 

 

 

29

 

 

 

3,314,737

 

 

 

(3,246,309

)

 

 

 

68,457

 

 

 

-

 

 

 

68,457

 

 

 

 

-

 

 

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

6


 

Great Elm Group, Inc.

Condensed Consolidated Statements of Cash Flows (Unaudited)

Dollar amounts in thousands

 

 

 

For the nine months ended March 31,

 

 

 

2024

 

 

2023

 

Cash flows from operating activities:

 

 

 

 

 

 

Net income from continuing operations

 

$

(364

)

 

$

19,735

 

Adjustments to reconcile net income to net cash used in operating activities:

 

 

 

 

 

 

Depreciation and amortization

 

 

837

 

 

 

870

 

Stock-based compensation

 

 

1,834

 

 

 

1,974

 

Unrealized gain on investments

 

 

(1,813

)

 

 

(12,776

)

Realized loss on investments

 

 

78

 

 

 

(4,658

)

Gain on sale of controlling interest in subsidiary

 

 

-

 

 

 

(10,524

)

Non-cash interest and amortization of capitalized issuance costs

 

 

1,732

 

 

 

1,737

 

Deferred tax expense

 

 

-

 

 

 

4

 

Change in fair value of contingent consideration

 

 

(518

)

 

 

180

 

Other non-cash (income) expense, net

 

 

(406

)

 

 

324

 

Adjustments to reconcile net income to net cash used in operating activities of Consolidated Funds:

 

 

 

 

 

 

Purchases of investments

 

 

(8,459

)

 

 

-

 

Sales of investments

 

 

426

 

 

 

1,558

 

Amortization

 

 

(15

)

 

 

-

 

Net realized and unrealized (gains) losses on investments

 

 

(245

)

 

 

16

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Receivables from managed funds

 

 

(1,092

)

 

 

(272

)

Prepaid and other assets

 

 

(2,143

)

 

 

32

 

Real estate under development

 

 

(6,421

)

 

 

(1,600

)

Operating leases

 

 

(25

)

 

 

(70

)

Related party payables

 

 

(1,199

)

 

 

-

 

Accounts payable, accrued expenses and other liabilities

 

 

4,779

 

 

 

(919

)

Changes in operating assets and liabilities of Consolidated Funds:

 

 

 

 

 

 

Cash and cash equivalents

 

 

(5,414

)

 

 

-

 

Other assets

 

 

(233

)

 

 

746

 

Accrued expenses and other liabilities

 

 

124

 

 

 

70

 

Net cash used in operating activities - continuing operations

 

 

(18,537

)

 

 

(3,573

)

Net cash provided by operating activities - discontinued operations

 

 

-

 

 

 

766

 

Net cash (used in) provided by operating activities

 

 

(18,537

)

 

 

(2,807

)

Cash flows from investing activities:

 

 

 

 

 

 

Purchases of investments in held-to-maturity securities

 

 

(49,036

)

 

 

-

 

Proceeds from settlement of held-to-maturity securities

 

 

50,000

 

 

 

-

 

Purchases of investments

 

 

(11,440

)

 

 

(3,105

)

Sales of investments

 

 

6,752

 

 

 

26,527

 

Proceeds from sale of controlling interest in subsidiary, net of cash sold

 

 

-

 

 

 

17,735

 

Other

 

 

(15

)

 

 

(37

)

Net cash (used in) provided by investing activities - continuing operations

 

 

(3,739

)

 

 

41,120

 

Net cash used in investing activities - discontinued operations

 

 

(947

)

 

 

67,230

 

Net cash (used in) provided by investing activities

 

 

(4,686

)

 

 

108,350

 

 

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

7


 

Great Elm Group, Inc.

Condensed Consolidated Statements of Cash Flows (Unaudited) (continued)

Dollar amounts in thousands

 

 

 

For the nine months ended March 31,

 

 

 

2024

 

 

2023

 

Cash flows from financing activities:

 

 

 

 

 

 

Principal payments on long term debt

 

 

-

 

 

 

(41,765

)

Contributions of non-controlling interests in Consolidated Funds

 

 

7,250

 

 

 

-

 

Distributions to non-controlling interests in Consolidated Funds

 

 

(107

)

 

 

(634

)

Net cash provided by (used in) financing activities - continuing operations

 

 

7,143

 

 

 

(42,399

)

Net cash provided by financing activities - discontinued operations

 

 

-

 

 

 

(5,221

)

Net cash provided by (used in) financing activities

 

 

7,143

 

 

 

(47,620

)

Net decrease in cash and cash equivalents, including cash and cash equivalents classified within current assets held for sale

 

 

(16,080

)

 

 

57,923

 

Less: net increase in cash and cash equivalents classified within current assets held for sale

 

 

-

 

 

 

62,775

 

Plus: cash received from (used in) discontinued operations

 

 

-

 

 

 

66,689

 

Net change in cash and cash equivalents

 

 

(16,080

)

 

 

61,837

 

Cash and cash equivalents at beginning of period

 

 

60,165

 

 

 

22,281

 

Cash and cash equivalents at end of period

 

$

44,085

 

 

$

84,118

 

 

 

 

 

 

 

 

Cash paid for interest

 

$

1,465

 

 

$

3,348

 

 

 

 

 

 

 

 

Non-cash investing and financing activities

 

 

 

 

 

 

Non-cash contribution to Consolidated Funds

 

$

389

 

 

$

-

 

Lease liabilities and right-of-use assets arising from operating leases

 

 

-

 

 

 

167

 

Partial settlement of Seller Note in exchange for GECC stock

 

 

-

 

 

 

2,609

 

Non-cash distributions received from Consolidated Funds

 

 

-

 

 

 

177

 

Equity consideration upon Sale of HC LLC

 

 

-

 

 

 

2,000

 

 

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

8


 

Great Elm Group, Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

March 31, 2024

1. Organization

Great Elm Group, Inc. (referred to as the Company or GEG) is an alternative asset management company incorporated in Delaware. The Company focuses on growing a scalable and diversified portfolio of long-duration and permanent capital vehicles across credit, real estate, specialty finance, and other alternative strategies.

The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, including Great Elm Capital Management, Inc. (GECM), Great Elm Opportunities GP, Inc. (GEO GP), Great Elm Capital GP, LLC, Great Elm FM Acquisition, Inc., Great Elm DME Holdings, Inc., Great Elm DME Manager, LLC, and Monomoy BTS Corporation (MBTS), Great Elm Investments LLC, as well as its majority-owned subsidiaries Forest Investments, Inc. (through December 30, 2022), and Great Elm Healthcare, LLC (HC LLC) and its wholly-owned subsidiaries (through January 3, 2023). In addition, we have determined that the Company was the primary beneficiary of certain variable interest entities, and therefore the operations of those entities have been included in our consolidated results for the relevant periods.

2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions for Form 10-Q and, therefore, do not include all information and footnotes that are normally included in the Company’s Form 10-K and should be read in conjunction with the audited consolidated financial statements and notes thereto, which are included in the Company’s Annual Report on Form 10-K for the year ended June 30, 2023. These financial statements reflect all adjustments (consisting of normal and recurring items or items discussed herein) that management believes are necessary to fairly state results for the interim periods presented. Results of operations for interim periods are not necessarily indicative of annual results of operations.

The historical results of the Durable Medical Equipment (DME) business, primarily consisting of HC LLC and its subsidiaries, sold on January 3, 2023, and related activity have been presented in the accompanying unaudited condensed consolidated statements of operations for the three and nine months ended March 31, 2023 and cash flows for the nine months ended March 31, 2023 as discontinued operations. Further, the historical segment information was recast to reflect our ongoing business as a single reportable segment and to remove the activity of discontinued operations. Unless otherwise specified, disclosures in these condensed consolidated financial statements reflect continuing operations only.

Certain prior period amounts have been reclassified to conform to current period presentation.

Use of Estimates

The preparation of these financial statements in accordance with accounting principles generally accepted in the United States of America (US GAAP) requires the Company 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 periods presented. On an on-going basis, the Company evaluates all of these estimates and assumptions. The most important of these estimates and assumptions relate to revenue recognition, valuation allowance for deferred tax assets, estimates associated with accounting for asset acquisitions, and fair value measurements, including stock-based compensation. Although these and other estimates and assumptions are based on the best available information, actual results could be different from these estimates.

9


 

Principles of Consolidation

The Company consolidates the assets, liabilities, and operating results of its wholly-owned subsidiaries, majority-owned subsidiaries, and subsidiaries in which we hold a controlling financial interest. In most cases, a controlling financial interest reflects ownership of a majority of the voting interests, including kick out rights, either directly or indirectly through related parties presumed to be under our control. We consolidate a variable interest entity (VIE) when we possess both the power to direct the activities of the VIE that most significantly impact its economic performance and the obligation to absorb losses of, or the right to receive benefits from, the entity that could potentially be significant to the VIE. We deconsolidate a VIE when we no longer possess the power to direct the activities of the VIE that most significantly impact its economic performance or the obligation to absorb losses of, or the right to receive benefits from, the entity that could potentially be significant to the VIE.

All intercompany accounts and transactions have been eliminated in consolidation.

Non-controlling interests in the Company’s subsidiaries are reported as a component of equity, separate from the parent company’s equity or outside of permanent equity for non-controlling interests that are contingently redeemable. Results of operations attributable to the non-controlling interests are included in the Company’s consolidated statements of operations.

Cash and Cash Equivalents

Cash and cash equivalents are comprised of cash and highly liquid investments with original maturities of 90 days or less at the date of purchase. Cash equivalents consist primarily of exchange-traded money market funds and U.S. treasury bills. The Company is exposed to credit risk in the event of default by the financial institutions or the issuers of these investments to the extent the amounts on deposit or invested are in excess of amounts that are insured.

Investments in Marketable Securities

Investments in marketable securities consist of U.S. treasury bills with original maturity exceeding 90 days. The Company classifies investments in debt securities as either trading, held-to-maturity, or available-for-sale. Securities are classified as trading if they are purchased and held principally for the purpose of selling in the near term and as held-to-maturity when the Company has both the positive intent and ability to hold the security to maturity. Investments in debt securities not classified as either trading or held-to-maturity are classified as available-for-sale securities. Trading securities are measured at fair value with unrealized gains and losses reported within net realized and unrealized gain on investments. Held-to-maturity securities are measured at amortized cost with realized gains and losses reported within net realized and unrealized gain on investments. Available-for-sale securities are measured at fair value with unrealized gains and losses reported in accumulated other comprehensive income (loss).

As of March 31, 2024, all investments in marketable securities were classified as held-to-maturity and had original maturities (at the time of purchase) exceeding 90 days. As of March 31, 2024, the amortized cost basis for these securities approximated their fair value.

Investments, at Fair Value

Investments, at fair value, consist of equity and equity-related securities and debt securities classified as trading carried at fair value, as well as investments in private funds measured using the net asset value (NAV) as reported by each fund’s investment manager. The private funds calculate NAV in a manner consistent with the measurement principles of the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 946, Financial Services – Investment Companies, as of the valuation date. Changes in the fair value and NAV are recorded within net realized and unrealized gain on investments. Dividends received are recorded within dividends and interest income on the consolidated statements of operations.

10


 

Real Estate under Development

Real estate under development is classified as follows: (i) real estate under development (current), which includes real estate projects that are in the process of being developed and expected to be completed and disposed of within one year of the balance sheet date; (ii) real estate under development (non-current), which includes real estate projects that are in the process of being developed and expected to be completed and disposed of more than one year from the balance sheet date; and (iii) real estate held for sale, which includes land and completed improvements thereon that meet all of the “held for sale” criteria.

Real estate under development is carried at cost less impairment, if applicable. We capitalize costs that are directly identifiable with the specific real estate projects, including pre-acquisition and pre-construction costs, development and construction costs, taxes, and insurance. We do not capitalize any general and administrative or overhead costs, regardless of whether the costs are internal or paid to third parties. Capitalization begins when the activities related to development have begun and ceases when activities are substantially complete and the asset is available for occupancy.

Real estate held for sale is recorded at the lower of cost or fair value less cost to sell. If an asset’s fair value less cost to sell, based on discounted future cash flows, management estimates or market comparisons, is less than its carrying amount, an allowance is recorded against the asset.

Impairment of Long-Lived Assets

Long-lived assets include real estate under development, property and equipment, definite-lived intangible assets, and lease right-of-use assets. The Company evaluates the recoverability of long-lived assets whenever events or changes in circumstances indicate that their carrying value may not be recoverable based on undiscounted cash flows. Impairment losses are recorded when undiscounted cash flows estimated to be generated by an asset are less than the asset’s carrying amount. The amount of the impairment loss, if any, is calculated as the excess of the asset’s carrying value over its fair value, which is determined using a discounted cash flow analysis, management estimates or market comparisons.

Leases

We determine if an arrangement contains a lease at the inception of a contract considering all relevant facts and circumstances, which normally does not require significant judgment. Right-of-use assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Right-of-use assets and lease liabilities are recognized at the commencement date of the lease based on the present value of the remaining future minimum lease payments. As the interest rate implicit in our leases is generally not readily determinable, we utilize the incremental borrowing rate, determined by class of underlying asset, to discount the lease payments. The operating lease right-of-use assets also include lease payments made before commencement and are reduced by lease incentives.

The Company’s office leases typically require reimbursements to the lessor for real estate taxes, common area maintenance and other operating costs, which are expensed as incurred as variable lease costs. The Company accounts for lease and nonlease components as a single lease component.

In March 2024, the Company signed a new office lease which is expected to commence in December 2024. As none of the criteria for recognition have been met as of March 31, 2024, there is no corresponding lease liability or right-of-use asset associated with this lease included in the condensed consolidated balance sheets.

11


 

Earnings per Share

The following table presents the calculation of basic and diluted net income (loss) per share:

 

 

For the three months ended March 31,

 

 

For the nine months ended March 31,

 

(in thousands except per share amounts)

 

2024

 

 

2023

 

 

2024

 

 

2023

 

Numerator:

 

 

 

 

 

 

 

 

 

 

 

 

Net (loss) income from continuing operations

 

$

(2,883

)

 

$

(455

)

 

$

(364

)

 

$

19,735

 

Less: net income (loss) attributable to non-controlling interest, continuing operations

 

 

217

 

 

 

-

 

 

 

328

 

 

 

(1,554

)

Numerator for basic EPS - Net (loss) income from continuing operations attributable to Great Elm Group, Inc.

 

$

(3,100

)

 

$

(455

)

 

$

(692

)

 

$

21,289

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income from discontinued operations

 

 

-

 

 

 

12,203

 

 

 

16

 

 

 

13,202

 

Less: net income attributable to non-controlling interest, discontinued operations

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1,504

 

Numerator for basic EPS - Net income (loss) from discontinued operations, attributable to Great Elm Group, Inc.

 

$

-

 

 

$

12,203

 

 

$

16

 

 

$

11,698

 

Effect of dilutive securities:

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense associated with Convertible Notes, continuing operations

 

$

-

 

 

$

-

 

 

$

-

 

 

$

1,451

 

Numerator for diluted EPS - Net (loss) income from continuing operations attributable to Great Elm Group, Inc., after the effect of dilutive securities

 

$

(3,100

)

 

$

(455

)

 

$

(692

)

 

$

22,740

 

Numerator for diluted EPS - Net income (loss) from discontinued operations, attributable to Great Elm Group, Inc.

 

$

-

 

 

$

12,203

 

 

$

16

 

 

$

11,698

 

Denominator:

 

 

 

 

 

 

 

 

 

 

 

 

Denominator for basic EPS - Weighted average shares of common stock outstanding

 

 

30,066

 

 

 

28,997

 

 

 

29,844

 

 

 

28,779

 

Effect of dilutive securities:

 

 

 

 

 

 

 

 

 

 

 

 

Restricted stock

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1,328

 

Convertible Notes

 

 

-

 

 

 

-

 

 

 

-

 

 

 

10,566

 

Denominator for diluted EPS - Weighted average shares of common stock outstanding after the effect of dilutive securities

 

 

30,066

 

 

 

28,997

 

 

 

29,844

 

 

 

40,673

 

Basic net income (loss) per share from:

 

 

 

 

 

 

 

 

 

 

 

 

Continuing operations

 

$

(0.10

)

 

$

(0.02

)

 

$

(0.02

)

 

$

0.74

 

Discontinued operations

 

 

-

 

 

 

0.42

 

 

 

-

 

 

 

0.41

 

Basic net income (loss) per share

 

$

(0.10

)

 

$

0.40

 

 

$

(0.02

)

 

$

1.15

 

Diluted net income (loss) per share from:

 

 

 

 

 

 

 

 

 

 

 

 

Continuing operations

 

$

(0.10

)

 

$

(0.02

)

 

$

(0.02

)

 

$

0.56

 

Discontinued operations

 

 

-

 

 

 

0.42

 

 

$

-

 

 

 

0.29

 

Diluted net income (loss) per share

 

$

(0.10

)

 

$

0.40

 

 

$

(0.02

)

 

$

0.85

 

As of March 31, 2024, the Company had 3,264,424 potential shares of common stock issuable upon the exercise of stock options that are not included in the diluted net income (loss) per share calculation because to do so would be anti-dilutive for the three and nine months ended March 31, 2024. Further, as of March 31, 2024, the Company had 11,191,461 shares of common stock issuable upon the conversion of Convertible Notes (as defined below) that are not included in the diluted income (loss) per share calculation because to do so would be anti-dilutive for the three and nine months ended March 31, 2024. As of March 31, 2024, the Company had 1,771,950 shares of restricted stock that are not included in the diluted income (loss) per share calculation because to do so would be anti-dilutive for the three and nine months ended March 31, 2024.

As of March 31, 2023, the Company had 1,270,651 potential shares of common stock issuable upon the exercise of stock options that are not included in the diluted net income (loss) per share calculation for the three and nine months ended March 31, 2023 because to do so would be anti-dilutive.

12


 

As of March 31, 2024 and 2023, the Company had an aggregate of 1,771,950 and 1,509,885 issued shares, respectively, that are not considered outstanding for accounting purposes since they are unvested and subject to forfeiture by the employees at a nominal price if service milestones are not met.

Recently Adopted Accounting Standards

Current Expected Credit Losses. In June 2016, the FASB issued Accounting Standards Update (ASU) 2016-13, Financial Instruments – Credit Losses (Topic 326), which changes the impairment model for financial instruments, including trade receivables from an incurred loss method to a new forward looking approach, based on expected losses. The estimate of expected credit losses will require entities to incorporate considerations of historical experience, current information and reasonable and supportable forecasts. The amendments in this ASU are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company adopted this ASU as of July 1, 2023, which did not have a material impact on its consolidated financial statements.

Recently Issued Accounting Standards

Income Taxes. In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, to expand the disclosure requirements for income taxes, specifically related to the rate reconciliation and income taxes paid disaggregated by jurisdiction. The amendments in this ASU are effective for fiscal years beginning after December 15, 2025, and early adoption and retrospective application are permitted. The Company is evaluating the potential impact that the adoption of this ASU will have on its consolidated financial statements.

3. Revenue

The revenues from each major source are summarized in the following table:

 

 

For the three months ended March 31,

 

 

For the nine months ended March 31,

 

(in thousands)

 

2024

 

 

2023

 

 

2024

 

 

2023

 

Management fees

 

$

1,462

 

 

$

1,384

 

 

$

4,314

 

 

$

4,067

 

Incentive fees

 

 

663

 

 

 

-

 

 

 

2,676

 

 

 

-

 

Property management fees

 

 

300

 

 

 

278

 

 

 

875

 

 

 

830

 

Administration and service fees

 

 

362

 

 

 

236

 

 

 

1,051

 

 

 

740

 

Total revenues

 

$

2,787

 

 

$

1,898

 

 

$

8,916

 

 

$

5,637

 

The Company recognizes investment management revenue at amounts that reflect the consideration to which it expects to be entitled in exchange for providing services to its customers. Investment management revenue primarily consists of fees based on a percentage of assets under management, fees based on the performance of managed assets, and administration and service fees. Fees are based on agreements with each investment product and may be terminated at any time by either party subject to the specific terms of each respective agreement.

Management Fees

The Company earns management fees based on the investment management agreements GECM has with Great Elm Capital Corp. (GECC), Monomoy Properties UpREIT, LLC (Monomoy UpREIT), the operating partnership of Monomoy Properties REIT, LLC, and other private funds managed by GECM (collectively, the Funds). The performance obligation is satisfied and management fee revenue is recognized over time as the services are rendered, since the Funds simultaneously receive and consume the benefits provided as GECM performs services. Management fee rates range from 1.0% to 1.5% of the management fee assets specified within each agreement and are calculated and billed in arrears of the period, either monthly or quarterly.

Property Management Fees

Under the Monomoy UpREIT investment management agreement, GECM is also entitled to 4.0% of rent collected. These fees are collected monthly in arrears. Property management fee revenue is recognized over time as the services are provided.

