Part I [Business](index=4&type=section&id=Item%201.%20Business) Great Elm Group operates through Durable Medical Equipment and Investment Management segments, leveraging $821 million in NOLs for strategic growth and value creation - The company operates through two main business segments: Durable Medical Equipment and Investment Management[14](index=14&type=chunk) - The Durable Medical Equipment business was launched in September 2018 and focuses on respiratory care equipment like PAP devices, ventilators, and oxygen equipment[16](index=16&type=chunk) - The Investment Management business, through its subsidiary GECM, managed approximately **$607.0 million** in assets as of June 30, 2022, primarily for GECC and Monomoy REIT[17](index=17&type=chunk) - As of June 30, 2022, the company had approximately **$821 million** of federal Net Operating Loss (NOL) carryforwards, which can be used to offset future taxable income[15](index=15&type=chunk) - In June 2021, the company sold its real estate business, which consisted of two office buildings in Fort Myers, Florida, marking a strategic shift[21](index=21&type=chunk) [Risk Factors](index=7&type=section&id=Item%201A.%20Risk%20Factors) The company faces risks including limited operating history, acquisition challenges, economic downturns, cybersecurity threats, NOL utilization uncertainty, Medicare dependency, supply chain disruptions, market volatility, and stock ownership restrictions [Risks Related to Our Business](index=7&type=section&id=Risks%20Related%20to%20Our%20Business) General business risks include limited operating history, acquisition competition, key personnel dependency, cybersecurity threats, and uncertainty in utilizing NOL carryforwards - The company has a limited track record in its durable medical equipment (since 2018) and investment management (since 2016) businesses, making future performance uncertain[36](index=36&type=chunk) - Growth through acquisitions is a core strategy, but the company faces intense competition from well-financed entities and may not successfully integrate or manage acquired businesses[39](index=39&type=chunk)[40](index=40&type=chunk) - The business is highly dependent on key personnel, and their loss could negatively impact operations and profitability[45](index=45&type=chunk) - The ability to fully utilize approximately **$821 million** in NOL carryforwards is not guaranteed and depends on generating sufficient future taxable income before they expire[48](index=48&type=chunk) - The business is subject to operational risks, including cyberattacks, which are becoming more frequent and sophisticated, potentially leading to financial losses and litigation[56](index=56&type=chunk) - The COVID-19 pandemic has negatively impacted the business through suppressed demand and significant global supply chain disruptions, particularly for medical devices, which may continue to adversely affect results[60](index=60&type=chunk) [Risks Related to Our Durable Medical Equipment Business](index=11&type=section&id=Risks%20Related%20to%20Our%20Durable%20Medical%20Equipment%20Business) DME business risks include Medicare reimbursement dependency, supply chain disruptions from limited suppliers, and compliance with complex healthcare fraud and abuse laws - A significant portion of the DME business revenue comes from Medicare, making it vulnerable to changes in reimbursement rates and methodologies[64](index=64&type=chunk) - The Medicare competitive bidding process, though temporarily suspended, could adversely impact reimbursement rates and financial results once it recommences, with the next round anticipated for **January 1, 2024**[67](index=67&type=chunk)[68](index=68&type=chunk) - The business is exposed to significant supply chain risk due to reliance on single-source or limited suppliers. A voluntary recall by key supplier Philips Respironics in June 2021 for certain PAP and ventilator devices has created legal, regulatory, and financial risks[70](index=70&type=chunk)[73](index=73&type=chunk) - Global supply chain shortages in semiconductor microchips have further limited the ability to procure sufficient PAP equipment, resulting in lost revenue opportunities[76](index=76&type=chunk) - Failure to comply with complex federal and state fraud and abuse laws (Anti-Kickback, Stark Law, False Claims) could result in substantial penalties, fines, and exclusion from government healthcare programs[81](index=81&type=chunk)[82](index=82&type=chunk)[83](index=83&type=chunk) [Risks Related to Our Investment Management Business](index=15&type=section&id=Risks%20Related%20to%20Our%20Investment%20Management%20Business) Investment Management risks include terminable agreements, market volatility impacting AUM and fees, LIBOR transition uncertainty, and potential classification as an investment company - Investment management agreements (IMAs) with key clients like GECC and Monomoy REIT can be terminated, posing a risk to a primary revenue source. The associated intangible asset is being amortized over **15 years** despite this cancellable nature[88](index=88&type=chunk) - Difficult market conditions can adversely affect the business by reducing the value of managed funds, which in turn lowers management fee revenue and could make it harder to attract or retain capital[89](index=89&type=chunk)[90](index=90&type=chunk) - The transition away from LIBOR to alternative reference rates like SOFR creates uncertainty and could increase interest expenses, reduce investment income, and require renegotiation of existing loans and contracts[91](index=91&type=chunk)[94](index=94&type=chunk) - If the company is deemed an "investment company" under the Investment Company Act of 1940, it would face burdensome compliance requirements and restrictions on its activities, potentially hindering its growth plans[95](index=95&type=chunk) [Risks Relating to Our Common Stock](index=17&type=section&id=Risks%20Relating%20to%20Our%20Common%20Stock) Common stock risks include ownership restrictions to protect NOLs, potential dilution from future equity issuances, and anti-takeover provisions - To protect its significant NOL carryforwards, the company's certificate of incorporation and a Tax Rights Plan restrict any person or entity from acquiring **4.99%** or more of its common stock without board approval[99](index=99&type=chunk)[100](index=100&type=chunk) - The company may issue additional common or preferred stock, which could significantly dilute existing stockholders' equity interests and adversely affect the market price of the common stock[101](index=101&type=chunk) - Anti-takeover provisions, including a classified board and limitations on stockholder actions, could discourage or render more difficult a potential acquisition, which might otherwise be beneficial to stockholders[102](index=102&type=chunk)[104](index=104&type=chunk) - The potential conversion of the **5.0%** Convertible Senior PIK Notes due **2030** could lead to significant dilution for existing common stockholders[105](index=105&type=chunk) [Unresolved Staff Comments](index=18&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports no unresolved staff comments - The company reports no unresolved staff comments[106](index=106&type=chunk) [Properties](index=18&type=section&id=Item%202.%20Properties) The company leases all its properties, including executive offices in Waltham, MA, and 22 DME offices and 15 sleep labs across multiple states - The company leases its principal executive offices in Waltham, MA, with the lease running through **September 2024**[107](index=107&type=chunk) - The Durable Medical Equipment business leases **22 offices** and **15 sleep labs**, primarily in Arizona, Alaska, Iowa, Kansas, Missouri, Nebraska, Oregon, and Washington, with various expiration dates through **2027**[109](index=109&type=chunk) [Legal Proceedings](index=19&type=section&id=Item%203.%20Legal%20Proceedings) The company reports no legal proceedings - The company reports no legal proceedings[110](index=110&type=chunk) [Mine Safety Disclosures](index=19&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - This item is not applicable to the company[111](index=111&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=19&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) GEG common stock trades on Nasdaq, with no current dividend plans and ownership restrictions to preserve NOLs, with waivers for key shareholders - Common stock is traded on the Nasdaq Global Select Market under the symbol "**GEG**"[113](index=113&type=chunk) - The company does not currently plan to pay dividends on its common stock[115](index=115&type=chunk) - Ownership is restricted to **4.99%** to preserve tax benefits, with waivers granted to significant investors Northern Right (**12.0%**) and ICAM (**17.6%**) as of **September 6, 2022**[116](index=116&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=19&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) FY2022 revenue grew 12% to $68.0 million, but pre-tax loss widened to $15.0 million due to increased operating expenses and unrealized investment losses [Overview and Critical Accounting Policies](index=20&type=section&id=Overview%20and%20Critical%20Accounting%20Policies) The company's performance was impacted by supply chain issues, with critical accounting policies involving significant judgment in areas like goodwill and deferred tax assets - The durable medical equipment business experienced suppressed referral pipelines and was impacted by global supply chain challenges, leading to a patient backlog and missed revenue opportunities for PAP devices[122](index=122&type=chunk) - Critical accounting estimates include goodwill impairment, revenue recognition, and valuation of deferred tax assets. The annual goodwill impairment test as of **April 1, 2022**, indicated no impairment, with the fair value of the DME reporting unit exceeding its carrying value by **34.3%**[125](index=125&type=chunk)[128](index=128&type=chunk) - A full valuation allowance of **$207.1 million** has been established against deferred tax assets as of **June 30, 2022**, due to historical