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What changed in Great Elm Group, Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Great Elm Group, Inc.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+61 added−68 removedSource: 10-K (2024-08-29) vs 10-K (2023-09-20)

Top changes in Great Elm Group, Inc.'s 2024 10-K

61 paragraphs added · 68 removed · 52 edited across 5 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeAs of June 30, 2023, we had $16.2 million of net operating loss carryforwards for federal income tax purposes.
Biggest changeWe intend to sell the land and improvements with the attached leases at or close to the respective lease commencement date. As of June 30, 2024, we had $8.9 million of net operating loss carryforwards for federal income tax purposes.
Monomoy UpREIT is the operating partnership of Monomoy Properties REIT, LLC. Monomoy Properties REIT, LLC was formed in 2014 with the purpose of building an industry leading single-tenant industrial portfolio specializing in net leased assets, specifically Class B & C warehouse, distribution & light manufacturing assets. The Company acquired the investment management agreement of Monomoy UpREIT in May 2022.
Monomoy UpREIT is the operating partnership of Monomoy Properties REIT, LLC. Monomoy Properties REIT, LLC was formed in 2014 with the purpose of building an industry-leading single-tenant industrial portfolio specializing in net leased assets, specifically Class B & C warehouse, distribution & light manufacturing assets. We acquired the investment management agreement of Monomoy UpREIT in May 2022.
Competition We face competition from larger, well financed organizations (both domestic and foreign), including global asset managers, investment banks, commercial banks, private equity funds, sovereign wealth funds and state-owned enterprises. Government regulation is a key competitive factor for certain industries. Employees We had 24 employees as of June 30, 2023.
Competition We face competition from larger, well financed organizations (both domestic and foreign), including global asset managers, investment banks, commercial banks, private equity funds, sovereign wealth funds and state-owned enterprises. Government regulation is a key competitive factor for certain industries. Employees We had 31 employees as of June 30, 2024.
GECC was established in 2016 and it elected to be treated as a business development company ( BDC ) under the Investment Company Act of 1940, as amended (the Investment Company Act ). We own approximately 20.2% of GECC’s shares that we may hold to generate dividends or sell to redeploy our capital in higher yielding opportunities.
GECC was established in 2016 and it elected to be treated as a business development company ( BDC ) under the Investment Company Act of 1940, as amended (the Investment Company Act ). We own approximately 14.5% of GECC’s shares that we may hold to generate dividends or sell to redeploy our capital in higher yielding opportunities.
GECM, our wholly-owned registered investment adviser subsidiary, is an investment adviser providing investment management services to GECC and Monomoy UpREIT, our largest investment vehicles, as well as other private funds. The combined assets under management of these entities at June 30, 2023 was approximately $639.8 million.
GECM, our wholly-owned registered investment adviser subsidiary, is an investment adviser providing investment management services to GECC and Monomoy UpREIT, our largest investment vehicles, as well as other private funds. The combined assets under management of these entities at June 30, 2024 was approximately $727.4 million.
The Company owns approximately 7.3% of Monomoy UpREIT. GECM, our wholly-owned subsidiary, earns revenue through investment management agreements with each investment vehicle that provide for management fees, property management fees, incentive fees and/or administration fees. These fees are generally based on assets under management, rent collected, investment performance and allocable expenses incurred in the administration of these investment vehicles.
We own approximately 6.9% of Monomoy UpREIT. GECM, our wholly-owned subsidiary, earns revenue through investment management agreements with each investment vehicle that provide for management fees, property management fees, incentive fees and/or administration fees. These fees are generally based on assets under management, rent collected, investment performance and allocable expenses incurred in the administration of these investment vehicles.
In January 2023, Monomoy BTS Corporation ( MBTS ), our wholly-owned subsidiary, completed purchases of certain land parcels. Contemporaneously with the land purchases, MBTS entered into commercial lease agreements, as a lessor, in respect to the land parcels and build-to-suit improvements to be constructed thereon.
In January 2023, Monomoy BTS Corporation ( MBTS ), our wholly-owned subsidiary, completed purchases of certain land parcels. Contemporaneously with the land purchases, MBTS entered into commercial lease agreements, as a lessor, in respect to the land parcels and build-to-suit improvements to be constructed thereon. The leases will commence upon substantial completion of the build-to-suit development.
Management’s Discussion and Analysis of Financial Condition and Results of Operations.” 2 Acquisition Program We continue to explore other investment management opportunities, as well as opportunities in other areas that we believe provide attractive risk-adjusted returns on invested capital. As of the date of this report, we had $2.3 million of unfunded binding commitments to make additional investments.
Management’s Discussion and Analysis of Financial Condition and Results of Operations.” 2 Acquisition Program We continue to explore other investment management opportunities, as well as opportunities in other areas that we believe provide attractive risk-adjusted returns on invested capital.
Our stockholders may also obtain a printed copy of any of the above documents or reports by sending a request to Great Elm Group, Inc., 800 South Street, Suite 230, Waltham, Massachusetts 02453; Attention: Investor Relations, or by calling (617) 375-3006. We charge $0.50 per page to cover expenses of copying and mailing.