13


 

Incentive Fees

The Company earns incentive fees based on the investment management agreements GECM has with GECC, Monomoy Properties II, LLC (MP II), a feeder fund of Monomoy Properties REIT, LLC and other private funds managed by GECM. Where an investment management agreement includes both management fees and incentive fees, the performance obligation is considered to be a single obligation for both fees. Incentive fees are variable consideration associated with the investment management agreements. Incentive fees are earned based on investment performance during the period, subject to the achievement of minimum return levels or high-water marks, in accordance with the terms of the respective investment management agreements. Incentive fees are typically 20% of the performance-based metric specified within each agreement. Incentive fees are recognized when it is determined that they are no longer probable of significant reversal. During the three and nine months ended March 31, 2024, the Company recorded revenue in respect to the incentive fees due from GECC of $0.7 million and $2.7 million, respectively.

Administration Fees

The Company earns administration fees based on the administration agreement GECM has with GECC whereby the investment vehicles reimburse GECM for costs incurred in performing certain administrative functions. This revenue is recognized over time as the services are performed. Administration fees are billed quarterly in arrears, which is consistent with the timing of the delivery of services and reflect agreed upon rates for the services provided. The services are accounted for as a single performance obligation for each investment vehicle that is a series of distinct services with substantially the same pattern of transfer as the services are provided on a daily basis.

The Company also earns services fees based on a shared services agreement with Imperial Capital Asset Management, LLC (ICAM). This revenue is recognized over time as the services are performed. Service fees are billed quarterly in arrears, which is consistent with the timing of the delivery of services and reflects agreed-upon rates for the services provided. The services are accounted for as a single performance obligation that is a series of distinct services with substantially the same pattern of transfer as the services are provided on a daily basis.

4. Related Party Transactions

Related party transactions are measured in part by the amount of consideration paid or received as established and agreed by the parties. Consideration paid for such services in each case is the negotiated value.

The following tables summarize activity and outstanding balances between the managed investment products and the Company:

 

 

For the three months ended March 31,

 

 

For the nine months ended March 31,

 

 (in thousands)

 

2024

 

 

2023

 

 

2024

 

 

2023

 

Net realized and unrealized gain (loss) on investments

 

$

(2,751

)

 

$

895

 

 

$

1,838

 

 

$

(7,950

)

Net realized and unrealized gain (loss) on investments of Consolidated Funds

 

 

131

 

 

 

-

 

 

 

245

 

 

 

(16

)

Dividend income

 

 

1,613

 

 

 

849

 

 

 

3,444

 

 

 

3,510

 

 

 (in thousands)

 

March 31, 2024

 

 

June 30, 2023

 

Dividends receivable

 

$

919

 

 

$

300

 

Investment management revenues receivable

 

 

2,216

 

 

 

2,167

 

Receivable for reimbursable expenses paid

 

 

1,265

 

 

 

841

 

Receivables from managed funds

 

$

4,400

 

 

$

3,308

 

Investment Management

GECM has agreements to manage the investment portfolios for GECC, Monomoy UpREIT and other investment products, as well as to provide administrative services. Under these agreements, GECM receives management fees based on the managed assets (other than cash and cash equivalents) and rent collected, incentive fees based on the performance of those assets, and administration and service fees. See Note 3 - Revenue for additional discussions of the fee arrangements.

14


 

Consolidated Funds

Through its wholly-owned subsidiaries GECM and GEO GP, the Company serves as the investment manager, general partner, or managing member of certain private funds, in which it may also have a direct investment. For funds which are determined to be VIEs and where it is determined that the Company is the primary beneficiary, the criteria for consolidation are met. The Company monitors such funds and related criteria for consolidation on an ongoing basis. Funds that have historically been consolidated will be deconsolidated at such time as the Company is no longer deemed to be the primary beneficiary and will then be treated as equity method investments.

The Company retains the specialized investment company accounting guidance under US GAAP with respect to the Consolidated Funds. As such, investments of the Consolidated Funds are included in the consolidated balance sheets at fair value and the net realized and unrealized gain or loss on those investments was included as a component of other income on the consolidated statements of operations. Non-controlling interests of the Consolidated Funds are included in net income (loss) attributable to non-controlling interest, continuing operations. The creditors of Consolidated Funds do not have recourse to the Company other than to the assets of the respective Consolidated Funds.

The Company holds investments in certain funds that are VIEs but the Company is not deemed to be the primary beneficiary. Such investments are treated as equity method investments and the Company has elected the fair value option using NAV as a practical expedient with all changes in fair value reported in net realized and unrealized gain (loss) on investments on the consolidated statements of operations.

See Note 2 - Summary of Significant Accounting Policies for additional details.

Investments

As of March 31, 2024, the Company owns 1,518,162 shares of GECC (approximately 16.1% of the outstanding shares). Certain officers and directors of GECC are also officers and directors of GEG. Matthew A. Drapkin is a director of our Board of Directors and also the Chairman of GECC's Board of Directors, Adam M. Kleinman is our President, as well as the Chief Compliance Officer of GECC, Matt Kaplan is the President of GECM, as well as the President and Chief Executive Officer of GECC, and Keri A. Davis is our Chief Financial Officer and Chief Accounting Officer, as well as the Chief Financial Officer of GECC.

The Company receives dividends from its investments in GECC and Monomoy UpREIT and earns unrealized gains and losses based on the mark-to-market performance of those investments. See Note 5 - Fair Value Measurements.

In February 2024, the Company invested in $6.0 million for a 25% interest in Great Elm Strategic Partnership I, LLC (GESP). The Company's investment in GESP is accounted for using the fair value option and it is included in Investments, at fair value on the consolidated balance sheets. GESP owns 1,850,424 shares of GECC.

Other Transactions

GECM has shared personnel and reimbursement agreements with ICAM. Jason W. Reese, the Chief Executive Officer and Chairman of the Company’s Board of Directors, is the Chief Executive Officer of ICAM, and Matt Kaplan, the President of GECM, is also a Managing Director of ICAM. Certain costs incurred under these agreements relate to human resources, investment management, and other administrative services provided by ICAM employees, for the benefit of the Company and its subsidiaries, and are included in investment management expenses in the consolidated statements of operations. For the three and nine months ended March 31, 2024, such costs were $0.1 million and $0.5 million, respectively. For the three and nine months ended March 31, 2023, such costs were $0.4 million and $1.1 million, respectively. Other costs include operational or administrative services performed on behalf of the funds managed by GECM and are included in receivables from managed funds in the consolidated balance sheets. As of March 31, 2024 and June 30, 2023, costs of $0.1 million and $0.1 million, respectively, related to the shared services agreements were included in receivables from managed funds.

As of January 1, 2024, GECM also has a shared personnel and reimbursement agreement with ICAM whereby ICAM reimburses certain costs incurred by GECM related to administrative services provided by GECM employees for the benefit of ICAM. See Note 3 - Revenue for additional details.

15


 

On August 31, 2021, the Company entered into a financial advisory agreement with Imperial Capital, LLC. The agreement included a retainer fee of $0.1 million which was paid in October 2021. In addition, the agreement included a success-based fee upon a sale of HC LLC. Upon completion of the sale of HC LLC on January 3, 2023, a success fee of $0.7 million was paid to Imperial Capital, LLC. Jason W. Reese is the Co-Founder of Imperial Capital, LLC.

See Note 5 - Fair Value Measurements for details on the contingent consideration payable to ICAM following the acquisition of the Monomoy UpREIT investment management agreement and Note 8 - Convertible Notes for details on the Convertible Notes issued to related parties.

5. Fair Value Measurements

Fair value is defined as the price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.

US GAAP provides a framework for measuring fair value on either a recurring or nonrecurring basis whereby inputs, used in valuation techniques, are assigned a hierarchical level. The following are the hierarchical levels of inputs to measure fair value:

Level 1: Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.
Level 2: Inputs reflect quoted prices for identical assets or liabilities in markets that are not active; quoted prices for similar assets or liabilities in active markets; inputs other than quoted prices that are observable for the assets or liabilities; or inputs that are derived principally from or corroborated by observable market data by correlation or other means.
Level 3: Unobservable inputs reflecting the Company’s own assumptions incorporated in valuation techniques used to determine fair value. These assumptions are required to be consistent with market participant assumptions that are reasonably available.

All financial assets or liabilities that are measured at fair value on a recurring and non-recurring basis have been segregated into the most appropriate level within the fair value hierarchy based on the inputs used to determine the fair value at the measurement date.

The assets and liabilities measured at fair value on a recurring and non-recurring basis are summarized in the tables below:

 

 

Fair Value as of March 31, 2024

 

 

(in thousands)

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity investments

 

$

16,856

 

 

$

-

 

 

$

3,130

 

 

$

19,986

 

 

Total assets within the fair value hierarchy

 

$

16,856

 

 

$

-

 

 

$

3,130

 

 

$

19,986

 

 

Investments valued at net asset value

 

 

 

 

 

 

 

 

 

 

$

18,258

 

 

Total assets

 

 

 

 

 

 

 

 

 

 

$

38,244

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

Contingent consideration liability

 

$

-

 

 

$

-

 

 

$

408

 

 

$

408

 

 

Total liabilities

 

$

-

 

 

$

-

 

 

$

408

 

 

$

408

 

 

 

16


 

 

 

Fair Value as of June 30, 2023

 

 

(in thousands)

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity investments

 

$

14,296

 

 

$

-

 

 

$

-

 

 

$

14,296

 

 

Total assets within the fair value hierarchy

 

$

14,296

 

 

$

-

 

 

$

-

 

 

$

14,296

 

 

Investments valued at net asset value

 

 

 

 

 

 

 

 

 

 

$

18,315

 

 

Total assets

 

 

 

 

 

 

 

 

 

 

$

32,611

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

Contingent consideration liability

 

$

-

 

 

$

-

 

 

$

1,903

 

 

$

1,903

 

 

Total liabilities

 

$

-

 

 

$

-

 

 

$

1,903

 

 

$

1,903

 

 

There were no transfers between levels of the fair value hierarchy during the three and nine months ended March 31, 2024 and 2023.

The following is a reconciliation of changes in Level 3 assets:

 

 

For the three months ended March 31,

 

 

For the nine months ended March 31,

 

(in thousands)

 

2024

 

 

2023

 

 

2024

 

 

2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning balance

 

$

-

 

 

$

-

 

 

$

-

 

 

$

-

 

Purchases

 

 

6,000

 

 

 

-

 

 

 

6,000

 

 

 

-

 

Payments

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Change in fair value

 

 

(2,870

)

 

 

-

 

 

 

(2,870

)

 

 

-

 

Ending balance

 

$

3,130

 

 

$

-

 

 

$

3,130

 

 

$

-

 

The following is a reconciliation of changes in Level 3 liabilities:

 

 

For the three months ended March 31,

 

 

For the nine months ended March 31,

 

(in thousands)

 

2024

 

 

2023

 

 

2024

 

 

2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning balance

 

$

962

 

 

$

1,180

 

 

$

1,903

 

 

$

1,120

 

Payments

 

 

-

 

 

 

-

 

 

 

(977

)

 

 

-

 

Change in fair value

 

 

(554

)

 

 

120

 

 

 

(518

)

 

 

180

 

Ending balance

 

$

408

 

 

$

1,300

 

 

$

408

 

 

$

1,300

 

The assets of the Consolidated Funds measured at fair value on a recurring basis are summarized in the table below:

 

 

Fair Value as of March 31, 2024

 

(in thousands)

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Assets of Consolidated Funds:

 

 

 

 

 

 

 

 

 

 

 

 

Equity investments

 

$

-

 

 

$

-

 

 

$

51

 

 

$

51

 

Debt securities

 

 

-

 

 

 

3,766

 

 

 

4,744

 

 

 

8,510

 

Total assets within the fair value hierarchy

 

$

-

 

 

$

3,766

 

 

$

4,795

 

 

$

8,561

 

There were no assets or liabilities of the Consolidated Funds measured at fair value as of June 30, 2023. One investment with a fair value of $461 was transferred from Level 3 to Level 2 as a result of increased pricing

17


 

transparency during the three and nine months ended March 31, 2024. The net change in unrealized appreciation relating to Level 3 assets still held as of March 31, 2024 totaled $127.

The following is a reconciliation of changes in fair value of Level 3 assets of Consolidated Funds:

 

 

For the three months ended March 31,

 

 

For the nine months ended March 31,

 

(in thousands)

 

2024

 

 

2024

 

 

 

 

 

 

 

 

Beginning balance

 

$

2,007

 

 

$

-

 

Purchases

 

 

3,230

 

 

 

5,141

 

Sales and Paydowns

 

 

(33

)

 

 

(34

)

Net Accretion

 

 

2

 

 

 

2

 

Transfers Out

 

 

(461

)

 

 

(461

)

Change in fair value

 

 

50

 

 

 

147

 

Ending balance

 

$

4,795

 

 

$

4,795

 

The valuation techniques applied to investments held by the Company and by the Consolidated Funds varied depending on the nature of the investment.

Equity and equity-related securities

Securities traded on a national securities exchange are stated at the close price on the valuation date. To the extent these securities are actively traded and valuation adjustments are not applied, they are classified as Level 1.

Equity investments that do not have readily-available market prices utilize valuation models to determine fair value and are classified as Level 3. As of March 31, 2024, the Company had an equity investment in a private company that was valued using an options pricing model with a volatility of 38.9% and a risk-free rate of 4.24%.

Debt securities

Bank loans, corporate debt and other debt obligations traded on a national exchange are valued based on quoted market prices and classified as Level 2. Debt investments that are not actively traded are generally based on discounted cash flows and classified as Level 3. As of March 31, 2024, debt investments valued based on discounted cash flows use discount rates ranging from 11.2% to 23.1% with a weighted average of 13.5%.

Investments in private funds

The Company values investments in private funds using NAV as reported by each fund’s investment manager. The private funds calculate NAV in a manner consistent with the measurement principles of FASB ASC Topic 946, Financial Services – Investment Companies, as of the valuation date. Investments valued using NAV as a practical expedient are not categorized within the fair value hierarchy.

As of March 31, 2024 and June 30, 2023, investments in private funds primarily consisted of our investments in Monomoy UpREIT and Great Elm Opportunities Fund I, LP Series D (GEOF Series D). Monomoy UpREIT allows redemptions annually with 90 days’ notice, subject to a one-year lockup from the date of initial investment, which are capped at 5% of its NAV. GEOF Series D allows withdrawals annually and there is no set duration for the private fund.

18


 

Contingent consideration

In conjunction with the acquisition of the Monomoy UpREIT investment management agreement, the Company entered into a contingent consideration agreement that requires the Company to pay up to $2.0 million to ICAM if certain fee revenue thresholds are achieved during fiscal years ending June 30, 2023 and 2024. As of June 30, 2023, the Company determined that the fee revenue threshold for the year ending June 30, 2023 was achieved and the amount payable to ICAM was approximately $1.0 million, which was paid in July 2023. Further, the Company determined that the fee revenue threshold for the year ending June 30, 2024 was expected to be achieved as well, and the related amount payable to ICAM was recorded at present value of approximately $1.9 million, using a discount rate of 8.0%, included within the current portion of related party payables in the condensed consolidated balance sheet as of June 30, 2023. As of March 31, 2024, it was determined that the full target revenue threshold for the year ended June 30, 2024 was unlikely to be met in full and the contingent consideration was updated to $0.4 million based on projected fee revenues through the end of the fiscal year.

See Note 7 - Long-Term Debt for additional discussion related to the fair value of our notes payable and other long-term debt. The carrying value of all other financial assets and liabilities approximate their fair values.

6. Real Estate Under Development

In January 2023, MBTS completed purchases of certain land parcels located in Mississippi and Florida. Contemporaneously with the land purchases, MBTS entered into commercial lease agreements, as a lessor, in respect to the land parcels and build-to-suit improvements to be constructed thereon. The leases will commence upon substantial completion of the build-to-suit development, which is expected not later than the second calendar quarter of 2024. We intend to sell the land and improvements with the attached leases at or close to the respective lease commencement date.

During the three and nine months ended March 31, 2024, the Company capitalized costs of $3.2 million and $6.4 million, respectively, within real estate under development (current) on its condensed consolidated balance sheet, representing the development and construction costs directly identifiable with the two real estate projects.

7. Long-Term Debt

The Company’s long-term debt is summarized in the following table:

(in thousands)

 

Borrower

March 31, 2024

 

June 30, 2023

 

GEGGL Notes

 

GEG

$

26,945

 

$

26,945

 

Total principal

 

 

$

26,945

 

$

26,945

 

Unamortized debt discounts and issuance costs

 

 

 

(926

)

 

(1,137

)

Long-term debt

 

 

 

 

26,019

 

 

 

25,808

 

During the three and nine months ended March 31, 2024, the Company incurred interest expense of $0.6 million and $1.7 million, respectively, attributed to its long-term debt. During the three and nine months ended March 31, 2023, the Company incurred interest expense of $0.6 million and $1.9 million, respectively, on long-term debt, as well as certain related-party notes payable fully repaid during the year ended June 30, 2023. See Note 8 - Convertible Notes for interest expense on Convertible Notes.

19


 

Additional details of the Company's long-term debt are discussed below.

GEGGL Notes

On June 9, 2022, we issued $26.9 million in aggregate principal amount of 7.25% notes due on June 30, 2027 (the GEGGL Notes), which included $1.9 million of GEGGL Notes issued in connection with the partial exercise of the underwriters’ over-allotment option. The GEGGL Notes are unsecured obligations and rank: (i) pari passu, or equal, with the Convertible Notes (as defined below) and any future outstanding unsecured unsubordinated indebtedness; (ii) senior to any of our indebtedness that expressly provides it is subordinated to the GEGGL Notes; (iii) effectively subordinated to any future secured indebtedness; and (iv) structurally subordinated to any future indebtedness and other obligations of any of our current and future subsidiaries. We pay interest on the GEGGL Notes on March 31, June 30, September 30 and December 31 of each year. The GEGGL Notes can be called on, or after, June 30, 2024. Holders of the GEGGL Notes do not have the option to have the notes repaid prior to the stated maturity date. The GEGGL Notes were issued in minimum denominations of $25 and integral multiples of $25 in excess thereof.

The GEGGL Notes include covenants that limit additional indebtedness or the payment of dividends subject to compliance with a net consolidated debt to equity ratio of 2:1. As of March 31, 2024, our net consolidated debt to equity ratio is 0.33:1.00.

8. Convertible Notes

As of March 31, 2024 and June 30, 2023, the total outstanding principal balance of convertible notes due on February 26, 2030 (the Convertible Notes) was $38.9 million, including cumulative interest paid in-kind. The Convertible Notes are held by a consortium of investors, including $15.8 million issued to certain related parties as of March 31, 2024.

The Convertible Notes accrue interest at 5.0% per annum, payable semiannually in arrears on June 30 and December 31, commencing June 30, 2020, in cash or in kind at the option of the Company. Each $1,000 principal amount of the Convertible Notes are convertible into 288.0018 shares of the Company’s common stock, subject to the terms therein, prior to maturity at the option of the holder.

The Company may, subject to compliance with the terms of the Convertible Notes, effect the conversion of some or all of the Convertible Notes into shares of common stock, subject to certain liquidity and pricing requirements, as specified in the Convertible Notes.

The embedded conversion feature in the Convertible Notes qualifies for the scope exception to derivative accounting in FASB ASC Topic 815, Derivatives and Hedging, for certain contracts involving a reporting entity’s own equity. The Company incurred $1.2 million in issuance costs on the original issuance. The debt issuance costs are being amortized over the 10-year term and are netted with the principal balance on our condensed consolidated balance sheets. As of March 31, 2024 and June 30, 2023, the remaining balance of unamortized debt issuance costs was $0.7 million and $0.8 million, respectively.

During the three and nine months ended March 31, 2024, the Company incurred interest expense of $0.5 million and $1.5 million, respectively, related to the Convertible Notes, inclusive of non-cash interest related to amortization of debt issuance costs. During the three and nine months ended March 31, 2023, the Company incurred interest expense of $0.5 million and $1.5 million, respectively, related to the Convertible Notes, inclusive of non-cash interest related to amortization of debt issuance costs.

20


 

9. Share-Based and Other Non-Cash Compensation

Restricted Stock Awards and Restricted Stock Units

The following table presents activity related to the Company’s restricted stock awards and restricted stock units for the nine months ended March 31, 2024:

Restricted Stock Awards and Restricted Stock Units

 

Shares
(in thousands)

 

 

Weighted Average Grant Date Fair Value

 

Outstanding at June 30, 2023

 

 

1,322

 

 

$

1.93

 

Granted

 

 

1,243

 

 

 

1.97

 

Vested

 

 

(617

)

 

 

2.13

 

Forfeited

 

 

(4

)

 

 

2.15

 

Outstanding at March 31, 2024

 

 

1,944

 

 

$

1.90

 

Restricted stock awards and restricted stock units have vesting terms between 1-4 years and are subject to service requirements. During the nine months ended March 31, 2024, the Company granted 1,242,596 restricted stock awards and did not grant any shares of restricted stock units.