net operating losses[140](index=140&type=chunk) [Results of Operations (Consolidated)](index=22&type=section&id=Results%20of%20Operations%20(Consolidated)) Consolidated revenue grew 12% to $68.0 million, but a 251% increase in other expenses led to a $15.0 million pre-tax loss Consolidated Results of Operations (in thousands) | | For the years ended June 30, | Percent Change | | :--- | :--- | :--- | :--- | | | **2022** | **2021** | | | **Total revenue** | $67,974 | $60,853 | 12% | | **Total operating expenses** | (72,081) | (64,590) | 12% | | **Operating loss** | (4,107) | (3,737) | 10% | | **Total other expense, net** | (10,909) | (3,107) | 251% | | **Total pre-tax loss from continuing operations** | $(15,016) | $(6,844) | 120% | - Revenue growth was driven by contributions from the AMPM and MedOne acquisitions in the DME segment and increased assets under management at GECC and the acquisition of the Monomoy REIT management agreement in the Investment Management segment[144](index=144&type=chunk) - The increase in 'Other income (expense)' was primarily due to net realized and unrealized losses on the company's investment in GECC and private funds[147](index=147&type=chunk) [Durable Medical Equipment Segment Analysis](index=24&type=section&id=Durable%20Medical%20Equipment%20Segment%20Analysis) DME segment revenue increased 10% to $63.5 million, but pre-tax loss widened to $3.8 million due to higher other expenses and supply chain issues Durable Medical Equipment Segment Results (in thousands) | | For the years ended June 30, | Percent Change | | :--- | :--- | :--- | :--- | | | **2022** | **2021** | | | **Total revenue** | $63,458 | $57,643 | 10% | | **Operating income** | 4,208 | 2,635 | 60% | | **Total other expense, net** | (8,053) | (5,124) | 57% | | **Total pre-tax loss from continuing operations** | $(3,845) | $(2,489) | 54% | - Revenue from equipment sales and sleep studies increased to **$36.2 million** and **$5.6 million** respectively, driven by the AMPM and MedOne acquisitions[150](index=150&type=chunk) - Global supply chain issues significantly restricted the ability to procure CPAP equipment, resulting in lost revenue opportunities during the year[152](index=152&type=chunk) - General and administrative expenses included benefits of **$2.3 million** from Employee Retention Credits (ERCs) in FY2022, compared to **$4.6 million** in FY2021[155](index=155&type=chunk) [Investment Management Segment Analysis](index=26&type=section&id=Investment%20Management%20Segment%20Analysis) Investment Management revenue grew 41% to $4.5 million, but a significant swing to $8.6 million pre-tax loss was driven by unrealized investment losses Investment Management Segment Results (in thousands) | | For the years ended June 30, | Percent Change | | :--- | :--- | :--- | :--- | | | **2022** | **2021** | | | **Total revenue** | $4,516 | $3,210 | 41% | | **Operating loss** | (2,758) | (830) | 232% | | **Other income (expense), net** | (5,794) | 3,553 | NM | | **Total pre-tax (loss) income from continuing operations** | $(8,552) | $2,723 | NM | - Management fee revenue increased to **$3.6 million** in FY2022 from **$2.7 million** in FY2021, due to higher AUM at GECC and **$0.3 million** in fees from the newly acquired Monomoy REIT management agreement[162](index=162&type=chunk) - Operating expenses increased primarily due to higher non-cash compensation (**$1.1 million** increase) and other general & administrative costs (**$2.1 million** increase) related to payroll, bonuses, and consulting fees[163](index=163&type=chunk)[164](index=164&type=chunk) - The segment recognized net realized and unrealized losses of **$7.8 million** during FY2022, compared to net gains of **$0.7 million** in FY2021, primarily from the mark-to-market of its investment in GECC[167](index=167&type=chunk) [General Corporate Segment Analysis](index=27&type=section&id=General%20Corporate%20Segment%20Analysis) General Corporate segment pre-tax loss improved to $2.6 million, driven by a positive swing in other income from intercompany items General Corporate Segment Results (in thousands) | | For the years ended June 30, | Percent Change | | :--- | :--- | :--- | :--- | | | **2022** | **2021** | | | **Operating loss** | $(5,557) | $(5,542) | 0% | | **Other income (expense), net** | 2,938 | (1,536) | NM | | **Total pre-tax loss from continuing operations** | $(2,619) | $(7,078) | (63)% | - Interest expense increased by **$2.1 million**, primarily due to a full year of dividends on the Forest Preferred Stock (issued Dec 2020) and interest on the new GEGGL Notes (issued May 2022)[172](index=172&type=chunk) - Other income (expense) improved significantly, driven by intercompany interest income and a **$2.1 million** benefit from the revaluation of an embedded derivative related to HC LLC preferred stock held within the corporate structure[173](index=173&type=chunk) [Income Taxes](index=28&type=section&id=Income%20Taxes) Minimal income tax expense was recorded, primarily state and local taxes, with no federal tax due to significant NOL utilization - The company recorded minimal income tax expense of **$0.02 million** in FY2022 and **$1.7 million** in FY2021, consisting solely of state and local taxes[174](index=174&type=chunk) - No federal income tax is expected for FY2022 or FY2021 due to the utilization of NOLs[174](index=174&type=chunk) [Summary of Discontinued Operations](index=28&type=section&id=Summary%20of%20Discontinued%20Operations) The company sold its real estate business for $4.6 million in June 2021, reclassifying it as a discontinued operation with $0.6 million net income Discontinued Operations for FY 2021 (in thousands) | | For the year ended June 30, 2021 | | :--- | :--- | | Net revenue | $5,005 | | Operating income from discontinued operations | 2,811 | | Gain on sale of real estate business | 263 | | Pretax income from discontinued operations | 538 | | **Net income from discontinued operations** | **$649** | [Liquidity and Capital Resources](index=28&type=section&id=Liquidity%20and%20Capital%20Resources) Working capital was $64.7 million, with operating cash flow at $29.3 million, and the capital structure includes significant debt obligations Selected Financial Position (in thousands) | | As of June 30, 2022 | As of June 30, 2021 | | :--- | :--- | :--- | | Working Capital | $64,746 | $55,529 | | Cash and cash equivalents | $23,595 | $24,382 | | Investments, at fair value | $48,042 | $24,044 | Cash Flow Summary (in thousands) | | For the year ended June 30, 2022 | For the year ended June 30, 2021 | | :--- | :--- | :--- | | Cash provided by (used in) operating activities | $29,280 | $(18,976) | | Cash used in investing activities | (40,047) | (15,482) | | Cash provided by financing activities | 9,980 | 18,340 | - Major borrowings as of June 30, 2022 include: - **$26.9 million** of **7.25%** GEGGL Notes due **2027**[186](index=186&type=chunk) - **$36.1 million** of **5.0%** Convertible Notes due **2030**[187](index=187&type=chunk) - **$6.3 million** Seller Note related to the Monomoy REIT IMA acquisition[189](index=189&type=chunk) - **$35.0 million** in Forest Preferred Stock held by JPM[190](index=190&type=chunk) - An undrawn **$10 million** revolving credit facility (DME Revolver)[193](index=193&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=31&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This item is not applicable to the company - This item is not applicable to the company[199](index=199&type=chunk) [Financial Statements and Supplementary Data](index=31&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section incorporates the company's financial statements from page F-1 and GECC's audited financial statements by reference - The company's financial statements are located starting on page **F-1** of the annual report[200](index=200&type=chunk) - The audited financial statements of Great Elm Capital Corp. (GECC) are incorporated by reference, as the investment in GECC is significant under SEC rules[201](index=201&type=chunk) [Changes in and Disagreements With Accountants on Accounting and Financial Disclosure](index=31&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20With%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) The company reports no changes in or disagreements with its accountants - The company reports no changes in or disagreements with its accountants[202](index=202&type=chunk) [Controls and Procedures](index=31&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that disclosure controls and internal control over financial reporting were effective as of June 30, 2022 - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were **effective** as of **June 30, 2022**[203](index=203&type=chunk) - Management concluded that the company's internal control over financial reporting was **effective** as of **June 30, 2022**, based on the COSO framework[207](index=207&type=chunk) - No material changes were made to the internal control over financial reporting during the fiscal quarter ended **June 30, 2022**[208](index=208&type=chunk) [Other Information](index=32&type=section&id=Item%209B.%20Other%20Information) The company reports no other information - The company reports no other information[209](index=209&type=chunk) [Disclosure Regarding Foreign Jurisdictions that Prevent Inspections](index=32&type=section&id=Item%209C.%20Disclosure%20Regarding%20Foreign%20Jurisdictions%20that%20Prevent%20Inspections.) This item is not applicable to the company - This item is not applicable to the company[210](index=210&type=chunk) Part III Part III incorporates information on corporate governance, executive compensation, security ownership, related party transactions, and accountant fees by reference from the definitive proxy statement [Directors, Executive Officers and Corporate Governance](index=32&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information on directors, executive officers, and corporate governance is incorporated by reference from the Proxy Statement - Information required by this item is incorporated by reference from the company's Proxy Statement[212](index=212&type=chunk) [Executive Compensation](index=32&type=section&id=Item%2011.