10q10k10q10k.net

What changed in Great Elm Group, Inc.'s 10-K — 2022 vs 2023

vs

Paragraph-level year-over-year comparison of Great Elm Group, Inc.'s 2022 and 2023 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 2023 report.

+130 added−309 removedSource: 10-K (2023-09-20) vs 10-K (2022-09-12)

Top changes in Great Elm Group, Inc.'s 2023 10-K

130 paragraphs added · 309 removed · 76 edited across 5 sections

Item 1. Business

Business — how the company describes what it does

10 edited+10 added−22 removed2 unchanged
Biggest changeThe combined assets under management for these entities as of June 30, 2022 was approximately $607.0 million. GECC was established in 2016 and it elected to be treated as a BDC under the Investment Company Act of 1940, as amended (the Investment Company Act ).
Biggest changeGECC 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.
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, MA 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., 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 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 into this filing. 4
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
Competition We face competition from larger, well financed organizations (both domestic and foreign), including operating companies, 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.
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.
Our Durable Medical Equipment Business We launched our durable medical equipment segment in September 2018 by acquiring two durable medical equipment businesses that specialize in the distribution of respiratory care equipment, including positive air pressure ( PAP ) equipment and supplies, ventilators and oxygen equipment, and provide sleep study services.
Discontinued Operations We launched our Durable Medical Equipment ( DME ) business in September 2018 by acquiring two businesses that specialized in the distribution of respiratory care equipment, including positive air pressure equipment and supplies, ventilators and oxygen equipment, and provided sleep study services.
GECM earns revenue through investment management agreements with each investment vehicle which provide for management fees, property management fees, incentive fees and/or administrative 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.
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.
Since then, we have grown the business organically through investments in scalability as well as inorganically through tuck-in acquisitions. Our Investment Management Business We decided to invest in the asset management business because of our assessment of its ability to generate recurring free cash flows, its growth prospects and our Board of Directors’ (our Board ) and employees’ industry expertise.
We decided to invest in the asset management business because of our assessment of its ability to generate recurring free cash flows, its growth prospects and our Board of Directors’ (our Board ) and employees’ industry expertise.
We own approximately 35.4% of GECC’s shares that we may hold to generate dividends or sell to redeploy our capital in higher yielding opportunities. Monomoy REIT 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.
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.
GECM, our wholly-owned registered investment adviser subsidiary, is an investment adviser providing investment management services to GECC and Monomoy REIT, our largest investment vehicles, as well as private funds, including the Great Elm SPAC Opportunity Fund, LLC ( GESOF ), and separate accounts for an institutional investor.
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.
As of June 30, 2022, we had approximately $821 million of net operating loss ( NOL ) carryforwards for Federal income tax purposes. The federal NOL carryforwards generated prior to fiscal year 2018 will expire from 2022 through 2037. The federal NOL carryforwards generated in fiscal year 2018 or later may be carried forward indefinitely.
As of June 30, 2023, we had $16.2 million of net operating loss carryforwards for federal income tax purposes.
Removed
Item 1. B usiness. Overview We are a holding company seeking to acquire assets and businesses, where our people and other assets provide a competitive advantage. We currently have two business operating segments: durable medical equipment and investment management with general corporate representing unallocated costs and activity to arrive at consolidated operations.
Added
Item 1. B usiness. Overview We are 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.
Removed
Our goal is to build a diversified holding company focused on generating attractive, risk-adjusted returns on investment and long-term value creation.
Added
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.
Removed
We intend to accomplish this principally through: ▪ continuous review of acquisitions of businesses, securities and assets that generate attractive risk-adjusted returns and exhibit the potential for significant long-term value creation; ▪ expanding and further diversifying assets under management by acquiring management rights to additional permanent or long-dated capital vehicles; ▪ effective use of the skills of our team and our financial resources, including our tax assets, our willingness to create bespoke solutions and our ability to prudently assume risks; and ▪ constant evaluation of the retention and disposition of our operations and holdings.
Added
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.
Removed
The Company acquired the investment management agreement of Monomoy REIT in May 2022. The Company and its subsidiaries collectively own approximately 10.5% of Monomoy Properties UpREIT, LLC, the operating partnership of Monomoy REIT ( Monomoy UpREIT ).
Added
Since then, the business was grown organically through investments in scalability as well as inorganically through tuck-in acquisitions. On January 3, 2023, we sold our DME business. For additional information see “Item 7.
Removed
Discontinued Operations We launched our real estate business in March 2018 with an investment in a majority-interest in two Class A office buildings totaling 257,000 square feet situated on 17 acres of land in Fort Myers, Florida (collectively, the Property). The Property was fully-leased, on a triple-net basis, to a single tenant through March 31, 2030.
Added
Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Sale of Forest On December 30, 2022, we and our wholly-owned subsidiary, Great Elm FM Acquisition, Inc. ( FM Acquisition ), entered into a stock purchase agreement (the Stock Purchase Agreement ) with J.P. Morgan Broker-Dealer Holdings Inc.
Removed
In June 2021, we sold the real estate business. 2 For additional information see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Holding Company Reorganization On December 21, 2020, Great Elm Capital Group, Inc.
Added
( JPM ) to sell 61 shares of the common stock, $0.001 par value per share, of Forest Investments, Inc. ( Forest ) owned by us and FM Acquisition, which constituted 61% of the issued and outstanding shares of Forest’s common stock, to JPM for approximately $18.4 million in cash (the Sale of Controlling Interest in Forest ).
Removed
( GEC ) announced plans to create a new public holding company, Great Elm Group, Inc. by implementing a non-taxable holding company reorganization (the Holding Company Reorganization ). Following the Holding Company Reorganization, the Company became the successor issuer to GEC.
Added
In connection with the Stock Purchase Agreement, we, JPM and Forest entered into an amended and restated stockholders’ agreement (the Stockholders Agreement ).
Removed
On December 29, 2020, we completed a reorganization of our corporate structure, where GEC changed its name to Forest Investments, Inc. (Forest) and became a wholly owned subsidiary of GEG. Outstanding shares of Forest under the ticker symbol “GEC” were automatically converted into shares of our common stock, ticker symbol “GEG”.
Added
Pursuant to the Stockholders Agreement, from January 17, 2023 until February 17, 2023, we had the right (the Put Option ) to sell our remaining 19% interest in Forest ( Investment in Forest ) for its then fair market value.
Removed
Forest's common stock was then delisted from the NASDAQ Global Select Market and subsequently deregistered under Section 12(b) of the Securities Exchange Act of 1934, as amended (the Exchange Act ). The Holding Company Reorganization was a tax-free transaction for U.S. federal income tax purposes for our shareholders. Financing Transaction Following the consummation of the Holding Company Reorganization, J.P.
Added
On January 17, 2023, we exercised the Put Option and sold the Investment in Forest for approximately $26.5 million in cash. For additional information see “Item 7.
Removed
Morgan Broker-Dealer Holdings, Inc. ( JPM ), a Delaware corporation and affiliate of JPMorgan Chase & Co., Forest and the Company agreed to effect certain transactions pursuant to which JPM provided financing in an aggregate amount of $37.7 million.
Added
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.
Removed
In connection with such financing, among other things: • Forest issued to JPM 35,010 newly issued shares of 9.0% preferred stock (the Forest Preferred Stock ) with a maturity date of December 29, 2027 for $1,000.00 per share; • Great Elm Healthcare, LLC ( HC LLC ), a wholly-owned subsidiary of Great Elm DME, Inc.
Removed
( DME Inc. ), and sole owner of the durable medical equipment operating subsidiaries, issued 10,090 newly issued shares of 9.0% Series A-1 preferred stock (the Series A-1 Preferred Stock ) with a maturity date of December 29, 2027 and face value of $1,000.00 per share to the owners of DME Inc., which in turn distributed such preferred stock pro rata to the holders of its common stock such that 80.1% of such preferred stock is held by Forest, 9.95% is held by Corbel Capital Partners SBIC, L.P.
Removed
( Corbel ), and 9.95% is held by Valley Healthcare Group, LLC ( VHG ).
Removed
Upon a sale of the durable medical equipment business, such holders of Series A-1 Preferred Stock are only entitled to their liquidation preference; • HC LLC issued to Forest 34,010 newly issued shares of 9.0% Series A-2 preferred stock (the Series A-2 Preferred Stock ) with a maturity date of December 29, 2027 for $1,000.00 per share.
Removed
Upon a sale of the durable medical equipment business, such holders of Series A-2 Preferred Stock are entitled to the greater of their liquidation preference or 33% of proceeds arising from such sale; • HC LLC distributed to the owners of DME Inc. cash of $1.9 million and reimbursed the Company $1.3 million to cover deal costs; • Forest distributed to the Company, its sole stockholder, all of the assets and liabilities of Forest other than certain excluded assets and related liabilities, including Forest’s real estate business, and a preferred investment in the Company’s durable medical equipment business; and • JPM acquired 20% of Forest’s common stock for a purchase price of $2.7 million.
Removed
The Company’s wholly-owned subsidiary, DME Manager, concurrently entered into an agreement with Forest to provide advisory services in exchange for annual consulting fees of $0.45 million. (each collectively noted above, the JPM Transactions ). Using proceeds from the JPM Transactions, DME Inc. paid off the term loan with Corbel (the Corbel Facility ).
Removed
Subsidiary Reorganization On May 31, 2021, our wholly-owned subsidiary Great Elm DME Holdings, Inc. exchanged its 80.1% interests in DME Inc. for an identical 80.1% direct interest in DME Inc.’s subsidiary HC LLC, which is the sole owner of the durable medical equipment operating subsidiaries.
Removed
Following the consummation of the reorganization, we no longer have an interest in DME Inc. 3 On June 29, 2021, GP Corp. assigned the rights to a profit sharing agreement with GECM, their intercompany obligation under a senior secured note payable issued by GP Corp. and other assets and liabilities to their wholly-owned subsidiary Great Elm Capital GP, LLC ( GEC GP ).
Removed
Subsequent to the assignment, we exchanged our 98.2% interests in GP Corp. for an identical 98.2% direct interest in GP Corp.’s wholly-owned subsidiary GEC GP. Following the consummation of the reorganization, the Company no longer has an interest in GP Corp.
Removed
CARES Act Stimulus During the year ended June 30, 2022 and 2021, the Company and its subsidiaries recognized benefits related to stimulus received under the Coronavirus Aid, Relief, and Economic Security Act initially passed into law on March 27, 2020 and subsequently expanded ( CARES Act ) of $2.4 million and $4.8 million, respectively, consisting of employee retention payroll tax credits.
Removed
Acquisition Program Great Elm’s team continues to monitor and identify opportunities in the durable medical equipment, investment management and other sectors through the acquisition of operating businesses. In the fiscal year ended June 30, 2022, we evaluated a number of opportunities in these areas.
Removed
Employees We had 381 employees as of June 30, 2022, including the 360 employees of our durable medical equipment subsidiaries.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