Stock Options

The following table presents activity related to the Company’s stock options for the nine months ended March 31, 2024:

Stock Options

 

Shares
(in thousands)

 

 

Weighted Average Exercise Price

 

 

Weighted Average Remaining Contractual Term (years)

 

 

Aggregate Intrinsic Value
(in thousands)

 

Outstanding at June 30, 2023

 

 

3,264

 

 

$

2.70

 

 

 

7.45

 

 

$

-

 

Options granted

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Forfeited, cancelled or expired

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Outstanding at March 31, 2024

 

 

3,264

 

 

$

2.70

 

 

 

6.69

 

 

$

-

 

Exercisable at March 31, 2024

 

 

1,261

 

 

$

3.72

 

 

 

3.13

 

 

$

-

 

Stock-Based Compensation Expense

Stock-based compensation expense related to all restricted stock awards, restricted stock units, and stock options totaled $0.5 million and $1.8 million for the three and nine months ended March 31, 2024, respectively. Stock-based compensation expense related to all restricted stock awards, restricted stock units, and stock options totaled $0.6 million and $2.0 million for the three and nine months ended March 31, 2023, respectively. As of March 31, 2024, the Company had unrecognized compensation costs related to all unvested restricted stock awards and stock options totaling $2.9 million.

Non-Employee Director Deferred Compensation Plan

In December 2020, the Company established the Great Elm Group, Inc. Non-Employee Directors Deferred Compensation Plan allowing non-employee directors to defer their cash and/or equity compensation under a non-revocable election for each calendar year. Such compensation is deferred until the earlier of 3 years from the original grant date of such compensation, termination of service, or death, and is payable in common stock shares. As of March 31, 2024, there were 167,941 restricted stock awards and restricted stock units that were deferred under this plan (and thus included in the number of restricted stock awards and restricted stock units outstanding as of that date).

Other Non-Cash Compensation

During the nine months ended March 31, 2024, the Company issued compensation to certain employees in the form of GECC common shares to be settled with GECC shares currently held by the Company. The total value of GECC shares awarded for the nine months ended March 31, 2024 was $0.6 million, of which $0.1 million vested immediately, and the balance will vest annually pro-rata over two- and three-year periods. Related compensation expense was $0.2 million and $0.4 million, respectively, for the three and nine months ended March 31, 2024.

21


 

10. Income Taxes

As of June 30, 2023, the Company had net operating loss (NOL) carryforwards for federal income tax purposes of approximately $16.2 million, of which approximately $8.2 million will expire in fiscal years 2024 through 2025 and $8.0 million can be carried forward indefinitely. As of June 30, 2023, the Company also had $25.5 million of state NOL carryforwards, principally in Massachusetts, Arizona, and Nebraska, that will expire from 2031 to 2043.

11. Commitments and Contingencies

From time to time, the Company is involved in lawsuits, claims, investigations and proceedings that arise in the ordinary course of business. The Company maintains insurance to mitigate losses related to certain risks. The Company is not a named party in any other pending or threatened litigation that we expect to have a material adverse impact on our business, results of operations, financial condition or cash flows.

22


 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Overview

GEG is a publicly-traded alternative asset management company focused on growing a scalable and diversified portfolio of long-duration and permanent capital vehicles across credit, real estate, specialty finance, and other alternative strategies. GEG and its subsidiaries currently manage GECC, a publicly-traded business development company, and Monomoy UpREIT, an industrial-focused real estate investment trust, in addition to other investments. The combined assets under management of these entities at March 31, 2024 was approximately $688.0 million.

GEG continues to explore other investment management opportunities, as well as opportunities in other areas that it believes provide attractive risk-adjusted returns on invested capital. As of the date of this report, GEG had no unfunded binding commitments to make additional investments.

Critical Accounting Policies

The discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires our management to make significant estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. These items are monitored and analyzed by our management for changes in facts and circumstances, and material changes in these estimates could occur in the future. During the three and nine months ended March 31, 2024 we did not make material changes in our critical accounting policies or underlying assumptions as disclosed in our Annual Report on Form 10-K for the fiscal year ended June 30, 2023 as it relates to normal and recurring transactions.

The historical results of the Durable Medical Equipment (DME) business, primarily consisting of HC LLC and its subsidiaries, sold on January 3, 2023 and related activity have been presented in the accompanying unaudited condensed consolidated statements of operations for the three and nine months ended March 31, 2023 and cash flows for the nine months ended March 31, 2023 as discontinued operations. Further, the historical segment information was recast to reflect our ongoing business as a single reportable segment and to remove the activity of discontinued operations. Unless otherwise specified, disclosures in these condensed consolidated financial statements reflect continuing operations only.

23


 

Results of Operations

The following table provides the results of our consolidated operations:

 

 

For the three months ended March 31,

 

 

For the nine months ended March 31,

 

(in thousands)

 

2024

 

 

Percent Change

 

2023

 

 

2024

 

 

Percent Change

 

2023

 

Revenues

 

$

2,787

 

 

47%

 

$

1,898

 

 

$

8,916

 

 

58%

 

$

5,637

 

Operating costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment management expenses, excluding non-cash compensation

 

 

(2,330

)

 

0%

 

 

(2,329

)

 

 

(7,116

)

 

20%

 

 

(5,906

)

Non-cash compensation

 

 

(698

)

 

6%

 

 

(660

)

 

 

(2,426

)

 

8%

 

 

(2,246

)

Other selling, general and administrative

 

 

(1,357

)

 

(9)%

 

 

(1,497

)

 

 

(4,552

)

 

8%

 

 

(4,228

)

Depreciation and amortization

 

 

(271

)

 

(4)%

 

 

(281

)

 

 

(837

)

 

(4)%

 

 

(870

)

Total operating costs and expenses

 

 

(4,656

)

 

 

 

 

(4,767

)

 

 

(14,931

)

 

 

 

 

(13,250

)

Operating loss

 

 

(1,869

)

 

 

 

 

(2,869

)

 

 

(6,015

)

 

 

 

 

(7,613

)

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

(1,074

)

 

(2)%

 

 

(1,095

)

 

 

(3,197

)

 

(36)%

 

 

(5,024

)

Other income (expense), net

 

 

60

 

 

(98)%

 

 

3,509

 

 

 

8,848

 

 

(73)%

 

 

32,374

 

Total other income (expense), net

 

 

(1,014

)

 

 

 

 

2,414

 

 

 

5,651

 

 

 

 

 

27,350

 

(Loss) income before income taxes from continuing operations

 

$

(2,883

)

 

 

 

$

(455

)

 

$

(364

)

 

 

 

$

19,737

 

Revenue

Revenues for the three months ended March 31, 2024 increased $0.9 million as compared to the three months ended March 31, 2023 primarily due to the recognition of $0.7 million in incentive fees earned from GECC in the current quarter whereas there were no corresponding incentive fees in the prior year period under the revenue recognition criteria. Revenues for the nine months ended March 31, 2024 increased $3.3 million as compared to the nine months ended March 31, 2023 primarily due to the recognition of $2.7 million in incentive fees earned from GECC in the current year to date period whereas there were no corresponding incentive fees in the prior year period under the revenue recognition criteria. In addition, administration and service fee revenues increased by $0.3 million for the nine months ended March 31, 2024 as compared to the nine months ended March 31, 2023 as a result of changes in organizational structure including additional personnel.

Operating Costs and Expenses

Investment management expenses, excluding non-cash compensation, for the nine months ended March 31, 2024 increased $1.2 million as compared to the corresponding period in the prior year. Increases in investment management expenses, excluding non-cash compensation, were primarily attributable to compensation-related costs as the Company has shifted focus to the investment management business after the sale of the DME business in prior year. These increases are partially offset by the decreases in other selling, general and administrative costs of $0.1 million and -$0.3 million, respectively, for the three and nine months ended March 31, 2024 as compared to the corresponding periods in the prior year.

Other Income (Expense)

Interest expense for the nine months ended March 31, 2024 decreased by $1.8 million compared to the corresponding period in the prior year, as there was no interest expense related to the 35,010 shares of preferred stock issued by Forest Investments, Inc. (Forest) to J.P. Morgan Broker-Dealer Holdings Inc. after the sale of controlling interest in Forest on December 30, 2022 or the $6.3 million promissory note issued to Imperial Capital Asset Management, LLC which was fully repaid in February 2023.

24


 

Other income (expense), net includes dividend and interest income and net realized and unrealized gains and losses. For the three and nine months ended March 31, 2024, dividend and interest income was $2.4 million and $6.4 million, respectively, as compared to $1.5 million and $4.4 million, respectively for the three and nine months ended March 31, 2023. The increases in dividend and interest income are primarily attributable to new investments in private funds and marketable securities. Net realized and unrealized gains and losses generally consist of unrealized mark-to-market adjustments on investments and the gain or loss realized on the sale of investments. In addition, during the three and nine months ended March 31, 2023, the Company recognized a gain on the sale of its controlling interest in Forest in December 2022 of $10.5 million and gain on the January 2023 sale of its remaining non-controlling interest in Forest of $24.4 million.

Liquidity and Capital Resources

Cash Flows

Cash used in operating activities of our continuing operations for the nine months ended March 31, 2024 were $18.5 million. The adjustments to reconcile our net income from continuing operations of -$0.4 million to net cash used in operating activities included add-backs for various non-cash charges, such as $1.8 million of stock-based compensation expense, $1.7 million of non-cash interest and amortization of capitalized issuance costs, and $0.8 million of depreciation and amortization, which was offset by deduction of $1.8 million of unrealized gain on our investments, and the net negative change in our operating assets and liabilities of $11.6 million, including the impact of changes related to consolidated funds.

Cash used in operating activities of our continuing operations for the nine months ended March 31, 2023 were $3.6 million. The adjustments to reconcile our net income from continuing operations of $19.7 million to net cash used in operating activities included add-backs for various non-cash charges, such as $2.0 million of stock-based compensation expense, $1.7 million of non-cash interest and amortization of capitalized issuance costs, and $0.9 million of depreciation and amortization, which was offset by deduction of $12.8 million of unrealized gain on our investments, $4.7 million of realized gain on our investments, $10.5 million of gain on Sale of Controlling Interest in Forest in December 2022, and the net negative change in our operating assets and liabilities of $2.0 million. During the nine months ended March 31, 2023 we also received $1.6 million attributed to sales of investments by Great Elm SPAC Opportunity Fund, LLC (GESOF). Cash flows provided by operating activities of our discontinued operations for the nine months ended March 31, 2023 were $0.8 million.

Cash used in investing activities of our continuing operations for the nine months ended March 31, 2024 were $3.7 million, which includes investment purchases of $59.8 million partially offset by the proceeds from sale of investments of $56.8 million. Cash flows used in investing activities of our discontinued operations for the nine months ended March 31, 2024 were $0.9 million, which represents the payments made to the buyer and former minority interest holders of our durable medical equipment business in connection with working capital adjustment and escrow payments.

Cash provided by investing activities of our continuing operations for the nine months ended March 31, 2023 were $41.1 million which is attributed to the combined proceeds from sale of Forest, net of cash sold, of $44.3 million, partially offset by purchases of investments of $3.1 million. Cash flows provided by investing activities of our discontinued operations for the nine months ended March 31, 2023 of $67.2 million were primarily attributed to the cash proceeds from the Sale of HC LLC, net of cash sold and before transaction costs and distributions to non-controlling interests, of $71.3 million, partially offset by other investing activities of our DME Business.

Cash provided by financing activities of our continuing operations for the nine months ended March 31, 2024 were $7.1 million related to capital activity of Consolidated Funds.

Cash used in financing activities of our continuing operations for the nine months ended March 31, 2023 were $42.4 million, which consisted of principal payments of $38.1 million on the promissory note issued to Forest on December 29, 2022 and fully repaid by January 3, 2023, and principal payments of $3.7 million on the Seller Note, as well as distributions to non-controlling interests in GESOF of $0.6 million. Cash flows used in financing activities of our discontinued operations for the nine months ended March 31, 2023 of $5.2 million were primarily attributed to distributions to non-controlling interests upon Sale of HC LLC of $5.9 million.

25


 

Financial Condition

As of March 31, 2024, we had an unrestricted cash balance of $44.1 million and $24.8 million in marketable securities. We also held 1,518,162 shares of GECC common stock with an estimated fair value of $16.8 million as of March 31, 2024. We believe we have sufficient liquidity available to meet our short-term and long-term obligations for at least the next 12 months.

Borrowings

As of March 31, 2024, the Company had $26.9 million in outstanding aggregate principal amount of 7.25% notes due on June 30, 2027 (the GEGGL Notes). Interest on the GEGGL Notes is paid quarterly. The GEGGL Notes include covenants that limit additional indebtedness or the payment of dividends in the event that our net consolidated debt to equity ratio is, or would be on a pro forma basis, greater than 2 to 1. In addition, if our net consolidated debt to equity ratio is greater than 2 to 1 at the end of any calendar quarter, we must retain no less than 10% of our excess cash flow as cash and cash equivalents until such time as our net consolidated debt to equity ratio is less than 2 to 1 at the end of a calendar quarter.

As of March 31, 2024, the Company had $38.9 million principal balance in convertible notes outstanding (including cumulative interest paid in-kind). The convertible notes are held by a consortium of investors, including related parties. The convertible notes accrue interest at 5.0% per annum, payable semiannually in arrears on June 30 and December 31, in cash or in kind at the option of the Company. The convertible notes are due on February 26, 2030, but are convertible at the option of the holders, subject to the terms therein, prior to maturity into shares of our common stock. Upon conversion of any note, the Company will pay or deliver, as the case may be, to the noteholder, in respect of each $1,000 principal amount of notes being converted, shares of common stock equal to the conversion rate in effect on the conversion date, together with cash, if applicable, in lieu of delivering any fractional share of common stock. To date, all interest on these instruments has been paid in-kind.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

There have been no material changes in the market risks discussed in Item 7A. of our Annual Report on Form 10-K for the fiscal year ended June 30, 2023.

Item 4. Controls and Procedures.

We evaluated the effectiveness of our disclosure controls and procedures as of March 31, 2024. Disclosure controls and procedures include, without limitation, controls and procedures that are designed to ensure that the information we are required to disclose in reports that we file under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer (CEO) and Chief Financial Officer (CFO), to allow timely decisions regarding required disclosure. Our CEO and CFO participated in this evaluation and concluded that, as of March 31, 2024, our disclosure controls and procedures were effective.

There were no changes in our internal control over financial reporting for the quarter ended March 31, 2024, that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

26


 

PART II—OTHER INFORMATION

No changes required to be disclosed.

Item 1A. Risk Factors.

We have disclosed the risk factors affecting our business, financial condition and operating results in the section entitled “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended June 30, 2023. There have been no material changes from the risk factors previously disclosed.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

In November 2023, the Company implemented a stock buyback program pursuant to Rule 10b5-1 and Rule 10b-18 under the Exchange Act (the "buyback program") authorizing us to repurchase our common stock in open market transactions in an aggregate amount of up to $3,850,000 through May 15, 2024 unless extended or terminated by our Board.

Common stock repurchases during the nine months ended March 31, 2024 were:

Month

 

Total Number of
Shares Purchased

 

 

Average Price Per
Share

 

 

Total Number of
Shares Purchased
as Part of 10b5-1 Plan

 

 

Maximum Number
(or Approximate
Dollar Value) of
Shares that May
Yet Be Purchased
Under the Plans or
Programs
(Amounts in dollars)

 

December 1-31, 2023

 

 

1,106

 

 

$

1.80

 

 

 

1,106

 

 

$

3,668,009

 

January 1-31, 2024

 

 

974

 

 

$

1.80

 

 

 

2,080

 

 

$

3,666,256

 

February 1-29, 2024

 

 

5

 

 

$

1.80

 

 

 

2,085

 

 

$

3,666,247

 

Total

 

 

2,085

 

 

$

1.80

 

 

 

2,085

 

 

 

 

 

Item 5. Other Information.

During the quarter ended March 31, 2024, no director or officer (as defined in Rule 16a-1(f) promulgated under the Exchange Act) of GEG adopted or terminated a "Rule 10b5-1 trading arrangement" or a "non-Rule 10b5-1 trading arrangement" (as each term is defined in Item 408 of Regulation S-K).

27


 

Item 6. Exhibits.

EXHIBIT INDEX

All references are to filings by Great Elm Group, Inc. (the registrant) with the SEC under File No. 001-39832.

Exhibit
Number Description

 

 

 

 

3.1

 

Certificate of Incorporation of Great Elm Group, Inc., dated October 23, 2020 (incorporated by reference to Exhibit 3.1 to the Form 8-K filed on December 29, 2020)

 

 

 

3.2

 

Amended and Restated Bylaws of Great Elm Group, Inc., dated November 14, 2022 (incorporated by reference to Exhibit 3.1 to the Form 8-K filed on November 14, 2022)

 

 

 

31.1*

 

Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

 

 

 

31.2*

 

Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

 

 

 

32.1*

 

Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

 

 

101

 

Materials from the registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2024, formatted in inline Extensible Business Reporting Language (XBRL): (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Operations, (iii) Condensed Consolidated Statements of Stockholders’ Equity and Contingently Redeemable Non-Controlling Interest, (iv) Condensed Consolidated Statements of Cash Flows, and (v) related Notes to the Condensed Consolidated Financial Statements, tagged in detail (furnished herewith).

 

 

 

104

 

The cover page from the registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2024, formatted in inline XBRL (included as Exhibit 101).

 

 

 

*Filed or furnished herewith.

28


 

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

 

GREAT ELM GROUP, INC.

 

 

Date: May 8, 2024

/s/ Jason W. Reese

 

Jason W. Reese

 

Chief Executive Officer & Chairman

 

 

Date: May 8, 2024

/s/ Keri A. Davis

 

Keri A. Davis

 

Chief Financial Officer & Chief Accounting Officer

 

 

29


Exhibit 31.1

CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT

 

I, Jason W. Reese, certify that:

 

1.
I have reviewed this quarterly report on Form 10-Q of Great Elm Group, Inc.;

 

2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4.
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

(b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

(c)
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

(d)
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

(a)
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 registrant’s ability to record, process, summarize and report financial information; and

 

(b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: May 8, 2024

 

By:

 

/s/ Jason W. Reese

 

 

Jason W. Reese

 

 

(Principal Executive Officer)

 

 


Exhibit 31.2

 

CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT

 

I, Keri A. Davis, certify that:

 

1.
I have reviewed this quarterly report on Form 10-Q of Great Elm Group, Inc.;

 

2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4.
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

(b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

(c)
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

(d)
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

(a)
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 registrant’s ability to record, process, summarize and report financial information; and

 

(b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: May 8, 2024

 

By:

 

/s/ Keri A. Davis

 

 

Keri A. Davis

 

 

(Principal Financial Officer)

 


Exhibit 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER

PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the Quarterly Report on Form 10-Q of Great Elm Group, Inc. (the “Company”) for the period ended March 31, 2024 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, Jason W. Reese, Principal Executive Officer of the Company, and Keri A. Davis, Principal Financial Officer of the Company, each certify, pursuant to the requirement set forth in Rule 13a-14(b) of the Securities Exchange Act of 1934 as amended (the “Exchange Act”) and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the undersigned’s knowledge:

 

(1)
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Exchange Act; and

 

(2)
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

By:

 

 

/s/ Jason W. Reese

 

 

Jason W. Reese

 

 

(Principal Executive Officer)

 

By:

 

 

/s/ Keri A. Davis

 

 

Keri A. Davis

 

 

(Principal Financial Officer)

 