%20Executive%20Compensation) Information on executive compensation is incorporated by reference from the Proxy Statement - Information required by this item is incorporated by reference from the company's Proxy Statement[213](index=213&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=32&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Information on security ownership is incorporated by reference from the Proxy Statement - Information required by this item is incorporated by reference from the company's Proxy Statement[214](index=214&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=32&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information on related party transactions and director independence is incorporated by reference from the Proxy Statement - Information required by this item is incorporated by reference from the company's Proxy Statement[215](index=215&type=chunk) [Principal Accountant Fees and Services](index=32&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services) Information on principal accountant fees and services is incorporated by reference from the Proxy Statement - Information required by this item is incorporated by reference from the company's Proxy Statement[216](index=216&type=chunk) Part IV Part IV lists exhibits and financial statement schedules, noting financial statements begin on F-1 and schedules are omitted, with no Form 10-K summary provided [Exhibits, Financial Statement Schedules](index=32&type=section&id=Item%2015.%20Exhibits%2C%20Financial%20Statement%20Schedules) Financial statements are included from page F-1, and schedules are omitted as not required or information is elsewhere - The required financial statements are included in the report, beginning on page **F-1**[218](index=218&type=chunk) - Financial statement schedules have been omitted as they are not required or the information is included elsewhere[219](index=219&type=chunk) [Form 10-K Summary](index=35&type=section&id=Item%2016.%20Form%2010-K%20Summary) The company elected not to provide a Form 10-K summary - The company elected not to provide a Form 10-K summary[225](index=225&type=chunk) Financial Statements and Supplementary Data [Report of Independent Registered Public Accounting Firm](index=38&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) Grant Thornton LLP issued an unqualified audit opinion, identifying DME revenue recognition as a critical audit matter due to significant judgment - Grant Thornton LLP issued an **unqualified audit opinion** on the company's consolidated financial statements[236](index=236&type=chunk) - The auditor identified Durable Medical Equipment Revenue Recognition, specifically the estimation of variable consideration, as a **critical audit matter** due to the significant judgment involved[240](index=240&type=chunk)[242](index=242&type=chunk) [Consolidated Financial Statements](index=40&type=section&id=Consolidated%20Financial%20Statements) Consolidated financial statements show total assets at $168.1 million, a net loss of $14.9 million, and positive operating cash flow of $29.3 million in FY2022 Consolidated Balance Sheet Highlights (in thousands) | | June 30, 2022 | June 30, 2021 | | :--- | :--- | :--- | | **Total Assets** | **$168,087** | **$161,869** | | Cash and cash equivalents | $23,595 | $24,382 | | Goodwill | $52,463 | $50,536 | | **Total Liabilities** | **$125,833** | **$106,445** | | Convertible Notes (face value) | $36,085 | $34,346 | | **Total Stockholders' Equity** | **$40,029** | **$52,785** | Consolidated Statement of Operations Highlights (in thousands) | | For the year ended June 30, 2022 | For the year ended June 30, 2021 | | :--- | :--- | :--- | | **Total revenues** | **$67,974** | **$60,853** | | **Operating loss** | **(4,107)** | **(3,737)** | | Loss from continuing operations | (15,037) | (8,519) | | Income from discontinued operations, net of tax | - | 649 | | **Net loss attributable to Great Elm Group, Inc.** | **$(14,893)** | **$(7,275)** | | **Net loss per share** | **$(0.56)** | **$(0.28)** | [Notes to the Consolidated Financial Statements](index=45&type=section&id=Notes%20to%20the%20Consolidated%20Financial%20Statements) Notes detail accounting policies, segment structure, impact of ASU 2020-06, acquisitions, related-party transactions, debt composition, and $821 million in federal NOL carryforwards - The company adopted ASU 2020-06 for convertible instruments on **July 1, 2021**, using the full retrospective method. This eliminated the separation of the conversion feature from the debt, resulting in adjustments to the carrying value of convertible notes, additional paid-in capital, and retained earnings in prior periods[311](index=311&type=chunk) Revenue by Source (in thousands) | Revenue Source | FY 2022 | FY 2021 | | :--- | :--- | :--- | | **Durable Medical Equipment** | | | | Equipment Sales | $36,161 | $32,293 | | Service Revenues | $5,559 | $5,167 | | Medical Equipment Rental Income | $21,738 | $20,183 | | *Subtotal DME* | *$63,458* | *$57,643* | | **Investment Management** | | | | Management Fees | $3,612 | $2,652 | | Property Management Fees | $171 | $- | | Administration Fees | $733 | $558 | | *Subtotal IM* | *$4,516* | *$3,210* | | **Total Revenue** | **$67,974** | **$60,853** | - On **May 4, 2022**, the company acquired the investment management agreement for Monomoy REIT. The consideration included **$2.5 million** in GEG stock, **$1.25 million** in GECC stock, a **$6.3 million** promissory note, and up to **$2.0 million** in contingent consideration[350](index=350&type=chunk)[351](index=351&type=chunk) - As of **June 30, 2022**, the company had **$821 million** in federal NOL carryforwards. Those generated before fiscal 2018 will expire between **2023** and **2037**, while those generated after can be carried forward indefinitely[493](index=493&type=chunk) Federal NOL Carryforward Expiration Schedule (in thousands) | Fiscal Year of Expiration | Federal NOL carryforwards | | :--- | :--- | | 2023 | $131,077 | | 2024 | $60,132 | | 2025 | $117,277 | | 2026 through 2037 | $486,542 | | Indefinite | $26,039 | | **Total** | **$821,067** |

[FORM 10-Q Filing Information](index=1&type=section&id=FORM%2010-Q) This section provides the basic identification details for the company's Quarterly Report on Form 10-Q [Registrant Information](index=1&type=section&id=Registrant%20Information) This section details Great Elm Group, Inc.'s identification, incorporation, address, and stock exchange listing for its Form 10-Q filing Registrant Information - Key Details | Field | Value | | :--- | :--- | | Registrant Name | Great Elm Group, Inc. | | Jurisdiction of Incorporation | Delaware | | Principal Executive Offices | 800 South Street, Suite 230, Waltham MA 02453 | | Telephone Number | (617) 375-3006 | | Trading Symbol | GEG | | Exchange | The Nasdaq Stock Market LLC (Nasdaq Global Select Market) | | Shares Outstanding (May 2, 2022) | 27,466,513 | | Filer Status | Non-accelerated filer, Smaller reporting company | [Cautionary Statement Regarding Forward-Looking Information](index=3&type=section&id=Cautionary%20Statement%20Regarding%20Forward-Looking%20Information) This section outlines risks and uncertainties that may cause actual results to differ from forward-looking statements [Forward-Looking Statements and Risks](index=3&type=section&id=Forward-Looking%20Statements%20and%20Risks) This section outlines forward-looking statements, emphasizing that actual results may differ due to various risks and uncertainties - The report contains forward-looking statements that are not guarantees of actual results, and actual results may differ materially due to various risks and uncertainties[8](index=8&type=chunk) - Key risks include the **ability** of Great Elm Capital Management, Inc. (GECM) to profitably manage Great Elm Capital Corp. (GECC) and Great Elm SPAC Opportunity Fund, LLC (GESOF)[10](index=10&type=chunk) - Other **significant risks** involve the company's **ability** to develop and grow its durable medical equipment and investment management businesses, raise capital, make acquisitions, and manage acquired businesses[10](index=10&type=chunk) - External factors such as equity and debt capital market conditions, interest rate volatility, inflationary pressures, supply chain challenges, and the impact of the COVID-19 pandemic are also identified as risks[10](index=10&type=chunk) [PART I. FINANCIAL INFORMATION](index=4&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This section presents the company's unaudited condensed consolidated financial statements and related disclosures [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements, including balance sheets, operations, cash flows, and detailed notes [Unaudited Condensed Consolidated Balance Sheets](index=4&type=section&id=Unaudited%20Condensed%20Consolidated%20Balance%20Sheets) This section presents the company's unaudited condensed consolidated balance sheets, detailing assets, liabilities, and equity Condensed Consolidated Balance Sheets (Unaudited) - Key Figures (in thousands) | Metric | March 31, 2022 | June 30, 2021 | | :--- | :--- | :--- | | **ASSETS** | | | | Total current assets | $65,586 | $88,534 | | Property and equipment, net | $613 | $981 | | Equipment held for rental, net | $6,810 | $7,391 | | Identifiable intangible assets, net | $7,733 | $8,928 | | Goodwill | $52,463 | $50,536 | | Total assets | $137,465 | $161,869 | | **LIABILITIES, NON-CONTROLLING INTEREST AND STOCKHOLDERS' EQUITY** | | | | Total current liabilities | $17,566 | $33,005 | | Convertible notes | $34,278 | $33,333 | | Redeemable preferred stock of subsidiaries | $35,694 | $35,529 | | Total liabilities | $90,485 | $106,445 | | Total stockholders' equity | $44,718 | $52,785 | | Total liabilities, non-controlling interest and stockholders' equity | $137,465 | $161,869 | - **Total assets decreased by** **$24.4 million** (**15.1%**) from **$161.9 million** at June 30, 2021, to **$137.5 million** at March 31, 2022[12](index=12&type=chunk) - **Total current liabilities decreased by** **$15.4 