Our stockholders may also obtain a printed copy of any of the above documents or reports by sending a request to Great Elm Group, Inc., 3801 PGA Blvd, Suite 603, Palm Beach Gardens, Florida 33410; Attention: Investor Relations, or by calling (617) 375-3006. We charge $0.50 per page to cover expenses of copying and mailing.
Our corporate headquarters is located at 800 South Street, Suite 230, Waltham, Massachusetts 02453. Our corporate website address is www.greatelmgroup.com. The contents of the websites referred to above are not incorporated by reference into this filing. 3
Our corporate headquarters is located at 3801 PGA Blvd, Suite 603, Palm Beach Gardens, Florida 33410. Our corporate website address is www.greatelmgroup.com. The contents of the websites referred to above are not incorporated by reference into this filing. 3
Removed
The leases will commence upon substantial completion of the build-to-suit development, which is expected not later than the first calendar quarter of 2024. We intend to sell the land and improvements with the attached leases at or close to the respective lease commencement date.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeAny such issuances would dilute the interest of our stockholders and likely present other risks. Our certificate of incorporation authorizes our Board to issue shares of our common stock or preferred stock from time to time in their business judgment up to the amount of our then authorized capitalization.
Biggest changeOur certificate of incorporation authorizes our Board to issue shares of our common stock or preferred stock from time to time in their business judgment up to the amount of our then authorized capitalization. We may issue a substantial number of additional shares of our common stock and may issue shares of our preferred stock.
We cannot predict or accurately forecast the total amount of shares of common stock that ultimately may be issued under the Convertible Notes. Further, the perception of these sales or issuances, or the conversion of the Convertible Notes, could impair our ability to raise additional capital through the sale of our equity securities. Item 1B. Unresolve d Staff Comments. None.
We cannot predict or accurately forecast the total amount of shares of common stock that ultimately may be issued under the Convertible Notes. Further, the perception of these sales or issuances, or the conversion of the Convertible Notes, could impair our ability to raise additional capital through the sale of our equity securities. Item 1B. Unresolve d Staff Comments.
The increased use of smartphones, tablets and other mobile devices as well as cloud computing may also heighten these and other operational risks. We and our third-party providers are the subject of attempted unauthorized access, computer viruses and malware, and cyberattacks designed to disrupt or degrade service or cause other damage and denial of service.
The increased use of smartphones, tablets and other mobile devices as well as cloud computing may also heighten these and other operational risks. We and our third-party providers are or may be the subject of attempted unauthorized access, computer viruses and malware, and cyberattacks designed to disrupt or degrade service or cause other damage and denial of service.
In addition, the law may impose upon us burdensome requirements, including: ▪ registration as an investment company and subsequent regulation as an investment company; ▪ adoption of a specific form of corporate structure; and ▪ reporting, record keeping, voting, proxy and disclosure requirements and other rules and regulations.
In addition, the Investment Company Act may impose upon us burdensome requirements, including: ▪ registration as an investment company and subsequent regulation as an investment company; ▪ adoption of a specific form of corporate structure; and 7 ▪ reporting, record keeping, voting, proxy and disclosure requirements and other rules and regulations.
Risks Relating to Our Common Stock Our common stock is subject to transfer restrictions. We have NOL carryforwards and other tax attributes, the amount and availability of which are subject to certain qualifications, limitations and uncertainties.
Risks Relating to Our Common Stock Our common stock is subject to transfer restrictions. We have net operating loss ( NOL ) carryforwards and other tax attributes, the amount and availability of which are subject to certain qualifications, limitations and uncertainties.
We also have a Tax Rights Plan that would be triggered if any person acquires 4.99% or more of our common stock without prior approval by our Board.
We also have a Tax Benefits Preservation Agreement (the Tax Rights Plan ) that would be triggered if any person acquires 4.99% or more of our common stock without prior approval by our Board.
These issuances: ▪ may significantly dilute your equity interests; ▪ may require you to make an additional investment in us or suffer dilution of your equity interest; ▪ may subordinate the rights of holders of shares of our common stock if shares of preferred stock are issued with rights senior to those afforded to our common stock; ▪ could cause a change in control if a substantial number of shares of our common stock are issued; ▪ may affect, among other things, our ability to use our NOL carry forwards; and ▪ may adversely affect prevailing market prices for our common stock.
These issuances: ▪ may significantly dilute your equity interests; ▪ may require you to make an additional investment in us or suffer dilution of your equity interest; ▪ may subordinate the rights of holders of shares of our common stock if shares of preferred stock are issued with rights senior to those afforded to our common stock; ▪ could cause a change in control if a substantial number of shares of our common stock are issued; ▪ may affect, among other things, our ability to use our NOL carry forwards; and ▪ may adversely affect prevailing market prices for our common stock. 8 Anti-takeover provisions contained in our certificate of incorporation and amended and restated bylaws, as well as provisions of Delaware law, could impair a takeover attempt.
Any provision of our certificate of incorporation or bylaws or Delaware law that has the effect of delaying or deterring a change in control could limit the opportunity for our stockholders to receive a premium for their shares of our common stock and could also affect the price that some investors are willing to pay for our common stock. 9 Our common stockholders may experience significant dilution upon the issuance of common stock upon conversion of our 5.0% Convertible Senior Notes due 2030 (the Convertible Notes).