38 edited+9 added−101 removed55 unchanged
Biggest changeHowever, if it were to continue for an extended period of time, it could adversely impact our business, financial condition or results of operations, or impact the recoverability of our long-lived assets. 8 Disruptions in the capital markets have increased the spread between the yields realized on risk-free and higher risk securities, resulting in illiquidity in parts of the capital markets.
Biggest changeAdditionally, disruptions in the financial markets have increased the spread between the yields realized on risk-free and higher risk securities, resulting in illiquidity in parts of the financial markets. These and future market disruptions and/or illiquidity would be expected to have an adverse effect on our business, financial condition, results of operations and cash flows.
In order to reduce the possibility that certain changes in ownership could result in limitations on the use of the tax attributes, our amended and restated certificate of incorporation (our certificate of incorporation ) contains provisions that generally restrict the ability of a person or entity from acquiring ownership (including through attribution under the tax law) of 4.99% or more of our common stock and the ability of persons or entities now owning 5% or more of our common shares from acquiring additional common shares.
In order to reduce the possibility that certain changes in ownership could result in limitations on the use of the tax attributes, our amended and restated certificate of incorporation contains provisions that generally restrict the ability of a person or entity from acquiring ownership (including through attribution under the tax law) of 4.99% or more of our common stock and the ability of persons or entities now owning 5% or more of our common shares from acquiring additional common shares.
Anti-takeover provisions contained in our certificate of incorporation and amended and restated bylaws (our 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.
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.
The incurrence of additional debt could have a variety of negative effects, including: ▪ default and foreclosure on our assets if our operating cash flows are insufficient to repay our debt obligations; ▪ acceleration of our obligations to repay the indebtedness even if we make all principal and interest payments when due if we breach covenants that require the maintenance of financial ratios or reserves without a waiver or renegotiation of that covenant; ▪ our immediate payment of all principal and accrued interest, if any, if the debt is payable on demand; ▪ our inability to pay dividends on our common stock; ▪ using a substantial portion of our cash flow to pay principal and interest on our debt, which will reduce the funds available for dividends on our common stock (if declared), expenses, capital expenditures, acquisitions and other general corporate purposes; ▪ limitations on our flexibility in planning for and reacting to changes in our business and in the industry in which we operate; ▪ increased vulnerability to adverse changes in general economic, industry and competitive conditions and adverse changes in government regulation; and ▪ limitation on our ability to borrow additional amounts for expenses, capital expenditures, acquisitions, debt service requirements, execution of our strategy and other purposes and other disadvantages compared to our competitors who have less debt.
The incurrence of additional debt could have a variety of negative effects, including: ▪ default and foreclosure on our assets if our operating cash flows are insufficient to repay our debt obligations; ▪ acceleration of our obligations to repay the indebtedness even if we make all principal and interest payments when due if we breach covenants that require the maintenance of financial ratios or reserves without a waiver or renegotiation of that covenant; ▪ our immediate payment of all principal and accrued interest, if any, if the debt is payable on demand; ▪ our inability to pay dividends on our common stock; ▪ using a substantial portion of our cash flow to pay principal and interest on our debt, which will reduce the funds available for dividends on our common stock (if declared), expenses, capital expenditures, acquisitions and other general corporate purposes; 5 ▪ limitations on our flexibility in planning for and reacting to changes in our business and in the industry in which we operate; ▪ increased vulnerability to adverse changes in general economic, industry and competitive conditions and adverse changes in government regulation; and ▪ limitation on our ability to borrow additional amounts for expenses, capital expenditures, acquisitions, debt service requirements, execution of our strategy and other purposes and other disadvantages compared to our competitors who have less debt.
There can be no assurance that such unauthorized access or cyber incidents will not occur in the future, and they could occur more frequently and on a larger scale. Legal liability arising from such risks may harm our business. Many aspects of our business involve substantial risks of liability. Our financial and operational controls may not be adequate.
There can be no assurance that such unauthorized access or cyber incidents will not occur in the future, and they could occur more frequently and on a larger scale. Legal liability arising from such risks may harm our business. Many aspects of our business involve substantial risks of liability. 6 Our financial and operational controls may not be adequate.
Should the target’s management not possess the necessary skills, qualifications or abilities, the operations and profitability of that business will be negatively impacted. In addition, we may acquire private, non-public companies, with unsophisticated accounting or compliance operations and personnel. Our ability to successfully grow our business will be dependent upon the efforts of our key personnel.
Should the target’s management not possess the necessary skills, qualifications or abilities, the operations and profitability of that business will be negatively impacted. In addition, we may acquire private, non-public companies, with unsophisticated accounting or compliance operations and personnel. 4 Our ability to successfully grow our business will be dependent upon the efforts of our key personnel.
The inability of our systems to accommodate an increasing volume of transactions could also constrain our ability to expand our businesses. 7 Our financial and other data processing systems will rely on access to and the functionality of operating systems maintained by third parties.
The inability of our systems to accommodate an increasing volume of transactions could also constrain our ability to expand our businesses. Our financial and other data processing systems will rely on access to and the functionality of operating systems maintained by third parties.
Upon conversion of any note, the Company will pay or deliver, as the case may be, to the noteholder, in respect of each $1,000 principal amount of notes being converted, shares of common stock equal to the conversion rate in effect on the conversion date, together with cash, if applicable, in lieu of delivering any fractional share of common stock.
Upon conversion of any note, we will pay or deliver, as the case may be, to the noteholder, in respect of each $1,000 principal amount of notes being converted, shares of common stock equal to the conversion rate in effect on the conversion date, together with cash, if applicable, in lieu of delivering any fractional share of common stock.
Difficult or changing market conditions can adversely affect our investment management business in many ways, by reducing the value or performance of our funds (including our invested funds and funds invested by third parties) or by reducing the ability of our funds to raise or deploy capital, each of which could negatively impact our income and cash flow and adversely affect our financial condition.
Difficult or changing market conditions can adversely affect our business in many ways, by reducing the value or performance of our funds (including our invested funds and funds invested by third parties) or by reducing the ability of our funds to raise or deploy capital, each of which could negatively impact our income and cash flow and adversely affect our financial condition.
Global or regional changes in the financial markets or economic conditions, including supply chain conditions, could adversely affect our business in many ways, including the following: ▪ Limitations on the availability of credit could affect our ability to borrow on a secured or unsecured basis, which may adversely affect our liquidity and results of operations.
Global or regional changes in the financial markets or economic conditions could adversely affect our business in many ways, including the following: ▪ Limitations on the availability of credit could affect our ability to borrow on a secured or unsecured basis, which may adversely affect our liquidity and results of operations.
The build-out of our investment management business is affected by conditions in the financial markets and economic conditions and events throughout the world, such as interest rates, availability of credit, inflation rates, economic uncertainty, changes in laws and regulations, market perceptions and other factors.
The build-out of our business is affected by conditions in the financial markets and economic conditions and events throughout the world, such as interest rates, availability of credit, inflation rates, economic uncertainty, changes in laws and regulations, market perceptions and other factors.