million** (**46.8%**) from **$33.0 million** at June 30, 2021, to **$17.6 million** at March 31, 2022[12](index=12&type=chunk) [Unaudited Condensed Consolidated Statements of Operations](index=5&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Operations) This section presents the unaudited condensed consolidated statements of operations, detailing revenues, expenses, and net loss Condensed Consolidated Statements of Operations (Unaudited) - Key Figures (in thousands) | Metric | For the three months ended March 31, 2022 | For the three months ended March 31, 2021 | For the nine months ended March 31, 2022 | For the nine months ended March 31, 2021 | | :--- | :--- | :--- | :--- | :--- | | Total revenues | $16,622 | $13,845 | $49,909 | $44,531 | | Total operating costs and expenses | $18,561 | $14,942 | $52,712 | $48,697 | | Operating loss | $(1,939) | $(1,097) | $(2,803) | $(4,166) | | Net realized and unrealized loss on investments | $(3,220) | $(1,112) | $(5,055) | $(454) | | Interest expense | $(1,354) | $(1,361) | $(4,078) | $(3,607) | | Net loss attributable to Great Elm Group, Inc. | $(5,909) | $(2,587) | $(10,347) | $(6,367) | | Basic and diluted net loss per share | $(0.22) | $(0.10) | $(0.38) | $(0.25) | - **Total revenues increased by** **$2.8 million** (**20.1%**) for the three months ended March 31, 2022, and by **$5.4 million** (**12.1%**) for the nine months ended March 31, 2022, compared to the prior year periods[14](index=14&type=chunk) - **Net loss attributable to Great Elm Group, Inc. significantly widened** to **$(5.9) million** for the three months ended March 31, 2022, from **$(2.6) million** in the prior year, and to **$(10.3) million** for the nine months, from **$(6.4) million**[14](index=14&type=chunk) [Unaudited Condensed Consolidated Statement of Stockholders' Equity and Contingently Redeemable Non Controlling Interest (March 31, 2022)](index=6&type=section&id=Unaudited%20Condensed%20Consolidated%20Statement%20of%20Stockholders%27%20Equity%20and%20Contingently%20Redeemable%20Non%20Controlling%20Interest%20for%20the%20three%20and%20nine%20months%20ended%20March%2031%2C%202022) This section details changes in stockholders' equity and non-controlling interests for the period ended March 31, 2022 Stockholders' Equity and Non-controlling Interest (March 31, 2022) - Key Changes (in thousands) | Metric | Balance, June 30, 2021 | Net Loss | Stock-based Compensation | Balance, March 31, 2022 | | :--- | :--- | :--- | :--- | :--- | | Total Great Elm Group, Inc. Stockholders' Equity | $43,236 | $(10,347) | $2,220 | $34,981 | | Non-controlling Interests | $9,549 | $159 | - | $9,737 | | Contingently Redeemable Non-controlling Interest | $2,639 | $(377) | - | $2,262 | - **Total Great Elm Group, Inc. stockholders' equity decreased by** from **$43.2 million** at June 30, 2021, to **$35.0 million** at March 31, 2022, **primarily due to** net losses[16](index=16&type=chunk) - **Stock-based compensation contributed** **$2.2 million** to additional paid-in capital during the nine months ended March 31, 2022[16](index=16&type=chunk) [Unaudited Condensed Consolidated Statement of Stockholders' Equity and Contingently Redeemable Non Controlling Interest (March 31, 2021)](index=7&type=section&id=Unaudited%20Condensed%20Consolidated%20Statement%20of%20Stockholders%27%20Equity%20and%20Contingently%20Redeemable%20Non%20Controlling%20Interest%20for%20the%20three%20and%20nine%20months%20ended%20March%2031%2C%202021) This section details changes in stockholders' equity and non-controlling interests for the period ended March 31, 2021 Stockholders' Equity and Non-controlling Interest (March 31, 2021) - Key Changes (in thousands) | Metric | Balance, June 30, 2020 | Net Loss | Stock-based Compensation | Balance, March 31, 2021 | | :--- | :--- | :--- | :--- | :--- | | Total Great Elm Group, Inc. Stockholders' Equity | $48,845 | $(6,367) | $1,330 | $43,876 | | Non-controlling Interests | $3,886 | $(862) | - | $9,536 | | Contingently Redeemable Non-controlling Interest | $3,890 | $(509) | - | $2,055 | - **Total Great Elm Group, Inc. stockholders' equity decreased by** from **$48.8 million** at June 30, 2020, to **$43.9 million** at March 31, 2021, **primarily due to** net losses[18](index=18&type=chunk) - **Non-controlling interests increased significantly** from **$3.9 million** to **$9.5 million**, partly **due to** the issuance of LP interests in Consolidated Fund (**$3.3 million**)[18](index=18&type=chunk) [Unaudited Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This section presents the unaudited condensed consolidated statements of cash flows, detailing operating, investing, and financing activities Condensed Consolidated Statements of Cash Flows (Unaudited) - Key Figures (in thousands) | Cash Flow Activity | Nine months ended March 31, 2022 | Nine months ended March 31, 2021 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $15,408 | $(21,302) | | Net cash used in investing activities | $(4,526) | $(13,361) | | Net cash provided by (used in) financing activities | $(12,518) | $18,465 | | Net decrease in cash and cash equivalents | $(1,636) | $(16,198) | | Cash and cash equivalents at end of period | $22,746 | $24,302 | - **Operating activities generated** **$15.4 million** in cash for the nine months ended March 31, 2022, a **significant improvement** from a **$(21.3) million** outflow in the prior year, driven by investment sales and non-cash adjustments[20](index=20&type=chunk)[257](index=257&type=chunk) - **Investing activities used** **$4.5 million**, **primarily for** acquisitions and equipment purchases, a **decrease by** from **$13.4 million** used in the prior year which included a large related party rights offering[20](index=20&type=chunk)[259](index=259&type=chunk)[260](index=260&type=chunk) - **Financing activities resulted in** a **net outflow** of **$12.5 million**, mainly **due to** payments to brokers of Consolidated Funds and equipment financing debt, contrasting with a **$18.5 million** **net inflow** in the prior year from JPM Transactions[22](index=22&type=chunk)[261](index=261&type=chunk)[263](index=263&type=chunk) [Unaudited Notes to Condensed Consolidated Financial Statements](index=10&type=section&id=Unaudited%20Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides comprehensive notes to the unaudited condensed consolidated financial statements, detailing accounting policies and disclosures [Note 1. Organization](index=10&type=section&id=Note%201.%20Organization) Great Elm Group, Inc. operates in durable medical equipment and investment management, expanded through acquisitions, and reorganized; real estate is discontinued - Great Elm Group, Inc. operates with two main business segments: durable medical equipment and investment management[24](index=24&type=chunk) - The durable medical equipment business, **acquired** in 2018, specializes in respiratory care equipment and **has expanded** to Kansas, Iowa, and Missouri through acquisitions in 2019 and 2021[27](index=27&type=chunk) - The investment management business, **established** in 2016, manages Great Elm Capital Corp. (GECC) and Great Elm SPAC Opportunity Fund, LLC (GESOF)[25](index=25&type=chunk)[26](index=26&type=chunk)[10](index=10&type=chunk) - A corporate reorganization on December 29, 2020, **resulted in** Great Elm Group, Inc. becoming the new holding company, with former GEC shares converting to GEG common stock[29](index=29&type=chunk) - The real estate business, launched in March 2018, **was sold** on June 23, 2021, for **$4.6 million** in cash and is now reported as discontinued operations[30](index=30&type=chunk) [Note 2. Summary of Significant Accounting Policies](index=11&type=section&id=Note%202.%20Summary%20of%20Significant%20Accounting%20Policies) This note details significant accounting policies, including basis of presentation, consolidation, segment reporting, and the retrospective adoption of ASU 2020-06 - The financial statements are unaudited and prepared in accordance with Form 10-Q instructions, reflecting all necessary adjustments for fair presentation[33](index=33&type=chunk) - The company consolidates wholly-owned, majority-owned, and variable interest entities where it holds a controlling financial interest[36](index=36&type=chunk) - The company has two business operating segments: durable medical equipment and investment management, with general corporate representing unallocated costs[39](index=39&type=chunk) - Accounts receivable for the DME business are constrained based on estimated collections from customers and third-party payors, with revenue reductions of **$1.2 million** and **$3.0 million** for the three and nine months ended March 31, 2022, respectively[41](index=41&type=chunk) Impact of ASU 2020-06 Adoption (as of June 30, 2021, in thousands) | Metric | As Reported | ASU 2020-06 Adjustment | As Adjusted | | :--- | :--- | :--- | :--- | | Convertible notes | $22,054 | $11,279 | $33,333 | | Additional paid-in-capital | $3,319,767 | $(12,154) | $3,307,613 | | Accumulated deficit | $(3,265,433) | $1,030 | $(3,264,403) | | Total Stockholder's Equity | $63,909 | $(11,124) | $52,785 | - The company **adopted** ASU 2020-06 on July 1, 2021, using the full retrospective method, which simplified accounting for convertible instruments by eliminating certain separation models and **increased** reported convertible notes and **decreased** additional paid-in capital[50](index=50&type=chunk)[51](index=51&type=chunk)[52](index=52&type=chunk) [Note 3. Revenue](index=16&type=section&id=Note%203.