Any provision of our certificate of incorporation or bylaws or Delaware law that has the effect of delaying or deterring a change in control could limit the opportunity for our stockholders to receive a premium for their shares of our common stock and could also affect the price that some investors are willing to pay for our common stock.
Anti-takeover provisions contained in our certificate of incorporation and amended and restated bylaws, as well as provisions of Delaware law, could impair a takeover attempt. Our certificate of incorporation, bylaws and Delaware law contain provisions that could have the effect of rendering more difficult or discouraging an acquisition deemed undesirable by our Board.
Our certificate of incorporation, bylaws and Delaware law contain provisions that could have the effect of rendering more difficult or discouraging an acquisition deemed undesirable by our Board.
Holders of more than 4.99% of our common stock on the day the rights plan was adopted were exempted from this limitation as to the number shares they held at the time of adoption of the rights plan. 8 We may issue additional shares of common stock or shares of our preferred stock to obtain additional financial resources, as acquisition currency or under employee incentive plans.
Holders of more than 4.99% of our common stock on the day the Tax Rights Plan was adopted were exempted from this limitation as to the number shares they held at the time of adoption of the Tax Rights Plan.
As a result, the transition from LIBOR could have a direct or indirect adverse effect on our business, results of operations and financial condition. 7 If we are deemed to be an investment company under the Investment Company Act, we may be required to institute burdensome compliance requirements and our activities may be restricted, which may make it difficult for us to execute our growth plans.
If we are deemed to be an investment company under the Investment Company Act, we may be required to institute burdensome compliance requirements and our activities may be restricted, which may make it difficult for us to execute our growth plans.
Removed
The replacement of the London Interbank Offered Rate (LIBOR) with the Secured Overnight Financing Rate (SOFR) may affect the funds we manage and our results of operations and financial results.
Added
We may issue additional shares of common stock or shares of our preferred stock to obtain additional financial resources, as acquisition currency or under employee incentive plans. Any such issuances would dilute the interest of our stockholders and likely present other risks.
Removed
As a result of the discontinuation of certain unsecured benchmark interest rates, including LIBOR, regulators and market participants in various jurisdictions have been working to identify alternative reference rates that are compliant with the International Organization of Securities Commission’s standards for transaction-based benchmarks.
Added
Our common stockholders may experience significant dilution upon the issuance of common stock upon conversion of our 5.0% Convertible Senior Notes due 2030 (the Convertible Notes).
Removed
In the U.S., the Alternative Committee, a group of market and official sector participants, identified SOFR as its recommended alternative benchmark rate. Other alternative reference rates have been recommended in other jurisdictions. The funds that we manage may hold a number of LIBOR-referenced contracts.
Removed
Transition from LIBOR to SOFR or to another reference rate may result in an increase or a decrease of the overall borrowing cost for the funds we manage and their portfolio companies.
Removed
Even if the overall borrowing cost decreases, any savings that the funds we manage realize from such decrease could be offset partially or entirely by lower overall interest income received from certain assets. In addition, the transition from LIBOR to another reference rate could result in financial market disruption and significant increases or volatility in risk-free benchmark rates.
Removed
Should such disruption occur, it may adversely affect, among other things, the trading market for LIBOR-based securities and the market for derivative instruments.
Removed
We may issue a substantial number of additional shares of our common stock and may issue shares of our preferred stock.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeItem 2. Pr operties. We currently lease office space for our principal executive office in Waltham, Massachusetts. Our lease is non-cancellable through September 2024. We lease additional office space in Charleston, South Carolina, which has a lease expiration date in September 2025. Item 3. Legal Proceedings. None. Item 4. Mine Saf ety Disclosures. Not applicable. 10 PART II
Biggest changeItem 2. Pr operties. We currently lease office space for our principal executive office in Palm Beach Gardens, Florida. We lease additional office space in Waltham, Massachusetts, which is non-cancellable through September 2024, and Charleston, South Carolina, which has a lease expiration date in September 2026. Item 3. Legal Proceedings. None. Item 4. Mine Saf ety Disclosures. Not applicable.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeAs of September 12, 2023, Northern Right and its affiliates and ICAM and its affiliates own approximately 19.2% and 19.7%, respectively, of the outstanding shares of our common stock. Ownership information is based on information in publicly available filings. Stock Purchases None.
Biggest changeAs of August 26, 2024, Northern Right and its affiliates and ICAM and its affiliates own approximately 19.6% and 20.0%, respectively, of the outstanding shares of our common stock.
We also have a tax benefits preservation rights plan that restricts ownership of 4.99% or more of our outstanding shares of common stock. Persons that owned more than 4.99% of our common stock when the rights plan was adopted were grandfathered as to their then-current holdings of our common stock.
We also have the Tax Rights Plan that restricts ownership of 4.99% or more of our outstanding shares of common stock. Persons that owned more than 4.99% of our common stock when the Tax Rights Plan was adopted were grandfathered as to their then-current holdings of our common stock.
Item 5. Market for Registrant's Common Equity, Related Stoc kholder Matters and Issuer Purchases of Equity Securities. Market Information Our common stock is traded on the Nasdaq Global Select Market under the trading symbol “GEG”. Record Holders As of September 12, 2023, there were 59 record holders of our common stock.