May 8, 2024

 


v3.24.1.u1
Document and Entity Information - shares
9 Months Ended
Mar. 31, 2024
May 02, 2024
Document Information [Line Items]    
Document Type 10-Q  
Amendment Flag false  
Document Period End Date Mar. 31, 2024  
Document Fiscal Year Focus 2024  
Document Fiscal Period Focus Q3  
Entity Registrant Name Great Elm Group, Inc.  
Entity Central Index Key 0001831096  
Current Fiscal Year End Date --06-30  
Entity Current Reporting Status Yes  
Entity Filer Category Non-accelerated Filer  
Entity Common Stock, Shares Outstanding   31,875,285
Entity Small Business true  
Entity Emerging Growth Company false  
Entity Shell Company false  
Entity File Number 001-39832  
Entity Tax Identification Number 85-3622015  
Entity Address, Address Line One 3801 PGA Boulevard  
Entity Address, Address Line Two Suite 603  
Entity Address, City or Town Palm Beach Gardens  
Entity Address, State or Province FL  
Entity Address, Postal Zip Code 33410  
City Area Code 617  
Local Phone Number 375-3006  
Document Quarterly Report true  
Entity Incorporation, State or Country Code DE  
Entity Interactive Data Current Yes  
Document Transition Report false  
Former Address    
Document Information [Line Items]    
Entity Address, Address Line One 800 South Street  
Entity Address, Address Line Two Suite 230  
Entity Address, City or Town Waltham  
Entity Address, State or Province MA  
Entity Address, Postal Zip Code 02453  
Common Stock    
Document Information [Line Items]    
Title of each class Common Stock, par value $0.001 per share  
Trading Symbol GEG  
Security Exchange Name NASDAQ  
7.25% Notes due 2027    
Document Information [Line Items]    
Title of each class 7.25% Notes due 2027  
Trading Symbol GEGGL  
Security Exchange Name NASDAQ  
v3.24.1.u1
Condensed Consolidated Balance Sheets (Unaudited) - USD ($)
$ in Thousands
Mar. 31, 2024
Jun. 30, 2023
Current assets:    
Cash and cash equivalents $ 44,085 $ 60,165
Investments in marketable securities 24,789 24,595
Investments, at fair value (cost $46,199 and $40,387, respectively) 38,244 32,611
Prepaid and other current assets 2,843 717
Real estate under development 8,104 1,742
Assets of Consolidated Funds - Cash and cash equivalents 5,414  
Assets of Consolidated Funds - Investments, at fair value (cost $8,353) 8,561  
Assets of Consolidated Funds - Other assets 233  
Total current assets 136,673 123,138
Identifiable intangible assets, net 11,300 12,115
Right-of-use assets 230 497
Other assets 150 143
Total assets 148,353 135,893
Current liabilities:    
Accrued expenses and other current liabilities 4,276 5,418
Payable for securities purchased 4,914  
Current portion of lease liabilities 183 359
Liabilities of Consolidated Funds - Payable for securities purchased 267  
Liabilities of Consolidated Funds- accrued expenses and other 124  
Total current liabilities 10,990 7,377
Lease liabilities, net of current portion 26 142
Long-term debt (face value $26,945) 26,019 25,808
Convertible notes (face value $38,859 and $37,912, including $15,780 and $15,395 held by related parties, respectively) 38,164 37,129
Other liabilities 683 669
Total liabilities 75,882 72,051
Commitments and Contingencies (Note 11)
Stockholders' equity    
Preferred stock, $0.001 par value; 5,000,000 authorized and zero outstanding
Common stock, $0.001 par value; 350,000,000 shares authorized and 31,881,695 shares issued and 30,164,142 outstanding at March 31, 2024; and 30,651,047 shares issued and 29,546,655 outstanding at June 30, 2023 30 30
Additional paid-in-capital 3,317,212 3,315,378
Accumulated deficit (3,252,242) (3,251,566)
Total Great Elm Group, Inc. stockholders' equity 65,000 63,842
Non-controlling interests 7,471
Total stockholders' equity 72,471 63,842
Total liabilities and stockholders' equity 148,353 135,893
Nonrelated Party    
Current liabilities:    
Accounts payable 608 191
Related Party    
Current assets:    
Receivables from managed funds 4,400 3,308
Current liabilities:    
Accounts payable $ 618 1,409
Related party payables, net of current portion   $ 926
v3.24.1.u1
Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - USD ($)
$ in Thousands
Mar. 31, 2024
Jun. 30, 2023
Statement of Financial Position [Abstract]    
Investments, cost basis $ 46,199 $ 40,387
Investments, cost basis 8,353  
Long term debt, face value 26,945 26,945
Convertible notes, face value 38,859 37,912
Convertible notes payable to related party non-current $ 15,780 $ 15,395
Preferred stock, par value $ 0.001 $ 0.001
Preferred stock, shares authorized 5,000,000 5,000,000
Preferred stock, shares outstanding 0 0
Common stock, par value $ 0.001 $ 0.001
Common stock, shares authorized 350,000,000 350,000,000
Common stock, shares issued 31,881,695 30,651,047
Common stock, shares outstanding 30,164,142 29,546,655
v3.24.1.u1
Condensed Consolidated Statements of Operations (Unaudited) - USD ($)
shares in Thousands, $ in Thousands
3 Months Ended 9 Months Ended
Mar. 31, 2024
Mar. 31, 2023
Mar. 31, 2024
Mar. 31, 2023
Revenues $ 2,787 $ 1,898 $ 8,916 $ 5,637
Operating costs and expenses:        
Investment management expenses 2,733 2,593 8,334 6,893
Depreciation and amortization 271 281 837 870
Selling, general and administrative 1,630 1,893 5,738 5,441
Expenses of Consolidated Funds 22   22 46
Total operating costs and expenses 4,656 4,767 14,931 13,250
Operating loss (1,869) (2,869) (6,015) (7,613)
Dividends and interest income 2,359 1,520 6,417 4,432
Net realized and unrealized gain (loss) on investments (2,753) 1,989 1,735 17,434
Net realized and unrealized gain (loss) on investments of Consolidated Funds 131   245 (16)
Interest and other income of Consolidated Funds 323   451  
Gain on sale of controlling interest in subsidiary       10,524
Interest expense (1,074) (1,095) (3,197) (5,024)
(Loss) income before income taxes from continuing operations (2,883) (455) (364) 19,737
Income tax benefit (expense)       (2)
Net (loss) income from continuing operations (2,883) (455) (364) 19,735
Discontinued operations:        
Net income from discontinued operations   12,203 16 13,202
Net (loss) income (2,883) 11,748 (348) 32,937
Less: net income (loss) attributable to non-controlling interest, continuing operations 217   328 (1,554)
Less: net income attributable to non-controlling interest, discontinued operations       1,504
Net (loss) income attributable to Great Elm Group, Inc. $ (3,100) $ 11,748 $ (676) $ 32,987
Basic net income (loss) per share from:        
Continuing operations $ (0.1) $ (0.02) $ (0.02) $ 0.74
Discontinued operations   0.42   0.41
Basic net income (loss) per share (0.1) 0.4 (0.02) 1.15
Diluted net income (loss) per share from:        
Continuing operations (0.1) (0.02) (0.02) 0.56
Discontinued operations   0.42   0.29
Diluted net income (loss) per share $ (0.1) $ 0.4 $ (0.02) $ 0.85
Weighted average shares outstanding        
Basic 30,066 28,997 29,844 28,779
Diluted 30,066 28,997 29,844 40,673
v3.24.1.u1
Condensed Consolidated Statements of Stockholders' Equity and Contingently Redeemable Non-controlling Interest (Unaudited) - USD ($)
$ in Thousands
Total
Common Stock
Additional Paid-in Capital
Accumulated Deficit
Total Great Elm Group Inc. Stockholders' Equity
Non-controlling Interest
Beginning balance at Jun. 30, 2022 $ 40,029 $ 29 $ 3,312,763 $ (3,279,296) $ 33,496 $ 6,533
Beginning balance (in shares) at Jun. 30, 2022   28,507,000        
Beginning balance, Contingently redeemable non-controlling interest at Jun. 30, 2022 2,225          
Net income (loss) (9,201)     (8,291) (8,291) (910)
Net (loss) income, Contingently redeemable non-controlling interest 662          
Distributions to non-controlling interests in Consolidated Funds (634)         (634)
Issuance of common stock related to vesting of restricted stock (in shares)   267,000        
Stock-based compensation 834   834   834  
Ending balance at Sep. 30, 2022 31,028 $ 29 3,313,597 (3,287,587) 26,039 4,989
Ending balance (in shares) at Sep. 30, 2022   28,774,000        
Ending balance, Contingently redeemable non-controlling interest at Sep. 30, 2022 2,887          
Net income (loss) 29,638     29,530 29,530 108
Net (loss) income, Contingently redeemable non-controlling interest 90          
Redemption of non-controlling interests upon sale of controlling interest in subsidiary (2,120)         (2,120)
Issuance of common stock related to vesting of restricted stock (in shares)   202,000        
Stock-based compensation 576   576   576  
Ending balance at Dec. 31, 2022 59,122 $ 29 3,314,173 (3,258,057) 56,145 2,977
Ending balance (in shares) at Dec. 31, 2022   28,976,000        
Ending balance, Contingently redeemable non-controlling interest at Dec. 31, 2022 2,977          
Net income (loss) 11,748     11,748 11,748  
Redemption of non-controlling interests upon sale of controlling interest in subsidiary (2,977)         (2,977)
Redemption of non-controlling interests upon sale of subsidiaries, contingently redeemable non-controlling interest (2,977)          
Issuance of common stock related to vesting of restricted stock (in shares)   170,000        
Stock-based compensation 564   564   564  
Ending balance at Mar. 31, 2023 68,457 $ 29 3,314,737 (3,246,309) 68,457  
Ending balance (in shares) at Mar. 31, 2023   29,146,000        
Beginning balance at Jun. 30, 2023 $ 63,842 $ 30 3,315,378 (3,251,566) 63,842  
Beginning balance (in shares) at Jun. 30, 2023 29,546,655 29,547,000        
Net income (loss) $ 2,774     2,774 2,774  
Issuance of common stock related to vesting of restricted stock (in shares)   322,000        
Stock-based compensation 705   705   705  
Ending balance at Sep. 30, 2023 67,321 $ 30 3,316,083 (3,248,792) 67,321  
Ending balance (in shares) at Sep. 30, 2023   29,869,000        
Net income (loss) (239)     (350) (350) 111
Issuance of interests in Consolidated Funds 6,900         6,900
Issuance of common stock related to vesting of restricted stock (in shares)   181,000        
Stock-based compensation 625   625   625  
Ending balance at Dec. 31, 2023 74,607 $ 30 3,316,708 (3,249,142) 67,596 7,011
Ending balance (in shares) at Dec. 31, 2023   30,050,000        
Net income (loss)   $ (2,883)   (3,100) (3,100) 217
Distributions to non-controlling interests in Consolidated Funds   (107)       (107)
Issuance of interests in Consolidated Funds   $ 350       350
Issuance of common stock related to vesting of restricted stock (in shares)   114,000        
Stock-based compensation   $ 504 504   504  
Ending balance at Mar. 31, 2024 $ 72,471 $ 30 $ 3,317,212 $ (3,252,242) $ 65,000 $ 7,471
Ending balance (in shares) at Mar. 31, 2024 30,164,142 30,164,000        
v3.24.1.u1
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($)
$ in Thousands
9 Months Ended
Mar. 31, 2024
Mar. 31, 2023
Cash flows from operating activities:    
Net income from continuing operations $ (364) $ 19,735
Adjustments to reconcile net income to net cash used in operating activities:    
Depreciation and amortization 837 870
Stock-based compensation 1,834 1,974
Unrealized gain on investments (1,813) (12,776)
Realized loss on investments 78 (4,658)
Gain on sale of controlling interest in subsidiary   (10,524)
Non-cash interest and amortization of capitalized issuance costs 1,732 1,737
Deferred tax expense   4
Change in fair value of contingent consideration (518) 180
Other non-cash (income) expense, net (406) 324
Adjustments to reconcile net income to net cash used in operating activities of Consolidated Funds:    
Purchases of investments (8,459)  
Sales of investments 426 1,558
Amortization (15)  
Net realized and unrealized (gains) losses on investments (245) 16
Changes in operating assets and liabilities:    
Receivables from managed funds (1,092) (272)
Prepaid and other assets (2,143) 32
Real estate under development (6,421) (1,600)
Operating leases (25) (70)
Related party payables (1,199)  
Accounts payable, accrued expenses and other liabilities 4,779 (919)
Changes in operating assets and liabilities of Consolidated Funds:    
Cash and cash equivalents (5,414)  
Other assets (233) 746
Accrued expenses and other liabilities 124 70
Net cash used in provided by operating activities - continuing operations (18,537) (3,573)
Net cash provided by operating activities - discontinued operations   766
Net cash (used in) provided by operating activities (18,537) (2,807)
Cash flows from investing activities:    
Purchases of investments in held-to-maturity securities (49,036)  
Proceeds from settlement of held-to-maturity securities 50,000  
Purchases of investments (11,440) (3,105)
Sales of investments 6,752 26,527
Proceeds from sale of controlling interest in subsidiary, net of cash sold   17,735
Other (15) (37)
Net cash (used in) provided by investing activities - continuing operations (3,739) 41,120
Net cash used in investing activities - discontinued operations (947) 67,230
Net cash (used in) provided by investing activities (4,686) 108,350
Cash flows from financing activities:    
Principal payments on long term debt   (41,765)
Contributions of non-controlling interests in Consolidated Funds 7,250  
Distributions to non-controlling interests in Consolidated Funds (107) (634)
Net cash provided by (used in) financing activities - continuing operations 7,143 (42,399)
Net cash provided by financing activities - discontinued operations   (5,221)
Net cash provided by (used in) financing activities 7,143 (47,620)
Net decrease in cash and cash equivalents, including cash and cash equivalents classified within current assets held for sale (16,080) 57,923
Less: net increase in cash and cash equivalents classified within current assets held for sale   62,775
Plus: cash received from (used in) discontinued operations   66,689
Net change in cash and cash equivalents (16,080) 61,837
Cash and cash equivalents at beginning of period 60,165 22,281
Cash and cash equivalents at end of period 44,085 84,118
Cash paid for interest 1,465 3,348
Non-cash investing and financing activities    
Non-cash contribution to Consolidated Funds $ 389  
Lease liabilities and right of use assets arising from operating leases   167
Partial settlement of Seller Note in exchange for GECC stock   2,609
Non-cash distributions received from Consolidated Funds   177
Equity consideration upon Sale of HC LLC   $ 2,000
v3.24.1.u1
Pay vs Performance Disclosure - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended
Mar. 31, 2024
Mar. 31, 2023
Mar. 31, 2024
Mar. 31, 2023
Pay vs Performance Disclosure        
Net Income (Loss) $ (3,100) $ 11,748 $ (676) $ 32,987
v3.24.1.u1
Insider Trading Arrangements
3 Months Ended
Mar. 31, 2024
Trading Arrangements, by Individual  
Rule 10b5-1 Arrangement Adopted false
Non-Rule 10b5-1 Arrangement Adopted false
Rule 10b5-1 Arrangement Terminated false
Non-Rule 10b5-1 Arrangement Terminated false
v3.24.1.u1
Organization
9 Months Ended
Mar. 31, 2024
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Organization

1. Organization

Great Elm Group, Inc. (referred to as the Company or GEG) is an alternative asset management company incorporated in Delaware. The Company focuses on growing a scalable and diversified portfolio of long-duration and permanent capital vehicles across credit, real estate, specialty finance, and other alternative strategies.

The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, including Great Elm Capital Management, Inc. (GECM), Great Elm Opportunities GP, Inc. (GEO GP), Great Elm Capital GP, LLC, Great Elm FM Acquisition, Inc., Great Elm DME Holdings, Inc., Great Elm DME Manager, LLC, and Monomoy BTS Corporation (MBTS), Great Elm Investments LLC, as well as its majority-owned subsidiaries Forest Investments, Inc. (through December 30, 2022), and Great Elm Healthcare, LLC (HC LLC) and its wholly-owned subsidiaries (through January 3, 2023). In addition, we have determined that the Company was the primary beneficiary of certain variable interest entities, and therefore the operations of those entities have been included in our consolidated results for the relevant periods.

v3.24.1.u1
Summary of Significant Accounting Policies
9 Months Ended
Mar. 31, 2024
Accounting Policies [Abstract]  
Summary of Significant Accounting Policies

2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions for Form 10-Q and, therefore, do not include all information and footnotes that are normally included in the Company’s Form 10-K and should be read in conjunction with the audited consolidated financial statements and notes thereto, which are included in the Company’s Annual Report on Form 10-K for the year ended June 30, 2023. These financial statements reflect all adjustments (consisting of normal and recurring items or items discussed herein) that management believes are necessary to fairly state results for the interim periods presented. Results of operations for interim periods are not necessarily indicative of annual results of operations.

The historical results of the Durable Medical Equipment (DME) business, primarily consisting of HC LLC and its subsidiaries, sold on January 3, 2023, and related activity have been presented in the accompanying unaudited condensed consolidated statements of operations for the three and nine months ended March 31, 2023 and cash flows for the nine months ended March 31, 2023 as discontinued operations. Further, the historical segment information was recast to reflect our ongoing business as a single reportable segment and to remove the activity of discontinued operations. Unless otherwise specified, disclosures in these condensed consolidated financial statements reflect continuing operations only.

Certain prior period amounts have been reclassified to conform to current period presentation.

Use of Estimates

The preparation of these financial statements in accordance with accounting principles generally accepted in the United States of America (US GAAP) requires the Company 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 periods presented. On an on-going basis, the Company evaluates all of these estimates and assumptions. The most important of these estimates and assumptions relate to revenue recognition, valuation allowance for deferred tax assets, estimates associated with accounting for asset acquisitions, and fair value measurements, including stock-based compensation. Although these and other estimates and assumptions are based on the best available information, actual results could be different from these estimates.

Principles of Consolidation

The Company consolidates the assets, liabilities, and operating results of its wholly-owned subsidiaries, majority-owned subsidiaries, and subsidiaries in which we hold a controlling financial interest. In most cases, a controlling financial interest reflects ownership of a majority of the voting interests, including kick out rights, either directly or indirectly through related parties presumed to be under our control. We consolidate a variable interest entity (VIE) when we possess both the power to direct the activities of the VIE that most significantly impact its economic performance and the obligation to absorb losses of, or the right to receive benefits from, the entity that could potentially be significant to the VIE. We deconsolidate a VIE when we no longer possess the power to direct the activities of the VIE that most significantly impact its economic performance or the obligation to absorb losses of, or the right to receive benefits from, the entity that could potentially be significant to the VIE.

All intercompany accounts and transactions have been eliminated in consolidation.

Non-controlling interests in the Company’s subsidiaries are reported as a component of equity, separate from the parent company’s equity or outside of permanent equity for non-controlling interests that are contingently redeemable. Results of operations attributable to the non-controlling interests are included in the Company’s consolidated statements of operations.

Cash and Cash Equivalents

Cash and cash equivalents are comprised of cash and highly liquid investments with original maturities of 90 days or less at the date of purchase. Cash equivalents consist primarily of exchange-traded money market funds and U.S. treasury bills. The Company is exposed to credit risk in the event of default by the financial institutions or the issuers of these investments to the extent the amounts on deposit or invested are in excess of amounts that are insured.

Investments in Marketable Securities

Investments in marketable securities consist of U.S. treasury bills with original maturity exceeding 90 days. The Company classifies investments in debt securities as either trading, held-to-maturity, or available-for-sale. Securities are classified as trading if they are purchased and held principally for the purpose of selling in the near term and as held-to-maturity when the Company has both the positive intent and ability to hold the security to maturity. Investments in debt securities not classified as either trading or held-to-maturity are classified as available-for-sale securities. Trading securities are measured at fair value with unrealized gains and losses reported within net realized and unrealized gain on investments. Held-to-maturity securities are measured at amortized cost with realized gains and losses reported within net realized and unrealized gain on investments. Available-for-sale securities are measured at fair value with unrealized gains and losses reported in accumulated other comprehensive income (loss).

As of March 31, 2024, all investments in marketable securities were classified as held-to-maturity and had original maturities (at the time of purchase) exceeding 90 days. As of March 31, 2024, the amortized cost basis for these securities approximated their fair value.

Investments, at Fair Value

Investments, at fair value, consist of equity and equity-related securities and debt securities classified as trading carried at fair value, as well as investments in private funds measured using the net asset value (NAV) as reported by each fund’s investment manager. The private funds calculate NAV in a manner consistent with the measurement principles of the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 946, Financial Services – Investment Companies, as of the valuation date. Changes in the fair value and NAV are recorded within net realized and unrealized gain on investments. Dividends received are recorded within dividends and interest income on the consolidated statements of operations.

Real Estate under Development

Real estate under development is classified as follows: (i) real estate under development (current), which includes real estate projects that are in the process of being developed and expected to be completed and disposed of within one year of the balance sheet date; (ii) real estate under development (non-current), which includes real estate projects that are in the process of being developed and expected to be completed and disposed of more than one year from the balance sheet date; and (iii) real estate held for sale, which includes land and completed improvements thereon that meet all of the “held for sale” criteria.

Real estate under development is carried at cost less impairment, if applicable. We capitalize costs that are directly identifiable with the specific real estate projects, including pre-acquisition and pre-construction costs, development and construction costs, taxes, and insurance. We do not capitalize any general and administrative or overhead costs, regardless of whether the costs are internal or paid to third parties. Capitalization begins when the activities related to development have begun and ceases when activities are substantially complete and the asset is available for occupancy.

Real estate held for sale is recorded at the lower of cost or fair value less cost to sell. If an asset’s fair value less cost to sell, based on discounted future cash flows, management estimates or market comparisons, is less than its carrying amount, an allowance is recorded against the asset.

Impairment of Long-Lived Assets

Long-lived assets include real estate under development, property and equipment, definite-lived intangible assets, and lease right-of-use assets. The Company evaluates the recoverability of long-lived assets whenever events or changes in circumstances indicate that their carrying value may not be recoverable based on undiscounted cash flows. Impairment losses are recorded when undiscounted cash flows estimated to be generated by an asset are less than the asset’s carrying amount. The amount of the impairment loss, if any, is calculated as the excess of the asset’s carrying value over its fair value, which is determined using a discounted cash flow analysis, management estimates or market comparisons.

Leases

We determine if an arrangement contains a lease at the inception of a contract considering all relevant facts and circumstances, which normally does not require significant judgment. Right-of-use assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Right-of-use assets and lease liabilities are recognized at the commencement date of the lease based on the present value of the remaining future minimum lease payments. As the interest rate implicit in our leases is generally not readily determinable, we utilize the incremental borrowing rate, determined by class of underlying asset, to discount the lease payments. The operating lease right-of-use assets also include lease payments made before commencement and are reduced by lease incentives.