The investment management agreements ( IMAs ) we have through GECM with various pooled investment vehicles, such as GECC and Monomoy REIT, may be cancelled at the applicable counterparty’s discretion upon certain notice or upon the occurrence of certain events.
The investment management agreements ( IMAs ) we have through GECM with various pooled investment vehicles, such as GECC and Monomoy UpREIT, may be cancelled at the applicable counterparty’s discretion upon certain notice or upon the occurrence of certain events.
Our corporate governance documents include provisions: ▪ authorizing blank check preferred stock, which could be issued with voting, liquidation, dividend and other rights superior to our common stock; ▪ limiting the liability of, and providing indemnification to, our Board and officers; 15 ▪ limiting the ability of our stockholders to call and bring business before special meetings and to take action by written consent in lieu of a meeting; ▪ requiring advance notice of stockholder proposals for business to be conducted at meetings of our stockholders and for nominations of candidates for election to our Board; ▪ controlling the procedures for the conduct and scheduling of Board and stockholder meetings; ▪ limiting the ability for persons to acquire 4.99% or more of our common stock; ▪ providing our Board with the express power to postpone previously scheduled annual meetings and to cancel previously scheduled special meetings; ▪ limiting the determination of the number of directors on our Board and the filling of vacancies or newly created seats on the board to our Board then in office; and ▪ providing that directors may be removed by stockholders only for cause.
Our corporate governance documents include provisions: ▪ authorizing blank check preferred stock, which could be issued with voting, liquidation, dividend and other rights superior to our common stock; ▪ limiting the liability of, and providing indemnification to, our Board and officers; ▪ limiting the ability of our stockholders to call and bring business before special meetings and to take action by written consent in lieu of a meeting; ▪ requiring advance notice of stockholder proposals for business to be conducted at meetings of our stockholders and for nominations of candidates for election to our Board; ▪ controlling the procedures for the conduct and scheduling of Board and stockholder meetings; ▪ limiting the ability for persons to acquire 4.99% or more of our common stock; ▪ providing an exclusive forum selection provision; ▪ providing our Board with the express power to postpone previously scheduled annual meetings and to cancel previously scheduled special meetings; ▪ limiting the determination of the number of directors on our Board and the filling of vacancies or newly created seats on the board to our Board then in office; and ▪ providing that directors may be removed by stockholders only for cause.
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 cyber-attacks 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 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.
Such laws, rules and regulations cover all aspects of the financial services business, including, but not limited to, sales and trading methods, trade practices, use and safekeeping of customers’ funds and securities, capital structure, anti-money laundering and anti-bribery and corruption efforts, recordkeeping and the conduct of directors, officers and employees.
Such laws, rules and regulations cover all aspects of the financial services business, including, but not limited to, sales and trading methods, trade practices, use and safekeeping of customers’ funds and securities, capital structure, anti-money laundering and anti-bribery and corruption efforts, record-keeping and the conduct of directors, officers and employees.
Operational risks may disrupt our business, result in regulatory action against us or limit our growth. Our businesses will be highly dependent on our ability to process, on a daily basis, transactions across numerous and diverse markets and the transactions we process have become increasingly complex.
Operational risks may disrupt our business, result in regulatory action against us or limit our growth. Our businesses are highly dependent on our ability to process, on a daily basis, transactions across numerous and diverse markets and the transactions we process have become increasingly complex.
These events have limited and could continue to limit our investment originations, limit our ability to grow and have a material negative impact on our operating results and the fair values of our debt and equity investments. As a result, we may experience additional losses on our investments in GECC stock.
These events have limited and could continue to limit our investment originations, limit our ability to grow and have a material negative impact on our operating results and the fair values of our debt and equity investments. As a result, we may experience additional losses on our investments.
Our D&O insurance contains certain customary exclusions that may make it unavailable for the company in the event it is needed; and in any case our D&O insurance may not be adequate to fully protect the company against liability for the conduct of its directors, officers or employees.
Our D&O insurance contains certain customary exclusions that may make it unavailable for the company in the event it is needed; and in any case our D&O insurance may not be adequate to fully protect the company against liability for the conduct of its directors, officers or employees. Our investment management agreements may be terminated.
In order not to be regulated as an investment company under the Investment Company Act, unless we can qualify for an exclusion, we must ensure that we are engaged primarily in a business other than investing, reinvesting or trading of securities and that our activities do not include investing, reinvesting, owning, holding or trading “investment securities” constituting more than 40% of our total assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis.
In order not to be regulated as an investment company under the Investment Company Act, unless we can qualify for an exclusion, we must ensure that our activities do not include investing, reinvesting, owning, holding or trading “investment securities” constituting more than 40% of our total assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis.
The loss of key personnel could negatively impact the operations and profitability of our business. Our ability to successfully effect our growth strategy is dependent upon the efforts of our key personnel. The loss of our key personnel could severely negatively impact the operations and profitability of our business. Increased competition may adversely affect our revenues, profitability and staffing.
Our ability to successfully effect our growth strategy is dependent upon the efforts of our key personnel. The loss of our key personnel could severely negatively impact the operations and profitability of our business. Increased competition may adversely affect our revenues, profitability and staffing. All aspects of our business are intensely competitive.
Many of these companies are well established, well financed and have extensive experience in identifying and effecting business combinations. The Company continually evaluates its assets and investments relative to other market opportunities in order to maximize shareholder value. As a result, the Company may purchase new assets or businesses or sell existing assets or businesses at any time.
Many of these companies are well established, well financed and have extensive experience in identifying and effecting business combinations. We continually evaluate our assets and investments relative to other market opportunities in order to seek to maximize shareholder value. As a result, we may purchase new assets or businesses or sell existing assets or businesses at any time.
Such entities may compete with us. We could pursue an affiliate transaction if we determined that such affiliated entity met our criteria for a business combination and such transaction was approved by a majority of our disinterested directors.
Such entities may compete with us and potential conflicts of interest may exist. Nonetheless, we could pursue an affiliate transaction if we determined that such affiliated entity met our criteria for a business combination and such transaction was approved by a majority of our disinterested directors and our audit committee.
Accordingly, they may have conflicts of interest in determining to which entity a particular business opportunity should be presented. These conflicts may not be resolved in our favor and a potential target business may be presented to another entity prior to its presentation to us, subject to their fiduciary duties under applicable law.
These conflicts may not be resolved in our favor and a potential target business may be presented to another entity prior to its presentation to us, subject to their fiduciary duties under applicable law.
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.
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).
Because we will consider investments in different industries, you have no basis at this time to ascertain the merits or risks of any business that we may ultimately invest in or seek to acquire. We are a holding company seeking to acquire assets and businesses.
Because we will consider investments in different industries, you have no basis at this time to ascertain the merits or risks of any business that we may ultimately invest in or seek to acquire. We are not limited to acquisitions and/or investments in any particular industry or type of business.
All aspects of our business are intensely competitive. We will compete directly with a number of BDCs, private equity and venture capital funds, financial investment firms and special purpose acquisition companies. There has been increasing competition from others offering financial services, including services based on technological innovations.