Item 5. Market for Registrant's Common Equity, Related Stoc kholder Matters and Issuer Purchases of Equity Securities. Market Information Our common stock is traded on the Nasdaq Global Select Market under the trading symbol “GEG”. Record Holders As of August 26, 2024, there were 52 record holders of our common stock.
Added
Ownership information is based on information in publicly available filings. 11 Stock Purchases The following table summarizes common stock repurchases during the three months ended June 30, 2024: Month Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased as Part of 10b5-1 Plans Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs April 1-30, 2024 - $ - - - May 1-31, 2024 1,074,862 $ 1.79 618,433 - June 1-30, 2024 86,700 $ 1.79 82,890 3,167,110 Total 1,161,562 $ 1.79 701,323 (1) In November 2023, the Company implemented a stock buyback program pursuant to Rule 10b5-1 and Rule 10b-18 under the Securities Exchange Act of 1934, as amended (the Exchange Act ), authorizing us to repurchase shares of our common stock in an aggregate amount of up to $3,850,000 in open market transactions through May 15, 2024.
Added
(2) In May 2024, the Company implemented a stock buyback program pursuant to Rule 10b5-1 and Rule 10b-18 under the Exchange Act authorizing us to repurchase up to 3,250,000 shares of our common stock in open market transactions through the close of business on the second full trading day following the filing with the SEC of the Company's Form 10-Q for the fiscal quarter ending September 30, 2024 unless extended or terminated by our Board.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeFor the twelve months ended June 30, (in thousands) 2023 2022 Net cash (used in) provided by operating activities - continuing operations $ (3,139 ) $ 17,061 Net cash provided by operating activities - discontinued operations 766 12,219 Net cash (used in) provided by operating activities $ (2,373 ) $ 29,280 Net cash provided by (used in) investing activities - continuing operations $ 16,733 $ (33,296 ) Net cash provided by (used in) investing activities - discontinued operations 67,230 (6,751 ) Net cash provided by (used in) investing activities $ 83,963 $ (40,047 ) Net cash (used in) provided by financing activities - continuing operations $ (42,399 ) $ 10,222 Net cash used in financing activities - discontinued operations (5,221 ) (242 ) Net cash (used in) provided by financing activities $ (47,620 ) $ 9,980 Net increase (decrease) in cash and cash equivalents, including cash and cash equivalents classified within current assets held for sale $ 33,970 $ (787 ) Less: net increase in cash and cash equivalents classified within current assets held for sale $ 62,775 $ 5,226 Plus: cash received from discontinued operations $ 66,689 $ 9,549 Net increase in cash and cash equivalents $ 37,884 $ 3,536 As of June 30, 2023, we had an unrestricted cash balance of $60.2 million, short-term investments in marketable securities of $24.6 million and investments with a fair value of $32.6 million, including 1,532,519 shares of GECC common stock with an estimated fair value of $11.9 million.
Biggest changeLiquidity and Capital Resources The following table presents selected financial information: (in thousands) June 30, 2024 June 30, 2023 Current assets $ 127,570 $ 123,138 Current liabilities 8,359 7,377 Working capital $ 119,211 $ 115,761 Long-term liabilities $ 61,892 $ 64,674 15 For the twelve months ended June 30, (in thousands) 2024 2023 Net cash provided by (used in) operating activities - continuing operations $ (15,555 ) $ (3,139 ) Net cash provided by (used in) operating activities - discontinued operations - 766 Net cash provided by (used in) operating activities $ (15,555 ) $ (2,373 ) Net cash provided by (used in) investing activities - continuing operations $ 3,217 $ 16,733 Net cash provided by (used in) investing activities - discontinued operations (947 ) 67,230 Net cash provided by (used in) investing activities $ 2,270 $ 83,963 Net cash provided by (used in) financing activities - continuing operations $ 2,838 $ (42,399 ) Net cash provided by (used in) financing activities - discontinued operations - (5,221 ) Net cash provided by (used in) financing activities $ 2,838 $ (47,620 ) Net increase (decrease) in cash and cash equivalents, including cash and cash equivalents classified within current assets held for sale $ (10,447 ) $ 33,970 Less: net increase in cash and cash equivalents classified within current assets held for sale - 62,775 Plus: cash received from discontinued operations - 66,689 Net change in cash and cash equivalents $ (10,447 ) $ 37,884 As of June 30, 2024, we had an unrestricted cash balance of $48.1 million, short-term investments in marketable securities of $9.9 million and investments with a fair value of $44.6 million, including 1,518,162 shares of GECC common stock with an estimated fair value of $16.2 million.
Overview GEG is a publicly-traded alternative asset management company focused on growing a scalable and diversified portfolio of long-duration and permanent capital vehicles across credit, real estate, specialty finance, and other alternative strategies. GEG and its subsidiaries currently manage GECC, a publicly-traded BDC, and Monomoy UpREIT, an industrial-focused real estate investment trust, in addition to other investments.
Overview GEG is a publicly-traded alternative asset management company focused on growing a scalable and diversified portfolio of long-duration and permanent capital vehicles across credit, real estate, specialty finance, and other alternative strategies. GEG and its subsidiaries currently manage GECC, a publicly-traded BDC, and Monomoy UpREIT, an industrial-focused real estate investment trust, in addition to other investment vehicles.