The Company’s office leases typically require reimbursements to the lessor for real estate taxes, common area maintenance and other operating costs, which are expensed as incurred as variable lease costs. The Company accounts for lease and nonlease components as a single lease component.

In March 2024, the Company signed a new office lease which is expected to commence in December 2024. As none of the criteria for recognition have been met as of March 31, 2024, there is no corresponding lease liability or right-of-use asset associated with this lease included in the condensed consolidated balance sheets.

Earnings per Share

The following table presents the calculation of basic and diluted net income (loss) per share:

 

 

For the three months ended March 31,

 

 

For the nine months ended March 31,

 

(in thousands except per share amounts)

 

2024

 

 

2023

 

 

2024

 

 

2023

 

Numerator:

 

 

 

 

 

 

 

 

 

 

 

 

Net (loss) income from continuing operations

 

$

(2,883

)

 

$

(455

)

 

$

(364

)

 

$

19,735

 

Less: net income (loss) attributable to non-controlling interest, continuing operations

 

 

217

 

 

 

-

 

 

 

328

 

 

 

(1,554

)

Numerator for basic EPS - Net (loss) income from continuing operations attributable to Great Elm Group, Inc.

 

$

(3,100

)

 

$

(455

)

 

$

(692

)

 

$

21,289

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income from discontinued operations

 

 

-

 

 

 

12,203

 

 

 

16

 

 

 

13,202

 

Less: net income attributable to non-controlling interest, discontinued operations

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1,504

 

Numerator for basic EPS - Net income (loss) from discontinued operations, attributable to Great Elm Group, Inc.

 

$

-

 

 

$

12,203

 

 

$

16

 

 

$

11,698

 

Effect of dilutive securities:

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense associated with Convertible Notes, continuing operations

 

$

-

 

 

$

-

 

 

$

-

 

 

$

1,451

 

Numerator for diluted EPS - Net (loss) income from continuing operations attributable to Great Elm Group, Inc., after the effect of dilutive securities

 

$

(3,100

)

 

$

(455

)

 

$

(692

)

 

$

22,740

 

Numerator for diluted EPS - Net income (loss) from discontinued operations, attributable to Great Elm Group, Inc.

 

$

-

 

 

$

12,203

 

 

$

16

 

 

$

11,698

 

Denominator:

 

 

 

 

 

 

 

 

 

 

 

 

Denominator for basic EPS - Weighted average shares of common stock outstanding

 

 

30,066

 

 

 

28,997

 

 

 

29,844

 

 

 

28,779

 

Effect of dilutive securities:

 

 

 

 

 

 

 

 

 

 

 

 

Restricted stock

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1,328

 

Convertible Notes

 

 

-

 

 

 

-

 

 

 

-

 

 

 

10,566

 

Denominator for diluted EPS - Weighted average shares of common stock outstanding after the effect of dilutive securities

 

 

30,066

 

 

 

28,997

 

 

 

29,844

 

 

 

40,673

 

Basic net income (loss) per share from:

 

 

 

 

 

 

 

 

 

 

 

 

Continuing operations

 

$

(0.10

)

 

$

(0.02

)

 

$

(0.02

)

 

$

0.74

 

Discontinued operations

 

 

-

 

 

 

0.42

 

 

 

-

 

 

 

0.41

 

Basic net income (loss) per share

 

$

(0.10

)

 

$

0.40

 

 

$

(0.02

)

 

$

1.15

 

Diluted net income (loss) per share from:

 

 

 

 

 

 

 

 

 

 

 

 

Continuing operations

 

$

(0.10

)

 

$

(0.02

)

 

$

(0.02

)

 

$

0.56

 

Discontinued operations

 

 

-

 

 

 

0.42

 

 

$

-

 

 

 

0.29

 

Diluted net income (loss) per share

 

$

(0.10

)

 

$

0.40

 

 

$

(0.02

)

 

$

0.85

 

As of March 31, 2024, the Company had 3,264,424 potential shares of common stock issuable upon the exercise of stock options that are not included in the diluted net income (loss) per share calculation because to do so would be anti-dilutive for the three and nine months ended March 31, 2024. Further, as of March 31, 2024, the Company had 11,191,461 shares of common stock issuable upon the conversion of Convertible Notes (as defined below) that are not included in the diluted income (loss) per share calculation because to do so would be anti-dilutive for the three and nine months ended March 31, 2024. As of March 31, 2024, the Company had 1,771,950 shares of restricted stock that are not included in the diluted income (loss) per share calculation because to do so would be anti-dilutive for the three and nine months ended March 31, 2024.

As of March 31, 2023, the Company had 1,270,651 potential shares of common stock issuable upon the exercise of stock options that are not included in the diluted net income (loss) per share calculation for the three and nine months ended March 31, 2023 because to do so would be anti-dilutive.

As of March 31, 2024 and 2023, the Company had an aggregate of 1,771,950 and 1,509,885 issued shares, respectively, that are not considered outstanding for accounting purposes since they are unvested and subject to forfeiture by the employees at a nominal price if service milestones are not met.

Recently Adopted Accounting Standards

Current Expected Credit Losses. In June 2016, the FASB issued Accounting Standards Update (ASU) 2016-13, Financial Instruments – Credit Losses (Topic 326), which changes the impairment model for financial instruments, including trade receivables from an incurred loss method to a new forward looking approach, based on expected losses. The estimate of expected credit losses will require entities to incorporate considerations of historical experience, current information and reasonable and supportable forecasts. The amendments in this ASU are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company adopted this ASU as of July 1, 2023, which did not have a material impact on its consolidated financial statements.

Recently Issued Accounting Standards

Income Taxes. In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, to expand the disclosure requirements for income taxes, specifically related to the rate reconciliation and income taxes paid disaggregated by jurisdiction. The amendments in this ASU are effective for fiscal years beginning after December 15, 2025, and early adoption and retrospective application are permitted. The Company is evaluating the potential impact that the adoption of this ASU will have on its consolidated financial statements.

v3.24.1.u1
Revenue
9 Months Ended
Mar. 31, 2024
Revenue from Contract with Customer [Abstract]  
Revenue

3. Revenue

The revenues from each major source are summarized in the following table:

 

 

For the three months ended March 31,

 

 

For the nine months ended March 31,

 

(in thousands)

 

2024

 

 

2023

 

 

2024

 

 

2023

 

Management fees

 

$

1,462

 

 

$

1,384

 

 

$

4,314

 

 

$

4,067

 

Incentive fees

 

 

663

 

 

 

-

 

 

 

2,676

 

 

 

-

 

Property management fees

 

 

300

 

 

 

278

 

 

 

875

 

 

 

830

 

Administration and service fees

 

 

362

 

 

 

236

 

 

 

1,051

 

 

 

740

 

Total revenues

 

$

2,787

 

 

$

1,898

 

 

$

8,916

 

 

$

5,637

 

The Company recognizes investment management revenue at amounts that reflect the consideration to which it expects to be entitled in exchange for providing services to its customers. Investment management revenue primarily consists of fees based on a percentage of assets under management, fees based on the performance of managed assets, and administration and service fees. Fees are based on agreements with each investment product and may be terminated at any time by either party subject to the specific terms of each respective agreement.

Management Fees

The Company earns management fees based on the investment management agreements GECM has with Great Elm Capital Corp. (GECC), Monomoy Properties UpREIT, LLC (Monomoy UpREIT), the operating partnership of Monomoy Properties REIT, LLC, and other private funds managed by GECM (collectively, the Funds). The performance obligation is satisfied and management fee revenue is recognized over time as the services are rendered, since the Funds simultaneously receive and consume the benefits provided as GECM performs services. Management fee rates range from 1.0% to 1.5% of the management fee assets specified within each agreement and are calculated and billed in arrears of the period, either monthly or quarterly.

Property Management Fees

Under the Monomoy UpREIT investment management agreement, GECM is also entitled to 4.0% of rent collected. These fees are collected monthly in arrears. Property management fee revenue is recognized over time as the services are provided.

Incentive Fees

The Company earns incentive fees based on the investment management agreements GECM has with GECC, Monomoy Properties II, LLC (MP II), a feeder fund of Monomoy Properties REIT, LLC and other private funds managed by GECM. Where an investment management agreement includes both management fees and incentive fees, the performance obligation is considered to be a single obligation for both fees. Incentive fees are variable consideration associated with the investment management agreements. Incentive fees are earned based on investment performance during the period, subject to the achievement of minimum return levels or high-water marks, in accordance with the terms of the respective investment management agreements. Incentive fees are typically 20% of the performance-based metric specified within each agreement. Incentive fees are recognized when it is determined that they are no longer probable of significant reversal. During the three and nine months ended March 31, 2024, the Company recorded revenue in respect to the incentive fees due from GECC of $0.7 million and $2.7 million, respectively.

Administration Fees

The Company earns administration fees based on the administration agreement GECM has with GECC whereby the investment vehicles reimburse GECM for costs incurred in performing certain administrative functions. This revenue is recognized over time as the services are performed. Administration fees are billed quarterly in arrears, which is consistent with the timing of the delivery of services and reflect agreed upon rates for the services provided. The services are accounted for as a single performance obligation for each investment vehicle that is a series of distinct services with substantially the same pattern of transfer as the services are provided on a daily basis.

The Company also earns services fees based on a shared services agreement with Imperial Capital Asset Management, LLC (ICAM). This revenue is recognized over time as the services are performed. Service fees are billed quarterly in arrears, which is consistent with the timing of the delivery of services and reflects agreed-upon rates for the services provided. The services are accounted for as a single performance obligation that is a series of distinct services with substantially the same pattern of transfer as the services are provided on a daily basis.

v3.24.1.u1
Related Party Transactions
9 Months Ended
Mar. 31, 2024
Related Party Transactions [Abstract]  
Related Party Transactions

4. Related Party Transactions

Related party transactions are measured in part by the amount of consideration paid or received as established and agreed by the parties. Consideration paid for such services in each case is the negotiated value.

The following tables summarize activity and outstanding balances between the managed investment products and the Company:

 

 

For the three months ended March 31,

 

 

For the nine months ended March 31,

 

 (in thousands)

 

2024

 

 

2023

 

 

2024

 

 

2023

 

Net realized and unrealized gain (loss) on investments

 

$

(2,751

)

 

$

895

 

 

$

1,838

 

 

$

(7,950

)

Net realized and unrealized gain (loss) on investments of Consolidated Funds

 

 

131

 

 

 

-

 

 

 

245

 

 

 

(16

)

Dividend income

 

 

1,613

 

 

 

849

 

 

 

3,444

 

 

 

3,510

 

 

 (in thousands)

 

March 31, 2024

 

 

June 30, 2023

 

Dividends receivable

 

$

919

 

 

$

300

 

Investment management revenues receivable

 

 

2,216

 

 

 

2,167

 

Receivable for reimbursable expenses paid

 

 

1,265

 

 

 

841

 

Receivables from managed funds

 

$

4,400

 

 

$

3,308

 

Investment Management

GECM has agreements to manage the investment portfolios for GECC, Monomoy UpREIT and other investment products, as well as to provide administrative services. Under these agreements, GECM receives management fees based on the managed assets (other than cash and cash equivalents) and rent collected, incentive fees based on the performance of those assets, and administration and service fees. See Note 3 - Revenue for additional discussions of the fee arrangements.

Consolidated Funds

Through its wholly-owned subsidiaries GECM and GEO GP, the Company serves as the investment manager, general partner, or managing member of certain private funds, in which it may also have a direct investment. For funds which are determined to be VIEs and where it is determined that the Company is the primary beneficiary, the criteria for consolidation are met. The Company monitors such funds and related criteria for consolidation on an ongoing basis. Funds that have historically been consolidated will be deconsolidated at such time as the Company is no longer deemed to be the primary beneficiary and will then be treated as equity method investments.

The Company retains the specialized investment company accounting guidance under US GAAP with respect to the Consolidated Funds. As such, investments of the Consolidated Funds are included in the consolidated balance sheets at fair value and the net realized and unrealized gain or loss on those investments was included as a component of other income on the consolidated statements of operations. Non-controlling interests of the Consolidated Funds are included in net income (loss) attributable to non-controlling interest, continuing operations. The creditors of Consolidated Funds do not have recourse to the Company other than to the assets of the respective Consolidated Funds.

The Company holds investments in certain funds that are VIEs but the Company is not deemed to be the primary beneficiary. Such investments are treated as equity method investments and the Company has elected the fair value option using NAV as a practical expedient with all changes in fair value reported in net realized and unrealized gain (loss) on investments on the consolidated statements of operations.

See Note 2 - Summary of Significant Accounting Policies for additional details.

Investments

As of March 31, 2024, the Company owns 1,518,162 shares of GECC (approximately 16.1% of the outstanding shares). Certain officers and directors of GECC are also officers and directors of GEG. Matthew A. Drapkin is a director of our Board of Directors and also the Chairman of GECC's Board of Directors, Adam M. Kleinman is our President, as well as the Chief Compliance Officer of GECC, Matt Kaplan is the President of GECM, as well as the President and Chief Executive Officer of GECC, and Keri A. Davis is our Chief Financial Officer and Chief Accounting Officer, as well as the Chief Financial Officer of GECC.

The Company receives dividends from its investments in GECC and Monomoy UpREIT and earns unrealized gains and losses based on the mark-to-market performance of those investments. See Note 5 - Fair Value Measurements.

In February 2024, the Company invested in $6.0 million for a 25% interest in Great Elm Strategic Partnership I, LLC (GESP). The Company's investment in GESP is accounted for using the fair value option and it is included in Investments, at fair value on the consolidated balance sheets. GESP owns 1,850,424 shares of GECC.

Other Transactions

GECM has shared personnel and reimbursement agreements with ICAM. Jason W. Reese, the Chief Executive Officer and Chairman of the Company’s Board of Directors, is the Chief Executive Officer of ICAM, and Matt Kaplan, the President of GECM, is also a Managing Director of ICAM. Certain costs incurred under these agreements relate to human resources, investment management, and other administrative services provided by ICAM employees, for the benefit of the Company and its subsidiaries, and are included in investment management expenses in the consolidated statements of operations. For the three and nine months ended March 31, 2024, such costs were $0.1 million and $0.5 million, respectively. For the three and nine months ended March 31, 2023, such costs were $0.4 million and $1.1 million, respectively. Other costs include operational or administrative services performed on behalf of the funds managed by GECM and are included in receivables from managed funds in the consolidated balance sheets. As of March 31, 2024 and June 30, 2023, costs of $0.1 million and $0.1 million, respectively, related to the shared services agreements were included in receivables from managed funds.

As of January 1, 2024, GECM also has a shared personnel and reimbursement agreement with ICAM whereby ICAM reimburses certain costs incurred by GECM related to administrative services provided by GECM employees for the benefit of ICAM. See Note 3 - Revenue for additional details.

On August 31, 2021, the Company entered into a financial advisory agreement with Imperial Capital, LLC. The agreement included a retainer fee of $0.1 million which was paid in October 2021. In addition, the agreement included a success-based fee upon a sale of HC LLC. Upon completion of the sale of HC LLC on January 3, 2023, a success fee of $0.7 million was paid to Imperial Capital, LLC. Jason W. Reese is the Co-Founder of Imperial Capital, LLC.

See Note 5 - Fair Value Measurements for details on the contingent consideration payable to ICAM following the acquisition of the Monomoy UpREIT investment management agreement and Note 8 - Convertible Notes for details on the Convertible Notes issued to related parties.

v3.24.1.u1
Fair Value Measurements
9 Months Ended
Mar. 31, 2024
Fair Value Disclosures [Abstract]  
Fair Value Measurements

5. Fair Value Measurements

Fair value is defined as the price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.

US GAAP provides a framework for measuring fair value on either a recurring or nonrecurring basis whereby inputs, used in valuation techniques, are assigned a hierarchical level. The following are the hierarchical levels of inputs to measure fair value:

Level 1: Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.
Level 2: Inputs reflect quoted prices for identical assets or liabilities in markets that are not active; quoted prices for similar assets or liabilities in active markets; inputs other than quoted prices that are observable for the assets or liabilities; or inputs that are derived principally from or corroborated by observable market data by correlation or other means.
Level 3: Unobservable inputs reflecting the Company’s own assumptions incorporated in valuation techniques used to determine fair value. These assumptions are required to be consistent with market participant assumptions that are reasonably available.

All financial assets or liabilities that are measured at fair value on a recurring and non-recurring basis have been segregated into the most appropriate level within the fair value hierarchy based on the inputs used to determine the fair value at the measurement date.

The assets and liabilities measured at fair value on a recurring and non-recurring basis are summarized in the tables below:

 

 

Fair Value as of March 31, 2024

 

 

(in thousands)

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity investments

 

$

16,856

 

 

$

-

 

 

$

3,130

 

 

$

19,986

 

 

Total assets within the fair value hierarchy

 

$

16,856

 

 

$

-

 

 

$

3,130

 

 

$

19,986

 

 

Investments valued at net asset value

 

 

 

 

 

 

 

 

 

 

$

18,258

 

 

Total assets

 

 

 

 

 

 

 

 

 

 

$

38,244

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

Contingent consideration liability

 

$

-

 

 

$

-

 

 

$

408

 

 

$

408

 

 

Total liabilities

 

$

-

 

 

$

-

 

 

$

408

 

 

$

408

 

 

 

 

 

Fair Value as of June 30, 2023

 

 

(in thousands)

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity investments

 

$

14,296

 

 

$

-

 

 

$

-

 

 

$

14,296

 

 

Total assets within the fair value hierarchy

 

$

14,296

 

 

$

-

 

 

$

-

 

 

$

14,296

 

 

Investments valued at net asset value

 

 

 

 

 

 

 

 

 

 

$

18,315

 

 

Total assets

 

 

 

 

 

 

 

 

 

 

$

32,611

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

Contingent consideration liability

 

$

-

 

 

$

-

 

 

$

1,903

 

 

$

1,903

 

 

Total liabilities

 

$

-

 

 

$

-

 

 

$

1,903

 

 

$

1,903

 

 

There were no transfers between levels of the fair value hierarchy during the three and nine months ended March 31, 2024 and 2023.

The following is a reconciliation of changes in Level 3 assets:

 

 

For the three months ended March 31,

 

 

For the nine months ended March 31,

 

(in thousands)

 

2024

 

 

2023

 

 

2024

 

 

2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning balance

 

$

-

 

 

$

-

 

 

$

-

 

 

$

-

 

Purchases

 

 

6,000

 

 

 

-

 

 

 

6,000

 

 

 

-

 

Payments

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Change in fair value

 

 

(2,870

)

 

 

-

 

 

 

(2,870

)

 

 

-

 

Ending balance

 

$

3,130

 

 

$

-

 

 

$

3,130

 

 

$

-

 

The following is a reconciliation of changes in Level 3 liabilities:

 

 

For the three months ended March 31,

 

 

For the nine months ended March 31,

 

(in thousands)

 

2024

 

 

2023

 

 

2024

 

 

2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning balance

 

$

962

 

 

$

1,180

 

 

$

1,903

 

 

$

1,120

 

Payments

 

 

-

 

 

 

-

 

 

 

(977

)

 

 

-

 

Change in fair value

 

 

(554

)

 

 

120

 

 

 

(518

)

 

 

180

 

Ending balance

 

$

408

 

 

$

1,300

 

 

$

408

 

 

$

1,300

 

The assets of the Consolidated Funds measured at fair value on a recurring basis are summarized in the table below:

 

 

Fair Value as of March 31, 2024

 

(in thousands)

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Assets of Consolidated Funds:

 

 

 

 

 

 

 

 

 

 

 

 

Equity investments

 

$

-

 

 

$

-

 

 

$

51

 

 

$

51

 

Debt securities

 

 

-

 

 

 

3,766

 

 

 

4,744

 

 

 

8,510

 

Total assets within the fair value hierarchy

 

$

-

 

 

$

3,766

 

 

$

4,795

 

 

$

8,561

 

There were no assets or liabilities of the Consolidated Funds measured at fair value as of June 30, 2023. One investment with a fair value of $461 was transferred from Level 3 to Level 2 as a result of increased pricing

transparency during the three and nine months ended March 31, 2024. The net change in unrealized appreciation relating to Level 3 assets still held as of March 31, 2024 totaled $127.

The following is a reconciliation of changes in fair value of Level 3 assets of Consolidated Funds:

 

 

For the three months ended March 31,

 

 

For the nine months ended March 31,

 

(in thousands)

 

2024

 

 

2024

 

 

 

 

 

 

 

 

Beginning balance

 

$

2,007

 

 

$

-

 

Purchases

 

 

3,230

 

 

 

5,141

 

Sales and Paydowns

 

 

(33

)

 

 

(34

)

Net Accretion

 

 

2

 

 

 

2

 

Transfers Out

 

 

(461

)

 

 

(461

)

Change in fair value

 

 

50

 

 

 

147

 

Ending balance

 

$

4,795

 

 

$

4,795

 

The valuation techniques applied to investments held by the Company and by the Consolidated Funds varied depending on the nature of the investment.

Equity and equity-related securities

Securities traded on a national securities exchange are stated at the close price on the valuation date. To the extent these securities are actively traded and valuation adjustments are not applied, they are classified as Level 1.

