Great Elm (GEG) - 2025 Q4 - Annual Report

PART I Business Overview GEG is an alternative asset management company with a diversified portfolio across credit, real estate, and specialty finance - GEG is an alternative asset management company with a diversified portfolio across credit, real estate, specialty finance, and other alternative strategies[15] - Combined assets under management (AUM) of GECM and MCRE was approximately $758.5 million as of June 30, 2025[16] - GEG owns approximately 12.4% of Great Elm Capital Corp. (GECC) shares and approximately 5.1% of Monomoy UpREIT as of June 30, 2025[17][18] - In January 2023, Monomoy BTS Corporation (MBTS) began purchasing land parcels for build-to-suit developments, completing its third purchase in March 2025. One development was sold in June 2024, and a lease for another commenced in December 2024[20] - GEG sold its Durable Medical Equipment (DME) business on January 3, 2023[22] - GEG had 50 employees as of June 30, 2025[25] Risk Factors The company faces risks in growth strategy, competition, market conditions, regulations, and potential stock dilution - Growth strategy may not be successful due to difficulties in identifying attractive opportunities, intense competition, and challenges in consummating transactions[30] - Investments may require write-downs or write-offs, restructuring, and impairment charges if they do not perform as expected, negatively impacting financial condition and share price[33] - The company faces intense competition from larger, well-financed organizations, including global asset managers, investment banks, and private equity funds[36] - Changing conditions in financial markets and the economy, such as illiquid credit markets, high inflation, and interest rates, could adversely affect revenues, profitability, and access to capital[38] - Incurring substantial debt, such as the 7.25% Notes due 2027, may adversely affect leverage, financial condition, and ability to pay dividends[41][44] - The financial services industry is subject to extensive regulation, which could impact revenue, profitability, and business opportunities[42] - Operational risks, including system failures and cyberattacks, may disrupt business, lead to regulatory action, or limit growth[45][47] - Common stock is subject to transfer restrictions (generally 4.99% or more) to reduce the possibility of limitations on the use of net operating loss (NOL) carryforwards[62] - Future issuances of common or preferred stock, or conversion of the 5.0% Convertible Senior Notes due 2030, could significantly dilute existing equity interests[64][68] Unresolved Staff Comments The company has no unresolved staff comments from the Securities and Exchange Commission - There are no unresolved staff comments[69] Cybersecurity GEG relies on GECM's cybersecurity program, with third-party assessments and board oversight, reporting no material attacks - GECM has implemented a cybersecurity program focused on protecting confidentiality, maintaining system security, supporting compliance, documenting incidents, and communicating with relevant parties[70] - The program utilizes encryption, data loss prevention, authentication, access control, anti-virus, anti-malware, spam/phishing filtering, and private networks[71] - Cybersecurity processes are reviewed and assessed by third parties, including annual penetration testing, with vulnerabilities reviewed by Great Elm's IT Committee[72] - GECM provides cybersecurity awareness training to employees at onboarding and semiannually, along with interim security reminders and phishing tests[74] - The IT Committee manages the cybersecurity program and incident response framework, with oversight from the Audit Committee and the Board of Directors[75][76][77] - As of the Form 10-K filing, no cyber-attacks have materially affected the company's business strategy, results of operations, or financial condition[78] Properties The company leases its principal executive office in Florida and additional office spaces in Massachusetts and South Carolina - The principal executive office is leased in Palm Beach Gardens, Florida[79] - Additional office spaces are leased in Boston, Massachusetts (non-cancellable through November 2029) and Charleston, South Carolina (lease expiration September 2026)[79] Legal Proceedings The company is not currently involved in any material legal proceedings - There are no material legal proceedings[80] Mine Safety Disclosures This item is not applicable to the company's operations - This item is not applicable[81] PART II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities GEG common stock trades on Nasdaq, with ownership restrictions to preserve NOLs, and the company actively repurchases shares - Common stock is traded on the Nasdaq Global Select Market under the symbol 'GEG'[83] - As of August 26, 2025, there were 54 record holders of common stock[84] - The company does not currently intend to pay dividends on its