During the year ended June 30, 2023 we also received $1.6 million attributed to sales of investments by GESOF. Cash flows provided by operating activities of our discontinued operations for the year ended June 30, 2023 were $0.8 million. Cash flows provided by operating activities of our continuing operations for the year ended June 30, 2022 were $17.1 million.
During the year ended June 30, 2023 we also received $1.6 million attributed to sales of investments by GESOF. Cash flows provided by operating activities of our discontinued operations for the year ended June 30, 2023 were $0.8 million.
We believe we have sufficient liquidity available to meet our short-term and long-term obligations for at least the next 12 months. Borrowings As of June 30, 2023, the Company had $26.9 million in outstanding aggregate principal of the GEGGL Notes. The GEGGL Notes are due on June 30, 2027, and interest is paid quarterly.
We believe we have sufficient liquidity available to meet our short-term and long-term obligations for at least the next 12 months and the foreseeable future thereafter. Borrowings As of June 30, 2024, the Company had $26.9 million in outstanding aggregate principal of the GEGGL Notes. The GEGGL Notes are due on June 30, 2027, and interest is paid quarterly.
As of June 30, 2023, the Company had $37.9 million principal balance in outstanding convertible notes (including cumulative interest paid in-kind) held by a consortium of investors, including related parties, that accrue interest at 5.0% per annum, payable semiannually in arrears on June 30 and December 31, in cash or in-kind at the option of the Company (the Convertible Notes ).
As of June 30, 2024, the Company had $35.5 million principal balance in outstanding Convertible Notes (including cumulative interest paid in-kind) held by a consortium of investors, including related parties, that accrue interest at 5.0% per annum, payable semiannually in arrears on June 30 and December 31, in cash or in-kind at the option of the Company.
Income Taxes The Company recognized an income tax expense from continuing operations of $0.2 million and $0.1 million for the years ended June 30, 2023 and 2022, respectively. This expense consisted solely of state and local taxes. No federal income taxes were incurred for the years ended June 30, 2023 and 2022.
Income Taxes The Company recognized an income tax expense from continuing operations of $0.1 million and $0.2 million for the years ended June 30, 2024 and 2023, respectively. This expense consisted of federal and state and local taxes for the year ended June 30, 2024. No federal income taxes were incurred for the year ended June 30, 2023.
On January 3, 2023, GEG’s wholly-owned subsidiary, Great Elm DME Holdings, Inc., along with the minority owners of Great Elm Healthcare, LLC ( HC LLC ), entered into a purchase agreement with QHM Holdings, Inc., a subsidiary of Quipt Home Medical Corp ( Quipt ), to sell 100% of the outstanding membership interests in HC LLC to Quipt (the Sale of HC LLC ) for $80.0 million, consisting of approximately $72.8 million in cash, $5.2 million of indebtedness assumed by Quipt and $2.0 million in shares of Quipt common stock based on the 20-day volume-weighted average price of Quipt’s common stock for the period ending on and including the second business day prior to the closing of the transaction.
On January 17, 2023, GEG exercised the Put Option and sold the Investment in Forest for approximately $26.5 million in cash. 12 On January 3, 2023, GEG’s wholly-owned subsidiary, Great Elm DME Holdings, Inc., along with the minority owners of Great Elm Healthcare, LLC ( HC LLC ), entered into a purchase agreement with QHM Holdings, Inc., a subsidiary of Quipt Home Medical Corp ( Quipt ), to sell 100% of the outstanding membership interests in HC LLC to Quipt (the Sale of HC LLC ) for $80.0 million, consisting of approximately $72.8 million in cash, $5.2 million of indebtedness assumed by Quipt and $2.0 million in shares of Quipt common stock based on the 20-day volume-weighted average price of Quipt’s common stock for the period ending on and including the second business day prior to the closing of the transaction.
Risk Factors.” Cash flows used in operating activities of our continuing operations for the year ended June 30, 2023 were $3.1 million.
Cash flows used in operating activities of our continuing operations for the year ended June 30, 2023 were $3.1 million.
Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amount of existing assets and liabilities and their respective tax basis and operating loss and tax credit carry-forwards.
Income Taxes Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amount of existing assets and liabilities and their respective tax basis and operating loss and tax credit carry-forwards.
The Company has established a valuation allowance for its deferred tax assets that are not recoverable from taxable temporary differences because the Company is unable to conclude that future utilization of a portion of its net operating loss carryforwards and other deferred tax assets is more likely than not.
Valuation allowances are established when necessary, in order to reduce deferred tax assets to the amounts more likely than not to be recovered. 13 The Company has established a valuation allowance for its deferred tax assets that are not recoverable from taxable temporary differences because the Company is unable to conclude that future utilization of a portion of its net operating loss carryforwards and other deferred tax assets is more likely than not.
The Company utilizes third-party specialists to assist management with the identification and valuation of intangible assets using customary valuation procedures and techniques. 12 Revenue Recognition The Company recognizes revenue at amounts that reflect the consideration to which it expects to be entitled in exchange for providing services to its customers under agreements with each investment product, which may be terminated at any time by either party subject to the specific terms of each respective agreement.
Revenue Recognition The Company recognizes revenue at amounts that reflect the consideration to which it expects to be entitled in exchange for providing services to its customers under agreements with each investment product, which may be terminated at any time by either party subject to the specific terms of each respective agreement.