%20Revenue) This note details revenue sources, including investment management, DME sales, services, and rental income, explaining recognition policies and billing adjustments Revenue by Source (in thousands) | Revenue Source | 3 Months Ended Mar 31, 2022 | 3 Months Ended Mar 31, 2021 | 9 Months Ended Mar 31, 2022 | 9 Months Ended Mar 31, 2021 | | :--- | :--- | :--- | :--- | :--- | | Investment Management | $988 | $728 | $2,992 | $2,261 | | DME Equipment Sales | $8,976 | $7,309 | $26,674 | $23,728 | | DME Service Revenues | $1,383 | $1,297 | $4,038 | $3,635 | | DME Medical Equipment Rental Income | $5,275 | $4,511 | $16,205 | $14,907 | | **Total Revenues** | **$16,622** | **$13,845** | **$49,909** | **$44,531** | - **Investment management revenues increased by** **35.7%** for the three months and **32.3%** for the nine months ended March 31, 2022, driven by management and administration fees[55](index=55&type=chunk) - **Durable medical equipment sales and services revenue increased by** **20.4%** for the three months and **12.2%** for the nine months ended March 31, 2022[55](index=55&type=chunk) - **Durable medical equipment rental income increased by** **16.9%** for the three months and **8.7%** for the nine months ended March 31, 2022[55](index=55&type=chunk) - The company constrains transaction prices for DME sales and services **due to** **expected** billing adjustments with Payors and patient customers, with **revenue reserves** of **$2.2 million** as of March 31, 2022[41](index=41&type=chunk)[60](index=60&type=chunk) - Incentive fees from investment management were unconditionally waived through March 31, 2022, **resulting in** **$0.0 million** in accrued yet constrained incentive fees[68](index=68&type=chunk) [Note 4. Discontinued Operations](index=19&type=section&id=Note%204.%20Discontinued%20Operations) This note details the sale of the real estate business for $4.6 million, a strategic shift, with its financial information recast as discontinued operations - The real estate business **was sold** on June 23, 2021, for **$4.6 million** in cash, with proceeds reinvested in Monomoy Properties, LLC[75](index=75&type=chunk) - The sale signifies a strategic shift away from direct ownership and operation of real estate properties[76](index=76&type=chunk) Net Income from Discontinued Operations (in thousands) | Metric | For the three months ended March 31, 2021 | For the nine months ended March 31, 2021 | | :--- | :--- | :--- | | Real estate rental revenue | $1,276 | $3,824 | | Real estate expenses | $128 | $380 | | Depreciation and amortization | $430 | $1,291 | | Interest expense | $645 | $1,942 | | Net income from discontinued operations | $73 | $211 | [Note 5. Acquisitions](index=20&type=section&id=Note%205.%20Acquisitions) This note outlines the acquisitions of MedOne Healthcare and AMPM, expanding the DME segment and contributing to goodwill and contingent consideration - On August 31, 2021, the company **acquired** MedOne Healthcare LLC for **$2.0 million**, including **$0.5 million** in contingent consideration, **resulting in** **$1.9 million** of goodwill[79](index=79&type=chunk)[80](index=80&type=chunk)[81](index=81&type=chunk) - On March 1, 2021, the company **acquired** Advanced Medical DME, LLC and PM Sleep Lab, LLC (AMPM) for **$1.1 million**, including **$0.4 million** in contingent consideration, **resulting in** **$0.7 million** of goodwill and **$0.4 million** in intangible assets[82](index=82&type=chunk)[84](index=84&type=chunk)[85](index=85&type=chunk) - Contingent consideration for MedOne is up to **$1.0 million** based on revenue thresholds for 12-month periods ending September 1, 2022, and 2023[81](index=81&type=chunk) - Contingent consideration for AMPM is up to **$2.1 million** based on revenue thresholds for the 12 months ending September 1, 2022[85](index=85&type=chunk) [Note 6. Related Party Transactions](index=21&type=section&id=Note%206.%20Related%20Party%20Transactions) This note details various related party transactions across DME, investment management, and corporate segments, including financing, management fees, and reorganization - Corbel Capital Partners SBIC, L.P., a related party, **held** a **non-controlling interest** in HC LLC and was involved in the Corbel Facility, which was repaid early in December 2020[87](index=87&type=chunk) - GECM manages investment portfolios for GECC and other private funds, earning administrative, management, and incentive fees[89](index=89&type=chunk) - The company owns approximately **20.4%** of GECC, **valued at** **$13.4 million** as of March 31, 2022, and receives dividends and recognizes unrealized profits/losses from this investment[95](index=95&type=chunk) - MAST Capital, a beneficial owner of **7.3%** of the company's common stock, **holds** **$2.3 million** in Convertible Notes[96](index=96&type=chunk) - The Holding Company Reorganization on December 29, 2020, involved J.P. Morgan Broker-Dealer Holdings Inc. (JPM) providing **$37.7 million** in financing, including the issuance of Forest Preferred Stock and HC LLC preferred stock[103](index=103&type=chunk)[210](index=210&type=chunk) Net (Loss) Income on Investments (in thousands) | Metric | 3 Months Ended Mar 31, 2022 | 3 Months Ended Mar 31, 2021 | 9 Months Ended Mar 31, 2022 | 9 Months Ended Mar 31, 2021 | | :--- | :--- | :--- | :--- | :--- | | Net (loss) income on investments | $(3,474) | $(1,112) | $(5,838) | $(454) | | Net (loss) income on investments of Consolidated Funds | $(284) | $155 | $(279) | $221 | | Dividend income | $549 | $554 | $1,651 | $2,400 | [Note 7. Fair Value Measurements](index=25&type=section&id=Note%207.%20Fair%20Value%20Measurements) This note defines fair value, categorizes financial assets and liabilities into a three-level hierarchy, and details valuation techniques for investments and contingent consideration - Fair value is defined as the exit price in an orderly transaction between market participants, categorized into Level 1 (quoted prices in active markets), Level 2 (observable inputs other than Level 1), and Level 3 (unobservable inputs)[105](index=105&type=chunk)[107](index=107&type=chunk) Fair Value Hierarchy of Assets and Liabilities (in thousands) | Metric | Level 1 (Mar 31, 2022) | Level 2 (Mar 31, 2022) | Level 3 (Mar 31, 2022) | Total (Mar 31, 2022) | | :--- | :--- | :--- | :--- | :--- | | Equity investments | $13,419 | $- | $- | $13,419 | | Equity investments of Consolidated Funds | $11,340 | $- | $- | $11,340 | | Investments valued at net asset value | - | - | - | $5,741 | | Contingent consideration liability | $- | $- | $388 | $388 | - **Contingent consideration liabilities**, **valued** using Monte Carlo simulation models, **increased by** from **$0.27 million** at June 30, 2021, to **$0.39 million** at March 31, 2022, **due to** additions from acquisitions and changes in fair value[109](index=109&type=chunk)[114](index=114&type=chunk)[115](index=115&type=chunk) - The participation feature of HC LLC Series A-2 Preferred Stock, an embedded derivative, **had** a fair value of **$9.3 million** at March 31, 2022, determined using an option pricing model, but eliminates in consolidation[117](index=117&type=chunk) [Note 8. Fixed Assets](index=28&type=section&id=Note%208.%20Fixed%20Assets) This note provides a breakdown of fixed assets, including property, equipment, and medical equipment held for rental, along with recognized depreciation expense Fixed Assets (in thousands) | Asset Category | March 31, 2022 (Net Carrying Amount) | June 30, 2021 (Net Carrying Amount) | | :--- | :--- | :--- | | Property and Equipment | $613 | $981 | | Medical Equipment Held for Rental | $6,810 | $7,391 | | **Total Fixed Assets** | **$7,423** | **$8,372** | Total Depreciation Expense (in thousands) | Period | 2022 | 2021 | | :--- | :--- | :--- | | Three months ended March 31, | $1,716 | $1,557 | | Nine months ended March 31, | $5,296 | $4,846 | - Net carrying amount of property and equipment **decreased by** **37.6%** from June 30, 2021, to March 31, 2022[119](index=119&type=chunk) - Net carrying amount of medical equipment **held** for rental **decreased by** **7.9%** from June 30, 2021, to March 31, 2022[119](index=119&type=chunk) [Note 9. Goodwill and Other Intangible Assets](index=28&type=section&id=Note%209.%20Goodwill%20and%20Other%20Intangible%20Assets) This note details goodwill and identifiable intangible assets, primarily from DME and investment management acquisitions, with goodwill increasing due to recent acquisitions Changes in Carrying Value of Goodwill (in thousands) | Metric | For the nine months ended March 31, 2022 | For the nine months ended March 31, 2021 | | :--- | :--- | :--- | | Beginning balance | $50,536 | $50,010 | | Acquisition of businesses | $1,927 | $648 | | Ending balance | $52,463 | $50,658 | Identifiable Intangible Assets, Net (in thousands) | Asset Category | March 31, 2022 (Net Carrying Amount) | June 30, 2021 (Net Carrying Amount) | | :--- | :--- | :--- | | Durable Medical Equipment | $6,209 | $7,104 | | Investment Management | $1,524 | $1,824 | | **Total** | **$7,733** | **$8,928** | - **Goodwill increased by** **$1.9 million** for the nine months ended March 31, 2022, **primarily due to** the acquisition of MedOne Healthcare LLC[122](index=122&type=chunk)[80](index=80&type=chunk) Aggregate Amortization Expense (in thousands) | Period | 2022 | 2021 | | :--- | :--- | :--- | | Three months ended March 31, | $376 | $413 | | Nine months ended March 31, | $1,195 | $1,261 | [Note 10. Lessor Operating Leases](index=29&type=section&id=Note%2010.%20Lessor%20Operating%20Leases) This note describes the company's role as a lessor of medical equipment through HC LLC, with all leases treated as month-to-month operating leases due to cancellation rights - The company leases medical equipment to customers, **primarily** patients through clinical providers, with lease terms generally ranging from 10 to 36 months[124](index=124&type=chunk)[125](index=125&type=chunk) - All leases are treated as month-to-month operating leases because customers can cancel at any time without penalty[125](index=125&type=chunk) - Rental income from operating leases is recognized on a daily basis, with deferred revenue related to remaining monthly rental periods[71](index=71&type=chunk)[73](index=73&type=chunk) [Note 11. Lessee Operating Leases](index=30&type=section&id=Note%2011.