We will compete directly with a number of BDCs, private equity and venture capital funds, financial investment firms and SPACs. There has been increasing competition from others offering financial services, including services based on technological innovations.
Further, concentration of capital we devote to a particular investment or industry may increase the risk that such investment could significantly impact our financial condition and results of operations, possibly in a material adverse way. 5 Subsequent to an investment, we may be required to take write-downs or write-offs, restructuring and impairment or other charges that could have a significant negative effect on our financial condition, results of operations and our share price, which could cause you to lose some or all of your investment.
Subsequent to an investment, we may be required to take write-downs or write-offs, restructuring and impairment or other charges that could have a significant negative effect on our financial condition, results of operations and our share price, which could cause you to lose some or all of your investment.
We have significant 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 NOL carryforwards and other tax attributes, the amount and availability of which are subject to certain qualifications, limitations and uncertainties.
We are not limited to acquisitions and/or investments in any particular industry or type of business. Accordingly, there is no current basis for you to evaluate the possible merits or risks of the particular industry in which we may ultimately invest or the target businesses in which we may ultimately invest or seek to acquire.
Accordingly, there is no current basis for you to evaluate the possible merits or risks of the particular industry in which we may ultimately invest or the target businesses in which we may ultimately invest or seek to acquire. We may not properly assess all of the significant risks present in that opportunity.
Though we do not believe that our principal activities will subject us to the Investment Company Act, if we were deemed to be subject to the Investment Company Act, compliance with these additional regulatory burdens would require additional expense and attention from management for which we have not accounted. 14 Our officers and directors may become aware of business opportunities which may be appropriate for presentation to us and the other entities to which they owe certain fiduciary or contractual duties.
Though we do not believe that our principal activities will subject us to the Investment Company Act, if we were deemed to be subject to the Investment Company Act, compliance with these additional regulatory burdens would require additional expense and attention from management for which we have not accounted.
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.
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.
For example, as part of our investment management business we will direct investments in a wide variety of industries and vehicles, including SPACs, which may decline in value.
Even if we properly assess those risks, some of them may be outside of our control or ability to affect. For example, as part of our investment management business we will direct investments in a wide variety of industries and vehicles, including SPACs, which may decline in value.
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 .
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.
These and future market disruptions and/or illiquidity would be expected to have an adverse effect on our business, financial condition, results of operations and cash flows. Unfavorable economic conditions also would be expected to increase our funding costs, limit our access to the capital markets or result in a decision by lenders not to extend credit to us.
Unfavorable economic conditions also would be expected to increase our funding costs, limit our access to the capital markets or result in a decision by lenders not to extend credit to us.
As a result of these factors, we may be forced to later write-down or write-off assets, restructure our operations, or incur impairment or other charges that could result in us reporting losses.
As a result of these factors, we may be forced to later write-down or write-off assets, restructure our operations, or incur impairment or other charges that could result in reporting losses. Even if our due diligence successfully identifies certain risks, unexpected risks may arise and previously known risks may materialize in a manner not consistent with our preliminary risk analysis.
Our certificate of incorporation authorizes our Board to issue shares of our common stock or preferred stock from time to time in their business judgement 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.
Any 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.
Although the risks are organized by headings, and each risk is discussed separately, many are interrelated. Risks Related to Our Business We have a limited track record in the durable medical equipment and investment management businesses, and provide no assurance as to our acquisition and investment program.
Although the risks are organized by headings, and each risk is discussed separately, many are interrelated. Risks Related to Our Business Our growth strategy may not be successful.
Our projections of future taxable income required to fully realize the recorded amount of the gross deferred tax asset reflect numerous assumptions about our operating businesses and investments and are subject to change as conditions change specific to our business units, investments or general economic conditions. 6 If our tax filing positions were to be challenged by federal, state and local or foreign tax jurisdictions, we may not be wholly successful in defending our tax filing positions.
Decreases in the market values of investments held within the underlying portfolios of managed funds could also lead to decreases in asset-based fee revenues. If our tax filing positions were to be challenged by federal, state and local or foreign tax jurisdictions, we may not be wholly successful in defending our tax filing positions.
Removed
We entered the investment management business in November 2016 and we entered the durable medical equipment business in September 2018. Accordingly, there is limited historical information about our performance. We have plans to make significant investments and will continue to explore opportunities in these and other sectors but cannot provide specificity as to our future investments or financing plans.
Added
Further, concentration of capital we devote to a particular investment or industry may increase the risk that such investment could significantly impact our financial condition and results of operations, possibly in a material adverse way.
Removed
These and other factors, including the other risk factors described in this report, make it difficult for you and other market participants to value our company and our prospects. We are unaware of any comparable company that securities analysts can use to benchmark our performance and valuation.
Added
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.
Removed
We cannot give any assurance that any of the uncertainties or risk factors in this report will be favorably resolved. Our growth strategy may not be successful.
Added
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.
Removed
We may not properly assess all of the significant risks present in that opportunity. Even if we properly assess those risks, some of them may be outside of our control or ability to affect.
Added
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
Even if our due diligence successfully identifies certain risks, unexpected risks may arise and previously known risks may materialize in a manner not consistent with our preliminary risk analysis.
Added
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
We may not be able to generate sufficient taxable income to fully realize the tax benefits of our NOL carry forwards, the potential benefits of which would be reduced if U.S. federal income tax rates are lowered. At June 30, 2022, we had NOL carryforwards of approximately $821 million.
Added
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
If we are unable to generate sufficient taxable income prior to the expiration of our U.S. federal NOL carryforwards, the NOL carryforwards would expire unused.
Added
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
Our business is subject to risks arising from epidemic diseases, such as the COVID-19 pandemic. The COVID-19 pandemic was designated as a global pandemic by the World Health Organization in March 2020 and continues to impact economic activity and supply chains in the United States and globally despite robust vaccination rollout efforts by governments and the medical community.
Added
Our officers and directors may become aware of business opportunities which may be appropriate for presentation to us and the other entities to which they owe certain fiduciary or contractual duties. Accordingly, they may have conflicts of interest in determining to which entity a particular business opportunity should be presented.
Removed
The COVID-19 pandemic, or other public health epidemic or pandemic, poses the risk that we or our employees, contractors, suppliers, portfolio companies and other partners may be prevented from conducting business activities for an indefinite period of time, including due to the spread of the disease within these groups or due to shutdowns that may be requested or mandated by governmental authorities.
Added
We may issue a substantial number of additional shares of our common stock and may issue shares of our preferred stock.