As of June 30, 2023, we had $16.2 million of net operating loss carryforwards for federal income tax purposes, of which approximately $8.2 million will expire in fiscal years 2024 through 2025 and $8.0 million can be carried forward indefinitely. 14 Discontinued Operations The following table provides the consolidated results of our discontinued operations: For the twelve months ended June 30, (in thousands) 2023 2022 Discontinued operations: Durable medical equipment sales and services revenue $ 21,574 $ 41,720 Durable medical equipment rental income 11,874 21,738 Net revenue 33,448 63,458 Cost of durable medical equipment sold and services (8,654 ) (16,795 ) Cost of durable medical equipment rentals (4,263 ) (7,149 ) Durable medical equipment other operating expenses (17,519 ) (32,561 ) Depreciation and amortization (783 ) (1,737 ) Transaction costs (2,462 ) (582 ) Interest expense (46 ) (240 ) Loss on extinguishment of debt (23 ) (190 ) Other (expense) income, net (50 ) 2 Gain on disposal of discontinued operations 13,264 - Income before income taxes from discontinued operations 12,912 4,206 Income tax benefit 289 62 Net income from discontinued operations $ 13,201 $ 4,268 During the year ended June 30, 2023, the results of the discontinued DME business only included operations through the date of its sale (January 3, 2023).
Discontinued Operations The following table provides the consolidated results of our discontinued operations: For the twelve months ended June 30, (in thousands) 2024 2023 Discontinued operations: Durable medical equipment sales and services revenue $ - $ 21,574 Durable medical equipment rental income - 11,874 Net revenue - 33,448 Cost of durable medical equipment sold and services - (8,654 ) Cost of durable medical equipment rentals - (4,263 ) Durable medical equipment other operating expenses 16 (17,519 ) Depreciation and amortization - (783 ) Transaction costs - (2,462 ) Interest expense - (46 ) Loss on extinguishment of debt - (23 ) Other (expense) income, net - (50 ) Gain on disposal of discontinued operations - 13,264 Income before income taxes from discontinued operations 16 12,912 Income tax benefit - 289 Net income from discontinued operations $ 16 $ 13,201 During the year ended June 30, 2023, the results of the discontinued DME business only included operations through the date of its sale (January 3, 2023).
The combined assets under management of these entities at June 30, 2023 was approximately $639.8 million. 11 GEG continues to explore other investment management opportunities, as well as opportunities in other areas that it believes provide attractive risk-adjusted returns on invested capital.
The combined assets under management of these entities at June 30, 2024 was approximately $727.4 million. GEG continues to explore other investment management opportunities, as well as opportunities in other areas that it believes provide attractive risk-adjusted returns on invested capital. As of the date of this report, GEG had no unfunded binding commitments to make additional investments.
In addition, the historical results of the DME business and related activity have been presented in the accompanying consolidated statements of operations for the years ended June 30, 2023 and 2022 as discontinued operations. See Note 4 - Assets and Liabilities Held for Sale and Discontinued Operations in the accompanying Notes to the Consolidated Financial Statements.
Actual results could be different from these estimates. The historical results of the DME business and related activity have been presented in the accompanying consolidated statements of operations for the years ended June 30, 2024 and June 30, 2023 as discontinued operations. See Note 16 - Discontinued Operations in the accompanying Notes to the Consolidated Financial Statements.
Results of Operations Continuing Operations The following table provides the consolidated results of our continuing operations: For the twelve months ended June 30, (in thousands) 2023 Percent Change 2022 Revenues $ 8,663 92% $ 4,516 Operating costs and expenses: Investment management expenses, excluding non-cash compensation (8,938 ) 88% (4,744 ) Non-cash compensation (2,948 ) (8)% (3,211 ) Transaction costs (1,105 ) 121% (499 ) Other selling, general and administrative (5,731 ) 34% (4,279 ) Depreciation and amortization (1,152 ) 120% (524 ) Total operating costs and expenses (19,874 ) (13,257 ) Operating loss (11,211 ) (8,741 ) Other income (expense): Interest expense (6,074 ) 10% (5,546 ) Other income (expense), net 31,964 NM* (4,935 ) Total other income (expense), net 25,890 (10,481 ) Income (loss) before income taxes from continuing operations $ 14,679 $ (19,222 ) *NM - not meaningful 13 Revenues Revenues for the year ended June 30, 2023 increased $4.1 million, as compared to the prior year.
Results of Operations Continuing Operations The following table provides the consolidated results of our continuing operations: For the twelve months ended June 30, (in thousands) 2024 Percent Change 2023 Revenues $ 17,834 106% $ 8,663 Cost of Revenues (5,526 ) *NM - Operating costs and expenses: Investment management expenses, excluding non-cash compensation (9,723 ) 9% (8,938 ) Non-cash compensation (3,113 ) 6% (2,948 ) Other selling, general and administrative (6,202 ) (9)% (6,836 ) Depreciation and amortization (1,108 ) (4)% (1,152 ) Total operating costs and expenses (20,146 ) (19,874 ) Operating loss (7,838 ) (11,211 ) Other income (expense): Interest expense (4,334 ) (29)% (6,074 ) Other income (expense), net 11,331 (65)% 31,964 Total other income (expense), net 6,997 25,890 Income (loss) before income taxes from continuing operations $ (841 ) $ 14,679 *NM - not meaningful Revenues Revenues for the year ended June 30, 2024 increased $9.2 million, as compared to the prior year.