common stock[85] - Ownership is restricted (generally 4.99% or more) to preserve NOL carryforwards. Waivers have been granted to Northern Right Capital Management, L.P. (17.4%), Imperial Capital Asset Management, LLC (22.0%), and PC Elfun LLC (11.0%)[86] Common Stock Repurchases (Three Months Ended June 30, 2025) | Month | Total Number of Shares Purchased | Average Price Paid Per Share | | :----------------- | :----------------------------- | :--------------------------- | | April 1-30, 2025 | 149,852 | $1.89 | | May 1-31, 2025 | 267,723 | $1.95 | | June 1-30, 2025 | 50,206 | $2.17 | | Total | 467,781 | $1.97 | - In July 2025, the Board authorized an increase in the company's stock repurchase plan from $20 million to $25 million[90] Reserved This item is reserved and contains no information - This item is reserved[92] Management's Discussion and Analysis of Financial Condition and Results of Operations This section analyzes GEG's financial performance, liquidity, and capital resources, highlighting asset management and real estate Overview GEG is an alternative asset management company with $758.5 million AUM, expanding into real estate and construction - GEG is an alternative asset management company focused on growing a scalable and diversified portfolio across credit, real estate, specialty finance, and other alternative strategies[94] - Combined assets under management (AUM) was approximately $758.5 million at June 30, 2025[94] - In January 2023, MBTS began purchasing land parcels for build-to-suit developments, completing its third purchase in March 2025. One development was sold in June 2024, and a lease for another commenced in December 2024[96] - On February 4, 2025, GEG acquired Greenfield CRE, forming Monomoy Construction Services, LLC (MCS) to launch an integrated, full-service construction business[97] - The Durable Medical Equipment (DME) business was sold on January 3, 2023, and its historical results are presented as discontinued operations[99] Critical Accounting Estimates Financial statements require significant estimates for revenue, deferred taxes, business combinations, and fair value measurements - Preparation of financial statements requires significant estimates and assumptions, particularly for revenue recognition, valuation allowance for deferred tax assets, business combinations, and fair value measurements (including stock-based compensation and private entities)[98][179] - Accounting for business combinations requires estimates and judgment regarding future cash flows of acquired businesses and allocation to identifiable intangible assets[100][101] - Income taxes are accounted for under the asset and liability method, with valuation allowances established for deferred tax assets not likely to be recovered[102][103] Results of Operations (Continuing Operations) Revenues decreased due to lower real estate sales, offset by higher management fees, while other income significantly increased Consolidated Results of Continuing Operations (Years Ended June 30) | (in thousands) | 2025 | 2024 | Percent Change | | :------------------------------------------ | :----- | :----- | :------------- | | Revenues | $16,316 | $17,834 | (9)% | | Cost of Revenues | $1,082 | $5,526 | (80)% | | Investment management expenses, excluding non-cash compensation | $(13,079) | $(9,723) | 35% | | Non-cash compensation | $(3,450) | $(3,113) | 11% | | Other selling, general and administrative | $(5,459) | $(6,202) | (12)% | | Depreciation and amortization | $(1,249) | $(1,108) | 13% | | Total operating costs and expenses | $(23,237) | $(20,146) | 15% | | Operating loss | $(8,003) | $(7,838) | (2)% | | Interest expense | $(4,157) | $(4,334) | (4)% | | Other income (expense), net | $27,796 | $11,331 | 145% | | Total other income (expense), net | $23,639 | $6,997 | 238% | | (Loss) income before income taxes from continuing operations | $15,636 | $(841) | >1000% | | Income tax benefit (expense) | $(86) | $(101) | (15)% | | Net (loss) income from continuing operations | $15,550 | $(942) | >1000% | - Revenues decreased by $1.5 million, primarily due to a decrease in real estate property sales ($1.2 million in FY2025 vs. $6.6 million in FY2024). This was partially offset by a $2.6 million increase in management and incentive fees from GECC and $0.9 million in project management fees from the newly acquired construction business[107] - Operating costs and expenses increased by $3.1 million, mainly due to a $3.4 million increase in investment management expenses driven by higher personnel costs from the Greenfield Acquisition[108] - Other income (expense), net, increased by $16.6 million, primarily due to a $14.6 million increase in net realized and unrealized gains on investments, including a significant unrealized gain on a private fund due to a public offering announcement and a change in valuation technique for special purpose vehicles[109] - Income tax expense from continuing operations was $0.1 million