%20Lessee%20Operating%20Leases) This note details the company's operating leases for facilities, vehicles, and equipment, providing key metrics like right-of-use assets, lease liabilities, and payment obligations Lessee Operating Lease Details (in thousands) | Category | March 31, 2022 (Right of Use Assets) | March 31, 2022 (Total Liabilities) | Weighted-Average Remaining Life (Years) | Weighted-Average Discount Rate (%) | | :--- | :--- | :--- | :--- | :--- | | Facilities | $3,957 | $4,183 | 3.0 | 11.0 | | Vehicles | $58 | $58 | 4.4 | 6.5 | | Equipment | $9 | $9 | 0.9 | 12.5 | | **Total** | **$4,024** | **$4,250** | | | Operating Lease Costs (in thousands) | Category | 3 Months Ended Mar 31, 2022 | 9 Months Ended Mar 31, 2022 | | :--- | :--- | :--- | | Facilities | $592 | $1,717 | | Vehicles | $19 | $48 | | Equipment | $5 | $23 | | **Total Operating Lease Cost** | **$616** | **$1,788** | Undiscounted Cash Payment Obligations for Operating Leases (in thousands) | Period | Amount | | :--- | :--- | | For the three months ending June 30, 2022 | $611 | | For the year ending June 30, 2023 | $1,804 | | For the year ending June 30, 2024 | $1,343 | | For the year ending June 30, 2025 | $814 | | For the year ending June 30, 2026 | $546 | | Thereafter | $128 | | **Total Lease Payments** | **$5,246** | [Note 12. Borrowings](index=32&type=section&id=Note%2012.%20Borrowings) This note summarizes outstanding borrowings, primarily equipment financing debt, detailing the Corbel Facility repayment, DME Revolver terms, and interest expense Equipment Financing Debt (in thousands) | Metric | March 31, 2022 | June 30, 2021 | | :--- | :--- | :--- | | Equipment Financing | $2,711 | $2,041 | | Less current portion | $(2,711) | $(1,974) | | Equipment financing debt, net of current portion | $0 | $67 | Interest Expense on Borrowings (in thousands) | Period | 2022 | 2021 | | :--- | :--- | :--- | | Three months ended March 31, | $30 | $900 | | Nine months ended March 31, | $900 | $2,300 | - The Corbel Facility, a term loan with a related party, **was repaid** early on December 29, 2020[137](index=137&type=chunk) - The DME Revolver allows for borrowings up to **$10.0 million**, secured by durable medical equipment assets, with **no outstanding** borrowings as of March 31, 2022[138](index=138&type=chunk) - HC LLC's operating subsidiaries utilize equipment financing debt, **totaling** **$2.7 million** **outstanding** as of March 31, 2022, with implicit interest rates between **7-8%**[142](index=142&type=chunk)[274](index=274&type=chunk) [Note 13. Convertible Notes](index=34&type=section&id=Note%2013.%20Convertible%20Notes) This note details outstanding Convertible Notes, including principal balance, interest, payment terms, and conversion features, with a significant portion held by related parties - As of March 31, 2022, the **total principal balance** of Convertible Notes **outstanding was** **$35.2 million**, including cumulative interest paid-in-kind[146](index=146&type=chunk) - Related parties **hold** **$16.6 million** of the Convertible Notes, including entities associated with Matthew A. Drapkin (**$6.6 million**), Jason W. Reese (**$7.0 million**), Eric J. Scheyer (**$0.7 million**), and MAST Capital (**$2.3 million**)[146](index=146&type=chunk)[151](index=151&type=chunk) - The Convertible Notes accrue interest at **5.0%** per annum, payable semiannually in cash or in kind, and are convertible into common stock at the holder's option[146](index=146&type=chunk) Interest Expense on Convertible Notes (in thousands) | Period | 2022 | 2021 | | :--- | :--- | :--- | | Three months ended March 31, | $400 | $400 | | Nine months ended March 31, | $1,300 | $1,200 | [Note 14. CARES Act](index=34&type=section&id=Note%2014.%20CARES%20Act) This note explains the company's participation in the Employee Retention Credit (ERC) program under the CARES Act, providing refundable tax credits - The company **claimed** **$2.4 million** in Employee Retention Credits (ERCs) during the nine months ended March 31, 2021, under the expanded CARES Act[150](index=150&type=chunk) - ERCs provide eligible employers with less than 500 employees a refundable tax credit equal to **70%** of qualified wages paid during calendar 2021, up to **$7,000** per employee per quarter[150](index=150&type=chunk) - The proceeds from the CARES Act are accounted for as in-substance government grants[151](index=151&type=chunk) [Note 15. Non-Controlling Interests and Preferred Stock of Subsidiaries](index=35&type=section&id=Note%2015.%20Non-Controlling%20Interests%20and%20Preferred%20Stock%20of%20Subsidiaries) This note provides a comprehensive overview of non-controlling interests and redeemable preferred stock in subsidiaries, detailing their classification and impact on net income (loss) Non-Controlling Interests of Subsidiaries (in thousands) | Subsidiary | March 31, 2022 | June 30, 2021 | | :--- | :--- | :--- | | HC LLC (Temporary equity) | $2,262 | $2,639 | | HC LLC (Permanent equity) | $2,262 | $2,639 | | Consolidated Funds (Permanent equity) | $3,648 | $4,228 | | Forest (Permanent equity) | $3,827 | $2,761 | | **Total Non-controlling interests** | **$11,999** | **$12,188** | Net Income (Loss) Attributable to Non-Controlling Interests (in thousands) | Subsidiary | 3 Months Ended Mar 31, 2022 | 3 Months Ended Mar 31, 2021 | 9 Months Ended Mar 31, 2022 | 9 Months Ended Mar 31, 2021 | | :--- | :--- | :--- | :--- | :--- | | HC LLC (Temporary equity) | $(686) | $- | $(377) | $- | | HC LLC (Permanent equity) | $(686) | $- | $(377) | $- | | Consolidated Funds (Permanent equity) | $(95) | $(148) | $(146) | $(148) | | Forest (Permanent equity) | $1,244 | $1,019 | $1,066 | $1,019 | | **Total** | **$(226)** | **$(158)** | **$159** | **$(862)** | - HC LLC Series A-1 Preferred Stock (10,090 shares, **$1,000** face value) and Series A-2 Preferred Stock (34,010 shares, **$1,000** face value) were issued in connection with the JPM Transactions, both classified as liabilities **due to** mandatory redemption features[164](index=164&type=chunk)[165](index=165&type=chunk)[170](index=170&type=chunk) - Forest Preferred Stock (35,010 shares, **$1,000** face value) **was sold** to JPM and is classified as a liability **due to** mandatory redemption on December 29, 2027[174](index=174&type=chunk)[176](index=176&type=chunk) [Note 16. Stockholders' Equity](index=39&type=section&id=Note%2016.%20Stockholders%27%20Equity) This note details changes in stockholders' equity, focusing on restricted stock awards, units, and options, including grants, vesting, and compensation expense - In November 2021, 580,023 performance shares **vested**, **resulting in** a **$0.6 million** stock-based compensation expense for the nine months ended March 31, 2022[180](index=180&type=chunk) - The company granted 748,288 service-based restricted stock awards and 140,294 restricted stock units to employees and directors during the nine months ended March 31, 2022[181](index=181&type=chunk)[182](index=182&type=chunk) Stock-Based Compensation Expense (in thousands) | Period | 2022 | 2021 | | :--- | :--- | :--- | | Three months ended March 31, | $500 | $600 | | Nine months ended March 31, | $2,200 | $1,300 | - As of March 31, 2022, **unrecognized compensation costs** for unvested share awards and options **totaled** **$1.7 million**[185](index=185&type=chunk) [Note 17. Income Tax](index=40&type=section&id=Note%2017.%20Income%20Tax) This note outlines the company's net operating loss (NOL) carryforwards and the valuation allowance against deferred tax assets due to cumulative operating losses - As of June 30, 2021, the company **had federal NOL carryforwards** of approximately **$952.0 million** and **state NOL carryforwards** of **$198.0 million**[187](index=187&type=chunk) - Federal NOLs **generated** prior to fiscal year 2018 expire from 2022-2037, while those from fiscal year 2018 or later can be carried forward indefinitely[187](index=187&type=chunk) - A **valuation allowance has been recorded** for all federal and state deferred tax assets **due to** the company's history of cumulative operating losses, indicating uncertainty about their realization[188](index=188&type=chunk) [Note 18. Commitments and Contingencies](index=40&type=section&id=Note%2018.%20Commitments%20and%20Contingencies) This note states the company is involved in routine legal proceedings but expects no material adverse impact on its business, operations, or financial condition - The company is involved in lawsuits, claims, investigations, and proceedings in the ordinary course of business[189](index=189&type=chunk) - **No pending or threatened litigation is expected** to have a material adverse impact on the company's business, results of operations, financial condition, or cash flows[189](index=189&type=chunk) [Note 19. Segment Information](index=41&type=section&id=Note%2019.%20Segment%20Information) This note provides detailed financial results and asset allocation for the durable medical equipment and investment management segments, including corporate activities Total Pre-Tax Income (Loss) by Segment (in thousands) | Segment | 3 Months Ended Mar 31, 2022 | 3 Months Ended Mar 31, 2021 | 9 Months Ended Mar 31, 2022 | 9 Months Ended Mar 31, 2021 | | :--- | :--- | :--- | :--- | :--- | | Durable Medical Equipment | $(6,620) | $(5,059) | $(3,601) | $(8,395) | | Investment Management | $(3,981) | $(732) | $(6,752) | $1,414 | | General Corporate | $4,446 | $2,930 | $79 | $(453) | | **Consolidated Total** | **$(6,155)** | **$(2,861)** | **$(10,274)** | **$(7,434)** | Total Assets by Segment (in thousands) | Segment | March 31, 2022 | June 30, 2021 | | :--- | :--- | :--- | | Durable Medical Equipment | $83,246 | $87,139 | | Investment Management | $31,837 | $68,752 | | General Corporate | $22,382 | $5,978 | | **Consolidated Total** | **$137,465** | **$161,869** | - Durable Medical Equipment segment revenue **increased by** **19%** for the three months and **11%** for the nine months ended March 31, 2022, compared to prior periods[192](index=192&type=chunk)[193](index=193&type=chunk) - Investment Management segment revenue **increased by** **36%** for the three months and **32%** for the nine months ended March 31, 2022, compared to prior periods[192](index=192&type=chunk)[193](index=193&type=chunk) [Note 20. Subsequent Events](index=43&type=section&id=Note%2020.