Cash flows provided by investing activities of our discontinued operations for the year ended June 30, 2023 of $67.2 million were primarily attributed to the cash proceeds from the Sale of HC LLC, net of cash sold and before transaction costs and distributions to non-controlling interests, of $71.3 million, partially offset by other investing activities of our DME business. 16 Cash flows used in investing activities of our continuing operations for the year ended June 30, 2022 were $33.3 million, primarily consisting of $15.0 million in net purchases of interests in Monomoy UpREIT and $17.5 million for participation in the GECC rights offering.
Cash flows provided by investing activities of our discontinued operations for the year ended June 30, 2023 of $67.2 million were primarily attributed to the cash proceeds from the Sale of HC LLC, net of cash sold and before transaction costs and distributions to non-controlling interests, of $71.3 million, partially offset by other investing activities of our DME business. 16 Cash flows provided by financing activities of our continuing operations for the year ended June 30, 2024 were $2.8 million, which is attributed to contributions of non-controlling interests in our Consolidated Funds, offset by a redemption of the Convertible Notes and share repurchase.
Contemporaneously with the land purchases, MBTS entered into commercial lease agreements, as a lessor, in respect to the land parcels and build-to-suit improvements to be constructed thereon. The leases will commence upon substantial completion of the build-to-suit development, which is expected not later than the first calendar quarter of 2024.
Contemporaneously with the land purchases, MBTS entered into commercial lease agreements, as a lessor, in respect to the land parcels and build-to-suit improvements to be constructed thereon. The leases will commence upon substantial completion of the build-to-suit development. GEG intends to sell the land and improvements with the attached leases at or close to the respective lease commencement date.
GEG intends to sell the land and improvements with the attached leases at or close to the respective lease commencement date. During the year ended June 30, 2023, GEG capitalized costs of $1.7 million attributed to the cost of land and development and construction costs directly identifiable with the two real estate projects.
During the year ended June 30, 2024, GEG capitalized development costs of $8.5 million attributed to the cost of land and development and construction costs directly identifiable with the two real estate projects.
Cash flows used in investing activities of our discontinued operations for the year ended June 30, 2022 were $6.8 million, mainly attributed to capital expenditures related to purchases of equipment held for rental.
Cash flows used in investing activities of our discontinued operations for the year ended June 30, 2024 of $0.9 million were attributed to investing activities of our DME business.
Our revenues primarily consist of fees based on a percentage of assets under management, fees based on rents collected, fees based on the performance of managed assets, and administration and service fees. Income Taxes Income taxes are accounted for under the asset and liability method.
Our revenues primarily consist of proceeds from the sale of build-to-suit properties and fees from managed investment products. Fees from managed investment products include fees based on a percentage of assets under management, fees based on rents collected, fees based on the performance of managed assets, and administration and service fees.
Other Expenses and Income Interest expense for the year ended June 30, 2023 increased by $0.5 million, compared to the prior year, primarily due to interest on the 7.25% notes due in 2027 issued in June 2022 (the GEGGL Notes ) and on the $6.3 million promissory note issued to Imperial Capital Asset Management, LLC ( ICAM) in May 2022 (the Seller Note ) (fully repaid in February 2023), which was partially offset by decrease in interest expense attributed to the 35,010 shares of preferred stock issued by Forest to JPM on December 29, 2020 (the Forest Preferred Stock ) following the Sale of Controlling Interest in Forest on December 30, 2022.
Other selling, general and administrative expenses decreased $0.6 million, which was mainly attributed to a decrease in our strategic initiative costs and other professional and operating fees due to our transition from a primarily durable medical equipment business to an asset management firm. 14 Other Expenses and Income Interest expense for the year ended June 30, 2024 decreased by $1.7 million, compared to the prior year, primarily due to the decrease in interest expense attributed to the 35,010 shares of preferred stock issued by Forest to JPM on December 29, 2020 (the Forest Preferred Stock ) following the Sale of Controlling Interest in Forest on December 30, 2022.
To date, all interest on these instruments has been paid in-kind. Item 7A. Quantitative and Qualitat ive Disclosures About Market Risk. Not applicable.
To date, all interest on these instruments has been paid in-kind. Item 7A. Quantitative and Qualitat ive Disclosures About Market Risk. Not applicable. Item 8. Financial Statemen ts and Supplementary Data. The information required by this Item appears beginning on page F-1 of this Annual Report on Form 10-K and is incorporated in this Item 8 by reference. Item 9.
During the year ended June 30, 2022, the Company recognized $4.9 million of other expense (net), mainly attributed to net realized and unrealized loss on investments of $7.6 million and net realized and unrealized loss on investments of our consolidated fund, Great Elm SPAC Opportunity Fund, LLC ( GESOF ), of $0.5 million, partially offset by dividends and interest income of $3.2 million.
During the year ended June 30, 2024, the Company recognized $11.3 million of other income (net), comprised of dividends and interest income of $8.1 million and net realized and unrealized gain on investments of $2.2 million, partially.