for both FY2025 and FY2024[110] Discontinued Operations No activity related to discontinued operations in FY2025, following the sale of the DME business in January 2023 - There was no activity related to discontinued operations during the year ended June 30, 2025[111] - Net income from discontinued operations was $0.02 million for the year ended June 30, 2024[111] Liquidity and Capital Resources The company maintains sufficient liquidity with $30.6 million cash and $60.6 million investments, managing debt obligations Selected Financial Information (in thousands) | (in thousands) | June 30, 2025 | June 30, 2024 | | :-------------------------------------------------- | :------------ | :------------ | | Current assets | $137,897 | $127,570 | | Current liabilities | $9,614 | $8,359 | | Working capital | $128,283 | $119,211 | | Long-term liabilities | $63,657 | $61,892 | | Net cash provided by (used in) operating activities - continuing operations | $(9,006) | $(15,555) | | Net cash provided by (used in) investing activities - continuing operations | $(1,336) | $3,217 | | Net cash provided by (used in) financing activities - continuing operations | $(8,773) | $2,838 | | Net increase (decrease) in cash and cash equivalents, including cash and cash equivalents classified within current assets held for sale | $(19,115) | $(10,447) | - As of June 30, 2025, the company had an unrestricted cash balance of $30.6 million and investments with a fair value of $60.6 million[112] - Cash flows used in operating activities of continuing operations improved to $9.0 million in FY2025 from $15.6 million in FY2024, primarily due to non-cash adjustments like a $16.0 million unrealized gain on investments[113] - Cash flows used in investing activities for continuing operations were $1.3 million in FY2025, including a $8.0 million related party loan receivable and $2.5 million for the Greenfield acquisition[115] - Cash flows used in financing activities for continuing operations were $8.8 million in FY2025, primarily due to increased stock repurchases and the repurchase of Convertible Notes[117] - The company believes it has sufficient liquidity to meet its short-term and long-term obligations for at least the next 12 months and the foreseeable future[118] - As of June 30, 2025, the company had $26.9 million in outstanding 7.25% Notes due 2027 (GEGGL Notes) and $35.1 million principal balance in 5.0% Convertible Notes due 2030[119][120] Quantitative and Qualitative Disclosures About Market Risk This item is not applicable to the company - This item is not applicable[121] Financial Statements and Supplementary Data Required financial statements and supplementary data are incorporated by reference from page F-1 - Financial statements and supplementary data are incorporated by reference from page F-1[122] Changes in and Disagreements With Accountants on Accounting and Financial Disclosure There have been no changes in or disagreements with accountants on accounting and financial disclosure - There are no changes in or disagreements with accountants on accounting and financial disclosure[123] Controls and Procedures Management concluded disclosure controls and internal control over financial reporting were effective as of June 30, 2025 - Disclosure controls and procedures were evaluated and concluded to be effective as of June 30, 2025[124] - Management concluded that internal control over financial reporting was effective as of June 30, 2025, based on the COSO 2013 framework[128] - No changes in internal control over financial reporting materially affected, or are reasonably likely to materially affect, internal control over financial reporting during FY2025[129] Other Information No other information is reported under this item - None[130] Disclosure Regarding Foreign Jurisdictions that Prevent Inspections. This item is not applicable to the company - This item is not applicable[131] PART III Directors, Executive Officers and Corporate Governance Information on directors, executive officers, and corporate governance is incorporated by reference from the proxy statement - Information is incorporated by reference from the definitive proxy statement[133] - The Code of Business Conduct is available on the company's website[134] Executive Compensation Information regarding executive compensation is incorporated by reference from the company's definitive proxy statement - Information is incorporated by reference from the definitive proxy statement[135] Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Information on security ownership and related stockholder matters is incorporated by reference from the proxy statement - Information is incorporated by reference from the definitive proxy statement[136] Certain Relationships and Related Transactions, and Director Independence Information on related transactions and director independence is incorporated by reference from the proxy statement - Information is incorporated by reference