Removed
The continued spread of COVID-19 and the measures taken by local governments to date has had a significant impact on our practitioner orders for sleep studies and durable medical equipment set-ups, though we have observed recovery in demand during the current year.
Removed
More recently however, the COVID-19 pandemic has impacted global supply chains, limiting our ability to procure sufficient durable medical devices to meet existing demand. The duration of this disruption remains uncertain.
Removed
Decreases in the market values of investments held within GECC’s portfolio companies could also lead to decreases in asset-based fee revenues within the investment management business.
Removed
The COVID-19 pandemic and mitigation measures have and may continue to have an adverse impact on global economic conditions which could have an adverse effect on our business, financial condition, result of operations, and the recovery of our long-lived assets, as well as our ability to obtain third-party financing for potential acquisitions on terms acceptable to us, if at all.
Removed
The extent to which the COVID-19 pandemic impacts our results and financial condition will depend on future developments that are highly uncertain and cannot be predicted, including the success of continued vaccination rollouts and the potential emergence of new virus strains.
Removed
Risks Related to Our Durable Medical Equipment Business Adverse trends in the healthcare industry may negatively affect our investment in HC LLC, a supplier of durable medical equipment and services.
Removed
The healthcare industry is currently experiencing, among other things: ▪ changes in the demand for and methods of delivering healthcare services; ▪ competition among healthcare providers; ▪ consolidation of large health insurers; ▪ regulatory and government reimbursement uncertainty resulting from the Patient Protection and Affordable Care Act (the ACA ) and other healthcare reform and transparency laws; ▪ federal court decisions on cases challenging the legality of certain aspects of the ACA; ▪ federal and state government plans to reduce budget deficits and address debt ceiling limits by lowering healthcare provider Medicare and Medicaid reimbursement rates; ▪ expanded patient enrollment in federal and state health care programs; ▪ federal and state regulatory reform related to pricing practices and disclosures for health care services and supplies; ▪ changes in third-party reimbursement methods and policies; and ▪ increased scrutiny of billing, referral and other practices by U.S. federal and state authorities.
Removed
These factors may negatively impact the economic performance of HC LLC, which may have a material adverse effect on our business and financial condition.
Removed
A significant portion of HC LLC’s patients who rent and use its products have health coverage under the Medicare program, and future changes in the reimbursement rates or payment methodologies under Medicare and other government programs may adversely affect the financial condition of HC LLC, which could materially and adversely affect our business and operating results.
Removed
As a provider of respiratory-related product rentals, a portion of HC LLC’s revenue comes from Medicare reimbursement, due in part to a higher proportion of elderly persons suffering from chronic respiratory conditions than in the general population. There are increasing pressures on Medicare to control healthcare costs and to reduce or limit reimbursement rates for home medical products.
Removed
Legislation, including the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, the Deficit Reduction Act of 2005, the Medicare Improvements for Patients and Providers Act of 2008, the ACA, the 21 st Century Cures Act and the CARES Act contain provisions that directly impact reimbursement for the durable medical equipment products supplied by HC LLC.
Removed
These legislative provisions as currently in effect and any changes to such provisions in the future will continue to have a material effect on HC LLC’s business, financial condition and operating results. Further, due to budgetary shortfalls, many states are considering, or have enacted, cuts to their Medicaid programs.
Removed
These cuts have included, or may include, elimination or reduction of coverage for HC LLC’s products, amounts eligible for payment under co-insurance arrangements, or reimbursement rates for covered items.
Removed
Continued state budgetary pressures could lead to further reductions in funding for the reimbursement for HC LLC’s products which, in turn, would adversely affect its, and ultimately our, business, financial condition and results of operations. 9 The competitive bidding process under Medicare could adversely impact the business and financial condition of HC LLC.
Removed
The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 requires the Secretary of Health and Human Services to establish and implement programs under which competitive bid areas ( CBAs )are established throughout the U.S. for purposes of awarding contracts for the furnishing of competitively priced items of durable medical equipment.
Removed
The Centers for Medicare and Medicaid Services ( CMS ), the agency responsible for administering this Medicare program, conducts a competition for each competitive acquisition area under which suppliers submit bids to supply certain covered items of durable medical equipment.
Removed
Successful bidders must meet certain program quality standards in order to be awarded a contract and only successful bidders can supply the covered items to Medicare beneficiaries in the CBAs. There are, however, regulations in place that allow non-contracted suppliers to continue to provide products and services to their existing customers at the new competitive bidding payment amounts.
Removed
The contracts are generally expected to be re-bid every three years. CMS suspended its competitive bidding process last year and existing contracts expired on December 31, 2018. As of January 1, 2019, there is a temporary gap in the competitive bidding program. The Company submitted bids for the 2021 competitive bidding program in September 2019.
Removed
However, in October 2020 CMS announced that relevant product categories had been removed from the 2021 competitive bidding program as resulting prices did not achieve expected savings. According to guidance from CMS, the next competitive bidding round is anticipated to begin on January 1, 2024.
Removed
We continue to monitor developments regarding the implementation of this competitive bidding program, but we are currently unable to predict the future outcome of the competitive bidding program on HC LLC once it recommences.
Removed
It is likely that reimbursement rates will continue to fluctuate, thus resulting in payment adjustments which could adversely affect the financial conditions and results of operations of HC LLC.
Removed
HC LLC obtains some of the components, subassemblies and completed products included in its sleep and respiratory-focused durable medical equipment from a single source or a limited group of manufacturers or suppliers, and the partial or complete loss of one of these manufacturers or suppliers could cause significant production delays, an inability to meet customer demand and a substantial loss in revenue.
Removed
HC LLC utilizes single-source suppliers for some of the components and subassemblies it uses in its sleep and respiratory-focused durable medical equipment.
Removed
HC LLC’s use of single-source suppliers for some components of its durable medical equipment may expose it to several risks, including, among other things: ▪ HC LLC’s suppliers may encounter financial hardships as a result of unfavorable economic and market conditions unrelated to its demand for components, which could inhibit their ability to fulfill orders and meet HC LLC’s requirements; ▪ HC LLC suppliers may fail to comply with regulatory requirements, be subject to lengthy compliance, validation or qualification periods, or make errors in manufacturing components that could negatively affect the performance or safety of HC LLC’s products or cause delays in the supplying of HC LLC’s products to its customers; ▪ suppliers that are newly identified by HC LLC may not qualify under the stringent quality or regulatory standards to which HC LLC’s business is subject; ▪ HC LLC or its suppliers may not be able to respond to unanticipated changes in customer orders, and if orders do not match forecasts, HC LLC or its suppliers may have excess or inadequate inventory of materials and components; ▪ HC LLC may be subject to price fluctuations due to a lack of long-term supply arrangements for key components; ▪ HC LLC may experience delays in delivery by its suppliers due to customs clearing delays, shipping delays, scarcity of raw materials or changes in demand from HC LLC or its other customers; ▪ HC LLC or its suppliers may lose access to critical services and components, resulting in an interruption in the manufacture, assembly and shipment of its systems; ▪ HC LLC’s suppliers may be subject to allegations by other parties of misappropriation of proprietary information in connection with their supply of products to HC LLC, which could inhibit their ability to fulfill HC LLC’s orders and meet its requirements; ▪ fluctuations in demand for products that HC LLC’s suppliers manufacture for others may affect their ability or willingness to deliver components to HC LLC in a timely manner; ▪ HC LLC’s suppliers may wish to discontinue supplying components or services to HC LLC; and ▪ HC LLC may not be able to find new or alternative components or reconfigure its system and manufacturing processes in a timely manner if the necessary components become unavailable. 10 HC LLC may experience problems with some of its suppliers in the future.