Equity investments that do not have readily-available market prices utilize valuation models to determine fair value and are classified as Level 3. As of March 31, 2024, the Company had an equity investment in a private company that was valued using an options pricing model with a volatility of 38.9% and a risk-free rate of 4.24%.

Debt securities

Bank loans, corporate debt and other debt obligations traded on a national exchange are valued based on quoted market prices and classified as Level 2. Debt investments that are not actively traded are generally based on discounted cash flows and classified as Level 3. As of March 31, 2024, debt investments valued based on discounted cash flows use discount rates ranging from 11.2% to 23.1% with a weighted average of 13.5%.

Investments in private funds

The Company values investments in private funds using NAV as reported by each fund’s investment manager. The private funds calculate NAV in a manner consistent with the measurement principles of FASB ASC Topic 946, Financial Services – Investment Companies, as of the valuation date. Investments valued using NAV as a practical expedient are not categorized within the fair value hierarchy.

As of March 31, 2024 and June 30, 2023, investments in private funds primarily consisted of our investments in Monomoy UpREIT and Great Elm Opportunities Fund I, LP Series D (GEOF Series D). Monomoy UpREIT allows redemptions annually with 90 days’ notice, subject to a one-year lockup from the date of initial investment, which are capped at 5% of its NAV. GEOF Series D allows withdrawals annually and there is no set duration for the private fund.

Contingent consideration

In conjunction with the acquisition of the Monomoy UpREIT investment management agreement, the Company entered into a contingent consideration agreement that requires the Company to pay up to $2.0 million to ICAM if certain fee revenue thresholds are achieved during fiscal years ending June 30, 2023 and 2024. As of June 30, 2023, the Company determined that the fee revenue threshold for the year ending June 30, 2023 was achieved and the amount payable to ICAM was approximately $1.0 million, which was paid in July 2023. Further, the Company determined that the fee revenue threshold for the year ending June 30, 2024 was expected to be achieved as well, and the related amount payable to ICAM was recorded at present value of approximately $1.9 million, using a discount rate of 8.0%, included within the current portion of related party payables in the condensed consolidated balance sheet as of June 30, 2023. As of March 31, 2024, it was determined that the full target revenue threshold for the year ended June 30, 2024 was unlikely to be met in full and the contingent consideration was updated to $0.4 million based on projected fee revenues through the end of the fiscal year.

See Note 7 - Long-Term Debt for additional discussion related to the fair value of our notes payable and other long-term debt. The carrying value of all other financial assets and liabilities approximate their fair values.

v3.24.1.u1
Real Estate Under Development
9 Months Ended
Mar. 31, 2024
Real Estate [Abstract]  
Real Estate Under Development

6. Real Estate Under Development

In January 2023, MBTS completed purchases of certain land parcels located in Mississippi and Florida. Contemporaneously with the land purchases, MBTS entered into commercial lease agreements, as a lessor, in respect to the land parcels and build-to-suit improvements to be constructed thereon. The leases will commence upon substantial completion of the build-to-suit development, which is expected not later than the second calendar quarter of 2024. We intend to sell the land and improvements with the attached leases at or close to the respective lease commencement date.

During the three and nine months ended March 31, 2024, the Company capitalized costs of $3.2 million and $6.4 million, respectively, within real estate under development (current) on its condensed consolidated balance sheet, representing the development and construction costs directly identifiable with the two real estate projects.

v3.24.1.u1
Long-Term Debt
9 Months Ended
Mar. 31, 2024
Debt Disclosure [Abstract]  
Long-Term Debt

7. Long-Term Debt

The Company’s long-term debt is summarized in the following table:

(in thousands)

 

Borrower

March 31, 2024

 

June 30, 2023

 

GEGGL Notes

 

GEG

$

26,945

 

$

26,945

 

Total principal

 

 

$

26,945

 

$

26,945

 

Unamortized debt discounts and issuance costs

 

 

 

(926

)

 

(1,137

)

Long-term debt

 

 

 

 

26,019

 

 

 

25,808

 

During the three and nine months ended March 31, 2024, the Company incurred interest expense of $0.6 million and $1.7 million, respectively, attributed to its long-term debt. During the three and nine months ended March 31, 2023, the Company incurred interest expense of $0.6 million and $1.9 million, respectively, on long-term debt, as well as certain related-party notes payable fully repaid during the year ended June 30, 2023. See Note 8 - Convertible Notes for interest expense on Convertible Notes.

Additional details of the Company's long-term debt are discussed below.

GEGGL Notes

On June 9, 2022, we issued $26.9 million in aggregate principal amount of 7.25% notes due on June 30, 2027 (the GEGGL Notes), which included $1.9 million of GEGGL Notes issued in connection with the partial exercise of the underwriters’ over-allotment option. The GEGGL Notes are unsecured obligations and rank: (i) pari passu, or equal, with the Convertible Notes (as defined below) and any future outstanding unsecured unsubordinated indebtedness; (ii) senior to any of our indebtedness that expressly provides it is subordinated to the GEGGL Notes; (iii) effectively subordinated to any future secured indebtedness; and (iv) structurally subordinated to any future indebtedness and other obligations of any of our current and future subsidiaries. We pay interest on the GEGGL Notes on March 31, June 30, September 30 and December 31 of each year. The GEGGL Notes can be called on, or after, June 30, 2024. Holders of the GEGGL Notes do not have the option to have the notes repaid prior to the stated maturity date. The GEGGL Notes were issued in minimum denominations of $25 and integral multiples of $25 in excess thereof.

The GEGGL Notes include covenants that limit additional indebtedness or the payment of dividends subject to compliance with a net consolidated debt to equity ratio of 2:1. As of March 31, 2024, our net consolidated debt to equity ratio is 0.33:1.00.

v3.24.1.u1
Convertible Notes
9 Months Ended
Mar. 31, 2024
Debt Disclosure [Abstract]  
Convertible Notes

8. Convertible Notes

As of March 31, 2024 and June 30, 2023, the total outstanding principal balance of convertible notes due on February 26, 2030 (the Convertible Notes) was $38.9 million, including cumulative interest paid in-kind. The Convertible Notes are held by a consortium of investors, including $15.8 million issued to certain related parties as of March 31, 2024.

The Convertible Notes accrue interest at 5.0% per annum, payable semiannually in arrears on June 30 and December 31, commencing June 30, 2020, in cash or in kind at the option of the Company. Each $1,000 principal amount of the Convertible Notes are convertible into 288.0018 shares of the Company’s common stock, subject to the terms therein, prior to maturity at the option of the holder.

The Company may, subject to compliance with the terms of the Convertible Notes, effect the conversion of some or all of the Convertible Notes into shares of common stock, subject to certain liquidity and pricing requirements, as specified in the Convertible Notes.

The embedded conversion feature in the Convertible Notes qualifies for the scope exception to derivative accounting in FASB ASC Topic 815, Derivatives and Hedging, for certain contracts involving a reporting entity’s own equity. The Company incurred $1.2 million in issuance costs on the original issuance. The debt issuance costs are being amortized over the 10-year term and are netted with the principal balance on our condensed consolidated balance sheets. As of March 31, 2024 and June 30, 2023, the remaining balance of unamortized debt issuance costs was $0.7 million and $0.8 million, respectively.

During the three and nine months ended March 31, 2024, the Company incurred interest expense of $0.5 million and $1.5 million, respectively, related to the Convertible Notes, inclusive of non-cash interest related to amortization of debt issuance costs. During the three and nine months ended March 31, 2023, the Company incurred interest expense of $0.5 million and $1.5 million, respectively, related to the Convertible Notes, inclusive of non-cash interest related to amortization of debt issuance costs.

v3.24.1.u1
Share-Based and Other Non-Cash Compensation
9 Months Ended
Mar. 31, 2024
Share-Based Payment Arrangement [Abstract]  
Share-Based and Other Non-Cash Compensation

9. Share-Based and Other Non-Cash Compensation

Restricted Stock Awards and Restricted Stock Units

The following table presents activity related to the Company’s restricted stock awards and restricted stock units for the nine months ended March 31, 2024:

Restricted Stock Awards and Restricted Stock Units

 

Shares
(in thousands)

 

 

Weighted Average Grant Date Fair Value

 

Outstanding at June 30, 2023

 

 

1,322

 

 

$

1.93

 

Granted

 

 

1,243

 

 

 

1.97

 

Vested

 

 

(617

)

 

 

2.13

 

Forfeited

 

 

(4

)

 

 

2.15

 

Outstanding at March 31, 2024

 

 

1,944

 

 

$

1.90

 

Restricted stock awards and restricted stock units have vesting terms between 1-4 years and are subject to service requirements. During the nine months ended March 31, 2024, the Company granted 1,242,596 restricted stock awards and did not grant any shares of restricted stock units.

Stock Options

The following table presents activity related to the Company’s stock options for the nine months ended March 31, 2024:

Stock Options

 

Shares
(in thousands)

 

 

Weighted Average Exercise Price

 

 

Weighted Average Remaining Contractual Term (years)

 

 

Aggregate Intrinsic Value
(in thousands)

 

Outstanding at June 30, 2023

 

 

3,264

 

 

$

2.70

 

 

 

7.45

 

 

$

-

 

Options granted

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Forfeited, cancelled or expired

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Outstanding at March 31, 2024

 

 

3,264

 

 

$

2.70

 

 

 

6.69

 

 

$

-

 

Exercisable at March 31, 2024

 

 

1,261

 

 

$

3.72

 

 

 

3.13

 

 

$

-

 

Stock-Based Compensation Expense

Stock-based compensation expense related to all restricted stock awards, restricted stock units, and stock options totaled $0.5 million and $1.8 million for the three and nine months ended March 31, 2024, respectively. Stock-based compensation expense related to all restricted stock awards, restricted stock units, and stock options totaled $0.6 million and $2.0 million for the three and nine months ended March 31, 2023, respectively. As of March 31, 2024, the Company had unrecognized compensation costs related to all unvested restricted stock awards and stock options totaling $2.9 million.

Non-Employee Director Deferred Compensation Plan

In December 2020, the Company established the Great Elm Group, Inc. Non-Employee Directors Deferred Compensation Plan allowing non-employee directors to defer their cash and/or equity compensation under a non-revocable election for each calendar year. Such compensation is deferred until the earlier of 3 years from the original grant date of such compensation, termination of service, or death, and is payable in common stock shares. As of March 31, 2024, there were 167,941 restricted stock awards and restricted stock units that were deferred under this plan (and thus included in the number of restricted stock awards and restricted stock units outstanding as of that date).

Other Non-Cash Compensation

During the nine months ended March 31, 2024, the Company issued compensation to certain employees in the form of GECC common shares to be settled with GECC shares currently held by the Company. The total value of GECC shares awarded for the nine months ended March 31, 2024 was $0.6 million, of which $0.1 million vested immediately, and the balance will vest annually pro-rata over two- and three-year periods. Related compensation expense was $0.2 million and $0.4 million, respectively, for the three and nine months ended March 31, 2024.

v3.24.1.u1
Income Taxes
9 Months Ended
Mar. 31, 2024
Income Tax Disclosure [Abstract]  
Income Taxes

10. Income Taxes

As of June 30, 2023, the Company had net operating loss (NOL) carryforwards for federal income tax purposes of approximately $16.2 million, of which approximately $8.2 million will expire in fiscal years 2024 through 2025 and $8.0 million can be carried forward indefinitely. As of June 30, 2023, the Company also had $25.5 million of state NOL carryforwards, principally in Massachusetts, Arizona, and Nebraska, that will expire from 2031 to 2043.

v3.24.1.u1
Commitments and Contingencies
9 Months Ended
Mar. 31, 2024
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies

11. Commitments and Contingencies

From time to time, the Company is involved in lawsuits, claims, investigations and proceedings that arise in the ordinary course of business. The Company maintains insurance to mitigate losses related to certain risks. The Company is not a named party in any other pending or threatened litigation that we expect to have a material adverse impact on our business, results of operations, financial condition or cash flows.

v3.24.1.u1
Summary of Significant Accounting Policies (Policies)
9 Months Ended
Mar. 31, 2024
Accounting Policies [Abstract]  
Basis of Presentation

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions for Form 10-Q and, therefore, do not include all information and footnotes that are normally included in the Company’s Form 10-K and should be read in conjunction with the audited consolidated financial statements and notes thereto, which are included in the Company’s Annual Report on Form 10-K for the year ended June 30, 2023. These financial statements reflect all adjustments (consisting of normal and recurring items or items discussed herein) that management believes are necessary to fairly state results for the interim periods presented. Results of operations for interim periods are not necessarily indicative of annual results of operations.

The historical results of the Durable Medical Equipment (DME) business, primarily consisting of HC LLC and its subsidiaries, sold on January 3, 2023, and related activity have been presented in the accompanying unaudited condensed consolidated statements of operations for the three and nine months ended March 31, 2023 and cash flows for the nine months ended March 31, 2023 as discontinued operations. Further, the historical segment information was recast to reflect our ongoing business as a single reportable segment and to remove the activity of discontinued operations. Unless otherwise specified, disclosures in these condensed consolidated financial statements reflect continuing operations only.

Certain prior period amounts have been reclassified to conform to current period presentation.

Use of Estimates

Use of Estimates

The preparation of these financial statements in accordance with accounting principles generally accepted in the United States of America (US GAAP) requires the Company 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 periods presented. On an on-going basis, the Company evaluates all of these estimates and assumptions. The most important of these estimates and assumptions relate to revenue recognition, valuation allowance for deferred tax assets, estimates associated with accounting for asset acquisitions, and fair value measurements, including stock-based compensation. Although these and other estimates and assumptions are based on the best available information, actual results could be different from these estimates.

Principles of Consolidation

Principles of Consolidation

The Company consolidates the assets, liabilities, and operating results of its wholly-owned subsidiaries, majority-owned subsidiaries, and subsidiaries in which we hold a controlling financial interest. In most cases, a controlling financial interest reflects ownership of a majority of the voting interests, including kick out rights, either directly or indirectly through related parties presumed to be under our control. We consolidate a variable interest entity (VIE) when we possess both the power to direct the activities of the VIE that most significantly impact its economic performance and the obligation to absorb losses of, or the right to receive benefits from, the entity that could potentially be significant to the VIE. We deconsolidate a VIE when we no longer possess the power to direct the activities of the VIE that most significantly impact its economic performance or the obligation to absorb losses of, or the right to receive benefits from, the entity that could potentially be significant to the VIE.

All intercompany accounts and transactions have been eliminated in consolidation.

Non-controlling interests in the Company’s subsidiaries are reported as a component of equity, separate from the parent company’s equity or outside of permanent equity for non-controlling interests that are contingently redeemable. Results of operations attributable to the non-controlling interests are included in the Company’s consolidated statements of operations.

Cash and Cash Equivalents

Cash and Cash Equivalents

Cash and cash equivalents are comprised of cash and highly liquid investments with original maturities of 90 days or less at the date of purchase. Cash equivalents consist primarily of exchange-traded money market funds and U.S. treasury bills. The Company is exposed to credit risk in the event of default by the financial institutions or the issuers of these investments to the extent the amounts on deposit or invested are in excess of amounts that are insured.

Investments in Marketable Securities

Investments in Marketable Securities

Investments in marketable securities consist of U.S. treasury bills with original maturity exceeding 90 days. The Company classifies investments in debt securities as either trading, held-to-maturity, or available-for-sale. Securities are classified as trading if they are purchased and held principally for the purpose of selling in the near term and as held-to-maturity when the Company has both the positive intent and ability to hold the security to maturity. Investments in debt securities not classified as either trading or held-to-maturity are classified as available-for-sale securities. Trading securities are measured at fair value with unrealized gains and losses reported within net realized and unrealized gain on investments. Held-to-maturity securities are measured at amortized cost with realized gains and losses reported within net realized and unrealized gain on investments. Available-for-sale securities are measured at fair value with unrealized gains and losses reported in accumulated other comprehensive income (loss).

As of March 31, 2024, all investments in marketable securities were classified as held-to-maturity and had original maturities (at the time of purchase) exceeding 90 days. As of March 31, 2024, the amortized cost basis for these securities approximated their fair value.

Investments, at Fair Value

Investments, at Fair Value

Investments, at fair value, consist of equity and equity-related securities and debt securities classified as trading carried at fair value, as well as investments in private funds measured using the net asset value (NAV) as reported by each fund’s investment manager. The private funds calculate NAV in a manner consistent with the measurement principles of the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 946, Financial Services – Investment Companies, as of the valuation date. Changes in the fair value and NAV are recorded within net realized and unrealized gain on investments. Dividends received are recorded within dividends and interest income on the consolidated statements of operations.

Real Estate under Development

Real Estate under Development

Real estate under development is classified as follows: (i) real estate under development (current), which includes real estate projects that are in the process of being developed and expected to be completed and disposed of within one year of the balance sheet date; (ii) real estate under development (non-current), which includes real estate projects that are in the process of being developed and expected to be completed and disposed of more than one year from the balance sheet date; and (iii) real estate held for sale, which includes land and completed improvements thereon that meet all of the “held for sale” criteria.

Real estate under development is carried at cost less impairment, if applicable. We capitalize costs that are directly identifiable with the specific real estate projects, including pre-acquisition and pre-construction costs, development and construction costs, taxes, and insurance. We do not capitalize any general and administrative or overhead costs, regardless of whether the costs are internal or paid to third parties. Capitalization begins when the activities related to development have begun and ceases when activities are substantially complete and the asset is available for occupancy.

Real estate held for sale is recorded at the lower of cost or fair value less cost to sell. If an asset’s fair value less cost to sell, based on discounted future cash flows, management estimates or market comparisons, is less than its carrying amount, an allowance is recorded against the asset.

Impairment of Long-Lived Assets

Impairment of Long-Lived Assets

Long-lived assets include real estate under development, property and equipment, definite-lived intangible assets, and lease right-of-use assets. The Company evaluates the recoverability of long-lived assets whenever events or changes in circumstances indicate that their carrying value may not be recoverable based on undiscounted cash flows. Impairment losses are recorded when undiscounted cash flows estimated to be generated by an asset are less than the asset’s carrying amount. The amount of the impairment loss, if any, is calculated as the excess of the asset’s carrying value over its fair value, which is determined using a discounted cash flow analysis, management estimates or market comparisons.

Leases

Leases

We determine if an arrangement contains a lease at the inception of a contract considering all relevant facts and circumstances, which normally does not require significant judgment. Right-of-use assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Right-of-use assets and lease liabilities are recognized at the commencement date of the lease based on the present value of the remaining future minimum lease payments. As the interest rate implicit in our leases is generally not readily determinable, we utilize the incremental borrowing rate, determined by class of underlying asset, to discount the lease payments. The operating lease right-of-use assets also include lease payments made before commencement and are reduced by lease incentives.

The Company’s office leases typically require reimbursements to the lessor for real estate taxes, common area maintenance and other operating costs, which are expensed as incurred as variable lease costs. The Company accounts for lease and nonlease components as a single lease component.

In March 2024, the Company signed a new office lease which is expected to commence in December 2024. As none of the criteria for recognition have been met as of March 31, 2024, there is no corresponding lease liability or right-of-use asset associated with this lease included in the condensed consolidated balance sheets.

Earnings per Share

Earnings per Share

The following table presents the calculation of basic and diluted net income (loss) per share:

 

 

For the three months ended March 31,

 

 

For the nine months ended March 31,

 

(in thousands except per share amounts)

 

2024

 

 

2023

 

 

2024

 

 

2023

 

Numerator:

 

 

 

 

 

 

 

 

 

 

 

 

Net (loss) income from continuing operations

 

$

(2,883

)

 

$

(455

)

 

$

(364

)

 

$

19,735

 

Less: net income (loss) attributable to non-controlling interest, continuing operations

 

 

217

 

 

 

-

 

 

 

328

 

 

 

(1,554

)

Numerator for basic EPS - Net (loss) income from continuing operations attributable to Great Elm Group, Inc.

 

$

(3,100

)

 

$

(455

)

 

$

(692

)

 

$

21,289

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income from discontinued operations

 

 

-

 

 

 

12,203

 

 

 

16

 

 

 

13,202

 

Less: net income attributable to non-controlling interest, discontinued operations

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1,504

 

Numerator for basic EPS - Net income (loss) from discontinued operations, attributable to Great Elm Group, Inc.

 

$

-

 

 

$

12,203

 

 

$

16

 

 

$

11,698

 

Effect of dilutive securities:

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense associated with Convertible Notes, continuing operations

 

$

-

 

 

$

-

 

 

$

-

 

 

$

1,451

 

Numerator for diluted EPS - Net (loss) income from continuing operations attributable to Great Elm Group, Inc., after the effect of dilutive securities

 

$

(3,100

)

 

$

(455

)

 

$

(692

)

 

$

22,740

 

Numerator for diluted EPS - Net income (loss) from discontinued operations, attributable to Great Elm Group, Inc.