from the definitive proxy statement[137] Principal Accountant Fees and Services Information on principal accountant fees and services is incorporated by reference from the company's definitive proxy statement - Information is incorporated by reference from the definitive proxy statement[138] PART IV Exhibits, Financial Statement Schedules This item details financial statements and schedules, incorporated by reference, and provides a comprehensive exhibit index - Financial statements are incorporated by reference from page F-1 of the Annual Report[140] - Financial statement schedules are omitted as they are not required, not applicable, or the information is presented in the consolidated financial statements or notes[141] - An exhibit index is attached and incorporated by reference[142][143] Form 10-K Summary The company has elected not to provide a Form 10-K summary - The company has elected not to provide a Form 10-K summary[147] Financial Statements Report of Independent Registered Public Accounting Firm (Deloitte & Touche LLP) Deloitte & Touche LLP issued an unqualified opinion for FY2025, noting Level 3 equity investments as a critical audit matter - Deloitte & Touche LLP served as the Company's auditor since 2024[162] - Issued an unqualified opinion on the consolidated financial statements for the year ended June 30, 2025[155] - A critical audit matter was identified regarding the fair value measurements of Level 3 equity investments, due to complex valuation techniques and unobservable inputs, requiring a high degree of auditor judgment[159][160][161] Report of Independent Registered Public Accounting Firm (Grant Thornton LLP) Grant Thornton LLP issued an unqualified opinion on consolidated financial statements for the year ended June 30, 2024 - Grant Thornton LLP served as the Company's auditor from 2019 to 2024[169] - Issued an unqualified opinion on the consolidated financial statements for the year ended June 30, 2024[165] Consolidated Balance Sheets Balance sheets show increased total assets and stockholders' equity, driven by investments and real estate growth Consolidated Balance Sheet Highlights (in thousands) | ASSETS/LIABILITIES AND STOCKHOLDERS' EQUITY | June 30, 2025 | June 30, 2024 | | :------------------------------------------ | :------------ | :------------ | | Total assets | $153,937 | $140,446 | | Total liabilities | $73,271 | $70,251 | | Total stockholders' equity | $80,666 | $70,195 | | Cash and cash equivalents | $30,603 | $48,147 | | Investments, at fair value | $60,614 | $44,585 | | Real estate assets, net | $9,085 | $5,769 | | Long-term debt (face value) | $26,945 | $26,945 | | Convertible notes (face value) | $35,063 | $35,494 | Consolidated Statements of Operations Operations reflect a significant turnaround to net income in FY2025, driven by unrealized investment gains and stable operating loss Consolidated Statements of Operations Highlights (in thousands, except per share data) | | 2025 | 2024 | | :-------------------------------------------------- | :----- | :----- | | Revenues | $16,316 | $17,834 | | Cost of revenues | $1,082 | $5,526 | | Total operating costs and expenses | $23,237 | $20,146 | | Operating loss | $(8,003) | $(7,838) | | Net realized and unrealized gain | $16,854 | $2,212 | | Net (loss) income from continuing operations | $15,550 | $(942) | | Net (loss) income attributable to Great Elm Group, Inc. | $12,891 | $(1,388) | | Net (loss) income attributable to shareholders per share - Basic | $0.47 | $(0.05) | | Net (loss) income attributable to shareholders per share - Diluted | $0.38 | $(0.05) | Consolidated Statements of Stockholders' Equity Stockholders' equity increased in FY2025 due to net income and stock-based compensation, partially offset by repurchases Consolidated Statements of Stockholders' Equity Highlights (in thousands) | | June 30, 2025 | June 30, 2024 | | :------------------------------------------ | :------------ | :------------ | | Total Great Elm Group, Inc. stockholders' equity | $70,318 | $62,714 | | Non-controlling interests | $10,348 | $7,481 | | Total stockholders' equity | $80,666 | $70,195 | | Net income (loss) attributable to Great Elm Group, Inc. (FY2025) | $12,891 | $(1,388) | | Stock repurchases (FY2025) | $(7,239) | $(2,104) | | Stock-based compensation (FY2025) | $1,952 | $2,364 | Consolidated Statements of Cash Flows Cash flows from operations improved in FY2025, while investing and financing activities used cash, leading to an overall decrease Consolidated Statements of Cash Flows Highlights (in thousands) | | 2025 | 2024 | | :-------------------------------------------------- | :----- | :----- | | Net cash provided by (used in) operating activities - continuing operations | $(9,006) | $(15,555) | | Net cash provided by (used in) investing activities - continuing operations | $(1,336) | $3,217 | | Net cash provided by (used in) financing activities - continuing operations | $(8,773) | $2,838 | | Net increase (decrease) in cash and cash equivalents, including cash and cash equivalents classified within current assets held for sale | $(19,115) | $(10,447) | | Cash, cash equivalents and restricted cash at end of period | $30,603 | $49,718 | - Operating cash flows for continuing operations improved due to non-cash adjustments, including a $15.991 million unrealized gain on investments[174] - Investing activities in FY2025 included a $8.0 million related party loan receivable, $7.4 million in purchases of held-to-maturity securities (offset by $17.5 million proceeds), and $2.5 million for the Greenfield acquisition[174] - Financing activities in FY2025 were primarily impacted by $7.239 million in stock repurchases and $1.757 million in redemption of Convertible Notes[175] Notes to the Consolidated Financial Statements Notes provide detailed disclosures on accounting policies, financial instruments, and significant transactions, including acquisitions 1. Organization GEG is a Delaware-incorporated alternative asset management company, consolidating subsidiaries and variable interest entities - Great Elm Group, Inc. (GEG) is a Delaware-incorporated alternative asset management company[177] - The consolidated financial statements include GEG and its wholly-owned subsidiaries (e.g., GECM, MCRE, MCS, MBTS) and certain variable interest entities where GEG is the primary beneficiary[178][181] 2. Summary of Significant Accounting Policies Financial statements adhere to GAAP, requiring estimates for revenue, taxes, business combinations, and fair value measurements - Financial statements are prepared in accordance with GAAP, requiring estimates for revenue recognition, deferred tax assets, business combinations, and fair value measurements[179] - The Durable Medical Equipment (DME) business is presented as discontinued operations for the year ended June 30, 2024[180] - The company consolidates wholly-owned subsidiaries, majority-owned subsidiaries, and variable interest entities where it holds a controlling financial interest[181] - Investments in marketable securities are classified as trading, held-to-maturity, or available-for-sale. Investments at fair value include equity and private funds measured using Net Asset Value (NAV)[186][188] - Real estate assets are classified as current (development projects expected to be disposed of within one year) or held for sale (land and completed improvements meeting 'held for sale' criteria)[189][191] - Goodwill is not amortized but reviewed for impairment annually. Definite-lived intangible assets (investment management agreements, assembled workforce, customer-related, licenses) are amortized over 10-15 years[192][193][194] - Stock-based compensation expense for equity awards is measured at grant-date fair value and recognized over the requisite service period[201] - Income taxes are accounted for under the asset and liability method, with deferred tax assets and liabilities recognized for temporary differences and valuation allowances established when necessary[204][205] 3. Acquisition GEG acquired Greenfield CRE for $2.5 million in cash, forming MCS, which generated $0.9 million revenue in FY2025 - On February 4, 2025, GEG acquired certain assets of Greenfield CRE for approximately $2.5 million in cash, forming Monomoy Construction Services, LLC (MCS)[218][219] Preliminary Purchase Price Allocation (in thousands) | (in thousands) | June 30, 2025 | | :------------- | :------------ | | Goodwill | $440 | | Intangible assets: | | | Customer related | $1,610 | | Licenses | $450 | | Total | $2,500 | - Goodwill is primarily attributable to the assembled workforce and expected synergies. Identifiable intangible assets (customer-related and licenses) have a weighted average estimated useful life of 15 years[221][222] - From February 4, 2025, through June 30, 2025, MCS generated approximately $0.9 million in revenue and an operating loss of $0.9 million[223] 4. Revenue Revenues include management, incentive, administration, property management, real estate sales, and project management fees Revenues Summary (in thousands) | (in thousands) | 2025 | 2024 | | :-------------------------- | :----- | :----- | | Management fees | $7,038 | $5,906 | | Incentive fees | $4,069 | $2,676 | | Administration and service fees | $1,514 | $1,405 | | Property management fees | $1,245 | $1,186 | | Real estate property sales | $1,192 | $6,586 | | Project management fees | $941 | $75 | | Real estate rental income | $317 | - | | Total revenues | $16,316 | $17,834 | - Management fees are based on assets under management and recognized over time as services are rendered[227] - Incentive fees are variable consideration recognized when contractual performance criteria are met and are no longer probable of significant reversal[228] - Real estate property sales revenue and cost of revenues are recognized when control of the asset is transferred to the buyer[233] - Project management fees from the construction