Great Elm (US:GEG)2021-05-14 11:01PART I. FINANCIAL INFORMATION Financial Statements 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 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 company2472 - The company operates in three segments: durable medical equipment, investment management, and real estate2432 - On March 1, 2021, the company acquired Advanced Medical DME, LLC and PM Sleep Lab, LLC (AMPM) for a total consideration of $1.1 million6970 - Following the reorganization, J.P. Morgan provided $37.7 million in financing through the issuance of preferred stock by a subsidiary7478 - During the quarter ended March 31, 2021, the company claimed $2.5 million in Employee Retention Credits (ERC) under the expanded CARES Act152 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 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 estate194196197 - The COVID-19 pandemic has continued to suppress revenues, particularly impacting the DME business's referral pipeline and investment management AUM203 - 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. Morgan200201 - 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 million267 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 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 pandemic220221223 - Investment Management: Revenue for Q1 2021 decreased 11% YoY to $0.7 million, primarily due to lower average assets under management237239 - Real Estate: The segment demonstrated stability, with revenues and costs remaining consistent YoY at $1.3 million in Q1 2021 revenue246247 - 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 adjustments250257258 Liquidity and Capital Resources 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 purchases260 - Cash provided by financing activities was $18.5 million, mainly from the JPM Transactions ($37.7 million gross proceeds), offset by debt repayment265 - As of March 31, 2021, the company had $33.5 million in face value of 5.0% Convertible Notes outstanding, due 2030269 - The company's subsidiary, Forest, has $35.0 million in 9.0% preferred stock held by JPM, which is mandatorily redeemable in 2027271 Quantitative and Qualitative Disclosures About Market Risk 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, 2020283 Controls and Procedures 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 effective284 - No material changes occurred in the company's internal control over financial reporting during the quarter ended March 31, 2021285 PART II. OTHER INFORMATION Legal Proceedings The company reports no new disclosable information regarding legal proceedings - No changes required to be disclosed286 Risk Factors 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, 2020287 Unregistered Sales of Equity Securities and Use of Proceeds The company reports no unregistered sales of equity securities during the period - None reported289 Defaults Upon Senior Securities The company reports no defaults upon its senior securities - None reported290 Mine Safety Disclosures This section is not applicable as the company has no mine safety disclosures to report - None reported291 Other Information The company reports no other material information for the period - None reported292 Exhibits This section lists all exhibits filed with the Form 10-Q, including agreements and certifications