Cash flows provided by financing activities of our continuing operations for the year ended June 30, 2022 were $10.2 million, primarily attributed to $26.9 million in proceeds from the issuance of the GEGGL Notes, partially offset by payments to the broker of GESOF of $11.4 million and distributions to non-controlling interests in GESOF of $3.9 million, while cash flows used in financing activities of our discontinued operations for the same period were $0.2 million.
Cash flows provided by investing activities of our continuing operations for the year ended June 30, 2024 were $3.2 million which is attributed to the proceeds from settlement of held-to-maturity securities of $65.1 million and sales of investments of $6.8 million, partially offset by purchases of investments of $19.6 million and purchases of investments in held-to-maturity securities of $49.0 million.
The net cash inflow was primarily the result of net sales of investments by GESOF of approximately $23.2 million, and non-cash adjustments of $8.2 million in realized loss on investments, $2.8 million in stock-based compensation, $2.0 million in non-cash interest and amortization of capitalized issuance costs, $0.5 million in depreciation and amortization, and $0.5 million in net realized and unrealized loss on investments of GESOF, partially offset by our net loss from continuing operations of $19.3 million and $0.4 million of stock dividends.
The adjustments to reconcile our net loss from continuing operations of $0.9 million to net cash used in operating activities included add-backs for net proceeds from sale of real estate of $6.2 million and for various non-cash charges, such as $2.4 million of stock-based compensation expense, $2.4 million of non-cash interest and amortization of capitalized issuance costs, and $1.1 million of depreciation and amortization, which was partially offset by a $0.5 million of change in fair value of contingent consideration payable to ICAM, $2.3 million of realized gain on redemption of Convertible Notes, $12.0 million of purchases of investments and the net negative change in our operating assets and liabilities of $11.2 million.
The cash flows provided by operating activities of our discontinued operations for the same period were $12.2 million.
Risk Factors.” Cash flows used in operating activities of our continuing operations for the year ended June 30, 2024 were $15.6 million.
The increase of $2.7 million is attributed to the Monomoy UpREIT investment management agreement acquired in May 2022, and the increase of $1.0 million is attributed to the incentive fees due from GECC. Operating Costs and Expenses Operating costs and expenses for the year ended June 30, 2023 increased $6.6 million, as compared to the prior year.
Operating Costs and Expenses Operating costs and expenses for the year ended June 30, 2024 increased $0.3 million, as compared to the prior year. Investment management expenses increased $0.8 million, which was mainly attributable to costs associated with business operations due to our company now functioning primarily as an investment management company.
Removed
As of the date of this report, GEG had $2.3 million of unfunded binding commitments to make additional investments.
Added
The Company utilizes third-party specialists to assist management with the identification and valuation of intangible assets using customary valuation procedures and techniques.
Removed
On January 17, 2023, GEG exercised the Put Option and sold the Investment in Forest for approximately $26.5 million in cash.
Added
Of the $9.2 million increase, $6.6 million is related to MBTS's June 2024 asset sale, which is offset by $5.5 million of cost of revenues related to the sale. The remaining $2.6 million expansion is primarily driven by increases in management and incentive fees from GECC as a result of increases in assets under management.
Removed
Actual results could be different from these estimates. Previously reported assets and liabilities related to our DME business, primarily consisting of HC LLC and its subsidiaries, have been reclassified as assets and liabilities held for sale on the Company's consolidated balance sheet as of June 30, 2022.
Added
As of June 30, 2024, we had $8.9 million of net operating loss carryforwards for federal income tax purposes, of which approximately $3.4 million will expire in fiscal years 2025 through 2037 and $5.5 million can be carried forward indefinitely.
Removed
Valuation allowances are established when necessary, in order to reduce deferred tax assets to the amounts more likely than not to be recovered.
Added
There was minimal operating activity related to discontinued operations during the year ended June 30, 2024.
Removed
Investment management expenses increased $4.2 million, which was mainly attributable to costs associated with servicing the recently acquired Monomoy UpREIT investment management agreement. Other selling, general and administrative expenses increased $1.5 million, which was mainly attributed to legal, consulting and other professional fees.
Added
Changes in and Disagreements With Accou ntants on Accounting and Financial Disclosure. Not applicable.
Removed
Depreciation and amortization increased $0.6 million, primarily due to amortization expense recorded in respect to the intangible assets identified upon acquisition of the Monomoy UpREIT investment management agreement.
Removed
As of June 30, 2022, the Company had NOL carryforwards for federal income tax purposes of approximately $821 million. Following the Sale of Controlling Interest in Forest, Forest ceased being part of our consolidated tax group and NOL carryforwards attributed to the entity became unavailable for the Company's use going forward.
Removed
Liquidity and Capital Resources The following table presents selected financial information: (in thousands) June 30, 2023 June 30, 2022 Current assets $ 123,138 $ 84,440 Current liabilities 7,377 19,694 Working capital $ 115,761 $ 64,746 Long-term liabilities $ 64,674 $ 106,139 15 As of June 30, 2022, our current assets, current liabilities and long-term liabilities contained $8.5 million, $15.0 million and $2.6 million of current assets held for sale, current liabilities held for sale and non-current liabilities held for sale, respectively, attributed to the DME business.

Other GEG 10-K year-over-year comparisons