… 68 more changes not shown on this page.

Item 2. Properties

Properties — owned and leased real estate

1 edited+0 added−2 removed0 unchanged
Biggest changeItem 2. Pr operties. We currently lease office space for our principal executive offices in Waltham, Massachusetts, where our general corporate and investment management businesses operate. Our lease is non-cancellable through September 2024. Investment Management Business We lease additional office space for our investment management business in Charleston, South Carolina, which has a lease expiration date in October 2024.
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
Removed
Durable Medical Equipment Business We lease 22 offices and 15 sleep labs for our durable medical equipment businesses. These facilities have various expiration dates between 2022 and 2027. Certain office locations may also include warehouse and retail sales space. The facilities are primarily located in Arizona, Alaska, Iowa, Kansas, Missouri, Nebraska, Oregon and Washington. 16 Item 3. Legal Proceedings. None.
Removed
Item 4. Mine Saf ety Disclosures. Not applicable. PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

3 edited+0 added−0 removed5 unchanged
Biggest changeAs of September 6, 2022, Northern Right and its affiliates and ICAM and its affiliates own approximately 12.0% and 17.6%, 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 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.
Restrictions on Ownership We have significant NOL carryforwards and other tax attributes, the amount and availability of which are subject to qualifications, limitations and uncertainties.
Restrictions on Ownership We have NOL carryforwards and other tax attributes, the amount and availability of which are subject to qualifications, limitations and uncertainties.
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 6, 2022, there were 60 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 September 12, 2023, there were 59 record holders of our common stock.