 

$

-

 

 

$

12,203

 

 

$

16

 

 

$

11,698

 

Denominator:

 

 

 

 

 

 

 

 

 

 

 

 

Denominator for basic EPS - Weighted average shares of common stock outstanding

 

 

30,066

 

 

 

28,997

 

 

 

29,844

 

 

 

28,779

 

Effect of dilutive securities:

 

 

 

 

 

 

 

 

 

 

 

 

Restricted stock

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1,328

 

Convertible Notes

 

 

-

 

 

 

-

 

 

 

-

 

 

 

10,566

 

Denominator for diluted EPS - Weighted average shares of common stock outstanding after the effect of dilutive securities

 

 

30,066

 

 

 

28,997

 

 

 

29,844

 

 

 

40,673

 

Basic net income (loss) per share from:

 

 

 

 

 

 

 

 

 

 

 

 

Continuing operations

 

$

(0.10

)

 

$

(0.02

)

 

$

(0.02

)

 

$

0.74

 

Discontinued operations

 

 

-

 

 

 

0.42

 

 

 

-

 

 

 

0.41

 

Basic net income (loss) per share

 

$

(0.10

)

 

$

0.40

 

 

$

(0.02

)

 

$

1.15

 

Diluted net income (loss) per share from:

 

 

 

 

 

 

 

 

 

 

 

 

Continuing operations

 

$

(0.10

)

 

$

(0.02

)

 

$

(0.02

)

 

$

0.56

 

Discontinued operations

 

 

-

 

 

 

0.42

 

 

$

-

 

 

 

0.29

 

Diluted net income (loss) per share

 

$

(0.10

)

 

$

0.40

 

 

$

(0.02

)

 

$

0.85

 

As of March 31, 2024, the Company had 3,264,424 potential shares of common stock issuable upon the exercise of stock options that are not included in the diluted net income (loss) per share calculation because to do so would be anti-dilutive for the three and nine months ended March 31, 2024. Further, as of March 31, 2024, the Company had 11,191,461 shares of common stock issuable upon the conversion of Convertible Notes (as defined below) that are not included in the diluted income (loss) per share calculation because to do so would be anti-dilutive for the three and nine months ended March 31, 2024. As of March 31, 2024, the Company had 1,771,950 shares of restricted stock that are not included in the diluted income (loss) per share calculation because to do so would be anti-dilutive for the three and nine months ended March 31, 2024.

As of March 31, 2023, the Company had 1,270,651 potential shares of common stock issuable upon the exercise of stock options that are not included in the diluted net income (loss) per share calculation for the three and nine months ended March 31, 2023 because to do so would be anti-dilutive.

As of March 31, 2024 and 2023, the Company had an aggregate of 1,771,950 and 1,509,885 issued shares, respectively, that are not considered outstanding for accounting purposes since they are unvested and subject to forfeiture by the employees at a nominal price if service milestones are not met.

Recently Adopted and Issued Accounting Standards

Recently Adopted Accounting Standards

Current Expected Credit Losses. In June 2016, the FASB issued Accounting Standards Update (ASU) 2016-13, Financial Instruments – Credit Losses (Topic 326), which changes the impairment model for financial instruments, including trade receivables from an incurred loss method to a new forward looking approach, based on expected losses. The estimate of expected credit losses will require entities to incorporate considerations of historical experience, current information and reasonable and supportable forecasts. The amendments in this ASU are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company adopted this ASU as of July 1, 2023, which did not have a material impact on its consolidated financial statements.

Recently Issued Accounting Standards

Income Taxes. In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, to expand the disclosure requirements for income taxes, specifically related to the rate reconciliation and income taxes paid disaggregated by jurisdiction. The amendments in this ASU are effective for fiscal years beginning after December 15, 2025, and early adoption and retrospective application are permitted. The Company is evaluating the potential impact that the adoption of this ASU will have on its consolidated financial statements.

Revenue

The revenues from each major source are summarized in the following table:

 

 

For the three months ended March 31,

 

 

For the nine months ended March 31,

 

(in thousands)

 

2024

 

 

2023

 

 

2024

 

 

2023

 

Management fees

 

$

1,462

 

 

$

1,384

 

 

$

4,314

 

 

$

4,067

 

Incentive fees

 

 

663

 

 

 

-

 

 

 

2,676

 

 

 

-

 

Property management fees

 

 

300

 

 

 

278

 

 

 

875

 

 

 

830

 

Administration and service fees

 

 

362

 

 

 

236

 

 

 

1,051

 

 

 

740

 

Total revenues

 

$

2,787

 

 

$

1,898

 

 

$

8,916

 

 

$

5,637

 

The Company recognizes investment management revenue at amounts that reflect the consideration to which it expects to be entitled in exchange for providing services to its customers. Investment management revenue primarily consists of fees based on a percentage of assets under management, fees based on the performance of managed assets, and administration and service fees. Fees are based on agreements with each investment product and may be terminated at any time by either party subject to the specific terms of each respective agreement.

Management Fees

The Company earns management fees based on the investment management agreements GECM has with Great Elm Capital Corp. (GECC), Monomoy Properties UpREIT, LLC (Monomoy UpREIT), the operating partnership of Monomoy Properties REIT, LLC, and other private funds managed by GECM (collectively, the Funds). The performance obligation is satisfied and management fee revenue is recognized over time as the services are rendered, since the Funds simultaneously receive and consume the benefits provided as GECM performs services. Management fee rates range from 1.0% to 1.5% of the management fee assets specified within each agreement and are calculated and billed in arrears of the period, either monthly or quarterly.

Property Management Fees

Under the Monomoy UpREIT investment management agreement, GECM is also entitled to 4.0% of rent collected. These fees are collected monthly in arrears. Property management fee revenue is recognized over time as the services are provided.

Incentive Fees

The Company earns incentive fees based on the investment management agreements GECM has with GECC, Monomoy Properties II, LLC (MP II), a feeder fund of Monomoy Properties REIT, LLC and other private funds managed by GECM. Where an investment management agreement includes both management fees and incentive fees, the performance obligation is considered to be a single obligation for both fees. Incentive fees are variable consideration associated with the investment management agreements. Incentive fees are earned based on investment performance during the period, subject to the achievement of minimum return levels or high-water marks, in accordance with the terms of the respective investment management agreements. Incentive fees are typically 20% of the performance-based metric specified within each agreement. Incentive fees are recognized when it is determined that they are no longer probable of significant reversal. During the three and nine months ended March 31, 2024, the Company recorded revenue in respect to the incentive fees due from GECC of $0.7 million and $2.7 million, respectively.

Administration Fees

The Company earns administration fees based on the administration agreement GECM has with GECC whereby the investment vehicles reimburse GECM for costs incurred in performing certain administrative functions. This revenue is recognized over time as the services are performed. Administration fees are billed quarterly in arrears, which is consistent with the timing of the delivery of services and reflect agreed upon rates for the services provided. The services are accounted for as a single performance obligation for each investment vehicle that is a series of distinct services with substantially the same pattern of transfer as the services are provided on a daily basis.

The Company also earns services fees based on a shared services agreement with Imperial Capital Asset Management, LLC (ICAM). This revenue is recognized over time as the services are performed. Service fees are billed quarterly in arrears, which is consistent with the timing of the delivery of services and reflects agreed-upon rates for the services provided. The services are accounted for as a single performance obligation that is a series of distinct services with substantially the same pattern of transfer as the services are provided on a daily basis.

v3.24.1.u1
Summary of Significant Accounting Policies (Tables)
9 Months Ended
Mar. 31, 2024
Accounting Policies [Abstract]  
Earnings Per Share, Basic and Diluted

The following table presents the calculation of basic and diluted net income (loss) per share:

 

 

For the three months ended March 31,

 

 

For the nine months ended March 31,

 

(in thousands except per share amounts)

 

2024

 

 

2023

 

 

2024

 

 

2023

 

Numerator:

 

 

 

 

 

 

 

 

 

 

 

 

Net (loss) income from continuing operations

 

$

(2,883

)

 

$

(455

)

 

$

(364

)

 

$

19,735

 

Less: net income (loss) attributable to non-controlling interest, continuing operations

 

 

217

 

 

 

-

 

 

 

328

 

 

 

(1,554

)

Numerator for basic EPS - Net (loss) income from continuing operations attributable to Great Elm Group, Inc.

 

$

(3,100

)

 

$

(455

)

 

$

(692

)

 

$

21,289

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income from discontinued operations

 

 

-

 

 

 

12,203

 

 

 

16

 

 

 

13,202

 

Less: net income attributable to non-controlling interest, discontinued operations

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1,504

 

Numerator for basic EPS - Net income (loss) from discontinued operations, attributable to Great Elm Group, Inc.

 

$

-

 

 

$

12,203

 

 

$

16

 

 

$

11,698

 

Effect of dilutive securities:

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense associated with Convertible Notes, continuing operations

 

$

-

 

 

$

-

 

 

$

-

 

 

$

1,451

 

Numerator for diluted EPS - Net (loss) income from continuing operations attributable to Great Elm Group, Inc., after the effect of dilutive securities

 

$

(3,100

)

 

$

(455

)

 

$

(692

)

 

$

22,740

 

Numerator for diluted EPS - Net income (loss) from discontinued operations, attributable to Great Elm Group, Inc.

 

$

-

 

 

$

12,203

 

 

$

16

 

 

$

11,698

 

Denominator:

 

 

 

 

 

 

 

 

 

 

 

 

Denominator for basic EPS - Weighted average shares of common stock outstanding

 

 

30,066

 

 

 

28,997

 

 

 

29,844

 

 

 

28,779

 

Effect of dilutive securities:

 

 

 

 

 

 

 

 

 

 

 

 

Restricted stock

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1,328

 

Convertible Notes

 

 

-

 

 

 

-

 

 

 

-

 

 

 

10,566

 

Denominator for diluted EPS - Weighted average shares of common stock outstanding after the effect of dilutive securities

 

 

30,066

 

 

 

28,997

 

 

 

29,844

 

 

 

40,673

 

Basic net income (loss) per share from:

 

 

 

 

 

 

 

 

 

 

 

 

Continuing operations

 

$

(0.10

)

 

$

(0.02

)

 

$

(0.02

)

 

$

0.74

 

Discontinued operations

 

 

-

 

 

 

0.42

 

 

 

-

 

 

 

0.41

 

Basic net income (loss) per share

 

$

(0.10

)

 

$

0.40

 

 

$

(0.02

)

 

$

1.15

 

Diluted net income (loss) per share from:

 

 

 

 

 

 

 

 

 

 

 

 

Continuing operations

 

$

(0.10

)

 

$

(0.02

)

 

$

(0.02

)

 

$

0.56

 

Discontinued operations

 

 

-

 

 

 

0.42

 

 

$

-

 

 

 

0.29

 

Diluted net income (loss) per share

 

$

(0.10

)

 

$

0.40

 

 

$

(0.02

)

 

$

0.85

 

v3.24.1.u1
Revenue (Tables)
9 Months Ended
Mar. 31, 2024
Revenue from Contract with Customer [Abstract]  
Summary of Major Source of Revenue

The revenues from each major source are summarized in the following table:

 

 

For the three months ended March 31,

 

 

For the nine months ended March 31,

 

(in thousands)

 

2024

 

 

2023

 

 

2024

 

 

2023

 

Management fees

 

$

1,462

 

 

$

1,384

 

 

$

4,314

 

 

$

4,067

 

Incentive fees

 

 

663

 

 

 

-

 

 

 

2,676

 

 

 

-

 

Property management fees

 

 

300

 

 

 

278

 

 

 

875

 

 

 

830

 

Administration and service fees

 

 

362

 

 

 

236

 

 

 

1,051

 

 

 

740

 

Total revenues

 

$

2,787

 

 

$

1,898

 

 

$

8,916

 

 

$

5,637

 

v3.24.1.u1
Related Party Transactions (Tables)
9 Months Ended
Mar. 31, 2024
Managed Investment Products  
Schedule of Activity and Outstanding Balances Related Party and Company

The following tables summarize activity and outstanding balances between the managed investment products and the Company:

 

 

For the three months ended March 31,

 

 

For the nine months ended March 31,

 

 (in thousands)

 

2024

 

 

2023

 

 

2024

 

 

2023

 

Net realized and unrealized gain (loss) on investments

 

$

(2,751

)

 

$

895

 

 

$

1,838

 

 

$

(7,950

)

Net realized and unrealized gain (loss) on investments of Consolidated Funds

 

 

131

 

 

 

-

 

 

 

245

 

 

 

(16

)

Dividend income

 

 

1,613

 

 

 

849

 

 

 

3,444

 

 

 

3,510

 

 

 (in thousands)

 

March 31, 2024

 

 

June 30, 2023

 

Dividends receivable

 

$

919

 

 

$

300

 

Investment management revenues receivable

 

 

2,216

 

 

 

2,167

 

Receivable for reimbursable expenses paid

 

 

1,265

 

 

 

841

 

Receivables from managed funds

 

$

4,400

 

 

$

3,308

 

v3.24.1.u1
Fair Value Measurements (Tables)
9 Months Ended
Mar. 31, 2024
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]  
Summary of Assets and Liabilities Measured at Fair Value on Recurring and Non-recurring Basis

The assets and liabilities measured at fair value on a recurring and non-recurring basis are summarized in the tables below:

 

 

Fair Value as of March 31, 2024

 

 

(in thousands)

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity investments

 

$

16,856

 

 

$

-

 

 

$

3,130

 

 

$

19,986

 

 

Total assets within the fair value hierarchy

 

$

16,856

 

 

$

-

 

 

$

3,130

 

 

$

19,986

 

 

Investments valued at net asset value

 

 

 

 

 

 

 

 

 

 

$

18,258

 

 

Total assets

 

 

 

 

 

 

 

 

 

 

$

38,244

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

Contingent consideration liability

 

$

-

 

 

$

-

 

 

$

408

 

 

$

408

 

 

Total liabilities

 

$

-

 

 

$

-

 

 

$

408

 

 

$

408

 

 

 

 

 

Fair Value as of June 30, 2023

 

 

(in thousands)

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity investments

 

$

14,296

 

 

$

-

 

 

$

-

 

 

$

14,296

 

 

Total assets within the fair value hierarchy

 

$

14,296

 

 

$

-

 

 

$

-

 

 

$

14,296

 

 

Investments valued at net asset value

 

 

 

 

 

 

 

 

 

 

$

18,315

 

 

Total assets

 

 

 

 

 

 

 

 

 

 

$

32,611

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

Contingent consideration liability

 

$

-

 

 

$

-

 

 

$

1,903

 

 

$

1,903

 

 

Total liabilities

 

$

-

 

 

$

-

 

 

$

1,903

 

 

$

1,903

 

 

Reconciliation of Changes in Fair Value of Level 3 Assets

The following is a reconciliation of changes in Level 3 assets:

 

 

For the three months ended March 31,

 

 

For the nine months ended March 31,

 

(in thousands)

 

2024

 

 

2023

 

 

2024

 

 

2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning balance

 

$

-

 

 

$

-

 

 

$

-

 

 

$

-

 

Purchases

 

 

6,000

 

 

 

-

 

 

 

6,000

 

 

 

-

 

Payments

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Change in fair value

 

 

(2,870

)

 

 

-

 

 

 

(2,870

)

 

 

-

 

Ending balance

 

$

3,130

 

 

$

-

 

 

$

3,130

 

 

$

-

 

Reconciliation of Changes in Level 3 Liabilities

The following is a reconciliation of changes in Level 3 liabilities:

 

 

For the three months ended March 31,

 

 

For the nine months ended March 31,

 

(in thousands)

 

2024

 

 

2023

 

 

2024

 

 

2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning balance

 

$

962

 

 

$

1,180

 

 

$

1,903

 

 

$

1,120

 

Payments

 

 

-

 

 

 

-

 

 

 

(977

)

 

 

-

 

Change in fair value

 

 

(554

)

 

 

120

 

 

 

(518

)

 

 

180

 

Ending balance

 

$

408

 

 

$

1,300

 

 

$

408

 

 

$

1,300

 

Consolidated Funds  
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]  
Summary of Assets and Liabilities Measured at Fair Value on Recurring and Non-recurring Basis

The assets of the Consolidated Funds measured at fair value on a recurring basis are summarized in the table below:

 

 

Fair Value as of March 31, 2024

 

(in thousands)

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Assets of Consolidated Funds:

 

 

 

 

 

 

 

 

 

 

 

 

Equity investments

 

$

-

 

 

$

-

 

 

$

51

 

 

$

51

 

Debt securities

 

 

-

 

 

 

3,766

 

 

 

4,744

 

 

 

8,510

 

Total assets within the fair value hierarchy

 

$

-

 

 

$

3,766

 

 

$

4,795

 

 

$

8,561

 

Reconciliation of Changes in Fair Value of Level 3 Assets

The following is a reconciliation of changes in fair value of Level 3 assets of Consolidated Funds:

 

 

For the three months ended March 31,

 

 

For the nine months ended March 31,

 

(in thousands)

 

2024

 

 

2024

 

 

 

 

 

 

 

 

Beginning balance

 

$

2,007

 

 

$

-

 

Purchases

 

 

3,230

 

 

 

5,141

 

Sales and Paydowns

 

 

(33

)

 

 

(34

)

Net Accretion

 

 

2

 

 

 

2

 

Transfers Out

 

 

(461

)

 

 

(461

)

Change in fair value

 

 

50

 

 

 

147

 

Ending balance

 

$

4,795

 

 

$

4,795

 

v3.24.1.u1
Long-Term Debt (Tables)
9 Months Ended
Mar. 31, 2024
Debt Instrument [Line Items]  
Schedule of Long-Term Debt

The Company’s long-term debt is summarized in the following table:

(in thousands)

 

Borrower

March 31, 2024

 

June 30, 2023

 

GEGGL Notes

 

GEG

$

26,945

 

$

26,945

 

Total principal

 

 

$

26,945

 

$

26,945

 

Unamortized debt discounts and issuance costs

 

 

 

(926

)

 

(1,137

)

Long-term debt

 

 

 

 

26,019

 

 

 

25,808

 

v3.24.1.u1
Share-Based and Other Non-Cash Compensation (Tables)
9 Months Ended
Mar. 31, 2024
Share-Based Payment Arrangement [Abstract]  
Activity of Restricted Stock Awards and Restricted Stock Units

The following table presents activity related to the Company’s restricted stock awards and restricted stock units for the nine months ended March 31, 2024:

Restricted Stock Awards and Restricted Stock Units

 

Shares
(in thousands)

 

 

Weighted Average Grant Date Fair Value

 

Outstanding at June 30, 2023

 

 

1,322

 

 

$

1.93

 

Granted

 

 

1,243

 

 

 

1.97

 

Vested

 

 

(617

)

 

 

2.13

 

Forfeited

 

 

(4

)

 

 

2.15

 

Outstanding at March 31, 2024

 

 

1,944

 

 

$

1.90

 

Summary of Option Activity

The following table presents activity related to the Company’s stock options for the nine months ended March 31, 2024:

Stock Options

 

Shares
(in thousands)

 

 

Weighted Average Exercise Price

 

 

Weighted Average Remaining Contractual Term (years)

 

 

Aggregate Intrinsic Value
(in thousands)

 

Outstanding at June 30, 2023

 

 

3,264

 

 

$

2.70

 

 

 

7.45

 

 

$

-

 

Options granted

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Forfeited, cancelled or expired

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Outstanding at March 31, 2024

 

 

3,264

 

 

$

2.70

 

 

 

6.69

 

 

$

-

 

Exercisable at March 31, 2024

 

 

1,261

 

 

$

3.72

 

 

 

3.13

 

 