%20Subsequent%20Events) This note describes the Monomoy Transaction, where GECM acquired investment management assets for Monomoy Properties REIT, involving a $10 million purchase and $15 million equity investment - On May 4, 2022, GECM **agreed to acquire** the investment management agreement and assets for Monomoy Properties REIT, LLC from ICAM[196](index=196&type=chunk) - The **upfront purchase price is** **$10.0 million**, financed by GEG common stock, GECC common stock, and a promissory note[197](index=197&type=chunk) - Additional consideration of up to **$2.0 million** is **owed** if certain performance targets are met over the first two years post-closing[199](index=199&type=chunk) - The transaction **requires** a **$15.0 million** **equity investment** into Monomoy REIT to fund growth in originations[199](index=199&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=45&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on financial performance, condition, and outlook, covering business segments, discontinued operations, COVID-19 impacts, and liquidity - The company operates two business segments: durable medical equipment (respiratory care, sleep study services) and investment management (managing GECC, private funds, SPAC-focused fund)[201](index=201&type=chunk)[202](index=202&type=chunk) - The real estate business **was sold** in June 2021, and its activities are now presented as discontinued operations[206](index=206&type=chunk) - The company completed a holding company reorganization on December 29, 2020, with Great Elm Group, Inc. becoming the new public holding company[207](index=207&type=chunk) - COVID-19 and global supply chain challenges continue to suppress revenues in both investment management (reduced AUM) and durable medical equipment (restricted PAP device procurement, missed revenue opportunities)[212](index=212&type=chunk)[213](index=213&type=chunk) Consolidated Revenue and Operating Loss (in thousands) | Metric | 3 Months Ended Mar 31, 2022 | 3 Months Ended Mar 31, 2021 | 9 Months Ended Mar 31, 2022 | 9 Months Ended Mar 31, 2021 | | :--- | :--- | :--- | :--- | :--- | | Total revenue | $16,622 | $13,845 | $49,909 | $44,531 | | Operating loss | $(1,939) | $(1,097) | $(2,803) | $(4,166) | - **Consolidated revenues increased by** **$2.8 million** (**20%**) for the three months and **$5.4 million** (**12%**) for the nine months ended March 31, 2022, **primarily due to** DME acquisitions and improved revenue reserves[222](index=222&type=chunk) - Operating costs **increased by** **$3.6 million** and **$4.0 million** for the three and nine months, respectively, driven by DME acquisitions, related transaction costs, and **increased** investment management expenses[223](index=223&type=chunk) - Cash and cash equivalents **stood at** **$22.7 million** as of March 31, 2022, with **$13.4 million** in GECC common stock[264](index=264&type=chunk) - The company **had** **$35.2 million** in convertible notes **outstanding** and **$35.0 million** face value in Forest Preferred Stock as of March 31, 2022[266](index=266&type=chunk)[268](index=268&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=56&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section confirms no material changes in market risks since the Annual Report on Form 10-K for the fiscal year ended June 30, 2021 - **No material changes** in market risks **have occurred** since the Annual Report on Form 10-K for the fiscal year ended June 30, 2021[276](index=276&type=chunk) [Item 4. Controls and Procedures](index=56&type=section&id=Item%204.%20Controls%20and%20Procedures) This section confirms the effectiveness of disclosure controls and procedures and reports no material changes in internal control over financial reporting - The company's disclosure controls and procedures were evaluated and deemed **effective** as of March 31, 2022[277](index=277&type=chunk) - **No material changes in internal control** over financial reporting **occurred** during the quarter ended March 31, 2022[278](index=278&type=chunk) [PART II. OTHER INFORMATION](index=56&type=section&id=PART%20II.%20OTHER%20INFORMATION) This section covers other information, including legal proceedings, risk factors, exhibits, and official signatures [Item 1. Legal Proceedings](index=56&type=section&id=Item%201.%20Legal%20Proceedings) This section indicates no changes to legal proceedings requiring disclosure, implying no new material legal developments - **No changes to legal proceedings are required** to be disclosed[280](index=280&type=chunk) [Item 1A. Risk Factors](index=56&type=section&id=Item%201A.%20Risk%20Factors) This section confirms no material changes to risk factors previously disclosed in the Annual Report on Form 10-K - **No material changes** from the risk factors previously disclosed in the Annual Report on Form 10-K for the fiscal year ended June 30, 2021[281](index=281&type=chunk) [Item 6. Exhibits](index=57&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including merger agreements, corporate documents, CEO/CFO certifications, and XBRL financial statements - Exhibits include the Agreement and Plan of Merger (December 21, 2020), Certificate of Incorporation (October 23, 2020), and Bylaws (October 23, 2020)[285](index=285&type=chunk) - Certifications from the Chief Executive Officer and Chief Financial Officer pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002 are filed or furnished[285](index=285&type=chunk) - The Quarterly Report on Form 10-Q for the quarter ended March 31, 2022, is provided in inline Extensible Business Reporting Language (XBRL) format[285](index=285&type=chunk) [SIGNATURES](index=58&type=section&id=SIGNATURES) This section contains the official signatures of the CEO and CFO, certifying the filing of the Form 10-Q on behalf of Great Elm Group, Inc. - The report is signed by Peter A. Reed, Chief Executive Officer, and Brent J. Pearson, Chief Financial Officer, on May 5, 2022[290](index=290&type=chunk)

Great Elm Group, Inc. (NASDAQ:GEG) Q2 2022 Earnings Conference Call February 11, 2022 9:00 AM ET Company Participants Adam Yates - Managing Director Peter Reed - Chief Executive Officer Brent Pearson - CFO & CAO Conference Call Participants Brian Alexitch - Greenwich Investment Management Operator Good morning. My name is Chris, and I'll be your conference operator today. At this time, I'd like to welcome everyone to the Great Elm Group Second Quarter 2022 Financial Results. All lines have been placed on mu ...

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 December 31, 2021 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) (State or other jurisdiction of incorpora ...

or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to 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 September 30, 2021 Commission File Number: 001-39832 Great Elm Group, Inc. (Exact name of registrant as specified in its charter) (State or other jurisdiction of incorpor ...

Financial Data and Key Metrics Changes - For the fiscal fourth quarter, consolidated revenue was $16.3 million, a decrease from $14.7 million in the same period last year, with a net loss from continuing operations of $1.4 million compared to a net income of $4.1 million last year [22][23] - Adjusted EBITDA for the fourth quarter was $3.5 million, down from $5.9 million in the prior year [22][23] - For the year ended June 30, 2021, total revenue increased to $57.6 million from $55.7 million, with adjusted EBITDA of $12.4 million compared to $16.0 million in the prior year [28][32] Business Line Data and Key Metrics Changes - Durable Medical Equipment (DME) generated $15.4 million in revenue for the fourth quarter, up from $13.9 million last year, driven by organic growth and acquisitions [25] - DME's total revenue for the year was $57.6 million, a 3.6% increase from the previous year, with net income rising to $5.9 million from $2.8 million [28][29] - Investment Management generated $0.9 million in revenue for the fourth quarter, slightly up from $0.7 million, with annual revenue of $3.2 million compared to $3.3 million in the prior year [32][33] Market Data and Key Metrics Changes - The DME business faced challenges due to the COVID-19 pandemic, with soft demand for sleep studies impacting referrals for new equipment setups [25] - The investment management segment benefited from a shared service agreement with Imperial Capital, enhancing the investment team's depth and experience [19] Company Strategy and Development Direction - The company aims to create shareholder value through its two verticals: operating companies and investment management, with a focus on acquisitions and increasing assets under management [5][10] - A transformative financing with JPMorgan has improved DME's cost of capital and provided funds for future acquisitions [12] - The company has simplified its corporate structure, reducing debt by $57 million and improving financial flexibility for growth opportunities [11][43] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about growth opportunities in the DME sector as the industry consolidates, despite current supply chain challenges [18][27] - The investment management segment is making strong progress in increasing assets under management and revenues, with a focus on proprietary investments and specialty finance [15][19] Other Important Information - The company completed a significant recapitalization of GECC, raising $31.7 million in a rights offering and closing a new $25 million revolving credit facility [14] - The company sold its entire ownership interest in two Class A office buildings for $4.6 million, reinvesting the proceeds into dividend-paying shares [17][18] Q&A Session Summary Question: What is the outlook for the DME business? - Management indicated that there are compelling opportunities in the DME sector as the industry continues to consolidate, despite current challenges [18] Question: How is the investment management segment performing? - The investment management segment is making strong progress in increasing assets under management and revenues, benefiting from strategic partnerships [19]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended June 30, 2021 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 in ...