Item 7. Management's Discussion & Analysis

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

24 edited+35 added−108 removed5 unchanged
Biggest changeGeneral Corporate The following table provides the results of our general corporate business: For the years ended June 30, (in thousands) 2022 Percent Change 2021 Revenue: Total revenue $ 876 51% $ 579 Operating costs and expenses: Non-cash compensation (1,339 ) 34% (998 ) Transaction costs (499 ) (19)% (618 ) Other general and administrative (4,594 ) 2% (4,504 ) Depreciation and amortization (1 ) 0% (1 ) Total operating expenses (6,433 ) (6,121 ) Operating loss (5,557 ) (5,542 ) Other income (expense): Interest expense (5,384 ) 66% (3,252 ) Other income (expense) 8,322 NM 1,716 Total other expense, net 2,938 (1,536 ) Total pre-tax loss from continuing operations $ (2,619 ) $ (7,078 ) General Corporate Revenue For the years ended June 30, 2022 and 2021, General Corporate revenue consists of fees earned by Great Elm DME Manager, LLC ( DME Manager ), a subsidiary in our general corporate segment, for consulting services provided to HC LLC, a subsidiary in our durable medical equipment segment.
Biggest changeResults 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.
The calculation of the Company’s tax positions involves dealing with uncertainties in the application of complex tax regulations in several different state tax jurisdictions. The Company is periodically reviewed by tax authorities regarding the amount of taxes due. These reviews include inquiries regarding the timing and amount of deductions and the allocation of income among various tax jurisdictions.
The calculation of the Company’s tax positions involves dealing with uncertainties in the application of complex tax regulations for federal and several different state tax jurisdictions. The Company is periodically reviewed by tax authorities regarding the amount of taxes due. These reviews include inquiries regarding the timing and amount of deductions and the allocation of income among various tax jurisdictions.
Asset Acquisitions and Business Combinations, Acquired Intangible Assets and Goodwill Asset acquisitions are accounted for using the cost accumulation method while business combinations are accounted for at fair value. Determining whether the acquired set represents an asset acquisition or a business combination requires quantitative and qualitative assessments that require judgment.
Asset Acquisitions Asset acquisitions are accounted for using the cost accumulation method while business combinations are accounted for at fair value. Determining whether the acquired set represents an asset acquisition or a business combination requires quantitative and qualitative assessments subject to judgment.
The Convertible Notes are held by a consortium of investors, including related parties. The Convertible Notes accrue interest at 5.0% per annum, payable semiannually in arrears on June 30 and December 31, in cash or in-kind at the option of the Company.
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 ).
To date, all interest on these instruments have been paid-in-kind. 27 The Convertible Notes are due on February 26, 2030, but are convertible at the option of the holders, subject to the terms therein, prior to maturity into shares of our common stock.
The Convertible Notes are due on February 26, 2030, but are convertible at the option of the holders, subject to the terms therein, prior to maturity into shares of our common stock.
Critical Accounting Policies and Estimates The discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States ( US GAAP ).
Critical Accounting Policies and Estimates The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ( GAAP ).
As of June 30, 2022, the Company had no cumulative earned but constrained incentive fee revenue. Income Taxes 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 carryforwards.
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.
Some of the information in this discussion and analysis includes forward-looking statements that involve risk and uncertainties.
Some of the information in this discussion and analysis includes forward-looking statements that involve risk and uncertainties. Actual results and timing of events could differ from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.
Risk Factors.” Cash Provided by or Used in Operating Activities. Cash flows provided by operating activities totaled $29.3 million for the year ended June 30, 2022.
Risk Factors.” Cash flows used in operating activities of our continuing operations for the year ended June 30, 2023 were $3.1 million.
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.
Cash flows used in investing activities totaled $40.0 million for the year ended June 30, 2022, primarily consisting of $15.0 million in net purchases of interests in Monomoy UpREIT, $17.5 million for participation in the GECC rights offering and $6.4 million in 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, 2022 were $6.8 million, mainly attributed to capital expenditures related to purchases of equipment held for rental.
Investment management revenue primarily consists of fees based on a percentage of assets under management; fees based on rents collected; fees based on the performance of managed assets; and administrative fees.
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.
There were no intraperiod allocations during the year end June 30, 2022. During 2021, the Company recognized an income tax benefit with respect to discontinued operations of $0.1 million related to intraperiod allocations. State and local taxes were approximately $0.02 million and $1.7 million for the years ended June 30, 2022 and 2021, respectively.
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.
Cash flows provided by financing activities totaled $10.0 million for the year ended June 30, 2022 and primarily consisted of $26.9 million in proceeds from the issuance of the GEGGL baby bonds.
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.
Valuation allowances are established when necessary in order to reduce deferred tax assets to the amounts expected to be recovered. The Company has established a full valuation allowance for its deferred tax assets that are not recoverable from taxable temporary differences due to historical net operating losses.
Valuation allowances are established when necessary, in order to reduce deferred tax assets to the amounts more likely than not to be recovered.
The GEGGL Notes are due on June 30, 2027, and interest is paid quarterly. The GEGGL Notes include covenants that limit additional indebtedness or the payment of dividends subject to compliance with a net consolidated debt to equity ratio. As of June 30, 2022 the Company had $36.1 million face value in Convertible Notes outstanding.
The GEGGL Notes include covenants that limit additional indebtedness or the payment of dividends in the event that our net consolidated debt to equity ratio is, or would be on a pro forma basis, greater than 2 to 1.
Administration fee revenue for the year ended June 30, 2022 increased as compared to the prior year primarily related to higher administrative costs to manage GECC. In conjunction with the acquisition of the Monomoy REIT management agreement in May 2022 we began earning property management fees, recognizing $0.2 million for the year ended June 30, 2022.
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.
Cash flows provided by operating activities are primarily driven by net sales of investments by consolidated funds of approximately $23.2 million and also includes non-cash activity of $8.8 million for depreciation and amortization, $2.8 million in stock-based compensation and $8.1 million in realized loss on investments. These inflows were partially offset by the net loss of $14.8 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.
Other income (expense) Interest expense increased $0.8 million for the year ended June 30, 2022 as compared to the year ended June 30, 2021 due primarily to current period interest on the $35.8 million face value externally-held preferred stock in Forest and HC LLC which were issued in December 2020.
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.
Dividend income on managed investments for the years ended June 30, 2022 and 2021 was $2.8 million and $3.0 million, respectively. In addition, we recognized net realized and unrealized losses of $7.8 million during the year ended June 30, 2022 as compared to net gains of $0.7 million during the year ended June 30, 2021.
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.
The preparation of these financial statements requires our management to make significant estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. These items are monitored and analyzed by our management for changes in facts and circumstances, and material changes in these estimates could occur in the future.
The preparation of financial statements in accordance with GAAP requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the periods presented. On an on-going basis, the Company evaluates all of these estimates and assumptions.
Liquidity and Capital Resources The following table presents selected financial information and statistics: As of June 30, (in thousands) 2022 2021 Current Assets $ 84,440 $ 88,534 Current Liabilities 19,694 33,005 Working Capital $ 64,746 $ 55,529 Long Term Liabilities $ 106,139 $ 73,440 26 For the years ended June 30, (in thousands) 2022 2021 Cash provided by (used in) operating activities $ 29,280 $ (18,976 ) Cash used in investing activities (40,047 ) (15,482 ) Cash provided by financing activities 9,980 18,340 Net decrease in cash and cash equivalents $ (787 ) $ (16,118 ) Working Capital and Cash Flows As of June 30, 2022, we have cash of $23.6 million and investments with a fair value of $48.0 million.
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.
Off-Balance Sheet Obligations As of June 30, 2022, we did not invest in any off-balance sheet vehicles that provide financing, liquidity, market or credit risk support or engage in any leasing activities that expose us to any liability that is not reflected in our consolidated financial statements. 28 New Accounting Pronouncements See Note 2 – Summary of Significant Accounting Policies in the accompanying Notes to the Consolidated Financial Statements.
New Accounting Pronouncements See Note 2 - Summary of Significant Accounting Policies in the accompanying Notes to the Consolidated Financial Statements.
Cash flows used in investing activities totaled $15.5 million for the year ended June 30, 2021.
Cash flows used in financing activities of our discontinued operations for the year ended June 30, 2023 of $5.2 million were primarily attributed to distributions to non-controlling interests upon Sale of HC LLC of $5.9 million.
Removed
Actual results and timing of events could differ from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. 17 Overview We are a holding company seeking to acquire assets and businesses, where our people and other assets provide a competitive advantage.
Added
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.
Removed
We currently have two business operating segments: durable medical equipment and investment management with general corporate representing unallocated costs and activity to arrive at consolidated operations. For additional information see “Item 1. Business.” COVID-19 The Company continued to experience suppressed revenues relative to its pre-pandemic expectations due to the continuing impact of the COVID-19 pandemic.
Added
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.
Removed
In particular, the investment management business continues to experience reduced assets under management in our managed portfolios as compared to pre-pandemic levels. COVID-19 may continue to impact such managed portfolios as well as the value of the shares of GECC held by the Company in the future.
Added
As of the date of this report, GEG had $2.3 million of unfunded binding commitments to make additional investments.
Removed
In addition, COVID-19 may impact our ability to finance and execute new acquisitions or other business opportunities. At our durable medical equipment business, the impacts of COVID-19 resulted in suppressed referral pipelines for sleep studies and durable medical equipment set-ups relative to pre-COVID levels.