business are recognized over time using the percentage of completion method[234] 5. Related Party Transactions Related party transactions include investment gains, dividend income, receivables, and a promissory note to Monomoy REIT Related Party Income (in thousands) | (in thousands) | 2025 | 2024 | | :------------------------------------------ | :----- | :----- | | Net realized and unrealized gain on investments | $4,692 | $71 | | Net realized and unrealized gain on investments of Consolidated Funds | $3,322 | $233 | | Dividend income | $3,448 | $4,412 | Receivables from Managed Funds (in thousands) | (in thousands) | June 30, 2025 | June 30, 2024 | | :------------------------------------------ | :------------ | :------------ | | Dividends receivable | $310 | $301 | | Investment management revenues receivable | $4,493 | $1,684 | | Receivable for reimbursable expenses paid | $1,642 | $274 | | Receivable for real estate property development | $1,886 | - | | Receivables from managed funds | $8,331 | $2,259 | - As of June 30, 2025, the Company owns 1,438,079 shares of GECC, representing approximately 12.4% of outstanding shares[244] - The Company holds investments in Great Elm Strategic Partnership I, LLC (GESP), Prosper Peak Holdings, LLC (PPH), and Summit Grove Partners, LLC (SGP), which are accounted for using the fair value option[246][247][248] - GECM has shared personnel and reimbursement agreements with Imperial Capital Asset Management, LLC (ICAM), with costs of $0.5 million incurred in FY2025[250] - In January 2025, the Company issued an $8.0 million promissory note to Monomoy REIT, accruing interest at 8.0% per annum, due January 2026[255] 6. Fair Value Measurements Fair value measurements are categorized into a three-level hierarchy, with Level 3 equity investments showing unrealized gains - Fair value measurements are categorized into a three-level hierarchy: Level 1 (quoted prices in active markets), Level 2 (observable inputs), and Level 3 (unobservable inputs)[257][260] - Equity investments without readily-available market prices are classified as Level 3 and valued using discounted cash flow models[261] - Investments in private funds are valued using Net Asset Value (NAV) as reported by each fund's investment manager and are not categorized within the fair value hierarchy[263] Investments at Fair Value, held by the Company (June 30, 2025, in thousands) | (in thousands) | Level 1 | Level 2 | Level 3 | Total | | :-------------------------------- | :------ | :------ | :------ | :------ | | Equity investments | $15,427 | $- | $13,374 | $28,801 | | Investments valued at net asset value | | | | $31,813 | | Total assets | | | | $60,614 | Investments at Fair Value, Consolidated Funds (June 30, 2025, in thousands) | (in thousands) | Level 1 | Level 2 | Level 3 | Total | | :-------------------------------- | :------ | :------ | :------ | :------ | | Equity investments | $- | $- | $231 | $231 | | Debt securities | $- | $3,891 | $5,208 | $9,099 | | Investments valued at net asset value | | | | $4,997 | | Total assets | | | | $14,327 | - For the year ended June 30, 2025, Level 3 assets held by the Company had an unrealized gain of $4.7 million[269] 7. Segment Reporting The company operates as a single operating segment, with the CEO using net income for budgeting and variance analysis - The company manages its business activities on a consolidated basis and operates as a single operating segment[275] - The Chief Operating Decision Maker (CODM) is the Chief Executive Officer and Chairman, Jason W. Reese, who uses net income for annual budgeting and quarterly variance analysis[276] Operating Financial Results of Operating Segment (in thousands) | (in thousands) | 2025 | 2024 | | :-------------------------------------------------- | :----- | :----- | | Revenues | $16,316 | $17,834 | | Cost of revenues | $1,082 | $5,526 | | Interest income | $3,602 | $4,600 | | Other income | $4,018 | $4,302 | | Employee expenses | $14,474 | $12,522 | | Operating expenses | $6,506 | $6,340 | | Interest expense | $4,157 | $4,334 | | Depreciation and amortization | $1,249 | $1,108 | | Income tax expense | $86 | $101 | | Other expenses | $1,008 | $176 | | Net realized and unrealized gain | $16,854 | $2,212 | | Net realized and unrealized gain on investments of Consolidated Funds | $3,322 | $233 | | Segment net income | $15,550 | $(926) | 8. Identifiable Intangible Assets, Net Identifiable intangible assets include investment management agreements, assembled workforce, customer-related, and licenses Identifiable Intangible Assets, Net (in thousands) | (in thousands) | June 30, 2025 (Net Carrying Amount) | June 30, 2024 (Net Carrying Amount) | | :-------------------------------- | :---------------------------------- | :---------------------------------- | | Investment management agreements | $9,533 | $10,483 | | Assembled workforce | $471 | $554 | | Customer related | $1,567 | $- | | Licenses | $438 | $- | | Identifiable