$

-

 

v3.24.1.u1
Summary of Significant Accounting Policies - Additional Information (Details) - USD ($)
9 Months Ended
Mar. 31, 2024
Mar. 31, 2023
Jun. 30, 2023
Significant Accounting Policies [Line Items]      
Potentially dilutive shares excluded from diluted net income (loss) per share 3,264,424    
Number of shares subject to forfeiture 1,771,950 1,509,885  
Change in accounting principle, accounting standards update, adopted [true false] true    
Change in accounting principle, accounting standards update, adoption date Jul. 01, 2023    
Change in accounting principle, accounting standards update, immaterial effect [true false] true    
Right-of-use asset $ 230,000   $ 497,000
New Office Lease      
Significant Accounting Policies [Line Items]      
Operating lease liability 0    
Right-of-use asset $ 0    
Common Stock Issuable upon Conversion of Convertible Notes      
Significant Accounting Policies [Line Items]      
Potentially dilutive shares excluded from diluted net income (loss) per share 11,191,461    
Common Stock Issuable upon Exercise of Stock Options      
Significant Accounting Policies [Line Items]      
Potentially dilutive shares excluded from diluted net income (loss) per share   1,270,651  
Common Stock Issuable upon Vesting of Restricted Stock Units and Restricted Stock Awards      
Significant Accounting Policies [Line Items]      
Potentially dilutive shares excluded from diluted net income (loss) per share 1,771,950    
v3.24.1.u1
Summary of Significant Accounting Policies - Earnings (Loss) Per Share (Details) - USD ($)
$ / shares in Units, shares in Thousands, $ in Thousands
3 Months Ended 9 Months Ended
Mar. 31, 2024
Mar. 31, 2023
Mar. 31, 2024
Mar. 31, 2023
Accounting Policies [Abstract]        
Net (loss) income from continuing operations $ (2,883) $ (455) $ (364) $ 19,735
Less: net income (loss) attributable to non-controlling interest, continuing operations 217   328 (1,554)
Numerator for basic EPS - Net (loss) income from continuing operations attributable to Great Elm Group, Inc. (3,100) (455) (692) 21,289
Net income from discontinued operations   12,203 16 13,202
Less: net income attributable to non-controlling interest, discontinued operations       1,504
Numerator for basic EPS - Net income (loss) from discontinued operations, attributable to Great Elm Group, Inc.   12,203 16 11,698
Effect of dilutive securities:        
Interest expense associated with Convertible Notes, continuing operations       1,451
Numerator for diluted EPS - Net (loss) income from continuing operations attributable to Great Elm Group, Inc., after the effect of dilutive securities $ (3,100) (455) (692) 22,740
Numerator for diluted EPS - Net income (loss) from discontinued operations, attributable to Great Elm Group, Inc.   $ 12,203 $ 16 $ 11,698
Denominator:        
Denominator for basic EPS - Weighted average shares of common stock outstanding 30,066 28,997 29,844 28,779
Effect of dilutive securities:        
Restricted stock       1,328
Convertible Notes       10,566
Denominator for diluted EPS - Weighted average shares of common stock outstanding after the effect of dilutive securities 30,066 28,997 29,844 40,673
Basic net income (loss) per share from:        
Continuing operations $ (0.1) $ (0.02) $ (0.02) $ 0.74
Discontinued operations   0.42   0.41
Basic net income (loss) per share (0.1) 0.4 (0.02) 1.15
Diluted net income (loss) per share from:        
Continuing operations (0.1) (0.02) (0.02) 0.56
Discontinued operations   0.42   0.29
Diluted net income (loss) per share $ (0.1) $ 0.4 $ (0.02) $ 0.85
v3.24.1.u1
Revenue - Summary of Major Source of Revenue (Details) - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended
Mar. 31, 2024
Mar. 31, 2023
Mar. 31, 2024
Mar. 31, 2023
Disaggregation Of Revenue [Line Items]        
Revenues $ 2,787 $ 1,898 $ 8,916 $ 5,637
Management Fees        
Disaggregation Of Revenue [Line Items]        
Revenues 1,462 1,384 4,314 4,067
Incentive Fees        
Disaggregation Of Revenue [Line Items]        
Revenues 663   2,676  
Property Management Fees        
Disaggregation Of Revenue [Line Items]        
Revenues 300 278 875 830
Administration and Service Fees        
Disaggregation Of Revenue [Line Items]        
Revenues $ 362 $ 236 $ 1,051 $ 740
v3.24.1.u1
Revenue - Additional Information (Details) - USD ($)
$ in Millions
3 Months Ended 9 Months Ended
Mar. 31, 2024
Mar. 31, 2024
Disaggregation Of Revenue [Line Items]    
Incentive fee earned as percentage on investment performance   20.00%
Incentive fees earned as per the terms of investment management agreements $ 0.7 $ 2.7
Minimum    
Disaggregation Of Revenue [Line Items]    
Percentage of management fee rates   1.00%
Maximum    
Disaggregation Of Revenue [Line Items]    
Percentage of management fee rates   1.50%
Funds    
Disaggregation Of Revenue [Line Items]    
Percentage entitled of rent collected   4.00%
v3.24.1.u1
Related Party Transactions - Additional Information (Details) - USD ($)
$ in Millions
1 Months Ended 3 Months Ended 9 Months Ended 12 Months Ended
Jan. 03, 2023
Oct. 31, 2021
Mar. 31, 2024
Mar. 31, 2023
Mar. 31, 2024
Mar. 31, 2023
Jun. 30, 2023
Feb. 29, 2024
GECC                
Related Party Transaction [Line Items]                
Percentage of ownership interest (as a percent)     16.10%   16.10%      
Number of sharers held in subsidiary     1,518,162   1,518,162      
GESP                
Related Party Transaction [Line Items]                
Investment amount in subsidiary               $ 6.0
Percentage of ownership interest (as a percent)               25.00%
Number of sharers held in subsidiary               1,850,424
Imperial Capital, LLC                
Related Party Transaction [Line Items]                
Retainer fee paid   $ 0.1            
Success fee paid $ 0.7              
Investment Management Expenses | Jason W. Reese | Shared Personnel and Reimbursement Agreement                
Related Party Transaction [Line Items]                
Costs incurred under agreement     $ 0.1 $ 0.4 $ 0.5 $ 1.1    
Receivables from Managed Funds | Shared Services Agreements                
Related Party Transaction [Line Items]                
Costs incurred under agreement         $ 0.1   $ 0.1  
v3.24.1.u1
Related Party Transactions - Schedule of Activity and Outstanding Balances Between Managed Investment Products and Company (Details) - Managed Investment Products - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended
Mar. 31, 2024
Mar. 31, 2023
Mar. 31, 2024
Mar. 31, 2023
Jun. 30, 2023
Related Party Transaction [Line Items]          
Net realized and unrealized gain (loss) on investments $ (2,751) $ 895 $ 1,838 $ (7,950)  
Net realized and unrealized gain (loss) on investments of Consolidated Funds 131   245 (16)  
Dividend income 1,613 $ 849 3,444 $ 3,510  
Dividends receivable 919   919   $ 300
Receivable for reimbursable expenses paid 1,265   1,265   841
Related Party          
Related Party Transaction [Line Items]          
Investment management revenues receivable 2,216   2,216   2,167
Receivables from managed funds $ 4,400   $ 4,400   $ 3,308
v3.24.1.u1
Fair Value Measurements - Summary of Assets and Liabilities Measured at Fair Value on Recurring and Non-recurring Basis (Details) - USD ($)
$ in Thousands
Mar. 31, 2024
Jun. 30, 2023
Assets:    
Total assets $ 38,244 $ 32,611
Liabilities:    
Contingent consideration liability 408 1,903
Total liabilities 408 1,903
Fair Value, Inputs, Level 1    
Assets:    
Equity investments 16,856 14,296
Total assets 16,856 14,296
Liabilities:    
Contingent consideration liability 0 0
Total liabilities 0 0
Fair Value, Inputs, Level 2    
Assets:    
Equity investments 0 0
Total assets 0 0
Liabilities:    
Contingent consideration liability 0 0
Total liabilities 0 0
Fair Value, Inputs, Level 3    
Assets:    
Equity investments 3,130 0
Total assets 3,130 0
Liabilities:    
Contingent consideration liability 408 1,903
Total liabilities 408 1,903
Fair Value, Inputs, Level 1, 2 and 3    
Assets:    
Equity investments 19,986 14,296
Total assets 19,986 14,296
Fair Value Measured at Net Asset Value Per Share    
Assets:    
Investments valued at net asset value $ 18,258 $ 18,315
v3.24.1.u1
Fair Value Measurements - Reconciliation of Changes in Fair Value of Level 3 Assets (Details) - USD ($)
3 Months Ended 9 Months Ended
Mar. 31, 2024
Mar. 31, 2023
Mar. 31, 2024
Mar. 31, 2023
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]        
Beginning balance $ 0 $ 0 $ 0 $ 0
Purchases 6,000,000 0 6,000,000 0
Transfers Out 0 0 0 0
Change in fair value $ (2,870,000) $ 0 $ (2,870,000) $ 0
Fair Value, Asset, Recurring Basis, Unobservable Input Reconciliation, Gain (Loss), Statement of Income or Comprehensive Income [Extensible Enumeration] Realized And Unrealized Gain Loss On Investments Realized And Unrealized Gain Loss On Investments Realized And Unrealized Gain Loss On Investments Realized And Unrealized Gain Loss On Investments
Ending balance $ 3,130,000 $ 0 $ 3,130,000 $ 0
Consolidated Funds        
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]        
Beginning balance 2,007,000   0  
Purchases 3,230,000   5,141,000  
Sales and Paydowns (33,000)   (34,000)  
Net Accretion 2,000   2,000  
Transfers Out (461,000)   (461,000)  
Change in fair value 50,000   147,000  
Ending balance $ 4,795,000   $ 4,795,000  
v3.24.1.u1
Fair Value Measurements - Reconciliation of Changes in Level 3 Liabilities (Details) - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended
Mar. 31, 2024
Mar. 31, 2023
Mar. 31, 2024
Mar. 31, 2023
Fair Value Disclosures [Abstract]        
Beginning balance $ 962 $ 1,180 $ 1,903 $ 1,120
Payments     (977)  
Change in fair value $ (554) $ 120 $ (518) $ 180
Fair Value, Liability, Recurring Basis, Unobservable Input Reconciliation, Gain (Loss), Statement of Income or Comprehensive Income [Extensible Enumeration] Realized And Unrealized Gain Loss On Investments Realized And Unrealized Gain Loss On Investments Realized And Unrealized Gain Loss On Investments Realized And Unrealized Gain Loss On Investments
Ending balance $ 408 $ 1,300 $ 408 $ 1,300
v3.24.1.u1
Fair Value Measurements - Additional Information (Details)
1 Months Ended 3 Months Ended 9 Months Ended 12 Months Ended
Jul. 31, 2023
USD ($)
Mar. 31, 2024
USD ($)
Mar. 31, 2023
USD ($)
Mar. 31, 2024
USD ($)
Mar. 31, 2023
USD ($)
Jun. 30, 2023
USD ($)
Dec. 31, 2023
May 04, 2022
USD ($)
Fair value assets level 1 to level 2 transfers   $ 0 $ 0 $ 0 $ 0      
Fair value assets level 2 to level 1 transfers   0 0 0 0      
Fair value asset transfers into level 3   0 0 0 0      
Fair value asset transfers out of level 3   0 0 0 0      
Fair value liabilities level 1 to level 2 transfers   0 0 0 0      
Fair value liabilities level 2 to level 1 transfers   0 0 0 0      
Fair value liability transfers into level 3   0 0 0 0      
Fair value liability transfers out of level 3   $ 0 $ 0 $ 0 $ 0      
Notice period for annually allowable redemptions       90 days   90 days    
Capped percentage of net asset value   5.00%   5.00%   5.00%    
Change in unrealized appreciation       $ 127,000        
Lockup period from date of investment       1 year   1 year    
Assets measured at fair value   $ 38,244,000   $ 38,244,000   $ 32,611,000    
Liabilities measured at fair value   $ 408,000   $ 408,000   1,903,000    
Option Pricing Model | Option Volatility                
Equity investment measurement input   0.389   0.389        
Option Pricing Model | Risk-Free Rate                
Equity investment measurement input   0.0424   0.0424        
Discounted Cash Flow | Discount Rate | Minimum                
Debt securities measurement input   0.112   0.112        
Discounted Cash Flow | Discount Rate | Maximum                
Debt securities measurement input   0.231   0.231        
Discounted Cash Flow | Discount Rate | Weighted Average                
Debt securities measurement input   0.135   0.135        
Investment Management Agreement and Certain Other Assets for Monomoy Properties REIT L.L.C.                
Asset acquisition, contingent consideration $ 1,000,000     $ 1,900,000        
Investment Management Agreement and Certain Other Assets for Monomoy Properties REIT L.L.C. | Income Approach | Discount Rate                
Measurement input             0.08  
Monomoy Properties REIT, LLC                
Maximum additional consideration payable               $ 2,000,000
Imperial Capital, LLC                
Contingent consideration liability   $ 400,000   400,000        
Consolidated Funds                
Fair value asset transfers out of level 3   $ 461,000   $ 461,000        
Consolidated Funds | Fair Value, Recurring Basis                
Assets measured at fair value           0    
Liabilities measured at fair value           $ 0    
v3.24.1.u1
Fair Value Measurements - Schedule of Assets of Consolidated Funds Measured at Fair Value on Recurring Basis (Details) - USD ($)
Mar. 31, 2024
Jun. 30, 2023
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Total assets $ 38,244,000 $ 32,611,000
Fair Value, Inputs, Level 1    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Equity investments 16,856,000 14,296,000
Total assets 16,856,000 14,296,000
Fair Value, Inputs, Level 2    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Equity investments 0 0
Total assets 0 0
Fair Value, Inputs, Level 3    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Equity investments 3,130,000 0
Total assets 3,130,000 0
Fair Value, Inputs, Level 1, 2 and 3    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Equity investments 19,986,000 14,296,000
Total assets 19,986,000 14,296,000
Consolidated Funds | Fair Value, Recurring Basis    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Total assets   $ 0
Consolidated Funds | Fair Value, Inputs, Level 1 | Fair Value, Recurring Basis    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Equity investments 0  
Debt securities 0  
Total assets 0  
Consolidated Funds | Fair Value, Inputs, Level 2 | Fair Value, Recurring Basis    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Equity investments 0  
Debt securities 3,766,000  
Total assets 3,766,000  
Consolidated Funds | Fair Value, Inputs, Level 3 | Fair Value, Recurring Basis    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Equity investments 51,000  
Debt securities 4,744,000  
Total assets 4,795,000  
Consolidated Funds | Fair Value, Inputs, Level 1, 2 and 3 | Fair Value, Recurring Basis    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Equity investments 51,000  
Debt securities 8,510,000  
Total assets $ 8,561,000  
v3.24.1.u1
Real Estate Under Development - Additional Information (Details)
$ in Millions
3 Months Ended 9 Months Ended
Mar. 31, 2024
USD ($)
Mar. 31, 2024
USD ($)
Project
Real Estate [Line Items]    
Capitalized cost within real estate under development current | $ $ 3.2 $ 6.4
Number of identifiable real estate projects | Project   2
v3.24.1.u1
Long-Term Debt - Schedule of Long-Term Debt (Details) - Subsidiaries Other Outstanding Borrowings - USD ($)
$ in Thousands
Mar. 31, 2024
Jun. 30, 2023
Debt Instrument [Line Items]    
Total principal $ 26,945 $ 26,945
Unamortized debt discounts and issuance costs (926) (1,137)
Long term debt 26,019 25,808
GEGGL Notes | GEG    
Debt Instrument [Line Items]    
Total principal $ 26,945 $ 26,945
v3.24.1.u1
Long-Term Debt - Additional Information (Details)
3 Months Ended 9 Months Ended
Jun. 09, 2022
USD ($)
Mar. 31, 2024
USD ($)
Mar. 31, 2023
USD ($)
Mar. 31, 2024
USD ($)
Mar. 31, 2023
USD ($)
Jun. 30, 2023
USD ($)
Debt Instrument [Line Items]            
Interest expense other borrowings   $ 600,000 $ 600,000 $ 1,700,000 $ 1,900,000  
Aggregate principal amount   $ 38,859,000   $ 38,859,000   $ 37,912,000
GEGGL Notes            
Debt Instrument [Line Items]            
Aggregate principal amount $ 26,900,000          
Interest rate 7.25%          
Debt instrument maturity date Jun. 30, 2027          
Notes issued in minimum denominations $ 25          
Net consolidated debt to equity ratio 2     0.33    
GEGGL Notes | Underwriters' Over-allotment Option            
Debt Instrument [Line Items]            
Aggregate principal amount $ 1,900,000          
GEGGL Notes | Minimum            
Debt Instrument [Line Items]            
Notes issued in integral multiples $ 25          
v3.24.1.u1
Convertible Notes - Additional Information (Details) - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended 12 Months Ended
Mar. 31, 2024
Mar. 31, 2023
Mar. 31, 2024
Mar. 31, 2023
Jun. 30, 2023
Debt Instrument [Line Items]          
Aggregate principal amount $ 38,859   $ 38,859   $ 37,912
Interest expense 1,074 $ 1,095 3,197 $ 5,024  
Convertible Notes          
Debt Instrument [Line Items]          
Aggregate principal amount $ 38,900   $ 38,900   $ 38,900
Debt instrument maturity date     Feb. 26, 2030   Feb. 26, 2030
Issuance of notes to related parties.     $ 15,800    
Accrued interest rate on notes payable 5.00%   5.00%    
Notes payable, interest rate description     The Convertible Notes accrue interest at 5.0% per annum, payable semiannually in arrears on June 30 and December 31, commencing June 30, 2020, in cash or in kind at the option of the Company.    
Number of common stock shares issuable upon conversion of each $1000 principal debt amount 288.0018   288.0018    
Debt issuance costs     $ 1,200    
Amortization period of convertible notes debt discount and debt issuance costs     10 years    
Unamortized debt issuance costs $ 700   $ 700   $ 800
Interest expense $ 500 $ 500 $ 1,500 $ 1,500  
v3.24.1.u1
Share-Based and Other Non-Cash Compensation - Activity of Restricted Stock Award (Details) - Restricted Stock Awards and Restricted Stock Units
shares in Thousands
9 Months Ended
Mar. 31, 2024
$ / shares
shares
Shares  
Beginning Balance | shares 1,322
Granted | shares 1,243
Vested | shares (617)
Forfeited | shares (4)
Ending Balance | shares 1,944
Weighted average grant date fair value  
Beginning Balance | $ / shares $ 1.93
Granted | $ / shares 1.97
Vested | $ / shares 2.13
Forfeited | $ / shares 2.15
Ending Balance | $ / shares $ 1.9
v3.24.1.u1
Share-Based and Other Non-Cash Compensation - Restricted Stock Awards and Restricted Stock Units - Additional Information (Details)
9 Months Ended
Mar. 31, 2024
shares
Restricted Stock Awards  
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]  
Granted, shares 1,242,596
Restricted Stock Units  
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]  
Granted, shares 0
Restricted Stock Awards and Restricted Stock Units  
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]  
Granted, shares 1,243,000
Restricted Stock Awards and Restricted Stock Units | Maximum  
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]  
Vesting period 4 years
Restricted Stock Awards and Restricted Stock Units | Minimum  
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]  
Vesting period 1 year
v3.24.1.u1
Share-Based and Other Non-Cash Compensation - Summary of Option Activity (Details) - $ / shares
shares in Thousands
9 Months Ended 12 Months Ended
Mar. 31, 2024
Jun. 30, 2023
Shares    
Beginning Balance 3,264  
Ending Balance 3,264 3,264
Exercisable 1,261  
Weighted average exercise price    
Beginning Balance $ 2.7  
Ending Balance 2.7 $ 2.7
Exercisable $ 3.72  
Weighted average remaining contractual term    
Outstanding 6 years 8 months 8 days 7 years 5 months 12 days
Exercisable 3 years 1 month 17 days  
v3.24.1.u1
Share-Based and Other Non-Cash Compensation - Non-Employee Director Deferred Compensation Plan - Additional Information (Details) - Deferred Compensation Plan - shares
1 Months Ended
Dec. 31, 2020
Mar. 31, 2024
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]    
Deferred compensation, service period 3 years  
Restricted stock units and restricted stock awards, deferred   167,941
v3.24.1.u1
Share-Based and Other Non-Cash Compensation - Stock-Based Compensation Expense - Additional Information (Details) - USD ($)
$ in Millions
3 Months Ended 9 Months Ended
Mar. 31, 2024
Mar. 31, 2023
Mar. 31, 2024
Mar. 31, 2023
Restricted Stock Awards and Restricted Stock Units and Stock Options        
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]        
Stock-based compensation expense $ 0.5 $ 0.6 $ 1.8 $ 2.0
Restricted Stock Awards and Stock Options        
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]        
Total unrecognized compensation cost $ 2.9   $ 2.9  
v3.24.1.u1
Share-Based and Other Non-Cash Compensation - Stock-Based Compensation Expense - Other Non-Cash Compensation (Details) - GECC Common Shares - USD ($)
$ in Millions
3 Months Ended 9 Months Ended
Mar. 31, 2024
Mar. 31, 2024
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]    
Stock issued during period, value   $ 0.6
Stock issued during period value vested immediately   $ 0.1
Minimum    
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]    
Number of years issued shares vest annually on pro-rata basis   2 years
Maximum    
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]    
Number of years issued shares vest annually on pro-rata basis   3 years
Employees    
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]    
Stock-based compensation expense $ 0.2 $ 0.4
v3.24.1.u1
Income Taxes - Additional Information (Details)
$ in Millions
12 Months Ended
Jun. 30, 2023
USD ($)
Income Tax [Line Items]  
Federal net operating loss carryforwards $ 16.2
Massachusetts, Arizona and Nebraska  
Income Tax [Line Items]  
Operating loss carryforward for state income tax 25.5
Federal  
Income Tax [Line Items]  
Net operating loss carryforwards, not subject to expiration 8.0
Federal | Expire in Fiscal Years 2024 Through 2025  
Income Tax [Line Items]  
Net operating loss carryforwards, subject to expiration $ 8.2
Minimum | Massachusetts, Arizona and Nebraska  
Income Tax [Line Items]  
Operating loss carryforwards expiration period 2031
Minimum | Federal  
Income Tax [Line Items]  
Operating loss carryforwards expiration period 2024
Maximum | Massachusetts, Arizona and Nebraska  
Income Tax [Line Items]  
Operating loss carryforwards expiration period 2043
Maximum | Federal  
Income Tax [Line Items]  
Operating loss carryforwards expiration period 2025

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