Added
On December 30, 2022, GEG and its wholly-owned subsidiary, FM Acquisition, entered into the Stock Purchase Agreement with JPM to sell 61 shares of the common stock, $0.001 par value per share, of Forest owned by FM Acquisition and GEG, which constituted 61% of the issued and outstanding shares of Forest’s common stock, to JPM for approximately $18.4 million in cash.
Removed
Although we have observed a recovery in demand for these services and products during the current year, global supply chain challenges have impacted our ability to procure sufficient volumes of PAP devices in accordance with our normal procurement process to meet patient demand during the year ended June 30, 2022.
Added
In connection with the Stock Purchase Agreement, GEG, JPM and Forest entered into the Stockholders Agreement. Pursuant to the Stockholders Agreement, from January 17, 2023 until February 17, 2023, GEG had the the Put Option to sell its remaining 19% interest in Forest for its then fair market value.
Removed
Our equipment allotments from key suppliers has resulted in a patient backlog, resulting in missed revenue opportunities. The impact of COVID-19 as well as global supply chain challenges continue to evolve and their duration and ultimate disruption to the Company’s customers and to its operations cannot be estimated at this time.
Added
On January 17, 2023, GEG exercised the Put Option and sold the Investment in Forest for approximately $26.5 million in cash.
Removed
However, the Company expects some level of missed revenue opportunities to continue in the near future due to the continually developing supply chain challenges noted above.
Added
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.
Removed
If determined to be a business combination, the accounting requires estimates and judgment as to expectations for future cash flows of the acquired business, and the allocation of those cash flows to identifiable intangible assets, in determining the estimated fair value for assets and liabilities acquired.
Added
After transaction costs of $2.5 million, distributions to non-controlling interests of $5.9 million, and indemnity escrow payment of $0.4 million, cash proceeds to GEG and its subsidiaries were $64.1 million, pending finalization of working capital adjustments.
Removed
Goodwill represents the excess of fair value over identifiable tangible and intangible net assets acquired in business combinations. Goodwill is not amortized.
Added
The disposal group satisfied the criteria for presentation as held for sale and discontinued operations through the date of sale, and as such GEG's historical segment information was recast to reflect its ongoing business as a single reportable segment and to remove the activity of discontinued operations. In January 2023, MBTS, GEG's wholly-owned subsidiary, completed purchases of certain land parcels.
Removed
Instead, goodwill is reviewed for impairment at least annually, or on an interim basis between annual tests when events or circumstances indicate that it is more likely than not that the fair value of a reporting unit is less than its carrying value.
Added
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.
Removed
The Company utilizes third-party specialists to assist management with the identification and valuation of intangible assets using customary valuation procedures and techniques. We perform our annual impairment test of goodwill on the first day of the fiscal fourth quarter.
Added
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.
Removed
The Company tests long-lived assets, including intangible assets, for impairment if conditions exist that indicate the carrying value may not be recoverable. All of the Company’s goodwill was acquired in conjunction with the acquisitions of the durable medical equipment businesses and has been recorded within our durable medical equipment reporting unit.
Added
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.
Removed
Based on our annual impairment test as of April 1, 2022 the fair value of the durable medical equipment reporting unit exceeded the carrying value by 34.3% and no impairment occurred. The fair value of this reporting unit was derived using a combination of present value of estimated cash flows and the valuations and prices of comparable businesses.
Added
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.
Removed
The discount rate used in this analysis was 13.0%. 18 Accounts Receivable Substantially all of the accounts receivable balance relates to the durable medical equipment business.
Added
Following presentation of our DME business as discontinued operations, the Company views its operations and manages its business as one operating segment 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.
Removed
Accounts receivable are customer obligations due under normal sales and rental terms and represent the amount estimated to be collected from the patient customers and, if applicable, the third-party private insurance provider or government program (collectively, Payors ), based on the contractual agreements.
Added
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.
Removed
The Company does not require collateral in connection with its customer transactions and aside from verifying insurance coverage, does not perform credit checks on patient customers. Revenue and accounts receivable have been constrained to the extent that billed amounts exceed the amounts estimated to be collected.
Added
Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
Removed
The constrained transaction price relates primarily to expected billing adjustments with the Payors and patient customers. Management’s evaluation of variable consideration takes into account such factors as past experience, information about specific receivables, Payors and patient customers. The assessment of variable consideration to be constrained is based on estimates, and ultimate losses may vary from current estimates.
Added
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.
Removed
As adjustments to these estimates become necessary, they are reported in earnings in the periods in which they become known. Changes in constraints on variable consideration are recorded as a component of net revenues.
Added
GAAP provides guidance on the accounting for and disclosure of uncertainty in tax positions and requires the evaluation of tax positions taken or expected to be taken in the course of preparing the Company's tax returns to determine whether the tax positions are "more likely than not" of being sustained by the applicable taxing authority.
Removed
To the extent historical experience is not indicative of future performance, actual collections experience could differ significantly from management’s judgments and expectations, resulting in either increases or decreases to future revenues, as applicable. The Company generally does not allow returns from providers for reasons not covered under the manufacturer’s standard warranty. Therefore, there is no provision for sales return reserves.
Added
The Company recognizes in its consolidated financial statements the impact of a tax position if that position is more likely than not of being sustained upon examination, based on the technical merits of the position.
Removed
The Company does not have significant bad debt experience with Payors, and therefore does not maintain an allowance for doubtful accounts. Durable Medical Equipment Revenue Durable medical equipment revenue from a customer consists of any combination of the sale and rental of durable medical equipment and/or the provision of sleep study services.
Added
In making these assessments, the Company determines the accounting recognition based on the technical merits of the position and consults with external tax experts as appropriate. The Company does not recognize income tax benefits for positions that it takes on its income tax returns that do not meet the more likely than not standard on its technical merits.
Removed
For durable medical equipment sales and services, the Company recognizes revenue in accordance with Financial Accounting Standards Board ( FASB ) Accounting Standards Codification ( ASC ) Topic 606, Revenue from Contracts with Customers . For revenue associated with durable medical equipment rentals, the Company recognizes revenue in accordance with ASC Topic 842, Leases .
Added
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.
Removed
The Company sells durable medical equipment, replacement parts and supplies to customers and recognizes revenue at the point control is transferred through delivery to the customer. Each piece of equipment, part or supply is distinct and separately priced; thus they each represent a single performance obligation.
Added
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
The revenue is allocated amongst the performance obligations based upon the relative standalone selling price method, however, items are typically all delivered or supplied together. The customer and, if applicable, the Payors are generally charged at the time that the product is sold, although separate layers of insurance coverage may need to be invoiced before final billings may occur.
Added
During the year ended June 30, 2023, the Company recognized $32.0 million of other income (net), comprised of gain on Sale of Controlling Interest in Forest of $10.5 million, gain on the Investment in Forest of $24.4 million, and dividends and interest income of $6.2 million, partially offset by net realized and unrealized loss on investments (excluding the Investment in Forest) of $9.2 million.
Removed
The Company also provides sleep study services to customers and recognizes revenue when the results of the sleep study are complete as that is when the performance obligation is met. The Company leases durable medical equipment to customers for a fixed monthly amount on a month-to-month basis.
Added
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
The customer has the right to cancel the lease at any time during the rental period and payments are generally billed in advance on a month-to-month basis.
Added
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).
Removed
Due to the nature of the durable medical equipment business, billing adjustments customarily occur during the collections process when explanations of benefits are received by Payors, and as amounts are deferred to secondary Payors or to patient responsibility.
Added
Upon sale of the DME business, we initially recognized a gain on sale of $13.6 million. In the fourth quarter of fiscal 2023, we recorded a loss of $0.3 million following finalization of working capital adjustments to the initial sales price for HC LLC, with the respective payment made to Quipt in September 2023.
Removed
For durable medical equipment sales and services revenue, the Company includes in the transaction price only the amount that the Company expects to be entitled. Durable medical equipment rental revenue is recognized for amounts where collection from Payors and patients are reasonably assured.
Added
For 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.
Removed
As such, revenue recognized upon satisfaction of the Company’s performance obligations consist of substantially all of the Payor billings at contractual rates as well as estimates of patient co-payments that will ultimately be collected. Inherent in these estimates is the risk that they will have to be revised or updated as additional information becomes available.
Added
The adjustments to reconcile our net income from continuing operations of $14.5 million to net cash used in operating activities included add-backs for various non-cash charges, such as $2.6 million of stock-based compensation expense, $2.3 million of non-cash interest and amortization of capitalized issuance costs, $1.2 million of depreciation and amortization, and $0.8 million of change in fair value of contingent consideration payable to ICAM, which was partially offset by deduction of $10.9 million of unrealized gain on our investments, $4.3 million of realized gain on our investments, $10.5 million of gain on Sale of Controlling Interest in Forest in December 2022, and the net negative change in our operating assets and liabilities of $0.7 million.

… 87 more changes not shown on this page.

Other GEG 10-K year-over-year comparisons