intangible assets, net | $12,009 | $11,037 | - Amortization expense was $1.1 million for both the years ended June 30, 2025, and 2024[279] Estimated Future Amortization Expense (in thousands) | For the year ending June 30, | Estimated Future Amortization Expense | | :--------------------------- | :------------------------------------ | | 2026 | $1,130 | | 2027 | $1,096 | | 2028 | $1,068 | | 2029 | $1,045 | | 2030 | $1,027 | | Thereafter | $6,643 | | Total | $12,009 | 9. Real Estate MBTS completed land purchases for build-to-suit developments, with one sold and another generating lease income in FY2025 - MBTS completed its third land parcel purchase in Florida in March 2025 for build-to-suit developments[281] - Capitalized development and construction costs were $3.4 million in FY2025 and $8.5 million in FY2024[282] - A development sold in June 2024 generated $1.2 million in revenue in FY2025 from remaining construction activities[283] - A second development was completed in December 2024, with its lease commencing and generating $0.3 million in lease income for FY2025[284][285] Total Base Rents for Remaining Lease Term (in thousands) | (in thousands) | June 30, 2025 | | :--------------------------- | :------------ | | For the year ending December 31, 2025 | $253 | | For the year ending December 31, 2026 | $516 | | For the year ending December 31, 2027 | $526 | | For the year ending December 31, 2028 | $537 | | Thereafter | $3,454 | | Total base rent | $5,286 | 10. Lessee Operating Leases Operating lease costs and liabilities are detailed, with a weighted-average remaining life of 4.3 years as of June 30, 2025 Operating and Variable Lease Costs (in thousands) | (in thousands) | 2025 | 2024 | | :------------------------------------------ | :----- | :----- | | Operating lease cost | $492 | $399 | | Variable lease cost | $59 | $66 | | Cash paid for operating leases | $493 | $436 | Lease Details (June 30) | | June 30, 2025 | June 30, 2024 | | :-------------------------- | :------------ | :------------ | | Weighted-average remaining life | 4.3 years | 1.9 years | | Weighted-average discount rate | 8.1% | 8.9% | Maturity Analysis of Operating Lease Liabilities (June 30, 2025, in thousands) | (in thousands) | June 30, 2025 | | :--------------------------- | :------------ | | For the year ending June 30, 2026 | $474 | | For the year ending June 30, 2027 | $421 | | For the year ending June 30, 2028 | $417 | | Thereafter | $569 | | Total lease payments | $1,881 | | Imputed interest | $(266) | | Total lease liabilities | $1,615 | 11. Accrued Expenses and Other Current Liabilities Accrued expenses and other current liabilities primarily consist of payroll, employee-related costs, and construction expenses Accrued Expenses and Other Current Liabilities (in thousands) | (in thousands) | June 30, 2025 | June 30, 2024 | | :-------------------------------- | :------------ | :------------ | | Payroll and other employee-related costs | $4,616 | $4,222 | | Construction business expenses | $2,591 | $2,425 | | Other | $500 | $362 | | Accrued expenses and other current liabilities | $7,707 | $7,009 | 12. Long-Term Debt The company has $26.9 million in 7.25% notes due 2027, with a net consolidated debt to equity ratio of 0.45:1.00 - As of June 30, 2025, the company had $26.9 million in aggregate principal amount of 7.25% notes due June 30, 2027 (GEGGL Notes)[290][291] - The GEGGL Notes are unsecured obligations, ranking pari passu with Convertible Notes and senior to subordinated indebtedness[290] - The net consolidated debt to equity ratio was 0.45:1.00 as of June 30, 2025, well below the 2:1 covenant limit[292] - Interest expense attributed to long-term debt was $2.2 million for both FY2025 and FY2024[291] 13. Convertible Notes Outstanding 5.0% Convertible Notes total $35.1 million, with $17.0 million held by related parties, and some repurchased - As of June 30, 2025, the total principal balance of 5.0% Convertible Notes outstanding was $35.1 million, due February 26, 2030[293][294][296] - In June 2025, the company repurchased $2.2 million of principal for $1.8 million, resulting in a realized gain of $0.5 million[293] - Related parties hold $17.0 million of the Convertible Notes, including entities associated with Matthew A. Drapkin ($7.8 million), Jason W. Reese ($8.3 million), and Eric J. Scheyer ($0.8 million)[294] - Interest expense related to Convertible Notes was $1.9 million in FY2025 and $2.1 million in FY2024, with interest paid in-kind[296] 14. Non-Controlling Interests and Redeemable Preferred Stock of Subsidiaries Non-controlling interests in consolidated funds totaled $10.3 million in FY2025, with attributable net income of $2.6 million Non-Controlling Interest Balances (in thousands) | (in thousands) | June 30, 2025 | June 30, 2024 | | :-------------------------------- | :------------ | :------------ | | Consolidated Funds - Permanent equity | $10,348 | $7,481 | | Total non-controlling interests | $10,348 | $7,481 | Net Income (Loss) Attributable to Non-Controlling Interests (in thousands) | (in thousands) | 2025 | 2024 | | :------------------------------------------ | :----- | :----- | | Consolidated Funds - Permanent equity | $2,659 | $462 | | Net loss attributable to non-controlling interest | $2,659 | $462 | - As of June 30, 2025, the Company held approximately 42% of the capital in the Consolidated Fund[300] 15. Share-Based and Other Non-Cash Compensation The company uses a Rights Plan to preserve NOLs and offers equity awards under incentive plans, with $2.0 million expense in FY2025 - The company adopted a Tax Benefits Preservation Agreement (Rights Plan) on December 29, 2020, to restrict ownership changes (generally 4.99% or more) and preserve NOL carryforwards[301] - The 2016 Long-Term Incentive Plan and 2016 Employee Stock Purchase Plan govern equity awards. As of June 30, 2025, 2,393,715 shares were available for future issuance under these plans[304][305] Restricted Stock Awards and Restricted Stock Units Activity (in thousands) | Restricted Stock Awards and Restricted Stock Units | Shares (in thousands) | Weighted Average Grant Date Fair Value | | :------------------------------------------------ | :-------------------- | :------------------------------------- | | Outstanding at June 30, 2024 | 1,597 | $1.96 | | Granted | 1,003 | $1.84 | | Vested | (1,279) | $1.90 | | Forfeited | (244) | $1.96 | | Outstanding at June 30, 2025 | 1,077 | $1.93 | Stock Options Activity (in thousands) | Stock Options | Shares (in thousands) | Weighted Average Exercise Price | | :-------------------------- | :-------------------- | :------------------------------ | | Outstanding at June 30, 2024 | 3,264 | $2.70 | | Forfeited, cancelled or expired | (258) | $4.20 | | Outstanding at June 30, 2025 | 3,006 | $2.57 | | Exercisable at June 30, 2025 | 1,006 | $3.60 | - Total stock-based compensation expense was $2.0 million in FY2025 and $2.4 million in FY2024[308] - Other non-cash compensation in FY2025 included $1.3 million in GECC common shares, $0.8 million in MP II restricted membership interests, and $0.5 million in Monomoy REIT restricted membership interests[310][311][312] 16. Income Taxes Income before taxes was $15.6 million in FY2025, with federal and state NOL carryforwards and a valuation allowance - Income before income taxes from continuing operations was $15.6 million in FY2025, compared to a loss of $0.8 million in FY2024[313] Provision for Income Taxes (in thousands) | (in thousands) | 2025 | 2024 | | :------------- | :----- | :----- | | Current | $(130) | $101 | | Deferred | $216 | - | | Income tax expense | $86 | $101 | - As of June 30, 2025, the company had federal net operating loss (NOL) carryforwards of $7.7 million ($6.2 million indefinite, $1.5 million expiring 2026-2038) and state NOL carryforwards of $7.9 million (expiring 2037-2045)[316] - A valuation allowance is established for deferred tax assets due to the inability to conclude that future utilization is more likely than not[315] - Unrecognized tax benefits, including interest and penalties, totaled $0.3 million as of June 30, 2025[318] 17. Commitments and Contingencies The company is involved in routine legal matters but expects no material adverse impact on its financial condition - The company is involved in routine lawsuits, claims, investigations, and proceedings but does not expect any material adverse impact on its business, results of operations, financial condition, or cash flows[322] 18. Discontinued Operations The DME business was sold in January 2023, with no activity in FY2025, and a $0.02 million gain recognized in FY2024 - The Durable Medical Equipment (DME) business was sold in January 2023[323] - There was no activity related to discontinued operations during the year ended June 30, 2025[323] - A gain of $0.02 million related to adjustments to payments was recognized in FY2024[323] 19. Subsequent Events Subsequent events include stock sales to KLIM and Woodstead Value Fund LP, with associated warrants and board covenants - On July 31, 2025, the company sold 1,353,885 common shares for $2.9 million to funds affiliated with Kennedy Lewis Investment Management LLC (KLIM)[324] - In connection with the KLIM transaction, Great Elm Real Estate Ventures, LLC was formed, granting KLIM affiliates a 'Profits Interest Percentage' in its real estate business, starting at 15% and increasing with borrowings[327] - On August 27, 2025, the company sold 4,000,000 common shares for $9 million to Woodstead Value Fund LP[329] - The company also issued Series A Warrants (1,000,000 shares, $3.50 exercise price, 10-year term, exercisable after one year) and Series B Warrants (1,000,000 shares, $5.00 exercise price, 10-year term, exercisable after three years) to Woodstead Value Fund LP[332][333] - Both subsequent stock purchase agreements include registration rights and board appointment covenants for the purchasers[325][326][330][331]