PART I. FINANCIAL INFORMATION [Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) The company's unaudited statements show total assets of $215.3 million and a nine-month net loss of $7.7 million Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2021 | June 30, 2020 | | :--- | :--- | :--- | | **Total Assets** | **$215,257** | **$195,445** | | Total Current Assets | $83,284 | $61,328 | | Goodwill | $50,658 | $50,010 | | **Total Liabilities** | **$148,338** | **$126,875** | | Total Current Liabilities | $35,464 | $25,514 | | Convertible notes | $21,036 | $17,444 | | **Total Stockholders' Equity** | **$64,864** | **$64,680** | Condensed Consolidated Statements of Operations Highlights (in thousands) | Metric | Three Months Ended Mar 31, 2021 | Three Months Ended Mar 31, 2020 | Nine Months Ended Mar 31, 2021 | Nine Months Ended Mar 31, 2020 | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $15,121 | $16,236 | $48,355 | $48,158 | | Operating Loss | $(379) | $(1,009) | $(2,013) | $(2,153) | | Net Loss | $(2,918) | $(11,918) | $(7,727) | $(17,223) | | Net Loss Attributable to GEG | $(2,760) | $(11,617) | $(6,865) | $(16,547) | | Diluted EPS | $(0.11) | $(0.46) | $(0.27) | $(0.65) | Condensed Consolidated Statements of Cash Flows Highlights (in thousands) | Cash Flow Activity | Nine Months Ended March 31, 2021 | Nine Months Ended March 31, 2020 | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | $(21,164) | $4,584 | | Net cash used in investing activities | $(13,361) | $(4,544) | | Net cash provided by financing activities | $18,465 | $26,660 | | **Net (decrease) increase in cash** | **$(16,060)** | **$26,700** | [Notes to Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Key disclosures include a corporate reorganization, a $37.7 million financing, and a $2.5 million CARES Act credit - On December 29, 2020, the company completed a reorganization, making **Great Elm Group, Inc. (GEG) the new public holding company**[24](index=24&type=chunk)[72](index=72&type=chunk) - The company operates in three segments: **durable medical equipment, investment management, and real estate**[24](index=24&type=chunk)[32](index=32&type=chunk) - On March 1, 2021, the company acquired Advanced Medical DME, LLC and PM Sleep Lab, LLC (AMPM) for a total consideration of **$1.1 million**[69](index=69&type=chunk)[70](index=70&type=chunk) - Following the reorganization, J.P. Morgan provided **$37.7 million in financing** through the issuance of preferred stock by a subsidiary[74](index=74&type=chunk)[78](index=78&type=chunk) - During the quarter ended March 31, 2021, the company claimed **$2.5 million in Employee Retention Credits (ERC)** under the expanded CARES Act[152](index=152&type=chunk) Revenue by Source (Nine Months Ended March 31, 2021, in thousands) | Revenue Source | 2021 | 2020 | | :--- | :--- | :--- | | **Durable Medical Equipment** | | | | Equipment Sales & Services | $27,363 | $25,725 | | Medical Equipment Rental | $14,907 | $16,028 | | **Investment Management** | $2,261 | $2,585 | | **Real Estate Rental** | $3,824 | $3,820 | | **Total Revenue** | **$48,355** | **$48,158** | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=43&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses segment performance, a major reorganization, and the ongoing impact of COVID-19 on operations - The company operates through three segments: durable medical equipment, investment management (**AUM of $245.7M** at March 31, 2021), and real estate[194](index=194&type=chunk)[196](index=196&type=chunk)[197](index=197&type=chunk) - The COVID-19 pandemic has continued to **suppress revenues**, particularly impacting the DME business's referral pipeline and investment management AUM[203](index=203&type=chunk) - A major corporate reorganization was completed on Dec 29, 2020, establishing GEG as the new holding company, followed by a **$37.7 million financing transaction with J.P. Morgan**[200](index=200&type=chunk)[201](index=201&type=chunk) - As of March 31, 2021, the company had **$24.3 million in unrestricted cash** and held 5,539,724 shares of GECC common stock valued at $18.8 million[267](index=267&type=chunk) Consolidated Operations Summary (Three Months Ended March 31, in thousands) | Metric | 2021 | 2020 | % Change | | :--- | :--- | :--- | :--- | | Total Revenue | $15,121 | $16,236 | (7)% | | Total Operating Expenses | $(15,500) | $(17,245) | (10)% | | Operating Loss | $(379) | $(1,009) | (62)% | | Pre-tax Loss | $(2,961) | $(12,066) | (75)% | [Results of Operations by Segment](index=47&type=section&id=Results%20of%20Operations%20by%20Segment) The DME segment's revenue declined 7% while the General Corporate segment's income improved significantly - **Durable Medical Equipment:** Revenue for Q1 2021 **decreased 7% YoY to $13.1 million** due to reduced new patient set-ups from the pandemic[220](index=220&type=chunk)[221](index=221&type=chunk)[223](index=223&type=chunk) - **Investment Management:** Revenue for Q1 2021 **decreased 11% YoY to $0.7 million**, primarily due to lower average assets under management[237](index=237&type=chunk)[239](index=239&type=chunk) - **Real Estate:** The segment demonstrated stability, with revenues and costs remaining consistent YoY at **$1.3 million in Q1 2021 revenue**[246](index=246&type=chunk)[247](index=247&type=chunk) - **General Corporate:** Other income for Q1 2021 was **$5.6 million**, a significant improvement from a loss of $9.3 million in Q1 2020, driven by fair value adjustments[250](index=250&type=chunk)[257](index=257&type=chunk)[258](index=258&type=chunk) [Liquidity and Capital Resources](index=52&type=section&id=Liquidity%20and%20Capital%20Resources) Operating cash flow was negative $21.2 million, while financing activities provided $18.5 million from the JPM transaction - Cash used in operating activities for the nine months ended March 31, 2021 was **$21.2 million**, primarily due to a net loss and investment purchases[260](index=260&type=chunk) - Cash provided by financing activities was **$18.5 million**, mainly from the JPM Transactions ($37.7 million gross proceeds), offset by debt repayment[265](index=265&type=chunk) - As of March 31, 2021, the company had **$33.5 million in face value of 5.0% Convertible Notes** outstanding, due 2030[269](index=269&type=chunk) - The company's subsidiary, Forest, has **$35.0 million in 9.0% preferred stock** held by JPM, which is mandatorily redeemable in 2027[271](index=271&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=55&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company reports no material changes in market risks from its most recent annual report - There have been **no material changes in market risks** since the last Annual Report on Form 10-K for the fiscal year ended June 30, 2020[283](index=283&type=chunk) [Controls and Procedures](index=55&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective with no material changes in internal controls - The CEO and CFO concluded that as of March 31, 2021, the company's **disclosure controls and procedures were effective**[284](index=284&type=chunk) - **No material changes** occurred in the company's internal control over financial reporting during the quarter ended March 31, 2021[285](index=285&type=chunk) PART II. OTHER INFORMATION [Legal Proceedings](index=55&type=section&id=Item%201.%20Legal%20Proceedings) The company reports no new disclosable information regarding legal proceedings - **No changes** required to be disclosed[286](index=286&type=chunk) [Risk Factors](index=55&type=section&id=Item%201A.%20Risk%20Factors) No material changes are reported from the risk factors previously disclosed in the annual report - **No material changes** have occurred from the risk factors disclosed in the Annual Report on Form 10-K for the fiscal year ended June 30, 2020[287](index=287&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=56&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reports no unregistered sales of equity securities during the period - **None reported**[289](index=289&type=chunk) [Defaults Upon Senior Securities](index=56&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reports no defaults upon its senior securities - **None reported**[290](index=290&type=chunk) [Mine Safety Disclosures](index=56&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section is not applicable as the company has no mine safety disclosures to report - **None reported**[291](index=291&type=chunk) [Other Information](index=56&type=section&id=Item%205.%20Other%20Information) The company reports no other material information for the period - **None reported**[292](index=292&type=chunk) [Exhibits](index=56&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including agreements and certifications

Great Elm Group, Inc. (GEC) Q2 2021 Earnings Conference Call February 16, 2021 8:30 AM ET Company Participants Peter Reed - Chief Executive Officer Brent Pearson - Chief Financial Officer Operator Ladies and gentlemen, thank you for standing by. Welcome to the Great Elm Group Q2 2021 Conference Call and Webcast. At this time, all participants are in listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] And I would like to hand the conference ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.) 800 South Street, Suite 230, Waltham MA 02453 (Address of principal executive offices) (Zip Code) Delaware 85-3622015 (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended December 31, 2020 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE ...